Document:

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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

                  AGREEMENT made as of the xxth day of MONTH-YEAR by and between
SAVE THE WORLD AIR, INC. ("STWA"), a Nevada chartered corporation, and Edward L.
Masry (the "Executive").

BACKGROUND

                  A.       STWA desires to employ the Executive and the
Executive is willing to serve on the terms and conditions herein provided.

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

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

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

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

                  3.       TERM OF AGREEMENT. The Executive's employment under
this Agreement shall commence on the date hereof and, except as otherwise
provided herein, shall continue until December 31, 2007; provided, however, that
commencing on December 31, 2007 and each anniversary thereafter, the term of
this Agreement shall automatically be extended for one additional year beyond
the term otherwise established unless, prior to such date, STWA or the Executive
shall have given a Notice of Non-Extension.

                  4.       POSITION AND DUTIES. The Executive shall serve as
Chief Executive Officer of STWA and he shall have such responsibilities, duties
and authority as he may from time to time deem appropriate in his best judgment.
He shall also serve as a Chairman of STWA's Board of Directors and upon any
committees thereof as requested by the Board. Nothing herein shall be construed
as precluding him from devoting a reasonable amount of time to civic,
charitable, trade association and other activities that do not represent
conflicts and are not otherwise in any way detrimental to STWA.

                  5.       COMPENSATION AND RELATED MATTERS.

                  BASE COMPENSATION. During the period of the Executive's
                  employment hereunder, the executive's annual base compensation
                  shall be for a total consideration of $1.00

                           (a)      INCENTIVE COMPENSATION. During the period of
                  the Executive's employment hereunder, he shall be entitled to
                  participate in all incentive plans, stock option plans, and
                  similar arrangements as may be in effect and maintained by
                  STWA for executive officers on a basis and at award levels
                  consistent and commensurate with his position and duties
                  hereunder.

                           (b)      EMPLOYEE BENEFIT PLANS AND OTHER PLANS OR
                  ARRANGEMENTS. The Executive shall be entitled to participate
                  in all Employee Benefit Plans of STWA that either, are in
                  effect at present or that may be adopted in the future. In
                  addition, he shall be entitled to participate in and

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                  enjoy any other plans and arrangements which provide for sick
                  leave, vacation, sabbatical, or personal days, club
                  memberships and dues, education payment or reimbursement,
                  business-related seminars, and similar fringe benefits
                  provided to or for the executive officers of STWA from time to
                  time. Notwithstanding the foregoing, Executive shall be
                  entitled to at least four (4) weeks vacation per calendar year
                  during each year of employment. Such vacation shall be
                  prorated during the year 2003 based on the date of this
                  Agreement.

                           (c)      EXPENSES. During the period of the
                  Executive's employment hereunder, he shall be entitled to
                  receive prompt reimbursement for all reasonable and customary
                  expenses, including transportation expenses, incurred by him
                  in performing services hereunder in accordance with the
                  general policies and procedures established by STWA.

                  6.       TERMINATION BY REASON OF DISABILITY.

                           (a)      IN GENERAL. In the event the Executive
                  becomes unable to perform his duties on a full-time basis by
                  reason of the occurrence of his Disability and, within 30 days
                  after a Notice of Termination is given, he shall not have
                  returned to the full-time performance of such duties, his
                  employment may be terminated by STWA.

                           (b)      BENEFITS. In the event of the termination of
                  the Executive's employment under Subparagraph (a), the term of
                  this Agreement shall continue for one year after the Date of
                  Termination, and STWA shall pay or provide the benefits set
                  forth below:

                                    (1)      The Executive shall be paid an
                                    amount equal to the higher of the aggregate
                                    bonus (es) paid to him with respect to one
                                    of the two years immediately preceding the
                                    year in which the Date of Termination
                                    occurs. Such amount shall be paid to him in
                                    cash on the first anniversary date of the
                                    Date of Termination.

                                    (2)      The Executive and his eligible
                                    dependents shall be entitled to continue to
                                    participate at the same aggregate benefit
                                    levels, for one year and at no out-of-pocket
                                    or tax cost to him, in the Welfare Benefit
                                    Plans in which he was a participant
                                    immediately prior to the Date of
                                    Termination, to the extent permitted under
                                    the terms of such plans and applicable law.
                                    To the extent STWA is unable to provide for
                                    continued participation in a Welfare Benefit
                                    Plan, it shall provide an equivalent benefit
                                    directly at no out-of-pocket or tax cost to
                                    him. For purposes of the preceding two
                                    sentences, STWA shall be deemed to have
                                    provided a benefit at no tax cost to him if
                                    it pays an additional amount to him or on
                                    his behalf, with respect to those benefits
                                    which would otherwise be nontaxable to him,
                                    calculated in a manner consistent with the
                                    provisions of Paragraph 12.

                           (c)      EARLIER CESSATION OF CERTAIN WELFARE
                           BENEFITS. Notwithstanding the provisions of
                           Subparagraph (b)(5), STWA shall not be required to
                           provide, at its cost, the welfare benefits covered
                           therein after the later of (i) the attainment by the
                           Executive and his spouse (if any) of age 65, or (ii)
                           the date specified in the relevant plan document for
                           benefit termination (assuming that he was employed
                           until age 65 or the normal retirement date, if any,
                           specified in such document).

                           (c)      DEATH DURING REMAINING TERM OF AGREEMENT.

                                    (1)      In the event the Executive dies
                                    during the remaining term of this Agreement
                                    following his termination for Disability and
                                    he is survived by a

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                                    spouse, the compensation and benefits
                                    remaining to be paid and provided under
                                    Subparagraph (b) shall be unaffected by his
                                    death and shall be paid and provided to her
                                    or on her behalf; provided, however, that
                                    the extent of her rights to the accrued
                                    benefits described in Subparagraph (b)(4)
                                    shall be determined by reference to the
                                    relevant plan provisions and any elections
                                    made under such plans; and provided further,
                                    that STWA shall not be required to provide
                                    continued benefits with respect to her
                                    deceased husband; and provided further, that
                                    in no event shall STWA be required to
                                    provide, at its cost, the other welfare
                                    benefits described in Subparagraph (b)(5) to
                                    such spouse and her eligible dependents
                                    after the earlier of (i) her death, or (ii)
                                    the later of (A) her attainment of age 65,
                                    or (B) the date specified in the relevant
                                    plan document for benefit termination
                                    (assuming that the Executive was employed
                                    until age 65 or the normal retirement date,
                                    if any, specified in such document).

                                    (2)      In the event the Executive dies
                                    during the remaining term of this Agreement
                                    following his termination for Disability and
                                    he is not survived by a spouse, (i) STWA
                                    shall thereafter make the remaining payments
                                    described in Subparagraphs (b)(1) through
                                    (b)(3) directly to his estate, (ii) the
                                    extent of the rights of any person to the
                                    accrued benefits described in Subparagraph
                                    (b)(4) shall be determined by reference to
                                    the relevant plan provisions and any
                                    elections made under such plans, and (iii)
                                    STWA's obligation to provide continued
                                    benefits under Subparagraph (b)(5) shall
                                    terminate.

                           (d)      COMPENSATION AND BENEFITS UPON EXPIRATION OF
                  REMAINING TERM OF AGREEMENT. Upon the expiration of the
                  remaining term of this Agreement following the Executive's
                  termination for Disability, and provided his Disability then
                  continues, he shall be entitled to receive the compensation
                  and benefits provided under the terms of any long-term
                  disability plan of STWA in effect on the Date of Termination
                  or, if greater, at the expiration of such remaining term. If
                  such plan exists, such compensation and benefits shall
                  continue until the earlier of (i) his death, or (ii) the later
                  of (A) his attainment of age 65, or (B) the date specified in
                  the plan document for benefit termination. To the extent STWA
                  is unable to provide such compensation and benefits under its
                  long-term disability plan, if any, it shall provide equivalent
                  compensation and benefits directly at no out-of-pocket or tax
                  cost to him. For purposes of the preceding sentence, STWA
                  shall be deemed to have provided compensation and benefits at
                  no tax cost to him if it pays an additional amount to him or
                  on his behalf, with respect to the compensation and benefits
                  which would otherwise be nontaxable to him, calculated in a
                  manner consistent with the provisions of Paragraph 12.

                  7.       TERMINATION BY REASON OF DEATH.

                           (a)      COMPENSATION AND BENEFITS TO SURVIVING
                  SPOUSE. In the event the Executive dies while he is employed
                  under this Agreement and is survived by a spouse, STWA shall
                  pay or provide the compensation and benefits set forth below:

                                    (1)      The surviving spouse shall be paid
                                    an amount equal to the greater of (i) the
                                    Executive's highest base compensation
                                    received during one of the two calendar
                                    years immediately preceding the calendar
                                    year in which the Date of Termination
                                    occurs, or (ii) his base compensation in
                                    effect immediately prior to the Date of
                                    Termination (or prior to any reduction which
                                    entitled him to terminate his employment for
                                    Good Reason) for a period of one year,
                                    beginning with such Date

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                                    of Termination. The frequency and manner of
                                    payment of such amounts shall be in
                                    accordance with STWA's executive payroll
                                    practices from time to time in effect.

                                    (2)      The surviving spouse shall be paid
                                    an amount equal to the highest payment made
                                    to Executive under each incentive bonus plan
                                    of STWA with respect to one of the two years
                                    immediately preceding the year in which the
                                    Date of Termination occurs. Such amount
                                    shall be paid in cash to her within 30 days
                                    after the Date of Termination.

                                    (3)      The surviving spouse shall be paid
                                    an amount equal to the sum of the highest
                                    annual contribution made on the Executive's
                                    behalf (other than his own salary reduction
                                    contributions) to each tax-qualified and
                                    non-qualified Defined Contribution Plan of
                                    STWA with respect to the year in which the
                                    Date of Termination occurs or one of the two
                                    years immediately preceding such year. Such
                                    amount shall be paid in cash to her within
                                    30 days after the Date of Termination or
                                    within 30 days after such amount can first
                                    be determined, whichever is later.

                                    (4)      Subject to the following sentence,
                                    the surviving spouse shall be paid benefits
                                    determined by reference to the excess of (i)
                                    the aggregate retirement benefits the
                                    Executive would have accrued under the terms
                                    of each tax-qualified and non-qualified
                                    Defined Benefit Plan as in effect
                                    immediately prior to the Date of
                                    Termination, had he (A) continued to be
                                    employed for a period of one year following
                                    the Date of Termination, and (B) received
                                    (on a pro rated basis, as appropriate) the
                                    greater of (I) the highest compensation
                                    taken into account under each such plan with
                                    respect to one of the two years immediately
                                    preceding the year in which the Date of
                                    Termination occurs, or (II) his annualized
                                    base compensation in effect immediately
                                    prior to the Date of Termination (or prior
                                    to any reduction which entitled him to
                                    terminate his employment for Good Reason),
                                    over (ii) the retirement benefits actually
                                    determined under such plans. The frequency,
                                    manner, and extent of payment of such
                                    benefits shall be consistent with the terms
                                    of the plans to which they relate and any
                                    elections made thereunder.

                                    (5)      The surviving spouse and her
                                    eligible dependents shall be entitled to
                                    continue to participate at the same
                                    aggregate benefit levels, for a period of
                                    one year following the Date of Termination
                                    and at no out-of-pocket or tax cost to her,
                                    in the Welfare Benefit Plans in which the
                                    Executive was a participant immediately
                                    prior to the Date of Termination, to the
                                    extent permitted under the terms of such
                                    plans and applicable law; provided, however,
                                    that STWA shall not be required to provide
                                    continued benefits with respect to her
                                    deceased husband; and provided further, that
                                    STWA shall not thereafter be required to
                                    provide, at its cost, the other welfare
                                    benefits covered by such plans to such
                                    spouse and her eligible dependents after the
                                    earlier of (i) her death, or (ii) the later
                                    of (A) her attainment of age 65, or (B) the
                                    date specified in the relevant plan document
                                    for benefit termination (assuming the
                                    Executive was employed until age 65 or the
                                    normal retirement date, if any, specified in
                                    such document). To the extent STWA is unable
                                    to provide for continued participation in a
                                    Welfare Benefit Plan as required, it shall
                                    provide an equivalent benefit directly at no
                                    out-of-pocket or tax

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                                    cost to her. For purposes of the preceding
                                    two sentences, STWA shall be deemed to have
                                    provided a benefit at no tax cost to her if
                                    it pays an additional amount to her or on
                                    her behalf, with respect to those benefits
                                    which would otherwise be nontaxable to her,
                                    calculated in a manner consistent with the
                                    provisions of Paragraph 12.

                           (b)      COMPENSATION AND BENEFITS TO ESTATE, ETC. In
                  the event the Executive dies while he is employed under this
                  Agreement and is not survived by a spouse, (i) STWA shall make
                  the payments described in Subparagraphs (a)(1) through (a)(3)
                  directly to his estate, (ii) the extent of the rights of any
                  person to the accrued benefits described in Subparagraph
                  (a)(4) shall be determined by reference to the relevant plan
                  provisions and any elections made under such plans, and (iii)
                  STWA's obligation to provide benefits under Subparagraph
                  (a)(5) shall terminate.

                  8.       TERMINATION BY STWA FOR CAUSE.

                           (a)      IN GENERAL. In the event STWA intends to
                  terminate the Executive's employment for Cause, it shall
                  deliver a Notice of Termination to him which specifies a Date
                  of Termination not less than 30 days following the date of
                  such notice, unless a shorter period of notice is required by
                  the principal regulator of STWA or any affiliate of STWA.

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

                  9.       TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON.

                           (a)      IN GENERAL. In the event the Executive
                  intends to terminate his employment without Good Reason, he
                  shall deliver a Notice of Termination to STWA which specifies
                  a Date of Termination not less than (i) 90 days following the
                  date of such notice, if a Change in Control shall not have
                  occurred, or (ii) 30 days following the date of such notice,
                  if a Change in Control shall have occurred.

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

                  10.      TERMINATION BY STWA WITHOUT DISABILITY OR CAUSE.

                           (a)      IN GENERAL. In the event STWA intends to
                  terminate the Executive's employment for any reason other than
                  Disability or Cause, it shall deliver a Notice of Termination
                  to him which specifies a Date of Termination not less than 90
                  days following the date of such notice.

                           (b)      COMPENSATION AND BENEFITS DURING REMAINING
                  TERM OF AGREEMENT. In the event of the termination of the
                  Executive's employment under Subparagraph (a), STWA shall pay
                  or provide the compensation and benefits described in
                  Paragraph 6(b), except that all such compensation and benefits
                  shall be for the remaining term of this Agreement determined
                  in accordance with Section 3 hereof, unless a change in
                  control has occurred prior to such termination of employment,
                  in which case all such compensation and benefits shall be for
                  a term of three (3) years from the Date of Termination and the
                  term of this Agreement shall continue until all such
                  compensation and benefits are paid to Executive in full.

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                           (c)      ADJUSTMENT TO CERTAIN SUBPARAGRAPH (b)
                  COMPENSATION AND BENEFITS. In the event the Executive suffers
                  a Disability during the remaining term of this Agreement
                  following the Date of Termination, STWA's obligation to pay or
                  fund any disability insurance premiums on his behalf shall be
                  suspended while his Disability continues, provided the
                  cessation of payment or funding does not result in the
                  termination of disability benefits. Any amounts described in
                  Paragraph 6(b) and otherwise payable under Subparagraph (b)
                  shall be reduced (but not below zero) by the dollar amount of
                  disability benefits received by him pursuant to plans or
                  policies funded, directly at its cost, by STWA.

                           (d)      EARLIER CESSATION OF CERTAIN WELFARE
                  BENEFITS. Notwithstanding the provisions of Subparagraph (b),
                  STWA shall not be required to provide, at its cost, the
                  welfare benefits covered by Paragraph 6(b)(5) after the later
                  of (i) the attainment by the Executive and his spouse (if any)
                  of age 65, or (ii) the date specified in the relevant plan
                  document for benefit termination (assuming that he was
                  employed until age 65 or the normal retirement date, if any,
                  specified in such document).

                           (e)      DEATH DURING REMAINING TERM OF AGREEMENT.

                                    (1)      In the event the Executive dies
                                    during the remaining term of this Agreement
                                    following his termination without Disability
                                    or Cause by STWA and he is survived by a
                                    spouse, the compensation and benefits
                                    required to be paid and provided under
                                    Subparagraph (b) shall be unaffected by his
                                    death and shall be paid and provided to her
                                    or on her behalf; provided, however, that
                                    the extent of her rights to the accrued
                                    benefits described in Paragraph 6(b)(4)
                                    shall be determined by reference to the
                                    relevant plan provisions and any elections
                                    made under such plans; and provided further,
                                    that STWA shall not be required to provide
                                    continued benefits with respect to her
                                    deceased husband; and provided further, that
                                    in no event shall STWA be required to
                                    provide, at its cost, the other welfare
                                    benefits described in Paragraph 6(b)(5) to
                                    such spouse and her eligible dependents
                                    after the earlier of (i) her death, or (ii)
                                    the later of (A) her attainment of age 65,
                                    or (B) the date specified in the relevant
                                    plan document for benefit termination
                                    (assuming that the Executive was employed
                                    until age 65 or the normal retirement date,
                                    if any, specified in such document).

                                    (2)      In the event the Executive dies
                                    during the remaining term of this Agreement
                                    following his termination without Disability
                                    or Cause and he is not survived by a spouse,
                                    (i) STWA shall thereafter make the remaining
                                    payments described in Paragraphs 6(b)(1)
                                    through 6(b)(3) directly to his estate, (ii)
                                    the extent of the rights of any person to
                                    the accrued benefits described in Paragraph
                                    6(b)(4) shall be determined by reference to
                                    the relevant plan provisions and any
                                    elections made under such plans, and (iii)
                                    STWA's obligation to provide the continued
                                    benefits described in Paragraph 6(b)(5)
                                    shall terminate.

                  11.      TERMINATION BY THE EXECUTIVE FOR GOOD REASON.

                           (a)      IN GENERAL. In the event the Executive
                  intends to terminate his employment for Good Reason, he shall
                  deliver a Notice of Termination to STWA which specifies a Date
                  of Termination not less than 30 days following the date of
                  such notice.

                           (b)      COMPENSATION AND BENEFITS DURING REMAINING
                  TERM OF AGREEMENT. In the event of the termination of the
                  Executive's employment under Subparagraph (a), STWA shall

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                  pay or provide the compensation and benefits described in
                  Paragraph 6(b), except that all such compensation and benefits
                  shall be for a term of three (3) years from the Date of
                  Termination and the term of this Agreement shall continue
                  until all such compensation and benefits are paid to Executive
                  in full.

                           (c)      ADJUSTMENT TO CERTAIN SUBPARAGRAPH (b)
                  COMPENSATION AND BENEFITS. In the event the Executive suffers
                  a Disability during the remaining term of this Agreement
                  following the Date of Termination, STWA's obligation to pay or
                  fund any disability insurance premiums on his behalf shall be
                  suspended while his Disability continues, provided the
                  cessation of payment or funding does not result in the
                  termination of disability benefits. Any amounts described in
                  Paragraph 6(b) and otherwise payable under Subparagraph (b)
                  shall be reduced (but not below zero) by the dollar amount of
                  disability benefits received by him pursuant to plans or
                  policies funded, directly at its cost, by STWA.

                           (d)      EARLIER CESSATION OF CERTAIN WELFARE
                  BENEFITS. Notwithstanding the provisions of Subparagraph (b),
                  STWA shall not be required to provide, at its cost, the
                  welfare benefits covered by Paragraph 6(b)(5) after the later
                  of (i) the attainment by the Executive and his spouse (if any)
                  of age 65, or (ii) the date specified in the relevant plan
                  document for benefit termination (assuming that he was
                  employed until age 65 or the normal retirement date, if any,
                  specified in such document).

                           (e)      DEATH DURING REMAINING TERM OF AGREEMENT.

                                    (1)      In the event the Executive dies
                                    during the remaining term of this Agreement
                                    following his termination for Good Reason
                                    and he is survived by a spouse, the
                                    compensation and benefits required to be
                                    paid and provided under Subparagraph (b)
                                    shall be unaffected by his death and shall
                                    be paid and provided to her or on her
                                    behalf; provided, however, that the extent
                                    of her rights to the accrued benefits
                                    described in Paragraph 6(b)(4) shall be
                                    determined by reference to the relevant plan
                                    provisions and any elections made under such
                                    plans; and provided further, that STWA shall
                                    not be required to provide continued
                                    benefits with respect to her deceased
                                    husband; and provided further, that in no
                                    event shall STWA be required to provide, at
                                    its cost, the other welfare benefits
                                    described in Paragraph 6(b)(5) to such
                                    spouse and her eligible dependents after the
                                    earlier of (i) her death, or (ii) the later
                                    of (A) her attainment of age 65, or (B) the
                                    date specified in the relevant plan document
                                    for benefit termination (assuming that the
                                    Executive was employed until age 65 or the
                                    normal retirement date, if any, specified in
                                    such document).

                                    (2)      In the event the Executive dies
                                    during the remaining term of this Agreement
                                    following his termination for Good Reason
                                    and he is not survived by a spouse, (i) STWA
                                    shall thereafter make the remaining payments
                                    described in Paragraphs 6(b)(1) through
                                    6(b)(3) directly to his estate, (ii) the
                                    extent of the rights of any person to the
                                    accrued benefits described in Paragraph
                                    6(b)(4) shall be determined by reference to
                                    the relevant plan provisions and any
                                    elections made under such plans, and (iii)
                                    STWA's obligation to provide the continued
                                    benefits described in Paragraph 6(b)(5)
                                    shall terminate.

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                  12.      PROVISIONS RELATING TO EXCISE TAXES.

                           (a)      IN GENERAL. In the event the Executive
                  becomes liable, for any taxable year, for the payment of an
                  Excise Tax (because of a change in control) with respect to
                  the compensation and benefits payable by STWA under this
                  Agreement or otherwise, STWA shall make one or more Gross-Up
                  Payments to the Executive or on his behalf. The amount of any
                  Gross-Up Payment shall be calculated by a certified public
                  accountant or other tax professional designated jointly by the
                  Executive and STWA. The provisions of this paragraph shall
                  apply with respect to the Executive's surviving spouse or
                  estate, where relevant.

                           (b)      METHODOLOGY FOR CALCULATION OF GROSS-UP
                  PAYMENT. For purposes of determining the amount of any
                  Gross-Up Payment, the Executive shall be deemed to pay income
                  taxes at the highest federal, state, and local marginal rates
                  of tax for the calendar year in which the Gross-Up Payment is
                  to be made, net of the maximum reduction in federal income tax
                  which could be obtained from the deduction of state and local
                  income taxes. In the event that the Excise Tax is subsequently
                  determined to be less than the amount taken into account at
                  the time the Gross-Up Payment was made, the Executive shall
                  repay to STWA, at the time that the amount of such reduction
                  in Excise Tax is finally determined, the portion of the
                  Gross-Up Payment attributable to the reduction (plus a portion
                  of the Gross-Up Payment attributable to the Excise Tax and the
                  federal, state, and local income taxes imposed on the portion
                  of the Gross-Up Payment being repaid by the Executive to the
                  extent such repayment results in a reduction in Excise Tax or
                  federal, state, or local income tax), plus interest on the
                  amount of such repayment. Such interest shall be calculated by
                  using the rate in effect under Section 1274(d)(1) of the IRC,
                  on the date the Gross-Up Payment was made, for debt
                  instruments with a term equal to the period of time which has
                  elapsed from the date the Gross-Up Payment was made to the
                  date of repayment. In the event that the Excise Tax is
                  subsequently determined to exceed the amount taken into
                  account at the time the Gross-Up Payment was made (including
                  by reason of any payment the existence or amount of which
                  could not be determined at the time of the Gross-Up Payment),
                  STWA shall make an additional Gross-Up Payment with respect to
                  the excess at the time the amount thereof is finally
                  determined, plus interest calculated in a manner similar to
                  that described in the preceding sentence.

                           (c)      TIME OF PAYMENT. Any Gross-Up Payment
                  provided for herein shall be paid not later than the 30th day
                  following the payment of any compensation or the provision of
                  any benefit which causes such payment to be made; provided,
                  however, that if the amount of such payment cannot be finally
                  determined on or before such day, STWA shall pay on such day
                  an estimate of the minimum amount of such payment and shall
                  pay the remainder of such payment (together with interest
                  calculated in a manner similar to that described in
                  Subparagraph (b)) as soon as the amount thereof can be
                  determined. In the event that the amount of an estimated
                  payment exceeds the amount subsequently determined to have
                  been due, such excess shall constitute a loan by STWA to the
                  Executive, payable on the 30th day after demand by STWA
                  (together with interest calculated in a manner similar to that
                  described in Subparagraph (b)).

                           (d)      OTHER ARRANGEMENTS. Notwithstanding the
                  provisions of this paragraph to the contrary, the actual
                  amounts payable hereunder as Gross-Up Payments shall be
                  coordinated with any similar amounts paid to the Executive
                  under any other contract, plan, or arrangement.

                  13.      FEES AND EXPENSES OF THE EXECUTIVE.

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                  After a Change in Control and except as provided in the
                  following sentence, STWA shall pay, within 30 days following
                  demand by the Executive, all legal, accounting, actuarial, and
                  related fees and expenses incurred by him in connection with
                  the enforcement of this Agreement. An arbitration panel or a
                  court of competent jurisdiction shall be empowered to deny
                  payment to the Executive of such fees and expenses only if it
                  determines that he instituted a proceeding hereunder, or
                  otherwise acted, in bad faith.

                  14.      REDUCTION FOR COMPENSATION AND BENEFITS RECEIVED
                  UNDER STWA SEVERANCE POLICY, ETC. Notwithstanding anything
                  herein to the contrary, in the event the Executive, his
                  surviving spouse, or any other person becomes entitled to
                  continued compensation and benefits hereunder by reason of the
                  Executive's termination of employment and, in addition,
                  compensation or similar benefits are payable under a severance
                  policy, program or arrangement maintained by STWA (other than
                  retirement plans), then the compensation or benefits otherwise
                  payable hereunder shall be reduced by the compensation or
                  benefits provided under such severance policy, program or
                  arrangement.

                  15.      MITIGATION. The Executive shall not be required to
                  mitigate the amount of any compensation or benefits which may
                  become payable hereunder by reason of his termination by
                  seeking other employment or otherwise, nor, except as
                  otherwise provided in the following sentence or elsewhere
                  herein, shall the amount of any such compensation or benefits
                  be reduced by any compensation or benefits received by the
                  Executive as the result of his employment by another employer.
                  Notwithstanding anything in this Agreement to the contrary,
                  STWA's obligation to provide any medical and dental benefits
                  hereunder may be suspended, with the written concurrence of
                  the Executive or, if applicable, his surviving spouse during
                  any period of time that such benefits are being provided by
                  reason of his or her employment.

                  16.      FUNDING OF COMPENSATION AND BENEFITS; ACCELERATION OF
                  CERTAIN PAYMENTS.

                           (a)      GRANTOR TRUST. In the event (i) the
                  Executive's employment is terminated without Cause or he
                  terminates his employment for Good Reason, and (ii) and a
                  Change in Control has occurred as of the Date of Termination
                  or occurs thereafter, the Executive shall have the right to
                  require STWA to establish a grantor trust (taxable to STWA)
                  and fund such trust, on an actuarially sound basis, to provide
                  the compensation and benefits to which he is entitled
                  hereunder, other than those which may be paid pursuant to the
                  provisions of Subparagraph (c). The specific terms of such
                  trust shall be as agreed to by the parties in good faith;
                  provided, however, that the trustee shall be a financial
                  institution independent of STWA; and provided further, that in
                  no event shall STWA be entitled to withdraw funds from the
                  trust for its benefit, or otherwise voluntarily assign or
                  alienate such funds, until such time as all compensation and
                  benefits required hereunder are paid and provided. The
                  determination of the extent of required funding, including any
                  supplemental funding in the event of adverse investment
                  performance of trust assets, shall be made by an actuary or a
                  certified public accountant retained by each party. To the
                  extent such professionals cannot agree on the proper level of
                  funding, they shall select a third such professional whose
                  determination shall be binding upon the parties.
                  Notwithstanding the foregoing, STWA shall remain liable for
                  all compensation and benefits required to be paid or provided
                  hereunder.

                           (b)      ALTERNATE SECURITY. In lieu of the right
                  given to the Executive under Subparagraph (a), he shall have
                  the right under such circumstances to require that STWA
                  provide (i) an irrevocable standby letter of credit issued by
                  a financial institution other than STWA or any Subsidiary of
                  STWA with a senior debt credit rating of "A" or better by
                  Moody's

                                      G-9
<PAGE>

                  Investors Service or Standard & Poor's Corporation, or (ii)
                  other security reasonably acceptable to him, to secure the
                  payment of such compensation and benefits.

                           (c)      ACCELERATED PAYMENT OF PRESENT VALUE OF
                  CERTAIN COMPENSATION. In the event (i) the Executive's
                  employment is terminated without Cause or he terminates his
                  employment for Good Reason, and (ii) a Change in Control has
                  occurred as of the Date of Termination or occurs thereafter,
                  the Executive shall have the continuing right to demand that
                  the present value of the remaining payments described in
                  Paragraphs 6(b)(1) through (3), and payable by reason of the
                  provisions of Paragraph 10 or 11 (as the case may be), be paid
                  to him in one lump sum within 30 days after the date written
                  demand is given. For purposes of calculating the present value
                  of such payments, a discount factor shall be applied to each
                  such payment which is equal to the relevant applicable federal
                  rate in effect on the date written demand is given by him,
                  determined by reference to the period of time between the date
                  of such notice and the scheduled time such payment would
                  otherwise be made. In the event any payment described in
                  Paragraphs 6(b)(1) through (3) is not yet determinable on the
                  date written demand is made, the other payments shall
                  nonetheless be made as provided above; and the undetermined
                  payment shall be made within 30 days after it becomes
                  determinable, calculated as provided in the preceding sentence
                  but by treating the date on which the payment becomes
                  determinable as the date of written notice. Nothing in this
                  subparagraph shall be construed as affecting the Executive's
                  right to one or more Gross-Up Payments in accordance with the
                  provisions of Paragraph 12; and a Gross-Up Payment (if
                  applicable) will be calculated and made with any payment made
                  under this subparagraph, as well as any other Gross-Up
                  Payments that may be required hereunder at a subsequent date.

                  17.      WITHHOLDING TAXES. All compensation and benefits
                  provided for herein shall, to the extent required by law, be
                  subject to federal, state, and local tax withholding.

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

                  19.      COVENANTS NOT TO COMPETE OR TO SOLICIT.

                           (a)      NONCOMPETITION. During the period in which
                  he is employed by STWA and, if the Executive's employment
                  terminates under Paragraphs 6, for a period of 12 months after
                  the Date of Termination (the "Noncompetition Period"), the
                  Executive shall not, without the written consent in writing of
                  the Board of Directors of STWA, become an executive officer,
                  partner, consultant, director, or a four and nine-tenths
                  percent or greater shareholder or equity owner of any entity
                  engaged in the banking, lending, asset management, mutual
                  fund, financial planning or investment security business
                  within the California counties of Camden, Burlington, or any
                  other California county in which STWA has a branch or loan
                  production office. If at the time of the enforcement of this
                  paragraph a court holds that the duration, scope, or area
                  restrictions stated herein are unreasonable under the
                  circumstances then existing and, thus, unenforceable,

                                      G-10
<PAGE>

                  STWA and the Executive agree that the maximum duration, scope,
                  or area reasonable under such circumstances shall be
                  substituted for the stated duration, scope, or area.

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

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

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

                  21.      ADDITIONAL EQUITABLE REMEDY. The Executive
                  acknowledges and agrees that STWA's remedy at law for a breach
                  or a threatened breach of the provisions of Paragraphs 18 and
                  19 would be inadequate; and, in recognition of this fact and
                  notwithstanding the provisions of Paragraph 20, in the event
                  of such a breach or threatened breach by him, it is agreed
                  that STWA shall be entitled to request equitable relief in the
                  form of specific performance, temporary restraining order,
                  temporary or permanent injunction, or any other equitable
                  remedy which may then be available. Nothing in this paragraph
                  shall be construed as prohibiting STWA from pursuing any other
                  remedy available under this Agreement for such a breach or
                  threatened breach.

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

                  23.      NO EFFECT ON OTHER RIGHTS. Except as otherwise
                  specifically provided herein, nothing contained in this
                  Agreement shall be construed as adversely affecting any rights
                  the Executive may have under any agreement, plan, policy or
                  arrangement to the extent any such right is not inconsistent
                  with the provisions hereof.

                                      G-11
<PAGE>

               24.      EXCLUSIVE RIGHTS AND REMEDY. Except for any explicit
               rights and remedies the Executive may have under any other
               contract, plan or arrangement with STWA, the compensation and
               benefits payable hereunder and the remedy for enforcement
               thereof shall constitute his exclusive rights and remedy in
               the event of his termination of employment.

               25.      DIRECTOR AND OFFICER LIABILITY INSURANCE;
               INDEMNIFICATION. STWA shall provide the Executive (including
               his heirs, executors, and administrators) with the maximum
               coverage permitted under its directors' and officers'
               liability insurance policy, as soon as STWA obtains such a
               policy, at STWA's expense and shall indemnify him as both a
               director and as an officer (and his heirs, executors, and
               administrators) to the fullest extent permitted under Federal
               and California law against all expenses and liabilities
               reasonably incurred by him in connection with or arising out
               of any action, suit, or proceeding in which he may be involved
               by reason of his having been an officer or director of STWA or
               any Subsidiary or affiliated company (whether or not he
               continues to be such an officer or director at the time of
               incurring such expenses or liabilities). Such expenses and
               liabilities shall include, but not be limited to, judgments,
               court costs, and attorneys' fees, and the costs of reasonable
               settlements.

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

                        If to the Executive: Edward L. Masry

                        If to STWA           5125 Lankersham Boulevard
                                             North Hollywood, CA 91601
                                             Attention: Chairman of the Board of
                                                        Directors

               27.      NO WAIVER. The failure by any party to this Agreement
               at any time or times hereafter to require strict performance
               by any other party of any of the provisions, terms, or
               conditions contained in this Agreement shall not waive,
               affect, or diminish any right of the first party at any time
               or times thereafter to demand strict performance therewith and
               with any other provision, term, or condition contained in this
               Agreement. Any actual waiver of a provision, term, or
               condition contained in this Agreement shall not constitute a
               waiver of any other provision, term, or condition herein,
               whether prior or subsequent to such actual waiver and whether
               of the same or a different type. The failure of STWA to
               promptly terminate the Executive's employment for Cause or the
               Executive to promptly terminate his employment for Good Reason
               shall not be construed as a waiver of the right of
               termination, and such right may be exercised at any time
               following the occurrence of the event giving rise to such
               right.

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

                                      G-12
<PAGE>

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

                  30.      BINDING EFFECT AND BENEFIT. The provisions of this
                  Agreement shall be binding upon and shall inure to the benefit
                  of the successors and assigns of STWA and the executors,
                  personal representatives, surviving spouse, heirs, devisees,
                  and legatees of the Executive.

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

                  32.      NO ASSIGNMENT. This Agreement, and the benefits and
                  obligations hereunder, shall not be assignable by any party
                  hereto except by operation of law.

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

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

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

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

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

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

                      _____________________________________
                                 Edward L. Masry

                            SAVE THE WORLD AIR, INC.

                                      G-13
<PAGE>

                            By:____________________________________________
                                         Eugene E. Eichler
                                         President

                            Attest:________________________________________
                                         Janice Holder, Corporate Secretary

                                    GLOSSARY

                  "BOARD OF DIRECTORS" means the board of directors of the
                  relevant corporation.

                                      G-14
<PAGE>

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

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

                  "CHANGE IN CONTROL" means the occurrence of any of the
                  following events:

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

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

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

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

                                    (ii)     the individuals who, immediately
                  before such merger, consolidation, share exchange, division or
                  reorganization, are members of the Incumbent Board continue to
                  constitute at least two-thirds of the board of directors of
                  the Surviving Company; provided, however, that if the
                  election, or nomination for election by STWA's shareholders,
                  of any new director was approved by a vote of at least
                  two-thirds of the Incumbent Board, such director shall, for
                  the purposes hereof, be considered a member of the Incumbent
                  Board; and provided further, however, that no individual shall
                  be considered a member of the Incumbent Board if such
                  individual initially assumed office as a result of either an
                  actual or threatened Election Contest or Proxy Contest,
                  including by reason of any agreement intended to avoid or
                  settle any Election Contest or Proxy Contest; and

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

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

                                      G-15
<PAGE>

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

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

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

                  "STWA" means Save The World Air, Inc.

                  "DATE OF TERMINATION" means:

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

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

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

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

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

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

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

                  "DEFINED BENEFIT PLAN" has the meaning ascribed to such term
                  in Section 3(35) of ERISA.

                  "DEFINED CONTRIBUTION PLAN" has the meaning ascribed to such
                  term in Section 3(34) of ERISA.

                                      G-16
<PAGE>

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

                  "ELECTION CONTEST" means a solicitation with respect to the
                  election or removal of directors that, if STWA was subject to
                  the provisions of the 1934 Act, would be subject to the
                  provisions of Rule 14a-11 of the 1934 Act.

                  "EMPLOYEE BENEFIT PLAN" has the meaning ascribed to such term
                  in Section 3(3) of ERISA.

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

                  "EXCISE TAX" means the tax imposed by Section 4999 of the IRC
                  (or any similar tax that may hereafter be imposed by federal,
                  state or local law).

                  "EXECUTIVE" means NAME OF EXECUTIVE, an individual residing in
                  ADDRESS, California.

                  "GOOD REASON" means:

                           (a)      prior to a Change in Control--

                                    (i) the Executive's demotion to a lesser
                                    position, or any material diminution in his
                                    duties or responsibilities;

                                    (ii) a reduction in the Executive's base
                                    compensation, other than a reduction which
                                    is proportionate to a company-wide reduction
                                    in executive pay;

                                    (iii) a failure to increase the Executive's
                                    base compensation, consistent with his
                                    performance rating, within 24 months since
                                    the last increase, other than similar
                                    treatment on a company-wide basis for
                                    executives or a voluntary deferral by him of
                                    an increase; or

                                    (iv) any purported termination of the
                                    Executive's employment which is not in
                                    accordance with the terms of this Agreement;
                                    and

                           (b)      after a Change in Control--

                                    (i) a change in the Executive's status or
                                    position, or any material diminution in his
                                    duties or responsibilities;

                                    (ii) any increase in the Executive's duties
                                    inconsistent with his position;

                                    (iii) any reduction in the Executive's base
                                    compensation;

                                    (iv) a failure to increase the Executive's
                                    base compensation, consistent with his
                                    performance review, within 12 months of the
                                    last increase; or a failure to consider
                                    Executive for an increase within 12 months
                                    of his last performance review;

                                    (v) a failure to continue in effect any
                                    Employee Benefit Plan in which the Executive
                                    participates, including (whether or not they
                                    constitute Employee Benefit Plans) incentive
                                    bonus, stock option, or other qualified or
                                    nonqualified plans of deferred compensation
                                    (A) other than as a result of the normal
                                    expiration of such a plan, or (B) unless
                                    such plan is merged or consolidated into, or
                                    replaced with, a plan with benefits which
                                    are of equal or greater value;

                                      G-17
<PAGE>

                                    (vi) requiring the Executive to be based
                                    anywhere other than the county where his
                                    principal office was located immediately
                                    prior to the Change in Control;

                                    (vii) refusal to allow the Executive to
                                    attend to matters or engage in activities in
                                    which he was permitted to engage prior to
                                    the Change in Control;

                                    (viii) delivery to the Executive of a Notice
                                    of Nonextension;

                                    (ix) failure to secure the affirmation by a
                                    Successor, within three business days prior
                                    to a Change in Control, of this Agreement
                                    and its or STWA's continuing obligations
                                    hereunder (or where there is not at least
                                    three business days advance notice that a
                                    Person may become a Successor, within one
                                    business day after having notice that such
                                    Person may become or has become a
                                    Successor); or

                                    (x) any purported termination of the
                                    Executive's employment which is not in
                                    accordance with the terms of this Agreement.

Notwithstanding anything herein to the contrary, at the election of the
Executive, beginning with the 181st day following a Change in Control and
continuing through the first anniversary of such Change in Control, he may
terminate his employment for any reason or no reason and such termination will
be treated as having occurred for Good Reason.

                  "GROSS-UP PAYMENT" means an additional payment to be made to
or on behalf of the Executive in an amount such that the net amount retained by
him, after deduction of any Excise Tax on the Total Payments and any federal,
state, and local income tax and Excise Tax on such additional payment, equals
the Total Payments.

                  "INCUMBENT BOARD" means the Board of Directors of STWA as
constituted at any relevant time.

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

                  "MATERIAL SUBSIDIARY" means a Subsidiary whose net worth,
determined under generally accepted accounting principles, at the fiscal year
end immediately prior to any relevant time is at least 25% of the aggregate net
worth of the controlled group of corporations of which STWA is parent.

                  "1934 ACT" means the Securities Exchange Act of 1934, as
amended and as the same may be amended from time to time.

                  "NOTICE OF NON-EXTENSION" means a written notice delivered to
or by the Executive which advises that the Agreement will not be extended as
provided in Paragraph 3.

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

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

                  "PROXY CONTEST" means the solicitation of proxies or consents
by or on behalf of a Person other than the Board of Directors of STWA.

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

                                      G-18
<PAGE>

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

                  "SURVIVING COMPANY" means the business entity that is a
resulting company following a merger, consolidation, share exchange, division or
other reorganization of or relating to STWA.

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

                  "WELFARE BENEFIT PLAN" has the meaning ascribed to the term
"employee welfare benefit plan" in Section 3(1) of ERISA. For purposes of
determining the Executive's or his dependents' right to continued welfare
benefits hereunder following his termination of employment, the meaning of such
term shall include any retiree health plan maintained by STWA at any time after
the relevant Date of Termination, notwithstanding the fact that the Executive is
not a participant therein prior to such date.

                                      G-19<PAGE>

                                                                    EXHIBIT 10.8

                              EMPLOYMENT AGREEMENT

         AGREEMENT made as of the 1st day of December 2003 by and between SAVE
THE WORLD AIR, INC. ("STWA"), a Nevada chartered corporation, and Eugene E.
Eichler (the "Executive").

BACKGROUND

         A.       STWA desires to employ the Executive and the Executive is
willing to serve on the terms and conditions herein provided.

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

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

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

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

         3.       TERM OF AGREEMENT. The Executive's employment under this
Agreement shall commence on the date hereof and, except as otherwise provided
herein, shall continue until December 31, 2007; provided, however, that
commencing on December 31, 2007 and each anniversary thereafter, the term of
this Agreement shall automatically be extended for one additional year beyond
the term otherwise established unless, prior to such date, STWA or the Executive
shall have given a Notice of Non-Extension.

         4.       POSITION AND DUTIES. The Executive shall serve as Chief
Operating Officer of STWA and he shall have such responsibilities, duties and
authority as may, from time to time, be generally associated with such position
and or as specifically detailed in the company's official "Position
Description." He shall also serve as a member of STWA's Board of Directors and
upon any committees thereof as requested by the Board. In addition, the
Executive shall serve in such capacity, with respect to each Subsidiary or
affiliated company, as the Board of Directors of each such Subsidiary or
affiliated company shall designate from time to time. During the term of this
Agreement, he shall devote substantially all of his working time and efforts to
the business and affairs of STWA, the Subsidiaries and affiliated companies;
provided, however, that nothing herein shall be construed as precluding him from
devoting a reasonable amount of time to civic, charitable, trade association and
similar activities that do not represent conflicts and are not otherwise in any
way detrimental to STWA.

                                                                               1
<PAGE>

         5.       COMPENSATION AND RELATED MATTERS.

         BASE COMPENSATION. During the period of the Executive's employment
         hereunder, STWA shall pay to him annual base compensation as follows:

         For the period from December 1, 2003 to December 31, 2004 at an annual
         rate not less than $192,000.00;

         The Board(s) of Directors of STWA shall periodically review the
         Executive's employment performance, in accordance with policies
         generally in effect from time to time, for possible merit or
         cost-of-living increases in such base compensation. Except for a
         reduction, should such reduction occur, which is proportionate to a
         company-wide reduction in executive pay, the annual base compensation
         paid to the Executive in any period shall not be less than the annual
         base compensation paid to him in any prior period. The frequency and
         manner of payment of such base compensation shall be in accordance with
         STWA's executive payroll practices from time to time in effect. Nothing
         herein shall be construed as precluding the Executive from entering
         into any salary reduction or deferral plan or arrangement during the
         term of this Agreement; provided, however, that his base compensation
         shall be determined without regard to any such salary reduction or
         deferral for purposes of calculating the amount of any compensation and
         benefits to which he or his surviving spouse may be entitled under
         Paragraph 6, 7, 10, or 11 following his termination of employment. The
         amounts set forth in the first sentence of this subparagraph (a) shall
         be pro rated to the extent such period is less than a year.

                  (a)      INCENTIVE COMPENSATION. During the period of the
         Executive's employment hereunder, he shall be entitled to participate
         in all incentive plans, stock option plans, and similar arrangements as
         may be in effect and maintained by STWA for executive officers on a
         basis and at award levels consistent and commensurate with his position
         and duties hereunder.

                  (b)      EMPLOYEE BENEFIT PLANS AND OTHER PLANS OR
         ARRANGEMENTS. The Executive shall be entitled to participate in all
         Employee Benefit Plans of STWA that either, are in effect at present or
         that may be adopted in the future. In addition, he shall be entitled to
         participate in and enjoy any other plans and arrangements which provide
         for sick leave, vacation, sabbatical, or personal days, club
         memberships and dues, education payment or reimbursement,
         business-related seminars, and similar fringe benefits provided to or
         for the executive officers of STWA from time to time. Notwithstanding
         the foregoing, Executive shall be entitled to at least four (4) weeks
         vacation per calendar year during each year of employment. Such
         vacation shall be prorated during the year 2003 based on the date of
         this Agreement.

                  (c)      EXPENSES. During the period of the Executive's
         employment hereunder, he shall be entitled to receive prompt
         reimbursement for all reasonable and customary expenses, including
         transportation expenses, incurred by him in

                                                                               2
<PAGE>

         performing services hereunder in accordance with the general policies
         and procedures established by STWA.

                  (d)      AUTOMOBILE. STWA shall provide for an unaccountable
         monthly automobile allowance of not less than $900.00. The company may,
         at its discretion, provide an automobile, mutually acceptable, to the
         Executive for his exclusive use.

         6.       TERMINATION BY REASON OF DISABILITY.

                  (a)      IN GENERAL. In the event the Executive becomes unable
         to perform his duties on a full-time basis by reason of the occurrence
         of his Disability and, within 30 days after a Notice of Termination is
         given, he shall not have returned to the full-time performance of such
         duties, his employment may be terminated by STWA.

                  (b)      COMPENSATION AND BENEFITS. In the event of the
         termination of the Executive's employment under Subparagraph (a), the
         term of this Agreement shall continue for one year after the Date of
         Termination, and STWA shall pay or provide the compensation and
         benefits set forth below:

                           (1)      The Executive shall be paid an amount per
                           annum equal to the greater of (i) his highest base
                           compensation (including the car allowance provided
                           for in Section 5(e)) received during one of the two
                           calendar years immediately preceding the calendar
                           year in which the Date of Termination occurs, or (ii)
                           his base compensation (including the car allowance
                           provided for in Section 5(e)) in effect immediately
                           prior to the Date of Termination (or prior to any
                           reduction which entitled him to terminate his
                           employment for Good Reason), over a period of one
                           year beginning with such Date of Termination. The
                           frequency and manner of payment of such amounts shall
                           be in accordance with STWA's executive payroll
                           practices from time to time in effect.

                           (2)      The Executive shall be paid an amount equal
                           to the higher of the aggregate bonus (es) paid to him
                           with respect to one of the two years immediately
                           preceding the year in which the Date of Termination
                           occurs. Such amount shall be paid to him in cash on
                           the first anniversary date of the Date of
                           Termination.

                           (3)      The Executive shall be paid an amount equal
                           to the highest annual contribution made on his behalf
                           (other than his own salary reduction contributions)
                           to each tax-qualified and non-qualified Defined
                           Contribution Plan of STWA with respect to the year in
                           which the Date of Termination occurs or one of the
                           two years immediately preceding such year. The amount
                           separately determined for each such plan shall be
                           aggregated and shall be paid to him in cash on the
                           first anniversary date of the Date of Termination.

                                                                               3
<PAGE>

                           (4)      The Executive shall accrue benefits equal to
                           the excess of (i) the aggregate retirement benefits
                           he would have received under the terms of each
                           tax-qualified and non-qualified Defined Benefit Plan
                           of STWA as in effect immediately prior to the Date of
                           Termination had he (A) continued to be employed for
                           one more year, and (B) received (on a pro rated
                           basis, as appropriate) the greater of (I) the highest
                           compensation taken into account under each such plan
                           with respect to one of the two years immediately
                           preceding the year in which the Date of Termination
                           occurs, or (II) his annualized base compensation in
                           effect immediately prior to the Date of Termination
                           (or prior to any reduction which entitled him to
                           terminate his employment for Good Reason), over (ii)
                           the retirement benefits he actually receives under
                           such plans. The frequency, manner and extent of
                           payment of such benefits shall be consistent with the
                           terms of the plans to which they relate and any
                           elections made thereunder.

                           (5)      The Executive and his eligible dependents
                           shall be entitled to continue to participate at the
                           same aggregate benefit levels, for one year and at no
                           out-of-pocket or tax cost to him, in the Welfare
                           Benefit Plans in which he was a participant
                           immediately prior to the Date of Termination, to the
                           extent permitted under the terms of such plans and
                           applicable law. To the extent STWA is unable to
                           provide for continued participation in a Welfare
                           Benefit Plan, it shall provide an equivalent benefit
                           directly at no out-of-pocket or tax cost to him. For
                           purposes of the preceding two sentences, STWA shall
                           be deemed to have provided a benefit at no tax cost
                           to him if it pays an additional amount to him or on
                           his behalf, with respect to those benefits which
                           would otherwise be nontaxable to him, calculated in a
                           manner consistent with the provisions of Paragraph
                           12.

                  (c)      ADJUSTMENT TO CERTAIN SUBPARAGRAPH (b) COMPENSATION
         AND BENEFITS. Notwithstanding the provisions of Subparagraph (b)(5),
         STWA's obligation to pay or fund any disability insurance premiums on
         behalf of the Executive shall be suspended while his Disability
         continues, provided the cessation of payment or funding does not result
         in the termination of disability benefits. Any amounts otherwise due
         under Subparagraph (b) shall be reduced (but not below zero) by the
         dollar amount of disability benefits received by him pursuant to plans
         or policies funded, directly at its cost, by STWA.

                  (d)      EARLIER CESSATION OF CERTAIN WELFARE BENEFITS.
         Notwithstanding the provisions of Subparagraph (b)(5), STWA shall not
         be required to provide, at its cost, the welfare benefits covered
         therein after the later of (i) the attainment by the Executive and his
         spouse (if any) of age 65, or (ii) the date specified in the relevant
         plan document for benefit termination (assuming that he was employed
         until age 65 or the normal retirement date, if any, specified in such
         document).

                                                                               4
<PAGE>

                  (e)      DEATH DURING REMAINING TERM OF AGREEMENT.

                           (1)      In the event the Executive dies during the
                           remaining term of this Agreement following his
                           termination for Disability and he is survived by a
                           spouse, the compensation and benefits remaining to be
                           paid and provided under Subparagraph (b) shall be
                           unaffected by his death and shall be paid and
                           provided to her or on her behalf; provided, however,
                           that the extent of her rights to the accrued benefits
                           described in Subparagraph (b)(4) shall be determined
                           by reference to the relevant plan provisions and any
                           elections made under such plans; and provided
                           further, that STWA shall not be required to provide
                           continued benefits with respect to her deceased
                           husband; and provided further, that in no event shall
                           STWA be required to provide, at its cost, the other
                           welfare benefits described in Subparagraph (b)(5) to
                           such spouse and her eligible dependents after the
                           earlier of (i) her death, or (ii) the later of (A)
                           her attainment of age 65, or (B) the date specified
                           in the relevant plan document for benefit termination
                           (assuming that the Executive was employed until age
                           65 or the normal retirement date, if any, specified
                           in such document).

                           (2)      In the event the Executive dies during the
                           remaining term of this Agreement following his
                           termination for Disability and he is not survived by
                           a spouse, (i) STWA shall thereafter make the
                           remaining payments described in Subparagraphs (b)(1)
                           through (b)(3) directly to his estate, (ii) the
                           extent of the rights of any person to the accrued
                           benefits described in Subparagraph (b)(4) shall be
                           determined by reference to the relevant plan
                           provisions and any elections made under such plans,
                           and (iii) STWA's obligation to provide continued
                           benefits under Subparagraph (b)(5) shall terminate.

                  (f)      COMPENSATION AND BENEFITS UPON EXPIRATION OF
         REMAINING TERM OF AGREEMENT. Upon the expiration of the remaining term
         of this Agreement following the Executive's termination for Disability,
         and provided his Disability then continues, he shall be entitled to
         receive the compensation and benefits provided under the terms of any
         long-term disability plan of STWA in effect on the Date of Termination
         or, if greater, at the expiration of such remaining term. If such plan
         exists, such compensation and benefits shall continue until the earlier
         of (i) his death, or (ii) the later of (A) his attainment of age 65, or
         (B) the date specified in the plan document for benefit termination. To
         the extent STWA is unable to provide such compensation and benefits
         under its long-term disability plan, if any, it shall provide
         equivalent compensation and benefits directly at no out-of-pocket or
         tax cost to him. For purposes of the preceding sentence, STWA shall be
         deemed to have provided compensation and benefits at no tax cost to him
         if it pays an additional amount to him or on his behalf, with respect
         to the compensation and benefits which would otherwise be

                                                                               5
<PAGE>

         nontaxable to him, calculated in a manner consistent with the
         provisions of Paragraph 12.

         7.       TERMINATION BY REASON OF DEATH.

                  (a)      COMPENSATION AND BENEFITS TO SURVIVING SPOUSE. In the
                  event the Executive dies while he is employed under this
                  Agreement and is survived by a spouse, STWA shall pay or
                  provide the compensation and benefits set forth below:

                           (1)      The surviving spouse shall be paid an amount
                           equal to the greater of (i) the Executive's highest
                           base compensation received during one of the two
                           calendar years immediately preceding the calendar
                           year in which the Date of Termination occurs, or (ii)
                           his base compensation in effect immediately prior to
                           the Date of Termination (or prior to any reduction
                           which entitled him to terminate his employment for
                           Good Reason) for a period of one year, beginning with
                           such Date of Termination. The frequency and manner of
                           payment of such amounts shall be in accordance with
                           STWA's executive payroll practices from time to time
                           in effect.

                           (2)      The surviving spouse shall be paid an amount
                           equal to the highest payment made to Executive under
                           each incentive bonus plan of STWA with respect to one
                           of the two years immediately preceding the year in
                           which the Date of Termination occurs. Such amount
                           shall be paid in cash to her within 30 days after the
                           Date of Termination.

                           (3)      The surviving spouse shall be paid an amount
                           equal to the sum of the highest annual contribution
                           made on the Executive's behalf (other than his own
                           salary reduction contributions) to each tax-qualified
                           and non-qualified Defined Contribution Plan of STWA
                           with respect to the year in which the Date of
                           Termination occurs or one of the two years
                           immediately preceding such year. Such amount shall be
                           paid in cash to her within 30 days after the Date of
                           Termination or within 30 days after such amount can
                           first be determined, whichever is later.

                           (4)      Subject to the following sentence, the
                           surviving spouse shall be paid benefits determined by
                           reference to the excess of (i) the aggregate
                           retirement benefits the Executive would have accrued
                           under the terms of each tax-qualified and
                           non-qualified Defined Benefit Plan as in effect
                           immediately prior to the Date of Termination, had he
                           (A) continued to be employed for a period of one year
                           following the Date of Termination, and (B) received
                           (on a pro rated basis, as appropriate) the greater of
                           (I) the highest compensation taken into account under
                           each such plan with respect to one of the two years
                           immediately preceding the year in which

                                                                               6
<PAGE>

                           the Date of Termination occurs, or (II) his
                           annualized base compensation in effect immediately
                           prior to the Date of Termination (or prior to any
                           reduction which entitled him to terminate his
                           employment for Good Reason), over (ii) the retirement
                           benefits actually determined under such plans. The
                           frequency, manner, and extent of payment of such
                           benefits shall be consistent with the terms of the
                           plans to which they relate and any elections made
                           thereunder.

                           (5)      The surviving spouse and her eligible
                           dependents shall be entitled to continue to
                           participate at the same aggregate benefit levels, for
                           a period of one year following the Date of
                           Termination and at no out-of-pocket or tax cost to
                           her, in the Welfare Benefit Plans in which the
                           Executive was a participant immediately prior to the
                           Date of Termination, to the extent permitted under
                           the terms of such plans and applicable law; provided,
                           however, that STWA shall not be required to provide
                           continued benefits with respect to her deceased
                           husband; and provided further, that STWA shall not
                           thereafter be required to provide, at its cost, the
                           other welfare benefits covered by such plans to such
                           spouse and her eligible dependents after the earlier
                           of (i) her death, or (ii) the later of (A) her
                           attainment of age 65, or (B) the date specified in
                           the relevant plan document for benefit termination
                           (assuming the Executive was employed until age 65 or
                           the normal retirement date, if any, specified in such
                           document). To the extent STWA is unable to provide
                           for continued participation in a Welfare Benefit Plan
                           as required, it shall provide an equivalent benefit
                           directly at no out-of-pocket or tax cost to her. For
                           purposes of the preceding two sentences, STWA shall
                           be deemed to have provided a benefit at no tax cost
                           to her if it pays an additional amount to her or on
                           her behalf, with respect to those benefits which
                           would otherwise be nontaxable to her, calculated in a
                           manner consistent with the provisions of Paragraph
                           12.

                  (b)      COMPENSATION AND BENEFITS TO ESTATE, ETC. In the
         event the Executive dies while he is employed under this Agreement and
         is not survived by a spouse, (i) STWA shall make the payments described
         in Subparagraphs (a)(1) through (a)(3) directly to his estate, (ii) the
         extent of the rights of any person to the accrued benefits described in
         Subparagraph (a)(4) shall be determined by reference to the relevant
         plan provisions and any elections made under such plans, and (iii)
         STWA's obligation to provide benefits under Subparagraph (a)(5) shall
         terminate.

         8.       TERMINATION BY STWA FOR CAUSE.

                  (a)      IN GENERAL. In the event STWA intends to terminate
         the Executive's employment for Cause, it shall deliver a Notice of
         Termination to him which specifies a Date of Termination not less than
         30 days following the

                                                                               7
<PAGE>

         date of such notice, unless a shorter period of notice is required by
         the principal regulator of STWA or any affiliate of STWA.

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

         9.       TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON.

                  (a)      IN GENERAL. In the event the Executive intends to
         terminate his employment without Good Reason, he shall deliver a Notice
         of Termination to STWA which specifies a Date of Termination not less
         than (i) 90 days following the date of such notice, if a Change in
         Control shall not have occurred, or (ii) 30 days following the date of
         such notice, if a Change in Control shall have occurred.

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

         10.      TERMINATION BY STWA WITHOUT DISABILITY OR CAUSE.

                  (a)      IN GENERAL. In the event STWA intends to terminate
         the Executive's employment for any reason other than Disability or
         Cause, it shall deliver a Notice of Termination to him which specifies
         a Date of Termination not less than 90 days following the date of such
         notice.

                  (b)      COMPENSATION AND BENEFITS DURING REMAINING TERM OF
         AGREEMENT. In the event of the termination of the Executive's
         employment under Subparagraph (a), STWA shall pay or provide the
         compensation and benefits described in Paragraph 6(b), except that all
         such compensation and benefits shall be for the remaining term of this
         Agreement determined in accordance with Section 3 hereof, unless a
         change in control has occurred prior to such termination of employment,
         in which case all such compensation and benefits shall be for a term of
         three (3) years from the Date of Termination and the term of this
         Agreement shall continue until all such compensation and benefits are
         paid to Executive in full.

                  (c)      ADJUSTMENT TO CERTAIN SUBPARAGRAPH (b) COMPENSATION
         AND BENEFITS. In the event the Executive suffers a Disability during
         the remaining term of this Agreement following the Date of Termination,
         STWA's obligation to pay or fund any disability insurance premiums on
         his behalf shall be suspended while his Disability continues, provided
         the cessation of payment or funding does not result in the termination
         of disability benefits. Any amounts described in Paragraph 6(b) and
         otherwise payable under Subparagraph (b) shall be reduced (but not
         below zero) by the dollar amount of disability benefits received by him
         pursuant to plans or policies funded, directly at its cost, by STWA.

                                                                               8
<PAGE>

                  (d)      EARLIER CESSATION OF CERTAIN WELFARE BENEFITS.
         Notwithstanding the provisions of Subparagraph (b), STWA shall not be
         required to provide, at its cost, the welfare benefits covered by
         Paragraph 6(b)(5) after the later of (i) the attainment by the
         Executive and his spouse (if any) of age 65, or (ii) the date specified
         in the relevant plan document for benefit termination (assuming that he
         was employed until age 65 or the normal retirement date, if any,
         specified in such document).

                  (e)      DEATH DURING REMAINING TERM OF AGREEMENT.

                           (1)      In the event the Executive dies during the
                           remaining term of this Agreement following his
                           termination without Disability or Cause by STWA and
                           he is survived by a spouse, the compensation and
                           benefits required to be paid and provided under
                           Subparagraph (b) shall be unaffected by his death and
                           shall be paid and provided to her or on her behalf;
                           provided, however, that the extent of her rights to
                           the accrued benefits described in Paragraph 6(b)(4)
                           shall be determined by reference to the relevant plan
                           provisions and any elections made under such plans;
                           and provided further, that STWA shall not be required
                           to provide continued benefits with respect to her
                           deceased husband; and provided further, that in no
                           event shall STWA be required to provide, at its cost,
                           the other welfare benefits described in Paragraph
                           6(b)(5) to such spouse and her eligible dependents
                           after the earlier of (i) her death, or (ii) the later
                           of (A) her attainment of age 65, or (B) the date
                           specified in the relevant plan document for benefit
                           termination (assuming that the Executive was employed
                           until age 65 or the normal retirement date, if any,
                           specified in such document).

                           (2)      In the event the Executive dies during the
                           remaining term of this Agreement following his
                           termination without Disability or Cause and he is not
                           survived by a spouse, (i) STWA shall thereafter make
                           the remaining payments described in Paragraphs
                           6(b)(1) through 6(b)(3) directly to his estate, (ii)
                           the extent of the rights of any person to the accrued
                           benefits described in Paragraph 6(b)(4) shall be
                           determined by reference to the relevant plan
                           provisions and any elections made under such plans,
                           and (iii) STWA's obligation to provide the continued
                           benefits described in Paragraph 6(b)(5) shall
                           terminate.

         11.      TERMINATION BY THE EXECUTIVE FOR GOOD REASON.

                  (a)      IN GENERAL. In the event the Executive intends to
         terminate his employment for Good Reason, he shall deliver a Notice of
         Termination to STWA which specifies a Date of Termination not less than
         30 days following the date of such notice.

                                                                               9
<PAGE>

                  (b)      COMPENSATION AND BENEFITS DURING REMAINING TERM OF
         AGREEMENT. In the event of the termination of the Executive's
         employment under Subparagraph (a), STWA shall pay or provide the
         compensation and benefits described in Paragraph 6(b), except that all
         such compensation and benefits shall be for a term of three (3) years
         from the Date of Termination and the term of this Agreement shall
         continue until all such compensation and benefits are paid to Executive
         in full.

                  (c)      ADJUSTMENT TO CERTAIN SUBPARAGRAPH (b) COMPENSATION
         AND BENEFITS. In the event the Executive suffers a Disability during
         the remaining term of this Agreement following the Date of Termination,
         STWA's obligation to pay or fund any disability insurance premiums on
         his behalf shall be suspended while his Disability continues, provided
         the cessation of payment or funding does not result in the termination
         of disability benefits. Any amounts described in Paragraph 6(b) and
         otherwise payable under Subparagraph (b) shall be reduced (but not
         below zero) by the dollar amount of disability benefits received by him
         pursuant to plans or policies funded, directly at its cost, by STWA.

                  (d)      EARLIER CESSATION OF CERTAIN WELFARE BENEFITS.
         Notwithstanding the provisions of Subparagraph (b), STWA shall not be
         required to provide, at its cost, the welfare benefits covered by
         Paragraph 6(b)(5) after the later of (i) the attainment by the
         Executive and his spouse (if any) of age 65, or (ii) the date specified
         in the relevant plan document for benefit termination (assuming that he
         was employed until age 65 or the normal retirement date, if any,
         specified in such document).

                  (e)      DEATH DURING REMAINING TERM OF AGREEMENT.

                           (1)      In the event the Executive dies during the
                           remaining term of this Agreement following his
                           termination for Good Reason and he is survived by a
                           spouse, the compensation and benefits required to be
                           paid and provided under Subparagraph (b) shall be
                           unaffected by his death and shall be paid and
                           provided to her or on her behalf; provided, however,
                           that the extent of her rights to the accrued benefits
                           described in Paragraph 6(b)(4) shall be determined by
                           reference to the relevant plan provisions and any
                           elections made under such plans; and provided
                           further, that STWA shall not be required to provide
                           continued benefits with respect to her deceased
                           husband; and provided further, that in no event shall
                           STWA be required to provide, at its cost, the other
                           welfare benefits described in Paragraph 6(b)(5) to
                           such spouse and her eligible dependents after the
                           earlier of (i) her death, or (ii) the later of (A)
                           her attainment of age 65, or (B) the date specified
                           in the relevant plan document for benefit termination
                           (assuming that the Executive was employed until age
                           65 or the normal retirement date, if any, specified
                           in such document).

                                                                              10
<PAGE>

                           (2)      In the event the Executive dies during the
                           remaining term of this Agreement following his
                           termination for Good Reason and he is not survived by
                           a spouse, (i) STWA shall thereafter make the
                           remaining payments described in Paragraphs 6(b)(1)
                           through 6(b)(3) directly to his estate, (ii) the
                           extent of the rights of any person to the accrued
                           benefits described in Paragraph 6(b)(4) shall be
                           determined by reference to the relevant plan
                           provisions and any elections made under such plans,
                           and (iii) STWA's obligation to provide the continued
                           benefits described in Paragraph 6(b)(5) shall
                           terminate.

         12.      PROVISIONS RELATING TO EXCISE TAXES.

                  (a)      IN GENERAL. In the event the Executive becomes
         liable, for any taxable year, for the payment of an Excise Tax (because
         of a change in control) with respect to the compensation and benefits
         payable by STWA under this Agreement or otherwise, STWA shall make one
         or more Gross-Up Payments to the Executive or on his behalf. The amount
         of any Gross-Up Payment shall be calculated by a certified public
         accountant or other tax professional designated jointly by the
         Executive and STWA. The provisions of this paragraph shall apply with
         respect to the Executive's surviving spouse or estate, where relevant.

                  (b)      METHODOLOGY FOR CALCULATION OF GROSS-UP PAYMENT. For
         purposes of determining the amount of any Gross-Up Payment, the
         Executive shall be deemed to pay income taxes at the highest federal,
         state, and local marginal rates of tax for the calendar year in which
         the Gross-Up Payment is to be made, net of the maximum reduction in
         federal income tax which could be obtained from the deduction of state
         and local income taxes. In the event that the Excise Tax is
         subsequently determined to be less than the amount taken into account
         at the time the Gross-Up Payment was made, the Executive shall repay to
         STWA, at the time that the amount of such reduction in Excise Tax is
         finally determined, the portion of the Gross-Up Payment attributable to
         the reduction (plus a portion of the Gross-Up Payment attributable to
         the Excise Tax and the federal, state, and local income taxes imposed
         on the portion of the Gross-Up Payment being repaid by the Executive to
         the extent such repayment results in a reduction in Excise Tax or
         federal, state, or local income tax), plus interest on the amount of
         such repayment. Such interest shall be calculated by using the rate in
         effect under Section 1274(d)(1) of the IRC, on the date the Gross-Up
         Payment was made, for debt instruments with a term equal to the period
         of time which has elapsed from the date the Gross-Up Payment was made
         to the date of repayment. In the event that the Excise Tax is
         subsequently determined to exceed the amount taken into account at the
         time the Gross-Up Payment was made (including by reason of any payment
         the existence or amount of which could not be determined at the time of
         the Gross-Up Payment), STWA shall make an additional Gross-Up Payment
         with respect to the excess at the time the amount thereof is finally
         determined, plus interest calculated in a manner similar to that
         described in the preceding sentence.

                                                                              11
<PAGE>

                  (c)      TIME OF PAYMENT. Any Gross-Up Payment provided for
         herein shall be paid not later than the 30th day following the payment
         of any compensation or the provision of any benefit which causes such
         payment to be made; provided, however, that if the amount of such
         payment cannot be finally determined on or before such day, STWA shall
         pay on such day an estimate of the minimum amount of such payment and
         shall pay the remainder of such payment (together with interest
         calculated in a manner similar to that described in Subparagraph (b))
         as soon as the amount thereof can be determined. In the event that the
         amount of an estimated payment exceeds the amount subsequently
         determined to have been due, such excess shall constitute a loan by
         STWA to the Executive, payable on the 30th day after demand by STWA
         (together with interest calculated in a manner similar to that
         described in Subparagraph (b)).

                  (d)      OTHER ARRANGEMENTS. Notwithstanding the provisions of
         this paragraph to the contrary, the actual amounts payable hereunder as
         Gross-Up Payments shall be coordinated with any similar amounts paid to
         the Executive under any other contract, plan, or arrangement.

         13.      FEES AND EXPENSES OF THE EXECUTIVE.

         After a Change in Control and except as provided in the following
         sentence, STWA shall pay, within 30 days following demand by the
         Executive, all legal, accounting, actuarial, and related fees and
         expenses incurred by him in connection with the enforcement of this
         Agreement. An arbitration panel or a court of competent jurisdiction
         shall be empowered to deny payment to the Executive of such fees and
         expenses only if it determines that he instituted a proceeding
         hereunder, or otherwise acted, in bad faith.

         14.      REDUCTION FOR COMPENSATION AND BENEFITS RECEIVED UNDER STWA
         SEVERANCE POLICY, ETC. Notwithstanding anything herein to the contrary,
         in the event the Executive, his surviving spouse, or any other person
         becomes entitled to continued compensation and benefits hereunder by
         reason of the Executive's termination of employment and, in addition,
         compensation or similar benefits are payable under a severance policy,
         program or arrangement maintained by STWA (other than retirement
         plans), then the compensation or benefits otherwise payable hereunder
         shall be reduced by the compensation or benefits provided under such
         severance policy, program or arrangement.

         15.      MITIGATION. The Executive shall not be required to mitigate
         the amount of any compensation or benefits which may become payable
         hereunder by reason of his termination by seeking other employment or
         otherwise, nor, except as otherwise provided in the following sentence
         or elsewhere herein, shall the amount of any such compensation or
         benefits be reduced by any compensation or benefits received by the
         Executive as the result of his employment by another employer.
         Notwithstanding anything in this Agreement to the contrary, STWA's
         obligation to provide any medical and dental benefits hereunder may be
         suspended, with the written concurrence of the Executive or, if
         applicable, his

                                                                              12
<PAGE>

         surviving spouse during any period of time that such benefits are being
         provided by reason of his or her employment.

         16.      FUNDING OF COMPENSATION AND BENEFITS; ACCELERATION OF CERTAIN
         PAYMENTS.

                  (a)      GRANTOR TRUST. In the event (i) the Executive's
         employment is terminated without Cause or he terminates his employment
         for Good Reason, and (ii) and a Change in Control has occurred as of
         the Date of Termination or occurs thereafter, the Executive shall have
         the right to require STWA to establish a grantor trust (taxable to
         STWA) and fund such trust, on an actuarially sound basis, to provide
         the compensation and benefits to which he is entitled hereunder, other
         than those which may be paid pursuant to the provisions of Subparagraph
         (c). The specific terms of such trust shall be as agreed to by the
         parties in good faith; provided, however, that the trustee shall be a
         financial institution independent of STWA; and provided further, that
         in no event shall STWA be entitled to withdraw funds from the trust for
         its benefit, or otherwise voluntarily assign or alienate such funds,
         until such time as all compensation and benefits required hereunder are
         paid and provided. The determination of the extent of required funding,
         including any supplemental funding in the event of adverse investment
         performance of trust assets, shall be made by an actuary or a certified
         public accountant retained by each party. To the extent such
         professionals cannot agree on the proper level of funding, they shall
         select a third such professional whose determination shall be binding
         upon the parties. Notwithstanding the foregoing, STWA shall remain
         liable for all compensation and benefits required to be paid or
         provided hereunder.

                  (b)      ALTERNATE SECURITY. In lieu of the right given to the
         Executive under Subparagraph (a), he shall have the right under such
         circumstances to require that STWA provide (i) an irrevocable standby
         letter of credit issued by a financial institution other than STWA or
         any Subsidiary of STWA with a senior debt credit rating of "A" or
         better by Moody's Investors Service or Standard & Poor's Corporation,
         or (ii) other security reasonably acceptable to him, to secure the
         payment of such compensation and benefits.

                  (c)      ACCELERATED PAYMENT OF PRESENT VALUE OF CERTAIN
         COMPENSATION. In the event (i) the Executive's employment is terminated
         without Cause or he terminates his employment for Good Reason, and (ii)
         a Change in Control has occurred as of the Date of Termination or
         occurs thereafter, the Executive shall have the continuing right to
         demand that the present value of the remaining payments described in
         Paragraphs 6(b)(1) through (3), and payable by reason of the provisions
         of Paragraph 10 or 11 (as the case may be), be paid to him in one lump
         sum within 30 days after the date written demand is given. For purposes
         of calculating the present value of such payments, a discount factor
         shall be applied to each such payment which is equal to the relevant
         applicable federal rate in effect on the date written demand is given
         by him, determined by reference to the period of time between the date
         of such notice and the scheduled time such payment would otherwise be
         made. In the

                                                                              13
<PAGE>

         event any payment described in Paragraphs 6(b)(1) through (3) is not
         yet determinable on the date written demand is made, the other payments
         shall nonetheless be made as provided above; and the undetermined
         payment shall be made within 30 days after it becomes determinable,
         calculated as provided in the preceding sentence but by treating the
         date on which the payment becomes determinable as the date of written
         notice. Nothing in this subparagraph shall be construed as affecting
         the Executive's right to one or more Gross-Up Payments in accordance
         with the provisions of Paragraph 12; and a Gross-Up Payment (if
         applicable) will be calculated and made with any payment made under
         this subparagraph, as well as any other Gross-Up Payments that may be
         required hereunder at a subsequent date.

         17.      WITHHOLDING TAXES. All compensation and benefits provided for
         herein shall, to the extent required by law, be subject to federal,
         state, and local tax withholding.

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

         19.      COVENANTS NOT TO COMPETE OR TO SOLICIT.

                  (a)      NONCOMPETITION. During the period in which he is
         employed by STWA and, if the Executive's employment terminates under
         Paragraphs 6, for a period of 12 months after the Date of Termination
         (the "Noncompetition Period"), the Executive shall not, without the
         written consent in writing of the Board of Directors of STWA, become an
         executive officer, partner, consultant, director, or a four and
         nine-tenths percent or greater shareholder or equity owner of any
         entity engaged in the banking, lending, asset management, mutual fund,
         financial planning or investment security business within the
         California counties of Camden, Burlington, or any other California
         county in which STWA has a branch or loan production office. If at the
         time of the enforcement of this paragraph a court holds that the
         duration, scope, or area restrictions stated herein are unreasonable
         under the circumstances then existing and, thus, unenforceable, STWA
         and the Executive agree that the maximum duration, scope, or area
         reasonable under such circumstances shall be substituted for the stated
         duration, scope, or area.

                  (b)      NONSOLICITATION. During his employment and the
         Noncompetition Period, the Executive shall not, whether on his own
         behalf or on behalf of any

                                                                              14
<PAGE>

         other individual or business entity, solicit, endeavor to entice away
         from STWA, a Subsidiary or any affiliated company, or otherwise
         interfere with the relationship of STWA, a Subsidiary or any affiliated
         company with any person who is, or was within the then most recent 12
         month period, an employee or associate thereof; provided, however, that
         this subparagraph shall not apply following the occurrence of a Change
         in Control.

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

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

         21.      ADDITIONAL EQUITABLE REMEDY. The Executive acknowledges and
         agrees that STWA's remedy at law for a breach or a threatened breach of
         the provisions of Paragraphs 18 and 19 would be inadequate; and, in
         recognition of this fact and notwithstanding the provisions of
         Paragraph 20, in the event of such a breach or threatened breach by
         him, it is agreed that STWA shall be entitled to request equitable
         relief in the form of specific performance, temporary restraining
         order, temporary or permanent injunction, or any other equitable remedy
         which may then be available. Nothing in this paragraph shall be
         construed as prohibiting STWA from pursuing any other remedy available
         under this Agreement for such a breach or threatened breach.

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

         23.      NO EFFECT ON OTHER RIGHTS. Except as otherwise specifically
         provided herein, nothing contained in this Agreement shall be construed
         as adversely affecting any rights the Executive may have under any
         agreement, plan, policy or

                                                                              15
<PAGE>

         arrangement to the extent any such right is not inconsistent with the
         provisions hereof.

         24.      EXCLUSIVE RIGHTS AND REMEDY. Except for any explicit rights
         and remedies the Executive may have under any other contract, plan or
         arrangement with STWA, the compensation and benefits payable hereunder
         and the remedy for enforcement thereof shall constitute his exclusive
         rights and remedy in the event of his termination of employment.

         25.      DIRECTOR AND OFFICER LIABILITY INSURANCE; INDEMNIFICATION.
         STWA shall provide the Executive (including his heirs, executors, and
         administrators) with the maximum coverage permitted under its
         directors' and officers' liability insurance policy, as soon as STWA
         obtains such a policy, at STWA's expense and shall indemnify him as
         both a director and as an officer (and his heirs, executors, and
         administrators) to the fullest extent permitted under Federal and
         California law against all expenses and liabilities reasonably incurred
         by him in connection with or arising out of any action, suit, or
         proceeding in which he may be involved by reason of his having been an
         officer or director of STWA or any Subsidiary or affiliated company
         (whether or not he continues to be such an officer or director at the
         time of incurring such expenses or liabilities). Such expenses and
         liabilities shall include, but not be limited to, judgments, court
         costs, and attorneys' fees, and the costs of reasonable settlements.

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

                  If to the Executive:              Eugene E. Eichler
                                                    4400 Carpenter Avenue
                                                    North Hollywood, CA 91607

                  If to STWA                        5125 Lankersham Boulevard
                                                    North Hollywood, CA 91601

                                                    Attention:  Chairman of the
                                                    Board of Directors

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

         27.      NO WAIVER. The failure by any party to this Agreement at any
         time or times hereafter to require strict performance by any other
         party of any of the provisions, terms, or conditions contained in this
         Agreement shall not waive, affect, or diminish any right of the first
         party at any time or times thereafter to demand strict performance
         therewith and with any other provision, term, or

                                                                              16
<PAGE>

         condition contained in this Agreement. Any actual waiver of a
         provision, term, or condition contained in this Agreement shall not
         constitute a waiver of any other provision, term, or condition herein,
         whether prior or subsequent to such actual waiver and whether of the
         same or a different type. The failure of STWA to promptly terminate the
         Executive's employment for Cause or the Executive to promptly terminate
         his employment for Good Reason shall not be construed as a waiver of
         the right of termination, and such right may be exercised at any time
         following the occurrence of the event giving rise to such right.

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

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

         30.      BINDING EFFECT AND BENEFIT. The provisions of this Agreement
         shall be binding upon and shall inure to the benefit of the successors
         and assigns of STWA and the executors, personal representatives,
         surviving spouse, heirs, devisees, and legatees of the Executive.

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

         32.      NO ASSIGNMENT. This Agreement, and the benefits and
         obligations hereunder, shall not be assignable by any party hereto
         except by operation of law.

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

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

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

                                                                              17
<PAGE>

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

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

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

                                               _________________________________
                                                       Eugene E. Eichler

                                               SAVE THE WORLD AIR, INC.

                                               By: _____________________________
                                                       Edward Masry
                                                       Chairman of the Board

                                               Attest: _________________________
                                                       Janice Holder
                                                       Corporate Secretary

                                                                              18
<PAGE>

GLOSSARY

         "BOARD OF DIRECTORS" means the board of directors of the relevant
         corporation.

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

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

         "CHANGE IN CONTROL" means the occurrence of any of the following
         events:

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

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

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

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

                           (ii)     the individuals who, immediately before such
         merger, consolidation, share exchange, division or reorganization, are
         members of the Incumbent Board continue to constitute at least
         two-thirds of the board of directors of the Surviving Company;
         provided, however, that if the election, or nomination for election by
         STWA's shareholders, of any new director was approved by a vote of at
         least two-thirds of the Incumbent Board, such director shall, for the
         purposes hereof, be considered a member of the Incumbent Board; and
         provided further, however, that no individual shall be considered a
         member of the Incumbent Board if such individual initially assumed
         office as a result of either an actual or threatened Election Contest
         or

                                      G-19
<PAGE>

         Proxy Contest, including by reason of any agreement intended to avoid
         or settle any Election Contest or Proxy Contest; and

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

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

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

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

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

         "STWA" means Save The World Air, Inc.

         "DATE OF TERMINATION" means:

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

                  (b)      if the Executive's employment terminates by reason of
         his death, the date of his

                                      G-20
<PAGE>

         death;

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

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

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

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

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

         "DEFINED BENEFIT PLAN" has the meaning ascribed to such term in Section
         3(35) of ERISA.

         "DEFINED CONTRIBUTION PLAN" has the meaning ascribed to such term in
         Section 3(34) of ERISA.

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

         "ELECTION CONTEST" means a solicitation with respect to the election or
         removal of directors that, if STWA was subject to the provisions of the
         1934 Act, would be subject to the provisions of Rule 14a-11 of the 1934
         Act.

         "EMPLOYEE BENEFIT PLAN" has the meaning ascribed to such term in
         Section 3(3) of ERISA.

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

         "EXCISE TAX" means the tax imposed by Section 4999 of the IRC (or any
         similar tax that may hereafter be imposed by federal, state or local
         law).

         "EXECUTIVE" means NAME OF EXECUTIVE, an individual residing in ADDRESS,
         California.

         "GOOD REASON" means:

                  (a)      prior to a Change in Control--

                           (i)      the Executive's demotion to a lesser
                           position, or any material diminution in his duties or
                           responsibilities;

                           (ii)     a reduction in the Executive's base
                           compensation, other than a reduction which is
                           proportionate to a company-wide reduction in
                           executive pay;

                                      G-21
<PAGE>

                           (iii)    a failure to increase the Executive's base
                           compensation, consistent with his performance rating,
                           within 24 months since the last increase, other than
                           similar treatment on a company-wide basis for
                           executives or a voluntary deferral by him of an
                           increase; or

                           (iv)     any purported termination of the Executive's
                           employment which is not in accordance with the terms
                           of this Agreement; and

                  (b)      after a Change in Control--

                           (i)      a change in the Executive's status or
                           position, or any material diminution in his duties or
                           responsibilities;

                           (ii)     any increase in the Executive's duties
                           inconsistent with his position;

                           (iii)    any reduction in the Executive's base
                           compensation;

                           (iv)     a failure to increase the Executive's base
                           compensation, consistent with his performance review,
                           within 12 months of the last increase; or a failure
                           to consider Executive for an increase within 12
                           months of his last performance review;

                           (v)      a failure to continue in effect any Employee
                           Benefit Plan in which the Executive participates,
                           including (whether or not they constitute Employee
                           Benefit Plans) incentive bonus, stock option, or
                           other qualified or nonqualified plans of deferred
                           compensation (A) other than as a result of the normal
                           expiration of such a plan, or (B) unless such plan is
                           merged or consolidated into, or replaced with, a plan
                           with benefits which are of equal or greater value;

                           (vi)     requiring the Executive to be based anywhere
                           other than the county where his principal office was
                           located immediately prior to the Change in Control;

                           (vii)    refusal to allow the Executive to attend to
                           matters or engage in activities in which he was
                           permitted to engage prior to the Change in Control;

                           (viii)   delivery to the Executive of a Notice of
                           Nonextension;

                           (ix)     failure to secure the affirmation by a
                           Successor, within three business days prior to a
                           Change in Control, of this Agreement and its or
                           STWA's continuing obligations hereunder (or where
                           there is not at least three business days advance
                           notice that a Person may become a Successor, within
                           one business day after having notice that such Person
                           may become or has become a Successor); or

                           (x)      any purported termination of the Executive's
                           employment which is not in accordance with the terms
                           of this Agreement.

Notwithstanding anything herein to the contrary, at the election of the
Executive, beginning with the 181st day following a Change in Control and
continuing through the first anniversary of such Change in Control, he may
terminate his employment for any reason or no reason and such termination will
be treated as having occurred for Good Reason.

                                       G-22
<PAGE>

         "GROSS-UP PAYMENT" means an additional payment to be made to or on
behalf of the Executive in an amount such that the net amount retained by him,
after deduction of any Excise Tax on the Total Payments and any federal, state,
and local income tax and Excise Tax on such additional payment, equals the Total
Payments.

         "INCUMBENT BOARD" means the Board of Directors of STWA as constituted
at any relevant time.

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

         "MATERIAL SUBSIDIARY" means a Subsidiary whose net worth, determined
under generally accepted accounting principles, at the fiscal year end
immediately prior to any relevant time is at least 25% of the aggregate net
worth of the controlled group of corporations of which STWA is parent.

         "1934 ACT" means the Securities Exchange Act of 1934, as amended and as
the same may be amended from time to time.

         "NOTICE OF NON-EXTENSION" means a written notice delivered to or by the
Executive which advises that the Agreement will not be extended as provided in
Paragraph 3.

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

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

         "PROXY CONTEST" means the solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of STWA.

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

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

         "SURVIVING COMPANY" means the business entity that is a resulting
company following a merger, consolidation, share exchange, division or other
reorganization of or relating to STWA.

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

         "WELFARE BENEFIT PLAN" has the meaning ascribed to the term "employee
welfare benefit plan" in Section 3(1) of ERISA. For purposes of determining the
Executive's or his dependents' right to continued welfare benefits hereunder
following his termination of employment, the meaning of such term shall include

                                      G-23
<PAGE>

any retiree health plan maintained by STWA at any time after the relevant Date
of Termination, notwithstanding the fact that the Executive is not a participant
therein prior to such date.

                                      G-24

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