EXHIBIT 4.1

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                                             Date of Issuance: July __, 2003

                                                            $---------------

                              CONVERTIBLE DEBENTURE

                                DUE JULY 13, 2006

           THIS DEBENTURE is one of a series of duly authorized and issued
Debentures of WaveRider Communications Inc., a Nevada corporation, having a
principal place of business at 255 Consumers Road, Suite 500, Toronto, Ontario
M2J 1R4 (the "Company"), designated as its Convertible Debenture, due July 13,
2006 (the "Debentures").


<PAGE>


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         FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on July 13, 2006 or such earlier date as the Debentures
are required or permitted to be repaid as provided hereunder (the "Maturity
Date"). Except as set forth in Section 5, the Company may not prepay any portion
of the principal amount of this Debenture without the prior written consent of
the Holder.

         This Debenture is subject to the following additional provisions:

         Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.

         Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
<PAGE>

         Section 3.  Events of Default.
         --------    -----------------

                  (a)"Event of Default", wherever used herein, means any one of
         the following events (whatever the reason and whether it shall be
         voluntary or involuntary or effected by operation of law or pursuant to
         any judgment, decree or order of any court, or any order, rule or
         regulation of any administrative or governmental body):

                           (i) any default in the payment of the principal of,
                  or liquidated damages in respect of, any Debentures, free of
                  any claim of subordination, as and when the same shall become
                  due and payable (whether on a Conversion Date or the Maturity
                  Date or by acceleration or otherwise) which default is not
                  cured, if possible to cure, within 3 days of notice of such
                  default sent by the Holder;

                           (ii) the Company shall materially fail to observe or
                  perform any other covenant, agreement or warranty contained
                  in, or otherwise commit any material breach of any of the
                  Transaction Documents (other than a breach by the Company of
                  its obligations to deliver shares of Common Stock to the
                  Holder upon conversion which breach is addressed in clause (x)
                  below) which is not cured, if possible to cure, within 5 days
                  of notice of such default sent by the Holder;

                           (iii) the Company or any of its subsidiaries shall
                  commence, or there shall be commenced against the Company or
                  any such subsidiary a case under any applicable bankruptcy or
                  insolvency laws as now or hereafter in effect or any successor
                  thereto, or the Company commences any other proceeding under
                  any reorganization, arrangement, adjustment of debt, relief of
                  debtors, dissolution, insolvency or liquidation or similar law
                  of any jurisdiction whether now or hereafter in effect
                  relating to the Company or any subsidiary thereof or there is
                  commenced against the Company or any subsidiary thereof any
                  such bankruptcy, insolvency or other proceeding which remains
                  undismissed for a period of 60 days; or the Company or any
                  subsidiary thereof is adjudicated insolvent or bankrupt; or
                  any order of relief or other order approving any such case or
                  proceeding is entered; or the Company or any subsidiary
                  thereof suffers any appointment of any custodian or the like
                  for it or any substantial part of its property which continues
                  undischarged or unstayed for a period of 60 days; or the
                  Company or any subsidiary thereof makes a general assignment
                  for the benefit of creditors; or the Company shall fail to
                  pay, or shall state that it is unable to pay, or shall be
                  unable to pay, its debts generally as they become due; or the
                  Company or any subsidiary thereof shall call a meeting of its
                  creditors with a view to arranging a composition, adjustment
                  or restructuring of its debts; or the Company or any
                  subsidiary thereof shall by any act or failure to act
                  expressly indicate its consent to, approval of or acquiescence
                  in any of the foregoing; or any corporate or other action is
                  taken by the Company or any subsidiary thereof for the purpose
                  of effecting any of the foregoing;

                           (iv) the Company shall default in any of its
                  obligations under any other Debenture or any mortgage, credit
                  agreement or other facility, indenture agreement, factoring
                  agreement or other instrument under which there may be issued,
                  or by which there may be secured or evidenced any indebtedness
                  for borrowed money or money due under any long term leasing or
                  factoring arrangement of the Company in an amount exceeding
                  $150,000, whether such indebtedness now exists or shall
                  hereafter be created and such default shall result in such
                  indebtedness becoming or being declared due and payable prior
                  to the date on which it would otherwise become due and
                  payable;

                           (v) the Common Stock shall not be eligible for
                  quotation on or quoted for trading on a Principal Market and
                  shall not again be eligible for and quoted or listed for
                  trading thereon within five Trading Days;
<PAGE>

                           (vi) the Company shall be a party to any Change of
                  Control Transaction , shall agree to sell or dispose of all or
                  in excess of 40% of its assets in one or more transactions
                  (whether or not such sale would constitute a Change of Control
                  Transaction) or shall redeem or repurchase more than a de
                  minimis number of its outstanding shares of Common Stock or
                  other equity securities of the Company (other than redemptions
                  of Underlying Shares and repurchases of shares of Common Stock
                  or other equity securities of departing officers and directors
                  of the Company; provided no repurchase shall exceed $100,000
                  for any officer or director);

                           (vii) an Underlying Shares Registration Statement
                  shall not have been declared effective by the Commission on or
                  prior to the 180th calendar day after the Original Issue Date
                  (210th calendar day in the event of a "full review" by the
                  Commission);

                           (viii) if, during the Effectiveness Period (as
                  defined in the Registration Rights Agreement), the
                  effectiveness of the Underlying Shares Registration Statement
                  lapses for any reason or the Holder shall not be permitted to
                  resell Registrable Securities (as defined in the Registration
                  Rights Agreement) under the Underlying Shares Registration
                  Statement, in either case, for more than 15 consecutive
                  Trading Days or 25 non-consecutive Trading Days during any 12
                  month period;

                           (ix) an Event (as defined in the Registration Rights
                  Agreement) shall not have been cured to the reasonable
                  satisfaction of the Holder prior to the expiration of thirty
                  days from the Event Date (as defined in the Registration
                  Rights Agreement) relating thereto (other than an Event
                  resulting from a failure of an Underlying Shares Registration
                  Statement to be declared effective by the Commission on or
                  prior to the Effectiveness Date (as defined in the
                  Registration Rights Agreement), which shall be covered by
                  Section 3(a)(vii));

                           (x) the Company shall fail for any reason to deliver
                  certificates to a Holder prior to the fifth Trading Day after
                  a Conversion Date pursuant to and in accordance with Section
                  4(b) or the Company shall provide notice to the Holder,
                  including by way of public announcement, at any time, of its
                  intention not to comply with requests for conversions of any
                  Debentures in accordance with the terms hereof; or

                           (xi) the Company shall fail for any reason to deliver
                  the payment in cash pursuant to a Buy-In (as defined herein)
                  within five days after notice thereof is delivered hereunder.

                  (b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture, together with other amounts owing in respect
thereof, to the date of acceleration shall become at the Holder's election,
immediately due and payable in cash. The aggregate amount payable upon an Event
of Default shall be equal to the Mandatory Prepayment Amount. All Debentures for
which the full prepayment price hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a Debenture holder until such
time, if any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.

         Section 4.  Conversion.

                  (a) (i) At any time after the Closing Date, this Debenture
                  shall be convertible into shares of Common Stock at the option
                  of the Holder, in whole or in part at any time and from time
                  to time (subject to the limitations on conversion set forth in
                  Section 4(a)(ii) hereof). The Holder shall effect conversions
                  by delivering to the Company the form of Notice of Conversion
                  attached hereto as Annex A (a "Notice of Conversion"),
<PAGE>
                  specifying therein the principal amount of Debentures to be
                  converted and the date on which such conversion is to be
                  effected (a "Conversion Date"). If no Conversion Date is
                  specified in a Notice of Conversion, the Conversion Date shall
                  be the date that such Notice of Conversion is provided
                  hereunder. To effect conversions hereunder, the Holder shall
                  not be required to physically surrender Debentures to the
                  Company unless the entire principal amount of this Debenture
                  has been so converted. Conversions hereunder shall have the
                  effect of lowering the outstanding principal amount of this
                  Debenture in an amount equal to the applicable conversion. The
                  Holder and the Company shall maintain records showing the
                  principal amount converted and the date of such conversions.
                  The Company shall deliver any objection to the figures
                  represented in the Conversion Schedules within 1 Business Day
                  of receipt of such notice. In the event of any dispute or
                  discrepancy, the records of the Holder shall be controlling
                  and determinative in the absence of manifest error. The Holder
                  and any assignee, by acceptance of this Debenture, acknowledge
                  and agree that, by reason of the provisions of this paragraph,
                  following conversion of a portion of this Debenture, the
                  unpaid and unconverted principal amount of this Debenture may
                  be less than the amount stated on the face hereof.

                           (ii) The Company shall not effect any conversion of
                  this Debenture, and the Holder shall not have the right to
                  convert any portion of this Debenture, pursuant to Section
                  4(a)(i), Section 5(b) or otherwise, to the extent that after
                  giving effect to such conversion, the Holder (together with
                  the Holder's affiliates), as set forth on the applicable
                  Notice of Conversion, would beneficially own in excess of
                  4.99% of the number of shares of the Common Stock outstanding
                  immediately after giving effect to such conversion. For
                  purposes of the foregoing sentence, the number of shares of
                  Common Stock beneficially owned by the Holder and its
                  affiliates shall include the number of shares of Common Stock
                  issuable upon conversion of this Debenture with respect to
                  which the determination of such sentence is being made, but
                  shall exclude the number of shares of Common Stock which would
                  be issuable upon (A) conversion of the remaining, nonconverted
                  portion of this Debenture beneficially owned by the Holder or
                  any of its affiliates and (B) exercise or conversion of the
                  unexercised or nonconverted portion of any other securities of
                  the Company (including, without limitation, any other
                  Debentures or the Warrants) subject to a limitation on
                  conversion or exercise analogous to the limitation contained
                  herein beneficially owned by the Holder or any of its
                  affiliates. Except as set forth in the preceding sentence, for
                  purposes of this Section 4(a)(ii), beneficial ownership shall
                  be calculated in accordance with Section 13(d) of the Exchange
                  Act. To the extent that the limitation contained in this
                  section applies, the determination of whether this Debenture
                  is convertible (in relation to other securities owned by the
                  Holder) and of which a portion of this Debenture is
                  convertible shall be in the sole discretion of such Holder. To
                  ensure compliance with this restriction, the Holder will be
                  deemed to represent to the Company each time it delivers a
                  Notice of Conversion that such Notice of Conversion has not
                  violated the restrictions set forth in this paragraph and the
                  Company shall have no obligation to verify or confirm the
                  accuracy of such determination. For purposes of this Section
                  4(a)(ii), in determining the number of outstanding shares of
                  Common Stock, the Holder may rely on the number of outstanding
                  shares of Common Stock as reflected in (x) the Company's most
                  recent Form 10-Q or Form 10-K, as the case may be, (y) a more
                  recent public announcement by the Company or (z) any other
                  notice by the Company or the Company's Transfer Agent setting
                  forth the number of shares of Common Stock outstanding. Upon
                  the written or oral request of the Holder, the Company shall
                  within two Trading Days confirm orally and in writing to the
                  Holder the number of shares of Common Stock then outstanding.
                  In any case, the number of outstanding shares of Common Stock
                  shall be determined after giving effect to the conversion or
                  exercise of securities of the Company, including this
                  Debenture, by the Holder or its affiliates since the date as
                  of which such number of outstanding shares of Common Stock was
                  reported. The provisions of this Section 4(a)(ii) may be
                  waived by the Holder upon, at the election of the Holder, not
                  less than 61 days' prior notice to the Company, and the
                  provisions of this Section 4(a)(i) shall continue to apply
                  until such 61st day (or such later date, as determined by the
                  Holder, as may be specified in such notice of waiver).
<PAGE>
                           (ii) Underlying Shares Issuable Upon Conversion and
                  Pursuant to the Conversion of Principal Amount. The number of
                  shares of Common Stock issuable upon a conversion shall be
                  determined by the quotient obtained by dividing (x) the
                  outstanding principal amount of this Debenture to be converted
                  by (y) the Set Price.

                  (b) (i) Not later than three Trading Days after any Conversion
                  Date, the Company will deliver to the Holder certificate or
                  certificates representing the Underlying Shares which shall be
                  free of restrictive legends and trading restrictions (other
                  than those required by the Purchase Agreement) representing
                  the number of shares of Common Stock being acquired upon the
                  conversion of Debentures. The Company shall, if available and
                  if allowed under applicable securities laws, use its best
                  efforts to deliver any certificate or certificates required to
                  be delivered by the Company under this Section electronically
                  through the Depository Trust Corporation or another
                  established clearing corporation performing similar functions.
                  If in the case of any Notice of Conversion such certificate or
                  certificates are not delivered to or as directed by the
                  applicable Holder by the fifth Trading Day after a Conversion
                  Date, the Holder shall be entitled by written notice to the
                  Company at any time on or before its receipt of such
                  certificate or certificates thereafter, to rescind such
                  conversion, in which event the Company shall immediately
                  return the certificates representing the principal amount of
                  Debentures tendered for conversion.

                           (ii) If the Company fails for any reason to deliver
                  to the Holder such certificate or certificates pursuant to
                  Section 4(b)(i) by the third Trading Day after the Conversion
                  Date, the Company shall pay to such Holder, in cash, as
                  liquidated damages and not as a penalty, for each $5,000 of
                  principal amount being converted, $50 per Trading Day
                  (increasing to $100 per Trading Day after 3 Trading Days after
                  such damages begin to accrue) for each Trading Day after such
                  third Trading Day until such certificates are delivered.
                  Nothing herein shall limit a Holder's right to pursue actual
                  damages or declare an Event of Default pursuant to Section 3
                  herein for the Company's failure to deliver certificates
                  representing shares of Common Stock upon conversion within the
                  period specified herein and such Holder shall have the right
                  to pursue all remedies available to it at law or in equity
                  including, without limitation, a decree of specific
                  performance and/or injunctive relief. The exercise of any such
                  rights shall not prohibit the Holders from seeking to enforce
                  damages pursuant to any other Section hereof or under
                  applicable law.

<PAGE>

                           (iii) In addition to any other rights available to
                  the Holder, if the Company fails for any reason to deliver to
                  the Holder such certificate or certificates pursuant to
                  Section 4(b)(i) by the third Trading Day after the Conversion
                  Date, and if after such third Trading Day the Holder is
                  required by its brokerage firm to purchase (in an open market
                  transaction or otherwise) Common Stock to deliver in
                  satisfaction of a sale by such Holder of the Underlying Shares
                  which the Holder anticipated receiving upon such conversion (a
                  "Buy-In"), then the Company shall (A) pay in cash to the
                  Holder (in addition to any remedies available to or elected by
                  the Holder) the amount by which (x) the Holder's total
                  purchase price (including brokerage commissions, if any) for
                  the Common Stock so purchased exceeds (y) the product of (1)
                  the aggregate number of shares of Common Stock that such
                  Holder anticipated receiving from the conversion at issue
                  multiplied by (2) the actual sale price of the Common Stock at
                  the time of the sale (including brokerage commissions, if any)
                  giving rise to such purchase obligation and (B) at the option
                  of the Holder, either reissue Debentures in principal amount
                  equal to the principal amount of the attempted conversion or
                  deliver to the Holder the number of shares of Common Stock
                  that would have been issued had the Company timely complied
                  with its delivery requirements under Section 4(b)(i). For
                  example, if the Holder purchases Common Stock having a total
                  purchase price of $11,000 to cover a Buy-In with respect to an
                  attempted conversion of Debentures with respect to which the
                  actual sale price of the Underlying Shares at the time of the
                  sale (including brokerage commissions, if any) giving rise to
                  such purchase obligation was a total of $10,000 under clause
                  (A) of the immediately preceding sentence, the Company shall
                  be required to pay the Holder $1,000. The Holder shall provide
                  the Company written notice indicating the amounts payable to
                  the Holder in respect of the Buy-In. Notwithstanding anything
                  contained herein to the contrary, if a Holder requires the
                  Company to make payment in respect of a Buy-In for the failure
                  to timely deliver certificates hereunder and the Company
                  timely pays in full such payment, the Company shall not be
                  required to pay such Holder liquidated damages under Section
                  4(b)(ii) in respect of the certificates resulting in such
                  Buy-In.

                  (c) (i) The conversion price in effect on any Conversion Date
                  shall be equal to $0.4318(1) (subject to adjustment herein)
                  (the "Set Price").

                           (ii) If the Company, at any time while the Debentures
                  are outstanding: (A) shall pay a stock dividend or otherwise
                  make a distribution or distributions on shares of its Common
                  Stock or any other equity or equity equivalent securities
                  payable in shares of Common Stock (which, for avoidance of
                  doubt, shall not include any shares of Common Stock issued by
                  the Company pursuant to this Debenture), (B) subdivide
                  outstanding shares of Common Stock into a larger number of
                  shares, (C) combine (including by way of reverse stock split)
                  outstanding shares of Common Stock into a smaller number of
                  shares, or (D) issue by reclassification of shares of the
                  Common Stock any shares of capital stock of the Company, then
                  the Set Price shall be multiplied by a fraction of which the
                  numerator shall be the number of shares of Common Stock
                  (excluding treasury shares, if any) outstanding before such
                  event and of which the denominator shall be the number of
                  shares of Common Stock outstanding after such event. Any
                  adjustment made pursuant to this Section shall become
                  effective immediately after the record date for the
                  determination of stockholders entitled to receive such
                  dividend or distribution and shall become effective
                  immediately after the effective date in the case of a
                  subdivision, combination or re-classification.

                           (iii) If the Company, at any time while Debentures
                  are outstanding, shall issue rights, options or warrants to
                  all holders of Common Stock (and not to Holders) entitling
                  them to subscribe for or purchase shares of Common Stock or
                  other securities exercisable, convertible into or exchangeable
                  for Common Stock (the "Common Stock Equivalents") at a price
                  per share less than the Closing Price at the record date
                  mentioned below, then the Set Price shall be adjusted by
                  multiplying the Set Price in effect immediately prior to such
                  record date by a fraction, of which the denominator shall be
                  the number of shares of the Common Stock (excluding treasury
                  shares, if any) outstanding on the date of issuance of such
                  rights or warrants plus the number of additional shares of
                  Common Stock offered for subscription or purchase, and of
                  which the numerator shall be the number of shares of the
                  Common Stock (excluding treasury shares, if any) outstanding
                  on the date of issuance of such rights or warrants plus the
                  number of shares which the aggregate offering price of the
                  total number of shares so offered would purchase at the
                  Closing Price on the record date. For purposes of this clause
                  (iii), the purchase price for the rights, options or warrants
                  includes the total amount, if any, received or receivable by
                  the Company as consideration for the issuance or granting of
                  all such rights, options or warrants, plus the minimum
                  aggregate amount of additional consideration, if any, payable
                  to the Company upon the exercise of all such rights, options
                  or warrants, plus in the case of Common Stock Equivalents
                  issuable upon the exercise of such rights, options or
                  warrants, the minimum aggregate additional consideration
                  payable upon the exercise, conversion or exchange thereof at
                  the time such Common Stock Equivalents first become
                  exercisable, convertible or exchangeable. Such adjustment
                  shall be made whenever such rights, options or warrants are
                  issued, and shall become effective immediately after the
                  record date for the determination of stockholders entitled to
                  receive such rights, options or warrants.
--------
1    110% of the average of the 10 Closing Prices immediately prior to
     the date of the Purchase Agreement.

<PAGE>
                           (iv) If the Company or any subsidiary thereof, as
                  applicable, at any time while Debentures are outstanding,
                  shall offer, sell, grant any option to purchase or offer, sell
                  or grant any right to reprice its securities, or otherwise
                  dispose of or issue (or announce any offer, sale, grant or any
                  option to purchase or other disposition) any Common Stock or
                  Common Stock Equivalent entitling any Person to acquire shares
                  of Common Stock, at an effective price per share less than the
                  then Set Price ("Dilutive Issuance"), as adjusted hereunder
                  (if the holder of the Common Stock or Common Stock Equivalent
                  so issued shall at any time, whether by operation of purchase
                  price adjustments, reset provisions, floating conversion,
                  exercise or exchange prices or otherwise, or due to warrants,
                  options or rights per share which is issued in connection with
                  such issuance, be entitled to receive shares of Common Stock
                  at an effective price per share which is less than the Set
                  Price, such issuance shall be deemed to have occurred for less
                  than the Set Price), then the Set Price shall be reduced to
                  equal the effective conversion, exchange or purchase price for
                  such Common Stock or Common Stock Equivalents (including any
                  reset provisions thereof) at issue. Such adjustment shall be
                  made whenever such Common Stock or Common Stock Equivalents
                  are issued. The Company shall notify the Holder in writing, no
                  later than the business day following the issuance of any
                  Common Stock or Common Stock Equivalent subject to this
                  section, indicating therein the applicable issuance price, or
                  of applicable reset price, exchange price, conversion price
                  and other pricing terms.

                           (v) If the Company, at any time while Debentures are
                  outstanding, shall distribute to all holders of Common Stock
                  (and not to Holders) evidences of its indebtedness or assets
                  or rights or warrants to subscribe for or purchase any
                  security, then in each such case the Set Price shall be
                  determined by multiplying such price in effect immediately
                  prior to the record date fixed for determination of
                  stockholders entitled to receive such distribution by a
                  fraction of which the denominator shall be the Closing Price
                  determined as of the record date mentioned above, and of which
                  the numerator shall be such Closing Price on such record date
                  less the then fair market value at such record date of the
                  portion of such assets or evidence of indebtedness so
                  distributed applicable to one outstanding share of the Common
                  Stock as determined by the Board of Directors in good faith.
                  In either case the adjustments shall be described in a
                  statement provided to the Holders of the portion of assets or
                  evidences of indebtedness so distributed or such subscription
                  rights applicable to one share of Common Stock. Such
                  adjustment shall be made whenever any such distribution is
                  made and shall become effective immediately after the record
                  date mentioned above.

                           (vi) All calculations under this Section 4 shall be
                  made to the nearest cent or the nearest 1/100th of a share, as
                  the case may be. For purposes of this Section 4, the number of
                  shares of Common Stock deemed to be outstanding as of a given
                  date shall be the sum of the number of shares of Common Stock
                  (excluding treasury shares, if any) outstanding.

                           (vii) Whenever the Set Price is adjusted pursuant to
                  any of Section 4(c)(ii) - (v), the Company shall promptly mail
                  to each Holder a notice setting forth the Set Price after such
                  adjustment and setting forth a brief statement of the facts
                  requiring such adjustment.

                           (viii) If (A) the Company shall declare a dividend
                  (or any other distribution) on the Common Stock; (B) the
                  Company shall declare a special nonrecurring cash dividend on
                  or a redemption of the Common Stock; (C) the Company shall
                  authorize the granting to all holders of the Common Stock

<PAGE>
                  rights or warrants to subscribe for or purchase any shares of
                  capital stock of any class or of any rights; (D) the approval
                  of any stockholders of the Company shall be required in
                  connection with any reclassification of the Common Stock, any
                  consolidation or merger to which the Company is a party, any
                  sale or transfer of all or substantially all of the assets of
                  the Company, of any compulsory share exchange whereby the
                  Common Stock is converted into other securities, cash or
                  property; (E) the Company shall authorize the voluntary or
                  involuntary dissolution, liquidation or winding up of the
                  affairs of the Company; then, in each case, the Company shall
                  cause to be filed at each office or agency maintained for the
                  purpose of conversion of the Debentures, and shall cause to be
                  mailed to the Holders at their last addresses as they shall
                  appear upon the stock books of the Company, at least 20
                  calendar days prior to the applicable record or effective date
                  hereinafter specified, a notice stating (x) the date on which
                  a record is to be taken for the purpose of such dividend,
                  distribution, redemption, rights or warrants, or if a record
                  is not to be taken, the date as of which the holders of the
                  Common Stock of record to be entitled to such dividend,
                  distributions, redemption, rights or warrants are to be
                  determined or (y) the date on which such reclassification,
                  consolidation, merger, sale, transfer or share exchange is
                  expected to become effective or close, and the date as of
                  which it is expected that holders of the Common Stock of
                  record shall be entitled to exchange their shares of the
                  Common Stock for securities, cash or other property
                  deliverable upon such reclassification, consolidation, merger,
                  sale, transfer or share exchange; provided, that the failure
                  to mail such notice or any defect therein or in the mailing
                  thereof shall not affect the validity of the corporate action
                  required to be specified in such notice. Holders are entitled
                  to convert Debentures during the 20-day period commencing the
                  date of such notice to the effective date of the event
                  triggering such notice.

                           (ix) If, at any time while this Debenture is
                  outstanding, (A) the Company effects any merger or
                  consolidation of the Company with or into another Person, (B)
                  the Company effects any sale of all or substantially all of
                  its assets in one or a series of related transactions, (C) any
                  tender offer or exchange offer (whether by the Company or
                  another Person) is completed pursuant to which holders of
                  Common Stock are permitted to tender or exchange their shares
                  for other securities, cash or property, or (D) the Company
                  effects any reclassification of the Common Stock or any
                  compulsory share exchange pursuant to which the Common Stock
                  is effectively converted into or exchanged for other
                  securities, cash or property (in any such case, a "Fundamental
                  Transaction"), then upon any subsequent conversion of this
                  Debenture, the Holder shall have the right to receive, for
                  each Underlying Share that would have been issuable upon such
                  conversion absent such Fundamental Transaction, the same kind
                  and amount of securities, cash or property as it would have
                  been entitled to receive upon the occurrence of such
                  Fundamental Transaction if it had been, immediately prior to
                  such Fundamental Transaction, the holder of one share of
                  Common Stock (the "Alternate Consideration"). For purposes of
                  any such conversion, the determination of the Set Price shall
                  be appropriately adjusted to apply to such Alternate
                  Consideration based on the amount of Alternate Consideration
                  issuable in respect of one share of Common Stock in such
                  Fundamental Transaction, and the Company shall apportion the
                  Set Price among the Alternate Consideration in a reasonable
                  manner reflecting the relative value of any different
                  components of the Alternate Consideration. If holders of
                  Common Stock are given any choice as to the securities, cash
                  or property to be received in a Fundamental Transaction, then
                  the Holder shall be given the same choice as to the Alternate
                  Consideration it receives upon any conversion of this
                  Debenture following such Fundamental Transaction. To the
                  extent necessary to effectuate the foregoing provisions, any
                  successor to the Company or surviving entity in such
                  Fundamental Transaction shall issue to the Holder a new
                  Debenture consistent with the foregoing provisions and
                  evidencing the Holder's right to convert such Debenture into
                  Alternate Consideration. The terms of any agreement pursuant
                  to which a Fundamental Transaction is effected shall include
                  terms requiring any such successor or surviving entity to
                  comply with the provisions of this paragraph (c) and insuring
                  that this Debenture (or any such replacement security) will be
                  similarly adjusted upon any subsequent transaction analogous
                  to a Fundamental Transaction.
<PAGE>

                           (x) Notwithstanding the foregoing, no adjustment will
                  be made under this paragraph (c) in respect of (A) the
                  granting or issuance of shares of capital stock or of options
                  to employees, officers, directors and consultants of the
                  Company pursuant to any stock option plan agreement or
                  arrangement duly adopted or approved by a majority of the
                  non-employee members of the Board of Directors of the Company
                  or a majority of the members of a committee of non-employee
                  directors established for such purpose, (B) upon the exercise
                  of this Debenture or any other Debenture of this series or of
                  any other series or security issued by the Company in
                  connection with the offer and sale of this Company's
                  securities pursuant to the Purchase Agreement, or (C) upon the
                  exercise of or conversion of any Common Stock Equivalents,
                  rights, options or warrants issued and outstanding on the
                  Original Issue Date, provided such securities have not been
                  amended since the date of the Purchase Agreement except as a
                  result of the Purchase Agreement, or (D) issuance of
                  securities in connection with acquisitions, strategic
                  investments, or strategic partnering arrangements, the primary
                  purpose of which is not to raise capital.

                           (xi) If the Set Price has been adjusted based on the
                  issuance of a right, option, warrant and/or Common Stock
                  Equivalent and all of such right, option, warrant and/or
                  Common Stock Equivalent expires pursuant to its own terms
                  before it is exercised, exchanged and/or converted, an upward
                  adjustment will be made such that the Set Price will no longer
                  reflect the issuance of such right, option, warrant and/or
                  Common Stock Equivalent.

                  (d) The Company covenants that it will at all times reserve
         and keep available out of its authorized and unissued shares of Common
         Stock solely for the purpose of issuance upon conversion of the
         Debentures, each as herein provided, free from preemptive rights or any
         other actual contingent purchase rights of persons other than the
         Holders, not less than such number of shares of the Common Stock as
         shall (subject to any additional requirements of the Company as to
         reservation of such shares set forth in the Purchase Agreement) be
         issuable (taking into account the adjustments and restrictions of
         Section 4(b)) upon the conversion of the outstanding principal amount
         of the Debentures hereunder. The Company covenants that all shares of
         Common Stock that shall be so issuable shall, upon issue, be duly and
         validly authorized, issued and fully paid, nonassessable and, if the
         Underlying Shares Registration Statement has been declared effective
         under the Securities Act, registered for public sale in accordance with
         such Underlying Shares Registration Statement.

                  (e) Upon a conversion hereunder the Company shall not be
         required to issue stock certificates representing fractions of shares
         of the Common Stock, but may if otherwise permitted, make a cash
         payment in respect of any final fraction of a share based on the
         Closing Price at such time. If the Company elects not, or is unable, to
         make such a cash payment, the Holder shall be entitled to receive, in
         lieu of the final fraction of a share, one whole share of Common Stock.

                  (f) The issuance of certificates for shares of the Common
         Stock on conversion of the Debentures shall be made without charge to
         the Holders thereof for any documentary stamp or similar taxes that may
         be payable in respect of the issue or delivery of such certificate,
         provided that the Company shall not be required to pay any tax that may
         be payable in respect of any transfer involved in the issuance and
         delivery of any such certificate upon conversion in a name other than
         that of the Holder of such Debentures so converted and the Company
         shall not be required to issue or deliver such certificates unless or
         until the person or persons requesting the issuance thereof shall have
         paid to the Company the amount of such tax or shall have established to
         the satisfaction of the Company that such tax has been paid.
<PAGE>
                  (g) Any and all notices or other communications or deliveries
         to be provided by the Holders hereunder, including, without limitation,
         any Notice of Conversion, shall be in writing and delivered personally,
         by facsimile, sent by a nationally recognized overnight courier
         service, addressed to the Company, at the address set forth above,
         facsimile number (416) 502-2968, Attn: T. Scott Worthington or such
         other address or facsimile number as the Company may specify for such
         purposes by notice to the Holders delivered in accordance with this
         Section. Any and all notices or other communications or deliveries to
         be provided by the Company hereunder shall be in writing and delivered
         personally, by facsimile, sent by a nationally recognized overnight
         courier service addressed to each Holder at the facsimile telephone
         number or address of such Holder appearing on the books of the Company,
         or if no such facsimile telephone number or address appears, at the
         principal place of business of the Holder. Any notice or other
         communication or deliveries hereunder shall be deemed given and
         effective on the earliest of (i) the date of transmission, if such
         notice or communication is delivered via facsimile at the facsimile
         telephone number specified in this Section prior to 5:30 p.m. (New York
         City time), (ii) the date after the date of transmission, if such
         notice or communication is delivered via facsimile at the facsimile
         telephone number specified in this Section later than 5:30 p.m. (New
         York City time) on any date and earlier than 11:59 p.m. (New York City
         time) on such date, (iii) the Business Day following the date of
         mailing, if sent by nationally recognized overnight courier service, or
         (iv) upon actual receipt by the party to whom such notice is required
         to be given.

         Section 5.        Redemption.

                  (a) Optional Redemption by the Company. The Company shall have
         the right, at any time after the Effective Date if the Closing Price on
         each of the 20 Trading Days immediately prior to the Notice Date (as
         defined below) is greater than 200% of the then Set Price, upon 10
         Trading Days' prior written notice to the Holder (an "Optional
         Redemption Notice" (the date such notice is received by the Holder is
         the "Notice Date"), to redeem no less than the entire principal amount
         of this Debenture then held by the Holder, at a cash price equal to the
         120% of the principal amount outstanding plus any fees owing thereon
         (the "Optional Redemption Price"). The Company may only effect an
         Optional Redemption Notice if each of the following shall be true: (i)
         the Company shall have duly honored all conversions occurring by virtue
         of one or more Notice of Conversions prior to the Optional Redemption
         Notice, (ii) there is an effective Underlying Shares Registration
         Statement pursuant to which the Holder is permitted to utilize the
         prospectus thereunder to resell all of the Underlying Shares issued to
         the Holder and all of the Underlying Shares as are issuable to the
         Holder upon conversion in full of the principal amount of this
         Debenture subject to the Optional Redemption Notice at the Set Price
         (and the Company believes, in good faith, that such effectiveness will
         continue uninterrupted for the foreseeable future), (iii) the Common
         Stock is listed for trading on a Principal Market (and the Company
         believes, in good faith, that trading of the Common Stock on a
         Principal Market will continue uninterrupted for the foreseeable
         future), (iv) all liquidated damages and other amounts owing in respect
         of the Debentures and Underlying Shares shall have been paid or will,
         concurrently with the issuance of the Underlying Shares, be paid in
         cash; (v) there is a sufficient number of authorized but unissued and
         otherwise unreserved shares of Common Stock for the issuance of all the
         Underlying Shares as are issuable to the Holder upon conversion in full
         of the Debentures subject to the Optional Redemption Notice; and (vi)
         no Event of Default nor any event that with the passage of time would
         constitute an Event of Default has occurred and is continuing. If any
         of the foregoing conditions shall cease to be in effect during the
         period between the Notice Date and the date the Optional Redemption
         Price is paid in full, then the Holders subject to such redemption may
         elect, by written notice to the Company given at any time after any of
         the foregoing conditions shall cease to be in effect, to invalidate ab
         initio such redemption, notwithstanding anything herein contained to
         the contrary. In any case, the Holders may convert any portion of the
         outstanding principal amount of the Debentures subject to an Optional
         Redemption Notice prior to the date that the Optional Redemption Price
         is due and paid in full.
<PAGE>

                  (b) Conditional Redemption at Election of Holder. On any
         Conversion Date after the earlier of the Effective Date or the 150th
         day after the Closing Date, if the Closing Price for each of the 20
         consecutive Trading Day period prior to such date is less than 120% of
         the Set Price then in effect, the Holder shall have the right
         ("Conditional Redemption Right") to cause the Company to, at the
         election of the Company, either (i) redeem the portion of this
         Debenture then subject to the Notice of Conversion applicable to such
         Conversion Date based on a redemption price equal to 120% of the
         principal amount of such principal amount (the "Conditional Redemption
         Price") or (ii) in lieu of a cash redemption payment, issue Conversion
         Shares based on a conversion price equal to 95% of the average of the
         lowest 3 Closing Prices during such 20 day period; provided, however,
         at anytime the Holder may request from the Company the Company's
         irrevocable decision to pay cash, shares or a combination thereof,
         during the following 10 Trading Days upon the Holder's exercise of a
         Conditional Redemption Right during such period ("Notice of Decision");
         provided, further, the Notice of Decision must include the amount of
         the Conditional Redemption Price the Company will pay in cash.
         Notwithstanding anything herein to the contrary, failure to deliver the
         Notice of Decision within 1 Trading Day of such request by the Holder
         shall obligate the Company to issue only shares of Common Stock upon a
         Conditional Redemption Right during such 10 Trading Day period. The
         Company must notify the Holder of its election to pay the Conditional
         Redemption Price in cash or shares of Common Stock within 24 hours
         after notification from the Holder that the Holder elects to exercise
         its right to a redemption hereunder. All conversions hereunder shall be
         made as if pursuant to Section 4 and the other sub-sections relating
         thereto, including but not limited to, liquidated damages and fees for
         late delivery of Conversion Shares. Nothing herein shall preclude the
         Holder from converting this Debenture to the extent this Debenture
         remains unpaid and unconverted after the redemption date as set forth
         in sub-section (c) below.

                  (c) Redemption Procedure. The Optional Redemption Price is due
         on the 20th Trading Day following the Notice Date and the Conditional
         Redemption Price is due on the 5th Trading Day following the applicable
         Conversion Date unless otherwise paid in shares of Common Stock, in
         which case the delivery of such shares shall be otherwise subject to
         Section 4. If any portion of the Optional Redemption Price or
         Conditional Redemption Price shall not be paid by the Company by the
         date such payment is due, interest shall accrue thereon at the rate of
         18% per annum (or the maximum rate permitted by applicable law,
         whichever is less) until such redemption price plus all such interest
         is paid in full. In addition, if any portion of the Optional Redemption
         Price or Conditional Redemption Price remains unpaid after such date,
         the Holders subject to such redemption may elect, by written notice to
         the Company given at any time thereafter, to invalidate ab initio such
         redemption, notwithstanding anything herein contained to the contrary.
         If a Holder elects to invalidate such redemption the Company shall
         promptly, and, in any event, not later than 3 Trading Days from receipt
         of such Holder's notice of such election, return to such Holder all of
         the Debentures for which the Optional Redemption Price or Conditional
         Redemption Price shall not have been paid in full.

         Section 6. Definitions. For the purposes hereof, in addition to the
         terms defined elsewhere in this Debenture: (a) capitalized terms not
         otherwise defined herein have the meanings given to such terms in the
         Purchase Agreement, and (b) the following terms shall have the
         following meanings:

                  "Business Day" means any day except Saturday, Sunday and any
         day which shall be a federal legal holiday in the United States or a
         day on which banking institutions in the State of New York are
         authorized or required by law or other government action to close.
<PAGE>

                  "Change of Control Transaction" means the occurrence after the
         date hereof of any of (i) an acquisition after the date hereof by an
         individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
         promulgated under the Exchange Act) of effective control (whether
         through legal or beneficial ownership of capital stock of the Company,
         by contract or otherwise) of in excess of 33% of the voting securities
         of the Company, or (ii) a replacement at one time or within a three
         year period of more than one-half of the members of the Company's board
         of directors which is not approved by a majority of those individuals
         who are members of the board of directors on the date hereof (or by
         those individuals who are serving as members of the board of directors
         on any date whose nomination to the board of directors was approved by
         a majority of the members of the board of directors who are members on
         the date hereof), or (iii) the execution by the Company of an agreement
         to which the Company is a party or by which it is bound, providing for
         any of the events set forth above in (i) or (ii).

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock, $0.001 par value per
         share, of the Company and stock of any other class into which such
         shares may hereafter have been reclassified or changed.

                  "Conditional Redemption Price" shall have the meaning set
         forth in Section 5(b).

                  "Conditional Redemption Right" shall have the meaning set
         forth in Section 5(b).

                  "Conversion Date" shall have the meaning set forth in Section
         4(a)(i) hereof.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended.

                  "Mandatory Prepayment Amount" for any Debentures shall equal
         the sum of (i) the greater of: (A) 120% of the principal amount of
         Debentures to be prepaid, plus all other accrued and unpaid amounts due
         hereunder, or (B) the principal amount of Debentures to be prepaid,
         plus all other accrued and unpaid amounts due hereunder, divided by the
         Set Price on (x) the date the Mandatory Prepayment Amount is demanded
         or otherwise due or (y) the date the Mandatory Prepayment Amount is
         paid in full, whichever is less, multiplied by the Closing Price on (x)
         the date the Mandatory Prepayment Amount is demanded or otherwise due
         or (y) the date the Mandatory Prepayment Amount is paid in full,
         whichever is greater, and (ii) all other amounts, costs, expenses and
         liquidated damages due in respect of such Debentures.

                  "Notice Date" shall have the meaning set forth in Section
         5(a).

                  "Optional Redemption Notice" shall have the meaning set forth
         in Section 5(a).

                  "Optional Redemption Price" shall have the meaning set forth
         in Section 5(a).

                  "Original Issue Date" shall mean the date of the first
         issuance of the Debentures regardless of the number of transfers of any
         Debenture and regardless of the number of instruments which may be
         issued to evidence such Debenture.

                  "Person" means a corporation, an association, a partnership,
         organization, a business, an individual, a government or political
         subdivision thereof or a governmental agency.

                  "Purchase Agreement" means the Securities Purchase Agreement,
         dated as of July 14, 2003, to which the Company and the original Holder
         are parties, as amended, modified or supplemented from time to time in
         accordance with its terms.
<PAGE>

                  "Registration Rights Agreement" means the Registration Rights
         Agreement, dated as of the date of the Purchase Agreement, to which the
         Company and the original Holder are parties, as amended, modified or
         supplemented from time to time in accordance with its terms.

                  "Securities Act" means the Securities Act of 1933, as amended,
         and the rules and regulations promulgated thereunder.

                  "Set Price" shall have the meaning set forth in Section
         4(c)(i).

                  "Trading Day" means (a) a day on which the shares of Common
         Stock are traded on a Principal Market on which the shares of Common
         Stock are then listed or quoted, or (b) if the shares of Common Stock
         are not quoted on a Principal Market, a day on which the shares of
         Common Stock are quoted in the over-the-counter market as reported by
         the National Quotation Bureau Incorporated (or any similar organization
         or agency succeeding its functions of reporting prices); provided, that
         in the event that the shares of Common Stock are not listed or quoted
         as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a
         Business Day.

                  "Transaction Documents" shall have the meaning set forth in
         the Purchase Agreement.

                  "Underlying Shares" means the shares of Common Stock issuable
         upon conversion of Debentures in accordance with the terms hereof.

                  "Underlying Shares Registration Statement" means a
         registration statement meeting the requirements set forth in the
         Registration Rights Agreement, covering among other things the resale
         of the Underlying Shares and naming the Holder as a "selling
         stockholder" thereunder.

         Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and liquidated damages (if any) on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct debt obligation of the Company and was
issued at an original issue discount to the principal amount. This Debenture
ranks pari passu with all other Debentures now or hereafter issued under the
terms set forth herein. As long as there are Debentures outstanding, the Company
shall not and shall cause it subsidiaries not to, without the consent of the
Holders, (a) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holders; (b) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying Shares
to the extent permitted or required under the Transaction Documents or as
otherwise permitted by the Transaction Documents; or (c) enter into any
agreement with respect to any of the foregoing.

         Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.

         Section 9. So long as any portion of the Debentures are outstanding,
the Company will not and will not permit any of its subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom that is senior in any respect to the Company's obligations under the
Debentures without the prior consent of the Holder, which consent shall not be
unreasonably withheld.
<PAGE>
         Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

         Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.

         Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any amount deemed interest due hereunder violates applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Company covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal or deemed
interest on the Debentures as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted.

         Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.

                              *********************

<PAGE>




         IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.

                     WAVERIDER COMMUNICATIONS INC.

                     By:_________________________________________

                         Name: T. Scott Worthington
                         Title: Vice President and Chief Financial Officer


<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Convertible
Debenture of WaveRider Communications Inc. (the "Company"), due on July 13,
2006, into shares of common stock, $0.001 par value per share (the "Common
Stock"), of the Company according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

Conversion calculations:

                                            Date to Effect Conversion:

                 Principal Amount of Debentures to be Converted:

           [__] Check here if undersigned elects to exercise its Conditional
Redemption Right as to this conversion pursuant to Section 5(b) of the
Debenture.

                                            Number of shares of Common Stock to
                                            be issued:

                                            Applicable Conversion Price:

                                            If applicable, Redemption to be paid
                                            in cash: $

Signature:

Name:

Address:

The Company confirms acceptance of this Notice of Conversion (to be faxed to the
Holder within 1 Trading Day of receipt by the Company).

Signature:  _________________________       Date:  _____________________________
Name:
Title:                                      Tel: _______________________________


<PAGE>



                                   Schedule 1

                               CONVERSION SCHEDULE

Convertible Debentures due on July ___, 2006, in the aggregate principal amount
of $____________ issued by WaveRider Communications Inc. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

           Dated:

<TABLE>
<CAPTION>

                                                             Aggregate Principal
                                                               Amount Remaining
      Date of Conversion                                       Subsequent to
(or for first entry, Original                                   Conversion
         Issue Date)              Amount of Conversion         (or original              Company Attest
                                                               Principal Amount)
<S>                             <C>                       <C>                     <C>
------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------


------------------------------- ------------------------- ----------------------- ------------------------------
</TABLE>