AGREEMENT
                                     FOR THE
                            SALE OF CERTAIN ASSETS OF
                        ROTARY POWER INTERNATIONAL, INC.,
                             A DELAWARE CORPORATION
                        TO ROTARY POWER ENTERPRISE, INC.,
                              A NEVADA CORPORATION

                                DATED MAY , 1998


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                                    AGREEMENT

THIS AGREEMENT, dated as of May , 1998, between ROTARY POWER ENTERPRISE, a
Nevada Corporation ("Purchaser"), having its principal place of business at
__________________________________________________, and ROTARY POWER
INTERNATIONAL, INC., a Delaware Corporation ("RPI"), having its principal place
of business at One Passaic Street, Wood-Ridge, NJ 07075. RPI and Purchaser are
together referred to in this Agreement as the "Parties".


                               W I T N E S S E T H

            WHEREAS, RPI is engaged in the business of selling engines and
related parts and equipment;

            WHEREAS, RPI has certain assets, including but not limited to
intellectual property, licenses, contracts, inventory and manufacturing
capability in the field of natural gas and propane fueled engines, which assets
are part of RPI's natural gas engine business;

            WHEREAS, RPI desires to sell to Purchaser, and Purchaser desires to
purchase from RPI certain of the assets of RPI, including all of the assets
employed or used in RPI's natural gas and propane engine business (the "NG
Business"); and

            WHEREAS, the Parties intend to effect such acquisition upon the
terms and conditions contained in this Agreement.

            NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements stated in this Agreement, the Parties agree as follows:

1. Sale  of Assets. RPI agrees to sell, convey, transfer, assign, and deliver
   to Purchaser, and Purchaser agrees to purchase from RPI, all of its right,
   title and interest in the following assets (the "NG Business Assets"):

      1.1.    The entire right, title and interest in and to RPI's rotary power
              natural gas and propane engine business, which includes the
              exclusive right to sell Mazda rotor engines modified for natural
              gas/propane service in North America (Mexico, USA and Canada) for
              all natural gas and propane applications, except passenger
              automobiles and minivan applications.

      1.2.    All right, tit le, and interest in and to the Mazda Agreement
              dated April 1, 1997, by and between RPI and Mazda, a copy of which
              is attached to this Agreement as Exhibit A.

      1.3.    All of the assets of RPI listed on Exhibit B attached hereto.

      1.4.    In addition to the assets listed on Exhibit B, all intangible
              assets and financial statements and information used or related to
              the operation of the NG Business, including but not limited to
              intellectual property, documents, papers, financial statements,
              books, advertising, show display materials used by RPI in
              conducting said
                                             
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              business, and all business records relating to the NG Business
              including property records, sales records, purchase orders,
              customer lists, catalogs and brochures.

      1.5.    All right, title and interest in and to the Hussmann Agreement
              dated October 16, 1995, a copy of which is attached hereto as
              Exhibit C, including the transfer of all rights and technical
              development of the GRI/Hussmann Contract completed to date,
              subject to Hussmann's approval of such assignment.


2. Assets to be Sold Free of All Liabilities. The NG Business Assets
   shall be transferred, assigned and conveyed to Purchaser free and clear of
   all claims, liabilities, obligations, liens and encumbrances. Purchaser is
   not agreeing to assume or pay any accounts payable or other obligation or
   liability of RPI (except as specifically set forth in Section 3.2 of this
   Agreement), and Purchaser is not agreeing to assume or otherwise perform any
   contractual duty or obligation of RPI, except those specific duties and
   obligations to be performed under the Mazda Agreement and the Hussmann
   Agreement arising after the effective date of Purchaser's acceptance of the
   assignment of the Mazda Agreement and the Hussmann Agreement as provided for
   in this Agreement.


3. Purchase Price for NG Business Assets. The purchase price of the
   NG Business Assets shall be $360,265.00 to be paid as follows:

      3.1.    $30,000 to be paid to RPI at the time of, and contingent upon, the
              full performance and satisfaction of the Closing Contingencies, as
              defined below.

      3.2.    $21,017 to be paid by Purchaser to Mazda and applied against
              outstanding invoices (accounts payable balance) issued by Mazda to
              RPI for the purchase of four engines. This payment shall be made
              at the time of, and contingent upon, the full performance and
              satisfaction of the Closing Contingencies.

      3.3.    $50,000 to be paid upon the assignment and transfer of all of the
              NG Business Assets to Purchaser (the date of such assignment and
              transfer is referred to in this Agreement as the "Closing" or
              "Closing Date").

      3.4.    $217,000 to be credited to RPI at Closing by forgiveness and
              cancellation of an accounts payable balance due from RPI to
              PowerCold Corporation ("PowerCold") for the purchase of 60 engines
              by RPI. At Closing, PowerCold shall release its outstanding UCC
              filings and security interest in the 60 engines sold to RPI and
              any other assets of RPI.

      3.5.    $24,000 to be paid to RPI upon the sale by Purchaser of twelve
              (12) finished RPI 65 Series GRI completed engines, with $2,000 to
              be remitted by Purchaser to RPI within sixty (60) days following
              Purchaser's sale of, and delivery to the buyer of a sales invoice
              for, each engine, until the balance shall be paid in full. Any
              remaining unpaid balance due to RPI under this subparagraph 3.5
              shall become due and payable in full on the later of December 31,
              1998, or 180 days following the date of Closing.

      3.6.    $18,248 to be paid to RPI upon the sale of sixty-four (64) Mazda
              13B short block NG engines, with $285 to be remitted by Purchaser
              to RPI within sixty (60) days following

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            Purchaser's sale of, and delivery to the buyer of a sales invoice
            for, each engine, until the balance shall be paid in full.
             
4. Closing Contingencies. Closing and Purchaser's obligation to make certain of
   the payments representing a part of the purchase price for the NG Business
   Assets under Sections 3.1 and 3.2 of this Agreement are conditioned and 
   contingent upon the following (the "Closing Contingencies"):

   4.1.     Mazda's approval of the assignment of the existing Mazda Agreement
            to Purchaser, and the assignment thereof to Purchaser without any
            modification or condition except as approved by Purchaser in
            writing..

   4.2.     Mazda's execution and delivery to Purchaser of a new agreement for
            natural gas and propane engines, in form and content acceptable to
            Purchaser in its sole discretion, and Purchaser's execution and
            acceptance of such new agreement.


   4.3.     Mazda's execution and delivery to Purchaser of an agreement for the
            partial staged shipment of one hundred and twenty (120) engines
            currently in inventory at Mazda in Flat Rock, Michigan, in form and
            content acceptable to Purchaser in its sole discretion, and
            Purchaser's execution and acceptance of such agreement.

   4.4.     Hussmann's approval of the assignment of the existing Hussmann
            Agreement dated October 16, 1995 between RPI and Hussmann
            Corporation, to Purchaser, and the assignment thereof to Purchaser,
            without any modification or condition except as approved by
            Purchaser in writing, and said assignment shall include the transfer
            to Purchaser of all rights and technical development of the
            GRI/Hussmann Contract completed to date. 


 5. Representations and Warranties of RPI. RPI represents and warrants
    to Purchaser that at and as of the Closing Date:

   5.1.     RPI is a corporation duly organized and validly existing and in
            good standing under the laws of the State of Delaware with all
            requisite corporate power to own and operate its properties and to
            carry on its business as presently conducted;

   5.2.     RPI has all requisite corporate power and authority to enter into,
            execute and deliver this Agreement, and has taken all necessary
            corporate action, including obtaining any required shareholder
            and/or lender approvals, to authorize the execution and delivery of
            this Agreement and the consummation of the transactions contemplated
            hereby;

   5.3.     RPI has the right to enter into this Agreement and perform all of
            its obligations in this Agreement without the consent or approval of
            any third parties;

   5.4.     The NG Business Assets will be sold and transferred to Purchaser at
            Closing free and clear of all liens, claims and encumbrances of any
            nature whatsoever, and upon such sale and transfer, no creditor of
            RPI will have or retain any security or other interest in the NG
            Business Assets, or any of them, and no such creditor claim or
            interest will be chargeable or enforceable against any of the NG
            Business Assets;
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   5.5.     The NG Business Assets do not constitute all or substantially all of
            the assets of RPI;

   5.6.     RPI and the NG Business Assets are not subject to any bankruptcy,
            insolvency or receivership proceedings of any nature whatsoever, and
            RPI is not insolvent;

   5.7.     The transactions contemplated by this Agreement will not violate or
            result in a breach of or constitute a default under any provision of
            any agreement, charter, bylaw, order, judgment, decree, ordinance,
            or regulation to which RPI or its assets are subject or by which RPI
            is bound;

   5.8.     RPI has good and marketable title to the NG Business Assets free and
            clear of all claims, liabilities, liens and encumbrances whatsoever,
            and has not entered into any contract, arrangement or agreement
            providing for the hypothecation, sale, transfer or other disposition
            of the NG Business Assets, except this Agreement;


   5.9.     RPI is not in default in any material respect of its obligations
            under the Mazda Agreement or the Hussmann Agreement, except as set
            forth on Exhibit D attached hereto, and each of the NG Business
            Assets listed on Exhibit B attached hereto are in salable and
            merchantable condition without material defects or deficiencies,
            latent or otherwise, except as specifically disclosed on Exhibit B;

   5.10.    There are no judgments, actions or proceedings in any court or
            before any federal, state or local administrative agency pending
            against RPI relating to or affecting this contemplated transaction
            or the NG Business Assets;

   5.11.    The licensing, distribution and marketing of the 580 Series engines
            and the 40 Series engines by Purchaser pursuant to the Engine
            Distributor Agreement to be entered into between RPI and Purchaser
            has been duly and validly authorized by RPI, does not require the
            consent or approval of any third parties, is legally binding upon
            and valid and enforceable against RPI, and does not and will not
            infringe any rights of any person or entity; and

   5.12.    Up to and including the Closing Date, RPI has paid or will pay
            before same shall become past due all amounts which have accrued or
            become payable under the Mazda Agreement and the Hussmann Agreement,
            except as specifically provided in this Agreement are to be paid by
            Purchaser, and RPI has paid and will pay any and all debts,
            obligations, fees and taxes which constitute, or if unpaid would
            constitute, a lien on all or any portion of the NG Business Assets.
            Purchaser's Representations and Warranties.

6. Purchaser represents and warrants to RPI that at and as of the Closing Date:

   6.1.     Purchaser is a corporation duly organized and validly existing and
            in good standing under the laws of the State of Nevada with all
            requisite corporate power to own and operate its properties and to
            carry on its business as presently conducted;

   6.2.     Purchaser has all requisite power and authority to enter into,
            execute and deliver this Agreement and has taken all necessary
            corporate action, including the obtaining of all
 
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            required Board of Director approvals (if any), to authorize the
            execution and delivery of this Agreement and the consummation of the
            transactions contemplated hereby; and

   6.3.     The transactions contemplated by this Agreement will not violate or
            result in a breach of or constitute a default under any provision of
            any agreement, charter, bylaw, order, judgment, decree, ordinance,
            regulation or any other restriction to which Purchaser is subject or
            by which it is bound. 

7. Survival of Representations and Warranties. The representations and 
   warranties made herein shall be effective on and as of the date hereof and on
   and as of the Closing Date and shall survive the Closing Date.

8. Covenants.

   8.1.    RPI's Pre-Closing Covenants. RPI covenants and agrees that up to and
           including the Closing Date:

   8.1.1.  RPI will continue to perform its obligations under the Mazda
           Agreement and the Hussmann Agreement, and will use its best efforts
           to preserve the good will of its customers, suppliers, independent
           contractors and others having business relations with RPI;

   8.1.2.  RPI will not enter into any material contracts or agreements 
           outside of the ordinary course of business in connection with the NG
           Business;

   8.1.3.  RPI will not take any action which would render any representation 
           or warranty made herein materially untrue or incorrect as of such
           date;

   8.1.4.  RPI will cooperate fully with Purchaser, assist Purchaser and act
           diligently and in good faith to cause all of the Closing
           Contingencies and conditions precedent to Closing under this
           Agreement to be satisfied and performed from and after the date of
           this Agreement through the Closing Date; and

   8.1.5.  RPI will comply with any and all applicable bulk sales or similar
           laws, including the timely notification of creditors of RPI of the
           transactions contemplated by this Agreement, so that the NG Business
           Assets can and will be sold and transferred to Purchaser at Closing
           free and clear of all liens, claims and encumbrances, including but
           not limited to any claim on the part of any creditor of RPI that it
           may assert its claim against Purchaser or the NG Business Assets.

  8.2.     Purchaser's Pre-Closing Covenant. Purchaser covenants and agrees
           that up to and including the Closing Date, Purchaser will not take
           any action which would render any representation or warranty made
           herein materially untrue or incorrect as of said date.

   8.3.    RPI's Post-Closing Covenants. The parties acknowledge that the
           natural gas engine business of RPI is very competitive, and that to
           protect the interests of Purchaser, RPI has agreed to abide by and
           comply with the restrictive covenants in this Section 8.3.
           Accordingly, RPI hereby agrees that, as a material condition of
           Purchaser's obligations under this Agreement, and in consideration
           of this Agreement and the payment of the

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           Purchase Price and other consideration to RPI provided for herein, 
           RPI from and after the Closing Date, and for a period of ten (10) 
           years thereafter, will be subject to the following restrictive
           covenants:
            

   8.3.1.  RPI will not divulge, use, furnish, disclose or make available to
           anyone other than Purchaser or its subsidiaries or affiliates, any
           Confidential Information. For purposes of this Agreement,
           "Confidential Information" shall mean any and all information, data
           and knowledge that (i) has been created, discovered, developed or
           otherwise become known to RPI, or in which property rights have been
           assigned or otherwise conveyed to RPI, which information, data or
           knowledge has commercial value in the NG Business. By way of
           illustration, but not limitation, Confidential Information includes
           trade secrets, business and customers links and relations,
           processes, formulas, know-how, improvements, discoveries,
           developments, designs, inventions, techniques, marketing plans,
           strategies, forecasts, new products, unpublished financial
           statements or parts thereof, budgets, projections, licenses, prices,
           costs, and employee, customer and supplier lists or parts thereof,
           and any information relating to the legal or business affairs of RPI
           or any affiliate thereof.

   8.3.2.  RPI agrees that it shall not make or retain a copy of, nor make or
           cause to be made any notes of, any document or recording
           incorporating any trade secret or Confidential Information belonging
           to or relating to RPI's NG Business, or any of the intellectual
           property or other documents comprising part of the NG Business
           Assets being sold and transferred to Purchaser under this Agreement.
           RPI will not take or possess, or deliver to any other person or
           entity, any of the foregoing or any reproduction of any of the
           foregoing.


   8.3.3.  RPI shall not itself, or by through any parent, subsidiary or
           affiliate (or in any other relationship or capacity), directly or
           indirectly, conduct or engage in the NG Business, and shall not,
           directly or indirectly, market, promote, distribute, or sell any
           natural gas engines, natural gas engine parts or spare parts, or
           enter into any contract, agreement or arrangement to do any of the
           foregoing, in the United States, Canada and Mexico.

   8.3.4.  RPI shall not itself, or by through any parent, subsidiary or
           affiliate (or in any other relationship or capacity), directly or
           indirectly (i) solicit or induce, or in any manner attempt to
           solicit or induce any person employed by, or acting as an agent of
           Purchaser or any affiliate of Purchaser to leave the employment or
           engagement by Purchaser or any affiliate, or to join another
           enterprise or company as an employee or agent; or (ii) divert, or
           attempt to divert any person, concern, or entity which is furnished
           services by Purchaser or any such affiliate or furnishes services
           for or to Purchaser or any such affiliate from doing business with
           Purchaser or any such affiliate; or (iii) induce or attempt to
           induce any customer or supplier of Purchaser or any affiliate to
           cease being a customer or supplier of Purchaser or any affiliate.

   8.3.5.  If RPI commits a breach of any of the provisions of this Section
           8.3, Purchaser shall have the right and remedy to have the
           provisions of this Agreement specifically enforced by way of
           preliminary and/or permanent injunction by any court having
           jurisdiction, it being acknowledged and agreed by RPI and Purchaser

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           that any such breach will cause irreparable injury to Purchaser
           and that money damages will not provide an adequate remedy to
           Purchaser. Such right and remedy shall be in addition to, and not in
           lieu of, any other rights and remedies available to Purchaser
           under law or in equity.

   8.3.6.  If any of the covenants or provisions contained in this Section 8.3,
           or any subsection or part thereof, is hereafter construed to be
           invalid or unenforceable in any respect, the same shall not affect
           the remainder of the covenant, covenants or provisions which shall
           be given the maximum effect possible without regard to the invalid
           portions and the remainder shall then be fully enforceable. 

  8.3.7.   If any of the covenants contained in this Sections 8.3, or any
           subsection or part thereof, is held to be unenforceable because of
           the duration of such provision or the geographical or
           product/business area covered thereby, the parties agree that such
           provisions shall be reformed and construed to reduce the duration
           and/or area of such provision to the extent necessary for
           enforceability and, in its reduced form, said provision shall then
           be fully enforceable. 

   8.3.8.  The parties hereto intend to and hereby confer jurisdiction to
           enforce the covenants contained in this Section 8.3, upon the courts
           of the Commonwealth of Pennsylvania (and the federal courts resident
           in such State). 

   8.3.9.  The covenants and provisions of this Article 8 shall survive Closing
           under this Agreement. Conditions Precedent to Closing.

9.0 Conditions Precedent to Closing.

  9.1.     Conditions to Purchaser's Obligations. The obligations of Purchaser
           under this Agreement, including but not limited to Purchaser's
           obligations to make the payments required under Sections 3.3, 3.4, 
           3.5 and 3.6 of this Agreement, are conditioned and contingent upon
           the satisfaction on or prior to the Closing Date of the following
           conditions, any of which may be waived by Purchaser in its sole
           discretion, but no such waiver shall be effective unless delivered
           in writing to RPI by Purchaser:

  9.1.1.   RPI shall have performed all obligations and agreements and 
           complied with all covenants contained in this Agreement to be 
           performed andcomplied with by it at or prior to the Closing Date;

  9.1.2.   The representations and warranties of RPI herein contained shall 
           be true and correct in all material respects on and as of the date
           of this Agreement and the Closing Date with the same force and 
           effect as though made on and as of such date, except as affected 
           by the transactions contemplated hereby;

  9.1.3.   RPI shall have executed and delivered to Purchaser that certain
           master Engine Distributor Agreement ("Engine Distributor Agreement")
           for distribution of the 580 Series NG engines in the form attached
           hereto as Exhibit E;

  9.1.4.   RPI shall have executed and delivered to Purchaser a master Engine
           Distributor Agreement for the 40 Series NG engines, in form and
           content 
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           satisfactory to Purchaser, or have amended the Engine Distributor 
           Agreement to cover the distribution of the 40 Series NG engines by 
           an amendment in form and content satisfactory to Purchaser;

  9.1.5.   All of the Closing Contingencies shall have occurred or been 
           fully satisfied, performed and completed to Purchaser's 
           satisfaction; and 9.1.6. RPI shall have delivered to Purchaser an 
           opinion of counsel in form and content reasonably acceptable to 
           Purchaser.

  9.2.     Conditions to RPI's Obligation. The obligations of RPI under this
           Agreement are conditioned and contingent upon the satisfaction on or
           prior to the Closing Date of the following conditions, any of which
           may be waived by RPI in its sole discretion, but no such waiver shall
           be effective unless delivered in writing to Purchaser by RPI:

  9.2.1.   Purchaser shall have performed all obligations and agreements
           contained in this Agreement to be performed by it prior to the
           Closing Date; and

  9.2.2.   The representations and warranties of Purchaser herein contained
           shall be true and correct in all material respects on and as of the
           date of this Agreement and the Closing Date with the same force and
           effect as though made on and as of such date, except as affected by
           transactions contemplated hereby. 

10. Closing Date and Closing Procedure.

  10.1.    Closing. Closing will occur on or before thirty (30) days following
           the satisfaction and performance of the Closing Contingencies. The
           execution and delivery of this Agreement and the consummation of the
           transactions contemplated hereby at Closing shall be performed
           through the execution and exchange of executed counterpart documents
           and the delivery of funds and other documents either at Purchaser's
           counsel's office in Philadelphia, Pennsylvania, or, with Purchaser's
           consent, via Federal Express or other courier services. The Closing
           Date shall occur no later than _________, 1998, unless otherwise
           agreed in writing by Purchaser and RPI.

   10.2.   RPI's Deliveries at Closing. At the Closing, RPI shall deliver or
           cause to be delivered to Purchaser (or any other person or entity
           designated by Purchaser) any and all bills of sale, certificates,
           assignments or other documents of transfer as shall be necessary or
           appropriate, in the opinion of Purchaser's counsel, to vest in
           Purchaser or its designee good and marketable title to the NG
           Business Assets. Such documents shall be provided by Purchaser to
           RPI at or prior to the Closing for RPI's execution, and may be
           signed and held in escrow by RPI's or Purchaser's counsel for
           delivery at the Closing. As soon as practicable, but in no event
           less than five (5) days before the scheduled Closing Date, RPI shall
           deliver all of the assets listed on Exhibit B and all documents in
           the possession or control of RPI relating to the conduct of the NG
           Business, including but not limited to all financial statements,
           books, advertising, show display materials and business records to
           such place or places specified by Purchaser.

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   10.3.   Sales Taxes. Purchaser shall pay all sales, use, transfer and
           documentary taxes, if any, payable in connection with the sale,
           transfer, assignment and delivery of the NG Business Assets to
           Purchaser hereunder.

   10.4.   RPI to Settle Production Parts Accounts Payable Obligation.
           Purchaser shall be entitled to be paid on or before the Closing Date
           all amounts owed to Purchaser on book account, including but not
           limited to the currently due account payable to Purchaser in the
           amount of Seventeen Thousand Nine Hundred Seventy-seven Dollars
           ($17,977).

   10.5.   RPI to Use Closing Proceeds to Pay Other Creditor Obligations. RPI
           shall provide to Purchaser, five (5) days prior to the scheduled
           Closing Date and again at Closing, a true, correct and up to date
           list of all accounts payable and other amounts owed to all creditors
           of RPI. RPI agrees that all amounts to be paid to RPI at Closing by
           Purchaser for the NG Business Assets shall be allocated equitably
           among and paid to all such listed creditors out of the Closing net
           proceeds of the transaction contemplated by this Agreement. In the
           event that any such creditor claims are disputed, RPI shall so
           notify Purchaser of such dispute, and the Closing net proceeds that
           would have been allocated and paid to the holders of such disputed
           claims shall be placed in escrow and not distributed or released
           until such disputed claims are finally settled or resolved.
           
11. Additional Rights and Obligations.

   11.1.   Additional Documentation. Subsequent to Closing, RPI will execute
           and deliver from time to time at the request of Purchaser all such
           further instruments of transfer and assignment, as may be necessary
           in order to vest and confirm in Purchaser title to and the right to
           use and enjoy the NG Business Assets hereby agreed to be transferred
           and assigned to Purchaser. Purchaser agrees to execute and deliver
           from time to time at the request of RPI all such instruments
           necessary to effectuate its undertakings hereunder. RPI shall
           deliver to Purchaser copies of any and all documents, books,
           records, papers, plans, drawings, specifications, patents, licenses,
           contracts and other materials as may be necessary or appropriate for
           Purchaser to fully market, promote, develop, operate, utilize,
           maintain, repair, and service the NG Business Assets acquired under
           this Agreement.

   11.2.   S580 Natural Gas Engine Development Plan. RPI has agreed to
           undertake certain research and development to lower the production
           cost of the Series 580 natural gas engine, which is intended to
           allow Purchaser to distribute, market and sell such engines as a
           master distributor under the Engine Distributor Agreement. Purchaser
           has agreed to pay to RPI the sum of $25,000 in installments for the
           purpose of conducting such research and development, to be paid upon
           achievement or performance of certain development milestones as set
           forth in Exhibit F attached hereto. RPI shall undertake and perform
           the research and development in accordance with Exhibit F, and
           Purchaser shall contribute said installments aggregating $25,000, as
           provided for in Exhibit F.

   11.3.   RPI to Assist Purchaser. RPI shall, without charge to Purchaser,
           make its key natural gas engineer, John Mack, available to Purchaser
           for not less than four (4) hours per week (engineering time) with
           regard to the 65 Series NG engine. In addition, RPI shall, without
           charge to Purchaser, make its personnel available to Purchaser to
           provide

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           assistance, training and instruction of Purchaser's personnel with
           regard to all aspects of the marketing, sale, operation,
           maintenance, repair and servicing of the natural gas engines being
           acquired as part of the NG Business or being sold by Purchaser under
           the Engine Distributor Agreement. If RPI's personnel are required to
           travel off-site to provide any services for Purchaser (other than
           warranty work), Purchaser will reimburse RPI for all reasonable
           expenses incurred by RPI personnel for travel, meals and lodging.

   11.4.   Exclusive Right to Distribute RPI Series 580 Natural Gas Engine. RPI
           grants Purchaser the exclusive right to distribute, market and sell
           (and in certain circumstances manufacture under license) the Series
           580 natural gas/propane engine in the territory defined in the
           Engine Distributor Agreement for stationary industrial/commercial
           applications and oil and gas field applications, except for air
           compression applications where air compression is not the primary
           load. The distribution terms and conditions are set forth in the
           Engine Distributor Agreement attached to this Agreement as Exhibit
           E.


   11.5.   Exclusive Right to Distribute RPI Series 40 Natural Gas Engine. RPI
           grants Purchaser the exclusive right to distribute, market and sell
           (and in certain circumstances manufacture under license) the Series
           40 natural gas/propane engine in the territory defined in the Engine
           Distributor Agreement for stationary industrial/commercial
           applications and oil and gas field applications, except for air
           compression applications where air compression is not the primary
           load. The Series 40 NG engines are not currently in production by
           RPI. The distribution terms and conditions are set forth in Exhibit
           G attached to this Agreement. Upon request of Purchaser, RPI will
           enter into an amendment of the Engine Distributor Agreement, or a
           separate master engine distribution agreement with Purchaser, for
           the distribution and/or manufacture of the Series 40 NG engines.

   11.6.   PowerCold Interest in Transaction. RPI acknowledges that Purchaser
           will be a subsidiary of PowerCold on or before the Closing Date, and
           that PowerCold has participated in the negotiation of this
           Agreement. RPI and its Board of Directors have independently
           evaluated the terms and conditions of this Agreement, and its Board
           of Directors has approved this Agreement as being in the best
           interests of RPI and further as being on terms and conditions that
           are fair and as favorable to RPI as could be obtained from any
           independent third party purchaser. RPI further acknowledges and
           agrees that the terms and conditions of this Agreement were the
           product of extensive negotiations between representatives of RPI and
           the Purchaser, and that such negotiations were conducted on an arms
           length basis.

   11.7.   Release. Because of certain disputes and commercial dealings between
           RPI and PowerCold preceding the date of this Agreement, the parties
           intend that upon entering this Agreement, and as additional
           consideration for Purchaser entering into this Agreement, RPI shall
           release Purchaser and PowerCold from any and all claims and
           liabilities of any nature whatsoever that may have existed prior to
           the date of this Agreement. Accordingly, RPI, in consideration of
           Purchaser entering into this Agreement, and other good and valuable
           consideration, does hereby remise, release and forever discharge
           Purchaser, PowerCold, and all of their respective officers,
           directors, principals, affiliates, employees, agents and
           shareholders (the "Released Parties"), and their respective
           successors and assigns, of and from any and all claims,
           counterclaims,

                                      10
<PAGE>

           demands, actions, causes of action, suits, debts, dues, accounts,
           awards, bonds, covenants, contracts, agreements, judgments, losses,
           damages, expenses or liabilities, of any nature whatsoever
           (together, the "Claims"), whether at law or in equity, which against
           the Released Parties, RPI, or its successors and assigns, or any of
           them, now has or hereafter can or may have, for or by reason of or
           relating in any way to any cause, matter or thing whatsoever, known
           or unknown, relating in any way to the business of RPI, or any
           property or assets owned by RPI, or any business dealings or
           agreements by and between or among RPI and any one or more of the
           Released Parties, or any stock ownership interest held in RPI by any
           of the Released Parties, through and including the date of this
           Agreement. Notwithstanding anything to the contrary herein, this
           Release is not intended to release, and shall have no effect upon,
           the obligations of RPI and Purchaser set forth in this Agreement.
           RPI covenants that it has not and will not commence or bring any
           legal or other proceedings of any nature whatsoever against the
           Released Parties or any of them to recover for or enforce any Claim
           or Claims, or seek any remedy or relief with respect thereto. The
           provisions of this Section 11.6 shall survive termination of, or
           Closing under, this Agreement. 

12.Indemnification.

   12.1.   RPI Indemnity. RPI hereby agrees that it shall and shall be liable
           to indemnify, defend and hold harmless Purchaser from and against
           any and all claims, demands, liens, encumbrances, liabilities,
           losses, damages, costs and expenses, including reasonable
           attorneys' fees and costs, asserted against or incurred by
           Purchaser in connection with (i) any breach of any representation
           or warranty, or failure to perform its obligations, under this
           Agreement, or (ii) any actual or alleged breach of contract or
           negligent or wrongful act or omission by RPI before the Closing
           Date regarding the NG Business and/or the NG Business Assets,
           including but not limited to a breach of any express or implied
           warranties given by RPI to any customers, and this indemnity
           paragraph shall survive the Closing for a period of five (5) years
           thereafter.

   12.2.   Purchaser's Indemnity. Purchaser hereby agrees that it shall and
           shall be liable to indemnify, defend and hold harmless RPI from and
           against any and all claims, demands, liens, encumbrances,
           liabilities, losses, damages, costs and expenses, including
           reasonable attorneys' fees and costs, asserted against or incurred
           by RPI in connection with (i) any breach of any representation or
           warranty, or failure to perform its obligations, under this
           Agreement, or (ii) any liability of RPI to Mazda or Hussmann
           arising, in whole or in part, from the failure of Purchaser to
           perform, after the Closing Date, any duty or obligation assumed by
           Purchaser as assignee of RPI's interest in the Mazda Agreement or
           the Hussmann Agreement, and this indemnity paragraph shall survive
           the Closing for a period of five (5) years thereafter.

   12.3.   Indemnification Procedure. The party seeking indemnification
           hereunder (the "Indemnitee") shall give the party obligated to
           provide indemnification (the "Indemnitor") prompt written notice of
           any claims which may give rise to liability for indemnification
           hereunder. The Indemnitor shall have the right to control the
           defense or settlement of any such claim and the defense of any
           action or proceeding shall be at the sole cost and expense of the
           Indemnitor. Should the Indemnitor fail to defend any such action
           within a reasonable period of time following receipt of such notice,
           then, in 

                                       11
<PAGE>

           addition to any other remedies, the Indemnitee may settle
           (provided that no settlement shall be accepted by the Indemnitee
           unless ten (10) days prior written notice of the terms thereof and
           the right to reject the same, and instead, to undertake such defense
           shall have been given to the Indemnitor) or defend such action or
           proceeding through legal counsel of the Indemnitee's own choosing
           and the amount of such settlement, demand, or any judgment or decree
           and all of the costs and expenses of the Indemnitee including
           Indemnitee's reasonable legal fees and costs, with respect thereto,
           shall be damages hereunder.

  12.4.    Survival. The provisions of this Section 12 shall survive
           termination of, or Closing under, this Agreement. 

13. Default. Neither party hereunder shall exercise any right or remedy under
    this Agreement for a breach or default of any term or provision of this
    Agreement unless such party has first given notice of default to the other
    in accordance with the notice provisions of this Agreement, and (i) such
    breach or default is not cured or corrected within thirty (30) days after
    receipt of such notice, or (ii) in the case of any non-monetary default,
    action is not commenced to cure or correct such breach or default within
    such thirty (30) day period and diligently pursued until such cure or
    correction is completed.

14. Miscellaneous.

   14.1.    Expenses. Each party hereto shall pay its own expenses of the
            transactions contemplated hereby and, in the event this Agreement is
            not consummated for any reason, each of the parties shall pay its
            own costs and expenses incident hereto, including, without
            limitation, the fees and expenses of its respective counsel and
            accountants.

   14.2.    Notices. All notices or other communications required or permitted
            hereunder shall be in writing and shall be deemed to have been given
            when delivered in person or by overnight air courier or when
            postmarked, if mailed by registered or certified mail, return
            receipt requested, postage prepaid, and addressed as follows: 
        
            If to RPI:

            Ken Brody, President
            ROTARY POWER
              INTERNATIONAL, INC.
            One Passaic Street
            Wood-Ridge, NJ  07075


                                       12

            Copy to:

            If to Purchaser:

            Jack Kazmar, President
            ROTARY POWER
              ENTERPRISES, INC.
            46 Passaic Street
            Wood-Ridge, NJ  07075

            Copy to:

            Stephen M. Foxman
            Connolly Epstein Chicco
               Foxman Oxholm & Ewing
            1515 Market Street - 9th Flr.
            Philadelphia, PA 19102

                and

            Frank Simola, President
            PowerCold Corporation
            9408 Meadowbrook Avenue
            Philadelphia, PA 19118


            or such other address as may be specified by the parties hereto
            pursuant to notice given to the other party in accordance with the
            provisions of this Section.

   14.3.    Entire Agreement. The exhibits attached to this Agreement are
            incorporated into this Agreement. This Agreement and the exhibits,
            schedules and documents delivered pursuant hereto, and the Engine
            Distributor Agreement to be entered into between the Parties at
            Closing, constitute the entire agreement between the parties,
            supplanting in their entirety all previous agreements, memoranda,
            oral representations and other understandings between or among the
            parties, their principals, agents, or employees, and shall not be
            construed against or for any party on account of such party having
            drafted or not drafted this Agreement or any portion thereof.

   14.4.    Amendment and Modification. No term or provision of this Agreement
            may be amended or modified in any respect except in writing signed
            by the parties to this Agreement. 

   14.5.    Successors and Assigns. Unless otherwise stated herein, each and
            every representation, warranty, covenant, agreement, indemnification
            and provision of this Agreement shall inure to the benefit of and be
            binding upon the respective successors and assigns of the parties.
            

   14.6.    Governing Law. This Agreement shall be interpreted and governed in
            accordance with the laws of the Commonwealth of Pennsylvania.

                                       13
<PAGE>

   14.7.    Waiver. No waiver of any term, provision or condition of this
            Agreement, whether by conduct or otherwise, in any one or more
            instances shall be deemed to be or construed as a further or
            continuing waiver of any such term, provision or condition of this
            Agreement.

   14.8.    Severability. The unenforceability or invalidity of any provision of
            this Agreement shall not affect the enforceability or validity of
            the balance of this Agreement. 

   14.9.    Costs and Fees. In the event that any of the parties hereto
            institutes any action, suit or proceeding to enforce the provisions
            of this Agreement, or for breach thereof, or to declare the rights
            of the parties with respect thereto, the non-prevailing party agrees
            to pay the prevailing party's reasonable costs and expenses,
            including reasonable attorney's fees and costs incurred in the
            furtherance of such action, suit or proceeding. 

   14.10.   Neither Party Agent of the Other. Neither party to this Agreement
            shall be the agent of the other, and neither party shall have the
            right to bind the other to any agreement or obligation unless such
            other party shall agree in writing to be so bound. 

   14.11.   Counterparts. This Agreement may be executed in any number of
            counterparts, and each such counterpart hereof shall be deemed to be
            an original instrument, but all such counterparts together shall
            constitute but one agreement. 

   14.12.   No Assignment. Neither party shall have the right to assign this
            Agreement or any rights hereunder without the prior written consent
            of the other party, such consent not to be unreasonably withheld or
            delayed, except that Purchaser shall have the right without RPI's
            consent to assign this Agreement to any entity controlled, directly
            or indirectly, by PowerCold. 

   14.13.   Limitation of Liability. Neither party shall be liable for any
            incidental, indirect, special, or consequential damages, or loss of
            revenue or profit, even if it is has been advised of the possibility
            of such damage.

   14.14.   Confidentiality and Non-Disclosure. All information concerning the
            terms and business transactions contemplated in this Agreement shall
            for all purposes be regarded as strictly confidential and may not be
            disclosed except to the Parties, their respective attorneys,
            accountants and other professional advisers. Nothing herein shall
            prevent disclosure as may be required pursuant to any legal
            requirements or the order of any court, or as may be required to
            satisfy any Closing Contingencies or conditions precedent to Closing
            hereunder. The provisions of this section shall be effective for a
            period of one (1) year following the earlier of Closing or the
            termination of this Agreement for any reason whatsoever.
            

15.Arbitration. In the event of any controversy, dispute or claim arising out of
   or related to this Agreement, the parties shall negotiate in good faith in an
   attempt to reach a mutually acceptable settlement of such dispute. If
   negotiations in good faith do not result in a settlement of any such
   controversy, dispute or claim, it shall be finally settled by arbitration in
   accordance with the Commercial Arbitration Rules of the American Arbitration
   Association, except to the extent deemed modified by the following:

                                       14
<PAGE>
   15.1.    The expenses of the arbitration shall be borne equally by each
            party; and each party shall bear its own legal fees and expenses,
            except that a party shall be awarded its reasonable attorney's fees
            and expenses if an award is rendered by the Arbitrator in its favor.

   15.2.    The Arbitrator shall determine whether and to what extent any party
            shall be entitled to damages under this Agreement. No party shall be
            entitled to punitive damages, and each party waives all such rights,
            if any. 

   15.3.    Each party shall prepare a submission and proposed finding with such
            affidavits, memoranda of law, exhibits and other documents as are
            appropriate to support the position taken by such party. The
            Arbitrator shall take such evidence in the hearing or request
            further submissions that the Arbitrator believes would be necessary
            to evaluate the submission or the credibility of the evidence,
            provided that the Arbitrator will use reasonable efforts to avoid a
            general hearing. The Arbitrator shall select one or the other or the
            proposed findings as the final determination of the matter in
            controversy. The Arbitrator shall not have the power to add nor
            modify any of the terms or conditions of the proposed findings or
            this Agreement. 

   15.4.    The Arbitrator's written decision shall be rendered within 60 days
            of the submission by both parties, or if the Arbitrator determines
            to hold a hearing, then within 60 days of the hearing. The decision
            reached by the Arbitrator shall be final and binding upon the
            parties as to the matter in dispute. To the extent that the relief
            or remedy granted by the Arbitrator is relief or a remedy on which a
            court could enter a judgment, a judgment upon the award rendered by
            the Arbitrator shall be entered in any court of competent
            jurisdiction (unless in the case of an award of damages, the full
            amount of the award is paid within 10 days of its determination by
            the Arbitrator). Otherwise, the award shall be binding on the
            parties in connection with their continuing performance of this
            Agreement and in any subsequent arbitration or judicial proceedings
            between the parties. 

   15.5.    The arbitration shall take place in Philadelphia, Pennsylvania.
           

   15.6.    The arbitration proceeding and all filings, testimony, documents and
            information relating to or presented during the arbitration
            proceeding shall be disclosed exclusively for the purpose of
            facilitating the arbitration process and for no other purpose and
            shall be deemed to be confidential. 

   15.7.    Except as otherwise provided herein, the parties shall continue
            performing their respective obligations under this Agreement
            notwithstanding the existence of a dispute while the dispute is
            being resolved unless and until such obligations are terminated or
            expire in accordance with the provisions hereof. 

   15.8.    Discovery shall be permitted pursuant to the Pennsylvania Rules of
            Civil Procedure. The parties may obtain information including
            depositions, interrogatories, production of documents, exchange of
            summaries of testimony or exchange of statements of position, and
            the Arbitrator shall limit such disclosure to avoid unnecessary
            burden to the parties and shall schedule promptly all discovery and
            other procedural steps and otherwise assume case management
            initiative and control to effect an efficient and expeditious

                                       15
<PAGE>

            resolution of the dispute. At any oral hearing of evidence in
            connection with an arbitration proceeding, each party and its
            counsel shall have the right to examine its witnesses and to
            cross-examine the witnesses of the other party who testify at the
            hearing. 

   15.9.    Notwithstanding the dispute resolution procedures contained in this
            Section, either party may apply to any court having jurisdiction (i)
            to enforce the Agreement to arbitrate, (ii) to seek provisional
            injunctive relief so as to maintain the status quo until the
            arbitration award is rendered or the dispute is otherwise resolved,
            or (iii) to challenge or vacate any final judgment, award or
            decision of the Arbitrator that does not comport with the express
            provisions of the Section.

            IN WITNESS WHEREOF, the parties have signed this Agreement by their
         officers thereunto duly authorized, as of the day and date set forth
         above.



                                             ROTARY POWER INTERNATIONAL, INC.


                                             By:
                                                -------------------------------
                                                 Ken Brody, President


                                             ROTARY POWER ENTERPRISE, INC.


                                             By:
                                                -------------------------------
                                                 Jack Kazmar, President

                                       16
<PAGE>



                                    EXHIBIT A

                                 Mazda Agreement


                                       17
<PAGE>




                                    EXHIBIT B

                        MAZDA Engines and Parts Inventory


                      NATURAL GAS ENGINE INVENTORY SUMMARY

    (12) RPI 65 Series GRI completed engines

    (01) RPI 65 Series Show model engine

    (44) Mazda 13B Short Blocks in sealed cartons

    (10) Mazda 13B Short Blocks in opened cartons

    (04) Mazda 13B Short Blocks work in process

    (02) Mazda 13B Short Blocks test in process

    (All) Natural gas production parts located in Natural Gas production
    storage cage currently valued at $33,188 per RPI September 23, 1997
    inventory list

    (All) Spare parts inventory

    (03) Damaged Mazda Short Blocks in opened cartons


                        PRODUCTION TOOLS

    Tooling i.e. - Exhaust manifold, intake adapter, intake collector, "S" Tube,

                oil filter bracket, etc.

    Pallet Racks dependent on availability

    Five (5) Engine Assembly Stands

    Parts Shelves and Fencing

    Engine Timing Tool

    Belt Tension Testers

    Mazda Compression Tester to be located

    Timing Light

    Torque Wrench to be located

    One (1) Vidmar Cabinet with production hardware

    Office Equipment for (4) Office Suits

                                       18
<PAGE>


                   MAZDA Engines and Parts Inventory- (con't)



                              INTELLECTUAL PROPERTY


N.G. Engineering Drawings

N.G. Bills of Materials

N.G. Vendor Lists

N.G. Copies of Vendors Purchase Orders

N.G. Engineering Samples and Components

N.G. Manufacturing Assembly Instructions

N.G. Manufacturing Test Instructions

N.G. All Previous Engines Test Reports

N.G. GRI Test Reports


                                       19
<PAGE>



                                    EXHIBIT C

                               Hussmann Agreement




                                       20
<PAGE>



                                    EXHIBIT D

                 Defaults Under Mazda and/or Hussmann Agreements


                                       21

<PAGE>



                                    EXHIBIT E

                          Engine Distributor Agreement



                                       22
<PAGE>


                                    EXHIBIT F

                        S580 Natural Gas Development Plan

RPI shall undertake and perform the following development plan for Natural Gas
Engines:
<TABLE>
<CAPTION>

Est. Date   Item   Description
<S>         <C>   <C>                                                               
-------------------------------------------------------------------------------------------------------------------------------
5/15/98     1.a.  Locate parts in house for Mk 0 NGRE engine; intake manifolds, rotor castings, housings, etc. for 1st engine
-------------------------------------------------------------------------------------------------------------------------------
5/30/98     1.b.  Identify sources and suppliers of Mk 0 NGRE parts for 2nd engine
-------------------------------------------------------------------------------------------------------------------------------
5/30/98     1.c.  Define production schedule for completion of 2 Mk 0 NGRE engines
-------------------------------------------------------------------------------------------------------------------------------
            2.a.  Complete 1st engine
-------------------------------------------------------------------------------------------------------------------------------
            2.b.  Complete 2nd engine
-------------------------------------------------------------------------------------------------------------------------------
7/1/98      3.a.  Install 1st engine on NGRE test stand
-------------------------------------------------------------------------------------------------------------------------------
            3.b.  Run tip seal design alternatives: gopalite vs ceramic, unitary ceramic vs 3 pc ceramic
-------------------------------------------------------------------------------------------------------------------------------
            3.c.  Refine and tune carburation and ignition parameters
-------------------------------------------------------------------------------------------------------------------------------
            3.d.  Test 2nd engine on test stand
-------------------------------------------------------------------------------------------------------------------------------
            4.a.  Tear down 1st engine and inspect for end housing wear
-------------------------------------------------------------------------------------------------------------------------------
            4.b.  Tear down 2nd engine and inspect for end housing wear, if necessary
-------------------------------------------------------------------------------------------------------------------------------
9/30/98     4.c.  Reassemble both engines, run final tests
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Purchaser will contribute $25,000 toward this test program on a milestone basis
as follows:
<TABLE>
<CAPTION>

Item        Payment
<S>         <C>
----------------------------------
1.c.        $10,000
----------------------------------
2.b.        $5,000
----------------------------------
3.d.        $5,000
----------------------------------
4.c.        $5,000
----------------------------------
</TABLE>
      

RPI will undertake a Value Improvement Program (VIP) to reduce the cost of the
S580 NGRE rotors from $20,000 to $7,500 (a target cost, not a contractual
obligation). Purchaser will contribute $25,000 toward this VIP on a milestone
basis to be defined.

                                       23
<PAGE>


                                    EXHIBIT G

             Master Distributor Agreement for Series 40 NGRE Engines

1. RPI is not in production with the Series 40 engine and has not currently
   defined a plan for the production of this engine.

2. If RPI does define a plan for the production of Series 40 NGRE engines, and
   such plan calls for outside production of these engines by an unrelated third
   party, then RPI will offer Purchaser the opportunity to manufacture these
   engines under the same terms and conditions as the first party, on a first
   right of refusal basis. Since engine manufacture is a capital-intensive
   business, Purchaser will have to demonstrate sufficient financial strength to
   fund economic build quantities and to provide a satisfactory build plan for
   these engines. Purchaser will also have to accept the rights of failure to
   meet acceptable manufacturing volumes and pricing requirements as defined in
   the Engine Distributor Agreement for S580 NGRE engines, and accept the
   necessary computer systems and quality control standards allowing integration
   into the planned RPI systems and according to RPI's quality and warranty
   standards.

3. Purchaser will have 90 days to respond to the proposal, after which the first
   right of refusal will expire and the contract will go to the first party.

4. If RPI produces, either in house or through third parties, the Series 40 NGRE
   engine, then RPI will negotiate with Purchaser, in good faith, a Master
   Distributor Agreement for Series 40 NGRE engines for those markets and
   territories served by Purchaser under any existing Series 580 NGRE
   distribution agreement in good standing.

                                       24