**EXHIBIT 10.3****THIS NOTE AND ANY SHARES OF COMMON STOCK INTO WHICH THIS NOTE MAY BE CONVERTED HAVE NOT BEENREGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED FOR SALE UNDER ANY STATESECURITIES LAWS (COLLECTIVELY, “SECURITIES LAWS”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISETRANSFERRED UNLESS REGISTERED OR QUALIFIED FOR SALE UNDER ALL APPLICABLE SECURITIES LAWS OR UNLESS,IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE SATISFACTORY TO THEISSUER, ANY SUCH OFFER, SALE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION OR QUALIFICATIONREQUIREMENTS OF SUCH SECURITIES LAWS.**   $     “Subscription Amount” “Issuance Date” “Holder”     FOR VALUE RECEIVED, SAVE THE WORLD AIR, INC., a corporation organized under the laws of thestate of Nevada (the “Company”), promises to pay to the order of the holder identified above(together with any subsequent holder hereof, called the “Holder”), at the address of the Holdershown on the books and records of the Company, or at such other place as Holder may direct fromtime to time, the “Subscription Amount” noted above (the “Loan”), payable in full on July 31, 2006,or at an earlier date as provided herein (the “Maturity Date”). This Note is one of several Notesissued by the Company on one or more Issuance Dates (collectively, the “Notes”).     The Company agrees to pay interest on the unpaid principal amount of the Subscription Amountfrom time to time outstanding hereunder at the rate of 9% per year. Interest hereunder shall becomputed on the basis of a year of three hundred sixty-five (365) days and the actual number ofdays elapsed. Interest on the unpaid principal amount hereof shall accrue on a monthly basis onthe last day of each calendar month, commencing on the calendar month following the Issuance Date.Interest on the unpaid principal amount hereof shall be payable quarterly commencing on the lastday of the second calendar month after the calendar month of the Issuance Date and continuing onthe last day of each third calendar month thereafter until all sums due hereunder have been paid infull. Accrual of interest hereunder shall commence on the Issuance Date.     Payments of both principal and interest will be made in immediately available funds in lawfulmoney of the United States of America to the Holder at the Investor’s Address.     The Note is subject to the following additional provisions:     1. The Company shall be entitled to withhold from all payments of principal and/or interest ofthis Note any amounts required to be withheld under the applicable
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provisions of the U.S. Internal Revenue Code of 1986, as amended, or other applicable laws atthe time of such payments.     2. This Note has been issued subject to investment representations of the original Holderhereof and may be transferred or exchanged only in compliance with the Securities Act andapplicable state and other securities laws. Prior to the due presentment for such transfer of thisNote, the Company and any agent of the Company may treat the person in whose name this Note is dulyregistered on the Company’s Note register as the owner hereof for the purpose of receiving paymentas herein provided and all other purposes, whether or not this Note is overdue, and neither theCompany nor any such agent shall be affected by notice to the contrary. The transferee shall bebound, as the original Holder by the same representations and terms described herein and under theAgreement.     3. a. The Holder or the Company may, at such Holder’s option, at any time convert theprincipal amount of this Note or any portion thereof, and any interest accrued and unpaid thereon(the “Conversion Amount”), into a number shares of fully paid and non-assessable Common Stock ofthe Company (the “Conversion Shares”) pursuant to the following formula: the Conversion Amountdivided by Seventy Cents ($0.70) (as the same may be adjusted from time to time pursuant to theprovisions of this Note, the “Conversion Price”). The Holder may exercise the right to convert allor any portion of the Conversion Amount by delivering to the Company (i) an executed and completednotice of conversion in the form attached to this Note (the “Notice of Conversion”) to the Companyand (ii) this Note. The business day on which a Notice of Conversion and this Note are deliveredto the Company in accordance with the provisions hereof shall be deemed a “Conversion Date”. TheCompany will transmit the certificates representing Conversion Shares issuable upon such conversionof this Note (together with the certificates representing the amount of this Note not so converted)to the Holder via express courier within ten Business Days after the Conversion Date. Nofractional shares shall be issued upon conversion of this Note. The amount of any of theConversion Amount which is less than a whole share of Common Stock shall be paid to the Holder incash. If the conversion of this Note requires that the Company amend its charter to increase thenumber of common shares authorized, the conversion may not take place prior to the Company’scompletion of that process. Any delay due to such circumstance shall not be an event of defaultunder this Note. The Company shall promptly take any action required to effect such amendments toits charter.          b. If at any time on or prior to the Maturity Date the Company should either consummate orenter into a “firm commitment” agreement for debt and/or equity financings in a transaction orseries of transactions in which the Company would be entitled to receive at least Five MillionDollars ($5,000,000.00) of proceeds before payment of all costs of consummating such transaction ortransactions (the “Financing”), the Company may, in its sole and absolute discretion, elect torequire that the Holders of all, but not less than all, of the Notes, convert their respectiveNotes on the same terms and subject to the same conditions as if each Holder had elected toexercise such Holder’s rights of conversion as provided for herein (the “Mandatory Conversion”).Whether or not the Company obtains the Financing, the Company shall have no obligation to require
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a Mandatory Conversion. Should it elect to exercise its rights to require a MandatoryConversion, the Company shall promptly so notify the Holder and each holder of the other Notes, butnot later than five business days following the Maturity Date. The principal amount of this Note,and any accrued interest thereon, shall be reduced as per that principal amount indicated on theNotice of Conversion upon the proper receipt by the Holder of such Conversion Shares due upon suchNotice of Conversion.     4. The number of Conversion Shares shall be adjusted as follows:          a. If the Company shall at any time after the Issuance Date subdivide its outstanding sharesof Common Stock into a greater number of shares of Common Stock, the number of Conversion Shares ineffect immediately prior to such subdivision shall be proportionately increased, and conversely, incase the outstanding shares of Common Stock shall be combined into a smaller number of shares ofCommon Stock, the Conversion Price in effect immediately prior to such combination shall beproportionately reduced.          b. If the Company shall at any time or from time to time after the Issuance Date make, or fixa record date for the determination of holders of Common Stock entitled to receive, a dividend orother distribution payable in additional shares of Common Stock, then and in each such event thenumber of Conversion Shares issuable upon conversion of this Note shall be proportionatelyincreased; provided, however, that if such record date is fixed and such dividend is not fullypaid, or if such distribution is not fully made on the date fixed therefor, the number ofConversion Shares shall be recomputed to reflect that such dividend was not fully paid or that suchdistribution was not fully made.          c. If the Company at any time or from time to time after the Issuance Date makes, or fixes arecord date for the determination of holders of Common Stock entitled to receive, a dividend orother distribution payable in securities of the Company other than shares of Common Stock, then andin each such event provision shall be made so that Holder shall receive upon exercise of theconversion right of this Note, in addition to the number of shares of Common Stock receivablethereupon, the amount of securities of the Company which Holder would have received had theConversion Amount of this Note been exercised on the date of such event and had it thereafter,during the period from the date of such event to and including the date of conversion or purchase,retained such securities receivable during such period.          d. If the Common Stock issuable upon the conversion of this Note or option to purchase ischanged into the same or a different number of shares of any class or classes of stock, whether byrecapitalization, reclassification or otherwise (other than a transaction described elsewhere inSection 4 of this Note), then, and in any such event, each Holder shall have the right thereafter,upon conversion of this Note or purchase pursuant to option to receive the kind and amount of stockand other securities and property receivable upon such reorganization or other change, in an amountequal to the amount that Holder would have been entitled to had it immediately prior to suchreorganization, reclassification or change converted this Note, but only to the extent this Note isactually converted, all subject to further adjustment as provided herein.
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          e. If at any time the Company proposes (A) the acquisition of the Company by another entity bymeans of any transaction or series of related transactions (including, without limitation, anyreorganization, merger, consolidation or stock issuance) that results in the transfer of fiftypercent (50%) or more of the then outstanding voting power of the Company; or (B) a sale of all orsubstantially all of the assets of the Company, then the Company shall give the Holder ten (10)days notice of the proposed effective date of the transaction. If this Note has not been convertedby the effective date of such transaction, this Note shall be exercisable into the kind and numberof shares of stock or other securities or property of the Company or of the entity resulting fromsuch merger or acquisition to which such Holder would have been entitled if immediately prior tosuch acquisition or merger, it had exercised this Note. The provisions of this Section 4(e) shallsimilarly apply to successive consolidations, mergers, sales or conveyances.     5. No provision of this Note shall alter or impair the obligation of the Company, whichis absolute and unconditional, upon an Event of Default (as defined below), to pay the principalof, and interest on this Note at the place, time, and rate, and in the coin or currency hereinprescribed.     6. Events of Default. Each of the following occurrences is hereby defined as an “Eventof Default”: (i) Nonpayment. The Company shall fail to make anypayment of principal, interest, or other amounts payable hereunder when and asdue; or  (ii) Dissolutions, etc. The Company or any subsidiaryshall fail to comply with any provision concerning its existence or anyprohibition against dissolution, liquidation, merger, consolidation or sale ofassets; or  (iii) Noncompliance with this Agreement. The Companyshall fail to comply in any material respect with any provision hereof, whichfailure does not otherwise constitute an Event of Default; or  (iv) Insolvency. The institution of bankruptcy,insolvency, reorganization or liquidation proceedings or other proceedings forrelief under any bankruptcy law or any law for the relief of debtors shall beinstituted by or against the Company, which proceedings shall not have beenvacated by appropriate court order within sixty (60) days of such institution.     If one or more “Events of Default” shall occur, then, or at any time thereafter, and in eachand every such case, unless such Event of Default shall have been waived in writing by the Holder(which waiver shall not be deemed to be a waiver of any subsequent default) or cured as providedherein, at the option of the Holder, and in the Holder’s sole discretion, the Holder may elect toconsider this Note (and all interest through such date) immediately due and payable. In order to soelect, the Holder must deliver written notice of the election and the amount due to the Company viacertified mail, return receipt requested, at the Company’s address as set forth herein (or anyother
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address provided to the Holder), and thereafter the Company shall have ten (10) business daysupon receipt to cure the Event of Default or pay this Note, or convert the amount due on the Notepursuant to the conversion formula set forth above. Notwithstanding the foregoing, no Event ofDefault shall have occurred, if the Company shall have given a notice of a Mandatory Conversionhereunder.     7. In case any provision of this Note is held by a court of competent jurisdiction tobe excessive in scope or otherwise invalid or unenforceable, such provision shall be adjustedrather than voided, if possible, so that it is enforceable to the maximum extent possible, and thevalidity and enforceability of the remaining provisions of this Note will not in any way beaffected or impaired thereby.     8. This Note does not entitle the Holder hereof to any voting rights or other rights as ashareholder of the Issuer prior to the conversion into Common Stock thereof, except as provided byapplicable law. If, however, at the time of the surrender of this Note and conversion the Holderhereof shall be entitled to convert this Note, the Conversion Shares so issued shall be and bedeemed to be issued to such holder as the record owner of such shares as of the close of businesson the Conversion Date.     9. The Holder shall pay all issue and transfer taxes and other incidental expenses in respectof the issuance of certificates for Conversion Shares upon the conversion of this Note, and suchcertificates shall be issued in the name of the Holder of this Note.     10. In no event will the Holder make a disposition of this Note or the Conversion Sharesunless and until, if requested by the Company, the Holder shall have furnished the Company with anopinion of counsel satisfactory to the Company and its counsel to the effect that appropriateaction necessary for compliance with the Securities Act of 1933, as amended (the “Act”) relating tosale of an unregistered security has been taken. Notwithstanding the foregoing, the restrictionsimposed upon the transferability of the Conversion Shares shall terminate as to this Note or anyparticular Conversion Share when (i) such security shall have been sold without registration incompliance with Rule 144 under the Act, or (ii) a letter shall have been issued to the Holder atits request by the staff of the Securities and Exchange Commission or a ruling shall have beenissued to the Holder at its request by such Commission stating that no action shall be recommendedby such staff or taken by such Commission, as the case may be, if such security is transferredwithout registration under the Act in accordance with the conditions set forth in such letter orruling and such letter or ruling specifies that no subsequent restrictions on transfer arerequired, or (iii) such security shall have been registered under the Act and sold by the Holderthereof in accordance with such registration.     11. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft,destruction or mutilation of this Note, and in case of loss, theft or destruction of this Note,upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount tothe Company or, in the case of any such mutilation, upon surrender and cancellation of such Note,and upon reimbursement to the Company of all reasonable expenses incidental thereto, the Companywill make and deliver to the
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Holder, in lieu thereof, a new Note in substantially identical form and dated as of suchcancellation.     12. If the last or appointed day for the taking of any action or the expiration of any rightrequired or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in theUnited States or the State of California, then such action may be taken or such right may beexercised on the next succeeding business day.     13. a. This Note shall be governed by and construed in accordance with the laws of the Stateof California applicable to contracts made and to be performed wholly within such state.          b. Except as otherwise provided herein, any notice or demand which, by the provisionshereof, is required or which may be given to or served upon the parties hereto shall be in writingand, if by telegram, telecopy or telex, shall be deemed to have been validly served, given ordelivered when sent, if by personal delivery, shall be deemed to have been validly served, given ordelivered upon actual delivery and, if mailed, shall be deemed to have been validly served, givenor delivered three (3) business days after deposit in the United States mails, as registered orcertified mail, with proper postage prepaid and addressed to the party or parties to be notified.          c. The Holder acknowledges that the Conversion Shares acquired upon the exercise of thisNote may have restrictions upon its resale imposed by state and federal securities laws.          d. With regard to any power, remedy or right provided herein or otherwise available to anyparty hereunder (i) no waiver or extension of time shall be effective unless expressly contained ina writing signed by the waiving party; and (ii) no alteration, modification or impairment shall beimplied by reason of any previous waiver, extension of time, delay or omission in exercise, orother indulgence.          e. This Note constitutes the Company’s and Holder’s entire agreement with respect to thesubject matter hereof and supersedes all agreements, representations, warranties, statements,promises and understandings, whether oral or written, with respect to the subject matter hereof.This Note may not be amended, altered or modified except by a writing signed by the Company and theHolder.     14. a. The rights of the Holder to receive payments hereunder shall be subordinate to therights of the holders of up to $10,000,000.00 of the Company’s other securities which may beissued after the Issuance Date and prior to the Maturity Date (the “Other Debt”), if the terms ofthe Other Debt require that the indebtedness represented by all Notes shall be so subordinated. .          b. Unless and until there should occur a default under the terms and conditions of the OtherDebt, the Holder shall be entitled to retain any payment of principal or interest made by theCompany in respect of its obligations under this Note. In the event of and during the continuanceof any such default, no payment of principal of
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          or interest on this Note shall be made by the Company or, to the extent made by the Company,retained by the Holder. If the Company should be in such default, the Company shall so notify theHolder not later than the next date a payment hereunder shall become due in accordance with theprovisions hereof          c. Upon any distribution of assets of the Company in connection with any dissolution,winding-up or liquidation (whether or not in bankruptcy, insolvency or other similar proceedings)the holders of the Other Debt shall first be entitled to receive payment in full in money ormoney’s worth, in accordance with the terms of the Other Debt, of all sums due in respect thereto,before the Holder shall be entitled to receive from the Company any payment under this Note.     IN WITNESS WHEREOF, the Issuer has caused this Convertible Note to be duly executed by anofficer thereunto duly authorized.      **SAVE THE WORLD AIR, INC.**