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**YA        GLOBAL INVESTMENTS, L.P.**

**101        Hudson Street, Suite 3700**

**Jersey        City, New Jersey 07092**

**“YA”**

| **Date                  of Instrument:** | **Issuer:** | **Outstanding                  Principal:**                |
|------------------------------------------|-------------|------------------------------------------------------------|
| March                  22, 2005          | SmarTire    | $3,085,440                  in Convertible Preferred Stock |
| May                  20, 2005            | SmarTire    | $1,420,000                                                 |
| June                  23, 2005           | SmarTire    | $9,770,000                                                 |
| January                  23, 2007        | SmarTire    | $684,000                                                   |
| February                  9, 2007        | SmarTire    | $334,000                                                   |
| March                  2, 2007           | SmarTire    | $782,000                                                   |
| April                  27, 2007          | SmarTire    | $1,150,000                                                 |
| August                  20, 2007         | SmarTire    | $350,000                                                   |

| 1.   | The                  certain registration                  statements required to be filed by the Company with the SEC and                  declared                  effective by the SEC on or before specified deadlines, all as required                  by                  the terms of three parties acknowledge that the Securities and                  Exchange Commission (the “SEC”) has not declared effective Registration                  Rights Agreements between the Company and YA dated March 22, 2005,                  May 20,                  2005 and June 23, 2005 respectively (the “RRAs”).                  Subject to the                  terms of a                  waiver dated May 24, 2007, the RRAs require that the Company pay                  damages (the Damages”) to YA because                  these registration                  statements have not been declared                  effective. |
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| 2.   | YA                  hereby agrees (i) to extend the Maturity Date of (a) the convertible                  preferred stock issued by the Company to YA with issue date March                  22, 2005                  (the “March 2005 Convertible Preferred”) and (b) the May 5, 2005,                  debenture (the “May 2005 Debenture”), issued by the                  Company  held by YA as well as the due date for any periodic                  payments due under either of the March 2005 Convertible Preferred                  or the                  May 2005 Debenture to January 1, 2008 and (ii) to permanently waive                  its                  right to the Damages whether now or hereafter accrued.  The                  waiver of YA’s right to the Damages shall extend only to these three RRAs                  and not to any of the other Existing Agreements (as hereinafter                  defined).                  The extension of the maturity date shall apply only to the March                  2005                  Convertible Preferred and the May 2005 Debenture, and not to any                  of the                  other Existing Debentures.  As modified herein, the Existing                  Debentures and Existing Agreements remain in full force and effect. |
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| 3.   | YA                  hereby agree to modify the final sentence of the Standby Equity                  Distribution Agreement dated December 30, 2005 (the “SEDA”) between the                  Company and YA, to read as follows:  “The Investor acknowledges                  that it shall pay any and all withholding taxes, interest and penalties                  assessed in connection with the transactions contemplated by this                  Agreement.” |
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| 4.   | All                  amounts owed, as set forth above, together with any fees, costs,                  expenses                  and other charges now or hereafter payable by the Company to YA                  (including, without limitation, the amounts referenced in the table                  above)                  under the Existing Debentures are unconditionally owing by the                  Company to                  YA, without offset, setoff, defense or counterclaim of any kind,                  nature or                  description whatsoever except as set forth in this                  Agreement.  The Company further acknowledges, confirms and                  agrees that (a) all agreements between SmarTire and YA (the                  “Existing Agreements”) have been duly executed and delivered by the                  Company to YA, and each is in full force and effect as of the date                  hereof;                  (b) the agreements and obligations of SmarTire contained in the                  Existing Agreements, as amended by this Agreement, constitute the                  legal,                  valid and binding obligations of SmarTire, enforceable against                  it in                  accordance with their respective terms, and the Company has no                  valid                  defense to the enforcement of such obligations; and (c)  YA is and                  shall be entitled to the rights, remedies and benefits provided                  for in the                  Existing Agreements and applicable law, without offset, setoff,                  defense or                  counterclaim of any kind, nature or descriptions                  whatsoever. |
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| 5.   | In                  exchange for the consideration described in paragraphs                  numbered                  1- 3, above, and except as otherwise set forth in this Agreement,                  SmarTire does hereby RELEASE AND FOREVER DISCHARGE YA and its subsidiaries                  and its respective affiliates, parents, joint ventures, officers,                  directors, shareholders, interest holders, members, managers, employees,                  consultants, representatives, successors and assigns, heirs, executors                  and                  administrators (collectively, “Buyer Parties”) from all causes of                  action, suits, debts, claims and demands whatsoever known or unknown,                  at                  law, in equity or otherwise, which the Company had, now has, or                  hereafter                  may have, arising from or relating in any way to the Company’s status as a                  debtor of YA on or prior to the date hereof, any agreement between                  SmarTire and YA entered into prior to the date hereof, any claims                  for                  reasonable attorneys’ fees and costs, and including, without limitation,                  any claims relating to fees, penalties, liquidated damages, and                  indemnification for losses, liabilities and expenses; provided,                  however,                  that this release shall not extend to YA’s obligation to pay all                  withholding taxes, interest and penalties on withholding taxes                  as set                  forth in the SEDA as modified herein.  This release is effective                  without regard to the legal nature of the claims raised and without                  regard                  to whether any such claims are based upon tort, equity, or implied                  or                  express contract. It is expressly understood and agreed that this                  release shall operate as a clear and unequivocal waiver by SmarTire                  of any                  such claim whatsoever. |
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**YA        GLOBAL INVESTMENTS,        L.P.**

**By:        Yorkville Advisors,        LLC**

**Its:  General        Partner**

*/s/Jerry Eicke*

**ACCEPTED        AND AGREED:**

**SMARTIRE        SYSTEMS INC.**

*/s/Jeff        Finkelstein*

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