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                                                                    EXHIBIT 10.1



                              MANAGEMENT AGREEMENT

THIS AGREEMENT effective as of the 1st day of June, 1999 (the "Effective Date").

BETWEEN:

               SMARTIRE USA INC., a company duly incorporated pursuant to the
               laws of Delaware, U.S.A. having an office at 6 Otis Park Drive,
               Bourne, MA, USA 02532

               (hereinafter referred to as the "Company")

                                                               OF THE FIRST PART

AND:

               MARK DESMARAIS, businessman, of 5 Volunteer Rd., East Sandwich,
               MA, USA, 02537

               (hereinafter referred to as the "Manager")

                                                              OF THE SECOND PART

AND:

               SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to
               the laws of the Province of British Columbia, having an office at
               150 - 13151 Vanier Place, Richmond, British Columbia, V6V 2J1

               (hereinafter referred to as "SmarTire")

                                                               OF THE THIRD PART

RECITALS

WHEREAS SmarTire has requested the assistance of the Manager in providing
certain management services to the Company and SmarTire, as hereinafter
described;

WHEREAS the Manager has agreed to provide such assistance and services to the
Company and SmarTire in accordance with the terms and conditions herein set
forth;

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants set forth below, the parties hereto agree as follows:

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1.       DUTIES AND DEVOTION OF TIME

1.1 Duties. During the term of this Agreement the Manager shall be responsible
for the duties contained in Schedule "A" attached hereto and incorporated herein
by this reference (the "Duties").

1.2 Devotion of Time. The parties hereto acknowledge and agree that the work of
the Manager is and shall be of such a nature that regular hours may not be
sufficient and occasions may arise whereby the Manager shall be required to work
more than eight (8) hours per day and/or five (5) days per week. The Manager
agrees that the consideration set forth herein shall be in full and complete
satisfaction for such work and services, regardless of when and where such work
and services are performed. The Manager further releases SmarTire and the
Company from any claims for overtime pay or other such compensation which may
accrue to the Manager. Notwithstanding the foregoing, SmarTire and the Company
agree that so long as the Manager properly discharges his duties hereunder, the
Manager may devote the remainder of his time and attention to other
non-competing business and personal pursuits.

1.3 Business Opportunities the Property of the Company. The Manager agrees to
communicate immediately to SmarTire all business opportunities, inventions and
improvements in the nature of the business of SmarTire or the Company which,
during the term of this Agreement, the Manager may conceive, make or discover,
become aware of, directly or indirectly, or have presented to him in any manner
which relates in any way to SmarTire or the Company, either as they are now or
as they may develop, and such business opportunities, inventions or improvements
shall become the exclusive property of SmarTire without any obligation on the
part of the Company or SmarTire to make any payments therefor in addition to the
salary and benefits herein described to the Manager.

1.4 No Personal Use. The Manager shall not use any of the work the Manager shall
perform for the Company or SmarTire for any personal purposes without first
obtaining the prior written consent of SmarTire.

2        SALARY, BONUSES AND BENEFITS

2.1 Salary. In consideration of the Manager providing the services referred to
herein, SmarTire agrees to pay the Manager an annual base salary (the "Annual
Base Salary") of one hundred sixty nine thousand six hundred U.S. dollars
($169,600) less applicable deductions, payable bi-weekly, plus incentive
compensation as set out below, subject to increase as from time to time approved
by the Board of Directors of SmarTire.

2.2 Benefits. SmarTire shall provide, maintain and pay for:

        (a)    medical and dental insurance for the Manager and his immediate
               family as is provided by SmarTire's medical services plan or an
               equivalent plan;

        (b)    such extended health and other benefits for the Manager and his
               immediate family as are provided to senior management employees
               of SmarTire, subject to the eligibility of the Manager; and

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2.3 Incentive Compensation and Stock Options. Within one hundred eighty (180)
days of the Effective Date, the SmarTire Board of Directors will approve and
implement an incentive compensation plan for the senior management of SmarTire
and its subsidiaries, including therein a policy regarding the granting of stock
options. The Manager will participate as a member of the Compensation Committee
of the Board of Directors in recommending that plan to the Board of Directors
and will participate in that plan when approved and implemented by the SmarTire
Board of Directors.

2.4 Payment in Cash or Shares. All payments payable by the Company or SmarTire
to the Manager, including the Annual Base Salary and reimbursement of expenses
under Section 4.1 hereof, shall be payable in cash or, at the election of the
Manager, and subject to the approval of the regulatory authorities, such will be
paid in whole or in part in common shares in the capital stock of SmarTire
("Remuneration Shares"), issued at the 10 day average closing price (for the 10
days prior to the Manager's election) of SmarTire's common shares on any stock
exchange or quotation system upon which SmarTire's common shares are listed for
trading.

2.5 Registration of Performance Bonus Shares. To ensure that any shares issued
to the Manager under paragraph 2.4 of this Agreement are freely tradable,
SmarTire shall register with the SEC any such shares issued. Upon or as soon as
is practical after the issuance of such shares, SmarTire shall file a form S-8
or other appropriate form with the United States Securities and Exchange
Commission (the "SEC") to effect registration.

2.6 Incentive Stock Options. The Manager acknowledges that prior to execution of
this Agreement SmarTire executed an incentive stock option agreement for the
right for the Manager to purchase up to seventy-five thousand (75,000) common
shares in the capital of SmarTire, with options to acquire up to fifteen
thousand (15,000) common shares vesting on execution of the Stock Option
Agreement which grants the options and on each of the first, second, third and
fourth anniversaries of such Agreement, all subject to regulatory approval.

2.7 Signing Bonus. In consideration of the Manager entering into this Agreement,
SmarTire agrees to pay the Manager a signing bonus of ten thousand (10,000)
common shares (the "Signing Bonus Shares") in the capital of SmarTire. The
Signing Bonus Shares shall be paid within ten (10) days of the execution of this
Agreement by all parties hereto. The Manager acknowledges that the Signing Bonus
Shares will be subject to a one year hold period; however, SmarTire will add
registration of the Signing Bonus Shares to any other share registration that
SmarTire may file with the SEC during the year. The Manager further acknowledges
that prior to the execution of this Agreement SmarTire paid to the Manager a
signing cash bonus of twenty five thousand U.S. dollars ($25,000 U.S.).

3        VACATION

3.1 Entitlement to Vacation. The Company and SmarTire acknowledge that the
Manager shall be entitled to an annual vacation of four (4) weeks. The Manager
shall use his best efforts to ensure that such vacation is arranged with
SmarTire in advance such that his vacation does not unduly affect the operations
of SmarTire or the Company.


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3.2 Increase in Vacation. The period set out in Section 3.1 above may be
increased from time to time as mutually agreed to by the Manager and the
SmarTire Board of Directors.

4        REIMBURSEMENT OF EXPENSES

4.1 Reimbursement of Expenses. The Manager shall be reimbursed for all
reasonable out-of-pocket expenses incurred by the Manager in or about the
execution of the Duties contained herein, including without limiting the
generality of the foregoing, all reasonable travel and promotional expenses
payable or incurred by the Manager in connection with the Duties under this
Agreement. All payments and reimbursements shall be made within two (2) weeks of
submission by the Manager of vouchers, bills or receipts for such expenses.

5        CONFIDENTIAL INFORMATION

5.1 Confidential Information. The Manager shall not, either during the term of
this Agreement or under the provisions of section 5.3, without specific consent
in writing, disclose or reveal in any manner whatsoever to any other person,
firm or corporation, nor will he use, directly or indirectly, for any purpose
other than the purposes of the Company and SmarTire, the private affairs of the
Company or SmarTire or any confidential information which he may acquire during
the term of this Agreement with relation to the business and affairs of the
directors and shareholders of the Company or SmarTire, unless the Manager is
ordered to do so by a court of competent jurisdiction or unless required by any
statutory authority.

5.2 Non-Disclosure Provisions. The foregoing provision shall be subject to the
further non-disclosure provisions contained in Schedule "B" attached hereto and
incorporated hereinafter by this reference.

5.3 Provisions Survive Termination. The provisions of this section shall survive
the termination of this Agreement for a period of three years.

6        TERM

6.1 Term. This Agreement shall remain in effect until terminated in accordance
with any of the provisions contained in this Agreement.

7        TERMINATION

7.1 Termination by Manager. Notwithstanding any other provision contained
herein, the parties hereto agree that the Manager may terminate this Agreement,
with or without cause, by giving ninety (90) days' written notice of such
intention to terminate.

7.2 Resignation or Cessation of Duties. In the event that the Manager ceases to
perform all of the Duties contained herein, other than by reason of the
Manager's death or disability, or if the Manager resigns unilaterally and on his
own initiative from all of his positions this Agreement shall be deemed to be
terminated by the Manager as of the date of such cessation of Duties or such
resignation, and the Company and SmarTire shall have no further obligations
under Section 2 hereof.


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7.3 Termination by Company. The Company may terminate this agreement at any time
for just cause without further obligation. In the event of termination for any
reason other than for just cause, the Company, at its option, will either (a)
continue to pay the salary under Clause 2.1 and provide the benefits under
Clauses 2.2 until one year from the date of termination or (b) pay one year's
salary under Clause 2.1 in lieu of notice. Any stock options that have been
granted but that have not yet vested shall immediately vest at the date of the
final payment, and may be exercised for a period of 30 days only after the final
payment.

7.4 Death. In the event of the death of the Manager during the term of this
Agreement, this Agreement shall be terminated as of the date of such death, and
the Manager's spouse, if living, or surviving children shall be entitled to the
termination allowance stated in Section 7.3 hereof.

7.5 Disability. In the event that the Manager will during the term of this
Agreement by reason of illness or mental or physical disability or incapacity be
prevented from or incapable of performing the Duties hereunder, then the Manager
shall be entitled to receive the remuneration provided for herein at the rate
specified hereinbefore for the period during which such illness, disability or
incapacity will continue, but not exceeding six (6) successive months. If such
illness, disability or incapacity continues or will continue for a period longer
than six (6) successive months, then this Agreement may, at the option of the
Directors of SmarTire, forthwith be terminated, and the Manager shall be
entitled to the termination allowance stated in Section 7.3 hereof.

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7.6 Termination Payments. Any payments made by the Company to the Manager upon
the termination of this Agreement shall be made in cash, or, if the Company does
not have available funds, in equal monthly cash instalments over one year, or in
Remuneration Shares, or in a combination of cash and Remuneration Shares,
subject to regulatory approval. All payments required to be made by the Company
to the Manager pursuant to Section 7 hereof shall be made in full.

8        RIGHTS AND OBLIGATIONS UPON TERMINATION

8.1 Rights and Obligations. Upon termination of this Agreement, the Manager
shall deliver up to SmarTire all documents, papers, plans, materials and other
property of or relating to the affairs of the Company and SmarTire, other than
the Manager's personal papers in regard to his role in the Company or SmarTire,
which may then be in the Manager's possession or under his control.

9        CLOSING

9.1 Closing Date. This Agreement shall be effective as of June 1, 1999.

9.2 Conditions of Closing. The parties hereto agree that it shall be a condition
of the execution of this Agreement that prior to or contemporaneously with the
execution of this Agreement:

        (a)    this Agreement shall be approved by the Board of Directors of
               SmarTire.

10       NOTICES AND REQUESTS

10.1 Notices and Requests. All notices and requests in connection with this
Agreement shall be deemed given as of the day they are received either by
messenger, delivery service, or mailed by registered or certified mail with
postage prepaid and return receipt requested and addressed as follows:

        (a)    if to the Company:

               SmarTire USA Inc. 6 Otis Park Drive
               Bourne, MA 02532, USA

               with a copy to: SmarTire (address below)

        (b)    If to the Manager:

               Mark Desmarais
               5 Volunteer Road
               East Sandwich, MA 02537
               USA


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        (c)    If to SmarTire:

               SmarTire Systems Inc.
               150 - 13151 Vanier Place
               Richmond, British Columbia
               V6V 2J1

               with a copy to:

               CLARK, WILSON
               Suite 800-885 West Georgia Street
               Vancouver, British Columbia
               V6C 3H1
               Attention: Bernard Pinsky

or to such other address as the party to receive notice or request so designates
by written notice to the others.

11       INDEPENDENT PARTIES

11.1 Independent Parties. This Agreement is intended solely as a management
services agreement and no partnership, agency, joint venture, distributorship or
other form of agreement is intended.

12       AGREEMENT VOLUNTARY AND EQUITABLE

12.1 Agreement Voluntary. The parties acknowledge and declare that in executing
this Agreement they are each relying wholly on their own judgement and knowledge
and have not been influenced to any extent whatsoever by any representations or
statements made by or on behalf of any other party regarding any matters dealt
with herein or incidental thereto.

12.2 Agreement Equitable. The parties further acknowledge and declare that they
each have carefully considered and understand the provisions contained herein,
including, but without limiting the generality of the foregoing, the Manager's
rights upon termination and the restrictions on the Manager after termination
and agree that the said provisions are mutually fair and equitable, and that
they executed this Agreement voluntarily and of their own free will.

13       CONTRACT NON-ASSIGNABLE; INUREMENT

13.1 Contract Non-Assignable. This Agreement and all other rights, benefits and
privileges contained herein may not be assigned by the Manager.

13.2 Inurement. The rights, benefits and privileges contained herein, including
without limitation the benefits of Sections 2 and 7 hereof, shall inure to the
benefit of and be binding upon the respective parties hereto, their heirs,
executors, administrators and successors.


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14       ENTIRE AGREEMENT

14.1 Entire Agreement. This Agreement represents the entire Agreement between
the parties and supersedes any and all prior agreements and understandings,
whether written or oral, among the parties. The Manager acknowledges that he was
not induced to enter into this Agreement by any representation, warranty,
promise or other statement, except as contained herein.

14.2 Previous Agreements Cancelled. Save and except for the express provisions
of this Agreement and the Manager's continuation as a director of SmarTire and
the Company, any and all previous agreements, written or oral, between the
parties hereto or on their behalf relating to the services of the Manager for
the Company or for SmarTire are hereby terminated and cancelled and each of the
parties hereby releases and further discharges the others of and from all manner
of actions, causes of action, claims and demands whatsoever under or in respect
of any such agreements.

15       WAIVER

15.1 Waiver. No consent or waiver, express or implied, by any party to or of any
breach or default by another party in the performance by the other of its or his
obligations herein shall be deemed or construed to be a consent or waiver to or
of any breach or default of the same or any other obligation of such party.
Failure on the part of any party to complain of any act or failure to act, or to
declare another party in default irrespective of how long such failure
continues, shall not constitute a waiver by such party of its or his rights
herein or of the right to then or subsequently declare a default.

16       SEVERABILITY

16.1 Severability. If any provision contained herein is determined to be void or
unenforceable in whole or in part, it is to that extent deemed omitted. The
remaining provisions shall not be affected in any way.

17       AMENDMENT

17.1 Amendment. This Agreement shall not be amended or otherwise modified except
by a written notice of even date herewith or subsequent hereto signed by both
parties.

18       HEADINGS

18.1 Headings. The headings of the sections and subsections herein are for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement.

19       GOVERNING LAW

19.1 Governing Law. This Agreement shall be construed under and governed by the
laws of the Province of British Columbia and the laws of Canada applicable
therein.

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20       EXECUTION

20.1 Execution in Several Counterparts. This Agreement may be executed by
facsimile and in several counterparts, each of which shall be deemed to be an
original and all of which shall together constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
2nd day of December, 1999.

SMARTIRE USA INC.


Per: /s/ ROBERT RUDMAN
     ------------------------------
        Authorized Signatory


SIGNED by MARK DESMARAIS in the    )
presence of:  H. FAHEY             )
                                   )
                                   )
HELEN FAHEY                        )
-----------------------------------)
Name                               )
                                   )
c/o SmarTire Systems Inc.          )         /s/ MARK DESMARAIS
-----------------------------------)         -----------------------------------
Address                            )         MARK DESMARAIS
                                   )
Richmond, B.C.                     )
-----------------------------------)
                                   )
EXEC. ASSISTANT                    )
-----------------------------------)
Occupation


SMARTIRE SYSTEMS INC.


Per: /s/ KEVIN CARLSON
     ------------------------------
        Authorized Signatory

This is page 9 of Agreement dated above for reference the 1st day of June, 1999.

<PAGE>   10

                                   SCHEDULE "A"

                                MANAGER'S DUTIES

1. To create value for SmarTire's shareholders by leading the development and
sales of tire pressure monitoring systems for SmarTire and the Company.

2. The Manager shall be appointed as the President, Chief Executive Officer and
as a director on the Board of Directors of the Company, and the Manager shall
faithfully, honestly and diligently serve the Company and each of the Company's
subsidiaries (if any) in these capacities. The Manager shall also be appointed
as the President and Chief Operating Officer of SmarTire and the Manager shall
faithfully, honestly and diligently serve SmarTire and each of SmarTire's
subsidiaries.

3. The Manager shall be responsible for the management of all operations of
SmarTire and its subsidiaries and each of the Company's subsidiaries, if any,
and for the supervision and delegation of such duties and responsibilities as
the Company deems appropriate to other officers and employees of the Company and
its subsidiaries, if any. The Manager shall report to the Chief Executive
Officer of SmarTire and shall share with him the responsibility for leading in
the strategic management and direction of SmarTire and each of SmarTire's
subsidiaries and for the supervision and delegation of such duties and
responsibilities as SmarTire deems appropriate to other officers and employees
of SmarTire and its subsidiaries.

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                                   SCHEDULE "B"

                            NON-DISCLOSURE PROVISIONS

1.      CONFIDENTIAL INFORMATION AND MATERIALS

        (a)    "Confidential Information" shall mean, for the purposes of this
               Agreement, non-public information which the Company or SmarTire
               designates as being confidential or which, under the
               circumstances surrounding disclosure ought reasonably to be
               treated as confidential. Confidential Information includes,
               without limitation, information, whether written, oral or
               communicated by any other means, relating to released or
               unreleased SmarTire or Company software or hardware products, the
               marketing or promotion of any product of SmarTire or the Company,
               SmarTire's or the Company's business policies or practices, and
               information received from others which SmarTire or the Company is
               obliged to treat as confidential. Confidential Information
               disclosed to the Manager by any subsidiary and/or agents of
               SmarTire is covered by this Agreement.

        (b)    Confidential Information shall not include that information
               defined as Confidential Information hereinabove which the Manager
               can exclusively establish:

               (i)    is or subsequently becomes publicly available without
                      breach of any obligation of confidentiality owed to
                      SmarTire or the Company;

               (ii)   became known to the Manager prior to disclosure by
                      SmarTire or the Company to the Manager;

               (iii)  became known to the Manager from a source other than
                      SmarTire or the Company other than by the breach of any
                      obligations of confidentiality owed to SmarTire or the
                      Company; or

               (iv)   is independently developed by the Manager.

        (c)    Confidential Materials shall include all tangible materials
               containing Confidential Information, including, without
               limitation, written or printed documents and computer disks or
               tapes, whether machine or user readable.


2.      RESTRICTIONS

        (a)    The Manager shall not disclose any Confidential Information to
               third parties for a period of three (3) years following the
               termination of this Agreement, except as provided herein.
               However, the Manager may disclose Confidential Information during
               bona fide execution of the Duties or in accordance with judicial
               or other governmental order, provided that the Manager shall give
               reasonable notice to SmarTire and the Company prior to such
               disclosure and shall comply with any applicable protective order
               or equivalent.

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        (b)    The Manager shall take reasonable security precautions, at least
               as great as the precautions he takes to protect his own
               confidential information, to keep confidential the Confidential
               Information, as defined hereinabove.

        (c)    Confidential Information and Materials may be disclosed,
               reproduced, summarized or distributed only in pursuance of the
               business relationship of the Manager with SmarTire and the
               Company, and only as provided hereunder.

3.       RIGHTS AND REMEDIES

        (a)    The Manager shall notify SmarTire immediately upon discovery of
               any unauthorized use or disclosure of Confidential Information or
               Materials, or any other breach of this Agreement by the Manager,
               and shall co-operate with SmarTire in every reasonable manner to
               aid SmarTire or the Company to regain possession of said
               Confidential Information or Materials and prevent all such
               further unauthorized use.

        (b)    The Manager shall return all originals, copies, reproductions and
               summaries of or relating to the Confidential Information at the
               request of SmarTire or, at the option of SmarTire, certify
               destruction of the same.

        (c)    The parties hereto recognize that a breach by the Manager of any
               of the provisions contained herein would result in damages to
               SmarTire and that SmarTire could not be compensated adequately
               for such damages by monetary award. Accordingly, the Manager
               agrees that in the event of any such breach, in addition to all
               other remedies available to SmarTire or the Company at law or in
               equity, SmarTire and the Company shall be entitled as a matter of
               right to apply to a court of competent jurisdiction for such
               relief by way of restraining order, injunction, decree or
               otherwise, as may be appropriate to ensure compliance with the
               provisions of this Agreement.

4.      MISCELLANEOUS

        (a)    All Confidential Information and Materials are and shall remain
               the property of the Company and SmarTire. By disclosing
               information to the Manager, the Company and SmarTire do not grant
               any express or implied right to the Manager to or under any and
               all patents, copyrights, trademarks, or trade secret information
               belonging to SmarTire or the Company.

        (b)    All obligations created herein shall survive change or
               termination of any and all business relationships between the
               parties for a period of three years after such termination.

        (c)    The Company may from time to time request suggestions, feedback
               or other information from the Manager on Confidential Information
               or on released or unreleased software belonging to SmarTire or
               the Company. Any suggestions, feedback or other disclosures made
               by the Manager are and shall be entirely voluntary on the part of
               the Manager and shall not create any obligations on the

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part of SmarTire or the Company or a confidential agreement between the Manager
and SmarTire or the Company. Instead, SmarTire and the Company shall be free to
disclose and use any suggestions, feedback or other information from the Manager
as SmarTire or the Company sees fit, entirely without obligation of any kind
whatsoever to the Manager.