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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 and
conditions herein provided.



     B. In order to effect the foregoing, the parties hereto desire to enter into an employment
agreement on the terms and conditions set forth below.



     NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements
of the parties contained herein, and intending to be legally bound hereby, the parties hereto agree
as follows:



     1. Definitions and Special Provisions Each capitalized word and term used herein
shall have the meaning ascribed to it in the glossary appended hereto, unless the context in which
such word or term is used otherwise clearly requires further definition. Such glossary is
incorporated herein by reference and made a part hereof.



     2. Employment. STWA hereby agrees to employ the Executive, and the Executive hereby
agrees to serve STWA, on the terms and conditions set forth herein.



     3. Term of Agreement The Executive’s employment under this Agreement shall commence on
the 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 term
of this Agreement shall automatically be extended for one additional year beyond the term otherwise
established unless, prior to such date, STWA or the Executive shall have given a Notice of
Non-Extension.



     4. Position and Duties The Executive shall serve as Vice President of Operations of
STWA and he shall have such responsibilities, duties and authority as may, from time to time, be
generally 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 to
each Subsidiary or affiliated company, as the Board of Directors of each such Subsidiary or
affiliated 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 employment
performance, in accordance with policies generally in effect from time to time, for
possible merit or cost-of-living increases in such base compensation. Except for a
reduction, should such reduction occur, which is proportionate to a company-wide
reduction in executive pay, the annual base compensation paid to the Executive in any
period shall not be less than the annual base compensation paid to him in any prior
period.The frequency and manner of payment of



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such base compensation shall be in accordance with STWA’s executive payroll practices
from time to time in effect




Incentive Compensation. During the period of the Executive’s employment
hereunder, he shall be eligible to participate in certain incentive plans, stock
option plans, and similar arrangements in accordance with him supervisor’s
recommendation at award levels consistent and commensurate with him position and
duties hereunder.




     (a) Employee Benefit Plans and Other Plans or Arrangements  The
Executive shall be entitled to participate in all Employee Benefit Plans of STWA that
either, 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 the
officers of STWA from time to time. Notwithstanding the foregoing, Executive shall be
entitled to at least four (4) weeks vacation per calendar year during each year of
employment. Such vacation shall be prorated during the year 2005 based on the date of
this Agreement.




     (b) Expenses. During the period of the Executive’s employment hereunder,
he shall be entitled to receive prompt reimbursement for all reasonable and customary
expenses, including transportation expenses, incurred by him in performing services
hereunder in accordance with the general policies and procedures established by STWA.
Not withstanding, such expenses require the Executive’s supervisor approval prior to
their expenditures.



     6. Termination By Reason of Disability




(a) In General. In the event the Executive becomes unable to perform him
duties 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 to
perform such duties, him employment may be terminated by STWA.




(b) Compensation During any period of disability during which Executive
is unable to perform the services required of Executive hereunder and remains
employed, 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 and
disability benefits.



     7. Termination By STWA for Cause




     (a) In General. STWA may terminate Executive’s employment for gross
negligence, conviction of a felony or any other conviction reflecting dishonesty, or
breach of this Agreement, and in any such event, all obligations of Employer hereunder
shall immediately terminate.




     (b) Compensation. Within 30 days after the Executive’s termination under
Subparagraph (a), STWA shall pay him, in one lump sum, him accrued but unpaid base
compensation 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’s
employment for any reason other than Disability or Cause, it shall deliver a Notice of
Termination to him which specifies a Date of Termination not less than 30 days
following the date of such notice.




     (b) Compensation and Benefits During Remaining Term of Agreement. In the
event of the termination of the Executive’s employment under Subparagraph (a), STWA
shall pay or provide the compensation and benefits described in Paragraph 6(b), except
that all such compensation and benefits shall be for the remaining term of this
Agreement determined in accordance with Section 3 hereof, unless a change in control
has occurred prior to such termination of employment, in which case all such
compensation and benefits shall be for a term of one (1) year from the Date of
Termination and the term of this Agreement shall continue until all such compensation
and benefits are paid to Executive in full.




     (c) Death During Remaining Term of Agreement In the event of Executive’s
death during the term of his employment, this Agreement shall terminate and Employer
shall only be obligated to pay Executive’s estate or legal representative accrued
salary 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 him
employment, he shall deliver a Notice of Termination to STWA which specifies a Date of
Termination not less than 30 days following the date of such notice.




     (b) Compensation Within 30 days after the Executive’s termination under
Subparagraph (a), STWA shall pay him, in one lump sum, him accrued but unpaid base
compensation and vacation compensation earned through the Date of Termination.



     10. Withholding Taxes. All compensation and benefits provided for herein
shall, to the extent required by law, be subject to federal, state, and local tax
withholding.



     11. Confidential Information. The Executive agrees that subsequent to him
employment with STWA, he will not, at any time, communicate or disclose to any
unauthorized person, without the written consent of the STWA, any proprietary or other
confidential information concerning STWA or any Subsidiary of STWA; provided, however,
that the obligations under this paragraph shall not apply to the extent that such
matters (i) are disclosed in circumstances where the Executive is legally obligated to
do so, or (ii) become generally known to and available for use by the public otherwise
than by him wrongful act or omission; and provided further, that he may disclose any
knowledge of insurance, financial, legal and economic principles, concepts and ideas
which are not solely and exclusively derived from the business plans and activities of
STWA.



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     12. Covenants Not to Compete or to Solicit.




     (a) Noncompetition. During the period in which he is employed by STWA
and, if the Executive’s employment terminates under Paragraphs 6, for a period of 12
months after the Date of Termination (the “Noncompetition Period”), the Executive
shall 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-tenths
percent or greater shareholder or equity owner of any entity engaged in any similar
activity as STWA it’s Subsidiaries and affiliated companies. If at the time of the
enforcement of this paragraph a court holds that the duration, scope, or area
restrictions stated herein are unreasonable under the circumstances then existing and,
thus, unenforceable, STWA and the Executive agree that the maximum duration, scope, or
area reasonable under such circumstances shall be substituted for the stated duration,
scope, or area.




     (b) Nonsolicitation. During him employment and the Noncompetition
Period, the Executive shall not, whether on him own behalf or on behalf of any other
individual or business entity, solicit, endeavor to entice away from STWA, a
Subsidiary or any affiliated company, or otherwise interfere with the relationship of
STWA, a Subsidiary or any affiliated company with any person who is, or was within the
then most recent 12 month period, an employee or associate thereof; provided, however,
that this subparagraph shall not apply following the occurrence of a Change in
Control.




     (c) Extension of Noncompetition Period The Non-Competition Period shall
be automatically extended by the length of time (if any) in which the Executive is in
violation of any of the terms of this Section 19.



     13. Arbitration. To the extent permitted by applicable law, any controversy
or 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 the
commercial rules of the American Arbitration Association then in existence (to the
extent such rules are not inconsistent with the provisions of this Agreement), it
being understood and agreed that the arbitration panel shall consist of three
individuals acceptable to the parties hereto. In the event that the parties cannot
agree on three arbitrators within 20 days following receipt by one party of a demand
for arbitration from another party, then the Executive and STWA shall each designate
one arbitrator and the two arbitrators selected shall select the third arbitrator.
The arbitration panel so selected shall convene a hearing no later than 90 days
following the selection of the panel. The arbitration award shall be final and
binding upon the parties, and judgment may be entered thereon in the California
Superior Court or in any other court of competent jurisdiction.



     14. Additional Equitable Remedy The Executive acknowledges and agrees that
STWA’s remedy at law for a breach or a threatened breach of the provisions of
Paragraphs 18 and 19 would be inadequate; and, in recognition of this fact and
notwithstanding the provisions of Paragraph 20, in the event of such a breach or
threatened breach by him, it is agreed that STWA shall be entitled to request
equitable relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction, or any other equitable remedy which may then be
available. 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 breach
or threatened breach.



     15. Related Agreements. Except as may otherwise be provided herein, to the
extent that any provision of any other agreement between STWA and the Executive shall
limit, qualify, duplicate, or be inconsistent with any provision of this Agreement,
the provision in this Agreement shall control and such provision of such other
agreement shall be deemed to have been superseded, and to be of no force or effect, as
if such other agreement had been formally amended to the extent necessary to
accomplish such purpose.



     16. No Effect on Other Rights. Except as otherwise specifically provided
herein, nothing contained in this Agreement shall be construed as adversely affecting
any rights the Executive may have under any agreement, plan, policy or arrangement to
the extent any such right is not inconsistent with the provisions hereof.



     17. Exclusive Rights and Remedy. Except for any explicit rights and remedies
the Executive may have under any other contract, plan or arrangement with STWA, the
compensation and benefits payable hereunder and the remedy for enforcement thereof
shall constitute him exclusive rights and remedy in the event of him termination of
employment.



     18. Notices. Any notice required or permitted under this Agreement shall be
sufficient if it is in writing and shall be deemed given (i) at the time of personal
delivery to the addressee, or (ii) at the time sent certified mail, with return
receipt requested, addressed as follows:



	 	 	 
	If to the Executive:

	 	John Richard Bautista III

16890 Church Street #19

Morgan Hill, CA 95037


	If to STWA

	 	5125 Lankershim Boulevard

North Hollywood, CA 91601



Attention: Chairman of the Board of Directors





The name or address of any addressee may be changed at any time and from time to time
by notice similarly given.




     19. No Waiver. The failure by any party to this Agreement at any time or
times hereafter to require strict performance by any other party of any of the
provisions, terms, or conditions contained in this Agreement shall not waive, affect,
or diminish any right of the first party at any time or times thereafter to demand
strict performance therewith and with any other provision, term, or condition
contained in this Agreement. Any actual waiver of a provision, term, or condition
contained in this Agreement shall not constitute a waiver of any other provision,
term, or condition herein, whether prior or subsequent to such actual waiver and
whether of the same or a different type. The failure of STWA to promptly terminate
the Executive’s employment for Cause or the Executive to promptly terminate him
employment for



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Good Reason shall not be construed as a waiver of the right of termination, and such
right may be exercised at any time following the occurrence of the event giving rise
to such right.



     20. Survival. Notwithstanding the nominal termination of this Agreement and
the Executive’s employment hereunder, the provisions hereof which specify continuing
obligations, compensation and benefits, and rights (including the otherwise applicable
term hereof) shall remain in effect until such time as all such obligations are
discharged, all such compensation and benefits are received, and no party or
beneficiary has any remaining actual or contingent rights hereunder.



     21. Severability. In the event any provision in this Agreement shall be held
illegal or invalid for any reason, such illegal or invalid provision shall not affect
the remaining provisions hereof, and this Agreement shall be construed, administered
and enforced as though such illegal or invalid provision were not contained herein.



     22. Binding Effect and Benefit. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the successors and assigns of STWA and
the executors, personal representatives, surviving spouse, heirs, devisees, and
legatees of the Executive.



     23. Entire Agreement. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and it supersedes all prior
Agreements, discussions and oral understandings of the parties with respect thereto.



     24. No Assignment. This Agreement, and the benefits and obligations
hereunder, shall not be assignable by any party hereto except by operation of law.



     25. No Attachment. Except as otherwise provided by law, no right to receive
compensation or benefits under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation, or to set off, execution, attachment, levy, or similar process, and any
attempt, voluntary or involuntary, to effect any such action shall be null and void.



     26. Captions. The captions of the several paragraphs and subparagraphs of
this Agreement have been inserted for convenience of reference only. They constitute
no part of this Agreement and are not to be considered in the construction hereof.



     27. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed one and the same instrument which may be
sufficiently evidenced by any one counterpart.



     28. Number. Wherever any words are used herein in the singular form, they
shall be construed as though they were used in the plural form, as the context
requires, and vice versa.



     29. Applicable Law. Except to the extent preempted by federal law, the
provisions of this Agreement shall be construed, administered, and enforced in
accordance with the domestic internal law of the State of California without reference
to its laws regarding conflict of laws.



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IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be
executed, as of the date first above written.




	 	 	 	 	 
	 	 	 
	 	 	                                             /s/ John Richard Bautista III
 	 
	 	 	John Richard Bautista III 	 
	 	 	 
	 
	 	 	SAVE THE WORLD AIR, INC.

 	 
	 	By:  	/s/ Eugene E. Eichler
 	 
	 	 	Eugene E Eichler, President 	 
	 	 	 	 
	 
	 	 	 
	 	Attest: 	 /s/ Janice Holder 	 
	 	 	Janice Holder 	 
	 	 	Corporate Secretary 	 



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GLOSSARY






“Board of Directors” means the board of directors of the relevant corporation.




“Cause” means (i) a documented repeated and willful failure by the Executive to
perform him duties, but only after written demand and only if termination is effected
by action taken by a vote of (A) prior to a Change in Control, at least a majority of
the directors of STWA then in office, or (B) after a Change in Control, at least 80%
of the non-officer directors of STWA then in office, (ii) him final conviction of a
felony, (iii) conduct by him which constitutes moral turpitude which is directly and
materially injurious to STWA or any Material Subsidiary, (iv) willful material
violation of corporate policy, or (v) the issuance by the regulator of STWA or any
Subsidiary or affiliated company of an unappealable order to the effect that he be
permanently discharged.




For purposes of this definition, no act or failure to act on the part of the Executive
shall be considered “willful” unless done or omitted not in good faith and without
reasonable belief that the action or omission was in the best interest of STWA or any
of its Subsidiaries or affiliated companies.




“Change in Control” means the occurrence of any of the following events:




     (a) any Person (except (i) STWA or any Subsidiary or prior affiliate of STWA, or
(ii) any Employee Benefit Plan (or any trust forming a part thereof) maintained by
STWA or any Subsidiary or prior affiliate of STWA) is or becomes the beneficial owner,
directly or indirectly, of STWA’s securities representing 19.9% or more of the
combined voting power of STWA’s then outstanding securities, or 50.1% or more of the
combined voting power of a Material Subsidiary’s then outstanding securities, other
than pursuant to a transaction described in Clause (c);




     (b) there occurs a sale, exchange, transfer or other disposition of substantially
all of the assets of STWA or a Material Subsidiary to another entity, except to an
entity controlled directly or indirectly by STWA;




     (c) there occurs a merger, consolidation, share exchange, division or other
reorganization of or relating to STWA, unless—




          (i) the shareholders of STWA immediately before such merger, consolidation, share
exchange, division or reorganization own, directly or indirectly, immediately
thereafter at least two-thirds of the combined voting power of the outstanding voting
securities of the Surviving Company in substantially the same proportion as their
ownership of the voting securities immediately before such merger, consolidation,
share exchange, division or reorganization; and




          (ii) the individuals who, immediately before such merger, consolidation, share
exchange, division or reorganization, are members of the Incumbent Board continue to
constitute at least two-thirds of the board of directors of the Surviving Company;
provided, however, that if the election, or nomination for election by STWA’s
shareholders, of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such director



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shall, for the purposes hereof, be considered a member of the Incumbent Board;
and provided further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of either an
actual or threatened Election Contest or Proxy Contest, including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest; and




          (iii) no Person (except (A) STWA or any Subsidiary or prior affiliate of STWA,
(B) any Employee Benefit Plan (or any trust forming a part thereof) maintained by STWA
or any Subsidiary or prior affiliate of STWA, or (C) the Surviving Company or any
Subsidiary or prior affiliate of the Surviving Company) has beneficial ownership of
19.9% or more of the combined voting power of the Surviving Company’s outstanding
voting securities immediately following such merger, consolidation, share exchange,
division or reorganization;




     (d) a plan of liquidation or dissolution of STWA, other than pursuant to
bankruptcy or insolvency laws, is adopted; or




     (e) during any period of two consecutive years, individuals who, at the beginning
of such period, constituted the Board of Directors of STWA cease for any reason to
constitute at least a majority of such Board of Directors, unless the election, or the
nomination for election by STWA’s shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were directors
at the beginning of the period; provided, however, that no individual shall be
considered a member of the Board of Directors of STWA at the beginning of such period
if such individual initially assumed office as a result of either an actual or
threatened Election Contest or Proxy Contest, including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest.




Notwithstanding the foregoing, a Change in Control shall not be deemed to have
occurred if a Person becomes the beneficial owner, directly or indirectly, of
securities representing 19.9% or more of the combined voting power of STWA’s then
outstanding securities solely as a result of an acquisition by STWA of its voting
securities which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person; provided, however,
that if a Person becomes a beneficial owner of 19.9% or more of the combined voting
power of STWA’s then outstanding securities by reason of share repurchases by STWA and
thereafter becomes the beneficial owner, directly or indirectly, of any additional
voting securities of STWA, then a Change in Control shall be deemed to have occurred
with respect to such Person under Clause (a).




Notwithstanding anything contained herein to the contrary, if the Executive’s
employment is terminated and he reasonably demonstrates that such termination (i) was
at the request of a third party who has indicated an intention of taking steps
reasonably calculated to effect a Change in Control and who effects a Change in
Control, or (ii) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes hereof, a Change in
Control shall be deemed to have occurred on the day immediately prior to the date of
such termination of him employment.




“STWA” means Save The World Air, Inc.



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“Date of Termination” means:




     (a) if the Executive’s employment is terminated for Disability, 30 days after the
Notice of Termination is given (provided that he shall not have returned to the
performance of him duties on a full-time basis during such 30-day period);




     (b) if the Executive’s employment terminates by reason of him death, the date
of him death;




     (c) if the Executive’s employment is terminated by STWA for Cause, the date of
termination specified in the Notice of Termination and determined in accordance with
Section 8(a);




     (d) if the Executive’s employment is terminated by him without Good Reason, the
date of termination specified in the Notice of Termination and determined in
accordance with Section 9(a);




     (e) if the Executive’s employment is terminated by STWA for any reason other than
for Disability or Cause, the date specified in the Notice of Termination and
determined in accordance with Section 10(a); or




     (f) if the Executive’s employment is terminated by him for Good Reason, the
termination date specified in the Notice of Termination and determined in accordance
with Section 11(a);




provided, however that the Date of Termination shall mean the actual date of
termination in the event the parties mutually agree to a date other than that
described above.




“Defined Benefit Plan” has the meaning ascribed to such term in Section 3(35) of ERISA.




“Disability” has the meaning ascribed to the term “permanent and total disability” in
Section 22(e)(3) of the IRC.




“Employee Benefit Plan” has the meaning ascribed to such term in Section 3(3) of ERISA.




“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as
the same may be amended from time to time.




“Excise Tax” means the tax imposed by Section 4999 of the IRC (or any similar tax that
may hereafter be imposed by federal, state or local law).




“Executive” means NAME OF EXECUTIVE, an individual residing in ADDRESS, California.




“Incumbent Board” means the Board of Directors of STWA as constituted at any relevant
time.



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“IRC” means the Internal Revenue Code of 1986, as amended and as the same may be
amended from time to time.




“Notice of Non-Extension” means a written notice delivered to or by the Executive
which advises that the Agreement will not be extended as provided in Paragraph 3.




“Notice of Termination” means a written notice that (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated, and (iii) gives the required
advance notice of termination.




“Person” has the same meaning as such term has for purposes of Sections 13(d) and
14(d) of the 1934 Act.




“Subsidiary” means any business entity of which a majority of its voting power or its
equity securities or equity interests is owned, directly or indirectly by STWA.




“Successor” means any Person that succeeds to, or has the practical ability to control
(either immediately or with the passage of time), STWA’s business directly, by merger
or consolidation, or indirectly, by purchase of STWA’s voting securities or all or
substantially all of its assets.




“Surviving Company” means the business entity that is a resulting company following a
merger, consolidation, share exchange, division or other reorganization of or relating
to STWA.




“Total Payments” means the compensation and benefits that become payable under the
Agreement or otherwise (and which may be subject to an Excise Tax) by reason of the
Executive’s termination of employment, less the federal, state and local income tax
(but not any Excise Tax) on such compensation and benefits, in each case determined
without regard to any Gross-Up Payments that may also be made.




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