<PAGE>

                                                                    EXHIBIT 10.2

NONE OF THE SECURITIES TO WHICH THIS AGREEMENT (THE "AGREEMENT") RELATES HAVE
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE
MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED
HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

                 ADVISORY FEE PAYMENT AND SUBSCRIPTION AGREEMENT

                  This ADVISORY FEE PAYMENT AND SUBSCRIPTION AGREEMENT (the
"Agreement") is made as of the 17th day of January, 2002, by and between
SmarTire Systems Inc. ("SmarTire"), whose business address is Suite 150, 13151
Vanier Place, Richmond, B.C., Canada, V6V 2J1, and West Sussex Trading, Inc.
("West Sussex Trading"), whose business address is 55 Ginty Boulevard,
Haverhill, Massachusetts 01830, U.S.A.

                                    RECITALS

                  WHEREAS:

A. The parties have entered into an Advisory Agreement dated as of August 17,
2001 (the "Advisory Agreement"), pursuant to which West Sussex Trading has
agreed to act as a non-exclusive advisor to SmarTire in raising new equity
and/or debt financing, and, in partial consideration for such services (the
"Services"), SmarTire has agreed to issue to West Sussex Trading three year
warrants (the "Warrants") to purchase common shares in the capital of SmarTire
(the "Warrant Shares") equal in number to seven percent (7%) of the total number
of common shares in the capital of SmarTire purchased by investors (the
"Investors") introduced to SmarTire by West Sussex Trading; and

B. Investors have agreed to subscribe for a total of 670,000 common shares in
the capital of SmarTire.

                  NOW, THEREFORE, the parties hereto agree as follows:

1.                ISSUANCE OF THE WARRANTS

1.1 In consideration for the Services provided to SmarTire under the Advisory
Agreement, SmarTire hereby grants to West Sussex Trading 46,900 Warrants, each
entitling West Sussex Trading to purchase one Warrant Share at an exercise price
of U.S. $1.70 per Warrant Share until 4:30 p.m. (Vancouver time) on that day
that is three years following the date hereof, at which time any unexercised
Warrants will expire.

1.2 SmarTire agrees to issue to West Sussex Trading a certificate representing
the Warrants, in the form attached as Appendix 2 hereto, as soon as practicable
following delivery by West Sussex Trading to SmarTire of two fully-executed
copies of this Agreement and a Prospective Investor Suitability Questionnaire in
the form attached as Appendix 1 (the "Questionnaire").

1.3 The Warrants and the Warrant Shares are sometimes collectively referred to
in this Agreement as the "Securities".

2.                ACKNOWLEDGEMENTS OF WEST SUSSEX TRADING

2.1               West Sussex Trading acknowledges and agrees that:

      (a)   none of the Warrants or the Warrant Shares have been registered
            under the 1933 Act, or under any state securities or "blue sky" laws
            of any state of the United States, and, unless


<PAGE>
                                       2


            so registered, may not be offered or sold in the United States or,
            directly or indirectly, to U.S. Persons, as that term is defined in
            Regulation S under the 1933 Act ("Regulation S"), except in
            accordance with the provisions of Regulation S, pursuant to an
            effective registration statement under the 1933 Act, or pursuant to
            an exemption from, or in a transaction not subject to, the
            registration requirements of the 1933 Act;

      (b)   West Sussex Trading acknowledges that SmarTire has not undertaken,
            and will have no obligation, to register any of the Securities under
            the 1933 Act;

      (c)   the decision to execute this Agreement and acquire the Securities
            hereunder has not been based upon any oral or written representation
            as to fact or otherwise made by or on behalf of SmarTire, and such
            decision is based entirely upon a review of information (the receipt
            of which is hereby acknowledged) which has been filed by SmarTire
            with the United States Shares and Exchange Commission and in
            compliance, or intended compliance, with applicable securities
            legislation (collectively, the "Public Record");

      (d)   if SmarTire has presented a business plan to West Sussex Trading,
            West Sussex Trading acknowledges that the business plan may not be
            achieved or be achievable;

      (e)   no securities commission or similar regulatory authority has
            reviewed or passed on the merits of the Securities;

      (f)   there is no government or other insurance covering the Securities;

      (g)   SmarTire has advised West Sussex Trading that SmarTire is relying on
            an exemption from the requirements to provide West Sussex Trading
            with a prospectus and to sell the Securities through a person
            registered to sell securities under the Securities Act (British
            Columbia) (the "B.C. Act") and, as a consequence of acquiring the
            Shares pursuant to this exemption, certain protections, rights and
            remedies provided by the B.C. Act, including statutory rights of
            rescission or damages, will not be available to West Sussex Trading;

      (h)   West Sussex Trading and West Sussex Trading's advisor(s) have had a
            reasonable opportunity to ask questions of and receive answers from
            SmarTire in connection with the distribution of the Securities
            hereunder, and to obtain additional information, to the extent
            possessed or obtainable without unreasonable effort or expense,
            necessary to verify the accuracy of the information about SmarTire;

      (i)   the books and records of SmarTire were available upon reasonable
            notice for inspection, subject to certain confidentiality
            restrictions, by West Sussex Trading during reasonable business
            hours at its principal place of business, and all documents, records
            and books in connection with the distribution of the Securities
            hereunder have been made available for inspection by West Sussex
            Trading, West Sussex Trading's attorney and/or advisor(s);

      (j)   SmarTire is entitled to rely on the representations and warranties
            and the statements and answers of West Sussex Trading contained in
            this Agreement and in the Questionnaire;

      (k)   West Sussex Trading will indemnify and hold harmless SmarTire and,
            where applicable, its directors, officers, employees, agents,
            advisors and shareholders, from and against any and all loss,
            liability, claim, damage and expense whatsoever (including, but not
            limited to, any and all fees, costs and expenses whatsoever
            reasonably incurred in investigating, preparing or defending against
            any claim, lawsuit, administrative proceeding or investigation
            whether commenced or threatened) arising out of or based upon any
            representation or warranty of West Sussex Trading contained herein
            or in any document furnished by West Sussex Trading to SmarTire in
            connection herewith (including, without limitation, the
            Questionnaire) being untrue in any material respect or any breach or
            failure


<PAGE>
                                       3


            by West Sussex Trading to comply with any covenant or agreement made
            by West Sussex Trading to SmarTire in connection therewith;

      (l)   none of the Securities are listed on any stock exchange or automated
            dealer quotation system and no representation has been made to West
            Sussex Trading that any of the Securities will become listed on any
            stock exchange or automated dealer quotation system; except that
            currently the common shares of SmarTire are listed for trading on
            the Nasdaq SmallCap Market;

      (m)   none of the Securities may be offered or sold to a U.S. Person or
            for the account or benefit of a U.S. Person (other than a
            distributor) prior to the end of the Restricted Period (as defined
            herein);

      (n)   offers and sales of any of the Securities prior to the expiration of
            a period of one year after the date of issuance of such Securities
            (the "Restricted Period") shall only be made in compliance with the
            safe harbor provisions set forth in Regulation S, pursuant to the
            registration provisions of the 1933 Act or an exemption therefrom,
            and that all offers and sales after the Restricted Period shall be
            made only in compliance with the registration provisions of the 1933
            Act or an exemption therefrom;

      (o)   there are additional restrictions on West Sussex Trading's ability
            to resell the Securities under the B.C. Act and Multilateral
            Instrument 45-102 adopted by the British Columbia Securities
            Commission;

      (p)   SmarTire will refuse to register any transfer of the Securities not
            made in accordance with the provisions of Regulation S, pursuant to
            an effective registration statement under the 1933 Act or pursuant
            to an available exemption from the registration requirements of the
            1933 Act; and

      (q)   West Sussex Trading has been advised to consult West Sussex
            Trading's own legal, tax and other advisors with respect to the
            merits and risks of an investment in the Securities and with respect
            to applicable resale restrictions, and it is solely responsible (and
            SmarTire is not in any way responsible) for compliance with
            applicable resale restrictions.

3.                REPRESENTATIONS, WARRANTIES AND COVENANTS OF WEST SUSSEX
                  TRADING

      (a)   West Sussex Trading hereby represents and warrants to and covenants
            with SmarTire (which representations, warranties and covenants shall
            survive the closing) that:

      (b)   West Sussex Trading is resident in the United States and is not a
            resident of British Columbia;

      (c)   West Sussex Trading has received and carefully read this Agreement;

      (d)   West Sussex Trading is duly incorporated and validly subsisting
            under the laws of its jurisdiction of incorporation and all
            necessary approvals by its directors, shareholders and others have
            been obtained to authorize execution and performance of this
            Agreement on behalf of West Sussex Trading;

      (e)   West Sussex Trading has the legal capacity and competence to enter
            into and execute this Agreement and to take all actions required
            pursuant hereto;

      (f)   West Sussex Trading has duly executed and delivered this Agreement
            and it constitutes a valid and binding agreement of West Sussex
            Trading enforceable against West Sussex Trading;

<PAGE>
                                       4


      (g)   the entering into of this Agreement and the transactions
            contemplated hereby do not result in the violation of any of the
            terms and provisions of any law applicable to, or, if applicable,
            the constating documents of, West Sussex Trading, or of any
            agreement, written or oral, to which West Sussex Trading may be a
            party or by which West Sussex Trading is or may be bound;

      (h)   West Sussex Trading (i) has adequate net worth and means of
            providing for its current financial needs and possible personal
            contingencies, (ii) has no need for liquidity in this investment,
            and (iii) is able to bear the economic risks of an investment in the
            Securities for an indefinite period of time, and can afford the
            complete loss of such investment;

      (i)   West Sussex Trading is aware that an investment in SmarTire is
            speculative and involves certain risks, including the possible loss
            of the investment, and West Sussex Trading has carefully read and
            considered the matters set forth under the caption "Risk Factors"
            appearing in SmarTire's most recent annual report on Form 10-KSB
            filed with the SEC;

      (j)   West Sussex Trading has the requisite knowledge and experience in
            financial and business matters as to be capable of evaluating the
            merits and risks of the investment in the Securities and SmarTire,
            and West Sussex Trading is providing evidence of such knowledge and
            experience in these matters through the information requested in the
            Questionnaire;

      (k)   West Sussex Trading understands and agrees that SmarTire and others
            will rely upon the truth and accuracy of the acknowledgements,
            representations and agreements contained in this Agreement and the
            Questionnaire, and agrees that if any of such acknowledgements,
            representations and agreements are no longer accurate or have been
            breached, West Sussex Trading shall promptly notify SmarTire;

      (l)   all information contained in the Questionnaire is complete and
            accurate and may be relied upon by SmarTire, and West Sussex Trading
            will notify SmarTire immediately of any material change in any such
            information occurring prior to the closing of the purchase of the
            Securities;

      (m)   West Sussex Trading is purchasing the Securities for its own account
            for investment purposes only and not for the account of any other
            person and not for distribution, assignment or resale to others, and
            no other person has a direct or indirect beneficial interest in such
            Securities, and West Sussex Trading has not subdivided its interest
            in the Securities with any other person;

      (n)   West Sussex Trading is not an underwriter of, or dealer in, the
            common shares of SmarTire, nor is West Sussex Trading participating,
            pursuant to a contractual agreement or otherwise, in the
            distribution of the Securities;

      (o)   West Sussex Trading has made an independent examination and
            investigation of an investment in the Securities and SmarTire and
            has depended on the advice of its legal and financial advisors and
            agrees that SmarTire will not be responsible in anyway whatsoever
            for West Sussex Trading's decision to invest in the Securities and
            SmarTire;

      (p)   if West Sussex Trading is acquiring the Securities as a fiduciary or
            agent for one or more investor accounts, the investor accounts for
            which West Sussex Trading acts as a fiduciary or agent satisfy the
            definition of an "Accredited Investor", as the term is defined under
            Regulation D of the 1933 Act, and none of the investor accounts are
            maintained for the benefit of a resident of British Columbia;

      (q)   if West Sussex Trading is acquiring the Securities as a fiduciary or
            agent for one or more investor accounts, West Sussex Trading has
            sole investment discretion with respect to


<PAGE>
                                       5


            each such account, and West Sussex Trading has full power to make
            the foregoing acknowledgements, representations and agreements on
            behalf of such account;

      (r)   West Sussex Trading is not aware of any advertisement of any of the
            Securities and is not acquiring the Securities as a result of any
            form of general solicitation or general advertising including
            advertisements, articles, notices or other communications published
            in any newspaper, magazine or similar media or broadcast over radio
            or television, or any seminar or meeting whose attendees have been
            invited by general solicitation or general advertising; and

      (s)   no person has made to West Sussex Trading any written or oral
            representations:

            (i)   that any person will resell or repurchase any of the
                  Securities;

            (ii)  that any person will refund the purchase price of any of the
                  Securities; or

            (iii) as to the future price or value of any of the Securities.

3.2 In this Agreement, the term "U.S. Person" shall have the meaning ascribed
thereto in Regulation S and for the purpose of the Agreement includes any person
in the United States.

4.                ACKNOWLEDGEMENT AND WAIVER

4.1 West Sussex Trading has acknowledged that the decision to purchase the
Securities was solely made on the basis of publicly available information
contained in the Public Record. West Sussex Trading hereby waives, to the
fullest extent permitted by law, any rights of withdrawal, rescission or
compensation for damages to which West Sussex Trading might be entitled in
connection with the distribution of any of the Securities.

5.                LEGENDING OF SUBJECT SECURITIES

5.1 West Sussex Trading hereby acknowledges that that upon the issuance thereof,
and until such time as the same is no longer required under the applicable
securities laws and regulations, the certificates representing any of the
Securities will bear legends in substantially the following forms:

      NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE
      UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY
      U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED
      OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
      1933 ACT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
      TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN
      ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

      UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE
      SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE [THE DATE THAT IS FOUR
      MONTHS AND A DAY AFTER THE ISSUE DATE OF THE WARRANTS]

5.2 West Sussex Trading hereby acknowledges and agrees to SmarTire making a
notation on its records or giving instructions to the registrar and transfer
agent of SmarTire in order to implement the restrictions on transfer set forth
and described in this Agreement.

6.                COSTS

6.1 West Sussex Trading acknowledges and agrees that all costs and expenses
incurred by West Sussex Trading (including any fees and disbursements of any
special counsel retained by West Sussex Trading) relating to the acquisition of
the Securities shall be borne by West Sussex Trading.

<PAGE>
                                       6


7.                GOVERNING LAW

7.1 This Agreement is governed by the laws of the Province of British Columbia
and the federal laws of Canada applicable therein. West Sussex Trading
irrevocably attorns to the jurisdiction of the courts of the Province of British
Columbia.

8.                SURVIVAL

8.1 This Agreement, including without limitation the representations, warranties
and covenants contained herein, shall survive and continue in full force and
effect and be binding upon the parties hereto notwithstanding the completion of
the purchase of the Shares by West Sussex Trading pursuant hereto.

9.                ASSIGNMENT

9.1 This Agreement is not transferable or assignable.

10.               COUNTERPARTS AND ELECTRONIC MEANS

10.1 This Agreement may be executed in several counterparts, each of which will
be deemed to be an original and all of which will together constitute one and
the same instrument. Delivery of an executed copy of this Agreement by
electronic facsimile transmission or other means of electronic communication
capable of producing a printed copy will be deemed to be execution and delivery
of this Agreement as of the date first above written.

11.               SEVERABILITY

11.1 The invalidity or unenforceability of any particular provision of this
Agreement shall not affect or limit the validity or enforceability of the
remaining provisions of this Agreement.

12.               ENTIRE AGREEMENT

12.1 Except as expressly provided in this Agreement and in the agreements,
instruments and other documents contemplated or provided for herein, this
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and there are no other terms, conditions, representations
or warranties, whether expressed, implied, oral or written, by statute or common
law, by SmarTire or by anyone else.

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of
the date first above written.

SMARTIRE SYSTEMS INC.                              WEST SUSSEX TRADING, INC.


By: /s/ Kevin A. Carlson                           By: /s/ John A. Finbury
    -------------------------------------------        -------------------------
    Kevin A. Carlson, Managing Director and CFO        Authorized Signatory



<PAGE>


                                   APPENDIX 1

                        ACCREDITED INVESTOR QUESTIONNAIRE

All capitalized terms herein, unless otherwise defined, have the meanings
ascribed thereto in the Agreement.

This Questionnaire is for use by the undersigned US person (as that term is
defined Regulation S of the United States Securities Act of 1933 (the "1933
Act")) who has indicated an interest in acquiring Securities of SMARTIRE SYSTEMS
INC. ("SmarTire"). The purpose of this Questionnaire is to assure SmarTire that
the undersigned will meet the standards imposed by the 1933 Act and the
appropriate exemptions of applicable state securities laws. SmarTire will rely
on the information contained in this Questionnaire for the purposes of such
determination. The Securities will not be registered under the 1933 Act in
reliance upon the exemption from registration afforded by Section 3(b) and/or
Section 4(2) and Regulation D of the 1933 Act. This Questionnaire is not an
offer of the Securities or any other securities of SmarTire in any state other
than those specifically authorized by SmarTire.

All information contained in this Questionnaire will be treated as confidential.
However, by signing and returning this Questionnaire, the undersigned agrees
that, if necessary, this Questionnaire may be presented to such parties as
SmarTire deems appropriate to establish the availability, under the 1933 Act or
applicable state securities law, of exemption from registration in connection
with the sale of the Securities under the Agreement.

The undersigned covenants, represents and warrants to SmarTire that it satisfies
one or more of the categories of "Accredited Investors", as defined by
Regulation D promulgated under the 1933 Act, as indicated below: (Please initial
in the space provide those categories, if any, of an "Accredited Investor" which
the Subscriber satisfies)

             Category 1             An organization described in Section
       -----                        501(c)(3) of the United States Internal
                                    Revenue Code, a corporation, a Massachusetts
                                    or similar business trust or partnership,
                                    not formed for the specific purpose of
                                    acquiring the Shares, with total assets in
                                    excess of US $5,000,000;

         X    Category 2            A natural person whose individual net worth,
       -----                        or joint net worth with that person's
                                    spouse, on the date of purchase exceeds US
                                    $1,000,000;

              Category 3            A natural person who had an individual
       -----                        income in excess of US $200,000 in each of
                                    the two most recent years or joint income
                                    with that person's spouse in excess of US
                                    $300,000 in each of those years and has a
                                    reasonable expectation of reaching the same
                                    income level in the current year;

              Category 4            A "bank" as defined under Section (3)(a)(2)
       -----                        of the 1933 Act or savings and loan
                                    association or other institution as defined
                                    in Section 3(a)(5)(A) of the 1933 Act acting
                                    in its individual or fiduciary capacity; a
                                    broker dealer registered pursuant to Section
                                    15 of the Securities Exchange Act of 1934
                                    (United States); an insurance company as
                                    defined in Section 2(13) of the 1933 Act; an
                                    investment company registered under the
                                    Investment Company Act of 1940 (United
                                    States) or a business development company as
                                    defined in Section 2(a)(48) of such Act; a
                                    Small Business


<PAGE>
                                     - 2 -


                                    Investment Company licensed by the U.S.
                                    Small Business Administration under Section
                                    301(c) or (d) of the Small Business
                                    Investment Act of 1958 (United States); a
                                    plan with total assets in excess of
                                    $5,000,000 established and maintained by a
                                    state, a political subdivision thereof, or
                                    an agency or instrumentality of a state or a
                                    political subdivision thereof, for the
                                    benefit of its employees; an employee
                                    benefit plan within the meaning of the
                                    Employee Retirement Income Security Act of
                                    1974 (United States) whose investment
                                    decisions are made by a plan fiduciary, as
                                    defined in Section 3(21) of such Act, which
                                    is either a bank, savings and loan
                                    association, insurance company or registered
                                    investment adviser, or if the employee
                                    benefit plan has total assets in excess of
                                    $5,000,000, or, if a self-directed plan,
                                    whose investment decisions are made solely
                                    by persons that are accredited investors;


              Category 5            A private business development company as
       -----                        defined in Section 202(a)(22) of the
                                    Investment Advisers Act of 1940 (United
                                    States);

         X   Category 6             A director or executive officer of SmarTire;
       -----
             Category 7             A trust with total assets in excess of
       -----                        $5,000,000, not formed for the specific
                                    purpose of acquiring the Shares, whose
                                    purchase is directed by a sophisticated
                                    person as described in Rule 506(b)(2)(ii)
                                    under the 1933 Act;

              Category 8            An entity in which all of the equity owners
       -----                        satisfy the requirements of one or more of
                                    the foregoing categories;

      Note that the undersigned, in claiming to satisfy one of the above
      categories of Accredited Investor, may be required to supply SmarTire with
      a balance sheet, prior years' federal income tax returns or other
      appropriate documentation to verify and substantiate the undersigned's
      status as an Accredited Investor.

If the Subscriber is an entity which initialled Category 8 in reliance upon the
Accredited Investor categories above, state the name, address, total personal
income from all sources for the previous calendar year, and the net worth:

________________________________________________________________________________

________________________________________________________________________________

The undersigned hereby certifies that the information contained in this
Questionnaire is complete and accurate and the Subscriber will notify SmarTire
promptly of any change in any such information. If this Questionnaire is being
completed on behalf of a corporation, partnership, trust or estate, the person
executing on behalf of the undersigned represents that it has the authority to
execute and deliver this Questionnaire on behalf of such entity.


<PAGE>
                                     - 3 -


IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the
17th day of January, 2002.


If a Corporation, Partnership or Other Entity:    If an Individual:

WEST SUSSEX TRADING, INC.

--------------------------------------            ------------------------------
Print of Type Name of Entity                      Signature

/s/ John A. Finbury, Director
--------------------------------------            ------------------------------
Signature of Authorized Signatory                 Print or Type Name

Corporation
--------------------------------------            ------------------------------
Type of Entity                                    Social Security/Tax I.D. No.




<PAGE>


                                   APPENDIX 2

                           FORM OF WARRANT CERTIFICATE

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY U.S. STATE
SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
SHALL NOT TRADE THE SECURITIES BEFORE [THE DATE THAT IS FOUR MONTHS AND A DAY
AFTER THE ISSUE DATE OF THE SHARES]

               THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID
             AT 4:30 P.M. (VANCOUVER TIME) ON _______________, 2005.

                             SHARE PURCHASE WARRANTS
                          TO PURCHASE COMMON SHARES OF

                              SMARTIRE SYSTEMS INC.

                incorporated in the Province of British Columbia

                  THIS IS TO CERTIFY THAT WEST SUSSEX TRADING, INC., (the
"Holder") of 55 Ginty Boulevard, Haverhill, Massachusetts 01830, U.S.A., (has
the right to purchase, upon and subject to the terms and conditions hereinafter
referred to, up to ________________________________ fully paid and
non-assessable common shares (the "Shares") in the capital of SmarTire Systems
Inc. (hereinafter called the "Company") on or before 4:30 p.m. (Vancouver time)
on ____________________, 2005 (the "Expiry Date") at a price of US$1.70 per
Share.

      1.    ONE (1) WARRANT AND U.S.$1.70 ARE REQUIRED TO PURCHASE ONE SHARE.
            THIS CERTIFICATE REPRESENTS __________________________ WARRANTS.

      2.    These Warrants are issued subject to the Terms and Conditions
            attached to the Warrants issued by the Company (the "Terms and
            Conditions") attached hereto as Appendix "A" and the Warrant Holder
            may exercise the right to purchase Shares only in accordance with
            those Terms and Conditions.

      3.    Nothing contained herein or in the Terms and Conditions will confer
            any right upon the Holder hereof or any other person to subscribe
            for or purchase any Shares at any time subsequent to the Expiry
            Date, and from and after such time, this Warrant and all rights
            hereunder will be void and of no value.


<PAGE>
                                     - 2 -


                  IN WITNESS WHEREOF the Company has executed this Warrant
Certificate this ______ day of ___________________ , 2002.


SMARTIRE SYSTEMS INC.


Per:  ___________________________________________
      Kevin A. Carlson, Managing Director and CFO

PLEASE NOTE THAT ALL SHARE CERTIFICATES MUST BE LEGENDED AS FOLLOWS DURING THE
CURRENCY OF APPLICABLE HOLD PERIODS:

      "NONE OF THE SECURITIES TO WHICH THIS AGREEMENT (THE "AGREEMENT") RELATES
      HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
      AMENDED (THE "1933 ACT"), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS
      SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S.
      PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
      TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT
      AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

      UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE
      SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE [THE DATE THAT IS FOUR
      MONTHS AND A DAY AFTER THE ISSUE DATE OF THE WARRANTS]"


<PAGE>


                                  APPENDIX "A"

TERMS AND CONDITIONS dated ___________________ , 2002, attached to the Warrants
issued by SmarTire Systems Inc.

1.                INTERPRETATION

1.1               Definitions

In these Terms and Conditions, unless there is something in the subject matter
or context inconsistent therewith:

      (a)   "Company" means SmarTire Systems Inc. until a successor corporation
            will have become such as a result of consolidation, amalgamation or
            merger with or into any other corporation or corporations, or as a
            result of the conveyance or transfer of all or substantially all of
            the properties and estates of the Company as an entirety to any
            other corporation and thereafter "Company" will mean such successor
            corporation;

      (b)   "Company's Auditors" means an independent firm of accountants duly
            appointed as auditors of the Company;

      (c)   "Director" means a director of the Company for the time being, and
            reference, without more, to action by the directors means action by
            the directors of the Company as a Board, or whenever duly empowered,
            action by an executive committee of the Board;

      (d)   "herein", "hereby" and similar expressions refer to these Terms and
            Conditions as the same may be amended or modified from time to time;
            and the expression "Article" and "Section," followed by a number
            refer to the specified Article or Section of these Terms and
            Conditions;

      (e)   "person" means an individual, corporation, partnership, trustee or
            any unincorporated organization and words importing persons have a
            similar meaning;

      (f)   "shares" means the common shares in the capital of the Company as
            constituted at the date hereof and any shares resulting from any
            subdivision or consolidation of the shares;

      (g)   "Warrant Holders" or "Holders" means the holders of the Warrants;
            and

      (h)   "Warrants" means the warrants of the Company issued and presently
            authorized and for the time being outstanding.

1.2               Gender

Words importing the singular number include the plural and vice versa and words
importing the masculine gender include the feminine and neuter genders.

1.3               Interpretation not affected by Headings

The division of these Terms and Conditions into Articles and Sections, and the
insertion of headings are for convenience of reference only and will not affect
the construction or interpretation thereof.

1.4               Applicable Law

The Warrants will be construed in accordance with the laws of the Province of
British Columbia.


<PAGE>
                                     - 2 -


2.                ISSUE OF WARRANTS

2.1               Additional Warrants

The Company may at any time and from time to time issue additional warrants or
grant options or similar rights to purchase shares of its capital stock.

2.2               Warrant to Rank Pari-Passu

All Warrants and additional warrants, options or similar rights to purchase
shares from time to time issued or granted by the Company, will rank pari-passu
whatever may be the actual dates of issue or grant thereof, or of the dates of
the certificates by which they are evidenced.

2.3               Issue in Substitution for Mutilated Lost, Destroyed or Stolen
                  Warrant Certificates

      (a)   In case a Warrant Certificate becomes mutilated, lost, destroyed or
            stolen, the Company, at its discretion, may issue and deliver a new
            Warrant Certificate of like date and tenor as the one mutilated,
            lost, destroyed or stolen, in exchange for and in place of and upon
            cancellation of such mutilated Warrant Certificate, or in lieu of,
            and in substitution for such lost, destroyed or stolen Warrant
            Certificate and the substituted Warrant Certificate will be entitled
            to the benefit hereof and rank equally in accordance with its terms
            with all other Warrants issued or to be issued by the Company.

      (b)   The applicant for the issue of a new Warrant Certificate pursuant
            hereto will bear the cost of the issue thereof and in case of loss,
            destruction or theft furnish to the Company such evidence of
            ownership and of loss, destruction, or theft of the Warrant
            Certificate so lost, destroyed or stolen as will be satisfactory to
            the Company in its discretion and such applicant may also be
            required to furnish indemnity in amount and form satisfactory to the
            Company in its discretion, and will pay the reasonable charges of
            the Company in connection therewith.

2.4               Warrant Holder Not a Shareholder

The holding of a Warrant will not constitute the Holder thereof a shareholder of
the Company, nor entitle him to any right or interest in respect thereof except
as in the Warrant expressly provided.

3.                NOTICE

3.1               Notice to Warrant Holders

Any notice required or permitted to be given to the Holders will be in writing
and may be given by prepaid registered post, electronic facsimile transmission
or other means of electronic communication capable of producing a printed copy
to the address of the Holder appearing on the Holder's Warrant or to such other
address as any Holder may specify by notice in writing to the Company, and any
such notice will be deemed to have been given and received by the Holder to whom
it was addressed if mailed, on the third day following the mailing thereof, if
by facsimile or other electronic communication, on successful transmission, or,
if delivered, on delivery; but if at the time or mailing or between the time of
mailing and the third business day thereafter there is a strike, lockout, or
other labour disturbance affecting postal service, then the notice will not be
effectively given until actually delivered.


<PAGE>
                                     - 3 -


3.2               Notice to the Company

Any notice required or permitted to be given to the Company will be in writing
and may be given by prepaid registered post, electronic facsimile transmission
or other means of electronic communication capable of producing a printed copy
to the address of the Company set forth below or such other address as the
Company may specify by notice in writing to the Holder, and any such notice will
be deemed to have been given and received by the Company to whom it was
addressed if mailed, on the third day following the mailing thereof, if by
facsimile or other electronic communication, on successful transmission, or, if
delivered, on delivery; but if at the time or mailing or between the time of
mailing and the third business day thereafter there is a strike, lockout, or
other labour disturbance affecting postal service, then the notice will not be
effectively given until actually delivered:

                 SmarTire Systems Inc.
                 13151 Vanier Place
                 Suite 150
                 Richmond, British Columbia
                 Canada V6V 2J1

      Attention: Chief Financial Officer

      Fax No.: (604) 276-2350

4.                EXERCISE OF WARRANTS

4.1               Method of Exercise of Warrants

The right to purchase shares conferred by the Warrants may be exercised by the
Holder surrendering the Warrant Certificate representing same, with a duly
completed and executed subscription in the form attached hereto and a bank draft
or certified cheque payable to or to the order Company, at par, in Vancouver,
British Columbia, for the purchase price applicable at the time of surrender in
respect of the shares subscribed for in lawful money of the United States of
America, to the Company at the address set forth in, or from time to time
specified by the Company pursuant to, Section 3.2.

4.2               Effect of Exercise of Warrants

      (a)   Upon surrender and payment as aforesaid the shares so subscribed for
            will be deemed to have been issued and such person or persons will
            be deemed to have become the Holder or Holders of record of such
            shares on the date of such surrender and payment, and such shares
            will be issued at the subscription price in effect on the date of
            such surrender and payment.

      (b)   Within ten business days after surrender and payment as aforesaid,
            the Company will forthwith cause to be delivered to the person or
            persons in whose name or names the shares so subscribed for are to
            be issued as specified in such subscription or mailed to him or them
            at his or their respective addresses specified in such subscription,
            a certificate or certificates for the appropriate number of shares
            not exceeding those which the Warrant Holder is entitled to purchase
            pursuant to the Warrant surrendered.

4.3               Subscription for Less Than Entitlement

The Holder of any Warrant may subscribe for and purchase a number of shares less
than the number which he is entitled to purchase pursuant to the surrendered
Warrant. In the event of any purchase of a number of common shares less than the
number which can be purchased pursuant to a Warrant, the Holder thereof upon
exercise thereof will in addition be entitled to receive a new Warrant in
respect of the balance of the shares which he was entitled to purchase pursuant
to the surrendered Warrant and which were not then purchased.


<PAGE>
                                     - 4 -


4.4               Warrants for Fractions of Shares

To the extent that the Holder of any Warrant is entitled to receive on the
exercise or partial exercise thereof a fraction of a common share, such right
may be exercised in respect of such fraction only in combination with another
Warrant or other Warrants which in the aggregate entitle the Holder to receive a
whole number of such common shares.

4.5               Expiration of Warrants

After the expiration of the period within which a Warrant is exercisable, all
rights thereunder will wholly cease and terminate and such Warrant will be void
and of no effect.

4.6               Time of Essence

Time will be of the essence hereof.

4.7               Subscription Price

One (1) Warrant and US$1.70 are required to subscribe for each Share during the
term of the Warrants.

4.8               Adjustment of Exercise Price

      (a)   The exercise price and the number of common shares deliverable upon
            the exercise of the Warrants will be subject to adjustment in the
            event and in the manner following:

            (i)   If and whenever the shares at any time outstanding are
                  subdivided into a greater or consolidated into a lesser number
                  of shares the exercise price will be decreased or increased
                  proportionately as the case may be; upon any such subdivision
                  or consolidation the number of shares deliverable upon the
                  exercise of the Warrants will be increased or decreased
                  proportionately as the case may be.

            (ii)  In case of any capital reorganization or of any
                  reclassification of the capital of the Company or in the case
                  of the consolidation, merger or amalgamation of the Company
                  with or into any other Company (hereinafter collectively
                  referred to as a "Reorganization"), each Warrant will after
                  such Reorganization confer the right to purchase the number of
                  shares or other securities of the Company (or of the Company's
                  resulting from such Reorganization) which the Warrant Holder
                  would have been entitled to upon Reorganization if the Warrant
                  Holder had been a shareholder at the time of such
                  Reorganization.

                  In any such case, if necessary, appropriate adjustments will
                  be made in the application of the provisions of this Article
                  Four relating to the rights and interest thereafter of the
                  Holders of the Warrants so that the provisions of this Article
                  Four will be made applicable as nearly as reasonably possible
                  to any shares or other securities deliverable after the
                  Reorganization on the exercise of the Warrants.

                  The subdivision or consolidation of shares at any time
                  outstanding into a greater or lesser number of shares (whether
                  with or without par value) will not be deemed to be a
                  Reorganization for the purposes of this clause.

      (b)   The adjustments provided for in this Section 4.8 are cumulative and
            will become effective immediately after the record date or, if no
            record date is fixed, the effective date of the event which results
            in such adjustments.

<PAGE>
                                     - 5 -


4.9               Determination of Adjustments

If any questions will at any time arise with respect to the exercise price or
any adjustment provided for in Section 4.8, such questions will be conclusively
determined by the Company's Auditors, or, if they decline to so act any other
firm of chartered accountants, in Vancouver, British Columbia that the Company
may designate and who will have access to all appropriate records and such
determination will be binding upon the Company and the Holders of the Warrants.

5.                COVENANTS BY THE COMPANY

5.1               Reservation of Shares

The Company will reserve and there will remain unissued out of its authorized
capital a sufficient number of shares to satisfy the rights of purchase provided
for herein and in the Warrants should the Holders of all the Warrants from time
to time outstanding determine to exercise such rights in respect of all shares
which they are or may be entitled to purchase pursuant thereto and hereto.

6.                WAIVER OF CERTAIN RIGHTS

6.1               Immunity of Shareholders, etc.

The Warrant Holder, as part of the consideration for the issue of the Warrants,
waives and will not have any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any past, present or future incorporator,
shareholder, Director or Officer (as such) of the Company for the issue of
shares pursuant to any Warrant or on any covenant, agreement, representation or
warranty by the Company herein contained or in the Warrant.

7.                MODIFICATION OF TERMS, MERGER, SUCCESSORS

7.1               Modification of Terms and Conditions for Certain Purposes

From time to time the Company may, subject to the provisions of these presents,
modify the Terms and Conditions hereof, for the purpose of correction or
rectification of any ambiguities, defective provisions, errors or omissions
herein.

7.2               Warrants Transferable

The Warrants and all rights attached to them are transferable or assignable at
the sole discretion of the Warrant Holder, subject to applicable securities laws
and regulatory requirements. The Company will refuse to register and will not
otherwise recognize any transfer of the Warrants not made in accordance with the
provisions of Regulation S, pursuant to an effective registration statement
under the 1933 Act or pursuant to an available exemption from, or in a
transaction not subject to, the registration requirements of the 1933 Act.


<PAGE>
                                     - 6 -


DATED as of the date first above written in these Terms and Conditions.


                                 SMARTIRE SYSTEMS INC.


                                 By: ___________________________________________
                                     Kevin A. Carlson, Managing Director and CFO


<PAGE>


                              FORM OF SUBSCRIPTION

TO:   SmarTire Systems Inc.
      13151 Vanier Place, Suite 150
      Richmond, British Columbia
      Canada V6V 2J1

The undersigned Holder of the within Warrants hereby subscribes for __________
common shares (the "Shares") of SmarTire Systems Inc. (the "Company) pursuant to
the within Warrants at U.S.$1.70 per Share on the terms specified in the said
Warrants. This subscription is accompanied by a certified cheque or bank draft
payable to or to the order of the Company for the whole amount of the purchase
price of the Shares.

The undersigned hereby directs that the Shares be registered as follows:

NAME(S) IN FULL             ADDRESS(ES)                         NUMBER OF SHARES

_________________________   ________________________________   _________________

_________________________   ________________________________   _________________

_________________________   ________________________________   _________________

                                                       TOTAL:  _________________


(Please print full name in which share certificates are to be issued, stating
whether Mr., Mrs. or Miss is applicable).

DATED this ______ day of __________________ , _____.

In the presence of:

_____________________________________       ____________________________________
Signature of Witness                        Signature of Warrant Holder

Please print below your name and address in full.


Name (Mr./Mrs./Miss) ___________________________________________________________

Address ________________________________________________________________________

        ________________________________________________________________________


                          INSTRUCTIONS FOR SUBSCRIPTION

The signature to the subscription must correspond in every particular with the
name written upon the face of the Warrant without alteration or enlargement or
any change whatever. If there is more than one subscriber, all must sign.

In the case of persons signing by agent or attorney or by personal
representative(s), the authority of such agent, attorney or representative(s) to
sign must be proven to the satisfaction of the Company.

If the Warrant certificate and the form of subscription are being forwarded by
mail, registered mail must be employed.


<PAGE>
                                     - 2 -


                        AGREEMENTS OF THE WARRANT HOLDER

                                    ARTICLE 1
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

1.1 By executing this Subscription, the Warrant Holder hereby covenants,
represents and warrants to and with the Company that:

      (a)   the Warrant Holder, is legally competent to execute this
            Subscription, to take all actions required pursuant hereto, and the
            execution and delivery of this Subscription by the Warrant Holder
            has been duly and validly authorized;

      (b)   the Warrant Holder is purchasing the Shares as a principal (and not
            as an agent) for investment purposes only with no intention or view
            to reselling or distributing any portion or beneficial interest in
            the Shares; provided, however, that the Warrant Holder may sell or
            otherwise dispose of any of the Shares pursuant to registration of
            any of the Shares pursuant to the United States Securities Act of
            1933 (the "1933 Act") and any applicable state securities laws or
            under an exemption from such registration requirements and as
            otherwise provided herein;

      (c)   the Warrant Holder is not an underwriter of, or dealer in, the
            common shares of the Company, nor is the Warrant Holder
            participating, pursuant to a contractual agreement or otherwise, in
            the distribution of the Shares; and

      (d)   the Warrant Holder is familiar with the aims and objectives of the
            Company and is aware of the risk and other characteristics of its
            investment in the Shares.

      (e)   If the Company will be issuing the Shares pursuant to Regulation S
            under the 1933 Act ("Regulation S"), the Warrant Holder additionally
            represents and warrants as follows:

            (i)   the Warrant Holder is not a U.S. Person (as defined in
                  Regulation S); and

            (ii)  the Warrant Holder is outside the United States when executing
                  this Subscription.

                                    ARTICLE 2
                     ACKNOWLEDGEMENTS OF THE WARRANT HOLDER

2.1 The Warrant Holder acknowledges and agrees that:

      (a)   none of the Shares have been registered under the 1933 Act, or under
            any state securities or "blue sky" laws of any state of the United
            States, and, unless so registered, may not be offered or sold in the
            United States or, directly or indirectly, to U.S. Persons except in
            accordance with the provisions of Regulation S, pursuant to an
            effective registration statement under the 1933 Act, or pursuant to
            an exemption from, or in a transaction not subject to, the
            registration requirements of the 1933 Act;

      (b)   none of the Shares are listed on any stock exchange or automated
            dealer quotation system and no representation has been made to the
            Warrant Holder that any of the Shares will become listed on any
            stock exchange or automated dealer quotation system, except that
            currently the common shares of the Company are listed for trading on
            the Nasdaq SmallCap Market;

      (c)   the decision to execute this Subscription and purchase the Shares
            agreed to be purchased hereunder has not been based upon any oral or
            written representation as to fact or otherwise made by or on behalf
            of the Company, and such decision is based entirely upon a review of
            information (the receipt of which is hereby acknowledged) which has
            been filed by the Company with the United States Securities and
            Exchange Commission (the "SEC") and in compliance, or intended

<PAGE>
                                     - 3 -


            compliance, with applicable securities legislation. If the Company
            has presented a business plan to the Warrant Holder, the Warrant
            Holder acknowledges that the business plan may not be achieved or be
            achievable;

      (d)   the Warrant Holder has been advised by the Company that the Warrant
            Holder should consult its own legal adviser before disposing of all
            or any part of any Shares that may be issued to the Warrant Holder
            pursuant to this Subscription to avoid breach of applicable
            Legislation;

            (i)   no person has made to the Warrant Holder any written or oral
                  representations:

            (ii)  that any person will resell or repurchase the Shares;

            (iii) that any person will refund the exercise price for the Shares;
                  or

      (e)   as to the future price or value of the Shares;

      (f)   neither the SEC nor any other securities commission or similar
            regulatory authority has reviewed or passed on the merits of the
            Shares;

      (g)   the Warrant Holder understands and agrees that offers and sales of
            any of the Shares prior to the expiration of the applicable hold
            period (the "Restricted Period") shall only be made in compliance
            with the safe harbor provisions set forth in Regulation S, pursuant
            to the registration provisions of the 1933 Act or an exemption
            therefrom, and that all offers and sales after the Restricted Period
            shall be made only in compliance with the registration provisions of
            the 1933 Act or an exemption therefrom;

      (h)   the Warrant Holder understands and agrees not to engage in any
            hedging transactions involving any of the Shares unless such
            transactions are in compliance with the provisions of the 1933 Act;

      (i)   the Warrant Holder acknowledges that it will not be acquiring the
            Shares as a result of, and will not itself engage in, any "directed
            selling efforts" (as defined in Regulation S under the 1933 Act) in
            the United States in respect of any of the Shares which would
            include any activities undertaken for the purpose of, or that could
            reasonably be expected to have the effect of, conditioning the
            market in the United States for the resale of any of the Shares;
            provided, however, that the Warrant Holder may sell or otherwise
            dispose of any of the Shares pursuant to registration of any of the
            Shares pursuant to the 1933 Act and any applicable state securities
            laws or under an exemption from such registration requirements; and

      (j)   the Warrant Holder is acquiring the Shares pursuant to an exemption
            from the registration and prospectus requirements of the securities
            legislation (the "Legislation") in all jurisdictions relevant to
            this Subscription. As a consequence, the undersigned acknowledges
            and agrees that:

            (i)   the Warrant Holder will not be entitled to use most of the
                  civil remedies available under the Legislation;

            (ii)  the Warrant Holder will not receive information that would
                  otherwise be required to be provided to him or her pursuant to
                  the Legislation;

            (iii) prior to issuing any Shares to the Warrant Holder, the Company
                  may require the Warrant Holder to complete, sign and return to
                  the Company as soon as possible, on request by the Company,
                  any such documents, questionnaires, notices and undertakings
                  as the Company may in its sole discretion deem appropriate to
                  ensure compliance with applicable law, and with the rules and
                  policies of the relevant regulatory authorities and stock
                  exchanges; and

<PAGE>
                                     - 4 -


      (k)   the issuance and sale of the Shares to the Warrant Holder will not
            be completed if it would be unlawful.

2.2 If the Company will be issuing the Shares pursuant to Regulation S, the
Warrant Holder also acknowledges and agrees that:

      (a)   none of the Shares may be offered or sold to a U.S. Person or for
            the account or benefit of a U.S. Person (other than a distributor)
            prior to the end of the applicable Restricted Period; and

      (b)   the statutory and regulatory basis for the exemption claimed for the
            offer Shares, although in technical compliance with Regulation S,
            would not be available if the offering is part of a plan or scheme
            to evade the registration provisions of the 1933 Act.

                                    ARTICLE 3
                         LEGENDING OF SUBJECT SECURITIES

3.1 The Warrant Holder hereby acknowledges that that upon the issuance thereof,
and until such time as the same is no longer required, the certificates
representing any of the Shares will bear such legend(s) as shall be required
under applicable securities laws and regulations.