KEY BANK NATIONAL ASSOCIATION
                                ESCROW AGREEMENT

         THIS ESCROW  AGREEMENT (the  "Agreement")  is made and executed this __
day  of  October,  2001,  by  and  among  WAVERIDER   COMMUNICATIONS  INC.  (the
"Company"),  whose address is 225 Consumers Road, Suite 500,  Toronto,  Ontario,
Canada M2J 1R4 and  CORPORATE  STOCK  TRANSFER,  INC.,  a  Colorado  corporation
(CST"),  whose  address is 3200 Cherry  Creek Drive  South,  Suite 430,  Denver,
Colorado 80209 ("CST" and collectively with the Company, the "Depositors"),  and
KEY BANK NATIONAL  ASSOCIATION,  Cherry Creek Branch  ("Escrow  Holder"),  whose
address is 3300 East First Avenue,  Denver,  Colorado 80206,  Attention:  Denise
Garcia (facsimile number 303-329-5325).

1. Deposits. Depositors shall deposit with Escrow Holder the funds
described below (the "Funds"), which Funds shall be held and disbursed in
accordance with and subject to the terms and conditions of this Agreement. Such
Funds constitute the following: Funds received from the exercise of rights to
purchase shares of common stock of the Company and warrants to purchase shares
of common stock of the Company (the "Rights Offering") pursuant to the
Registration Statement on Form S-3 No. 333-70114 originally filed with the
Securities and Exchange Commission on September 25, 2001, a copy of which will
be delivered to Escrow Holder when it is declared effective by the Securities
and Exchange Commission. Escrow Holder will hold all Funds in the escrow account
free from any lien, claim or offset until the conditions set forth in this
Agreement have been fully satisfied.

         The Escrow Holder shall be provided the name and address of each
subscriber and amounts to be deposited into the escrow by CST. CST shall also
confirm that all subscribers have been accepted.

         2.  Disbursements.  Upon  confirmation  from the  Company to the Escrow
Holder that the closing  conditions in the  Solicitation  Agent  Agreement  (the
"Solicitation  Agent  Agreement")  between the Company and Gruntal & Co., L.L.C.
(the  "Solicitation  Agent") have been met or waived by the Solicitation  Agent,
the Escrow Holder shall disburse the Funds in accordance with the following:

         o        fees payable to the  Solicitation  Agent pursuant to the terms
                  of the Solicitation Agent Agreement;

         o        fees payable to CST under the terms of the Subscription  Agent
                  Agreement between the Company and CST;

         o        legal  fees and  disbursements  of Foley,  Hoag & Eliot LLP of
                  $150,000;

         o        legal  fees and  disbursements  of Gadsby  Hannah LLP of up to
                  $80,000  pursuant  to  the  terms  of the  Subscription  Agent
                  Agreement; and

         o        the remainder of the Funds to the Company.

The escrow account will remain open until termination of the Rights Offering as
provided in the Registration Statement and until all Funds have been disbursed.
<PAGE>

         3. Notices.  Any notice required or desired to be given to any party to
this  Agreement  may be given either by personal  delivery,  or by telegram,  by
facsimile transmission,  or by certified mail, return receipt requested, postage
prepaid;  provided,  however, any notice given by facsimile transmission,  to be
effective,  shall be followed  by  delivery  of same by personal  delivery or by
certified mail,  return receipt  requested.  All such notices shall be sent to a
party at its address  noted above,  and such notice shall for all purposes be as
effectual  as though  served  upon such party in person at the time of  personal
delivery,  or on the date of receipt in the case of transmission by telegram, or
on the  date  of  receipt  of the  original,  in the  case  of  transmission  by
facsimile,  or two business days after the date of deposit in the U.S.  mail, as
applicable.

         4.  Limitations  on Duties.  Escrow  Holder shall hold and disburse the
Funds in accordance with the terms and conditions of this  Agreement.  If at any
time in the  performance  of its  duties  as set forth in this  Agreement  it is
necessary for Escrow Holder to receive, accept or act upon any notice or writing
purported to have been  executed or issued by or on behalf of any of the parties
hereto,  it shall not be necessary for Escrow Holder to ascertain whether or not
the  person  or  persons  who have  executed,  signed  or  otherwise  issued  or
authenticated  the writing had the  authority  to so execute,  sign or otherwise
issue or  authenticate  said  writing,  or that they are the same persons  named
therein or otherwise to pass upon any  requirements of such instruments that may
be  essential  for  their  validity.   Further,  Escrow  Holder  shall  have  no
responsibility  or liability  for the  sufficiency  or  correctness  as to form,
manner,  execution or validity of any instrument deposited or delivered pursuant
to this Agreement,  or as to the truth or accuracy of any information  contained
therein,  or as to the  identity,  authority,  capacity  or rights of any person
executing  the  same,  nor  for the  failure  to  comply  with  the  provisions,
requirements  or  conditions  of any  agreement,  contract or other  instruments
deposited with or delivered to Escrow Holder or referred to herein.  Rather, the
duties of Escrow  Holder  pursuant  to this  Agreement  in all  events  shall be
limited to the  safekeeping  of the Funds,  documents  and other items  actually
received by Escrow Holder and the  disposition  of same in  accordance  with the
instructions set forth above.

         5. No Liability  for Actions  Taken in Good Faith.  Escrow Holder shall
not be  personally  liable for any act it may do or omit to do  hereunder  while
acting in good faith and in the exercise of its own  subjective  best  judgment,
and any act done or omitted  by it  pursuant  to the advice of its own  attorney
shall be conclusive evidence of such good faith and best judgment.

         6. Notices and Warnings.  Escrow Holder is hereby expressly  authorized
and  directed to disregard  any and all notices or warnings  given by any of the
parties hereto, or by any other person or entity,  except as otherwise expressly
set forth in this  Agreement  and except  for  orders or  process of court,  and
Escrow  Holder  is  expressly  authorized  to  comply  with and obey any and all
orders,  judgments or decree of any court.  Escrow Holder shall not be liable to
any of the  parties  hereto  or to any  other  person  or  entity  by  reason of
compliance with any order,  judgment or decree of any court, even if such order,
judgment or decree is reversed,  modified, annulled, set aside or vacated, or is
found to have been entered with jurisdiction.

         7.  Indemnity.  In  consideration  of the  acceptance of this escrow by
Escrow  Holder,  the  Company  covenants  and  agrees to pay  Escrow  Holder its
charges,  costs and expense  hereunder  and to indemnify  and hold Escrow Holder
harmless as to any liability by it incurred to any person or entity by reason of
its having  accepted the same, or in connection  with any  performance by Escrow
Holder in its capacity as the escrow holder pursuant to this Agreement. Further,
the Company  covenants  and agrees to reimburse  Escrow Holder for all costs and
expenses,  including,  among other things, counsel fees and court costs incurred
in connection  with this Agreement  and/or the deposited  Funds.  In case of any
suit, proceeding,  cause of action, demand or other claim to which Escrow Holder
is or at any time may be a party,  the  Company  agrees  to pay,  promptly  upon
Escrow Holder's demand, any and all costs and expenses,  including without limit
attorneys'   fees,   incurred  by  Escrow  Holder  in   connection   with  same.
Notwithstanding any contrary provision of this Agreement, the provisions of this
paragraph 7 shall survive the expiration and/or termination of this Agreement.
<PAGE>

         8. Interpleader. If at any time a dispute shall exist as to the duty of
Escrow Holder under the terms of this Agreement,  or if at any time  conflicting
demands  are  served  upon  Escrow  Holder,  whether  verbally  or  in  writing,
concerning  the  possession of, title to or proceeds of any or all of the Funds,
or if any dispute arises between or among the parties and/or any other person or
entity relating in any way to any item deposited,  held or disbursed pursuant to
or  otherwise  relating  to this  Agreement,  Escrow  Holder  may  deposit  this
Agreement and the items then or thereafter held by it pursuant to this Agreement
with the Clerk of the District Court of the City and County of Denver,  State of
Colorado,  and may  interplead  the  parties  hereto.  Upon so  depositing  this
Agreement and such items and filing its complaint in interpleader, Escrow Holder
shall be relieved of and released from all  liability  under the terms hereof as
to the items so deposited.  If the Court does not provide for  reimbursement  to
Escrow  Holder  for  its  attorney  fees,  costs  and  expenses  related  to the
interpleader action out of the interplead Funds, then Escrow Holder shall have a
claim  enforceable by separate action in Court against the parties,  jointly and
severally, for said attorney fees, costs and expenses.

         9. FDIC Insurance. In consideration of the fee paid to Escrow Holder as
set forth in this  agreement and the covenants and  agreements of the parties as
set forth  above,  Escrow  Holder  agrees to hold the  Funds in  accordance  and
subject to the terms of this Agreement. During the escrow period, the Funds will
be deposited  in an  FDIC-insured  depository  (which  depository  may be Escrow
Holder  or  any  other  bank  owned  or   controlled  by  Key  Corp.)  Under  no
circumstances  shall Escrow Holder have liability for loss of Funds due to bank,
savings  and  loan  association  or  other  depository  failure,  suspension  or
cessation  of  business,  or any  action  or  inaction  on the part of the bank,
savings  and  loan  association  or other  depositor,  or any  delivery  service
transporting Funds to and from such depository.

         10. Successors.  No Third Party Rights. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective  heirs,
personal representatives, successors and assigns. This Agreement is only for the
benefit  of  the   parties   hereto  and  their   respective   heirs,   personal
representatives,  successors and assigns, and no other person or entity shall be
entitled to rely on,  receive any benefit  from or to enforce  against any party
hereto any provisions of this Agreement.

         11.  Applicable  Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada.
<PAGE>

         12. Entire  Agreement;  Waiver.  This Agreement  constitutes the entire
understanding  between  the  parties  with  respect  to the  escrow  arrangement
contemplated   herein,  and  all  prior  or  contemporaneous   oral  agreements,
understandings,  discussions,  representations  and statements  relating to said
escrow are superseded by this Agreement.  The waiver of any particular condition
precedent,  provision or remedy  provided by this Agreement shall not constitute
the waiver of any other.

         13.Business  Day. If any date herein set forth for the  performance  of
any obligation by Escrow Holder or for the delivery of any Funds,  instrument or
notice  as  herein  provided,  is a  Saturday,  Sunday  or  legal  holiday,  the
compliance  with such  obligation  or  delivery  shall be deemed  acceptable  if
effected  on he next  business  day  following  such  Saturday,  Sunday or legal
holiday.  As used herein,  the term "legal  holiday"  means any state or federal
holiday for which financial institutions or post offices are generally closed in
the State of Colorado for observance thereof.

         14.  Construction.  This Agreement shall not be construed more strictly
against one party than  against  any other  merely by virtue of the fact that it
may have been  prepared by counsel for one of the parties,  it being  recognized
that Escrow Holder and the Company have contributed substantially and materially
to the preparation of this Agreement. The headings of various paragraphs in this
Agreement are for convenience  only and are not to be utilized in construing the
content or meaning of the substantive provisions hereof.

         15. Time is of the Essence.  All times,  wherever specified herein, are
of the essence of this Agreement.

         16. Validity.  If any term or provision of this Agreement shall be held
illegal and unenforceable or inoperative as a matter of law, the remaining terms
and provisions of this agreement  shall not be affected  thereby,  but each such
term and provisions shall be valid and shall remain in full force and effect.

         17.  Counterparts.  This  Agreement  may be  executed  in any number of
counterparts,  each of which shall be deemed an original  and all of which shall
be taken to be one and the same instrument,  to the same effect as if all of the
parties  hereto had signed the same  signature  page. Any signature page of this
agreement  may be  detached  from  any  counterpart  of this  Agreement  without
impairing  the legal  effect of any  signatures  thereon  and may be attached to
another  counterpart  of this  Agreement  identical  in form  hereto  but having
attached to it one or more additional signature pages.

         18.  Escrow Fee.  The parties  agree that Escrow  Holder's  fee for its
services pursuant to this agreement shall be $250 payable in full upon the
Company's execution of this Agreement.
<PAGE>

              IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the date first above written.

              ESCROW AGENT:KEY BANK NATIONAL ASSOCIATION

                                            By: /s/ Denise Garcia
                                               ---------------------------------
                                                    Denise Garcia
                                                    Vice President


              THE COMPANY:          WAVERIDER COMMUNICATIONS INC.

                                            By: /s/ T. Scott Worthington
                                               ---------------------------------
                                                    T. Scott Worthington
                                                    Chief Financial Officer


                                            CORPORATE STOCK TRANSFER, INC.

                                            By: /s/ Carylyn Bell
                                               ---------------------------------
                                                    Carylyn Bell
                                                    President