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| 1.   | The      Vendors hereby acknowledge and agree that the Company is liable to the      Lenders for all obligations under the Financing Documents, including,      without limitation, the following (collectively, the “Obligations”):  (a)      the amounts set forth on Exhibit “C” attached hereto and incorporated      herein by reference, and (b) all fees, costs, expenses, and costs of      collection (including reasonable attorneys’ fees and expenses) heretofore      or hereafter accruing and/or incurred by the Lenders in connection with      the Financing Documents, including, without limitation, all reasonable      attorneys’ fees and expenses incurred in connection with the negotiation      and preparation of this Agreement and all documents, instruments, and      agreements incidental hereto. |
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| 2.   | The      Vendors hereby acknowledge and agree that they have no offsets, defenses,      claims, or counterclaims against the Collateral Agent, the Lenders and/or      their respective officers, directors, employees, attorneys,      representatives, predecessors, affiliates, parents, successors, and      assigns (the “Released      Parties”) with respect to the Financing Documents, the Obligations,      or otherwise, and that if the Vendors now have, or ever did have, any      offsets, defenses, claims, or counterclaims against the Released Parties      whether known or unknown, at law or in equity, from the beginning of the      world through this date and through the time of execution of this      Agreement, all of them are hereby expressly WAIVED, and the Vendors      each hereby RELEASE the Released      Parties from any liabilitytherefor. |
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| 3.   | The      Vendors: |
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| (a)   | Hereby      ratify, confirm, and reaffirm all of the terms and conditions of the      Financing Documents.  The Vendors further acknowledge and agree      that, except as specifically modified in this Agreement, all terms and      conditions of the Financing Documents shall remain in full force and      effect; |
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| (b)   | Hereby      ratify, confirm, and reaffirm that (i) the obligations secured by the      Financing Documents include, without limitation, the Obligations, and any      future modifications, amendments, substitutions or renewals thereof, (ii)      the Financing Documents, this Agreement, and the documents executed in      connection herewith or related hereto (collectively, the “Transaction Documents”),      grant security interests in favor of the Lenders in the undertaking of the      Vendors and all present and after-acquired personal property and real      property of the Vendors, and that such security interests remain in full      force and effect, and (iii) all collateral, whether now existing or      hereafter acquired, granted to the Collateral Agent and/or the Lenders      pursuant to the Transaction Documents shall continue to secure all of the      Obligations until payment in full of the Obligations;  and |
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| (c)   | Shall,      from and after the execution of this Agreement, execute and deliver to the      Collateral Agent whatever additional documents, instruments, and      agreements that the Lenders may reasonably require in order to vest or      perfect the Transaction Documents and the collateral granted to the      Lenders therein more securely in the Collateral Agent and Lenders and to      otherwise give effect to the terms and conditions of this      Agreement. |
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| 4.   | The      Vendors have presented the Lenders with a proposed wind-down plan      (hereinafter, the “Wind-Down Plan”),      together with a projected budget (hereinafter, the “Budget”) covering the      period from the date of this Agreement through the anticipated wind-down      of the Vendors’ operations on or about December 31, 2009 (hereinafter, the      “Termination      Date”), a copy of which is annexed hereto marked Exhibit      “D”.  The Budget sets forth the anticipated expenses and costs      of the Vendors’ operations through the date of closing on the Sale, and      the subsequent wind down of the Vendors’ operations (hereinafter, the      “Budgeted      Expenses”).  In connection  therewith: |
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| (a)   | The      Vendors warrant and represent to the Lenders that the Budget contains the      Vendors’ best estimate of all foreseeable, reasonable, and necessary      expenses which may be incurred or otherwise are required to be paid in      connection with the Sale and the subsequent wind-down of the Vendors’      operations. |
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| (b)   | Certain      of the Budgeted Expenses identified on the Budget as “Funds req’d at      closing” in the amount of $762,532.00 (the “Specified Expenses”),      need to be paid on or before the closing on the Sale, and the Vendors do      not have sufficient funds on hand to pay for the      same.  Accordingly, the Vendors have requested that YA Global      make a loan in the amount of $762,532.00 (the “Bridge Loan”) to fund      such Specified Expenses, and YA Global has agreed to do so, subject to the      following: |
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| (i)   | The      Bridge Loan shall be made upon, and subject to, the terms and conditions      set forth in a Bridge Note in the form attached hereto as Exhibit “E” (the      “Bridge      Note”); |
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| (ii)   | All      amounts advanced under the Bridge Loan, and all interest accrued thereon      and/or fees, costs, expenses, and costs of collection incurred in      connection therewith and all other amounts due under the Bridge Loan      Documents shall constitute Obligations, shall be secured by all collateral      which secures the Obligations, and shall be repaid as part of the      Obligations from the proceeds of the Sale and/or the Excluded Assets (as      defined below) in accordance with the provisions of this Agreement,      subject to certain agreements among the Lenders regarding the application      of such proceeds; and |
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| (iii)   | At      the option of YA Global, with the consent of the other Lenders, the      proceeds of the Bridge Loan may be disbursed directly to the party to      which the Specified Expense is due, or deposited into the Pledged Account,      as defined below, to be used by the Vendors solely to pay the Specified      Expenses.  The Vendors shall cooperate fully with YA Global in      making such disbursements directly to the parties to which the Specified      Expenses are owed, and shall execute and deliver to YA Global such      notices, documents, instruments and/or agreements as YA Global may require      in connection with the same. |
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| (c)   | Provided      that no Termination Event, as defined below, has occurred, the Lenders (i)      will permit the Vendors to use their cash on hand, or other cash or funds      received by the Vendors from assets excluded from the Sale, as set forth      on Schedule 2.01 to the APA (hereinafter, the “Excluded Assets”) to pay      Budgeted Expenses and the proceeds of the Bridge Loan to pay Specified      Expenses (if not disbursed directly as set forth above), but only to the      extent that such Budgeted Expenses/Specified Expenses are actually      incurred and are then due and payable, and, to the extent that the funds      available pursuant to sub-section (i) are not sufficient to pay all such      Budgeted Expenses, then (ii) will deposit in the Pledged Account (as      defined below) from funds received under the APA, if and when such amounts      are actually received by the Collateral Agent in good and collected funds,      prior to such funds being distributed to the Lenders, sufficient amounts      to pay such Budgeted Expenses that are actually incurred and then due and      payable. The Vendors covenant and agree that they shall not, without the      prior written consent of the Collateral Agent and the Lenders, pay any      Budgeted Expense (x) prior to the week that such Budgeted Expense is      scheduled to be paid as shown in the Budget, or (y) in excess of the      Budgeted Expenses set forth in the Budget, whether by line item or in the      aggregate. |
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| 5.   | On      or before December ___, 2008, the Company shall open an account (the      “Pledged Account”)      with a U.S. branch of Wachovia Bank, N.A., or another U.S. bank acceptable      to the Collateral Agent and the Lenders and will deposit into the Pledged      Account all cash, collections, and other funds as and when received by the      Vendors, including, without limitation, all proceeds from the Excluded      Assets and all proceeds of the Bridge Loan which are not directly      disbursed per the provisions of Paragraph 4, above.  The Company      shall execute and deliver all such documents (including a pledge agreement      and control agreement) as such bank and the Lenders may require in order      to grant the Collateral Agent for the benefit of the Lenders a perfected      security interest in the Pledged Account to secure the      Obligations.  The Vendors shall not open or maintain any deposit      accounts, savings accounts, money market accounts, or any other account or      investment, with any other bank, lending institution, or financial      company, with the sole exceptions of the Pledged Account and the Company’s      existing deposit account #’s _______, and _________ maintained with      _______________ (the “Existing Accounts”)      which the Vendors are required to keep open pursuant to the Transition      Services Agreement entered into with Bendix (as defined below) in      connection with the APA (the “Transition Services      Agreement”) for 120 days for the sole purpose of collecting      payments on accounts receivable which are to be sold to Bendix per the      APA.  The Vendors covenant and agree that (a) any funds      currently in such accounts which are not proceeds of accounts receivable      sold to Bendix will be immediately transferred to the Pledged Account, (b)      no funds of any nature shall be deposited in such accounts other than      funds received from accounts receivable which have been sold to Bendix,      and (c) the Vendors will close such accounts no later than 120 days from      the date of the Transition Services Agreement.  Unless and until      the occurrence of a Termination Event, the Company shall have access to      the funds contained in the Pledged Account solely for the payment of      Budgeted Expenses/Specified Expenses in accordance with Paragraph 4,      above, provided, however, that the Company covenants and agrees that it      will not pay any Budgeted Expenses/Specified Expenses without first      providing at least three (3) days written notice to the Lenders of the      same.  If and when the funds contained in the Pledged Account      equal or exceed the amounts necessary to pay any remaining Budgeted      Expenses, such excess funds shall be remitted to the Collateral Agent for      the benefit of the Lenders in accordance with the instructions set forth      on Exhibit “F” attached hereto.  Further, upon the earlier of      (a) the completion of the wind-down of the Vendors’ businesses, or (b) the      time at which all Budgeted Expenses that have been incurred or which are      reasonably expected to be incurred, have been paid, all remaining funds      contained in the Pledged Account shall be remitted to the Collateral Agent      for the benefit of the Lenders in accordance with the instructions set      forth on Exhibit “F” attachedhereto. |
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| 6.   | The      Vendors have informed the Lenders that they have entered into the APA with      Bendix CVS Canada Inc. (“Bendix”), as purchaser, and Bendix Commercial      Vehicle Systems LLC, as guarantor of Bendix’s obligations under the APA,      and have requested that the Lenders consent to the same.  The      Lenders hereby consent to the Vendors entering into the APA.  In      consideration of the Lenders providing their consent to the Vendors      entering into the APA, the Vendors agree as  follows: |
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| (a)   | Capitalized      terms used in this Section and not otherwise defined herein, shall have      the meaning therefore set forth in theAPA. |
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| (b)   | The      Vendors hereby acknowledge and agree that the Lenders hold a perfected,      first priority security interest in the APA and the Escrow Agreement, and      all of the Vendors rights thereunder, including, without limitation, all      rights to payment thereunder and the right under the Escrow Agreement to      the return of the undertaking and all assets of the Purchased Business if      the transaction is unwound (which constitute rights in such undertaking      and property and a continuing interest in such undertaking and      property).  In that regard, the Vendors acknowledge and agree      that all payments under the APA have been directed to the Collateral Agent      in accordance with the instructions set forth on Exhibit “F” attached      hereto, and upon receipt by the Collateral Agent, will be applied in      reduction of the Obligations in a manner determined by the Lenders in      their sole and exclusive discretion.  In the event that      notwithstanding the foregoing, a Vendor receives, or otherwise obtains or      comes into the possession of, any payments due under the APA, or any other      proceeds of the Sale, then such Vendor shall hold such payments or      proceeds in trust for the Lenders, and shall immediately remit the same to      the Collateral Agent in accordance with the instructions set forth on      Exhibit “F” attached hereto in the same form received, with any necessary      endorsements thereon. |
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| (c)   | The      Vendors covenant and agree that the Vendors will not, and will not cause      or encourage any other party to, cancel, revoke, terminate, rescind, or      abandon the APA, or to amend, modify, waive, or otherwise change any of      the terms and conditions of the APA, or consent to any of the foregoing,      in any manner, without the prior written consent of the Collateral Agent      and the Lenders. |
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| (d)   | The      Vendors shall provide the Lenders with notice immediately upon it becoming      reasonably apparent to the Vendors that (i) either the Vendors or Bendix      will not be able to consummate the Sale on or before December 5, 2008, or      (ii) the required shareholder approvals will not be obtained on or before      March 13, 2009. |
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| (e)   | The      Vendors shall use their commercially reasonable best efforts to close on      the Sale upon the terms contemplated by the APA on or before December 5,      2008. |
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| (f)   | Upon      the closing of the Sale, the Vendors shall, as soon as is practicable      thereafter, subject to applicable law, convene and hold a special meeting      of the shareholders of the Company for the purpose of passing special      resolutions to approve the Sale and any other transactions contemplated by      the APA, but in any event on or before March 13, 2009, or if the Company      is unable to obtain, after using its best efforts to do so, such      shareholder approval of the Sale and the other transactions contemplated      by the APA, the Company will use all reasonable commercial efforts to      obtain an order of the British Columbia Supreme Court declaring that the      Sale is for valuable consideration to Bendix who is dealing with the      Company in good faith pursuant to Section 301(3)(a) of the Business Corporations      Act (British Columbia) or is otherwise  valid. |
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| (g)   | The      Company covenants and agrees to cooperate fully with the Lenders who are      entering into a voting agreement as contemplated by the APA, and to      provide such Lenders with all such documents, instruments, agreements, and      waivers as such Lenders may reasonably request, in connection with any      such Lender’s conversion of a portion of the Obligations into shares of      the Company pursuant to the terms and conditions of the Convertible      Debentures set forth on Exhibit “A” attached hereto, to promptly issue the      required shares to such Lenders, and to otherwise fully comply with all of      the Company’s obligations under the Convertible Debentures and the other      Financing Documents in connection with thesame. |
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| (h)   | The      Company covenants and agrees to cooperate fully with the Lenders, and to      provide the Lenders with all such documents, instruments, agreements, and      waivers as the Lenders may reasonably request, in connection with the      Lenders’ performance pursuant to that certain Voting Arrangement Agreement      of even date herewith entered into by and among Bendix, the Company, and      the Lenders. |
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| (i)   | The      Vendors will provide the Lenders with copies of all correspondence,      notices, documents, agreements and other written information and/or      materials relating to the Sale, the APA, the shareholder meeting,      shareholder approval, the wind-down of the Vendors operations, and all      related matters, as and when such materials are sent, or received by, the      Vendors, and shall at all times keep the Lenders fully apprized of the      status of the Sale, the Vendors efforts to obtain shareholder, or court,      approval of the same, and, after the closing on the Sale, all transactions      between the Vendors and Bendix thereafter, including, without limitation,      the calculation of Closing Net Book Value and Final Net Book Value, and      calculation of Earnout Payments.  In that regard, the Vendors      covenant and agree (i) to provide the Lenders with copies of the Closing      Net Book Value Statement and each Earn Out Statement promptly upon      receiving the same, (ii) to provide the Lenders with prior notice before      inspecting, examining or auditing any information or other materials      provided by Bendix pursuant to Section 2.03 of the APA, or observing any      physical inventory under Section 2.04 of the APA, and allow the Lenders      and/or their auditor or representatives to participate in the same, (iii)      not to dispute any Earn Out Statement or deliver a Notice of Objection to      Bendix, or take any other material action under the APA, without first      providing the Lenders with a detailed summary of the Vendors objection to      the Earn Out Statement and/or Closing Net Book Value Statement, or      proposed action, and obtaining the Lenders consent to the same, which      consent shall not be unreasonably withheld, conditioned, or delayed, and      (v) to provide the Lenders with prior notice of any other meeting or      conference call with Bendix, and, at the Lenders request, allow the      Lenders to participate in the same. |
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| (j)   | Weekly,      on or before 11:00 a.m. on Wednesday of each week, the Vendors shall      provide the Lenders with a report of the status of the Sale, the Vendors’      efforts to obtain shareholder or court approval of the Sale, the wind-down      of the Vendors operations, and any other developments under or related to      the Sale or the APA or the wind-down.  Each such report shall      include a detailed summary of all sources and uses of cash, a comparison      for the prior week of actual expenditures against the Budgeted Expenses      set forth in the Budget, and a comparison of the status of the wind-down      of the Vendors’ operations to the Wind-Down Plan.  In addition,      the Vendors shall provide such other reporting and information as the      Lenders may reasonably request from time to  time. |
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| (k)   | The      Lenders’ and or their auditor and/or other representatives or agents,      shall be permitted access to the Vendors’ business premises, and/or the      location at which the Vendors store their books and records, at any time      during normal business hours upon reasonable prior notice and shall be      afforded complete access to all information, books, and records as may be      necessary in order to effectively monitor the Vendors’ progress in      conducting the Sale, any post-sale transactions, such as the calculation      of Closing Net Book Value or Earn Out Payments, and/or the wind-down of      their operations.  The reasonable out-of-pocket costs incurred      by the Lenders in connection with such inspections and the retention of      auditors or other professionals in connection with the same shall be added      to, and be a part of, theObligations. |
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| (l)   | The      Excluded Assets include the right to pursue a patent enforcement action      with respect to two patents held by the Company.  In connection      therewith, the Company will use commercially reasonable efforts to      diligently prosecute such enforcement action, provided that the Company      will not incur any obligations or liabilities, or pay any out-of-pocket      expenses, in connection with the same without the Collateral Agent’s prior      consent.  Further, the Company has ensured, under the terms of      the Transition Services Agreement, that the employees that it may need in      connection with prosecuting such enforcement action (namely Greg Tooke and      Shawn Lammers) will be available, subject to reimbursing Bendix for their      time, to the Company in connection with such litigation.  The      Company acknowledges and agrees that all proceeds of such enforcement      actions constitute the Lenders’ collateral, and agree that they will      execute and deliver all necessary documents, instruments, and agreements      to preserve, protect, perfect, or vest such interests in the Lenders      and/or the Collateral Agent, as the Lenders may reasonably require,      including, without limitation, to execute an assignment of any judgment(s)      obtained in such actions to the Collateral Agent and/or      Lenders.  Further, the Company agrees (i) that it will not      settle such litigation without the Collateral Agent’s and Lenders consent,      and (ii) all proceeds of the Excluded Assets shall be remitted to the      Collateral Agent for the benefit of the Lenders in accordance with the      instructions set forth on Exhibit “F” attached  hereto. |
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| (m)   | The      Vendors confirm and reaffirm that the consideration set forth in the APA      is the only consideration being paid by Bendix, or on Bendix behalf, in      connection with the Sale, and that no fees, commissions, or other amounts,      or any other consideration, are being paid to the Vendors or any of the      Lenders, or any of their respective officers or directors, in connection      with the Sale, except as expressly set forth in this      Agreement. |
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| 7.   | In      consideration of the Lenders consenting to the Sale, and permitting the      Vendors to pay the Budgeted Expenses with the proceeds of the Lenders’      collateral, the Subsidiaries hereby guarantee to the Collateral Agent, for      the benefit of all of the Lenders, the payment and performance of the      Obligations, and grant the Collateral Agent, for the benefit of all of the      Lenders, a security interest in and to all of their personal      property.  In order to further evidence this grant of a security      interest, each of the Subsidiaries have executed and delivered to the      Collateral Agent a Guarantee and a Security Agreement of even date      herewith.  Such Guarantees and Security Agreements shall      constitute Financing Documents as defined  hereunder. |
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| 8.   | From      and after the earlier of the occurrence of a Termination Event, or the      Termination Date, but only to the extent that any Obligations remain      unpaid, any collateral of the Lenders which remains may be disposed of by      the Collateral Agent and/or Lenders, as appropriate, in such manner as the      Collateral Agent and/or Lenders, in their sole and exclusive discretion,      but subject to applicable law, may determine.  The Vendors shall      execute and deliver to the Collateral Agent and/or Lenders, as applicable,      whatever assents and waivers that the Lenders may require in connection      with any such secured party’s sale or other disposition, and shall      reasonably cooperate with the Collateral Agent and Lenders in connection      with their efforts to liquidate any remaining assets of the Vendors and/or      collect any outstanding accounts receivable.  In connection      therewith, the Vendors hereby: |
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| (a)   | Acknowledge      and agree that the Lenders may apply the proceeds realized from the      disposition of the collateral in reduction of the Obligations in such      manner as the Lenders, in their sole and exclusive discretion, may      determine; |
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| (b)   | Acknowledge      and agree that the Vendors are, and shall be, liable to the Lenders for      any deficiency which remains after the disposition of all or any portion      of the collateral; and |
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| (c)   | Acknowledge      and agree that (i) nothing herein shall require the Collateral Agent      and/or the Lenders to take possession of, sell by secured party sale, or      otherwise dispose of the collateral, and (ii) the Collateral Agent and/or      the Lender may exercise its rights and remedies to collect the Obligations      from the Vendors without resort, or regard, to the    collateral. |
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| 9.   | Each      Vendor hereby appoints the Collateral Agent as its attorney-in-fact, with      full authority in the place and stead of such Vendor and in the name of      each Vendor or otherwise, from time to time in the Collateral Agent’s      discretion to take any action and to execute any instrument which the      Collateral Agent may reasonably deem necessary to accomplish the purposes      of this Agreement or for the purpose of perfecting, confirming, continuing      , enforcing or protecting the security interest in the collateral held by      the Collateral Agent and/or the Lenders, including, without limitation, to      (a) receive and collect all payments, or instruments made payable, to the      Vendors under the APA or otherwise or any part thereof and to give full      discharge for the same, (b) to exercise any and all of the Vendors rights      under the APA, and to take all actions to preserve, protect, and/or      enforce the same, and/or (c) demand, collect, receipt for, settle,      compromise, adjust, sue for, foreclose, or realize on any collateral as      and when the Collateral Agent may determine.  The foregoing      power of attorney is a power coupled with an interest and shall be      irrevocable until all Obligations are paid and performed in      full.  The Vendors agree that the powers conferred on the      Collateral Agent hereunder are solely to protect the Collateral Agent’s      and Lenders’ interests in the Collateral and shall not impose any duty      upon the Collateral Agent to exercise any such  powers. |
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| 10.   | From      and after the execution of this Agreement, interest shall accrue upon, and      the Obligations shall be repaid, asfollows: |
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| (a)   | Interest      shall continue to accrue upon the principal balance of the Obligations at      the applicable non-default rate set forth in the Financing      Documents; |
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| (b)   | All      proceeds of the Sale, net of any amounts necessary to pay Budgeted      Expenses, shall be applied in reduction of the Obligations in a manner      determined by the Lenders in their sole and exclusive      discretion; |
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| (c)   | After      payment of all reasonable and necessary Budgeted Expenses actually      incurred by the Vendors, all remaining cash and other funds of the      Vendors, and all other proceeds of the Lenders’ collateral, shall be      applied in reduction of the Obligations in a manner determined by the      Lenders in their sole and exclusivediscretion; |
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| (d)   | All      Obligations shall be paid in full, in good and collected funds, upon the      earlier of (i) the occurrence of a Termination Event, or (ii) the      Termination Date; and |
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| (e)   | Any      and all payments hereunder shall be made to the Collateral Agent for the      benefit of the Lenders in accordance with the instructions set forth on      Exhibit “F” attached hereto. |
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| 11.   | In      consideration of the Vendors’ performance in accordance with this      Agreement, the Lenders shall forbear from enforcing the Lenders’ rights      and remedies under the Transaction Documents and/or applicable law against      the Vendors, until the earlier of (i) the occurrence of a Termination      Event, or (ii) the Termination Date. Notwithstanding the foregoing,      nothing contained in this Agreement shall constitute a waiver by the      Lenders of any default or event of default (including, without limitation,      the Existing Defaults) under the Financing Documents, whether now existing      or hereafter arising, nor a waiver by the Lenders of any of their claims,      rights, and/or remedies with respect to any of the Vendors or any other      third party under the Transaction Documents, applicable law, or      otherwise.  This Agreement shall only constitute an agreement by      the Lenders to forbear from enforcing their rights and remedies upon the      terms and conditions set forthherein. |
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| 12.   | The      occurrence of any one or more of the following events shall constitute a      termination event (hereinafter, a “Termination Event”)      under this Agreement: |
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| (a)   | The      filing of a petition for relief by or against any of the Vendors under any      insolvency law, including the United States Bankruptcy Code, Bankruptcy or      Insolvency Act (Canada), Companies Creditors Arrangement Act      (Canada), or other insolvency statute or  proceeding; |
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| (b)   | The      waiver, modification or amendment of any of the terms and conditions of      the APA without the Lenders prior written  consent; |
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| (c)   | The      Vendors and Bendix fail to consummate the Sale in accordance with the      terms of the APA on or before December 12,2008; |
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| (d)   | The      APA and/or the Sale is cancelled, terminated, revoked, voided, or      rescinded for any reason; |
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| (e)   | The      Vendors shall pay any expenses which are not Budgeted Expenses, or      otherwise fail to comply with theBudget; |
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| (f)   | The      issuance of an attachment, injunction, restraining order, or other order      of any court of competent jurisdiction or government authority enjoining,      restraining, or otherwise restricting the ability of the Vendors to      consummate the Sale or to obtain a shareholder resolution ratifying the      same; |
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| (g)   | The      failure of the Vendors to conduct the wind-down of their operations      substantially in accordance with the Wind-Down  Plan; |
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| (h)   | The      failure of the Vendors to promptly, punctually, or faithfully perform any      term or condition of this Agreement as and when due, it being expressly      acknowledged and agreed that TIME IS OF THE      ESSENCE; |
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| (i)   | The      failure of the Vendors to pay any amount required to be paid to the      Lenders under this Agreement as and when due, it being expressly      acknowledged and agreed that TIME IS OF THE ESSENCE;      and |
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| (j)   | The      failure of the Vendors to pay all Obligations in full on or before 5:00      p.m. on the Termination Date, it being expressly acknowledged and agreed      that TIME IS OF THE      ESSENCE. |
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| 13.   | Upon      the earlier of the occurrence of any Termination Event or the Termination      Date, the Lenders’ forbearance as set forth in this Agreement shall      automatically terminate, all Obligations shall become immediately due and      payable in full, and the Collateral Agent and the Lenders may immediately      commence enforcing their rights and remedies against the Vendors pursuant      to the Transaction Documents and/or applicable law.  Further,      upon the occurrence of any Termination Event, interest shall accrue on the      outstanding balance of the Obligations at the default rate of interest set      forth in the Financing Documents. |
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| 14.   | Any      and all reasonable out-of-pocket costs, expenses, and costs of collection      (including reasonable attorneys’ fees and expenses) heretofore or      hereafter incurred by the Lenders in connection with the protection,      preservation, and enforcement by the Collateral Agent and/or the Lenders      of their rights and remedies under the Financing Documents and this      Agreement, including, without limitation, the negotiation and preparation      of this Agreement, shall be added to, and be a part of, the      Obligations. |
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| 15.   | Unless      otherwise specified herein, all notices hereunder to any party hereto      shall be in writing and (i) hand delivered, or (ii) sent by a recognized      overnight courier, addressed to such party at its address indicated      below: |
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| (a)   | If      to the Collateral Agent or the Lenders, toboth: |
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| (b)   | If      to the Vendors: |
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| 16.   | Non-Interference.  From      and after the occurrence of any Termination Event, the Vendors agree not      to interfere with the exercise by the Collateral Agent and/or the Lenders      of any of their rights and remedies.  The Vendors further agree      that they shall not seek to distrain or otherwise hinder, delay, or impair      the Collateral Agent’s and/or Lenders’ efforts to realize upon their      collateral, or otherwise to enforce their respective rights and remedies      pursuant to the Transaction Documents.  The provisions of this      Paragraph shall be specifically enforceable by the Collateral Agent and      the Lenders. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17.   | Jury      Trial.  Each of the Vendors hereby makes the following      waiver knowingly, voluntarily, and intentionally, and understands that the      Collateral Agent and the Lenders, in entering into this Agreement, are      relying on such a waiver:  THE VENDORS HEREBY IRREVOCABLY      WAIVE ANY PRESENT OR FUTURE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR      CONTROVERSY IN WHICH THE COLLATERAL AGENT OR THE LENDERS OR ANY ONE OF      THEM BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR      AGAINST SUCH PARTY OR IN WHICH SUCH PARTY IS JOINED AS A PARTY LITIGANT),      WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF, THE      OBLIGATIONS, THE TRANSACTION DOCUMENTS, THE SALE, OR ANY RELATED      MATTER. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18.   | This      Agreement shall be binding upon the Vendors and the Vendors’ respective      successors, and assigns, and shall inure to the benefit of the Collateral      Agent, the Lenders and their respective successors and      assigns.  This Agreement and all documents, instruments, and      agreements executed in connection herewith incorporate all of the      discussions and negotiations between the parties hereto, either expressed      or implied, concerning the matters included herein and in such other      documents, instruments and agreements, any statute, custom, or usage to      the contrary notwithstanding.  No such discussions or      negotiations shall limit, modify, or otherwise affect the provisions      hereof.  No modification, amendment, or waiver of any provision      of this Agreement, or any provision of any other document, instrument, or      agreement between the parties hereto shall be effective unless executed in      writing by all of the parties hereto, and if such party be the Collateral      Agent or a Lender, then by a duly authorized representative      thereof. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19.   | The      Vendors agree that any legal action, proceeding, case, or controversy      against the Vendors or any one of them with respect to the Obligations,      the Transaction Documents, or any related matter may be brought in any      Federal or state court located in the State of New Jersey, or the Supreme      court located in the Province of British Columbia, as the Lenders may      elect in their sole discretion.  By execution and delivery of      this Agreement, the Vendors, for themselves and in respect of their      property, accept, submit, and consent generally and unconditionally, to      the jurisdiction of the aforesaidcourts. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 20.   | In      connection with the interpretation of this Agreement and all other      documents, instruments, and agreements incidental  hereto: |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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

| 21.   | Any      determination that any provision or application of this Agreement is      invalid, illegal, or unenforceable in any respect, or in any instance,      shall not affect the validity, legality, or enforceability of any such      provision in any other instance, or the validity, legality, or      enforceability of any other provision of this  Agreement. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 22.   | The      Vendors warrant and represent to the Lenders that the    Vendors: |
|-----------------|----------------------------------------------------------------------------|

| (a)   | Have      read and understand all of the terms and conditions of this      Agreement; |
|-----------------|---------------------------------------------------------------------------------------|

| (b)   | Intend      to be bound by the terms and conditions of this Agreement;    and |
|-----------------|-------------------------------------------------------------------------------|

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

| YA      GLOBAL INVESTMENTS, L.P., as Collateral Agent and as a LenderBy:           Yorkville      Advisors LLC, its InvestmentManagerBy:      /s/ Mark AngeloName:      Mark AngeloTitle:      Portfolio Manager | SMARTIRE      SYSTEMS INC. By:      /s/ David WarkentinName:                      David      WarkentinTitle:  CEO      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| XENTENIAL      HOLDINGS LIMITED, as a Lender By:      /s/ Mark AngeloName:      Mark AngeloTitle:      Director                                                                                                                                                    | SMARTIRE      TECHNOLOGIES INC. By:      /s/ David WarkentinName:                      David      WarkentinTitle:  CEO |
| STARAIM      ENTERPRISES LIMITED, as Lender By:      /s/ Mark AngeloName:      Mark AngeloTitle:      Director                                                                                                                                                     | SMARTIRE      USA, INC. By:      /s/ David WarkentinName:                      David      WarkentinTitle:  CEO         |
| STAROME      INVESTMENTS LIMITED, as a Lender By:      /s/ Matthew HoffmanName:      Matthew HoffmanTitle:      Authorized Signatory                                                                                                                               |                                                                                                                                                                                                                                                |

| 1.   | The      $20M Debenture: |
|----------------|--------------------------|

| a.   | Principal:                      $19,202,198 |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $6,170,423 |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $25,372,621 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | The      $600K Debenture: |
|----------------|---------------------------|

| a.   | Principal:                      $600,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $107,583 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $707,583 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | The      $1.5M Debenture: |
|----------------|---------------------------|

| a.   | Principal:                      $820,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $150,908 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $970,908 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The      $2M Debenture: |
|----------------|-------------------------|

| a.   | Principal:                      $1,415,400 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $567,034 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $1,982,434 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | The      $8M Debenture: |
|----------------|-------------------------|

| a.   | Principal:                      $7,100,025 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $2,509,084 |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $9,609,109 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | The      $684K Debenture: |
|----------------|---------------------------|

| a.   | Principal:                      $684,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $128,820 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $812,820 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | The      $334K Debenture: |
|----------------|---------------------------|

| a.   | Principal:                      $334,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $61,326 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $395,326 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | The      $782K Debenture: |
|----------------|---------------------------|

| a.   | Principal:                      $782,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $139,022 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $921,022 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.   | The      $1.15M Debenture: |
|----------------|----------------------------|

| a.   | Principal:                      $1,150,000 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $186,556 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $1,336,556 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.   | The      $350K Debenture: |
|-----------------|---------------------------|

| a.   | Principal:                      $350,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $45,597 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $395,597 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11.   | The      $96K Debenture: |
|-----------------|--------------------------|

| a.   | Principal:                      $95,500 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $10,133 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $106,633 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12.   | The      $422K Debenture: |
|-----------------|---------------------------|

| a.   | Principal:                      $422,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $51,625 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $473,625 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.   | The      $392K Debenture: |
|-----------------|---------------------------|

| a.   | Principal:                      $392,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $41,683 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $433,683 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.   | The      $74K Debenture: |
|-----------------|--------------------------|

| a.   | Principal:                      $74,000 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $7,030 |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $81,030 |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15.   | The      $269K Debenture: |
|-----------------|---------------------------|

| a.   | Principal:                      $269,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $14,705 |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $283,705 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16.   | The      $152K Debenture: |
|-----------------|---------------------------|

| a.   | Principal:                      $152,500 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $6,202 |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $158,702 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17.   | The      $100K Debenture: |
|-----------------|---------------------------|

| a.   | Principal:                      $100,000 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Interest:                      $3,600 |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Total:                                $103,600 |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| SMARTIRE      SYSTEMS INC. By:__________________________________Name:Title:      |
|---------------------------------------------------------------------------------------|
| SMARTIRE      TECHNOLOGIES INC. By:__________________________________Name:Title: |
| SMARTIRE      USA, INC. By:__________________________________Name:Title:         |

|   | Bank:                                 Bank of America |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                           100 FederalStreet |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                           Boston, MA  02110 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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