Document:

Exhibit 10.1

 

Exhibit 10.1

SEPARATION AGREEMENT AND

GENERAL MUTUAL RELEASE OF CLAIMS

     This Separation Agreement and General Mutual Release of Claims dated as of June 15, 2007 (this
“Agreement”) is made between Save the World Air, Inc. (the “Company”) and Bruce H. McKinnon, an
individual (“McKinnon”). The Company and McKinnon are sometimes referred to collectively herein as
the “Parties”.

     WHEREAS, McKinnon wishes to resign as Chief Executive Officer (“CEO”) of the Company, for personal
reasons; and

     WHEREAS, the Company wishes to accept the resignation of McKinnon as CEO of the Company; and

     WHEREAS, the Parties wish to provide for clarity, finality and certainty as to the basis for
McKinnon’s resignation, and the terms of cash and non-cash compensation to which McKinnon is
entitled following such resignation; and

     WHEREAS, McKinnon wants to release any and all claims that he may have or which exist, or may
exist, by him against the Company, known and unknown, including but not necessarily limited to,
all known and unknown claims arising out of McKinnon’s service to the Company as CEO of the Company
or any subsidiary thereof (individually, a “Subsidiary” and collectively the “Subsidiaries”) except
as specifically provided for herein; and

     WHEREAS, the Company wants to release any and all claims that it may have or which exist, or may
exist, by it against McKinnon, known and unknown, including, but not necessarily limited to, all
known and unknown claims arising out of McKinnon’s service to the Company as CEO of the Company or
any Subsidiary thereof, except as specifically provided for herein;

     THEREFORE, in consideration of the promises in this Agreement, the adequacy of which is
acknowledged, the Parties agree as follows:

     1. Resignation

     1.1 Resignation as CEO. McKinnon hereby tenders his resignation as Chief Executive Officer
of the Company and each Subsidiary under that certain Employment Agreement dated October 5,
2005 between the Company and McKinnon (the “Employment Agreement”), such resignations to
take effect upon the appointment by the Board of Directors of the Company (the “Board”) of his
successor, but in no event later than July 31,2007.

     1.2 Resignation from Other Offices. McKinnon hereby tenders his resignation from any and
all other offices he holds with the Company and each Subsidiary, other than the office of
President of the Company, such resignations to take effect upon the appointment by the
Board of his successor, but in no event later than July 31, 2007. Mr. McKinnon is not
tendering his resignation as President of the Company and shall continue to serve as
President of the Company, with all the rights, privileges, prerogatives

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and responsibilities attendant thereto, including without limitation, compensation therefor, until
he has resigned, been removed by the Board or the Employment
Agreement has terminated.

     1.3 Resignation as Director. McKinnon hereby tenders his resignation as a director of
each Subsidiary effective July 31, 2007. McKinnon is not tendering his resignation as a
director of the Company and shall continue to serve as a director of the Company with all
the rights, privileges, prerogatives and responsibilities attendant thereto, including
without limitation, compensation therefore.

     2. Compensation

	 	2.1	 	No Reduction in Salary. Notwithstanding the provisions of Section 1 above, each
component of McKinnon’s compensation under the Employment Agreement shall remain
unchanged for the period commencing the date hereof and continuing thereafter to and
including December 31, 2007 (the “Remaining Term”), which period constitutes the remaining term of
the Employment Agreement, all such amounts to be paid in accordance with the Company’s normal pay
policies applicable to senior officers of the Company; provided, however, that the Company may not
declare a moratorium on any payment hereunder to McKinnon as part of cash management by the
Company, or any other reason, without McKinnon’s prior written consent. All compensation
under the Employment Agreement that has been accrued but is, as of the date of this Agreement
unpaid, as well as all subsequent payments that may become accrued and not paid, shall be paid to
McKinnon as soon as reasonably practicable, taking into account the Company’s available cash and
other operating requirements, but in no event shall such sums be paid later than the first to occur
of (i) the consummation of a financing transaction in which at least $2,000,000. gross proceeds are
received by the Company and (ii) August 31, 2007 All sums paid hereunder shall be subject to
appropriate withholding as required by applicable laws and regulations.
	 
	 	2.2	 	Compensation. Pursuant to the Employment Agreement, McKinnon shall remain
eligible for and be entitled to any additional amounts, in the form of cash or non-cash
compensation, as the Compensation Committee of the Board, or the Board, may determine, in
their sole and absolute discretion, or nothing as the Compensation Committee of the Board
or the Board may determine.
	 
	 	2.3	 	Other Benefits. McKinnon shall be entitled to all other benefits not
expressly provided for herein, pursuant to the Employment Agreement for the Remaining
Term.

     3. Claims

     3.1 Waiver of Claims. McKinnon acknowledges that the consideration provided for pursuant to
Section 2 of this Agreement is provided to him in full and complete satisfaction and discharge of
any and all claims that he may have against the Company, its parents, subsidiaries, directors,
officers and agents, whether asserted or

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unasserted, known or unknown, occurring up to and including the date of execution of this
Agreement. The Company acknowledges that McKinnon’s agreements and releases set forth in this
Agreement are provided to the Company in full and complete satisfaction and discharge of any and
all claims that the Company, its parents, subsidiaries, directors, officers and agents may have
against McKinnon, whether asserted or unasserted, known or unknown, occurring up to and including
the date of execution of this Agreement.

     3.2 Section 1542. With respect to the waivers set forth in Section 3.1 above, the Parties
and each of them acknowledges and expressly waives any and all rights he or it may have under
California Civil Code Section 1542 which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if known to him must have materially affected
his settlement with the debtor.

     3.3 No Other Relief. Each of the Parties understands and agrees that all other entities
released herein shall neither make nor cause to be made any additional relief to the other
Party, except as specifically referenced herein. Should any third party, including any state
or federal agency, bring any action or claim against the Company on McKinnon’s behalf,
either collectively or individually, McKinnon acknowledges and agrees that this Agreement
provides him with full relief and that he will not request any other relief. Should any third
party, including any state or federal agency, bring any action or claim against McKinnon on
the Company’s behalf, either collectively or individually, the Company acknowledges and agrees
that this Agreement provides it with full relief and that it will not request any other
relief.

     3.4 Indemnification by the Company. The Company agrees to indemnify and hold McKinnon
harmless from any “Damages” (as defined in Section 3.7 below) which McKinnon suffers as a
result of the agreements made in the Employment Agreement, this Agreement or anything else
arising from, or in connection with, McKinnon’s service as an
employee of the Company.

	 	3.5	 	Indemnification by McKinnon. McKinnon agrees to indemnify and hold the Company
harmless from any Damages which the Company suffers as a result of the agreements made in the
Employment Agreement, this Agreement or anything else arising from, or in
connection with, McKinnon’s service as an employee of the Company.
	 
	 	3.6	 	3.6 Statutory Indemnification. Notwithstanding anything to the
contrary contained in Sections 3.4 or 3.5 of this Agreement, McKinnon shall be entitled to
indemnification in accordance with laws of the state of Nevada, and the Articles of Incorporation
and Bylaws of the Company, to the fullest extent provided by law.

     3.7 Definitions. As used in this Section 3, the term “Damages” shall mean (i) the amount
of any damages awarded against the Company in a judgment entered by any court of competent
jurisdiction pursuant to which judgment a finding has been made, (ii) all amounts paid in
settlement of any “Third Party Claim” (as defined below) and (iii) all legal fees and related
costs incurred in connection with defending any Third Party Claim. As used in this Section 3,
the term “Third Party Claim” shall mean any claim

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asserted by any person other than McKinnon and the Company, and shall also include claims asserted
in the name of the Company in the nature of a derivative claim.

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     4. Miscellaneous

     4.1 Nondisclosure. The Parties hereto agree to keep the terms of this Agreement and the
transactions provided for herein strictly confidential, except as the same may be required to
be disclosed under the Rules and Regulations of the United State Securities and Exchange
Commission. No press release or other public statements shall be issued or made by either
Party without the prior written consent of the other Party. The Parties further agree not to
disparage each to any third person(s), either orally or in writing. The Parties acknowledge
that irreparable harm would occur to the non-breaching Party if the other Party violates the
terms of this paragraph 4, and, accordingly, the non-breaching Party may immediately seek
legal and equitable relief, including without limitation injunctive relief, against the Party
who breaches any provision of this paragraph 4.

     4.2 Severability. If any portion of this Agreement is void or deemed unenforceable
for any reason, the unenforceable portion shall be deemed severed from the remaining portions
of this Agreement, which shall otherwise remain in full force.

     4.3 Disputes: Applicable Law. Any dispute under this Agreement shall be resolved by
meditation and, if such meditation is not successful, by arbitration pursuant to the rules of
the Los Angeles Superior Court. This Agreement shall be interpreted in accordance with
California law without regard to conflict of laws principles.

     4.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which together shall constitute
one and the same instrument. Faxed copies shall be effective and enforceable.

     4.5 Authorization. Each of the Parties and each of the individuals signing this
Agreement on behalf of the Parties represents and warrants that the individuals executing this
Agreement on behalf of the Parties have the capacity and have been duly authorized to execute this
Agreement on behalf of the party so indicated. Each of the Parties shall indemnify the other
parties to this Agreement, and hold the other harmless, for, from and against any and all damages,
costs, attorneys’ fees, and other expenses, if the respective signatory executing on behalf of such
party is not so authorized.

     4.6 Conflicts. In the event of any conflict between the provisions of the Employment
Agreement and this Agreement, the provisions of this Agreement shall govern.

[remainder of this page intentionally left blank]

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     4.7 Entire Agreement. This Agreement constitutes the entire agreement of the Parties and
that in executing this Agreement neither Party has relied upon any representation or statement
not set forth herein with regard to the subject matter, basis, or effect of this Agreement.
McKinnon represents that he has been given adequate time to consider this Agreement before
executing it and that he executes this Agreement as his own free act and deed.

     WHEREFORE, the Parties, by their signatures below, acknowledge that there exist no other promises,
representations, or agreements relating to this Agreement, except as specifically set forth herein
and that they voluntarily enter into this Agreement with the intent to be legally bound thereby, as
of the date first above written.

	 	 	 	 	 	 	 
	 	 	SAVE THE WORLD AIR, INC.

(“Company”)	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 		 	 
	 

	 	 	 	 	 	 
	 	 	Name: Joseph Helleis	 	 
	 	 	Title: Chairman of the Board	 	 
	 
	 	 	 	 	 	 
	 	 	(“McKinnon”)	 	 
	 
	 	 	 	 	 	 
	 	 		 	 
	 	 	Bruce H. McKinnon	 	 

6Exhibit 10.2

 

Exhibit 10.2

EMPLOYMENT AGREEMENT 

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of July 18, 2007, by and
between Save the World Air, Inc, a Nevada corporation (the “Company”), whose address is 5125
Lankershim Boulevard, North Hollywood, California 91601, and Charles Blum (“Executive”), an
individual, whose address is 1505 Upland Hills Drive North, Upland, California 91784, with
reference to the following:

RECITALS

     A. Executive has certain technical knowledge, skills and abilities pertaining to the business
in which the Company engages.

     B. The Company wishes to employ Executive as its President and Chief Executive Officer, and
Executive wishes to accept employment with the Company, all on the terms and subject to the
conditions set forth in this Agreement.

AGREEMENT

     Accordingly, the parties agree as follows:

     1. EFFECTIVE DATE AND TERM. Unless sooner terminated as provided in this Agreement,
including as a result of the Company’s early termination of this Agreement as provided in Section 4
below, the Company shall employ Executive for an initial term commencing on a date to be agreed
between the parties but not later than August 1, 2007 (the “Effective Date”) and continuing
thereafter until the close of business on the day immediately preceding the first anniversary of
the Effective Date. Thereafter, this Agreement shall be renewed for successive one year periods
unless either party shall give written notice to the other, not later than April 30 of the
then-current year of the Term that this Agreement shall not be renewed (the “Expiration Date”).
This Agreement shall in all respects terminate on the Expiration Date, except for those obligations
of either party that are expressly stated to continue after such time or by nature will continue
after such time. The period beginning on the Effective Date and ending on the earlier of the
Expiration Date or the date Executive’s employment under this Agreement actually terminates is
referred to as the “Term.”

     2. POSITION AND DUTIES.

          2.1 General Duties. Executive shall serve as the Company’s President and Chief
Executive Officer, and in such capacity shall be one of the Company’s senior executive officers.
Executive’s duties shall be consistent with such position. In carrying out his duties, Executive
shall use Executive’s best efforts, skills, judgment and abilities, and shall at all times promote
the Company’s interests and perform and discharge well and faithfully, those duties. Executive
shall report directly to the Company’s Board of Directors. In acting on the Company’s behalf,
Executive shall observe and be governed by all of the Company’s rules and policies, In addition,
Executive shall abide by all of the requirements of the Securities and Exchange Commission, and
adhere to the policies and requests of the Company with respect thereto, as the same may exist from
time to time, applicable to executive officers of public companies.

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          2.2 Full-Time Employment. At all times during the Term, Executive shall devote
Executive’s entire business time, attention and energies to the Company’s business, and shall
furnish services for the Company and for its subsidiaries, affiliates and divisions. During the
Term, Executive shall not engage in any activity that would materially interfere with or adversely
affect Executive’s performance of Executive’s duties under this Agreement or which could reasonably
be expected to be competitive with or adverse to the business of the Company or any of its
subsidiaries, affiliates or divisions.

          2.3 Place of Performance. In connection with Executive’s employment under this
Agreement, Executive shall be based at the Company’s offices where the same are from time to time
located during the term of this Agreement, and which are, on the date hereof, in North Hollywood,
California.

     3. COMPENSATION.

          3.1 “Compensation”. “Compensation” means the Base Salary (as defined below) and bonus,
if any, pursuant to this Section 3.

          3.2 Base Salary. For all services rendered pursuant to this Agreement to the Company
and any of its subsidiaries and affiliates, commencing on the Effective Date Executive shall
receive a base salary (as may be adjusted from time to time, the “Base Salary”) of $200,000 per
year. On or prior to each anniversary of the Effective Date, the Company’s Board of Directors, or
the appropriate committee thereof, shall review the performance of the Executive hereunder and
shall consider whether or not to alter the Base Salary; provided that the Base Salary shall not be
reduced unless such reduction is in proportion to, and on all of the other terms and conditions
promulgated in connection with, a reduction in salaries paid to other senior executives of the
Company generally.

          3.3 Bonus. Executive shall be eligible to receive an annual cash bonus in an amount
equal to 2% of the Company’s net profit, if any, for its most recently completed fiscal year,
computed in accordance with generally accepted accounting principles applied consistently with
prior periods. The bonus shall be payable, if at all, on the anniversary date of employment of
each year of the term; provided that no bonus shall be payable if the Executive is not, on such
payment date, in the employ of the Company.

          3.4 Benefits. Executive shall be eligible to receive employee benefits
during the Term, at such times and on such terms and conditions as such benefits are made available
to the senior employees of the Company generally. In addition, Executive shall receive paid
vacation of four weeks per year. Executive shall be entitled to participate in the Company’s stock
option plan as determined by the Compensation Committee of the Board of Directors (the
“Compensation Committee”) in its sole, full and absolute discretion, such participation to be in
addition to the stock option grant provided for pursuant to Section 3.7 below. The Company shall
provide to the Executive an unaccountable monthly automobile allowance of $900.00, which amount
shall be payable on the last day of each month during the Term. Notwithstanding the provisions of
the first sentence of this Section 3.4, the Executive may elect not to participate in any group
health insurance plan which may be offered to employees of the Company. If the

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Executive elects not to participate in such group health insurance plan, the Executive shall be
paid on the last day of each month during the Term the lesser of (i) the premium the Company would
have paid to include the Executive as a participant in the Company’s group health insurance plan
and (ii) the sums paid by the Executive in connection with maintaining private health insurance for
the Executive.

          3.5 Expenses. The Company shall reimburse Executive for all reasonable and ordinary
expenses determined in the Company’s sole discretion that Executive incurs or pays during the Term
in performing Executive’s services under this Agreement. Ordinary expenses reimbursable to the
Executive pursuant to this Section 3.5 shall include the reasonable costs paid by the Executive for
maintaining dsl Internet access and other direct costs of maintaining an office at the home of the
Executive, but only until such time as the Company shall provide to the Executive an office at a
location reasonably acceptable to the Executive. The Company shall, however, be required to make
any such reimbursement only after Executive presents appropriate written expense statements,
vouchers or such other supporting information in accordance with the Company’s reimbursement
policies, as the Company may adopt from time to time. The Company shall notify Executive of any
dispute with respect to any such expenses within three months of any request for reimbursement or
the expense shall be classified as non-recoverable. Reimbursements shall be in arrears unless other
arrangements are made in advance.

          3.6 Payment of Compensation. All Compensation and other amounts payable to Executive
under this Agreement, whether for a period during or after the Term, shall be paid in such
installments and on such schedule as the Company may from time to time implement for general
payroll purposes, provided that the Base Salary shall be paid at least monthly. Any Base Salary
required to be paid to Executive upon a termination of Executive’s employment in excess of amounts
accrued through the Date of Termination (as defined in Section 4.1.1 below) shall be paid in the
same manner that Base Salary is paid during the Term, but not more than 30 days from the Date of
Termination. Any payments made by the Company shall be designated by the Company as applied towards
base compensation, bonus payment or other remuneration as the case may be. Any payments made prior
to the effective date of this Agreement shall not be applied to any calculations called for in this
Agreement.

          3.7
Stock Option Grant. Subject to the final decision of
the Compensation Committee and on terms and subject to conditions
provided for by the Company’s then-current Stock Option Plan,
the Company will use its reasonable efforts to cause to be granted to Executive:

               (i) an option (the “Initial Option”) to purchase a number of shares (the “Initial Option
Shares”) of the Company’s common stock equal to the result of (A) 100,000 divided by (B) the
closing bid price per share of the Company’s Common Stock on the Effective Date. The Initial Option shall be an incentive stock option, shall be
exercisable at the closing price per share on the Effective Date, shall be exercisable for
ten years from the date of grant and shall vest on the first anniversary of the Effective Date; and

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               (ii) an option (the “Supplemental Option”) to purchase a number of shares (the “Supplemental
Option Shares”) of the Company’s common stock equal to the result of (A) 100,000 divided by (B) the
closing price per share of the Company’s Common Stock first
anniversary of the Effective Date. The Supplemental Option shall be an incentive stock option,
shall be exercisable at the closing price per share on the first anniversary of the Effective Date,
shall be exercisable for ten years from the date of grant and shall vest on the second anniversary
of the Effective Date.

          Consistent with the foregoing, the precise terms and conditions of the agreements evidencing
the Initial Option and the Supplemental Option (each, a “Stock Option Agreement”) to be entered
into between the Company and the Executive shall be as determined by the Board of Directors and/or
the Compensation Committee. Each Stock Option Agreement and each stock certificate evidencing any
Initial Option Shares or any Supplemental Option Shares shall bear a legend substantially in the
following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED FOR SALE UNDER ANY STATE SECURITIES LAWS (COLLECTIVELY, “SECURITIES LAWS”)
AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED OR QUALIFIED FOR SALE UNDER ALL APPLICABLE SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER, ANY SUCH OFFER, SALE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION OR
QUALIFICATION REQUIREMENTS OF SUCH SECURITIES LAWS.

     4. TERMINATION AND COMPENSATION UPON TERMINATION.

          4.1 Definitions.

               4.1.1 “Date of Termination” has the following meaning: (a) in the case of a termination of
Executive’s employment pursuant to this Agreement due to Executive’s death or Disability (as
defined below), the date Executive dies or the date on which it is determined that Executive has
suffered a Disability, as applicable; and (b) in the case of any other termination of Executive’s
employment pursuant to this Agreement, the date specified for termination of Executive’s employment
in the Notice of Termination (as defined below), provided that the date specified shall be no
earlier than the time the Notice of Termination is delivered.

               4.1.2 “Notice of Termination” means a written document delivered by the party terminating this
Agreement to the other party that specifies (i) the section of this Agreement pursuant to which
termination is being made and (ii) (the Date of Termination.

          4.2 Effectiveness of Termination. Termination of Executive’s employment, for any
reason, shall be effective upon the Date of Termination.

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          4.3 Death. Upon Executive’s death, this Agreement shall automatically forever
terminate.

          4.4 Disability. The Company may, acting in its sole and absolute discretion, terminate
Executive’s employment under this Agreement because of Executive’s Disability by delivering to
Executive of a Notice of Termination, which termination shall be effective 30 days after delivery
of such Notice of Termination. For purposes of this Agreement, “Disability” means Executive’s
physical or mental incapacity or illness rendering Executive unable to perform Executive’s duties
under this Agreement on a long-term basis (i) as evidenced by Executive’s failure or inability to
perform Executive’s duties under this Agreement for a total of 90 days in any 360 day period, or
(ii) as determined by an independent and licensed physician whom the Company selects, or (iii) as
determined without recourse by the Company’s disability insurance carrier, if any.

          4.5 Termination by Company Without Cause. The Company may, acting in its sole and
absolute discretion, at any time terminate Executive’s employment under this Agreement, upon no
notice without Cause (as defined below), or for any reason whatsoever or for no reason, by
delivering to Executive a Notice of Termination.

          4.6 Termination for Cause. The Company may at any time terminate Executive’s
employment for Cause by delivering to Executive a Notice of Termination. For purposes of this
Agreement, “Cause” means that the Company, reasonably and in good faith, forms the belief that
Executive has (i) committed any act or omission constituting a material breach of this Agreement;
(ii) engaged in gross negligence or willful misconduct in connection with the Company’s business;
(iii) been convicted of, or plead guilty or nolo contendre in connection with, fraud or any crime
that constitutes a felony or that involves moral turpitude or theft; or (iv) undertaken any act
injurious to the Company’s business, including insubordination or failure to follow a directive of
any of Executive’s superiors.

          4.7 Voluntary Termination. Executive may terminate Executive’s employment with the
Company at any time, for any reason whatsoever, by giving the Company a Notice of Termination,
which termination shall be effective on the sooner of (i) 30 days after delivery of such Notice of
Termination or (ii) the Company’s notice to the Executive that it has accepted the Notice of
Termination delivered by the Executive.

          4.8 Involuntary Termination. The Company may terminate this Agreement in conjunction
with a Change of Control, merger, acquisition, bankruptcy or dissolution of the Company. The
Company shall pay Executive the amounts provided for in Section 4.9 below upon any termination
pursuant to this Section 4.8. For purposes of this Agreement, “Change of Control” means the
occurrence of one or more of the following events:

     (i) the consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization, if more than fifty percent (50%) of the combined
voting power of the continuing or surviving entity’s securities outstanding immediately after
such merger, consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation or other
reorganization; or

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     (ii) the sale, transfer or other disposition of all or substantially all of the Company’s
assets.

          4.9 Payment Upon Termination. If Executive’s employment under this Agreement is
terminated by the Company pursuant to Section 4.8, Executive shall be entitled to receive (i) all
Compensation that has accrued through the Date of Termination, plus (ii) a severance payment equal
to one year’s Compensation, plus the Executive shall be entitled to continue to participate in the
Company’s employee benefit programs offered to other senior management employees of the Company for
a period of 12 months following the Date of Termination; provided, however, that if
at any time while the Company is required to pay severance to Executive pursuant to clause (ii) of
this paragraph any event occurs that would cause the termination of Executive’s employment (for
example, Executive dies) or give rise to the right of the Company to terminate this Agreement for
Cause or due to Executive’s Disability were Executive still employed pursuant to this Agreement,
then the Company’s obligation to pay such severance shall thereupon immediately terminate. If
Executive’s employment under this Agreement is terminated for any other reason except for
termination pursuant to Section 4.8, Executive (or in the case of Executive’s death, Executive’s
estate or other legal representative) shall only be entitled to receive the Compensation accrued
through the Date of Termination.

          4.10 Effect of Termination. The amounts payable to Executive pursuant to Section 4.9
upon a termination of Executive’s employment shall upon payment constitute full and complete
satisfaction of the Company’s obligations to Executive in connection with this Agreement and the
Company’s employment of Executive. Executive shall have no further rights or remedies with respect
to or against the Company in connection with this Agreement or the Company’s employment of
Executive. Notwithstanding anything to the contrary in this Agreement, Executive’s representations,
warranties, covenants, duties and other obligations set forth under Sections 5, 6, 7, 10 and 11 of
this Agreement shall survive and continue after any termination of this Agreement, regardless of
the reason for the termination.

     5. WORK MADE FOR HIRE 

          5.1 Assignment. Executive and/or designates of the Executive shall promptly and fully
inform the Company of, and disclose to the Company, any and all ideas, processes, trademarks, trade
names, service marks, service mark applications, copyrights, mask work rights, fictitious business
names, technology, patents, know-how, trade secrets, computer programs, original works of
authorship, formulae, concepts, themes, inventions, designs, creations, new works, derivative works
and discoveries, and all applications, improvements, rights and claims related to any the
foregoing, and all other intellectual property, proprietary rights and work product, whether or not
patentable or copyrightable, registered or unregistered or domestic or foreign, and whether or not
relating to a published work, that Executive develops, makes, creates, conceives or reduces to
practice during the Term, whether alone or in collaboration with others (collectively, “Invention
Ideas”). Executive hereby assigns to the Company exclusively in perpetuity throughout the world all
right, title and interest (choate or inchoate) in (i) the Invention Ideas, (ii) all precursors,
portions and work in progress with respect thereto and all inventions, works of authorship, mask
works, technology, information, know-how, materials and tools relating thereto or to the
development, support or maintenance thereof

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and (iii) all copyrights, patent rights, trade secret rights, trademark rights, mask works
rights, sui generis database rights and all other intellectual and industrial property rights of
any sort and all business, contract rights, causes of action, and goodwill in, incorporated or
embodied in, used to develop, or related to any of the foregoing (collectively “Intellectual
Property”). All copyrightable Invention Ideas are intended by Executive to be a
“work-made-for-hire” by Executive for the Company and owned by the Company pursuant to Section 201
(b) of Title 17 of the United States Code. Executive shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the Company may reasonably request in order
to obtain patent or copyright registration on all Invention Ideas and Intellectual Property, and
shall execute and deliver all documents, instruments and agreements, including the formal execution
of an assignment of copyright and/or patent application or issued patent, and do all things
necessary or requested by the Company, in order to enable the Company to ultimately and finally
obtain and enforce full and exclusive title to all Invention Ideas and Intellectual Property and
all rights assigned pursuant to this Section 5. Executive hereby appoints the Company as
Executive’s irrevocable attorney-in-fact for the purpose of executing and delivering all such
documents, instruments and agreements, and performing all such acts, with the same legal force and
effect as if executed and delivered and taken by Executive.

          5.2 License. If for any reason the foregoing assignment is determined to be
unenforceable Executive grants to the Company a perpetual, irrevocable, worldwide, royalty-free,
exclusive, sub-licensable right and license to exploit and exercise all such Invention Ideas and
Intellectual Property.

          5.3 Presumptions. Because of the difficulty of establishing when Executive first
conceives of or develops Intellectual Property, proprietary rights or work product or whether such
Intellectual Property, proprietary rights or work product results from access to the Company’s
confidential and proprietary information or equipment, facilities or data, Executive agrees that
any Intellectual Property, proprietary rights and work product shall be presumed to be an Invention
Idea if it is conceived, developed, used, sold, exploited or reduced to practice by Executive or
with the aid of Executive within one year after the normal termination of Executive’s employment
with the Company. Executive can rebut that presumption if Executive proves that the intellectual
property, proprietary rights and work product (i) was first conceived or developed after
termination of Executive’s employment with and by the Company; (ii) was conceived or developed
entirely on Executive’s own time without using the Company’s equipment, supplies, facilities or
confidential and proprietary information; and (iii) did not result from any work performed by
Executive for or on behalf of the Company.

          5.4 Exclusions. Executive acknowledges that there is no intellectual property,
proprietary right or work product that Executive desires not to be deemed Invention Ideas or
Intellectual Property and thus to exclude from the above provisions of this Agreement. To the best
of Executive’s knowledge, there is no other existing contract in conflict with this Agreement or
any other contract to assign ideas, processes, trademarks, service marks, inventions, technology,
computer programs, original works of authorship, designs,

7

 

formulas, discoveries, patents or copyrights that is now in existence between Executive and
any other person or entity.

          5.5 Labor Code. This Section 5 shall not operate to require Executive to assign to
the Company any of Executive’s rights to inventions, intellectual properties or work products that
would not be assignable under the provisions of California Labor Code Section 2870. Executive
represents and warrants to the Company that this paragraph constitutes the Company’s written
notification to Executive of the provisions of Section 2870 of the California Labor Code, and
Executive represents and warrants to the Company that Executive has reviewed Section 2870 of the
California Labor Code.

     6. UNFAIR COMPETITION AND PROTECTION OF PROPRIETARY INFORMATION.

          6.1 Proprietary Information. Executive shall not at any time (including after
Executive’s employment with the Company terminates) divulge, furnish or make accessible to anyone
any of the Company’s Proprietary Information, or use in any way any of the Company’s Proprietary
Information other than as reasonably required to perform Executive’s duties under this Agreement.
Executive shall not undertake any other acts or omissions that would reduce the value to the
Company of the Company’s Proprietary Information. The restrictions on Executive’s use of the
Company’s Proprietary Information shall not apply to knowledge or information that Executive can
prove is part of the public domain through no fault of Executive. Executive agrees that such
restrictions are fair and reasonable.

          6.2 Injunctive Relief. Executive agrees that the Company’s Proprietary Information
constitutes a unique and valuable asset of the Company that the Company acquired at great time and
expense, and which is secret and confidential and will only be available to or communicated to
Executive in confidence in the course of Executive’s provision of services to the Company.
Executive also agrees that any disclosure or other use of the Company’s Proprietary Information
other than for the Company’s sole benefit would be wrongful, would constitute unfair competition
and will cause irreparable and incalculable harm to the Company and to its subsidiaries, affiliates
and divisions. In addition to all other remedies the Company may have, it shall have the right to
seek and obtain appropriate injunctive and other equitable relief, including emergency relief, to
prevent any violations of this Section 6.

          6.3 Non-Solicitation. Executive agrees that the Company’s employees constitute a
valuable asset of the Company. Executive agrees that Executive shall not, during the Term and for a
period of two years thereafter, directly or indirectly, for Executive or on behalf of any other
person or entity, solicit any person who was an employee of or consultant to the Company (at any
time while Executive is performing any services for the Company, or at any time within twelve
months prior to or after such solicitation) for a competing business or otherwise induce or attempt
to induce any such persons to terminate their employment or relationship with the Company or
otherwise to disrupt or interfere, or attempt to disrupt or interfere, with the Company’s
employment or relationships with such persons. Executive agrees that any such solicitation,
inducement or interference would be wrongful and would constitute unfair competition, and will

8

 

cause irreparable and incalculable harm to the Company. Further, Executive shall not engage in
any other unfair competition with the Company. Executive agrees that such restrictions are fair and
reasonable.

          6.4 Privacy. Executive recognizes and agrees that Executive has no expectation of
privacy with respect to Company’s telecommunications, networking or information processing systems
(including stored computer files, e-mail messages and voice messages), and that Executive’s
activity, and any files or messages, on or using any of those systems may be monitored at any time
without notice.

          6.5 Definition. As used in this Agreement, “Company’s Proprietary Information” means
any knowledge, trade secrets (including “trade secrets” as defined in Section 3426.1 of the
California Civil Code), Invention Ideas, proprietary rights or proprietary information, intangible
assets or property, and other intellectual property (whether or not copyrighted or copyrightable or
patented or patentable), information and materials (including processes, trademarks, trade names,
service marks, service mark applications, copyrights, mask work rights, technology, patents, patent
applications and works of authorship), in whatever form, including electronic form, and all
goodwill relating or appurtenant thereto, owned or licensed by the Company or any of its
subsidiaries, affiliates or divisions, or directly or indirectly useful in any aspect of the
business of the Company or its subsidiaries, affiliates or divisions, whether or not marked as
confidential or proprietary and whether developed by Executive, by the Company or its subsidiaries,
affiliates or divisions or by others. Without limiting the foregoing, the Company’s Proprietary
Information includes (a) the names, locations, practices and requirements of any of the Company’s
customers, prospective customers, vendors, suppliers and personnel and any other persons having a
business relationship with the Company; (b) confidential or secret development or research work of
the Company or its subsidiaries, affiliates or divisions, including information concerning any
future or proposed services or products; (c) the Company’s accounting, cost, revenue and other
financial records and documents and the contents thereof; (d) the Company’s documents, contracts,
agreements, correspondence and other similar business records; (e) confidential or secret designs,
software code, know how, processes, formulae, plans and devices; and (f) any other confidential or
secret aspect of the business of the Company or its subsidiaries, affiliates or divisions.

     7. RESTRICTION OF EXECUTIVE’S ACTIVITIES. During the Term, including any period during
which the Company is making any payments to Executive pursuant to this Agreement, neither Executive
nor any person or entity acting with or on Executive’s behalf, nor any person or entity under the
control of or affiliated with Executive, shall, directly or indirectly, in any way Compete with the
Company. Executive agrees that, if Executive has any business to transact on Executive’s own
account that is similar to the business entrusted to Executive by the Company, Executive shall
notify the Company and always give preference to the Company’s business. Executive agrees that such
restrictions are fair and reasonable. For purposes of this Agreement, “Compete” means doing any of
the following: (i) selling products or services to any person or entity that was or is (at any
time, including during the Term and the period when the provisions of this paragraph are in effect)
a client or customer of the Company (or its subsidiaries, affiliates or divisions) or on a list of
prospective clients or customers of the Company, or

9

 

calling on, soliciting, taking away or accepting any such person or entity as a client or
customer, or any attempt or offer to do any of the foregoing; (ii) entering into, or any attempt or
offer to enter into, any business, enterprise or activity that is in any way similar to or
otherwise competitive with the business that the Company (or its subsidiaries, affiliates or
divisions) conducted at any time during the Term or any time the provisions of this paragraph are
in effect, or (iii) directly or indirectly assisting any person or entity to take or attempt or
offer to take any of the actions described in the foregoing clauses (i) or (ii).

     8. NOTICES. Any notice, statement, request or consent made hereunder shall be in
writing and shall be given as follows: (a) to Executive by Federal Express, or any other nationally
recognized overnight carrier, addressed to Executive at his address stated as set forth in the
preamble paragraph of this Agreement or at such other address as Executive may designate by notice
to the Company as provided herein, and (b) to the Company by Federal Express or any other
nationally recognized overnight carrier to the Company’s s address stated as set forth in the
preamble paragraph of this Agreement or to such other address as the Company may designate by
notice to Executive as provided herein. Any such communication shall be deemed to have been given
to Executive or the Company on the first business day following that mailing. In addition, any such
communication may also be given by (i) personal delivery which shall be deemed to have been given
upon delivery; (ii) facsimile which shall be deemed to have been given upon telephonic confirmation
of successful transmission; or (iii) first class certified mail, return receipt requested, postage
prepaid, addressed to the party to whom that notice is to be given and when notice is given in this
manner it shall be deemed received on the third day after that notice was deposited with the United
States Postal Service.

     9. ASSIGNMENT; SUCCESSORS 

          9.1 By Company. This Agreement is fully assignable by the Company to any person or
entity, including any successor entity; provided, however, that any such person or
entity shall assume the Company’s obligations under this Agreement in accordance with its terms.

          9.2 By Executive. Executive may not assign this Agreement or any part of this
Agreement without the Company’s prior written consent, which consent may be given or withheld by
the Company acting in its sole and absolute discretion.

     10. REMEDIES.

          10.1 Uniform Trade Secrets Act. If Executive breaches any provision of Section 6 of
this Agreement, the Company shall have the right to invoke any and all remedies provided under the
California Uniform Trade Secrets Act (California Civil Code §§3426, et seq.) or other statutes or
common law remedies of similar effect.

          10.2 Non-Exclusive Remedies. The remedies provided to the Company in this Section 10
are cumulative, and not exclusive, of any other remedies that may be available to the Company.

          10.3 Arbitration. Any controversy, dispute or claim between the parties to this
Agreement, including any claim arising out of, in connection with, or in relation to the

10

 

formation, interpretation, performance or breach of this Agreement or Executive’s employment
with the Company, shall be settled exclusively by arbitration, before a single arbitrator, in
accordance with this Section and the then most applicable rules of the American Arbitration
Association, except as modified by this Section 10.3, but only if one (or both) of the parties
requests such arbitration. The arbitrator shall be bound by the express provisions of this
Agreement and by the laws of the jurisdiction chosen by the parties to be the law governing the
interpretation of this Agreement. The arbitrator shall permit such discovery as required by
applicable law and as sufficient to adequately arbitrate Executive’s statutory claims (if any have
been asserted), including access to essential documents and witnesses where required by applicable
law. Judgment upon any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. Notwithstanding the foregoing, to the extent permitted by
applicable law either party may in an appropriate manner apply to a court pursuant to California
Code of Civil Procedure Section 1281.8, or any comparable provision, for provisional relief,
including a temporary restraining order or a preliminary or permanent injunction (such as specified
in Section 10.1 of this Agreement), on the ground that the award to which the applicant may be
entitled in arbitration may be rendered ineffectual without provisional relief. Nor shall anything
in this Section 10 (to the extent permitted by applicable law) prevent any party from (i) joining
any party as a defendant in any action brought by or against a third party; (ii) bringing an action
in court to effect any attachment or garnishment; or (iii) bringing an action in court to compel
arbitration as required by this Section 10.

     If the parties are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent”
(or “Gold Card”) list of retired judges. If the parties are unable to agree upon an arbitrator from
the list so drawn, then the parties shall each strike names alternately from the list, with the
first strike being determined by lot. After each party has used four strikes, the remaining name on
the list shall be the arbitrator. If such person is unable to serve for any reason, the parties
shall repeat this process until an arbitrator is selected.

     This agreement to resolve any disputes by binding arbitration shall extend to claims against
any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any
officer, director, shareholder, employee or agent of each party, or of any of the above, and shall
apply as well to claims arising out of state and federal statutes and local ordinances as well as
to claims arising under the common law. In the event of a dispute subject to this Section 10 the
parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The
remedial authority of the arbitrator shall be the same as, but no greater than, would be the
remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator
shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party
bringing the motion establishes that he or she would be entitled to summary judgment if the matter
had been pursued in court litigation.

     To the extent permitted by law, the initial fees and costs of the arbitrator shall be borne by
the Company, with the Company being responsible for the costs and fees of

11

 

the arbitration and the prevailing party shall be entitled to reimbursement for legal fees and
costs incurred by the other.

     The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties.

     Any arbitration shall take place in the county of Los Angeles, California.

     THE PARTIES UNDERSTAND THAT BY AGREEING TO ARBITRATE IN THE MANNER REQUIRED BY THIS SECTION
10, THEY ARE WAIVING THEIR RIGHTS TO HAVE ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR EXECUTIVE’S
EMPLOYMENT BY THE COMPANY TRIED BEFORE AND ADJUDICATED BY A JURY, INCLUDING DISPUTES RELATING TO
ANY CLAIM EXECUTIVE MAY HAVE FOR UNLAWFUL TERMINATION OF HER EMPLOYMENT OR FOR A VIOLATION OF ANY
FEDERAL, STATE OR OTHER LAW OR STATUTORILY PROTECTED RIGHTS, (SUCH AS, WITHOUT LIMITATION, AGE
DISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED, 29 U.S.C. §§ 621—634; OLDER WORKERS BENEFIT
PROTECTION ACT, AS AMENDED, 29 U.S. §§ 621, 623; TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS
AMENDED, 42 U.S.C. §§ 2000E—2000E-17; THE FAIR LABOR STANDARDS ACT OF 1938 AS AMENDED; THE EQUAL
PAY ACT OF 1963, AS AMENDED, 29 U.S.C. §§ 206(D); THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, 29 U.S.C. §§ 1001—1461; THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT,
AS AMENDED, 29 U.S.C. § 2101 ET SEQ.; THE NATIONAL LABOR RELATIONS ACT, AS AMENDED, 29 U.S.C. §§ 151-169; FAMILY AND MEDICAL LEAVE ACT OF 1993, AS AMENDED, 29 U.S.C. § 825 ET SEQ. AMERICANS WITH
DISABILITY ACT OF 1990, AS AMENDED, 42 U.S.C. §§ 12101 ET. SEQ.; INFLICTION OF EMOTIONAL DISTRESS,
DEFAMATION, PERSONAL INJURY AND BREACH OF CONTRACT, WHICH INCLUDE DISCRIMINATION ON THE BASIS OF
AGE, RACE, GENDER, DISABILITY, ETHNIC ORIGIN OR SEXUAL ORIENTATION). NEVERTHELESS, BOTH PARTIES
AGREE TO WAIVE ALL SUCH RIGHTS THEY MAY HAVE TO A JURY TRIAL AND TO SUBMIT ALL SUCH DISPUTES TO
BINDING ARBITRATION IN ACCORDANCE WITH THE TERMS OF THIS SECTION 10.

	 	 	 	 	 	 	 	 	 
	 	Company

	 	/s/           EEE
	 	Executive
	 	/s/           CB
	 	 

	 	 
	 	 	 	 
	 	 

	 	(initials)
	 	 	 	(initials)

     11. NO CONFLICT. Executive represents and warrants that neither his execution of this
Agreement nor his performance under this Agreement will (i) violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event that, with notice or lapse of
time, or both, would constitute a default) under, any contract or other obligation to which
Executive is a party or by which he is bound; or (ii) violate any judgment or other order
applicable to Executive. Executive shall indemnify, defend and

12

 

hold harmless the Company from and against any and all claims, liabilities, lawsuits,
judgments, losses, costs, fees and expenses (including reasonable attorneys’ fees, costs and
expenses) that the Company or any of its agents, affiliates, employees, shareholders, officers or
directors may suffer or incur as a result of Executive’s breach or alleged or threatened breach of
any of the representations and warranties set forth in this paragraph.

     12. GENERAL.

          12.1 Captions. The section headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

          12.2 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties with regard to the subject matter hereof and supersedes all prior
agreements, arrangements and understandings, written or oral, between the parties.

          12.3 Amendments; Waivers. This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms or covenants of this Agreement may be waived, only by
a written instrument executed by both of the parties hereto, or in the case of a waiver, by the
party waiving compliance. The failure of either party at any time or times to require performance
of any provision of this Agreement shall in no manner affect such party’s right at a later time to
enforce such performance. No waiver by either party of the breach of any term or covenant contained
in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the
breach of any other term or covenant contained in this Agreement.

          12.4 No Other Representations. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and neither party shall be bound by or be
liable for any alleged representation, promise or inducement not so set forth.

          12.5 Severability. If any of the provisions of this Agreement (including Section 10)
are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this Agreement, and this Agreement shall be
reformed to the extent necessary to carry out its provisions to the greatest extent possible and,
with respect to reformation of any provision of Section 10, to ensure that the resolution of all
conflicts between the parties (including those arising out of statutory claims) shall be resolved
by neutral, binding arbitration. If a court should find that any provision set forth in Section 10
is not absolutely binding, the parties intend that any arbitration decision and award with respect
to this Agreement be fully admissible in evidence in any subsequent action, given great weight by
any finder of fact, and treated as determinative to the maximum extent permitted by law.

          12.6 Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof of this Agreement,
to produce or account for more than one such counterpart.

13

 

          12.7 Withholding. Notwithstanding anything in this Agreement to the contrary, all
payments that the Company is required to make under this Agreement to Executive or Executive’s
estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as
the Company may reasonably determine it should withhold pursuant to any applicable law or
regulation.

          12.8 Tax Consequences. The Company shall have no obligation to any person entitled to
the benefits of this Agreement with respect to any tax obligation any such person incurs as a
result of or attributable to this Agreement, including any supplemental agreements, stock option
plans or employee benefit plans, or arising from any payments made or to be made under this
Agreement or thereunder.

          12.9 Consent to Jurisdiction. The parties to this Agreement agree that all actions or
proceedings arising directly or indirectly from this Agreement shall be arbitrated or litigated
before arbitrators or in courts having a situs within Loa Angeles, California; hereby consent to
the jurisdiction of any local, state or federal court in which such an action or proceeding is
commenced that is located in Los Angeles County, California; agree not to disturb such choice of
forum (including waiving any argument that venue in any such forum is not convenient); agree that
any litigation initiated by any party hereto in connection with this Agreement may be venued in
either the state or federal courts located in Orange County, California; agree that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law; and waive the
personal service of any and all process upon them and consent that all such service of process may
be made by certified or registered mail, return receipt requested, addressed to the respective
parties at the address set forth above.

          12.10 Gender References. References in this Agreement to any gender shall include the
masculine, feminine and neuter genders.

[remainder of page intentionally left blank]

14

 

          12.11 Construction. In all instances when appearing in this Agreement, the terms
“including,” “include” and “includes” shall be deemed to be followed by “without limitation.”

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above
written.

	 	 	 	 	 
	 	SAVE THE WORLD AIR, INC.

 	 
	 	By:  	/s/ Eugene E. Eichler
 	 
	 	 	EUGENE E. EICHLER 	 
	 	Title:  	Acting Chief Executive Officer 	 
	 
 
	 	EXECUTIVE:

 	 
	 	/s/ Charles Blum
 	 
	 	CHARLES BLUM 	 
	 	 	 
	 

15

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