EXHIBIT 10.1**EMPLOYMENT AGREEMENT**     AGREEMENT made as of the 1st day of July 2005 by and between SAVE THE WORLD AIR, INC.(“STWA”), a Nevada chartered corporation, and John Richard Bautista III (the “Executive”).**BACKGROUND**     A. STWA desires to employ the Executive and the Executive is willing to serve on the terms andconditions herein provided.     B. In order to effect the foregoing, the parties hereto desire to enter into an employmentagreement on the terms and conditions set forth below.     NOW, THEREFORE, in consideration of the premises and the respective covenants and agreementsof the parties contained herein, and intending to be legally bound hereby, the parties hereto agreeas follows:     1. **Definitions and Special Provisions** Each capitalized word and term used hereinshall have the meaning ascribed to it in the glossary appended hereto, unless the context in whichsuch word or term is used otherwise clearly requires further definition. Such glossary isincorporated herein by reference and made a part hereof.     2. **Employment**. STWA hereby agrees to employ the Executive, and the Executive herebyagrees to serve STWA, on the terms and conditions set forth herein.     3. **Term of Agreement** The Executive’s employment under this Agreement shall commence onthe date hereof and, except as otherwise provided herein, shall continue until December 31, 2005;provided, however, that commencing on December 31, 2005 and each anniversary thereafter, the termof this Agreement shall automatically be extended for one additional year beyond the term otherwiseestablished unless, prior to such date, STWA or the Executive shall have given a Notice ofNon-Extension.     4. **Position and Duties** The Executive shall serve as Vice President of Operations ofSTWA and he shall have such responsibilities, duties and authority as may, from time to time, begenerally associated with such position and or as specifically detailed in the company’s official“Position Description.” In addition, the Executive shall serve in such capacity, with respect toeach Subsidiary or affiliated company, as the Board of Directors of each such Subsidiary oraffiliated company shall designate from time to time.     5. **Compensation and Related Matters.****Base Compensation**. During the period of the Executive’s employment hereunder,STWA shall pay to him annual base compensation of not less than $120,000.00;The Board(s) of Directors of STWA shall periodically review the Executive’s employmentperformance, in accordance with policies generally in effect from time to time, forpossible merit or cost-of-living increases in such base compensation. Except for areduction, should such reduction occur, which is proportionate to a company-widereduction in executive pay, the annual base compensation paid to the Executive in anyperiod shall not be less than the annual base compensation paid to him in any priorperiod.The frequency and manner of payment of
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such base compensation shall be in accordance with STWA’s executive payroll practicesfrom time to time in effect**Incentive Compensation**. During the period of the Executive’s employmenthereunder, he shall be eligible to participate in certain incentive plans, stockoption plans, and similar arrangements in accordance with him supervisor’srecommendation at award levels consistent and commensurate with him position andduties hereunder.     (a) **Employee Benefit Plans and Other Plans or Arrangements** TheExecutive shall be entitled to participate in all Employee Benefit Plans of STWA thateither, are in effect at present or that may be adopted in the future. In addition,he shall be entitled to participate in and enjoy any other plans and arrangements,which provide for sick leave, vacation, or personal days, provided to or for theofficers of STWA from time to time. Notwithstanding the foregoing, Executive shall beentitled to at least four (4) weeks vacation per calendar year during each year ofemployment. Such vacation shall be prorated during the year 2005 based on the date ofthis Agreement.     (b) **Expenses**. During the period of the Executive’s employment hereunder,he shall be entitled to receive prompt reimbursement for all reasonable and customaryexpenses, including transportation expenses, incurred by him in performing serviceshereunder in accordance with the general policies and procedures established by STWA.Not withstanding, such expenses require the Executive’s supervisor approval prior totheir expenditures.     6. **Termination By Reason of Disability**(a) **In General**. In the event the Executive becomes unable to perform himduties on a basis as required by reason of the occurrence of him Disability and,within 30 days after a Notice of Termination is given, he shall not have returned toperform such duties, him employment may be terminated by STWA.(b) **Compensation**During any period of disability during which Executiveis unable to perform the services required of Executive hereunder and remainsemployed, him salary hereunder shall be payable only to the extent of, and subject to,Employer’s policies and practices then in effect with regard to sick leave anddisability benefits.     7. **Termination By STWA for Cause**     (a) **In General**. STWA may terminate Executive’s employment for grossnegligence, conviction of a felony or any other conviction reflecting dishonesty, orbreach of this Agreement, and in any such event, all obligations of Employer hereundershall immediately terminate.     (b) **Compensation**. Within 30 days after the Executive’s termination underSubparagraph (a), STWA shall pay him, in one lump sum, him accrued but unpaid basecompensation and vacation compensation earned through the Date of Termination.
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     8. **Termination By STWA Without Disability or Cause**     (a) **In General**. In the event STWA intends to terminate the Executive’semployment for any reason other than Disability or Cause, it shall deliver a Notice ofTermination to him which specifies a Date of Termination not less than 30 daysfollowing the date of such notice.     (b) **Compensation and Benefits During Remaining Term of Agreement**. In theevent of the termination of the Executive’s employment under Subparagraph (a), STWAshall pay or provide the compensation and benefits described in Paragraph 6(b), exceptthat all such compensation and benefits shall be for the remaining term of thisAgreement determined in accordance with Section 3 hereof, unless a change in controlhas occurred prior to such termination of employment, in which case all suchcompensation and benefits shall be for a term of one (1) year from the Date ofTermination and the term of this Agreement shall continue until all such compensationand benefits are paid to Executive in full.     (c) **Death During Remaining Term of Agreement**In the event of Executive’sdeath during the term of his employment, this Agreement shall terminate and Employershall only be obligated to pay Executive’s estate or legal representative accruedsalary and benefits to the extent earned by Executive prior to his death.     9. **Termination By the Executive**     (a) **In General**. In the event the Executive intends to terminate himemployment, he shall deliver a Notice of Termination to STWA which specifies a Date ofTermination not less than 30 days following the date of such notice.     (b) **Compensation**Within 30 days after the Executive’s termination underSubparagraph (a), STWA shall pay him, in one lump sum, him accrued but unpaid basecompensation and vacation compensation earned through the Date of Termination.     10. **Withholding Taxes**. All compensation and benefits provided for hereinshall, to the extent required by law, be subject to federal, state, and local taxwithholding.     11. **Confidential Information**. The Executive agrees that subsequent to himemployment with STWA, he will not, at any time, communicate or disclose to anyunauthorized person, without the written consent of the STWA, any proprietary or otherconfidential information concerning STWA or any Subsidiary of STWA; provided, however,that the obligations under this paragraph shall not apply to the extent that suchmatters (i) are disclosed in circumstances where the Executive is legally obligated todo so, or (ii) become generally known to and available for use by the public otherwisethan by him wrongful act or omission; and provided further, that he may disclose anyknowledge of insurance, financial, legal and economic principles, concepts and ideaswhich are not solely and exclusively derived from the business plans and activities ofSTWA.
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     12. **Covenants Not to Compete or to Solicit**.     (a) **Noncompetition**. During the period in which he is employed by STWAand, if the Executive’s employment terminates under Paragraphs 6, for a period of 12months after the Date of Termination (the “Noncompetition Period”), the Executiveshall not, without the written consent in writing of the Board of Directors of STWA,become an executive officer, partner, consultant, director, or a four and nine-tenthspercent or greater shareholder or equity owner of any entity engaged in any similaractivity as STWA it’s Subsidiaries and affiliated companies. If at the time of theenforcement of this paragraph a court holds that the duration, scope, or arearestrictions stated herein are unreasonable under the circumstances then existing and,thus, unenforceable, STWA and the Executive agree that the maximum duration, scope, orarea reasonable under such circumstances shall be substituted for the stated duration,scope, or area.     (b) **Nonsolicitation**. During him employment and the NoncompetitionPeriod, the Executive shall not, whether on him own behalf or on behalf of any otherindividual or business entity, solicit, endeavor to entice away from STWA, aSubsidiary or any affiliated company, or otherwise interfere with the relationship ofSTWA, a Subsidiary or any affiliated company with any person who is, or was within thethen most recent 12 month period, an employee or associate thereof; provided, however,that this subparagraph shall not apply following the occurrence of a Change inControl.     (c) **Extension of Noncompetition Period** The Non-Competition Period shallbe automatically extended by the length of time (if any) in which the Executive is inviolation of any of the terms of this Section 19.     13. **Arbitration**. To the extent permitted by applicable law, any controversyor dispute arising out of or relating to this Agreement, or any alleged breach hereof,shall be settled by arbitration in Los Angeles, California in accordance with thecommercial rules of the American Arbitration Association then in existence (to theextent such rules are not inconsistent with the provisions of this Agreement), itbeing understood and agreed that the arbitration panel shall consist of threeindividuals acceptable to the parties hereto. In the event that the parties cannotagree on three arbitrators within 20 days following receipt by one party of a demandfor arbitration from another party, then the Executive and STWA shall each designateone arbitrator and the two arbitrators selected shall select the third arbitrator.The arbitration panel so selected shall convene a hearing no later than 90 daysfollowing the selection of the panel. The arbitration award shall be final andbinding upon the parties, and judgment may be entered thereon in the CaliforniaSuperior Court or in any other court of competent jurisdiction.     14. **Additional Equitable Remedy** The Executive acknowledges and agrees thatSTWA’s remedy at law for a breach or a threatened breach of the provisions ofParagraphs 18 and 19 would be inadequate; and, in recognition of this fact andnotwithstanding the provisions of Paragraph 20, in the event of such a breach orthreatened breach by him, it is agreed that STWA shall be entitled to requestequitable relief in the form of specific performance, temporary restraining order,temporary or permanent injunction, or any other equitable remedy which may then beavailable. Nothing in this paragraph shall be construed as prohibiting
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STWA from pursuing any other remedy available under this Agreement for such a breachor threatened breach.     15. **Related Agreements**. Except as may otherwise be provided herein, to theextent that any provision of any other agreement between STWA and the Executive shalllimit, qualify, duplicate, or be inconsistent with any provision of this Agreement,the provision in this Agreement shall control and such provision of such otheragreement shall be deemed to have been superseded, and to be of no force or effect, asif such other agreement had been formally amended to the extent necessary toaccomplish such purpose.     16. **No Effect on Other Rights**. Except as otherwise specifically providedherein, nothing contained in this Agreement shall be construed as adversely affectingany rights the Executive may have under any agreement, plan, policy or arrangement tothe extent any such right is not inconsistent with the provisions hereof.     17. **Exclusive Rights and Remedy**. Except for any explicit rights and remediesthe Executive may have under any other contract, plan or arrangement with STWA, thecompensation and benefits payable hereunder and the remedy for enforcement thereofshall constitute him exclusive rights and remedy in the event of him termination ofemployment.     18. **Notices**. Any notice required or permitted under this Agreement shall besufficient if it is in writing and shall be deemed given (i) at the time of personaldelivery to the addressee, or (ii) at the time sent certified mail, with returnreceipt requested, addressed as follows:   If to the Executive: John Richard Bautista III