Document:

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                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

[**] The items marked by two asterisks have been omitted from this filing and
     have been filed separately with the Securities and Exchange Commission.

                       ASSIGNMENT AND AMENDMENT AGREEMENT

THIS AGREEMENT dated the 13th day of December, 2000 (the "Agreement Date")

BETWEEN:

     TRW INC., a company duly incorporated pursuant to the laws of the State of
     Ohio, acting on behalf of its Automotive Electronics Group, North America,
     24175 Research Dr., Farmington Hills, Michigan 48335-2642

     ("TRW")

                                                               OF THE FIRST PART

AND:

     SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to the laws of
the Province of British Columbia, having an office at 150-14151 Vanier Place,
Richmond, British Columbia, V6V 2J1

     ("SmarTire")

                                                              OF THE SECOND PART

WHEREAS:

A.   TRW and SmarTire entered into a license agreement (the "License
Agreement") dated April 20, 1998 whereby SmarTire granted to TRW an exclusive
license (the "License") to use SmarTire intellectual property (as defined
therein) to manufacture and sell tire pressure monitoring systems for passenger
cars and light, medium and heavy trucks;

B.   TRW and SmarTire entered into a technical cooperation agreement (the
"Technical Cooperation Agreement") dated April 20, 1998, whereby the parties
agreed to cooperate in further technical developments.

C.   TRW and SmarTire entered into an ASIS development/purchase agreement (the
"ASIS Agreement") dated September 1, 1998 with SensoNor asa ("SensoNor")
whereby SensoNor agreed to develop application specific integrated sensors for
sale to TRW and SmarTire upon the terms and conditions set forth therein;

D.   TRW has not, as of the effective date of this Agreement, obtained any
orders for tire pressure monitoring systems in respect of its license rights in
and to the Medium and Heavy Duty Truck (as hereafter defined) market (the
"Medium and Heavy Duty Truck Market License"); and

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E.     SmarTire wishes to purchase and obtain from TRW, and TRW wishes to
transfer, assign and sell to SmarTire, its rights to the Medium and Heavy Duty
Truck Market License under the terms and conditions set forth herein.

THEREFORE, in consideration of the premises, the parties covenant and agree as
follows:

1.          ASSIGNMENT OF LICENSE

1.1         Upon and subject to the terms and conditions herein, TRW hereby
transfers, assigns and sells to SmarTire all of its right, title and interest
in and to the Medium and Heavy Duty Truck Market License.

1.2         The License Agreement is amended as follows:

      (a)   The existing Section 1.6 is renumbered to be section number 1.9;

      (b)   The following are added as new Section 1.6, 1.7, and 1.8:

            "     1.6   Medium and Heavy Duty Trucks: Land based motor
            vehicles, whether on or off road, commercial, agricultural, or
            otherwise, having a gross vehicle weight rating ("GVWR") in the
            United States and Canada of greater than 14,400 pounds and outside
            the United States and Canada of greater than 3.5 metric tonnes;
            provided that passenger vehicles designed to carry up to 8
            passengers shall not be included unless their weight exceeds 14,400
            pounds.

                  1.7   Non-Overlapping OE Customers: Those original equipment
            manufacturers that have a purchasing organisation for tire
            monitoring systems for Medium and Heavy Duty Trucks that is
            separate and apart from the purchasing organisation that purchases
            tire monitoring systems for passenger vehicles and light trucks."

                  1.8   High Pressure TMS: An application of tire pressure
            monitoring to a tire that is rated by its manufacturer for normal
            use at an inflation of 80 pounds per square inch or greater.

      (c)   Article 2 is deleted and replaced in its entirety with the
            following:

            "     2.1   Grant By SmarTire: Subject only to the reservation of
            rights set forth in Section 2.2 hereof, SmarTire hereby grants to
            TRW the exclusive, world wide right to make, have made, use, and
            sell, Licensed Products for use as original equipment in passenger
            car and truck markets, and for use as service parts for such
            original equipment.

                  2.2   Reservation of Rights: SmarTire excludes from the
            license of Section 2.1 and reserves to itself all rights to make,
            have made, and use Licensed Products for sale:

                        (a)   in the aftermarket, and

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                    (b) for use as original equipment and as service parts for
               such original equipment in Medium and Heavy Duty Trucks where
               either (i) the customer is a Non-Overlapping OE Customer, or (ii)
               the application is for High Pressure TMS.

               2.3  Overlap: The parties recognise that there could be some
          minor overlap between the market identified in the exclusive license
          of Section 2.1 and the market retained by SmarTire. For avoidance of
          doubt, it will not be considered to be a violation of the exclusive
          license of Section 2.1 if some products sold by SmarTire in its
          retained market are used by customers as service replacements for
          vehicles in TRW's market, or if some products sold by TRW in its
          markets are used by customers as service replacement for vehicles in
          SmarTire's market.

               2.4  Logical Re-Allocation: The parties recognise that it may be
          logically desirable (because of customer procurement requirements,
          grouping of vehicles within families, territorial issues,
          inappropriate classification of specific vehicles under the Agreement
          definitions, need for a Licensed Product containing a pressure sensor
          or other component unique to one party, etc.) for one party to assume
          responsibility for a vehicle falling within the license rights of the
          other party. The parties will determine which such vehicles
          responsibilities should be transferred from one party to the other on
          an ad hoc basis, provided, however, that neither party will be
          required to agree to any such vehicle responsibility transfer.

               2.5  Sublicenses: TRW may grant sublicenses to its Affiliates
          under the rights granted herein without the consent of SmarTire, but
          may grant sublicenses to others under the rights granted herein only
          upon the prior written consent of SmarTire, which will not be
          unreasonably withheld. TRW will report sales, and pay royalties on
          sales, of sublicensees hereunder under the same terms and conditions
          upon which TRW reports and pays royalties on its own sales hereunder.

               2.6  Determination of GVWR: If the GVWR of a particular vehicle
          has not been established by the vehicle manufacturer at the time that
          the parties must decide who has responsibility therefor, and the
          vehicle manufacturer is unwilling to provide an estimate of such GVWR,
          then the parties will themselves estimate the GVWR of the vehicle by
          reference to the GVWR of the most similar existing vehicle or
          vehicles.

1.3       The Technical Cooperation Agreement is amended as follows:

     (a)  The existing Section 1.9 is renumbered to be section 1.12.

     (b)  Sections 1.7 and 1.8, are deleted and replaced with the following:

          "1.7 SmarTire Markets: Aftermarket sales of products and components
          for all vehicles, and the market for sale of original equipment
          products and components for Medium and Heavy Duty Trucks (a) to
          Non-Overlapping OE Customers or

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     (b)  to Overlapping OE Customers for tire pressure monitoring applications
          with tires that are rated by their manufacturer for normal use at an
          inflation of 80 pounds per square inch or greater."

          "1.8 TRW Markets: The market for original equipment products and
          components for passenger car and light trucks, and for service parts
          for such products and components, and the entire market for original
          equipment products and components for Overlapping OE Customers except
          for tire pressure monitoring applications with tires that are rated by
          their manufacturer for normal use at an inflation of 80 pounds per
          square inch or greater."

     (c)  The following are added as new Sections 1.9, 1.10, and 1.11:

          "1.9 Medium and Heavy Duty Trucks: Motor vehicles, whether on or off
          road, commercial, agricultural, or otherwise, having a gross vehicle
          weight rating ("GVWR") in the United States and Canada of greater than
          14,400 pounds and outside the United States and Canada of greater than
          3.5 metric tonnes; provided that passenger vehicles designed to carry
          up to 8 passengers shall not be included unless their weight exceeds
          14,400 pounds.

          1.10 Non-Overlapping OE Customers: Those original equipment
          manufacturers that have a purchasing organization for tire monitoring
          systems for Medium and Heavy Duty Trucks that is separate and apart
          from the purchasing organization that purchases tire monitoring
          systems for passenger vehicles and light trucks.

          1.11 Overlapping OE Customers: Original equipment manufacturers other
          than Non-Overlapping OE Customers."

2.        PURCHASE PRICE

2.1       Within 5 business days of execution of this Agreement, SmarTire will
allot and issue to TRW as fully paid and non-assessable 450,000 common shares
(the "Shares") in the capital of SmarTire.

2.2       TRW and SmarTire have been negotiating with SensoNor asa, the
manufacturer of the pressure sensor device. Although a definitive agreement has
not yet been signed with SensoNor, as of the signature date of this Agreement
it appears likely that the parties will pay ** to SensoNor for completed design
work, thereby to allow SensoNor to recalculate piece pricing to a more
commercially acceptable level, and another ** to SensoNor in consideration for
certain design changes.

     (a)  TRW and SmarTire have agreed that, as part of the consideration of
SmarTire to TRW under this Agreement, SmarTire will pay ** to SensoNor for the
equal and mutual benefit of both parties. It is expected by the parties that **
of such amount will be for completed design work and ** will be for design
changes.**

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     (b)  Upon the signature date of this Agreement, SmarTire will transfer
          **, (the "trust amount") to the law firm of Clark Wilson, to be held
          by Clark Wilson in trust for the parties until a definitive agreement
          with SensoNor (the "SensoNor Agreement") is executed. Upon execution
          of the SensoNor Agreement, Clark Wilson will pay the trust amount to
          SensoNor in accordance with the terms of the SensoNor Agreement, it
          being understood by the parties that the entire trust amount are
          intended to be paid out to SensoNor before any fees are directly paid
          to SensoNor by SmarTire or TRW. The parties will **.

     (c)  The parties consider it very unlikely that they will fail to execute
          a definitive agreement with SensoNor within four months of the
          effective date of this Agreement, or that the agreement with SensoNor
          will require a payment from the parties of less than the entire trust
          amount. However, in either such event, regardless of the cause of
          such event, Clark Wilson will immediately and without condition
          deliver the remaining trust amount (the "Refund") to SmarTire.
          SmarTire will then issue to TRW a number of SmarTire common shares
          (the "Additional Shares") equal to the Refund divided by the average
          daily closing price of the SmarTire shares for the 30 days prior to
          the Refund being delivered to SmarTire, in full payment of SmarTire's
          obligations under this Agreement.

     (d)  Any acknowledgement or representation of TRW as to the Shares herein
          will apply equally as to the Additional Shares.

3.        AMENDMENT TO ASIS AGREEMENT

3.1       TRW will, immediately upon execution of this Agreement, use its best
efforts to negotiate with SensoNor an amendment to the ASIS Agreement, or a
replacement for the ASIS Agreement, acceptable both to TRW and to SmarTire
whereby (a) the parties agree to pay SensoNor for completed design work,
thereby to allow SensoNor to recalculate the price of Products (as defined in
the ASIS Agreement) to a more commercially acceptable level satisfactory to TRW
and SmarTire, and (b) SensoNor agrees to make certain design changes at a price
acceptable to TRW and SmarTire. SmarTire will provide all reasonable
co-operation in such negotiations.

4.        DELIVERY OF SHARES

4.1       SmarTire will deliver new share certificates representing the initial
Shares referred to in Section 2.1, issued in the name of TRW, to TRW immediately
upon issuance. The Shares will be delivered via registered mail addressed to
TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124, attention Allan W. Vogele,
Esq.

5.        LEGENDING OF SUBJECT SHARES

5.1       TRW 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
Shares will bear a legend in substantially the following form:

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     "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."

6.        RESALE RESTRICTIONS

6.1       TRW acknowledges that any resale of the Shares will be subject to
resale restrictions contained in applicable legislation. TRW acknowledges that
the Shares have not been registered under the 1933 Act of the securities laws
of any state or the United States and that SmarTire does not intend to register
same under the 1933 Act, or the securities laws of any such state and has no
obligation to do so. The Shares may not be offered or sold in the United States
unless registered in accordance with federal securities laws and all applicable
state securities laws or exemptions from such registration requirements are
available.

6.2       TRW further acknowledges that:

     (a)  the Shares will be subject to a hold period under the Securities Act
          (British Columbia) and may not be traded in British Columbia until one
          year and day following the date of delivery of the Shares, except as
          permitted by the Securities Act (British Columbia); and

     (b)  in lieu of SmarTire placing a legend on the certificates representing
          the Shares pursuant to section 132(2) of the Rules under the B.C. Act,
          TRW must file a report with the British Columbia Securities Commission
          in the form attached as Schedule"A" within 10 days of the initial
          trade of any Shares.

7.        ACKNOWLEDGEMENTS OF TRW REGARDING THE SHARES

7.1       TRW acknowledges and agrees that:

     (a)  the Shares will be issued under the exemption from the prospectus
          requirements of the Securities Act (British Columbia) (the "B.C. Act")
          and will therefore be subject to resale restrictions under the B.C.
          Act;

     (b)  TRW will be acquiring the Shares pursuant to an exemption from the
          prospectus requirements under the B.C. Act on the basis that TRW is
          sophisticated and, as a consequence, TRW:

          (i)  is restricted from using most of the civil remedies available
               under securities legislation;

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          (ii)   may not receive information that would otherwise be required to
                 be provided to TRW under securities legislation; and

          (iii)  SmarTire is relieved from certain obligations that would
                 otherwise apply under securities legislation;

     (c)  the Shares have not been registered under the United States Securities
          Act of 1933 (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 to U.S.
          persons ("U.S. Person") (as that term is defined in Regulation S under
          the 1933 Act, which definition includes any person in the United
          States) except pursuant to an exemption from, or in a transaction not
          subject to, the registration requirements of the 1933 Act;

     (d)  the decision to acquire the Shares pursuant to this Agreement 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 any public information which has been filed
          by SmarTire with the British Columbia Securities Commission and the
          United States Securities and Exchange Commission in compliance, or
          intended compliance, with applicable securities legislation;

     (e)  TRW and TRW's advisor(s) have had a reasonable opportunity to ask
          questions of and receive answers from SmarTire; and

     (f)  TRW has been advised to consult its own legal, tax and other advisors
          with respect to the merits and risks of an investment in the Shares
          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.

8.   REPRESENTATIONS AND WARRANTIES OF SMARTIRE

8.1  SmarTire represents and warrants to TRW that, as of the date of this
Agreement and at the date of issuance of the initial Shares referred to in
Section 2.1:

     (a)  SmarTire is a valid and subsisting corporation duly incorporated and
          in good standing under the laws of British Columbia;

     (b)  SmarTire is duly registered and licensed to carry on business in the
          jurisdictions in which it carries on business;

     (c)  SmarTire has complied, or will comply, with all applicable corporate
          and securities laws and regulations in connection with the offer, sale
          and issuance of the Shares;

     (d)  the issuance and sale of the Shares by SmarTire does not and will not
          conflict with and does not and will not result in a breach of any of
          the terms, conditions or

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          provisions of its constating documents or any agreement or instrument
          to which SmarTire is a party;

     (e)  this Agreement has been duly authorized by all necessary corporate
          action on the part of SmarTire and, subject to acceptance by SmarTire,
          constitutes a valid obligation of SmarTire legally binding upon it and
          enforceable in accordance with its terms;

     (f)  the Annual Report on Form 10-KSB filed by the SmarTire with respect to
          the fiscal year ended July 31, 2000 and all reports subsequently filed
          by the SmarTire with the U.S. Securities Exchange Commission pursuant
          to Section 13 or 15(d) of the Securities Exchange Act of 1934, when
          filed, did not contain any untrue statement of a material fact or omit
          to state any material fact required to be stated therein or necessary
          in order to make the statements therein not misleading, and, since
          October 31, 2000, there has been no material adverse change in the
          financial position or affairs of the SmarTire; and

     (g)  total warrants, convertible debt and options outstanding would result
          in fully diluted share capital of 15,965,139 common shares of which
          14,506,297 were outstanding as of October 1, 2000.

8.2       SmarTire will promptly notify TRW of any material change in any
representation or warranty of SmarTire set out herein that occurs prior to the
initial Shares being issued and delivered hereunder.

9.        REPRESENTATIONS AND WARRANTIES OF TRW

9.1       TRW represents and warrants to SmarTire that, as of the date of this
Agreement and at the date upon which the initial Shares referred to in Section
2.1 are to be issued hereunder:

     (a)  TRW has not assigned, transferred, sub-licensed or sold the Medium and
          Heavy Duty Truck Market License to another party and TRW has absolute
          authority to assign the Medium and Heavy Duty Truck Market License to
          SmarTire;

     (b)  TRW is resident in the United States;

     (c)  TRW has such knowledge and experience in business matters as to be
          capable of evaluating the merits and risks of its prospective
          investment in the Shares; and it has the ability to bear the economic
          risks of its prospective investment and can afford the complete loss
          of such investment;

     (d)  TRW is not aware of any advertisement of any of the Shares;

     (e)  no person has made to TRW any written or oral representations:

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

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

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

          (iv)  that any of the Shares will be listed and posted for trading on
                any stock exchange or automated dealer quotation system or that
                application has been made to list and post any of the Shares of
                SmarTire on any stock exchange or automated dealer quotation
                system; and

     (f)  TRW is acquiring the Shares as principal for its own account, for
          investment purposes only, and not with a view to, or for, resale,
          distribution or fractionalisation thereof, in whole or in part.

9.2  SmarTire is entitled to rely on the representations and warranties of TRW
contained in this Agreement and in the U.S. Securities Law Questionnaire (the
"Questionnaire") to be completed by TRW prior to closing in the form attached
as Schedule "B" hereto, which forms a part of this Agreement.

10.   GENERAL

10.1  All references to dollar amounts are in United States currency.

10.2  All taxes, including but not limited to income taxes, duties, fees, and
dues, including interest and penalties, and all other charges, whether or not in
effect at the date first written above, which arise out of or by virtue of this
Agreement or the operation of the parties will be borne by, and be the
responsibility of, the party on whom legally levied. In addition, withholding
taxes, if any, will be considered levied on the recipient of any payment from
the other party, but will be remitted to the applicable governmental authority
by the payor and deducted from the amount otherwise payable to the recipient of
such payment. The payor will notify the recipient of any such withholding taxes,
if applicable, and will promptly furnish to the recipient a receipt evidencing
each such withholding tax payment in a form sufficient to enable the recipient
to obtain any tax credit to which it may be entitled under the laws of the
country of its incorporation.

10.3  No waiver of any right or remedy in respect of any occurrence or event on
one occasion will be deemed a waiver of such right or remedy in respect of such
occurrence or event on any subsequent occasion.

10.4  This Agreement will enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.

10.5  This Agreement will be governed by and construed in accordance with the
laws of British Columbia and Canada.

10.6  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.

10.7  Except as expressly amended by this Agreement, the License Agreement and
the Technical Cooperation Agreement are hereby ratified and confirmed.

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

TRW INC.

Per: /s/ WILLIAM A. FULLMER
    ---------------------------
        Authorized Signatory
         William A. Fullmer

Title: Assistant General Counsel & Assistant Secretary
      -------------------------

SMARTIRE SYSTEMS INC.

Per: /s/ ROBERT RUDMAN
    ---------------------------
        Authorized Signatory

Title: President & CEO
      -------------------------

Schedule A: Securities Act Initial Trade Report
Schedule B: U.S. Securities Law Questionnaire

TA-4326
13 December 2000

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                                  SCHEDULE "A"

                                 SECURITIES ACT
                              INITIAL TRADE REPORT

1. Name and address of reseller

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

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

2. Name and address of the issuer whose securities were traded by the seller

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

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

3. Name and address of the party from whom the seller acquired the securities

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

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

4. Description of securities sold

     (a) Number and description of securities             ---------------------

     (b) Date of acquisition of securities by the seller  ---------------------

     (c) Exemption under which securities were acquired
         by the seller                                    ---------------------

     (d) Exemption under which securities were traded by
         the seller                                       ---------------------

     (e) Date of sale of securities                       ---------------------

     (f) Sale Price                                       ---------------------

5. Certificate of seller

     The undersigned seller hereby certifies that the information given in this
     report relating to the seller is true and that, to the best of the
     seller's information and belief,

     (a) the information given in this report relating to any other party is
         true,

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     (b) no unusual effort has been made to prepare the market or create a
         demand for the securities, and

     (c) no extraordinary commission or other consideration has been paid in
         respect of the trade to which this report relates.

DATED at __________________ this ________ day of _________________, 2000

                                 --------------------------------------------
                                 Signature of the seller or, if the seller is
                                 a company, signature of authorized signatory

                                 --------------------------------------------
                                 Name of the seller or, if the seller is a
                                 company, name and office of authorized
                                 signatory

INSTRUCTIONS;

1. If the space provided for any answer is insufficient, additional sheets may
   be used. Each sheet must be cross-referenced to the relevant item, properly
   identified and signed by the person whose signature appears on the report.

2. File this report with the required fee and completed Fee Checklist. In
   order to determine the fee payable, consult section 22 of the Securities
   Regulation, B.C. Reg. 478/95. Cheques should be made payable to the
   "British Columbia Securities Commission".

IT IS AN OFFENCE FOR A PERSON TO MAKE A STATEMENT IN A DOCUMENT REQUIRED TO BE
FILED OR FURNISHED UNDER THE SECURITIES ACT THAT, AT THE TIME AND IN LIGHT OF
CIRCUMSTANCES UNDER WHICH IT IS MADE, IS A MISREPRESENTATION.

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                                  SCHEDULE "B"

                       U.S. SECURITIES LAW QUESTIONNAIRE

All capitalized terms herein, unless otherwise defined, have the meanings
ascribed thereto in the Agreement. As used in this questionnaire, the term
"Securities" means "Shares" and "Additional Shares", as those terms are defined
in the Assignment and Amendment Agreement.

TRW covenants, represents and warrants to SmarTire that:

     (a)  TRW is a U.S. Person;

     (b)  TRW has such knowledge and experience in financial and business
          matters as to be capable of evaluating the merits and risks of the
          transactions detailed in the Agreement and TRW is able to bear the
          economic risk of loss arising from such transactions;

     (c)  TRW is acquiring the Securities for investment only and not with a
          view to resale or distribution and, in particular, TRW has no
          intention to distribute either directly or indirectly any of the
          Securities in the United States or to U.S. Persons; provided, however,
          that TRW may sell or otherwise dispose of any of the Securities
          pursuant to registration thereof pursuant to the Securities Act of
          1933 (the "1933 Act") and any applicable State securities laws or
          pursuant to an exemption from such registration requirements or if
          registration is otherwise not required under the 1933 Act;

     (d)  TRW acknowledges that, except as otherwise provided for in the
          Agreement, SmarTire has not undertaken, and will have no obligation,
          to register any of the Securities under the 1933 Act;

     (e)  TRW understands that any of the Securities have not been registered
          under the 1933 Act and that the issuance contemplated hereby is being
          made in reliance on an exemption from such registration requirements;

     (f)  TRW satisfies one or more of the categories indicated below (please
          check the appropriate box):

          [ ]  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 Securities, with total
                              assets in excess of US $5,000,000;

          [ ]  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;

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[ ]  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 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);

[ ]  Category 6  A director or executive officer of the company;

[ ]  Category 7  A trust with total assets in excess of $5,000,000, not formed
                 for the specific purpose of acquiring the Securities, whose
                 purchase is directed by a sophisticated person as described in
                 Rule 506(b)(2)(ii) under the 1933 Act; or

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

                                   -Page B.2-

<PAGE>   15
                                                                  EXECUTION COPY

(g)  TRW acknowledges that it 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;

(h)  TRW agrees that if TRW decides to offer, sell or otherwise transfer any of
     the Securities, TRW will not offer, sell or otherwise transfer any of such
     securities directly or indirectly, unless:

     (i)    the sale is to SmarTire;

     (ii)   the sale is made outside the United States in a transaction
            meeting the requirements of Rule 904 of Regulation S under the 1933
            Act and in compliance with applicable local laws and regulations;

     (iii)  the sale is made pursuant to the exemption from the registration
            requirements under the 1933 Act provided by Rule 144 thereunder if
            available and in accordance with any applicable state securities or
            "Blue Sky" laws; or

     (iv)   the Securities are sold in a transaction that does not require
            registration under the 1933 Act or any applicable U.S. state laws
            and regulations governing the offer and sale of securities, and it
            has prior to such sale furnished to SmarTire an opinion of counsel
            reasonably satisfactory to SmarTire;

(i)  TRW understands and agrees that the Securities may not be transferred in
     the United States or by or on behalf of a U.S. Person unless registered
     under the 1933 Act and any applicable state securities laws unless an
     exemption from such registration requirements is available;

(j)  TRW acknowledges that TRW has not acquired the Securities 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 the
     Securities which would include any activities undertaken for the purpose
     of, or that could reasonable be expected to have the effect of,
     conditioning the market in the United States for the resale of any of the
     Securities; provided, however, that TRW may sell or otherwise dispose of
     any of the Securities pursuant to registration of any of the securities
     pursuant to the 1933 Act and any applicable state securities laws or under
     an exemption from such registration requirements and as otherwise provided
     herein; and

(k)  TRW understands and acknowledges that upon the issuance thereof, and until
     such time as the same is no longer required under the applicable
     requirements of the 1933 Act or applicable U.S. State laws and regulations,
     the certificates representing any of the Securities will bear a legend in
     substantially the following form:

                                  - Page B.3 -
<PAGE>   16
                                                                  EXECUTION COPY

          "THESE SECURITIES HAVE NOT 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."

     (l)  TRW consents to SmarTire making a notation on its records or giving
          instruction to the registrar and transfer agent of SmarTire in order
          to implement the restrictions on transfer set forth and described
          herein; and

     (m)  the office of TRW at which TRW received and accepted the offer to
          acquire the Securities is the address listed on TRW's execution page
          of the Agreement.

          IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as
of the _____ day of _____________, 2000.

TRW Inc.:
Per:

                                               TRW Inc.
----------------------------------           ----------------------------------
Authorized Signatory                         Print Name

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

                                   -Page B.4-<PAGE>   1
                                                                   EXHIBIT 10.21

                           SECOND AMENDED AND RESTATED
                                 DONJOY, L.L.C.
                                1999 OPTION PLAN

      1.    PURPOSE OF THE PLAN

            The purpose of the Second Amended and Restated DonJoy, L.L.C. 1999
Option Plan (the "Plan") is (i) to further the growth and success of, DonJoy,
L.L.C. (the "Company") and its Subsidiaries (as hereinafter defined) by enabling
directors and employees of, and independent consultants and contractors to, the
Company and any of its Subsidiaries to acquire equity ownership interests in the
Company (the "Units"), thereby increasing their personal interest in such growth
and success, and (ii) to provide a means of rewarding outstanding performance by
such persons to the Company and/or its Subsidiaries. For purposes of the Plan,
the term "Subsidiary" shall mean "Subsidiary Corporation" as defined in Section
424(f) of the Internal Revenue Code of 1986, as amended.

      2.    ADMINISTRATION OF THE PLAN

            (a)   Option Committee

            The Plan shall be administered by the Board of Managers of the
Company (the "Board") or a three-person Option Committee (the "Committee")
appointed from time to time by the Board. Any reference in the Plan to action by
the Company means action by or under the authority of the Board or the
Committee. The members of the Committee may be removed by the Board at any time
either with or without cause. Any vacancy on the Committee, whether due to
action of the Board or any other cause, shall be filled by the Board. The term
"Committee" shall, for all purposes of the Plan other than this Section 2, be
deemed to refer to the Board if the Board is administering the Plan.

            (b)   Procedures

            The Committee shall adopt such rules and regulations as it shall
deem appropriate concerning the holding of meetings and the administration of
the Plan. A majority of the entire Committee shall constitute a quorum and the
actions of a majority of the members of the Committee present at a meeting at
which a quorum is present, or actions approved in writing by all of the members
of the Committee, shall be the actions of the Committee.

            (c)   Interpretation

            Except as otherwise expressly provided in the Plan, the Committee
shall have all powers with respect to the administration of the Plan, including,
without limitation, full power and authority to interpret the provisions of the
Plan and any Option Agreement (as defined in Section 5(b)), and to resolve all
questions arising under the Plan. All decisions of the Board or the Committee,
as the case may be, shall be conclusive and binding on all participants in the
Plan.

<PAGE>   2

      3.    UNITS SUBJECT TO THE PLAN.

            (a)   Number of Units

            Subject to the provisions of Section 9 (relating to adjustments upon
changes in capital structure and other limited liability company transactions),
the maximum number of Units subject at any one time to options granted under the
Plan ("Options"), plus the number of Units theretofore issued and delivered
pursuant to the exercise of Options granted under the Plan, shall not in
aggregate exceed 166,799 Units, as follows:

                  (i)   Options relating to up to 62,720 Units may be granted
      pursuant to Option Agreements substantially in the form of Exhibit A
      hereto ("Tier I Options");

                  (ii)  Options relating to up to 41,813 Units may be granted
      pursuant to Option Agreements substantially in the form of Exhibit B
      hereto ("Tier II Options");

                  (iii) Options relating to up to 52,266 Units may be granted
      pursuant to Option Agreements substantially in the form of Exhibit C
      hereto ("Tier III Options"); and

                  (iv)  Options relating to up to 10,000 Units may be granted
      pursuant to Option Agreements substantially in the form of Exhibit D
      hereto ("Non-Employee Options").

            If and to the extent that Options granted under clauses (i) through
(iv) above terminate, expire or are canceled without having been fully
exercised, new Options may be granted under clauses (i) through (iv) above with
respect to the Units covered by the unexercised portion of such terminated,
expired or canceled Options.

            (b)   Character of Units

            The Units issuable upon exercise of an Option granted under the Plan
shall be (i) authorized but unissued Units, (ii) Units held in the Company's
treasury or (iii) a combination of the foregoing.

            (c)   Reservation of Units

            The number of Units reserved for issuance under the Plan shall at no
time be less than the maximum number of Units which may be purchased at any time
pursuant to outstanding Options.

      4.    ELIGIBILITY

            Options may be granted under the Plan only to (i) persons who are
employees of, or independent consultants to, the Company or any of its
Subsidiaries and (ii) persons who are directors or managers of the Company or
any of its Subsidiaries. Notwithstanding the foregoing,

                                       2
<PAGE>   3

Options may be conditionally granted to persons who are prospective employees or
directors or managers of, or independent consultants to, the Company or any of
its Subsidiaries.

      5.    GRANT OF OPTIONS

            (a)   General

            Options may be granted under the Plan at any time and from time to
time on or prior to the tenth anniversary of the Effective Date (as defined in
Section 11). Subject to the provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to determine:

                  (i)   the persons (from among the class of persons eligible to
      receive Options under the Plan) whom Options shall be granted (the
      "Optionees");

                  (ii)  the time or times at which Options shall be granted;

                  (iii) the number of Units subject to each Option;

                  (iv)  the Option Price of the Units subject to each Option;
      and

                  (v)   the time or times when each Option shall become
      exercisable and the duration of the exercise period.

            (b)   Option Agreements

            Each Option granted under the Plan shall be evidenced by a written
agreement (an "Option Agreement"), containing such terms and conditions and in
such form, not inconsistent with the Plan, as the Committee shall, in its
discretion, provide. Each Option Agreement shall be executed by the Company and
the Optionee.

            (c)   No Evidence of Employment or Service

            Nothing contained in the Plan or in any Option Agreement shall
confer upon any Optionee any right with respect to the continuation of his or
her employment by or service with the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any such Subsidiary
(subject to the terms of any separate agreement to the contrary) at any time to
terminate such employment or service or to increase or decrease the compensation
of the Optionee from the rate in existence at the time of the grant of an
Option.

            (d)   Date of Grant

            The date of grant of an Option under the Plan shall be the date as
of which the Committee approves the grant; provided, however, that the grant
shall in no event be earlier than the date as of which the Optionee becomes an
employee of the Company or one of its Subsidiaries.

                                       3
<PAGE>   4

      6.    OPTION PRICE

            Subject to Section 9, the price (the "Option Price") at which each
Unit subject to an Option granted under the Plan may be purchased shall be
determined by the Committee at the time the Option is granted.

      7.    EXERCISABILITY OF OPTIONS

            (a)   Committee Determination

            Each Option granted under the Plan shall be exercisable at such time
or times, or upon the occurrence of such event or events, and for such number of
Units subject to the Option, as shall be determined by the Committee and set
forth in the Option Agreement evidencing such Option. If an Option is not at the
time of grant immediately exercisable, the Committee may (i) in the Option
Agreement evidencing such Option, provide for the acceleration of the exercise
date or dates of the subject Option upon the occurrence of specified events
and/or (ii) at any time prior to the complete termination of an Option,
accelerate the exercise date or dates of such Option.

            (b)   Automatic Termination of Options

            The unexercised portion of any Option granted under the Plan shall
automatically terminate and shall become null and void and be of no further
force or effect upon the first to occur of the following:

                  (i)   the end of the stated term thereof;

                  (ii)  if the Optionee is an employee, unless a shorter period
      is provided for in any Option Agreement, the expiration of three months
      from the date that the Optionee ceases to be an employee of the Company or
      any of its Subsidiaries (other than as a result of an Involuntary
      Termination (as defined in clause (iii) below) or termination For Cause
      (as defined herein)); provided, however, that if the Optionee shall die
      during such three-month period, the time of termination of the unexercised
      portion of such Option shall be the expiration of 12 months from the date
      that such Optionee ceased to be an employee of the Company or any of its
      Subsidiaries;

                  (iii) if the Optionee is an employee, the expiration of 12
      months from the date that the Optionee ceases to be an employee of the
      Company or any of its Subsidiaries, if such termination is due to such
      Optionee's death or Disability (as defined below) (an "Involuntary
      Termination");

                  (iv)  if the Optionee is an employee, immediately upon the
      date that the Optionee ceases to be an employee of the Company or any of
      its Subsidiaries, if such termination is For Cause;

                  (v)   the expiration of such period of time or the occurrence
      of such event as the Committee in its discretion may provide in the Option
      Agreement;

                                       4
<PAGE>   5

                  (vi)  on the effective date of a Material Transaction (as
      defined in Section 9(b)(i)) to which Section 9(b)(ii) (relating to
      assumptions and substitutions of Options) does not apply; and

                  (vii) except to the extent permitted by Section 9(b)(ii), the
      date on which an Option or any part thereof or right or privilege relating
      thereto is transferred (otherwise than by will or the laws of descent and
      distribution), assigned, pledged, hypothecated, attached or otherwise
      disposed of by the Optionee.

            As used herein, "Disability" means any accident, sickness,
incapacity or other disability which (i) renders the Optionee unable to
substantially perform all of his duties for 90 days during any period of 360
consecutive days or (ii) would reasonably be expected to render the Optionee
unable to substantially perform all of his duties for 90 days during any period
of 360 consecutive days, in the case of each of clauses (i) or (ii), as
determined by the Board (excluding the Optionee should he be a member of the
Board at the time of such determination) in its good faith judgment.

            As used herein, "For Cause" shall mean (i) the failure by the
Optionee to perform such duties as are reasonably requested by the Board or the
Chief Executive Officer of the Company or its Subsidiaries, as applicable, (ii)
the Optionee's failure to observe any material policies of the Company or its
Subsidiaries, as applicable, (iii) gross negligence or willful misconduct by the
Optionee in the performance of his duties, (iv) the commission by the Optionee
of any act of fraud, theft or financial dishonesty with respect to the Company
or any of its Affiliates, or any felony or act involving moral turpitude, (v)
the material breach by the Optionee of his/her employment agreement (if
applicable) with the Company or its Subsidiaries, as applicable, or of any other
agreement or contract with the Company or any Affiliate thereof (including,
without limitation, the Members' Agreement of the Company or any option
agreement which must be entered into pursuant to this Plan), (vi) chronic
absenteeism or (vii) the failure of the Optionee to give at least 30 days' prior
written notice of his termination of employment with the Company or its
Subsidiaries, as applicable. For purposes of this Agreement, "Affiliates" means
dj Orthopedics, LLC (or its successors or assigns) and all subsidiaries thereof.

            Anything contained in the Plan to the contrary notwithstanding,
unless otherwise provided in an Option Agreement, no Option granted under the
Plan shall be affected by any change of duties or position of the Optionee
(including a transfer to or from the Company or one of its Subsidiaries), so
long as such Optionee continues to be an employee of the Company or one of its
Subsidiaries.

      8.    PROCEDURE FOR EXERCISE

            (a)   Payment

            Payment upon exercise of an Option shall be made, at the election of
the Optionee, (i) in cash or personal or certified check payable to the Company
in an amount equal to the aggregate Option Price of the Units with respect to
which the Option is being exercised or (ii) upon the surrender of Units or
option to buy Units, in each case with such Units or Options to

                                       5
<PAGE>   6

buy Units, as the case may be, valued at the Fair Value per Unit (as defined in
Section 8) thereof as determined by the Committee.

            (b)   Notice

            An Optionee (or other person, as provided in Section 10(b)) may
exercise an Option granted under the Plan in whole or in part (but for the
purchase of whole Units only), as provided in the Option Agreement evidencing
his Option, by delivering a written notice (the "Notice") to the Secretary of
the Company. The Notice shall state:

                  (i)   that the Optionee elects to exercise the Option;

                  (ii)  the number of Units with respect to which the Option is
      being exercised (the "Optioned Units");

                  (iii) the method of payment for the Optioned Units (which
      method must be available to the Optionee under the terms of his or her
      Option Agreement);

                  (iv)  the date upon which the Optionee desires to consummate
      the purchase (which date must be prior so the termination of such Option);

                  (v)   a copy of any election filed by the Optionee pursuant to
      Section 83(b) of the Code; and

                  (vi)  such further provisions consistent with the Plan as the
      Committee may from time to time require.

            The exercise date of an Option shall be the date on which the
Company receives the Notice from the Optionee.

            (c)   Issuance of Certificates

            The Company shall issue a certificate in the name of the Optionee
(or such other person exercising the Option in accordance with the provisions of
Section 10(b)) for the Optioned Units as soon as practicable after receipt of
the Notice and payment of the aggregate Option Price for such Units. Neither the
Optionee nor any person exercising an Option in accordance with the provisions
of Section 10(b) shall have any privileges as a holder of Units with respect to
any Units subject to an Option granted under the Plan until the date of payment
for such Units pursuant to the Option.

            (d)   Determination of Fair Market Value.

            Fair Market Value of each Unit shall be determined in accordance
with the following:

                  (i)   "FAIR VALUE PER UNIT" shall mean, as of any date of
      determination, the fair value of each Unit (or, with respect to a warrant
      or option, the fair value of each Unit obtainable upon exercise thereof
      net of the exercise price), determined as follows:

                                       6
<PAGE>   7

      At any time that the Fair Value per Unit shall be required to be
      determined hereunder, the Board shall make a good faith determination (the
      "Board's Determination") of the fair value of each Unit within 30 days of
      the delivery by the Company of a Repurchase Notice (as defined in the
      Operating Agreement) (without taking into account that the Units may be
      "restricted securities" but with a reasonable discount, for the minority
      position represented by the Units and shall provide to the Member (as
      defined in the Operating Agreement) with respect to whose Unit such
      determination is being made a written notice thereof which notice shall
      set forth supporting data in respect of such calculation (the
      "Determination Notice"). The Member shall have 10 days following receipt
      of the Determination Notice within which to deliver to the Company a
      written notice (the "Objection Notice") of an objection, if any, to the
      Board's Determination, which Objection Notice shall set forth the Member's
      good faith determination (the "Member's Determination") of the fair value
      of each Unit. The failure by the Member to deliver the Objection Notice
      within such 10-day period shall constitute the Member's acceptance of the
      Board's Determination as conclusive. In the event of the timely delivery
      of an Objection Notice, the Company and the Member shall attempt in good
      faith to arrive at an agreement with respect to the Fair Value per Unit,
      which agreement shall be set forth in writing within 15 days following
      delivery of the Objection Notice. If the Company and the Member are unable
      to reach an agreement within such 15-day period, the matter shall be
      promptly referred for determination to a regionally or nationally
      recognized investment banking or valuation firm (the "Valuer") reasonably
      acceptable to the Company and the Member. The Company and the Member will
      cooperate with each other in good faith to select such Valuer. The Valuer
      may select the Board's Determination or the Member's Determination as the
      Fair Value per Unit or may select any other number or value (determined
      without taking into account that the Units may be "restricted securities"
      but with a reasonable discount, not to exceed 20% for the minority
      position represented by the Units). The Valuer's selection will be
      furnished to the Company and the Member in writing and conclusive and
      binding upon the Company and the Member. The fees and expenses of the
      Valuer shall be borne equally by the Company and the Member with respect
      to whose Units such determination relates; provided, however, that if the
      Fair Value per Unit, as determined by the Valuer, shall be more than 15%
      greater than the Board's Determination of such Fair Value per Unit, then
      such fees and expenses of the Valuer shall be borne entirely by the
      Company.

      9.    ADJUSTMENTS

            (a)   Changes in Capital Structure

            Subject to Section 9(b), if the Unit is changed by reason of a
split, reverse split or recapitalization, or converted into or exchanged for
other securities as a result of a merger, consolidation or reorganization, the
Committee shall make such adjustments in the number and class of Units with
respect to which Options may be granted under the Plan as shall be equitable and
appropriate in order to make such Options, as nearly as may be practicable,
equivalent to such Options immediately prior to such change. A corresponding
adjustment changing the

                                       7
<PAGE>   8

number and class of Units allocated to, and the Option Price of, each Option or
portion thereof outstanding at the time of such change shall likewise be made.

            (b)   Material Transactions

            The following rules shall apply in connection with the dissolution
or liquidation of the Company, a reorganization, merger or consolidation in
which the Company is not the surviving corporation, or a sale of all or
substantially all of the assets of the Company to another person or entity
(each, a "Material Transaction"), unless otherwise provided in the Option
Agreement or in the Members' Agreement of even date herewith:

                  (i)   each holder of an Option outstanding at such time shall
      be given (A) written notice of such Material Transaction at least 20 days
      prior to its proposed effective date (as specified in such notice) and (B)
      an opportunity, during the period commencing with delivery of such notice
      and ending 10 days prior to such proposed effective date, to exercise the
      Option to the full extent to which such Option would have been exercisable
      by the Optionee at the expiration of such 20-day period; provided,
      however, that upon the occurrence of a Material Transaction, all Options
      granted under the Plan and not so exercised shall automatically terminate;
      and

                  (ii)  Notwithstanding anything contained in the Plan to the
      contrary, Section 9(b)(i) shall not be applicable if provision shall be
      made in connection with such Material Transaction for the assumption of
      outstanding Options by, or the substitution for such Options of new
      options covering the equity securities of, the surviving, successor or
      purchasing corporation, or a parent or subsidiary thereof, with
      appropriate adjustments as to the number, kind and option prices of Units
      subject to such options.

            (c)   Special Rules

            The following rules shall apply in connection with Section 9(a) and
(b) above:

                  (i)   no fractional Units shall be issued as a result of any
      such adjustment, and any fractional Units resulting from the computations
      pursuant to Section 9(a) or (b) shall be eliminated and the Optionee shall
      receive cash consideration for such fractional Unit at the rate of the
      Fair Market Value of such Unit, determined in accordance with clause (d)
      below;

                  (ii)  no adjustment shall be made for cash dividends or the
      issuance to holders of rights to subscribe for additional Units or other
      securities; and

                  (iii) any adjustments referred to in Section 9(a) or (b) shall
      be made by the Board or Committee (as the case may be) in good faith and
      shall be conclusive and binding on all persons holding Options granted
      under the Plan.

                                       8
<PAGE>   9

      10.   RESTRICTIONS ON OPTIONS AND OPTIONED UNITS

            (a)   Compliance With Securities Laws

            No Options shall be granted under the Plan, and no Units shall be
issued and delivered upon the exercise of Options granted under the Plan, unless
and until the Company and/or the Optionee shall have complied with all
applicable Federal or state registration, listing and/or qualification
requirements and all other requirements of law or of any regulatory agencies
having jurisdiction.

            The Committee in its discretion may, as a condition to the exercise
of any Option granted under the Plan, require an Optionee (i) to represent in
writing that the Units received upon exercise of an Option are being acquired
for investment and not with a view to distribution and (ii) to make such other
representations and warranties as are deemed appropriate by the Company.
Certificates representing Units acquired upon the exercise of Options that have
not been registered under the Securities Act shall, if required by the
Committee, bear the following legend and such additional legends as may be
required by the Option Agreement evidencing a particular Option:

            "THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
            THE UNITS HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE PLEDGED,
            HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
            REGISTRATION STATEMENT FOR THE UNITS UNDER THE SECURITIES ACT OR AN
            OPINION OF COUNSEL TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
            UNDER SAID ACT."

            (b)   Nonassignability of Option Rights

            No Option granted under the Plan shall be assignable or otherwise
transferable by the Optionee except by will or by the laws of descent and
distribution. An Option may be exercised during the lifetime of the Optionee
only by the Optionee. If an Optionee dies, his or her Option shall thereafter be
exercisable, during the period specified in Section 7(b)(ii) or (iii) (as the
case may be), by his or her executors or administrators to the full extent to
which such Option was exercisable by the Optionee at the time of his or her
death.

      11.   EFFECTIVE DATE OF PLAN

            The Plan shall become effective on the date of its adoption by the
Board.

      12.   EXPIRATION AND TERMINATION OF THE PLAN

            Except with respect to Options then outstanding, the Plan shall
expire on the first to occur of (i) the fifteenth anniversary of the date on
which the Plan is approved by the holders of Units and (ii) the date as of which
the Board, in its sole discretion, determines that the Plan

                                       9
<PAGE>   10

shall terminate (the "Expiration Date"). Any Options outstanding as of the
Expiration Date shall remain in effect until they have been exercised or
terminated or have expired by their respective terms.

      13.   AMENDMENT OF PLAN

            The Board may at any time prior to the Expiration Date modify and
amend the Plan in any respect. No such amendment to the Plan shall affect the
terms or provisions of any Option granted by the Company prior to the
effectiveness of such amendment.

      14.   CAPTIONS

            The use of captions in the Plan is for convenience. The captions are
not intended to provide substantive rights.

      15.   WITHHOLDING TAXES

            Whenever under the Plan, Units are to be delivered by an Optionee
upon exercise of an Option, the Company shall be entitled to require as a
condition of delivery that the Optionee remit or, in appropriate cases, agree to
remit when due, an amount sufficient to satisfy all current or estimated future
Federal, state and local income tax withholding the employee's portion of any
employment tax requirements relating thereto.

      16.   OTHER PROVISIONS

            Each Option granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.

      17.   NUMBER AND GENDER

            With respect to words used in the Plan, the singular form shall
include the plural form, the masculine gender shall include the feminine gender,
and vice-versa, as the context requires

      18.   GOVERNING LAW

            The validity and construction of the Plan and the instruments
evidencing the Options granted hereunder shall be governed by the laws of the
State of Delaware.

AS ADOPTED BY THE BOARD OF MANAGERS
OF DONJOY, L.L.C.
ON AUGUST 18, 2000.

                                       10

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