EQUITY LINE OF CREDIT AGREEMENT

AGREEMENT dated as of the 19 day of February 2003 (the "Agreement") between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the "Investor"), and SMARTIRE SYSTEMS INC., a corporation organized and existing under the laws of the Yukon (the "Company").

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company up to Five Million ($5,000,000) Dollars of the Company's common stock, no par value per share (the "Common Stock"); and

WHEREAS, such investments will be made in reliance upon the provisions of:

1. Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended, (the "Securities Act").and,

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

WHEREAS, the Company has engaged TN Capital Equities, Ltd. to act as the Company's exclusive placement agent in connection with the sale of the Company's Common Stock to the Investor hereunder.

NOW, THEREFORE, the parties hereto agree as follows:

Section "Advance" shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.

Section "Advance Date" shall mean the date Butler Gonzalez LLP/Wachovia Bank, N.A. Escrow Account is in receipt of the funds from the Investor and Butler Gonzalez LLP, as the Investor's Counsel, is in possession of free trading shares from the Company and therefore an Advance by the Investor to the Company can be made and Butler Gonzalez LLP can release the free trading shares to the Investor. No Advance Date shall be less than six (6) Trading Days after an Advance Notice Date.

Section "Advance Notice" shall mean a written notice to the Investor setting forth the Advance amount that the Company requests from the Investor and the Advance Date.

Section "Advance Notice Date" shall mean each date the Company delivers to the Investor an Advance Notice requiring the Investor to advance funds to the Company, subject to the terms of this Agreement. No Advance Notice Date shall be less than seven (7) Trading Days after the prior Advance Notice Date.

Section "Bid Price" shall mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or if the Common Stock is not traded on a Principal Market, the highest reported bid price for the Common Stock, as furnished by the National Association of Securities Dealers, Inc. (the "NASD").

Section "Closing" shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.3.

Section "Commitment Amount" shall mean the aggregate amount of up to Five Million Dollars ($5,000,000) which the Investor has agreed to provide to the Company in order to purchase the Company's Common Stock pursuant to the terms and conditions of this Agreement.

Section "Commitment Period" shall mean the period commencing on the earlier to occur of (i) the Effective Date, or (ii) such earlier date as the Company and the Investor may mutually agree in writing, and expiring on the earliest to occur of (x) the date on which the Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of Five Million Dollars ($5,000,000), (y) the date this Agreement is terminated pursuant to Section 2.4, or (z) the date occurring twenty-four (24) months after the Effective Date.

Section "Common Stock" shall mean the Company's common stock, no par value per share.

Section "Condition Satisfaction Date" shall have the meaning set forth in Section 8.2.

Section "Damages" shall mean any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorney's fees and disbursements and costs and expenses of expert witnesses and investigation).

Section "Effective Date" shall mean the date on which the SEC first declares effective a Registration Statement registering the resale of the Registrable Securities as set forth in Section 8.2 (a) .

Section "Escrow Agreement" shall mean the escrow agreement among the Company, the Investor, the Investor's Counsel and Wachovia Bank, N.A. dated the date hereof.

Section "Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Section "Material Adverse Effect" shall mean any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement or the Registration Rights Agreement in any material respect.

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