Document:

exv10w4

 

Exhibit 10.4

GENERAL TENANCY AGREEMENT

(Not to be used for ‘Residential Tenancies)

.Memorandum of Agreement made the March day of 14th of 2006

BETWEEN Autumlee pty Ltd of Unit 206 Sun City Gold Coast HQW Surfers Paradise in
the state of Queensland (Hereinafter called the Landlord)

And Qf

STWA, Inc. of 5125 Lankershim Boulevard North Hollywood, California 91601 USA

     (hereinafter called the Tenant)

in “the state

California USA

WHEREBY in consideration of the rent hereinafter reserved and the covenants and conditions

hereinafter

Contained on the part of the Tenant to be observed and performed the ‘Landlord agrees to let to the

Tenant

And the Tenant agrees to take from the Landlord the ...FACTORY unit

And premises situated in Taree Street the land

Being described as Factory 1 Jot 94 Taree St. Andrews

Count of ...Ward Parish of ...MudQeeraba Town of BurleiQh Junction Qld

Area 2152 Sq. feet more or less, being the property known as..................and last occupied by STWA to be

held by the said STWA Inc. as Tenant at the rental of

     $1462.00 AUD

per calendar Month SUCH tenancy to commence on November

day of ....March ...........15th..........2006 the year and such tenance is to continue for the term

of 2 years + 2 X 2 Year Option.

The rent is to be paid by the Tenant to the Landlord or his agent in advance on the 15th

day of each and V every Month of the tenancy, the first of such payments to be made

on March day 15th the year of 2006

The Tenant hereby agrees:

1. To keep and at the end of this tenancy to deliver up to the said Unit 1..............

and premises to the said Landlord in a clean condition and good order and repair as at present,

fair wear

and tear and damage by fire, storm, flood, tempest or any act of God excepted.

 

 

2. Not to make, nor suffer to be made, any material alteration in the said Unit #1 ............ and
premises or any part thereof without the consent in writing of the said Landlord.

3. Not to use or permit to be used the premises or any part hereof for any purpose other than a
research on vehicle parts or carry on or permit to be carried upon the same any noisome dangerous
or offensive trade
business or process not do nor suffer to be done anything which may annoy persons in “the
neighborhood of the premises or which may render the Landlord liable to pay more than the presl;_t
amount of water rates or sewerage Of cleansing charges or.,which may Render the Landlord liable to
pay in respect of the buildings or any part thereof more than the ordinary or present rate of
premium for insurance fire or which may make void or unavoidable any policy for such insurance.

4. To keep clean any drains or water pipes on the said premises.

5. To indemnigy the Landlord against all losses damages and expenses which he may sustain; expend
or-be out unto by reasn of any neglect, misconduct, or misperformance on the part of Tenant of any of
the covenants and agreements herein before contained.

7. That the Landlord may by himself or his agent at all reasonable times enter into and upon the
said described premises and view the state or repair thereof.

8. AND the Tenant will upon the date of expiration or determinations of the tenancy hereby created
deliver
up to the Landlord peaceably and quietly the possession of the demised premises and every part
thereof together with all erections, buildings, improvements, and fixtures, which he is not
entitled in terms of his tenancy to remove.

9. The tenant will keep the furniture and effects (if any) which are now hereby leased with the
premises and a list of which is contained in the schedule hereto marked “A” in good condition and
at the end of the tenancy leave the said furniture and effects clean and in as good state condition
and repair as they are now in and will make compensation ‘for any damage done for any article
missing (reasonable wear and tear and damage by accidental fire excepted).

10. If at any time during the said term the buildings on the sid land or any part thereof shall be
damaged by fire then and in every such case all moneys received. By the Landlord in respect of such
damage shall be forthwith laid out and expended in reinstating the same so far as the said moneys
will extend and as form the date of such damage until the said insurance moneys shall have been
laid out in making good such damage the ‘said rental shall abate by a fair and just proportion
PROVIDED AL WAYS that if at anytime during ‘the said term the buildings on the said land shall be
completely destroyed by fire or so damaged by fire as to be uninhabitable then and in any such case
these presents shall ipso facto determine and should any dispute or difference arising touching or
concerning any matter or thing in this clause of these presents referred to then the same shall be
determined by a single arbitrator to be agreed upon by the parties hereto

 

 

and failing such agreement then the dispute or difference shall be referred to the arbitration of
two arbitrators (and in the case of their disagreeing by their umpire) one of such arbitrators to
be appointed by the Tenant and every such reference shall be deemed to be an arbitration within the
meaning of the “Arbitration Act of 1973” and be subject to the provisions as to Arbitration
contained in said Act.

11. In case the rent payable hereunder or any part thereof shall be unpaid on any day on which the
same ought to be paid and shall remain unpaid for seven days thereafter whether lawfully demanded
or not in case the Tenant becomes bankrupt or insolvent or in case of the breach non-observance or
non-performance by
the Tenant of any agreement or stipulation herein on the Tenant’s part contained or implied then
and in every such case it shall be lawful for the Landlord forthwith or at any time thereafter
without notice or Suit to ‘enter upon any part of the said lands in the flame of the whole and
determine the estate of the Tenant under these premises but without releasing the Tenant from
liability in respect of any breach of any of the same agreements and stipulations and it is hereby
declared that the power of reentry implied in leases by “Property Law Act of 1974-1978” shall be
implied herein but shall be modified accordingly.

 

AS WITNESS the hand of said parties the day and the year first above.,

Signed by the said

SCOTT WHIELDON

     In the presence of

Landlord /s/ Scott Whieldon

/s/ A. Menzell

Signed by the said

JOHN KOSTIC

In the presence of

Tenant /s/ John Kostic

/s/ A Menzell

 

 

 

Annexure’ A’

1. Term of tenancy to be 2 year plus 2 x 2 year’s option. The first year rent is $1462.00
Including all outgoings per month.

2. Rental increase for the first year of the 2x2 YEAR option period is to be 5% or C.P.I.
(Whichever is the greater) being added to the rental of the preceding month.

3. Lessee agrees to conduct the business wholly within the confines of the demised premises
and not to obstruct the vehicle access to other occupants of the adjacent building.

4. Lessee has the right to change or attach signage to the outside walls of the demised premises
but only after the consent from the’ Lessor as to the size and placement of the signage. This is
to have Council approval if necessary, cost paid by the Lessee.

5. Tenancy to commence March 15th 2006.

6. Lessee to give 2 months notice in writing prior to the expiration of the initial 2 year period.
Such notice being of the intention to take up the option offered.

7. C.P.I (Consumer Price Index) as mentioned in the preceding clauses will be as for the City of
Brisbane.

8. The Lessee acknowledges that it has not relied upon any representation by the Lessor
or
any other person or Corporation in and about entering into this agreement other than is set
out herein.

	 	 	 
	LESSOR /s/ Scott Whieldon
	 	LESSEE /s/ John Kostic
	 	 	 
	WITNESS /s/ A Menzellexv10w42

 

EXHIBIT 10.42

THIS IS AN ADDENDUM TO THE LEASE AGREEMENT DATED AUGUST 5,

2005 WHEREIN IS REFERRED TO AS “LESSOR” AND IS REFERRED TO AS

“LESSEE” FOR THE PROPERTY COMMONLY KNOWN AS 235 TENNANT

AVENUE #5, MORGAN HILL, CALIFORNIA

The Provisions of this Addendum shall amend and supercede the Provisions if the Lease
Agreement were inconsistent. In all other aspects the Terms and Conditions contained in the
Lease Agreement shall remain in full force and effect.

	1.	 	Additional Space Leased:
	 
	 	 	Lessee had elected to lease unit #4 adjacent to its current unit #5. Therefore, Section 1.2(a)
of this lease shall be amended from a 3,200 square foot unit to a 5,600 square foot unit.
Total rent for the additional 2,400 square feet rented shall be $1,920.00 per month Gross.
This rent amount shall be added with the Lessee’s current rent schedule under the same
terms and conditions in the above referenced lease.

 
 
 

	 	 	 	 	 	 	 	 
	READ AND APPROVED	 	 	 	 
	 

	 	 	 	 	 	 
	Lessee: Save the World Air, Inc.
	 	Lessor: Tom Jackson
	 
	 

	 	 	 	 	 	 
	By:

	 	/s/ Bruce McKinnon
	 	By:
	 	/s/ Tom Jacksonexv10w45

 

EXHIBIT 10.45

THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

			
	 
	Los Angeles, California
	 	                                        , 2005

     FOR VALUE RECEIVED, Save the World Air, Inc., a Nevada corporation (the “Company” or “SWA”),
promises to pay to                                                              (the “Holder”), or its assigns, the principal sum of
                                        , the outstanding principal amount subscribed to hereof and hereby noted on
the signature page below, together with interest from the date of this Note on the unpaid principal
balance at a rate equal to 9% (nine percent) per annum, computed on the basis of the actual number
of days elapsed and a year of 365 days. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and payable on the “Maturity
Date” which date shall be the earlier of (i) May 31, 2006, or (ii) within 5 (five) business days
after the closing of an additional $5,000,000 of net proceeds from one or more offerings of the
Company’s equity or quasi-equity securities, or (iii) when such amounts are declared due and
payable by the Holder (or made automatically due and payable) upon or after the occurrence of an
Event of Default (as defined below).

     The following is a statement of the rights of the Holder and the conditions to which this Note
is subject, and to which the Holder, by the acceptance of this Note, agrees:

     1. DEFINITIONS. As used in this Note, the following capitalized terms have the following
meanings:

          (a) The “Company” includes the corporation initially executing this Note and any Person
which shall succeed to or assume the obligations of the Company under this Note.

          (b) “Certificate” shall mean the Articles of Incorporation of Company as in effect on the
date hereof.

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          (c) “Equity Securities” of any Person shall mean (a) all common stock, preferred stock,
participations, shares, partnership interests or other equity interests in and of such Person
(regardless of how designated and whether or not voting or non-voting) and (b) all warrants,
options and other rights to acquire any of the foregoing.

          (d) “Event of Default” has the meaning given in Section 7 hereof.

          (e) “Financial Statements” shall mean, with respect to any accounting period for any
Person, statements of operations, retained earnings and cash flows of such Person for such period,
and balance sheets of such Person as of the end of such period, setting forth in each case in
comparative form figures for the corresponding period in the preceding fiscal year if such period
is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding fiscal year, all prepared in reasonable detail and in accordance with generally
accepted accounting principles (except, with respect to quarterly financial statements, for
footnotes and year end adjustments). Unless otherwise indicated, each reference to Financial
Statements of any Person shall be deemed to refer to Financial Statements prepared on a
consolidated basis.

          (f) “Holder” shall mean the Person specified in the introductory paragraph of this Note
or any Person who shall at the time be the holder of this Note, pursuant to a transfer, assignment
or other transaction effected on the terms and subject to the conditions set forth in this Note.
“Holders” shall mean the Holder, together with all other Persons who hold up to $1,000,000.00
maximum principal amount of the Company’s 9% Subordinated Convertible Notes due May 31, 2006.

          (g) “Indebtedness” shall mean and include the aggregate amount of, without duplication
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations to pay the deferred purchase price of property or
services (other than accounts payable incurred in the ordinary course of business determined in
accordance with generally accepted accounting principals), (d) all obligations with respect to
capital leases, (e) all guaranty obligations; (f) all obligations created or arising under any
conditional sale or other title retention agreement with respect to property acquired by such
Person, (g) all reimbursement and other payment obligations, contingent or otherwise, in respect of
letters of credit and/or taxes or other charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith.

          (h) “Investment” of any Person shall mean any loan or advance of funds by such Person to
any other Person (other than advances to employees of such Person for moving and travel expense,
drawing accounts and similar expenditures in the ordinary course of business), any purchase or
other acquisition of any Equity Securities or Indebtedness of any other Person, any capital
contribution by such Person to or any other investment by such Person in any other Person
(including, without limitation, any Indebtedness incurred by such Person of the type described in
clauses (a) and (b) of the definition of “Indebtedness” on behalf of any other Person); provided,
however, that

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Investments shall not include accounts receivable or other indebtedness owed by customers of such
Person, which are current assets and arose from sales or non-exclusive licensing in the ordinary
course of such Person’s business.

          (i) “Lien” shall mean, with respect to any property, any security interest, mortgage,
pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income
therefrom, including, without limitation, the interest of a vendor or lessor under a conditional
sale agreement, capital lease or other title retention agreement, or any agreement to provide any
of the foregoing, and the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.

          (j) “Material Adverse Effect” shall mean a material adverse effect on (a) the business,
assets, operations, or financial or other condition of the Company; (b) the ability of the Company
to pay or perform the Obligations in accordance with the terms of this Note and the other
Transaction Documents and to avoid a default or Event of Default under any Transaction Document; or
(c) the rights and remedies, taken as a whole, of Holder under this Note, the other Transaction
Documents or any related document, instrument or agreement.

          (k) “Permitted Indebtedness” means:

               (i) Indebtedness of Company in favor of the Holder arising under this Note;

               (ii) The existing Indebtedness set forth on the Company’s Form 10-QSB for its quarter
ended June 30, 2005 filed by the Company with the Securities and Exchange Commission (the “SEC”),
as the same may have increased or decreased in the ordinary course of the Company’s business after
the date thereof;

               (iii) Up to $1,405,000 of the Company’s 9% Convertible Notes due July 31, 2006
(collectively, the “Interim Bridge Notes”), of which $953,720 was already closed on September 23,
2005, as disclosed on the Company’s Current Report on Form 8-K dated September 29, 2005;

               (iv) Indebtedness of up to $2,000,000 issued by the Company in connection with the
Company’s offering of its securities after the date of this Note;

               (v) Indebtedness incurred in connection with the financing of the Company’s inventory or
its accounts receivable;

               (vi) Indebtedness to trade creditors, including, without limitation, affiliates of and
service providers to the Company, incurred in the ordinary course of business;

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               (vii) Other Indebtedness of Company, not exceeding $1.0 million in the aggregate
outstanding at any time;

               (viii) Contingent obligations of Company consisting of guarantees (and other credit
support) of the obligations of vendors and suppliers of Company in respect of transactions entered
into in the ordinary course of business;

               (ix) Indebtedness with respect to capital lease obligations and Indebtedness secured by
Permitted Liens;

               (x) Extensions, renewals, refundings, refinancings, modifications, amendments and
restatements of any of the items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified to impose more
burdensome terms upon Company.

               (xi) Taxes or other charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith.

          (l) “Permitted Investments” shall mean and include: (a) deposits with commercial banks
organized under the laws of the United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation; (b) Investments in marketable
obligations issued or fully guaranteed by the United States and maturing not more than one (1) year
from the date of issuance; (c) Investments in open market commercial paper rated at least “A1” or
“P1” or higher by a national credit rating agency and maturing not more than one (1) year from the
creation thereof; (d) Investments pursuant to or arising under currency agreements or interest rate
agreements entered into in connection with bona fide hedging arrangements; (e) Investments consisting of
deposit accounts of the Company in which the Holder has a perfected security interest and deposit
accounts of its Subsidiaries maintained in the ordinary course of business; (f) Investments
existing on the Closing Date disclosed in the Schedule; (g) Extensions of credit in the nature of
accounts receivable or notes receivable arising from the same or lease of goods or services in the
ordinary course of business; (h) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of business;
(i) Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business; (j) Investments consisting of
(i) compensation of employees, officers and directors of borrower so long as the Board of Directors
of Company determines that such compensation is in the best interests of Company, (ii) travel
advances, employee relocation loans and other employee loans and advances in the ordinary course of
business, (iii) loans to employees, officers or directors relating to the purchase of equity
securities of Company, (iv) other loans to officers and employees approved by the Board of
Directors; and (k) other Investments aggregating not in excess of $1,000,000 at any time; (l)
Investments in Subsidiaries of the Company or in joint ventures formed in connection with the
Company’s manufacturing, distribution or sales activities.

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          (m) “Permitted Liens” shall mean and include: (i) Liens for taxes or other governmental
charges not at the time delinquent or thereafter payable without penalty or being contested in good
faith, provided provision is made to the reasonable satisfaction of Holder for the eventual payment
thereof if subsequently found payable; (ii) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith, provided
provision is made to the reasonable satisfaction of Holder for the eventual payment thereof if
subsequently found payable; (iii) deposits under workers’ compensation, unemployment insurance and
social security laws or to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory obligations of surety or appeal
bonds or to secure indemnity, performance or other similar bonds in the ordinary course of
business; (iv) Liens securing obligations under a capital lease if such Liens do not extend to
property other than the property leased under such capital lease; (v) Liens upon any equipment
acquired or held by Company or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the acquisition of such
equipment; (vi) easements, reservations, rights of way, restrictions, minor defects or
irregularities in title and other similar charges or affecting the value or use of such property;
(vii) Liens in favor of the Holder; (viii) Liens existing on the date hereof in favor of holders of
Senior Indebtedness; (ix) any liens existing as of the date hereof and disclosed in the Schedule;
(x) liens on equipment leased by Company pursuant to an operating lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for the purpose of
financing the lease of such equipment (including Liens arising from UCC financing statements
regarding such leases); (xi) liens arising from judgements, decrees or attachments to the extent
and only so long as such judgment, decree or attachment does not constitute an Event of Default
under 7(h); (xii) liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods; (xiii) liens arising
solely by virtue of any statutory or common law provision relating to banker’s liens, rights off
setoff or similar rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (xiv) liens on the Company’s inventory or accounts receivable to
secure Indebtedness incurred in connection with the financing of such accounts receivable or
inventory; and (xv) liens incurred in connection with the extension, renewal, refunding,
refinancing, modification, amendment or restatement of the indebtedness secured by Liens of the
type described in clauses (i) and (xiv) above, provided that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien and the principal amount of
the indebtedness being extended, renewed or refinanced does not increase.

          (n) “Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability company, an unincorporated
association, a joint venture or other entity or a governmental authority.

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          (o) “Senior Indebtedness” shall mean the principal of, unpaid interest on and other
amounts due in connection with the notes payable and other evidences of indebtedness outstanding at
the time of execution of this Note.

          (p) “Subsidiary” shall mean (a) any corporation of which more than 50% of the issued and
outstanding equity securities having ordinary voting power to elect a majority of the Board of
Directors of such corporation is at the time directly or indirectly owned or controlled by Company,
(b) any partnership, joint venture, or other association of which more than 50% of the equity
interest having the power to vote, direct or control the management of such partnership, joint
venture or other association is at the time directly or indirectly owned and controlled by Company
(c) any other entity included in the financial statements of Company on a consolidated basis.

          (q) “Transaction Documents” shall mean this Note and the Warrant (as defined in Section
11 hereof).

     2. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company represents and warrants to the
Holder as follows:

          (a) Due Incorporation and Qualification. Each of the Company and its Subsidiaries (i) is
a corporation duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation; (ii) has the power and authority to own, lease and operate its
properties and carry on its business as now conducted and as proposed to be conducted; and (iii) is
duly qualified, licensed to do business and in good standing as a foreign corporation in each
jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have
a Material Adverse Effect.

          (b) Authority. The execution, delivery and performance by Company of each Transaction
Document to be executed by Company and the consummation of the transactions contemplated thereby
(i) are within the corporate power of Company and (ii) have been duly authorized by all necessary
corporate actions on the part of Company.

          (c) Enforceability. Each Transaction Document executed, or to be executed, by Company
has been, or will be, duly executed and delivered by Company and constitutes, or will constitute, a
legal, valid and binding obligation of Company, enforceable against Company in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general application relating to
or affecting the enforcement of creditors’ rights generally and general principles of equity.

          (d) Non-Contravention. The execution and delivery by Company of the Transaction
Documents executed by Company and the performance and consummation of the transactions contemplated
thereby do not and will not (i) violate the Certificate or Bylaws of the Company or any material
judgment, order, writ, decree, statute, rule or regulation applicable to Company; (ii) violate any
provision of, or result in the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of

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notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or
contract to which Company is a party or by which it is bound; or (iii) result in the creation or
imposition of any Lien upon any property, asset or revenue of Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or
approval applicable to Company, its business or operations, or any of its assets or properties.

     (e) Approvals. No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other Person (including, without
limitation, the shareholders of any Person) is required in connection with the execution and
delivery of the Transaction Documents executed by Company and the performance and consummation of
the transactions contemplated thereby, except for filings and notifications required by federal and
state securities laws in connection with the offer and sale of this Note and the consummation of
the transactions contemplated hereby and thereby.

     (f) No Violation or Default. None of the Company or the Company’s Subsidiaries is in
violation of or in default with respect to (i) its Certificate or Bylaws or equivalent charter
document or any material judgment, order, writ, decree, statute, rule or regulation applicable to
such Person; (ii) any material mortgage, indenture, agreement, instrument or contract to which such
Person is a party or by which it is bound (nor is there any waiver in effect which, if not in
effect, would result in such a violation or default), where, in each case, such violation or
default, individually, or together with all such violations or defaults, could reasonably be
expected to have a Material Adverse Effect.

     (g) Litigation. Except as described in the Company’s Quarterly Report on Form 10-QSB for
the period ended June 30, 2005, no actions (including, without limitation, derivative actions),
suits, proceedings or investigations are pending or, to the knowledge of the Company, threatened
against the Company or the Company’s Subsidiaries at law or in equity in any court or before any
other governmental authority which if adversely determined (i) would (alone or in the aggregate)
have a Material Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by the Company of the Transaction Documents or the transactions
contemplated thereby.

     (h) Title. The Company and the Company’s Subsidiaries own and have good and marketable
title in fee simple absolute to, or a valid leasehold interest in, all their respective real
properties and good title to their other respective assets and properties as reflected in the most
recent Financial Statements delivered to Purchasers (except those assets and properties disposed of
in the ordinary course of business since the date of such Financial Statements) and all respective
assets and properties acquired by Company and Company’s Subsidiaries since such date (except those disposed of in the ordinary course
of business). Such assets and properties are subject to no Lien, except for Permitted Liens.

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          (i) Equity Securities. The authorized capital stock of the Company may be found in the
Company’s Quarterly Report on Form 10-QSB for the period ended June 30, 2005 filed by the Company
with the SEC.

     3. REPRESENTATIONS AND WARRANTIES OF HOLDER. The Holder represents and warrants to the
Company that such Holder has been advised that neither this Note nor the securities which may be
issued upon the conversion hereof have been registered under the Securities Act, or any state
securities laws and, therefore, cannot be resold unless registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration requirements is
available. Such Holder is aware that the Company is under no obligation to effect any such
registration with respect to the Note or to file for or comply with any exemption from
registration. Such Holder has not been formed solely for the purpose of making this investment and
is purchasing the Note to be acquired by such Holder hereunder for its own account for investment,
not as a nominee or agent, and not with a view to, or for resale in connection with, the
distribution thereof. Such Holder has such knowledge and experience in financial and business
matters that such Purchaser is capable of evaluating the merits and risks of such investment, is
able to incur a complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time. Such Holder is an accredited investor as such term is
defined in Rule 501 of Regulation D under the Securities Act.

     4. INTEREST. Accrued interest on the outstanding principal balance on this Note shall
be payable on the Maturity Date.

     5. PREPAYMENT. Upon 3 (three) days’ prior written notice to the Holder, the Company may
prepay this Note in whole or in part; provided that any such prepayment will be applied first to
the payment of expenses due under this Note, second to interest accrued on this Note and third, if
the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.

     6. CERTAIN COVENANTS. While any amount is outstanding under the Note, without the prior written consent of Holders of 2/3 (two thirds) or more in interest of
then-outstanding principal amount of the Notes, which consent shall not be unreasonably withheld or
delayed:

          (a) Indebtedness. Neither Company nor any of its Subsidiaries shall create, incur,
assume or permit to exist any Indebtedness except Senior Indebtedness and Permitted Indebtedness.

          (b) Liens. Neither the Company nor any of its Subsidiaries shall create, incur, assume
or permit to exist any Lien on or with respect to any of its assets or property of any character,
whether now owned or hereafter acquired, except for Permitted Liens.

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          (c) Asset Dispositions. Neither the Company nor any of its Subsidiaries shall sell,
lease, transfer, license or otherwise dispose of any of its assets or property (collectively, a
“Transfer”), whether now owned or hereafter acquired, except (i) transfers in the ordinary course
of its business consisting of the sale of inventory and sales of worn-out or obsolete equipment and
(ii) transfers not in excess of $1.0 million for fair value and other than to any affiliate of the
Company.

          (d) Mergers, Acquisitions, Etc. Neither the Company nor any of its Subsidiaries shall
consolidate with or merge into any other Person or permit any other Person to merge into it, or
acquire all or substantially all of the assets or capital stock of any other Person.

          (e) Investments. Neither the Company nor any of its Subsidiaries shall make any
Investment except for Permitted Investments. Without previous notice to Holder, Company will not
sell an amount greater than $100,000 in equity securities, with the exception of (i) up to $10
million offering contemplated in the Private Placement Memorandum; (ii) compensatory and incentive
awards of Equity Securities to employees of and consultants to the Company consistent with its
prior practices; and (iii) for issuances of Equity Securities in connection with the exercise of
conversion rights of the holders of the Interim Bridge Notes and of warrants or options to purchase
Company securities granted by the Company prior to the date hereof.

          (f) Dividends, Redemptions, Etc. Neither the Company nor any of its Subsidiaries shall
(i) pay any dividends or make any distributions on its Equity Securities; (ii) purchase, redeem,
retire, decease or otherwise acquire for value any of its Equity Securities; (iii) return any
capital to any holder of its Equity Securities; (iv) make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity Securities; or (v) set apart any
sum for any such purpose; other than payments of principal and interest on outstanding Interim
Bridge Notes and repurchases of shares from terminated employees pursuant to the terms of
restricted stock purchase agreements, and provided, however, that any Subsidiary may pay cash
dividends to Company.

          (g) Indebtedness Payments. Neither the Company nor any of its Subsidiaries shall (i)
prepay, redeem, purchase, decrease or otherwise satisfy in any manner prior to the scheduled
repayment thereof any Indebtedness for borrowed money (other than (A) amounts due under this Note
and (B) Senior Indebtedness) or lease obligations, (ii) amend, modify or otherwise change the terms
of any Indebtedness for borrowed money (other than (A) obligations under this Note and (B) Senior
Indebtedness) or lease obligations so as to accelerate the scheduled repayment thereof or (iii)
repay any notes to officers, directors or stockholders.

          (h) Information Rights; Notices. The Company shall furnish to the Holder the following:

               (i) SEC Reports. In no event later than five (5) business days after they are sent, made
available or filed, copies of all registration statements and reports filed by

9

 

Company with the Securities and Exchange Commission and all reports, proxy statements and financial
statements sent or made available by Company to its stockholders generally; and

               (ii) Notice of Defaults. Promptly upon the occurrence thereof, written notice of the
occurrence of any Event of Default hereunder or any event of default with respect to any Senior
Indebtedness.

          (i) Inspection Rights. The Holder and its representatives shall have the right, at any
time during normal business hours, upon reasonable prior notice, and at the expense of the Holder,
to visit and inspect the properties of the Company and its corporate, financial and operating
records, and make abstracts therefrom, and to discuss the Company’s affairs, finances and accounts
with its directors, officers and independent public accountants.

          (j) Use of Proceeds. The Company shall use the proceeds it receives from sales of Notes
to all of the Holders as set forth in the Company’s Private Placement Memorandum dated October 10,
2005; provided, however that (i) not more than $25,000 per month of such proceeds may be used by
the Company to pay R&D payables reflected on the Balance Sheet contained in its Quarterly Report on
Form 10-QSB for its period ended June 30, 2005 (the “Form 10-QSB”) and (ii) not more than $10,000
per month may be used to pay other payables reflected on the Balance Sheet contained in the Form
10-QSB.

     7. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an “Event
of Default” under this Note and the other Transaction Documents:

          (a) Failure to Pay. The Company shall fail to pay (i) when due any principal payment on
the due date hereunder or (ii) any interest or other payment required under the terms of this Note
or any other Transaction Document on the date due and such payment shall not have been made within
five (5) days of Company’s receipt of the Holder’s written notice to Company of such failure to
pay; or

          (b) Breaches of Certain Covenants. The Company or any of its Subsidiaries shall fail to
observe or perform any covenant, obligation, condition or agreement set forth in Section 6(d), 6(f)
or 6(j) of this Note; or

          (c) Breaches of Other Covenants. The Company or any of its Subsidiaries shall fail to
observe or perform any other covenant, Transaction Documents (other than those specified in
Sections 7(a) and 7(b)) and (i) such failure shall continue for fifteen (15) days, or (ii) if such
failure does not result from the payment of money or the failure to pay money and is not curable
within such fifteen (15) day period, but is reasonably capable of cure within forty-five (45) days,
either (A) such failure shall continue for forty-five (45) days or (B) the Company or its
Subsidiary shall not have commenced a cure in a manner reasonably satisfactory to the Holders
within the initial fifteen (15) day period; or

10

 

          (d) Representations and Warranties. Any representation, warranty, certificate, or other
statement (financial or otherwise) made or furnished by or on behalf of the Company to the Holder
in writing in connection with this Note or any of the other Transaction Documents, or as an
inducement to the Holder to enter into this Note and the other Transaction Documents, shall be
false, incorrect, incomplete or misleading in any material respect when made or furnished, except
any such false, incorrect, incomplete or misleading statement which will not result in a Material
Adverse Effect on the Company; or

          (e) Other Payment Obligations. The Company or any of its Subsidiaries shall (i)(A) fail
to make any payment when due under the terms of any bond, debenture, note or other evidence of
Indebtedness, including the Senior Indebtedness, to be paid by such Person (excluding this Note and
the other Transaction Documents but including any other evidence of Indebtedness of Company or any
of its Subsidiaries to the Holder) and such failure shall continue beyond any period of grace
provided with respect thereto, or (B) default in the observance or performance of any other
agreement, term or condition contained in any such bond, debenture, note or other evidence of
Indebtedness, and (ii) the effect of such failure or default is to cause, or permit the holder or
holders thereof to cause, Indebtedness in an aggregate amount of Two Hundred Fifty Thousand Dollars
($250,000) or more to become due prior to its stated date of maturity, unless such acceleration
shall have been rescinded or forgone and such failure to pay cured within thirty (30) days from the
date of such acceleration; or

          (f) Voluntary Bankruptcy or Insolvency Proceedings. The Company or any of its
Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they mature, (iii) make a general assignment
for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part,
(v) become insolvent (as such term may be defined or interpreted under any applicable statute),
(vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other proceeding commenced
against it, or (vii) take any action for the purpose of effecting any of the foregoing; or

          (g) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of
a receiver, trustee, liquidator or custodian of the Company or any of its Subsidiaries or of all or
a substantial part of the property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to the Company or any of its Subsidiaries
or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in
effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed
or discharged within sixty (60) days of commencement; or

11

 

          (h) Judgments. A final judgment or order for the payment of money in excess of Two
Hundred Fifty Thousand Dollars ($250,000) (exclusive of amounts covered by insurance issued by an
insurer not an affiliate of Company) shall be rendered against the Company or any of its
Subsidiaries and the same shall remain undischarged for a period of thirty (30) days during which
execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a substantial part of
the property of the Company or any of its Subsidiaries and such judgment, writ, or similar process
shall not be released, stayed, vacated or otherwise dismissed within thirty (30) days after issue
or levy; or

          (i) Transaction Documents. Any Transaction Document or any material term thereof shall
cease to be, or be asserted by the Company not to be, a legal, valid and binding obligation of
Company enforceable in accordance with its terms or if the Liens of the Holder in any of the assets
of Company or its Subsidiaries shall cease to be or shall not be valid and perfected Liens or the
Company or any Subsidiary shall assert that such Liens are not valid and perfected Liens.

     8. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in Sections 7(f) and 7(g)) and at any time
thereafter during the continuance of such Event of Default, the Holders may, by written notice to
the Company, declare all outstanding Obligations payable by the Company hereunder to be
immediately due and payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the other Transaction
Documents to the contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 7(f) and 7(g), immediately and without notice, all outstanding
Obligations payable by Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the other Transaction Documents to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, the Holders may exercise any other right, power or remedy granted to it by the
Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at
law, or both.

     9. SUBORDINATION. The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the
prior payment in full of the Senior Indebtedness.

          (a) Insolvency Proceedings. If there shall occur any receivership, insolvency, assignment for
the benefit of creditors, bankruptcy, reorganization, or arrangements with creditors (whether or
not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of the
Company, (i) no amount shall be paid by the Company in respect of the principal of, interest on or
other amounts due with respect to

12

 

this Note at the time outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof of claim shall be
filed with the Company by or on behalf of Holder of this Note which shall assert any right to
receive any payments in respect of the principal of and interest on this Note except subject to the
payment in full of the principal of and interest on all of the Senior Indebtedness then
outstanding.

          (b) Default on Senior Indebtedness. If there shall occur an event of default which has
been declared in writing with respect to any Senior Indebtedness, as defined therein, or in the
instrument under which it is outstanding, permitting the holder to accelerate the maturity thereof
and the Holder shall have received written notice thereof from the holder of such Senior
Indebtedness, then, unless and until such event of default shall have been cured or waived or shall
have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be
made in respect of the principal of or interest on this Note, unless within one hundred eighty
(180) days after the happening of such event of default, the maturity of such Senior Indebtedness
shall not have been accelerated. Not more than one notice may be given to Holder pursuant to the
terms of this Section 9(b) during any 360 day period.

          (c) Further Assurances. By acceptance of this Note, the Holder agrees to execute and
deliver customary forms of subordination agreement requested from time to time by holders of Senior
Indebtedness, and as a condition to the Holder’s rights hereunder, the Company may require that the
Holder execute such forms of subordination agreement; provided that such forms shall not impose on
the Holder terms less favorable than those provided herein.

          (d) Other Indebtedness. No Indebtedness which does not constitute Senior Indebtedness
shall be senior in any respect to the indebtedness represented by this Note.

          (e) Subrogation. Subject to the payment in full of all Senior Indebtedness, the Holder
shall be subrogated to the rights of the holder(s) of such Senior Indebtedness (to the extent of
the payments or distributions made to the holder(s) of such Senior Indebtedness pursuant to the
provisions of this Section 9) to receive payments and distributions of assets of the Company
applicable to the Senior Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on account of this
Note; and for purposes of such subrogation, no payments or distributions to the holders of Senior
Indebtedness to which the Holder would be entitled except for the provisions of this Section 9
shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and
the Holder, be deemed to be a payment by the Company to or on account of the Senior Indebtedness.

          (f) No Impairment. Subject to the rights, if any, of the holders of Senior Indebtedness
under this Section 9 to receive cash, securities or other properties otherwise payable or
deliverable to the Holder, nothing contained in this Section 9 shall impair, as

13

 

between the Company and the Holder, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder the principal hereof and interest hereon as and when the
same become due and payable, or shall prevent the Holder, upon default hereunder, from exercising
all rights, powers and remedies otherwise provided herein or by applicable law.

          (g) Reliance of Holders of Senior Indebtedness. The Holder, by its acceptance hereof, shall
be deemed to acknowledge and agree that the foregoing subordination provisions are, and are
intended to be, an inducement to and a consideration of each holder of Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after the creation of the indebtedness
evidenced by this Note, and each such holder of Senior Indebtedness shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in continuing to hold,
such Senior Indebtedness.

     10. CONVERSION.

          (a) Conversion by Holder. At any time prior to payment in full of the principal balance
of this Note, the Holder shall have the right, at the Holder’s option, to convert this Note, in
accordance with the provisions of Section 10(c) hereof, in whole or in part, into fully paid and
nonassessable shares of Common Stock, provided that the Holder shall provide at least thirty (15)
days notice to the Company of Holder’s election to convert this Note into shares of SWA’s Common
Stock. The number of shares of SWA’s Common Stock into which this Note may be converted shall be
determined by dividing the aggregate amount of this Note to be converted by the Conversion Price
(as defined below) in effect at the time of such conversion. The initial “Conversion Price” shall
be equal to $0.70 per share. The Conversion Price shall be subject to adjustment from time to time
pursuant to Section 12 hereof.

          (b) Conversion by the Company. The Company shall have the right, but only with the
Holder’s consent, to convert this Note, in accordance with the provisions of Section 10(c) hereof,
in whole or in part, into fully paid and nonassessable shares of SWA’s common stock. The number of
shares of common stock into which this Note may be converted shall be determined by dividing the
aggregate amount of this Note to be converted by the Conversion Price in effect at the time of such
conversion.

          (c) Conversion Procedure.

               (i) Conversion Pursuant to Section 10(a). Before the Holder shall be entitled to convert
this Note into shares of SWA’s Common Stock, it shall surrender this Note, duly endorsed, at the
office of the Company and shall give written notice, postage prepaid, to the Company at its
principal corporate office, of the election to convert the same pursuant to Section 10(a), and
shall state therein the amount of the unpaid principal amount of this Note, together with accrued
but unpaid interest, to be converted and the name or names in which the certificate or certificates
for shares of SWA’s Common Stock are to be issued, subject to compliance by the Holder of this Note
with the transfer

14

 

restrictions applicable to this Note. The Company shall, as soon as practicable thereafter (but in
any event within ten (10) days thereafter), issue and deliver to the Holder of this Note a
certificate or certificates for the number of shares of SWA’s Common Stock to which the Holder
shall be entitled upon conversion (bearing such legends as are required by applicable state and
federal securities laws), together with a replacement Note (if any principal amount is not
converted) and any other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to Holder for any cash amounts
payable as described in Section 10(d). The conversion shall be deemed to have been made
immediately prior to the close of business on the date of the surrender of this Note, and the
Person or Persons entitled to receive the shares of SWA’s Common Stock upon such conversion shall
be treated for all purposes as the record holder or holders of such shares of SWA’s Common Stock as
of such date.

               (ii) Conversion Pursuant to Section 10(b). If this Note is converted by the Company
pursuant to Section 10(b), written notice shall be delivered to the Holder notifying the Holder of
the conversion to be effected, specifying the Conversion Price, the principal amount of the Note to
be converted, the date on which such conversion is expected to occur and calling upon such Holder
to surrender to Company, in the manner and at the place designated, the Note. Upon such conversion
of this Note, the Holder shall surrender this Note, duly endorsed, at the principal office of
Company. At its expense, the Company shall, as soon as practicable thereafter (but in any event
within ten (10) days thereafter), issue and deliver to such Holder a certificate or certificates
for the number of shares to which Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws), together with any other
securities and property to which the Holder is entitled upon such conversion under the terms of
this Note, including a check payable to the Holder for any cash amounts payable as described in
Section 10(d). Any conversion of this Note pursuant to Section 10(b) shall be deemed to have been
made immediately prior to the closing of the issuance and sale of shares as described in Section
10(b) and on and after such date the Person entitled to receive the shares issuable upon such
conversion shall be treated for all purpose as the record Holder of such shares as of such date.

          (d) Fractional Shares; Interest; Effect of Conversion. No fractional shares shall be
issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to the
Holder upon the conversion of this Note, the Company shall pay to the Holder an amount equal to the
product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant
to the previous sentence. In addition, the Company shall pay to the Holder any interest accrued on
the amount converted and on the amount to be paid to the Company pursuant to the previous sentence.
Upon conversion of this Note in full and the payment of the amounts specified in this Section
10(d), the Company shall be forever released and discharged from all its obligations and
liabilities under this Note.

15

 

     11. ISSUANCES OF WARRANTS.

          (a) The Holder shall receive, for no additional consideration, a stock purchase warrant
(the “Warrant”) in a form attached to this Note, entitling the Holder to purchase shares of the
Company’s Common Stock.

          (b) The Company shall issue to the Holder a Warrant entitling the Holder to purchase a
number of shares of the Company’s Common Stock equal to 150% of the number of shares of Common
Stock into which this Note initially is convertible.

          (c) Each Warrant to be issued by the Company pursuant to this Section 11 shall have an
initial exercise price of $1.00 per share, and expiration date of 2 (two) years from the date when
it is issued.

          (d) The shares of SWA’s Common Stock issuable upon the exercise of any Warrants issued
pursuant to this Section 11 shall be entitled to “piggy back” registration rights.

     12. CONVERSION PRICE ADJUSTMENTS.

          (a) Adjustments for Stock Splits and Subdivisions. In the event the Company should at any
time or from time to time after the date of issuance hereof fix a record date for the effectuation
of a split or subdivision of the outstanding shares of SWA’s Common Stock or other distribution
payable in additional shares of SWA’s Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly, additional shares of SWA’s
Common Stock (hereinafter referred to as “SWA’s Common Stock Equivalents”) without payment of any
consideration by such holder (including the additional shares of SWA’s Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion Price of this Note
shall be appropriately decreased so that the number of shares of SWA’s Common Stock issuable upon
conversion of this Note shall be increased in proportion to such increase of outstanding shares.

          (b) Adjustments for Reverse Stock Splits. If the number of shares of SWA’s Common Stock
outstanding at any time after the date hereof is decreased by a combination of the outstanding
shares of SWA’s Common Stock, then, following the record date of such combination, the Conversion
Price for this Note shall be appropriately increased so that the number of shares of SWA’s Common
Stock issuable on conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.

          (c) Notices of Record Date, etc. In the event of:

               (i) Any taking by the Company of a record of the holders of any class of securities of
the Company for the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend payable out of earned surplus

16

 

at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right; or

               (ii) Any capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any transfer of all or substantially all of the assets of
the Company to any other Person or any consolidation or merger involving the Company; or

               (iii) Any voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the Company will mail to Holder of this Note at least ten (10) days prior to the earliest date
specified therein, a notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of such dividend,
distribution or right; and (B) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up is expected to become
effective and the record date for determining stockholders entitled to vote thereon.

          (d) Reservation of Stock Issuable Upon Conversion. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of SWA’s Common Stock solely
for the purpose of effecting the conversion of this Note such number of its shares of SWA’s Common
Stock as shall from time to time be sufficient to effect the conversion of the Note; and if at any
time the number of authorized but unissued shares of SWA’s Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note, without limitation
of such other remedies as shall be available to the holder of this Note, the Company will use its
best efforts to take such corporate action as may, in the opinion of counsel, be necessary to
increase its authorized but unissued shares of SWA’s Common Stock to such number of shares as shall
be sufficient for such purposes.

     13. SUCCESSORS AND ASSIGNS. Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by
the Company without the prior written consent of the Holder or by the Holder without the prior
written consent of the Company. Subject to the foregoing and the restrictions on transfer
described in Section 15 below, the rights and obligations of the Company and the Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators and transferees of the
parties.

     14. WAIVER AND AMENDMENT. Any provision of this Note may be amended, waived or modified
upon the written consent of the Company and the Holder.

     15. TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any
offer, sale or other disposition of this Note or any securities into which this Note may be
converted, the Holder will give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of the Holder’s counsel, to the effect that such
offer, sale

17

 

or other distribution may be effected without registration or qualification under any federal or
state law then in effect. Promptly upon receiving such written notice and reasonably satisfactory
opinion, if so requested and subject to Section 13, the Company, as promptly as practicable, shall
notify the Holder that the Holder may sell or otherwise dispose of this Note or such securities,
all in accordance with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 15 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Company, the Company shall so notify the Holder promptly after such
determination has been made. Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Act, unless in the opinion of counsel for
the Company such legend is not required in order to ensure compliance with the Act. The Company
may issue stop transfer instructions to its transfer agent in connection with such restrictions.

     16. NOTICES. Any notice, request or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been duly given if personally delivered or mailed
by registered or certified mail, postage prepaid, or by recognized overnight courier, or by
facsimile transmission or personal delivery, addressed (i) if to the Holder, at such Holder’s
address set forth at the end of this Agreement, or at such other address as such Holder shall have
furnished the Company in writing, or (ii) if to the Company, at its address or fax number set forth
at the end of this Agreement, or at such other address as the Company shall have furnished to the
Holder in writing. Any party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when received.

     17. PAYMENT. Payment shall be made in lawful tender of the United States.

     18. DEFAULT RATE; USURY. During any period in which an Event of Default has occurred and
is continuing, the Company shall pay interest on the unpaid principal balance hereof at a rate per
annum equal to the rate otherwise applicable hereunder plus 9% (nine percent) until such time as
the event of default has been cured in its entirety, and the Note Holders will be entitled to
receive additional Warrants to purchase a number of shares of SWA’s Common Stock equal to 25%
(twenty-five percent) of the number of shares of SWA’s Common Stock issuable upon the exercise of
the original Warrants issued hereunder. In the event any interest is paid on this Note which is
deemed to be in excess of the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed a payment of
principal and applied against the principal of this Note.

     19. EXPENSES; WAIVERS. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation, reasonable
attorneys’ fees and costs, incurred by one counsel representing all Holders designated in
accordance with Section 21 herein below, in connection with such action. The Company hereby waives
notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor
and all other notices or demands relative to this instrument. The Company shall pay on demand all
reasonable fees and expenses,

18

 

including reasonable attorneys’ fees and expenses, incurred by the Holder with respect to the
enforcement or attempted enforcement of any of the obligations of the Company to the Holder under
the Transaction Documents or in preserving any of the Holder’s rights and remedies (including,
without limitation, all such fees and expenses incurred in connection with any “workout” or
restructuring affecting the Transaction Documents or the obligations thereunder or any bankruptcy
or similar proceeding involving Company or any of its Subsidiaries).

     20. REPLACEMENT NOTE. Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any Note and (a) in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b) in the case
of mutilation, upon surrender thereof; the Company, at its expense, will execute and deliver in
lieu thereof a new Note executed in the same manner as the Note being replaced, in the same
principal amount as the unpaid principal amount of such Note and dated the date to which interest
shall have been paid on such Note or, if no interest shall have yet been so paid, dated the date of
such Note.

     21. ACTION OF HOLDERS. Any action required or permitted to be taken by the Holders
of this Note and the other Notes, and any demand, sent, forbearance or waiver, shall be effective
only with the consent or other affirmative action of 2/3 (two thirds) or more in interest of
then-outstanding principal amount of the Notes. No such demand, consent, waiver or forbearance
shall be of any force or effect without such consent or other action.

[remainder of page left blank intentionally]

19

 

     22. GOVERNING LAW. This Note and all actions arising out of or in connection with this
Note shall be governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of law provisions of the State of New York or of any other state.

          IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written
above.

SAVE THE WORLD AIR, INC.

	 	 	 
	By:
	 	 
	 	 
	 
	 	 
	Its:
	 	 
	 	 
	 
	 	 
	Fax Number:

	 	(818) 487-8003
	 	 	 

	 	 	 
	HOLDER
	 	 
	 
	 	 
	Amount:

	$	 
	 	 	 
	 
	 	 
	Signature:
	 	 
	 	 	 
	 
	 	 
	Name:
	 	 
	 	 	 
	 
	 	 
	Address:
	 	 
	 	 	 
	 
	 	 
	 
	 	 
	 	 	 
	 
	 	 
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Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}]]