<PAGE>


                              SETTLEMENT AGREEMENT
                              --------------------

THIS  AGREEMENT  is  dated  for  reference  the  29th  day  of  January,  2003.

AMONG:

          TURBODYNE  SYSTEMS  INC., of 6155 Carpinteria Avenue, Carpinteria, CA,
          ------------------------
          93013

          a  company  incorporated  pursuant  to the laws of the State of Nevada

          ("TSI")
                                                               OF THE FIRST PART

AND:

          TURBODYNE  TECHNOLOGIES INC., of 6155 Carpinteria Avenue, Carpinteria,
          ----------------------------
          CA,  93013

          ("TTI")
                                                              OF THE SECOND PART

AND:

          LEON  E.  NOWEK,  of  L03-788  West  8th  Avenue,  Vancouver,  British
          ---------------
          Columbia,  Canada  V5Z  1E1

          ("Nowek")
                                                               OF THE THIRD PART
AND:

          L.N.  FAMILY  HOLDINGS  INC.,  of St. Andrew's Court, Frederick Street
          ----------------------------
          Steps,  Nassau,  Bahamas  N  4805

          ("LN")
                                                              OF THE FOURTH PART


WHEREAS:

A.   Pursuant  to an Employment Agreement dated for reference August 1, 1997, as
     amended  July  27, 1998 (the "Employment Agreement"), Nowek was employed as
     Chief  Financial  Officer  of  each  of  TTI  and  TSI.

B.   In February of 2000 the Company ceased making payments to Nowek as required
     by  the  Employment  Agreement.

C.   TSI  and  TTI  wish to resolve any outstanding liability to Nowek under the
     Employment  Agreement.


<PAGE>

D.   Nowek  is  indebted  to  TTI  in  the  amount  of $225,000 in respect of an
     Employee  Housing  Loan  (the  "Employee  Housing  Loan").

E.   TTI  wishes  to  collect  the  Employee  Housing  Loan.

F.   Nowek  claims  that  TTI  is  indebted to Nowek in the amount of $32,000 in
     respect  of  reimbursable  expenses  (the  "Employee  Expenses").

G.   TSI  wishes  to  resolve any liability in respect of the Employee Expenses.

H.   Nowek  was  a  director and officer of TTI at the time it delisted from the
     NASDAQ  stock  market  (the  "NASDAQ  Delisting").

I.   In  connection with an application for listing on the proposed BBX Exchange
     TTI  wishes to be able to provide evidence to the BBX Exchange that none of
     its directors or officers at the time of the NASDAQ delisting will have any
     significant  involvement  in  the  affairs  of  the  Company.

J.   L.N.  Family  Holdings, a company controlled by Nowek, holds 900,000 common
     shares  of  TTI  (the  "Escrow Shares"), which shares are currently held in
     escrow  by  TTI's  transfer  agent,  Computershare  Trust Company of Canada
     ("Computershare").


NOW  THEREFORE in consideration of the foregoing and of the mutual covenants and
agreements  hereinafter provided, the parties have agreed and do hereby agree as
follows:

1.     For  the  consideration set out in paragraph two (2) hereof, Nowek agrees
to release TTI and TSI from any and all liability under the Employment Agreement
or  in  respect  of  the  Employee  Expenses  (the  "Release  of  Liabilities").

2.     The  consideration for the Release of Liabilities shall be $938,500 to be
satisfied  and  paid  as  follows:

     a.   $225,000  by  reduction and satisfaction of the Employee Housing Loan;
          and

     b.   the  balance  by  the  issuance  to  LN  of  35,675 shares of Series X
          Preferred  Stock  of  TTI  at  a  price  of  $20.00  per  share.

3.     The  shares of Series X Preferred Stock  shall be identical to the common
shares of TTI save and except that they shall be non-voting (except where voting
is  specifically  required  by  the  Nevada  Revised  Statutes)  and  shall  be
convertible at any time at the option of the holder into common shares of TTI on
a  one  hundred  (100)  common  shares  for  each one (1) Preferred Share basis.

4.     LN  agrees  to  cancel  and  surrender  to  TTI  the  Escrow  Shares  in
consideration  of  the  issuance  of  9,000  shares of Series X Preferred Stock.


<PAGE>

5.     Notwithstanding  that  the  shares  of  Series X Preferred Stock shall be
convertible  at any time into common shares, LN agrees that it will not exercise
its  rights to convert any shares of Series X Preferred Stock into common shares
at any time if, after conversion, LN would own legally or beneficially more than
one  half  of  one  percent  (0.5%)  of the common shares of TTI then issued and
outstanding.  In  the event that LN wishes to convert at any time such number of
shares  as shall, when aggregated with previously converted shares, be more than
one  half of one percent (0.5%) of the common shares of TTI, LN shall provide to
TTI  evidence that it has disposed through sales in accordance with Rule 144, or
bona  fide  dispositions  under  available  exemptions,  (or  offshore  sales in
accordance  with  Regulation  S)  the  previously  converted  shares.

6.1     The  parties  acknowledge  and  agree  that  the shares of Series X
Preferred  Stock  to  be issued are restricted shares, as contemplated under the
United States Securities Act of 1933 (the "1933 Act") which will be issued to LN
              ----------------------
in  reliance  of  Regulation S of the 1933 Act without registration and that all
share  certificates  representing the shares of Series X Preferred Stock will be
endorsed  with  the  following  legend:

     "THE  SECURITIES  REPRESENTED  BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER  THE  SECURITIES  ACT  OF  1933  (THE "ACT"), AND HAVE BEEN ISSUED IN
     RELIANCE  UPON  AN  EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT
     PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT
     BE  REOFFERED  FOR  SALE  OR  RESOLD  OR  OTHERWISE  TRANSFERRED  EXCEPT IN
     ACCORDANCE  WITH  THE  PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
     REGISTRATION  UNDER  THE  ACT,  OR  PURSUANT TO AN AVAILABLE EXEMPTION FROM
     REGISTRATION  UNDER  THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
     MAY  NOT  BE  CONDUCTED  UNLESS  IN  COMPLIANCE  WITH  THE  ACT"


6.2     LN  and Nowek represent that they are not "U.S. Persons" as defined by
Regulation  S  of  the  1933  Act.

7.1     Closing  shall  take  place  at the offices of TTI's legal counsel, Cane
O'Neill  Taylor, LLC at Las Vegas, Nevada, on the 5th business day following the
execution  of  this Agreement or at such other time and place as the parties may
mutually  agree.

7.2     On  the  Closing  Date:

     (a)  Nowek  and  LN  shall  deliver  to  TTI  and  TSI:

          i.   a  release  in  the  form  attached  as  Schedule  A  hereto;

          ii.  such  documents  as  may  be required to effect the surrender and
               cancellation  of  the  Escrow  Shares;  and


<PAGE>

         iii.  copy  of  board  minutes  or  resolutions  of  LN  approving  the
               execution  of  this  Settlement Agreement and the cancellation of
               the  Escrow  Shares.

     (b)  TTI  and  TSI  shall  deliver  to  Nowek  and  LN:

          i.   a  release  in  the  form  attached  as  Schedule  B  hereto;

          ii.  share  certificates  representing  44,675  shares  of  Series  X
               Preferred  Stock  registered  in  the  name  of  LN;  and

          iii. copy  of  board minutes or resolutions approving the execution of
               this  Settlement  Agreement  and  the  issuance  of the shares of
               Series  X  Preferred  Stock

8.     This  Agreement constitutes the entire agreement between the parties and
there  are  no  representations  or warranties, express or implied, statutory or
otherwise, and no agreements collateral hereto other than as expressly set forth
or  referred  to  herein.

9.     Time  shall  be  of  the  essence  of  this  Agreement.

10.     This  Agreement  shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of Nevada,
and  each  of  the parties hereto irrevocably attorns to the jurisdiction of the
courts  of  the  State  of  Nevada.

11.     Any  notice  to be given under this agreement shall be duly and properly
given  if  made  in  writing  and  by  delivering or telecopying the same to the
addressee  at  the address as set out on page one of this agreement.  Any notice
given  as aforesaid shall be deemed to have been given or made on, if delivered,
the  date  on which it was delivered or, if telecopied, on the next business day
after  it  was  telecopied.  Any  party hereto may change its address for notice
from time to time by notice given to the other parties hereto in accordance with
the  foregoing.

12.     The  parties  shall deliver to each other such further documentation and
shall  perform  such  further acts as and when the same may be required to carry
out  and  give  effect  to  the  terms  and  intent  of  this  Agreement.

13.     This  Agreement  shall  enure  to the benefit of and be binding upon the
parties  hereto and their respective heirs, personal representatives, successors
and  assigns.

14.     Neither  this Agreement nor any provision hereof may be amended, waived,
discharged  or terminated orally, but only by an instrument in writing signed by
the  party  against  whom  enforcement  of  the  amendment, waiver, discharge or
termination  is  sought.

15.     This Agreement has been prepared by Cane O'Neill Taylor, LLC counsel for
TTI.  The  parties  acknowledge  that Cane O'Neill Taylor, LLC have advised that
they  may  have  a  conflict  of interest in that Mr. Nowek has been a long-time
client  of  Cane  O'Neill  Taylor,  LLC  and  its predecessor law firms and Mrs.
O'Neill,  the  wife  of  one  of  the  members of Cane O'Neill Taylor, LLC has a
minority  interest  in  the  non-voting shares of LN.  The parties agree to Cane
O'Neill  Taylor,  LLC  acting  in  drafting  this  agreement  on


<PAGE>

behalf of TTI notwithstanding the potential conflict of interest and acknowledge
that  the  obligations  of  TTI  under  this  Agreement  will  be subject to TTI
obtaining independent legal advice. Nowek and LN acknowledge that they have also
been  advised  to  obtain  independent  legal  advice.

16.     This  Agreement  may  be  executed in one or more counter-parts, each of
which  so  executed shall constitute an original and all of which together shall
constitute  one  and  the  same  agreement.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and  year  first  above  written.


TURBODYNE SYSTEMS INC.

By:
     /s/  Daniel  Black
     ------------------
     Its duly authorized signatory


TURBODYNE TECHNOLOGIES INC.

By:
     /s/  Charles  Caverno
     ---------------------
     Its duly authorized signatory


L.N. FAMILY HOLDINGS INC.

By:
     /s/  Leon  E.  Nowek
     --------------------
     Its duly authorized signatory




    /s/  Leon  E.  Nowek
    --------------------
    LEON E. NOWEK


<PAGE>

                                  SCHEDULE "A"

   Release in favor of Turbodyne Technologies Inc. and Turbodyne Systems Inc.



<PAGE>

                                  SCHEDULE "B"

         Release in favor of Leon E. Nowek and L.N. Family Holdings Inc.