Document:

Exhibit 4.7

                                     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.  NOTWITHSTANDING  THE FOREGOING,  THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.

                             SMARTIRE SYSTEMS, INC.

                        WARRANT TO PURCHASE COMMON STOCK

Warrant No.: _____                                     Number of Shares: _______

Date of Issuance: __________________

SmarTire Systems,  Inc., _______  corporation (the "Company"),  hereby certifies
that,  for Ten  United  States  Dollars  ($10.00)  and other  good and  valuable
consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,
Cornell Capital Partners LP, a Delaware  limited  partnership  ("Cornell"),  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)  ________________
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. 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

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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 the common  stock  purchase  warrant (the
"Warrant") issued pursuant to a secured convertible debenture dated December __,
2004 by and between the Company and Cornell (the "Convertible Debenture").

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

                           (i) "Approved Stock Plan" means any employee  benefit
plan which has been approved by the Board of Directors of the Company,  pursuant
to which the  Company's  securities  may be issued 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 New York
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)  "Excluded   Securities"  means,   provided  such
security is issued at a price which is greater  than or equal to the  arithmetic
average  of the  Closing  Bid  Prices  of the  Common  Stock  for the  ten  (10)
consecutive trading days immediately preceding the date of issuance,  any of the
following:  (a) any issuance by the Company of securities  in connection  with a
strategic partnership or a joint venture (the primary purpose of which is not to
raise  equity  capital),  (b) any  issuance  by the  Company  of  securities  as
consideration  for a merger or  consolidation  or the acquisition of a business,
product, license, or other assets of another person or entity and (c) options to
purchase shares of Common Stock,  provided (I) such options are issued after the

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date of this Warrant to employees of the Company within thirty (30) days of such
employee's starting his employment with the Company, and (II) the exercise price
of such  options is not less than the Closing  Bid Price of the Common  Stock on
the date of issuance of such option.

                           (vi)  "Expiration  Date" means the date two (2) years
from the  Issuance  Date of this  Warrant  or, if such date falls on a Saturday,
Sunday or other day on which banks are  required or  authorized  to be closed in
the City of New York or the State of New York or on which  trading does not take
place on the Principal Market or automated  quotation system on which the Common
Stock is traded (a "Holiday"), the next date that is not a Holiday.

                           (vii) "Issuance Date" means the date hereof.

                           (viii)  "Options"  means  any  rights,   warrants  or
options to subscribe for or purchase Common Stock or Convertible Securities.

                           (ix) "Other  Securities"  means (i) those options and
warrants of the Company issued prior to, and  outstanding  on, the Issuance Date
of this  Warrant,  (ii) the shares of Common Stock  issuable on exercise of such
options and  warrants,  provided such options and warrants are not amended after
the Issuance Date of this Warrant and (iii) the shares of Common Stock  issuable
upon exercise of this Warrant.

                           (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)  "Principal  Market"  means  the New York  Stock
Exchange,  the American Stock Exchange,  the Nasdaq National Market,  the Nasdaq
SmallCap  Market,  whichever is at the time the  principal  trading  exchange or
market  for such  security,  or the  over-the-counter  market on the  electronic
bulletin  board for such security as reported by Bloomberg or, if no bid or sale
information is reported for such security by Bloomberg,  then the average of the
bid prices of each of the market  makers for such  security  as  reported in the
"pink sheets" by the National Quotation Bureau, Inc.

                           (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 one hundred
twenty  percent  (120%) of the Closing Bid Price (as defined in the  Convertible
Debenture) of the Company's  Common Stock on the Closing Date (as defined in the
Convertible  Debenture)  or as  subsequently  adjusted  as provided in Section 8
hereof.

                           (xv)  "Warrant  Shares"  means  the  shares of Common
Stock issuable at any time upon exercise of this Warrant.

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                  (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.  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, by (i) 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,  (ii)  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 (iii) 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. In the event of any exercise of the rights  represented by this Warrant in
compliance  with this Section 2, the Company  shall on 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"),  and if the Common Stock is DTC
eligible  credit such  aggregate  number of shares of Common  Stock to which the
holder shall be entitled to the holder's or its designee's  balance account with
The Depository Trust Company; provided, however, if the holder who submitted the
Exercise Notice requested physical delivery of any or all of the Warrant Shares,
or, if the Common Stock is not DTC eligible 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 (ii) above the holder of this
Warrant shall be deemed for all corporate  purposes to have become the holder of

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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.  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.

                  (a) 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.

                  (b) 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.

                  (c) 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 the  Placement
Agent Agreement 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.

                  (d) 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 the Placement Agent Agreement,  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

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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  thirty  (30) days of that time for the sole  purpose of  increasing  the
number of authorized shares of Common Stock.

                  (d) If at any time  after the date  hereof the  Company  shall
file a  registration  statement,  the Company shall  include the Warrant  Shares
issuable  to the  holder,  pursuant  to the  terms  of this  Warrant  and  shall
maintain,  so long as any other shares of Common Stock shall be so listed,  such
listing of all Warrant  Shares from time to time  issuable  upon the exercise of
this Warrant; and the Company shall so list on each national securities exchange
or  automated  quotation  system,  as the case may be, and shall  maintain  such
listing of, any other shares of capital  stock of the Company  issuable upon the
exercise of this Warrant if and so long as any shares of the same class shall be
listed on such national securities exchange or automated quotation system.

                  (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  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.

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                  (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, if requested by the Company,  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.

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         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 (i) Excluded  Securities  and (ii) shares
of Common Stock which are issued or deemed to have been issued by the Company in
connection  with an Approved  Stock Plan or upon  exercise or  conversion of the
Other  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

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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.

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

                           (i)  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

                                       9
<PAGE>

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.

                           (ii) 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.

                           (iii) 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.

                           (iv) 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.

                  (d) 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.

                                       10
<PAGE>

Any  adjustment  under this Section 8(d) shall become  effective at the close of
business on the date the subdivision or combination becomes effective.

                  (e)  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).

                  (f)  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(d),that no such adjustment
pursuant  to this  Section  8(f) will  increase  the Warrant  Exercise  Price or
decrease the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 8.

                                       11
<PAGE>

                  (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

                                       12
<PAGE>

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 Cornell:              Cornell Capital, LP
                            101 Hudson Street - Suite 3700
                            Jersey City, NJ  07302
                            Attention:  Mark A. Angelo
                            Telephone:  (201) 985-8300
                            Facsimile:  (201) 985-8266

With Copy to:               Cornell Capital Partners, LP
                            101 Hudson Street - Suite 3700
                            Jersey City, NJ 07302
                            Attention:  Troy Rillo, Esq.
                            Telephone:  (201) 985-8300
                            Facsimile:  (201) 985-1964

                                       13
<PAGE>

If to the Company, to:      SmarTire Systems, Inc.
                            Richmond Corporate Centre
                            Suite 150-13151 Vanier Place
                            Richmond, British Columbia
                            Canada V6V 2J1
                            Attention:  Robert V. Rudman
                            Telephone:  (604) 276-9884
                            Facsimile:  (604) 276-2353

With a copy to:             Sichenzia Ross Friedman Ference LLP
                            1065 Avenue of the Americas
                            New York, NY 10018
                            Attention:  Darrin M. Ocasio, Esq.
                            Telephone:  (212) 981-6768
                            Facsimile:  (212) 930-9725

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 State of New Jersey 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

                                       14
<PAGE>

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 Warrant 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.

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

                                                   SMARTIRE SYSTEMS, INC.

                                                   By:
                                                       ------------------------
                                                   Name:  Robert V. Rudman
                                                   Title: CEO

                                       15
<PAGE>

                              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., a ______ corporation (the "Company"),  evidenced by the attached
Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.

         1. Form of Warrant  Exercise Price.  The Holder intends that payment of
the Warrant  Exercise  Price shall be made as a "Cash  Exercise" with respect to
______________ Warrant Shares.

         2. Payment of Warrant  Exercise Price.  The holder shall pay the sum of
$______________ to the Company in accordance with the terms of the Warrant.

         3. 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-1

<PAGE>

                              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., a ______
corporation,  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-1Exhibit 4.8

                              SMARTIRE SYSTEMS INC.

                      2004 STOCK INCENTIVE PLAN (NON-U.S.)

      1.    PURPOSE

The purpose of this 2004 Non-U.S.  Stock Incentive Plan of SmarTire Systems Inc.
(the  "Company")  is to advance  the  interests  of the  Company by  encouraging
Eligible Employees (as herein defined) to acquire shares of the Company, thereby
increasing their proprietary interest in the Company, encouraging them to remain
associated with the Company and furnish them with additional  incentive in their
efforts of the Company in the conduct of their affairs.

This Plan is specifically designed for Eligible Employees of the Company who are
not  residents of the United States and/or not subject to taxation in the United
States,  although  Awards  under  this  Plan may be  issued  to  other  Eligible
Employees.

      2.    DEFINITIONS

As used herein, the following definitions shall apply:

      (a)   "Administrator"  means the Board or a  Committee  of the Board  duly
            appointed by the Board as the Administrator hereof;

      (b)   "Affiliate"  and  "Associate"  shall  have the  respective  meanings
            ascribed to such terms in the Securities Act.

      (c)   "Applicable  Laws"  means the  legal  requirements  relating  to the
            administration  of stock incentive  plans, if any, under  applicable
            provisions  of  federal   securities   laws,   state  corporate  and
            securities  laws,  the  Securities  Act, the rules of any applicable
            stock  exchange  or  national  market  system,  and the rules of any
            foreign  jurisdiction  applicable  to Awards  granted  to  residents
            therein.

      (d)   "Award" means the grant of an Option, SAR, Restricted Stock or other
            right or benefit  under the Plan.  (e) "Award  Agreement"  means the
            written  agreement  evidencing the grant of an Award executed by the
            Company and the Grantee, including any amendments thereto.

      (f)   "Board" means the Board of Directors of the Company.

      (g)   "Cause" means,  with respect to the  termination by the Company or a
            Related  Entity  of the  Grantee's  Continuous  Service,  that  such
            termination  is for `Cause' as such term is  expressly  defined in a
            then-effective written agreement between the Grantee and the Company
            or such  Related  Entity,  or in the absence of such  then-effective
            written agreement and definition,  is based on, in the determination
            of the Administrator, the Grantee's:

            (i)   refusal  or failure to act in  accordance  with any  specific,
                  lawful direction or order of the Company or a Related Entity;

<PAGE>

            (ii)  unfitness  or  unavailability  for  service or  unsatisfactory
                  performance (other than as a result of Disability);

            (iii) performance  of any act or failure  to perform  any act in bad
                  faith and to the detriment of the Company or a Related Entity;

            (iv)  dishonesty,  intentional  misconduct or material breach of any
                  agreement with the Company or a Related Entity; or

            (v)   commission of a crime involving  dishonesty,  breach of trust,
                  or physical or  emotional  harm to any person.

      (h)   "Change in Control"  means a change in  ownership  or control of the
            Company effected through either of the following transactions:

            (i)   the direct or  indirect  acquisition  by any person or related
                  group of persons  (other  than an  acquisition  from or by the
                  Company or by a Company-sponsored  employee benefit plan or by
                  a person that directly or indirectly  controls,  is controlled
                  by,  or  is  under  common   control  with,  the  Company)  of
                  beneficial ownership of securities  possessing more than fifty
                  percent  (50%)  of the  total  combined  voting  power  of the
                  Company's  outstanding  securities  pursuant  to a  tender  or
                  exchange  offer made  directly to the  Company's  shareholders
                  which  a  majority  of the  Continuing  Directors  who are not
                  Affiliates or Associates of the offeror do not recommend  such
                  shareholders accept, or

            (ii)  a change  in the  composition  of the  Board  over a period of
                  thirty-six  (36)  months or less such that a  majority  of the
                  Board members (rounded up to the next whole number) ceases, by
                  reason  of  one  or  more   contested   elections   for  Board
                  membership,  to be comprised of individuals who are Continuing
                  Directors.

      (i)   "Committee" means any committee appointed by the Board to administer
            the Plan.

      (j)   "Common Stock" means the common stock of the Company.

      (k)   "Company" means SmarTire Systems Inc., a British Columbia company.

      (l)   "Consultant"  means any person  (other than an Employee  or,  solely
            with respect to rendering  services in such  person's  capacity as a
            Director)  who is engaged by the  Company or any  Related  Entity to
            render  consulting  or  advisory  services  to the  Company  or such
            Related Entity.

      (m)   "Continuing  Directors"  means  members  of the Board who either (i)
            have  been  Board  members  continuously  for a  period  of at least
            thirty-six (36) months or (ii) have been Board members for less than
            thirty-six (36) months and were elected or nominated for election as
            Board members by at least a majority of the Board members  described
            in clause (i) who were still in office at the time such  election or
            nomination was approved by the Board.

      (n)   "Continuous  Service"  means that the  provision  of services to the
            Company or a Related Entity in any capacity of Employee, Director or
            Consultant,  is not  interrupted or terminated.  Continuous  Service
            shall not be considered  interrupted in the case of (i) any approved
            leave of absence, (ii) transfers between locations of the Company or

                                       2
<PAGE>

            among the Company,  any Related  Entity,  or any  successor,  in any
            capacity of Employee, Director or Consultant, or (iii) any change in
            status  as long as the  individual  remains  in the  service  of the
            Company or a Related Entity in any capacity of Employee, Director or
            Consultant (except as otherwise provided in the Award Agreement). An
            approved leave of absence shall include sick leave,  military leave,
            or any other authorized  personal leave. For purposes of Options, no
            such leave may exceed  ninety (90) days,  unless  reemployment  upon
            expiration of such leave is guaranteed by statute or contract.

      (o)   "Corporate Transaction" means any of the following transactions:

            (i)   a merger  or  consolidation  in which the  Company  is not the
                  surviving  entity,  except  for a  transaction  the  principal
                  purpose  of which is to change the  jurisdiction  in which the
                  Company is organized;

            (ii)  the   sale,   transfer   or  other   disposition   of  all  or
                  substantially all of the assets of the Company  (including the
                  capital stock of the  Company's  subsidiary  corporations)  in
                  connection with the complete liquidation or dissolution of the
                  Company; or

            (iii) any  reverse  merger in which  the  Company  is the  surviving
                  entity  but in which  securities  possessing  more than  fifty
                  percent  (50%)  of the  total  combined  voting  power  of the
                  Company's  outstanding  securities are transferred to a person
                  or  persons  different  from  those who held  such  securities
                  immediately prior to such merger.

      (p)   "Director"  means a member of the Board or the board of directors of
            any Related Entity.

      (q)   "Disability"  means  that a  Grantee  is  unable  to  carry  out the
            responsibilities  and  functions of the position held by the Grantee
            by  reason  of  any  medically   determinable   physical  or  mental
            impairment.  A Grantee  will not be  considered  to have  incurred a
            Disability  unless  he or she  furnishes  proof  of such  impairment
            sufficient to satisfy the Administrator in its discretion.

      (r)   "Eligible  Employee" means any person who is an Officer, a Director,
            an Employee or a Consultant.

      (s)   "Employee" means any person,  including an Officer or Director,  who
            is a full-time or  part-time  employee of the Company or any Related
            Entity.

      (t)   "Fair Market Value" means, as of any date, the value of Common Stock
            determined as follows:

            (i)   Where there exists a public market for the Common  Stock,  the
                  Fair Market  Value shall be (A) the closing  price for a Share
                  for the  last  market  trading  day  prior  to the time of the
                  determination  (or, if no closing  price was  reported on that
                  date,  on the last trading  date on which a closing  price was
                  reported)   on   the   stock   exchange   determined   by  the
                  Administrator to be the primary market for the Common Stock or
                  the Nasdaq National Market,  whichever is applicable or (B) if
                  the  Common  Stock  is not  traded  on any  such  exchange  or
                  national  market  system,  the  average of the closing bid and
                  asked prices of a Share on the Nasdaq Small Cap Market for the
                  day  prior to the time of the  determination  (or,  if no such
                  prices were  reported on that date,  on the last date on which
                  such prices were  reported),  in each case, as reported in The
                  Wall Street Journal or such other source as the  Administrator
                  deems reliable; or

                                       3
<PAGE>

            (ii)  In the absence of an  established  market for the Common Stock
                  of the type  described  in  2.(s)(i),  above,  the Fair Market
                  Value thereof shall be determined by the Administrator in good
                  faith.

      (u)   "Grantee" means an Eligible  Employee who receives an Award pursuant
            to an Award  Agreement  under the Plan.

      (v)   "Insider" means:

            (i)   a Director or Senior Officer of the Company;

            (ii)  a Director  or Senior  Officer  of a person  that is itself an
                  Insider or Subsidiary of the Company;

            (iii) a person that has:

                  A.    direct or indirect  beneficial  ownership of,

                  B.    control or direction over, or

                  C.    a combination of direct or indirect beneficial ownership
                        of and control or direction

                  over  securities of the Company  carrying more than 10% of the
                  voting rights attached to all the Company's outstanding voting
                  securities,  excluding,  for the purpose of the calculation of
                  the  percentage  held,  any  securities  held by the person as
                  underwriter in the course of a distribution, or

            (iv)  the Company itself, if it has purchased, redeemed or otherwise
                  acquired any  securities  of its own issue,  for so long as it
                  continues to hold those securities.

      (w)   "Officer"  means a  person  who is an  officer,  including  a Senior
            Officer,  of the  Company or a Related  Entity  within  the  meaning
            prescribed to under the Securities Act and the rules and regulations
            promulgated thereunder.

      (x)   "Option"  means an option to  purchase  Shares  pursuant to an Award
            Agreement  granted  under the  Plan.

      (y)   "Parent"  means a "parent  corporation",  whether  now or  hereafter
            existing,  which  holds  a  majority  of the  voting  shares  of the
            Company.

      (z)   "Performance  Shares" means Shares or an Award denominated in Shares
            which  may  be  earned  in  whole  or in  part  upon  attainment  of
            performance criteria established by the Administrator.

      (aa)  "Performance  Units"  means an Award which may be earned in whole or
            in part upon attainment of performance  criteria  established by the
            Administrator  and which may be  settled  for cash,  Shares or other
            securities or a combination of cash,  Shares or other  securities as
            established by the Administrator.

                                       4
<PAGE>

      (bb)  "Plan" means this 2004 Stock Incentive Plan.

      (cc)  "Related  Entity"  means any Parent,  Subsidiary  and any  business,
            corporation,  partnership, limited liability company or other entity
            in which the Company,  a Parent or a Subsidiary  holds a substantial
            ownership interest, directly or indirectly.

      (dd)  "Restricted Stock" means Shares issued under the Plan to the Grantee
            for such consideration,  if any, and subject to such restrictions on
            transfer, rights of first refusal, repurchase provisions, forfeiture
            provisions,  and other terms and  conditions as  established  by the
            Administrator.

      (ee)  "SAR"  means a stock  appreciation  right  entitling  the Grantee to
            Shares or cash  compensation,  as established by the  Administrator,
            measured by appreciation in the value of Common Stock.

      (ff)  "Securities Act" means the British Columbia Securities Act, R.S.B.C.
            1996, as amended.

      (gg)  "Senior  Officer"  means:

            (i)   the  chair  or vice  chair  of the  Board,  the  president,  a
                  vice-president,   the  secretary,  or  the  treasurer  of  the
                  Company;

            (ii)  any individual who performs  functions for a person similar to
                  those normally performed by an individual occupying any office
                  specified in paragraph 2.(ff)(i) above, and

            (iii) the five (5) highest paid employees of the Company,  including
                  any   individual   referred  to  in  paragraph   2.(ff)(i)  or
                  2.(ff)(ii) and excluding a commissioned  salesperson  who does
                  not act in a managerial capacity.

      (hh)  "Share" means a share of the Common Stock.

      (ii)  "Subsidiary"  means  a  "subsidiary  corporation",  whether  now  or
            hereafter existing, as determined by British Columbia corporate law.

      (jj)  "Related Entity  Disposition" means the sale,  distribution or other
            disposition  by  the  Company  of all  or  substantially  all of the
            Company's interests in any Related Entity effected by a sale, merger
            or consolidation or other transaction  involving that Related Entity
            or the  sale  of all or  substantially  all of the  assets  of  that
            Related Entity.

3.    STOCK SUBJECT TO THE PLAN

Subject to the provisions of Section 10, below, the maximum  aggregate number of
Shares which may be issued pursuant to all Awards  (including  Options) is Fifty
Million  (50,000,000)  Shares. The Shares to be issued pursuant to Awards may be
authorized, but unissued, or reacquired Common Stock.

Any Shares  covered by an Award (or portion of an Award)  which is  forfeited or
cancelled,  expires  or is  settled  in cash,  shall be deemed  not to have been
issued for purposes of determining the maximum  aggregate number of Shares which
may be issued under the Plan.  Shares that  actually  have been issued under the
Plan pursuant to an Award shall not be returned to the Plan and shall not become
available  for  future  issuance  under the  Plan,  except  that if  Shares  are
forfeited or repurchased by the Company at their original  purchase price,  such
Shares shall become available for future grant under the Plan.

                                       5
<PAGE>

No Insider of the Company is eligible to receive an Award where:

      (a)   Insiders  are not  Directors  or Senior  Officers of the Company and
            receiving Options as Consultants of the Company;

      (b)   any  Award,  together  with all of the  Company's  other  previously
            established or proposed Awards could result at any time in:

            (i)   the number of Shares reserved for issuance pursuant to Options
                  granted to Insiders  exceeding 10% of the outstanding issue of
                  Common Stock; or

            (ii)  the issuance to Insiders, within a one year period of a number
                  of Shares exceeding 10% of the outstanding issue of the Common
                  Stock;

provided,  however,  that this  restriction  on the  eligibility  of Insiders to
receive  an Award  will  cease to apply if it is no  longer  required  under any
Applicable Laws.

4.    ADMINISTRATION

      (a)   Plan Administrator

            (i)   Administration  with  Respect  to  Eligible  Employees.   With
                  respect to grants of Awards to  Eligible  Employees,  the Plan
                  shall be  administered  by (A) the  Board  or (B) a  Committee
                  designated by the Board,  which Committee shall be constituted
                  in such a manner  as to  satisfy  the  Applicable  Laws.  Once
                  appointed,  such  Committee  shall  continue  to  serve in its
                  designated capacity until otherwise directed by the Board.

            (ii)  Administration  Errors.  In the event an Award is granted in a
                  manner  inconsistent  with the  provisions of this  subsection
                  4.(a), such Award shall be presumptively valid as of its grant
                  date to the extent permitted by the Applicable Laws.

      (b)   Powers of the  Administrator.  Subject  to  Applicable  Laws and the
            provisions  of the Plan  (including  any other  powers  given to the
            Administrator  hereunder),  and except as otherwise  provided by the
            Board,  the   Administrator   shall  have  the  authority,   in  its
            discretion:

            (i)   to select the Eligible Employees to whom Awards may be granted
                  from time to time hereunder;

            (ii)  to  determine  whether and to what  extent  Awards are granted
                  hereunder;

            (iii) to  determine  the  number of  Shares  or the  amount of other
                  consideration to be covered by each Award granted hereunder;

            (iv)  to approve forms of Award  Agreements  for use under the Plan;

                                       6
<PAGE>

            (v)   to determine  the terms and  conditions  of any Award  granted
                  hereunder;

            (vi)  to amend the terms of any outstanding  Award granted under the
                  Plan,  including a reduction  in the  exercise  price (or base
                  amount  on which  appreciation  is  measured)  of any Award to
                  reflect a  reduction  in the Fair  Market  Value of the Common
                  Stock  since the grant  date of the Award,  provided  that any
                  amendment  that would  adversely  affect the Grantee's  rights
                  under an  outstanding  Award  shall  not be made  without  the
                  Grantee's written consent;

            (vii) the Administrator shall have the right to suspend the right of
                  a holder to  exercise  all or part of a stock  option  for any
                  reason that the  Administrator  considers in the best interest
                  of the Company;

            (viii)to   establish   additional   terms,   conditions,   rules  or
                  procedures  to  accommodate  the  rules or laws of  applicable
                  foreign   jurisdictions  and  to  afford  Grantees  favourable
                  treatment under such laws;  provided,  however,  that no Award
                  shall be granted under any such additional terms,  conditions,
                  rules  or  procedures  with  terms  or  conditions  which  are
                  inconsistent with the provisions of the Plan; and

            (ix)  to take such other action,  not inconsistent with the terms of
                  the Plan, as the Administrator deems appropriate.

      (c)   Effect of Administrator's  Decision.  All decisions,  determinations
            and  interpretations  of the  Administrator  shall be conclusive and
            binding on all persons.

5.    ELIGIBILITY

Options and Awards other than Options may be granted to Eligible  Employees.  An
Eligible Employee who has been granted an Award may, if otherwise  eligible,  be
granted additional Awards.

6.    TERMS AND CONDITIONS OF AWARDS

      (a)   Type of Awards.  The  Administrator  is authorized under the Plan to
            award any type of  arrangement  to an Eligible  Employee that is not
            inconsistent  with the  provisions of the Plan and that by its terms
            involves  or might  involve  the  issuance  of (i)  Shares,  (ii) an
            Option,  (iii) a SAR or similar right with a fixed or variable price
            related to the Fair Market  Value of the Shares and with an exercise
            or  conversion  privilege  related  to  the  passage  of  time,  the
            occurrence of one or more events, or the satisfaction of performance
            criteria or other  conditions,  or (iv) any other  security with the
            value  derived  from the value of the Shares.  Such awards  include,
            without  limitation,  Options,  SARs, sales or bonuses of Restricted
            Stock,  Performance  Units or Performance  Shares,  and an Award may
            consist of one such security or benefit,  or two (2) or more of them
            in any  combination or alternative.

      (b)   Designation  of Award.  Each Award shall be  designated in the Award
            Agreement.

      (c)   Conditions  of  Award.  Subject  to  the  terms  of  the  Plan,  the
            Administrator shall determine the provisions,  terms, and conditions
            of each Award  including,  but not  limited  to,  the Award  vesting
            schedule, repurchase provisions, rights of first refusal, forfeiture
            provisions,  form of payment (cash,  Shares, or other consideration)

                                       7
<PAGE>

            upon   settlement   of  the  Award,   payment   contingencies,   and
            satisfaction of any performance  criteria.  The performance criteria
            established  by the  Administrator  may be based  on any one of,  or
            combination of, increase in share price,  earnings per share,  total
            shareholder return,  return on equity,  return on assets,  return on
            investment, net operating income, cash flow, revenue, economic value
            added,  personal  management   objectives,   or  other  measures  of
            performance  selected by the Administrator.  Partial  achievement of
            the   specified   criteria  may  result  in  a  payment  or  vesting
            corresponding to the degree of achievement as specified in the Award
            Agreement.

      (d)   Acquisitions and Other  Transactions.  The  Administrator  may issue
            Awards under the Plan in settlement, assumption or substitution for,
            outstanding   awards  or  obligations  to  grant  future  awards  in
            connection  with the Company or a Related Entity  acquiring  another
            entity, an interest in another entity or an additional interest in a
            Related Entity whether by merger, stock purchase,  asset purchase or
            other form of transaction.

      (e)   Deferral of Award Payment.  The  Administrator  may establish one or
            more  programs  under  the  Plan to  permit  selected  Grantees  the
            opportunity to elect to defer receipt of consideration upon exercise
            of an Award,  satisfaction of performance  criteria,  or other event
            that  absent the  election  would  entitle the Grantee to payment or
            receipt  of  Shares  or  other  consideration  under an  Award.  The
            Administrator may establish the election  procedures,  the timing of
            such  elections,  the  mechanisms  for  payments  of, and accrual of
            interest or other  earnings,  if any,  on  amounts,  Shares or other
            consideration so deferred, and such other terms,  conditions,  rules
            and  procedures  that  the  Administrator  deems  advisable  for the
            administration of any such deferral program.

      (f)   Award Exchange Programs. The Administrator may establish one or more
            programs under the Plan to permit  selected  Grantees to exchange an
            Award under the Plan for one or more other types of Awards under the
            Plan on such terms and conditions as determined by the Administrator
            from time to time.

      (g)   Separate  Programs.  The  Administrator  may  establish  one or more
            separate  programs  under  the  Plan  for  the  purpose  of  issuing
            particular  forms of Awards to one or more  classes of  Grantees  on
            such terms and  conditions as determined by the  Administrator  from
            time to time.

      (h)   Individual  Option and SAR Limit.  The maximum number of Shares with
            respect to which  Options and SARs may be granted to any Employee in
            any fiscal year of the  Company  shall be five  percent  (5%) of the
            outstanding  Shares.  The  foregoing  limitation  shall be  adjusted
            proportionately  in  connection  with any  change  in the  Company's
            capitalization pursuant to Section 10, below.

      (i)   Early  Exercise.  The Award  Agreement may, but need not,  include a
            provision  whereby  the  Grantee  may  elect  at any  time  while an
            Eligible  Employee to exercise any part or all of the Award prior to
            full vesting of the Award. Any unvested Shares received  pursuant to
            such exercise may be subject to a repurchase  right in favour of the
            Company  or a  Related  Entity  or  to  any  other  restriction  the
            Administrator determines to be appropriate.

      (j)   Term of Award.  The term of each Award  shall be the term  stated in
            the Award Agreement,  provided,  however, that the term of an Option
            shall be no more than ten (10) years from the date of grant thereof.

                                       8
<PAGE>

      (k)   Transferability  of  Awards.  Options  may  not  be  sold,  pledged,
            assigned,  hypothecated,  transferred,  or disposed of in any manner
            other than by will or by the laws of descent or distribution and may
            be  exercised,  during  the  lifetime  of the  Grantee,  only by the
            Grantee;  provided,  however,  that  the  Grantee  may  designate  a
            beneficiary  of the  Grantee's  Option in the event of the Grantee's
            death  on  a   beneficiary   designation   form   provided   by  the
            Administrator.  Other  Awards  shall be  transferable  to the extent
            provided in the Award Agreement.

      (l)   Time of Granting Awards. The date of grant of an Award shall for all
            purposes  be  the  date  on  which  the   Administrator   makes  the
            determination  to  grant  such  Award,  or  such  other  date  as is
            determined by the Administrator.  Notice of the grant  determination
            shall be given to each  Employee,  Director or Consultant to whom an
            Award is so granted within a reasonable  time after the date of such
            grant.

7.    AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION, TAXES AND RELOAD OPTIONS

      (a)   Exercise or Purchase Price.  The exercise or purchase price, if any,
            for  an  Award  shall  be as  determined  by  the  Administrator  in
            compliance with the Applicable Laws.

      (b)   Consideration.  Subject to Applicable Laws, the  consideration to be
            paid for the Shares to be issued  upon  exercise  or  purchase of an
            Award  including  the method of payment,  shall be determined by the
            Administrator (and, in the case of an Option, shall be determined at
            the time of grant).  In addition to any other types of consideration
            the Administrator may determine,  the Administrator is authorized to
            accept  as  consideration  for  Shares  issued  under  the  Plan the
            following:

            (i)   cash;

            (ii)  check;

            (iii) surrender of Shares or delivery of a properly executed form of
                  attestation  of ownership of Shares as the  Administrator  may
                  require (including withholding of Shares otherwise deliverable
                  upon  exercise of the Award) which have a Fair Market Value on
                  the date of surrender or  attestation  equal to the  aggregate
                  exercise  price of the Shares as to which said Award  shall be
                  exercised  (but only to the extent  that such  exercise of the
                  Award would not result in an  accounting  compensation  charge
                  with  respect to the  Shares  used to pay the  exercise  price
                  unless otherwise determined by the Administrator); or

            (iv)  any combination of the foregoing methods of payment.

      (c)   Taxes. No Shares shall be delivered under the Plan to any Grantee or
            other   person   until  such   Grantee  or  other  person  has  made
            arrangements acceptable to the Administrator for the satisfaction of
            any foreign,  federal,  state,  or local income and  employment  tax
            withholding obligations,  including, without limitation, obligations
            incident to the receipt of Shares or the  disqualifying  disposition
            of Shares  received on exercise  of an Option.  Upon  exercise of an
            Award,  the Company shall withhold or collect from Grantee an amount
            sufficient to satisfy such tax obligations.

                                       9
<PAGE>

      (d)   Reload  Options.  In the event the exercise price or tax withholding
            of an Option is satisfied by the Company or the  Grantee's  employer
            withholding  Shares  otherwise   deliverable  to  the  Grantee,  the
            Administrator may issue the Grantee an additional Option, with terms
            identical  to  the  Award  Agreement  under  which  the  Option  was
            exercised,   but  at  an  exercise   price  as   determined  by  the
            Administrator in accordance with the Plan.

8.    EXERCISE OF AWARD

      (a)   Procedure for Exercise; Rights as a Shareholder.

            (i)   Any Award granted hereunder shall be exercisable at such times
                  and under such  conditions as determined by the  Administrator
                  under  the  terms  of the  Plan  and  specified  in the  Award
                  Agreement.

            (ii)  An Award shall be deemed to be exercised  when written  notice
                  of such  exercise has been given to the Company in  accordance
                  with the terms of the Award by the person entitled to exercise
                  the Award and full  payment  for the  Shares  with  respect to
                  which the Award is received by the Company. Until the issuance
                  (as  evidenced  by the  appropriate  entry on the books of the
                  Company or of a duly authorized transfer agent of the Company)
                  of the stock  certificate  evidencing such Shares, no right to
                  vote or receive dividends or any other rights as a shareholder
                  shall  exist  with  respect  to  Shares  subject  to an Award,
                  notwithstanding  the exercise of an Option or other Award. The
                  Company  shall  issue  (or  cause  to be  issued)  such  stock
                  certificate promptly upon exercise of the Award. No adjustment
                  will be made for a  dividend  or other  right  for  which  the
                  record  date is prior to the date  the  stock  certificate  is
                  issued,  except as provided in the Award  Agreement or Section
                  10, below.

      (b)   Exercise of Award Following Termination of Continuous Service.

            (i)   An Award may not be exercised  after the  termination  date of
                  such  Award  set  forth  in the  Award  Agreement  and  may be
                  exercised following the termination of a Grantee's  Continuous
                  Service only to the extent provided in the Award Agreement.

            (ii)  Where the Award  Agreement  permits a Grantee to  exercise  an
                  Award  following the  termination of the Grantee's  Continuous
                  Service for a specified  period,  the Award shall terminate to
                  the  extent  not  exercised  on the last day of the  specified
                  period  or the last  day of the  original  term of the  Award,
                  whichever occurs first.

      (c)   Buyout  Provisions.  The  Administrator may at any time offer to buy
            out for a payment in cash or Shares,  an Award  previously  granted,
            based  on such  terms  and  conditions  as the  Administrator  shall
            establish and communicate to the Grantee at the time that such offer
            is made.

9.    CONDITIONS UPON ISSUANCE OF SHARES

      (a)   Shares  shall not be issued  pursuant  to the  exercise  of an Award
            unless the  exercise of such Award and the  issuance and delivery of
            such Shares pursuant  thereto shall comply with all Applicable Laws,
            and shall be further  subject  to the  approval  of counsel  for the
            Company with respect to such compliance.

                                       10
<PAGE>

      (b)   As a condition to the exercise of an Award,  the Company may require
            the person  exercising  such Award to  represent  and warrant at the
            time of any such exercise that the Shares are being  purchased  only
            for  investment  and  without  any  present  intention  to  sell  or
            distribute  such  Shares  if,  in the  opinion  of  counsel  for the
            Company, such a representation is required by any Applicable Laws.

10.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

Subject to any required action by the shareholders of the Company, the number of
Shares covered by each  outstanding  Award,  and the number of Shares which have
been  authorized  for issuance under the Plan but as to which no Awards have yet
been granted or which have been  returned to the Plan,  the exercise or purchase
price of each  such  outstanding  Award,  as well as any  other  terms  that the
Administrator  determines require  adjustment shall be proportionately  adjusted
for (i) any increase or decrease in the number of issued Shares resulting from a
stock   split,   reverse   stock   split,   stock   dividend,   combination   or
reclassification  of the  Shares,  (ii) any other  increase  or  decrease in the
number of  issued  Shares  effected  without  receipt  of  consideration  by the
Company,  or (iii) as the  Administrator  may determine in its  discretion,  any
other reorganization transaction with respect to Common Stock; provided, however
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of  consideration.  Such adjustment shall
be made by the Administrator and its determination  shall be final,  binding and
conclusive.  Except as the Administrator  determines, no issuance by the Company
of shares of stock of any class, or securities  convertible into shares of stock
of any class,  shall  affect,  and no  adjustment by reason hereof shall be made
with  respect  to,  the  number or price of  Shares  subject  to an  Award.

11.   CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY DISPOSITIONS

Except as may be provided in an Award Agreement the Administrator shall have the
authority,  exercisable either in advance of any actual or anticipated Corporate
Transaction,  Change in Control or Related Entity  Disposition or at the time of
an actual Corporate Transaction, Change in Control or Related Entity Disposition
and  exercisable at the time of the grant of an Award under the Plan or any time
while an Award remains  outstanding,  to provide for the full automatic  vesting
and exercisability of one or more outstanding unvested Awards under the Plan and
the release from restrictions on transfer and repurchase or forfeiture rights of
such Awards in  connection  with a Corporate  Transaction,  Change in Control or
Related Entity  Disposition,  on such terms and conditions as the  Administrator
may specify.  The  Administrator  also shall have the authority to condition any
such Award vesting and  exercisability or release from such limitations upon the
subsequent  termination  of the  Continuous  Service  of the  Grantee  within  a
specified  period  following  the effective  date of the Corporate  Transaction,
Change in Control or Related Entity  Disposition.  The Administrator may provide
that any Awards so vested or released from such limitations in connection with a
Change in Control or Related Entity Disposition,  shall remain fully exercisable
until the  expiration or sooner  termination  of the Award.  Effective  upon the
consummation of a Corporate  Transaction,  all outstanding Awards under the Plan
shall terminate unless assumed by the successor company or its parent.

12.   EFFECTIVE DATE AND TERM OF PLAN

The Plan shall become  effective  upon its adoption by the Board of Directors of
the  Company.  It shall  continue in effect for a term of ten (10) years  unless
sooner terminated. Subject to Section 17, below, and Applicable Laws, Awards may
be granted under the Plan upon its becoming effective.

                                       11
<PAGE>

13.   AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN

      (a)   The Board may at any time amend,  suspend or terminate  the Plan. To
            the extent  necessary to comply with  Applicable  Laws,  the Company
            shall obtain  shareholder  approval of any Plan  amendment in such a
            manner and to such a degree as required.

      (b)   No Award may be granted  during any  suspension of the Plan or after
            termination  of  the  Plan.

      (c)   Any  amendment,  suspension or  termination  of the Plan  (including
            termination  of the Plan  under  Section  13 (a),  above)  shall not
            affect Awards already granted,  and such Awards shall remain in full
            force and effect as if the Plan had not been  amended,  suspended or
            terminated, unless mutually agreed otherwise between the Grantee and
            the Administrator,  which agreement must be in writing and signed by
            the Grantee and the Company.

14.   RESERVATION OF SHARES

      (a)   The Company,  during the term of the Plan, will at all times reserve
            and keep  available  such number of Shares as shall be sufficient to
            satisfy the requirements of the Plan.

      (b)   The inability of the Company to obtain authority from any regulatory
            body having jurisdiction, which authority is deemed by the Company's
            counsel  to be  necessary  to the  lawful  issuance  and sale of any
            Shares  hereunder,  shall  relieve the Company of any  liability  in
            respect of the failure to issue or sell such Shares as to which such
            requisite  authority shall not have been obtained.

15.   NO EFFECT ON TERMS OF EMPLOYMENT/CONSULTING RELATIONSHIP

The Plan  shall not  confer  upon any  Grantee  any right  with  respect  to the
Grantee's  Continuous Service, nor shall it interfere in any way with his or her
right or the Company's  right to terminate the Grantee's  Continuous  Service at
any time, with or without cause.

16.   NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS

Except as  specifically  provided in a retirement  or other  benefit plan of the
Company  or a  Related  Entity,  Awards  shall not be  deemed  compensation  for
purposes of computing benefits or contributions under any retirement plan of the
Company or a Related  Entity,  and shall not affect any benefits under any other
benefit plan of any kind or any benefit plan subsequently instituted under which
the availability or amount of benefits is related to level of compensation.

                                       12
<PAGE>

17.   GOVERNING LAW

The Plan shall be governed by the laws of the  Province of British  Columbia and
the laws of  Canada  applicable  therein;  provided,  however,  that  any  Award
Agreement  may provide by its terms that it shall be governed by the laws of any
other jurisdiction as may be deemed appropriate by the parties thereto.

                                       13

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