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                                                                    EXHIBIT 10.9

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THE ITEMS MARKED BY TWO ASTERISKS ** HAVE BEEN OMITTED FROM THIS FILING AND
HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


                             AGREEMENT NO. TA-3727

                       ASIS DEVELOPMENT/PURCHASE CONTRACT

THIS AGREEMENT ("Agreement") is made this 1st day of September 1998, by and
between SensoNor asa, a Norwegian corporation, ("Supplier") and TRW Inc.
("TRW") an Ohio, USA corporation acting on behalf of its Automotive Electronics
Group, North America, 24175 Research Dr., Farmington Hills, MI 48335-2642
("AEG") and SmarTire Systems Inc., a British Columbian corporation having a
place of business at 13151 Vanier Place, Suite 150, Richmond, British Columbia,
Canada V6V 2J1 ("SmarTire").

                                    OVERVIEW

Supplier is in the business of developing and manufacturing, among other
things, application specific integrated sensors ("ASISs");

Supplier wants to develop an ASIS (AEG part number 152008, Specification Doc#
152008 Tire Pressure Sensor) for AEG and SmarTire and to sell such ASISs to AEG
and SmarTire;

AEG and SmarTire want Supplier to develop an ASIS for AEG and SmarTire; and

If Supplier's ASIS is acceptable, AEG and SmarTire will buy the ASISs from
Supplier upon the terms set forth herein.

Therefore, in consideration of the mutual provisions of this Agreement, the
Parties agree as follows:

1.   DEFINITIONS: As used in this Agreement, the following terms will have the
     following meanings:

     (A)  "Product" will mean the ASIS (AEG part number 152008) developed under
          this Agreement.

     (B)  "Specifications" will mean the technical outline of the Product,
          including block diagrams, circuit schematics, die size, net list, test
          vectors, layout, simulation results, screening requirements, packaging
          information, and any other information required to manufacture the
          Product, and the performance and test requirements for the Product.
          The Specifications are designated by AEG as document number 152008 and
          part number


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          152008.

     (C)  "Concept Verification Units" ("CVs") will mean quantities of the
          Product which have undergone functional testing and characterization
          as agreed by AEG, Smartire, and Supplier, and which will be used to
          verify the concept of the Product.

     (D)  "Design Verification Units" ("DVs") will mean quantities of the
          Product made on qualified production equipment and processes which
          have undergone testing as agreed to by AEG, SmarTire and Supplier and
          which will be used to verify the aftermarket design and
          manufacturability of the Product.

     (E)  "Production Verification Units" ("PVs") will mean quantities of the
          Product made on the qualified production equipment and processes and
          which have undergone testing as defined in the Specification.

     (F)  "Schedule" will mean the development schedule set out in Attachment A
          and corresponding payment milestones set out in Section 4(a).

     (G)  "Product Database" will mean the database[s] which contains any
          information pertaining to a Product in the possession of Supplier on
          any media (including but not limited to documents, magnetic tape,
          film, and other media) to create, process, verify, and test the
          Product. The Product Database will include the Specifications and all
          physical data in a database format necessary to manufacture the
          Product, bonding diagrams, pin outs, electrical specifications, and
          part marking specifications.

     (H)  "Tape Out" means the date on which the design of all components of
          the Product is complete, has been digitized in an electronic format
          and is otherwise ready for the commencement of the preparation of
          masks for the particular components of the Product.

2.   SPECIFICATIONS

     (A)  AEG Obligations: AEG has submitted to Supplier a written description
          representing the initial version of the Specifications, a copy of
          which is attached hereto as Attachment E.

     (B)  Supplier Obligations: Supplier will use the initial version of the
          Specifications supplied by AEG and modify the Specifications as
          necessary and submit them to AEG for approval.

     (C)  Production: The AEG part number and the associated Specifications,




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          when approved by AEG, will be referenced on the purchase orders
          ("POs") issued by AEG and SmarTire for production quantities of the
          Product. Supplier acknowledges that AEG and SmarTire will incorporate
          the Products into tire monitoring systems for motor vehicles and,
          therefore, the Products require the highest level of quality and
          conformance to Specifications and other requirements.

3.   SUPPLIER/AEG DEVELOPMENT RESPONSIBILITIES

     (A)  Supplier: Time is of the essence in Supplier's performance of it's
          obligations under this Agreement. Supplier will, in accordance with
          the Schedule (Attachment A):

          (1)  Supply design tools for completion of design. Fully describe the
               design tools and tool flow. Provide technical support during
               development.

          (2)  Supply application and technical support to evaluate design
               during development. Design any cells which are not available or
               which cannot be constructed from existing cells and perform
               layout.

          (3)  Generate test programs for functional test. Describe test
               methods, tools, and fixtures.

          (4)  Conduct regular design reviews during the development process
               according to the Schedule (the location of these design reviews
               will be as agreed between AEG, SmarTire, and Supplier). These
               reviews will be held to ensure problems are resolved and review
               action item status and schedule conformance.

          (5)  Submit to AEG and SmarTire a final release package containing (i)
               layout, (ii) circuit specifications, (iii) schematic diagram,
               (iv) results of simulations, and (v) packaging information.

          (6)  Produce 450 plastic packaged CVs to be used for concept
               verification, 1000 DVs to be used for aftermarket production
               validation, and 1500 PVs to be used for OEM production
               validation. CVs, DVs, and PVs will be fully functional as per the
               Specification, and will be assembled in the package defined in
               the Specifications. If the CVs, DVs or PVs do not meet the
               Specifications, Supplier will rework the CVs, DVs, or PVs (as the
               case may be) at Suppliers expense. If AEG orders more than 450
               CVs, 1000 DVs, and/or 1500 PVs, Supplier will deliver such
               additional CVs, DVs, and/or PVs within four (4) weeks after
               receipt of order, subject to Suppliers limited production
               capabilities.


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            (7)   Perform mask fabrication, wafer fabrication, CV and DV
                  assembly and testing.

            (8)   Supply test fixtures, equipment, and personnel for Product
                  testing.

            (9)   Complete production hardware/software as specified in the
                  Specification.

      (B)   AEG: AEG will, in accordance with the Schedule (Attachment A):

            (1)   Support the design reviews.

            (2)   Cooperate with SmarTire to submit to Supplier the initial
                  version of the Specification, including the test requirements.

            (3)   Submit to Supplier the TRW Supplier Development Manual (the
                  "Supplier Development Manual"), which will govern the terms of
                  the development of the Product.

      (C)   SmarTire: SmarTire will, in accordance with the Schedule
            (Attachment A):

            (1)   Support the design reviews.

            (2)   Cooperate with AEG to submit to Supplier the initial version
                  of the Specification, including the test requirements.

      (D)   Project Organization: The business and technical contacts of the
            three parties are specified in Attachment B.

4.    DEVELOPMENT PRICING

      Development Price: AEG and SmarTire will pay to Supplier the following
            amounts (collectively, the "Development Price") for all development
            work performed by Supplier under the Agreement:

                        AEG           **
                        SmarTire      **

            The Development Price includes all charges for Product to be
            delivered by Supplier under the provisions of Section 3. Supplier
            will invoice AEG and SmarTire for milestone payments according to
            the following schedule:




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<TABLE>
<CAPTION>
          DEVELOPMENT MILESTONES                                 PAYMENT
          ----------------------                                 -------
          <S>                                                     <C>   <C>
          Signing of the Agreement                                [**]
          After Tape Out of the Product                           [**]
          After completion of DVs that meet the Specification     [**]
          Delivery of PVs that meet Specifications                [**]
</TABLE>

     (B)  Price of Additional Samples:  Supplier will supply the first 450 CVs
          to AEG and SmarTire without charge. If AEG and SmarTire require more
          than 450 CVs, AEG and SmarTire will pay $[**] U.S. for
          each additional CV. AEG and SmarTire will pay Supplier $[**]
          for each DV and PV purchased hereunder.

5.   PURCHASE ORDERS

     (A)  Requirements: Competitiveness:  If the Product developed hereunder
          performs to the satisfaction of AEG and SmarTire, then AEG and
          SmarTire will purchase its requirements for the Product from
          Supplier, subject to Supplier being and remaining competitive in
          terms of price, quality, delivery, service, technology, and terms of
          sale. However, this obligation is not, and will not be construed
          as, (a) a representation that AEG or SmarTire will have any
          particular requirements for the Product, or (b) a proscription
          against AEG or SmarTire purchasing from another company next
          generation pressure sensors (with or without on-board ASICs or
          microcomputers) or pressure sensors for other applications. If
          Supplier is competitive in supplying the Product, then TRW and
          SmarTire will give Supplier an opportunity to competitively quote on
          the next generation of pressure sensors.

     (B)  Purchase Orders:  If AEG has requirements for the Product, AEG will
          issue POs and/or shipping releases to Supplier from time to time to
          satisfy such requirements. Such purchases will be subject to the TRW
          Terms and Conditions of Purchase set forth in the TRW Automotive
          North America Supplier Information Package, October 1998, attached as
          Exhibit 1 ("the AEG Terms and Conditions"). In case of conflict
          between the terms of this Agreement and the AEG Terms and Conditions,
          the terms of this Agreement will prevail.

     (C)  Authorizations:  POs and releases issued pursuant to POs will
          reference this Agreement and will specify the AEG and/or SmarTire
          part number for the Product, the quantity ordered, the delivery due
          dates, the purchase price, the transportation requirements, and the
          invoice instructions. POs and releases will also include a 'shipping
          authorization', a 'fabrication


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     authorization', and a 'raw material procurement authorization'. 'Shopping
     authorizations' will authorize Supplier to ship specified quantities of
     Products for arrival at the location designated by Buyer on specified due
     dates. 'Fabrication authorizations' will authorize Supplier to manufacture
     specified quantities of Products. 'Raw material procurement
     authorizations' will authorize Supplier to procure the necessary raw
     materials for specified quantities of Goods. POs and releases will be
     Supplier's only authorization to manufacture and ship Products to AEG and
     SmarTire in production quantities.

     AEG normally will issue releases weekly, with each release including a
     four week fabrication authorization, an additional eight week raw material
     procurement authorization, and a six month rolling forecast of future
     orders.

     Forecast quantity estimates set forth on AEG's POs or releases are for
     planning purposes only and do not constitute a commitment by AEG to
     purchase such quantities.

(D)  Acknowledgment: Supplier will acknowledge all POs and releases received
     from AEG and SmarTire. Failure of Supplier to acknowledge receipt of the
     PO or the releases will constitute acceptance by Supplier.

(E)  Testing/Screening: Supplier will test all Products supplied pursuant to
     POs and releases as specified in the Specifications. Supplier will deliver
     Products which have been qualified to CDF-AEC-Q100 and any additional test
     requirements established by the Specifications.

(F)  Purchases of Products by SmarTire: SmarTire will purchase Products from
     Supplier, and Supplier will sell Products to SmarTire, at prices and upon
     other terms and conditions that are the same as the terms and conditions
     of purchase and sale set forth in this Agreement with respect to AEG. Such
     purchases by AEG and SmarTire will be independent of one another, however,
     and neither AEG or SmarTire will be responsible for the performance of the
     other hereunder. Further, a breach of this Agreement by one of AEG and
     SmarTire will not diminish or otherwise affect the responsibility of
     Supplier under this Agreement with respect to the other of AEG and
     SmarTire.

(g)  Noncompetitiveness: If Supplier is noncompetitive, AEG and/or SmarTire, as
     the case may be, ("Purchaser") will provide written notice thereof to
     Supplier. Such notice will identify and describe the non-competitiveness
     giving rise to the notice.

     Within thirty (30) days after receipt of such notice, Suppler will give to




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          Purchaser, in writing, its proposed plan to correct the
          non-competitiveness. Such plan must allow Supplier to correct the
          non-competitiveness within sixty (60) days of approval of the plan by
          Purchaser.

          Purchaser will promptly approve or reject the proposed plan. If the
          proposed plan is approved by Purchaser, then Supplier will diligently
          implement the plan and cure the non-competitiveness according to the
          plan.

          The requirements obligation set forth in Section 5(A) will terminate
          as to Purchaser if Supplier fails to provide a corrective plan, or
          such plan is not reasonably acceptable to Purchaser, or Supplier fails
          to diligently implement such plan, or Supplier is unsuccessful in
          implementing the plan within the sixty day cure period.

6.   PRODUCTION-PRICING

     (A)  Purchase Price: The Purchase Price of Products will be determined in
          accordance with Attachment C.

     (B)  Rollback: Supplier will use its best efforts to offer 5% price
          reductions to AEG and SmarTire for each calendar year after the last
          calendar year for which pricing is specified in Attachment C.
          Quarterly meetings will be held to develop recommendations on yield
          and process improvements.

     (C)  Inclusions: The Purchase Price will include all costs for packaging
          and packing.

     (D)  Exclusions: AEG will be responsible for all sales and use taxes
          imposed on the sale of Products to AEG. SmarTire will be responsible
          for all sales and use taxes imposed on the sale of the Product to
          SmarTire.

     (E)  Delivery Terms: Delivery terms shall be Ex Works (Incoterms 1990).

7.   LIFETIME PURCHASE

     Supplier will (i) notify AEG and SmarTire at least two (2) years prior to
     discontinuing the manufacture of such Product and (ii) make available a
     "lifetime" purchase of such Product.

8.   PAYMENT TERMS

     (A)  Non Production Orders: Payment terms are net thirty (30) days from
          receipt of a correct invoice.


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     (B)  Production Orders: Payment terms are net thirty (30) days from receipt
          of a correct invoice. Each shipment will be considered a separate
          transaction. The details on payment terms and methodology are
          contained in the TRW Automotive North America Supplier Information
          Package, October 1998, attached as Exhibit 1.

9.   PRODUCT DATABASE

     (A)  Maintenance: Supplier will, at no charge to AEG or SmarTire, maintain
          the Product Database for a period of not less than one (1) year
          following Supplier's last scheduled shipment of such Product.

     (B)  Limitations: Supplier will not use, for any purpose other than
          producing Products for AEG and SmarTire, any Product Database
          information not owned by Supplier unless previously authorized in
          Section 10(c) or in writing by AEG.

10.  TECHNOLOGY RIGHTS

     (A)  Ownership, Generally: As between AEG and SmarTire and Supplier, each
          party will own all know-how, copyrights, inventions (patentable or
          unpatentable) and other intellectual property created or developed by
          the party, or which the party introduces to the Product from another
          source. The parties agree that, under this general rule, certain
          technology is owned by certain parties as set out in Attachment D. As
          used in this Section 10(A), the term "own" means that the party
          owning certain technology will have the right to seek and enforce
          such intellectual property rights for the owned technology
          (including, but not limited to, patents) as are available at law
          outside of this Agreement. This Section 10(A) does not impose any
          obligation on any party with respect to information or technology
          falling into one or more of the exceptions set forth in Section 21(C).

     (B)  Ownership, Masks: Section 10(A) notwithstanding, AEG and SmarTire
          will jointly own the masks of any application specific integrated
          circuit ("ASIC") to be used in the Product developed hereunder.
          Supplier will not use such masks to produce products for any other
          customer, and will deliver to AEG at no additional cost to AEG, a
          complete set of the most current masks, in such electronic and/or
          physical form as AEG may specify, under the conditions specified in
          Section 13.

     (C)  Standard Cell Designs: Supplier will own the designs of standard
          cells contained within the Products that do not utilize (1) the
          designs (above the cell level) of the Products or masks of the
          Products or (2) any AEG or



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                                                                  --------------

          SmarTire Proprietary Information. Supplier may continue to incorporate
          these standard cells in integrated circuits for other customers.

     (D)  Use of AEG/SmarTire Features:  As long as AEG is purchasing its
          requirements for Products from Supplier hereunder, Supplier will not
          incorporate in any products sold to other customers any of the
          features outlined in part (B) of Attachment D. Further, Supplier will
          at no time incorporate in any products sold to other customers (i) any
          AEG or SmarTire Proprietary information, or (ii) any feature patented,
          copyrighted, or otherwise protected by law by either AEG or SmarTire.

11.  CHANGES
     -------

     (A)  Specifications: AEG and SmarTire reserve the right to change the
          Specification from time to time. Supplier will promptly implement such
          changes. Supplier will make changes to the Specifications that result
          in minor changes to the design without charge, unless the cost to
          Supplier of making such change is not minor.

     (B)  Consequences: If any change causes an increase or decrease in
          development costs, an increase or decrease in the time required for
          the performance of any part of the development, or a change in the die
          size necessitating a change in the Development Price or the Purchase
          Price, Supplier will promptly notify AEG and SmarTire in writing, but
          in any event within ten (10) business days of the date on which AEG
          first requests the change. In such event, an equitable adjustment will
          be made in the prices or delivery schedule or both, and this Agreement
          will be modified by a written agreement (in accordance with Section
          20) to reflect such mutually agreed upon equitable adjustment.

12.  TERM AND TERMINATION
     --------------------

     (A)  Commencement: This Agreement will begin on the date set forth in the
          preamble of this Agreement (the "Effective Date").

     (B)  Specifications: If Supplier and AEG cannot agree on the
          Specifications, either Party may terminate this Agreement as to all
          parties with ten (10) days' written notice and with no further
          liability or obligations, except the obligations concerning
          confidentiality.

     (C)  Termination for Breach:  If either one of AEG or Supplier fails to
          perform its respective obligations under this Agreement, the other of
          AEG and Supplier will have the right to terminate this Agreement for
          cause. To exercise such right, the non-breaching party will give
          notice of termination (setting forth specific deficiencies in writing
          signed by a duly authorized

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            representative. Termination will become effective if the breaching
            party fails to correct the deficiencies within a mutually agreed
            upon time, not to exceed thirty (30) days from receipt of notice of
            termination. If AEG terminates this Agreement for cause, AEG and
            SmarTire will have no further payment liability to Supplier, except
            for payment obligations relating to conforming Product delivered
            and milestones completed prior to the effective date of termination
            and non-disclosure obligations then accrued through the date of
            termination. The obligations of the parties under Sections 10, 13,
            16, 18 and 21 shall survive the termination, cancellation or
            expiration of this Agreement.

      (D)   Termination for Special Conditions: Either of AEG or Supplier has
            the right to terminate this Agreement if the other of AEG or
            Supplier (i) has a permanent disruption of its business due to
            bankruptcy, insolvency, or reorganization, (ii) is adjudged a
            bankrupt, or (iii) makes a general assignment for the benefit of
            its creditors.

      (E)   Purchase Order Termination: If either AEG or SmarTire terminates a
            Purchase Order or a Release pursuant to the AEG Terms and
            Conditions, the terminating party's liability will be limited to
            (i) paying Supplier for finished Products ordered by the party
            pursuant to Shipping Authorizations and (ii) reimbursing Supplier
            for inventory procured or fabricated by Supplier in accordance with
            the party's Fabrication and Raw Material Authorizations. Supplier
            will promptly deliver any such finished Products or inventory to
            AEG or SmarTire, as the case may be.

      (F)   Document Delivery: Upon the expiration or termination of this
            Agreement for any reason whatsoever, Supplier will immediately
            deliver to AEG and SmarTire at no additional charge:

            (1)   All AEG and SmarTire documentation provided by AEG and
                  SmarTire, respectively, to Supplier.
            (2)   All test results generated by Supplier.
            (3)   The Product Database and all net lists and test vectors
                  generated by Supplier.

13.   MANUFACTURING RIGHTS

      Supplier recognizes that AEG and/or SmarTire must have a continuous
      supply of the Product after production begins. Thus, if Supplier
      thereafter becomes unable to continue to supply the Product to AEG and/or
      SmarTire as required hereunder and no alternative source of equivalent
      pressure sensors exists that is reasonably acceptable to AEG and/or
      SmarTire, as the case may be, then Supplier will give to AEG and SmarTire
      a license under any intellectual property rights Supplier may hold
      necessary to make the Product or have the Product


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      made for AEG and SmarTire by a third party. Such license will be
      exclusive, worldwide, and will have sufficient scope to permit AEG or such
      third party to manufacture, use, and sell the Product. Such license will
      also require Supplier to disclose to AEG all technical information
      necessary to manufacture the Product (such information will include,
      without limitation, the masks for the Product, functional design
      information, detailed electrical schematics, net lists, and test vectors)
      and will allow AEG to disclose information as necessary to make the
      Product or have the Product made by a third party. The license will be
      cost-free to AEG and SmarTire.

14.   NRE PRICE ASSURANCE

      Supplier warrants that software, models, and layout information will be
      representative of the Product process. If the test results do not match
      the simulation results and the failure requires one or more new masks and
      wafer runs, there will be no additional cost to AEG or SmarTire. For
      purposes of this Section 14, a test result match means a result that is
      equal to or better than the expected result as defined in the Supplier
      Development Manual.

15.   DEVELOPMENT PRODUCT WARRANTY

      Supplier warrants that the Products delivered during the development
      process will conform to the Specifications and will meet all applicable
      quality requirements of Supplier and AEG and SmarTire.

16.   INDEMNIFICATION

      Supplier will indemnify and hold harmless AEG and SmarTire, their
      respective officers, employees, agents, successors, assigns, customers,
      and users of its products from and against any and all losses, expenses,
      damages, claims, suits and liabilities (including recall, repair and
      replacement expenses and other incidental and consequential damages, court
      costs, and attorneys' fees) arising as a result of any claim that the
      manufacture, use, sale or resale of Product infringes any patent, utility
      model, industrial design, copyright, trade secret, or other intellectual
      property right in any country. Supplier will, when requested by AEG or
      SmarTire (the "requesting party"), defend any action or claim of such
      infringement at its own expense. If the sale and/or use of the Product is
      enjoined or, in the requesting party's sole judgment, is likely to be
      enjoined, Supplier will, at the requesting party's election and Supplier's
      sole expense, either (i) procure for the requesting party the right to
      continue using the Product, (ii) replace the Product with an equivalent
      noninfringing Product, or (iii) modify the Product so it becomes
      noninfringing. The foregoing notwithstanding, Supplier will not be liable
      to AEG or SmarTire for, and will not indemnify and hold harmless AEG and
      SmarTire against, any patent infringement arising from Product features or
      functions required by AEG or SmarTire.



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17.  TRADEMARK/TRADENAME

     No Party will use any trademark or tradename of any other Party, or except
     as may be required by law, refer directly or indirectly to this Agreement
     or to the services performed hereunder in connection with any Product,
     promotion, or publication, without the prior written consent of the other
     Party.

18.  APPLICABLE LAW; DISPUTE RESOLUTION

     This Agreement will be construed, and the legal relations between the
     parties will be determined, in accordance with the laws of the State of
     Ohio. Any claim, controversy or dispute arising from the execution of, or
     in connection with, this Agreement preferably shall be settled through
     negotiations between the parties. As such, the parties shall attempt in
     good faith to resolve such claim, controversy or dispute promptly by
     negotiation between executives who have authority to settle the controversy
     and who are at a higher level of management than the persons with direct
     responsibility for administration of this Agreement. If no settlement can
     be reached through negotiations within sixty (60) days of the submission of
     such a matter by one of the parties to the other party, then such dispute
     shall be submitted to the Arbitration Institute of the Stockholm Chamber of
     Commerce for arbitration in accordance with its rules of procedure. Any
     such arbitration proceeding shall be held in Stockholm, Sweden and
     conducted in the English language. The arbitration award shall be final and
     binding upon all parties and shall be enforceable in accordance with its
     terms. The cost of the arbitration, including a reasonable allowance for
     attorneys' fees, shall be borne by the losing Party or as otherwise
     specified in the ruling of the arbitration tribunal. The arbitration award
     shall be in writing and shall specify the factual and legal bases for the
     award. The arbitrator shall only have authority to award compensatory
     damages in accordance with the Agreement and shall not have authority to
     award punitive damages, other non-compensatory damages, or any other
     relief, and the parties hereby waive all rights for this type of relief
     with respect to claims resolved by arbitration.

19.  ASSIGNMENT

     No right or interest in this Agreement may be assigned and no duty under
     this Agreement may be delegated by any party without the prior written
     consent of the other parties. However, any party may assign its rights and
     delegate its duties under this Agreement, without such consent, to any
     successor in interest by amalgamation, merger, consolidation, or
     acquisition of substantially all the assets of such party relating to this
     Agreement.

20.  MODIFICATIONS


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     No modification of this Agreement will be binding upon any party unless
     such modification is in a writing that (a) specifically refers to the
     provision of this Agreement to be modified and (b) has been signed by
     authorized representatives of all parties.

21.  CONFIDENTIALITY AND USE OF INFORMATION

     (A)  AEG Information.

          (1)  Definition. "AEG Proprietary Information" means the fact that
               this Agreement exits, the AEG and SmarTire technical information
               listed on Attachment D, and any other information, including
               models and prototypes, which (1) relate to products and
               components and subsystems thereof of TRW Inc. or its
               subsidiaries, and (2) are disclosed to Supplier by AEG or any
               employee, agent or independent contractor of TRW Inc. or its
               subsidiaries, or are developed by Supplier under this Agreement.
               In particular and without limiting the foregoing, the datasheet
               for any Product developed under this Agreement and any
               information on such datasheet will be AEG Proprietary
               Information.

          (2)  Use and Obligation of Confidence. Supplier will, during the
               fulfillment of this Agreement and for a period of seven (7) years
               after its cancellation, termination or expiration: (1) use the
               AEG Proprietary Information only in developing and/or
               manufacturing Products and their components for sale by or to TRW
               Inc. or its subsidiaries; and (2) hold the AEG Proprietary
               Information in confidence and disclose such AEG Proprietary
               Information only to its own employees who will likewise hold the
               AEG Proprietary Information in confidence and use the AEG
               Proprietary Information only as provided in this Subsection
               21(A)(2), unless otherwise agreed in writing by TRW.

     (B)  SmarTire Information.

          (1)  Definition. "SmarTire Proprietary Information" means the fact
               that this Agreement exists, the AEG and SmarTire technical
               information listed on Attachment D, and any other information,
               including models and prototypes, which (1) relate to products and
               components and subsystems thereof of SmarTire, or its
               subsidiaries, and (2) are disclosed to Supplier by SmarTire or
               any employee, agent or independent contractor of SmarTire or its
               subsidiaries, or are developed by Supplier under this Agreement.
               In particular and without limiting the foregoing, the datasheet
               for any Product developed under this Agreement and any
               information




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<PAGE>   14
                                                                  Execution Copy

               on such datasheet will be SmarTire Proprietary Information.

          (2)  Use and Obligation of Confidence. Supplier will, during the
               fulfillment of this Agreement and for a period of seven (7) years
               after its cancellation, termination or expiration: (1) use the
               SmarTire Proprietary Information only in developing and/or
               manufacturing Products and their components for sale by or to
               SmarTire or its subsidiaries; and (2) hold the SmarTire
               Proprietary Information in confidence and disclose such SmarTire
               Proprietary Information only to its own employees who will
               likewise hold the SmarTire Proprietary Information in confidence
               and use the SmarTire Proprietary Information only as provided in
               this Subsection 21(B)(2), unless otherwise agreed in writing by
               SmarTire.

     (C)  Supplier Information.

          (1)  Definition. "Supplier Proprietary Information" means the Supplier
               technical information listed on Attachment D and other
               information which (1) relates to Supplier's manufacturing
               processes or business financial data or business plans, and (2)
               is disclosed to AEG or SmarTire by Supplier or any employee,
               agent or independent contractor retained by Supplier during the
               fulfillment of this Agreement. The datasheet for any Product
               developed under this Agreement and any information on such
               datasheet will be not be Supplier Proprietary Information.

          (2)  Use and Obligation of Confidence. Each of AEG and SmarTire will,
               during the fulfillment of this Agreement and for a period of
               seven (7) years after its cancellation, termination or
               expiration: (1) use the Supplier Proprietary Information that it
               receives only in connection with activities that are permissible
               under this Agreement; and (2) hold the Supplier Proprietary
               Information that it receives in confidence and disclose such
               Supplier Proprietary Information only to its own employees who
               will likewise hold such Supplier Proprietary Information in
               confidence and use such Supplier Proprietary Information only as
               provided in Subsection 21(B)(2), unless otherwise agreed in
               writing by Supplier.

     (D)  Exceptions. Notwithstanding Subsections (A) and (B), this Agreement
          will impose no obligation upon any party with respect to any
          information which: (i) is now or subsequently becomes publicly known
          or available by publication, commercial use or otherwise without
          breach of this Agreement; (ii) is known to the party at the time of
          receipt, (iii) is subsequently rightfully furnished to the party by a
          third person without a


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<PAGE>   15
                                                                  Execution Copy

          restriction on disclosure; (iv) is independently developed by
          employees of the party who have not had access to the Proprietary
          Information of the other party; or (v) is delivered to the party after
          the cancellation. termination or expiration of this Agreement, or (vi)
          is required by law to be disclosed.

     (E)  Override. In the event of any conflict between the provisions of this
          Section 21 and the provisions of any secrecy or confidentiality
          agreement between Supplier and either AEG or SmarTire, the provisions
          of this Section 21 will govern.

22.  INDEPENDENT CONTRACTOR

     The relationship between the parties will be that of independent
     contractors. No party will be or hold itself out as an employee or agent of
     the other, and no party will create or assume any obligation, express or
     implied, on behalf of the other.

23.  ENTIRE AGREEMENT

     This Agreement, together with the Attachments and Exhibits, each of which
     is incorporated fully and is made a part of this Agreement by this
     reference, (i) contains the entire agreement of the parties with respect to
     the subject matter hereof and (ii) supersedes all prior agreements or other
     arrangements between the parties with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives, effective as of
the Effective Date.

TRW INC.                                     SMARTIRE SYSTEMS INC.
Automotive Electronics Group,
            North America

By: /s/  MARK DESMARAIS                      By: /s/ R.J. RUDMAN
   -----------------------                       ------------------------
    Mark Desmarais                               R.J. Rudman
    (Typed/Printed Name)                         (Typed/Printed Name)

Title: Director Planning & Business Dev.     Title: President & CEO

SENSONOR ASA

By: /s/ SVERRE HOENTUEDT
   ----------------------
    Sverre Hoentuedt
    President & CEO

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