Filed by Automated Filing Services Inc. (604) 609-0244 - Turbodyne Technologies, Inc. - Exhibit 10.6






 SETTLEMENT AGREEMENT AND GENERAL RELEASE 


Effective January 23, 2004



between 


 Turbodyne Technologies, Inc., Turbodyne Systems, Inc.,
  and any affiliated persons or entities, having offices at 6155 Carpinteria
  Avenue, Carpinteria, California 93013 ("Turbodyne"); 


and 


 Honeywell International Inc. (f/k/a AlliedSignal Inc.),
  having offices at 3201 W. Lomita Blvd., Torrance, California 90505-5064 (“Honeywell”).



RECITALS 


                 A.                On
  January 28, 1999, Turbodyne and Honeywell entered into a Joint Development Agreement
  ("JDA") and a License Agreement ("LA"). On December 15, 1999, Turbodyne and
  Honeywell amended the JDA and LA and entered into an Intellectual Property and
  Product Rights Agreement ("IPPRA") under which Turbodyne assigned to Honeywell
  certain patent rights, including those described in article 5 below. Collectively,
  the JDA as amended, LA as amended, and IPPRA are referred to herein as the "HON-TRBD
  Agreements". The HON-TRBD Agreements generally related to the development of,
  and certain intellectual property associated with, Electrically Assisted Turbocharger
  technology and products and Electrically Driven Compressor technology and products,
  as more fully defined below. The HON-TRBD Agreements referred to Turbodyne's
  version of Electrically Assisted Turbochargers as "Dynacharger", and Turbodyne's
  version of Electrically Driven Compressors as "Turbopac". In their performance
  of the JDA, the Parties created some additional patentable subject matter and
  other intellectual property rights. Such patentable subject matter, together
  with the patent rights assigned to Honeywell under the IPPRA, are collectively
  referred to herein as the "Patents". 

                 B.                In
  August 2001, Turbodyne commenced an action for damages against Honeywell in
  the United States District Court, Central District of California, case number
  CV 01-07113-NM (the "Federal Litigation"), alleging, among other matters, that
  Honeywell’s conduct relating to and under the HON-TRBD Agreements constituted
  a restraint of trade and tortious delay of commercialization of Turbodyne’s
  technology. Turbodyne was seeking unspecified damages and costs. The District
  Court granted Honeywell's request to dismiss the Federal Litigation with leave
  to amend. During the leave-to-amend period Turbodyne voluntarily dismissed its
  complaint without prejudice on July 1, 2002 and did not thereafter attempt to
  re-file the Federal Litigation or otherwise commence new court proceedings.


                 C.                In
  June 2001, Honeywell initiated arbitration proceedings under the HON-TRBD Agreements,
  AAA Arbitration #72 180 00683 01 EP (the "Arbitration"). Honeywell was seeking
  unspecified damages and costs and termination of the HON-TRBD Agreements based
  on allegations that Turbodyne breached the HON-TRBD Agreements and was unwilling
  and unable to perform future obligations thereunder. Turbodyne brought counterclaims
  in the Arbitration seeking unspecified damages and costs based on allegations,
  among others, that Honeywell breached the HON-TRBD Agreements, fraudulently
  induced Turbodyne to enter 


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the HON-TRBD Agreements, and tortiously interfered with Turbodyne's
  attempts to transact business with third parties.

                
  D.                Without
  admitting or conceding fault or liability, the parties to this Settlement Agreement
  and General Release (the "Settlement Agreement") wish to fully and finally settle
  and compromise, upon the terms and conditions set forth herein, any and all
  claims existing or which may exist on the part of either party or which either
  party did assert or could have asserted in the Federal Litigation, the Arbitration,
  or any other proceeding.

                 NOW,
  THEREFORE, Turbodyne and Honeywell agree to the following terms and conditions:

 TERMS AND CONDITIONS

 1.                Recitals.
  The recitals set forth above are incorporated herein by this reference and
  made a part of this Settlement Agreement.

 2.                Representations

                
  a.                By
  Turbodyne

                                
  (1)                To
  ensure that Honeywell has no liability to Turbodyne's creditors as a result
  of any settlement payment to Turbodyne, Turbodyne makes the following representations
  and warranties:

                                                
  (a)                Regarding
  Lien Holders and Creditors. Turbodyne represents and warrants that it will
  obtain unconditional written releases or consents from all judgment lien creditors
  who have submitted a lien claim in the Arbitration or Federal Litigation. A
  list of these lien holders and creditors is attached hereto as Schedule A.
  Turbodyne represents and warrants that no other lien claims exist relative to
  the Arbitration or Federal Litigation.

                                                
  (b)                Regarding
  Assignees. Turbodyne represents and warrants that it will obtain unconditional
  written releases or consents from all persons to whom Turbodyne has assigned
  any rights to any proceeds of the Arbitration or Federal Litigation. A list
  of these assignees is attached hereto as Schedule B. Turbodyne represents
  and warrants that no other assignments exist relative to the Arbitration or
  Federal Litigation. Honeywell is already in possession of facsimile copies of
  a Conditional Waiver and Release executed by Gerhard Delf and Robert A. Philipson,
  his attorney ("Delf Conditional Release"), and a Conditional Waiver and Release
  executed by Wendell Anderson ("Anderson Conditional Release"). Turbodyne represents
  and warrants that Mr. Philipson is the legal representative of Mr. Delf and
  Mr. Anderson and has the authority to act for each as set forth below. Turbodyne
  may satisfy its obligations under this subparagraph relative to Mr. Delf, Mr.
  Philipson and Mr. Anderson by providing Honeywell with (i) written confirmation
  from Mr. Philipson, on his and Mr. Delf's behalf, that all conditions to the
  Delf Conditional Release have been satisfied, that relative to Honeywell the
  release of any lien, partial assignment, or other rights shall have permanently
  and irrevocably ended any obligation of Honeywell to Mr. Delf and Mr. Philipson
  and their successors, agents and assigns, and that he has delivered the original
  Delf Conditional Release to counsel for Turbodyne; (ii) written confirmation
  from Mr. Philipson, on his and Mr. Anderson's behalf, that all conditions to
  the Anderson Conditional Release have been satisfied and that he has delivered
  the original Anderson Conditional Release to counsel for Turbodyne; and (iii)
  written confirmation from counsel for Turbodyne that the original Delf Conditional
  Release and Anderson Conditional Release have been received.

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                                (2)                Turbodyne
  represents and warrants that, except for in its license agreement dated April
  16, 2003, with Advanced Propulsion Technologies, Inc. ("APT") and in its license
  agreement dated September 5, 2002 with Ishikawajima-Harima Heavy Industries
  Co., Ltd. ("IHI"), neither Turbodyne nor any of its past or present employees
  have granted anyone rights in any Patents, and will not do so with respect to
  any Patents not assigned to Turbodyne under paragraph 5.c. below. Turbodyne
  represents and warrants that true, correct and complete copies of the license
  agreements with APT and IHI are attached hereto in Schedule C.

                                 (3)                 Turbodyne
  represents and warrants that it has not assigned or otherwise transferred any
  of the Turbodyne Claims (as defined in paragraph 7.a. below) or portions thereof,
  and that it maintains complete and full authority to release them. Turbodyne
  further represents and warrants that the individual executing this Settlement
  Agreement on its behalf has the full power and authority to do so.

                                 (4)                Turbodyne
  represents and warrants that, other than for the patents listed in Schedules
  D-1 and D-2, neither Turbodyne nor any of its past or present employees
  have filed for or been granted patents related to Electrically Assisted Turbochargers.

                 b.                By
  Honeywell. Honeywell represents and warrants that it has not assigned or
  otherwise transferred any of the Honeywell Claims (as defined in paragraph 7.b.
  below) or portions thereof, and that it maintains complete and full authority
  to release them. Honeywell further represents and warrants that the individual
  executing this Settlement Agreement on its behalf has the full power and authority
  to do so.

                 c.                 No
  Additional Representations. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
  IN THIS SETTLEMENT AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO
  AND EACH PARTY AGREES EXPRESSLY THAT NEITHER PARTY IS MAKING ANY REPRESENTATION
  OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN
  THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR REPRESENTATION
  AS TO CONDITION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT
  OF INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. EXCEPT AS OTHERWISE PROVIDED
  IN THIS AGREEMENT, THE PATENTS AND EDC PATENTS (DEFINED BELOW) ARE BEING ASSIGNED
  OR LICENSED, AS THE CASE MAY BE, ON AN “AS IS,” “WHERE IS”
  BASIS. IN NO EVENT SHALL EITHER PARTY OR ANY OF THEIR AFFILIATES BE LIABLE UNDER
  ANY TERM OR PROVISION OF THIS AGREEMENT FOR SPECIAL, PUNITIVE, INCIDENTAL OR
  CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS.

 3.                Payments.

                 a.                On
  or before January 26, 2004, Honeywell shall pay Turbodyne the sum of US$6,200,000
  (six million two hundred thousand U.S. dollars), subject to the adjustments
  stated in paragraph 3.b., by wire transfer to the following account designated
  by Turbodyne (the "Bank Account"): 

	 	 	U S Bank, 633 W. Fifth St, LA 90071 	 
	 	 	Berger Kahn, A Law Corporation, Client Trust Account	 
	 	 	Acct.
      No. - 16430113983	 
	 	 	Routing
      No. - 12235821	 



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Turbodyne shall use a portion of the funds wired to it on January
  26, 2004 to make payment in full to each of Turbodyne’s creditors or lien
  holders that have submitted a lien claim in connection with the Arbitration
  or Federal Litigation (listed in Schedule A) and to each of Turbodyne’s
  creditors that have been assigned any right to proceeds from the Arbitration
  or Federal Litigation (listed in Schedule B). Within one business day
  of receiving written proof from Turbodyne that (i) each of Turbodyne’s
  creditors or lien holders (listed in Schedules A and B hereto) has executed
  an unconditional release or consent and (ii) each unconditional release of a
  judgment lien has been recorded in the office of the Secretary of State and
  in the relevant county, Honeywell shall authorize a wire transfer to Turbodyne
  in the sum of US$1,300,000 (one million three hundred thousand U.S. dollars),
  to the Bank Account.

 Provided, however, that if Turbodyne fails to use the funds
  from the January 26, 2004 wire transfer to make the promised payments to its
  creditors and lien holders set forth above and if Honeywell is ordered by a
  court or arbitration panel to make payment to one or more of Turbodyne’s
  creditors or lien holders (listed in Schedules A and B hereto), then
  any amount that Honeywell is ordered to pay to a Turbodyne creditor or lien
  holder (plus any other expenses, costs and legal fees that Honeywell incurs
  in connection with such payment to a Turbodyne creditor or lien holder) shall
  be deducted from amounts owed by Honeywell to Turbodyne under this paragraph
  of the Settlement Agreement. 

Pursuant to Paragraph 6 of the December 12, 2003 Binding Settlement
  Memorandum ("Memorandum") between the Parties, if on or before January 23, 2004,
  Turbodyne obtains an amendment to its license with APT that satisfies the terms
  of Paragraph 6 of the Memorandum and provides written proof thereof to Honeywell,
  then within one business day of receiving written proof that such amendment
  to the APT licenses was obtained and satisfied the terms of Paragraph 6 of the
  Memorandum, Honeywell shall authorize a wire transfer to Turbodyne in the sum
  of US$1,0000,000 (one million U.S. dollars) to the Bank Account.

                
  b.                Adjustments
  To Settlement Payment.

                                
  (1)                Honeywell
  may deduct from the settlement payment actual costs associated with prosecution
  and maintenance of the EDC Patents (defined below) incurred by it after December
  12, 2003, in an amount not to exceed US$5,000.00. Honeywell shall provide documentary
  support for such deduction.

                                
  (2)                Honeywell
  shall add US$100.00 to the settlement payment in consideration for Turbodyne's
  execution of various patent assignment and power of attorney forms related to
  the Assigned Intellectual Property Rights (defined below). Honeywell may apportion
  this consideration among the patent assignment and power of attorney forms as
  Honeywell deems appropriate.

                
  c.                No
  Charging Lien. Turbodyne acknowledges that, at Turbodyne’s and its
  counsel's instructions, the settlement funds are being paid by wire transfer
  to Berger Kahn, A Law Corporation, Client Trust Account. Turbodyne waives any
  charging liens or equitable claims to the settlement proceeds being paid in
  this manner in accordance with the terms of this Settlement Agreement.

 4.                Termination
  of Agreements. The parties agree that the JDA and LA, as amended, are
  terminated and superseded by this Settlement Agreement and that the parties
  shall have no further rights or obligations thereunder. 

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5.                Patent
  Rights.

                
  a.                Definitions

                                
  (1)                EDC
  Patents means those of the Patents which have all of their independent claims
  directed in particular to products or technology associated specifically with
  Electrically Driven Compressors (or "EDC") and not Electrically Assisted Turbochargers
  (or "EAT"). Electrically Driven Compressors are devices used to compress air
  for use in internal combustion engines and which include a radial compressor
  wheel attached to and powered by an electrically driven motor. Electrically
  Driven Compressors, unlike turbochargers, do not include a turbine. Electrically
  Assisted Turbochargers are turbochargers that include an electric motor that
  can be used to drive a compressor and/or turbine. The EDC Patents are those
  issued patents and pending patent applications listed in Schedule D-1,
  and all continuations, divisions, reissues, reexaminations and extensions of
  any of the foregoing patents and patent applications and all foreign counterparts
  to any of the foregoing patent applications and issued patents, and patent rights
  in invention records, provided that all of their independent claims are directed
  in particular to products or technology associated specifically with EDC and
  not EAT.

                                
  (2)                Assigned
  Intellectual Property Rights means all of the intellectual property, other
  than for EDC Patents, that may have been owned solely or jointly by Turbodyne
  as of June 30, 2001 or which otherwise relates back to work conducted in connection
  with the HON-TRBD Agreements, including the issued patents, pending patent applications,
  and patent rights for the inventions of the invention records listed in Schedule
  D-2, and all continuations, divisions, reissues, reexaminations and extensions
  of any of the foregoing patents and patent applications and all foreign counterparts
  to any of the foregoing patent applications, issued patents, and patent rights
  in invention records. Any continuation-in-part patent or patent application
  to the extent claiming an invention disclosed in an invention disclosure, issued
  patent, or patent application included in the Assigned Intellectual Property
  Rights shall be included within the Assigned Intellectual Property Rights.

                
  b.                Assignment
  of Rights to Honeywell. Effective as of January 23, 2004, to the extent
  that Turbodyne has not already done so, Turbodyne hereby assigns, sells, sets
  over, conveys, transfers and delivers to Honeywell, all right, title and interest
  of Turbodyne in, to and under the Assigned Intellectual Property Rights, subject
  to:

                                
  (1)                Turbodyne's
  license agreements with APT and IHI in the form attached hereto in Schedule
  C; and

                                
  (2)                A
  retained non-exclusive, non-transferable, license to such limited portion of
  Assigned Intellectual Property Rights, as may be necessary solely in order for
  Turbodyne to make or sell EDC products. The patents subject to this paragraph
  5.b.(2) are listed in Schedule D-3 attached hereto.

                
  c.                Assignment
  of Rights to Turbodyne. Effective as of January 23, 2004, to the extent
  that Honeywell has not already done so, Honeywell hereby assigns, sells, sets
  over, conveys, transfers and delivers to Turbodyne, all right, title and interest
  of Honeywell in, to and under the EDC Patents.

                
  d.                Documentation
  and Further Cooperation.

                                
  (1)                To
  Be Provided By Turbodyne. At and after the Effective Date, Turbodyne shall
  execute and deliver as reasonably necessary to Honeywell any files,

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 agreements, documentation, contact information, deeds, assignments,
  and recordings of assignment documents, and shall take, do and deliver any other
  actions and things reasonably necessary to perfect, confirm and enforce any
  and all of Honeywell's right, title and interest in, to and under any of the
  Assigned Intellectual Property Rights. Turbodyne further agrees, from and after
  the Effective Date, to execute or take reasonable steps to have executed (to
  the extent Turbodyne requires the cooperation of any third parties), all reasonably
  necessary, desirable and lawful documents, including oaths, declarations, assignments,
  affidavits, and powers of attorney in favor of Honeywell, as Honeywell or its
  legal representatives may from time-to-time present to Turbodyne in order to
  perfect title in, confirm, and enforce Assigned Intellectual Property Rights
  in the United States and countries foreign thereto; and Turbodyne further agrees
  to duly execute and deliver or take reasonable steps to have executed and delivered
  (to the extent Turbodyne requires the cooperation of any third parties) or otherwise
  provide, such reasonably necessary, desirable and lawful papers associated with
  any applications for U.S. or foreign patents in the Assigned Intellectual Property
  Rights, and/or for obtaining any reexamination, reissue or reissues of any patents
  in the Assigned Intellectual Property Rights as Honeywell shall hereafter require
  and prepare at its own expense. 

                 
                  
  (2)                
  To Be Provided By Honeywell. At and after the Effective Date, Honeywell
  shall execute and deliver as reasonably necessary to Turbodyne any files, agreements,
  documentation, contact information, deeds, assignments, and recordings of assignment
  documents, and shall take, do and deliver any other actions and things reasonably
  necessary to perfect, confirm and enforce any and all of Turbodyne's right,
  title and interest in, to and under the EDC Patents. Honeywell further agrees,
  from and after the Effective Date, to execute or take reasonable steps to have
  executed (to the extent Honeywell requires the cooperation of any third parties)
  all assignments and powers of attorney in favor of Turbodyne, as Turbodyne or
  its legal representatives may from time-to-time present to Honeywell in order
  to perfect title in, confirm, and enforce EDC Patents in the United States and
  countries foreign thereto, as Turbodyne shall hereafter require and prepare
  at its own expense. 

                 
                  
  (3)                
  The Parties acknowledge that reasonable efforts have been used by both Parties
  to identify, list, and properly categorize all Patents. In the event, however,
  it is discovered by Turbodyne or Honeywell that any intellectual property rights
  have been omitted from, erroneously listed in, or improperly categorized in
  Schedule D, Turbodyne or Honeywell shall (i) notify the other promptly
  in writing thereof, and (ii) work in good faith to exchange such information
  and documentation as needed to correct such mistake. 

                 
  e.                
  No License Rights. No license, either express or implied, is granted
  by either party to the other hereunder with respect to any patent or other intellectual
  property except as expressly stated in this article 5. 

                 
  f.                
  No Royalties. Neither party has any obligation to pay the other party
  any royalties, now or in the future, in connection with the rights described
  in this article 5 or under the HON-TRBD Agreements. 

                 
  g.                
  Enforcement of Licensed Intellectual Property Rights. Honeywell shall
  at all times have the right to take whatever steps it deems necessary or desirable
  to enforce the Assigned Intellectual Property Rights, including the filing and
  prosecution of patent litigation, and Turbodyne shall have such right with respect
  to the EDC Patents. Notwithstanding anything contained herein to the contrary,
  (i) Turbodyne shall not have the right to license any of the Assigned Intellectual
  Property Rights including those subject to paragraph 5.b(2), and (ii) Honeywell
  shall not have the right to license the EDC Patents. 


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  h.                
   Costs. Honeywell will have no obligation to pay any costs associated
  with prosecution, recording of documents, and maintenance of the EDC Patents
  incurred after December 12, 2003. Turbodyne will bear the responsibility for
  paying such costs.

                 
  i.                
  Discretion to Maintain. Honeywell may (but is not obligated to) offer
  to assign to Turbodyne any Assigned Intellectual Property Rights prior to abandoning
  them in exchange for payment from Turbodyne of any prosecution and maintenance
  costs that Honeywell incurred in connection therewith, and Turbodyne may (but
  is not obligated to) accept such assignment. Similarly, Turbodyne may (but is
  not obligated to) offer to assign to Honeywell any EDC Patents prior to abandoning
  them in exchange for payment from Honeywell of any prosecution and maintenance
  costs that Turbodyne incurred in connection therewith, and Honeywell may (but
  is not obligated to) accept such assignment.

 6.                
  Dismissal. With regard to the Arbitration and the Federal Litigation,
  the parties will take all steps that may be necessary to obtain a dismissal
  with prejudice of each proceeding, or if a proceeding is terminated and no longer
  pending, the parties will deem and agree that such proceeding was and is, in
  complete effect, resolved and dismissed with prejudice. If either party has
  filed a further demand for arbitration or any other legal proceedings against
  the other or against one or more of the other's affiliated companies, such party
  will immediately file a stipulation and order of dismissal with prejudice in
  any and all such proceedings.

 7.                 
  Release.

                
  a.                
  By Turbodyne. Subject to the terms and conditions of this Settlement
  Agreement, Turbodyne, for itself and its insurers, predecessors and successors
  in interest, assignees, nominees, present and future parents, subsidiaries,
  shareholders, partners, affiliates, directors, officers, agents, employees,
  attorneys, heirs, executors, administrators and assignees of all those persons
  and entities (all collectively referred to as the “Turbodyne Releasing
  Parties”), hereby releases and forever discharges Honeywell, its insurers,
  predecessors and successors in interest, assignees, nominees, present and future
  parents, subsidiaries, shareholders, partners, affiliates, directors, officers,
  agents, employees, attorneys, heirs, executors, administrators and assignees
  of all those persons and entities (all collectively referred to as the “Honeywell
  Released Parties”), from all claims, demands, obligations, actions, or
  causes of action, whether known or unknown, however denominated for any injury,
  liability, damage, or loss, whether known or unknown, arising directly or indirectly
  from any circumstances generally described in the Recitals and/or arising out
  of, based upon, or related to EAT or EDC technology or products, and/or which
  could have been asserted in the Arbitration or the Federal Litigation (collectively,
  the "Turbodyne Claims"). TURBODYNE EXPRESSLY WAIVES ANY AND ALL RIGHTS UNDER
  SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA, WHICH READS AS FOLLOWS:


   A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
    DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
    RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
    WITH THE DEBTOR.



 The parties intend for the Honeywell Released Parties that
  are not parties to this Settlement Agreement to be third-party beneficiaries
  of the release provided for by this article 7. The Turbodyne Releasing Parties
  hereby acknowledge full and final settlement in satisfaction of all claims,
  demands, actions, and causes of action of whatsoever kind or character, except
  as specifically defined herein, which they may have against the Honeywell

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Released Parties by reason of the above-mentioned matters.
  In making this release, it is understood and agreed that Turbodyne Releasing
  Parties rely wholly upon their own judgment, belief and knowledge and that no
  representations or statements regarding the above-mentioned matters or regarding
  any other matters made by the persons, firms or corporations who are hereby
  released or by any other person or persons representing them have influenced
  the Turbodyne Releasing Parties to any extent whatsoever in making this release.
  The Turbodyne Releasing Parties further state that the foregoing release has
  been read, understood and agreed to.

                
  b.                
  By Honeywell. Subject to the terms and conditions of this Settlement
  Agreement, Honeywell, for itself and its insurers, predecessors and successors
  in interest, assignees, nominees, present and future parents, subsidiaries,
  shareholders, partners, affiliates, directors, officers, agents, employees,
  attorneys, heirs, executors, administrators and assignees of all those persons
  and entities (all collectively referred to as the “Honeywell Releasing
  Parties”), hereby releases and forever discharges Turbodyne, its insurers,
  predecessors and successors in interest, assignees, nominees, present and future
  parents, subsidiaries, shareholders, partners, affiliates, directors, officers,
  agents, employees, attorneys, heirs, executors, administrators and assignees
  of all those persons and entities (all collectively referred to as the “Turbodyne
  Released Parties”), from all claims, demands, obligations, actions, or
  causes of action, whether known or unknown, however denominated for any injury,
  liability, damage, or loss, whether known or unknown, arising directly or indirectly
  from any circumstances generally described in the Recitals and/or arising out
  of, based upon, or related to EAT or EDC technology or products, and/or which
  could have been asserted in the Arbitration or the Federal Litigation (collectively,
  the "Honeywell Claims"). HONEYWELL EXPRESSLY WAIVES ANY AND ALL RIGHTS UNDER
  SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA, WHICH READS AS FOLLOWS:


   A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
    DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
    RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
    WITH THE DEBTOR.



 The parties intend for the Turbodyne Released Parties that
  are not parties to this Settlement Agreement to be third-party beneficiaries
  of the release provided for by this article 7. The Honeywell Releasing Parties
  hereby acknowledge full and final settlement in satisfaction of all claims,
  demands, actions, and causes of action of whatsoever kind or character, except
  as specifically defined herein, which they may have against the Turbodyne Released
  Parties by reason of the above-mentioned matters. In making this release, it
  is understood and agreed that Honeywell Releasing Parties rely wholly upon their
  own judgment, belief and knowledge and that no representations or statements
  regarding the above-mentioned matters or regarding any other matters made by
  the persons, firms or corporations who are hereby released or by any other person
  or persons representing them have influenced the Honeywell Releasing Parties
  to any extent whatsoever in making this release. The Honeywell Releasing Parties
  further state that the foregoing release has been read, understood and agreed
  to.

 8.                
   Indemnification; Third Party Claims.

                 
  a.                
  By Turbodyne. Turbodyne shall indemnify, defend and hold harmless the
  Honeywell Released Parties from and against any and all demands, claims, suits,
  causes of action, liability, damages, costs, expenses, settlements and judgments
  (including court costs and reasonable experts’ and attorneys’ fees)
  by or in favor of any third parties arising

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from or in connection with (i) any of the Turbodyne Claims
  or circumstances related to the Turbodyne Claims, (ii) any action or omission
  of Turbodyne relating to lien or credit holders, (iii) any claims related to
  Turbodyne's license agreements with IHI and APT, the compliance with which shall
  remain Turbodyne's responsibility, and (iv) the breach of any representation
  or obligation under this Settlement Agreement. Turbodyne further agrees and
  covenants that (i) if any third party asserts any claims in any way related
  to the subject matter of the Turbodyne Claims released by this Settlement Agreement
  against any of the Turbodyne Released Parties, Turbodyne will not cross-claim
  or otherwise assert any claims whatsoever against any of the Honeywell Released
  Parties, and (ii) Turbodyne will take all necessary actions to ensure that no
  other person within its direct or indirect control shall assert or commence
  any action, proceeding or claim of any kind in any court or agency or before
  any arbitral or other tribunal in respect of any of the Turbodyne Claims.

                
  b.                
  By Honeywell. Honeywell shall indemnify, defend and hold harmless the
  Turbodyne Released Parties from and against any and all demands, claims, suits,
  causes of action, liability, damages, costs, expenses, settlements and judgments
  (including court costs and reasonable experts’ and attorneys’ fees)
  by or in favor of any third parties arising from or in connection with (i) any
  of the Honeywell Claims or circumstances related to the Honeywell Claims, or
  (ii) the breach of any representation or obligation under this Settlement Agreement.

 9.                
  Covenants.

                 
  a.                
  By Turbodyne. Turbodyne hereby agrees never to institute, maintain, prosecute,
  or affirmatively assist in any way in any lawsuit, arbitration, or other proceeding
  against any of the Honeywell Released Parties based upon any of the Turbodyne
  Claims or the circumstances related thereto. Turbodyne further agrees never
  to institute, maintain, prosecute, or affirmatively assist in any way in any
  lawsuit, arbitration, or other proceeding against any of the Honeywell Released
  Parties under any of the Patents including the EDC Patents based upon the manufacture,
  use, sale, offer to sell, importation or distribution of EAT products by Honeywell
  or any of its affiliates.

  Honeywell. Honeywell hereby agrees never to institute, maintain,

                
  b.                
  By Honeywell. Honeywell hereby agrees never to institute, maintain, prosecute,
  or affirmatively assist in any way in any lawsuit, arbitration, or other proceeding
  against any of the Turbodyne Released Parties based upon any of the Honeywell
  Claims or the circumstances related thereto. Honeywell further agrees never
  to institute, maintain, prosecute, or affirmatively assist in any way in any
  lawsuit, arbitration, or other proceeding against any of the Turbodyne Released
  Parties under the EDC Patents or those of the Patents retained by Honeywell
  and licensed to Turbodyne in paragraph 5.b(2) based upon Turbodyne's manufacture,
  use, sale, offer to sell, importation or distribution of EDC products.



  10.                
  Applicability. This Settlement Agreement, including the releases
  in article 7, shall be binding on both parties and each of their successors
  in interest, assignees, and affiliates. This Settlement Agreement shall inure
  to the benefit of, and shall be binding upon, the assigns, successors in interest,
  personal representatives, executors, estate heirs, legatees, agents, and related
  entities of each of the parties hereto. Each party and those individuals signing
  on its behalf represent and warrant to the other party that it and he, respectively,
  have the power, authority and legal right to sign and perform this Settlement
  Agreement, and that this Settlement Agreement has been duly authorized by all
  necessary actions of its directors and officers and constitutes valid and binding
  obligations on each party in accordance with the terms of this Settlement Agreement.

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 11.                
  No Admission of Liability. Neither this Settlement Agreement,
  nor payment of the consideration reflected in this Settlement Agreement, nor
  any statements or communications made by the parties or their agents during
  the negotiations leading to this Settlement Agreement shall be considered admissions
  of liability by or on behalf of any of them. 

 12.                
  Advice of Counsel. This Settlement Agreement is executed
  without reliance on any representation by any persons concerning the nature
  or extent of damages or legal liability, and each of the undersigned has read
  and understood the contents of this release and signs the same of the undersigned’s
  own free will. Each party has secured the advice of counsel of its own choosing
  in order to determine the advisability of entering into this Settlement Agreement,
  and to explain the obligations, terms and conditions set forth herein and any
  legal ramifications resulting therefrom. 

 13.                
  Confidentiality. The parties agree that each shall
  maintain the terms of this Settlement Agreement in strict confidence and shall
  not publicize, comment upon or disclose the terms of this Settlement Agreement
  except for any disclosures required by law. In particular but without limitation,
  no disclosure shall be made of (i) the amount paid to settle this dispute, in
  either specific or approximate terms, or (ii) actions undertaken relative to
  the Products, unless such disclosure is required by law or is made to accountants,
  federal or state government agencies, or attorneys as necessary in the normal
  operation of the parties’ business. To the extent a party must make a public
  disclosure regarding this Settlement Agreement in order to comply with applicable
  law, that party will provide the other party with advance notice and opportunity
  to comment upon the proposed form of such disclosure, and the disclosing party
  will make every effort to adopt revisions reasonably requested by the other
  party. 

 14.                
  Entire Agreement. This Settlement Agreement constitutes the
  entire agreement of the parties and supersedes any prior written or oral agreements
  between them concerning the Turbodyne Claims, the Honeywell Claims, and/or EAT
  and EDC products and technology, with the exception of the IPPRA. In the event
  of a conflict between the IPPRA and this Settlement Agreement, the Settlement
  Agreement controls. This Settlement Agreement may only be waived, modified,
  or amended by the written agreement of all parties to this Settlement Agreement.


 15.                
  Applicable Law. This Settlement Agreement shall in all respects
  be interpreted, construed and governed by and in accordance with the laws of
  the State of California, disregarding any conflicts of law provision, which
  may require the application of the law of another jurisdiction. 

 16.                
  Interpretation. No provision of this Settlement Agreement
  shall be interpreted by, for, or against any party because that party’s
  legal representative drafted (or participated in the drafting of) the provision.



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 17.                
  Dispute Resolution. In the event of any dispute, claim, question,
  controversy or disagreement arising from or relating to this Settlement Agreement
  or the transactions contemplated thereby, or the breach, termination, enforcement,
  interpretation or validity thereof, including the determination of the scope
  or applicability of this Dispute Resolution provision ("Dispute"), the Parties
  shall use their best efforts to settle the Dispute. If the parties do not reach
  a solution through negotiation or mediation, then the Dispute shall be determined
  by the state or federal court system in Los Angeles, California. Any actions
  brought to enforce the provisions of this Agreement shall be brought only in
  Los Angeles, California, and both parties hereto agree that they are subject
  to jurisdiction in California and that such location is a convenient forum for
  dispute resolution. 

 18.                
  Attorneys’ Fees. Each party shall bear its own attorneys’
  fees and costs incurred with respect to the Turbodyne Claims, Honeywell Claims,
  and this Settlement Agreement. In the event any litigation is commenced relating
  in any respect to this Settlement Agreement, including any circumstance in which
  this Settlement Agreement is asserted as a defense, the prevailing party in
  such litigation shall be entitled to recover its reasonable attorneys’
  fees and costs from the non-prevailing party. 

 19.                
  Non-waiver of Rights. Failure of either party hereto
  to enforce any of the provisions of this Settlement Agreement or any rights
  with respect thereto or failure to exercise any election provided for herein
  shall in no way be a waiver of such provisions, rights or elections or in any
  way affect the validity of this Agreement. The failure of either party to exercise
  any of said provisions, rights or elections shall not preclude or prejudice
  such party from later enforcing or exercising the same or any other provisions,
  rights or elections which it may have under this Settlement Agreement. 

 20.                
  Invalid Provisions. If any terms, provision, covenant,
  or condition of this Settlement Agreement is held by a court of competent jurisdiction
  to be invalid, void, or unenforceable, the remainder of the provisions shall
  remain in full force and effect and shall in no way be affected, impaired or
  invalidated. 

 21.                
  Execution. This Settlement Agreement may be executed
  in one or more counterparts, each of which will be deemed an original once all
  parties have signed one of the counterparts. 


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IN WITNESS WHEREOF, the parties hereto subscribe their names in recognition of their agreement to and acceptance of all terms and conditions hereof.


	Turbodyne Technologies, Inc.	 	Honeywell International Inc.
	 	 	 	 	 
	 	 	 	 	 
	/s/
      Gene O'Hagen	 	/s/
      Robert J. Gillette
	 	 	 	 	 
	Name:  	Gene
      O'Hagan	 	Name: 	Robert
      J. Gillette
	 	 	 	 	 
	 	 	 	 	 
	Title:   	Director	 	Title:   	President
      & CEO,
	 	 	 	 	Honeywell
      Transportation &
	Date:  	 January  23,
      2004	 	 	Power
      Systems
	 	 	 	 	 
	 	 	 	Date: 	January
      23, 2004
	/s/
      Andrew Martyn-Smith	 	 	 
	 	 	 	 	 
	Name:	
      Andrew Martyn-Smith	 	 	 
	 	 	 	 	 
	Title: 	Director	 	 	 
	 	 	 	 	 
	Date:	
      January 23, 2004	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	Turbodyne
      Systems, Inc.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	/s/
      Gene O'Hagan 	 	 	 
	 	 	 	 	 
	Name: 	Gene
      O'Hagan	 	 	 
	 	 	 	 	 
	Title: 	Director	 	 	 
	 	 	 	 	 
	Date: 	January
      23, 2004 	 	 	 



- 12 -






 

	/s/
      Andrew Martyn-Smith 	 	 	 
	 	 	 	 	 
	Name: 	
      Andrew Martyn-Smith 	 	 	 
	 	 	 	 	 
	Title: 	Director	 	 	 
	 	 	 	 	 
	Date: 	January
      23, 2004 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 Counsel for Turbodyne 	 	Counsel for Honeywell
	 	 	 	 	 
	/s/
      Steven H. Gentry 	 	/s/
      Alexander F. MacKinnon 
	 	 	 	 	 
	Name:	
      Steven H. Gentry 	 	Name: 	Alexander
      F. MacKinnon
	 	 	 	 	 
	Firm:	
      Berger Kahn	 	Firm:	Kirkland
      & Ellis LLP
	 	 	 	 	 
	Date:	
      January     , 2004 	 	Date:	January
      23, 2004 



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