Document:

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                                                                   Exhibit 10.43

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1,
2002, is by and between IDT Corporation, a Delaware corporation (the "Company"),
and Howard S. Jonas (the "Executive").

         WHEREAS, in recognition of the Executive's experience and abilities,
the Company desires to assure itself of the continued employment of the
Executive in accordance with the terms and conditions provided herein;

         WHEREAS, the Executive wishes to continue to perform services for the
Company in accordance with the terms and conditions provided herein; and

         NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:

         1. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue to be employed by and
perform services for the Company, on the terms and conditions set forth herein.

         2. Term. This Agreement is for the five (5) year period (the "Term")
commencing on April 1, 2002, and terminating on the fifth anniversary of such
date, or upon the Executive's earlier death or other termination of employment
pursuant to Section 7 hereof; provided, however, that commencing on March 31,
2007 and each anniversary thereafter, the term shall automatically be extended
for one additional year beyond its otherwise scheduled expiration unless, not
later than ninety (90) days prior to any such anniversary, either party hereto
shall have notified the other party in writing that such extension shall not
take effect.

         3. Position. During the Term, the Executive shall serve as the Chairman
of the Board of Directors of the Company.

         4. Duties and Reporting Relationship. During the Term, the Executive
shall devote 100% of his normal business time and, on a full time basis, use his
skills and render services to the best of his abilities on behalf of the
Company. The Executive shall report directly to the Board of Directors of the
Company.

         5. Place of Performance. The Executive shall perform his duties and
conduct his business at the offices of the Company, located in Newark, New
Jersey, except for required travel on the Company's business.

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         6. Compensation and Related Matters.

         (a) Annual Base Salary. The Company shall pay to the Executive an
annual base salary (the "Base Salary") at a rate not less than Two Hundred Fifty
Thousand Dollars ($250,000.00), less applicable taxes, such salary to be paid in
conformity with the Company's payroll policies relating to its senior executive
officers. During the Term, the Executive's Base Salary shall be increased, if
necessary, so that the Base Salary is not less than the highest paid employee(s)
of the Company or any of the Company's controlled entities.

         (b) Employee Benefit Plans. During the Term, the Executive shall be
entitled to participate in those incentive plans, programs, and arrangements
which are available to other senior executive officers of the Company (the
"Benefits Plans"). The Executive shall be provided benefits under the Benefit
Plans substantially equivalent, in the aggregate, to the benefits provided to
other senior executive officers of the Company and on substantially similar
terms and conditions.

         (c) Pension and Welfare Benefits. During the Term, the Executive shall
be eligible to participate in the pension and retirement plans (the "Pension
Plans") provided to other senior executive officers of the Company, and
participate fully in all health benefits, insurance programs and other similar
executive welfare benefit arrangements available to other senior executive
officers of the Company and shall be provided benefits under such plans and
arrangements substantially equivalent, in the aggregate, to the benefits
provided to other senior executive officers of the Company and on substantially
similar terms and conditions. Notwithstanding the foregoing, during the Term,
the Company shall provide the Executive with life and disability insurance at a
benefit level no less favorable to the Executive than the benefit level provided
to him as of the date of this Agreement.

         (d) Fringe Benefits and Perquisites. During the Term, the Company shall
provide to the Executive all of the fringe benefits and perquisites that are
provided to other senior executive officers of the Company, and the Executive
shall be entitled to receive any other fringe benefits or perquisites that
become available to other senior executive officers of the Company subsequent to
the date hereof. The benefits described herein include, but are not limited to,
an automobile leased for the Executive by the Company, the make and model of
which is consistent with that being used by the Executive on the execution date
of this Agreement.

         (e) Business Expense. The Executive will be reimbursed for all ordinary
and necessary business expenses incurred by him in connection with his
employment (including without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Company) upon submission by
the Executive of receipts and other documentation in accordance with the
Company's normal reimbursement procedures.

         7. Termination. The Executive's employment hereunder may be terminated
without breach of the Agreement only under the following circumstances:

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         (a) Death.

         (b) Cause. The Company may terminate the Executive's employment
hereunder for "Cause." For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder (i) upon the
Executive's conviction for the commission of an act or acts constituting a
felony under the laws of the United States or any state thereof, or (ii) upon
the Executive's willful and continued failure to substantially perform his
duties hereunder (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness), after written notice has been
delivered to the Executive by the Company, which notice specifically identifies
the manner in which the Executive has not substantially performed his duties,
and the Executive's failure to substantially perform his duties is not cured
within ten (10) business days after notice of such failure has been given to the
Executive. For purposes of this Section 7 (b), no act or failure to act on the
Executive's part shall be deemed "willful" unless done or omitted to be done, by
the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company.

         (c) Termination by the Executive. The Executive may terminate his
employment hereunder for "Good Reason." "Good Reason" shall mean the occurrence
(without the Executive's express written consent) of any one of the following
acts by the Company, or failure by the Company to act:

              (i)    a material breach of the Agreement by the Company;

              (ii)   the assignment to the Executive of any duties inconsistent
         with the Executive's status as a senior executive officer of the
         Company or a substantial adverse alteration in the nature or status of
         the Executive's responsibilities; or

              (iii)  any purported termination of the Executive's employment
         which is not effected pursuant to a Notice of Termination satisfying
         the requirement of paragraph (d) below; for purposes of this Agreement,
         no such purported termination shall be effective.

              (iv)   a reduction in Executive's annual Base Salary;

              (v)    a significant reduction in Executive's positions,  duties,
         responsibilities or reporting lines from those described in Section 4
         hereof;

              (vi)   relocation of Executive's principal place of employment
         outside of the Newark, New Jersey area; or

              (vii)  a "Change in Control" of the Company, as defined above.

The Executive's right to terminate the Executive's employment for Good Reason
shall not be affected by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to any act or failure to act constituting
Good Reason hereunder. Notwithstanding the foregoing, a termination shall not be
treated as a Termination for Good Reason if the Executive shall have consented
in writing to the occurrence of the event giving rise to the claim of
Termination for Good Reason.

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         (d) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination under
Section 7(a) hereof) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 12 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claims to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board at a meeting of the
Board (after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive was guilty
of conduct set forth in the definition of Cause herein, and specifying the
particulars thereof.

         (e) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, or
(ii) if the Executive's employment is terminated pursuant to paragraph (c) or
(d) above, the date specified in the Notice of Termination; provided, however,
that if within thirty (30) days after any Notice of Termination is given the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined. If within fifteen (15) days
after any Notice of Termination is given, or if later, prior to the Date of
Termination (as determined without regard to the Section 7(e)), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal, therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.

         (f) Compensation During Dispute. If a purported termination occurs
during the term of this Agreement, and such termination is disputed in
accordance with Section 7(e) hereof, the Company shall continue to pay the
Executive the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved. Amounts paid under this
Section 7(f) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.

         8. Compensation Upon Termination or During Disability.

         (a) Death. In the event that Executive's employment is terminated
pursuant to Section 7(a) hereof, then as soon as practicable thereafter, the
Company shall pay the Executive's Beneficiary (as defined in Section 11(b)
hereof), as the case may be, (i) all unpaid amounts, if any, to which the
Executive was entitled as of the Date of Termination under Section 6(a) hereof
and (ii) all unpaid amounts to which the Executive was then entitled under the
Benefit Plans, the Pension Plans and any other unpaid employee benefits,
perquisites or other reimbursements (the amounts set forth in clauses (i) and
(ii) above being hereinafter referred to as the "Accrued Obligation"). In
addition, the Company shall pay Executive's estate a lump sum payment equal to
12 months of Executive's Base Salary (at the rate in effect on the date of his
death).

         (b) Termination for Cause; Voluntary Termination Without Good Reason.
If the Executive's employment is terminated by the Company for Cause or by the
Executive other than for Good Reason, then the Company shall pay all Accrued
Obligations to the Executive and the Company shall have no further obligations
to the Executive under this Agreement.

         (c) Termination Without Cause; Termination for Good Reason. If the
Company shall terminate the Executive's employment, other than for Cause, or the
Executive shall terminate his employment for Good Reason, then;

         (i)      the Company shall pay to the Executive, within ten (10) days
                  after the Date of Termination, the Accrued Obligations; and

         (ii)     the Company shall pay the Executive a Severance Benefit as
                  defined hereunder.

                       Severance Benefit means the sum of Executive's minimum
                  Base Salary for the remainder of the Term, but in no event
                  less than twelve (12) months.

         9. Non-Disclosure. The parties hereto agree, recognize and acknowledge
that during the Term the Executive shall obtain knowledge of confidential
information regarding the business and affairs of the Company. It is therefore
agreed that the Executive will respect and protect the confidentiality of all
confidential information pertaining to the Company, and will not (i) without the
prior written consent of the Company, (ii) unless required in the course of the
Executive's employment hereunder, or (iii) unless required by applicable law,
rules, regulations or court, government or regulatory authority order or decree,
disclose in any fashion such confidential information to any person (other than
a person who is a director of, or who is employed by, the Company or any
subsidiary or who is engaged to render services to the Company or any
subsidiary) at any time during the Term.

         10. Covenant Not to Compete.

         (a) Executive hereby agrees that for a period of one (1) year following
the termination of this Agreement (other than a termination of the Executive's
employment (i) by the Executive for Good Reason or (ii) by the Company other
than for Cause)(the "Restricted Period") the Executive shall not, directly or
indirectly, whether acting individually or through any person, firm,
corporation, business or any other entity:

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         (i)      engage in, or have any interest in any person, firm,
                  corporation, business or other entity (as an officer,
                  director, employee, agent, stockholder, or other security
                  holder, creditor, consultant or otherwise) that engages in any
                  business activity where a substantial aspect of the business
                  of the Company is conducted, or planned to be conducted, at
                  any time during the Restricted Period, which business activity
                  is the same as, similar to or competitive with the Company as
                  the same may be conducted from time to time;

         (ii)     interfere with any contractual relationship that may exist
                  from time to time of the business of the Company, including,
                  but not limited to, any contractual relationship with any
                  director, officer, employee, or sales agent, or supplier of
                  the Company; or

         (iii)    solicit, induce or influence, or seek to induce or influence,
                  any person who currently is, or from time to time may be,
                  engaged or employed by the Company (as an officer, director,
                  employee, agent, or independent contractor) to terminate his
                  or her employment or engagement by the Company.

         (b) Notwithstanding anything to the contrary contained herein,
Executive, directly or indirectly, may own publicly traded stock constituting
not more than five percent (5%) of the outstanding shares of such class of stock
of any corporation if, and as long as, Executive is not an officer, director,
employee or agent of, or consultant or advisor to, or has any other relationship
or agreement with such corporation.

         (c) Executive acknowledges that the non-competition provisions
contained in this Agreement are reasonable and necessary, in view of the nature
of the Company and his knowledge thereof, in order to protect the legitimate
interests of the Company.

         11. Successors; Binding Agreement.

         (a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinafter defined and any successor to its business and/or
assets as aforesaid that executes and delivers the agreement provided for in
this Section 11 or that otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.

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         (b) This Agreement and all rights of the Executive hereunder shall
insure to the benefit of and be enforced by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributee,
devisee, and legatees. If the Executive should die while any amounts should
still be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other designee or, if
there be no such designee, to the Executive's estate (any of which is referred
to herein as a "Beneficiary").

         12. Notice. For purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage paid, addressed as follows:

                           If to the Company:

                           IDT Corporation
                           520 Broad Street, 7th Floor
                           Newark,  New Jersey 07102
                           Attn:  General Counsel

                           If to the Executive:

                           Howard S. Jonas

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

         13. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such other officer of the Company as may
be specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto, or compliance with any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the state of New Jersey without regard to its conflicts of law
principles.

         14. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability if
any such other provision of this Agreement, which shall remain in full force and
effect.

         15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

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         16. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes any and all other prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto, and in
prior agreements of the parties hereto in respect to the subject matter
contained herein is hereby terminated and canceled.

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

                                        EXECUTIVE

                                        /s/ Howard S. Jonas
                                        ---------------------------------------
                                        Howard S. Jonas

                                        IDT CORPORATION

                                        By:  /s/ James A. Courter
                                             ----------------------------------
                                             Name:  James A. Courter
                                             Title: Chief Executive Officer

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                                                                    EXHIBIT 10.1

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

                    PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
                             (outside North America)

                             Personal & Confidential

TO:      SMARTIRE SYSTEMS INC. (the "Company")
         Richmond Corporate Centre
         #150 - 13151 Vanier Place
         Richmond, British Columbia
         Canada V6V 2J1

AND TO:  ____________________________ (the "Agent")

         ____________________________

         ____________________________

                             Purchase of Securities

1.       Subscription

1.1 The undersigned (the "Subscriber") hereby irrevocably subscribes for and
agrees to purchase (such subscription and agreement to purchase being the
"Subscription") on the basis of the representations and warranties and subject
to the terms and conditions set forth herein, that number of units (each, a
"Unit") consisting of one common share (a "Share") and one share purchase
warrant in the form of Exhibit A to this Private Placement Subscription
Agreement (a "Warrant"), (the Shares, the Warrants and the common shares issued
on exercise of the Warrants being referred to herein as "Securities") in the
capital of the Company set out on page 10 at the price per Unit of U.S.$1.70
(the "Subscription Price").

1.2 The Company hereby irrevocably agrees to sell, on the basis of the
representations and warranties and subject to the terms and conditions set forth
herein, to the Subscriber that number of Units set out on page 10, at the
Subscription Price.

1.3 Subject to the terms hereof, the Subscription will be effective upon its
acceptance by the Company or the Agent on behalf of the Company.

2.       Payment

2.1 The Subscription Price shall be paid by certified cheque or bank draft made
payable to the Company in immediately available funds. Such certified cheque or
bank draft must accompany this Subscription for delivery at Closing (as defined
below), or the Subscription Price may be immediately wired to the Company
according to the wire instructions provided by the Company. If the Subscription
Price is wired to the Company's agents or lawyers, those

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agents or lawyers are authorized to immediately deliver the Subscription Price
to the Company upon Closing.

3.       Undertaking and Direction

3.1 The Subscriber must complete, sign and return along with an executed
original of this Agreement to the Agent a direction to the Company and the Agent
with respect to registration and delivery instructions as set out on page 10.

3.2 The Subscriber shall complete, sign and return to the Company and the Agent
as soon as possible on request by the Company or the Agent any documents,
questionnaires, acknowledgements, notices and undertakings as may be required by
regulatory authorities, stock exchanges and applicable law.

4.       Closing

4.1 Closing of the offering (the "Closing") shall occur no later than November
15, 2001 or on such other date as may be mutually agreed to by the Agent and the
Company (the "Closing Date").

5.       Acknowledgements of Subscriber

5.1      The Subscriber acknowledges and agrees that:

         (a)      the Securities have not been registered under the 1933 Act, or
                  under any state securities or "blue sky" laws of any state of
                  the United States, and, unless so registered, may not be
                  offered or sold in the United States or to U.S. Persons, as
                  that term is defined in Regulation S promulgated under the
                  1933 Act ("Regulation S"), except pursuant to an exemption
                  from, or in a transaction not subject to, the registration
                  requirements of the 1933 Act;

         (b)      the decision to execute this Agreement and purchase the
                  Securities agreed to be purchased hereunder has not been based
                  upon any oral or written representation as to fact or
                  otherwise made by or on behalf of the Company or the Agent,
                  and such decision is based entirely upon a review of
                  information (the receipt of which is hereby acknowledged)
                  which has been filed by the Company with the British Columbia
                  Securities Commission and the United States Securities and
                  Exchange Commission and in compliance, or intended compliance,
                  with applicable securities legislation (collectively, the
                  "Public Record") including the Company's audited financial
                  statements, together with the related schedules and notes, for
                  the year ending July 31, 2001;

         (c)      although the Agent may have introduced the Subscriber to the
                  Company, the Subscriber and the Company acknowledge and agree
                  with, and for the benefit of, the Agent and the Company, as
                  applicable (such acknowledgement and agreements to survive the
                  Closing) that:

                  (i)      the Agent and its directors, officers, employees,
                           agents and representatives have no responsibility or
                           liability of any nature whatsoever for the accuracy
                           or adequacy of the information contained in this
                           Agreement, the Public Record or any other publicly
                           available information concerning the

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                                     - 3 -

                           Company or as to whether all information concerning
                           the Company required to be disclosed by it or them
                           has generally been disclosed;

                  (ii)     the Agent makes no representations or warranties
                           herein with respect to the Securities, and neither
                           the Agent nor its directors, officers, employees,
                           agents or representatives shall have any liability
                           with respect to the sale of the Securities;

                  (iii)    the Agent has not engaged in any independent
                           investigation or verification with respect to this
                           Subscription or any such information; and

                  (iv)     the Agent and the Company are entitled to rely on the
                           representations and warranties and the statements and
                           answers of the Subscriber contained in this Agreement
                           and in the questionnaires and undertakings attached
                           as schedules to this Agreement, and the Subscriber
                           will hold harmless each of the Agent and the Company
                           from any loss or damage it or they may suffer as a
                           result of the Subscriber's failure to correctly
                           complete this Agreement or such questionnaires and
                           undertakings;

         (d)      by execution hereof the Subscriber has waived the need for the
                  Company or the Agent to communicate the Company's acceptance
                  of the purchase of the Securities pursuant to this Agreement;

         (e)      it will indemnify and hold harmless the Company and the Agent
                  and, where applicable, their respective directors, officers,
                  employees, agents, advisors and shareholders from and against
                  any and all loss, liability, claim, damage and expense
                  whatsoever (including, but not limited to, any and all fees,
                  costs and expenses whatsoever reasonably incurred in
                  investigating, preparing or defending against any claim,
                  lawsuit, administrative proceeding or investigation whether
                  commenced or threatened) arising out of or based upon any
                  representation or warranty of the Subscriber contained herein
                  or in any document furnished by the Subscriber to the Company
                  or the Agent in connection herewith being untrue in any
                  material respect or any breach or failure by the Subscriber to
                  comply with any covenant or agreement made by the Subscriber
                  to the Company or the Agent in connection therewith;

         (f)      the issuance and sale of the Securities to the Subscriber will
                  not be completed if the Subscription is otherwise fully
                  subscribed, if acceptance would be unlawful or if, in the
                  discretion of the Company, acting reasonably, acceptance is
                  not in the best interests of the Company;

         (g)      it has been advised to consult its own legal, tax and other
                  advisors with respect to the merits and risks of an investment
                  in the Securities and with respect to applicable resale
                  restrictions and it is solely responsible (and neither the
                  Agent nor the Company is in any way responsible except with
                  regard to the Company's obligations arising from section 7 of
                  this Agreement) for compliance with applicable resale
                  restrictions;
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                                     - 4 -

         (h)      the Securities are not listed on any stock exchange or subject
                  to quotation except that the Shares currently are listed on
                  the National Association of Securities Dealers, Inc. Automated
                  Quotation System SmallCap Market, and no representation has
                  been made to the Subscriber that the Securities will become
                  listed on any other stock exchange or subject to quotation on
                  any other quotation system;

         (i)      the Subscriber is not resident in Canada nor the United States
                  and is not purchasing the Securities for such residents;

         (j)      no securities commission or similar regulatory authority has
                  reviewed or passed on the merits of the Securities; (k) there
                  is no government or other insurance covering the Securities;

         (l)      there are risks associated with the purchase of the
                  Securities;

         (m)      there are restrictions on the Subscriber's ability to resell
                  the Securities and it is the responsibility of the Subscriber
                  to find out what those restrictions are and to comply with
                  them before selling the Securities;

         (n)      the Subscriber must file with the British Columbia Securities
                  Commission an "Initial Trade Report" in the form as attached
                  to B.C. BOR#95/17 within 10 days of the initial sale of the
                  Securities;

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

         (p)      this Agreement is not enforceable by the Subscriber unless it
                  has been accepted by the Company.

6.       Representations, Warranties and Covenants of the Subscriber

6.1 The Subscriber hereby represents and warrants to and covenants with the
Company and the Agent (which representations, warranties and covenants shall
survive the Closing) that:

         (a)      the Subscriber and any beneficial purchaser for whom it is
                  acting are resident in the jurisdiction set out under the
                  heading "Name and Address of Subscriber" on page 11 of this
                  Subscription;

         (b)      the Subscriber has the legal capacity and competence to enter
                  into and execute this Subscription and to take all actions
                  required pursuant hereto and, if the Subscriber is a
                  corporation, it is duly incorporated and validly subsisting
                  under the laws of its jurisdiction of incorporation and all
                  necessary approvals by its directors,

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                                     - 5 -

                  shareholders and others have been obtained to authorize
                  execution and performance of this Subscription on behalf of
                  the Subscriber;

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

         (d)      the Subscriber has duly executed and delivered this
                  Subscription and it constitutes a valid and binding agreement
                  of the Subscriber enforceable against the Subscriber;

         (e)      it understands and agrees that none of the Securities has been
                  registered under the 1933 Act, and they may not be sold under
                  U.S. law except as permitted in paragraph 6.1(g) below;

         (f)      it is purchasing the Securities for its own account or for an
                  account with respect to which it exercises sole investment
                  discretion, and that it or such account is an accredited
                  investor as that term is defined in Rule 501 under the 1933
                  Act (an "Institutional Accredited Investor") acquiring the
                  Securities for investment purposes and not for distribution;

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

         (h)      it understands and agrees that the notification requirement
                  referred to in paragraph 6.1(g) above will be satisfied by
                  virtue of the fact that the legend set out below will be
                  placed on the Shares unless otherwise agreed by the Company:

                           "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
                           UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
                           "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
                           SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
                           THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
                           TRANSFERRED TO A U.S. PERSON EXCEPT AFTER THE EXPIRY
                           OF A 40 DAY DISTRIBUTION COMPLIANCE PERIOD AS
                           PRESCRIBED IN REGULATION S."

         (i)      it (i) is able to fend for itself in the Subscription; (ii)
                  has such knowledge and experience in business matters as to be
                  capable of evaluating the merits and risks of its prospective
                  investment in the Securities; and (iii) has the ability to
                  bear the

<PAGE>
                                     - 6 -

                  economic risks of its prospective investment and can afford
                  the complete loss of such investment;

         (j)      it understands and agrees that the legend referred to in
                  paragraph 6.1(h) above shall not be removed from any Shares
                  purchased by it pursuant to this Subscription unless there is
                  delivered to the Company such satisfactory evidence, which may
                  include an opinion of counsel licensed to practice law in one
                  of the states of the United States of America, as may be
                  reasonably required by the Company, that such Shares are not
                  "restricted" within the meaning of Rule 144;

         (k)      if it is acquiring the Securities as a fiduciary or agent for
                  one or more investor accounts, it has sole investment
                  discretion with respect to each such account and it has full
                  power to make the foregoing acknowledgments, representations
                  and agreements on behalf of such account;

         (l)      it understands and agrees that the Company and others will
                  rely upon the truth and accuracy of the acknowledgments,
                  representations and agreements contained in sections 5 and 6
                  hereof and agrees that if any of such acknowledgments,
                  representations and agreements are no longer accurate or have
                  been breached, it shall promptly notify the Company;

         (m)      the Subscriber is not aware of any advertisement of any of the
                  Securities;

         (n)      in purchasing the Securities the Subscriber has complied with
                  all securities laws of its jurisdiction of residence and
                  warrants that the sale of the Securities by the Company is in
                  full compliance with such laws, and the Subscriber will make
                  all filings necessary in such jurisdiction to ensure the
                  Company complies with securities laws of such jurisdiction;
                  and

         (o)      no person has made to the Subscriber any written or oral
                  representations:

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

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

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

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

7.       Representations and Warranties of the Company

7.1 The Company acknowledges and agrees that the Subscriber is entitled to rely
upon the representations and warranties of the Company contained in this
Agreement and further acknowledges that the Subscriber will be relying upon such
representations and warranties in purchasing the Securities.

<PAGE>
                                     - 7 -

7.2 The Company warrants that the Public Record fairly represents the status of
the Company as at the dates indicated in the Public Record.

8.       Commission to the Agent

8.1 The Subscriber understands that upon Closing, the Agent will receive from
the Company a commission of up to seven percent (7%) of the gross proceeds
raised from the sale of the Securities, payable to the Agent in cash. The Agent
will also receive share purchase warrants which permit the acquisition of the
Company's common shares at the Subscription Price in such number as equals the
commission payable to the Agent hereunder divided by the Subscription Price.

9.       Acknowledgement and Waiver

9.1 The Subscriber has acknowledged that the decision to purchase the Securities
was solely made on the basis of publicly available information. The Subscriber
hereby waives, to the fullest extent permitted by law, any rights of withdrawal,
rescission or compensation for damages (other than as expressly described
herein).

10.      B.C. Resale Restrictions

10.1 Subscriber acknowledges that the Shares are subject to a hold period in
British Columbia and may not be traded in British Columbia until 4 months from
the Closing Date except as permitted by the Securities Act (British Columbia)
and the Rules made thereunder.

10.2 The Subscriber acknowledges that within 10 days of the initial trade of the
Shares by the Subscriber it must file with the British Columbia Securities
Commission an "Initial Trade Report" in the form as attached to B.C. Blanket
Order and Ruling 95/17.

11.      Costs

11.1 The Subscriber acknowledges and agrees that all costs and expenses incurred
by the Subscriber (including any fees and disbursements of any special counsel
retained by the Subscriber) relating to the purchase of the Shares shall be
borne by the Subscriber.

12.      Appointment of Agent

12.1 The Subscriber (and others for whom the Subscriber is contracting
hereunder) hereby:

         (a)      irrevocably authorizes the Agent to swear, execute, file and
                  record any documents necessary to accept delivery of the
                  Securities on the Closing Date; and

         (b)      appoints the Agent to act as its agent to represent it with
                  respect to all matters relating to this Subscription
                  Agreement, including representing the Subscriber at the
                  Closing for the purpose of all closing matters and deliveries
                  of documents and payment of funds, and the Subscriber hereby
                  authorizes the Agent to extend such time periods and to modify
                  or waive such conditions as the Agent may deem appropriate,
                  acting reasonably, provided however that the Agent shall not
                  modify

<PAGE>
                                     - 8 -

                  or waive any such condition where to do so would result in a
                  material change to any of the material attributes or terms of
                  sale of the Securities, and to correct or rectify any
                  ambiguities, errors or omissions herein that the Agent, acting
                  reasonably, may deem appropriate.

13.      Governing Law

13.1 This Subscription Agreement is governed by the laws of the province of
British Columbia and the federal laws of Canada applicable herein. The
Subscriber, in its personal or corporate capacity and, if applicable, on behalf
of each beneficial purchaser for whom it is acting, irrevocably attorns to the
jurisdiction of the courts of the Province of British Columbia.

14.      Survival

14.1 This Subscription, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the parties hereto notwithstanding the
completion of the purchase of the Securities by the Subscriber pursuant hereto,
the completion of the issue of Securities of the Company and any subsequent
disposition by the Subscriber of the Shares.

15.      Assignment

15.1 This Subscription is not transferable or assignable.

16.      Execution

16.1 The Company shall be entitled to rely on delivery by facsimile machine of
an executed copy of this Subscription and acceptance by the Company of such
facsimile copy shall be equally effective to create a valid and binding
agreement between the Subscriber and the Company in accordance with the terms
hereof.

17.      Severability

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

18.      Termination

18.1 If, prior to Closing, the Agent determines for valid cause to terminate
this Subscription Agreement, this Agreement and the obligations of the parties
hereto are deemed to have terminated as at the effective date of such
termination.

19.      Entire Agreement

19.1 Except as expressly provided in this Agreement and in the agreements,
instruments and other documents contemplated or provided for herein, this
Agreement contains the entire agreement between the parties with respect to the
sale of the Securities and there are no

<PAGE>
                                     - 9 -

other terms, conditions, representations or warranties, whether expressed,
implied, oral or written, by statute or common law, by the Company, the Agent,
the Subscriber or by anyone else.

20.      Notices and Counterparts

20.1 All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Subscriber shall be directed to the
address on page 11; notices to the Company shall be directed to it at Richmond
Corporate Centre, #150 - 13151 Vanier Place, Richmond, British Columbia, V6V
2J1, attention of The President; notices to the Agent shall be directed to it at
the address first above written.

20.2 This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall constitute an original and all of
which together shall constitute one instrument.

<PAGE>
                                     - 10 -

IN WITNESS WHEREOF the Subscriber has duly executed this Subscription as of the
date first above mentioned.

Number of Units

to be purchased at U.S.$1.70 each:______________________________________________

Total purchase price: __________________________________________________________

DELIVERY INSTRUCTIONS

1.       Delivery - please deliver the Share certificate(s) to:

         _______________________________________________________________________

         _______________________________________________________________________

2.       Registration - registration of the Share certificates which are to be
         delivered at Closing should be made as follows:

         _______________________________________________________________________
         (name)

         _______________________________________________________________________
         (address)

3.       Delivery - please deliver the Warrant certificate(s) to:

         _______________________________________________________________________

         _______________________________________________________________________

4.       Registration - registration of the Warrant certificates which are to be
         delivered at Closing should be made as follows:

         _______________________________________________________________________
         (name)

         _______________________________________________________________________
         (address)

<PAGE>
                                     - 11 -

5.       The undersigned hereby acknowledges that it will deliver to the Company
         all such additional completed forms in respect of the Subscriber's
         purchase of Securities as may be required for filing with the
         appropriate securities commissions and regulatory authorities and stock
         exchanges.

                            ____________________________________________________
                            (Name of Subscriber - Please type or print)

                            ____________________________________________________
                            (Signature and, if applicable, Office)

                            ____________________________________________________
                            (Address of Subscriber)

                            ____________________________________________________
                            (City, State or Province, Postal Code of Subscriber)

                            ____________________________________________________
                            (Country of Subscriber)

<PAGE>
                                     - 12 -

                               A C C E P T A N C E

The above-mentioned Subscription in respect of the Securities is hereby accepted
by SMARTIRE SYSTEMS INC.

DATED at ___________________________________________ , the _________ day of
___________________ , 2001.

SMARTIRE SYSTEMS INC.

Per:     __________________________________
         Authorized Signatory

<PAGE>

                                    Exhibit A

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

================================================================================

                               WARRANT CERTIFICATE

================================================================================

                      WARRANT FOR PURCHASE OF COMMON SHARES

================================================================================
           THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED
                       WITHIN THE LIMITS HEREIN PROVIDED

                        THIS WARRANT IS NOT TRANSFERABLE

                              SMARTIRE SYSTEMS INC.

        (INCORPORATED UNDER THE LAWS OF THE PROVINCE OF BRITISH COLUMBIA)

WARRANT CERTIFICATE NO. _____                             _____________ WARRANTS

                                    Each such warrant entitling the holder to
                                    purchase one (1) Common Share at the
                                    Exercise Price of (i) $2.30 US per Common
                                    Share if exercised at or before 5:00 p.m.
                                    (Vancouver time) on June 30, 2002, (ii)
                                    $2.80 US per Common Share if exercised after
                                    June 30, 2002 but at or before 5:00 p.m.
                                    (Vancouver time) on February 28, 2003 or
                                    (iii) $3.30 US per Common Share if exercised
                                    after February 28, 2003 but at or before
                                    5:00 p.m. (Vancouver time) on October 31,
                                    2003.

            DATE OF ISSUANCE: _______________________________ , 2001

THIS IS TO CERTIFY THAT ________________________________________________ (herein
called the "Holder") is entitled to acquire in the manner herein provided,
subject to the restrictions herein contained, during the period commencing on
the date hereof and ending at 5:00 p.m. (Vancouver time) on October 31, 2003
(the "Expiry Date"), the number of fully paid

<PAGE>
                                      - 2 -

and non-assessable common shares ("Common Shares") without nominal or par value
of SmarTire Systems Inc. ("the Company") as set forth above.

The Warrants are governed by the Terms and Conditions attached.

Any Common Shares issuable on exercise of the Warrants represented by this
Certificate will contain the following legends:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

SMARTIRE SYSTEMS INC.

Per:     _______________________________________
         Authorized Signatory

<PAGE>
                                     - 3 -

THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN THIS WARRANT:

                                    ARTICLE 1
                                 INTERPRETATION

1.1               Definitions

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

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

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

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

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

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

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

         (g)      "Warrants" mean share purchase warrants issued by the Company.

1.2               Gender

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

1.3               Interpretation Not Affected by Headings

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

1.4               Applicable Law

                  The Warrants will be construed in accordance with the laws of
the Province of British Columbia and the laws of Canada applicable thereto and
will be treated in all respects as British Columbia contracts.

                                    ARTICLE 2
                          ISSUE OF ADDITIONAL WARRANTS

2.1               Additional Warrants

                  The Company may at any time and from time to time issue
additional warrants or grant options or similar rights to acquire or purchase
Common Shares.

<PAGE>
                                     - 4 -

2.2               Issue in Substitution for Lost Warrants

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

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

2.3               Warrant Holder Not a Shareholder

                  A Warrant Holder is not a shareholder of the Company, is not
entitled to any rights or interests as a shareholder of the Company and has only
the rights and interests expressly provided herein.

                                    ARTICLE 3
                                     NOTICE

3.1               Notice to Warrant Holders

                  Any notice to be given to the Holders will be sent by prepaid
registered post and will be deemed to have been received by the Holder on the
fourth day following the mailing thereof or on the date of successful facsimile
transmission or email. Any such notice will be addressed to the Holder at the
address of the Holder appearing on the Holder's Warrant or to such other address
as the Holder may advise the Company by notice in writing.

3.2               Notice to the Company

                  Any notice to be given to the Company may be delivered
personally, or sent by facsimile or other means of electronic communication
providing a printed copy ("Electronic Communication") or may be forwarded by
first class prepaid registered mail to the addresses set forth below. Any notice
delivered or sent by Electronic Communication shall be deemed to have been given
and received at the time of delivery. Any notice mailed as aforesaid shall be
deemed to have been given and received on expiration of 72 hours after it is
posted, addressed as follows:

                  SmarTire Systems Inc.
                  13151 Vanier Place, Suite 150
                  Richmond, B.C.
                  V6V 2J1

                  Attention: The President
                  Facsimile No.: (604) 276-2350

<PAGE>
                                     - 5 -

                                    ARTICLE 4
                              EXERCISE OF WARRANTS

4.1               Method of Exercise of Warrants

                  The right to acquire Common Shares conferred by the Warrants
may be exercised by the Holder of such Warrant by surrendering the Warrant
Certificate representing same, together with a duly completed and executed
Exercise Form in the form attached hereto and a bank draft or certified cheque
payable to the Company at its principal office in the City of Richmond, British
Columbia, for the purchase price applicable at the time of exercise in respect
of the number of Warrants exercised.

4.2               Effect of Exercise of Warrants

         (c)      Upon surrender and payment as aforesaid the Common Shares so
                  subscribed for will be deemed to have been issued and such
                  person or persons will be deemed to have become the holder or
                  holders of record of such Common Shares on the date of such
                  surrender.

         (d)      Within ten (10) business days after surrender as aforesaid,
                  the Company will forthwith cause to be delivered to the person
                  or persons in whose name or names the Common Shares so
                  subscribed for are to be issued as specified in such
                  subscription or mailed to him or them at his or their
                  respective addresses specified in such subscription, a
                  certificate or certificates for the appropriate number of
                  Common Shares not exceeding those which the Warrant Holder is
                  entitled to acquire pursuant to the Warrant surrendered.

4.3               Subscription for Less Than Entitlement

                  The holder of any Warrant may subscribe for and acquire a
number of Common Shares, less than the number which he is entitled to acquire
pursuant to the surrendered Warrant. In the event of any acquisition of a number
of Common Shares less than the number which can be acquired pursuant to a
Warrant, the holder thereof upon exercise thereof will in addition be entitled
to receive a new Warrant in respect of the balance of the Common Shares which he
was entitled to acquire pursuant to the surrendered Warrant and which were not
then acquired.

4.4               Warrants for Fractions of Shares

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

4.5               Expiration of Warrants

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

4.6               Time of Essence

                  Time will be of the essence hereof.

4.7               Adjustments

                  The number of Common Shares deliverable upon the exercise of
the Warrants will be subject to adjustment in the event and in the manner
following:

<PAGE>
                                     - 6 -

         (e)      if and whenever the Common Shares at any time outstanding are
                  subdivided into a greater or consolidated into a lesser number
                  of Common Shares the number of Common Shares deliverable upon
                  the exercise of the Warrants will be increased or decreased
                  proportionately as the case may be;

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

                  (ii)     in any such case, if necessary, appropriate
                           adjustments will be made in the application of the
                           provisions of this Article 4 relating to the rights
                           and interest thereafter of the holders of the
                           Warrants so that the provisions of this Article 4
                           will be made applicable as nearly as reasonably
                           possible to any shares or other securities
                           deliverable after the Reorganization or the exercise
                           of the Warrants;

                  (iii)    the subdivision or consolidation of Common Shares at
                           any time outstanding into a greater or lesser number
                           of Common Shares (whether with or without par value)
                           will not be deemed to be a Reorganization for the
                           purposes of this Section 4.7(b);

         the adjustments provided for in this Section 4.7 are cumulative and
         will become effective immediately after the record date for or, if a
         record date is fixed, the effective date of the event which results in
         such adjustments.

4.8               Determination of Adjustments

                  If any questions will at any time arise with respect to any
adjustment provided for in Section 4.7, such question will be conclusively
determined by the Company's Auditors, or, if they decline to so act any other
firm of chartered accountants, in Vancouver, British Columbia, that the Company
may designate and who will have access to all appropriate records and such
determination will be binding upon the Company and the holders of the Warrants.

                                    ARTICLE 5
                            COVENANTS BY THE COMPANY

5.1               Reservation of Shares

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

5.2               Company may Purchase

                  The Company may from time to time offer to purchase and
purchase, for cancellation only, any Warrants in such manner, from such persons
and on such terms and conditions as it determines.

                                    ARTICLE 6
                            WAIVER OF CERTAIN RIGHTS

6.1               Immunity of Shareholders, Etc.

                  The Warrant Holder, as part of the consideration for the issue
of the Warrants, waives and releases and will not have any right, cause of
action or remedy now or hereafter existing in any jurisdiction against any past,
present or future incorporator, shareholder, director or officer (as such) of
the Company for the issue of Common

<PAGE>
                                     - 7 -

Shares pursuant to any Warrant or on any covenant, agreement, representation or
warranty by the Company herein contained or in the Warrant.

                                    ARTICLE 7
                    MODIFICATION OF TERMS, MERGER, SUCCESSORS

7.1               Modification of Terms and Conditions for Certain Purposes

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

7.2               Transferability

                  The Warrant and all rights attached to it are not transferable
or assignable.

IN WITNESS WHEREOF SMARTIRE SYSTEMS INC. has caused this Warrant to be signed by
its duly authorized officers under its corporate seal, and this Warrant to be
dated as of the date of issuance first above written.

SIGNED BY:

SMARTIRE SYSTEMS INC.

Per: "SmarTire Systems Inc."
     ---------------------------
     Authorized Signatory

<PAGE>

                                  EXERCISE FORM

TO:      SMARTIRE SYSTEMS INC.

The undersigned holder of Warrants hereby exercises the right to acquire
_____________ Common Shares without nominal or par value of SmarTire Systems
Inc. (the "Company") (or such number of other securities or property to which
such Warrants entitle the undersigned in lieu thereof or in addition thereto
under the provisions set forth in the Warrant Certificate) according to the
terms set forth in the Warrant Certificate.

Such securities or property are to be issued as follows:

Name:                 __________________________________________________________

Address in Full:      __________________________________________________________

                      __________________________________________________________

The undersigned acknowledges that the certificates representing the Common
Shares issuable hereunder shall bear such legends as may be required under
applicable securities law.

DATED this ______ day of ______________________ , _____.

                                         _______________________________________
                                         Signature

                                         _______________________________________
                                         (Print full name)

                                         _______________________________________
                                         (Print full address)

                                         _______________________________________

INSTRUCTIONS:

THE REGISTERED HOLDER MAY EXERCISE HIS RIGHT TO ACQUIRE COMMON SHARES BY
COMPLETING THE ABOVE FORM, SURRENDERING THIS WARRANT CERTIFICATE AND PROVIDING
PAYMENT BY BANK DRAFT, MONEY ORDER OR CERTIFIED CHECK TO THE COMPANY AT ITS
PRINCIPAL OFFICE IN RICHMOND, BRITISH COLUMBIA. FOR THE PROTECTION OF THE
HOLDER, IT WOULD BE PRUDENT TO REGISTER IF FORWARDING BY MAIL. CERTIFICATES FOR
COMMON SHARES WILL BE DELIVERED OR MAILED AS SOON AS PRACTICABLE AFTER THE
EXERCISE OF THE WARRANTS. THE RIGHTS OF THE REGISTERED HOLDER CEASE IF THE
WARRANTS ARE NOT EXERCISED PRIOR TO 5:00 P.M. (VANCOUVER TIME) ON THE EXPIRY
DATE.

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