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<SEC-DOCUMENT>0000950124-07-000219.txt : 20070110
<SEC-HEADER>0000950124-07-000219.hdr.sgml : 20070110
<ACCEPTANCE-DATETIME>20070110152607
ACCESSION NUMBER:		0000950124-07-000219
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20070104
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20070110
DATE AS OF CHANGE:		20070110

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SAVE THE WORLD AIR INC
		CENTRAL INDEX KEY:			0001103795
		STANDARD INDUSTRIAL CLASSIFICATION:	MOTOR VEHICLE PARTS & ACCESSORIES [3714]
		IRS NUMBER:				522088326
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-29185
		FILM NUMBER:		07523169

	BUSINESS ADDRESS:	
		STREET 1:		5125 LANKERSHIM BOULEVARD
		CITY:			NORTH HOLLYWOOD
		STATE:			CA
		ZIP:			91601
		BUSINESS PHONE:		818-487-8000

	MAIL ADDRESS:	
		STREET 1:		5125 LANKERSHIM BOULEVARD
		CITY:			NORTH HOLLYWOOD
		STATE:			CA
		ZIP:			91601
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>v26349e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e8vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 8-K</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Current Report<BR>
Pursuant to Section&nbsp;13 or 15(d)<BR>
of the Securities Exchange Act of 1934</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Date of Report (Date of earliest event reported): January&nbsp;4, 2007</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.<BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>(Exact name of registrant as specified in charter)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Nevada<BR>
(State or other <BR>
jurisdiction of <BR>
incorporation)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>0-29185<BR>
(Commission File<BR>
Number)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>52-2088326<BR>
(IRS Employer<BR>
Identification No.)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>5125 Lankershim Boulevard, North Hollywood, California 91601<BR>
(Address of principal executive offices) (Zip Code)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Registrant&#146;s telephone number, including area code: (818)&nbsp;487-8000</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Not Applicable<BR>
<B>(Former name or former address, if changed since last report)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#168;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">










<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1.01 Entry into a Material Definitive Agreement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;4, 2007, the Company entered into a Consulting Agreement (the &#147;Consulting
Agreement&#148;) with Spencer Clarke LLC (&#147;Spencer Clarke&#148;) pursuant to which Spencer Clarke has agreed
that for a twelve-month period beginning January&nbsp;4, 2007, Spencer Clarke will provide the Company
with financial consulting services (including but not limited to executive search, strategic
partnerships, research on new markets, strategic visibility, etc) to help further develop the
Company&#146;s strategic business plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For Spencer Clarke&#146;s services the Company has agreed to pay Spencer Clarke a non-refundable
fee of $20,000 per month, payable in advance. The first payment, in the amount of $60,000 and
covering three months, is payable by the Company on March&nbsp;1, 2007. The Company will also reimburse
Spencer Clarke for expenses it incurs in connection with the performance of its services under the
Consulting Agreement, provided that expenses in excess of $2,000 require the Company&#146;s prior
approval before such expenses may be incurred by Spencer Clarke.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has agreed to indemnify Spencer Clarke against any losses, claims, damages or
liabilities to which Spencer Clarke may become subject arising out of or in connection with the
services it renders under the Consulting Agreement, unless it is finally judicially determined that
such losses, claims, damages or liabilities arose primarily out of the gross negligence or bad
faith of Spencer Clarke. The Company has also agreed to reimburse Spencer Clarke immediately for
any legal or other expenses they reasonably incur in connection with investigating, preparing to
defend or defending any lawsuits or other proceedings arising out of or in connection with their
rendering of services under the Consulting Agreement; provided, however, that in the event of a
final judicial determination that the alleged losses, claims, damages or liabilities arose
primarily out of the gross negligence or bad faith of Spencer Clarke, Spencer Clarke will remit to
the Company any amounts reimbursed, but the amount which Spencer Clarke must remit in such event is
limited to the fee payable by the Company to Spencer Clarke under the Consulting Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9.01 Financial Statements and Exhibits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Financial Statements
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;ProForma Financial Information
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Exhibits
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 Consulting Agreement dated January&nbsp;4, 2007 between the Company and Spencer Clarke LLC.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">Date: January 10, 2007&nbsp;</TD>
    <TD colspan="3" align="left">SAVE THE WORLD AIR, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Bruce McKinnon
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Bruce McKinnon&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Office and President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v26349exv10w1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Spencer Clarke LLC</B><BR>
<U><B>Securities Investment Banking</B></U><BR>
<B>Member NASD MSRB SIPC SIA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Confidential
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">January&nbsp;4, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Save the World Air, Inc.<BR>
5125 Lankershim Boulevard<BR>
North Hollywood, California 91601

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Attention: Mr.&nbsp;Bruce H. McKinnon, Chief Executive Officer</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Re: Consulting Agreement between Spencer Clarke LLC and Save the World Air, Inc.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;McKinnon:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This will confirm the terms of our mutual understanding and agreement (&#147;Agreement&#148;) in connection
with the efforts of Spencer Clarke LLC (&#147;Spencer Clarke&#148;) shall be named the exclusive advisor to
Save the World Air, Inc. (the &#147;Company&#148; or &#147;SWA&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Scope of Services</B></U><B>. </B>For a period of twelve (12)&nbsp;months beginning on January&nbsp;4, 2007,
Spencer Clarke will provide the Company with financial consulting services (including but not
limited to executive search, strategic partnerships, research on new markets, strategic visibility,
etc.) to help further develop the Company&#146;s strategic business plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Fee</B></U><B>. </B>Pursuant to this agreement the Company will employ Spencer Clarke as a financial
consultant for a non-refundable monthly fee of Twenty Thousand Dollars ($20,000) exclusive of any
actual out-of-pocket expenses approved by the Company. It is understood that the monthly fees for
the first three months totaling Sixty Thousand Dollars ($60,000) shall be due on March&nbsp;1, 2007, and
the remaining nine monthly fees shall be due the first of each month thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Expenses</B></U><B>. </B>SWA will reimburse Spencer Clarke for those costs, fees and expenses incurred by
Spencer Clarke in connection with this engagement, including but not limited to, due diligence,
travel, communication, marketing, and the legal fees and expenses of Spencer Clarke&#146;s counsel. SWA
will reimburse Spencer Clarke&#146;s expenses as incurred, and it is understood that any expenditure by
Spencer Clarke on behalf of this engagement that is in excess of $2,000 will need the prior
approval of SWA prior to incurrence.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">505
Park Avenue&nbsp;&nbsp;&nbsp;4th Floor&nbsp;&nbsp;&nbsp;New York, NY 10022<BR>
888.505.PARK(7275)&nbsp;&nbsp;&nbsp;212.446.6100&nbsp;&nbsp;&nbsp;FAX
212.446.6191<BR>
www.spencerclarke.com
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Save the World Air, Inc.<BR>
January&nbsp;4, 2007<BR>
Page 2

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Indemnification</B></U><B>. </B>SWA shall:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;indemnify Spencer Clarke and hold it harmless against any losses, claims, damages or
liabilities to which Spencer Clarke may become subject arising in any manner out of or in
connection with the rendering of services by Spencer Clarke hereunder, unless it is finally
judicially determined that such losses, claims, damages or liabilities arose primarily out of the
gross negligence or bad faith of Spencer Clarke; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;reimburse Spencer Clarke immediately for any legal or other expenses reasonably incurred by it
in connection with investigating, preparing to defend or defending any lawsuits or other
proceedings arising in any manner out of or in connection with the rendering of services by Spencer
Clarke hereunder; provided, however, that in the event a final judicial determination is that the
alleged losses, claims, damages or liabilities arose primarily out of the gross negligence or bad
faith of Spencer Clarke, Spencer Clarke will remit to SWA any amounts reimbursed under this
subparagraph (b). Notwithstanding anything to the contrary stated herein, in no event shall the
amount payable by Spencer Clarke hereunder exceed the Fee payable to Spencer Clarke pursuant to
this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SWA agrees that (i)&nbsp;the indemnification and reimbursement commitments set forth in this paragraph
shall apply whether or not Spencer Clarke is a formal party to any such lawsuits, claims or other
proceedings, (ii)&nbsp;Spencer Clarke is entitled to retain separate counsel of its choice in connection
with any of the matters to which such commitments relate, and such commitments shall extend upon
the terms set forth in this paragraph to any controlling person, director, officer, employee or
agent of Spencer Clarke; provided, however, that to the extent that Spencer Clarke retains separate
counsel in connection with any matter set forth in this subparagraph (b), such counsel shall
coordinate its efforts with counsel to SWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Amendments</B></U><B>. </B>No amendment or waiver of any provision of this Agreement, or consent to any
departure by either party from any such provision, shall in any event be effective unless the same
shall be in writing and signed by the parties to this Agreement and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Governing Law</B></U><B>. </B>This Agreement shall be construed and enforced in accordance with the laws
of New York and shall inure to the benefit of, and be binding upon, Spencer Clarke and SWA and
their respective successors and assigns.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;signatures on next page&#093;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">505
Park Avenue&nbsp;&nbsp;&nbsp;4th Floor&nbsp;&nbsp;&nbsp;New York, NY 10022<BR>
888.505.PARK(7275)&nbsp;&nbsp;&nbsp;212.446.6100&nbsp;&nbsp;&nbsp;FAX
212.446.6191<BR>
www.spencerclarke.com
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Save the World Air, Inc.<BR>
January&nbsp;4, 2007<BR>
Page 3

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If the foregoing correctly sets forth our Agreement, please sign and return the enclosed copy of
this letter.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;&nbsp;</TD>
    <TD colspan="3" align="left">Sincerely,<BR>
<BR>
<BR>
SPENCER CLARKE LLC<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Reid H. Drescher&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Reid H. Drescher&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">CEO&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">ACCEPTED AND AGREED TO: as of January&nbsp;4, 2007
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>

    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    </TR>
<TR>

    <TD colspan="3" align="left">SAVE THE WORLD AIR, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    </TR><TR>

    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Bruce H. McKinnon
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    </TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Bruce H. McKinnon&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left">&nbsp;</TD>
</TR><TR>

    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">CEO&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    </TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">505
Park Avenue&nbsp;&nbsp;&nbsp;4th Floor&nbsp;&nbsp;&nbsp;New York, NY 10022<BR>
888.505.PARK(7275)&nbsp;&nbsp;&nbsp;212.446.6100&nbsp;&nbsp;&nbsp;FAX
212.446.6191<BR>
www.spencerclarke.com
</DIV>

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