Private and Confidential

Portions of this document have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a Request for Confidential
Treatment. Redacted portions are indicated with the notation:****

MASTER DISTRIBUTION AGREEMENT

made the 17th day of October, 2003

BETWEEN:

SmarTire Systems Inc. ("SmarTire"), a corporation incorporated under the laws of
Yukon Territory whose registered office is at Suite 150, 13151 Vanier Place,
Richmond, British Columbia, Canada, V6V 2J1

and

Beijing Boom Technology Co. Ltd. ("Distributor"), a company incorporated under
the laws of Peoples Republic of China whose registered office is located at
Guangming Tower, Liangmaqiao Road, Chaoyang District, Beijing

.

WHEREAS:

SmarTire

is in the business of developing, manufacturing, and selling Tire Pressure
Monitoring Systems and related devices, and;

Beijing Boom

is interested in establishing a distributorship and marketing relationship that
is mutually beneficial for the distribution and marketing of SmarTire products
in the People's Republic of China (the "Territory"), and;

SmarTire wishes to appoint the Distributor as a Master Distributor for the
promotion and sale of its Products within the Market Sector in the Territory in
accordance with the terms of this Agreement.

IT IS HEREBY AGREED

as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 In this Agreement unless the context otherwise requires, the following words
shall have the following meanings:

"Agreement" means this agreement including the schedules to it;

"Commencement Date" means October 9th, 2003;

"Confidential Information" means any information of a technical or commercial
nature relating to the business or affairs of either party, whether or not such
information is marked or otherwise

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Private and Confidential

expressed to be "confidential" or similar, and whether such information is
disclosed by one party to the other prior to or during the term of this
Agreement;

"Certified Dealer"

is a Dealer that has been trained by Beijing Boom to sell, install, and program
Products and provide local technical support, all to the standard required of
Distributor in this Agreement.

"Master Distributor" is a preferred organization with infrastructure and capital
necessary to service a large or complex geographic territory.

"Market Sector" means the "Market Sector" as described in Schedule 1;

"Products" means the SmarTire products listed in Schedule 1 or any updates
thereto;

"Quarter" means a calendar quarter;

"Territory" means the "Territory" as described in Schedule 1; and

"Trade Marks" means the trademarks identified in Schedule 2.

1.2 References to Clauses and Schedules are to the clauses and schedules of this
Agreement. Headings are for ease of reference only and shall not affect the
interpretation of this Agreement. Use of the plural shall include the singular
and vice versa and use of the masculine, feminine or neuter gender shall be
immaterial.

2. APPOINTMENT

2.1 SmarTire appoints the Distributor as a Master Distributor and the
Distributor accepts such appointment as SmarTire's Distributor in the Territory
in respect of the Market Sector to purchase Products from SmarTire and resell
the same in the Territory to customers in the Market Sector.

2.2 The Master Distributor is responsible for all shipping and receiving of
Products into the Territory and for providing a warranty and service program for
customers. To qualify for a Master Distributorship, the candidate must prove its
ability to service the market and purchase an initial stocking order of no less
than 12000 Products in the first year and 28000 Products in the second year.

2.3 Subject to the continuing obligations of the Distributor in this Agreement,
SmarTire agrees that it will not appoint another Master Distributor in the
Territory for two years from date of this Agreement.

2.4 The Distributor shall purchase the Products only from SmarTire.

2.5 The Distributor shall not manufacture or distribute during the term of this
Agreement any goods or services that compete with the Products.

2.6 The Distributor shall not seek customers outside the Territory or outside of
the Market Sector for the Products or establish any branch or maintain any
distribution depot outside the Territory in relation to the Products.

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2.7 The Distributor shall not represent itself as an agent of SmarTire for any
purpose, pledge SmarTire's credit, give any warranty or make any representation
on SmarTire's behalf or otherwise incur any liability on behalf of SmarTire.
Further, the Distributor shall not without SmarTire's prior written consent make
any representation or give any warranty or other undertaking in respect of the
quality, manufacture or fitness for any particular purpose of the Products
beyond those generally given by SmarTire.

2.8 SmarTire agrees to direct all inquiries for Product to be sold in China to
the Master Distributor.

3. DISTRIBUTOR'S UNDERTAKINGS

The Distributor undertakes and agrees with SmarTire at all times during the term
of this Agreement:

3.1 to use its best efforts to promote and extend the sale of the Products in
the Market Sector throughout the Territory;

3.2 to maintain an active and suitably trained sales force and such other
qualified personnel as are reasonably required to promote the Products;

3.3 to keep SmarTire informed of market conditions in respect of the Products
and similar products in the Territory;

3.4 without prejudice to Clause 3.3, promptly upon request from SmarTire from
time to time to supply to SmarTire such information relating to the distribution
and promotion of the Products in the Territory as SmarTire reasonably request,
including at a minimum of the following information:

i. number of Certified Dealers, basic information about dealers and the
opportunity they represent;

ii. sales of Product, inventory levels

iii. forecast for following month and quarter;

3.5 to maintain on its own account such inventory of the Products as is
appropriate and adequate for the Distributor promptly and efficiently to meet
all reasonably foreseeable customer delivery requirements for the Products
within the Market Sector throughout the Territory;

3.6 to establish a network of Certified Dealers in at least the following 11
Provinces and Municipalities by December 31, 2003: Beijing, Tianjing, Shanghai,
Chongquing, Jiangsu, Shangdong, Zhejiang, Guangdong, Hunan, Sichuan, and
Shenzhen.

3.7 to expand its network of Certified Dealers to include all Provinces by May
1, 2004.

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3.8 to ensure that its network of Certified Dealers conforms to the obligations
of Distributor in this Agreement.

3.9 at its own cost to keep and transport all stocks of the Products in
conditions appropriate for their storage and transport and to provide
appropriate security for the Products both in storage and in transit;

3.10 to insure at its own cost with a reputable insurance company all stocks of
the Products as are held by it against all risks which would normally be insured
against by a prudent businessman to their full replacement value, and to produce
to SmarTire on demand full particulars of that insurance and the receipt for the
then current premium;

3.11 at all times during the duration of this Agreement and for at least twelve
(12) months thereafter to maintain an adequate after-sales support and warranty
service;

3.12 promptly to inform SmarTire of any change in the Distributor's organisation
or method of doing business which might affect the performance of the
Distributor's duties under this Agreement and of any changes in ownership or
control of the Distributor;

3.13 to use all reasonable endeavours to maintain good relations with all
customers and potential customer for the Products; and

3.14 promptly to inform SmarTire of any facts or circumstances likely to give
rise to a dispute between the Distributor and any customer or prospective
customer, and promptly to inform SmarTire of any prospective or alleged
infringement or copying of its Products. .

4. SUPPLY OF the PRODUCTS

No later than the first day of each Quarter, the Distributor shall provide
SmarTire with the Distributor's forecast of the number of each type of the
Products that the Distributor expects to purchase from SmarTire for delivery
during the following month and quarter.

4.1 SmarTire shall advise the Distributor in writing of SmarTire's estimated
usual times required by SmarTire to arrange the manufacture of Products in
certain quantities which may be ordered by the Distributor. The Distributor
shall not enter into any commitment to supply any Products to any customer prior
to SmarTire's estimated date of delivery of such Products to the Distributor.

4.2 The Distributor shall place all orders for Products on Distributor's
standard order form. No order for Products shall be binding on SmarTire unless
accepted in writing.

4.3 The Distributor commits to issue a purchase order for an initial stocking
order of no less than **** Products in the first year and ****Products in the
second year (Part Number 060.5004). The 2000 Products ordered prior to August
31, 2003, are part of the **** Product commitments.

4.4 SmarTire shall use reasonable efforts to meet the Distributor's orders for
Products, save that nothing in this Agreement shall entitle the Distributor to
any priority of supply as against SmarTire's other customers.

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4.5 All Products shall be delivered by SmarTire to the Distributor in accordance
with the delivery terms set out in Schedule 1 and delivery schedule set out in
Schedule 3.

4.6 The standard terms and conditions of sale of SmarTire (a copy of the current
form of which is set out at Schedule 5) shall apply to all sales of the Products
to the Distributor pursuant to this Agreement except to the extent that any of
the same are inconsistent with the provisions of this Agreement, in which case
the provisions of this Agreement shall prevail. SmarTire shall give the
Distributor notice in writing of any changes to the standard conditions of sale
not less than thirty 30 days prior to such change taking effect for orders
placed under this Agreement.

5. PRICE, PAYMENT and return of products

5.1 The price to be paid by the Distributor to SmarTire in respect of any
Products shall be the price current at the date of SmarTire's acceptance of the
Distributor's order, as listed in Schedule 4 or any updates thereto. Such prices
are quoted exclusive of GST, duties and/or any other sales taxes.

5.2 SmarTire shall give the Distributor not less than ninety (90) days' notice
of any changes in the prices for the Products.

5.3 The Distributor shall pay to SmarTire all amounts due under this Agreement
in full without any set-off, counter-claim, abatement, or other similar
deduction by the method of payment specified in Schedule 1.

5.4 The Distributor shall be responsible for the collection, remittance and
payment of any or all taxes, duties, excise charges, levies, assessments and
other amounts of any kind payable in connection with the purchase from SmarTire,
importation into any part of the Territory, sale or disposal of the Products.

5.5 Interest shall be payable on any amounts overdue from the Distributor to
SmarTire at the rate of 3% above the base rate of the Bank of Canada.

5.6 The Distributor shall not return any Products to SmarTire without obtaining
the prior written permission of SmarTire. If the Distributor returns any
Products without such permission SmarTire shall be entitled to charge the
Distributor an amount equal to [50%] of the invoiced value.

6. ADVERTISING AND PROMOTION

6.1 The Distributor shall:

(a) be responsible for the advertising and promotion of the Products in respect
of the Market Sector in the Territory; and

(b) comply with the requirements for training in relation to the Products set
out in Schedule 6.

(c) observe all reasonable directions and instructions given to it by SmarTire
in relation to training and to the promotion and advertisement of the Products.

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6.2 At its sole discretion and without undertaking any obligation to do so
SmarTire may upon the written request of the Distributor pay to the Distributor
an amount up to the maximum set out in Schedule 6 by way of contribution to such
promotional and/or training costs of the Distributor as SmarTire deems necessary
to the performance of this Agreement.

6.3 SmarTire shall indemnify the Distributor against damages and reasonable
legal expenses incurred by the Distributor arising from any claim made by any
third party against the Distributor in respect of the use by the Distributor of
any advertising or promotional materials supplied by SmarTire and relating to
the Products, save to the extent that any such claim arises by reason of:

(a) the improper or unauthorised use by the Distributor of such materials; or

(b) the use of material that has been altered or amended in any manner by the
Distributor without the express permission of SmarTire.

6.4 SmarTire agrees to provide personnel to participate in a maximum of two
tradeshows per year. SmarTire's only financial responsibility for participation
in these events will be for the travel and living expenses incurred by its
employees.

6.5 SmarTire agrees to invite selected customers, dealers or distributors
identified by Distributor to Vancouver and to host them as guests of the
company. Any costs associated with travel and lodging will be paid by others.

6.6 SmarTire agrees to provide Distributor with any existing design or artwork,
marketing materials or collateral that would help Distributor create appropriate
sales and marketing materials for the Chinese market.

6.7 SmarTire will provide the Master Distributor with working drawings and
photographs of the SmarTire display currently located in the lobby of its
headquarters in Richmond.

6.8 SmarTire agrees to supply 20 Products at no cost for testing and promotional
and 40 Products at 50% of Distributor price.

6.9 SmarTire agrees to provide Distributor technical training on the Product.
Training will be provided to Distributor in Richmond, BC, any time upon receipt
of 30 days notice. Distributor will be responsible for any costs or expenses
associated with this training. In addition, SmarTire would offer Distributor
training twice during the term of this Agreement. Cost of this training will be
borne by SmarTire.

7. COMPLIANCE WITH LAWS AND REGULATIONS

7.1 The Distributor shall be responsible for obtaining and maintaining in force
any necessary import and other licences or permits necessary for the importation
of the Products into any part of the Territory, their delivery to the
Distributor and/or the sale or distribution of the Products by the Distributor
in the Territory.

7.2 The Distributor shall keep SmarTire informed of all laws and regulations
affecting the manufacture, sale, packaging and labelling of Products which are
in force within the Territory or any part thereof.

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8. TRADE MARKS AND INTELLECUTAL PROPERTY

8.1 SmarTire hereby grants to the Distributor the non-exclusive right in the
Territory to use the Trade Marks in the promotion, advertisement and sale of the
Products in accordance with the terms of and for the duration of this Agreement.

8.2 The Distributor shall not use any of the Trade Marks on any advertising or
promotional material used by the Distributor or on the Distributor's business
stationery otherwise than with SmarTire's prior written consent as to the
precise form of such use.

8.3 The Distributor shall not without the prior written consent of SmarTire
alter or make any addition to the labelling or packaging of the Products, and
shall not alter, deface or remove in any manner any reference to the Trade
Marks, any reference to SmarTire or any other name attached or affixed to the
Products or their packaging or labelling.

8.4 SmarTire makes no representation or warranty as to the validity or
enforceability of the Trade Marks or as to whether the same infringe any
intellectual property rights of any third party in the Territory.

8.5 The Distributor shall not reverse engineer the Products, and will use its
best efforts to prevent such unauthorized activity by its Certified Dealers or
other parties.

8.6 The Distributor shall promptly inform SmarTire in the event that the
Distributor becomes aware of any reverse engineering or any infringement or
suspected infringement of the Trade Marks or any other intellectual property
rights within the Territory.

8.7 The Distributor shall promptly inform SmarTire in writing in the event that
the Distributor becomes aware of any claim that any Product or the manufacture,
use, sale or other disposal of any Product within the Territory, whether or not
under the Trade Marks, infringes any intellectual property rights of any third
party. The Distributor shall if so requested by SmarTire give SmarTire sole
conduct of the defence of any such claim, and the Distributor shall at
SmarTire's expense give to SmarTire all such assistance as is reasonably
requested by SmarTire in relation to such defence. The Distributor shall not
without SmarTire's prior written consent make any admission in respect of or
otherwise compromise the defence of any such claim.

8.8 SmarTire agrees to proceed with registration of Trade Marks in the
Territory.

9. PRODUCT LIABILITY

9.1 The Distributor shall promptly inform SmarTire in writing in the event that
the Distributor becomes aware of any claim, or any circumstances that could give
rise to any claim in respect of any loss, damage or injury arising in respect of
the Products. The Distributor shall, if so requested by SmarTire, give SmarTire
sole conduct of the defence of any such claim, and the Distributor shall at
SmarTire's expense give to SmarTire all such assistance as is reasonably
requested by SmarTire in relation to such defence. The Distributor shall not
without SmarTire's prior written consent make any admission in respect of or
otherwise compromise the defence of any such claim.

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9.2 SmarTire shall indemnify the Distributor against all damages and reasonable
legal expenses incurred by the Distributor arising from any claim made by any
third party against the Distributor in respect of any personal injury, death or
damage to any property (other than any Products) caused by any defect in any
Products, except to the extent that any such claim arises by reason of:

(a) any damage to any Products which occurred after their delivery by SmarTire
to the Distributor;

(b) any alteration to any Products made after their delivery by SmarTire to the
Distributor; or

(c) any failure correctly to install any Products.

10. DURATION AND TERMINATION

10.1 This Agreement shall come into effect on the Commencement Date and, subject
to earlier termination as provided for herein, shall continue in force for a
period of two (2) years thereafter unless terminated by either party giving not
less than ninety (90) days' prior written notice. At the end of the
aforementioned two year period, this Agreement shall automatically continue in
force for subsequent one year periods unless or until it is terminated by either
party giving not less than ninety (90) days' written notice prior to the end of
each yearly period.

10.2 Without prejudice to any other rights to which it may be entitled, SmarTire
may give notice in writing terminating this Agreement with immediate effect if:

(a) the Distributor commits any material breach of any of the terms of this
Agreement, (if such a breach is remediable) fails to remedy that breach within
thirty (30) days of being notified of the breach and provided that the breach is
not substantially caused by SmarTire;

(b) an order is made or a resolution is passed for the winding up of the
Distributor, an order is made for the appointment of an administrator to manage
the affairs, business or assets of the Distributor, a receiver is appointed over
any of the assets or undertaking of the Distributor, circumstances arise which
entitle the Court or a creditor to appoint a receiver or manager over any of the
undertaking or assets of the Distributor or which entitle the Court to make a
winding-up order in respect of the Distributor, the Distributor becomes unable
to pay its debts, or if the Distributor takes or suffers any similar or
analogous action in relation to its insolvency or the protection of its
creditors; or

(c) there is a change of control of the Distributor.

For the purposes of this Agreement, a material breach includes any default of
the Distributor of its obligations in section 3 above.

11. EFFECTS OF TERMINATION

11.1 Termination of this Agreement however caused shall be without prejudice to
any rights or liabilities accrued at the date of termination.

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11.2 Following termination SmarTire shall have the option to purchase from the
Distributor any or all of the Distributor's stock of the Products remaining at
the date of termination, such option to be exercised within thirty (30) days of
termination. In the event that SmarTire so exercises such option the Distributor
shall deliver the Products so purchased, carriage and insurance prepaid at the
Distributor's expense to SmarTire's premises. The price payable by SmarTire to
the Distributor in respect of any Products repurchased under such option shall
be:

(a) in the event that the Distributor shall have terminated this Agreement, the
price paid by the Distributor less a discount of thirty percent (30%); or

(b) in the event that SmarTire shall have terminated this Agreement, the price
paid by the Distributor therefore

SmarTire shall be entitled to deduct from any amounts due from SmarTire to the
Distributor under this Clause 11.2 any amounts then due from the Distributor to
SmarTire.

11.3 In the event that SmarTire chooses not to exercise its option under Clause
11.2 in respect of all or any of the Distributor's stock of Products, the
Distributor shall be permitted for a period of three (3) months following
termination of this Agreement to sell any stock not purchased by SmarTire.
Thereafter, the Distributor shall promptly return all remaining stocks of the
Products to SmarTire at the expense of the Distributor or otherwise dispose of
the stocks as SmarTire may instruct.

11.4 Promptly upon the earlier of (i) the disposal of the entirety of the
Distributor's stock of Products (whether to SmarTire or otherwise), and (ii) the
expiration of the three (3) month period referred to in Clause 11.3, the
Distributor shall return to SmarTire or otherwise dispose of as SmarTire may
instruct all samples, technical pamphlets, catalogues, advertising materials,
specifications and other materials, documents or papers whatsoever is relating
to the Products and/or SmarTire's business (other than correspondence which has
passed between the parties) which the Distributor may have in its possession or
under its control.

11.5 The termination of this Agreement shall not of itself give rise to any
liability on the part of SmarTire to pay any compensation to the Distributor for
loss of profits or goodwill.

11.6 Save as provided in this Clause 11, all rights and licences of the
Distributor under this Agreement shall terminate on the termination date.

11.7 SmarTire shall be entitled to cancel all orders placed by the Distributor
prior to the termination date, whether or not such orders have been accepted by
SmarTire, without liability to the Distributor.

11.8 In the event that SmarTire terminates the agreement and Distributor has not
committed a material breach, SmarTire will reimburse distributor for marketing
expenses to a maximum of $250,000 US. The Distributor shall not be entitled to
reimbursement if termination of the agreement is a result of its failure to
achieve the volume of business required to maintain its Master Distributor
status. In the event that SmarTire terminates this agreement for cause, no
reimbursement shall be made. Any such claim made by the Master Distributor shall
be backed up with verifiable data such as receipts or invoices for expenses
incurred. SmarTire shall have at its sole discretion the right to accept or
reject any such individual invoice or receipt.

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11.9 Clauses 1, 3.9, 3.12, 4.6, 5, 7.1, 8.7, 9, 11, 12, 14, 15, 17, 18, 19, 20,
21 and 22 shall survive the termination of this Agreement.

12. CONFIDENTIALITY

12.1 With respect to any Confidential Information disclosed to it by the other
party each party (for the purposes of this Clause 12 "the Recipient") hereby
undertakes to the other that:

(a) the Recipient shall not without the prior written consent of the other party
disclose any of the Confidential Information to any third party other than
employees of the Recipient reasonably needing to know the same for the purposes
envisaged by this Agreement and the Recipient's professional advisers;

(b) the Recipient shall not use any of the Confidential Information other than
for the purposes envisaged by this Agreement; and

(c) the Recipient shall procure that all Confidential Information is treated as
confidential and not disclosed (save as aforesaid) or used other than for the
purposes envisaged by this Agreement by any party to which it is disclosed by
the Recipient.

12.2 The provisions of Clause 12.1 shall not apply to any information which the
Recipient can show:

(a) is or becomes generally available to the public other than by breach of this
Clause 12;

(b) was in the possession of the Recipient without restriction in relation to
disclosure prior to the date of receipt from the disclosing party;

(c) has been received by the Recipient from a third party who lawfully acquired
it and who is under no obligation restricting its disclosure; or

(d) has been independently developed without access to the other party's
Confidential Information.

13. FORCE MAJEURE

13.1 Subject to Clause 13.2, the obligations of each party under this Agreement
shall be suspended during the period and to the extent that that party is
prevented or hindered from complying with them by any cause beyond its
reasonable control including (insofar as the same are beyond such control but
without prejudice to the generality of the foregoing expression) strikes,
lock-outs, labour disputes, acts of God, war, riot, civil commotion, malicious
damage, government action, accident, breakdown of plant or machinery, fire,
flood, storm, difficulty or increased expense in obtaining workmen, materials,
goods or raw materials.

13.2 In the event of either party being hindered or prevented as described in
Clause 13.1, the party concerned shall give notice of suspension as soon as
reasonably possible to the other party stating the date and extent of the
suspension and its cause. Any party whose obligations have been suspended as
aforesaid shall resume the performance of those obligations as soon as
reasonably possible after the removal of the cause and shall so notify the other
party. In the event that the

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cause continues for more than thirty (30) days either party may terminate this
Agreement on thirty (30) days' notice.

14. LIABILITY

SmarTire shall have no liability to the Distributor arising out of or in
connection with this Agreement in respect of any indirect or consequential loss
of any kind, including without limitation any loss of profits (real or
anticipated), loss of revenue, loss of goodwill or loss of anticipated savings
except as outlined in section 11.8.

15. ENTIRE AGREEMENT

This Agreement constitutes the entire understanding between the parties with
respect to the subject matter of this Agreement and supersedes all prior
representations, agreements, negotiations and discussions between the parties
relating to it, save that nothing in this Agreement shall exclude or limit any
party's rights or liability in respect of any representation fraudulently made.

16. AMENDMENTS

Save as expressly provided in this Agreement, no amendment or variation of this
Agreement shall be effective unless in writing and signed by a duly authorised
representative of each of the parties.

17. ASSIGNMENT

17.1 The Distributor shall not without the prior written consent of SmarTire,
such consent not unreasonably to be withheld or delayed, assign, transfer,
charge or deal in any other manner with this Agreement or any of its rights or
obligations under it or any part of it, nor sub-contract any of its obligations
under this Agreement or, purport to do any of the same.

17.2 SmarTire shall be entitled to assign or subcontract any or all of its
rights or obligations under this Agreement to a Subsidiary of the Company or to
any Company which SmarTire has a 51% ownership position.

18. WAIVER

The failure of a party to exercise or enforce any right under this Agreement
shall not be deemed to be a waiver of that right nor operate to bar the exercise
or enforcement of it at any time or times thereafter.

19. SEVERABILITY

In the event that any part of this Agreement is found to be or becomes invalid,
illegal or unenforceable, the parties shall negotiate in good faith in order to
agree the terms of a mutually satisfactory provision to be substituted for the
invalid, illegal or unenforceable provision which as nearly as possible validly
gives effect to their intentions as expressed in this Agreement. Failure to
agree on such a provision within two months of commencement of those
negotiations shall result in automatic termination of this Agreement. The
obligations of the parties under any

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invalid, illegal or unenforceable provision of the Agreement shall be suspended
during such a negotiation.

20. NOTICES

20.1 Any notice required to be given pursuant to this Agreement shall be in
writing and shall be given by hand delivery, prepaid first class post (airmail
if to an address outside the country of posting) or fax (confirmed by post as
aforesaid) to the address or fax number of the relevant party. Any notice given
according to the above procedure shall be deemed to have been given on the first
working day following the date of delivery or transmission (if delivered by hand
or sent by fax) or when received (if sent by post).

The parties' respective addresses for notices shall be as follows:

SmarTire: SmarTire Systems Inc.

Fax: 604-276-2350

F.A.O: Suite 150, 13151 Vanier Place, Richmond, British Columbia, CANADA V6V 2J1

Distributor: Beijing Boom Technology Co. Ltd.

Fax: +0731-4448819

F.A.O: Guangming Mansion, Liangmaqiao Road, Chaoyang District, Beijing

21. GOVERNING LAW AND JURISDICTION

This Agreement shall be governed by and construed in accordance with the laws of
British Columbia and each party hereby submits to the jurisdiction of the Courts
of British Columbia in relation to any dispute arising out of or in connection
with the subject matter of this Agreement, save that nothing in this Agreement
shall prevent SmarTire from bringing any proceedings for any injunctive or
interlocutory relief against the Distributor in the courts of any jurisdiction
in which the Distributor has any place of business or assets.

AS WITNESS

the duly authorised representatives of the parties hereto:

SIGNED by J. Taylor-Wilson duly authorised for and on behalf of SMARTIRE SYSTEMS
INC. :

/s/ J. Taylor-Wilson

Date October 17, 2003

SIGNED by Jian Ming Cia duly authorised for and on behalf of Beijing Boom
Technology Co. Ltd.:

/s/ Jian Ming Cia

Date October 17, 2003

 

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SCHEDULE 1

A. The Products:

Part #

Description

Systems

 

060.5004

Tire Pressure Monitoring System with Display

062.1004

Spare Parts Kit (4 sensor & 2 Strap)

Parts

 

062.1001

Transmitter Strap Mount (Single)

062.1002

Mounting Strap

062.0001

Receiver

062.0002

Receiver bracket w/(bolts,s/cups,washers)

062.0003

Receiver power cord

062.4002

Remote display cord

SmarTire agrees to provide Quality Certificate for Product 060.5004

SmarTire agrees to provide single package for Product 060.5004

B. Market Sector:

Passenger Vehicle After-Market

C. Territory:

P. R. China (Mainland China). Hong Kong is excluded.

D. Delivery Terms:

F. O. B Richmond, BC, Canada

E. Invoicing Currency:

U. S. Dollars

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F. Method of Payment:

Wire Transfer $US funds in our account to:

To the credit of:

BANK OF MONTREAL
595 BURRARD STREET
VANCOUVER, B.C.
CANADA V7X 1L7

Swift BIC address BOFMCAM2

Beneficiary:
SMARTIRE SYSTEMS INC.

Bank Transit: 0004
Account # 4640 105

Funds to be received prior to shipment leaving SmarTire.

These terms to remain in effect until March of 2004. After this payment terms
will be renegotiated.

2% additional discount will apply at any time if payment is received prior to
Product shipping from SmarTire.

15

Private and Confidential

SCHEDULE 2

The Trade Marks

[smartire1.jpg]

 

[smartire2.jpg]

 

 

16

 Private and Confidential

SCHEDULE 3

Delivery Schedule

Quantity of Products

PN 060.5004

Shipment from SmarTire

[Month]

****

Sept 2003

****

Oct 2003

****

****

****

****

****

****

****

Nov 2003

Dec 2003

Jan 2004

Feb 2004

March 2004

May 2004

July 2004

The above is the first year's commitment overview.

The following year's commitment of

**** products are to be added here May 1, 2004.

The first 1000 Products on this schedule are part of the 2000 system commitment
prior to August 31, 2003.

SmarTire agrees to ship an additional amount of Products equivalent to 1 % of
Product shipment for all product shipped up until December 31, 2003 (2500
Products) then 1/2% of Product shipment for all Product shipped as warranty
support products.

17

Private and Confidential

SCHEDULE 4

Price List

 

Part #

Description

Price

Systems

 

USD

060.5004

Tire Pressure Monitoring System with Display

****

062.1004

4 sensor/2 strap spares kit

****

061.1002

2 sensor/2 strap spares kit

****

Parts

 

062.1001

Transmitter Strap Mount (Single)

****

062.1002

Mounting Strap

****

062.0001

Receiver

****

062.0002

Receiver bracket w/(bolts,s/cups,washers)

****

062.0003

Receiver power cord

****

062.4002

Remote display cord

****

Prepayment Discount: 2%

Discount Bonus for Sales over 10,000 Products (060.5004) - Price adjusted to
$****US. However, the Master Distributor may feel free to negotiate for larger
price reductions based on volume commitments.

 

SCHEDULE 5

Conditions of Sale

1. APPLICATION

1.1 These terms and conditions ("Conditions") shall apply to and shall be deemed
to be incorporated in all contracts ("Contracts") between the customer ("the
Customer") and SmarTire ("the Company") for the sale of products ("the
Products") to the exclusion of any other terms and conditions including, without
limit, those which the Customer purports to apply under any order for Products
(an "Order"). Variations to the terms of any Contract shall only be effective if
agreed in writing and signed by a duly authorized officer of the Company.

2. ORDERS, PRICE AND PAYMENT

2.1 All Orders made by the Customer must clearly state the exact description and
quantity of the Products required.

2.2 All Orders shall be deemed to be an offer and shall only be deemed accepted
by the Company upon the issue of a written Acknowledgement of Order by the
Company. All correspondence must state the order number, which will be set out
in the Acknowledgement of Order.

2.3 The Customer may only cancel any Order accepted by the Company with the
prior written consent of the Company and on terms that the Customer shall
indemnify the Company against all losses incurred directly or indirectly as a
result of such cancellation.

2.4 Unless a fixed price has been agreed, the price of the Products (the
"Price") shall be the Price specified in the Company's Acknowledgement of Order
and in the Company's invoice in respect of the Products and shall not include
any taxes or any costs of delivery, carriage, package and insurance which shall
be payable in addition to the Price.

2.5 Customers to whom the Company has, in its sole discretion, granted a credit
facility, shall pay the Price of the Products to the Company within 30 days of
receipt of the Company's invoice. The Company reserves the right, in its sole
discretion to amend the terms of or withdraw any such credit facility at any
time without notice with immediate effect whereupon all moneys due shall become
immediately payable. Customers who have not been granted a credit facility shall
pay the Price of the Products upon placing an Order for such Products.

2.6 The Company may invoice the Customer for the Price at any time after
delivery of the Products. Products delivered in instalments may be invoiced on
delivery of each instalment. If delivery of the Products is postponed or
delayed, the Company shall be entitled to invoice the Customer at any time after
the Products are ready for delivery.

2.7 Payment shall be made by the Customer in the currency specified, and within
the terms set out in the invoice in full, in cleared funds, without any
deduction, legal or equitable set off or abatement on any grounds by cheque
payable to the Company or by credit transfer directly to the Company's bankers,
as specified in the invoice, quoting the order number and invoice number shown
on the invoice. The Company may appropriate any payment made by the Customer to
any outstanding invoice. The Company may bring an action for the Price of the
Products even though property in them may not have passed to the Customer.

2.8 Time for payment of the Price shall be of the essence. Interest shall be
payable on any overdue amounts (before as well as after judgement) at the annual
rate of 3 per cent above the base lending rate of the Bank of Canada on the
outstanding amount until the outstanding amount of the Price and any delivery
charges or VAT are paid in full. The Customer shall indemnify the Company
against all expenses and legal costs incurred by the Company in recovering
overdue amounts, and against all bank charges incurred by the Company as a
result of any payment not being met by the Customer and/or the Customer's
bankers for any reason. The Company reserves the right to retain all the
documents and any items in its possession relating to any matter or Products
until all invoices are paid in full.

3. DELIVERY

3.1 Delivery shall be deemed to take place ex works (as defined in INCOTERMS
1990) except where agreed otherwise by the Company, in which case delivery shall
take place as specified by the Company in the Acknowledgement of Order. If the
Customer is to collect the Products, the Company shall notify the Customer of
the time, date and place for collection, and the Customer shall collect the
Products within 7 days of the date specified in such notification.

3.2 Any claim for shortages or discrepancies in the Products must be notified to
the Company within 15 days of delivery.

3.3 The Company may deliver the Products in instalments. Deliveries of further
instalments may be withheld until the Products comprised in earlier instalments
have been paid for in full. Default by the Company in respect of one or more
instalments shall not entitle the Customer to terminate the relevant Contract as
a whole.

3.4 If the Customer fails for any reason to take delivery of the Products in
accordance with the relevant Order, or the Company agrees in its sole discretion
to postpone delivery of the Products at the expense of the Customer, then risk
in the Products shall be deemed to have passed to the Customer, delivery of the
Products shall be deemed to have taken place, and the Company may store or
arrange for storage of the Products and charge the Customer for all costs and
expenses (including insurance) of so doing, and may sell the Products after 28
days after any failure to take delivery and deduct any moneys payable to the
Company by the Customer from the sale proceeds and account to the Customer for
any excess or charge the Customer for any shortfall below the sums owing to the
Company.

4. RISK AND TITLE

4.1 Risk shall pass to the Customer on delivery.

4.2 Title to the Products shall not pass to the Customer until the Company has
received in cash or cleared funds payment in full in respect of all moneys owing
by the Customer to the Company under all Contracts between the Customer and the
Company.

4.3 Until title to the Products passes:

(a) the Customer shall hold the Products as the Company's fiduciary agent as
bailee. The Customer shall be entitled to re-sell the Products in the ordinary
course of business but shall account to the Company for the proceeds of sale,
and shall keep such proceeds separate from any other moneys; and

(b) the Customer shall keep the Products separately stored from its other goods
and identified as the property of the Company and shall not destroy or deface
any identifying marks on the Products or their packaging and shall keep the
Products fully insured against all risks, and shall account to the Company for
the proceeds of any insurance claim, and shall keep such proceeds separate from
any other moneys; and

(c) the Company shall be entitled to demand the immediate return of the
Products, and shall be permitted to enter the Customer's premises to remove the
Products; and

(d) the Customer shall not pledge or charge any of the Products, and if it does
so, all moneys owing by the Customer to the Company shall forthwith become due
and payable.

5. CUSTOMER'S WARRANTY

5.1 On placement of an Order for Products the Customer shall be deemed to
represent and warrant that the Customer is not insolvent (as defined in Clause
10.1(b) below).

6. QUALITY

6.1 The Company warrants that all Products shall upon delivery be of
satisfactory quality and reasonably fit for their common purpose save where
either any defect arises from wear and tear, willful damage, negligence, failure
to follow the Company's instructions, misuse or any attempted repair or
alteration of the Products without the Company's approval; or the Price for the
Products has not been paid on the due date for payment.

6.2 All other warranties as to the condition of the Products, be they implied by
statute or by the common law or otherwise are hereby excluded to the fullest
extent permitted by law.

7. LIABILITY

7.1 Where any valid claim in respect of the Products is notified to the Company,
the total liability of the Company under Clause 6.1 shall be limited, at the
Company's option, to repair of the Product in question or to a credit for or a
refund of the Price paid in respect of such Product and the Company shall have
no further liability for consequential loss or loss of profit.

7.2 Save in respect of death or personal injury caused by the Company's
negligence, or where it is not otherwise permissible under the applicable law to
exclude liability the Company shall not be liable to the Customer for any
consequential loss or damage including, without limit, economic loss, loss of
profit, loss of business contracts, revenues or anticipated savings, damage to
reputation or goodwill, third party claims and any special or indirect loss
whatsoever.

8. INTELLECTUAL PROPERTY

8.1 The Customer shall be permitted to advertise using the trade marks of the
Company provided it has obtained the Company's prior consent to do so. Such
consent is at the absolute discretion of the Company and may be removed or
withdrawn by the Company at any time. Where such advertising is used in
catalogues or other sales literature of the Customer, on withdrawal of the
Company's consent, the Customer shall destroy all such copies of the catalogues
or sales literature held by it immediately on request by the Company. The
Customer acknowledges that no rights are granted to the Customer by the use by
it of any of the Company's trade marks, trade names and/or service marks.

8.2 The Customer shall not, under any circumstances acquire any right in or to
any of the intellectual property rights of the Company, including without
limitation, inventions, patents, utility models, design rights, copyright, know
how, trade secrets, confidential information, trade marks, service marks, trade
names and goodwill, descriptions and technical information, nor to any of its
Products.

9. FORCE MAJEURE

9.1 If the Company is prevented or delayed from carrying out its obligations
under any Contract as a result of any cause beyond its control such as but not
limited to acts of God, governmental intervention or restriction, import or
export regulations, war, riots, strikes or trade disputes (including by and with
the Company's own employees), power failure, inadequate performance of, failure
of or incorrect processing by computer systems, fire, flood, natural disasters,
default or insolvency of suppliers or sub-contractors, or breakdown of plant,
machinery or vehicles then the Company shall be relieved of its obligations and
liabilities under any Contract for as long as such fulfillment is prevented.

10. TERMINATION

10.1 Without prejudice to its other rights the Company may immediately terminate
any Contract with the Customer for the supply of any Products and demand payment
of all moneys due from the Customer, re-sell the Products, or withhold or cancel
any further deliveries of the Products if any of the following occurs or is
likely to occur:

(a) the Customer is in breach of its obligations under any Contract with the
Company; or

(b) the Customer is or becomes insolvent meaning, in relation to an individual,
partnership or company the appointment of any nominee, trustee, supervisor,
receiver or liquidator (as relevant) or the appointment of a manager or receiver
(as relevant) or the presentation of a petition with a view to winding up the
Customer or the appointment of a receiver or an administrative receiver over the
Customer's assets or undertaking, or an agreement made by the Customer with, or
an assignment for the benefit of, its creditors, or the occurrence or sufferance
of anything equivalent under any jurisdiction or the calling of any meeting or
the passing of any resolution whether formal or informal for the purpose of
proposing the taking of any of the foregoing steps; or

(c) Customer suffers a change of ownership or control.

11. GENERAL

11.1 Any waiver by the Company in exercise of its rights shall not restrict it
from exercising any such rights at a subsequent date.

11.2 The Customer shall not assign or sub-contract any of its rights or
obligations under any Order without the prior written consent of the Company.
The Company may assign or sub-contract its rights and obligations under any
Contract.

11.3 This Agreement and all Contracts and Orders shall be governed by the laws
of British Columbia. The parties agree to submit to the non-exclusive
jurisdiction of the Courts of British Columbia, save that the Company may apply
for injunctive or any other relief in any other jurisdiction.

11.4 These Conditions, and each Order made under them shall constitute the
entire Contract between the Company and the Customer to the exclusion of all
other representations, warranties, promises or assurances made or given by
either party or any other person, provided that this shall not exclude any
liability which the Company would otherwise have to the Customer in respect of
any statements made fraudulently by the Company prior to the date of any
Contract.

11.5 Any temporary waiver or indulgence by the Company in exercise of its rights
will not restrict it from exercising any of its rights at a subsequent date.

11.6 Any notices to be served under these Conditions shall be in writing sent by
registered post to the registered office of the Company or the Customer (as the
case may be).

11.7 No variation shall be made to these Conditions unless approved in writing
by the Company.

 

Schedule 6

Promotional and Training Budget

The Company shall pay the Master Distributor a bonus equal to 2% of the net
sales (the total of all Product sold and delivered less insurance, freight,
taxes, duties, or any other outstanding accounts payable).

Payment of the bonus shall be made as per the conditions set forth in section
6.2 of the Master Distribution Agreement or at the end of the Company's fiscal
year end.

Table of Contents

1.

DEFINITIONS AND INTERPRETATION

1

2.

APPOINTMENT

2

3.

DISTRIBUTOR'S UNDERTAKINGS

3

4.

SUPPLY OF THE PRODUCTS

4

5.

PRICE, PAYMENT AND RETURN OF PRODUCTS

5

6.

ADVERTISING AND PROMOTION

5

7.

COMPLIANCE WITH LAWS AND REGULATIONS

6

8.

TRADE MARKS AND INTELLECUTAL PROPERTY

7

9.

PRODUCT LIABILITY

7

10.

DURATION AND TERMINATION

8

11.

EFFECTS OF TERMINATION

8

12.

CONFIDENTIALITY

10

13.

FORCE MAJEURE

10

14.

LIABILITY

11

15.

ENTIRE AGREEMENT

11

16.

AMENDMENTS

11

17.

ASSIGNMENT

11

18.

WAIVER

11

19.

SEVERABILITY

11

20.

NOTICES

11

21.

GOVERNING LAW AND JURISDICTION

12

SCHEDULE 1

14

SCHEDULE 2

16

 

The Trade Marks

16

SCHEDULE 3

17

 

Delivery Schedule

17

 

The above is the first year's commitment overview

17

 

The following year's commitment of 28000 products are to be added here May 1,
2004

17

 

The first 1000 Products on this schedule are part of the 2000 system commitment
prior to August 31, 2003

17

 

SmarTire agrees to ship an additional amount of products equivalent to 1/2% of
product shipment as warranty support products

17

SCHEDULE 4

19

 

Price List

19

SCHEDULE 5

I

 

Conditions of Sale

i

1.

APPLICATION

I

2.

ORDERS, PRICE AND PAYMENT

I

3.

DELIVERY

II

4.

RISK AND TITLE

II

5.

CUSTOMER'S WARRANTY

II

6.

QUALITY

III

7.

LIABILITY

III

8.

INTELLECTUAL PROPERTY

III

9.

FORCE MAJEURE

III

10.

TERMINATION

III

11.

GENERAL

IV

 

Promotional and Training Budget

v

 

Table of Contents

i

DATED: October 17, 2003

 

(1) SMARTIRE SYSTEMS INC.

And

(2) [ Beijing Boom Technology Co. Ltd. ]

 

 

Master DISTRIBUTION AGREEMENT