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Exhibit 10.18 NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, NO SHARES OF THE COMPANYS STOCK SHALL
BE ISSUED PURSUANT HERETO UNLESS THE SAVE THE WORLD AIR, INC. 2004 STOCK OPTION PLAN SHALL HAVE
FIRST BEEN APPROVED BY SHAREHOLDERS OF THE COMPANY HOLDING NOT LESS THAN A MAJORITY OF THE VOTING
POWER OF THE COMPANY. INCENTIVE STOCK OPTION AGREEMENT THIS INCENTIVE STOCK OPTION AGREEMENT(this Agreement)is made and
entered into as of ____________, 20___(the
Grant Date) by and between SAVE THE WORLD AIR, INC., a
Nevada corporation (the Company),whose address is 5125 Lankershim Boulevard, North Hollywood,
California 91601, and ___an individual (Executive), with reference to the following facts
(capitalized terms used and not otherwise defined in this Agreement shall have the meanings set
forth in the Glossary of Terms attached as AppendixAhereto, which Appendix is hereby
incorporated by this reference): A.The Board of Directors of the Company (the Board) has heretofore adopted the Save The
World Air, Inc. 2004 Stock Option Plan (the Plan, a copy of which is attached hereto and
incorporated by this reference) under which the Company may grant Stock Options to certain
personnel of the Company such as Executive. B.Pursuant to the Plan, the Board has authorized granting to Executive, effective as of the
date of this Agreement, an Incentive Stock Option under such terms and conditions as are
hereinafter set forth. C.Executive is an employee of the Company and is not a Ten Percent Shareholder of the
Company. NOW, THEREFORE,in consideration of the mutual covenants, agreements, representations and
warranties herein set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows: 1. Grant of Stock Option.Pursuant to the action of the Board described above, the Company
hereby grants to Executive an Incentive Stock Option to purchase, upon and subject to the
terms and conditions of the Plan, all or any part of___(___) shares of Stock at an Exercise
Price of Dollars ___($___) per share (which Exercise Price equals one hundred percent
(100%) of the Fair Market Value of a share of Stock as of the Grant Date). 2. Vesting. The Stock Option granted under Section I hereof shall become exercisable with
respect to the following percentages of the number of shares subject to such Stock Option upon the
following dates and at any time thereafter unless and until such Stock Option shall terminate under
Sections 4, 6 or 7 hereof, and subject to acceleration upon a Corporate Transaction only if and as
provided under the Plan (provided,that no installment of the Stock Option hereunder shall be Page 1 of 7




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exercisable except with respect to a whole share, and fractional shares shall be disregarded except
that they may be accumulated): Percentage
    
    Vesting Date
    
    Fair Market Value*Percent (___%)
    
    First (181) anniversary of
Grant DatePercent (___%)
    
    Second (2nd) anniversary
of Grant DatePercent (___%)
    
    Third (3rd) anniversary
of Grant DatePercent (___%)
    
    Fourth (4th) anniversary of Grant
Date
 * Determined as of Grant Date; may not exceed One Hundred Thousand Dollars ($100,000) for vesting
date(s) during any calendar year (taking into account any other ISOs granted to Executive under any
other plan of the Company or a Parent or Subsidiary) 3. Manner of Exercise and Payment. Executive shall exercise the Stock Option
granted under Section 1 hereof: if at all, by giving (a) written notice .of such exercise to the
Committee specifying the number of shares of Stock with respect to which such Stock Option is being
exercised, together with (b) payment of the full purchase price for such shares, by wire transfer
to a Company account designated by the Committee or by unendorsed certified or cashiers check,
equal to the number of shares to be purchased times the Exercise Price per share. 3.1 Effective Date of Exercise.The date upon which such written notice is given and payment
of the full purchase price is received by the Committee shall be the exercise date for such Stock
Option. From such exercise date, Executive shall be entitled to the issuance of a stock certificate
evidencing Executives ownership of the shares of Stock acquired pursuant to such exercise (but
subject to Section 8 hereof). Executive shall not have any of the rights or privileges of a
shareholder of the Company (including, without limitation, rights to distributions, voting rights,
inspection rights, dissenters rights, rights to bring a derivative action, or other rights of a
shareholder under applicable corporate law) in respect of any shares of Stock issuable upon
exercise of such Stock Option until and only to the extent such Stock Option is exercised and
certificates representing such shares shall have been issued and delivered. 3.2 Minimum Number of Shares Purchased;Fractional Shares. No fewer than five (5) share (or,
if less, the maximum number of shares that may be purchased pursuant to the Stock Option to the
extent vested but unexercised) may be purchased pursuant to the exercise under anyone notice given
under Section 3 hereof. No installment of such Stock Option shall be exercisable except with
respect to whole shares. Page 2 of 7




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4. Termination 4.1 In General.The Stock Option granted under Section 1 hereof, to the extent unexercised,
shall terminate at the close of business of the day before the tenth (10th) anniversary of the
Grant Date, but subject to Section 6 or Section 7 hereof ( as applicable). 4.2 Corporate Transaction.The Committee shall notify Executive of the pendency of a Corporate
Transaction a reasonable time before such Corporate Transaction is to occur, and Executive (or such
other person entitled to exercise such Stock Option under Section 7 hereof) shall have the right,
at any time prior to such Corporate Transaction, to exercise such Stock Option of such person to
the extent that such Stock Option is otherwise exercisable under Section 2 hereof. Except and to
the extent provided in the Plan and as set forth in the notice under this Section 4.2, the Stock
Option granted under Sect. on 1 hereof to the extent unexercised shall terminate as of the
Effective Date of the Corporate Transaction. 5. Non-Transferability.Neither Executive nor any successor or assignee thereof shall have any
power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part
or all of the Stock Option granted under Section 1 hereof, other than. by Will or by the laws of
descent and distribution, and such Stock Option shall be exercisable during Executives lifetime
only by Executive; nor shall all or any part of such Stock Option be subject to seizure by any
creditor of any such person, by a proceeding at law or in equity, and no such benefit shall be
transferable by operation of law in the event of the bankruptcy or insolvency of Executive or any
successor or assignee thereof. Any such attempted assignment or transfer shall be void and shall
terminate this Agreement, and the Company shall thereupon have no further liability hereunder. 6. Cessation of Employment 6.1 In General.Subject to Sections 6.2 and 7 hereof, if Executive ceases to be
employed by the Company or any of Subsidiary or Parent thereof~ Executive may, subject to the time
limitations of Section 4 hereof, exercise the Stock Option granted under Section 1 hereof to the
extent that Executive was entitled to exercise it under Section 2 hereof on the date of such
cessation at any time (a) within one (1) year after such cessation if such cessation results from
the Disability of Executive, or (b) otherwise within ninety (90) days after such cessation. 6.2 Termination for Cause.If Executive is terminated as an employee of the Company or any
Subsidiary or Parent thereof for Cause, the Stock Option granted under Section 1 hereof shall
terminate immediately. 7. Death of Executive.If Executive dies while employed by the Company or any Parent
or Subsidiary thereof, or during the period described in clause (a)or clause (b)of Section 6.1
hereof as applicable, then, subject to the time limitations of Section 4 hereof, the Stock Option
granted under Section 1 hereof shall expire within one (1) year after the date of death; and the
executor or administrator of Executive's estate, or the person or persons to whom Executives
rights under such Page 3 of 7




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Stock Option shall have passed by Will or by the applicable laws of descent and distribution, shall
have the right to exercise such Stock Option to the extent ~at Executive was entitled to exercise
such Stock Option under Section 2 hereof on the date of death. 8. Compliance With Securities and Tax Laws.No shares of Stock shall be issued
pursuant to the exercise of the Stock Option hereunder except in compliance with all applicable
federal and state securities and tax laws and regulations and in compliance with rules of stock
exchanges on which the Stock may be listed. In furtherance of the foregoing and not in order to
limit the generality of the foregoing in any way: 8.1 Representation.The Company, as a condition to the issuance of such shares, may require
the person exercising such Stock Option to represent and warrant at the time of such exercise that
any shares of Stock acquired upon exercise are being acquired only for investment and without any
present intention to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required under any applicable law, regulation or rule of any governmental
agency. 8.2 Notice of Sale.The person acquiring such shares shall give the Company notice of any sale
or other disposition of any such shares not less than ten (10) days after such sale or other
disposition. 8.3 Withholding.Executive acknowledges and agrees that the Company, in order to fulfill its
withholding obligations under any federal, state or local tax law (including, without limitation,
upon the disposition by Executive of shares of Stock acquired pursuant to the exercise of the Stock
Option hereunder within two (2) years after the Grant Date or within one (1) year after exercise of
the Stock Option, or upon Executives exercising an ISO more than three (3) months after Executive
has ceased to be an employee of the Company or a Parent or Subsidiary) may (a) withhold such sums
from other compensation due Executive, (b) require Executive to pay to the Company such amounts as
a condition to the delivery of shares pursuant to such exercise, or (c) sell shares that would
otherwise be delivered to Executive upon exercise of the Stock Option in order to raise cash in the
necessary amount. Page 4 of 7




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9. Miscellaneous 9.1 Complete Agreement.This Agreement, and any appendices, schedules, exhibits or documents
referred to herein or executed contemporaneously herewith, constitute the entire agreement among
the parties hereto with respect to the subject matter hereof, and supersede all prior written, and
all prior and contemporaneous oral, agreements, representations, warranties, statements, promises
and understandings with respect to the subject matter hereof; whether express or implied. All
schedules, appendices and exhibits attached hereto are hereby incorporated in and
made a part of this Agreement as if fully set forth herein. . 9.2 PaymentsSubject to Creditors. Payments to Executive hereunder shall be made from assets
which shall continue, for all purposes, to be a part of the general assets of the Company; and no
person, other than the Company, shall have, by virtue of the provisions of the Plan or the grant of
the Stock Option hereunder, any interest in such assets. To the extent that any person acquires a
right to receive payments from the Company under the provisions hereof; such right shall be no
greater than the right of any unsecured general creditor of the Company. 9.3 No Trust or Contract of Employment.It is expressly understood by the parties hereto that
this Agreement and the Plan relate exclusively to additional compensation for Executives services,
and are not intended to be an employment contract. Nothing contained in this Agreement or the Plan,
and no action taken pursuant to their provisions by either party hereto shall create, or be
construed to create, (a) a trust of any kind, or a fiduciary relationship between the Company and
Executive; or (b) a contract of employment for any term of years, or a right of Executive to
continue in the employ of the Company in any capacity. 9.4 Binding Effect.This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and Executive and Executives successors, assigns, heirs,
executors, administrators and beneficiaries. Nothing in this Section 9.4 shall be deemed to modify
or waive in any manner whatsoever such prohibitions on transfer or assignment of Executives rights
hereunder as are contained elsewhere in this Agreement. 9.5 Amendment. Except as provided herein, this Agreement may not be amended, altered, modified
or terminated except by a written instrument signed by the parties hereto, or their respective
successors or assigns. 9.6 Notice.Whenever this Agreement or the Plan requires that notice be given by or to the
Company or Executive, such notice shall be given to the Company at the address first set forth
above (or to such other address as the Company may communicate to Executive under this Section 9.6)
and to Executive at such address as is set forth on the books and records of the Company for the
mailing of any Form W-2 with respect to Executive as follows: (a) by personal delivery, in which
case notice shall be deemed to have been given on the date of delivery; (b) by certified United
States mail, in which case notice shall be deemed to have been given two (2) days after deposit of
such notice with the United States Postal Service; or (c) by DHL, Federal Express, Page 5 of 7




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United Parcel Service, or similar internationally-recognized overnight delivery service, in which
case notice shall be deemed to have been given one (1) day after deposit of such notice or
instrument with such service 9.7 Governing Law; Jurisdiction.This Agreement shall be governed by the laws of the State of
California, regardless of the choice of law provisions of California or any other jurisdiction and
regardless of where the parties hereto may now or hereafter be formed, do business, or reside. Any
and all disputes between the parties which may arise pursuant to this Agreement will be heard and
determined before an appropriate federal or state court located in Los Angeles, California. The
parties hereto acknowledge that such court has the jurisdiction to interpret and enforce the
provisions of this Agreement and the parties waive any and all objections that they may have as to
personal jurisdiction or venue in any of the above courts. 9.8 Headings.The headings in this Agreement are inserted only as a matter of convenience, and
in no way define, limit, or interpret the scope of this Agreement or of any particular section
hereof. 9.9 WaiversStrictly Construed. With regard to any power, remedy or right provided herein or
otherwise available to any party hereunder, (a) no waiver or extension of time shall be effective
unless expressly contained in a writing signed by the waiving party, and (b) no alteration,
modification or impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or by any other indulgence. 9.10 Severability. The validity, legality or enforceability of the remainder of this Agreement
shall not be affected even if one or more of the provisions of this Agreement shall be held to be
invalid, illegal or unenforceable in any respect. 9.11 Counterparts.This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. Page 6 of 7




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IN WITNESS WHEREOF,the parties hereto have executed this Agreement as of the date first set forth
above. Company
    
    ExecutiveSAVE THE WORLD AIR, INC., a Nevada
corporationByName:Title:ByName:Title:
 Page 7 of 7




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SPOUSAL CONSENT I certify that: 1. I
am the spouse of
__________________who
signed the foregoing Incentive Stock Option
Agreement dated as of
___________,
20___(the Agreement)by and between-as the
Executive thereunder and Save The World Air, Inc. as the Companythereunder. 2.I have read and approve the provisions of the Agreement, including, but not limited
to, those relating to the exercise, transfer and disposition of the Stock Option described therein. 3.I agree to be bound by and accept those provisions of that Agreement in lieu of all
other interests I may have in the Stock Options thereby granted, whether that interest may be
community property or otherwise. 4.Executive shall have full power of management of Executives interests in the Stock
Options, including any portion of those interests that may be community property, and Executive has
the full right, without my further approval, to exercise Executives rights with respect to such
Stock Options, to execute any amendments to the Agreement, and to exercise and otherwise deal in
any manner with such Stock Options, including any portion of such interests that may be community
property. Date:Name of Spouse:




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APPENDIX A
GLOSSARY OF TERMS  1.
    Agreementmeans the Incentive Stock
Option Agreement dated _______ ___
20___by and between Save The World Air, Inc.,an Nevada corporation, as the Companythereunder,
and _________, an individual, as
the Executive thereunder.2.
    Boardis as defined in Recital Aof the Agreement.3.
    Causeis as defined in the Plan.4.
    Committeeis as defined in the Plan.5.
    Companymeans Save The World Air, Inc., a Nevada corporation.6.
    Corporate Transactionis as defined in the Plan.7.
    Disabilityis as defined in the Plan.8.
    Effective Date of a Corporate Transaction is as defined in the Plan.9.
    Executivemeans                  
      , an individual.10.
    Exercise Priceis as defined in Section 1 of the Agreement.11.
    Grant Dateis as set forth in the first paragraph of the Agreement.12.
    Incentive Stock Option is as defined in the Plan.13.
    Parentis as defined in the Plan.14.
    Planis as defined in Recital Aof the Agreement.15.
    Stockis as defined in the Plan.16.
    Stock Optionis as defined in the Plan.17.
    Subsidiaryis as defined in the Plan.18.
    Ten Percent Shareholderis as defined in the Plan.19.
    Willis as defined in the Plan.