SMARTIRE SYSTEMS INC.
                            PLACEMENT AGENT AGREEMENT

                                                      Dated as of: June 23, 2005

Newbridge Securities Corporation
1451 Cypress Creek Road, Suite 204
Fort Lauderdale, Florida 33309

Ladies and Gentlemen:

      The undersigned, SmarTire Systems Inc., a Yukon Territory corporation (the
"Company"), hereby agrees with Newbridge Securities Corporation (the "Placement
Agent") and Cornell Capital Partners, LP, a Delaware Limited Partnership (the
"Investor"), as follows:

      1. Offering. The Company hereby engages the Placement Agent to act as its
exclusive placement agent in connection with the Standby Equity Distribution
Agreement dated the date hereof (the "Standby Equity Distribution Agreement"),
pursuant to which the Company shall issue and sell to the Investor, from time to
time, and the Investor shall purchase from the Company (the "Offering") up to
One Hundred Sixty Million Dollars ($160,000,000) of the Company's common stock
(the "Commitment Amount"), no par value (the "Common Stock"), at price per share
equal to the Purchase Price, as that term is defined in the Standby Equity
Distribution Agreement. The Placement Agent services shall consist of reviewing
the terms of the Standby Equity Distribution Agreement and advising the Company
with respect to those terms.

      All capitalized terms used herein and not otherwise defined herein shall
have the same meaning ascribed to them as in the Standby Equity Distribution
Agreement. The Investor will be granted certain registration rights with respect
to the Common Stock as more fully set forth in the Registration Rights Agreement
between the Company and the Investor dated the date hereof (the "Registration
Rights Agreement"). The documents to be executed and delivered in connection
with the Offering, including, but not limited, to the Company's latest Quarterly
Report on Form 10-QSB for the quarterly period ended April 30, 2005 as filed
with the United States Securities and Exchange Commission, this Agreement, the
Standby Equity Distribution Agreement, the Registration Rights Agreement, and
the Escrow Agreement dated the date hereof (the "Escrow Agreement"), are
referred to sometimes hereinafter collectively as the "Offering Materials." The
Company's Common Stock purchased by the Investor hereunder or to be issued in
connection with the conversion of any debentures are sometimes referred to
hereinafter as the "Securities." The Placement Agent shall not be obligated to
sell any Securities.

      2. Compensation.

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            A. The Company has previously issued to the Placement Agent or its
designee seventy five thousand one hundred eighty eight (75,188) shares of the
Company's Common Stock (the "Placement Agent's Shares"). The Placement Agent
shall be entitled to "piggy-back" registration rights, which shall be triggered
upon registration of any shares of Common Stock by the Investor with respect to
the Placement Agent's Shares pursuant to the Registration Rights Agreement dated
the date hereof.

      3. Representations, Warranties and Covenants of the Placement Agent.

            A. The Placement Agent represents, warrants and covenants as
follows:

                  (i) The Placement Agent has the necessary power to enter into
this Agreement and to consummate the transactions contemplated hereby.

                  (ii) The execution and delivery by the Placement Agent of this
Agreement and the consummation of the transactions contemplated herein will not
result in any violation of, or be in conflict with, or constitute a default
under, any agreement or instrument to which the Placement Agent is a party or by
which the Placement Agent or its properties are bound, or any judgment, decree,
order or, to the Placement Agent's knowledge, any statute, rule or regulation
applicable to the Placement Agent. This Agreement when executed and delivered by
the Placement Agent, will constitute the legal, valid and binding obligations of
the Placement Agent, enforceable in accordance with their respective terms,
except to the extent that (a) the enforceability hereof or thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, (b)
the enforceability hereof or thereof is subject to general principles of equity,
or (c) the indemnification provisions hereof or thereof may be held to be in
violation of public policy.

                  (iii) Upon receipt and execution of this Agreement, the
Placement Agent will promptly forward copies of this Agreement to the Company or
its counsel and the Investor or its counsel.

                  (iv) The Placement Agent will not intentionally take any
action that it reasonably believes would cause the Offering to violate the
provisions of the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act"), the respective rules and
regulations promulgated thereunder (the "Rules and Regulations") or applicable
"Blue Sky" laws of any state or jurisdiction.

                  (v) The Placement Agent is a member of the National
Association of Securities Dealers, Inc., and is a broker-dealer registered as
such under the 1934 Act and under the securities laws of the states in which the
Securities will be offered or sold by the Placement Agent unless an exemption
for such state registration is available to the Placement Agent. The Placement
Agent is in material compliance with the rules and regulations applicable to the
Placement Agent generally and applicable to the Placement Agent's participation
in the Offering.

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      4. Representations and Warranties of the Company.

            A. The Company represents and warrants as follows:

                  (i) The execution, delivery and performance of each of this
Agreement, the Standby Equity Distribution Agreement, the Escrow Agreement, and
the Registration Rights Agreement has been or will be duly and validly
authorized by the Company and is, or with respect to this Agreement, the Standby
Equity Distribution Agreement, the Escrow Agreement, and the Registration Rights
Agreement will be, a valid and binding agreement of the Company, enforceable in
accordance with its respective terms, except to the extent that (a) the
enforceability hereof or thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect and
affecting the rights of creditors generally, (b) the enforceability hereof or
thereof is subject to general principles of equity or (c) the indemnification
provisions hereof or thereof may be held to be in violation of public policy.
The Securities to be issued pursuant to the transactions contemplated by this
Agreement and the Standby Equity Distribution Agreement have been duly
authorized and, when issued and paid for in accordance with this Agreement, the
Standby Equity Distribution Agreement and the certificates/instruments
representing such Securities, will be valid and binding obligations of the
Company, enforceable in accordance with their respective terms, except to the
extent that (1) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, and (2) the
enforceability thereof is subject to general principles of equity. All corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken by the Company.

                  (ii) The Company has a duly authorized, issued and outstanding
capitalization as set forth herein and in the Standby Equity Distribution
Agreement. Except as disclosed in the SEC Documents, the Company is not a party
to or bound by any instrument, agreement or other arrangement providing for it
to issue any capital stock, rights, warrants, options or other securities,
except for this Agreement, the agreements described herein and as described in
the Standby Equity Distribution Agreement, dated the date hereof and the
agreements described therein. Except as disclosed in the SEC Documents, all
issued and outstanding securities of the Company, have been duly authorized and
validly issued and are fully paid and non-assessable; the holders thereof have
no rights of rescission or preemptive rights with respect thereto and are not
subject to personal liability solely by reason of being security holders; and
none of such securities were issued in violation of the preemptive rights of any
holders of any security of the Company.

                  (iii) The Common Stock to be issued in accordance with this
Agreement and the Standby Equity Distribution Agreement has been duly authorized
and, when issued and paid for in accordance with this Agreement, and the Standby
Equity Distribution Agreement, the certificates/instruments representing such
Common Stock will be validly issued, fully-paid and non-assessable; the holders
thereof will not be subject to personal liability solely by reason of being such
holders; such Securities are not and will not be subject to the preemptive
rights of any holder of any security of the Company.

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<PAGE>

                  (iv) The Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal property
necessary to conduct its business (including, without limitation, any real or
personal property stated in the Offering Materials to be owned or leased by the
Company), free and clear of all liens, encumbrances, claims, security interests
and defects of any material nature whatsoever, other than those set forth in the
Offering Materials and liens for taxes not yet due and payable.

                  (v) There is no litigation or governmental proceeding pending
or, to the best of the Company's knowledge, threatened in writing against, or
involving the properties or business of the Company, except as set forth in the
Offering Materials.

                  (vi) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of British Columbia.
Except as set forth in the Offering Materials, the Company does not own or
control, directly or indirectly, an interest in any other corporation,
partnership, trust, joint venture or other business entity. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction in which the character of its operations requires such
qualification or licensing and where failure to so qualify would have a material
adverse effect on the Company. The Company has all requisite corporate power and
authority, and all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies (domestic and foreign) to conduct its businesses (and
proposed business) as described in the Offering Materials. Any disclosures in
the Offering Materials concerning the effects of foreign, federal, state and
local regulation on the Company's businesses as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact. The Company has all corporate power and authority to enter into
this Agreement, the Standby Equity Distribution Agreement, the Registration
Rights Agreement, and the Escrow Agreement, to carry out the provisions and
conditions hereof and thereof, and all consents, authorizations, approvals and
orders required in connection herewith and therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required by the Company for the issuance of the
Securities or execution and delivery of the Offering Materials except for
applicable federal and state securities laws. The Company, since its inception,
has not incurred any liability arising under or as a result of the application
of any of the provisions of the 1933 Act, the 1934 Act or the Rules and
Regulations.

                  (vii) There has been no material adverse change in the
condition of the Company, financial or otherwise, from the latest dates as of
which such condition is set forth in the Offering Materials, and the outstanding
debt, the property and the business of the Company conform in all material
respects to the descriptions thereof contained in the Offering Materials.

                  (viii) Except as set forth in the Offering Materials, the
Company is not in material breach of, or in material default under, any term or
provision of any material indenture, mortgage, deed of trust, lease, note, loan
or Standby Equity Distribution Agreement or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which it is a party or by which it or any of its
properties may be bound or affected. The Company is not in material violation of
any provision of its articles or by-laws or in material violation of any
franchise, license, permit, judgment, decree or order, or in material violation
of any material statute, rule or regulation. Neither the execution and delivery
of the Offering Materials nor the issuance and sale or delivery of the
Securities, nor the consummation of any of the transactions contemplated in the
Offering Materials nor the compliance by the Company with the terms and
provisions hereof or thereof, has conflicted with or will conflict with, or has
resulted in or will result in a breach of, any of the terms and provisions of,
or has constituted or will constitute a default under, or has resulted in or
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or any other agreement or
instrument evidencing an obligation for borrowed money, or any other agreement
or instrument to which the Company may be bound or to which any of the property
or assets of the Company is subject except (a) where such default, lien, charge
or encumbrance would not have a material adverse effect on the Company and (b)
as described in the Offering Materials; nor will such action result in any
violation of the provisions of the charter or the by-laws of the Company or,
assuming the due performance by the Placement Agent of its obligations
hereunder, any material statute or any material order, rule or regulation
applicable to the Company of any court or of any foreign, federal, state or
other regulatory authority or other government body having jurisdiction over the
Company.

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                  (ix) Subsequent to the dates as of which information is given
in the Offering Materials, and except as may otherwise be indicated or
contemplated herein or therein and the securities offered pursuant to the
Standby Equity Distribution Agreement dated the date hereof, the Company has not
(a) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, or (b) entered into any transaction other than
in the ordinary course of business, or (c) declared or paid any dividend or made
any other distribution on or in respect of its capital stock. Except as
described in the Offering Materials, the Company has no outstanding obligations
to any officer or director of the Company.

                  (x) There are no claims for services in the nature of a
finder's or origination fee with respect to the sale of the Common Stock or any
other arrangements, agreements or understandings that may affect the Placement
Agent's compensation, as determined by the National Association of Securities
Dealers, Inc.

                  (xi) The Company owns or possesses, free and clear of all
liens or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without limitation, any
such licenses or rights described in the Offering Materials as being owned or
possessed by the Company) and, except as set forth in the Offering Materials,
there is no claim or action by any person pertaining to, or proceeding, pending
or threatened, which challenges the exclusive rights of the Company with respect
to any trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the Company's
businesses (including, without limitation, any such licenses or rights described
in the Offering Materials as being owned or possessed by the Company) except any
claim or action that would not have a material adverse effect on the Company;
the Company's current products, services or processes do not infringe or will
not infringe on the patents currently held by any third party.

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<PAGE>

                  (xii) Except as described in the Offering Materials, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications, licenses
or technology it has developed, uses, employs or intends to use or employ, other
than to their respective licensors.

                  (xiii) Subject to the performance by the Placement Agent of
its obligations hereunder the offer and sale of the Securities complies, and
will continue to comply, in all material respects with the requirements of Rule
506 of Regulation D promulgated by the SEC pursuant to the 1933 Act and any
other applicable federal and state laws, rules, regulations and executive
orders. Neither the Offering Materials nor any amendment or supplement thereto
nor any documents prepared by the Company in connection with the Offering will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

                  (xiv) All material taxes which are due and payable from the
Company have been paid in full or adequate provision has been made for such
taxes on the books of the Company, except for those taxes disputed in good faith
by the Company

                  (xv) None of the Company nor any of its officers, directors,
employees or agents, nor any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who is or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (A) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (B) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the Offering Materials, or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.

      5. Representations, Warranties and Covenants of the Investor.

            A. The Investor represents, warrants and covenants as follows:

                  (i) The Investor has the necessary power to enter into this
Agreement and to consummate the transactions contemplated hereby.

                  (ii) The execution and delivery by the Investor of this
Agreement and the consummation of the transactions contemplated herein will not
result in any violation of, or be in conflict with, or constitute a default
under, any agreement or instrument to which the Investor is a party or by which
the Investor or its properties are bound, or any judgment, decree, order or, to
the Investor's knowledge, any statute, rule or regulation applicable to the
Investor. This Agreement when executed and delivered by the Investor, will
constitute the legal, valid and binding obligations of the Investor, enforceable
in accordance with their respective terms, except to the extent that (a) the
enforceability hereof or thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect and
affecting the rights of creditors generally, (b) the enforceability hereof or
thereof is subject to general principles of equity, or (c) the indemnification
provisions hereof or thereof may be held to be in violation of public policy.

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                  (iii) The Investor will promptly forward copies of any and all
due diligence questionnaires compiled by the Investor to the Placement Agent.

                  (iv) The Investor is an Accredited Investor (as defined under
the 1933 Act).

                  (v) The Investor is acquiring the Securities for the
Inventor's own account as principal, not as a nominee or agent, for investment
purposes only, and not with a view to, or for, resale, distribution or
fractionalization thereof in whole or in part and no other person has a direct
or indirect beneficial interest in such Securities. Further, the Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.

                  (vi) The Investor acknowledges the Investor's understanding
that the offering and sale of the Securities is intended to be exempt from
registration under the 1933 Act by virtue of Section 3(b) of the 1933 Act and
the provisions of Regulation D promulgated thereunder ("Regulation D"). In
furtherance thereof, the Investor represents and warrants as follows:

                        (a) The Investor has the financial ability to bear the
economic risk of the Investor's investment, has adequate means for providing for
the Inventor's current needs and personal contingencies and has no need for
liquidity with respect to the Investor's investment in the Company; and

                        (b) The Investor has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the prospective investment. The Inventor also represents it has not
been organized for the purpose of acquiring the Securities.

                  (vii) The Investor has been given the opportunity for a
reasonable time prior to the date hereof to ask questions of, and receive
answers from, the Company or its representatives concerning the terms and
conditions of the Offering, and other matters pertaining to this investment, and
has been given the opportunity for a reasonable time prior to the date hereof to
obtain such additional information in connection with the Company in order for
the Investor to evaluate the merits and risks of purchase of the Securities, to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense. The Investor is not relying on the Placement
Agent or any of its affiliates with respect to the accuracy or completeness of
the Offering Materials or for any economic considerations involved in this
investment.

      6. Certain Covenants and Agreements of the Company.

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      The Company covenants and agrees at its expense and without any expense to
the Placement Agent as follows:

            A. To advise the Placement Agent and the Investor of any material
adverse change in the Company's financial condition, prospects or business or of
any development materially affecting the Company or rendering untrue or
misleading any material statement in the Offering Materials occurring at any
time as soon as the Company is either informed or becomes aware thereof.

            B. To use its commercially reasonable efforts to cause the Common
Stock issuable in connection with the Standby Equity Distribution Agreement to
be qualified or registered for sale on terms consistent with those stated in the
Registration Rights Agreement and under the securities laws of such
jurisdictions as the Placement Agent and the Investor shall reasonably request.
Qualification, registration and exemption charges and fees shall be at the sole
cost and expense of the Company.

            C. Upon written request, to provide and continue to provide the
Placement Agent and the Investor copies of all quarterly financial statements
and audited annual financial statements prepared by or on behalf of the Company,
other reports prepared by or on behalf of the Company for public disclosure and
all documents delivered to the Company's stockholders.

            D. To deliver, if and to the extent permissible under Regulation FD
without public disclosure, during the registration period of the Standby Equity
Distribution Agreement, to the Investor upon the Investor's request, within
forty five (45) days, a statement of its income for each such quarterly period,
and its balance sheet and a statement of changes in stockholders' equity as of
the end of such quarterly period, all in reasonable detail, certified by its
principal financial or accounting officer; (ii) within ninety (90) days after
the close of each fiscal year, its balance sheet as of the close of such fiscal
year, together with a statement of income, a statement of changes in
stockholders' equity and a statement of cash flow for such fiscal year, such
balance sheet, statement of income, statement of changes in stockholders' equity
and statement of cash flow to be in reasonable detail and accompanied by a copy
of the certificate or report thereon of independent auditors if audited
financial statements are prepared; and (iii) a copy of all documents, reports
and information furnished to its stockholders at the time that such documents,
reports and information are furnished to its stockholders.

            E. To comply with the terms of the Offering Materials.

            F. To ensure that any transactions between or among the Company, or
any of its officers, directors and affiliates be on terms and conditions that
are no less favorable to the Company, than the terms and conditions that would
be available in an "arm's length" transaction with an independent third party.

      7. Indemnification and Limitation of Liability.

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            A. The Company hereby agrees that it will indemnify and hold the
Placement Agent and each officer, director, shareholder, employee or
representative of the Placement Agent and each person controlling, controlled by
or under common control with the Placement Agent within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act or the SEC's Rules and
Regulations promulgated thereunder (the "Rules and Regulations"), harmless from
and against any and all loss, claim, damage, liability, cost or expense
whatsoever (including, but not limited to, any and all reasonable legal fees and
other expenses and disbursements incurred in connection with investigating,
preparing to defend or defending any action, suit or proceeding, including any
inquiry or investigation, commenced or threatened, or any claim whatsoever or in
appearing or preparing for appearance as a witness in any action, suit or
proceeding, including any inquiry, investigation or pretrial proceeding such as
a deposition) to which the Placement Agent or such indemnified person of the
Placement Agent may become subject under the 1933 Act, the 1934 Act, the Rules
and Regulations, or any other federal or state law or regulation, common law or
otherwise, arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in (a) Section 4 of this
Agreement, (b) the Offering Materials (except those written statements relating
to the Placement Agent given by the Placement Agent for inclusion therein), (c)
any application or other document or written communication executed by the
Company or based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock under the securities laws
thereof, or any state securities commission or agency; (ii) the omission or
alleged omission from documents described in clauses (a), (b) or (c) above of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (iii) the breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss, claim,
damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Company has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Paragraph 7(A), any
such payment or reimbursement by the Company of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against the Placement Agent or such indemnified person
based upon specific finding of fact that the Placement Agent or such indemnified
person's gross negligence or willful misfeasance will be promptly repaid to the
Company.

            B. The Placement Agent hereby agrees that it will indemnify and hold
the Company and each officer, director, shareholder, employee or representative
of the Company, and each person controlling, controlled by or under common
control with the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act or the Rules and Regulations, harmless from and
against any and all loss, claim, damage, liability, cost or expense whatsoever
(including, but not limited to, any and all reasonable legal fees and other
expenses and disbursements incurred in connection with investigating, preparing
to defend or defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Company or such indemnified person of the Company may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon (i) the material breach of any representation, warranty,
covenant or agreement made by the Placement Agent in this Agreement, or (ii) any
false or misleading information provided to the Company in writing by one of the
Placement Agent's indemnified persons specifically for inclusion in the Offering
Materials.

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            C. The Investor hereby agrees that it will indemnify and hold the
Placement Agent and each officer, director, shareholder, employee or
representative of the Placement Agent, and each person controlling, controlled
by or under common control with the Placement Agent within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act or the Rules and
Regulations, harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action, suit or proceeding, including any inquiry, investigation or
pretrial proceeding such as a deposition) to which the Placement Agent or such
indemnified person of the Placement Agent may become subject under the 1933 Act,
the 1934 Act, the Rules and Regulations, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon (i) the
conduct of the Investor or its officers, employees or representatives in its
acting as the Investor for the Offering, (ii) the material breach of any
representation, warranty, covenant or agreement made by the Investor in the
Offering Materials, or (iii) any false or misleading information provided to the
Placement Agent by one of the Investor's indemnified persons.

            D. The Placement Agent hereby agrees that it will indemnify and hold
the Investor and each officer, director, shareholder, employee or representative
of the Investor, and each person controlling, controlled by or under common
control with the Investor within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act or the Rules and Regulations, harmless from and
against any and all loss, claim, damage, liability, cost or expense whatsoever
(including, but not limited to, any and all reasonable legal fees and other
expenses and disbursements incurred in connection with investigating, preparing
to defend or defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Investor or such indemnified person of the Investor may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon the material breach of any representation, warranty,
covenant or agreement made by the Placement Agent in this Agreement.

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<PAGE>

            E. Promptly after receipt by an indemnified party of notice of
commencement of any action covered by Section 7(A), (B), (C) or (D), the party
to be indemnified shall, within five (5) business days, notify the indemnifying
party of the commencement thereof; the omission by one (1) indemnified party to
so notify the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 7(A), (B), (C), or (D) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof, but
the indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party's
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action at the expense of the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.

            F. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 7(A) or 7(B)
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and the Placement
Agent shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with the
investigation or defense of same) which the other may incur in such proportion
so that the Placement Agent shall be responsible for such percent of the
aggregate of such losses, claims, damages and liabilities as shall equal the
percentage of the gross proceeds paid to the Placement Agent and the Company
shall be responsible for the balance; provided, however, that no person guilty
of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
Act shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(F), any person
controlling, controlled by or under common control with the Placement Agent, or
any partner, director, officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as the Placement Agent and
each person controlling, controlled by or under common control with the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
and each officer of the Company and each director of the Company shall have the
same rights to contribution as the Company. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against the other party under this Section 7(D), notify such party from
whom contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any obligation
they may have hereunder or otherwise if the party from whom contribution may be
sought is not materially prejudiced thereby.

                                       11
<PAGE>

            G. The indemnity and contribution agreements contained in this
Section 7 shall remaint 12 operative and in full force and effect regardless of
any investigation made by or on behalf of any indemnified person or any
termination of this Agreement.

            H. The Company hereby waives, to the fullest extent permitted by
law, any right to or claim of any punitive, exemplary, incidental, indirect,
special, consequential or other damages (including, without limitation, loss of
profits) against the Placement Agent and each officer, director, shareholder,
employee or representative of the placement agent and each person controlling,
controlled by or under common control with the Placement Agent within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act or the Rules
and Regulations arising out of any cause whatsoever (whether such cause be based
in contract, negligence, strict liability, other tort or otherwise).
Notwithstanding anything to the contrary contained herein, the aggregate
liability of the Placement Agent and each officer, director, shareholder,
employee or representative of the Placement Agent and each person controlling,
controlled by or under common control with the Placement Agent within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act or the Rules
and Regulations shall not exceed the compensation received by the Placement
Agent pursuant to Section 2 hereof. This limitation of liability shall apply
regardless of the cause of action, whether contract, tort (including, without
limitation, negligence) or breach of statute or any other legal or equitable
obligation.

      8. Payment of Expenses.

      The Company hereby agrees to bear all of the expenses in connection with
the Offering, including, but not limited to the following: filing fees, printing
and duplicating costs, advertisements, postage and mailing expenses with respect
to the transmission of Offering Materials, registrar and transfer agent fees,
escrow agent fees and expenses, fees of the Company's counsel and accountants,
issue and transfer taxes, if any.

      9. Conditions of Closing.

      The Closing shall be held at the offices of the Investor or its counsel.
The obligations of the Placement Agent hereunder shall be subject to the
continuing accuracy of the representations and warranties of the Company and the
Investor herein as of the date hereof and as of the Date of Closing (the
"Closing Date") with respect to the Company or the Investor, as the case may be,
as if it had been made on and as of such Closing Date; the accuracy on and as of
the Closing Date of the statements of the officers of the Company made pursuant
to the provisions hereof; and the performance by the Company and the Investor on
and as of the Closing Date of its covenants and obligations hereunder and to the
following further conditions:

            A. Upon the effectiveness of a registration statement covering the
Standby Equity Distribution Agreement, the Investor and the Placement Agent
shall receive the opinion of counsel to the Company, dated as of the date
thereof, which opinion shall be in form and substance as set forth in Schedule 9
hereto.

            B. At or prior to the Closing, the Investor and the Placement Agent
shall have been furnished such documents, certificates and opinions as it may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Agreement and the Offering Materials, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.

                                       12
<PAGE>

            C. At and prior to the Closing, (i) there shall have been no
material adverse change in the condition or the business activities, financial
or otherwise, of the Company from the latest dates as of which such condition is
set forth in the Offering Materials; (ii) there shall have been no transaction,
not in the ordinary course of business except the transactions pursuant to the
Securities Purchase Agreement entered into by the Company on the date hereof
which has not been disclosed in the Offering Materials or to the Placement Agent
in writing; (iii) except as set forth in the Offering Materials, the Company
shall not be in material default under any provision of any instrument relating
to any outstanding indebtedness for which a waiver or extension has not been
otherwise received; (iv) except as set forth in the Offering Materials, the
Company shall not have issued any securities (other than those to be issued as
provided in the Offering Materials) or declared or paid any dividend or made any
distribution of its capital stock of any class and there shall not have been any
change in the indebtedness (long or short term) or liabilities or obligations of
the Company (contingent or otherwise) and trade payable debt; (v) no material
amount of the assets of the Company shall have been pledged or mortgaged, except
as indicated in the Offering Materials; and (v) no action, suit or proceeding,
at law or in equity, against the Company or affecting any of its properties or
businesses shall be pending or threatened in writing before or by any court or
federal or state commission, board or other administrative agency, domestic or
foreign, wherein an unfavorable decision, ruling or finding could materially
adversely affect the businesses, prospects or financial condition or income of
the Company, except as set forth in the Offering Materials.

If requested at Closing, the Investor and the Placement Agent shall receive a
certificate of the Company signed by an executive officer and chief financial
officer, dated as of the applicable Closing, to the effect that the conditions
set forth in subparagraph (C) above have been satisfied and that, as of the
applicable closing, the representations and warranties of the Company set forth
herein shall have been true and correct in all material respects as of the date
of the initial Closing.

      10. Termination.

      This Agreement shall be co-terminus with, and terminate upon the same
terms and conditions as those set forth in, the Standby Equity Distribution
Agreement. The rights of the Investor and the obligations of the Company under
the Registration Rights Agreement, and the rights of the Placement Agent and the
obligations of the Company shall survive the termination of this Agreement
unabridged.

      11. Miscellaneous.

            A. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all which shall be deemed
to be one and the same instrument.

            B. Any notice required or permitted to be given hereunder shall be
given in writing and shall be deemed effective when deposited in the United
States mail, postage prepaid, or when received if personally delivered or faxed
(upon confirmation of receipt received by the sending party), addressed as
follows to such other address of which written notice is given to the others):

                                       13
<PAGE>

If to Placement Agent, to:      Newbridge Securities Corporation
                                1451 Cypress Creek Road, Suite 204
                                Fort Lauderdale, Florida 33309
                                Attention: Doug Aguililla
                                Telephone: (954) 334-3450
                                Facsimile: (954) 229-9937

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

With a copy to:                 Greenberg Traurig, LLP
                                Met Life Building
                                200 Park Avenue
                                New York, NY  10166
                                Attention: Spencer G. Feldman, Esq.
                                Telephone: (212) 801-9200
                                Facsimile: (212) 801-6400

If to the Investor:             Cornell Capital Partners, LP
                                101 Hudson Street - Suite 3700
                                Jersey City, New Jersey  07302
                                Attention: Mark A. Angelo
                                           Portfolio Manager
                                Telephone: (201) 985-8300
                                Facsimile: (201) 985-8266

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

            C. This Agreement shall be governed by and construed in all respects
under the laws of the State of New Jersey, without reference to its conflict of
laws rules or principles. Any suit, action, proceeding or litigation arising out
of or relating to this Agreement shall be brought and prosecuted in such federal
or state court or courts located within the State of New Jersey as provided by
law. The parties hereby irrevocably and unconditionally consent to the
jurisdiction of each such court or courts located within the State of New Jersey
and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.

                                       14
<PAGE>

            D. This Agreement and the other agreements referenced herein contain
the entire understanding between the parties hereto and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.

            E. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       15
<PAGE>

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

                                 COMPANY:
                                 SMARTIRE SYSTEMS INC.

                                 By:      /s/Robert Rudman
                                          ----------------
                                 Name:    Robert Rudman
                                 Title:   President and Chief Executive Officer

                                 PLACEMENT AGENT:
                                 NEWBRIDGE SECURITIES CORPORATION

                                 By:      /s/Guy Amico
                                          ------------
                                 Name:    Guy S. Amico
                                 Title:   President

                                 INVESTOR:
                                 CORNELL CAPITAL PARTNERS, LP

                                 By:      Yorkville Advisors, LLC
                                 Its:     General Partner

                                 By:      /s/Mark Angelo
                                          --------------
                                 Name:    Mark A. Angelo
                                 Title:   Portfolio Manager

                                       16