Document:

exhibit93.htm

     

    
      

      

    

    Exhibit 10.7

     

    

      AMENDMENT
        NO. 2

      TO
        INVESTOR REGISTRATION RIGHTS AGREEMENT

      

      This
        AMENDMENT NO. 2 TO INVESTOR REGISTRATION RIGHTS AGREEMENT (this
“Amendment”), is made effective as of November 19,
        2007 (the “Effective Date”), by and
        between XENTENIAL HOLDINGS LIMITED
        (“Investor”); and SMARTIRE SYSTEMS
        INC., a corporation continued under the laws of the Province of British
        Columbia (the “Company”), with reference to the
        following recitals:

       

      A.           Investor
        and the Company entered into that certain Investor Registration Rights
        Agreement, dated January 23, 2007 (the “Master Agreement”).

       

      B.           Contemporaneously
        with the execution of this Amendment, Investor and Company are entering into
        a
        securities purchase agreement (the “SPA”) pursuant to
        which the Company shall issue and sell to the Investors additional secured
        convertible debentures (the “Additional Convertible
        Debentures”) which shall be convertible into that number of shares
        (the “Additional Conversion Shares”) of the Company’s
        Common Stock.

       

      C.           To
        induce the Investor to execute and deliver the SPA, the Company has agreed
        to
        amend the Master Agreement to provide certain registration rights by including
        the Additional Conversion Shares as part of the “Registrable Securities” under
        the Master Agreement.

       

      FOR
        GOOD
        AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
        acknowledged, Investor and the Company agree as follows:

       

      1.  Registable
        Securities.  The Definition of “Registrable Securities” in Section
        1(c) of the Master Agreement shall be deleted in its entirety and replaced
        with
        the following:

       

      “Registrable
        Securities” means (i) 300% of the aggregate number of Conversion
        Shares and Additional Conversion Shares issuable to the Investors upon
        conversion in full (without taking into account any conversion limitations)
        of
        the Convertible Debentures and Additional Convertible Debentures which have
        been
        issued pursuant to the Securities Purchase Agreement and the SPA and remain
        outstanding, and (ii) all Conversion Shares and Additional Conversion Shares
        issued to the Investor.

       

      2.  Definitions.  Capitalized
        terms not otherwise defined herein shall have the meaning ascribed to them
        under
        the Master Agreement, and if not defined in the Master Agreement shall have
        the
        meaning ascribed to them in the Operating Agreement.

       

      3.  Non-Impairment.  Except
        as expressly modified herein, the Master Agreement shall continue in full
        force
        and effect, and the parties hereby reinstate and reaffirm the Master Agreement
        as modified herein.

       

      4.  Inconsistencies.  In
        the event of any inconsistency, ambiguity or conflict between the terms and
        provisions of this Amendment and the terms and provisions of the Master
        Agreement, the terms and provisions of this Amendment shall
        control.

       

      5.  Counterparts.  This
        Amendment may be executed in any number of counterparts, each of which when
        executed will be deemed an original and all of which, taken together, well
        be
        deemed to be one and the same instrument.

       

      REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties have executed this Amendment effective as
        of the date first written above.

       

      
        	
                INVESTOR:

              	
                COMPANY:

              
	
                Xentenial
                  Holdings Limited

              	
                Smartire
                  Systems Inc.

              
	 	 
	
                By:       /s/Mark
                  Angelo          

              	
                By:       /s/Jeff
                  Finkelstein               

              
	
                Name: 
                  Mark Angelo

              	
                Name:  Jeff
                  Finkelstein

              
	 	
                Title:    Chief
                  Financial Officerexhibit94.htm

     

    
      

      

    

    Exhibit 10.8

     

    
       

       

      WARRANT

       

      THE
        SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
        OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
        AS
        AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN
        A FORM
        REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER
        SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
        144
        UNDER SAID ACT.

       

       

      SMARTIRE
        SYSTEMS, INC.

       

       

      Warrant
        To Purchase Common Stock

       

      
        	
                Warrant
                  No.: SMTR-5-1

              	
                Number
                  of Shares:

              	
                225,000,000

              
	 	
                Warrant
                  Exercise Price:

              	
                $0.0298

              
	 	
                Expiration
                  Date:

              	
                November
                  30, 2012

              

      

      

      Date
        of
        Issuance: November 30, 2007

      

      Smartire
        Systems, Inc., a British Columbia corporation, (the “Company”), hereby
        certifies that, for good and valuable consideration, the receipt and sufficiency
        of which are hereby acknowledged, Xentenial Holdings Limited
        (the “Holder”), the registered holder hereof or its permitted assigns, is
        entitled, subject to the terms set forth below, to purchase from the Company
        upon surrender of this Warrant, at any time or times on or after the date
        hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as
        defined herein) up to Two Hundred Twenty Five Million (225,000,000) fully
        paid
        and nonassessable shares of Common Stock (as defined herein) of the Company
        (the
“Warrant Shares”) at the exercise price per share provided in
        Section 1(b) below or as subsequently adjusted; provided, however, that in
        no event shall the holder be entitled to exercise this Warrant for a number
        of
        Warrant Shares in excess of that number of Warrant Shares which, upon giving
        effect to such exercise, would cause the aggregate number of shares of Common
        Stock beneficially owned by the holder and its affiliates to exceed 4.99%
        of the
        outstanding shares of the Common Stock following such exercise, except within
        sixty (60) days of the Expiration Date (however, such restriction may be
        waived
        by Holder (but only as to itself and not to any other holder) upon not less
        than
        65 days prior notice to the Company).  For purposes of the foregoing
        proviso, the aggregate number of shares of Common Stock beneficially owned
        by
        the holder and its affiliates shall include the number of shares of Common
        Stock
        issuable upon exercise of this Warrant with respect to which the determination
        of such proviso is being made, but shall exclude shares of Common Stock which
        would be issuable upon (i) exercise of the remaining, unexercised Warrants
        beneficially owned by the holder and its affiliates and (ii) exercise or
        conversion of the unexercised or unconverted portion of any other securities
        of
        the Company beneficially owned by the holder and its affiliates (including,
        without limitation, any convertible notes or preferred stock) subject to
        a
        limitation on conversion or exercise analogous to the limitation contained
        herein.  Except as set forth in the preceding sentence, for purposes
        of this paragraph, beneficial ownership shall be calculated in accordance
        with
        Section 13(d) of the Securities Exchange Act of 1934, as amended.  For
        purposes of this Warrant, in determining the number of outstanding shares
        of
        Common Stock a holder may rely on the number of outstanding shares of Common
        Stock as reflected in (1) the Company’s most recent Form 10-QSB or Form 10-KSB,
        as the case may be, (2) a more recent public announcement by the Company
        or (3)
        any other notice by the Company or its transfer agent setting forth the number
        of shares of Common Stock outstanding.  Upon the written request of
        any holder, the Company shall promptly, but in no event later than one (1)
        Business Day following the receipt of such notice, confirm in writing to
        any
        such holder the number of shares of Common Stock then outstanding.  In
        any case, the number of outstanding shares of Common Stock shall be determined
        after giving effect to the exercise of Warrants (as defined below) by such
        holder and its affiliates since the date as of which such number of outstanding
        shares of Common Stock was reported.

       

      Section
        1.  

       

      (a)  This
        Warrant is one of the warrants issued pursuant to Section 1(a) of the Securities
        Purchase Agreement (“Securities Purchase Agreement”) dated the date
        hereof between the Company and the Buyers listed on Schedule I thereto or
        issued
        in exchange or substitution thereafter or replacement thereof.  Each
        Capitalized term used, and not otherwise defined herein, shall have the meaning
        ascribed thereto in the Securities Purchase Agreement.

       

      (b)  Definitions.  The
        following words and terms as used in this Warrant shall have the following
        meanings:

       

      (i)  “Approved
        Stock Plan” means a stock option plan that has been approved by the Board of
        Directors of the Company prior to the date of the Securities Purchase Agreement,
        pursuant to which the Company’s securities may be issued only to any employee,
        officer or director for services provided to the Company.

       

      (ii)   “Business
        Day” means any day other than Saturday, Sunday or other day on which
        commercial banks in the City of Richmond, British Columbia are authorized
        or
        required by law to remain closed.

       

      (iii)  “Closing
        Bid Price” means the closing bid price of Common Stock as quoted on the
        Principal Market (as reported by Bloomberg Financial Markets
        (“Bloomberg”) through its “Volume at Price” function).

       

      (iv)  “Common
        Stock” means (i) the Company’s common stock, no par value, and
        (ii) any capital stock into which such Common Stock shall have been changed
        or any capital stock resulting from a reclassification of such Common
        Stock.

       

      (v)  “Event
        of Default” means an event of default under the Securities Purchase
        Agreement or the Convertible Debentures issued in connection
        therewith.

       

      (vi)  “Excluded
        Securities” means, (a) shares issued or deemed to have been issued by the
        Company pursuant to an Approved Stock Plan, (b) shares of Common Stock issued
        or
        deemed to be issued by the Company upon the conversion, exchange or exercise
        of
        any right, option, obligation or security outstanding on the date prior to
        date
        of the Securities Purchase Agreement, provided that the terms of such right,
        option, obligation or security are not amended or otherwise modified on or
        after
        the date of the Securities Purchase Agreement, and provided that the conversion
        price, exchange price, exercise price or other purchase price is not reduced,
        adjusted or otherwise modified and the number of shares of Common Stock issued
        or issuable is not increased (whether by operation of, or in accordance with,
        the relevant governing documents or otherwise) on or after the date of the
        Securities Purchase Agreement,  and (c) the shares of Common
        Stock issued or deemed to be issued by the Company upon conversion of the
        Convertible Debentures or exercise of the Warrants.

       

      (vii)  “Expiration
        Date” means November ____, 2012.

       

      (viii)  “Issuance
        Date” means the date hereof.

       

      (ix)  “Options”
        means any rights, warrants or options to subscribe for or purchase Common
        Stock
        or Convertible Securities.

       

      (x)   “Person”
        means an individual, a limited liability company, a partnership, a joint
        venture, a corporation, a trust, an unincorporated organization and a government
        or any department or agency thereof.

       

      (xi)  “Primary
        Market” means on any of (a) the American Stock Exchange, (b) New York Stock
        Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or
        (e)
        the Nasdaq OTC Bulletin Board (“OTCBB”)

       

      (xii)  “Securities
        Act” means the Securities Act of 1933, as amended.

       

      (xiii)  “Warrant”
        means this Warrant and all Warrants issued in exchange, transfer or replacement
        thereof.

       

      (xiv)  “Warrant
        Exercise Price” shall be $0.0298 or as subsequently adjusted as provided in
        Section 8 hereof.

       

      (c)  Other
        Definitional Provisions.

       

      (i)  Except
        as
        otherwise specified herein, all references herein (A) to the Company shall
        be deemed to include the Company’s successors and (B) to any applicable law
        defined or referred to herein shall be deemed references to such applicable
        law
        as the same may have been or may be amended or supplemented from time to
        time.

       

      (ii)  When
        used
        in this Warrant, the words “herein”, “hereof”, and
“hereunder” and words of similar import, shall
        refer to
        this Warrant as a whole and not to any provision of this Warrant, and the
        words
“Section”, “Schedule”, and “Exhibit” shall refer to
        Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
        specified.

       

      (iii)  Whenever
        the context so requires, the neuter gender includes the masculine or feminine,
        and the singular number includes the plural, and vice versa.

       

      Section
        2.  Exercise
        of
        Warrant.

       

      (a)  Subject
        to the terms and conditions hereof, this Warrant may be exercised by the
        holder
        hereof then registered on the books of the Company, pro rata as hereinafter
        provided, at any time on any Business Day on or after the opening of business
        on
        such Business Day, commencing with the first day after the date hereof, and
        prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by delivery of
        a written notice, in the form of the subscription notice attached as Exhibit
        A hereto (the “Exercise Notice”), of such holder’s election to
        exercise this Warrant, which notice shall specify the number of Warrant Shares
        to be purchased, payment to the Company of an amount equal to the Warrant
        Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied
        by the number of Warrant Shares (at the applicable Warrant Exercise Price)
        as to which this Warrant is being exercised (plus any applicable issue or
        transfer taxes) (the “Aggregate Exercise Price”) in cash or wire transfer
        of immediately available funds and the surrender of this Warrant (or an
        indemnification undertaking with respect to this Warrant in the case of its
        loss, theft or destruction) to a common carrier for overnight delivery to
        the
        Company as soon as practicable following such date (“Cash Basis”) or (ii)
        if at the time of exercise, the Warrant Shares are not subject to an effective
        registration statement or if an Event of Default has occurred, by delivering
        an
        Exercise Notice and in lieu of making payment of the Aggregate Exercise Price
        in
        cash or wire transfer, elect instead to receive upon such exercise the “Net
        Number” of shares of Common Stock determined according to the following formula
        (the “Cashless Exercise”):

       

      Net
        Number = (A x B) – (A x C)

                                            B

      

      For
        purposes of the foregoing
        formula:

      

      A
        = the
        total number of Warrant Shares with respect to which this Warrant is then
        being
        exercised.

      

      B
        = the
        Closing Bid Price of the Common Stock on the date of exercise of the
        Warrant.

      

      C
        = the
        Warrant Exercise Price then in effect for the applicable Warrant Shares at
        the
        time of such exercise.

      

      In
        the
        event of any exercise of the rights represented by this Warrant in compliance
        with this Section 2, the Company shall on or before the fifth (5th)
        Business Day following the date of receipt of the Exercise Notice, the Aggregate
        Exercise Price and this Warrant (or an indemnification undertaking with respect
        to this Warrant in the case of its loss, theft or destruction) and the receipt
        of the representations of the holder specified in Section 6 hereof, if requested
        by the Company (the “Exercise Delivery Documents”),  then the
        Company shall, on or before the fifth (5th) Business
        Day
        following receipt of the Exercise Delivery Documents, issue and surrender
        to a
        common carrier for overnight delivery to the address specified in the Exercise
        Notice, a certificate, registered in the name of the holder, for the number
        of
        shares of Common Stock to which the holder shall be entitled pursuant to
        such
        request.  Upon delivery of the Exercise Notice and Aggregate Exercise
        Price referred to in clause (i) or (ii) above the holder of this Warrant
        shall be deemed for all corporate purposes to have become the holder of record
        of the Warrant Shares with respect to which this Warrant has been
        exercised.  In the case of a dispute as to the determination of the
        Warrant Exercise Price, the Closing Bid Price or the arithmetic calculation
        of
        the Warrant Shares, the Company shall promptly issue to the holder the number
        of
        Warrant Shares that is not disputed and shall submit the disputed determinations
        or arithmetic calculations to the holder via facsimile within one (1) Business
        Day of receipt of the holder’s Exercise Notice.

       

      (b)  If
        the
        holder and the Company are unable to agree upon the determination of the
        Warrant
        Exercise Price or arithmetic calculation of the Warrant Shares within one
        (1)
        day of such disputed determination or arithmetic calculation being submitted
        to
        the holder, then the Company shall immediately submit via facsimile (i) the
        disputed determination of the Warrant Exercise Price or the Closing Bid Price
        to
        an independent, reputable investment banking firm or (ii) the disputed
        arithmetic calculation of the Warrant Shares to its independent, outside
        accountant.  The Company shall cause the investment banking firm or
        the accountant, as the case may be, to perform the determinations or
        calculations and notify the Company and the holder of the results no later
        than
        forty-eight (48) hours from the time it receives the disputed determinations
        or
        calculations.  Such investment banking firm’s or accountant’s
        determination or calculation, as the case may be, shall be deemed conclusive
        absent manifest error.

       

      (c)  Unless
        the rights represented by this Warrant shall have expired or shall have been
        fully exercised, the Company shall, as soon as practicable and in no event
        later
        than five (5) Business Days after any exercise and at its own expense, issue
        a
        new Warrant identical in all respects to this Warrant exercised except it
        shall
        represent rights to purchase the number of Warrant Shares purchasable
        immediately prior to such exercise under this Warrant exercised, less the
        number
        of Warrant Shares with respect to which such Warrant is exercised.

       

      (d)  No
        fractional Warrant Shares are to be issued upon any pro rata exercise of
        this
        Warrant, but rather the number of Warrant Shares issued upon such exercise
        of
        this Warrant shall be rounded up or down to the nearest whole
        number.

       

      (e)  If
        the
        Company or its Transfer Agent shall fail for any reason or for no reason
        to
        issue to the holder within ten (10) days of receipt of the Exercise
        Delivery Documents, a certificate for the number of Warrant Shares to which
        the
        holder is entitled or to credit the holder’s balance account with The Depository
        Trust Company for such number of Warrant Shares to which the holder is entitled
        upon the holder’s exercise of this Warrant, the Company shall, in addition to
        any other remedies under this Warrant or otherwise available to such holder,
        pay
        as additional damages in cash to such holder on each day the issuance of
        such
        certificate for Warrant Shares is not timely effected an amount equal to
        0.025%
        of the product of (A) the sum of the number of Warrant Shares not issued
        to the
        holder on a timely basis and to which the holder is entitled, and (B) the
        Closing Bid Price of the Common Stock for the trading day immediately preceding
        the last possible date which the Company could have issued such Common Stock
        to
        the holder without violating this Section 2.

       

      (f)  If
        within
        ten (10) days after the Company’s receipt of the Exercise Delivery Documents,
        the Company fails to deliver a new Warrant to the holder for the number of
        Warrant Shares to which such holder is entitled pursuant to Section 2 hereof,
        then, in addition to any other available remedies under this Warrant, or
        otherwise available to such holder, the Company shall pay as additional damages
        in cash to such holder on each day after such tenth (10th) day
        that such
        delivery of such new Warrant is not timely effected in an amount equal to
        0.25%
        of the product of (A) the number of Warrant Shares represented by the
        portion of this Warrant which is not being exercised and (B) the Closing
        Bid Price of the Common Stock for the trading day immediately preceding the
        last
        possible date which the Company could have issued such Warrant to the holder
        without violating this Section 2.

       

      Section
        3.  Covenants
        as to Common
        Stock.  The Company hereby covenants and agrees as
        follows:

       

      (a)  This
        Warrant is, and any Warrants issued in substitution for or replacement of
        this
        Warrant will upon issuance be, duly authorized and validly issued.

       

      (b)  All
        Warrant Shares which may be issued upon the exercise of the rights represented
        by this Warrant will, upon issuance, be validly issued, fully paid and
        nonassessable and free from all taxes, liens and charges with respect to
        the
        issue thereof.

       

      (c)  During
        the period within which the rights represented by this Warrant may be exercised,
        the Company will at all times have authorized and reserved at least one hundred
        percent (100%) of the number of shares of Common Stock needed to provide
        for the
        exercise of the rights then represented by this Warrant and the par value
        of
        said shares will at all times be less than or equal to the applicable Warrant
        Exercise Price.  If at any time the Company does not have a sufficient
        number of shares of Common Stock authorized and available, then the Company
        shall call and hold a special meeting of its stockholders within sixty (60)
        days of that time for the sole purpose of increasing the number of authorized
        shares of Common Stock.

       

      (d)  RESERVED

       

      (e)  The
        Company will not, by amendment of its Articles of Incorporation or through
        any
        reorganization, transfer of assets, consolidation, merger, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms to be observed or performed
        by it
        hereunder, but will at all times in good faith assist in the carrying out
        of all
        the provisions of this Warrant and in the taking of all such action as may
        reasonably be requested by the holder of this Warrant in order to protect
        the
        exercise privilege of the holder of this Warrant against dilution or other
        impairment, consistent with the tenor and purpose of this
        Warrant.  The Company will not increase the par value of any shares of
        Common Stock receivable upon the exercise of this Warrant above the Warrant
        Exercise Price then in effect, and (ii) will take all such actions as may
        be necessary or appropriate in order that the Company may validly and legally
        issue fully paid and nonassessable shares of Common Stock upon the exercise
        of
        this Warrant.

       

      (f)  This
        Warrant will be binding upon any entity succeeding to the Company by merger,
        consolidation or acquisition of all or substantially all of the Company’s
        assets.

       

      Section
        4.  Taxes.  The
        Company
        shall pay any and all taxes, except any applicable withholding, which may
        be
        payable with respect to the issuance and delivery of Warrant Shares upon
        exercise of this Warrant.

       

      Section
        5.  Warrant
        Holder Not Deemed a
        Stockholder.  Except as otherwise specifically provided herein, no
        holder, as such, of this Warrant shall be entitled to vote or receive dividends
        or be deemed the holder of shares of capital stock of the Company for any
        purpose, nor shall anything contained in this Warrant be construed to confer
        upon the holder hereof, as such, any of the rights of a stockholder of the
        Company or any right to vote, give or withhold consent to any corporate action
        (whether any reorganization, issue of stock, reclassification of stock,
        consolidation, merger, conveyance or otherwise), receive notice of meetings,
        receive dividends or subscription rights, or otherwise, prior to the issuance
        to
        the holder of this Warrant of the Warrant Shares which he or she is then
        entitled to receive upon the due exercise of this Warrant.  In
        addition, nothing contained in this Warrant shall be construed as imposing
        any
        liabilities on such holder to purchase any securities (upon exercise of this
        Warrant or otherwise) or as a stockholder of the Company, whether such
        liabilities are asserted by the Company or by creditors of the
        Company.  Notwithstanding this Section 5, the Company will provide the
        holder of this Warrant with copies of the same notices and other information
        given to the stockholders of the Company generally, contemporaneously with
        the
        giving thereof to the stockholders.

       

      Section
        6.  Representations
        of
        Holder.  The holder of this Warrant, by the acceptance hereof,
        represents that it is acquiring this Warrant and the Warrant Shares for its
        own
        account for investment only and not with a view towards, or for resale in
        connection with, the public sale or distribution of this Warrant or the Warrant
        Shares, except pursuant to sales registered or exempted under the Securities
        Act; provided, however, that by making the representations herein, the holder
        does not agree to hold this Warrant or any of the Warrant Shares for any
        minimum
        or other specific term and reserves the right to dispose of this Warrant
        and the
        Warrant Shares at any time in accordance with or pursuant to a registration
        statement or an exemption under the Securities Act.  The holder of
        this Warrant further represents, by acceptance hereof, that, as of this date,
        such holder is an “accredited investor” as such term is defined in
        Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
        Commission under the Securities Act (an “Accredited
        Investor”).  Upon exercise of this Warrant  the holder
        shall, confirm in writing, in a form satisfactory to the Company, that the
        Warrant Shares so purchased are being acquired solely for the holder’s own
        account and not as a nominee for any other party, for investment, and not
        with a
        view toward distribution or resale and that such holder is an Accredited
        Investor.  If such holder cannot make such representations because
        they would be factually incorrect, it shall be a condition to such holder’s
        exercise of this Warrant that the Company receive such other representations
        as
        the Company considers reasonably necessary to assure the Company that the
        issuance of its securities upon exercise of this Warrant shall not violate
        any
        United States or state securities laws.

       

      Section
        7.  Ownership
        and
        Transfer.

       

      (a)  The
        Company shall maintain at its principal executive offices (or such other
        office
        or agency of the Company as it may designate by notice to the holder hereof),
        a
        register for this Warrant, in which the Company shall record the name and
        address of the person in whose name this Warrant has been issued, as well
        as the
        name and address of each transferee.  The Company may treat the person
        in whose name any Warrant is registered on the register as the owner and
        holder
        thereof for all purposes, notwithstanding any notice to the contrary, but
        in all
        events recognizing any transfers made in accordance with the terms of this
        Warrant.

       

      Section
        8.  Adjustment
        of Warrant Exercise Price
        and Number of Shares.  The Warrant Exercise Price and the number
        of shares of Common Stock issuable upon exercise of this Warrant shall be
        adjusted from time to time as follows:

       

      (a)  Adjustment
        of Warrant Exercise Price and Number of Shares upon Issuance of Common
        Stock.  If and whenever on or after the Issuance Date of this
        Warrant, the Company issues or sells, or is deemed to have issued or sold,
        any
        shares of Common Stock (other than Excluded Securities) for a consideration
        per share less than a price (the “Applicable Price”) equal to the Warrant
        Exercise Price in effect immediately prior to such issuance or sale, then
        immediately after such issue or sale the Warrant Exercise Price then in effect
        shall be reduced to an amount equal to such consideration per
        share.  Upon each such adjustment of the Warrant Exercise Price
        hereunder, the number of Warrant Shares issuable upon exercise of this Warrant
        shall be adjusted to the number of shares determined by multiplying the Warrant
        Exercise Price in effect immediately prior to such adjustment by the number
        of
        Warrant Shares issuable upon exercise of this Warrant immediately prior to
        such
        adjustment and dividing the product thereof by the Warrant Exercise Price
        resulting from such adjustment.

       

      (b)  Effect
        on Warrant Exercise Price of Certain Events.  For purposes of
        determining the adjusted Warrant Exercise Price under Section 8(a) above,
        the
        following shall be applicable:

       

      (i)  Issuance
        of Options.  If after the date hereof, the Company in any manner
        grants any Options and the lowest price per share for which one share of
        Common
        Stock is issuable upon the exercise of any such Option or upon conversion
        or
        exchange of any convertible securities issuable upon exercise of any such
        Option
        is less than the Applicable Price, then such share of Common Stock shall
        be
        deemed to be outstanding and to have been issued and sold by the Company
        at the
        time of the granting or sale of such Option for such price per
        share.  For purposes of this Section 8(b)(i), the lowest price per
        share for which one share of Common Stock is issuable upon exercise of such
        Options or upon conversion or exchange of such Convertible Securities shall
        be
        equal to the sum of the lowest amounts of consideration (if any) received
        or
        receivable by the Company with respect to any one share of Common Stock upon
        the
        granting or sale of the Option, upon exercise of the Option or upon conversion
        or exchange of any convertible security issuable upon exercise of such
        Option.  No further adjustment of the Warrant Exercise Price shall be
        made upon the actual issuance of such Common Stock or of such convertible
        securities upon the exercise of such Options or upon the actual issuance
        of such
        Common Stock upon conversion or exchange of such convertible
        securities.

       

      (ii)  Issuance
        of Convertible Securities.  If the Company in any manner issues or
        sells any convertible securities and the lowest price per share for which
        one
        share of Common Stock is issuable upon the conversion or exchange thereof
        is
        less than the Applicable Price, then such share of Common Stock shall be
        deemed
        to be outstanding and to have been issued and sold by the Company at the
        time of
        the issuance or sale of such convertible securities for such price per
        share.  For the purposes of this Section 8(b)(ii), the lowest
        price per share for which one share of Common Stock is issuable upon such
        conversion or exchange shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with respect
        to one
        share of Common Stock upon the issuance or sale of the convertible security
        and
        upon conversion or exchange of such convertible security.  No further
        adjustment of the Warrant Exercise Price shall be made upon the actual issuance
        of such Common Stock upon conversion or exchange of such convertible securities,
        and if any such issue or sale of such convertible securities is made upon
        exercise of any Options for which adjustment of the Warrant Exercise Price
        had
        been or are to be made pursuant to other provisions of this Section 8(b),
        no
        further adjustment of the Warrant Exercise Price shall be made by reason
        of such
        issue or sale.

       

      (iii)  Change
        in Option Price or Rate of Conversion.  If the purchase price
        provided for in any Options, the additional consideration, if any, payable
        upon
        the issue, conversion or exchange of any convertible securities, or the rate
        at
        which any convertible securities are convertible into or exchangeable for
        Common
        Stock changes at any time, the Warrant Exercise Price in effect at the time
        of
        such change shall be adjusted to the Warrant Exercise Price which would have
        been in effect at such time had such Options or convertible securities provided
        for such changed purchase price, additional consideration or changed conversion
        rate, as the case may be, at the time initially granted, issued or sold and
        the
        number of Warrant Shares issuable upon exercise of this Warrant shall be
        correspondingly readjusted.  For purposes of this Section 8(b)(iii),
        if the terms of any Option or convertible security that was outstanding as
        of
        the Issuance Date of this Warrant are changed in the manner described in
        the
        immediately preceding sentence, then such Option or convertible security
        and the
        Common Stock deemed issuable upon exercise, conversion or exchange thereof
        shall
        be deemed to have been issued as of the date of such change.  No
        adjustment pursuant to this Section 8(b) shall be made if such adjustment
        would result in an increase of the Warrant Exercise Price then in
        effect.

       

      (iv)  Calculation
        of Consideration Received.  If any Common Stock, Options or
        convertible securities are issued or sold or deemed to have been issued or
        sold
        for cash, the consideration received therefore will be deemed to be the net
        amount received by the Company therefore.  If any Common Stock,
        Options or convertible securities are issued or sold for a consideration
        other
        than cash, the amount of such consideration received by the Company will
        be the
        fair value of such consideration, except where such consideration consists
        of
        marketable securities, in which case the amount of consideration received
        by the
        Company will be the market price of such securities on the date of receipt
        of
        such securities.  If any Common Stock, Options or convertible
        securities are issued to the owners of the non-surviving entity in connection
        with any merger in which the Company is the surviving entity, the amount
        of
        consideration therefore will be deemed to be the fair value of such portion
        of
        the net assets and business of the non-surviving entity as is attributable
        to
        such Common Stock, Options or convertible securities, as the case may
        be.  The fair value of any consideration other than cash or securities
        will be determined jointly by the Company and the holders of Warrants
        representing at least two-thirds (b) of the Warrant Shares issuable upon
        exercise of the Warrants then outstanding.  If such parties are unable
        to reach agreement within ten (10) days after the occurrence of an event
        requiring valuation (the “Valuation Event”), the fair value of such
        consideration will be determined within five (5) Business Days after the
        tenth (10th) day
        following the
        Valuation Event by an independent, reputable appraiser jointly selected by
        the
        Company and the holders of Warrants representing at least two-thirds (b)
        of the
        Warrant Shares issuable upon exercise of the Warrants then
        outstanding.  The determination of such appraiser shall be final and
        binding upon all parties and the fees and expenses of such appraiser shall
        be
        borne jointly by the Company and the holders of Warrants.

       

      (v)  Integrated
        Transactions.  In case any Option is issued in connection with the
        issue or sale of other securities of the Company, together comprising one
        integrated transaction in which no specific consideration is allocated to
        such
        Options by the parties thereto, the Options will be deemed to have been issued
        for a consideration of $.01.

       

      (vi)  Treasury
        Shares.  The number of shares of Common Stock outstanding at any
        given time does not include shares owned or held by or for the account of
        the
        Company, and the disposition of any shares so owned or held will be considered
        an issue or sale of Common Stock.

       

      (vii)  Record
        Date.  If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (1) to receive a dividend or other
        distribution payable in Common Stock, Options or in convertible securities
        or
        (2) to subscribe for or purchase Common Stock, Options or convertible
        securities, then such record date will be deemed to be the date of the issue
        or
        sale of the shares of Common Stock deemed to have been issued or sold upon
        the
        declaration of such dividend or the making of such other distribution or
        the
        date of the granting of such right of subscription or purchase, as the case
        may
        be.

       

      (c)  Adjustment
        of Warrant Exercise Price upon Subdivision or Combination of Common
        Stock.  If the Company at any time after the date of issuance of
        this Warrant subdivides (by any stock split, stock dividend, recapitalization
        or
        otherwise) one or more classes of its outstanding shares of Common Stock
        into a
        greater number of shares, any Warrant Exercise Price in effect immediately
        prior
        to such subdivision will be proportionately reduced and the number of shares
        of
        Common Stock obtainable upon exercise of this Warrant will be proportionately
        increased.  If the Company at any time after the date of issuance of
        this Warrant combines (by combination, reverse stock split or otherwise)
        one or
        more classes of its outstanding shares of Common Stock into a smaller number
        of
        shares, any Warrant Exercise Price in effect immediately prior to such
        combination will be proportionately increased and the number of Warrant Shares
        issuable upon exercise of this Warrant will be proportionately
        decreased.  Any adjustment under this Section 8(c) shall become
        effective at the close of business on the date the subdivision or combination
        becomes effective.

       

      (d)  Distribution
        of Assets.  If the Company shall declare or make any dividend or
        other distribution of its assets (or rights to acquire its assets) to holders
        of
        Common Stock, by way of return of capital or otherwise (including, without
        limitation, any distribution of cash, stock or other securities, property
        or
        options by way of a dividend, spin off, reclassification, corporate
        rearrangement or other similar transaction) (a “Distribution”), at any
        time after the issuance of this Warrant, then, in each such case:

       

      (i)  any
        Warrant Exercise Price in effect immediately prior to the close of business
        on
        the record date fixed for the determination of holders of Common Stock
        entitled to receive the Distribution shall be reduced, effective as
        of the close of business on such record date, to a price determined by
        multiplying such Warrant Exercise Price by a fraction of which (A) the numerator
        shall be the Closing Sale Price of the Common Stock on the trading day
        immediately preceding such record date minus the value of the Distribution
        (as
        determined in good faith by the Company’s Board of Directors) applicable to one
        share of Common Stock, and (B) the denominator shall be the Closing Sale
        Price
        of the Common Stock on the trading day immediately preceding such record
        date;
        and

       

      (ii)  either
        (A) the number of Warrant Shares obtainable upon exercise of this Warrant
        shall
        be increased to a number of shares equal to the number of shares of Common
        Stock
        obtainable immediately prior to the close of business on the record date
        fixed
        for the determination of holders of Common Stock entitled to receive the
        Distribution multiplied by the reciprocal of the fraction set forth in the
        immediately preceding clause (i), or (B) in the event that the Distribution
        is
        of common stock of a company whose common stock is traded on a national
        securities exchange or a national automated quotation system, then the holder
        of
        this Warrant shall receive an additional warrant to purchase Common Stock,
        the
        terms of which shall be identical to those of this Warrant, except that such
        warrant shall be exercisable into the amount of the assets that would have
        been
        payable to the holder of this Warrant pursuant to the Distribution had the
        holder exercised this Warrant immediately prior to such record date and with
        an
        exercise price equal to the amount by which the exercise price of this Warrant
        was decreased with respect to the Distribution pursuant to the terms of the
        immediately preceding clause (i).

       

      (e)  Certain
        Events.  If any event occurs of the type contemplated by the
        provisions of this Section 8 but not expressly provided for by such
        provisions (including, without limitation, the granting of stock appreciation
        rights, phantom stock rights or other rights with equity features), then
        the
        Company’s Board of Directors will make an appropriate adjustment in the Warrant
        Exercise Price and the number of shares of Common Stock obtainable upon exercise
        of this Warrant so as to protect the rights of the holders of the Warrants;
        provided, except as set forth in section 8(c),that no such adjustment pursuant
        to this Section 8(e) will increase the Warrant Exercise Price or decrease
        the
        number of shares of Common Stock obtainable as otherwise determined pursuant
        to
        this Section 8.

       

      (f)  Voluntary
        Adjustments By Company.  The Company may at any time during the
        term of this Warrant reduce the then current Exercise Price to any amount
        and
        for any period of time deemed appropriate by the Board of Directors of the
        Company.

       

      (g)  Notices.

       

      (i)  Immediately
        upon any adjustment of the Warrant Exercise Price, the Company will give
        written
        notice thereof to the holder of this Warrant, setting forth in reasonable
        detail, and certifying, the calculation of such adjustment.

       

      (ii)  The
        Company will give written notice to the holder of this Warrant at least ten
        (10)
        days prior to the date on which the Company closes its books or takes a record
        (A) with respect to any dividend or distribution upon the Common Stock,
        (B) with respect to any pro rata subscription offer to holders of Common
        Stock or (C) for determining rights to vote with respect to any Organic
        Change (as defined below), dissolution or liquidation, provided that such
        information shall be made known to the public prior to or in conjunction
        with
        such notice being provided to such holder.

       

      (iii)  The
        Company will also give written notice to the holder of this Warrant at least
        ten
        (10) days prior to the date on which any Organic Change, dissolution or
        liquidation will take place, provided that such information shall be made
        known
        to the public prior to or in conjunction with such notice being provided
        to such
        holder.

       

      Section
        9.  Purchase
        Rights; Reorganization,
        Reclassification, Consolidation, Merger or Sale.

       

      (a)  In
        addition to any adjustments pursuant to Section 8 above, if at any time the
        Company grants, issues or sells any Options, Convertible Securities or rights
        to
        purchase stock, warrants, securities or other property pro rata to the record
        holders of any class of Common Stock (the “Purchase Rights”), then the
        holder of this Warrant will be entitled to acquire, upon the terms applicable
        to
        such Purchase Rights, the aggregate Purchase Rights which such holder could
        have
        acquired if such holder had held the number of shares of Common Stock acquirable
        upon complete exercise of this Warrant immediately before the date on which
        a
        record is taken for the grant, issuance or sale of such Purchase Rights,
        or, if
        no such record is taken, the date as of which the record holders of Common
        Stock
        are to be determined for the grant, issue or sale of such Purchase
        Rights.

       

      (b)  Any
        recapitalization, reorganization, reclassification, consolidation, merger,
        sale
        of all or substantially all of the Company’s assets to another Person or other
        transaction in each case which is effected in such a way that holders of
        Common
        Stock are entitled to receive (either directly or upon subsequent liquidation)
        stock, securities or assets with respect to or in exchange for Common Stock
        is
        referred to herein as an “Organic Change.”  Prior to the
        consummation of any (i) sale of all or substantially all of the Company’s assets
        to an acquiring Person or (ii) other Organic Change following which the Company
        is not a surviving entity, the Company will secure from the Person purchasing
        such assets or the successor resulting from such Organic Change (in each
        case,
        the “Acquiring Entity”) a written agreement (in form and substance
        satisfactory to the holders of Warrants representing at least two-thirds
        (iii) of the Warrant Shares issuable upon exercise of the Warrants then
        outstanding) to deliver to each holder of Warrants in exchange for such
        Warrants, a security of the Acquiring Entity evidenced by a written instrument
        substantially similar in form and substance to this Warrant and satisfactory
        to
        the holders of the Warrants (including an adjusted warrant exercise price
        equal
        to the value for the Common Stock reflected by the terms of such consolidation,
        merger or sale, and exercisable for a corresponding number of shares of Common
        Stock acquirable and receivable upon exercise of the Warrants without regard
        to
        any limitations on exercise, if the value so reflected is less than any
        Applicable Warrant Exercise Price immediately prior to such consolidation,
        merger or sale).  Prior to the consummation of any other Organic
        Change, the Company shall make appropriate provision (in form and substance
        satisfactory to the holders of Warrants representing a
        majority of the Warrant Shares issuable upon exercise of
        the Warrants then outstanding) to insure that each of the holders of the
        Warrants will thereafter have the right to acquire and receive in lieu of
        or in
        addition to (as the case may be) the Warrant Shares immediately theretofore
        issuable and receivable upon the exercise of such holder’s
        Warrants (without regard to any limitations on exercise), such shares of
        stock, securities or assets that would have been issued or payable in such
        Organic Change with respect to or in exchange for the number of Warrant Shares
        which would have been issuable and receivable upon the exercise of such holder’s
        Warrant as of the date of such Organic Change (without taking into account
        any
        limitations or restrictions on the exercisability of this Warrant).

       

      Section
        10.  Lost,
        Stolen, Mutilated or Destroyed
        Warrant.  If this Warrant is lost, stolen, mutilated or destroyed,
        the Company shall promptly, on receipt of an indemnification undertaking
        (or, in
        the case of a mutilated Warrant, the Warrant), issue a new Warrant of like
        denomination and tenor as this Warrant so lost, stolen, mutilated or
        destroyed.

       

      Section
        11.  Notice.  Any
        notices,
        consents, waivers or other communications required or permitted to be given
        under the terms of this Warrant must be in writing and will be deemed to
        have
        been delivered:  (i) upon receipt, when delivered personally;
        (ii) upon receipt, when sent by facsimile (provided confirmation of receipt
        is received by the sending party transmission is mechanically or electronically
        generated and kept on file by the sending party); or (iii) one Business Day
        after deposit with a nationally recognized overnight delivery service, in
        each
        case properly addressed to the party to receive the same.  The
        addresses and facsimile numbers for such communications shall be:

       

      
        	
                If
                  to Holder:

              	
                Xentenial
                  Holdings, Ltd.

              
	 	
                Athalassis,
                  47

              
	 	
                2nd
                  Floor, Flat
                  Office

              
	 	
                Strovolos,
                  P.C. 2012

              
	 	
                Nicosia,
                  Cyprus

              
	 	
                Telephone: +357-22313339

              
	 	
                Facsimile:   +357-22313346

              
	 	 
	
                With
                  Copy to:

              	
                David
                  Gonzalez, Esq.

              
	 	
                101
                  Hudson Street – Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile:   (201)
                  985-8266

              
	 	 
	 	 
	
                If
                  to the Company, to:

              	
                Smartire
                  Systems Inc.

              
	 	
                Richmond
                  Corporate Centre

              
	 	
                Suite
                  150-13151 Vanier Place

              
	 	
                Richmond,
                  British Columbia, Canada V6V 2J1

              
	 	
                Attention:  
                   Jeff Finkelstein

              
	 	
                Telephone: 
                  (604) 276-9884

              
	 	
                Facsimile:    (604)
                  276-2353

              
	
                With
                  a copy to:

              	
                Ethan
                  Minsky

              
	 	
                Clark
                  Wilson LLP

              
	 	
                800
                  – 885 West Georgia Street

              
	 	
                Vancouver,
                  British Columbia V6C 3H1

              
	 	
                Telephone: (604)
                  687-5700

              
	 	
                Facsimile:   (604)
                  687-6314

              

      

      

      If
        to a
        holder of this Warrant, to it at the address and facsimile number set forth
        on
Exhibit C hereto, with copies to such holder’s representatives as
        set forth on Exhibit C, or at such other address and facsimile as
        shall be delivered to the Company upon the issuance or transfer of this
        Warrant.  Each party shall provide five days’ prior written notice to
        the other party of any change in address or facsimile number.  Written
        confirmation of receipt (A) given by the recipient of such notice, consent,
        facsimile, waiver or other communication, (or (B) provided by a nationally
        recognized overnight delivery service shall be rebuttable evidence of personal
        service, receipt by facsimile or receipt from a nationally recognized overnight
        delivery service in accordance with clause (i), (ii) or (iii) above,
        respectively.

       

      Section
        12.  Date.  The
        date of
        this Warrant is set forth on page 1 hereof.  This Warrant, in all
        events, shall be wholly void and of no effect after the close of business
        on the
        Expiration Date, except that notwithstanding any other provisions hereof,
        the
        provisions of Section 8(b) shall continue in full force and effect after
        such date as to any Warrant Shares or other securities issued upon the exercise
        of this Warrant.

       

      Section
        13.  Amendment
        and
        Waiver.  Except as otherwise provided herein, the provisions of
        the Warrants may be amended and the Company may take any action herein
        prohibited, or omit to perform any act herein required to be performed by
        it,
        only if the Company has obtained the written consent of the holders of Warrants
        representing at least two-thirds of the Warrant Shares issuable upon exercise
        of
        the Warrants then outstanding; provided that, except for Section 8(d), no
        such
        action may increase the Warrant Exercise Price or decrease the number of
        shares
        or class of stock obtainable upon exercise of any Warrant without the written
        consent of the holder of such Warrant.

       

      Section
        14.  Descriptive
        Headings; Governing
        Law.  The descriptive headings of the several sections and
        paragraphs of this Warrant are inserted for convenience only and do not
        constitute a part of this Warrant.  The corporate laws of the Province
        of British Columbia shall govern all issues concerning the relative rights
        of
        the Company and its stockholders.  All other questions concerning the
        construction, validity, enforcement and interpretation of this Agreement
        shall
        be governed by the internal laws of the State of New Jersey, without giving
        effect to any choice of law or conflict of law provision or rule (whether
        of the
        State of New Jersey or any other jurisdictions) that would cause the application
        of the laws of any jurisdictions other than the State of New
        Jersey.  Each party hereby irrevocably submits to the exclusive
        jurisdiction of the state and federal courts sitting in Hudson County and
        the
        United States District Court for the District of New Jersey, for the
        adjudication of any dispute hereunder or in connection herewith or therewith,
        or
        with any transaction contemplated hereby or discussed herein, and hereby
        irrevocably waives, and agrees not to assert in any suit, action or proceeding,
        any claim that it is not personally subject to the jurisdiction of any such
        court, that such suit, action or proceeding is brought in an inconvenient
        forum
        or that the venue of such suit, action or proceeding is
        improper.  Each party hereby irrevocably waives personal service of
        process and consents to process being served in any such suit, action or
        proceeding by mailing a copy thereof to such party at the address for such
        notices to it under this Agreement and agrees that such service shall constitute
        good and sufficient service of process and notice thereof.  Nothing
        contained herein shall be deemed to limit in any way any right to serve process
        in any manner permitted by law.

       

      Section
        15.  Waiver
        of Jury
        Trial.  AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO
        ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL
        BY
        JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY
        AND
        ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS
        TRANSACTION.

       

      

      REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the Company has caused this Warrant to be signed as of
        the date first set forth above.

       

      
        	 	
                SMARTIRE
                  SYSTEMS, INC.

              
	 	 
	 	
                By:       /s/Jeff
                  Finkelstein                                                         

              
	 	
                Name: Jeff
                  Finkelstein

              
	 	
                Title:   Chief
                  Financial Officer

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

       

      EXHIBIT
        A TO WARRANT

       

       

      EXERCISE
        NOTICE

       

       

      TO
        BE EXECUTED

       

       

      BY
        THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

       

       

      SMARTIRE
        SYSTEMS, INC.

       

      The
        undersigned holder hereby exercises the right to purchase ______________
        of the
        shares of Common Stock (“Warrant Shares”) of Smartire Systems, Inc. (the
“Company”), evidenced by the attached Warrant (the
“Warrant”).  The undersigned holder is an accredited investor
        in the category indicated on the attached U.S. and Canadian
        questionnaires.  Capitalized terms used herein and not otherwise
        defined shall have the respective meanings set forth in the
        Warrant.

       

      Specify
        Method of exercise by check mark:

       

      1.  ___                      Cash
        Exercise

       

      (a)
        Payment of Warrant Exercise Price. The holder shall pay the Aggregate
        Exercise Price of $______________ to the Company in accordance with the terms
        of
        the Warrant.

       

      (b)
        Delivery of Warrant Shares.  The Company shall deliver to the
        holder _________ Warrant Shares in accordance with the terms of the
        Warrant.

       

      

       

      2.  ___                      Cashless
        Exercise

       

      (a)
        Payment of Warrant Exercise Price.  In lieu of making payment
        of the Aggregate Exercise Price, the holder elects to receive upon such exercise
        the Net Number of shares of Common Stock determined in accordance with the
        terms
        of the Warrant.

       

      (b)
        Delivery of Warrant Shares.  The Company shall deliver to the
        holder _________ Warrant Shares in accordance with the terms of the
        Warrant.

       

      

      Date:
        _______________ __, ______

      

      Name
        of
        Registered Holder

      

      By:                                                      

      Name:                                                                

      Title:                                                                

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

                

                    A
              -
      
      

                    
      
    

        

      

      

      U.S.
        SECURITIES LAW QUESTIONNAIRE

       

      1.           The
        Subscriber covenants, represents and warrants to the Company that:

       

      
        	
                 

              	
                (a)

              	
                the
                  Subscriber 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 Subscription Agreement and it is able
                  to bear
                  the economic risk of loss arising from such
                  transactions;

              

      

       

      
        	
                 

              	
                (b)

              	
                the
                  Subscriber is acquiring the Securities for investment only and
                  not with a
                  view to resale or distribution and, in particular, it 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 the Subscriber
                  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 unless an exemption
                  from such registration requirements is available or registration
                  is not
                  required pursuant to Regulation S under the 1933 Act or registration
                  is otherwise not required under this 1933
                  Act;

              

      

       

      
        	
                 

              	
                (c)

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

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                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;

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                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;

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                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;

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                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;

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                Category
                  5

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

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                Category
                  6

              	
                A
                  director or executive officer of the
                  Company;

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                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

              

      

       

      
        	
                 

              	
                SYMBOL

              	
                Category
                  8

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

              

      

       

      
        	
                 

              	
                (e)

              	
                the
                  Subscriber 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.

              

      

       

      IN
        WITNESS WHEREOF, the undersigned has
        executed this form as of the _____ day of ______________,
        _________.

       

       

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

       

      

       

      

       

      

       

      Print
        or
        Type Name of
        Entity                                                                           Signature

       

      

       

      

       

      Signature
        of Authorized
        Signatory                                                                    Print
        or Type Name

       

      

       

      

       

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

      

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

                

                    A
              -
      
      

                    
      
    

        

      

      CANADIAN
        QUESTIONNAIRE

       

      TO:                      Smartire
        Systems Inc. (the “Issuer”)

       

      1.  MINIMUM
        PURCHASE DECLARATION (TO BE COMPLETED BY ALL BUYERS RELYING ON THE
        MINIMUM PURCHASE EXEMPTION PURSUANT TO SECTION 2.10 OF
        NI45-106)

       

      SYMBOL                      By
        checking the box to the left and completing and executing this Canadian
        Certificate below, the Buyer is eligible to purchase the Convertible Debentures
        pursuant to an exemption from the prospectus and registration provisions
        of the
        B.C. Act pursuant to section 2.10 of NI45-106 and represent and warrants
        to the
        Issuer that:

       

      
        	
                (a)  

              	
                the
                  Buyer, or each of the beneficial purchasers for whom the Buyer
                  is acting,
                  is subject to the securities laws of the Province of British
                  Columbia;

              

      

       

      
        	
                (b)  

              	
                the
                  Buyer is purchasing the Convertible Debentures as principal for
                  its own
                  account and not for the benefit of any other
                  person;

              

      

       

      
        	
                (c)  

              	
                the
                  Convertible Debentures have an acquisition cost to the Purchaser
                  of not
                  less than Cdn$150,000, payable in cash at the Closing of the Offering;
                  and

              

      

       

      
        	
                (d)  

              	
                the
                  Buyer was not created and is not being used solely to purchase
                  or hold
                  securities in reliance on the registration and prospectus exemptions
                  provided under Section 2.10 of NI45-106, it pre-existed the offering
                  of
                  Convertible Debentures and has a bona fide purpose other than investment
                  in the Convertible Debentures.

              

      

       

      2.  ACCREDITED
        INVESTOR DECLARATION (TO BE COMPLETED BY ALL BUYERS RELYING ON
        THE ACCREDITED INVESTOR EXEMPTION PURSUANT TO SECTION 2.3 OF
        NI45-106)

       

      The
        categories listed herein contain certain specifically defined
        terms.  If you are unsure as to the meanings of those terms, or are
        unsure as to the applicability of any category below, please contact your
        legal
        advisor before completing this certificate.

       

      In
        connection with the purchase by the undersigned Buyer of the Convertible
        Debentures, the Buyer, on its own behalf and on behalf of each of the beneficial
        purchasers for whom the Buyer is acting, hereby represents, warrants, covenants
        and certifies to the Issuer (and acknowledges that the Issuer and its counsel
        are relying thereon) that:

       

      
        	
                (a)  

              	
                the
                  Buyer, or each of the beneficial purchasers for whom the Buyer
                  is acting,
                  is subject to the securities laws of the Province of British
                  Columbia;

              

      

       

      
        	
                (b)  

              	
                the
                  Buyer, or each of the beneficial purchasers for whom the Buyer
                  is acting,
                  is purchasing the Convertible Debentures as principal for its own
                  account
                  and not for the benefit of any other person;
                  and

              

      

       

      
        	
                (c)  

              	
                the
                  Buyer, or each of the beneficial purchasers for whom the Buyer
                  is acting,
                  is an “accredited investor” within the meaning of NI45-106 on the basis
                  that the undersigned fits within the category of an “accredited investor”
                  reproduced below beside which the undersigned has indicated the
                  undersigned belongs to such category and the undersigned has confirmed
                  such by completing and executing the Canadian Certificate
                  below.

              

      

       

      (PLEASE
        CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED
        INVESTOR)

       

      
        	 	
                (a) 
                  a Canadian financial institution, or a Schedule III bank;

                 

              
	 	
                (b) 
                  the Business Development Bank of Canada incorporated under the
                  Business Development Bank of Canada Act (Canada);

                 

              
	 	
                (c) 
                  a subsidiary of any person referred to in paragraphs (a) or (b),
                  if the
                  person owns all of the voting securities of the subsidiary, except
                  the
                  voting securities required by law to be owned by directors of that
                  subsidiary;

                 

              
	 	
                (d) 
                  a person registered under the securities legislation of a jurisdiction
                  of
                  Canada as an adviser or dealer, other than a person registered
                  solely as a
                  limited market dealer under one or both of the Securities Act
                  (Ontario) or the Securities Act (Newfoundland and
                  Labrador);

                 

              
	 	
                (e) 
                  an individual registered or formerly registered under the securities
                  legislation of a jurisdiction of Canada as a representative of
                  a person
                  referred to in paragraph (d);

                 

              
	 	
                (f)  
                  the Government of Canada or a jurisdiction of Canada, or any crown
                  corporation, agency or wholly owned entity of the Government of
                  Canada or
                  a jurisdiction of Canada;

                 

              
	 	
                (g) 
                  a municipality, public board or commission in Canada and a metropolitan
                  community, school board, the Comité de gestion de la taxe scolaire de
                  l’île de Montréal or an intermunicipal management board in
                  Québec;

                 

              
	 	
                (h) 
                  any national, federal, state, provincial, territorial or municipal
                  government of or in any foreign jurisdiction, or any agency of
                  that
                  government;

                 

              
	 	
                (i) 
                  a pension fund that is regulated by either the Office of the
                  Superintendent of Financial Institutions (Canada) or a pension
                  commission
                  or similar regulatory authority of a jurisdiction of Canada;

                 

              
	 	
                (j) 
                  an individual who, either alone or with a spouse, beneficially
                  owns,
                  directly or indirectly, financial assets having an aggregate realizable
                  value that before taxes, but net of any related liabilities, exceeds
                  $1,000,000;

                 

              
	 	
                (k) an
                  individual whose net income before taxes exceeded $200,000 in each
                  of the
                  two most recent calendar years or whose net income before taxes
                  combined
                  with that of a spouse exceeded $300,000 in each of the two most
                  recent
                  calendar years and who, in either case, reasonably expects to exceed
                  that
                  net income level in the current calendar year;

                 

              
	 	
                (l) 
                  an individual who, either alone or with a spouse, has net assets
                  of at
                  least $5,000,000;

                 

              
	 	
                (m)
                  a person, other than an individual or investment fund, that has
                  net assets
                  of at least $5,000,000 as shown on its most recently prepared financial
                  statements;

                 

              
	 	
                (n) 
                  an investment fund that distributes or has distributed its securities
                  only
                  to (i) a person that is or was an accredited investor at the time
                  of the
                  distribution, (ii) a person that acquires or acquired securities
                  in the
                  circumstances referred to in sections 2.10 [Minimum amount
                  investment] and 2.19 [Additional investment in investment
                  funds] of NI 45-106, or (iii) a person described in paragraph (i)
                  or
                  (ii) that acquires or acquired securities under section 2.18
                  [Investment fund reinvestment] of NI 45-106;

                 

              
	 	
                (o) 
                  an investment fund that distributes or has distributed securities
                  under a
                  prospectus in a jurisdiction of Canada for which the regulator
                  or, in
                  Québec, the securities regulatory authority, has issued a
                  receipt;

                 

              
	 	
                (p)
                  a trust company or trust corporation registered or authorized to
                  carry on
                  business under the Trust and Loan Companies Act (Canada) or under
                  comparable legislation in a jurisdiction of Canada or a foreign
                  jurisdiction, acting on behalf of a fully managed account managed
                  by the
                  trust company or trust corporation, as the case may be;

                 

              
	 	
                (q)
                  a person acting on behalf of a fully managed account managed by
                  that
                  person, if that person (i) is registered or authorized to carry
                  on
                  business as an adviser or the equivalent under the securities legislation
                  of a jurisdiction of Canada or a foreign jurisdiction, and (ii)
                  in
                  Ontario, is purchasing a security that is not a security of an
                  investment
                  fund;

                 

              
	 	
                (r) 
                  a registered charity under the Income Tax Act (Canada) that, in
                  regard to the trade, has obtained advice from an eligibility adviser
                  or an
                  adviser registered under the securities legislation of the jurisdiction
                  of
                  the registered charity to give advice on the securities being
                  traded;

                 

              
	 	
                (s) 
                  an entity organized in a foreign jurisdiction that is analogous
                  to any of
                  the entities referred to in paragraphs (a) to (d) or paragraph
                  (i) in form
                  and function;

                 

              
	 	
                (t) 
                  a person in respect of which all of the owners of interests, direct,
                  indirect or beneficial, except the voting securities required by
                  law to be
                  owned by directors, are persons that are accredited
                  investors;

                 

              
	 	
                (u) 
                  an investment fund that is advised by a person registered as an
                  adviser or
                  a person that is exempt from registration as an adviser, or

                 

              
	 	
                (v) 
                  a person that is recognized or designated by the securities
                  regulatory authority or, except in Ontario and Québec, the regulator as
                  (i) an accredited investor, or (ii) an exempt purchaser in Alberta
                  or
                  British Columbia.

                 

              

      

      For
        the
        purposes hereof, the following definitions are included for
        convenience:

       

      
        	
                (a)  

              	
                “Canadian
                  financial institution” means (i) an association governed by the
                  Cooperative Credit Associations Act (Canada) or a central cooperative
                  credit society for which an order has been made under section 473(1)
                  of
                  that Act, or (ii) a bank, loan corporation, trust company, trust
                  corporation, insurance company, treasury branch, credit union,
                  caisse
                  populaire, financial services cooperative, or league that, in each
                  case,
                  is authorized by an enactment of Canada or a jurisdiction of Canada
                  to
                  carry on business in Canada or a jurisdiction of
                  Canada;

              

      

       

      
        	
                (b)  

              	
                “control
                  person” has the same meaning as in securities legislation except in
                  Manitoba, Newfoundland and Labrador, Northwest Territories, Nova
                  Scotia,
                  Nunavut, Ontario, Prince Edward Island and Quebéc where control person
                  means any person that holds or is one of a combination of persons
                  that
                  holds (i) a sufficient number of any of the securities of an issuer
                  so as
                  to affect materially the control of the issuer, or (ii) more than
                  20% of
                  the outstanding voting securities of an issuer except where there
                  is
                  evidence showing that the holding of those securities does not
                  affect
                  materially the control of the
                  issuer;

              

      

       

      
        	
                (c)  

              	
                “entity”
                  means a company, syndicate, partnership, trust or unincorporated
                  organization;

              

      

       

      
        	
                (d)  

              	
                “financial
                  assets” means cash, securities, or any a contract of insurance, a deposit
                  or an evidence of a deposit that is not a security for the purposes
                  of
                  securities legislation;

              

      

       

      
        	
                (e)  

              	
                “founder” means,
                  in respect of an issuer, a person who, (i) acting alone, in conjunction,
                  or in concert with one or more persons, directly or indirectly,
                  takes the
                  initiative in founding, organizing or substantially reorganizing
                  the
                  business of the issuer, and (ii) at the time of the trade is actively
                  involved in the business of the
                  issuer;

              

      

       

      
        	
                (f)  

              	
                “fully
                  managed account” means an account of a client for which a person makes the
                  investment decisions if that person has full discretion to trade
                  in
                  securities for the account without requiring the client’s express consent
                  to a transaction;

              

      

       

      
        	
                (g)  

              	
                “investment
                  fund” means a mutual fund or a non-redeemable investment fund, and, for
                  greater certainty in British Columbia, includes an employee venture
                  capital corporation that does not have a restricted constitution,
                  and is
                  registered under Part 2 of the Employee Investment Act (British
                  Columbia), R.S.B.C. 1996 c. 112, and whose business objective is
                  making
                  multiple investments and a venture capital corporation registered
                  under
                  Part 1 of the Small Business Venture Capital Act (British
                  Columbia), R.S.B.C. 1996 c. 429 whose business objective is making
                  multiple investments;

              

      

       

      
        	
                (h)  

              	
                “mutual
                  fund” means an issuer whose primary purpose is to invest money provided
                  by
                  its security holders and whose securities entitle the holder to
                  receive on
                  demand, or within a specified period after demand, an amount computed
                  by
                  reference to the value of a proportionate interest in the whole
                  or in part
                  of the net assets, including a separate fund or trust account,
                  of the
                  issuer;

              

      

       

      
        	
                (i)  

              	
                "non-redeemable
                  investment fund" means an issuer,

              

      

       

      (A)
        whose
        primary purpose is to invest money provided by its securityholders,

       

      (B)
        that
        does not invest,

       

      (i)
        for
        the purpose of exercising or seeking to exercise control of an issuer, other
        than an issuer that is a mutual fund or a non-redeemable investment fund,
        or

       

      (ii)
        for
        the purpose of being actively involved in the management of any issuer in
        which
        it invests, other than an issuer that is a mutual fund or a non-redeemable
        investment fund, and

       

      (C)
        that
        is not a mutual fund;

       

      
        	
                (j)  

              	
                “related
                  liabilities” means liabilities incurred or assumed for the purpose of
                  financing the acquisition or ownership of financial assets and
                  liabilities
                  that are secured by financial
                  assets;

              

      

       

      
        	
                (k)  

              	
                “Schedule
                  III bank” means an authorized foreign bank named in Schedule III of the
                  Bank Act (Canada);

              

      

       

      
        	
                (l)  

              	
                “spouse”
                  means an individual who(i)is married to another individual and
                  is not
                  living separate and apart within the meaning of the Divorce Act
                  (Canada),
                  from the other individual, (ii) is living with another individual
                  in a
                  marriage-like relationship, including a marriage-like relationship
                  between
                  individuals of the same gender, or (iii) in Alberta, is an individual
                  referred to in paragraph (i) or (ii), or is an adult interdependent
                  partner within the meaning of the Adult Interdependent Relationships
                  Act
                  (Alberta); and

              

      

       

      
        	
                (m)  

              	
                “subsidiary”
                  means an issuer that is controlled directly or indirectly by another
                  issuer and includes a subsidiary of that
                  subsidiary.

              

      

       

      In
        NI
        45-106 a person or company is considered to be an affiliated entity of another
        person or company if one is a subsidiary entity of the other, or if both
        are
        subsidiary entities of the same person or company, or if each of them is
        controlled by the same person or company.

       

      In
        NI
        45-106 a person (first person) is considered to control another person (second
        person) if (a) the first person,   directly or indirectly,
        beneficially owns or exercises control or direction over securities of the
        second person carrying votes which, if exercised, would entitle the first
        person
        to elect a majority of the directors of the second person, unless that first
        person holds the voting securities only to secure an obligation, (b) the
        second
        person is a partnership, other than a limited partnership, and the first
        person
        holds more than 50% of the interests of the partnership, or (c) the second
        person is a limited partnership and the general partner of the limited
        partnership is the first person.

       

      The
        foregoing representations contained in this certificate are true and accurate
        as
        of the date of this certificate and will be true and accurate as of the Closing
        Date.  If any such representations shall not be true and accurate
        prior to the Closing Date, the undersigned shall give immediate written notice
        of such fact to the Issuer prior to the Closing Date.

       

      
        	
                 Dated:

                 

              	
                ____________________

                 

              	 	
                Signed:

                 

              	
                ________________________________

                 

              
	 	 	 
	
                _________________________________

                Witness
                  (If Purchaser is an Individual)

                 

              	 	
                __________________________________________

                Print
                  the name of Purchaser

                 

              
	
                _________________________________

                Print
                  Name of Witness

                 

              	 	
                __________________________________________

                If
                  Purchaser is a corporation, print name and title of Authorized
                  Signing
                  Officer

                 

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

                

                              
                            
      

                    A-      
    

        

      

      

       

      EXHIBIT
        B TO WARRANT

       

       

      FORM
        OF WARRANT POWER

       

      FOR
        VALUE RECEIVED, the undersigned does hereby assign and transfer to
        ________________, Federal Identification No. __________, a warrant to
        purchase ____________ shares of the capital stock of Smartire Systems, Inc.
        represented by warrant certificate no. _____, standing in the name of the
        undersigned on the books of said corporation.  The undersigned does
        hereby irrevocably constitute and appoint ______________, attorney to transfer
        the warrants of said corporation, with full power of substitution in the
        premises.

       

      
        	
                Dated:

              	 
	 	 
	 	
                By:                                                                

              
	 	
                Name:

              
	 	
                Title:

              
	 	 

      

      

      

      

      
        
                

                    B-

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