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EXHIBIT  10.1
 
SAVE THE WORLD AIR, INC.

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (“Agreement”) is made as of November 26,
2009, by and between Save The World Air, Inc., a company organized under the
laws of the State of Nevada (the “Company”), and the purchasers who execute the
Purchaser Signature Page (as hereinafter defined) hereto (each, a “Purchaser”).

R E C I T A L S

A.           The Company desires to obtain funds from each Purchaser in order to
provide working capital to fund the Company’s general working capital needs.
 
B.   In order to obtain such funds, the Company is borrowing and in exchange
therefore issuing Units (the “Units”), each Unit comprised of (i) an unsecured
$25,000 principal amount of 7% Convertible Promissory Note, initially
convertible at $.25 per share (as may be adjusted from time to time, the
“Conversion Price”) a form of which is annexed hereto as Exhibit A, (each a
“Note,”  and collectively, the “Notes”), and (ii) Common Stock Purchase
Warrants, initially exercisable into at the $.30 per share, a form of which is
annexed hereto as Exhibit B (the “Warrants”).  The Units being acquired herein
are being acquired directly from the Company without the benefit of an Escrow
Agent or any Placement Agent and there is no minimum required amount to be
raised in order for the Company to conduct a Closing and utilize the Purchaser’s
funds for a subscription.  The Purchaser understands that the Company has raised
over $300,000 of Units on its own, as well as $75,000 of Notes through a
placement agent (which agency has since completed and terminated) and, that
the  Securities sold are substantially similar to the Units.  The Company is
further offering to the Purchaser and potential additional purchasers,
additional Units through January 15, 2010.  The common stock, par value $.001
per share of the Company (“Common Stock”) into which the Notes are convertible
are sometimes referred to herein as the Conversion Shares, and the shares of
Common Stock into which the Warrants are exercisable are sometimes referred to
herein as the “Warrant Shares”.  The Notes, Warrants, Conversion Shares and
Warrant Shares are sometimes referred to herein as the “Securities”.
 
C.   Purchasers understand that there is a great deal or risk, illiquidity and
uncertainty in the Purchase of the Units herein and that no assurance can be
made that the Company will complete its business plans or, if completed, that it
will be successful in doing so or that the Company will be successful with its
other offerings.  Purchasers also understand that the Company is dependant on
its ability to raise substantial additional capital and that additional
securities such as any one or more of the Securities, or securities at different
or senior or more favorable terms, may be sold.
 
D.   The Purchasers are investing herein on an irrevocable basis, without the
benefit of an escrow agent or escrow account and without the benefit of any
minimum closing amount.  All funds reflecting subscriptions are being deposited
immediately directly with the Company in accordance with the wire instructions
annexed hereto as Exhibit C.  All funds deposited will become immediately
available for use by the Company or may be attacked or attached by creditors
upon deposit regardless of whether a closing has occurred or the minimum has
been raised.   The Purchaser’s acknowledge and agree that their subscriptions
are irrevocable and binding commitments on the part of the Purchaser and that
once their funds have been tendered with appropriate subscription documents and
the minimum offering amount has been raised in accepted funds and subscriptions,
the Company may conduct a Closing without any consent of or notice to
Purchasers.   The Company may reject any subscriptions in whole or in part for
any reason or for no reason but shall return funds to the extent not closed upon
prior to January 15, 2010.   This offering shall be terminated at January 15,
2010 unless earlier terminated by the Company.
 
 
 

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AGREEMENT

NOW THEREFORE, based on the mutual premises and consideration of the parties, it
is agreed as follows:
 
1.    PURCHASE AND SALE OF NOTES.
 
1.1   Purchase and Sale.  In reliance upon the representations and warranties of
the Company and each Purchaser contained herein and subject to the terms and
conditions set forth herein, at Closing (as hereinafter defined), each Purchaser
hereby agrees to purchase, and the Company shall sell and issue to each
Purchaser, the Units comprised of Notes and Warrants as set forth on the
signature page annexed to the end of this Agreement (the “Purchaser Signature
Page”) at a purchase price equal to the principal amount of Notes being acquired
(the “Purchase Price”) as set forth in Section 1.2 below.  After the initial
minimum amount of Units are sold at a Closing in this offering, the Company may
accept additional Purchasers in Closings from time to time without notice to or
consent of any investor, until the maximum offering amount (inclusive of the
overallotment option) is sold hereby.
 
1.2   Notes and Warrants.  At Closing, the Company will issue and deliver to the
Purchaser as listed on the Purchaser Signature Page hereto, the (i) Notes for
the principal amount of Notes subscribed for and, (ii)   Warrants to acquire
such number  of shares of common stock of the Company (the “Common Stock”) as
equals the principal amount of Notes acquired and accepted divided by the
initial Conversion Price of $.25 per share (the “Warrant Shares”), and
exercisable at $.30 per share (the “Exercise Price”) commencing six months after
the issuance date at any time prior to the three year anniversary of the first
Closing of this offering.  The Notes and Warrants comprising the Units are
substantially similar to those Notes and Warrants offered and sold to other
Purchasers in previously reported offerings of the Company.
 
2.    CLOSING.
 
2.1   Date and Time.
 
(a)           The sale of Notes and Warrants will take place at the discretion
of the Company, upon receipt of cleared funds represented by subscriptions
accepted by the Company (the “Closing”) subject to the satisfaction of all the
parties hereto of their obligations herein.  There is no minimum offering amount
to the number of Units that may be sold prior to a closing of the sale of the
Units hereby.  The Purchaser(s) shall each submit an executed copy of this
Agreement to the Company along with the Purchase Price in advance of Closing,
which shall be by the Company at the account set forth in Exhibit C, which
account is operated by the Company and is not a segregated account.  The Closing
shall take place from time to time at the discretion of the Company at such
place as the Company shall agree in writing, on or before January 15, 2010
unless otherwise terminated early by the Company or extended by it for up to 30
days (the “Termination Date”).   In the event that the Company desires to extend
the offering period beyond January 15, 2010, consent of each Purchaser shall be
required.
 
(b)   There is no minimum offering amount in this private offering and
purchasers will not have an opportunity to approve of a Closing or request
refund of any moneys held in escrow until the final closing has occurred or
offering period has terminated.  In the event that funds are returned if a
Closing does not occur on such Purchaser’s investment, no interest shall be paid
and only the net amount received by the Company need by repaid.  Purchaser’s
acknowledge and agree that their subscriptions are irrevocable and binding
commitments on the part of the Purchaser and that once their funds have been
tendered to escrow with the appropriate subscription documents and the minimum
offering amount has been raised in accepted funds and subscriptions, the Company
may conduct a closing and utilize funds therefore.   The Company may reject any
subscriptions in whole or in part for any reason or for no reason, or, retains
the right to hold the same in escrow for acceptance or rejection at a future
closing, until termination of the offering, at which time, any unused
subscription funds shall be returned to Purchaser.
 
 
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3.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
 
As a material inducement to each Purchaser to enter into this Agreement and to
purchase the Units, the Company represents and warrants that the following
statements are true and correct in all material respects as of the date hereof
and will be true and correct in all material respects at Closing, except as
expressly qualified or modified herein or as specifically updated in the
Company’s recently filed Current Reports on Form 8-K, or Quarterly Report on
Form10-Q for the period ended September 30, 2009.
 
3.1   Organization and Qualification.  The Company is duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
state of Nevada, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.  The
Company is not in any violation of any of the provisions of its certificate of
incorporation, bylaws or other organizational or charter documents (the “Company
Documents”).
 
3.2   Authorization; Enforcement.  The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated
under this Agreement, the Notes and along with the Warrants (collectively as may
be amended or supplemented through each Closing, the “Transaction Documents”)
herein and otherwise to carry out its obligations hereunder.  The execution and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company and no further action is
required by the Company in connection therewith.  This Agreement and the other
Transaction Documents have been duly executed by the Company and, when delivered
in accordance with the terms hereof or thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies, or (ii) laws relating to the availability of specific performance,
injunctive relief or other equitable principles of general application.
 
3.3   SEC Reports; Financial Statements.  The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials, as finally amended being
collectively referred to herein as the "SEC Reports") on a timely basis or has
timely filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their respective
dates, the SEC Reports, as amended, complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent that such SEC Reports may
have been subsequently amended or supplemented to correct such misstatement or
omission or to correct information relating to the Company’s internal
controls.  The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing.  Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
 
 
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3.4   Certain Registration Matters. Assuming the accuracy of each Purchaser’s
representations and warranties, no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the
Purchaser under this Agreement.
 
3.5   Capitalization.  The Company is authorized to issue 200,000,000 shares of
Common Stock, of which, prior to the date of this Agreement, there are
65,355,858 shares issued and outstanding, with an additional 14,947,583 shares
currently underlying warrants, options and convertible notes or other
securities, in addition to other shares and warrants as a result of consummation
of the recent offerings of Units.  There are no shares of preferred stock or
other securities or convertible securities.  All outstanding shares of the
company’s capital stock have been duly authorized and validly issued, and are
fully paid and non-assessable, and are free of any preemptive rights.  The
Company has not entered into any agreement, or granted any right to any party,
that results or would result in, the Company’s obligation to redeem or
repurchase any securities or issue any dividends.  The shares issuable upon
conversion of the Notes and upon exercise of the Warrants are, duly authorized
and reserved for issuance and, upon issuance upon due conversion of the Notes or
due exercise of the Warrants, will be deemed validly issued and fully paid.
 
3.6   Securities Law Compliance.  Assuming the accuracy of the representations
and warranties of each Purchaser set forth in this Agreement and the
Questionnaire, the offer, issue, sale and delivery of the Notes and Warrants
will constitute an exempted transaction under the Securities Act of 1933, as
amended and now in effect (the “Securities Act”), and registration of the Notes,
Warrants, or the issuance of the Conversion Shares (upon conversion of the Note)
or Warrant Shares (upon due exercise thereof), under the Securities Act is not
required.  The Company shall make such filings as may be necessary to comply
with the Federal securities laws and the “blue sky” laws of any state or other
jurisdictions where filings must be made, which filings will be made in a timely
manner.
 
3.7   Tax Matters.  The Company has timely prepared and filed all tax returns
required to have been filed by the Company with all appropriate governmental
agencies and timely paid all taxes shown thereon or otherwise owed by it.  The
charges, accruals and reserves on the books of the Company in respect of taxes
for all fiscal periods are adequate in all material respects, and there are no
material unpaid assessments against the Company nor, to the Company’s Knowledge,
any basis for the assessment of any additional taxes, penalties or interest for
any fiscal period or audits by any federal, state or local taxing authority
except for any assessment which is not material to the Company, taken as a
whole.  All taxes and other assessments and levies that the Company is required
to withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due.  For the
purposes of this agreement, “Company’s Knowledge” means the actual knowledge of
the executive officers (as defined in Rule 405 under the Securities Act) of the
Company, after due inquiry.
 
3.8   Title to Properties. The Company has good and marketable title to all real
properties and all other properties and assets owned by it (if any), in each
case free from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or currently planned to
be made thereof by them; the Company holds any leased real or personal property
under valid and enforceable leases with no exceptions that would materially
interfere with the use made or currently planned to be made thereof by them.
 
3.9   Litigation.  There are no pending actions, suits or proceedings against or
affecting the Company, its subsidiaries or any of its or their properties; and
to the Company’s Knowledge, no such actions, suits or proceedings are threatened
or contemplated.
 
 
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3.10   No Directed Selling Efforts or General Solicitation.  Neither the
Company, nor any Person acting on its or their behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
 
3.11   No Integrated Offering.  Neither the Company nor any of its Affiliates,
nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any Company security or solicited any offers to buy any
security, under circumstances that would adversely affect reliance by the
Company on Section 4(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
Securities Act.  For purposes of this Agreement, “Affiliate” means, with respect
to any Person, any other Person which directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with, such
Person.
 
3.12   Questionable Payments.   Neither the Company nor, to the Company’s
Knowledge, any of their respective directors, executive officers, employees, or
other Persons acting at the direction of the Company or any subsidiary, has on
behalf of the Company or any subsidiary or in connection with their respective
businesses: (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payments to any governmental officials or
employees from corporate funds; (iii) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (iv) made any false or
fictitious entries on the books and records of the Company or any subsidiary; or
(v) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
 
3.13   Transactions with Affiliates.  None of the officers or directors of the
Company is presently a party to any transaction with the Company or any
subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company’s Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
 
3.14   Disclosures.  The written materials delivered to the Purchasers in
connection with the transactions contemplated by the Transaction Documents do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.

4.    REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER.

Each Purchaser hereby represents, warrants and covenants with the Company as
follows.  For avoidance of doubt, these warranties and representations are made
to Purchasers:
 
4.1   Legal Power.  Each Purchaser has the requisite individual, corporate,
partnership, limited liability company, trust, or fiduciary power, as
appropriate, and is authorized, if such Purchaser is a corporation, partnership,
limited liability company, or trust, to enter into this Agreement, to purchase
the Units hereunder, and to carry out and perform its obligations under the
terms of the Transaction Documents to which it is a party.
 
4.2   Due Execution.  This Agreement and the other Transaction Documents have
been duly authorized, if such Purchaser is a corporation, partnership, limited
liability company, trust or fiduciary, executed and delivered by such Purchaser,
and, upon due execution and delivery by the Company, this Agreement and such
other Transaction Documents will be a valid and binding agreement of such
Purchaser.
 
 
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4.3   Access to Information.  Purchaser has thoroughly reviewed this Agreement
including, without limitation, Section 3 which discloses certain material
information about the Company and Section 6.  Each Purchaser represents that
such Purchaser has been given full and complete access to the Company and to all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Notes and Warrants and the
issuance of Conversion Shares and/or Warrant Shares upon conversion or exercise
thereof, which have been requested by Purchaser or its advisors.  Each Purchaser
represents that such Purchaser has been afforded the opportunity to ask
questions of, and has inquired with, the officers of the Company regarding its
business prospects and the Notes, all as such Purchaser or such Purchaser’s
qualified representative have found necessary to make an informed investment
decision to purchase the Units.  Neither such inquiries nor any other due
diligence investigation conducted by Purchaser or any of its advisors or
representatives shall modify, amend or affect purchaser’s right to rely on the
Company’s representations and warranties contained herein.  The Purchaser
understands that an investment in the Units involves a significant degree of
risk and illiquidity.  The Purchaser understands further that the Conversion
Shares and Warrant Shares when issued will also be restricted securities, and
may only be re-sold pursuant to an exemption from the registration requirements
of the Securities Act that may or may not be available at such time, and, that
even if the Company is successful and succeeds with its business plan, no
assurance can be made that the securities of the Company will be liquid or will
increase in market price.
 
4.4   Restricted Securities.
 
4.4.1    Each Purchaser has been advised that none of the Notes,
Warrants,  Conversion Shares or Warrant Shares (collectively, the “Securities”)
have been registered under the Securities Act or any other applicable securities
laws and that Securities are being offered and sold pursuant to Section 4(2) of
the Securities Act and/or Rule 506 of Regulation D thereunder or such other
exemption as may be available from the Securities Act registration requirements
as may be available from time to time, and that the Company’s reliance upon
Section 4(2) and/or Rule 506 of Regulation D is predicated in part on such
Purchaser’s representations as contained herein.  Each Purchaser acknowledges
that the Notes and Warrants, and upon conversion or exercise thereof, the
Conversion Shares and the Warrant Shares when issued, will be issued as
“restricted securities” as defined by Rule 144 promulgated pursuant to the
Securities Act.  None of the Securities may be resold in the absence of an
effective registration thereof under the Securities Act and applicable state
securities laws unless, in the opinion of the Company’s counsel, an applicable
exemption from registration is available.
 
4.4.2    Each Purchaser represents that such Purchaser is acquiring the
Securities for such Purchaser’s own account, and not as nominee or agent, for
investment purposes only and not with a view to, or for sale in connection with,
a distribution, as that term is used in Section 2(11) of the Securities Act, in
a manner which would require registration under the Securities Act or any state
securities laws.
 
4.4.3    Each Purchaser understands and acknowledges that the Notes and
Warrants, and if and when issued, the Conversion Shares will bear substantially
the following legend:

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
 
 
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4.4.4    Each Purchaser acknowledges that an investment in any of the Securities
are not liquid and are transferable only under limited conditions.  Each
Purchaser acknowledges that such securities must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available.  Each Purchaser is aware of the provisions of
Rule 144 promulgated under the Securities Act, which permits limited resale of
restricted securities subject to the satisfaction of certain conditions and that
such Rule is not now available and, in the future, may not become available for
resale of any of the Notes or Conversion Shares.
 
4.4.5    Each Purchaser is an “accredited investor” as defined under Rule 501(a)
of Regulation D of the Securities Act (an “Accredited Investor”).
 
4.4.6    The representations made by each Purchaser on the Purchaser Signature
Page and in the questionnaire immediately preceding the same (the
“Questionnaire”) are true and correct and do not omit any material information.

4.5   Purchaser Sophistication and Ability to Bear Risk of Loss.  Each Purchaser
acknowledges that it is able to protect its interests in connection with the
acquisition of the Notes and Warrants and other Securities and can bear the
economic risk of investment in such Securities without producing a material
adverse change in such Purchaser’s financial condition.  Each Purchaser, either
alone or with such Purchaser’s representative(s), otherwise has such knowledge
and experience in financial or business matters that such Purchaser is capable
of evaluating the merits and risks of the investment in the Notes.
 
4.6   Preexisting Relationship.  Each Purchaser has a preexisting personal or
business relationship with the Company, one or more of its officers, directors,
or controlling persons.
 
4.7   Purchases by Groups.  Each Purchaser represents, warrants and covenants
that it is not acquiring the Securities as part of a group within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
 
4.8   Placement Agent Review.  Each Purchaser acknowledges that placement agent
or representative of the purchasers has  independently verified the accuracy,
completeness, materiality or otherwise, of any information, representation or
warranty contained in this Purchase Agreement or any offering documents
provided, that such placement agent related entities and their principals shall
have no liability for any representation (express or implied) contained in, or
for any omissions from, the Purchase Agreement or any offering documents
provided or any other written or oral communications transmitted to the
recipient in the course of his or her evaluation of the investment, and that it
is understood that each prospective investor will make an independent
investigation and analysis of a potential investment in the Company and will be
relying upon same in making any such investment.
           

5.    COVENANTS OF THE COMPANY.
 
5.1   Use of Proceeds.  The Company intends to employ the net proceeds from the
purchase and sale of the Units (after legal, blue-sky, and related fees) for
general working capital purposes and research and development only (inclusive or
repayment of payables incurred in the ordinary course of business).
 
5.2   Best Efforts.  The parties shall use their best efforts to satisfy timely
each of the conditions described herein as applicable to them.
 
5.3   Form D; Blue Sky Laws.  The Company agrees to file a Form D with respect
to the Notes and Warrants as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing.
 
5.4   Financial Information.  For as long as the Notes are outstanding, the
Company agrees to remain current with the filings of its SEC Reports.
 
5.5   Reservation of Shares.  The Company shall, as a condition to any merger or
business combination (and in addition to other restrictions that may arise),
require the provisions of this Agreement and the Notes and Warrants (including
issuance of shares upon conversion or exercise thereof) to be assumed by the
surviving parent company.
 
5.6   Covenants Relating to Promissory Note.  For so long as any principal or
interest is outstanding on the Notes the Company shall not, without consent of
holders of a majority of the outstanding principal amount of Notes that will be
outstanding immediately after the consummation of taking such action:
 
5.6.1    effect a merger or consolidation, share exchange, asset purchase or
similar transaction resulting in a Change of Control (as hereinafter defined)
with an entity without causing the assumption of the obligations herein and
under the Notes and Warrants by such surviving entity.  The term “Change of
Control” shall mean any merger or consolidation, business transaction or similar
transaction in which securities possessing more then fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, whether or not the Company or
a subsidiary is the surviving corporation or other transaction wherein the
Company becomes a material or controlling stockholder of any other
corporation.  Notwithstanding the foregoing, the Company may raise capital in
the form of debt, convertible debt or equity financings;
 
5.6.2    sell, transfer or otherwise dispose of more than 50% of the
consolidated assets of the Company (computed either on the basis of book value,
as determined in accordance with generally accepted accounting principles
consistently applied, or fair market value) in any transaction or series of
related transactions outside of the ordinary course of the Company’s business
consistent with past practice;
 
5.6.3    sell or transfer in any transaction or series of related transactions,
any of the Company’s assets to any person or entity that is an Affiliate of the
Company, other then a sale or transfer in the ordinary course of business or
such assets as are immaterial to the business purpose of the Company;
 
5.6.4    declare or pay any distribution or dividend, in cash or otherwise on
any of the Shares of the Company, or redeem, purchase or otherwise acquire any
of its Shares now or hereafter outstanding;
 
 
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provided, however, that the Company may take any of the foregoing actions
without the consent of the Purchasers in connection with, if contemporaneous
with the consummation of such action, the Notes are converted in accordance with
their terms, and Section 5.5 above is complied with.

5.7   Conversion of Notes.
 
5.7.1    Upon the conversion of a Note or part thereof, the Company shall, at
its own cost and expense, take all commercially reasonable action, including
obtaining and delivering, an opinion of counsel to assure that the Company's
transfer agent shall issue stock certificates in the name of Purchaser (or its
permitted nominee) or such other persons as designated by Purchaser and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion.  The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the certificates
representing such shares shall contain no legend other than the usual Securities
Act restriction from transfer legend.
 
5.7.2    A Purchaser will give notice of its decision to exercise its right to
convert the Note, interest, or part thereof by telecopying, or otherwise
delivering a completed Notice of Conversion (a form of which is annexed as
“Exhibit A” to the Note) to the Company via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of this Agreement.  Such Purchaser will not
be required to surrender the Note until the Note has been fully converted or
satisfied.  Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof by 6 PM Eastern Time (“ET”) (or
if received by the Company after 6 PM ET or at any time or a non-business day
then the next business day) shall be deemed a “Conversion Date.”  The Company
will itself or cause the Company’s transfer agent to transmit the Company's
Common Stock certificates representing the Shares issuable upon conversion of
the Note to such Purchaser via express courier for receipt by such Purchaser
within ten (10) business days after receipt by the Company of the Notice of
Conversion (such seventh day being the "Delivery Date").  In the event the
Conversion Shares are electronically transferable, then delivery of the Shares
must be made by electronic transfer provided request for such electronic
transfer has been made by the Purchaser.   A Note representing the balance of
the Note not so converted will be provided by the Company to such Purchaser if
requested by Purchaser, provided such Purchaser delivers the original Note to
the Company.  In the event that a Purchaser elects not to surrender a Note for
reissuance upon partial payment or conversion of a Note, such Purchaser hereby
indemnifies the Company against any and all loss or damage attributable to a
third-party claim in an amount in excess of the actual amount then due under the
Note.
 
5.7.3   Delivery of Shares.  In lieu of delivering physical certificates
representing the Unlegended Shares, upon request of a Purchaser, so long as the
certificates therefore do not bear a legend and the Purchaser is not obligated
to return such certificate for the placement of a legend thereon, the Company
will undertake commercially reasonable efforts cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Purchaser’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates in such
DWAC system.  Such delivery must be made on or before the Unlegended Shares
Delivery Date.
 
5.8.   Exchange of Notes for New Securities Issued in Subsequent Offering. In
the event the Company conducts any subsequent financings (each, a “Follow On
Offering”) of any kind other than an offering of Units or securities
substantially similar hereto as is currently being offered by the Company
through one or more placement agents and other than any Exempted Issuances (as
hereinafter defined), the Notes may, at the discretion of each holder
thereof,  be exchanged in whole or in part to the extent of outstanding
principal and/or interest in such Note, into the securities offered in the
Follow On Offering, by applying and exchanging the outstanding principal and
interest of such Notes towards the purchase price of the securities offered in
such Follow On Offering, at the price offered for such units or securities to
other investors generally.  In lieu of offering cash, such Note holder shall
tender the Note with the duly executed subscription documents provided to all
investors in such Follow On Offering, and a notice indicating the dollar amount
of principal and interest being applied, and the Company shall, at closing of
such Follow On Offering, issue to such holder any securities acquired by such
holder in such offering, and a Note certificate reflecting the remaining
principal and interest owed, if any.  In the event that the holder of the Notes
elects not to so convert, such holder may do so in whole or in part from time to
time, until the Note is either repaid or fully exchanged for securities issued
in Follow On Offerings.   Nothing herein shall be deemed to prohibit any early
repayment of the Notes without penalty.
 
 
8

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5.9   No pre-emptive Rights.  Holders of Notes and Warrants shall not have
pre-emptive or other rights of a shareholders, notwithstanding that other
investors or prospective investors may receive the benefit of such rights.
 
5.10   Third Party Beneficiaries. There are no third party beneficiaries to the
warranties or covenants made by the Company in this agreement.

6.    CONDITIONS.
 
6.1   Conditions Precedent to the Obligation of the Company to Close and to Sell
the Notes.  The obligation hereunder of the Company to close and issue and sell
the Units to the Purchasers at a Closing is subject to the satisfaction or
waiver, at or before such Closing of the conditions set forth below.  These
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion.
 
6.1.1   Accuracy of the Purchasers’ Representations and Warranties.  The
representations and warranties of each Purchaser herein and in the Questionnaire
attached hereto shall be true and correct in all material respects as of the
date when made and as of such Closing as though made at that time, except for
representations and warranties that are expressly made as of a particular date,
which shall be true and correct in all material respects as of such date.
 
6.1.2   Performance by the Purchasers.  Each Purchaser shall have performed,
satisfied, and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to such Closing.
 
6.1.3   No Injunction.  No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
 
6.1.4   Delivery of Purchase Price.  The Purchase Price for the Units shall have
been delivered to the Company on or before such Closing.
 
6.1.5   Delivery of Transaction Documents.  The Transaction Documents shall have
been duly executed and delivered by the Purchasers to the Company.

6.2   Conditions Precedent to the Obligation of the Purchasers to Close and to
Purchase the Notes.  The obligation hereunder of the Purchasers to purchase the
Units and consummate the transactions contemplated by this Agreement is subject
to the satisfaction or waiver, at or before such Closing, of each of the
conditions set forth below.  These conditions are for the Purchasers’ sole
benefit and may be waived by the Purchasers at any time in their sole
discretion.
 
 
9

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6.2.1   Accuracy of the Company’s Representations and Warranties.  Each of the
representations and warranties of the Company in this Agreement and the other
Transaction Documents shall be true and correct in all material respects as of
such Closing, except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such date.
 
6.2.2   Performance by the Company.  The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to such Closing.
 
6.2.3   No Injunction.  No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
 
6.2.4   No Proceedings or Litigation.  No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been initiated, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
 
6.2.5   Notes and Shares.  At the Closing, the Company shall have delivered to
the Purchasers the Notes in such denominations as each Purchaser may request.
 
6.2.6   Closing Date.  In the event that no Closing occurs by the Termination
Date, then the Company shall return to each Purchaser the net amount of all of
the funds for subscription amounts of such Purchaser without interest or set
off, other than any check or wire or similar fees.

7.    PLACEMENT AGENT/LEGAL FEES.
 
7.1           Placement Agent’s Commission.   The Company and each Purchaser
represent that there are no other parties entitled to receive fees, commissions,
or similar payments in connection with the offering described in this Agreement
other than legal, accounting, blue sky filing, printing or similar offering
expenses.  The parties also agree and acknowledge hereby that such fees shall
not be deemed as interest or fees relating to the Note.
 
7.2   Legal Fees.   The Purchasers and the Company shall each bear their own
legal fees in connection with this Agreement.

8.    MISCELLANEOUS.
 
8.1   Indemnification.  Each Purchaser agrees to defend, indemnify and hold the
Company harmless against any liability, costs or expenses arising as a result of
any dissemination of any of the Shares by such Purchaser in violation of the
Securities Act or applicable state or Cayman securities law.
 
 
10

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8.2   Governing Law - Waiver of Stay, Extension or Usury Laws.  This Agreement
shall be governed by and construed under the laws of the State of New York.  The
Company represents and warrants that it deems the sale of the Units hereby as an
Investment and does not consider the sale of the Units together with the payment
of all fees and expenses in connection herewith to be usurious under the usury
laws of the State of New York (“Applicable Law”).  If, from any circumstances
whatsoever, interest (or any original issue discount that would be determined to
be interest) would otherwise be payable to any holder of the Notes in excess of
the maximum amount permissible under Applicable Law, the interest payable to
such holder shall be reduced to the maximum amount permissible under Applicable
Law, and if from any circumstances such holder shall ever receive anything
deemed interest by the Applicable Law in excess of the maximum amount
permissible under the Applicable Law, an amount equal to the excessive interest
shall be applied to the reduction of the principal hereof and not to the payment
of interest, or if such excessive amount of interest exceeds the unpaid
principal balance of principal hereof, such excess shall be refunded to the
Company as applicable.  All interest paid or agreed to be paid to the holders of
the Notes shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread throughout full period (including any renewal or
extension) until payment in full of the principal so that the interest hereon
for such full period shall not exceed the maximum amount permissible under the
Applicable Law.
 
8.3   Successors and Assigns.  Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
 
8.4   Entire Agreement.  This Agreement and the Exhibits hereto and thereto, and
the other documents delivered pursuant hereto and thereto, constitute the full
and entire understanding and agreement among the parties with regard to the
subjects hereof and no party shall be liable or bound to any other party in any
manner by any representations, warranties, covenants, or agreements except as
specifically set forth herein or therein.  Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
 
8.5   Severability.  In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, it shall to the extent practicable, be modified so as
to make it valid, legal and enforceable and to retain as nearly as practicable
the intent of the parties, and the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
 
8.6   Amendment and Waiver.  Except as otherwise provided herein, any term of
this Agreement may be amended, and the observance of any term of this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and the Purchasers
holding a majority of the outstanding principal amount of Notes, or, to the
extent such amendment affects only one Purchaser, by the Company and such
Purchaser.  Any amendment or waiver effected in accordance with this Section
shall be binding upon each future holder of any security purchased under this
Agreement (including securities into which such securities have been converted)
and the Company.
 
8.7   Notices.  All notices and other communications required or permitted
hereunder shall be in writing and shall be effective when delivered personally,
or sent by telex or telecopier (with receipt confirmed), provided that a copy is
mailed by registered mail, return receipt requested, or when received by the
addressee, if sent by Express Mail, Federal Express or other nationally
recognized overnight courier service (receipt requested) in each case to the
appropriate address set forth below:

 

  If to the Company:
Save the World Air, Inc.
235 Tennant Avenue
Morgan Hill, California 95037
Attn:  Cecil Bond Kyte
Tel:  (408) 778-0101
Fax: (408) 778-8585

 
 
11

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  With a copy to:
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, NY 10006
Attn: Greg Sichenzia
Fax: (212) 930-9725
       
If to the Purchaser:
At the address set forth on the Purchaser’s Signature Page

 
8.8   Faxes and Counterparts.  This Agreement may be executed in one or more
counterparts.  Delivery of an executed counterpart of the Agreement or any
exhibit attached hereto by facsimile transmission shall be equally as effective
as delivery of an executed hard copy of the same.  Any party delivering an
executed counterpart of this Agreement or any exhibit attached hereto by
facsimile transmission shall also deliver an executed hard copy of the same, but
the failure by such party to deliver such executed hard copy shall not affect
the validity, enforceability or binding nature effect of this Agreement or such
exhibit.
 
8.9   Consent of Purchasers.  As used in the Agreement, “consent of the
Purchasers” or similar language means the consent of holders of not less than
50% of the total principal and interest outstanding on the Notes owned by
Purchasers on the date consent is requested.
 
8.10   Titles and Subtitles.  The titles of the paragraphs and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
 
 
12

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[Counterpart Signature Page to Securities Purchase Agreement of Save the World
Air, Inc.]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth on the Purchase Signature Page hereto.

 

  PURCHASER

(By Counterpart Form - See Purchaser Signature
Pages following the Questionnaire)

 
COMPANY

SAVE THE WORLD AIR, INC
 
(By Execution of Acceptance Page following
Certificate of Signatory)

 
 
13

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QUESTIONNAIRE

The undersigned Purchaser has read the Securities Purchase Agreement of Save the
World Air, Inc., dated as of ______ __, 2009, and acknowledges that the
completion of this Questionnaire and the execution of the Purchaser Signature
Page that follows shall constitute the undersigned’s execution of such
Agreement.  This Questionnaire is and shall remain part of the Agreement.  All
capitalized terms used herein shall be as defined in such Agreement
 
I hereby subscribe for the 7% Convertible Promissory Note in the aggregate
principal amount of $__________________, and Common Stock Purchase Warrants to
purchase ___________________ shares (each as subject to adjustment) and tender a
purchase price of $_______________ therefore.
 
I am a resident of the State of __________________.
 

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

Please print above the exact name(s) in which the Notes are to be held

 

My address is:          

 
 
 
 
 
 
 
 
[continued]
 
 
 

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

 
                                           
I agree to keep information relating to the Company strictly confidential and
not to discuss or exploit or distribute any of the information herein except to
my professional advisors or as necessary to comply with law.
 
I acknowledge that the offering of the Units is subject to the Federal
securities laws of the United States and state securities laws of those states
in which the Notes are offered, and that, pursuant to the U.S. Federal
securities laws and state securities laws, the Units may be purchased by persons
who come within the definition of an “Accredited Investor” as that term is
defined in Rule 501(a) of Regulation D promulgated under the Securities Act
(“Regulation D”).
 
By initialing one of the categories below, I represent and warrant that I come
within the category so initialed and have truthfully set forth the factual basis
or reason I come within that category.  All information in response to this
paragraph will be kept strictly confidential.  I agree to furnish any additional
information that the Company deems necessary in order to verify the answers set
forth below.
 
NOTE:  You must either initial that at least ONE category.
 
Individual Purchaser:
(A Purchaser who is an individual may initial either Category I, II, or III)
 
Category I
______
I am a director or executive officer of the Company.

 
Category II
______
I am an individual (not a partnership, corporation, etc.) whose individual net
worth, or joint net worth with my spouse, presently exceeds $1,000,000.
 
Explanation.  In calculation of net worth, you may include equity in personal
property and real estate, including your principal residence, cash, short term
investments, stocks and securities.  Equity in personal property and real estate
should be based on the fair market value of such property less debt secured by
such property.

 
Category III
______
I am an individual (not a partnership, corporation, etc.) who had an individual
income in excess of $200,000 in 2007 and 2008, or joint income with my spouse in
excess of $300,000 in 2007 and 2008, and I have a reasonable expectation of
reaching the same income level in 2009.

 
 
 
 
[continued]
 
 
 

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

 
 
Entity Purchasers:
 
(A Purchaser which is a corporation, limited liability company, partnership,
trust, or other entity may initial either Category IV, V, VI, VII or VIII)
 
Category IV
______
The Purchaser is an entity in which all of the equity owners are “Accredited
Investors” as defined in Rule 501(a) of Regulation D.  If relying upon this
category alone, each equity owner must complete a separate copy of this
Agreement.
 
_____________________________________________________
 
_____________________________________________________

 

 
_____________________________________________________

 
(describe entity)

 
Category V
______
The Purchaser is a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Units offered, whose purchase is
directed by a “Sophisticated Person” as described in Rule 506(b)(2)(ii) of
Regulation D.

 
Category VI
______
The Purchaser is an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Units, with
total assets in excess of $5,000,000.

 
_____________________________________________________
 
_____________________________________________________
 

 
_____________________________________________________

 
(describe entity)

 
Category VII
______
The Purchaser is a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
 
_____________________________________________________
 
_____________________________________________________

 

 
_____________________________________________________

                                                                (describe
entity)

Executed this _____ day of  _________, 2009 at ____________________,
________________.
 
 
 
[Purchasers' Signature Page follows]
 
 
 

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

 
 
PURCHASER SIGNATURE PAGE
(For Individual Purchasers)

This Securities Purchase Agreement of Save the World Air, Inc. (including the
Questionnaire) is hereby executed and entered into by the below Purchaser.

Principal Amount of Note $_____________
 
No. of Warrants_____________________
 
______________________________________
Signature (Individual)
 
______________________________________
Name (Print)
 
______________________________________
Street address
 
______________________________________
City, State and Zip Code
   

 
______________________________________
Tax Identification or Social Security Number
 
(______)_______________________________
Telephone Number
 
(______)_______________________________
Facsimile Number

 
Address to Which Correspondence Should Be
Directed (if different from above)
______________________________________
c/o Name
 
______________________________________
Street Address
 
 
______________________________________
City, State and Zip Code
 
(______)_______________________________
Telephone Number
 
(______)_______________________________
Facsimile Number

 
 
 

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

 

PURCHASER SIGNATURE PAGE
(for Corporation, Partnership, Trust or Other Entities)
 
This Securities Purchase Agreement of Save the World Air, Inc.  (including the
Questionnaire) is hereby executed and entered into by the below Purchaser:

Principal Amount of Note $_____________
 
No. of Warrants_____________________
 
______________________________________
Name of Entity
 
______________________________________
Type of Entity (i.e., corporation, partnership, etc.)
   

 
______________________________________
Tax Identification or Social Security Number
 
______________________________________
State of Formation of Entity
 
______________________________________
Name of Signatory Typed or Printed
 
Its:____________________________________
    Title

 
Address to Which Correspondence Should Be
Directed (if different from above)
______________________________________
c/o Name
 
______________________________________
Street Address
 
 
______________________________________
City, State and Zip Code
 
(______)_______________________________
Telephone Number
 
(______)_______________________________
Facsimile Number

 
*If Notes are being subscribed for by an entity, the Certificate of Signatory
that follows must also be completed.
 
 
 

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

 

CERTIFICATE OF SIGNATORY
 
To be completed if Units  are being subscribed for by an entity.

I,__________________________________, am the ___________________________ of
___________________________________________ (the “Entity”).
 
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Securities Purchase Agreement and to purchase and
hold the Notes and Shares.  The Securities Purchase Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
 
IN WITNESS WHEREOF, I have hereto set my hand this ______ day of _________,
2009.

 
______________________________________________
Signature

 
 

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

 

ACCEPTANCE PAGE TO SECURITIES PURCHASE AGREEMENT OF
SAVE THE WORLD AIR, INC

The foregoing subscriptions for an aggregate of $___________ principal amount of
7% Convertible Promissory Notes and Warrants, in accordance with the foregoing
Securities Purchase Agreement, AGREED AND ACCEPTED; provided, however, that the
Company may accept additional subscriptions from time to time without consent of
Purchasers until the maximum offering amount (plus the over-allotment option, if
any) are accepted and Closed upon, in accordance with this Agreement:

SAVE THE WORLD AIR, INC

By:_____________________________________
Name:
Title:

Date:  September __, 2009
 
 
 

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

 
 
EXHIBIT A

Form of 7% Convertible Promissory Note
 
 
 
 
 
 
 
 
 

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

 

EXHIBIT B

Form of Common Stock Purchase Warrant
 
 
 
 
 
 
 
 
 
 
 

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EXHIBIT C

Wire Instructions
 
 
 
 
 
 
 
 
 
 

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