Document:

Exhibit 4.4

 

DRAGONWAVE INC.

 

MANAGEMENT PROXY CIRCULAR

 

This Management Proxy Circular (this “Circular”)
is furnished in connection with the solicitation of proxies by or on behalf of
the management of DRAGONWAVE INC. (“DragonWave” or the “Corporation”)
for use at the annual and special meeting of the shareholders of the
Corporation (the “Meeting”) to be held on Tuesday, the 9th day of June, 2009 at the hour of 10:00 a.m.
(EDT) at the Holiday Inn Select & Suites, 101 Kanata Avenue, Ottawa,
Ontario, and at any adjournment or adjournments thereof, for the purposes set
forth in the Notice of Meeting.  Unless
otherwise specified herein, all references to “$” are to Canadian dollars.

 

FORWARD-LOOKING STATEMENTS

 

This Circular contains ‘‘forward-looking
statements’’ and ‘‘forward-looking information’’ under applicable securities
laws (collectively, the ‘‘forward-looking statements’’) relating, but not
limited to, the expectations, intentions, plans and beliefs of the management
of the Corporation.  Forward-looking
statements can often be identified by forward-looking words such as ‘‘anticipate’’,
‘‘believe’’, ‘‘expect’’, ‘‘goal’’, ‘‘plan’’, ‘‘intend’’, ‘‘estimate’’, ‘‘optimize’’,
‘‘may’’, ‘‘will’’ or similar words suggesting future outcomes or other
expectations, intentions, plans, beliefs, objectives, assumptions or statements
about future events or performance.

 

Shareholders are cautioned not to place undue
reliance on forward-looking statements. By their nature, forward-looking
statements involve numerous assumptions, known and unknown risks and
uncertainties, of both a general and specific nature, that could cause actual
results to differ materially from those suggested by the forward-looking
statements or contribute to the possibility that predictions, forecasts or
projections will prove to be materially inaccurate. In evaluating these
statements, shareholders should specifically consider various factors,
including the risks outlined under the heading ‘‘Risk Factors’’ in the
Corporation’s Annual Information Form dated May 7, 2009, and as
contained in the Management Discussion and Analysis for the twelve month period
ended February 28, 2009, which risks may cause actual results to differ
materially from any forward-looking statement.

 

The Corporation cautions that the list of
forward-looking statements, risks and assumptions set forth or referred to
above is not exhaustive. All forward-looking statements in this Circular are
qualified by these cautionary statements. Some of the risks, uncertainties and
other factors which negatively affect the reliability of forward-looking
statements are discussed in DragonWave’s public filings with the Canadian
Securities Administrators. These statements are made as of the date of this
Circular and the Corporation does not undertake to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise, except to the extent expressly required by law.  The Corporation undertakes no obligation to
comment on analyses, expectations or statements made by third parties in
respect of the Corporation, its financial or operating results or its
securities, respectively.

 

 

DragonWave Inc.

Management Proxy Circular

May 14, 2009

 

PROXIES

 

THE ENCLOSED PROXY IS BEING
SOLICITED BY OR ON BEHALF OF THE MANAGEMENT OF THE CORPORATION and
the cost of such solicitation will be borne by the Corporation.  The solicitation of proxies will be primarily
by mail, but proxies may also be solicited by officers and employees of the
Corporation or by the transfer agent and registrar of the Corporation,
Computershare Investor Services Inc.

 

The persons named in the enclosed form of
proxy are directors and/or officers of the Corporation.  A
shareholder desiring to appoint some other person to represent it at the
Meeting may do so by inserting such person’s name in the blank space provided
in the form of proxy or by completing another form of proxy and, in either
case, delivering the completed proxy: (i) to the Chief Financial Officer
of the Corporation at the Corporation’s head office at 411 Legget Drive, Suite 600,
Ottawa, Ontario K2K 3C9, (ii) to Computershare Investor Services Inc.
at 100 University Avenue, 9th Floor, North Tower,
Toronto, Ontario M5J 2Y1, Attention: Proxy Department, or (iii) to
Computershare Investor Services Inc. by facsimile at (416) 263-9524 or toll
free at 1-866-249-7775, in any case not later than 5:00 p.m. (EDT) on June 5,
2009 (being the second business day preceding the date of the Meeting) or, if
the Meeting is adjourned, not later than 48 hours (excluding Saturdays, Sundays
and holidays) before the Meeting is reconvened, provided that the Chairman of
the Meeting shall have discretion to accept late proxies.  It is the responsibility of the shareholder
appointing some other person to represent him to inform such person that he has
been so appointed.  The proxy must be
executed by the shareholder or his attorney authorized in writing or, if the
shareholder is a corporation, by an officer or attorney thereof, duly
authorized.

 

A shareholder executing the enclosed form of
proxy has the right to revoke it under subsection 148(4) of the Canada Business Corporations Act (the “Act”).  A shareholder may revoke a proxy by
depositing an instrument in writing executed by the shareholder or by the shareholder’s
attorney authorized in writing at the head office of the Corporation at any
time up to and including the last business day preceding the day of the
Meeting, or any adjournment or adjournments thereof, at which the proxy is to
be used or with the Chairman of the Meeting on the day of the Meeting or any
adjournment or adjournments thereof or in any other manner permitted by law.

 

The Common Shares of the Corporation
(hereinafter called the “Common Shares”) represented by the proxy will
be voted, for or against, or withheld from voting, in accordance with the
instructions of the shareholder on any ballot that may be called for.

 

IF A SHAREHOLDER DOES NOT
SPECIFY THAT ITS COMMON SHARES ARE TO BE WITHHELD FROM VOTING WITH RESPECT TO
THE ELECTION OF DIRECTORS AND/OR THE APPOINTMENT OF AUDITOR, SUCH COMMON SHARES
WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEE DIRECTORS
SPECIFIED IN THIS CIRCULAR AND THE APPOINTMENT OF ERNST

 

2

 

& YOUNG LLP AS THE
CORPORATION’S AUDITOR ON ANY BALLOT THAT MAY BE CALLED FOR.

 

IF A CHOICE IS NOT SPECIFIED
BY A SHAREHOLDER WITH RESPECT TO THE RESOLUTION ATTACHED HERETO AS EXHIBIT “A”
TO SANCTION, RATIFY AND CONFIRM THE ENACTMENT OF THE SHAREHOLDER RIGHTS PLAN
AGREEMENT, SUCH COMMON SHARES WILL BE VOTED FOR SUCH RESOLUTION ON ANY
BALLOT THAT MAY BE CALLED FOR.

 

IF A  CHOICE IS NOT SPECIFIED BY A SHAREHOLDER WITH RESPECT
TO THE RESOLUTION ATTACHED HERETO AS EXHIBIT “B” TO APPROVE AMENDMENT NO.
2009-1 TO THE CORPORATION’S FOURTH AMENDED AND RESTATED KEY EMPLOYEE STOCK
OPTION/STOCK ISSUANCE PLAN (THE “STOCK OPTION PLAN”) APPROVING THE
EXCHANGE OF CERTAIN OPTIONS UNDER SUCH PLAN, SUCH COMMON SHARES WILL BE VOTED FOR
SUCH RESOLUTION ON ANY BALLOT THAT MAY BE CALLED FOR.

 

IF A  CHOICE IS NOT SPECIFIED BY A SHAREHOLDER WITH RESPECT
TO THE RESOLUTION ATTACHED HERETO AS EXHIBIT “C” TO APPROVE AMENDMENT NO.
2009-2 TO THE STOCK OPTION PLAN APPROVING THE EXTENSION TO THE EXPIRY DATES OF
CERTAIN OPTIONS GRANTED UNDER SUCH PLAN, SUCH COMMON SHARES WILL BE VOTED FOR
SUCH RESOLUTION ON ANY BALLOT THAT MAY BE CALLED FOR.

 

It is not intended to use the proxies hereby
solicited for the purpose of voting upon the financial statements of the
Corporation as at February 28, 2009 or the report of the auditor thereon.

 

If any amendments or
variations to matters identified in the Notice of Meeting are proposed at the
Meeting or if any other matters properly come before the Meeting, the enclosed
form of proxy confers discretionary authority to vote on such amendments or
variations or such other matters according to the best judgment of the person
voting the proxy at the Meeting. 
Management knows of no matters to come before the Meeting other than the
matters referred to in the Notice of Meeting.

 

All information in this Circular is presented
as at May 14, 2009 unless
otherwise indicated.

 

NON-REGISTERED HOLDERS

 

In many cases, Common Shares beneficially owned by a holder (a “Non-Registered
Holder”)  are registered
either:

 

(i)             in the name of an intermediary
that the Non-Registered Holder deals with in respect of the Common Shares.  Intermediaries include banks, trust
companies, securities dealers or brokers, and trustees or administrators of
self-administered RRSPs, RRIFs, RESPs and similar plans; or

 

3

 

(ii)          in the name of a depository
(such as The Canadian Depository for Securities Limited or “CDS”).

 

Non-Registered Holders do not appear on the list of shareholders of the
Corporation maintained by the Corporation’s registrar and transfer agent.

 

In accordance with applicable Canadian securities law, the Corporation
has distributed copies of the Notice of Meeting, this Circular and the form of
proxy (collectively, the “meeting materials”) to CDS and intermediaries
for onward distribution to Non-Registered Holders.

 

Intermediaries are required to forward meeting materials to
Non-Registered Holders unless a Non-Registered Holder has waived the right to
receive them.  Typically, intermediaries
will use a service company to forward the meeting materials to Non-Registered
Holders.

 

Non-Registered Holders, other than NOBOs, will receive either a voting
instruction form or, less frequently, a form of proxy.  The purpose of these forms is to permit
Non-Registered Holders to direct the voting of the Common Shares they
beneficially own.  Non-Registered Holders
should follow the procedures set out below, depending on which type of form
they receive.

 

·                                          Voting Instruction Form.  In most cases, a Non-Registered Holder will receive,
as part of the meeting materials, a voting instruction form.  If the Non-Registered Holder does not wish to
attend and vote at the Meeting in person (or have another person attend and
vote on the Non-Registered Holder’s behalf), the voting instruction form must
be completed, signed and returned in accordance with the directions on the
form.  If a Non-Registered Holder wishes
to attend and vote at the Meeting in person (or have another person attend and
vote on the Non-Registered Holder’s behalf), the Non-Registered Holder must
complete, sign and return the voting instruction form in accordance with the
directions provided and a form of proxy giving the right to attend and vote
will be forwarded to the Non-Registered Holder; or

 

·                                          Form of Proxy.  Less frequently, a Non-Registered Holder will
receive, as part of the meeting materials, a form of proxy that has already
been signed by the intermediary (typically by a facsimile, stamped signature)
which is restricted as to the number of shares beneficially owned by the
Non-Registered Holder but which is otherwise incomplete.  If the Non-Registered Holder does not wish to
attend and vote at the Meeting in person (or have another person attend and vote
on the Non-Registered Holder’s behalf), the Non-Registered Holder must complete
the form of proxy and deposit it with: (i) the Chief Financial Officer of the Corporation at the Corporation’s head
office at 411 Legget Drive, Suite 600, Ottawa, Ontario K2K 3C9, (ii) Computershare
Investor Services Inc. at 100 University Avenue, 9th Floor, North
Tower, Toronto, Ontario M5J 2Y1, Attention: Proxy Department, or (iii) Computershare
Investor Services Inc. by facsimile at (416) 263-9524 or toll free at
1-866-249-7775, in any case not later than 5:00 p.m. (EDT) on June 5,
2009 (being the second business day preceding the date of the Meeting) or, if
the Meeting is adjourned, not later than 48 hours (excluding Saturdays, Sundays
and holidays) before the Meeting is reconvened, provided

 

4

 

that
the Chairman of the Meeting shall have discretion to accept late proxies. If a
Non-Registered Holder wishes to attend and vote at the Meeting in person (or
have another person attend and vote on the Non-Registered Holder’s behalf), the
Non-Registered Holder must strike out the names of the persons named in the
proxy and insert the Non-Registered Holder’s (or such other person’s) name in
the blank space provided.

 

Non-Registered Holders should follow the instructions on the forms they
receive and contact their intermediaries promptly if they need assistance.

 

Non-Objecting Beneficial
Owners

 

These security holder materials (meeting materials) are being sent to
both registered and non-registered owners of the securities.  If you are a non-registered owner, and the
Corporation or its agent has sent these materials directly to you, your name
and address and information about your holdings of securities have been
obtained in accordance with applicable securities regulatory requirements from
the intermediary holding on your behalf. 
By choosing to send these materials to you directly, the Corporation
(and not the intermediary holding on your behalf) has assumed responsibility
for: (i) delivering these materials to you; and (ii) executing your
proper voting instructions.  Please
return your voting instructions as specified in the request for voting
instructions or form of proxy delivered to you.

 

VOTING SHARES AND PRINCIPAL
SHAREHOLDERS

 

The Common Shares are the only class of shares of
the Corporation authorized.

 

The Corporation has fixed April 10, 2009
as the record date (the “Record Date”) for the purpose of determining
shareholders entitled to receive notice of and vote at the Meeting.  In accordance with the provisions of the Act,
the Corporation’s transfer agent and registrar, Computershare Investor Services
Inc., has prepared a list of holders of Common Shares as of the Record Date not
later than ten (10) days after such Record Date.  Each holder of Common Shares named in the
list will be entitled to vote the Common Shares shown opposite his, her or its
name on the list at the Meeting. As at the Record Date, 28,559,973  Common Shares  are outstanding, each carrying the right to one (1) vote
per Common Share at the Meeting.

 

To the knowledge of the directors and
executive officers of the Corporation, as of the Record Date and the date of
this Circular, no person or Corporation beneficially owns, or controls or
directs, directly or indirectly, Common Shares carrying more than 10% of the
votes attached to the outstanding Common Shares other than as follows:

 

5

 

	
  Name
  of Shareholder

  	
   

  	
  Number
  of Common Shares

  Owned,

  Controlled or Directed

  	
   

  	
  Percentage
  of Outstanding 

  Common Shares

  Owned, Controlled or Directed

  	
   

  
	
  Enterprise Partners V, L.P. (1)

  	
   

  	
  2,456,942

  	
   

  	
  8.6

  	
  %

  
	
  Enterprise Partners VI, L.P. (1)

  	
   

  	
  2,456,942

  	
   

  	
  8.6

  	
  %

  

 

(1)          Enterprise Partners V, L.P. and Enterprise
Partners VI, L.P. are under common management. 
In addition to the issued Common Shares set forth above, Enterprise
Partners V, L.P. holds a warrant to purchase up to 57,183 Common Shares and
Enterprise Partners VI, L.P. holds a warrant to purchase up to 57,183 Common
Shares.

 

ELECTION
OF DIRECTORS

 

The number of directors to be elected at the
Meeting is seven (7). The table below sets forth the names of the persons who
are proposed as nominees for election as directors of the Corporation and for
whom it is intended to vote the Common Shares represented by the proxies
solicited in respect of the Meeting, on any ballot that may be called for,
unless authority to do so is withheld. 
Each director elected will hold office until the next annual general
meeting of shareholders or until his successor is elected or appointed.

 

Each of the nominees listed below is
currently a director of the Corporation, except for new independent nominee Mr. Jean-Paul
Cossart.  Mr. Ake Persson, currently
an independent member of the Board and a member of the Audit Committee and the
Compensation Committee, will continue to serve in those capacities through to
the Meeting but will not stand for re-election as a director at the
Meeting.  Mr. Cossart has agreed to
join the Audit Committee and the Compensation Committee on election to the
Board.

 

In the event that prior to the Meeting any
vacancies occur in the slate of nominees submitted below, it is intended that
discretionary authority shall be exercised to vote the proxies hereby solicited
(unless otherwise directed as aforesaid) for the election of any other person
or persons as directors. Management is not aware that any of such nominees
would be unwilling to serve as a director if elected.

 

The following table sets out the name of each person
proposed to be nominated for election, as well as other pertinent information,
including principal occupation or employment, all major positions and offices
presently held in the Corporation, the year first elected a director of the
Corporation (if applicable) and the number of Common Shares and options to
purchase Common Shares beneficially owned, or controlled or directed, directly
or indirectly, by such person.

 

6

 

	
  Name, Province and Country of
  Residence,

  Status (Independent/Not Independent) and

  Biographical Information

  	
   

  	
  Present
  Principal

  Occupation,

  Business or

  Employment

  	
   

  	
  Year
  first

  became a

  Director

  	
   

  	
  Common
  Shares/

  Options

  Beneficially

  Owned, or

  Controlled or

  Directed, Directly

  or Indirectly

  
	
  Gerry Spencer (Chair), Kingswood, Surrey,  U.K. (1)(2)

  Independent

   

  Gerry Spencer is the Chair of
  DragonWave’s Board. Gerry 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 director
  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.

  	
   

  	
  Retired

  	
   

  	
  2006

  	
   

  	
  Common Shares: Nil

  Options: Nil

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Peter Allen, Ontario, Canada

  Not Independent

   

  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 Corporation and Rothmans International plc, and has lived and worked in
  North America, Europe and Africa.

  	
   

  	
  President
  and Chief Executive Officer, DragonWave Inc.

  	
   

  	
  2004

  	
   

  	
  Common Shares: 541,107(3)

  Options: 385,000

  

 

7

 

	
  Name, Province and Country of
  Residence,

  Status (Independent/Not Independent) and

  Biographical Information

  	
   

  	
  Present
  Principal

  Occupation,

  Business or

  Employment

  	
   

  	
  Year
  first

  became a

  Director

  	
   

  	
  Common
  Shares/

  Options

  Beneficially

  Owned, or

  Controlled or

  Directed, Directly

  or Indirectly

  
	
  Jean-Paul
  Cossart, Versailles, France

  Independent

   

  Jean-Paul
  Cossart is an Associate Director of Infoteria of France, a company that
  provides technological coaching. He has held this position since 2004. Prior
  to this Jean-Paul was Vice President Strategy and Marketing of Cofratel since
  2002, a company that provides PBX and LAN integration for the enterprise
  market and was a subsidiary of France Telecom. Jean-Paul also held several
  positions at Alcatel. Jean-Paul’s experience has spanned carrier, corporate
  and consumer markets; telephony, data/internet and broadcast services; and
  international development, global sales and marketing. He is also a member of
  the executive committee of the French chapter of the Institute of Directors,
  United Kingdom. Jean-Paul has been an executive advisor to DragonWave since
  2007 and has been granted options to purchase 10,000 Common Shares as his
  only compensation for these services. Jean-Paul is also on the board of
  directors of Mitel Networks Corporation. Jean-Paul holds an electronic
  engineering degree from Ecole Supérieure d’Electricité in Paris.

  	
   

  	
  Associate
  Director, Infoteria

  	
   

  	
  Proposed
  nominee for election at the Meeting

  	
   

  	
  Common Shares: Nil

  Options: 10,000

  

 

8

	
  Name, Province and Country of Residence,

  Status (Independent/Not Independent) and

  Biographical Information

  	
   

  	
  Present
  Principal

  Occupation,

  Business or

  Employment

  	
   

  	
  Year
  first

  became a

  Director

  	
   

  	
  Common
  Shares/

  Options

  Beneficially

  Owned, or

  Controlled or

  Directed, Directly

  or Indirectly

  
	
  Carl Eibl, California, United States (2)(4)

  Independent

   

  Carl Eibl
  has been a managing director with Enterprise Partners Venture Capital (“Enterprise
  Partners”) since 2003. Prior to joining Enterprise Partners, Carl was the
  chief executive officer of several 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 CEO
  and President for Mycogen Corporation, a publicly held agricultural
  biotechnology Corporation, which was sold to The Dow Chemical Corporation in
  1998 for US$1.1 billion. Carl is a former chairman 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.

  	
   

  	
  Managing
  Director, Enterprise Partners Venture Capital

  	
   

  	
  2005

  	
   

  	
  Common Shares: Nil (5)

  Options: 14,238

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Russell Frederick, Ontario, Canada

  Not Independent

   

  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.

  	
   

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

  	
   

  	
  2007

  	
   

  	
  Common Shares: 158,141(6)

   

  Options: 160,000

  

 

9

 

	
  Name, Province and Country of Residence,

  Status (Independent/Not Independent) and

  Biographical Information

  	
   

  	
  Present
  Principal

  Occupation,

  Business or

  Employment

  	
   

  	
  Year
  first

  became a

  Director

  	
   

  	
  Common
  Shares/

  Options

  Beneficially

  Owned, or

  Controlled or

  Directed, Directly

  or Indirectly

  
	
  Claude Haw, Ontario, Canada (1)(2)(4)

  Independent

   

  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
  the 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 Networks Corporation, 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.

  	
   

  	
  President and Chief Executive Officer of
  OCRI & Managing Partner, Venture Coaches

  	
   

  	
  2003

  	
   

  	
  Common Shares: Nil (7)

   

  Options: 26,638

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Terry Matthews, Ontario, Canada

  Not Independent

   

  Terry
  Matthews is the non-executive chairman of a number of technology companies
  including Mitel Networks Corporation, March Networks Corporation,
  Newport Networks Ltd., Solace Systems, Inc. and Counterpath Corporation.
  In 1972, Terry co-founded his first technology company, Mitel Corporation. He
  served as chief executive officer and chairman of Newbridge Networks
  Corporation, a company he founded in 1986. Terry holds an honours degree in
  electronics from the University of Wales, and is a Fellow of the Institute of
  Electrical Engineers and of the Royal Academy of Engineering. Terry is also
  the founder of Wesley Clover Corporation, an early stage technology venture
  capital firm with offices in Canada, the United States and the United
  Kingdom.

  	
   

  	
  Chairman of
  Mitel Networks Corporation, March Networks Corporation, Wesley Clover
  Corporation, Bridgewater Systems Corporation, Solace Systems, Inc. and
  CounterPath Corporation

  	
   

  	
  2000

  	
   

  	
  Common Shares: 1,118,242(8)

   

  Options: Nil

  

 

10

 

	
  Name, Province and Country of Residence,

  Status (Independent/Not Independent) and

  Biographical Information

  	
   

  	
  Present
  Principal

  Occupation,

  Business or

  Employment

  	
   

  	
  Year
  first

  became a

  Director

  	
   

  	
  Common
  Shares/

  Options

  Beneficially

  Owned, or

  Controlled or

  Directed, Directly

  or Indirectly

  
	
  Terry has
  formed over 80 companies and has earned recognition worldwide for his
  experience in driving technology companies to success.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Notes:

 

(1)          Member of the Audit Committee.

(2)          Member of the Nominating and Governance  Committee.

(3)          Mr. Allen owns 541,107 Common Shares. As of May 14, 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.

(4)          Member of Compensation Committee.

(5)          Enterprise Partners V, L.P. and Enterprise
Partners VI, L.P. are controlled by Enterprise Partners Venture Capital, of
which Mr. Eibl is Managing Director. Each of the Enterprise funds own
2,456,942 Common 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.

(6)          Mr. Frederick owns 158,141 Common
Shares. As of May 14, 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. 
This repurchase right lapses over time, and will terminate on the change
of control of the Corporation.

(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)          Terry 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.

 

Cease Trade Orders and Bankruptcies

 

Peter Allen, a director and Chief Executive
Officer of the Corporation, was a director and the President of Innovance Inc.
(“Innovance”), a private, venture capital funded company that developed
photonics networking solutions. 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”). Pricewaterhouse Coopers 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.

 

11

 

Terry Matthews 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. Terry 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 Corporation, 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.

 

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

 

COMPENSATION OF DIRECTORS

 

General Compensation Principles

 

Compensation for directors of the Corporation
is determined by the full Board of Directors (the “Board”), based on
recommendations from the Compensation Committee of the Board.  In determining appropriate compensation for
directors, the Board and the Compensation Committee consider prevailing market
conditions and practices, as well risks and responsibilities assumed by the
directors.  Compensation may vary by
director, as the Board and the Compensation Committee also take into account
factors such as the director’s committee membership(s) and the time
commitment associated with acting in this capacity.

 

Director Compensation Table

 

The following table sets forth all amounts of
compensation earned by the directors of the Corporation (other than Peter Allen
and Russell Frederick, whose compensation is reflected in the “Summary
Compensation Table” under the heading “Information on Executive Compensation”
below) for the financial year ended February 28, 2009.

 

	
  Name of Director

  	
   

  	
  Fees Earned

  	
   

  	
  Option Based

  Awards(1)

  	
   

  	
  All other 

  compensation 

  	
   

  	
  Total

  compensation

  	
   

  
	
  Gerry Spencer (Chair)

  	
   

  	
  £

  	
  40,000

  	
   

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  	
  £

  	
  40,000

  	
   

  
	
  Carl Eibl

  	
   

  	
   

  	
  Nil

  	
   

  	
  $

  	
  36,190

  	
   

  	
  Nil

  	
   

  	
  $

  	
  36,190

  	
   

  
	
  Claude
  Haw

  	
   

  	
  US$

  	
  30,000

  	
   

  	
  $

  	
  36,190

  	
   

  	
  Nil

  	
   

  	
  $

  	
  74,311

  	
  (2)

  
	
  Terry Matthews

  	
   

  	
   

  	
  Nil

  	
   

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  	
   

  	
  Nil

  	
   

  
	
  Ake
  Persson (3)

  	
   

  	
  US$

  	
  20,000

  	
   

  	
  $

  	
  24,126

  	
   

  	
  Nil

  	
   

  	
  $

  	
  49,540

  	
  (2)

  

 

(1)                                  Option based award values are
calculated at their market value established using the Black-Scholes
methodology, which has been chosen as the method to value options as it is the
most widely recognized

 

12

 

methodology and is accepted by Canadian Generally
Accepted Accounting standards.  The
Black-Scholes model considers various factors including historical share
prices, price volatility and interest rates.

(2)                                  The Bank of Canada closing
foreign exchange rate for converting one (1) US dollar into Canadian
dollars on February 28, 2009 was 1.2707.

(3)                                  Mr. Persson’s term as a
director of the Corporation expires at the Meeting.

 

The Corporation’s compensation policy for
independent directors (other than the Chair of the Board) includes a grant
under the Corporation’s Stock Option Plan to each independent director, on an
annual basis, of options to purchase that number of Common Shares equal to a
minimum of 0.025% and a maximum of 0.05% of the outstanding Common Shares as at
the last day of such fiscal year. For the fiscal year ended on February 28,
2009, a total of 37,968 options were granted to directors (other than Peter
Allen and Russell Frederick). Certain of the Corporation’s independent
directors received cash compensation for acting as a director commensurate with
their level of service on the Board and board committees. For the fiscal year
ending February 28, 2009, Gerry Spencer received a cash payment of £40,000
in recognition of his service as Chair of the Board and his committee service,
Claude Haw received a cash payment of US$30,000 in recognition of his service
as Chair of the Audit Committee and his committee service, and Ake Persson
received a cash payment of US$20,000 in recognition of his service on the Audit
Committee and Compensation Committee.

 

Aside from the above noted option grants,
none of the non-employee directors of the Corporation received any grants of
options under the Stock Option Plan in the fiscal year ended February 28,
2009.

 

Each non-employee director is reimbursed for
out-of-pocket expenses incurred in connection with attending directors’
meetings.  During the fiscal year ended February 28,
2009, the Corporation reimbursed its non-employee directors, as a group, for
approximately $9,314 in travel and other out-of-pocket expenses.

 

Neither Mr. Allen nor Mr. Frederick
are compensated separately for their service as directors of the Corporation.

 

Outstanding Option-Based Awards for Directors as at February 28,
2009

 

The following table sets forth all
unexercised options outstanding as of February 28, 2009 for each director
of the Corporation (other than Peter Allen and Russell Frederick whose
unexercised options are reflected in the table titled “Outstanding Option-Based
Awards and Share-Based Awards as at February 28, 2009” under the heading “Information
on Executive Compensation” below).

 

13

 

	
  Name of Director

  	
   

  	
  Number of

  Common Shares

  underlying

  unexercised

  options (#)

  	
   

  	
  Option exercise

  price

  ($)

  	
   

  	
  Option

  expiration date

  	
   

  	
  Aggregate value of

  unexercised in-the-

  money options as at February 28, 2009

  ($) (1)

  	
   

  
	
  Gerry
  Spencer (Chair)

  	
   

  	
  Nil

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Nil

  	
   

  
	
  Carl Eibl

  	
   

  	
  14,238

  	
   

  	
  $

  	
  5.73

  	
   

  	
  May 12,
  2013

  	
   

  	
  Nil

  	
   

  
	
  Claude
  Haw

  	
   

  	
  14,238

  	
   

  	
  $

  	
  5.73

  	
   

  	
  May 12,
  2013

  	
   

  	
  Nil

  	
   

  
	
   

  	
   

  	
  12,400

  	
   

  	
  $

  	
  5.47

  	
   

  	
  March 1,
  2012

  	
   

  	
  Nil

  	
   

  
	
  Terence
  Matthews

  	
   

  	
  Nil

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  Nil

  	
   

  
	
  Ake
  Persson (2)

  	
   

  	
  9,492

  	
   

  	
  $

  	
  5.73

  	
   

  	
  May 12,
  2013

  	
   

  	
  Nil

  	
   

  
	
   

  	
   

  	
  53,600

  	
   

  	
  $

  	
  0.10

  	
   

  	
  June 22,
  2011

  	
   

  	
  $

  	
  78,792

  	
   

  
												

 

(1)                                  The closing market price of
the Common Shares on the TSX on February 27, 2009 (being the last trading
day of the Corporation’s fiscal year ended February 28, 2009)  was $1.57 per Common Share.

 

(2)                                  Mr. Persson’s term as a
director of the Corporation expires at the Meeting.

 

Incentive plan awards — value vested by directors
during the year ended February 28, 2009

 

The following table sets forth the value
vested by each director of the Corporation (other than Peter Allen and Russell
Frederick whose value vested option-based awards are reflected in the table
titled “Incentive plan awards — value vested or earned during the year ended February 28,
2009” under the heading “Information on Executive Compensation” below) during
the year ended February 28, 2009.

 

	
  Name
  of Director

  	
   

  	
  Option-based
  awards — Value vested during the year

  ended February 28, 2009

  ($)

  	
   

  
	
  Gerry
  Spencer (Chair)

  	
   

  	
  Nil

  	
   

  
	
  Carl Eibl

  	
   

  	
  Nil

  	
   

  
	
  Claude
  Haw

  	
   

  	
  Nil

  	
   

  
	
  Terence
  Matthews

  	
   

  	
  Nil

  	
   

  
	
  Ake
  Persson (1)

  	
   

  	
  $

  	
  26,298

  	
   

  
					

 

(1)           Mr. Persson’s term as a director
of the Corporation expires at the Meeting.

 

14

 

DIRECTORS’ AND OFFICERS’
INSURANCE AND INDEMNIFICATION

 

The Corporation’s
by-laws provide for the indemnification by the Corporation of the Corporation’s
directors and officers from and against liability and costs in respect of any
action or suit against them in connection with the execution of their duties of
office, subject to certain limitations. The Corporation has also entered into contractual
indemnities in favour of each of the directors that provide, to the full extent
allowed by law, that the Corporation shall indemnify and save harmless each
director, his estate, executors, administrators, legal representatives and
lawful heirs, from and against any and all costs, charges or expenses
(including, but not limited to, an amount paid to settle any action or to
satisfy any judgment, legal fees on a solicitor and client basis, other
professional fees, out-of-pocket expenses for attending proceedings including
discoveries, trials, hearings and meetings, and any amount for which he is
liable by reason of any statutory provision whether civil, criminal or
otherwise (“indemnifiable costs”)), suffered or incurred by the director
or such other indemnified parties, directly or indirectly, as a result of or by
reason of the director: (i) being or having been a director or officer of
the Corporation or an affiliate of the Corporation or by reason of any action
taken by the director in his capacity as a director or officer of the
Corporation or an affiliate of the Corporation; (ii) being or having been
a member of a committee of the board of directors of the Corporation or an
affiliate of the Corporation; or (iii) acting as a member of the plan administrator
pursuant to the Stock Option Plan, subject to certain conditions being
satisfied including that the director: (a) acted honestly and in good
faith with a view to the best interests of the Corporation, or the best
interests of the Corporation’s affiliate, as the case may be; and (b) in
the case of a criminal or administrative action, proceeding, investigation,
inquiry or hearing that is enforced by monetary penalty, he had reasonable
grounds for believing that his conduct was lawful. The indemnities also provide
that indemnifiable costs will be paid by the Corporation immediately, with the
agreement that, in the event it is ultimately determined that the indemnified
party was not entitled to be so indemnified, such amounts shall be refunded to
the Corporation.

 

The Corporation has
purchased insurance referred to in subsection 124(6) of the Act for the
benefit of its directors and officers in respect of certain liabilities that
may be incurred by them in such capacities. 
The directors’ and officers’ insurance is contained in a policy issued
on June 1, 2008 and the annual premium of $81,500  has been paid by the Corporation. The
policy carries a limit of $20,000,000 and has a deductible of $50,000 for each
claim.

 

INDEBTEDNESS OF
DIRECTORS AND EXECUTIVE OFFICERS

 

No director, executive
officer or employee or former director, executive officer or employee of the
Corporation, or any associate of any such person, was indebted to the
Corporation or its subsidiaries at any time during the fiscal year ended February 28,
2009 and/or as at the date of this Circular.

 

15

 

INFORMATION
ON EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Overview

 

The responsibilities of
DragonWave’s Compensation Committee, discussed in detail in the Compensation
Committee’s charter, include:

 

·                  overseeing the total
compensation package for the Corporation’s “Named Executive Officers”,
being the Corporation’s President and Chief Executive Officer (namely, Peter
Allen), the Corporation’s Vice-President, Chief Financial Officer and Secretary
(namely, Russell Frederick) and the three other most highly compensated
executive officers of the Corporation and its subsidiaries that earned total
annual compensation during the year ended February 28, 2009 that exceeded
$150,000 and who were serving as executive officers as of February 28,
2009 (namely, Brian McCormack, Erik Boch and Alan Solheim);

 

·                  making recommendations to
the Board regarding the Corporation’s equity compensation plans and, to the
extent that authority to do so is delegated by the Board, approving grants
under such plans;

 

·                  approving all executive
officer employment and severance contracts; and

 

·                  evaluating the performance
of the Chief Executive Officer and making recommendations to the Board on the
Chief Executive Officer’s compensation level in light of that evaluation.

 

Objectives of Compensation Program

 

The Corporation’s compensation
practices are intended to attract and retain highly competent executives in a
competitive marketplace. The program provides the Named Executive Officers with
compensation that is industry competitive, internally equitable and
commensurate with their skills, knowledge, experience and
responsibilities.  The primary objective
of the program, however, is to firmly align total executive compensation with
the attainment of the Corporation’s annual performance goals, which are
principally based upon the Corporation’s revenues, operating profit, and
business development.

 

The compensation of the
Corporation’s executive officers, including the Named Executive Officers,
consists of base salary, cash bonuses expressed as a percentage of annual
salary, and incentive compensation in the form of stock options and the ability
to participate in the Corporation’s Employee Share Purchase Plan (the “ESPP”).

 

16

 

Elements of Compensation

 

Base Salary

 

As noted above,
the Compensation Committee evaluates the performance of the Corporation’s Chief
Executive Officer, and recommends to the Board the Chief Executive Officer’s
compensation level in light of that evaluation. The Chief Executive Officer’s
base salary is determined pursuant to the terms of an employment agreement,
with annual increases at the discretion of the Board. The Compensation
Committee reviews the base salary of the Chief Executive Officer on an annual
basis in light of his performance over the previous year. The Compensation
Committee reviewed Mr. Allen’s base salary in September 2008 and
recommended his salary be set at $200,000 for 2009. The Compensation Committee
considers the following factors in evaluating the Chief Executive Officer’s
performance:

 

·                                          the
degree to which he has displayed leadership for the senior management team and
the organization as a whole;

 

·                                          strategic
planning and the execution of the Corporation’s strategic plans;

 

·                                          the
Corporation’s financial results; and

 

·                                          communications
and relations with shareholders, the Board, senior management and employees.

 

Base salaries of
executives other than the Chief Executive Officer are reviewed by the
Compensation Committee after consultation with, and upon the recommendation of,
the Chief Executive Officer for approval by the Board. The base salary of each
executive officer is determined by the terms of their respective employment
agreement, with annual increases at the discretion of the Board. After
evaluating each executive officer’s performance over the year in light of (i) the
Corporation’s overall financial performance, (ii) the individual’s
performance during the year and contributions to the Corporation, and (iii) other
relevant factors (for example, market conditions), the Chief Executive Officer
may deem it appropriate to recommend executive officer base salary adjustments
to the Compensation Committee.

 

The Compensation
Committee also considers the factors above when evaluating the Chief Executive
Officer’s recommendations regarding base salary adjustments.  At their most recent annual reviews, the
Compensation Committee recommended that: Mr. Allen’s base salary be set at
$200,000, Mr. Frederick’s base salary be set at $185,000, Mr. McCormack’s
base salary be set at US$200,000, Mr. Boch’s base salary be set at
$185,000, and Mr. Solheim’s base salary be set at $185,000.

 

17

 

Variable Compensation —
Annual Cash Bonuses and Sales Commissions

 

The second
element of the Corporation’s compensation program is an annual cash bonus. All
of the Corporation’s executive officers are entitled to receive an annual cash
bonus based on corporate performance, except for Mr. McCormack whose
variable compensation is earned under a sales commission arrangement (described
below). Employment agreements with the Named Executive Officers set out the
parameters for the amount of such bonuses, with the Chief Executive Officer
being entitled to a on-plan performance bonus equal to 75% of his annual base
salary and the Corporation’s other Named Executive Officers (except for Mr. McCormack)
being entitled to an on-plan bonus equal to 50% of his annual base salary.

 

The Board
believes these bonuses play a key role in enabling the Corporation to attract,
retain and motivate executive officers. The Compensation Committee has broad
discretion in reviewing and recommending to the Board the amount of the annual
cash bonuses within the parameters described above. Within 90 days after the beginning of each
year, the Compensation Committee approves the Corporation’s performance goals
for that year. Those performance goals are generally based upon revenues,
operating profit, and business development. At the end of the fiscal year, the
Compensation Committee reviews the Corporation’s performance for that year on a
broad scale, and its success in achieving the performance goals in particular.
The Compensation Committee then recommends the annual bonus for the Corporation’s
Chief Executive Officer as a percentage of his annual base salary under his
employment agreement, and considers the Chief Executive Officer’s
recommendations in determining the cash awards for the Corporation’s other
executive officers. The Chief Executive Officer’s recommendations are guided by
his evaluation of the Corporation’s actual financial performance compared with
the Corporation’s performance goals and his assessment of the effectiveness of
the individual and collective efforts of the Corporation’s executive officers
in achieving the Corporation’s business objectives. The Compensation Committee
and the Chief Executive Officer also consider extraordinary efforts by
executive officers in various projects or initiatives during the year.

 

In April 2009,
the Compensation Committee determined that bonuses for fiscal year 2009 would
not be awarded to the Named Executive Officers. This decision was based on the
Corporation’s growth rate being less than planned, and to support expense
reduction measures implemented by the Corporation in December 2008 in
light of the difficulty in worldwide financial markets.

 

As indicated
above, Brian McCormack, the Corporation’s Vice President of Sales, is not
entitled to an annual cash bonus, but rather receives variable compensation in
the form of sales commissions in accordance with industry standards.  In fiscal year 2009, Mr. McCormack was
entitled to receive 0.85% of eligible revenues, payable half upon order receipt
and half upon revenue recognition.  The
percentage of revenue that Mr. McCormack is eligible to receive is
established annually and is intended to support the Corporation’s revenue
targets and to provide Mr. McCormack with a strong incentive to

 

18

 

grow the
Corporation’s revenues.  In fiscal year
2009, Mr. McCormack earned US$310,340 under his sales commission
plan.  Although other Named Executive
Officers support the Corporation’s sales activities, none of them receive
compensation under sales commission plans.

 

Equity Compensation

 

The third element
of the Corporation’s compensation program is equity compensation. Equity
compensation is intended to more closely align annual incentive compensation,
as well as total compensation, with the financial interests of shareholders.
The equity compensation component of the Corporation’s compensation program is
based upon: (1) awards of stock options under the Corporation’s Stock
Option Plan and (2) the ability to participate in the Corporation’s ESPP.

 

Stock Option Compensation

 

The Corporation’s Board
administers the Stock Option Plan. The purpose of the Stock Option Plan is to:

 

·                  increase the interest in the
Corporation’s welfare of those individuals who share primary responsibility for
the management, growth and protection of the Corporation’s business;

 

·                  furnish an incentive to such
individuals to continue providing their services to the Corporation; and

 

·                  provide a means through
which the Corporation may attract qualified persons to engage as directors,
officers, employees and consultants.

 

In determining
whether to grant options and how many options to grant to eligible persons
under the Stock Option Plan, consideration is given to each individual’s past
performance and contribution to the Corporation as well as that individual’s
expected ability to contribute to the Corporation in the future.

 

On January 8,
2009, based upon the recommendation of the Compensation Committee, the
Corporation’s Board authorized awards of options to the Named Executive
Officers and a number of other employees, on a basis consistent with the number
of options awarded in previous years. The awards to each of the Named Executive
Officers were as follows: Peter Allen — 70,000 options, Russell Frederick —
45,000 options, Brian McCormack — 15,000 options, Erik Boch — 45,000 options,
and Alan Solheim — 45,000 options.  All
of such options were granted at an exercise price of $1.34, expire on the fifth
anniversary of the date of grant, and vest one-fourth annually starting on the
first anniversary of the date of grant (except for options granted to Brian
McCormack which have a vesting period of two years).

 

19

 

Certain options
granted under the Stock Option Plan to the Named Executive Officers have
exercise prices that significantly exceed the current trading price of the
Common Shares.  The Board believes that
these underwater options no longer serve as an effective incentive, and
accordingly has recommended an option exchange program pursuant to which these
options would be cancelled and replaced with new options.  The proposed option exchange program requires
the approval of shareholders, which management is seeking at the Meeting.  See:  “Amendment
No. 2009-1 to Stock Option Plan Approving Exchange of Options” in this
Circular.

 

ESPP

 

The Corporation’s ESPP was
implemented in the 2008 fiscal year following the approval of shareholders
obtained at the Corporation’s last annual general and special meeting.  The purpose of the ESPP is to give employees
of the Corporation access to an equity participation vehicle, in addition to
the Stock Option Plan, through the purchase of Common Shares by payroll
deduction and the issuance of matching shares. 
The ESPP is intended to encourage employees to use their combined best
efforts on behalf of the Corporation to improve its profits through increased
sales, reduction of costs and increased efficiency.

 

In the fiscal
year ended February 28, 2009, one of the Named Executive Officers
participated in the ESPP, namely, Alan Solheim. During the fiscal year ended February 28,
2009, Mr. Solheim purchased 1,997 Common Shares under the ESPP and the
Corporation contributed 498 Common Shares to Mr. Solheim as matching
shares.

 

Employment Agreements

 

The Compensation Committee
reviews and approves every employment agreement entered into with senior
executives. The Corporation has entered into employment agreements with each
Named Executive Officer. The agreements provide each Named Executive Officer
with what the Compensation Committee believes to be a suitable base salary and
bonus, as described above. Termination and change of control provisions
contained in these agreements are described in detail under the heading “Termination
and Change-in-Control Provisions.”

 

Perquisites

 

No material additional
benefits or perquisites are currently provided to members of management that
are not available to employees of the Corporation generally.  Benefits are generally extended to all
employees include health, long-term disability, dental and group life
insurance.

 

20

 

Performance
Graph

 

The following graph compares the cumulative
shareholder return of the Common Shares to the cumulative returns of the
S&P/TSX Composite Index for the period commencing April 19, 2007 (the
date the Common Shares were first listed on the TSX) to May 14, 2009.  The graph assumes an investment of $100 on April 19,
2007 in the Corporation’s Common Shares.

 

 

While the Corporation’s share performance in
the financial year ended February 28, 2009 was below the S&P/TSX
Composite Total Return index at certain points during the year, the Corporation’s
performance continues to yield promising results with the Corporation reporting
revenue growth of 7% in the 2009 fiscal
year as compared to the previous fiscal year.  The Named Executive Officers’ compensation is
not based on performance of the Corporation’s stock price, and therefore the
Named Executive Officers’ compensation may not directly compare to the trend
shown above.

 

21

 

Summary
Compensation Table

 

The following table sets forth compensation
information for the fiscal year ended February 28, 2009 for the
Corporation’s Named Executive Officers.

 

	
  Name and

  principal position

  	
   

  	
  Salary

  ($)

  	
   

  	
  Option-based

  awards

  ($) (1)

  	
   

  	
  Non-equity

  incentive plan

  compensation

  ($)

  	
   

  	
  All other

  compensation

  ($)

  	
   

  	
  Total

  compensation

  ($)

  	
   

  
	
  Peter Allen

  President and Chief

  Executive Officer

  	
   

  	
  $

  	
  200,000

  	
   

  	
  $

  	
  49,000

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  	
  $

  	
  249,000

  	
   

  
	
  Russell Frederick

  Chief Financial Officer,

  Vice President and

  Secretary

  	
   

  	
  $

  	
  185,000

  	
   

  	
  $

  	
  31,500

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  	
  $

  	
  216,500

  	
   

  
	
  Erik Boch

  Vice President, R&D

  and Chief Technology Officer

  	
   

  	
  $

  	
  185,000

  	
   

  	
  $

  	
  31,500

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  	
  $

  	
  216,500

  	
   

  
	
  Brian McCormack

  Vice President, Sales

  	
   

  	
  US$

  	
  200,000

  	
   

  	
  US$

  	
  8,573

  	
  (2)

  	
  US$

  	
  310,340

  	
  (3)

  	
  Nil

  	
   

  	
  US$

  	
  518,913

  	
   

  
	
  Alan Solheim

  Vice President,

  Product Line Management

  	
   

  	
  $

  	
  185,000

  	
   

  	
  $

  	
  31,500

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  	
  $

  	
  216,500

  	
   

  
																	

 

(1)        Option
based award values are calculated at their fair market value established using
the Black-Scholes methodology, which has been chosen as the method to value
options as it is the most widely recognized methodology and is accepted by
Canadian Generally Accepted Accounting standards.  The Black-Scholes model considers various
factors including historical share prices, price volatility and interest rates.

(2)        Foreign
exchange rate used to convert Canadian dollar compensation to US dollars is
1.2248 (the Bank of Canada CDN$ to US$ closing rate on January 13, 2009,
being the date of option grant).

(3)        Mr. McCormack
earned  US$310,340 in sales commission in
fiscal year 2009.

 

Option-Based Awards

 

The
Corporation established the Stock Option Plan to attract, retain and provide an
incentive to its employees, directors, officers and consultants and to advance
the Corporation’s interests by providing these persons with the opportunity,
through stock options, to acquire an ownership interest in the Corporation. The
Stock Option Plan is administered by the Board. All options granted under the
Stock Option Plan must be approved by the Board, unless authority to grant
options is specifically delegated to the Compensation Committee by the Board.
In granting options, the Compensation Committee or the Board, as applicable,
may determine the terms relating to each option, including the number of shares
subject to each option, the exercise price in accordance with the terms of the
Stock Option Plan, the expiration date of each option, and the

 

22

 

extent
to which each option is exercisable during the term of the option. The Stock Option
Plan does not contemplate the inclusion of performance based criteria as a
condition of exercise of options.

 

The maximum number
of Common Shares issued or issuable under the Stock Option Plan is a fixed
percentage of 15% of the Common Shares outstanding from time to time. As of May 14,
2009, options to acquire 2,128,255
Common Shares (representing approximately 7.4% of the issued and outstanding Common Shares) are outstanding under the
Stock Option Plan.  The Stock Option Plan
also contains provisions governing “restricted stock” that was issued by the
Corporation prior to its initial public offering on the exchange of certain
options previously granted under the Stock Option Plan.  The restricted stock is subject to repurchase
rights in favour of the Corporation that lapse over time.  The Stock Option Plan provides on and as of
the date of listing of the Common Shares on the TSX, the Corporation shall not
make any new awards of restricted stock under the Stock Option Plan.

 

For each financial
year of the Corporation, the maximum number of Common Shares issuable pursuant
to options granted to a director by virtue of his or her service as a director
in that financial year, is that number of Common Shares equal to 0.05% of the
outstanding Common Shares as at the last day of such financial year.  The Stock Option Plan also provides that no
awards may be made under the Stock Option Plan if such award would result in: (a) the
number of Common Shares issued to insiders pursuant to the Stock Option Plan,
together with all of the Corporation’s other share compensation arrangements,
within any one year period, exceeding 10% of the outstanding Common Shares
(excluding Common Shares issued as or under share compensation arrangements
during such year), or (b) the number of Common Shares issuable to insiders
at any time pursuant to the Stock Option Plan and all of the Corporation’s
other share compensation arrangements exceeding 10% of the outstanding Common
Shares.

 

Options granted
pursuant to the Stock Option Plan are priced at the volume weighted average
trading price of the Common Shares on the TSX, or another stock exchange where
the majority of the volume and value of the Common Shares occurs, for the five
trading days immediately preceding the date of grant.  Subject to applicable securities laws, the rules of
the TSX or any stock exchange or market on which the Common Shares are then
listed or admitted to trading, and any other requirements of the plan
administrator, the exercise price of options may be satisfied by the actual
delivery or deemed delivery or assignment to the Corporation of Common Shares
having a fair market value (as determined by the plan administrator) equal to
the purchase price.  In practice, “cashless”
exercises are funded by the actual sale of Common Shares by the participant.

 

Under the Stock
Option Plan, unless otherwise determined by the Board, options vest as to 25%
on the first anniversary of the date of grant and thereafter, as to 1/36th of
the remaining 75% of the optioned shares on the last day of each month, such
that the option is fully vested on that date which is four years from the date
of the grant.

 

No option granted
under the Plan extends for a period longer than ten years from the date of
grant, and unless otherwise approved by the Board, the term and expiry date of
any option is five

 

23

 

years after the
date of the grant.  The Stock Option Plan
contains provisions governing the termination of options in the event of a
termination of employment or service of a director, officer, consultant or
employee.  In such circumstances,
unvested options terminate immediately. 
Vested options expire 120 days after the death of the participant or 30
days after the termination of the participant’s service “without cause” or by
reason of voluntary resignation (or earlier if the option was otherwise due to
expire).  In the case of termination of
the participant’s services “for cause”, or by reason of the breach of the
participant’s fiduciary duty to the Corporation or consulting arrangement with
the Corporation, vested options terminate immediately.

 

If an option expires (other than an expiry by
reason of the termination of the
participant’s services “for cause”, or by reason of the breach of the participant’s
fiduciary duty to the Corporation or consulting arrangement with the
Corporation) during or within ten days after a period during which a
participant is prohibited from exercising options pursuant to the Corporation’s
insider trading policy, as in effect from time to time (a “Black Out Period”),
the participant may elect for the term of such option to be extended to the
date which is ten business days after the last day of the Black Out Period;
provided, that, the expiration date as extended will not in any event be beyond
the later of: (i) December 31 of the calendar year in which the
option was otherwise due to expire; and (ii) the 15th day of the third
month following the month in which the option was otherwise due to expire.

 

In the event of a “Corporate Event” (as
defined below), the Board in its sole discretion (but subject to obtaining the
prior approval of the TSX if required by the rules, regulations and policies of
the TSX) may, without any action or consent of the participants, provide for: (a) the
continuation or assumption of outstanding options by or to the successor to all
or substantially all of the assets or capital shares of the Corporation, or any
other successor of the business of the Corporation as determined by the Board
(the “Acquirer”); (b) the substitution of options for options and/or
shares of restricted stock and/or other securities of the Acquirer; (c) the
substitution of options with a cash incentive program of the Acquirer; (d) the
acceleration of the vesting of options and, in the case of outstanding options
the right to exercise such options, to a date prior to or on the date of the
Corporate Event, and the expiration of outstanding options to the extent not
timely exercised by the date of the Corporate Event or such other date as may
be designated by the Board; (e) the cancellation of all or any portion of
the outstanding Options by a cash payment and/or other consideration receivable
by the holders of Common Shares as a result of the Corporate Event equal to the
excess, if any, of the fair market value (as determined by the Board), on the
date of the Corporate Event, over the exercise price of the Common Shares
subject to the outstanding options or portion thereof being cancelled; or (f) such
other actions or combinations of the foregoing actions as it deems fair and
reasonable in the circumstances.  A “Corporate
Event” is defined as: (i) a merger, amalgamation, consolidation,
reorganization or arrangement of the Corporation with or into another
corporation (other than a merger, amalgamation, consolidation, reorganization
or arrangement of the Corporation with one or more of its related entities); (ii) a
tender offer for all or substantially all of the outstanding Common Shares; (iii) the
sale of all or substantially all of the assets of the Corporation; or (iv) any
other acquisition of the business of the Corporation as determined by the
Board.

 

24

 

The Plan contains additional restrictions
that are only applicable to options which are characterized as “incentive stock
options” for the purposes of the United States Internal Revenue Code of 1986
(the “Code”).  In the case of incentive
stock option grants to holders of 10% or more of the Common Shares, the
exercise price of such incentive stock options must be not less than 110% of
the fair market value of the Common Shares (provided that such fair market
value shall not be less than the 5-day volume weighted trading price on the
date of grant).

 

Except in the case
of death of an optionee or in accordance with the applicable law, options are
not assignable without the consent of the Corporation.

 

Amendments to the
Stock Option Plan generally require the consent of the TSX and the shareholders
of the Corporation given at a duly constituted meeting. However, the following
amendments to the Stock Option Plan may be made by the Board without TSX or
other stock exchange approval and without shareholder approval: (a) amendments
of a technical, clerical or “housekeeping” nature, or to clarify any provision
of the Stock Option Plan, including without limiting the generality of the
foregoing, any amendment for the purpose of curing any ambiguity, error or
omission in the Stock Option Plan or to correct or supplement any provision of
the Stock Option Plan that is inconsistent with any other provision of the
Stock Option Plan; (b) suspension or termination of the Stock Option Plan;
(c) amendments to respond to changes in legislation, regulations,
instruments (including National Instrument 45-106), stock exchange rules (including
the rules, regulations and policies of the TSX) or accounting or auditing
requirements; (d) amendments respecting administration of the Stock Option
Plan; (e) any amendment to the definition of “Consultant”, “Officer”, “Director”
or “Employee” therein or otherwise relating to the eligibility of any service
provider of the Corporation or a related entity to receive an award under the
Stock Option Plan; (f) changes to the vesting provisions, or conditions
for the lapse of any repurchase right, for any outstanding option or Common
Shares issued subject to contractual repurchase rights, except with respect to
awards held by any insider; (g) amendments to reduce the exercise price or
purchase price of an option, except with respect to an option granted to an
insider; (h) amendments to the termination provisions of the Stock Option
Plan or any outstanding option, provided no such amendment may result in an
extension of any outstanding option held by an insider beyond its original
expiry date; (i) adjustments to reflect stock dividends, stock splits,
reverse stock splits, share combinations or other alterations of the capital
stock of the Corporation; (j) amendments to permit awards granted under
the Stock Option Plan to be transferable; (k) amendments necessary to
qualify any or all incentive stock options for such favourable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code; and (l) any
other amendment, whether fundamental or otherwise, not requiring shareholder
approval under applicable law (including, without limitation, the rules,
regulations and policies of the TSX).

 

Shareholder
approval will be required for the following types of amendments of the Stock
Option Plan: (a) amendments to the number of common shares issuable under
the Stock Option Plan, including an increase to a fixed maximum number of
common shares or a fixed maximum percentage or a change from a fixed maximum number
of common shares to a fixed maximum percentage; (b) amendments: (i) reducing
the exercise price or purchase price of an option held by an insider, or (ii) extending
the term of an option that benefits an insider; and (c) amendments

 

25

 

required to be
approved by shareholders under applicable law (including, without limitation,
the rules, regulations and policies of the TSX). Further, except in certain
limited circumstances, in no event may the Board of Directors alter or impair
any rights or increase any obligations with respect to any option previously
granted without the consent of the optionee.

 

Proposed amendments
to the Stock Option Plan to permit the exchange of certain options held by “insiders”
for new grants of options at a lower exercise price, and to extend the expiry
dates of certain options held by “insiders”, are being submitted to the
shareholders for consideration at the Meeting. 
See:  “Amendment No. 2009-1
to Stock Option Plan to Approve Exchange of Options” and “Amendment No. 2009-2
to Stock Option Plan to Approve Extension of Option Expiry Dates”.

 

Outstanding Option-Based Awards and Share-Based Awards as at February 28,
2009

 

The following table
sets forth all unexercised options outstanding as of February 28, 2009 for
each Named Executive Officer.

 

	
   

  	
   

  	
  Option-Based
  Awards

  	
   

  	
  Share-Based
  Awards

  	
   

  
	
  Name of

  Executive

  Officer

  	
   

  	
  Number
  of

  Common

  Shares

  underlying

  unexercised

  options

  (#)

  	
   

  	
  Option

  exercise

  price

  ($) (1)

  	
   

  	
  Option

  expiration date

  	
   

  	
  Aggregate
  value

  of unexercised

  in-the-money

  options as at

  February 28,

  2009

  ($) (2)

  	
   

  	
  Number
  of

  Common

  Shares that

  have not

  vested (#)

  	
   

  	
  Market
  value

  of share-

  based awards

  that have not

  vested as at

  February 28,

  2009 ($)(1)

  	
   

  
	
  Peter Allen

  	
   

  	
  70,000

  	
   

  	
  $

  	
  1.34

  	
   

  	
  January 13, 2014

  	
   

  	
  $

  	
  16,100

  	
   

  	
  9,472

  	
   

  	
  $

  	
  14,871

  	
   

  
	
   

  	
   

  	
  80,000

  	
   

  	
  $

  	
  6.57

  	
   

  	
  October 5, 2012(1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  235,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22, 2010

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Russell 

  	
   

  	
  45,000

  	
   

  	
  $

  	
  1.34

  	
   

  	
  January 13, 2014

  	
   

  	
  $

  	
  10,350

  	
   

  	
  6,555

  	
   

  	
  $

  	
  10,291

  	
   

  
	
  Frederick

  	
   

  	
  45,000

  	
   

  	
  $

  	
  6.57

  	
   

  	
  October 5, 2012(1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  70,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22, 2010

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Erik Boch

  	
   

  	
  45,000

  	
   

  	
  $

  	
  1.34

  	
   

  	
  January 13, 2014

  	
   

  	
  $

  	
  10,350

  	
   

  	
  2,488

  	
   

  	
  $

  	
  3,906

  	
   

  
	
   

  	
   

  	
  50,000

  	
   

  	
  $

  	
  6.57

  	
   

  	
  October 5, 2012(1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  100,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22, 2010(3)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Brian 

  	
   

  	
  15,000

  	
   

  	
  $

  	
  1.34

  	
   

  	
  January 13, 2014

  	
   

  	
  $

  	
  3,450

  	
   

  	
  2,688

  	
   

  	
  $

  	
  4,220

  	
   

  
	
  McCormack

  	
   

  	
  20,000

  	
   

  	
  $

  	
  6.57

  	
   

  	
  October 5, 2012(1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  60,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22, 2010(3)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Alan Solheim

  	
   

  	
  45,000

  	
   

  	
  $

  	
  1.34

  	
   

  	
  January 13,
  2014

  	
   

  	
  $

  	
  10,350

  	
   

  	
  5,000

  	
   

  	
  $

  	
  7,850

  	
   

  
	
   

  	
   

  	
  50,000

  	
   

  	
  $

  	
  6.57

  	
   

  	
  October 5,
  2012(1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010(3)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1)                        If
the resolution approving Amendment No. 2009-1 to the Stock Option Plan is
approved by the shareholders at the Meeting, these options may be exchanged for
new options with an exercise price of not less than $3.38.  The expiry date of the new options to be
issued on the exchange will be extended by a period of one (1) year from
the expiry date of the options listed in the table.

 

26

 

(2)                        The
closing market price of the Common Shares on the TSX on February 27, 2009
(being the last trading day of the Corporation’s fiscal year ended February 28,
2009) was $1.57 per Common Share.

(3)                        If
the resolution approving Amendment No. 2009-2 to the Stock Option Plan is
approved by the shareholders at the Meeting, the expiry date of these options
will be extended by a period of not more than one (1) year.

 

Incentive plan awards – value vested or earned during the year ended February 28,
2009

 

The following table
sets forth the value vested or earned by the Named Executive Officers under the
Corporation’s equity and non-equity incentive plans.

 

	
  Name of

  Executive Officer

  	
   

  	
  Option-based
  awards –

  Value vested during the year

  ended February 28, 2009

  ($)(1)

  	
   

  	
  Share-based
  awards – Value 

  vested during the year ($)

  	
   

  	
  Non-equity
  incentive plan

  compensation – Value earned

  during the year ended February

  28, 2009

  ($)

  	
   

  
	
  Peter Allen

  	
   

  	
  $

  	
  45,426

  	
   

  	
  $

  	
  85,709

  	
   

  	
  Nil

  	
   

  
	
  Russell Frederick

  	
   

  	
  $

  	
  13,530

  	
   

  	
  $

  	
  59,203

  	
   

  	
  Nil

  	
   

  
	
  Erik Boch

  	
   

  	
  $

  	
  19,330

  	
   

  	
  $

  	
  44,532

  	
   

  	
  Nil

  	
   

  
	
  Brian McCormack

  	
   

  	
  $

  	
  11,600

  	
   

  	
  $

  	
  24,116

  	
   

  	
  US$310,340(2)

  	
   

  
	
  Alan Solheim

  	
   

  	
  $

  	
  15,461

  	
   

  	
  $

  	
  134,263

  	
   

  	
  Nil

  	
   

  

                

(1)                        Represents
the aggregate dollar value that would have been realized if the options under
the option-based award had been exercised on the vesting date.

(2)                        Mr. McCormack
earned  US$310,340 in sales commission in
fiscal year 2009.

 

ESPP

 

The
ESPP was established on July 17, 2008 (the “Effective Date”)
following approval of the ESPP at the Corporation’s 2008 annual and special
meeting of shareholders.

 

The
ESPP is open for participation to all employees (including directors and
officers who are under a permanent full-time or part-time contract of
employment with the Corporation) of the Corporation and any subsidiary subject
to certain provisions contained within the ESPP.

 

Summary of ESPP

 

Pursuant
to the ESPP, 500,000 Common Shares (approximately 1.75% of the 28,559,973 issued and outstanding Common Shares on the
Record Date) are reserved for issuance under the ESPP.  All Common Shares purchased or issued
pursuant to the ESPP come from the treasury of the Corporation.

 

The
Board has full power and authority to administer the ESPP on behalf of the
Corporation, including the power and authority to delegate the administration
of the ESPP to the Compensation Committee. The Board determines questions of
interpretation or application of the

 

27

 

ESPP
and its decisions shall be final and binding on all participants. Board members
receive no additional compensation for their services in administering the
ESPP.

 

Eligible
employees become participants in the ESPP by delivering to the Corporation an election
to purchase shares prior to the commencement of the applicable purchase period.
Each participant contributes to the ESPP, at the participant’s option, an
amount equal to or between the following minimum and maximum amounts (in whole
percentages): a minimum of one percent (1%) of the participant’s basic
compensation, and a maximum of ten percent (10%) of the participant’s basic
compensation. The contributions are made through payroll deductions at the end
of each employee’s bi-weekly or monthly pay period, as applicable. The
Corporation, as agent of the participant, makes such deductions and pays the
participant’s contribution to the Administrator (as such term is defined in the
ESPP).

 

On
the last business day of each month, the Administrator purchases Common Shares
from the Corporation based on the contributions received from each participant
during the preceding month (the “Participant Shares”). The purchase
price of the Participant Shares is the volume weighted average closing trading
price of the Common Shares on the TSX for the five trading days immediately
preceding the last business day of such month. The Administrator deposits the
Participant Shares into an account in the name of the participant and holds
such shares on behalf of such participant.

 

The
Corporation matches a portion of each employee’s participation in the ESPP by
issuing additional Common Shares to each participant (through the
Administrator). Specifically, on  the
last business day of each month, the Corporation issues to the Administrator
that number of Common Shares (the “Matching Shares”) equal to
twenty-five percent (25%) of the aggregate number of Participant Shares
purchased by the Administrator on behalf of the participants for such month for
each participant. The Matching Shares are deposited into a trust account by the
Administrator on behalf of the Corporation.

 

The
Participant Shares purchased on behalf of each participant vest immediately to
the benefit of such participant. Subject to provisions in the ESPP relating to
a change in control of the Corporation, the Matching Shares vest one year from
the date of issuance of such Matching Shares.

 

In
the event of a change of control of the Corporation, the Board, in its sole
discretion (but subject to obtaining the prior approval of the TSX if required
by the rules, regulations and policies of the TSX) may, without any action or
consent of the participants in the ESPP, provide for: (a) the continuation
of the vesting period with regard to any unvested Matching Shares; (b) the
substitution of any unvested Matching Shares for shares of the acquirer; (c) the
substitution of any unvested Matching Shares with a cash incentive program of
the acquirer; (d) the acceleration of the vesting period to a date prior
to or on the date of the change of control; (e) the cancellation of all or
any portion of any unvested Matching Shares by a cash payment and/or other
consideration receivable by the holders of any unvested Matching Shares as a
result of the change in control equal to the market price of the unvested
Matching Shares on the date of the change in control; or (f) such other
actions or combinations of the foregoing actions as it deems

 

28

 

fair
and reasonable in the circumstances.

 

Upon
the termination of employment of any participant for any reason, any unvested
Matching Shares held by the Administrator for such participant are forfeited by
such participant. A participant whose employment is terminated for any reason
other than death must withdraw or otherwise transfer all of their Participant
Shares and vested Matching Shares in such participant’s account within ninety
(90) days of such termination of employment. The participant may also request
that the Administrator sell the Participant Shares and vested Matching Shares
in the participant’s account and distribute the cash proceeds to the
participant. In the event of the death of a participant, the Participant Shares
and vested Matching Shares in such participant’s account are distributed to
such participant’s estate in accordance with the instructions of such
participant’s legal representative. Such distribution may take the form of a
distribution of the cash realized from the sale of such Participant Shares and
vested Matching Shares by the Administrator if so requested by the legal
representative of the participant’s estate.

 

The
Corporation reserves the right to discontinue use of payroll deductions at any
time such action is deemed advisable. The ESPP will terminate on the date which
is ten (10) years from the Effective Date, unless earlier terminated by
the Board. No right or interest of any participant in or under the ESPP may be
assigned by such participant.

 

No
Common Shares are issuable under the ESPP at any time to any Insider (as such
term is defined in the ESPP) if such issuance, together with all of the
Corporation’s previously established or proposed Share Compensation
Arrangements (as such term is defined in the ESPP), including the ESPP, could
result, at any time, in: (i) the number of Common Shares issued to
Insiders pursuant to the ESPP, together with all of such other Share
Compensation Arrangements, within any one (1) year period exceeding ten
percent (10%) of the issued and outstanding Common Shares; or (ii) the
number of Common Shares issuable to Insiders at any time pursuant to the ESPP
and all such other Share Compensation Arrangements exceeding ten percent (10%)
of the issued and outstanding Common Shares.

 

Amendments to the
ESPP generally require the consent of the TSX and the shareholders of the
Corporation given at a duly constituted meeting. However, the following
amendments to the ESPP may be made by the Board without TSX or other stock
exchange approval and without shareholder approval: (a) amendments of a technical,
clerical or “housekeeping” nature, or to clarify any provision of the ESPP,
including without limiting the generality of the foregoing, any amendment for
the purpose of curing any ambiguity, error or omission in the ESPP or to
correct or supplement any provision of the ESPP that is inconsistent with any
other provision of the ESPP; (b) suspension or termination of the ESPP; (c) amendments
to respond to changes in legislation, regulations, instruments (including
National Instrument 45-106), stock exchange rules (including the rules,
regulations and policies of the TSX) or accounting or auditing requirements; (d) amendments
respecting administration of the ESPP; (e) any amendment to the definition
of “Employee” in the ESPP; (f) any amendment to the definition of “Subsidiary”
in the ESPP and the consequential amendments to Appendix “B” of the ESPP; (g) changes
to the vesting provisions for any outstanding Unvested Matching Shares (as
defined in the ESPP); (h) amendments to the participant contribution provisions
of the ESPP; (i) amendments to the

 

29

 

withdrawal and
suspension provisions of the ESPP; (j) amendments to the number or
percentage of Matching Shares contributed by the Corporation; (k) amendments
to the termination provisions of the ESPP; (l) adjustments to reflect
stock dividends, stock splits, reverse stock splits, share combinations or
other alterations of the capital stock of the Corporation; and (m) any
other amendment, whether fundamental or otherwise, not requiring shareholder
approval under applicable law (including, without limitation, the rules,
regulations and policies of the TSX).

 

Shareholder
approval will be required for the following types of amendments of the ESPP: (a) amendments
to the number of Common Shares issuable under the ESPP, including an increase
to the fixed maximum number of Common Shares or a change from a fixed maximum
number of Common Shares to a fixed maximum percentage; and (b) amendments
required to be approved by shareholders under applicable law (including,
without limitation, the rules, regulations and policies of the TSX).

 

Termination and Change-in-Control Benefits

 

Peter Allen.  The
Corporation may terminate Mr. Allen’s employment by providing him with
twelve months compensation (including any bonus entitlement) if he is
terminated without cause, and no compensation if he is terminated with cause. Mr. Allen
may terminate his employment with the Corporation upon ninety days prior
written notice.  Mr. Allen is subject
to industry standard covenants in the Corporation’s favour, including
non-competition and non-solicitation covenants for a period of twelve months
after termination of employment.

 

Russell Frederick.  The
Corporation may terminate Mr. Frederick’s employment by providing him with
six months compensation (including any bonus entitlement) if he is terminated
without cause, and no compensation if he is terminated with cause. Mr. Frederick
may terminate his employment with the Corporation upon two weeks prior written
notice.  Mr. Frederick is subject to
industry standard covenants in the Corporation’s favour, including
non-competition and non-solicitation covenants for a period of six months from
termination of employment.

 

Brian McCormack.  The
Corporation may terminate Mr. McCormack’s employment by providing him with
an amount equal to the greater of (i) twelve months base salary and (ii) one
month base salary for each full calendar year worked if he is terminated
without cause. If Mr. McCormack finds alternative employment or commences
work as an independent contractor during the twelve month notice period he is
entitled to a lump sum payment equal to 50% of the balance of such amount. Mr. McCormack
is not entitled to any compensation if he is terminated with cause. Mr. McCormack
may terminate his employment with the Corporation upon forty-five days prior
written notice.  Mr. McCormack is
subject to industry standard covenants in the Corporation’s favour, including
non-competition and non-solicitation covenants for a period of twelve months
from termination of employment.

 

Erik Boch.  The
Corporation may terminate Mr. Boch’s employment by providing him with six
months compensation (including any bonus entitlement) if he is terminated
without cause, and no compensation if he is terminated with cause. On a
termination without cause, Mr. Boch is also entitled to receive eighteen
months of additional vesting of any options to purchase Common

 

30

 

Shares then held by
him, and such options will not terminate at the end of the Corporation’s
standard post-service exercise period but instead may be exercised until their
date of expiry, and the lapse of any repurchase right then applicable to Common
Shares then held by Mr. Boch will accelerate by eighteen months. Mr. Boch
may terminate his employment with the Corporation upon thirty days prior
written notice.  Mr. Boch is subject
to industry standard covenants in the Corporation’s favour, including
non-competition and non-solicitation covenants for a period of six months from
termination of employment.

 

Alan Solheim.  The
Corporation may terminate Dr. Solheim’s employment by providing him with
six months compensation (including any bonus entitlement) if he is terminated
without cause, and no compensation if he is terminated with cause. Dr. Solheim
may terminate his employment with the Corporation upon two weeks prior written
notice. Dr. Solheim is subject to industry standard covenants in the
Corporation’s favour, including non-competition and non-solicitation covenants
for a period of six months from termination of employment.

 

Option
Vesting on Change-in-Control

 

On a merger,
amalgamation, consolidation, reorganization or other business combination in
which the shareholders of the Corporation prior to such event own less than 50%
of the outstanding voting shares of the surviving or continuing entity, or on
the sale or other disposition of all of the assets of the Corporation, all
options to purchase Common Shares held by each of the executive officers of the
Corporation will vest and become immediately and fully exercisable, and any
repurchase rights applicable to Common Shares held by the executive officers of
the Corporation will immediately lapse and terminate.

 

Director Compensation

 

Information with
respect to the compensation of the Corporation’s directors is set forth above
under the heading “Compensation of Directors”.

 

31

 

SECURITIES AUTHORIZED FOR ISSUANCE

UNDER EQUITY COMPENSATION PLANS

 

The following table sets
forth certain information with respect to the Stock Option Plan and the ESPP as
at February 28, 2009:

 

	
  Plan Category

  	
   

  	
  Number of
  securities to be 

  issued upon exercise of outstanding options,

  warrants and rights

  (a)

  	
   

  	
  Weighted-average
  exercise

  price of outstanding options,

  warrants and rights

  (b)

  	
   

  	
  Number of
  securities

  remaining available for

  future issuance under equity

  compensation plans

  (excluding securities

  reflected in column (a))

  (c)

  	
   

  
	
  Equity compensation plans approved by security holders (1)

  	
   

  	
  2,075,918

  	
   

  	
  $

  	
  3.37

  	
   

  	
  898,804 

  	
  (2)

  
	
  Equity compensation plans not approved by
  security holders

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
   

  	
   

  	
  2,075,918

  	
   

  	
  $

  	
  3.37

  	
   

  	
  898,804

  	
   

  

 

(1)          The only equity compensation plans currently
approved by security holders as of the date of this Circular are the Stock
Option Plan and the ESPP.

(2)          Comprised of 400,028 Common Shares that may
issued under the Stock Option Plan and 498,776 Common Shares that may be issued
under the ESPP.

 

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

 

The Corporation and its
Board are committed to exercising effective corporate governance in the conduct
of the Corporation’s business and the Board’s affairs.  National Instrument 58-101 - Disclosure of
Corporate Governance Practices (the “National Instrument”) promulgated
by the applicable Canadian securities regulatory authorities requires reporting
issuers to disclose their approach to corporate governance and relate their
corporate governance practices to specific guidelines.  The National Instrument serves as the
reference point for this Statement of Corporate Governance Practices.

 

Overview

 

The Board is
responsible for managing the business and affairs of the Corporation.  It is the Board’s belief that good corporate
governance improves corporate performance and benefits all shareholders.

 

32

 

Board of Directors

 

The Board is
currently comprised of seven directors. 
Directors of the Corporation are elected annually by the
shareholders.  The composition of the
Board provides a mix of skills and experience to guide the strategy and
operations of the Corporation.

 

The Board has
concluded that four of the seven current directors (namely, Gerry Spencer, Ake
Persson, Carl Eibl and Claude Haw), together constituting a majority of the
Board, and the proposed nominee director (namely, Jean-Paul Cossart), are or
would be “independent” within the meaning of the National Instrument.  The definition of “independence” in the
National Instrument focuses on whether a director, directly or indirectly, has
a material relationship with an issuer that could reasonably be expected to
interfere with the exercise of that director’s independent judgment, provided
that employees and certain other categories of individuals are considered to
have material relationships with an issuer. 
Specifically, the Board has concluded that:  Gerry Spencer, Ake Persson, Carl Eibl, Claude
Haw and Jean-Paul Cossart are or would be 
“independent” within the meaning of the National Instrument; Peter Allen
and Russell Frederick are not “independent” as a result of their positions as
executive officers of the Corporation; and Terry Matthews is not independent by
reason of the interests disclosed below under the heading “Interests of
Informed Persons in Material Transactions”. 
The Board believes that the extensive knowledge of the Corporation’s
business and industry brought to the Corporation by Messrs.  Allen,
Frederick and Matthews is beneficial to the other directors and contributes to
the effectiveness of the Board.

 

The Corporation’s
Nominating and Governance Committee has the responsibility for determining, on
an annual basis, whether Board members are “independent” within the meaning of
the National Instrument.

 

The following is a
list of those directors (or proposed nominee directors) of the Corporation who
are also directors of other reporting issuers:

 

	
  Director

  	
   

  	
  Reporting Issuer

  	
   

  	
  Exchange/Market

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gerry Spencer

  	
   

  	
  AT
  Communications Group plc

  	
   

  	
  AIM

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Terence Matthews

  	
   

  	
  March Networks
  Corporation

  Bridgewater
  Systems Corporation

  CounterPath
  Corporation

  Mitel
  Networks Corporation

  	
   

  	
  TSX

  TSX

  TSX-V/OTC BB

  n/a

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jean-Paul Cossart

  	
   

  	
  Mitel
  Networks Corporation

  	
   

  	
  n/a

  

 

At each Board
meeting, the “independent” directors have the ability to hold in camera sessions without the presence of
the non-independent directors and other members of the Corporation’s
management, a process intended to facilitate open and candid discussion among
the “independent” directors.  Although
not regularly scheduled, the Board exercises its ability to hold such in camera sessions whenever any “independent”
director(s) deems it necessary. 
Since

 

33

 

February 29,
2008, no such in camera sessions
were deemed to be necessary by the Board and none were held.

 

Gerry Spencer, an “independent”
director, serves as the Board’s Chair. 
In addition to chairing all Board meetings, the Chair’s role is to
facilitate and chair discussions among the Corporation’s “independent”
directors, facilitate communication between the “independent” directors and the
Corporation’s management, and, if and when necessary, act as a spokesperson on
behalf of the Board in dealing with the press and members of the public.  The Chair’s responsibilities and duties are
described in detail in a position description developed by the Board in
co-operation with the current Chair.  The
existence of the position of Chair is not intended in any way to inhibit
discussions among the directors or between any of them and the Corporation’s
management.  The Chair, the Nominating
and Governance Committee, the Audit Committee and the Board at large are
responsible for ensuring that the Board effectively discharges its mandate.

 

During the year
ended February 28, 2009, the Board held nine (9) meetings.  Each meeting was attended by all directors
with the following exceptions: (i) Terence Matthews was absent from three (3) meetings;
and (ii) Claude Haw was absent from one (1) meeting.

 

Mandate of the Board

 

On February 23, 2007, the Board adopted
a written mandate of directors’ duties and responsibilities.  A copy of the Corporation’s Mandate for the
Board of Directors is attached to this Circular as Schedule “A” and is
also available on the Corporation’s website at www.dragonwaveinc.com.

 

Board Committees

 

The Board of
Directors has established the Audit Committee, the Compensation Committee, the
Nominating and Governance Committee and the Disclosure Committee to assist the
Board in efficiently carrying out its responsibilities. The Board does not
currently have an executive committee.

 

Audit Committee

 

The mandate, role,
responsibilities and procedures of the Audit Committee are set forth in the
Corporation’s Audit Committee Charter. 
The Audit Committee is responsible for, among other things, reviewing
the Corporation’s financial reporting procedures, internal controls and the
performance of the Corporation’s external auditors.  The Audit Committee is also responsible for
reviewing quarterly financial statements, the annual financial statements and
related press releases prior to their approval by the full Board and certain
other documents required by regulatory authorities.  The Audit Committee Charter addresses in
detail the relationship between the Audit Committee, the Corporation’s external
auditors and management of the Corporation, and contemplates direct
communication channels between the Audit Committee and the external
auditors.  The Audit Committee is
empowered to retain persons having special competence as necessary to assist it
in fulfilling its responsibilities.

 

34

 

The Audit Committee
is currently comprised of three “independent” directors: Claude Haw (Committee
Chair), Gerry Spencer and Ake Persson. 
All members of the Audit Committee have accounting or related financial
expertise.  This Committee held five (5) meetings during the year ended February 28,
2009, and each meeting was attended by all members. Following the Meeting, and
assuming all of management’s nominees are elected to the Board by the
shareholders of the Corporation, Ake Persson will be replaced on the Audit
Committee by independent nominee Jean-Paul Cossart.

 

Additional
information relating to the Audit Committee as required pursuant to National
Instrument 52-110 - Audit Committees, promulgated by the applicable Canadian
securities regulatory authorities, may be found in the Corporation’s Annual
Information Form for the year ended February 28, 2009 (the “AIF”)
(see “Article 15 - Audit Committee” in the AIF and Schedule 15.1  to the AIF which sets forth a copy of the
Audit Committee Charter).  A copy of the
AIF may be found on SEDAR at www.sedar.com and otherwise may be obtained free
of charge upon request from Investor Relations at the Corporation’s head office
located at 411 Legget Drive, Suite 600, Ottawa, Ontario, K2K 3C9, Canada.
A copy of the Corporation’s Audit Committee Charter is also available on the
Corporation’s website at www.dragonwaveinc.com.

 

Compensation
Committee

 

The Compensation
Committee makes recommendations to the Board on executive compensation,
including the compensation of the President and Chief Executive Officer.  The responsibilities of the Compensation Committee
also include oversight of the Corporation’s equity compensation plans and
management succession strategy.  At least
a majority of the Compensation Committee members must be “independent” within
the meaning of the National Instrument.

 

The Compensation
Committee is currently composed of three “independent” directors:  Carl Eibl (Committee Chair), Ake Persson and
Claude Haw.  This Committee
held two (2) meetings during the
year ended February 28, 2009, and each meeting was attended by all
members. Following the Meeting, and assuming all of management’s nominees are
elected to the Board by the shareholders of the Corporation, Ake Persson will
be replaced on the Compensation Committee by independent nominee Jean-Paul
Cossart.

 

Nominating
and Governance Committee

 

Pursuant to the
Nominating and Governance Committee Charter, the mandate of the Nominating and
Governance Committee is to assist the directors  of
the Corporation in carrying out the Board’s oversight responsibility for
ensuring that the strategic direction of the Corporation is reviewed annually
and that the Board and each of its committees carry out their respective
functions in accordance with an appropriate process.  The Nominating and Governance Committee is
also responsible for assessing the effectiveness of the Board as a whole, each
committee of the Board, and the contribution of each individual director.  The Nominating and Governance Committee is
responsible for governance issues and for identifying, recruiting, nominating,
endorsing, recommending the appointment of, and orienting, new directors, as
well

 

35

 

as the ongoing
training and education of existing directors. 
The Nominating and Governance Committee also reviews the Corporation’s
Insider Trading Policy, Disclosure Policy and Code of Business Conduct and
Ethics and is responsible for recommending changes and any action required to
deal with any breach of any such policy or code.  At least a majority of the Nominating and
Governance Committee members must be “independent” within the meaning of the
National Instrument.

 

The Nominating and
Governance Committee is currently composed of three “independent” directors:
Gerry Spencer (Committee Chair), Carl Eibl and Claude Haw.  This
Committee held two (2) meetings and one (1) strategy meeting as part of a Board meeting during the
year ended February 28, 2009, and each meeting was attended by all members.

 

The full Board will
continue to be directly involved in corporate governance matters upon the
recommendation of the Nominating and Governance Committee and where otherwise
appropriate.

 

A copy of the
Corporation’s Nominating and Governance Committee Charter is available on the
Corporation’s website at www.dragonwaveinc.com and otherwise may be obtained
free of charge upon request from Investor Relations at the Corporation’s head
office located at 411 Legget Drive, Suite 600, Ottawa, Ontario, K2K 3C9.

 

Disclosure
Committee

 

The Corporation has adopted a written Disclosure Policy and has formed a Disclosure
Committee consisting of members of senior management (namely, Peter Allen and
Russell Frederick) in order to oversee the Corporation’s disclosure practices
and generally regulate the manner in which the Corporation and its directors,
officers, employees and other representatives interact with shareholders and
other stakeholders, analysts and the public. 
The Corporation’s Disclosure Policy has been established in accordance
with relevant disclosure requirements set out in applicable Canadian and United Kingdom securities laws.  The Disclosure Committee was formed on February 23,
2007 and meets periodically on an as-needed basis throughout the year.

 

A copy of the Corporation’s Disclosure
Committee Charter and Disclosure Policy is available on the Corporation’s
website at www.dragonwaveinc.com and otherwise may be obtained free of charge
upon request from Investor Relations at the Corporation’s head office located
at 411 Legget Drive, Suite 600, Ottawa, Ontario, K2K 3C9.

 

Position Descriptions

 

The Board has adopted written position
descriptions for the Chair of the Board and the chairs of each of the Audit
Committee, the Compensation Committee and the Nominating and Governance
Committee.  The Board and the Chief
Executive Officer have jointly developed and adopted a written position
description for the Chief Executive Officer.

 

36

 

Orientation and Continuing Education

 

Pursuant to the Corporation’s Nominating and
Governance Committee Charter, the Nominating and Governance Committee monitors
and recommends training and development programs for the Board and individual
directors.  The Corporation encourages
its directors to pursue continuing education relating to their positions as
members of the Board.  From time to time,
management arranges for the Corporation’s external advisors to provide
materials to, or meet with, the Board in order to address continuing education
topics such as governance and continuous disclosure obligations.  The meetings in which new directors
participate (including the annual review sessions of strategic plans and
budgets), as well as informal discussions with other directors and the
Corporation’s senior management, also permit new directors to rapidly
familiarize themselves with the Corporation’s operations and history.

 

Ethical Business Conduct

 

The Corporation is committed to a culture of
honesty, integrity and accountability and strives to operate its business in
accordance with the highest ethical standards and applicable laws, rules and
regulations.  In furtherance of the
foregoing, the Corporation has adopted a written Code of Business Conduct and
Ethics (the “Code”) which governs the behaviour of its directors,
officers and employees.  The Code also
provides that all directors, officers and employees must avoid any situation
that constitutes a conflict of interest or the appearance of a conflict of
interest with the Corporation.

 

As required by the Act, directors formally
disclose to the Board any material transactions or arrangements in which the
director has an interest, and interested directors refrain from voting on such
transaction or agreement.

 

The full Board is responsible for monitoring
compliance with the Code, for regularly assessing its adequacy, for
interpreting the Code in any particular situation and for approving any changes
to the Code from time to time.  The Code
provides that all directors, officers and employees of the Corporation are
required to immediately report any violation of the Code or any applicable law,
rule or regulation to the Audit Committee in accordance with the
Corporation’s Whistleblower Policy.  A copy of the Code is available on SEDAR at www.sedar.com, or the Corporation’s
web-site at www.dragonwaveinc.com,
and otherwise may be obtained free of charge upon request from Investor
Relations at the Corporation’s head office located at 411 Legget Drive, Suite 600,
Ottawa, Ontario, K2K 3C9.

 

The Corporation has also adopted an Insider
Trading Policy which governs the conduct of directors, officers, employees and
other insiders of the Corporation with respect to the trading of the
Corporation’s securities, particularly in the context of material information
concerning the Corporation and its affairs. 
Among other matters, the Insider Trading Policy sets out prohibited
trading activities, establishes guidelines for identifying insiders of the
Corporation and describes reporting requirements applicable to insiders.

 

37

 

Nomination of Directors

 

The Corporation’s
nominating committee is subsumed in the Nominating and Governance Committee
which is composed entirely of “independent” directors.  The
Nominating and Governance Committee has the responsibility of annually
recommending to the Board whether a director should be nominated for
re-election based upon the Nominating and Governance Committee’s consideration
of his or her performance in office and any other factors deemed relevant.  The Nominating and Governance Committee may
also identify new individuals and recommend such individuals as nominees to the
Board, whether to fill vacancies on the Board, its committees or
otherwise.  The Chairman of the Board,
the Chief Executive Officer and other individual directors may also identify
potential candidates as directors and the Nominating and Governance Committee
or the full Board, as the case may be, may review such candidates and make
appropriate recommendations.

 

The Nominating and
Governance Committee also monitors the size and composition of the Board and its
committees to ensure effective decision-making and reports to the full Board on
any resulting recommendations.

 

In preparation for
the Corporation’s recent initial public offering, the full Board participated
in the identification and selection of each Board candidate.  The full Board also participated in the
selection of the members of its committees. 
In identifying candidates for election to the Board, emphasis is placed
on individuals possessing expertise that is strategic to the fulfillment of the
Mandate for the Board.

 

Compensation

 

The Board, acting on the recommendations of
the Compensation Committee which is composed entirely of “independent”
directors, reviews the adequacy of management’s and the directors’
compensation, as determined based on reviews of the competitive marketplace, to
ensure that they are respectively current and reflective of the roles of each
director.  Additional disclosure relating
to compensation matters is found above under the headings “Information on
Executive Compensation” and “Board Committees - Compensation Committee”.

 

Assessment

 

In general, since the directors work closely
as a group throughout the year, the Chair and the full Board are able to
continuously assess whether each director is contributing towards the fulfilment
of the Mandate for the Board and otherwise performing his duties at the highest
level.

 

INTERESTS OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

 

Kanata
Research Park Corporation

 

The
principal office of the Corporation at 411 Legget Drive, Ottawa, Ontario
is leased by the Corporation 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

 

38

 

on
November 30, 2011. The Corporation 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
Corporation 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.  Management 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 Terry Matthews, a
director of the Corporation.

 

BreconRidge
Corporation

 

On
November 4, 2005, the Corporation entered into a supply agreement with
BreconRidge Corporation (“BreconRidge”) (the “Supply Agreement”).
Pursuant to the Supply Agreement, BreconRidge has agreed to provide the
Corporation with production and pre-production products and related services
that may included prototype development and manufacturing, and pre-production
and production product manufacturing for materials by way of purchase orders
and forecasts from the Corporation. In fiscal 2009, the Corporation purchased
manufacturing and other services in the approximate amount of
$14.1 million from BreconRidge. The Corporation 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 Corporation has no
minimum purchase commitments pursuant to the Supply Agreement. Upon request
from the Corporation, Breconridge provides the Corporation with price
quotations for pre-production and production products and services. If such
quotation is acceptable to the Corporation, the Corporation 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 Corporation or
BreconRidge may terminate the Supply Agreement on 30 days notice. Terry
Matthews, a director of the Corporation, is an investor in BreconRidge.

 

APPOINTMENT
OF AUDITOR

 

It
is intended to vote the Common Shares represented by the proxies solicited in
respect of the Meeting, on any ballot that may be called for, unless authority
to do so is withheld, in favour of the appointment of the firm of Ernst &
Young LLP, as the auditor of the Corporation. 
Ernst & Young LLP has been the auditor of the Corporation since
2000.  In order to be effective, the
resolution appointing the auditor must be approved by a majority of the votes
cast at the Meeting.

 

39

 

SHAREHOLDER RIGHTS PLAN AGREEMENT

 

Introduction

 

On
January 29, 2009, the Board approved a Shareholder Rights Plan Agreement
(the “Rights Plan”).  The
objective of the Rights Plan is to enable the Board to better control the
timing and process of unsolicited take-over bids.  The Rights Plan was not adopted in response
to or in anticipation of any pending or threatened take-over bid.  It is not intended to and will not prevent a
take-over of the Corporation.

 

Specifically,
the Rights Plan is designed to encourage an offeror either to make a Permitted
Bid (as defined therein), without approval of the Board, or to negotiate the
terms of the offer with the Board. 
Failure to pursue either course of action creates the potential for
substantial dilution of the offeror’s position.

 

The
underlying purpose of the Rights Plan is to address the following concerns,
which are widely believed to be inherent in the provisions of current
legislation governing take-over bids in Canada.

 

Time

 

Currently,
the minimum period for a take-over bid is 35 days.  The Board is of the view that 35 days
constitutes an insufficient amount of time to permit the directors and
shareholders to assess an offer, or to allow the directors to negotiate with
the offeror, solicit competing offers and otherwise try to maximize shareholder
value.  The Rights Plan provides that a
Permitted Bid must be open for at least 60 days and must remain open for a
further period of not less than 10 business days after the offeror publicly
announces that more than 50% of the outstanding Common Shares held by
Independent Shareholders (as defined therein) have been deposited or tendered
and not withdrawn.  The term “Independent
Shareholders” generally includes all holders of Common Shares other than the
offeror and its associates or affiliates and persons acting “jointly or in
concert” with such persons within the meaning of the Rights Plan.

 

Pressure
to Tender

 

A
shareholder may feel compelled to tender to a take-over bid which the
shareholder considers to be inadequate because, in failing to tender, the
shareholder may be left with illiquid or minority discounted shares.  This is particularly so in the case of a
partial bid where the offeror wishes to obtain a control position but does not
wish to acquire all of the Common Shares. 
The Rights Plan contains a shareholder approval mechanism in the
Permitted Bid definition, which is that no Common Shares may be taken up and
paid for under the bid unless more than 50% of the outstanding Common Shares
held by Independent Shareholders have been deposited or tendered and not
withdrawn.  By requiring a Permitted Bid
to remain open for acceptance for a further period of not less than 10 business
days following a public announcement that more than 50% of the outstanding
Common Shares have been deposited, a shareholder’s decision to accept a bid is
separated from the decision to tender, lessening concern about undue pressure
to tender to the

 

40

 

Unequal
Treatment of Shareholders

 

bid.
Under current securities legislation, an offeror may obtain control or
effective control of the Corporation without paying full value, without
obtaining shareholder approval and without treating all shareholders
equally.  For example, an acquirer could
acquire blocks of shares by private agreement from one or a small group of
shareholders at a premium to market price, which premium is not shared by the
other shareholders.  In addition, a
person could slowly accumulate shares through stock exchange acquisitions which
may result, over time, in an acquisition of control or effective control
without paying a control premium or fair sharing of any control premium among
shareholders.  Under the Rights Plan, if
a take-over bid is to qualify as a Permitted Bid, all offers to acquire 25% or
more of the Corporation’s Common Shares must be made to all holders of Common
Shares.

 

Effect
of the Rights Plan

 

It
is not the intention of the Board to entrench itself or avoid a bid for control
that is fair and in the best interest of shareholders.  For example, shareholders may tender to a bid
which meets the Permitted Bid criteria without triggering the Rights Plan,
regardless of the acceptability of the bid to the Board.

 

Generally,
the board of directors of a company confronted with an unsolicited take-over
bid will not be allowed to maintain a shareholder rights plan indefinitely to
keep a bid from shareholders.  In the
event of an unsolicited take-over bid, the Board believes that the effect of
the Rights Plan will be to enhance shareholder value, ensure equal treatment of
shareholders in the context of an acquisition of control, and lessen the
pressure upon a shareholder to tender to a bid.

 

The
Rights Plan does not reduce the duty of the Board to act honestly, in good
faith and in the best interests of the Corporation and its shareholders, or to
consider on that basis any take-over bid that is made, nor does the Rights Plan
alter the proxy mechanism to change the Board, create dilution on the initial
issue of the rights, or change the way in which the Corporation’s Common Shares
trade.

 

A
summary of the principal terms and conditions of the Rights Plan is set forth
in Exhibit “A-1” attached hereto. 
The complete text of the Rights Plan is available on www.sedar.com or upon request.  Shareholders
wishing to receive a copy of the Rights Plan should submit their request to Investor Relations at the Corporation’s head office located
at 411 Legget Drive, Suite 600, Ottawa, Ontario K2K 3C9.

 

If
the resolution attached hereto as Exhibit “A” is approved at the
Meeting, the Rights Plan will continue in effect.  Notwithstanding the foregoing, in order for
the Rights Plan to remain in effect, it must be ratified at the Corporation’s
2012 annual meeting of shareholders (and every third anniversary shareholder
meeting thereafter) by: (i) holders of a majority of the votes cast by
Independent Shareholders present in person or represented by proxy at each such
meeting, and

 

41

 

(ii) holders
of a majority of the votes cast by all shareholders present in person or
represented by proxy at each such meeting. 
If the Rights Plan does not receive any such approval at the applicable
time, the Rights Plan will automatically terminate unless any rights under the
Rights Plan have then been triggered.

 

If
the resolution is not approved, the Rights Plan will automatically terminate as
of the date of the Meeting.

 

Form of
Resolution and Vote Required

 

A
copy of the full text of the resolution to sanction, ratify and confirm the
enactment of the Rights Plan is annexed to this Circular as Exhibit “A”.  In order to be effective, the resolution must
be approved by:

 

·                                          not less than a majority of the votes cast by
Independent Shareholders (as such term is defined in the Rights Plan) present
or represented by proxy at the Meeting; and

 

·                                          not less than a majority of the votes cast by
shareholders present or represented by proxy at the Meeting; and

 

At
the date of this Circular, management believes that all shareholders are
Independent Shareholders.

 

Directors’
Recommendation

 

The
Board believes that the Rights Plan will result in fair treatment to
shareholders, is consistent with current best Canadian corporate practices and
addresses institutional investor guidelines. 
The Board therefore recommends that all shareholders vote FOR the resolution ratifying the Rights Plan
attached hereto as Exhibit “A”.

 

AMENDMENT NO. 2009-1 TO STOCK OPTION PLAN

APPROVING EXCHANGE OF OPTIONS

 

The Corporation is seeking shareholder
approval of an amendment to its existing Stock Option Plan to allow for a
one-time stock option exchange program for the benefit of the Corporation’s
officers.  The proposed amendment is in
the form attached to this Circular as Schedule B-1 (“Amendment 2009-1”).  If Amendment No. 2009-1 is approved, the
exchange program would allow officers (including officers who are also
directors) to exchange existing stock options for new grants of options with a
lower exercise price.  New options
received on the proposed exchange would be exercisable for the same number of
Common Shares and otherwise have the same terms and conditions as the exchanged
options, except that the vesting schedule and expiry date of the new options
would be extended for a period of one year. 
Because Amendment No. 2009-1 affects options granted to insiders of
the Corporation, shareholder approval of the amendment is required under the
terms of the Corporation’s Stock Option Plan and the rules and policies of
the Toronto Stock Exchange.

 

42

 

Overview
and Reasons for the Exchange

 

The Corporation has made significant efforts
over the past year to strengthen its business, diversify its market presence
and develop the Corporation’s various product platforms.  Management believes that these measures will
result in improved financial and operating performance in the future.  Notwithstanding these efforts, the Corporation’s
stock price has experienced a significant decline over the past year for
reasons that the Board believes to be outside the Corporation’s control,
specifically, global economic conditions and dramatic declines in financial
markets.  As a result, the Corporation’s
officers hold a significant number of options with exercise prices that exceed
the current market price of the Common Shares. 
The following table illustrates the exercise prices of the Corporation’s
options granted under the Stock Option Plan as at May 14, 2009:

 

	
  Exercise Price

  (Range)

  	
   

  	
  Weighted Average

  Exercise Price

  	
   

  	
  Common Shares

  issuable on

  exercise of

  Options held by

  Insiders

  (Directors or

  Officers) (1)

  	
   

  	
  Common Shares

  issuable on

  exercise of

  Options held by

  other Employees

  and Consultants

  	
   

  	
  Total

  	
   

  
	
  $0.10-$1.00

  	
   

  	
  $

  	
  0.10

  	
   

  	
  53,600

  	
   

  	
  Nil

  	
   

  	
  53,600

  	
   

  
	
  $1.01-$2.00

  	
   

  	
  $

  	
  1.37

  	
   

  	
  260,000

  	
   

  	
  192,000

  	
   

  	
  452,000

  	
   

  
	
  $2.01-$3.00

  	
   

  	
  $

  	
  2.46

  	
   

  	
  625,000

  	
   

  	
  212,800

  	
   

  	
  837,800

  	
   

  
	
  $3.01-$4.00

  	
   

  	
  $

  	
  3.59

  	
   

  	
  42,837

  	
   

  	
  61,100

  	
   

  	
  103,937

  	
   

  
	
  $4.01-$5.00

  	
   

  	
  $

  	
  4.65

  	
   

  	
  10,000

  	
   

  	
  28,500

  	
   

  	
  38,500

  	
   

  
	
  $5.01-$6.00

  	
   

  	
  $

  	
  5.43

  	
   

  	
  50,386

  	
   

  	
  204,982

  	
   

  	
  255,368

  	
   

  
	
  $6.01-$7.00

  	
   

  	
  $

  	
  6.57

  	
   

  	
  290,000

  	
   

  	
  97,050

  	
   

  	
  387,050

  	
   

  
	
  Total

  	
   

  	
  $

  	
  3.37

  	
   

  	
  1,331,823

  	
   

  	
  796,432

  	
   

  	
  2,128,255

  	
   

  

 

(1)          Includes
options to purchase 10,000 Common Shares awarded in 2007 to Jean-Paul Cossart,
one of management’s nominees to act as a director of the Corporation, in Mr. Cossart’s
capacity as a consultant of the Corporation.

 

The Corporation’s stock price has traded as
low as $0.96 over the last 52 weeks.  The
Board believes that underwater options no longer serve as an effective
incentive to motivate and retain the Corporation’s employees.

 

DragonWave’s management, like the Corporation’s
workforce at large, brings a high degree of specialized skill and experience to
the Corporation’s business.  The
Corporation relies on these individuals to implement strategic initiatives,
expand and develop the Corporation’s business, and anticipate and exceed
customer expectations.  Notwithstanding
current economic conditions, competition for individuals with the skills and
abilities necessary to execute on the Corporation’s business and strategic plan
continues to be intense.  The Board
believes that the proposed option

 

43

 

exchange program will increase shareholder
value by helping the Corporation to retain and motivate experienced and
productive members of management.

 

The proposed option exchange program will
also allow the Corporation to recapture value from compensation costs that the
Corporation is already incurring.  Under
applicable accounting rules, in its 2009 fiscal year the Corporation had to
recognize a total of approximately $624,000 in compensation expense related to
the Stock Option Plan, even though at the Corporation’s 2009 fiscal year end
approximately 78% of outstanding options had exercise prices that exceeded the
trading price of the Common Shares, and accordingly such options provided
little incentive value.  While
compensation expense will increase as a result of the proposed option exchange,
replacing underwater options with options issued at current trading prices
means that compensation expense will reflect a meaningful incentive.

 

The Board believes that the proposed option
exchange program is a superior alternative to increasing cash
compensation.  In light of difficult
economic conditions and the need to carefully manage the Corporation’s cash
resources, the Corporation’s executive officers did not receive any cash bonus
in the 2009 fiscal year.  The proposed
option exchange program is intended to ensure that executive officers continue
to have a meaningful overall incentive program while at the same time
conserving the Corporation’s cash.  The
Board also believes that the proposed option exchange program is preferable to
simply issuing new options while leaving underwater options outstanding, which
would leave an unacceptably small pool of options available for future grant
under the Stock Option Plan.

 

For the reasons described above, an option
exchange program for the Corporation’s non-executive employees is in the course
of being implemented.  Under this
program, non-executive employees and consultants will have the ability to
exchange outstanding options for new options to purchase an equal number of
Common Shares at an exercise price of $3.38, being the five-day volume weighted
average price of the Common Shares as at the close of trading on May 14,
2009.  Under the terms of the Stock
Option Plan and the rules and policies of the TSX, Amendment No. 2009-1
is necessary in order to enable the Corporation to extend this option exchange
program to the Corporation’s officers.

 

Summary of Material Terms

 

The principal terms of the option exchange
program contemplated by Amendment No. 2009-1 (the “Management Option
Exchange Program”) are as follows:

 

·                  The Management Option
Exchange Program will be open to all officers of the Corporation, including
officers who are also directors. Officers will be permitted to exchange any
outstanding options granted under the Stock Option Plan (the “Exchanged
Options”) for new options (the “New Options”).  The Corporation’s non-executive directors
will not participate in the Management Option Exchange Program.

 

44

 

·                  The exchange will occur on a
1:1 basis, such that the New Options will be exercisable for the same number of
Common Shares as the Exchanged Options. 
Any Exchanged Options that are replaced by New Options will be cancelled.

 

·                  The exercise price of the New
Options (the “Exchange Price”) will be equal to the greater of
the fair market value (based on the five-day volume weighted average trading
price) of the Common Shares as at the close of trading on:

 

·                  May 14, 2009
(being $3.38 per share), and

 

·                  the date of the
Meeting, or if on such date there is any material information (within the
meaning of the rules and policies of the TSX) that has not been publicly
disclosed, the date that is five trading days after disclosure of such material
information.

 

Since participation in the
Management Option Exchange Program is voluntary, the Corporation expects that
only options with exercise prices greater than the Exchange Price will be
exchanged for New Options.  Any options
that are eligible for the Management Option Exchange Program that are not
voluntarily exchanged by the holder shall continue in effect.

 

·                  Existing outstanding options
generally vest over a four year period measured from the date of grant, which
is the Corporation’s standard vesting schedule. 
However, the New Options will vest over a period of five years measured
from the original date of grant of the Exchanged Options that are forfeited on
the exchange.  The Board felt that it was
appropriate for officers who receive the benefit of the exchange to agree to an
extended vesting schedule to signify their long-term commitment to the
Corporation’s objectives.

 

·                  Existing outstanding options
generally expire after five years of the date of grant, which is the
Corporation’s standard option expiry schedule. 
On account of the extended vesting schedule described above, the New
Options will expire six years after the original date of grant of the Exchanged
Options that are forfeited on the exchange.

 

·                  Provided that shareholder
approval for Amendment No. 2009-1 is received at the Meeting, the option
exchange for directors and officers under the Management Option Exchange
Program will be effective after the date of determination of the Exchange
Price.

 

The full text of proposed Amendment 2009-1 is
set forth in Schedule B-1 to this Circular. 
If Amendment 2009-1 is approved, the following options held by insiders
will be eligible for exchange under the Management Option Exchange Program:

 

45

 

	
  Name of Option

  Holder

  	
   

  	
  Date of Grant

  	
   

  	
  Expiry Date

  	
   

  	
  Number of

  Shares

  Subject to

  Option

  	
   

  	
  Exercise
  Price

  (per share)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Peter Allen

  	
   

  	
  January 13,
  2009

  	
   

  	
  January 13,
  2014

  	
   

  	
  70,000

  	
   

  	
  $

  	
  1.34

  	
   

  
	
  President
  and Chief Executive Officer

  	
   

  	
  October 5,
  2007

  	
   

  	
  October 5,
  2012

  	
   

  	
  80,000

  	
   

  	
  $

  	
  6.57

  	
   

  
	
   

  	
   

  	
  June 22, 2006

  	
   

  	
  June 22,
  2010

  	
   

  	
  235,000

  	
   

  	
  $

  	
  2.46

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Russell Frederick

  	
   

  	
  January 13,
  2009

  	
   

  	
  January 13,
  2014

  	
   

  	
  45,000

  	
   

  	
  $

  	
  1.34

  	
   

  
	
  Chief
  Financial Officer,

  	
   

  	
  October 5,
  2007

  	
   

  	
  October 5,
  2012

  	
   

  	
  45,000

  	
   

  	
  $

  	
  6.57

  	
   

  
	
  Vice
  President and Secretary

  	
   

  	
  June 22, 2006

  	
   

  	
  June 22,
  2010

  	
   

  	
  70,000

  	
   

  	
  $

  	
  2.46

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Erik Boch

  	
   

  	
  January 13,
  2009

  	
   

  	
  January 13,
  2014

  	
   

  	
  45,000

  	
   

  	
  $

  	
  1.34

  	
   

  
	
  Vice
  President, R&D and 

  	
   

  	
  October 5,
  2007

  	
   

  	
  October 5,
  2012

  	
   

  	
  50,000

  	
   

  	
  $

  	
  6.57

  	
   

  
	
  Chief
  Technology Officer

  	
   

  	
  June 22, 2006

  	
   

  	
  June 22,
  2010

  	
   

  	
  100,000

  	
   

  	
  $

  	
  2.46

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David Farrar

  	
   

  	
  January 13,
  2009

  	
   

  	
  January 13,
  2014

  	
   

  	
  40,000

  	
   

  	
  $

  	
  1.34

  	
   

  
	
  Vice
  President, Operations

  	
   

  	
  October 5,
  2007

  	
   

  	
  October 5,
  2012

  	
   

  	
  45,000

  	
   

  	
  $

  	
  6.57

  	
   

  
	
   

  	
   

  	
  June 22, 2006

  	
   

  	
  June 22,
  2010

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Brian McCormack

  	
   

  	
  January 13,
  2009

  	
   

  	
  January 13,
  2014

  	
   

  	
  15,000

  	
   

  	
  $

  	
  1.34

  	
   

  
	
  Vice
  President, Sales

  	
   

  	
  October 5,
  2007

  	
   

  	
  October 5,
  2012

  	
   

  	
  20,000

  	
   

  	
  $

  	
  6.57

  	
   

  
	
   

  	
   

  	
  June 22, 2006

  	
   

  	
  June 22,
  2010

  	
   

  	
  60,000

  	
   

  	
  $

  	
  2.46

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Alan Solheim

  	
   

  	
  January 13,
  2009

  	
   

  	
  January 13,
  2014

  	
   

  	
  45,000

  	
   

  	
  $

  	
  1.34

  	
   

  
	
  Vice
  President, Product Line Management

  	
   

  	
  October 5,
  2007

  	
   

  	
  October 5,
  2012

  	
   

  	
  50,000

  	
   

  	
  $

  	
  6.57

  	
   

  
	
   

  	
   

  	
  June 22, 2006

  	
   

  	
  June 22,
  2010

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  

 

Again, because the Management Option Exchange
Program is voluntary, the Corporation expects that only options with an
exercise price greater than the Exchange Price will be exchanged under the
program.

 

Form of
Resolution and Vote Required

 

A copy of the full text of
the resolution to approve Amendment No. 2009-1 to the Corporation’s Stock
Option Plan is annexed to this Circular as Exhibit “B”.  In order to be effective, the resolution must
be approved by not less than a majority of the votes cast by shareholders
present or represented by proxy at the Meeting, excluding the votes of
securities held directly or indirectly by insiders who may benefit from the
Management Option Exchange Program.

 

Directors’
Recommendation

 

The Board believes that Amendment No. 2009-1
to the Corporation’s Stock Option Plan and the Management Option Exchange
Program will result in a more effective incentive to retain and motivate the
Corporation’s officers and as such is consistent with the enhancement of
shareholder value.  The Board therefore
recommends that all shareholders vote FOR the

 

46

 

resolution approving
Amendment No. 2009-1 to the Corporation’s Stock Option Plan annexed hereto
as Exhibit “B”.

 

AMENDMENT NO. 2009-2 TO STOCK OPTION PLAN

APPROVING EXTENSION OF OPTION EXPIRY DATES

 

The Corporation is seeking shareholder
approval for an amendment to its existing Stock Option Plan to allow for the
extension of expiry dates for certain options held by insiders of the Corporation
(“Amendment No. 2009-2”).  If
Amendment No. 2009-2 is approved, the expiry dates of options to purchase
an aggregate of 625,000 Common Shares held by officers of the Corporation will
be extended by one year.  The affected
options are detailed in the table below:

 

	
  Name of Officer

  	
   

  	
  Date of Grant

  	
   

  	
  Number of Shares

  Subject to Option

  	
   

  	
  Exercise Price

  (per share)

  	
   

  	
  Expiry Date (1)

  
	
  Peter
  Allen

  	
   

  	
  June 22,
  2006

  	
   

  	
  235,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Russell
  Frederick

  	
   

  	
  June 22,
  2006

  	
   

  	
  70,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Erik
  Boch

  	
   

  	
  June 22,
  2006

  	
   

  	
  100,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  David
  Farrar

  	
   

  	
  June 22,
  2006

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Brian
  McCormack

  	
   

  	
  June 22,
  2006

  	
   

  	
  60,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Alan
  Solheim

  	
   

  	
  June 22,
  2006

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  

 

(1)           The original expiry
date is listed in this column.  If
Amendment No. 2009-2 is approved, the Corporation will be authorized to extend
the expiry dates in this column by a period of up to one (1) year.

 

Background of and Reasons
for the Proposed Amendment

 

The options listed above expire four years
after the date of grant, which is not consistent with the Corporation’s
standard five-year expiry schedule.  In
order to standardize option compensation across the Corporation’s workforce, on
May 7, 2009 the Board approved a one-year extension of the expiry date for
options to purchase an aggregate of 205,600 Common Shares held by non-executive
employees that were originally granted with four year expiry dates.  Under the terms of the Stock Option Plan and
the rules and policies of the TSX, a similar one-year extension that
benefits any insider of the Corporation requires shareholder approval.  The Board believes that it is appropriate to
extend the expiry date of options held by executive officers that now expire
after four years, in order to bring these options into alignment with the
Corporation’s usual approach for option expiry.

 

Form of
Resolution and Vote Required

 

A copy of the full text of the resolution to
approve Amendment No. 2009-2 to the Corporation’s Stock Option Plan is
annexed to this Circular as Exhibit “C”.  In order to be effective, the resolution must
be approved by not less than a majority of the votes cast by shareholders
present or represented by proxy at the Meeting, excluding the votes of
securities held directly or

 

47

 

indirectly by insiders benefiting from the
extension of the expiry date under Amendment No. 2009-2.

 

Directors’
Recommendation

 

The Board believes that
Amendment No. 2009-2 to the Corporation’s Stock Option Plan is important
to reflect fair and consistent treatment of the various participants in the
Corporation’s Stock Option Plan.  The
Board therefore recommends that all shareholders vote FOR
the resolution approving Amendment No. 2009-1 to the Corporation’s Stock
Option Plan annexed hereto as Exhibit “B”.

 

SHAREHOLDER PROPOSALS

 

Shareholder
proposals must be submitted no later than February 18, 2010 
to be considered for inclusion in next year’s Management Proxy Circular
for the purposes of the Corporation’s next annual meeting of shareholders.

 

ADDITIONAL INFORMATION

 

Financial information
regarding the Corporation may be found in the Corporation’s comparative
financial statements and management’s discussion and analysis for the year
ended February 28, 2009. Additional information regarding the Corporation
may be found in the Corporation’s Annual Information Form for the year
ended February 28, 2009.  Copies of
the AIF, this Circular (together with collateral material for the Meeting) and
the Corporation’s financial statements and management’s discussion and analysis
for the year ended February 28, 2009, may be found on SEDAR at www.sedar.com
and otherwise may be obtained free of charge upon request from Investor
Relations at the Corporation’s head office located at 411 Legget Drive, Suite 600,
Ottawa, Ontario K2K 3C9.

 

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

 

APPROVAL OF BOARD OF DIRECTORS

 

The contents of this
Circular and the sending thereof to each holder of Shares entitled to receive
notice of and vote at the Meeting, to each director of the Corporation, to the
auditor of the Corporation and to the appropriate governmental agencies have
been approved by the directors of the Corporation.

 

DATED at Ottawa, Ontario, this 14th day of
May, 2009.

 

[signed]

 

Russell
Frederick

Chief
Financial Officer and Secretary

 

48

 

SCHEDULE “A”

 

MANDATE
FOR THE DIRECTORS OF

DRAGONWAVE INC.

 

1.                                       Purpose

 

The primary function of the directors (individually a “Director” and
collectively the “Board”) of DragonWave Inc. (the “Corporation”) is to
supervise the management of the business and affairs of the Corporation.  Management is responsible for the day-to-day
conduct of the business of the Corporation. 
The fundamental objectives of the Board are to enhance and preserve
long-term shareholder value and to ensure that the Corporation conducts
business in an ethical and safe manner. 
In performing its functions, the Board should consider the legitimate
interests that stakeholders, such as employees, customers and communities, may
have in the Corporation.  In carrying out
its stewardship responsibility, the Board, through the Chief Executive Officer
(the “CEO”), should set the standards of conduct for the Corporation.

 

2.                                       Procedure and Organization

 

The Board operates by delegating certain responsibilities and duties set
out below to management or committees of the Board and by reserving certain
responsibilities and duties for the Board. 
The Board retains the responsibility for managing its affairs, including
selecting its chairman and constituting committees of the Board.  The chairman of the Board shall be
independent within the meaning of required by applicable laws, rules and
regulations, and stock exchange requirements (“Applicable Laws”).  In this Mandate, the term “independent”
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. The Board shall assess, on an annual basis,
the adequacy of this Mandate.

 

3.                                       Responsibilities and Duties

 

The principal responsibilities and duties of the Board fall into a number
of categories which are summarized below.

 

(a)                                  Legal Requirements

 

(i)                                     The Board has the overall responsibility to ensure
that applicable legal requirements are complied with and documents and records
have been properly prepared, approved and maintained.

 

(ii)                                  The Board has the statutory responsibility to, among
other things:

 

A.                                   manage, or supervise the management of, the
business and affairs of the Corporation;

 

B.                                     act honestly and in good faith with a view to
the best interests of the Corporation;

 

C.                                     declare conflicts of interest, real or
perceived;

 

 

D.                                    exercise the care, diligence and skill that
reasonably prudent people would exercise in comparable circumstances;  and

 

E.                                      act in accordance with the obligations
contained in the Canada Business
Corporations Act (the “CBCA”), the regulations thereunder, the
articles and by-laws of the Corporation, applicable securities laws and
policies, applicable stock exchange rules, and other applicable legislation and
regulations.

 

(iii)                               The Board has the statutory responsibility for
considering the following matters as a Board which in law may not be delegated
to management or to a committee of the Board:

 

A.                                   any submission to the shareholders of any
question or matter requiring the approval of the shareholders;

 

B.                                     the filling of a vacancy among the directors
or in the office of auditor and the appointment or removal of any of the chief
executive officer, the chairman of the Board or the president of the Corporation;

 

C.                                     the issue of securities except as authorized
by the Board;

 

D.                                    the declaration of dividends;

 

E.                                      the purchase, redemption or any other form of
acquisition of shares issued by the Corporation;

 

F.                                      the payment of a commission to any person in
consideration of the person purchasing or agreeing to purchase shares of the
Corporation from the Corporation or from any other person, or procuring or
agreeing to procure purchasers for any such shares except as authorized by the
Board;

 

G.                                     the approval of a management proxy circular;

 

H.                                    the approval of a take-over bid circular,
directors’ circular or issuer bid circular;

 

I.                                         the approval of an amalgamation of the
Corporation;

 

J.                                        the approval of an amendment to the articles
of the Corporation;

 

K.                                    the approval of annual financial statements of
the Corporation; and

 

L.                                      the adoption,
amendment or repeal of any by-law of the Corporation.

 

In addition to those matters which at law
cannot be delegated, the Board must consider and approve all major decisions
affecting the Corporation, including all material acquisitions and

 

2

 

dispositions, material capital expenditures,
material debt financings, issue of shares and granting of options.

 

(b)                                 Strategy Development

 

The Board has the responsibility to ensure that there are long-term goals
and a strategic planning process in place for the Corporation and to
participate with management directly or through committees in developing and
approving the strategy by which the Corporation proposes to achieve these goals
(taking into account, among other things, the opportunities and risks of the
business of the Corporation).

 

(c)                                  Risk Management

 

The Board has the responsibility to safeguard the assets and business of
the Corporation, identify and understand the principal risks of the business of
the Corporation and to ensure that there are appropriate systems in place which
effectively monitor and manage those risks with a view to the long-term
viability of the Corporation.

 

(d)                                 Appointment, Training and Monitoring Senior Management

 

The Board has the responsibility to:

 

(i)                                     appoint the CEO, and together with the CEO, to
develop a position description for the CEO;

 

(ii)                                  with the advice of the compensation committee of the
Board (the “Compensation Committee”), develop corporate goals and objectives
that the CEO is responsible for meeting and to monitor and assess the
performance of the CEO in light of those corporate goals and objectives and to
determine the compensation of the CEO;

 

(iii)                               provide advice and counsel to the CEO in the
execution of the duties of the CEO;

 

(iv)                              develop, to the extent considered appropriate,
position descriptions for the chairman of the Board and the chairman of each
committee of the Board;

 

(v)                                 approve the appointment of all corporate officers;

 

(vi)                              consider, and if considered appropriate, approve,
upon the recommendation of the Compensation Committee and the CEO, the
remuneration of all corporate officers;

 

(vii)                           consider, and if considered appropriate, approve,
upon the recommendation of the Compensation Committee, incentive-compensation
plans and equity-based plans of the Corporation; and

 

3

 

(viii)                        ensure that adequate provision has been made to
train and develop management and members of the Board and for the orderly
succession of management, including the CEO.

 

(e)                                  Ensuring Integrity of Management

 

The Board has the responsibility, to the extent considered appropriate,
to satisfy itself as to the integrity of the CEO and other officers of the
Corporation and to ensure that the CEO and such other officers are creating a
culture of integrity throughout the Corporation.

 

(f)                                    Policies, Procedures and Compliance

 

The Board is responsible for the oversight and review of the following
matters and may rely on management of the Corporation to the extent appropriate
in connection with addressing such matters:

 

(a)                                  ensuring that the Corporation operates at all times
within applicable laws and regulations and to appropriate ethical and moral
standards;

 

(b)                                 approving and monitoring compliance with significant
policies and procedures by which the business of the Corporation is conducted;

 

(c)                                  ensuring that the Corporation sets appropriate
environmental standards for its operations and operates in material compliance
with environmental laws and legislation;

 

(d)                                 ensuring that the Corporation has a high regard for
the health and safety of its employees in the workplace and has in place
appropriate programs and policies relating thereto;

 

(e)                                  developing the approach of the Corporation to
corporate governance, including to the extent appropriate developing a set of
governance principles and guidelines that are specifically applicable to the
Corporation; and

 

(f)                                    examining the corporate governance practices within
the Corporation and altering such practices when circumstances warrant.

 

(g)                                 Reporting and Communication

 

The Board is responsible for the oversight and review of the following
matters and may rely on management of the Corporation to the extent appropriate
in connection with addressing such matters:

 

(i)                                     ensuring that the Corporation has in place policies
and programs to enable the Corporation to communicate effectively with
management, shareholders, other stakeholders and the public generally;

 

4

 

(ii)                                  ensuring that the financial results of the
Corporation are adequately reported to shareholders, other security holders and
regulators on a timely and regular basis;

 

(iii)                               ensuring that the financial results are reported
fairly and in accordance with applicable generally accepted accounting
standards;

 

(iv)                              ensuring the timely and accurate reporting of any
developments that could have a significant and material impact on the value of
the Corporation; and

 

(v)                                 reporting annually to the shareholders of the
Corporation on the affairs of the Corporation for the preceding year.

 

(h)                                 Monitoring and Acting

 

The Board is responsible for the oversight and review of the following matters
and may rely on management of the Corporation to the extent appropriate in
connection with addressing such matters:

 

(i)                                     monitoring the Corporation’s progress in achieving
its goals and objectives and revise and, through management, altering the direction
of the Corporation in response to changing circumstances;

 

(ii)                                  considering taking action when performance falls
short of the goals and objectives of the Corporation or when other special
circumstances warrant;

 

(iii)                               reviewing and approving material transactions
involving the Corporation;

 

(iv)                              ensuring that the Corporation has implemented
adequate internal control and management information systems;

 

(v)                                 assessing the individual performance of each
Director and the collective performance of the Board; and

 

(vi)                              overseeing the size and composition of the Board as
a whole to facilitate more effective decision-making by the Corporation.

 

4.                                       Board’s Expectations of Management

 

The Board expects each member of management to perform such duties, as
may be reasonably assigned by the Board from time to time, faithfully,
diligently, to the best of his or her ability and in the best interests of the
Corporation.  Each member of management
is expected to devote substantially all of his or her business time and efforts
to the performance of such duties. 
Management is expected to act in compliance with and to ensure that the
Corporation is in compliance with all laws, rules and regulations
applicable to the Corporation.

 

5

 

5.                                       Responsibilities and Expectations of Directors

 

The responsibilities and expectations of each Director are as follows:

 

(a)                                  Commitment and Attendance

 

All
Directors should make every effort to attend all meetings of the Board and
meetings of committees of which they are members. Members may attend by
telephone.

 

(b)                                 Participation in Meetings

 

Each
Director should be sufficiently familiar with the business of the Corporation,
including its financial position and capital structure and the risks and
competition it faces, to actively and effectively participate in the
deliberations of the Board and of each committee on which he or she is a
member.  Upon request, management should
make appropriate personnel available to answer any questions a Director may
have about any aspect of the business of the Corporation.  Directors should
also review the materials provided by management and the Corporation’s advisors
in advance of meetings of the Board and committees and should arrive prepared
to discuss the matters presented.

 

(c)                                  Code of Business Conduct and Ethics

 

The
Corporation has adopted a Code of Business Conduct and Ethics to deal with the
business conduct of Directors and officers of the Corporation.  Directors should be familiar with the
provisions of the Code of Business Conduct and Ethics.

 

(d)                                 Other Directorships

 

The
Corporation values the experience Directors bring from other boards on which
they serve, but recognizes that those boards may also present demands on a
Director’s time and availability, and may also present conflicts issues.
Directors should consider advising the chairman of
the Nominating and Governance Committee before accepting any new membership on
other boards of directors or any other affiliation with other businesses or
governmental bodies which involve a significant commitment by the Director.

 

(e)                                  Contact with Management

 

All
Directors may contact the CEO at any time to discuss any aspect of the business
of the Corporation. Directors also have complete access to other members of
management.  The Board expects that there
will be frequent opportunities for Directors to meet with the CEO and other
members of management in Board and committee meetings and in other formal or
informal settings.

 

6

 

(f)                                    Confidentiality

 

The
proceedings and deliberations of the Board and its committees are, and shall
remain, confidential.  Each Director
should maintain the confidentiality of information received in connection with
his or her services as a director of the Corporation.

 

(g)                                 Evaluating Board Performance

 

The
Board, in conjunction with the Nominating and Governance Committee, and each of
the committees of the Board should conduct a self-evaluation at least annually
to assess their effectiveness.  In
addition, the Nominating and Governance Committee should periodically consider
the mix of skills and experience that Directors bring to the Board and assess,
on an ongoing basis, whether the Board has the necessary composition to perform
its oversight function effectively.

 

6.                                       Qualifications and Directors’ Orientation

 

Directors should have the highest personal and professional ethics and
values and be committed to advancing the interests of the Corporation.  They should possess skills and competencies
in areas that are relevant to the business of the Corporation.  The CEO is responsible for the provision of
an orientation and education program for new Directors.

 

7.                                       Meetings

 

The Board should meet on at least a quarterly basis and should hold
additional meetings as required or appropriate to consider other matters.  In addition, the Board should meet as it
considers appropriate to consider strategic planning for the Corporation.  Financial
and other appropriate information  should be made available to the Directors in advance of Board meetings.  Attendance at each meeting of the Board
should be recorded.

 

Management may be asked to participate in any meeting of the Board.  The Board should meet separately from
management as considered appropriate to ensure that the Board functions
independently of management.  The
Directors independent of management should meet with no members of management
of the Corporation present as considered appropriate.

 

8.                                       Committees

 

The Board has established an Audit Committee, a Compensation Committee, a
Nominating and Governance Committee and a Disclosure Committee to assist the
Board in discharging its responsibilities. 
Special committees of the Board may be established from time to time to
assist the Board in connection with specific matters.  The chairman of each committee should report
to the Board following meetings of the committee.  The charter of each standing committee should
be reviewed annually by the Board.

 

7

 

9.                                       Evaluation

 

Each Director will be subject to an annual evaluation of his or her
individual performance. The collective performance of the Board and of each
committee of the Board will also be subject to annual review.  Directors should be encouraged to exercise
their duties and responsibilities in a manner that is consistent with this
mandate and with the best interests of the Corporation and its shareholders
generally.

 

10.                                 Resources

 

The Board has the authority to retain independent legal, accounting and
other consultants.  The Board may request
any officer or employee of the Corporation or outside counsel or the
external/internal auditors to attend a meeting of the Board or to meet with any
member of, or consultant to, the Board.

 

Directors are permitted to engage an outside legal or other adviser at
the expense of the Corporation where for example he or she is placed in a
conflict position through activities of the Corporation, but any such
engagement shall be subject to the prior approval of the Nominating and Governance Committee.

 

Approved
by the Directors on February 23, 2007.

 

8

 

Exhibit “A”

 

RESOLUTION OF THE SHAREHOLDERS

 

SHAREHOLDER RIGHTS PLAN AGREEMENT

 

BE IT RESOLVED THAT:

 

1.                                       the
Shareholder Rights Plan Agreement effective as of January 29, 2009 between the
Corporation and Computershare Investor Services Inc., as rights agent (the
“Rights Plan”), is hereby sanctioned, ratified and confirmed; and

 

2.                                       any
one director or any one officer of the Corporation is hereby authorized and
directed to execute, whether under the corporate seal of the Corporation or
otherwise, and to deliver all such other confirmations, instruments,
agreements, certificates and other documents and to do all such other acts and
things as in his or her opinion may be necessary or desirable in connection
with the foregoing.

 

 

Exhibit “A-1”

 

SUMMARY OF SHAREHOLDER RIGHTS PLAN AGREEMENT

 

The following is a summary of the terms and conditions of the Rights
Plan.  This summary is qualified in its
entirety by, and is subject to, the full text of the Rights Plan, a copy of
which is available at www.sedar.com or on request to the Corporation as
described in the accompanying Management Proxy Circular.  All capitalized terms where used in this
summary without definition have the meanings attributed to them in the Rights
Plan.

 

Issuance of Rights

 

One Right will be issued in respect of each Common Share outstanding as
of the Record Time (i.e., January 29, 2009).  One Right will also be issued in respect of
each Common Share issued after the Record Time and prior to the earlier of the
Separation Time and the Expiration Time. 
The exercise price of the Rights is three times the Market Price,
subject to appropriate anti-dilution adjustments.

 

Expiration Time

 

If the resolution attached as Exhibit “A” to the
accompanying Management Proxy Circular is approved by the requisite shareholder
approval at the Corporation’s Annual and Special Meeting of Shareholders to be
held on June 9, 2009, the Rights Plan will continue in effect.  Notwithstanding the foregoing, unless earlier
terminated in accordance with the Rights Plan, it must be ratified at the Corporation’s 2012 annual meeting of
shareholders (and every third anniversary shareholder meeting thereafter) by: (i) holders
of a majority of the votes cast by Independent Shareholders present in person
or represented by proxy at each such meeting, and (ii) holders of a
majority of the votes cast by all shareholders present in person or represented
by proxy at each such meeting.  If
the Rights Plan does not receive any such approval at the applicable time, the
Rights Plan will automatically terminate unless any rights under the Rights
Plan have then been triggered.

 

Separation Time - Rights
Exercise Privilege

 

The Rights will separate from the Common Shares, and will become
exercisable, at the Separation Time, i.e., that time which is: (a) the
tenth trading day after the earlier of: (i) the Stock Acquisition Date,
being the date of the first public announcement by the Corporation or an
Acquiring Person (being, subject to certain exceptions, any Person who is the
Beneficial Owner of twenty-five percent (25%) or more of the outstanding Voting
Shares) of facts indicating that a Person has become an Acquiring Person; and (ii) the
date of commencement of, or first public announcement of, the intent of any
Person to commence a Take-over Bid (other than a Permitted Bid or a Competing
Permitted Bid); or (b) such later date as may be determined by the Board
of Directors acting in good faith.

 

A “Permitted Bid” is defined as a Take-over Bid, made by an Offeror by
way of take-over bid circular, which also complies with the following
additional provisions:

 

(i)                                     the
Take-over Bid is made to all holders of Voting Shares on the books of the
Corporation, other than the Offeror;

 

 

(ii)                                  no
Voting Shares are taken up or paid for pursuant to the Take-over Bid unless
more than 50% of the Voting Shares held by Independent Shareholders shall have
been deposited or tendered pursuant to the Take-over Bid and not withdrawn;

 

(iii)                               no
Voting Shares are taken up or paid for pursuant to the Take-over Bid prior to
the close of business on a date that is no earlier than 60 days (or such
shorter period of time as may be permitted by the Board of Directors from time
to time) following the date of the Take-over Bid;

 

(iv)                              Voting
Shares may be deposited pursuant to such Take-over Bid at any time during the
period of time between the date of the Take-over Bid and the date on which
Voting Shares may be taken up and paid for and any Voting Shares deposited
pursuant to the Take-over Bid may be withdrawn until taken up and paid for; and

 

(v)                                 if
on the date on which Voting Shares may be taken up and paid for under the
Take-over Bid, more than 50% of the Voting Shares held by Independent
Shareholders have been deposited or tendered pursuant to the Take-over Bid and
not withdrawn, the Offeror makes a public announcement of that fact and the
Take-over Bid is extended to remain open for deposits and tenders of Voting
Shares for not less than ten Business Days from the date of such public
announcement.

 

The Rights will not be exercisable prior to the Separation Time.

 

Exercise of Rights

 

The acquisition by an Acquiring Person, including others acting jointly
in or concert, of 25% or more of the outstanding Shares, other than by way of a
Permitted Bid and other certain limited circumstances described in the Rights
Plan, is referred to as a “Flip-in Event”. 
Any Rights held by an Acquiring Person on or after the earlier of the
Separation Date and the Stock Acquisition Date will become null and void upon
the occurrence of a Flip-in Event.

 

Effective as of the close of business on the tenth trading day after
the Stock Acquisition Date, each Right (other than those held by an Acquiring
Person) will effectively permit the holder to purchase $2 worth of Common
Shares for $1 subject to appropriate anti-dilution adjustments (i.e., at a 50%
discount).

 

The issue of the Rights is not initially dilutive.  Upon a Flip-in Event occurring and the Rights
separating from the attached Common Shares, reported earnings per Common Share
on a fully diluted or non-diluted basis may be affected.  Holders of Rights who do not exercise the
Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.

 

Certificates and
Transferability

 

Prior to the Separation Time, the Rights will be evidenced by a legend
imprinted on certificates for Common Shares. 
Prior to the Separation Time, Rights will not be transferable separately
from the

 

2

 

attached Common Shares.  From and
after the Separation Time, the Rights will be evidenced by Rights certificates
which will be transferable and traded separately from the Common Shares.

 

Permitted Bid Requirements

 

The requirements of a Permitted Bid include the following:

 

1.                                       the take-over bid must be made by means of
a take-over bid circular;

 

2.                                       the take-over bid must be made to all
holders of Common Shares, other than the bidder;

 

3.                                       the take-over bid must not permit Shares
tendered pursuant to the take-over bid to be taken up prior to the expiry of a
period of not less than 60 days following the date of the bid and then only if
at such time more than 50% of the Common Shares held by Independent
Shareholders have been tendered pursuant to the take-over bid and not
withdrawn; and

 

4.                                       if more than 50% of the Common Shares held
by Independent Shareholders are tendered to the take-over bid within the 60 day
period, the bidder must make a public announcement of that fact and the
take-over bid must remain open for deposits of Common Shares for not less than
an additional 10 business days from the date of such public announcement.

 

The Rights Plan allows a Competing Permitted Bid to be made while a
Permitted Bid is in existence.  A
Competing Permitted Bid must satisfy all the requirements of a Permitted Bid
except for the minimum deposit period.  A
Competing Permitted Bid must also be subject to a condition that no Shares will
be taken up and paid for prior to 60 days after the date the earliest Permitted
Bid then in existence is made, and not prior to 35 days after the Competing
Permitted Bid is made.

 

Redemption

 

The Board of Directors may, with the prior consent of the holders of
Common Shares or Rights, as the case may be, given in accordance with the terms
of the Rights Plan, at any time prior to the occurrence of a Flip-in Event,
determine to redeem all, but not less than all, of the outstanding Rights at a
redemption price of $0.001 per Right.

 

Waiver

 

The Board of Directors may, at any time prior to the occurrence of a
Flip-in Event, determine to waive the application of the Flip-in Event
provisions to a take-over bid made by means of a take-over bid circular that
would otherwise be subject to these provisions. 
If the Board of Directors waives the application of the Flip-in Event
provisions to a take-over bid, the Board of Directors is deemed to have waived
the application of the Flip-in Event provisions to any other Flip-in Event
occurring by reason of any competing take-over bid made by means of a take-over
bid circular prior to the expiry of the take-over bid for which the waiver was
granted.  The Board of Directors may also
waive the application of the Flip-in Event provisions to a Flip-in Event where
the Acquiring Person became such by inadvertence if at the time of waiver it is
no longer an Acquiring Person.  The Board
of Directors may waive the application of the Flip-in Event provisions to any
other Flip-in Event upon the prior

 

3

 

consent of the holders of the Voting Shares or Rights, as the case may
be, given in accordance with the terms of the Rights Plan.

 

Supplement and Amendments

 

The Corporation is authorized to make amendments to the Rights Plan to
correct any clerical or typographical error or to maintain the validity of the
Rights Plan as a result of changes in law or regulation.  The Corporation may, with the prior consent
of the holders of Voting Shares expressed by majority vote, at any time before
the Separation Time or, if after the Separation Time, with the prior consent of
holders of Rights expressed by majority vote, amend, vary, rescind or delete
any provision of the Rights Plan and the Rights (whether or not such action
would materially adversely affect the interests of holders of Rights
generally).  No amendment shall be made
to the Rights Plan without the prior approval of the Toronto Stock Exchange.

 

4

 

Exhibit “B”

 

RESOLUTION OF THE SHAREHOLDERS

 

AMENDMENT NO. 2009-1 TO FOURTH AMENDED AND RESTATED

KEY EMPLOYEE STOCK OPTION/STOCK ISSUANCE PLAN

 

WHEREAS the Board of Directors has recommended an option exchange
program for the benefit of the officers of the Corporation to permit such
officers to exchange certain outstanding options for new options with lower
exercise prices;

 

BE IT RESOLVED THAT:

 

1.                                       Amendment No. 2009-1 to
the Corporation’s Fourth Amended and Restated Key Employee Stock Option/Stock
Issuance Plan approving the exchange of certain options held by insiders of the
Corporation for new grants of options, in the form annexed hereto as Schedule
B-1, is hereby approved; and

 

2.                                       any
one director or any one officer of the Corporation is hereby authorized and
directed to execute, whether under the corporate seal of the Corporation or
otherwise, and to deliver all such other confirmations, instruments,
agreements, certificates and other documents and to do all such other acts and
things as in his or her opinion may be necessary or desirable in connection
with Amendment No. 2009-1 and the implementation of the Management Option Exchange
Program contemplated therein.

 

 

Schedule B-1

 

Amendment No. 2009-1 to Fourth Amended and Restated 

Key Employee Stock Option/Stock Issuance Plan

 

1.                                       Capitalized terms not otherwise defined in this Amendment No. 2009-1
shall have the respective meanings set forth in the Corporation’s Fourth
Amended and Restated Key Employee Stock Option/Stock Issuance Plan.

 

2.                                       This Amendment No. 2009-1 sets forth the terms and
conditions of an Option exchange program for Officers (including, for greater
certainty, Officers who are also Directors) (the “Management Option Exchange
Program”).  The Management Option
Exchange Program will not be open to Directors who are not also Officers.

 

3.                                       The participation of any Officer in the Management Option
Exchange Program is voluntary.  Any
Options that are eligible for the Management Option Exchange Program that are
not voluntarily exchanged by a holder pursuant to such program shall continue
in effect unchanged (i.e., a holder shall be permitted, in the holder’s
discretion, to exchange only a portion of such holder’s outstanding Options
under the Management Option Exchange Program without affecting other Options
held by such holder).

 

4.                                       Pursuant to the Management Option Exchange Program, the
Corporation shall be permitted to exchange Options held by Officers that are
outstanding as of May 14, 2009 (any Options so exchanged being hereafter
referred to as the “Exchanged Options”) for new Options (the “New Options”).  The exchange will occur on a 1:1 basis, such that
the New Options will be exercisable for the same number of Shares as the
Exchanged Options.

 

5.                                       The exercise price of the New
Options (the “Exchange Price”) will be equal to the greater of the five-day
volume weighted average trading price for a Common Share as at the close of
trading on:

 

(a)                                  May 14, 2009 (being $3.38
per share), and

 

(b)                                 the date of the Meeting, or if on
such date there is any material information (within the meaning of the rules and
policies of the TSX) that has not been publicly disclosed, the date that is
five trading days after disclosure of such material information.

 

6.                                       The New Options shall expire six (6) years
after the original date of grant of the corresponding Exchanged Options.

 

7.                                       The
New Options shall vest over a period of five (5) years from the original
date of grant of the corresponding Exchanged Options.

 

8.                                       The
option exchange under the Management Option Exchange Program shall be effective
after the close of trading on the date of determination of the Exchange
Price.  Any Exchanged Options shall be
cancelled.

 

2

 

9.                                       The
Management Option Exchange Program shall be administered by the Plan
Administrator.  Notwithstanding any other
term or provisions of this Amendment No. 2009-1, the Plan Administrator
retains the authority to not proceed with the Management Option Exchange
Program, even if shareholder approval for such program is obtained.

 

3

 

Exhibit “C”

 

RESOLUTION OF THE SHAREHOLDERS

 

AMENDMENT NO. 2009-2 TO FOURTH AMENDED AND RESTATED

KEY EMPLOYEE STOCK OPTION/STOCK ISSUANCE PLAN

 

BE IT RESOLVED THAT:

 

1.                                       Amendment No. 2009-2 to the
Corporation’s Fourth Amended and Restated Key Employee Stock Option/Stock
Issuance Plan approving the extension to the expiry dates of certain options
held by insiders, in the form annexed hereto as Schedule C-1, is hereby
approved; and

 

2.                                       any
one director or any one officer of the Corporation is hereby authorized and
directed to execute, whether under the corporate seal of the Corporation or
otherwise, and to deliver all such other confirmations, instruments,
agreements, certificates and other documents and to do all such other acts and
things as in his or her opinion may be necessary or desirable in connection
with Amendment No. 2009-2 or the extension of options contemplated
therein.

 

 

Schedule C-1

 

Amendment No. 2009-2 to Fourth Amended and Restated 

Key Employee Stock Option/Stock Issuance Plan

 

1.                                       Capitalized terms not otherwise defined in this Amendment No. 2009-2
shall have the respective meanings set forth in the Corporation’s Fourth
Amended and Restated Key Employee Stock Option/Stock Issuance Plan.

 

2.                                       The Corporation shall be permitted to extend the expiry
dates for period of up to one (1) year for the following grants of Options
to Insiders of the Corporation:

 

	
  Name of Option

  Holder

  	
   

  	
  Date of Grant

  	
   

  	
  Number of Shares

  Subject to Option

  	
   

  	
  Exercise Price

  (per share)

  	
   

  	
  Expiry Date (1)

  
	
  Peter
  Allen

  	
   

  	
  June 22,
  2006

  	
   

  	
  235,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Russell
  Frederick

  	
   

  	
  June 22,
  2006

  	
   

  	
  70,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Erik
  Boch

  	
   

  	
  June 22,
  2006

  	
   

  	
  100,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  David
  Farrar

  	
   

  	
  June 22,
  2006

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Brian
  McCormack

  	
   

  	
  June 22,
  2006

  	
   

  	
  60,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  
	
  Alan
  Solheim

  	
   

  	
  June 22,
  2006

  	
   

  	
  80,000

  	
   

  	
  $

  	
  2.46

  	
   

  	
  June 22,
  2010

  

 

(1) The original expiry date is listed in this column.  As a result of this Amendment No. 2009-2,
the Corporation is authorized to extend the expiry dates in this column by a
period of up to one (1) year.

 

3.                                       Notwithstanding
any other term or provision of this Amendment No. 2009-2, the Plan
Administrator retains the authority to not proceed with the extension of the
expiry dates of Options contemplated herein, even if shareholder approval for
such extension is obtained.

 

2Exhibit
4.5

 

 

FOR IMMEDIATE RELEASE

 

DRAGONWAVE’S SHAREHOLDER RIGHTS PLAN RATIFIED BY SHAREHOLDERS

 

Ottawa,
Canada, June 9, 2009  — DragonWave
Inc. (TSX: DWI) (“DragonWave” or the “Corporation”) announced today that its
shareholder rights plan (the “Rights Plan”) enacted on January 29, 2009
was ratified and approved by the Corporation’s shareholders at DragonWave’s
annual and special meeting of shareholders held on June 9, 2009.  A
copy of the Rights Plan has been filed on SEDAR at www.sedar.com and can also
be obtained from the Corporation upon written request.

 

About
DragonWave

 

DragonWaveTM
is a leading provider of high-capacity packet microwave radio systems used in
emerging IP networks. DragonWave designs, develops, and markets carrier-grade
packet microwave radio frequency networking equipment that transmit broadband
voice, video and other data.  DragonWave’s products, 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. Additional applications for DragonWave’s products include
point-to-point transport in private networks, including municipal and enterprise
networks. DragonWave’s corporate headquarters is located in Ottawa, Ontario,
with sales locations in Europe, Middle East and North America.  The
company’s Web site is http://www.dragonwaveinc.com

 

Media Contacts

 

DragonWave Inc.

Russell Frederick

Chief Financial Officer

(613) 599-9991 ext. 2253

rfrederick@dragonwaveinc.com

 

Nadine Kittle

Marketing Communications

DragonWave Inc.

Tel: 613-599-9991 ext
2262

nkittle@dragonwaveinc.com

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