AGREEMENT IN PRINCIPLE


THIS AGREEMENT in Principle ("Agreement") is entered into, as of the 11th day
of April, 1997, by and between TURBODYNE SYSTEMS, INC., Nevada Corporation,
with offices located at 6155 Carpinteria Avenue, Carpinteria, California 93013,
USA, hereinafter called "Turbodyne" and AG KUHNLE, KOPP & KAUSCH, a German
Aktien gesellshaft, with offices located at Hessheimer Strasse 2m D-67227
Frankenthal, Germany, hereinafter called "KKK".

WHEREAS, Turbodyne is in the business of design, development, manufacturing and
sales of electrically driven turbochargers and turbo compressors and has
established test and development programs with various engine, auto, and truck
manufacturers, and is the owner and beneficiary of several patents, patent
applications and other intellectual property related to its technology; and

WHEREAS, KKK is established in the business of design, development,
manufacturing and sales of turbochargers for the automotive market; and

WHEREAS, Turbodyne has been conducting design, development, prototype
manufacturing and test and evaluations with various engine manufacturers with
respect to motor driven turbochargers; and

WHEREAS, several engine manufacturers have expressed a desire for incorporation
of motor-driven turbochargers in their automotive products and have suggested a
joint cooperation between Turbodyne and a turbocharger manufacturer for joint
design, development and marketing of motor assisted turbochargers.

THEREFORE, in consideration of the mutual covenants and conditions contained
herein, and other good and valuable consideration, the parties agree as
follows:

1.   DESIGN AND DEVELOPMENT
     ----------------------

     Turbodyne has developed various versions of brushless motor designs for
     incorporation into various turbochargers.  Under the terms of this
     Agreement, Turbodyne will, in cooperation with KKK and at Turbodyne's own
     sole cost and expense, design, develop and manufacture prototype motor and
     electronic controller units, as well as the appropriate light metal
     castings, as a sub-system for incorporation into turbochargers which will
     be specifically designed, developed and prototype manufactured by KKK at
     its sole cost and expense.  During the design, development and prototype
     manufacturing phase, KKK will make space available to Turbodyne engineers
     for fabrication and testing at KKK facilities at no cost.  Turbodyne will,
     however, be responsible for salaries and other related expenses of its own
     personnel.

2.   SCOPE OF WORK
     -------------

     The parties will start the implementation of this agreement for mutually
     selected customers as soon as possible and will each use their best
     efforts in that regard.  It is, however, 

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     contemplated that by mutual agreement of the parties, similar programs may
     be started for additional customers.

3.   CUSTOMER EVALUATION
     -------------------

     During the design and development stage, the parties shall work closely
     with mutually selected customers and will conduct testing and evaluation
     at Turbodyne, KKK and customer facilities, as required and at each parties
     own expense.

4.   MANUFACTURING
     -------------

     The parties recognize that there are various benefits associated with
     motor-driven turbochargers on commercial engine applications, including
     creating more sales due to improved engine performance.  In an effort to
     increase the market share of the device and maintain a competitive edge in
     the market place (recognizing that the field of automotive supply is an
     extremely competitive business), the parties agree to establish a joint
     manufacturing policy with the objective of reaching minimum cost to afford
     maximum flexibility in penetrating the market and without detriment to
     either party.  The parties, therefore, agree to conduct the manufacturing
     operations on a joint venture basis so that components contributed by each
     party to the join-venture will be at cost, based on a cost formula to be
     agreed on by the parties and made part of this agreement.  Cost of
     assembly, marketing and other related costs are to be borne by the join-
     venture, which will be added to the unit cost.  Details of the commercial
     aspects of the joint venture will be mutually agreed upon and finalized
     prior to manufacture.

5.   MARKETING AND SALES
     -------------------

     KKK will have the overall responsibility for all marketing and sales of
     the joint venture products, and Turbodyne personnel will assist in all
     evaluation and sales activities as needed.  All such marketing and sales
     costs are to be borne by the joint venture under a formula to be agreed to
     by the parties.

     The parties agree to share proportionately in the profits derived from the
     sale of the products in relation to the respective parties' cost
     contributions, under a formula to be agreed to by the parties.  The join-
     venture shall be responsible for administration of all warranty and
     services programs.  The respective parties shall be responsible to the
     joint-venture for any defects in components contributed to the joint-
     venture.

6.   EXCLUSIVITY
     -----------

     The parties recognize that extensive resources will be allocated by them
     for the development, manufacturing and sale of the joint venture products.
     Furthermore, the benefits of motor-driven turbochargers, such as
     elimination of turbolag, improvements in performance and 

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     reduction in pollution, will encourage auto and truck manufactures to
     utilize turbochargers on a larger percentage of their engines,
     particularly in cases where turbocharging has been avoided due to
     consumers dislike of turbolag.  Therefore, while the parties endeavor to
     promote expansion of the market, it is important that the parties also
     enjoy the benefits of exclusivity.  Accordingly, Turbodyne will grant an
     exclusive license of its technology to the joint venture for the design,
     manufacture and sale of motor-driven turbochargers in Europe for such
     automotive manufacturers and in such other territories as KKK and
     Turbodyne shall mutually agree shall be commercially beneficial for the
     joint venture.

7.   TECHNOLOGY
     ----------

     Turbodyne will grant a royalty-free license of its technology to the joint
     venture for the purposes set forth above and for the term of the joint
     venture.  Such license will include any continuations of and improvements
     in Turbodyne's technology, and Turbodyne shall have the sole
     responsibility for any additional patent filings to cover such
     continuations and improvements.

8.   TERMINATION AND CONTINUATION OF TECHNOLOGY LICENSE
     --------------------------------------------------

     If the joint venture shall be terminated at some date, KKK will have the
     option to continue the use of the technology licensed hereunder by
     Turbodyne, for period of three years from the date of such termination. 
     KKK will pay a royalty to Turbodyne for such license for the three-year
     period under a formula to be agreed to by the parties.

9.   FINAL DOCUMENTATION
     -------------------

     The parties agree to work diligently to finalize and execute a mutually
     acceptable Joint Venture Agreement based upon the terms set forth in this
     Agreement.

                              TURBODYNE SYSTEMS, INC.


                              "EDWARD M. HALIMI"                
                              ------------------------------------
                              By:  Edward M. Halimi
                                   President

                              AG KUHNLE, KOPP & KAUSCH


                              "KARL WALTER"                       
                              -------------------------------------
                              By:  Karl Walter
                                   Ex. V.P. AG KKK
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