Exhibit 10.11

                      MARKETING AND DISTRIBUTION AGREEMENT

      This MARKETING AND DISTRIBUTION AGREEMENT is made and entered into as of
the date of last signature below, by and between DANA CORPORATION, a Virginia
corporation, through its Heavy Vehicle Technology and Systems Group; and
SMARTIRE SYSTEMS INC., a Yukon corporation.

      WHEREAS, DANA is a leading Tier I supplier in the design and manufacture
of commercial vehicle drive train components for medium and heavy duty vehicles
for sale to original equipment manufacturers and associated original equipment
service and the independent aftermarket;

      WHEREAS, SMARTIRE is a Tier I and Tier II supplier engaged in the design
and manufacture of wireless sensing systems and associated components for medium
and heavy duty vehicles;

      WHEREAS, the Parties desire to enter into an agreement pursuant to which
DANA would market, sell, and distribute SMARTIRE products for use in VEHICLES,
both independently and through ROAD RANGER (defined below); and

      WHEREAS, SMARTIRE's tire monitoring system is based on a "wireless
gateway" concept that may be compatible with other sensing opportunities for
other products, and the PARTIES may wish to co-develop further products in the
future.

      NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the PARTIES hereby agree as follows:

1.    DEFINITIONS

      "AGREEMENT" means this Marketing and Distribution Agreement.

      "COMPONENTS" means components supplied by SMARTIRE as part of a SYSTEM,
whether now existing or developed during the term of this AGREEMENT. References
to COMPONENTS include, where appropriate, the entire SYSTEM.

      "CONFIDENTIAL INFORMATION" means all nonpublic information disclosed by
either PARTY to the other, whether before or after the date of this AGREEMENT,
which relates to the design, production, marketing, distribution, or sale of
COMPONENTS.

      "CUSTOMERS" means OEMs, fleets and INDEPENDENT DISTRIBUTORS.

      "DANA" means the Heavy Vehicle Technology and Systems Group of Dana
Corporation, a Virginia corporation.

      "DISCOVERIES" means all ideas, concepts, creations, developments,
enhancements, modifications, know-how, techniques, business methods, other
methods, procedures, processes, notes, drawings, compositions, computer
programs, product formulations, source codes, layout designs, works of
authorship, copyrights (whether registered or unregistered), improvements,
processes, apparatuses, formulations, inventions and discoveries and physical
embodiments thereof, whether patentable or not, with respect to COMPONENTS or
SYSTEMS.


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      "INDEPENDENT DISTRIBUTOR" means aftermarket distributors not under the
direct or indirect control of an OEM.

      "LOSS" is defined in Section 9.5

      "NOTICE" means formal notice in accordance with Section 13.

      "OEM" means an original equipment manufacturer, which manufactures POWER
UNITS and/or TRAILERS, including its dealers and distributors.

      "PARTY" means DANA or SMARTIRE. "PARTIES" means both DANA and SMARTIRE.

      "PERSON" means any individual or entity.

      "POWER UNIT" means a Class 4 through Class 8 truck, bus, motorhome, or
tractor (excluding agricultural tractors).

      "ROAD RANGER" means DANA's Road Ranger marketing alliance with Eaton
Corporation.

      "SMARTIRE" means SmarTire Systems Inc., a Yukon corporation.

      "SYSTEM" means any wireless sensor system developed by SMARTIRE, using a
wireless gateway, sensors, and other COMPONENTS for tire pressure monitoring and
other remote sensor tasks, whether now existing or developed during the term of
this AGREEMENT.

      "TERRITORY" means the United States of America, Canada, Mexico, Australia,
and New Zealand.

      "TRAILER" means a highway trailer, dolly and chassis designed for use with
a POWER UNIT.

      "VEHICLE" means a POWER UNIT or TRAILER.

2.    SCOPE OF RELATIONSHIP

2.1.  SMARTIRE hereby grants to DANA, directly or through ROAD RANGER, the
      non-exclusive right to market, sell, and distribute COMPONENTS to
      CUSTOMERS in the TERRITORY for use in POWER UNITS and TRAILERS.

2.2.  As of the date of this AGREEMENT, SMARTIRE represents and DANA
      acknowledges SMARTIRE's representation that that SMARTIRE has previously
      entered into agreements with third parties related to the marketing, sale
      and distribution of COMPONENTS within the TERRITORY, which agreements may
      be extended from time to time, which SMARTIRE may only generally describe,
      as set for in Exhibit A, pursuant to SMARTIRE's confidentiality
      obligations. Provided that DANA shall be in compliance with this AGREEMENT
      in all material respects specifically using reasonable commercial efforts
      to meet the mutually agreed sales targets as set forth elsewhere herein,


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      during the term of this AGREEMENT, SMARTIRE will not: (i) except as
      permitted in current agreements described in Exhibit A, the term of which
      may be extended, sell directly any COMPONENTS to any new CUSTOMERS in the
      TERRITORY; or (ii) grant rights related to the marketing, sale and
      distribution of COMPONENTS in the TERRITORY to any other third party.
      SMARTIRE may request a waiver of DANA's right to market and sell to a
      particular OEM in the TERRITORY by giving DANA NOTICE. If DANA does not
      affirm by NOTICE to SMARTIRE, within ten business (10) days after receipt
      of such NOTICE, DANA's intention to market and sell to such OEM, then DANA
      will be deemed to have waived its right to market and sell to such OEM.

2.3.  Notwithstanding Section 2.1, SMARTIRE may continue to provide COMPONENTS
      directly to CUSTOMERS in the TERRITORY under existing part numbers,
      purchase orders and contracts. Subject to mutual agreement between Dana
      and SmarTire, the parties may agree to transfer these contracts to Dana
      providing that the customer is in agreement with this transfer, and that
      mutual pricing terms between Dana and SmarTire can be established. These
      agreements shall not be transferred to a third party.

2.4.  SMARTIRE hereby grants to DANA the nonexclusive right to market, sell, and
      distribute COMPONENTS to CUSTOMERS outside the TERRITORY, or for use other
      than in POWER UNITS and TRAILERS; provided that DANA shall give NOTICE to
      SMARTIRE of its intention and if SMARTIRE does not advise DANA of its
      rejection of the request within ten business (10) days after receipt of
      such NOTICE, DANA may exercise its rights to the extent of the NOTICE and
      of this AGREEMENT.

2.5.  SMARTIRE shall negotiate in good faith with DANA prior to granting to any
      other PERSON nonexclusive or exclusive rights to market, sell, or
      distribute COMPONENTS to CUSTOMERS outside the TERRITORY, or for use in
      vehicles other than POWER UNITS and TRAILERS.

2.6.  At the request of either PARTY, SMARTIRE and DANA shall negotiate in good
      faith regarding the expansion of the TERRITORY and/or of the markets
      within the TERRITORY.

2.7.  Throughout the term of this AGREEMENT, DANA shall not market, sell, or
      distribute any system for wireless tire pressure monitoring other than the
      SYSTEMS. This covenant shall not affect in any way DANA's tire pressure
      control business.

2.8.  Throughout the term of this AGREEMENT, SMARTIRE shall not design, develop,
      manufacture, or sell, any tire pressure control system.

2.9.  The PARTIES acknowledge and agree that money damages may be inadequate to
      compensate a PARTY for any breach of Section 2.7 or 2.8. Therefore, in the
      event of any actual or threatened breach of Section 2.7 or 2.8, in
      addition to any other remedies that may be available at law or in equity,
      the aggrieved PARTY shall be entitled to appropriate temporary and/or
      permanent injunctive relief.


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                                      -3-
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3.       SMARTIRE'S AND DANA'S OBLIGATIONS

3.1.     SMARTIRE shall design, develop, manufacture and sell to DANA, and DANA
         shall purchase from SMARTIRE, one hundred percent (100%) of DANA's
         requirements for COMPONENTS for CUSTOMERS in the TERRITORY during the
         term of this AGREEMENT. The COMPONENTS shall be supplied by SMARTIRE to
         DANA in compliance with all specifications as agreed between the
         PARTIES.

3.2.     SMARTIRE shall make reasonable commercial efforts, on a timely basis,
         to assure that all COMPONENTS are competitive with similar products,
         and to assure its suppliers are competitive, taking into consideration
         all relevant factors including, but not limited to, design, technology,
         performance, features, quality, reliability, service, delivery, and
         cost.

3.3.     SMARTIRE shall use reasonable commercial efforts to assure that it has
         (or its suppliers have) adequate production capacities to meet the
         estimated annual requirements provided by DANA. Any estimates are for
         planning purposes only, and are not obligations to purchase COMPONENTS.

3.4.     SMARTIRE shall provide technical and application support to DANA and
         the CUSTOMERS as agreed between SMARTIRE and DANA from time to time.
         Such support shall be at SMARTIRE's or CUSTOMER's expense as agreed.
         SMARTIRE shall keep DANA informed of any environmental or vehicle
         installation issues that may affect performance of the SYSTEM or
         COMPONENTS of which SMARTIRE is, or should, through the exercise of
         reasonable diligence, becomes aware.

3.5.     SMARTIRE shall provide reasonable amounts of training to DANA's sales
         and service technicians and to CUSTOMERS as agreed between SMARTIRE and
         DANA from time to time..

3.6.     SMARTIRE shall provide prototypes and reasonable quantities of
         production samples of COMPONENTS to DANA free of charge as agreed on a
         case by case basis to facilitate DANA's sale of the COMPONENTS.

3.7.     DANA shall use reasonable commercial efforts to actively market and
         sell COMPONENTS to CUSTOMERS and INDEPENDENT DISTRIBUTORS in the
         TERRITORY, and obtain the highest practical market penetration
         throughout the TERRITORY.

3.8.     The PARTIES will consult each other regularly, at least twice annually
         or as mutually agreed, to review market developments, discuss proposed
         amendments to this AGREEMENT, and to address new opportunities outside
         the TERRITORY, CUSTOMER needs, competing products, production planning,
         COMPONENT developments, COMPONENTS and SYSTEMS developments, COMPONENTS
         and SYSTEMS costs, product performance, warranty, competitiveness,
         sales targets, promotions, advertising campaigns, sales and service
         actions. One of these meetings will be held annually in September.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
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3.9.  DANA and SMARTIRE shall mutually agree on monthly, quarterly and/or annual
      sales targets to be achieved by DANA. At any time, if DANA fails to meet
      the mutually agreed sales targets, the parties shall meet to discuss the
      reasons for such failure and mutually develop a corrective action plan
      which shall provide for no less than two (2) quarters for DANA to achieve
      the sales targets. During such a period, SmarTire shall be able to provide
      increased sales support to the Customers to assist in the attainment of
      the targets, and Dana shall provide SmarTire with any relevant customer
      information required to assist in this process. Provided DANA shall be
      meeting its obligations set forth in Section 3.7, the failure of DANA to
      achieve such sales targets will not, by itself, be considered grounds for
      termination of this AGREEMENT. DANA shall provide SMARTIRE with timely
      sales reports listing all current sales prospects and opportunities for
      the COMPONENTS and participate in conference calls with SMARTIRE to
      discuss goals and plans to achieve the highest sales reasonably possible.
      DANA shall, at SMARTIRE's reasonable request, provide any information
      relating to the actual sale of COMPONENTS including e-mails, status
      reports, sales plans, proposals, or related items

3.10. If DANA fails to meet it sales targets despite having participated in a
      corrective action plan and having met its obligations set forth in Section
      3.7, following the second year of the AGREEMENT, DANA may, on sixty (60)
      days prior written notice in advance of any annual AGREEMENT anniversary
      date, advise SMARTIRE of DANA's intention to terminate the AGREEMENT
      without cause.

3.11. SMARTIRE will own, develop and provide technical and training materials
      and, at CUSTOMERS' or INDEPENDENT DISTRIBUTORS' expense, provide marketing
      and technical counsel to CUSTOMERS and INDEPENDENT DISTRIBUTORS to assist
      with the application and installation of retrofit SYSTEMS.

3.12. DANA will own, develop and provide reasonable and customary amounts of
      marketing and sales materials for the SYSTEMS and COMPONENTS. At
      SMARTIRE's option, SMARTIRE may develop or fund additional marketing and
      sales materials.

3.13. In order to assure mutual success, SMARTIRE shall furnish to DANA any
      relevant technical and commercial information regarding COMPONENTS and
      SYSTEMS, including market leads and competitive market knowledge, which
      might come into SMARTIRE's possession, except through agreements or
      relationships described in Exhibit A.

3.14. Each Party shall, in connection with its performance hereunder, comply
      with all applicable, rules, and regulations.

4.    BRANDING AND TRADEMARKS

4.1.  DANA has the right to market, sell, and distribute COMPONENTS under a
      brand owned by DANA; provided, however, that COMPONENT packaging will
      identify SMARTIRE as the manufacturer of the COMPONENTS.


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4.2.  Subject to the provisions of this AGREEMENT, DANA grants to SMARTIRE for
      the term of this AGREEMENT a non-exclusive license to use the trade names,
      trademarks, logo marks and other similar markings of DANA as provided by
      DANA from time to time or other marks that DANA may identify from time to
      time in writing to SMARTIRE ("DANA MARKS") on COMPONENTS and packaging for
      COMPONENTS that it sells to DANA so long as COMPONENTS are manufactured
      and distributed in accordance with the standards, specifications and
      instructions established and approved by DANA. SMARTIRE may not use the
      DANA MARKS on COMPONENTS or packaging for COMPONENTS sold to third parties
      outside of this AGREEMENT.

4.3.  Upon expiration or termination of this AGREEMENT, SMARTIRE agrees to
      discontinue the use of the DANA MARKS or any mark confusingly similar
      thereto immediately, not to attempt to register or to use any trademark,
      service mark, trade name, logo, trade dress, or other similar marking that
      in the opinion of DANA is confusingly similar to any DANA MARKS. SMARTIRE
      agrees that it will destroy all materials bearing the DANA MARKS or remove
      the DANA MARKS from web sites and other electronic media.

4.4.  DANA shall have the right, at reasonable times and upon reasonable prior
      notice, to (a) inspect samples of SMARTIRE's finished COMPONENTS,
      packaging, labels or advertising bearing the DANA MARKS at a mutually
      agreeable location, or (b) receive, at SMARTIRE's expense, reasonable
      quantities of samples of SMARTIRE's finished COMPONENTS, packaging, labels
      or advertising bearing the DANA MARKS for the purpose of determining that
      they are of the proper quality. SMARTIRE shall change all COMPONENTS,
      packaging, labels or advertising bearing the DANA MARKS that are not
      approved by DANA.

4.5.  Subject to the provisions of this AGREEMENT, SMARTIRE grants to DANA for
      the term of this AGREEMENT a non-exclusive license to use the trade names,
      trademarks, logo marks and other similar markings of SMARTIRE as provided
      by SMARTIRE or other marks that SMARTIRE may identify from time to time in
      writing to DANA ("SMARTIRE MARKS") on printed material, including but not
      limited to technical materials, brochures, catalogs, instruction manuals,
      advertising, and marketing materials related to COMPONENTS and SYSTEMS.

4.6.  Upon expiration or termination of this AGREEMENT, DANA agrees to
      discontinue the use of the SMARTIRE MARKS or any mark confusingly similar
      thereto immediately, not to attempt to register or to use any trademark,
      service mark, trade name, logo, trade dress, or other similar marking that
      in the opinion of SMARTIRE is confusingly similar to any SMARTIRE MARKS.
      DANA agrees that it will destroy all materials bearing the SMARTIRE MARKS
      or remove the SMARTIRE MARKS from web sites and other electronic media,
      except that DANA may use printed materials until COMPONENTS in inventory
      are sold or returned for credit.


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4.7.  SMARTIRE shall have the right, at reasonable times and upon reasonable
      prior notice, to (a) inspect samples of DANA's packaging, labels or
      advertising bearing the SMARTIRE MARKS at a mutually agreeable location,
      or (b) receive, at DANA's expense, reasonable quantities of samples of
      DANA's packaging, labels or advertising bearing the SMARTIRE MARKS for the
      purpose of determining that they meet quality standards and proper use of
      SMARTIRE MARKS previously defined by SMARTIRE. DANA shall change all
      packaging, labels or advertising bearing the SMARTIRE MARKS in a manner
      not previously approved by SMARTIRE.

5.    PURCHASE ORDERS AND FORECASTS

5.1.  DANA shall issue biweekly shipping releases by direct computer order
      entry, specifying the quantities of COMPONENTS, delivery date and delivery
      location. Each such release will indicate an twelve (12) week rolling
      estimate of weekly volumes, the last ten (10) weeks of which are forecasts
      for planning purposes and the first two (2) weeks' volume requirements
      shall be a firm commitment. The firm orders submitted by DANA shall be
      effective after confirmation by SMARTIRE. SMARTIRE will use its best
      efforts to provide such confirmation within one (1) business day after
      receipt of the order. On specific long lead components (greater than six
      months lead time), DANA will develop a one year forecast. SMARTIRE shall
      provide a list of long lead components for DANA's acknowledgement.
      Requests for additions or changes to this list shall be submitted to DANA
      for approval in writing and include an estimate of the associated costs
      and lead times by component.

5.2.  At any time, DANA may place an emergency order for COMPONENTS with
      SMARTIRE. SMARTIRE shall make reasonable efforts to accept such orders and
      notify DANA within one (1) business day after receipt of the emergency
      order if it accepts the order. Any incremental costs required to fulfill
      such emergency order shall be borne by DANA unless the need for the
      emergency order is created by SMARTIRE.

5.3.  In addition to the foregoing, DANA shall, twice annually in the first
      (1st) and third (3rd) quarter of each year give SMARTIRE a good faith
      estimate of its COMPONENT purchases during the next applicable year. These
      estimates are for planning purposes only, and are not obligations to
      purchase COMPONENTS.

5.4.  If any COMPONENTS are delivered in excess of volumes ordered or in advance
      of schedule, DANA may return them at SMARTIRE's expense or retain them and
      invoice SMARTIRE for any resulting handling and storage costs. DANA will
      not process invoices for COMPONENTS shipped in advance of schedule until
      the scheduled delivery date. DANA may change scheduled deliveries at any
      time by written notice to SMARTIRE and will reimburse SMARTIRE for
      reasonable, documented, unavoidable incremental costs incurred by SMARTIRE
      due to such changes. If SMARTIRE fails to deliver any shipment of
      COMPONENTS in accordance with DANA's instructions, DANA may, at its
      option, cancel the shipment, accept partial or delayed delivery.


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6.    PRICES AND PAYMENT CONDITIONS

6.1.  SMARTIRE shall give DANA NOTICE of its price for each COMPONENT at the
      time of execution of this AGREEMENT or, for new COMPONENTS, as soon as the
      price is determined. SMARTIRE may change these prices upon ninety (90)
      days NOTICE to DANA; provided, however, that SMARTIRE shall honor the old
      price with respect to any binding commitments DANA has made to a CUSTOMER
      prior to receiving NOTICE of the price change. All prices shall be stated
      in United States dollars.

6.2.  SMARTIRE warrants that its prices to DANA for the COMPONENTS are and will
      remain no less favorable than its prices to other customers for the same
      or comparable goods in comparable quantities and in comparable terms of
      sale.

6.3.  DANA shall mark up SMARTIRE prices (excluding any shipping, duties,
      handling, packaging or dunnage charges) by an amount solely determined by
      DANA for resale to CUSTOMERS.

6.4.  Where specific opportunities or pricing issues arise with existing or
      potential CUSTOMERS, the PARTIES shall negotiate, on a case by case basis,
      in good faith a suitable pricing structure between DANA and SMARTIRE to
      meet the CUSTOMERS' request.

6.5.  SMARTIRE shall invoice DANA in United States dollars on a regular basis
      upon delivery of COMPONENTS. Payment terms from DANA are net on the
      sixty-second (62nd) day following the date of invoice. All PRODUCTS shall
      be sold Delivery Duty Paid to the delivery point, which may be a CUSTOMER
      location or DANA facility. As such, SMARTIRE is liable for paying all
      costs of transport, insurance, duties and brokerage fees to the delivery
      point. Title and risk of loss shall pass at the delivery point.

6.6.  Without limiting any other remedies available to DANA, DANA has the right
      to offset, against amounts due to SMARTIRE, any amounts due and payable
      from SMARTIRE to DANA under this AGREEMENT.

6.7.  All other terms and conditions of the sale of COMPONENTS to DANA shall be
      in accordance with the terms and conditions of DANA'S purchase order as
      set forth in Exhibit C. To the extent that the terms and conditions of
      such order are inconsistent with or contradictory to the express terms of
      this AGREEMENT, the terms of this AGREEMENT shall govern without
      modification by the provisions contained in such order or sales terms.

7.    CONFIDENTIALITY

The following terms govern the confidentiality of information disclosed by
either PARTY ("DISCLOSING PARTY") to the other PARTY ("RECEIVING PARTY"):

7.1.  RECEIVING PARTY shall restrict access to and disclosure of the
      CONFIDENTIAL INFORMATION to its affiliates and suppliers and their
      respective directors, officers, employees, and agents who have a need to
      know the CONFIDENTIAL INFORMATION. RECEIVING PARTY shall not disclose
      CONFIDENTIAL INFORMATION, directly or indirectly, to any other PERSON.


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      RECEIVING PARTY shall not use CONFIDENTIAL INFORMATION to reproduce,
      redesign, reverse engineer, or manufacture products or equipment of
      DISCLOSING PARTY, to perform services relating to the products or
      equipment of DISCLOSING PARTY, or for its own benefit, except as expressly
      provided in this AGREEMENT.

7.2.  RECEIVING PARTY may only use DISCLOSING PARTY's CONFIDENTIAL INFORMATION
      in accordance with the purpose of this AGREEMENT. No other rights or
      licenses are granted to either PARTY in the CONFIDENTIAL INFORMATION.

7.3.  RECEIVING PARTY shall use at least the same high degree of care, but no
      less than a reasonable degree of care, to avoid inadvertent disclosure or
      unpermitted use of DISCLOSING PARTY's CONFIDENTIAL INFORMATION which it
      employs with respect to its own proprietary or CONFIDENTIAL INFORMATION
      and that it does not wish to have disseminated, published or disclosed.

7.4.  There shall be no restrictions under this AGREEMENT with respect to any
      portion of the CONFIDENTIAL INFORMATION, which RECEIVING PARTY can
      establish through documentary evidence:

      a.    was known to RECEIVING PARTY at the time of its disclosure to
            RECEIVING PARTY;

      b.    was or becomes publicly known through no fault, wrongful act or
            omission of RECEIVING PARTY;

      c.    was received by RECEIVING PARTY from a third party, without
            solicitation, such third party having a bona fide right to do so,
            and not having any confidential relationship or obligation to
            DISCLOSING PARTY, and without breach of the restrictions contained
            in this AGREEMENT;

      d.    was independently developed by RECEIVING PARTY without access to
            DISCLOSING PARTY's CONFIDENTIAL INFORMATION or a breach of this
            AGREEMENT;

      e.    was approved for release in writing by DISCLOSING PARTY; or

      f.    was required by law, court order or governmental agency to be
            disclosed. In such cases, RECEIVING PARTY shall immediately notify
            DISCLOSING PARTY that production or disclosure has been ordered, and
            to take all reasonable steps and cooperate with DISCLOSING PARTY to
            limit disclosure of the CONFIDENTIAL INFORMATION.

7.5.  CONFIDENTIAL INFORMATION shall not be deemed to be in the public domain
      merely because any part of such CONFIDENTIAL INFORMATION is embodied in
      general disclosures or because individual features, components or
      combinations thereof are now or become known to the public. All
      CONFIDENTIAL INFORMATION delivered by DISCLOSING PARTY to RECEIVING PARTY
      pursuant to this AGREEMENT shall be and remain the property of DISCLOSING
      PARTY unless otherwise provided herein.


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7.6.  The PARTIES do not seek the confidential information or trade secrets of
      any third party, and the PARTIES shall not use in the performance of this
      AGREEMENT or disclose to the other PARTY such confidential information or
      trade secrets.

7.7.  In any judicial proceeding, it will be presumed that matters which are
      designated as Confidential or Proprietary constitute CONFIDENTIAL
      INFORMATION, and that RECEIVING PARTY will bear the burden of proving such
      matters or information are unrestricted pursuant to Section 7.4.

7.8.  RECEIVING PARTY is liable for any breach of this Section 7 by all PERSONS
      to whom it has disclosed CONFIDENTIAL INFORMATION.

7.9.  Upon the expiration or termination of this AGREEMENT, each PARTY shall
      return or destroy and certify the destruction of the other PARTY's
      CONFIDENTIAL INFORMATION within thirty (30) days of such request. Counsel
      for each PARTY is entitled to keep one copy in a confidential file as
      evidence of the disclosure.

8.    QUALITY ASSURANCE, PRODUCT APPLICATIONS and PACKAGING

8.1.  SMARTIRE or its suppliers shall manufacture or assemble COMPONENTS
      according to its normal quality assurance procedures and TSI6949 standards
      so as to ensure COMPONENTS' conformity with the applicable engineering
      drawings and specifications. SMARTIRE shall submit to DANA a written
      summary of its quality assurance plan and, prior to initiating the supply
      of COMPONENTS to DANA, shall furnish inspection data to show adherence to
      such plan.

8.2.  Prior to making any subsequent modifications to its manufacturing process
      or quality system, SMARTIRE shall furnish to DANA a written summary of its
      revised quality assurance plan, together with the applicable inspection
      data.

8.3.  Any changes to COMPONENTS or their specifications are subject to the prior
      written agreement of the PARTIES and, if required, the CUSTOMER.

8.4.  At DANA'S request, SMARTIRE shall provide ongoing evidence of conformance
      to SMARTIRE'S quality assurance plan and TSI6949 standards in the form of
      a certification from SMARTIRE'S quality department. SMARTIRE shall also
      permit DANA or its designee at reasonable times and on reasonable notice
      to audit SMARTIRE'S quality assurance procedure and review pertinent
      inspection records at the manufacturing and assembly locations of SMARTIRE
      and its suppliers. The PARTIES agree to work toward the objective of
      SMARTIRE becoming a qualified supplier pursuant to DANA'S supplier quality
      requirements.


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8.5.  SMARTIRE shall develop approval guidelines for acceptable applications and
      installations of COMPONENTS with regard to wheel installation and signal
      integrity within 60 days after validation of any COMPONENTS and may revise
      the same from time to time to reflect COMPONENT modifications, COMPONENT
      packaging modification or additional COMPONENT configurations, upon
      agreement by the PARTIES.

8.6.  DANA shall approve COMPONENT applications and installations which are
      within the limits of the guidelines referred to in Section 8.5. In those
      cases where an application or installation does not conform to the
      standard conditions, DANA shall request SMARTIRE'S assistance and SMARTIRE
      will respond to such request by approving or disapproving the proposed
      application within ten (10) days.

8.7.  The engineering departments of SMARTIRE and DANA shall maintain
      information on approved applications and installations of COMPONENTS. DANA
      shall be responsible for the communications of CUSTOMER and applications
      and installation approval or disapproval to its CUSTOMERS. DANA shall
      promptly notify SMARTIRE regarding such communications.

8.8.  The PARTIES will mutually agree upon COMPONENT packaging prior to initial
      deliveries.

9.    WARRANTY & LIABILITY

9.1.  SMARTIRE shall provide DANA with SMARTIRE's express warranty with respect
      to the SYSTEMS and COMPONENTS, a copy of which is attached as Exhibit B
      and made an integral part hereof. DANA shall pass the aforesaid SMARTIRE
      warranty on to its CUSTOMERS, and SMARTIRE shall fully honor this
      warranty. SMARTIRE shall have no obligation to honor any warranty
      obligations--with respect to the SYSTEMS and COMPONENTS--which are in
      addition to those obligations set forth on Exhibit B, except to the extent
      that DANA and SMARTIRE shall previously have agreed otherwise..

9.2.  Decisions on warranty claims made against DANA for COMPONENTS shall be
      made by DANA in its reasonable discretion. DANA shall use reasonable
      commercial efforts to justify all such warranty claims. If SMARTIRE
      disagrees with DANA'S decisions on these warranty claims, the PARTIES
      shall negotiate an agreeable settlement within a reasonable period. DANA
      shall provide SMARTIRE with adequate written documentation in support of
      all warranty claims for COMPONENTS that are submitted to SMARTIRE by DANA.
      DANA will invoice SMARTIRE at quarterly intervals for all warranty
      payments made by DANA against COMPONENTS and payment will be made by
      SMARTIRE within thirty (30) days of determination of settlement.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -11-
<PAGE>

9.3.  If a recall, service campaign or similar action is required by law or
      regulation, or if any such action is ordered by any governmental agency
      with respect to COMPONENTS, then to the extent permitted by law or
      regulation, the PARTIES shall negotiate in good faith to determine the
      corrective actions to be taken, the costs of which shall be borne by the
      PARTIES in proportion to their respective responsibility for the alleged
      defect.

9.4.  SMARTIRE shall be liable to DANA hereunder for: (a) the replacement of all
      defective COMPONENTS; and (b) reimbursement for reasonable
      removal/installation costs, as well as for all other reasonable costs
      incurred by DANA or its customers to perform the corrective action,
      excluding internal handling and administrative costs and any mark-up
      normally accruing to DANA or its customer in the distribution of service
      parts

9.5.  Each PARTY shall defend (as provided in Section 9.6 below), indemnify and
      save harmless the other PARTY, its directors, officers and employees and
      agents, from any and all actual and alleged costs, expenses, claims,
      suits, damages and liabilities (collectively "LOSS") based upon injury or
      death to persons or damaged property, to the extent such LOSS is caused by
      or arises out of or in connection with a claim, suit or proceeding brought
      by a third party based on a) any negligent or wrongful act or omission of
      the other PARTY, its supplier, or their respective employees, agents or
      representatives in the performance of this AGREEMENT; and b) in the case
      of SMARTIRE to DANA, any defects in the design, material and/or
      workmanship of COMPONENTS.

9.6.  Where the cause of the LOSS is the negligence, fault or other breach of
      duty of both DANA and SMARTIRE or a third party's, the liability therefor
      shall be allocated, reallocated or prorated, as the case may be, between
      the PARTIES hereto and any other party bearing responsibility in
      accordance with their percentage of negligence, fault or other breach of
      duty in causing such LOSS and the liability of the indemnifying PARTY
      proportionately reduced. Each PARTY shall notify the other within fifteen
      (15) days after receipt of knowledge of any accident involving COMPONENTS
      and shall fully cooperate with the other in the investigation and
      determination of the cause of any such accident. The furnishing of
      information and investigation by a PARTY shall in no manner constitute or
      be construed as an assumption of liability by such party. The foregoing
      indemnification obligations in Sections 9.5 and 9.6 are conditioned upon
      the indemnified PARTY promptly notifying the indemnifying PARTY in writing
      of the claim, suit or proceeding for which the indemnifying PARTY is
      obligated under these Sections, the indemnified PARTY cooperating with,
      assisting and providing information to, the indemnifying PARTY as
      reasonably required and at the indemnifying PARTY's expense, and granting
      the indemnifying PARTY the exclusive right to defend or settle such claim,
      suit or proceeding.

9.7.  SUBJECT TO THE INDEMNIFICATION OR WARRANTY OBLIGATIONS, IMPOSED UPON EACH
      PARTY PURSUANT TO THIS AGREEMENT, IN NO EVENT SHALL THE LIABILITY OF
      EITHER PARTY OR THEIR RESPECTIVE SUBSIDIARIES, EMPLOYEES, DIRECTORS OR
      OFFICERS, TO THE OTHER PARTY PURSUANT TO THIS CONTRACT, WHETHER ARISING IN


                                      -12-
<PAGE>

      CONTRACT OR IN TORT, OR ANY OTHER LEGAL THEORY (BUT EXCLUDING WILLFUL
      MISCONDUCT) BE THE GREATER OF IN AGGREGATE (i) THE AMOUNT PAID BY DANA TO
      SMARTIRE IN THE TWELVE (12) MONTHS PRECEDING THE CLAIM OR CIRCUMSTANCES
      FIRST GIVING RISE TO THE EVENT OR (ii) THREE MILLION DOLLARS ($3,000,000).

      EACH PARTY HEREBY RELEASES THE OTHER PARTY AND ITS SUBSIDIARIES,
      EMPLOYEES, DIRECTORS AND OFFICERS FROM ANY LIABILITY IN EXCESS OF SUCH
      AMOUNT. THIS SECTION SHALL PREVAIL AND TAKE PRECEDENCE OVER ANY
      CONFLICTING OR INCONSISTENT PROVISIONS IN THE CONTRACT. NOTHING IN THIS
      AGREEMENT SHALL LIMIT EITHER PARTY'S LIABILITY TO THE OTHER PARTY FOR
      BODILY INJURY OR DEATH CAUSED BY THE INDEMNIFYING PARTY'S NEGLIGENCE. THIS
      LIMITATION OF LIABILITY IS CUMULATIVE AND NOT PER-INCIDENT (I. E., THE
      EXISTENCE OF TWO OR MORE CLAIMS WILL NOT ENLARGE THIS LIMIT.)

      NOTWITHSTANDING THE FOREGOING, IF EITHER PARTY IS SUED BY A THIRD PARTY IN
      ANY COURT FOR DAMAGES FOR REASON OF THE ACTS OR OMISSIONS OF THE OTHER
      PARTY INCLUDING BUT NOT LIMITED TO CLAIMS RELATED TO WARRANTY,
      INTELLECTUAL PROPERTY INFRINGEMENT OR PRODUCTS LIABILITY, TO THE EXTENT
      SUCH LAWSUIT RELATES TO THE ACTS OR OMISSIONS OF THE OTHER PARTY, SUCH
      OTHER PARTY SHALL DEFEND SUCH ACTION (OR CAUSE THE SAME TO BE DEFENDED) AT
      ITS OWN EXPENSE AND SHALL PAY AND DISCHARGE ANY JUDGMENT THAT MAY BE
      RENDERED IN SUCH ACTION. IF SUCH OTHER PARTY FAILS OR NEGLECTS TO SO
      DEFEND IN SAID ACTION, THE PARTY SUED MAY DEFEND THE SAME AND ANY
      EXPENSES, INCLUDING REASONABLE ATTORNEYS' FEES, WHICH IT MAY PAY OR INCUR
      IN DEFENDING SAID ACTION AND THE AMOUNT OF ANY JUDGMENT WHICH IT MAY BE
      REQUIRED TO PAY SHALL BE REIMBURSABLE BY THE OTHER PARTY TO THE EXTENT
      SUCH LAWSUIT RELATES TO THE ACTS OR OMISSIONS OF THE OTHER PARTY.

      SMARTIRE shall maintain product liability insurance, with coverage amounts
      no less than USD $25,000,000, with a reputable insurer, which policy shall
      name DANA as an additional insured.

9.8.  Each PARTY represents and warrants that it has the right to enter into
      this AGREEMENT, and that entry into this AGREEMENT will not result in the
      breach or violation of or constitute default under any other AGREEMENT,
      statute, court order, judgment, rule or regulation, court, regulatory
      authority or government body to which the such PARTY is a party or bound.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -13-
<PAGE>

9.9.  Each PARTY represents and warrants that it will not make any agreements or
      assignments with or in favor of any third party, which would conflict with
      or render it unable to comply with its obligations hereunder.

9.10. Except for liability arising out of or in connection with death or bodily
      injury, the tort of deceit or where it is not otherwise permissible under
      applicable law to exclude liability, in no event shall either PARTY, its
      respective affiliates, officers, directors, employees, agents or suppliers
      be liable for any special, incidental, indirect or consequential damages,
      or lost revenue, lost profits, or lost or damaged data, whether arising in
      contract, tort (including negligence), or otherwise, even if such PARTY
      has been informed of the possibility thereof. Notwithstanding the
      foregoing, damages arising out of or in connection with amounts owing
      under the express obligations under Section 9.5, Section 9.7, third
      paragraph and Section 10.5, shall not be considered consequential in
      nature regardless of their form or origin.

9.11. This Section 9 shall survive the expiration and/or termination of this
      AGREEMENT.

10.   INTELLECTUAL PROPERTY MATTERS

10.1. All DISCOVERIES authored, made, conceived or reduced to practice by DANA
      or for DANA by a third party for DANA's benefit, prior to this AGREEMENT,
      will remain the property of DANA. All DISCOVERIES authored, made,
      conceived or reduced to practice from time to time solely by DANA or
      solely for DANA by a third party for DANA's benefit, during the term this
      AGREEMENT and after its termination will remain the property of DANA

10.2. All DISCOVERIES authored, made, conceived or reduced to practice by
      SMARTIRE or for SMARTIRE by a third party for SMARTIRE'S benefit, prior
      this AGREEMENT, will remain the property of SMARTIRE. All DISCOVERIES
      authored, made, conceived or reduced to practice from time to time solely
      by SMARTIRE or solely for SMARTIRE by a third party for SMARTIRE'S
      benefit, during the term of this AGREEMENT and after its termination will
      remain the property of SMARTIRE.

10.3. The PARTIES anticipate that they may engage in one or more joint product
      development or co-development projects in the future involving the PARTIES
      and potentially one or more CUSTOMERS. Prior to commencing any such
      project, the PARTIES and any participating CUSTOMERS will negotiate in
      good faith and enter into a comprehensive joint development agreement for
      such project.

10.4. SMARTIRE represents and warrants that all COMPONENTS it furnishes
      hereunder are free of encumbrances or claims, that SMARTIRE has the right
      to convey ownership of COMPONENTS to DANA.

10.5. Subject to the following provisions of this Section, SMARTIRE shall, at
      its own expense, indemnify, hold harmless, defend or at its option settle
      any claim, suit or proceeding brought against DANA or CUSTOMER which is
      based on an allegation that any COMPONENTS or any components thereof sold
      and supplied to DANA under this AGREEMENT constitute an infringement of a


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -14-
<PAGE>

      patent issued within the TERRITORY, design right, or copyright,
      constitutes a misuse or misappropriation of proprietary information, or
      violates another form of intellectual property ("CLAIM"). This obligation
      shall be effective only if SMARTIRE is notified promptly in writing and
      given authority, information and assistance (including, without
      limitation, making available to SMARTIRE such documents and witnesses as
      are within the control of DANA, at DANA'S expense) for the defense of such
      claim, suit or proceeding. SMARTIRE shall pay all damages (compensatory or
      punitive), attorney fees, and costs awarded in such suit or proceeding so
      defended or payable as a result of any settlement which SMARTIRE enters
      into. If any COMPONENTS or any components thereof furnished hereunder
      become the subject of any CLAIM and a settlement or an adjudication
      establishes that such COMPONENTS or components thereof do in fact infringe
      such a patent, design right, or copyright, constitutes a misuse or
      misappropriation of proprietary information, or violates another form of
      intellectual property or if the use or sale of such COMPONENTS or
      components thereof is enjoined, SMARTIRE shall, at its own expense,
      either:

      a.    procure for DANA and CUSTOMERS the right to continue using such
            COMPONENTS or components thereof;

      b.    replace such COMPONENTS or components thereof with non-infringing
            COMPONENTS or components thereof reasonably acceptable to DANA and
            CUSTOMERS; or

      c.    modify such COMPONENTS or components thereof in a manner reasonably
            acceptable to DANA and CUSTOMERS so such COMPONENTS or components
            thereof become non-infringing.

Notwithstanding the foregoing, SMARTIRE shall have no liability for a CLAIM
arising from:

      a)    the combination, operation, or use of a COMPONENT supplied under
            this Agreement with any product, device, or software not supplied by
            or through SMARTIRE to the extent the CLAIM is based on the
            combination;

      b)    the alteration or modification of any COMPONENTS except as
            authorized by SMARTIRE;

      c)    SMARTIRE's compliance with DANA's designs, specifications, or
            instructions; and,

      d)    DANA or CUSTOMER's use of the COMPONENT after SMARTIRE has informed
            DANA of modifications or changes in the COMPONENTS required to avoid
            such a CLAIM if the alleged infringement would have been avoided by
            implementation of SMARTIRE's recommended modifications or changes
            where such modifications or changes have been provided to DANA at no
            additional charge.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -15-
<PAGE>

This Section 10.5 states the entire liability of SMARTIRE to DANA with respect
to infringement of design right or copyright that constitutes a misuse or
misappropriation of proprietary information, constitutes any competition, or
violates another form of intellectual property, by any COMPONENTS or any
components thereof. TO THE EXTENT PERMITTED BY LAW, THIS INDEMNITY OBLIGATION
AND REMEDY ARE GIVEN TO DANA AND ITS CUSTOMERS SOLELY FOR THEIR RESPECTIVE
BENEFIT AND IN LIEU OF, AND SMARTIRE DISCLAIMS, ALL WARRANTIES, CONDITIONS AND
OTHER TERMS OF NON-INFRINGEMENT WITH RESPECT TO ANY COMPONENT.

11.   TERM AND TERMINATION

11.1. This AGREEMENT shall remain in effect for a term of seven (7) years from
      the effective date as of the date of last signature below, at which time
      this AGREEMENT shall be continue indefinitely until terminated by either
      PARTY, upon one (1) year's NOTICE to the other PARTY.

11.2. Either PARTY may terminate this AGREEMENT immediately upon NOTICE to the
      other PARTY upon the occurrence of one of the following events:

      a.    the failure or refusal of the other PARTY for a period of ninety
            (90) days after NOTICE to perform fully and promptly its obligations
            under this AGREEMENT.

      b.    either PARTY defaults or breaches any material provision of this
            AGREEMENT and does not remedy the default or breach within thirty
            (30) days after NOTICE by the other PARTY.

      c.    the commencement of any proceeding by or against either PARTY or its
            property under any law dealing with bankruptcy, insolvency,
            receivership or other relief of debtors.

      d.    the insolvency or dissolution of either PARTY.

      e.    by the other PARTY, if the maximum amount payable by one PARTY to
            the other PARTY, in the limitation of liability set forth in
            paragraph 1 of Section 9.7, has been exhausted.

11.3. If DANA has failed to make any payments, unless a reasonable dispute
      exists and the PARTIES are negotiating a resolution with respect to such
      invoice, when due, SMARTIRE may terminate this AGREEMENT upon thirty (30)
      days written notice to DANA.

11.4. If SMARTIRE is (i) in breach of this AGREEMENT, (ii) ceases to carry on
      business as a going concern; (iii) becomes or may become the object of the
      institution of voluntary or involuntary proceedings in bankruptcy or
      liquidation; (iv) a receiver or similar officer is appointed with respect
      to the whole or a substantial part of its assets; or (v) an event similar
      to any of the foregoing occurs under applicable law, and fails or refuses
      to supply COMPONENTS to DANA as required under this AGREEMENT, provided
      that DANA shall not be in breach of this AGREEMENT, then DANA shall have


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -16-
<PAGE>

      the right to manufacture, have manufactured, or acquire from SMARTIRE's
      suppliers, substitutes for COMPONENTS for the sole purpose of DANA
      continuing to supply its then current CUSTOMERS with COMPONENTS. In such
      case, DANA shall have the right to utilize SMARTIRE's intellectual
      property rights, DISCOVERIES and CONFIDENTIAL INFORMATION for such
      purposes, subject to the terms of this Agreement, and DANA shall pay
      SMARTIRE a reasonable royalty to SMARTIRE for use of its intellectual
      property rights. SMARTIRE shall not obstruct DANA's efforts or ability to
      find and qualify alternate supplier(s) of substitute products. This
      Section does not grant DANA the right to develop the SYSTEMS or COMPONENTS
      including adding new or enhanced functionality. The rights of DANA under
      this Section shall survive the termination of this AGREEMENT for one (1)
      year; provided, however, that if DANA's contractual commitment as at the
      date of SMARTIRE's failure or refusal to supply COMPONENTS to DANA to
      supply COMPONENTS to any CUSTOMER is longer, the rights of DANA under this
      Section shall survive the termination of this AGREEMENT with respect to
      such CUSTOMER only for the length of DANA's contractual commitment.

11.5. Except with respect to injunctive relief sought by either PARTY where
      appropriate, in the event of a dispute between the PARTIES, the PARTIES
      shall use the following procedure prior to either PARTY pursuing other
      available remedies.

      a.    Meeting. A meeting shall be held promptly between the PARTIES,
            attended by individuals with decision-making authority regarding the
            dispute, to attempt in good faith to negotiate a resolution of the
            dispute.

      b.    If the PARTIES have not succeeded in negotiating a resolution of the
            dispute within sixty (60) days after the first meeting, they shall
            submit the dispute to mediation in accordance with the Mediation of
            Business Disputes Model Procedure of the Center for Public
            Resources.

      c.    Mediation. The PARTIES will jointly appoint a mutually acceptable
            mediator, seeking assistance in such regard from the CPR
            International Institute for Conflict Prevention and Resolution if
            they have been unable to agree upon such appointment within twenty
            (20) days after one PARTY has given the other NOTICE of its intent
            to invoke mediation.

      d.    Participation. The PARTIES shall participate in good faith in the
            mediation and negotiations related thereto for a minimum period of
            thirty (30) days after the initial meeting with the mediator. If the
            PARTIES are not successful in resolving the dispute through the
            mediation, then either PARTY may pursue other available remedies.
            Sections 11.4 and 11.5 shall survive the expiration or other
            termination of this AGREEMENT.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -17-
<PAGE>

12.   SEVERABILITY AND FORCE MAJEURE

12.1. All provisions of this AGREEMENT are intended to be in conformance with
      applicable laws and regulations binding on the PARTIES and to which each
      of them are subject, and each PARTY hereby undertakes to take all
      necessary measures to comply with all such laws and regulations and to
      ensure that this AGREEMENT remains valid at all times. Any provisions of
      this AGREEMENT which may be in conflict with such laws and regulations
      shall be so modified, in an amendment to this AGREEMENT to be agreed
      between the PARTIES, so as to conform to such laws and regulations.Neither
      PARTY shall be liable for damages for delay in or prevention of its
      performance arising out of causes beyond its reasonable control,
      including, but not limited to, acts of God or of the public enemy, acts of
      any government in its sovereign capacity, fires, floods, epidemics, and
      strikes or other labor disputes. If either PARTY's performance in meeting
      an agreed shipping date is delayed due to continuing causes covered by
      this Section, the shipping date shall be extended only for the period
      during which they continue to exist. Delay in performance by either PARTY
      shall be excused under this Section only if the PARTY whose performance is
      delayed gives NOTICE of the delay to the other PARTY promptly and in no
      event more than fifteen (15) days after the event causing the delay.

13.   NOTICES, AMENDMENTS, ASSIGNMENT, NO AGENCY & GOVERNING LAW

13.1. All notices, requests, consents and other communications hereunder shall
      be deemed to have been duly given hereunder if in writing and, upon
      receipt when delivered by hand or sent by courier, facsimile transmission
      or telex, or three (3) calendar days after being mailed by first class
      mail, postage prepaid, in each case addressed as follows:

      If given to DANA, to:                             Copy to:

      Vice President, Marketing and Planning            Dana Corporation
      Commercial Vehicle Systems Group                  4500 Dorr Street
      Dana Corporation                                  P.O. Box 1000
      6938 Elm Valley Drive                             Toledo, OH 43697-1000
      Kalamazoo, MI 49009                               Attn: General Counsel
      Fax: 616.567.1550                                 Fax: 419.535.4790

      If given to SMARTIRE, to:
      President and CEO
      SMARTIRE SYSTEMS INC.
      Suite 150, 13151 Vanier Place
      Richmond, BC Canada V6V 2J1
      Fax: 604.276.2353

      or such other persons or addresses as the addressee PARTY may have
      previously designated in writing by NOTICE to the other PARTY, and such
      notice or communication shall be deemed to have been given as of the date
      so delivered or mailed.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -18-
<PAGE>

13.2. This AGREEMENT, including the Exhibits hereto, sets forth the entire
      understanding of DANA and SMARTIRE with respect to the matters covered and
      supersedes all prior agreements, representations and understandings,
      whether oral or written, between them as to the subject matter herein. Any
      amendments, waivers, or modifications of this AGREEMENT, or of any exhibit
      hereto, shall be valid only when they have been reduced to writing and
      duly signed by the PARTIES. The terms of this Section shall not be deemed
      to have been waived by oral agreement, course of performance or by any
      other means other than a written agreement expressly providing for such
      waiver.

13.3. Neither PARTY may assign this AGREEMENT without the prior written consent
      of the other PARTY.

13.4. No Agency. This AGREEMENT does not create any agency, partnership, joint
      venture, or franchise relationship. No employee of either PARTY shall be
      or become, or shall be deemed to be or become, an employee of the other
      PARTY by virtue of the existence or implementation of this Agreement. Each
      PARTY hereto is an independent contractor. Neither PARTY has the right or
      authority to, and shall not, assume or create any obligation of any nature
      whatsoever on behalf of the other PARTY or bind the other PARTY in any
      respect whatsoever.

13.5. This AGREEMENT shall in all respects be interpreted, construed and
      governed by and in accordance with the laws of the State of Ohio and the
      United States of America, without regard to the conflict of laws
      provisions thereof. The United Nations Convention on Contracts for the
      International Sale of Goods shall not govern this AGREEMENT.


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -19-
<PAGE>

IN WITNESS WHEREOF, the PARTIES hereto have executed this AGREEMENT as of the
date of last signature below.


DANA CORPORATION

By /s/ Frank Sheehan                            By /s/ Glenn Sulpizio
   -----------------------------                   -----------------------------
Frank Sheehan                                      Glenn Sulpizio
Vice President Sales, Marketing and
Planning Commercial Vehicle Systems
Group

Date: October 12, 2005                          Date: October 12, 2005
      --------------------------                      --------------------------


SMARTIRE SYSTEMS INC.

By /s/ Al Kozak
   -----------------------------
Al KozakPresident and CEO

Date: October 12, 2005
      --------------------------


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -20-
<PAGE>

                                    EXHIBIT A
                       SMARTIRE CONTRACTUAL RELATIONSHIPS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Third Party           Territory        Market Segments                             Comments
--------------------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>                                         <C>
Company A             United States    o    OEM and Aftermarket for                Current market focus is RV and
                                            recreational vehicles                  towed vehicles.  In some cases
                                       o    OEM and Aftermarket for                they may equip Class 1-3 trucks
                                            passenger cars                         that tow other vehicles or small
                                       o    OEM and Aftermarket for towed          trailers.
                                            vehicles
                                       o    OEM and Aftermarket for
                                            commercial vehicles
                                       o    OEM and Aftermarket for buses
--------------------------------------------------------------------------------------------------------------------
Company B             North America    o    OEM Customer                           SmarTire direct account
                                       o    OEM Aftermarket service centers
--------------------------------------------------------------------------------------------------------------------
Company C             North America    o    OEM Customer                           SmarTire direct account
                                       o    OEM and Aftermarket service
                                            centers
--------------------------------------------------------------------------------------------------------------------
Company D             North America    o    OEM and Aftermarket for                Internet/on-line sales normally
                                            passenger cars                         to individual customers or
                                       o    OEM and Aftermarket for                vehicle users.
                                            motorcycles
                                       o    OEM and Aftermarket for
                                            recreational vehicles
                                       o    OEM and Aftermarket for trucks
--------------------------------------------------------------------------------------------------------------------
Company E             North America    o    OEM and Aftermarket for                Internet/on-line sales normally
                                            passenger cars                         to individual customers or
                                       o    OEM and Aftermarket for                vehicle users.  Virtually all
                                            motorcycles                            sales are to vehicle owners.
                                       o    OEM and Aftermarket for                Truck systems are typically Class
                                            recreational vehicles                  1-3.
                                       o    OEM and Aftermarket for trucks
--------------------------------------------------------------------------------------------------------------------
Company F             United States    o    OEM and Aftermarket for                Sells to aftermarket and some
                                            recreational vehicles                  select RV OEMs.  Works closely
                                                                                   with RV manufacturer to retrofit
                                                                                   units in aftermarket.
--------------------------------------------------------------------------------------------------------------------
Company G             United States    o    Light trucks and trucks                Second stage company that
                                                                                   retrofits commercial vehicles for
                                                                                   military and specialty markets.
--------------------------------------------------------------------------------------------------------------------
</TABLE>


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -21-
<PAGE>

<TABLE>
<S>                   <C>              <C>                                         <C>
--------------------------------------------------------------------------------------------------------------------
Company H             Mexico           o    Bus aftermarket
--------------------------------------------------------------------------------------------------------------------
Company I             Australia        o    OEM and aftermarket Passcar            May possibly sell to Class 1-3
                                       o    Aftermarket Motorcycle                 trucks.
--------------------------------------------------------------------------------------------------------------------
Various small         United States    o    Varied market segments                 These organizations do not have
companies                                                                          formal agreements with SmarTire
                                                                                   and all have sales less than $15K
                                                                                   per year.
--------------------------------------------------------------------------------------------------------------------
</TABLE>


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -22-
<PAGE>

                                    EXHIBIT B
                                SMARTIRE WARRANTY

                                                                 SMARTIRE [LOGO]

                     Original Equipment Commercial Vehicles
                         North America (Canada and USA)

Warranty Statement

Subject to the conditions stated herein, SmarTire Systems Ltd. ("SmarTire")
warrants to Original Equipment Manufacturer ("OEM") that the parts, components
and assemblies sold as original equipment or service parts, ("Product") will,
when properly installed on commercial vehicles approved for such purpose,
conform to Product specifications and will be free from defects in design,
material and workmanship under normal use and service for the applicable
warranty period as described in the Warranty Period section of this statement.
SmarTire assumes no responsibility, in the absence of its written approval, for
the selection of Product for specific applications that have not been approved.

Commercial vehicles include Class 3 to 8 Trucks (Rigid Truck and Tractor),
Commercial Trailers, Bus and Recreational Vehicles.

Warranty Period

The term of SmarTire's warranty to OEM shall be for three years or 300,000 miles
of vehicle use, whichever comes first, for original equipment parts and one year
unlimited miles for service parts

      (a)   Warranty coverage for Product furnished as original equipment
            commences on the vehicle in-service date.

      (b)   Warranty coverage for Product furnished as service parts commences
            on the date of retail sale.

Remedy

For Products sold as Original Equipment production parts, SmarTire shall
reimburse (a) the cost of parts and labor (subject to pre-established dealer
retail prices and posted labor rates subject to attached labor hour guidelines)
to replace the Product.

For Products sold as Original Equipment service parts, SmarTire shall reimburse
(a) the cost of parts only (subject to pre-established dealer retail prices) to
replace the Product.

SmarTire's obligation to satisfy a warranty claim is subject to the following
conditions:


SMARTIRE/DANA CONFIDENTIAL                                        September 2005
                                      -23-
<PAGE>

      (a)   all such claims must be submitted to SmarTire no later than ninety
            (90) days from the date of the failure occurrence and shall be
            supported by satisfactory evidence in respect of the conditions
            stated herein;

      (b)   if requested by SmarTire, the Product involved shall be returned,
            freight collect, to SmarTire Systems Inc. for examination; and

      (c)   SmarTire's examination of the Product must disclose to its
            satisfaction that none of the Warranty Exclusions described herein
            apply. In all cases, SmarTire shall make the final determination as
            to the warrantability of the Product.

Products replaced under warranty are covered hereunder by the remaining portion
of the original warranty period or 12 months whichever is longer.

General Limits and Exclusions

SmarTire must provide documented and signed off installation approval for the
specified OEM application for this warranty to be in effect.

Coverage is not provided for the following failures or expenses:

      (a)   Towing.
      (b)   Downtime, lodging, meals, and travel time or transportation.
      (c)   Troubleshooting / Diagnostics - except where allowed as indicated in
            the OEM and SmarTire approved guidelines
      (d)   Freight for expedited or rush parts shipments. Parts will be shipped
            by the most economical means possible.
      (e)   Non-genuine replacement parts void the component warranty when used
            to make a repair.
      (f)   Component damage due to failure of other chassis components.
      (g)   Parts and labor markup in excess of OEM and SmarTire approved
            guidelines.
      (h)   Undefined or unidentifiable miscellaneous changes.
      (i)   Failures due to product mis-application or SmarTire unapproved
            application.
      (j)   Failures due to unapproved alterations or modifications to the
            vehicle or the SmarTire component.
      (k)   Failures caused by improper installation or improper prior repair
            including damage to Product by tire removal or installation.
      (l)   Miscellaneous shop supplies and/or fees.
      (m)   Corrosion and rust.
      (n)   Tires
      (o)   Failures due to dirt, snow, or ice build-up.
      (p)   Accident, damage, negligence, abuse or misuse

Claims Procedure

Warranty claims may be made to the OEM through an authorized dealer, per your
OEM warranty procedures. Please refer to stated warranty coverage for your
specific OEM.

Claims submitted must

      (a)   be for verifiable defects in material or workmanship.


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      (b)   be submitted within ninety (90) days from the date on which the
            failure occurred.
      (c)   provide the following information on or with the OEM claim:
            1.    Complete Vehicle Identification Number, model and vehicle
                  type, tire and rim description
            2.    Date in service
            3.    Model and serial number of failed component(s)
            4.    Itemized SmarTire part numbers and dealer parts prices
            5.    Description of complaint, failure, fault code(s), dealer test
                  results, cause, correction (repair)
            6.    Date of failure and mileage at time of failure
            7.    Hourly labor rate and number of labor hours requested
            8.    OEM published labor code and hours

In the event the OEM rejects Product or makes a claim under this warranty,
SmarTire may request the return of the Product and SmarTire will issue the OEM a
return material authorization (RMA) number.

If requested by SmarTire, the Product shall be returned, freight collect, to

Attention: Customer Service
SmarTire Systems Inc.
Suite 150, 13151 Vanier Place
Richmond, British Columbia
Canada, V6V 2J1

for examination. All returned Products shall become SmarTire's property.

SmarTire's determination of warranty coverage shall be final in all cases.

SmarTire reserves the right to reject a warranty claim for any or all of the
following reasons:

      a.    Original claim was filed after ninety (90) days from the date of
            failure
      b.    Failure occurred beyond applicable warranty period
      c.    Claim information is insufficient
      d.    Product was not returned for inspection as requested
      e.    Product inspection does not substantiate claim or indicate a failure

Policy / Goodwill:

If OEM agrees to reimburse customer from Product failure due to non-conforming
material or workmanship beyond the standard warranty period in order to maintain
good will and customer satisfaction, SmarTire agrees to negotiate in good faith
with OEM regarding the reimbursement of OEM for these expenses on a case-by-case
basis. All Policy / Goodwill must be approved by SmarTire Systems Inc.

Warranty Disclaimer

SMARTIRE'S EXPRESS WARRANTY AND PURCHASER'S REMEDIES THEREUNDER ARE EXCLUSIVE
AND GIVEN IN PLACE OF (a) ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
WHETHER WRITTEN OR ORAL, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR IMPLIED WARRANTY ARISING
FROM PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, AND (b) ALL OTHER
OBLIGATIONS, LIABILITIES, RIGHTS, CLAIMS OR REMEDIES, INCLUDING ANY RIGHT IN
CONTRACT, TORT, EXTRA-CONTRACTUALLY, STRICT LIABILITY OR ANY RIGHT ARISING FROM
SMARTIRE'S NEGLIGENCE, ACTUAL OR IMPUTED.


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                                      -25-
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Limitation of Liability

SMARTIRE'S OBLIGATIONS AND PURCHASER'S REMEDIES UNDER SMARTIRE'S EXPRESS
WARRANTY ARE LIMITED TO SMARTIRE'S CHOICE OF REPAIR OR REPLACEMENT AND EXCLUDE
LIABILITY FOR INCIDENTAL, SPECIAL, CONSEQUENTIAL OR ANY OTHER DAMAGES,
INCLUDING, WITHOUT LIMITATION, REPLACEMENT COSTS, ECONOMIC LOSS, LOST REVENUE,
LOST PROFITS, OR LOSS OF USE OR DAMAGE TO OTHER PROPERTY.

PRODUCTS ARE CONSIDERED TO BE MONITORING DEVICES, AND ARE NOT TO BE CONSIDERED
AS SAFETY DEVICES.

Effective Date

This warranty shall become effective October 1, 2005, and applies only to
Product sold in the United States and Canada. This warranty supersedes all past
warranties expressed by SmarTire and may not be changed, altered or modified in
any way except in writing by SmarTire.

Part Return Requirements

Be sure the parts are properly identified.

      a.    Clearly print the RMA number on the bill of lading and shipping
            container.

      b.    If parts for more than one claim are shipped all together, list all
            claim numbers on the bill of lading or provide a detailed packing
            list. This will ensure proof of shipment for a specific claim if the
            parts are lost.

      c.    When shipping parts for several different claims together, do not
            mix the parts in the same container, box, etc. This could cause
            confusion in performing a failure analysis, a delay in claim
            processing, and possible rejection of the claim.

      d.    Package the parts carefully to avoid shipping damage which could
            distort or mask the true cause of the failure.

      e.    Return all parts collect, per SmarTire approved carrier and to the
            correct designated location. Failure to return requested parts to
            designated SmarTire location may result in rejection of the claim.

      f.    Parts lost from broken boxes, damaged shipping containers,
            negligence in packaging, or returned without proper claim
            identification, may result in no reimbursement for the parts not
            received and shall be the responsibility of the dealer.


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      g.    Corrosion or rust that prevents proper inspection, or prevents
            identification of the primary failure, may result in a rejected
            claim.

      h.    Rejected / Non-SmarTire Parts will be returned to dealer at dealer's
            expense.

Labor Hour Guidelines

This section contains a recently revised schedule of various labor hours allowed
for performing warrantable repairs. The hours listed are the maximum amounts
which will be paid on a warranty claim. To insure a better understanding of its
content, please have all personnel involved in warranty, read the section
thoroughly.

These guidelines reflect replacement times only. Components for this product are
not serviceable or rebuildable.

                                                     Allowed Time (Hours)

Diagnostics                                          0.5

Replacement of Sensor and Strap in Tire              0.5

Replacement of Receiver                              0.5

Replacement of Strap Only                            0.5

Replacement of Display                               0.75

Replacement of Antenna                               1

Replacement of Display Cable                         0.5

Reprogramming of System                              0.5


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                                      -27-
<PAGE>

                                    EXHIBIT C
                           ORDER TERMS AND CONDITIONS

1. CONTRACT. Notwithstanding the terms and conditions on any purchase order
("Order") issued by DANA pursuant to this AGREEMENT, the terms of this AGREEMENT
including this Exhibit B shall govern with respect to DANA's purchase of
COMPONENTS from SMARTIRE. No additional or different terms proposed by DANA on
any Order or by SMARTIRE in its acknowledgement shall be binding upon the
parties. The terms of this AGREEMENT shall apply, regardless of any additional
or conflicting terms on any Order, acknowledgement or otherwise submitted by
either party, and any such additional or conflicting terms are deemed rejected
by the other party. Captions in these Terms are for convenience only. For the
purposes of this Exhibit, Seller shall mean SMARTIRE; Goods shall mean
COMPONENTS

2. ASSIGNMENT. Seller may not assign or subcontract this Order or any of its
rights or obligations hereunder, other than the right to assign any amount due
which shall be freely assignable, without Dana's prior written consent and any
purported assignment in violation of this provision will be void.

3. PACKING AND SHIPMENT. Seller will pack and ship the Goods in accordance with
Dana's instructions, furnish all shipping documents required by Dana, and
plainly mark Dana's name and the Order number on all packages and documents.

4. INSPECTIONS. Dana may inspect and/or test the Goods at any time, at its own
expense, and Seller will make its premises available for this purpose and
provide any necessary assistance at no charge. However, no inspections or tests
by Dana will relieve Seller of any of its obligations hereunder relating to the
Goods. If Dana finds any Goods to be defective or not in conformity with its
specifications or requirements, it may return them for a refund of the purchase
price, or require Seller to repair or replace them.

5. HAZARDOUS MATERIALS. Seller warrants that it will properly classify,
describe, package, mark, label and provide any necessary Material Safety Data
Sheets for the Goods and will pack and ship them in compliance with all
applicable hazardous materials laws, regulations, ordinances and orders.

6. SPECIAL TOOLING. All dies, jigs, fixtures, drawings, molds, patterns,
templates, gages and the like that Dana provides to Seller or pays Seller to
make or buy for use in performing this Order (collectively, "Tooling") are at
all times the personal property of Dana or Dana's customer, as the case may be.
Dana will not be obligated to pay for such Tooling, if applicable, until Seller
has provided Dana with an itemized list and adequate cost records for the same
and Dana has accepted the Tooling or the first run of Goods manufactured or
assembled therewith. If Seller fails to provide adequate cost records, Dana will
be not be obligated to pay more than the fair market value of the Tooling,
regardless of the Tooling purchase price set out in the Order. While the Tooling
is in its possession or custody, Seller will be responsible for any loss or
damage to the Tooling and for all taxes, assessments, and similar charges levied
with respect to or on it. Seller will label the Tooling in accordance with
Dana's instructions to permit accurate identification and will segregate it from
other tooling in Seller's possession to the extent practicable. At its own
expense, Seller will repair and maintain the Tooling, keep it in good working
condition, and replace it when necessary for any reason, including normal wear
and tear. Seller will use the Tooling exclusively to produce Goods for Dana


                                      -28-
<PAGE>

hereunder and for no other purpose. Upon expiration, cancellation, or
termination of this Order, Seller will hold the Tooling and any operation
sheets, process data, or other information necessary to show its use, at no
charge, pending receipt of Dana's instructions about its removal or disposition,
which will be at Dana's expense. Seller acknowledges that Dana or Dana's
customer, as the case may be, has title to and all rights in the Tooling, all
accessories and attachments thereto, all substitutes and replacements therefor
and all proceeds therefrom. Seller authorizes Dana or Dana's customer, as
applicable, or their agents, on Seller's behalf and as its attorney-in-fact, to
prepare, sign and file such Uniform Commercial Code financing statements and
amendments thereto and similar documents as they deem necessary to evidence
their ownership of the Tooling.

7. TRADE CREDITS, COUNTRY OF ORIGIN. All trade credits, export credits, customs
drawbacks, tax and fee rebates and the like relating to this Order will belong
to Dana. Seller will cooperate with Dana in obtaining these benefits and
credits. Seller will furnish Dana and its designees with such documentation
establishing the country of origin and value of the Goods as Dana may request,
including, as applicable, affidavits of manufacture and NAFTA certificates of
origin.

8. INSURANCE. Seller will maintain, at its own expense, the following minimum
insurance coverages with insurers satisfactory to Dana: (i) statutory workers'
compensation; (ii) employer's liability in the amount of U.S. $5 million; (iii)
commercial general liability (including products/completed operations and
contractual liability coverage) in the amount of $5 million bodily injury or
property damage per occurrence; and (iv) automotive liability (covering owned,
non-owned, and hired vehicles) in the amount of $5 million bodily injury or
property damage per accident. Such coverages can be provided under primary
and/or excess policies. In addition, where applicable, Seller will maintain all
risk property coverage (including transit) and theft coverage for Goods, whether
or not owned by Dana, which have been ordered hereunder and which are in the
care, custody, or control of Seller, its agents, or contractors, and any other
insurance coverages that Dana deems appropriate. On the acceptance of this Order
and each subsequent renewal of its insurance coverages, Seller will furnish Dana
with certificates of insurance evidencing such coverages, naming Dana as an
additional insured where deemed appropriate by Dana, and requiring written
notice to Dana at least 15 days prior to the cancellation, reduction or
non-renewal of coverage. Compliance with these provisions will not relieve
Seller of its defense and indemnity obligations under Paragraph 19. These
obligations will survive the expiration or cancellation of this Order to the
extent necessary to cover acts or events arising in connection with the
performance of the Order.

9. ALLOCATION. If Seller is unable, at any time, to supply the entire quantity
of Goods ordered by Dana, Seller will meet all of Dana's requirements before
making any allocation among its other customers under Section 2-615 of the
Uniform Commercial Code or the equivalent.

10. TERMINATION. Dana may terminate this Order for convenience at any time by
fifteen (15) business days written notice to Seller. On termination, Dana will
be liable to Seller solely for unpaid invoices for conforming Goods previously
shipped and for Seller's reasonable, documented costs of raw materials,
work-in-process and finished Goods that cannot be canceled without penalty or
sold in the general trade, not to exceed the volumes specified in this Order (if
a spot Order) or in any open releases hereunder (if a blanket Order) and payable
only after Dana's receipt of the same.


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                                      -29-
<PAGE>

11. CANCELLATION. Dana may cancel this Order without liability or further
obligation hereunder by 15 business days' written notice to Seller if Seller
breaches any provision, term or condition of the Order (or Dana anticipates such
breach); provided, that the cancellation will be void if Seller cures the breach
(or provides assurances of performance acceptable to Dana) within the 15-day
notice period. Dana may cancel this Order immediately by written notice to
Seller without liability or further obligation hereunder (i) if Seller fails or
refuses to furnish Dana promptly with such information and assurances as Dana
may request, from time to time, about Seller's financial and operating
conditions and ability to supply Goods under this Order, and (ii) to the extent
permitted by law, in the event of Seller's insolvency, the filing of a voluntary
or involuntary petition in bankruptcy by or against Seller, the appointment of a
receiver or trustee for Seller, Seller's execution of an assignment for the
benefit of creditors, or a comparable event.

12. BINDING EFFECT. This Order will be binding on the parties and their
respective agents, subcontractors, successors and permitted assigns.


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