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                                                                    Exhibit 10.1


October 25, 2002                                              CONFIDENTIAL

Mr. Robert V. Rudman, President & CEO
SmarTire Systems, Inc.
13151 Vanier Place - Suite 150
Richmond, BC
Canada V6V 2J1

Dear Robert,

This agreement (the "Agreement") replaces and supersedes all previous agreements
entered into by and between Impact Capital Partners Limited ("Impact Capital")
and SmarTire Systems, Inc. (the "Company"). This Agreement shall serve as our
full and complete understanding relative to your engagement of Impact Capital as
financial advisors and investment intermediaries to the Company. The Funds may
be provided, without limitation, through conventional debt, convertible debt,
secured debt, participating debt, warrants, equity, preferred equity, lines of
credit, equity draw-down facilities, letters of credit and/or other form of
financing. Notwithstanding, any financing successfully completed by and between
the Company and Live Oak Capital, L.L.C. and/or Smith Point Capital Partners,
L.P. will be subject to the compensation provisions provided in paragraphs 2 a)
and b) of our letter of engagement dated August 10, 2001.

For good and mutual consideration, Impact Capital and the Company hereby agree
to the following terms and conditions:

1.     ROLE OF IMPACT CAPITAL PARTNERS LIMITED AND INDEPENDENT CONTRACTOR
       STATUS.

The Company hereby engages Impact Capital as its non-exclusive financial
advisors and investment intermediaries to find and introduce one or more
persons, partnerships, corporations or other entities or groups (the
"Investor(s)") satisfactory to the Company who would be interested in entering
into a Transaction with the Company, as well as such other consultants and/or
professionals as may be necessary or appropriate in effecting a Transaction. A
"Transaction" shall mean the payment of Funds to the Company as investments in
the form or forms listed above including multiple tranche investments, or in any
other similar investment. The Company shall have the absolute right to refuse to
consummate a Transaction with any Investor(s) for any reason or no reason.
Impact Capital shall not expect, receive or be entitled to any compensation or
remuneration from any Transaction rejected by the Company. Impact Capital and
its agents, servants and employees are not acting as an agent or broker of the
Company or otherwise acting in a fiduciary capacity on behalf of the Company and
are acting solely as an independent contractor. Impact Capital and its agents,
servants and employees shall not be empowered to act for or bind the Company to
any third parties.

2.     IMPACT CAPITAL COMPENSATION.

a.)    In consideration of the various financial advisory and investment
intermediary services provided hereunder, the Company agrees to pay Impact
Capital a cash fee equal to eight percent


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(8%) of the gross cash proceeds of any Transaction whether closed during the
term of this Agreement or within twenty-four (24) months from the termination or
expiration thereof with Funds from any Investor(s) introduced to or caused to be
introduced to the Company in writing (the "Name Registration") by Impact Capital
during the term hereof. Said Name Registration to be approved in writing by the
Company. Upon the closing of the Transaction(s) and based upon the actual Funds
provided by the Investor(s), Impact Capital's eight percent (8%) cash fee shall
be wire transferred to its banking co-ordinates found attached within
forty-eight (48) hours of receipt of Funds by the Company.

b.)    In addition to the cash fee compensation detailed in paragraph 2(a)
above, at the closing of the Transaction(s), the Company shall issue to Impact
Capital five (5) year warrants (the "Warrants") to purchase the number of shares
of the Company's common stock resulting by multiplying eight percent (8%) times
the value of the Transaction and then divided by the closing bid price of the
Company's common stock on the day of the closing (the "Closing Bid Price"). Such
Warrants shall be exercisable at the same warrant exercise price (the "Warrant
Exercise Price") as issued to the Investor(s) in the Transaction(s). In the
event no Warrants are issued to the Investor, the Company will issue Warrants to
Impact Capital exercisable at 110% of the Closing Bid Price (the "Warrant Strike
Price"). The number of shares issuable upon exercise of such Warrants and the
Warrant Exercise Price or Warrant Strike Price shall be adjusted for
recapitalizations, stock splits, etc. during the life of the Warrants. The
Warrants shall include weighted average anti-dilution protection (subject to
exceptions for any shares issuable pursuant to options or other convertible
securities outstanding on the date first written above, as well as for options
or other stock-based compensation or incentives that may be reasonably granted
to directors, offices and employees pursuant to stock incentive plans), and a
cashless exercise provision (subject to any limitations imposed by applicable
corporate laws).

Further, these Warrants shall be divisible, assignable and transferable at the
sole discretion of Impact Capital but subject to the provisions of the
Securities Act of 1933, as amended, and the Rules and Regulations promulgated
thereunder, and any applicable state securities laws. In conjunction to any
Transaction, the Company agrees to register the underlying common stock issuable
upon exercise of any and all Warrants issued to Impact Capital in the same
registration statement, if any, covering the resale of any securities in the
Transaction at no cost to the holder thereof (the "Piggyback Rights").
Notwithstanding the foregoing, the compensation payable under this section may
be paid in Company shares subject to mutual agreement between Impact Capital and
the Company.

c.)    The Company further agrees to pay Impact Capital a non-refundable cash
fee of USD $10,000. Said cash fee shall be immediately wired transferred to the
banking co-ordinates found attached when a financing of any size is closed by
the Company after the execution of this Agreement.

d.)    The Company shall also reimburse Impact Capital any and all out-of-pocket
expenses relating to travel, accommodations, car hires, and other reasonable
costs incurred by Impact Capital on behalf of the Company. Expenses shall not
exceed $5,000 (Five Thousand Dollars) in any 30 day period unless approved in
advance by the Company. All expenses shall be paid within five (5) business days
upon the receipt of an expense invoice from Impact Capital. When feasible,
Impact Capital will have the Company incur any approved expenditures directly.

e.)    In the event all or a portion of the consideration paid in a Transaction
is other than cash, then the value of such non-cash consideration shall be the
fair market value thereof on the date such Transaction is consummated, as agreed
to in good faith by the parties.


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3.     ADDITIONAL OR FUTURE TRANSACTION(S) BY INVESTOR(S).

In the event any Investor(s) introduced to the Company by Impact Capital
successfully complete(s) a Transaction or multiple tranche Transaction subject
to the terms of the Agreement, and the same Investor(s) complete(s) another
Transaction(s) or are a participant in another Transaction(s) with the Company
within twenty-four (24) months from the termination or expiration of the
Agreement, the Company shall pay Impact Capital a eight percent (8%) cash fee on
any and all Funds received by the Company or on the portion of Funds contributed
by the Investor(s) if part of a group or syndicate of investors. Both parties
shall negotiate additional warrant coverage for Impact Capital in good faith.

Notwithstanding the twenty-four (24) month termination provision, any exercising
of warrants by any Investor(s) introduced to the Company by Impact Capital
during the life of said warrants shall be considered another Transaction, and
the Company shall be obligated, pursuant to paragraph 2(a) of the Agreement, to
pay Impact Capital a four percent (4%) cash fee. No additional compensation in
the form of warrants shall be issued to Impact Capital by the Company upon the
exercise of such warrants.

4.     COMPANY INFORMATION.

The Company warrants that all materials supplied to any prospective investor(s)
by or on behalf of the Company shall be accurate and complete in all material
respects and shall not contain any misstatements or omissions of material fact.
All offerings of securities by the Company shall be conducted in compliance with
all applicable laws, including but not limited to federal and state securities
laws. Impact Capital and its agents, servants and employees shall have no
responsibility for any information supplied by or on behalf of the Company to
any prospective investor(s), and the Company shall not represent to any person
or entity that Impact Capital and/or its agents, servants and employees have
assumed such responsibility.

5.     MUTUAL INDEMNIFICATION.

a.)    The Company agrees to indemnify and hold harmless Impact Capital and its
agents, servants and employees against any losses, claims, damages or
liabilities, joint or several, for which Impact Capital or its agents, servants
and employees may directly or indirectly become liable in connection with or
arising out of the advisory services that are governed by this Agreement or the
offering or sale of securities of the Company. Furthermore, the Company shall
reimburse any legal or other expenses reasonably incurred by Impact Capital and
its agents, servants and employees in connection with investigating or defending
against any loss, claim, damage or liability or any action in respect thereof.
Notwithstanding anything to the contrary contained herein, the Company shall not
be liable hereunder for any loss, claim, damage or liability resulted from
intentional wrongdoing, recklessness and the bad faith or negligence of Impact
Capital and its agents, servants or employees. The indemnity agreement in this
paragraph shall, upon same terms and conditions, extend to and inure to the
benefit of each person, if any, who may be deemed to control Impact Capital and
to its officers, directors, partners, employees, agents or servants and shall
survive the termination of Impact Capital's engagement hereunder.

b.)    Impact Capital agrees to indemnify and hold harmless the Company and its
agents, servants and employees against any losses, claims, damages or
liabilities, joint or several, for which the Company or its agents, servants and
employees may directly or indirectly become liable in connection with or arising
out of the consultancy and advisory services that are governed by this
Agreement. Furthermore, Impact Capital shall reimburse any legal or other
expenses reasonably incurred by the Company and its agents, servants and
employees in connection with investigating or defending against any loss, claim,
damage or liability or any action in respect thereof. Notwithstanding anything
to the contrary contained herein, Impact


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Capital shall not be liable hereunder for any loss, claim, damage or liability
resulted from intentional wrongdoing, recklessness and the bad faith or
negligence of the Company and its agents, servants or employees. The indemnity
agreement in this paragraph shall, upon same terms and conditions, extend to and
inure to the benefit of each person, if any, who may be deemed to control the
Company and to its officers, directors, partners, employees, agents or servants
and shall survive the termination of the Company's engagement hereunder.

6.     TERM OF ENGAGEMENT.

The term of this Agreement shall be for a period of sixty (60) days commencing
from the date that the Company has signed and dated this Agreement. Impact
Capital shall be non-exclusive financial advisors and investment intermediaries
to the Company during the term of this Agreement. Thereafter, this Agreement
shall renew automatically for successive terms of sixty (60) days unless either
party shall give notice of termination in writing to the other party before a
renewal date. In any event, the Company shall remain liable to compensate Impact
Capital as provided in paragraphs 2 and 3 above.

7.     OBLIGATIONS OF COMPANY.

a.)    The Company shall make available to Impact Capital all information
concerning the business, assets, operations and financial condition of the
Company which Impact Capital reasonably requests in connection with the
performance of its services hereunder. Impact Capital may rely upon the accuracy
and completeness of such information without independent verification. Impact
Capital shall make available to the Company all materials intended to be used by
Impact Capital in the developments of investments, prior to its use, for the
Company's approval.

b.)    In connection with the Agreement, Impact Capital may receive from the
Company information relating to the Company which is of a confidential and
proprietary nature (the "Proprietary Information"). Such Proprietary Information
may include (without limitation) trade secrets, know-how, designs, formulas,
processes, data and information regarding the Company's personnel, plans,
operations, customers, prices, costs or financial condition. Except for
appropriate actions related to its activities under this Agreement by Impact
Capital's employees, Impact Capital will not permit any other Person to use the
Proprietary Information or disclose to any other person any of the Proprietary
Information, except with the written consent of the Company. Impact Capital will
ensure that the confidentiality of the Proprietary Information is maintained by
its employees, contractors, affiliates and agents. Upon termination or
expiration of this Agreement, any Proprietary Information possessed by Impact
Capital, including duplicates, shall be given to the Company and shall not be
retained, furnished or communicated to any third party in any form. The
foregoing obligations will not apply to disclosures of Proprietary Information
required by court order or applicable laws or to information which, through no
wrongful act or inaction or any breach on the part of Impact Capital or the
disclosing party, has become generally known or available to the public, has
been furnished to the disclosing party by a third party as a matter of right and
without restriction on such disclosure, or has been developed independently by
the disclosing party.

8.     ARBITRATION.

Any controversy or claim arising out of or relating to this Agreement, or breach
thereof, shall be settled by arbitration in Los Angeles, California in
accordance with the commercial Arbitration Rules of the American Arbitration
Association, and judgement upon the award by the arbitrator/s may be entered in
any court having jurisdiction thereof. The Agreement shall be governed by the
laws of the State of California; without regard to its conflicts of law
provisions.


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9.     ATTORNEY'S FEES.

If any party to this Agreement brings an action directly or indirectly based on
this Agreement, the prevailing party shall be entitled to reasonable expenses
therefor, including but not limited to, attorney's fees and court costs.

10.    ASSIGNMENT.

This Agreement and the rights and obligations of the parties hereto shall bind
and inure to the benefit of any successor or successors of the Company by
reorganization, merger, consolidation or otherwise and any assignee of all or
substantially all of its business and properties. Subject to the Company's prior
approval in writing, Impact Capital shall have the right to assign its rights
under this Agreement to any person(s) or entity(ies) as specified in writing
with notice of assignment sent to the Company by mail and/or facsimile.

11.    NOTICES.

Any notice which a party is required or may desire to give pursuant to this
Agreement shall be given by personal delivery, facsimile, or registered or
certified mail, return receipt requested, addressed to the Company at the
business address of the Company above, or to Impact Capital at the business
address of Impact Capital above, or at such other place either party from time
to time may designate in writing. The date of actual delivery of any such notice
shall be deemed to be the date of delivery thereof.

12.    AUTHORIZATION.

The undersigned hereby represent and warrant that they are duly authorized to
execute this Agreement and that this Agreement, when executed, shall become a
valid and binding obligation, enforceable in accordance with its terms.

13.    ENTIRE AGREEMENT: NO MODIFICATION.

This Agreement sets forth the complete terms and conditions between the parties
and may not be amended except in another written document executed by the
parties. This Agreement may be executed in one or more counterparts, each of
which will be deemed a valid, original agreement, but all of which together will
constitute one and the same instrument.

Please confirm that the foregoing is in accordance with your understanding by
initialing each page in the lower right hand corner, and signing and dating this
letter in the spaces provided below, and faxing a copy to our Los Angeles
telefax no. 310.407.5166. Kindly return one original executed copy to our U.S.
representative offices at 1800 Century Park East - Suite 600, Los Angeles, CA
90067 after receipt of the originals by DHL courier delivery.


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Sincerely,


IMPACT CAPITAL PARTNERS LIMITED



/s/Henrik Rouf
--------------------
Henrik Rouf
Managing Partner
and Director



The foregoing has been read, understood and approved:

SMARTIRE SYSTEMS, INC.



By: /s/Robert Rudman                            Dated October 25, 2002
    ----------------                                  ----------------
    Robert V. Rudman
    President & CEO


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