Document:

Exhibit 10.105

                                     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.

                      AMENDED AND RESTATED ON JULY 21, 2005

                        Warrant to Purchase Common Stock

      Warrant No.: 002                              Number of Shares: 16,668,750

      Date of Issuance: June 23, 2005

      Smartire Systems Inc., a corporation organized and existing under the laws
      of the Yukon  Territory (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"), in trust
      for LCC Global Limited, a corporation  organized under the laws of Cyprus,
      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)  sixteen  million six hundred sixty eight  thousand seven
      hundred fifty (16,668,750)  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
<PAGE>

      upon exercise of this Warrant with respect to which the  determination  of
      such proviso is being made, but shall exclude shares of Common Stock which
      would be issuable upon (i) exercise of the remaining, unexercised Warrants
      beneficially  owned by the holder and its  affiliates and (ii) exercise or
      conversion  of  the  unexercised  or  unconverted  portion  of  any  other
      securities  of the  Company  beneficially  owned  by the  holder  and  its
      affiliates  (including,  without  limitation,  any  convertible  notes  or
      preferred  stock)  subject  to a  limitation  on  conversion  or  exercise
      analogous to the limitation  contained herein.  Except as set forth in the
      preceding sentence,  for purposes of this paragraph,  beneficial ownership
      shall be  calculated in  accordance  with Section 13(d) of the  Securities
      Exchange  Act of 1934,  as  amended.  For  purposes  of this  Warrant,  in
      determining the number of outstanding  shares of Common Stock a holder may
      rely on the number of  outstanding  shares of Common Stock as reflected in
      (1) the Company's most recent Form 10-QSB or Form 10-KSB,  as the case may
      be, (2) a more recent public  announcement by the Company or (3) any other
      notice by the Company or its transfer  agent  setting  forth the number of
      shares  of Common  Stock  outstanding.  Upon the  written  request  of any
      holder,  the Company  shall  promptly,  but in no event later than one (1)
      Business Day following  the receipt of such notice,  confirm in writing to
      any such holder the number of shares of Common Stock then outstanding.  In
      any case,  the  number of  outstanding  shares  of Common  Stock  shall be
      determined  after  giving  effect to the  exercise of Warrants (as defined
      below) by such holder and its  affiliates  since the date as of which such
      number of outstanding shares of Common Stock was reported.

            Section 1.

                  (a) This  Warrant is the common  stock  purchase  warrant (the
"Warrant")  issued  pursuant to a secured  convertible  debenture dated June 23,
2005 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 per share, 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

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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,  (c) any shares of capital  stock or
other  securities  exercisable  for or convertible  into shares of capital stock
pursuant to a commitment  arising on or prior to the date hereof and (d) options
to purchase  shares of Common Stock,  provided (I) such options are issued after
the 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 five (5) 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  Exchange  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) "Registration  Rights" the shares of the Company's
Common  Stock  underlying  this  warrant  shall  have  "piggy-back"  and  demand
registration rights.

                        (xiii)  "Securities  Act"  means the  Securities  Act of
1933, as amended.

                        (xiv)  "Warrant"  means this  Warrant  and all  Warrants
issued in exchange, transfer or replacement thereof.

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<PAGE>

                        (xv)  "Warrant  Exercise  Price" shall be Sixteen  Cents
($0.16) or as subsequently adjusted as provided in Section 8 hereof.

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

                  (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(a), 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

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<PAGE>

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
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:1

                  (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 (ii) will take all such  actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  nonassessable  shares of Common  Stock upon the exercise of this
Warrant.

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

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            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.

            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

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

                        (ii)  Issuance  of  Convertible  Securities.  Subject to
Section (a) above,  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

                                       8
<PAGE>

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
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.

                                       9
<PAGE>

                        (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.
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

                                       10
<PAGE>

                        (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.

                  (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.

                                       11
<PAGE>

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

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

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

            Section  11.  Notice.  Any  notices,   consents,  waivers  or  other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered:  (i) upon receipt,
when delivered  personally;  (ii) upon receipt, when sent by facsimile (provided

                                       12
<PAGE>

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

With Copy to:                 David Gonzalez, Esq.
                              101 Hudson Street - Suite 3700
                              Jersey City, NJ 07302
                              Telephone: (201) 985-8300
                              Facsimile: (201) 985-8266

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

                              Greenberg Traurig, LLP
                              200 Park Avenue
                              New York, NY  10166
                              Attention: Spencer G. Feldman, Esq.
                              Telephone: (212) 801-9200
                              Facsimile: (212) 801-6400

      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

                                       13
<PAGE>

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
State of New Jersey or any other jurisdictions) that would cause the application
of the laws of any jurisdictions  other than the State of New Jersey. Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
federal courts sitting in Hudson County and the United States District Court for
the District of New Jersey,  for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding,  any claim that it is not personally  subject to the
jurisdiction of any such court,  that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby  irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.

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

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

                                        SMARTIRE SYSTEMS INC.

                                        By:    /s/ Jeff Finkelstein
                                               ---------------------------------
                                        Name:  Jeff Finkelstein
                                        Title: Chief Financial Officer

                                       14
<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  organized and existing  under the laws of the Yukon
Territory (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
organized and existing  under the laws of the Yukon  Territory,  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 10.106

                                     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.

                      AMENDED AND RESTATED ON JULY 21, 2005

                        Warrant to Purchase Common Stock

      Warrant No.: 003                               Number of Shares: 4,162,500

      Date of Issuance: June 23, 2005

      Smartire Systems Inc., a corporation organized and existing under the laws
      of the Yukon  Territory (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,  Highgate
      House Funds, Ltd, a Cayman Islands exempted Company ("Highgate"), in trust
      for LCC Global Limited, a corporation  organized under the laws of Cyprus,
      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) four million one hundred  sixty two thousand five hundred
      sixty six (4,162,500) 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
<PAGE>

      affiliates  shall  include the number of shares of Common  Stock  issuable
      upon exercise of this Warrant with respect to which the  determination  of
      such proviso is being made, but shall exclude shares of Common Stock which
      would be issuable upon (i) exercise of the remaining, unexercised Warrants
      beneficially  owned by the holder and its  affiliates and (ii) exercise or
      conversion  of  the  unexercised  or  unconverted  portion  of  any  other
      securities  of the  Company  beneficially  owned  by the  holder  and  its
      affiliates  (including,  without  limitation,  any  convertible  notes  or
      preferred  stock)  subject  to a  limitation  on  conversion  or  exercise
      analogous to the limitation  contained herein.  Except as set forth in the
      preceding sentence,  for purposes of this paragraph,  beneficial ownership
      shall be  calculated in  accordance  with Section 13(d) of the  Securities
      Exchange  Act of 1934,  as  amended.  For  purposes  of this  Warrant,  in
      determining the number of outstanding  shares of Common Stock a holder may
      rely on the number of  outstanding  shares of Common Stock as reflected in
      (1) the Company's most recent Form 10-QSB or Form 10-KSB,  as the case may
      be, (2) a more recent public  announcement by the Company or (3) any other
      notice by the Company or its transfer  agent  setting  forth the number of
      shares  of Common  Stock  outstanding.  Upon the  written  request  of any
      holder,  the Company  shall  promptly,  but in no event later than one (1)
      Business Day following  the receipt of such notice,  confirm in writing to
      any such holder the number of shares of Common Stock then outstanding.  In
      any case,  the  number of  outstanding  shares  of Common  Stock  shall be
      determined  after  giving  effect to the  exercise of Warrants (as defined
      below) by such holder and its  affiliates  since the date as of which such
      number of outstanding shares of Common Stock was reported.

            Section 1.

                  (a) This  Warrant is the common  stock  purchase  warrant (the
"Warrant")  issued  pursuant to a secured  convertible  debenture dated June 23,
2005 by and between the Company and Highgate (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 per share, 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

                                       2
<PAGE>

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,  (c) any shares of capital  stock or
other  securities  exercisable  for or convertible  into shares of capital stock
pursuant to a commitment  arising on or prior to the date hereof and (d) options
to purchase  shares of Common Stock,  provided (I) such options are issued after
the 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 five (5) 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  Exchange  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) "Registration  Rights" the shares of the Company's
Common  Stock  underlying  this  warrant  shall  have  "piggy-back"  and  demand
registration rights.

                        (xiii)  "Securities  Act"  means the  Securities  Act of
1933, as amended.

                        (xiv)  "Warrant"  means this  Warrant  and all  Warrants
issued in exchange, transfer or replacement thereof.

                                       3
<PAGE>

                        (xv)  "Warrant  Exercise  Price" shall be Sixteen  Cents
($0.16) or as subsequently adjusted as provided in Section 8 hereof.

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

                  (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(a), 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

                                       4
<PAGE>

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
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

                                       5
<PAGE>

on each day after such tenth  (10th) day that such  delivery of such new Warrant
is not timely  effected  in an amount  equal to 0.25% of the  product of (A) the
number of Warrant Shares represented by the portion of this Warrant which is not
being  exercised  and (B) the  Closing  Bid  Price of the  Common  Stock for the
trading day immediately preceding the last possible date which the Company could
have issued such Warrant to the holder without violating this Section 2.

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

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

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

                  (c) During the period within which the rights  represented  by
this Warrant may be exercised, the Company will at all times have authorized and
reserved at least one hundred  percent  (100%) of the number of shares of Common
Stock needed to provide for the exercise of the rights then  represented by this
Warrant and the par value of said shares will at all times be less than or equal
to the applicable  Warrant  Exercise  Price. If at any time the Company does not
have a sufficient  number of shares of Common Stock  authorized  and  available,
then the  Company  shall  call and hold a special  meeting  of its  stockholders
within  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 (ii) will take all such  actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  nonassessable  shares of Common  Stock upon the exercise of this
Warrant.

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

                                       6
<PAGE>

            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.

            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

                                       7
<PAGE>

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

                        (ii)  Issuance  of  Convertible  Securities.  Subject to
Section (a) above,  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

                                       8
<PAGE>

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
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

                                       9
<PAGE>

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.
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

                                       10
<PAGE>

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.

                  (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.

                                       11
<PAGE>

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

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

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

            Section  11.  Notice.  Any  notices,   consents,  waivers  or  other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered:  (i) upon receipt,
when delivered  personally;  (ii) upon receipt, when sent by facsimile (provided
confirmation  of  receipt is  received  by the  sending  party  transmission  is

                                       12
<PAGE>

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 Highgate:               Highgate House Funds, Ltd
                              488 Madison Ave. - 12th Floor
                              New York, NY 10022
                              Attention: Adam Gottbetter
                              Telephone: (212) 400-6900
                              Facsimile: (212) 400-6901

With Copy to:                 David Gonzalez, Esq.
                              101 Hudson Street - Suite 3700
                              Jersey City, NJ 07302
                              Telephone: (201) 985-8300
                              Facsimile: (201) 985-8266

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

                              Greenberg Traurig, LLP
                              200 Park Avenue
                              New York, NY  10166
                              Attention: Spencer G. Feldman, Esq.
                              Telephone: (212) 801-9200
                              Facsimile: (212) 801-6400

      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

                                       13
<PAGE>

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
State of New Jersey or any other jurisdictions) that would cause the application
of the laws of any jurisdictions  other than the State of New Jersey. Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
federal courts sitting in Hudson County and the United States District Court for
the District of New Jersey,  for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding,  any claim that it is not personally  subject to the
jurisdiction of any such court,  that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby  irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.

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

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

                                        SMARTIRE SYSTEMS INC.

                                        By:    /s/ Jeff Finkelstein
                                               ---------------------------------
                                        Name:  Jeff Finkelstein
                                        Title: Chief Financial Officer

                                       14
<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  organized and existing  under the laws of the Yukon
Territory (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
organized and existing  under the laws of the Yukon  Territory,  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-1

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