Document:

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                                                                   Exhibit 10.31

                          SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September 20,
2002, between Smartire Systems Inc., a corporation organized under the laws of
the Province of British Columbia (the "Company") and _______ (the "Investor").

WHEREAS:

A.       The Company and the Investor are executing and delivering this
Agreement in reliance upon the exemptions from securities registration afforded
by the provisions of:

         (i)      Regulation S ("Regulation S"), as promulgated by the United
                  States Securities and Exchange Commission (the "SEC") under
                  the Securities Act of 1933, as amended (the "Securities Act");
                  and

         (ii)     Multilateral Instrument 45-103 adopted by the British Columbia
                  Securities Commission (the "BCSC").

B.       Upon the terms and conditions stated in this Agreement, the Company
desires to issue to the Investor: (i) a redeemable convertible note of the
Company, in the aggregate principal amount of x ($x.00), in the form attached
hereto as Exhibit A (the "Note"), convertible into shares of the Company's
common stock (the "Common Stock") and (ii) x share purchase warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to acquire Common Stock.

C.       The shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Note are referred to herein as the "Conversion Shares" and the
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the "Warrant Shares". The Note, the Warrants,
the Conversion Shares and the Warrant Shares are collectively referred to herein
as the "Securities" and each of them may individually be referred to herein as a
"Security".

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Investor hereby agree as
follows:

1.       PURCHASE AND SALE OF THE NOTE AND THE WARRANTS

1.1      On the basis of the representations and warranties and subject to the
         terms and conditions set forth herein, the Company shall issue and sell
         on the Closing Date (as defined below), to the Investor, and the
         Investor agrees to purchase from the Company, for an aggregate purchase
         price of x ($x.00) (the "Purchase Price") the following:

         (a)      the Note; and

         (b)      the Warrants.

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1.2      On the Closing Date, the Investor shall deliver, against delivery of
         the Note and the Warrants, the Purchase Price by wiring to Clark,
         Wilson, Barristers and Solicitors pursuant to wiring instructions
         attached hereto as Exhibit E. The Investor agrees that Clark, Wilson is
         authorized to immediately deliver the Purchase Price to the Company.

1.3      On the maturity date of the Note, the Company agrees to deliver the
         Conversion Shares, if the Note has been converted into shares of Common
         Stock.

1.4      Closing of the issuance and sale of the Note and Warrants pursuant to
         this Agreement (the "Closing") shall occur on or before September 20,
         2002, or on such other date as may be mutually determined by the
         Company and the Investor (the "Closing Date").

2.       DOCUMENTS REQUIRED FROM INVESTOR

2.1      The Investor must complete, sign and return to the Company:

         (a)      an executed copy of this Agreement;

         (b)      if the Investor is purchasing pursuant to Multilateral
                  Instrument 45-103, adopted by the BCSC, a British Columbia
                  Accredited Investor Questionnaire in the form attached as
                  Exhibit C (the "Questionnaire"); and

         (c)      if the Investor is an individual and is purchasing pursuant to
                  Section 74(2)(4) of the Securities Act (British Columbia) (the
                  "B.C. Act"), a Form 45-903F1 in the form attached as Exhibit
                  D.

2.2      The Investor shall complete, sign and return to the Company as soon as
         possible, on request by the Company, any documents, questionnaires,
         notices and undertakings as may be required by any regulatory
         authorities and applicable law.

3.       INVESTOR'S ACKNOWLEDGEMENTS

3.1      The Investor acknowledges and agrees that:

         (a)      none of the Securities have been registered under the
                  Securities Act, under any state securities or "blue sky" laws
                  of any state of the United States, or under any provincial
                  securities laws and, unless so registered, may not be offered
                  or sold in the United States or, directly or indirectly, to
                  U.S. Persons, as that term is defined in Regulation S under
                  the Securities Act ("Regulation S"), except in accordance with
                  the provisions of Regulation S, pursuant to an effective
                  registration statement under the Securities Act, or pursuant
                  to an exemption from, or in a transaction not subject to, the
                  registration requirements of the Securities Act, and in each
                  case only in accordance with any applicable state and
                  provincial securities laws;

         (b)      the Investor acknowledges that the Company has not undertaken,
                  and will have no obligation, to register any of the Securities
                  under the Securities Act;

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         (c)      the decision to execute this Agreement and acquire the
                  Securities hereunder has not been based upon any oral or
                  written representation as to fact or otherwise made by or on
                  behalf of the Company, 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 SEC
                  and in compliance, or intended compliance, with applicable
                  securities legislation (collectively, the "Public Record");

         (d)      no securities commission or similar regulatory authority has
                  reviewed or passed on the merits of the Securities;

         (e)      there is no government or other insurance covering the
                  Securities;

         (f)      there are risks associated with an investment in the
                  Securities, as more fully described in certain information
                  forming part of the Public Record;

         (g)      the Investor understands that the Securities are being offered
                  and sold to the Investor in reliance upon specific exemptions
                  from the registration requirements of United States federal
                  and state securities laws and that the Company is relying upon
                  the truth and accuracy of, and the Investor's compliance with,
                  the representations, warranties, agreements, acknowledgements
                  and understandings of the Investor set forth herein and in the
                  Questionnaire in order to determine the availability of such
                  exemptions and the eligibility of the Investor to acquire the
                  Securities;

         (h)      the Investor has not acquired any of the Securities as a
                  result of, and will not itself engage in, any "directed
                  selling efforts" (as defined in Regulation S under the
                  Securities Act) in the United States in respect of any of the
                  Securities which would include any activities undertaken for
                  the purpose of, or that could reasonably be expected to have
                  the effect of, conditioning the market in the United States
                  for the resale of any of the Conversion Shares or Warrant
                  Shares; provided, however, that the Investor may sell or
                  otherwise dispose of any of the Conversion Shares or Warrant
                  Shares pursuant to registration thereof under the Securities
                  Act and any applicable state securities laws or under an
                  exemption from such registration requirements;

         (i)      the Company has advised the Investor that the Company is
                  relying on an exemption from the requirements to provide the
                  Investor with a prospectus and to sell the Securities through
                  a person registered to sell securities under 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 Investor;

         (j)      the Investor and the Investor's advisor(s) have had a
                  reasonable opportunity to ask questions of and receive answers
                  from the Company in connection with the distribution of the
                  Securities hereunder, and to obtain additional information, to

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                  the extent possessed or obtainable without unreasonable effort
                  or expense, necessary to verify the accuracy of the
                  information about the Company;

         (k)      the books and records of the Company were available upon
                  reasonable notice for inspection, subject to certain
                  confidentiality restrictions, by the Investor during
                  reasonable business hours at its principal place of business,
                  and all documents, records and books in connection with the
                  distribution of the Securities hereunder have been made
                  available for inspection by the Investor, the Investor's
                  lawyers and/or advisor(s);

         (l)      the Investor will indemnify and hold harmless the Company and,
                  where applicable, its 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 Investor contained herein, the Questionnaire or in any
                  document furnished by the Investor to the Company in
                  connection herewith being untrue in any material respect or
                  any breach or failure by the Investor to comply with any
                  covenant or agreement made by the Investor to the Company in
                  connection therewith;

         (m)      in addition to resale restrictions imposed under U.S.
                  securities laws, there are additional restrictions on the
                  Investor's ability to resell the Conversion Shares and the
                  Warrant Shares under the B.C. Act and Multilateral Instrument
                  45-102 adopted by the BCSC;

         (n)      the Company will refuse to register any transfer of the
                  Conversion Shares or the Warrant Shares not made in accordance
                  with the provisions of Regulation S, pursuant to an effective
                  registration statement under the Securities Act or pursuant to
                  an available exemption from the registration requirements of
                  the Securities Act and in each case in accordance with
                  applicable state and provincial securities laws;

         (o)      the statutory and regulatory basis for the exemption claimed
                  for the offer of the Securities, although in technical
                  compliance with Regulation S, would not be available if the
                  offering is part of a plan or scheme to evade the registration
                  provisions of the Securities Act; and

         (p)      the Investor has been advised to consult the Investor's 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 the Company is not in any way responsible) for compliance
                  with:

                  (i)      any applicable laws of the jurisdiction in which the
                           Investor is resident in connection with the
                           distribution of the Securities hereunder, and

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                  (ii)     applicable resale restrictions.

4.       MUTUAL ACKNOWLEDGEMENTS

4.1      Although West Sussex Trading, Inc. (the "the Agent") may have
         introduced the Investor to the Company, the Investor 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:

         (a)      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 or in any publicly
                  available information concerning the Company or as to whether
                  all information concerning the Company required to be
                  disclosed by it or them has generally been disclosed;

         (b)      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;

         (c)      the Agent has not engaged in any independent investigation or
                  verification with respect to this subscription for the
                  Securities or any such information; and

         (d)      the Agent and the Company are entitled to rely on the
                  representations and warranties and the statements and answers
                  of the Investor contained in this Agreement and in the
                  questionnaires and acknowledgements attached as exhibits to
                  this Agreement, and the Investor 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
                  acknowledgements.

5.       INVESTOR REPRESENTATIONS AND WARRANTIES

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

         (a)      if the Investor is a corporation or other entity, the Investor
                  has the legal capacity and competence to enter into and
                  execute this Agreement and to take all actions required
                  pursuant hereto and the Investor is duly incorporated and
                  validly subsisting under the laws of its jurisdiction of
                  incorporation and all necessary approvals by its directors,
                  shareholders and others have been obtained to authorize
                  execution and performance of this Agreement on behalf of the
                  Investor;

         (b)      if the Investor is a corporation or other entity, the entering
                  into of this Agreement 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 Investor or of any agreement, written or
                  oral, to which the Investor may be a party or by which the
                  Investor is or may be bound;

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                                      -6-

         (c)      the Investor has duly executed and delivered this Agreement
                  and it constitutes a valid and binding agreement of the
                  Investor enforceable against the Investor in accordance with
                  its terms except as enforcement may be limited by bankruptcy,
                  insolvency, reorganization, moratorium or similar laws
                  affecting the enforcement of creditors' rights generally and
                  by equitable principles;

         (d)      all information contained in the Questionnaire is complete and
                  accurate and may be relied upon by the Company;

         (e)      if the Investor is purchasing pursuant to Multilateral
                  Instrument 45-103, by completing the Questionnaire, the
                  Investor is representing and warranting that the Investor is
                  an "Accredited Investor", as the term is defined in
                  Multilateral Instrument 45-103 adopted by the BCSC;

         (f)      the Investor is resident in the jurisdiction set out under the
                  heading "Name and Address of Investor" on the signature page
                  of this Agreement;

         (g)      the Investor is not a U.S. Person;

         (h)      the Investor is not acquiring the Securities for the account
                  or benefit of, directly or indirectly, any U.S. Person;

         (i)      the sale of the Securities to the Investor as contemplated in
                  this Agreement complies with or is exempt from the applicable
                  securities legislation of the jurisdiction of residence of the
                  Investor;

         (j)      the Investor is acquiring the Securities for investment only
                  and not with a view to resale or distribution and, in
                  particular, it has no intention to distribute either directly
                  or indirectly any of the Securities in the United States or to
                  U.S. Persons;

         (k)      the Investor is outside the United States when receiving and
                  executing this Agreement and is acquiring the Securities as
                  principal for the Investor's own account, for investment
                  purposes only, and not with a view to, or for, resale,
                  distribution or fractionalisation thereof, in whole or in
                  part, and no other person has a direct or indirect beneficial
                  interest in such Securities;

         (l)      the Investor acknowledges that the Investor has not acquired
                  the Securities as a result of, and will not itself engage in,
                  any "directed selling efforts" (as defined in Regulation S
                  under the Securities Act) in the United States in respect of
                  any of the Securities which would include any activities
                  undertaken for the purpose of, or that could reasonably be
                  expected to have the effect of, conditioning the market in the
                  United States for the resale of any of the Securities;
                  provided, however, that the Investor may sell or otherwise
                  dispose of any of the Securities pursuant to registration of
                  any of the Securities pursuant to the Securities Act and any
                  applicable state securities laws or under an exemption from
                  such registration requirements and as otherwise provided
                  herein;

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                                      -7-

         (m)      the Investor is purchasing the Securities for the Investor's
                  own account for investment purposes only and not with a
                  present view towards the public sale or distribution thereof,
                  except pursuant to sales that are exempt from the registration
                  requirements of the Securities Act and/or sales registered
                  under the Securities Act;

         (n)      the Investor understands that the Investor must bear the
                  economic risk of this investment indefinitely, unless the
                  Securities are registered pursuant to the Securities Act and
                  any applicable state securities or blue sky laws or an
                  exemption from such registration is available, and that the
                  Company has no present intention of registering the resale of
                  any such Securities;

         (o)      the Investor is not an underwriter of, or dealer in, the
                  shares of Common Stock of the Company, nor is the Investor
                  participating, pursuant to a contractual agreement or
                  otherwise, in the distribution of the Securities;

         (p)      if the Investor is acquiring the Securities as a fiduciary or
                  agent for one or more investor accounts:

                  (i)      the Investor has sole investment discretion with
                           respect to each such account and it has full power to
                           make the foregoing acknowledgements, representations
                           and agreements on behalf of such account, and

                  (ii)     the investor accounts for which the Investor acts as
                           a fiduciary or agent satisfy the definition of an
                           "Accredited Investor", as the term is defined in
                           Multilateral Instrument 45-103 adopted by the BCSC;

         (q)      the Investor is not aware of any advertisement of any of the
                  Securities; and

         (r)      no person has made to the Investor 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; or

                  (iv)     that any of the Securities will be listed and posted
                           for trading on any stock exchange or automated dealer
                           quotation system or that application has been made to
                           list and post any of the Securities of the Company on
                           any stock exchange or automated dealer quotation
                           system.

5.2      If the Investor is purchasing the Securities pursuant to section
         74(2)(4) of the B.C. Act, then the Investor additionally represents,
         warrants and covenants to the Company (which representations,
         warranties and covenants shall survive closing) that:

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                                      -8-

         (a)      the Investor is purchasing as principal for its own account,
                  and not for the benefit of any other person or company, a
                  sufficient number of Securities such that the aggregate
                  acquisition cost to the Investor is not less than CDN$97,000;

         (b)      if the Investor is not an individual or a corporation, each
                  member of the partnership, syndicate or other unincorporated
                  organization which is the purchaser, or each beneficiary of
                  the trust which is the purchaser, as the case may be, is an
                  individual who has an aggregate acquisition cost for the
                  Securities of not less than CDN$97,000;

         (c)      neither the Investor nor any party on whose behalf the
                  Investor is acting has been created, established, formed or
                  incorporated solely, or is used primarily, to acquire
                  securities or to permit the purchase of the Securities without
                  a prospectus in reliance on an exemption from the prospectus
                  requirements of applicable securities legislation; and

         (d)      if the Investor is purchasing pursuant to the exemption from
                  prospectus requirements available under subsection 74(2)(4) of
                  the B.C. Act and is not purchasing for its own account:

                  (i)   the Investor is:

                        A.   a trust company or an insurer which has received a
                             business authorization under the Financial
                             Institutions Act (British Columbia) or is a trust
                             company or an insurer authorized under the laws of
                             another province or territory of Canada to carry on
                             such business in such province or territory, and
                             the Investor is purchasing the Securities as an
                             agent or trustee for accounts that are fully
                             managed by the Investor; or

                        B.   an advisor who manages the investment portfolios of
                             clients through discretionary authority granted by
                             one or more clients and the Investor is:

                             I.    registered as an advisor under the B.C. Act
                                   or the laws of another province or territory
                                   of Canada or the Investor is exempt from such
                                   registration and the Investor is purchasing
                                   the Securities as an agent for accounts that
                                   are fully managed by the Investor; or

                             II.   carrying on the business of an advisor
                                   outside of Canada in which case:

                                   i.    it was not created solely or primarily
                                         for the purpose of purchasing
                                         Securities of the Company;

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                                      -9-

                                   ii.   the total asset value of the investment
                                         portfolios it manages on behalf of
                                         clients is not less than
                                         CDN$20,000,000; or

                                   iii.  it does not believe and has no
                                         reasonable grounds to believe that any
                                         resident of British Columbia or any
                                         directors, senior officers or other
                                         insiders of the Company or any persons
                                         carrying on investor relations
                                         activities for the Company has a
                                         beneficial interest in any of the
                                         managed accounts for which it is
                                         purchasing, and

                  (ii)  the aggregate acquisition cost for the Securities is not
                        less than CDN$97,000.

6.       BRITISH COLUMBIA RESALE RESTRICTIONS

6.1      The Investor acknowledges that the Securities are subject to resale
         restrictions in British Columbia and may not be traded in British
         Columbia except as permitted by the B.C. Act and the rules made
         thereunder.

6.2      Pursuant to Multilateral Instrument 45-102, as adopted by the BCSC,
         effective November 30, 2001, a subsequent trade in the Conversion
         Shares or the Warrant Shares will be a distribution subject to the
         prospectus and registration requirements of applicable Canadian
         securities legislation (including the B.C. Act) unless certain
         conditions are met, including the following:

         (a)      at least twelve months (the "Canadian Hold Period") shall have
                  elapsed from the date on which the Securities were issued to
                  the Investor;

         (b)      during the currency of the Canadian Hold Period, any
                  certificate representing the Securities is imprinted with a
                  legend (the "Canadian Legend") stating:

                       "Unless permitted under securities legislation,
                       the holder of the securities shall not trade the
                       securities before [insert the date that is
                       twelve months and a day after the distribution
                       date]."

         (c)      the trade is not a control distribution (as defined in
                  Multilateral Instrument 45-102);

         (d)      no unusual effort is made to prepare the market or to create a
                  demand for the Conversion Shares or the Warrant Shares that
                  are the subject of the trade;

         (e)      no extraordinary commission or consideration is paid to a
                  person or company in respect of the trade; and

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                                 -10-

         (f)      if the selling security holder is an insider or officer of the
                  Company, the selling security holder has no reasonable grounds
                  to believe that the Company is in default of securities
                  legislation.

6.3      By executing and delivering this Agreement, the Investor will have
         directed the Company not to include the Canadian Legend on any
         certificates representing the Conversion Shares or the Warrant Shares
         to be issued to the Investor.

6.4      As a consequence, the Investor will not be able to rely on the resale
         provisions of Multilateral Instrument 45-102, and any subsequent trade
         in the Conversion Shares or the Warrant Shares during or after the
         Canadian Hold Period will be a distribution subject to the prospectus
         and registration requirements of Canadian securities legislation, to
         the extent that the trade is at that time subject to any such Canadian
         securities legislation.

7.       LEGENDING OF THE SECURITIES

7.1      The Investor understands that the Note and Warrants and, until such
         time as the Conversion Shares and Warrant Shares have been registered
         under the Securities Act (including registration pursuant to Rule 416
         thereunder) or otherwise may be sold by the Investor under Rule 144,
         the certificates for the Conversion Shares and Warrant Shares may bear
         a restrictive legend in substantially the following form:

         "THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO
         ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER
         THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
         ACCORDINGLY NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES
         HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES
         LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE
         UNITED STATES, OR DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED
         HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
         PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
         REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN
         ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."

7.2      The Investor hereby acknowledges and agrees to the Company making a
         notation on its records or giving instructions to the registrar and
         transfer agent of the Company in order to implement the restrictions on
         transfer set forth and described in this Subscription Agreement.

7.3      The legend set forth above shall be removed and the Company shall issue
         a certificate without such legend to the holder of any of the
         Securities upon which it is stamped, if, unless otherwise required by
         state securities laws, (a) the sale of such Securities is registered
         under the Securities Act (including registration pursuant to Rule 416
         thereunder); (b) such holder provides the Company with an opinion of
         counsel, in form, substance and scope customary for opinions of counsel
         in comparable transactions, to the effect that a public sale or
         transfer of such Securities may be made without registration

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                                      -11-

         under the Securities Act; or (c) such holder provides the Company with
         reasonable assurances that such Securities can be sold under Rule 144.
         In the event the above legend is removed from any of the Securities and
         thereafter the effectiveness of a registration statement covering such
         Securities is suspended or the Company determines that a supplement or
         amendment thereto is required by applicable securities laws, then upon
         reasonable advance written notice to the Investor, the Company may
         require that the above legend be placed on any such Securities that
         cannot then be sold pursuant to an effective registration statement or
         under Rule 144 and the Investor shall cooperate in the replacement of
         such legend. Such legend shall thereafter be removed when such Security
         may again be sold pursuant to an effective registration statement or
         under Rule 144.

8.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY

8.1      The Company hereby represents and warrants to and covenants with the
         Investor (which representations, warranties and covenants shall survive
         closing) that:

         (a)      the Company is a corporation duly organized and existing in
                  good standing under the laws of the jurisdiction in which it
                  is incorporated, and has the requisite corporate power to own
                  its properties and to carry on its business as now being
                  conducted;

         (b)      the Company has the requisite corporate power and authority to
                  issue and sell the Note and the Warrants in accordance with
                  the terms hereof, to issue the Conversion Shares upon
                  conversion of the Note in accordance with the terms thereof
                  and to issue the Warrant Shares upon exercise of the Warrants
                  in accordance with the terms thereof;

         (c)      the execution, delivery and performance of this Agreement, the
                  Note and the Warrants (the "Transaction Documents") by the
                  Company and the consummation by it of the transactions
                  contemplated hereby and thereby (including, without
                  limitation, the issuance of the Note and the Warrants and the
                  issuance and reservation for issuance of the Conversion Shares
                  and Warrant Shares) have been duly authorized by the Company's
                  Board of Directors and no further consent or authorization of
                  the Company, its Board of Directors, any or committee of the
                  Board of Directors is required;

         (d)      this Agreement constitutes, and, upon execution and delivery
                  by the Company of the Note and the Warrants, such agreements
                  will constitute, valid and binding obligations of the Company
                  enforceable against the Company in accordance with their terms
                  except as enforcement may be limited by bankruptcy,
                  insolvency, reorganization, moratorium or similar laws
                  affecting the enforcement of creditors' rights generally and
                  by equitable principles;

         (e)      the Conversion Shares and Warrant Shares are duly authorized
                  and reserved for issuance, and, upon conversion of the Note
                  and exercise of the Warrants in accordance with the terms
                  thereof, will be validly issued, fully paid and
                  non-assessable, and free from all taxes, liens, claims and
                  encumbrances and will not be

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                                      -12-

                  subject to pre-emptive rights, rights of first refusal or
                  other similar rights of stockholders of the Company and will
                  not impose personal liability upon the holder thereof;

         (f)      the execution, delivery and performance of the Transaction
                  Documents by the Company, and the consummation by the Company
                  of the transactions contemplated hereby and thereby
                  (including, without limitation, the issuance and reservation
                  for issuance, as applicable, of the Note, the Warrants, the
                  Conversion Shares and Warrant Shares) will not (i) result in a
                  violation of the Certificate of Incorporation or By-laws or
                  (ii) conflict with, or constitute a default (or an event that
                  with notice or lapse of time or both would become a default)
                  under, or give to others any rights of termination, amendment
                  (including, without limitation, the triggering of any
                  anti-dilution provisions), acceleration or cancellation of,
                  any agreement, indenture or instrument to which the Company is
                  a party; and

         (g)      neither the Company nor any distributor participating on the
                  Company's behalf in the transactions contemplated hereby (if
                  any) nor any person acting for the Company, or any such
                  distributor, has conducted any "general solicitation," as such
                  term is defined in Regulation D, with respect to any of the
                  Securities being offered hereby.

9.       COVENANTS

9.1      The parties shall use their best efforts timely to satisfy each of the
         conditions described in Section 11 and Section 12 of this Agreement.

9.2      So long as any Investor beneficially owns any of the Securities, the
         Company shall timely file all reports required to be filed with the SEC
         pursuant to the Securities Exchange Act of 1934, as amended (the
         "Exchange Act"), and the Company shall not terminate its status as an
         issuer required to file reports under the Exchange Act even if the
         Exchange Act or the rules and regulations thereunder would permit such
         termination.

9.3      The Company currently has authorized and reserved for the purpose of
         issuance one million (1,000,000) shares of Common Stock to provide for
         the full conversion of the Note and issuance of the Conversion Shares
         in connection therewith, the payment of interest on the Note and the
         issuance of Common Stock in connection therewith, the full exercise of
         the Warrants and the issuance of the Warrant Shares in connection
         therewith and as otherwise required by the Note, the Warrants and the
         Registration Rights Agreement (collectively, the "Issuance
         Obligations"). In the event such number of shares becomes insufficient
         to satisfy the Issuance Obligations, the Company shall take all
         necessary action to authorize and reserve such additional shares of
         Common Stock necessary to satisfy the Issuance Obligations.

9.4      If the Company is prohibited by Rule 4350 of the NASD or any successor
         or similar rule, or the rules of any other securities exchange or
         over-the-counter market on which the Common Stock is then listed or
         traded from issuing all of the shares of Common Stock issuable upon
         complete conversion of the Note and complete exercise of the Warrants,

<PAGE>

                                      -13-

         the Company shall call a meeting of its stockholders to be held as
         promptly as practicable and in any event no later than 90 days after
         the conversion of the Note for the purpose of voting upon and approving
         the Transaction Documents, the authorization and issuance of the Note
         and the Warrants, and the issuance of the Conversion Shares upon
         conversion of or otherwise pursuant to the Note and the Warrant Shares
         upon exercise of or otherwise pursuant to the Warrants. The Company
         shall, through its Board of Directors, recommend to its stockholders
         approval of such matters. The Company shall use its best efforts to
         solicit from its stockholders proxies in favour of such matters
         sufficient to comply with all relevant legal requirements, including,
         without limitation Rule 4350 promulgated by the NASD, and shall vote
         such proxies in favour of such matters.

10.      TRANSFER AGENT INSTRUCTIONS

10.1     The Company shall instruct its transfer agent to issue certificates,
         registered in the name of the Investor or its nominee, for the
         Conversion Shares and the Warrant Shares in such amounts as specified
         from time to time by the Investor to the Company upon conversion of the
         Note or exercise of the Warrants, as applicable. To the extent and
         during the periods provided in Section 7.3 of this Agreement, all such
         certificates shall bear the restrictive legend specified in Section 7.1
         of this Agreement.

10.2     If the Investor provides the Company and the transfer agent with an
         opinion of counsel, which opinion of counsel shall be in form,
         substance and scope customary for opinions of counsel in comparable
         transactions, to the effect that the Conversion Shares or the Warrant
         Shares to be sold or transferred may be sold or transferred pursuant to
         an exemption from registration, or the Investor provides the Company
         with reasonable assurances that the Conversion Shares or the Warrant
         Shares may be sold under Rule 144, the Company shall permit the
         transfer and promptly instruct its transfer agent to issue one or more
         certificates in such name and in such denominations as specified by the
         Investor.

11.      CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL

11.1     The obligation of the Company hereunder to issue and sell the Note and
         Warrants to the Investor hereunder is subject to the satisfaction, at
         or before the Closing, of each of the following conditions thereto,
         provided that these conditions are for the Company's sole benefit and
         may be waived by the Company at any time in its sole discretion:

         (a)      the Investor shall have delivered the Purchase Price in
                  accordance with Section 1 of this Agreement;

         (b)      the representations and warranties of the Investor shall be
                  true and correct as of the date when made and as of the
                  Closing Date as though made at that time (except for
                  representations and warranties that speak as of a specific
                  date, which representations and warranties shall be true and
                  correct as of such date), and the Investor shall have
                  performed, satisfied and complied in all material respects
                  with the covenants, agreements and conditions required by this
                  Agreement to be

<PAGE>

                                      -14-

                  performed, satisfied or complied with by the Investor at or
                  prior to the Closing Date; and

         (c)      no statute, rule, regulation, executive order, decree, ruling
                  or injunction shall have been enacted, entered, promulgated or
                  endorsed by any court or governmental authority of competent
                  jurisdiction or any self-regulatory organization having
                  authority over the matters contemplated hereby which prohibits
                  the consummation of any of the transactions contemplated by
                  this Agreement.

12.      CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE

12.1     The obligation of the Investor hereunder to purchase the Note and
         Warrants from the Company hereunder is subject to the satisfaction, at
         or before the Closing Date, of each of the following conditions,
         provided that such conditions are for the Investor's sole benefit and
         may be waived by the Investor at any time in the Investor's sole
         discretion:

         (a)      the Company shall have delivered to the Investor a duly
                  executed Note and Warrants (each in such denominations as the
                  Investor shall request) in accordance with Section 1 of this
                  Agreement;

         (b)      the representations and warranties of the Company shall be
                  true and correct as of the date when made and as of the
                  Closing Date as though made at that time (except for
                  representations and warranties that speak as of a specific
                  date, which representations and warranties shall be true and
                  correct as of such date) and the Company shall have performed,
                  satisfied and complied in all material respects with the
                  covenants, agreements and conditions required by this
                  Agreement to be performed, satisfied or complied with by the
                  Company at or prior to the Closing Date; and

         (c)      no statute, rule, regulation, executive order, decree, ruling,
                  injunction, action or proceeding shall have been enacted,
                  entered, promulgated or endorsed by any court or governmental
                  authority of competent jurisdiction or any self-regulatory
                  organization having authority over the matters contemplated
                  hereby which questions the validity of, challenges or
                  prohibits the consummation of, any of the transactions
                  contemplated by this Agreement.

13.      GOVERNING LAW

13.1     This Agreement shall be governed by and construed in accordance with
         the laws of the Province of British Columbia. The Company irrevocably
         consents to the jurisdiction of the courts located in the Province of
         British Columbia in any suit or proceeding based on or arising under
         this Warrant and irrevocably agrees that all claims in respect of such
         suit or proceeding may be determined in such courts.

14.      MISCELLANEOUS

14.1     The Company acknowledges and agrees that all costs and expenses (to a
         maximum of $5,000) incurred by the Investor (including any fees and
         disbursements of any special

<PAGE>

                                      -15-

         counsel retained by the Investor) relating to the purchase of the
         Securities shall be borne by the Company.

14.2     All references herein to monetary denominations shall refer to lawful
         money of the United States of America.

14.3     This Agreement may be executed in two or more counterparts, all of
         which shall be considered one and the same agreement and shall become
         effective when counterparts have been signed by each party and
         delivered to the other party. This Agreement, once executed by a party,
         may be delivered to the other party hereto by facsimile transmission of
         a copy of this Agreement bearing the signature of the party so
         delivering this Agreement. In the event any signature is delivered by
         facsimile transmission, the party using such means of delivery shall
         cause the manually executed execution page(s) hereof to be physically
         delivered to the other party within five (5) days of the execution
         hereof, provided that the failure to so deliver any manually executed
         execution page shall not affect the validity or enforceability of this
         Agreement.

14.4     The headings of this Agreement are for convenience of reference and
         shall not form part of, or affect the interpretation of, this
         Agreement.

14.5     If any provision of this Agreement shall be invalid or unenforceable in
         any jurisdiction, such invalidity or unenforceability shall not affect
         the validity or enforceability of the remainder of this Agreement or
         the validity or enforceability of this Agreement in any other
         jurisdiction.

14.6     This Agreement and the instruments referenced herein contain the entire
         understanding of the Investor, the Company, their affiliates and
         persons acting on their behalf with respect to the matters covered
         herein and therein and, except as specifically set forth herein or
         therein, neither the Company nor the Investor makes any representation,
         warranty, covenant or undertaking with respect to such matters. No
         provision of this Agreement may be waived other than by an instrument
         in writing signed by the party to be charged with enforcement and no
         provision of this Agreement may be amended other than by an instrument
         in writing signed by the Company and the Investor.

14.7     Any notices required or permitted to be given under the terms of this
         Agreement shall be sent by certified or registered mail (return receipt
         requested) or delivered personally, by responsible overnight carrier or
         by confirmed facsimile, and shall be effective five (5) days after
         being placed in the mail, if mailed, or upon receipt or refusal of
         receipt, if delivered personally or by responsible overnight carrier or
         confirmed facsimile, in each case addressed to a party. The addresses
         for such communications shall be:

                  If to the Company:

                  Smartire Systems Inc.
                  Richmond Corporate Centre
                  #150 - 13151 Vanier Place
                  Richmond, British Columbia
                  Canada V6V 2J1

<PAGE>

                                      -16-

                  Facsimile: (604) 276-2353
                  Attn: President

                  With a copy simultaneously transmitted by like means to:

                  Clark, Wilson
                  800 - 885 West Georgia Street
                  Vancouver, BC
                  Canada V6C 3H1
                  Facsimile: (604) 687-6314
                  Attn: Bernard Pinsky

                  If to the Investor:

         Each party shall provide notice to the other party of any change in
         address.

14.8     This Agreement shall be binding upon and inure to the benefit of the
         parties and their successors and assigns. Neither the Company nor the
         Investor may assign this Agreement or any rights or obligations
         hereunder. Notwithstanding the foregoing, the Investor may assign its
         rights hereunder to any of its "affiliates," as that term is defined
         under the Exchange Act, with the consent of the Company.

14.9     This Agreement is intended for the benefit of the parties hereto and
         their respective permitted successors and assigns, and is not for the
         benefit of, nor may any provision hereof be enforced by, any other
         person.

14.10    The Company and the Investor shall have the right to approve before
         issuance any press releases, SEC or, to the extent applicable, NASD
         filings, or any other public statements with respect to the
         transactions contemplated hereby; provided, however, that the Company
         shall be entitled, without the prior approval of the Investor , to make
         any press release or SEC or, to the extent applicable, NASD filings
         with respect to such transactions as is required by applicable law and
         regulations.

<PAGE>

                                      -17-

14.11    Each party shall do and perform, or cause to be done and performed, all
         such further acts and things, and shall execute and deliver all such
         other agreements, certificates, instruments and documents, as the other
         party may reasonably request in order to carry out the intent and
         accomplish the purposes of this Agreement and the consummation of the
         transactions contemplated hereby.

IN       WITNESS WHEREOF, the Investor and the Company have caused this
         Agreement to be duly executed as of the date first above written.

SMARTIRE SYSTEMS INC.

By:
        -----------------------------------
Name:   Robert Rudman
Title:  President
Date:   September 20, 2002

EXECUTED by INVESTOR in the presence of:       )
                                               )
                                               )
-------------------------------------------    )
Signature                                      )
                                               )
-------------------------------------------    )   -----------------------------
Print Name                                     )   INVESTOR
                                               )
-------------------------------------------    )
Address                                        )
                                               )
-------------------------------------------    )
                                               )
-------------------------------------------    )
Occupation                                     )
                                               )

<PAGE>

                                    EXHIBIT A

                             SENIOR CONVERTIBLE NOTE

<PAGE>

                                    EXHIBIT B

                                    WARRANTS

<PAGE>

                                    EXHIBIT C

                         MULTILATERAL INSTRUMENT 45-103

                        ACCREDITED INVESTOR QUESTIONNAIRE

The purpose of this Questionnaire is to assure Smartire Systems Inc. (the
"Company") that the undersigned (the "Investor") will meet certain requirements
for the registration and prospectus exemptions provided for under Multilateral
Instrument 45-103 ("MI 45-103"), as adopted by the British Columbia Securities
Commission and the Alberta Securities Commission, in respect of a proposed
private placement of securities by the Company (the "Transaction"). The Company
will rely on the information contained in this Questionnaire for the purposes of
such determination.

The Investor covenants, represents and warrants to the Company that:

         1.       the Investor has such knowledge and experience in financial
                  and business matters as to be capable of evaluating the merits
                  and risks of the Transaction and the Investor is able to bear
                  the economic risk of loss arising from such Transaction;

         2.       the Investor satisfies one or more of the categories of
                  "accredited investor" (as that term is defined in MI 45-103)
                  indicated below (please check the appropriate box):

                  [  ]     an individual who beneficially owns, or who together
                           with a spouse beneficially own, financial assets (as
                           defined in MI 45-103) having an aggregate realizable
                           value that, before taxes but net of any related
                           liabilities, exceeds CDN$1,000,000;

                  [  ]     an individual whose net income before taxes exceeded
                           CDN$200,000 in each of the two more recent years or
                           whose net income before taxes combined with that of a
                           spouse exceeded $300,000 in each of those years and
                           who, in either case, has a reasonable expectation of
                           exceeding the same net income level in the current
                           year;

                  [  ]     an individual registered or formerly registered under
                           the Securities Act (British Columbia), or under
                           securities legislation in another jurisdiction of
                           Canada, as a representative of a person or company
                           registered under the Securities Act (British
                           Columbia), or under securities legislation in another
                           jurisdiction of Canada, as an adviser or dealer,
                           other than a limited market dealer registered under
                           the Securities Act (Ontario);

                  [  ]     a Canadian financial institution as defined in
                           National Instrument 14-101, or an authorized foreign
                           bank listed in Schedule III of the Bank Act (Canada);

<PAGE>

                                      -2-

                  [  ]     the Business Development Bank of Canada incorporated
                           under the Business Development Bank Act (Canada);

                  [  ]     an association under the Cooperative Credit
                           Associations Act (Canada) located in Canada;

                  [  ]     a subsidiary of any company referred to in any of the
                           foregoing categories, where the company owns all of
                           the voting securities of the subsidiary, except the
                           voting securities required by law to be owned by
                           directors of that subsidiary;

                  [  ]     a person or company registered under the Securities
                           Act (British Columbia), or under securities
                           legislation of another jurisdiction of Canada, as an
                           adviser or dealer, other than a limited market dealer
                           registered under the Securities Act (Ontario);

                  [  ]     a pension fund that is regulated by either the Office
                           of the Superintendent of Financial Institutions
                           (Canada) or a provincial pension commission or
                           similar regulatory authority;

                  [  ]     an entity organized in a foreign jurisdiction that is
                           analogous to any of the entities referred to in any
                           of the foregoing categories in form and function;

                  [  ]     the government of Canada or a province, or any crown
                           corporation or agency of the government of Canada or
                           a province;

                  [  ]     a municipality, public board or commission in Canada;

                  [  ]     a national, federal, state, provincial, territorial
                           or municipal government of or in any foreign
                           jurisdiction, or any agency thereof;

                  [  ]     a registered charity under the Income Tax Act
                           (Canada);

                  [  ]     a corporation, limited partnership, limited liability
                           partnership, trust or estate, other than a mutual
                           fund or non-redeemable investment fund, that had net
                           assets of at least CDN$5,000,000 as reflected on its
                           most recently prepared financial statements;

                  [  ]     a mutual fund or non-redeemable investment fund that,
                           in British Columbia, distributes it securities only
                           to persons or companies that are accredited
                           investors;

                  [  ]     a mutual fund or non-redeemable investment fund that,
                           in British Columbia, distributes its securities under
                           a prospectus for which a receipt has been issued by
                           the executive director of the British Columbia
                           Securities Commission; or

<PAGE>

                                      -3-

                  [  ]     a person or company in respect of which all of the
                           owners of interests, direct or indirect, legal or
                           beneficial, are persons or companies that are
                           accredited investors.

The Investor acknowledges and agrees that the Investor may be required by the
Company to provide such additional documentation as may be reasonably required
by the Company and its legal counsel in determining the Investor 's eligibility
to acquire the Securities under relevant legislation.

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of
September 20, 2002.

                                            ------------------------------------
                                            Signature of Purchaser

                                            ------------------------------------
                                            Name of Purchaser

                                            ------------------------------------
                                            Address of Purchaser

                                            ------------------------------------
<PAGE>

                                    EXHIBIT D

This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 76 of the Securities Act.

                   BC FORM 45-903F1 (Previously Form 20A(IP))

                                 SECURITIES ACT

                     ACKNOWLEDGMENT OF INDIVIDUAL PURCHASER

1.       I have agreed to purchase from Smartire Systems Inc. (the "Issuer") a
         Senior Convertible Note with attached Warrants (the "Securities") of
         the Issuer.

2.       I am purchasing the Securities as principal and, on closing of the
         agreement of purchase and sale, I will be the beneficial owner of the
         Securities.

3.       I [CIRCLE ONE] have/have not received an offering memorandum describing
         the Issuer and the Securities.

4.       I acknowledge that:

         (a)      no securities commission or similar regulatory authority has
                  reviewed or passed on the merits of the Securities, AND

         (b)      there is no government or other insurance covering the
                  Securities, AND

         (c)      I may lose all of my investment, AND

         (d)      there are restrictions on my ability to resell the Securities
                  and it is my responsibility to find out what those
                  restrictions are and to comply with them before selling the
                  Securities, AND

         (e)      I will not receive a prospectus that the British Columbia
                  Securities Act, R.S.B.C. 1996, c. 418 (the "Act") would
                  otherwise require be given to me because the Issuer has
                  advised me that it is relying on a prospectus exemption, AND

         (f)      because I am not purchasing the Securities under a prospectus,
                  I will not have the civil remedies that would otherwise be
                  available to me, AND

         (g)      the Issuer has advised me that it is using an exemption from
                  the requirement to sell through a dealer registered under the
                  Act, except purchases referred to in paragraph 5(g), and as a
                  result I do not have the benefit of any protection that might
                  have been available to me by having a dealer act on my behalf.

5.       I also acknowledge that: [CIRCLE ONE]

         (a)      I am purchasing Securities that have an aggregate acquisition
                  cost of $97,000 or more, OR

<PAGE>

                                      -2-

         (b)      my net worth, or my net worth jointly with my spouse at the
                  date of the agreement of purchase and sale of the security, is
                  not less than $400,000, OR

         (c)      my annual net income before tax is not less than $75,000, or
                  my annual net income before tax jointly with my spouse is not
                  less than $125,000, in each of the two most recent calendar
                  years, and I reasonably expect to have annual net income
                  before tax of not less than $75,000 or annual net income
                  before tax jointly with my spouse of not less than $125,000 in
                  the current calendar year, OR

         (d)      I am registered under the Act, OR

         (e)      I am a spouse, parent, brother, sister or child of a senior
                  officer or director of the Issuer, or of an affiliate of the
                  Issuer, OR

         (f)      I am a close personal friend of a senior officer or director
                  of the Issuer, or of an affiliate of the Issuer, OR

         (g)      I am purchasing securities under section 128(c) ($25,000 -
                  registrant required) of the Rules, and I have spoken to

                                                of
                  -----------------------------    -----------------------------
                  (Name of Registered              (Name of Registered
                  Individual)                      Individual's Registered
                                                   Dealer)

                  who advised me that they are registered to trade or advise in
                  the Securities and that the purchase of the Securities is a
                  suitable investment for me.

6.       If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I
         acknowledge that, on the basis of information about the Securities
         furnished by the Issuer, I am able to evaluate the risks and merits of
         the Securities because: [CIRCLE ONE]

         (a)      of my financial, business or investment experience, OR

         (b)      I have received advice from

                                                of
                  -----------------------------    -----------------------------
                  (Name of Registered              (Name of Registered
                  Individual)                      Individual's Registered
                                                   Adviser/Dealer)

                  who advised me that they are:

                  (i)      registered to advise, or exempted from the
                           requirement to be registered to advise, in respect of
                           the Securities, and

<PAGE>

                                      -3-

                  (ii)     not an insider of, or in a special relationship with,
                           the Issuer.

The statements made in this report are true.

DATED _____________________, 2002

                                            ------------------------------------
                                            Signature of Purchaser

                                            ------------------------------------
                                            Name of Purchaser

                                            ------------------------------------
                                            Address of Purchaser

                                            ------------------------------------

<PAGE>

                                    EXHIBIT E

                               WIRING INSTRUCTIONS

                 INSTRUCTIONS FOR WIRING FUNDS TO CLARK, WILSON

U.S. Funds may be wired to our trust account as follows:

         Routed through Bank of America NT & SA
         New York, New York
         ABA No.                            026009593
         For credit to:                     CIBC, Toronto, Ontario
         Account No.                        6550-8-26157
         For further credit to:
         CANADIAN IMPERIAL BANK OF COMMERCE
         400 Burrard Street, Vancouver, BC V6B 1P9
         Account Name:                      Clark, Wilson Trust Account
         US Trust Account No.               03-39016
         Transit No.                        10
         Bank Code No.                      010

NOTE:  PLEASE QUOTE THE LAWYER'S NAME OR OUR FILE NUMBER<PAGE>

                                                                   Exhibit 10.32

THE SENIOR CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S) PURSUANT TO REGULATION S UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").

THIS SENIOR CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY
STATE OR PROVINCE. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES
ACT AND APPLICABLE STATE AND PROVINCIAL SECURITIES LAWS, OR ANY SUCH OFFER, SALE
OR TRANSFER IS MADE UNDER AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING ANY OF
THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY
REGULATION S UNDER THE SECURITIES ACT.

                             SENIOR CONVERTIBLE NOTE

Date:  September 20, 2002
$500,000.00

FOR VALUE RECEIVED, SMARTIRE SYSTEMS INC., a corporation organized under the
laws of the Province of British Columbia (the "BORROWER" or the "CORPORATION")
hereby promises to pay to the order of _______ (the "INVESTOR"), the sum of x
($x.00) on December 20, 2002 (the "SCHEDULED MATURITY DATE"), and to pay
interest on the unpaid principal balance hereof at the rate of ten percent (10%)
per annum. Interest should accrue on the unpaid principal balance hereof from
the date hereof (the "ISSUE DATE") when the same becomes due and payable at
maturity, or upon prepayment, repayment, or otherwise. Interest shall be
calculated based on a 365 day year and shall commence accruing on the Issue Date
and, to the extent not converted in accordance with the provisions hereof, shall
be payable in arrears at such time as the outstanding principal balance hereof
with respect to which such interest has accrued becomes due and payable
hereunder. Interest on this Note shall be payable on the Scheduled Maturity Date
or when this Note is fully converted, fully redeemed or exchanged (if
applicable) in accordance with the terms of this Note. At the option of the
Borrower, the Borrower shall make payments of interest in lawful money of the
United States of America or in shares of the Corporation's common stock (the
"COMMON STOCK") determined in accordance with the provisions of this Note. All
payments of principal (to the extent not converted in accordance with the terms
hereof) shall be made in, and all references herein to monetary denominations
shall refer to, lawful money of the United States of America. All payments shall
be made at such address as

<PAGE>

the Investor shall have given or shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Note.

The term "NOTE" and all references thereto, as used throughout this instrument,
shall mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented. This Note is being issued by
the Borrower pursuant to that certain Securities Purchase Agreement, dated as of
September 20, 2002, between the Borrower and the Investor (the "SECURITIES
PURCHASE AGREEMENT"). The Corporation is issuing Warrants pursuant to the
Securities Purchase Agreement (the "WARRANTS").

                                    ARTICLE I
                                   PREPAYMENT

A.   Prepayment at Borrower's Option.

         (i) Except as provided in Paragraph A of this Article I, this Note may
         not be prepaid at the option of Borrower without the prior written
         consent of the Investor.

         (ii) The Borrower shall have the right to prepay all of the principal
         and accrued interest outstanding under this Note for the Optional
         Prepayment Amount (as defined below), which right shall be exercisable
         at the times specified below by the Borrower in its sole discretion by
         delivery of an Optional Prepayment Notice. The "OPTIONAL PREPAYMENT
         AMOUNT" with respect to this Note means:

                  (a) for the period from the Issue Date until and including the
                  thirtieth (30th) day after the Issue Date, 110% multiplied by
                  the principal amount of this Note plus all accrued and unpaid
                  interest through the date of repayment;

                  (b) for the period from the thirty-first (31st) day after the
                  Issue Date until and including the sixtieth (60th) day after
                  the Issue Date, 115% multiplied by the principal amount of
                  this Note plus all accrued and unpaid interest through the
                  date of prepayment; and

                  (c) for the period from the sixty-first (61st) day until and
                  including the ninetieth (90th) day from the Issue Date, 120%
                  multiplied by the principal amount of this Note plus all
                  accrued and unpaid interest through the date of prepayment.

         (iii) The Borrower shall effect each prepayment under this Article I.A
         by giving written notice (the "OPTIONAL PREPAYMENT NOTICE") of the date
         which such prepayment is to become effective (the "EFFECTIVE DATE OF
         PREPAYMENT") to the Investor at the address and facsimile number of the
         Investor, which Optional Prepayment Notice shall be deemed to have been
         delivered on the business day after the Borrower's fax of such notice
         to the Investor.

         (iv) The Optional Prepayment Amount shall be paid to the Investor on or
         before the date which is three (3) business days after the Effective
         Date of Prepayment; provided, however, that the Borrower shall not be
         obligated to deliver any portion of the Optional Prepayment Amount
         until this Note is delivered to the office of the Borrower, or the

                                      -2-

<PAGE>

         Investor notifies the Borrower that this Note has been lost, stolen or
         destroyed and delivers the documentation in accordance with Article V.F
         hereof. Notwithstanding anything herein to the contrary, in the event
         that this Note is not delivered to the Borrower prior to the third
         (3rd) business day following the Effective Date of Prepayment, the
         prepayment of this Note pursuant to this Article I.A shall still be
         deemed effective as of the Effective Date of Prepayment and the
         Optional Prepayment Amount shall be paid to the Investor within five
         (5) business days of the date this Note is actually delivered to the
         Borrower.

                                   ARTICLE II
                               CERTAIN DEFINITIONS

The following terms shall have the following meanings:

A.   "CLOSING BID PRICE" means, for any security as of any date, the closing bid
price of such security on the principal United States securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets (or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to the Investor if
Bloomberg Financial Markets is not then reporting closing bid prices of such
security) (collectively, "BLOOMBERG"), or if the foregoing does not apply, the
last reported bid price of such security in the OTC Bulletin Board for such
security as reported by Bloomberg, or, if no bid price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the Pink Sheets LLC, in each
case for such date or, if such date was not a trading date for such security, on
the next preceding date which was a trading date. If the Closing Bid Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to the Investor, with the
costs of such appraisal to be borne by the Corporation.

B.   "CONVERSION AMOUNT" means the principal amount of this Note plus any
accrued and unpaid interest thereon through the Conversion Date.

C.   "CONVERSION DATE" means the Scheduled Maturity Date.

D.   "CONVERSION PRICE" shall mean the lesser of: (a) an amount which is equal
to seventy-five (75) percent of the average of the three (3) lowest Closing Bid
Prices for the ten (10) day period ending on the day before the Scheduled
Maturity Date; or (b) $1.00.

E.   "INTEREST PAYABLE" means accrued interest under this Note as of the date
of calculation.

                                      -3-

<PAGE>

                                   ARTICLE III
                                   CONVERSIONS

A.   Payment of Interest in Common Stock; Automatic Conversion.

         (i)  Payment of Interest in Common Stock.

                  (a) If the Corporation elects to make any payment of interest
                  due and payable in accordance with this terms of this Note in
                  shares of Common Stock, the Corporation shall issue to the
                  Investor such number of fully paid and nonassessable shares of
                  Common Stock determined in accordance with the following
                  formula:

                                INTEREST PAYABLE
                                CONVERSION PRICE

                  (b) If any payment of interest in accordance with this Article
                  III.A(i) would result in the issuance of a fractional share of
                  Common Stock, such fractional share shall be disregarded and
                  the number of shares of Common Stock issuable upon payment in
                  accordance with this Article III.A(i) shall be the next higher
                  whole number of shares.

                  (c) The Corporation shall deliver to the Investor physical
                  certificates representing the Common Stock issuable in
                  accordance with Article III.A(i).

         (ii)  Automatic Conversion.  If, on the Scheduled Maturity Date, this
         Note and any accrued and unpaid interest has not been repaid by the
         Corporation pursuant to Article I.A., then this Note, plus all accrued
         and unpaid interest due thereon through the Scheduled Maturity Date,
         shall be automatically converted (the "Automatic Conversion") into a
         number of fully paid and nonassessable shares of Common Stock
         determined in accordance with the following formula:

                                CONVERSION AMOUNT
                                CONVERSION PRICE

B.  Mechanics of Conversion.  In order to effect the Automatic Conversion, the
Investor shall surrender or cause to be surrendered this Note to the
Corporation. The Corporation shall not be obligated to issue shares of Common
Stock upon the Automatic Conversion unless either this Note is delivered to the
Corporation as provided above, or the Investor notifies the Corporation that the
Note has been lost, stolen or destroyed and delivers the documentation to the
Corporation required by Article V.F hereof.

         (i)  Delivery of Common Stock Upon Conversion.  Upon the surrender of
         this Note, the Corporation shall, no later than the later of (a) the
         second (2nd) business day following the Conversion Date and (b) the
         business day following the date of such surrender (or, in the case of
         lost, stolen or destroyed certificates, after provision of indemnity
         pursuant to Article V.F), issue and deliver to the Investor or its
         nominee physical certificates

                                      -4-

<PAGE>

         representing that number of shares of Common Stock issuable upon
         conversion of this Note.

         (ii)  Taxes.  The Corporation shall pay any and all taxes which may be
         imposed upon it with respect to the issuance and delivery of the shares
         of Common Stock upon the conversion of this Note.

         (iii)  No Fractional Shares.  If any conversion of this Note would
         result in the issuance of a fractional share of Common Stock, such
         fractional share shall be disregarded and the number of shares of
         Common Stock issuable upon conversion of this Note shall be the next
         higher whole number of shares.

C.  Exchange.  Subject to the terms and conditions specified in this Article
III, until the Scheduled Maturity Date, the Investor shall have a right to
participate with respect to the future issuance of securities by the
Corporation, whether in the form of debt (including debt which is convertible
into equity or in which there is an equity component), equity, or equity-linked
securities ("ADDITIONAL SECURITIES"); provided such issuance of Additional
Securities is part of an issuance of securities with an aggregate purchase price
of at least $1,000,000. Each time the Corporation proposes to offer any
Additional Securities, the Corporation shall make an offering of such Additional
Securities to the Investor in accordance with the following provisions:

         (i) the Corporation shall deliver a notice (the "NOTICE") to the
         Investor stating (a) its bona fide intention to offer such Additional
         Securities, (b) the number of such Additional Securities to be offered,
         (c) the price and terms, if any, upon which it proposes to offer such
         Additional Securities, and (d) the anticipated closing date of the sale
         of such Additional Securities;

         (ii) by written notification received by the Corporation, within 10
         days after giving of the Notice, the Investor may elect to purchase or
         obtain, at the price and on the terms specified in the Notice, up to
         that portion of such Additional Securities which equals the principal
         amount and accrued interest outstanding under this Note owed to the
         Investor, by applying the outstanding principal balance and accrued
         interest under this Note to the purchase price of, and as payment for
         the Additional Securities, without further consideration; and

         (iii) the exchange right in this Article III.C shall not be applicable
         to (a) the issuance or sale of shares of Common Stock (or options
         therefor) to employees, officers, directors, or consultants of the
         Corporation for the primary purpose of soliciting or retaining their
         employment or service pursuant to a stock option plan (or similar
         equity incentive plan) approved by the Board of Directors, or (b) the
         issuance of securities in connection with mergers, acquisitions,
         strategic business partnerships or joint ventures (the primary purpose
         of which, in the reasonable judgment of the Board of Directors, is not
         to raise additional capital).

                                      -5-

<PAGE>

                                   ARTICLE IV
                      RESERVATION OF SHARES OF COMMON STOCK

A.  Reserved Amount.  On the Issue Date, the Corporation shall reserve one
million (1,000,000) shares of the authorized but unissued shares of Common Stock
for issuance upon conversion of this Note and upon exercise of the Warrants and
thereafter the number of authorized but unissued shares of Common Stock so
reserved shall not be decreased and shall at all times be sufficient to provide
for the conversion of this Note at the Conversion Price.

                                    ARTICLE V
                                  MISCELLANEOUS

A.  Failure or Indulgency Not Waiver.  No failure or delay on the part of the
Investor in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

B.  Notices.  Any notices required or permitted to be given under the terms of
this Note shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:

                        If to the Company:

                        Smartire Systems Inc,
                        Richmond Corporate Centre
                        #150 - 13151 Vanier Place
                        Richmond, British Columbia
                        Canada V6V 2J1
                        Facsimile: (604) 276-2353
                        Attn:  President

                        With a copy simultaneously transmitted by like means to:

                        Clark, Wilson
                        800 - 885 West Georgia Street
                        Vancouver, BC
                        Canada V6C 3H1
                        Facsimile: (604) 687-6314
                        Attn:  Bernard Pinsky

                        If to the Investor:

Each party shall provide notice to the other party of any change in address.

                                      -6-

<PAGE>

C.  Amendment Provision.  This Note and any provision hereof may be amended only
by an instrument in writing signed by the Corporation and the Investor.

D.  Assignability.  This Note shall be binding upon the Corporation and its
successors and shall enure to the benefit of the Investor and its successors.
This Note is not assignable by the Investor unless the Corporation consents to
such assignment.

E.  Governing Law; Jurisdiction.  This Note shall be governed by and construed
in accordance with the laws of the Province of British Columbia. The Corporation
irrevocably consents to the jurisdiction of the courts located in the Province
of British Columbia in any suit or proceeding based on or arising under this
Note and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts.

F.  Lost or Stolen Note.  Upon receipt by the Corporation of (i) evidence of the
loss, theft, destruction or mutilation of this Note and (ii) (y) in the case of
loss, theft or destruction, of indemnity (without any bond or other security)
reasonably satisfactory to the Corporation, or (z) in the case of mutilation,
upon surrender and cancellation of this Note, the Corporation shall execute and
deliver a new Note of like tenor and date.

G.  Payment of Cash; Defaults.  Whenever the Corporation is required to make any
cash payment to the Investor under this Note (whether upon prepayment, repayment
or otherwise), such cash payment shall be made in U.S. dollars to the Investor
within five (5) business days.

H.  Restrictions on Shares.  The shares of Common Stock issuable upon conversion
of this Note may not be sold or transferred unless (i) they first shall have
been registered under the Securities Act and applicable state securities laws,
(ii) the Corporation shall have been furnished with an opinion of legal counsel
(in form, substance and scope customary for opinions in such circumstances) to
the effect that such sale or transfer is exempt from the registration
requirements of the Securities Act or (iii) they are sold under Rule 144 under
the Securities Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon conversion
of this Note that have not been so registered and that have not been sold under
an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:

         THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO
         PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT
         TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF
         1933, AS AMENDED (THE "1933 ACT"). ACCORDINGLY NONE OF THE
         SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE BEEN
         REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES
         LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD
         IN THE UNITED STATES, OR DIRECTLY OR INDIRECTLY, TO U.S.
         PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE
         REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN
         A TRANSACTION NOT SUBJECT TO, THE REGISTRATION

                                  -7-

<PAGE>

         REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN
         ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

Upon the request of the Investor of a certificate representing any shares of
Common Stock issuable upon conversion of this Note, the Corporation shall remove
the foregoing legend from the certificate and issue to the Investor a new
certificate therefor free of any transfer legend, if (i) with such request, the
Corporation shall have received either (A) an opinion of counsel, in form,
substance and scope customary for opinions in such circumstances, to the effect
that any such legend may be removed from such certificate, or (B) satisfactory
representations from the Investor that the Investor is eligible to sell such
security under Rule 144 or (ii) a registration statement under the Securities
Act covering the resale of such securities is in effect.

I.  Status as Note Holder.  Upon the Automatic Conversion, (i) the principal
amount of this Note and the interest thereon covered thereby shall be deemed
converted into shares of Common Stock as of the Conversion Date and (ii) the
Investor's rights as a holder of this Note shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to the
Investor because of a failure by the Corporation to comply with the terms of
this Note.

J.  Remedies Cumulative.  The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the Investor's right to pursue actual
damages for any failure by the Corporation to comply with the terms of this
Note.

K.  Obligation to Cure.  If the Corporation is prohibited from issuing shares of
Common Stock to the Investor for any reason, the Corporation shall immediately
notify the Investor of such occurrence and shall take immediate action
(including, if necessary, seeking the approval of its shareholders) to eliminate
any prohibitions under applicable law or the rules of regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Corporation or any of its securities on the
Corporation's ability to issue shares of Common Stock.

L.  Business Day.  For purposes of this Note, the term "BUSINESS DAY" means any
day, other than a Saturday or Sunday or a day on which banking institutions in
the Province of British Columbia are authorized or obligated by law, regulation
or executive order to close.

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly
authorized officer.

SMARTIRE SYSTEMS INC.

By:
       --------------------------------------------
Name:  Robert Rudman
Title: President

                                      -8-

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