Document:

Exhibit 10.4(d)

 

THIRD AMENDMENT TO 

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

 

THIS
THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this “Amendment”)
is made as of the 26th day of February, 2009, between Crystal
River Capital, Inc., a Maryland corporation (“Borrower”),
and Brookfield US Corporation, f/k/a Brascan (US)
Corporation (“Lender”).

 

W I T N E S S E T H:

 

WHEREAS,
Borrower and Lender are parties to that certain Amended and Restated Revolving
Credit Agreement dated as of November 8, 2007, as amended pursuant to that
certain First Amendment to Amended and Restated Revolving Credit Agreement
dated as of March 7, 2008, as further amended by that Second Amendment to
Amended and Restated Revolving Credit Agreement dated as of August 7, 2008
(as further amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”; unless otherwise defined herein, all
capitalized terms used in this Amendment shall have the meanings ascribed to
such terms in the Credit Agreement); and

 

WHEREAS,
Borrower and Lender desire to amend the Credit Agreement as hereinafter set
forth;

 

NOW,
THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.                                       Amendments to the Credit Agreement.

 

(a)                                  Section 1.2
of the Credit Agreement is hereby modified and amended, effective as of December 31,
2008, by deleting the definitions of “Adjusted Net Portfolio Value”, “Net
Worth” and “Qualified Subordinated Debt” in their entirety.

 

(b)                                 Section 1.2
of the Credit Agreement is hereby further modified and amended by deleting the
following paragraph:

 

““Maximum Advance
Amount” shall mean $100,000,000.”

 

and replacing it with the following:

 

““Maximum
Advance Amount” shall mean $50,000,000.”

 

(c)                                  Section 5.4
of the Credit Agreement is hereby amended and restated in its entirety as
follows, effective as of December 31, 2008, as follows:

 

1

 

“5.4                           [Reserved].”

 

(d)                                 Section 12.1
of the Credit Agreement is hereby amended and restated in its entirety as
follows:

 

“12.1                     Term. This
Agreement, which shall inure to the benefit of and shall be binding upon the
respective successors and permitted assigns of Borrower and Brascan, shall
become effective on the date hereof and shall continue in full force and effect
until May 15, 2010 (the “Term”) unless sooner terminated as herein provided.”

 

2.                                       Conditions of Effectiveness.  This
Amendment shall become effective as of the date hereof when, and only when, Lender
shall have received:

 

(a)                                  a counterpart of this Amendment duly executed
by Borrower; and

 

(b)                                 such other information, documents, instruments
or approvals as Lender or Lender’s counsel may require.

 

3.                                       Representations and Warranties of Borrower. 
Borrower represents and warrants as follows:

 

(a)                                  Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland;

 

(b)                                 The execution, delivery and performance by
Borrower of this Amendment are within Borrower’s corporate powers, have been
duly authorized by all necessary corporate action and do not (i) contravene
Borrower’s charter or by-laws, or (ii) violate the law or any material
contractual restriction binding on or affecting Borrower;

 

(c)                                  No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by Borrower of
this Amendment;

 

(d)                                 Each representation or warranty of Borrower
set forth in the Credit Agreement is hereby restated and reaffirmed as true and
correct on and as of the date of this Amendment, and after giving effect to
this Amendment, as if such representation or warranty were made on and as of
the date of, and after giving effect to, this Amendment (except to the extent
that any such representation or warranty expressly relates to a prior specific date
or period and except to the extent of changes in facts or circumstances
permitted by the terms of the Credit Agreement);

 

(e)                                  This Amendment constitutes the legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
with its terms; and

 

(f)                                    No Default or Event of Default is existing.

 

2

 

4.                                       Reference to and Effect on the Credit
Agreement and the Other Documents.

 

(a)                                  Upon the effectiveness of this Amendment, on
and after the date hereof each reference in the Credit Agreement to “this
Agreement,” “hereunder,” “hereof” or words of like import referring to the Credit
Agreement, and each reference in the Other Documents to “the Credit Agreement,”
“thereunder,” “thereof” or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement as amended
hereby.

 

(b)                                 Except as specifically amended above, the Credit
Agreement and all Other Documents, are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed.  Borrower has no knowledge of any challenge to
Lender’s claims arising under the Credit Agreement or the Other Documents or
the effectiveness of the Credit Agreement or the Other Documents.

 

(c)                                  The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of Lender under any of the Credit
Agreement or the Other Documents, nor constitute a waiver of any provision of
any of the Credit Agreement or the Other Documents.  This Amendment shall not constitute a
modification of the Credit Agreement or a course of dealing with Lender at
variance with the Credit Agreement such as to require further notice by Lender
to require strict compliance with the terms of the Credit Agreement and the
Other Documents in the future, except as expressly set forth herein.

 

5.                                       Costs and Expenses. 
Borrower agrees to pay on demand all reasonable costs and expenses in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for Lender with respect
thereto and with respect to advising Lender as to its rights and
responsibilities hereunder and thereunder.

 

6.                                       Governing Law.  This
Amendment shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflict of laws principles of such state.

 

7.                                       Counterparts.  This
Amendment may be executed by one or more of the parties hereto on any number of
separate counterparts, each of which shall be deemed an original and all of
which, taken together, shall be deemed to constitute one and the same
instrument.  Delivery of an executed
counterpart of this Amendment by facsimile or electronic mail transmission shall
be as effective as delivery of a manually executed counterpart hereof.

 

[Remainder of page intentionally left blank]

 

3

 

IN
WITNESS WHEREOF, the parties hereto have caused their respective duly
authorized officers or representatives to execute and deliver this Amendment as
of the day and year first written above.

 

 

	
   

  	
  CRYSTAL
  RIVER CAPITAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  William M. Powell

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  William
  M. Powell

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BROOKFIELD
  US CORPORATION, F/K/A BRASCAN (US) CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Barry Blattman

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Barry
  Blattman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  

 

 

SIGNATURE
PAGE TO THIRD AMENDMENT TO 

AMENDED AND RESTATED LOAN AGREEMENTexhibit1096.htm

     

    
      

      

    

    Exhibit
10.96

     

     

    
      LIQUIDATION
AGREEMENT

       

      This
Liquidation Agreement (hereinafter, this “Agreement”) is made as of this
4th day of December, 2008 by and among:

       

      YA GLOBAL INVESTMENTS, L.P.,
f/k/a Cornell Capital Partners, L.P., a Cayman Island exempt limited
partnership as collateral agent (hereinafter, the “Collateral
Agent”);

       

      YA GLOBAL INVESTMENTS, L.P.,
f/k/a Cornell Capital Partners, L.P., a Cayman Island exempt limited
partnership (“YA
Global”), XENTENIAL
HOLDINGS LIMITED (“Xentenial”), a corporation
incorporated under the laws of the Republic of Cyprus, and STARAIM ENTERPRISES LIMITED
(“Staraim”), a
corporation incorporated under the laws of the Republic of Cyprus, each having
an office at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07303, and
STAROME INVESTMENTS LIMITED
(“Starome”), a
corporation incorporated under the laws of the Republic of Cyprus, having an
office at Athalassas, 47, 2nd Floor,
Flat Office 202, Strovolos, P.C. 2012, Nicosia, Cyprus (hereinafter,
collectively, the “Lenders”);

       

      SMARTIRE SYSTEMS INC.
(hereinafter the “Company”), a corporation
incorporated under the laws of the Province of British Columbia with its
principal place of business located at Suite #150 - 13151 Vanier Place,
Richmond, British Columbia, Canada V6V 2J1; and

       

      SMARTIRE TECHNOLOGIES INC., a
corporation incorporated under the laws of the Province of British Columbia and
SMARTIRE USA, INC., a
corporation incorporated under the laws of the State of Delaware (hereinafter,
collectively, the “Subsidiaries”), each with its
principal place of business located at Suite #150 - 13151 Vanier Place,
Richmond, British Columbia, Canada V6V 2J1.

       

      Background

       

      Reference
is made to certain financing arrangements entered into by and between the
Lenders and the Company evidenced by, among other things, the documents,
instruments, and agreements set forth on Exhibit “A” attached hereto and
incorporated herein by reference (collectively, together with all other
documents, instruments, and/or agreements executed in connection therewith or
related thereto, the “Financing
Documents”).

       

      One or
more defaults have occurred under the Financing Documents prior to the date
hereof, and certain of the obligations under the Financing Documents have
matured and remain unpaid by the Company (hereinafter, the “Existing
Defaults”).  The Company has informed the Lender that the
Company and its Subsidiaries (collectively, jointly, and severally, the “Vendors”) have located a
purchaser for the Vendors’ assets and have requested that the Lenders consent to
the proposed sale (the “Sale”) upon the terms and
conditions set forth in the asset purchase agreement in the form attached hereto
as Exhibit “B” (the “APA”), and agree to allow the
Company to use its existing cash and proceeds of the Lenders’ collateral, and/or
certain proceeds of the Sale to pay certain costs and expenses of the Sale and
certain costs and expenses of the Vendors’ wind-down after consummation of the
Sale, and the Lenders have agreed to do so, but only on the express terms and
conditions set forth herein.

       

      Accordingly,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed by and between the Lenders and the
Vendors, as follows:

       

      Acknowledgment of
Indebtedness

       

      
        	
                1.  

              	
                The
      Vendors hereby acknowledge and agree that the Company is liable to the
      Lenders for all obligations under the Financing Documents, including,
      without limitation, the following (collectively, the “Obligations”):  (a)
      the amounts set forth on Exhibit “C” attached hereto and incorporated
      herein by reference, and (b) all fees, costs, expenses, and costs of
      collection (including reasonable attorneys’ fees and expenses) heretofore
      or hereafter accruing and/or incurred by the Lenders in connection with
      the Financing Documents, including, without limitation, all reasonable
      attorneys’ fees and expenses incurred in connection with the negotiation
      and preparation of this Agreement and all documents, instruments, and
      agreements incidental hereto.

              

      

       

      Waiver of
Claims

       

      
        	
                2.  

              	
                The
      Vendors hereby acknowledge and agree that they have no offsets, defenses,
      claims, or counterclaims against the Collateral Agent, the Lenders and/or
      their respective officers, directors, employees, attorneys,
      representatives, predecessors, affiliates, parents, successors, and
      assigns (the “Released
      Parties”) with respect to the Financing Documents, the Obligations,
      or otherwise, and that if the Vendors now have, or ever did have, any
      offsets, defenses, claims, or counterclaims against the Released Parties
      whether known or unknown, at law or in equity, from the beginning of the
      world through this date and through the time of execution of this
      Agreement, all of them are hereby expressly WAIVED, and the Vendors
      each hereby RELEASE the Released
      Parties from any liability
therefor.

              

      

       

      Ratification of Financing
Documents; Further Assurances

       

      
        	
                3.  

              	
                The
      Vendors:

              

      

       

      
        	
                (a)  

              	
                Hereby
      ratify, confirm, and reaffirm all of the terms and conditions of the
      Financing Documents.  The Vendors further acknowledge and agree
      that, except as specifically modified in this Agreement, all terms and
      conditions of the Financing Documents shall remain in full force and
      effect;

              

      

       

      
        	
                (b)  

              	
                Hereby
      ratify, confirm, and reaffirm that (i) the obligations secured by the
      Financing Documents include, without limitation, the Obligations, and any
      future modifications, amendments, substitutions or renewals thereof, (ii)
      the Financing Documents, this Agreement, and the documents executed in
      connection herewith or related hereto (collectively, the “Transaction Documents”),
      grant security interests in favor of the Lenders in the undertaking of the
      Vendors and all present and after-acquired personal property and real
      property of the Vendors, and that such security interests remain in full
      force and effect, and (iii) all collateral, whether now existing or
      hereafter acquired, granted to the Collateral Agent and/or the Lenders
      pursuant to the Transaction Documents shall continue to secure all of the
      Obligations until payment in full of the Obligations;
  and

              

      

       

      
        	
                (c)  

              	
                Shall,
      from and after the execution of this Agreement, execute and deliver to the
      Collateral Agent whatever additional documents, instruments, and
      agreements that the Lenders may reasonably require in order to vest or
      perfect the Transaction Documents and the collateral granted to the
      Lenders therein more securely in the Collateral Agent and Lenders and to
      otherwise give effect to the terms and conditions of this
      Agreement.

              

      

       

      Budget; Payment of Budgeted
Expenses

       

      
        	
                4.  

              	
                The
      Vendors have presented the Lenders with a proposed wind-down plan
      (hereinafter, the “Wind-Down Plan”),
      together with a projected budget (hereinafter, the “Budget”) covering the
      period from the date of this Agreement through the anticipated wind-down
      of the Vendors’ operations on or about December 31, 2009 (hereinafter, the
      “Termination
      Date”), a copy of which is annexed hereto marked Exhibit
      “D”.  The Budget sets forth the anticipated expenses and costs
      of the Vendors’ operations through the date of closing on the Sale, and
      the subsequent wind down of the Vendors’ operations (hereinafter, the
      “Budgeted
      Expenses”).  In connection
  therewith:

              

      

       

      
        	
                (a)  

              	
                The
      Vendors warrant and represent to the Lenders that the Budget contains the
      Vendors’ best estimate of all foreseeable, reasonable, and necessary
      expenses which may be incurred or otherwise are required to be paid in
      connection with the Sale and the subsequent wind-down of the Vendors’
      operations.

              

      

       

      
        	
                (b)  

              	
                Certain
      of the Budgeted Expenses identified on the Budget as “Funds req’d at
      closing” in the amount of $762,532.00 (the “Specified Expenses”),
      need to be paid on or before the closing on the Sale, and the Vendors do
      not have sufficient funds on hand to pay for the
      same.  Accordingly, the Vendors have requested that YA Global
      make a loan in the amount of $762,532.00 (the “Bridge Loan”) to fund
      such Specified Expenses, and YA Global has agreed to do so, subject to the
      following:

              

      

       

      
        	
                (i)  

              	
                The
      Bridge Loan shall be made upon, and subject to, the terms and conditions
      set forth in a Bridge Note in the form attached hereto as Exhibit “E” (the
      “Bridge
      Note”);

              

      

       

      
        	
                (ii)  

              	
                All
      amounts advanced under the Bridge Loan, and all interest accrued thereon
      and/or fees, costs, expenses, and costs of collection incurred in
      connection therewith and all other amounts due under the Bridge Loan
      Documents shall constitute Obligations, shall be secured by all collateral
      which secures the Obligations, and shall be repaid as part of the
      Obligations from the proceeds of the Sale and/or the Excluded Assets (as
      defined below) in accordance with the provisions of this Agreement,
      subject to certain agreements among the Lenders regarding the application
      of such proceeds; and

              

      

       

      
        	
                (iii)  

              	
                At
      the option of YA Global, with the consent of the other Lenders, the
      proceeds of the Bridge Loan may be disbursed directly to the party to
      which the Specified Expense is due, or deposited into the Pledged Account,
      as defined below, to be used by the Vendors solely to pay the Specified
      Expenses.  The Vendors shall cooperate fully with YA Global in
      making such disbursements directly to the parties to which the Specified
      Expenses are owed, and shall execute and deliver to YA Global such
      notices, documents, instruments and/or agreements as YA Global may require
      in connection with the same.

              

      

       

      
        	
                (c)  

              	
                Provided
      that no Termination Event, as defined below, has occurred, the Lenders (i)
      will permit the Vendors to use their cash on hand, or other cash or funds
      received by the Vendors from assets excluded from the Sale, as set forth
      on Schedule 2.01 to the APA (hereinafter, the “Excluded Assets”) to pay
      Budgeted Expenses and the proceeds of the Bridge Loan to pay Specified
      Expenses (if not disbursed directly as set forth above), but only to the
      extent that such Budgeted Expenses/Specified Expenses are actually
      incurred and are then due and payable, and, to the extent that the funds
      available pursuant to sub-section (i) are not sufficient to pay all such
      Budgeted Expenses, then (ii) will deposit in the Pledged Account (as
      defined below) from funds received under the APA, if and when such amounts
      are actually received by the Collateral Agent in good and collected funds,
      prior to such funds being distributed to the Lenders, sufficient amounts
      to pay such Budgeted Expenses that are actually incurred and then due and
      payable. The Vendors covenant and agree that they shall not, without the
      prior written consent of the Collateral Agent and the Lenders, pay any
      Budgeted Expense (x) prior to the week that such Budgeted Expense is
      scheduled to be paid as shown in the Budget, or (y) in excess of the
      Budgeted Expenses set forth in the Budget, whether by line item or in the
      aggregate.

              

      

       

      Cash
Management

       

      
        	
                5.  

              	
                On
      or before December ___, 2008, the Company shall open an account (the
      “Pledged Account”)
      with a U.S. branch of Wachovia Bank, N.A., or another U.S. bank acceptable
      to the Collateral Agent and the Lenders and will deposit into the Pledged
      Account all cash, collections, and other funds as and when received by the
      Vendors, including, without limitation, all proceeds from the Excluded
      Assets and all proceeds of the Bridge Loan which are not directly
      disbursed per the provisions of Paragraph 4, above.  The Company
      shall execute and deliver all such documents (including a pledge agreement
      and control agreement) as such bank and the Lenders may require in order
      to grant the Collateral Agent for the benefit of the Lenders a perfected
      security interest in the Pledged Account to secure the
      Obligations.  The Vendors shall not open or maintain any deposit
      accounts, savings accounts, money market accounts, or any other account or
      investment, with any other bank, lending institution, or financial
      company, with the sole exceptions of the Pledged Account and the Company’s
      existing deposit account #’s _______, and _________ maintained with
      _______________ (the “Existing Accounts”)
      which the Vendors are required to keep open pursuant to the Transition
      Services Agreement entered into with Bendix (as defined below) in
      connection with the APA (the “Transition Services
      Agreement”) for 120 days for the sole purpose of collecting
      payments on accounts receivable which are to be sold to Bendix per the
      APA.  The Vendors covenant and agree that (a) any funds
      currently in such accounts which are not proceeds of accounts receivable
      sold to Bendix will be immediately transferred to the Pledged Account, (b)
      no funds of any nature shall be deposited in such accounts other than
      funds received from accounts receivable which have been sold to Bendix,
      and (c) the Vendors will close such accounts no later than 120 days from
      the date of the Transition Services Agreement.  Unless and until
      the occurrence of a Termination Event, the Company shall have access to
      the funds contained in the Pledged Account solely for the payment of
      Budgeted Expenses/Specified Expenses in accordance with Paragraph 4,
      above, provided, however, that the Company covenants and agrees that it
      will not pay any Budgeted Expenses/Specified Expenses without first
      providing at least three (3) days written notice to the Lenders of the
      same.  If and when the funds contained in the Pledged Account
      equal or exceed the amounts necessary to pay any remaining Budgeted
      Expenses, such excess funds shall be remitted to the Collateral Agent for
      the benefit of the Lenders in accordance with the instructions set forth
      on Exhibit “F” attached hereto.  Further, upon the earlier of
      (a) the completion of the wind-down of the Vendors’ businesses, or (b) the
      time at which all Budgeted Expenses that have been incurred or which are
      reasonably expected to be incurred, have been paid, all remaining funds
      contained in the Pledged Account shall be remitted to the Collateral Agent
      for the benefit of the Lenders in accordance with the instructions set
      forth on Exhibit “F” attached
hereto.

              

      

       

      Sale

       

      
        	
                6.  

              	
                The
      Vendors have informed the Lenders that they have entered into the APA with
      Bendix CVS Canada Inc. (“Bendix”), as purchaser, and Bendix Commercial
      Vehicle Systems LLC, as guarantor of Bendix’s obligations under the APA,
      and have requested that the Lenders consent to the same.  The
      Lenders hereby consent to the Vendors entering into the APA.  In
      consideration of the Lenders providing their consent to the Vendors
      entering into the APA, the Vendors agree as
  follows:

              

      

       

      
        	
                (a)  

              	
                Capitalized
      terms used in this Section and not otherwise defined herein, shall have
      the meaning therefore set forth in the
APA.

              

      

       

      
        	
                (b)  

              	
                The
      Vendors hereby acknowledge and agree that the Lenders hold a perfected,
      first priority security interest in the APA and the Escrow Agreement, and
      all of the Vendors rights thereunder, including, without limitation, all
      rights to payment thereunder and the right under the Escrow Agreement to
      the return of the undertaking and all assets of the Purchased Business if
      the transaction is unwound (which constitute rights in such undertaking
      and property and a continuing interest in such undertaking and
      property).  In that regard, the Vendors acknowledge and agree
      that all payments under the APA have been directed to the Collateral Agent
      in accordance with the instructions set forth on Exhibit “F” attached
      hereto, and upon receipt by the Collateral Agent, will be applied in
      reduction of the Obligations in a manner determined by the Lenders in
      their sole and exclusive discretion.  In the event that
      notwithstanding the foregoing, a Vendor receives, or otherwise obtains or
      comes into the possession of, any payments due under the APA, or any other
      proceeds of the Sale, then such Vendor shall hold such payments or
      proceeds in trust for the Lenders, and shall immediately remit the same to
      the Collateral Agent in accordance with the instructions set forth on
      Exhibit “F” attached hereto in the same form received, with any necessary
      endorsements thereon.

              

      

       

      
        	
                (c)  

              	
                The
      Vendors covenant and agree that the Vendors will not, and will not cause
      or encourage any other party to, cancel, revoke, terminate, rescind, or
      abandon the APA, or to amend, modify, waive, or otherwise change any of
      the terms and conditions of the APA, or consent to any of the foregoing,
      in any manner, without the prior written consent of the Collateral Agent
      and the Lenders.

              

      

       

      
        	
                (d)  

              	
                The
      Vendors shall provide the Lenders with notice immediately upon it becoming
      reasonably apparent to the Vendors that (i) either the Vendors or Bendix
      will not be able to consummate the Sale on or before December 5, 2008, or
      (ii) the required shareholder approvals will not be obtained on or before
      March 13, 2009.

              

      

       

      
        	
                (e)  

              	
                The
      Vendors shall use their commercially reasonable best efforts to close on
      the Sale upon the terms contemplated by the APA on or before December 5,
      2008.

              

      

       

      
        	
                (f)  

              	
                Upon
      the closing of the Sale, the Vendors shall, as soon as is practicable
      thereafter, subject to applicable law, convene and hold a special meeting
      of the shareholders of the Company for the purpose of passing special
      resolutions to approve the Sale and any other transactions contemplated by
      the APA, but in any event on or before March 13, 2009, or if the Company
      is unable to obtain, after using its best efforts to do so, such
      shareholder approval of the Sale and the other transactions contemplated
      by the APA, the Company will use all reasonable commercial efforts to
      obtain an order of the British Columbia Supreme Court declaring that the
      Sale is for valuable consideration to Bendix who is dealing with the
      Company in good faith pursuant to Section 301(3)(a) of the Business Corporations
      Act (British Columbia) or is otherwise
  valid.

              

      

       

      
        	
                (g)  

              	
                The
      Company covenants and agrees to cooperate fully with the Lenders who are
      entering into a voting agreement as contemplated by the APA, and to
      provide such Lenders with all such documents, instruments, agreements, and
      waivers as such Lenders may reasonably request, in connection with any
      such Lender’s conversion of a portion of the Obligations into shares of
      the Company pursuant to the terms and conditions of the Convertible
      Debentures set forth on Exhibit “A” attached hereto, to promptly issue the
      required shares to such Lenders, and to otherwise fully comply with all of
      the Company’s obligations under the Convertible Debentures and the other
      Financing Documents in connection with the
same.

              

      

       

      
        	
                (h)  

              	
                The
      Company covenants and agrees to cooperate fully with the Lenders, and to
      provide the Lenders with all such documents, instruments, agreements, and
      waivers as the Lenders may reasonably request, in connection with the
      Lenders’ performance pursuant to that certain Voting Arrangement Agreement
      of even date herewith entered into by and among Bendix, the Company, and
      the Lenders.

              

      

       

      
        	
                (i)  

              	
                The
      Vendors will provide the Lenders with copies of all correspondence,
      notices, documents, agreements and other written information and/or
      materials relating to the Sale, the APA, the shareholder meeting,
      shareholder approval, the wind-down of the Vendors operations, and all
      related matters, as and when such materials are sent, or received by, the
      Vendors, and shall at all times keep the Lenders fully apprized of the
      status of the Sale, the Vendors efforts to obtain shareholder, or court,
      approval of the same, and, after the closing on the Sale, all transactions
      between the Vendors and Bendix thereafter, including, without limitation,
      the calculation of Closing Net Book Value and Final Net Book Value, and
      calculation of Earnout Payments.  In that regard, the Vendors
      covenant and agree (i) to provide the Lenders with copies of the Closing
      Net Book Value Statement and each Earn Out Statement promptly upon
      receiving the same, (ii) to provide the Lenders with prior notice before
      inspecting, examining or auditing any information or other materials
      provided by Bendix pursuant to Section 2.03 of the APA, or observing any
      physical inventory under Section 2.04 of the APA, and allow the Lenders
      and/or their auditor or representatives to participate in the same, (iii)
      not to dispute any Earn Out Statement or deliver a Notice of Objection to
      Bendix, or take any other material action under the APA, without first
      providing the Lenders with a detailed summary of the Vendors objection to
      the Earn Out Statement and/or Closing Net Book Value Statement, or
      proposed action, and obtaining the Lenders consent to the same, which
      consent shall not be unreasonably withheld, conditioned, or delayed, and
      (v) to provide the Lenders with prior notice of any other meeting or
      conference call with Bendix, and, at the Lenders request, allow the
      Lenders to participate in the same.

              

      

       

      
        	
                (j)  

              	
                Weekly,
      on or before 11:00 a.m. on Wednesday of each week, the Vendors shall
      provide the Lenders with a report of the status of the Sale, the Vendors’
      efforts to obtain shareholder or court approval of the Sale, the wind-down
      of the Vendors operations, and any other developments under or related to
      the Sale or the APA or the wind-down.  Each such report shall
      include a detailed summary of all sources and uses of cash, a comparison
      for the prior week of actual expenditures against the Budgeted Expenses
      set forth in the Budget, and a comparison of the status of the wind-down
      of the Vendors’ operations to the Wind-Down Plan.  In addition,
      the Vendors shall provide such other reporting and information as the
      Lenders may reasonably request from time to
  time.

              

      

       

      
        	
                (k)  

              	
                The
      Lenders’ and or their auditor and/or other representatives or agents,
      shall be permitted access to the Vendors’ business premises, and/or the
      location at which the Vendors store their books and records, at any time
      during normal business hours upon reasonable prior notice and shall be
      afforded complete access to all information, books, and records as may be
      necessary in order to effectively monitor the Vendors’ progress in
      conducting the Sale, any post-sale transactions, such as the calculation
      of Closing Net Book Value or Earn Out Payments, and/or the wind-down of
      their operations.  The reasonable out-of-pocket costs incurred
      by the Lenders in connection with such inspections and the retention of
      auditors or other professionals in connection with the same shall be added
      to, and be a part of, the
Obligations.

              

      

       

      
        	
                (l)  

              	
                The
      Excluded Assets include the right to pursue a patent enforcement action
      with respect to two patents held by the Company.  In connection
      therewith, the Company will use commercially reasonable efforts to
      diligently prosecute such enforcement action, provided that the Company
      will not incur any obligations or liabilities, or pay any out-of-pocket
      expenses, in connection with the same without the Collateral Agent’s prior
      consent.  Further, the Company has ensured, under the terms of
      the Transition Services Agreement, that the employees that it may need in
      connection with prosecuting such enforcement action (namely Greg Tooke and
      Shawn Lammers) will be available, subject to reimbursing Bendix for their
      time, to the Company in connection with such litigation.  The
      Company acknowledges and agrees that all proceeds of such enforcement
      actions constitute the Lenders’ collateral, and agree that they will
      execute and deliver all necessary documents, instruments, and agreements
      to preserve, protect, perfect, or vest such interests in the Lenders
      and/or the Collateral Agent, as the Lenders may reasonably require,
      including, without limitation, to execute an assignment of any judgment(s)
      obtained in such actions to the Collateral Agent and/or
      Lenders.  Further, the Company agrees (i) that it will not
      settle such litigation without the Collateral Agent’s and Lenders consent,
      and (ii) all proceeds of the Excluded Assets shall be remitted to the
      Collateral Agent for the benefit of the Lenders in accordance with the
      instructions set forth on Exhibit “F” attached
  hereto.

              

      

       

      
        	
                (m)  

              	
                The
      Vendors confirm and reaffirm that the consideration set forth in the APA
      is the only consideration being paid by Bendix, or on Bendix behalf, in
      connection with the Sale, and that no fees, commissions, or other amounts,
      or any other consideration, are being paid to the Vendors or any of the
      Lenders, or any of their respective officers or directors, in connection
      with the Sale, except as expressly set forth in this
      Agreement.

              

      

       

      Guarantee and Grant of
Security Interest by Subsidiaries

       

      
        	
                7.  

              	
                In
      consideration of the Lenders consenting to the Sale, and permitting the
      Vendors to pay the Budgeted Expenses with the proceeds of the Lenders’
      collateral, the Subsidiaries hereby guarantee to the Collateral Agent, for
      the benefit of all of the Lenders, the payment and performance of the
      Obligations, and grant the Collateral Agent, for the benefit of all of the
      Lenders, a security interest in and to all of their personal
      property.  In order to further evidence this grant of a security
      interest, each of the Subsidiaries have executed and delivered to the
      Collateral Agent a Guarantee and a Security Agreement of even date
      herewith.  Such Guarantees and Security Agreements shall
      constitute Financing Documents as defined
  hereunder.

              

      

       

      Disposition of Remaining
Collateral

       

      
        	
                8.  

              	
                From
      and after the earlier of the occurrence of a Termination Event, or the
      Termination Date, but only to the extent that any Obligations remain
      unpaid, any collateral of the Lenders which remains may be disposed of by
      the Collateral Agent and/or Lenders, as appropriate, in such manner as the
      Collateral Agent and/or Lenders, in their sole and exclusive discretion,
      but subject to applicable law, may determine.  The Vendors shall
      execute and deliver to the Collateral Agent and/or Lenders, as applicable,
      whatever assents and waivers that the Lenders may require in connection
      with any such secured party’s sale or other disposition, and shall
      reasonably cooperate with the Collateral Agent and Lenders in connection
      with their efforts to liquidate any remaining assets of the Vendors and/or
      collect any outstanding accounts receivable.  In connection
      therewith, the Vendors hereby:

              

      

       

      
        	
                (a)  

              	
                Acknowledge
      and agree that the Lenders may apply the proceeds realized from the
      disposition of the collateral in reduction of the Obligations in such
      manner as the Lenders, in their sole and exclusive discretion, may
      determine;

              

      

       

      
        	
                (b)  

              	
                Acknowledge
      and agree that the Vendors are, and shall be, liable to the Lenders for
      any deficiency which remains after the disposition of all or any portion
      of the collateral; and

              

      

       

      
        	
                (c)  

              	
                Acknowledge
      and agree that (i) nothing herein shall require the Collateral Agent
      and/or the Lenders to take possession of, sell by secured party sale, or
      otherwise dispose of the collateral, and (ii) the Collateral Agent and/or
      the Lender may exercise its rights and remedies to collect the Obligations
      from the Vendors without resort, or regard, to the
    collateral.

              

      

       

      Power of
Attorney

       

      
        	
                9.  

              	
                Each
      Vendor hereby appoints the Collateral Agent as its attorney-in-fact, with
      full authority in the place and stead of such Vendor and in the name of
      each Vendor or otherwise, from time to time in the Collateral Agent’s
      discretion to take any action and to execute any instrument which the
      Collateral Agent may reasonably deem necessary to accomplish the purposes
      of this Agreement or for the purpose of perfecting, confirming, continuing
      , enforcing or protecting the security interest in the collateral held by
      the Collateral Agent and/or the Lenders, including, without limitation, to
      (a) receive and collect all payments, or instruments made payable, to the
      Vendors under the APA or otherwise or any part thereof and to give full
      discharge for the same, (b) to exercise any and all of the Vendors rights
      under the APA, and to take all actions to preserve, protect, and/or
      enforce the same, and/or (c) demand, collect, receipt for, settle,
      compromise, adjust, sue for, foreclose, or realize on any collateral as
      and when the Collateral Agent may determine.  The foregoing
      power of attorney is a power coupled with an interest and shall be
      irrevocable until all Obligations are paid and performed in
      full.  The Vendors agree that the powers conferred on the
      Collateral Agent hereunder are solely to protect the Collateral Agent’s
      and Lenders’ interests in the Collateral and shall not impose any duty
      upon the Collateral Agent to exercise any such
  powers.

              

      

       

      Interest Rate; Repayment of
Obligations

       

      
        	
                10.  

              	
                From
      and after the execution of this Agreement, interest shall accrue upon, and
      the Obligations shall be repaid, as
follows:

              

      

       

      
        	
                (a)  

              	
                Interest
      shall continue to accrue upon the principal balance of the Obligations at
      the applicable non-default rate set forth in the Financing
      Documents;

              

      

       

      
        	
                (b)  

              	
                All
      proceeds of the Sale, net of any amounts necessary to pay Budgeted
      Expenses, shall be applied in reduction of the Obligations in a manner
      determined by the Lenders in their sole and exclusive
      discretion;

              

      

       

      
        	
                (c)  

              	
                After
      payment of all reasonable and necessary Budgeted Expenses actually
      incurred by the Vendors, all remaining cash and other funds of the
      Vendors, and all other proceeds of the Lenders’ collateral, shall be
      applied in reduction of the Obligations in a manner determined by the
      Lenders in their sole and exclusive
discretion;

              

      

       

      
        	
                (d)  

              	
                All
      Obligations shall be paid in full, in good and collected funds, upon the
      earlier of (i) the occurrence of a Termination Event, or (ii) the
      Termination Date; and

              

      

       

      
        	
                (e)  

              	
                Any
      and all payments hereunder shall be made to the Collateral Agent for the
      benefit of the Lenders in accordance with the instructions set forth on
      Exhibit “F” attached hereto.

              

      

       

      Forbearance by
Lenders

       

      
        	
                11.  

              	
                In
      consideration of the Vendors’ performance in accordance with this
      Agreement, the Lenders shall forbear from enforcing the Lenders’ rights
      and remedies under the Transaction Documents and/or applicable law against
      the Vendors, until the earlier of (i) the occurrence of a Termination
      Event, or (ii) the Termination Date. Notwithstanding the foregoing,
      nothing contained in this Agreement shall constitute a waiver by the
      Lenders of any default or event of default (including, without limitation,
      the Existing Defaults) under the Financing Documents, whether now existing
      or hereafter arising, nor a waiver by the Lenders of any of their claims,
      rights, and/or remedies with respect to any of the Vendors or any other
      third party under the Transaction Documents, applicable law, or
      otherwise.  This Agreement shall only constitute an agreement by
      the Lenders to forbear from enforcing their rights and remedies upon the
      terms and conditions set forth
herein.

              

      

       

      Termination
Events

       

      
        	
                12.  

              	
                The
      occurrence of any one or more of the following events shall constitute a
      termination event (hereinafter, a “Termination Event”)
      under this Agreement:

              

      

       

      
        	
                (a)  

              	
                The
      filing of a petition for relief by or against any of the Vendors under any
      insolvency law, including the United States Bankruptcy Code, Bankruptcy or
      Insolvency Act (Canada), Companies Creditors Arrangement Act
      (Canada), or other insolvency statute or
  proceeding;

              

      

       

      
        	
                (b)  

              	
                The
      waiver, modification or amendment of any of the terms and conditions of
      the APA without the Lenders prior written
  consent;

              

      

       

      
        	
                (c)  

              	
                The
      Vendors and Bendix fail to consummate the Sale in accordance with the
      terms of the APA on or before December 12,
2008;

              

      

       

      
        	
                (d)  

              	
                The
      APA and/or the Sale is cancelled, terminated, revoked, voided, or
      rescinded for any reason;

              

      

       

      
        	
                (e)  

              	
                The
      Vendors shall pay any expenses which are not Budgeted Expenses, or
      otherwise fail to comply with the
Budget;

              

      

       

      
        	
                (f)  

              	
                The
      issuance of an attachment, injunction, restraining order, or other order
      of any court of competent jurisdiction or government authority enjoining,
      restraining, or otherwise restricting the ability of the Vendors to
      consummate the Sale or to obtain a shareholder resolution ratifying the
      same;

              

      

       

      
        	
                (g)  

              	
                The
      failure of the Vendors to conduct the wind-down of their operations
      substantially in accordance with the Wind-Down
  Plan;

              

      

       

      
        	
                (h)  

              	
                The
      failure of the Vendors to promptly, punctually, or faithfully perform any
      term or condition of this Agreement as and when due, it being expressly
      acknowledged and agreed that TIME IS OF THE
      ESSENCE;

              

      

       

      
        	
                (i)  

              	
                The
      failure of the Vendors to pay any amount required to be paid to the
      Lenders under this Agreement as and when due, it being expressly
      acknowledged and agreed that TIME IS OF THE ESSENCE;
      and

              

      

       

      
        	
                (j)  

              	
                The
      failure of the Vendors to pay all Obligations in full on or before 5:00
      p.m. on the Termination Date, it being expressly acknowledged and agreed
      that TIME IS OF THE
      ESSENCE.

              

      

       

      Rights Upon
Termination

       

      
        	
                13.  

              	
                Upon
      the earlier of the occurrence of any Termination Event or the Termination
      Date, the Lenders’ forbearance as set forth in this Agreement shall
      automatically terminate, all Obligations shall become immediately due and
      payable in full, and the Collateral Agent and the Lenders may immediately
      commence enforcing their rights and remedies against the Vendors pursuant
      to the Transaction Documents and/or applicable law.  Further,
      upon the occurrence of any Termination Event, interest shall accrue on the
      outstanding balance of the Obligations at the default rate of interest set
      forth in the Financing Documents.

              

      

       

      Reimbursement of Costs and
Expenses

       

      
        	
                14.  

              	
                Any
      and all reasonable out-of-pocket costs, expenses, and costs of collection
      (including reasonable attorneys’ fees and expenses) heretofore or
      hereafter incurred by the Lenders in connection with the protection,
      preservation, and enforcement by the Collateral Agent and/or the Lenders
      of their rights and remedies under the Financing Documents and this
      Agreement, including, without limitation, the negotiation and preparation
      of this Agreement, shall be added to, and be a part of, the
      Obligations.

              

      

       

      Notices

       

      
        	
                15.  

              	
                Unless
      otherwise specified herein, all notices hereunder to any party hereto
      shall be in writing and (i) hand delivered, or (ii) sent by a recognized
      overnight courier, addressed to such party at its address indicated
      below:

              

      

       

      
        	
                (a)  

              	
                If
      to the Collateral Agent or the Lenders, to
both:

              

      

       

      YA Global
Investments, L.P.

       

      c/o
Yorkville Advisors, LLC

       

      101
Hudson Street Suite 3700

       

      Jersey
City, NJ 07302

       

      Attn:  Michael
Schreck

       

      and

       

      Starome  Investments
Limited

       

      c/o
Prentice Capital Management, LP

       

      623 Fifth
Avenue, 32nd Floor

       

      New York,
NY 10022

       

      Attn:
Mathew Hoffman, Esquire

       

      With a
copy to:

       

      Douglas
K. Clarke, Esquire

       

      Riemer
& Braunstein LLP

       

      3 Center
Plaza

       

      Boston,
MA 02108

       

      Fax No.
(617) 692-3485

       

      
        	
                (b)  

              	
                If
      to the Vendors:

              

      

       

      SmarTire
Systems Inc.

       

      5781 Lee
Boulevard, Suite 208

       

      Box
#243

       

      Lehigh
Acres, FL 33971

       

      U.S.A.

       

      Attention:
David Dodge

       

      With a
copy to:

       

      Clark
Wilson LLP

       

      800 – 885
West Georgia Street

       

      Vancouver,
B.C. V6M 3R9

       

      Attention:
Bernard Pinsky

       

      Fax No.
(604) 687-6414

       

      or at any
other address specified by such party in writing upon seven (7) days written
notice to the other parties.  Any such notice shall be treated as
having been given upon the earlier of (i) actual receipt (by any method of
delivery) by the person to whom the notice is addressed, or (ii) upon delivery
to such address (or refusal to accept delivery).

       

      Waivers

       

      
        	
                16.  

              	
                Non-Interference.  From
      and after the occurrence of any Termination Event, the Vendors agree not
      to interfere with the exercise by the Collateral Agent and/or the Lenders
      of any of their rights and remedies.  The Vendors further agree
      that they shall not seek to distrain or otherwise hinder, delay, or impair
      the Collateral Agent’s and/or Lenders’ efforts to realize upon their
      collateral, or otherwise to enforce their respective rights and remedies
      pursuant to the Transaction Documents.  The provisions of this
      Paragraph shall be specifically enforceable by the Collateral Agent and
      the Lenders.

              

      

       

      
        	
                17.  

              	
                Jury
      Trial.  Each of the Vendors hereby makes the following
      waiver knowingly, voluntarily, and intentionally, and understands that the
      Collateral Agent and the Lenders, in entering into this Agreement, are
      relying on such a waiver:  THE VENDORS HEREBY IRREVOCABLY
      WAIVE ANY PRESENT OR FUTURE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
      CONTROVERSY IN WHICH THE COLLATERAL AGENT OR THE LENDERS OR ANY ONE OF
      THEM BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR
      AGAINST SUCH PARTY OR IN WHICH SUCH PARTY IS JOINED AS A PARTY LITIGANT),
      WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF, THE
      OBLIGATIONS, THE TRANSACTION DOCUMENTS, THE SALE, OR ANY RELATED
      MATTER.

              

      

       

      Entire
Agreement

       

      
        	
                18.  

              	
                This
      Agreement shall be binding upon the Vendors and the Vendors’ respective
      successors, and assigns, and shall inure to the benefit of the Collateral
      Agent, the Lenders and their respective successors and
      assigns.  This Agreement and all documents, instruments, and
      agreements executed in connection herewith incorporate all of the
      discussions and negotiations between the parties hereto, either expressed
      or implied, concerning the matters included herein and in such other
      documents, instruments and agreements, any statute, custom, or usage to
      the contrary notwithstanding.  No such discussions or
      negotiations shall limit, modify, or otherwise affect the provisions
      hereof.  No modification, amendment, or waiver of any provision
      of this Agreement, or any provision of any other document, instrument, or
      agreement between the parties hereto shall be effective unless executed in
      writing by all of the parties hereto, and if such party be the Collateral
      Agent or a Lender, then by a duly authorized representative
      thereof.

              

      

       

      Venue

       

      
        	
                19.  

              	
                The
      Vendors agree that any legal action, proceeding, case, or controversy
      against the Vendors or any one of them with respect to the Obligations,
      the Transaction Documents, or any related matter may be brought in any
      Federal or state court located in the State of New Jersey, or the Supreme
      court located in the Province of British Columbia, as the Lenders may
      elect in their sole discretion.  By execution and delivery of
      this Agreement, the Vendors, for themselves and in respect of their
      property, accept, submit, and consent generally and unconditionally, to
      the jurisdiction of the aforesaid
courts.

              

      

       

      Construction of
Agreement

       

      
        	
                20.  

              	
                In
      connection with the interpretation of this Agreement and all other
      documents, instruments, and agreements incidental
  hereto:

              

      

       

      
        	
                (a)  

              	
                All
      rights and obligations hereunder and thereunder, including matters of
      construction, validity, and performance, shall be governed by and
      construed in accordance with the law of the State of New Jersey and are
      intended to take effect as sealed
instruments.

              

      

       

      
        	
                (b)  

              	
                The
      captions of this Agreement are for convenience purposes only, and shall
      not be used in construing the intent of the parties under this
      Agreement.

              

      

       

      
        	
                (c)  

              	
                In
      the event of any inconsistency between the provisions of this Agreement
      and any other document, instrument, or agreement entered into by and
      between the parties hereto, the provisions of this Agreement shall govern
      and control.

              

      

       

      
        	
                (d)  

              	
                The
      parties have prepared this Agreement and all documents, instruments, and
      agreements incidental hereto with the aid and assistance of their
      respective counsel.  Accordingly, all of them shall be deemed to
      have been jointly drafted by the parties and shall not be construed
      against any one party.

              

      

       

      Illegality or
Unenforceability

       

      
        	
                21.  

              	
                Any
      determination that any provision or application of this Agreement is
      invalid, illegal, or unenforceable in any respect, or in any instance,
      shall not affect the validity, legality, or enforceability of any such
      provision in any other instance, or the validity, legality, or
      enforceability of any other provision of this
  Agreement.

              

      

       

      Informed
Execution

       

      
        	
                22.  

              	
                The
      Vendors warrant and represent to the Lenders that the
    Vendors:

              

      

       

      
        	
                (a)  

              	
                Have
      read and understand all of the terms and conditions of this
      Agreement;

              

      

       

      
        	
                (b)  

              	
                Intend
      to be bound by the terms and conditions of this Agreement;
    and

              

      

       

      
        	
                (c)  

              	
                Are
      executing this Agreement freely and voluntarily, without duress, after
      consultation with independent counsel of their own
    selection.

              

      

       

      

       

      [Remainder
of Page Intentionally Left Blank - Signature Page to Follow]

       

      

       

      IN WITNESS WHEREOF, this
Liquidation Agreement has been executed as of the date first set forth
above.

       

      

       

      
        	
                YA
      GLOBAL INVESTMENTS, L.P., as Collateral Agent and as a Lender

                By:           Yorkville
      Advisors LLC, its InvestmentManager

                By:
      /s/ Mark Angelo

                Name:
      Mark Angelo

                Title:
      Portfolio Manager

              	
                SMARTIRE
      SYSTEMS INC.

                 

                By:
      /s/ David Warkentin

                Name:                      David
      Warkentin

                Title:  CEO

              
	
                XENTENIAL
      HOLDINGS LIMITED, as a Lender

                 

                By:
      /s/ Mark Angelo

                Name:
      Mark Angelo

                Title:
      Director

              	
                SMARTIRE
      TECHNOLOGIES INC.

                 

                By:
      /s/ David Warkentin

                Name:                      David
      Warkentin

                Title:  CEO

              
	
                STARAIM
      ENTERPRISES LIMITED, as Lender

                 

                By:
      /s/ Mark Angelo

                Name:
      Mark Angelo

                Title:
      Director

              	
                SMARTIRE
      USA, INC.

                 

                By:
      /s/ David Warkentin

                Name:                      David
      Warkentin

                Title:  CEO

              
	
                STAROME
      INVESTMENTS LIMITED, as a Lender

                 

                By:
      /s/ Matthew Hoffman

                Name:
      Matthew Hoffman

                Title:
      Authorized Signatory

              	 
      

      

      

       

      Exhibit
“A”

       

      Financing
Documents

       

      1.           Securities
Purchase Agreement dated as of May 20, 2005 by and between the Company and YA
Global (“May 05 SPA”);

       

      2.           Securities
Purchase Agreement dated as of June 23, 2005 by and among the Company, YA
Global, and Highgate House Funds, LTD, as amended by that certain Amendment No.
1 to Securities Purchase Agreement dated as of December 30, 2005, by and among
the Company, the Lenders, and LCC Global Limited (“June 05 SPA”);

       

      3.           Securities
Purchase Agreement dated as of January 23, 2007 by and between the Company and
Xentenial, as amended by that certain Amendment to Securities Purchase Agreement
dated as of February 9, 2007, and as further amended by that certain Amendment
to Securities Purchase Agreement dated as of on March 2, 2007 (“January 07
SPA”);

       

      4.           Securities
Purchase Agreement dated as of April 27, 2007 by and between the Company and
Xentenial (“April 07 SPA”);

       

      5.           Securities
Purchase Agreement dated as of November 19, 2007 by and among the Company and
Xentenial (“November 19, 2007 SPA”);

       

      6.           Securities
Purchase Agreement dated as of November 30, 2007 by and between the Company and
Xentenial (“November 30, 2007 SPA”);

       

      7.           Amended
and Restated Convertible Debenture dated as of March 27, 2005 issued by the
Company in favor of Staraim pursuant to the May 05 SPA in the original principal
amount of $600,000 (“$600K Debenture”);

       

      8.           Amended
and Restated Convertible Debenture dated as of December 30, 2005 issued by the
Company in favor of Starome pursuant to the June 05 SPA in the original
principal amount of $20,000,000 (“$20M Debenture”);

       

      9.           Amended
and Restated Convertible Debenture dated as of June 10, 2005 issued by the
Company in favor of YA Global pursuant to the May 05 SPA in the original
principal amount of $1,500,000 (“$1.5M Debenture”);

       

      10.           Amended
and Restated Convertible Debenture dated as of December 30, 2005 issued by the
Company in favor of Xentenial pursuant to the June 05 SPA in the original
principal amount of $8,000,000 as amended by that certain Amendment No. 1 to
Smartire Systems Inc. Amended and Restated Convertible Debenture No. 2 dated as
of December 30, 2006 and effective as of August 16, 2007, as further amended by
that certain Amendment No. 2 to Smartire Systems Inc. Amended and Restated
Convertible Debenture No. 2 effective as of November 7, 2006 (“$8M
Debenture”);

       

      11.           Amended
and Restated Convertible Debenture dated as of December 30, 2005 issued by the
Company in favor of Staraim pursuant to the June 05 SPA in the original
principal amount of $2,000,000, as amended by that certain Amendment No. 1 to
Smartire Systems Inc. Amended and Restated Convertible Debenture No. 3 dated as
of December 30, 2006 and effective as of August 16, 2007, as further amended by
that certain Amendment No. 2 to Smartire Systems Inc. Amended and Restated
Convertible Debenture No. 3 effective as of November 7, 2006 (“$2M
Debenture”);

       

      12.           Convertible
Debenture dated as of January 23, 2007 issued by the Company in favor of
Xentenial pursuant to the January 07 SPA in the original principal amount of
$684,000 (“$684K Debenture”);

       

      13.           Convertible
Debenture dated as of February 9, 2007 issued by the Company in favor of
Xentenial pursuant to the January 07 SPA in the original principal amount of
$334,000 (“$334K Debenture”);

       

      14.           Convertible
Debenture dated as of March 2, 2007 issued by the Company in favor of Xentenial
pursuant to the January 07 SPA in the original principal amount of $782,000
(“$782K Debenture”);

       

      15.           Convertible
Debenture dated as of April 27, 2007 issued by the Company in favor of Xentenial
pursuant to the April 07 SPA in the original principal amount of $1,150,000
(“$1.15M Debenture”);

       

      16.           Convertible
Debenture dated as of November 19, 2007 issued by the Company in favor of
Xentenial pursuant to the November 19, 2007 SPA in the original principal amount
of $96,500 (“$96K Debenture”);

       

      17.           Convertible
Debenture dated as of November 30, 2007 issued by the Company in favor of
Xentenial pursuant to the November 30, 2007 SPA in the original principal amount
of $422,000 (“$422K Debenture”);

       

      18.           Convertible
Debenture dated as of August 20, 2007 issued by the Company in favor of
Xentenial pursuant to the April 07 SPA in the original principal amount of
$350,000 (“$350K Debenture”);

       

      19.           Convertible
Debenture dated as of January 17, 2008 issued by the Company in favor of
Xentenial pursuant to the November 30, 2007 SPA in the original principal amount
of $392,000 (“$392K Debenture”);

       

      20.           Convertible
Debenture dated as of February 20, 2008 issued by the Company in favor of
Xentenial pursuant to the November 30, 2007 SPA in the original principal amount
of $74,000 (“$74K Debenture”);

       

      21.           Convertible
Debenture dated as of June 20, 2008 issued by the Company in favor of Xentenial
pursuant to the November 30, 2007 SPA in the original principal amount of
$269,000 (“$269K Debenture”);

       

      22.           Convertible
Debenture dated as of August 1, 2008 issued by the Company in favor of Xentenial
pursuant to the November 30, 2007 SPA in the original principal amount of
$152,500 (“$152K Debenture”);

       

      23.           Convertible
Debenture dated as of August 15, 2008 issued by the Company in favor of
Xentenial pursuant to the November 30, 2007 SPA in the original principal amount
of $100,000 (“$100K Debenture”);

       

      24.           Warrant
dated as of November 30, 2007 executed and delivered to Xentenial by the Company
granting Xentenial the right to purchase 225,000,000 shares of the Company’s
common stock;

       

      25.           Warrant
dated as of December, 2005 executed and delivered to Staraim by the Company
granting Staraim the right to purchase 4,162,500 shares of the Company’s common
stock;

       

      26.           Warrant
dated as of January 17, 2008 executed and delivered to Xentenial by the Company
granting Xentenial the right to purchase 225,000,000 shares of the Company’s
common stock;

       

      27.           Warrant
dated as of February 20, 2008 executed and delivered to Xentenial by the Company
granting Xentenial the right to purchase 41,925,000 shares of the Company’s
common stock;

       

      28.           Amended
and Restated Warrant dated as of June 23, 2005 executed and delivered to
Xentenial by the Company granting Xentenial the right to purchase 16,668,750
shares of the Company’s common stock;

       

      29.           Security
Agreement (Patent) dated as of April 27, 2007 granted by the Company in favor of
the Lenders; and

       

      30.           Security
Agreement dated as of January 23, 2007 granted by the Company in favor of the
Lenders, as amended by that certain Amendment No. 1 to Security Agreement dated
as of April 27, 2007.

       

      31.           Amended
and Restated Warrant dated as of December 30, 2005 executed and delivered to
Starome by the Company granting Starome the right to purchase 41,668,750 shares
of the Company’s common stock;

       

      

       

      Exhibit
“B”

       

      Asset
Purchase Agreement

       

      Exhibit
“C”

       

      Obligations

       

      Amounts
owed under the following documents as of December 1, 2008 (rounded to nearest
dollar):

      

      
        	
                1.  

              	
                The
      $20M Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $19,202,198

              

      

       

      
        	
                b.  

              	
                Interest:                      $6,170,423

              

      

       

      
        	
                c.  

              	
                Total:                                $25,372,621

              

      

       

      
        	
                2.  

              	
                The
      $600K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $600,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $107,583

              

      

       

      
        	
                c.  

              	
                Total:                                $707,583

              

      

       

      
        	
                3.  

              	
                The
      $1.5M Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $820,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $150,908

              

      

       

      
        	
                c.  

              	
                Total:                                $970,908

              

      

       

      
        	
                4.  

              	
                The
      $2M Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $1,415,400

              

      

       

      
        	
                b.  

              	
                Interest:                      $567,034

              

      

       

      
        	
                c.  

              	
                Total:                                $1,982,434

              

      

       

      
        	
                5.  

              	
                The
      $8M Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $7,100,025

              

      

       

      
        	
                b.  

              	
                Interest:                      $2,509,084

              

      

       

      
        	
                c.  

              	
                Total:                                $9,609,109

              

      

       

      
        	
                6.  

              	
                The
      $684K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $684,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $128,820

              

      

       

      
        	
                c.  

              	
                Total:                                $812,820

              

      

       

      
        	
                7.  

              	
                The
      $334K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $334,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $61,326

              

      

       

      
        	
                c.  

              	
                Total:                                $395,326

              

      

       

      
        	
                8.  

              	
                The
      $782K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $782,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $139,022

              

      

       

      
        	
                c.  

              	
                Total:                                $921,022

              

      

       

      
        	
                9.  

              	
                The
      $1.15M Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $1,150,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $186,556

              

      

       

      
        	
                c.  

              	
                Total:                                $1,336,556

              

      

       

      
        	
                10.  

              	
                The
      $350K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $350,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $45,597

              

      

       

      
        	
                c.  

              	
                Total:                                $395,597

              

      

       

      
        	
                11.  

              	
                The
      $96K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $95,500

              

      

       

      
        	
                b.  

              	
                Interest:                      $10,133

              

      

       

      
        	
                c.  

              	
                Total:                                $106,633

              

      

       

      
        	
                12.  

              	
                The
      $422K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $422,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $51,625

              

      

       

      
        	
                c.  

              	
                Total:                                $473,625

              

      

       

      
        	
                13.  

              	
                The
      $392K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $392,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $41,683

              

      

       

      
        	
                c.  

              	
                Total:                                $433,683

              

      

       

      
        	
                14.  

              	
                The
      $74K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $74,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $7,030

              

      

       

      
        	
                c.  

              	
                Total:                                $81,030

              

      

       

      
        	
                15.  

              	
                The
      $269K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $269,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $14,705

              

      

       

      
        	
                c.  

              	
                Total:                                $283,705

              

      

       

      
        	
                16.  

              	
                The
      $152K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $152,500

              

      

       

      
        	
                b.  

              	
                Interest:                      $6,202

              

      

       

      
        	
                c.  

              	
                Total:                                $158,702

              

      

       

      
        	
                17.  

              	
                The
      $100K Debenture:

              

      

       

      
        	
                a.  

              	
                Principal:                      $100,000

              

      

       

      
        	
                b.  

              	
                Interest:                      $3,600

              

      

       

      
        	
                c.  

              	
                Total:                                $103,600

              

      

       

      

       

      

       

      

       

      

       

      Exhibit
“D”

       

      Wind-Down
Plan and Budget

       

      Exhibit
“E”

       

      Bridge
Note

       

       

      

       

       

      BRIDGE
NOTE

       

      

      

      $762,532.00                                                                                                     As
of December __, 2008

       

      

       

      Smartire
Systems Inc., a corporation incorporated under the laws of the Province of
British Columbia, Smartire Technologies Inc., a corporation incorporated under
the laws of the Province of British Columbia, and Smartire USA, Inc., a
corporation incorporated under the laws of the State of Delaware (collectively,
jointly, and severally, the “Borrowers”), hereby
promise to pay to the order of YA GLOBAL INVESTMENTS, L.P. (“YA Global”), at the
office of YA Global at 101 Hudson Street, Suite 3700, Jersey City, New Jersey
07303, in lawful money of the United States and in immediately available funds,
the principal sum of SEVEN HUNDRED AND SIXTY-TWO THOUSAND FIVE HUNDRED AND
THIRTY-TWO DOLLARS ($762,532.00).

                 This
Note is the Bridge Note referred to in that certain Liquidation Agreement, dated
as of the date hereof, between the Borrowers, YA Global as Collateral Agent and
as a Lender, and Xentenial Holdings Limited, Staraim Enterprises Limited, and
Starome Investments Limited as Lenders (as such agreement may be amended from
time to time the “Liquidation
Agreement”), and is subject to repayment upon the terms contained in the
Liquidation Agreement. Capitalized terms used herein shall be defined as in the
Liquidation Agreement.

      

                 The
outstanding unpaid principal balance of this Note shall bear interest at the
rate of fourteen percent (14.0%) per annum.  Interest shall be
calculated on the basis of a year of 360 days, for the actual number of days
elapsed, and shall be repaid in accordance with the terms of the Liquidation
Agreement.

      

                 If
any payment on this Note becomes due and payable on a day which is not a
Business Day, such payment shall be extended to the next succeeding day on which
those offices are open, and if the date for any payment of principal is so
extended, interest thereon shall be payable for the extended time.

      

                 The
Borrowers hereby waive diligence, presentment, protest and notice of any kind,
and assent to extensions of the time of payment, release, surrender or
substitution of security, or forbearance or other indulgence, without
notice.

      

                 This
Note may not be changed, modified or terminated orally, but only by an agreement
in writing signed by the Borrowers and YA Global, or any holder
hereof.

      

                 This
Note shall be governed by, and construed in accordance with, the laws of the
State of New Jersey, and shall be binding upon the successors and assigns of the
Borrowers and inure to the benefit of YA Global, its successors, endorsees and
assigns. If any term or provisions of this note shall be held invalid, illegal
or unenforceable, the validity of all other terms and provisions thereof shall
in no way be affected thereby.

      

      This Note is secured by all collateral
granted to the Collateral Agent and/or the Lenders by the Borrowers under the
Financing Documents, the Liquidation Agreement, or otherwise.

      Executed
under seal as of the date first set forth above.

       

      

      
        	
                SMARTIRE
      SYSTEMS INC.

                 

                By:__________________________________

                Name:

                Title:

              
	
                SMARTIRE
      TECHNOLOGIES INC.

                 

                By:__________________________________

                Name:

                Title:

              
	
                SMARTIRE
      USA, INC.

                 

                By:__________________________________

                Name:

                Title:

              

      

      

      

       

      1120287.1

      Exhibit
“F”

       

      Payment
Instructions

       

      

       

      Payments
via wire shall be remitted in accordance with the following
instructions:

       

      Name of
Account :        Riemer & Braunstein
LLP

       
Clients Trust Fund

      

      Account
Number:        
000053776978

      

      
        	
                 
      

              	
                Bank:                           
      Bank of America

              

      

      
        	
                 
      

              	
                                               
           100 Federal
Street

              

      

      
        	
                 
      

              	
                                                    
      Boston, MA  02110

              

      

      

      Transit
Number:          
0260-0959-3

      

       

      All other
payments shall be remitted to the following address:

       

      Riemer
& Braunstein LLP

       

      3 Center
Plaza

       

      Boston,
Massachusetts 02108

       

      Attention:  Douglas
K. Clarke, Esquire

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