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SAVE THE WORLD AIR, INC.

NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS

To Our Stockholders:

      You are cordially invited to attend the 2004 Annual Meeting of Stockholders of Save the World Air, Inc. The Annual Meeting will be held on Monday, May 24, 2004, at 10:00 a.m. local time, at the Hilton Hotel located at 555 Universal Hollywood Drive, Universal City, California.

      The matters to be voted on at the Annual Meeting are:

      These matters are described more fully in the proxy statement accompanying this notice.

      Our stockholders will also act upon such other business as may properly come before the meeting or any adjournment or postponement thereof. The Board is not aware of any other business to be presented to a vote of the stockholders at the 2004 Annual Meeting.

      The Board has fixed the close of business on April 22, 2004 as the record date (the “Record Date”) for determining those stockholders who will be entitled to notice of and to vote at the 2004 Annual Meeting. The stock transfer books will remain open between the Record Date and the date of the 2004 Annual Meeting.

      Representation of at least a majority in voting interest of our Common Stock either in person or by proxy is required to constitute a quorum for purposes of voting on each proposal to be voted on at the 2004 Annual Meeting. Accordingly, it is important that your shares be represented at the 2004 Annual Meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE 2004 ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. Your proxy may be revoked at any time prior to the time it is voted at the 2004 Annual Meeting.

      Please read the accompanying proxy material carefully. Your vote is important and we appreciate your cooperation in considering and acting on the matters presented.

      Included with the Proxy Statement is a copy of our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003. We encourage you to read the Form 10-KSB. It includes our audited financial statements and information about our business, technology and devices.

      Your vote is important. Whether or not you plan to attend the meeting, please complete, sign, date, and return the accompanying proxy card in the enclosed postage-paid envelope. Returning the proxy card will ensure your representation at the meeting but does NOT deprive you of your right to attend the meeting and to vote your shares in person. The Proxy Statement explains more about the proxy voting. Please read it carefully. We look forward to seeing you at the Annual Meeting.

	By Order of the Board of Directors
	EDWARD L. MASRY
	Chairman of the Board and
	Chief Executive Officer

May 3, 2004

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SAVE THE WORLD AIR, INC.

INFORMATION CONCERNING SOLICITATION AND VOTING

      The enclosed Proxy is solicited on behalf of the Board of Directors of Save the World Air, Inc. (“the Company”), for use at the Annual Meeting of Stockholders to be held on Monday, May 24, 2004 at 10:00 a.m. local time, and at any postponement or adjournment thereof. The Annual Meeting will be held at the Hilton Hotel located at 555 Universal Hollywood Drive, Universal City, California 91608. The purposes of the Annual Meeting are set forth in the accompanying Notice of Annual Meeting of Stockholders.

      These proxy solicitation materials and the enclosed Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, including financial statements, were first mailed on or about May 3, 2004 to all stockholders entitled to vote at the Annual Meeting. Our principal executive offices are located at 5125 Lankershim Boulevard, North Hollywood, California 91601, and our telephone number is (818) 487-8000.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

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PROPOSAL ONE:

ELECTION OF DIRECTORS

      The Board of Directors currently consists of eight directors. On July 30, 2002, one of our directors, Jeffrey Muller, was prohibited by court order from acting as an officer or director. At each Annual Meeting of stockholders, directors are elected until their respective successors are duly elected and qualified.

      The Board of Directors unanimously recommends that stockholders vote “FOR” the election of Edward L. Masry, Eugene E. Eichler, Bruce H. McKinnon, Robert F. Sylk, John Brown, John F. Price and Joseph Helleis to the Board of Directors.

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Information About the Directors and Nominees

      The following table sets forth information regarding our directors and the nominees as of April 26, 2004:

      There are no family relationships between any director and executive officer of the Company.

      Edward L. Masry, Esq. has served as our Chairman of the Board of Directors and Chief Executive Officer since October 2001. From October 2001 until February 2004, Mr. Masry served as our President. Mr. Masry has been a member of the law firm of Masry & Vititoe since 1986 and was Mayor of Thousand Oaks City, California and is currently a member of the Thousand Oaks City Council. From 1960 to 1986, he was a partner of various law firms. Mr. Masry was corporate director of Merlin Olsen Porsche Audi from 1970 to 1988 and corporate director of Gabriel Olsen Volkswagen from 1969 to 1973. Mr. Masry received a J.D. from Loyola Law School, Los Angeles.

      Eugene E. Eichler, CPA has served as our Chief Financial Officer and Treasurer since October 2001 and as a director since May 2002. From October 2001 to February 2004, Mr. Eichler served as our Chief Operating Officer. Mr. Eichler was the Chief Financial Officer and Firm Administrator of the law firm Masry & Vititoe from 1982 to October 2001. From 1974 to 1982, Mr. Eichler provided financial consulting services to Foundation for HMO’s, Acne Care Medical Clinics and Earth Foods, Inc. From 1960 to 1974, Mr. Eichler headed financial consulting services for Milburn Industries and Brown, Eichler & Company. From 1953 to 1960, he held the position of Chief Budgets and Forecasts at North American Aviation. From 1951 to 1953, Mr. Eichler held various audit positions at the Atomic Energy Commission. Mr. Eichler received a B.A. from University of Montana.

      Bruce H. McKinnon has served as a director since May 2002, our Executive Vice-President of Business Development since December 2003 and as our Chief Operating Officer since February 2004. Mr. McKinnon has served as Chief Executive Officer and President of KZ Golf, Inc., an international golf equipment company, since 1994. From 1990 to 1994, he was President and Chief Executive Officer of TTL Corporation and Novaterra, Inc., environmental remediation and technology corporations. Prior to 1990, Mr. McKinnon was an owner, Chairman and Chief Executive Officer of several international trading and manufacturing corporations.

      Robert F. Sylk has served as a director since October 2001 and our Vice President of Investor Relations since May 2002. He currently is one of the board of directors of the La Quinta, California Chamber of Commerce and Chairman of its Ambassadors Committee. From 1991 to 2003, he has served as a senior

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      Hon. J. Joseph Brown, AO has served as a director since May 2002. He has served as Chairman of the Australian Tourism Task Force since 1989 and currently is a professional consultant to Service Corporation International Australia. Mr. Brown has also served as director of Macquarie Tourism and Leisure since 1990. From 1983 to 1988, Mr. Brown was Minister for Sport and Tourism for the Australian government and from 1987 to 1988 he was the Minister for the Environment. He was a member of the Olympics bid teams for Brisbane (1992), Melbourne (1996) and the successful Sydney bid (2000). Mr. Brown was Founding Director of the Sydney Olympic Games Organizing Committee in 1992 and the Sydney Paralympic Organizing Committee in 1998.

      John F. Price, PhD has served as a director since May 2002. He co-founded and has served as Chairman of the Board of Conscious Investing Pty Ltd., a software company, since May 2001. In June 1998, Mr. Price founded Price Value, Inc., a software company to market software that he developed. He has served as Chairman of the Board of Price Value, Inc. since 1998. Since October 1997, Mr. Price has held various teaching positions in mathematics and physics at University of New South Wales. From 1990 to 1998, he was professor and head of the Mathematics Department at Maharishi University of Management. Mr. Price received a B.Sc. and M.Sc. from the University of Melbourne and a Ph.D. from the Australian National University.

      Joseph Helleis has served as a director since May 2002. Since 2002, he has been operating his own financial services consulting firm, Joseph Helleis and Associates. From 2000 to 2002, he was President/ Chief Executive Officer with Bank of Whittier, California. From 1981 to 2000, he served in senior executive capacities as Chairman/ CEO, President/ CEO, and Chief Credit Officer with number of financial institutions in the southern California region. After his honorable discharge from the United States Navy in 1960, Mr. Helleis served with Citibank in New York City until 1981 where his last position was Vice President/ Senior Credit Officer for the New York State Business Banking Region. Mr. Helleis has an AA degree from the National Institute of Credit.

      Jeffrey A. Muller was elected as a director in February 1999. In July 2002, he was enjoined by court order from acting as a director or officer of our company. (See “Certain Relationships and Related Transactions”.) Mr. Muller is the Company’s founder and served as our President from February 1999 until July 2002.

CORPORATE GOVERNANCE

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

      The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2004 as to

      Unless otherwise indicated, the address of each listed stockholder is c/o Save the World Air, Inc., 5125 Lankershim Boulevard, North Hollywood, California 91601. As of March 31, 2004, there were 34,691,821 shares of common stock outstanding.

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PROPOSAL TWO:

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

      The Board of Directors has selected Weinberg & Company, P.A. to audit our financial statements for the fiscal year ending December 31, 2004. Although ratification by stockholders is not required by law, the Board of Directors has determined that it is desirable to request approval of this selection by the stockholders. Notwithstanding its selection, the Board of Directors, in its discretion, may appoint new independent auditors at any time during the year if the Board of Directors believes that such a change would be in the best interest of the Company and its stockholders. If the stockholders do not ratify the appointment of Weinberg & Company, P.A. the Board of Directors may reconsider its selection.

      Weinberg & Company, P.A. was first appointed in fiscal year 2003, and has audited our financial statements for fiscal years 2002 and 2003. Certain additional information regarding changes in our independent auditors in 2002 and 2003 can be found in Part II, Item 8 of our Annual Report on Form 10-KSB, a copy of which accompanies this proxy statement.

      The Board of Directors expects that representatives of Weinberg & Company, P.A. will be present at the Annual Meeting to respond to appropriate questions and to make a statement if they so desire.

Audit and Other Fees

      The following table summarizes the fees charged by Weinberg & Company, P.A. for certain services rendered to the company during 2002 and 2003. Weinberg & Company, P.A. was retained in December 2003 to audit the Company’s financial statements and provide audit-related services for fiscal years 2002 and 2003. Because of the date of the engagement, Weinberg & Company, P.A. did not commence its audit and audit-

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      The Board of Directors unanimously recommends that stockholders vote “FOR” the ratification of Weinberg & Company, P.A. as the Company’s independent auditors for the fiscal year ending December 31, 2004.

APPROVAL OF THE 2004 STOCK OPTION PLAN

      We are asking our stockholders to approve the 2004 Stock Option Plan (the “2004 Plan”) so that we can attract and retain the best available personnel for service as employees as well as non-employee directors and to encourage their continued service with us. On March 2, 2004, the Board of Directors approved the 2004 Plan, subject to approval from our stockholders at the Annual Meeting.

      The following is only a summary of the principal provisions of the 2004 Plan. The summary is qualified in its entirety by reference to the 2004 Plan, which is attached as Appendix C.

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      The Board of Directors unanimously recommends that stockholders vote “FOR” the approval of the 2004 Plan.

EXECUTIVE COMPENSATION AND OTHER MATTERS

      The following table sets forth compensation information for our Chief Executive Officer and our other Named Executive Officers as of the end of our last three fiscal years ended December 31, 2003.

Summary Compensation Table

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OPTION GRANTS IN LAST FISCAL YEAR

      No options were granted to the Named Executive Officers in 2003.

      The following table sets forth information with respect to the Named Executive Officers concerning exercised and unexercised options held as of December 31, 2003.

EQUITY COMPENSATION PLAN INFORMATION FOR 2003

      The following table sets forth information regarding outstanding options and shares reserved for future issuance under our equity compensation plans as of December 31, 2003:

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During 2002, we entered into an agreement with Edward L. Masry, our Chairman of the Board and Chief Executive Officer, for the reimbursement of a $500,000 loan made by Masry & Vititoe, PC, of which Mr. Masry is a member, to us. In June 2003, we paid this loan in full by issuing an aggregate 2,000,000 shares at a price per share of $0.25 and warrants to purchase an aggregate 2,000,000 shares at an exercise price of $0.50, exercisable for a five-year period. Also during 2003, $49,651 of billed legal fees by Masry & Vititoe, PC, was paid by us in the form of issuing warrants to purchase 83,414 shares of our Common Stock. The warrants are exercisable at $ ..50 per share for a five-year period.

      In October 2003, we entered into a lease agreement with KZ Golf, Inc. to lease office space for our primary administrative facility. Jennifer J. King, the wife of Mr. McKinnon, one of our directors, is the indirect principal stockholder of KZ Golf, Inc.

      In July 2002, after an investigation by our newly constituted board of directors, we commenced litigation against Jeffrey Muller, the Company’s founder and former President, and others, seeking injunctive relief, disgorgement and financial restitution for a variety of acts and omissions in connection with sales of our Common Stock and other transactions occurring between 1998 and 2002. We are also seeking a court order allowing us to cancel all of the approximately 8,716,710 shares of our Common Stock which we believe are controlled, directly or indirectly, by Mr. Muller, divesting Mr. Muller of any right to exercise options for 10,000,000 shares of our Common Stock and a monetary judgment against Muller and others in the amount of several million dollars. On July 30, 2002, the U.S. Federal District Court, Southern District of New York, granted our application for a preliminary injunction against Mr. Muller and others, which prevents Mr. Muller and the other defendants from selling, transferring, or encumbering any of our assets and property, from selling or transferring any of our Common Stock that they may own or control, or from taking any action to injure us or our business and stockholders. The order also prevents Mr. Muller from exercising any control over our company and serving as an officer or director of our company. The litigation is pending.

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COMPENSATION COMMITTEE REPORT

      The following Report of the Compensation Committee and the Performance Graph that follows do not constitute soliciting material and should not be deemed filed or incorporated by reference into any of our other filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that we specifically incorporate this report or the performance graph by reference therein.

      The Compensation Committee has furnished this report on executive compensation for the 2003 fiscal year.

      The Compensation Committee has the authority to review and determine the salaries and bonuses of senior executive officers of the company, including the Chief Executive Officer, and to establish the general compensation policies for such individuals. The Compensation Committee also has the sole and exclusive authority to make discretionary option grants to all of the company’s employees under the 2004 Plan, if the Plan is approved by our stockholders at the 2004 Annual Meeting.

      The Compensation Committee believes that the compensation programs for the Company’s executive officers should reflect the company’s performance and the value created for the Company’s stockholders. In addition, the compensation programs should support the short-term and long-term strategic goals and values of the company, reward individual contribution to the Company’s success and align the interests of the Company’s officers with the interests of its stockholders. The Company is engaged in a very competitive industry, and the Company’s success depends upon its ability to attract and retain qualified executives through the competitive compensation packages it offers to such individuals.

      The principal factors that were taken into account in establishing each executive officer’s compensation package for the 2003 fiscal year are described below. However, the Compensation Committee may in its discretion apply entirely different factors, such as different measures of financial performance, for future fiscal years.

      Chief Executive Officer Compensation. Edward L. Masry, who served as our President and Chief Executive Officer in 2003, received no compensation for 2003. Mr. Masry’s principal compensation came from his law firm, Masry & Vititoe. That law firm also provides legal work for us. Because of the terms of Mr. Masry’s employment agreement, the Compensation Committee did not consider specific factors in connection with Mr. Masry’s compensation. Because the Company is in the development stage, the Compensation Committee did not award a bonus to Mr. Masry for 2003. We entered into an employment agreement with Mr. Masry in December 2003, under which his base compensation will be $1.00 per year for each year of the term of the agreement, commencing in 2004.

      Other Senior Executive Officer Compensation. Eugene E. Eichler, who served as our Chief Operating Officer, Chief Financial Officer and Treasurer in 2003, was paid his compensation by Masry & Vititoe. Masry & Vititoe billed us 90% of that amount, reflecting the approximate allocation of Mr. Eichler’s time devoted to the affairs of our Company. Because the Company is in the development stage, the Compensation Committee did not award a bonus to Mr. Eichler for 2003. We entered into an employment agreement with Mr. Eichler in December 2003, under which his base compensation will be $192,000 in 2004 and which is reviewable for subsequent years of the term of the agreement.

      Our other executive officers were paid relatively nominal amounts of base compensation in 2003, reflecting the development stage of our Company. Because the company is in the development stage, the Compensation Committee also did not award a bonus to any of our executive officers for 2003.

      Compliance with Code Section 162(m). Section 162(m) of the Code disallows a tax deduction to publicly-held companies for compensation paid to certain of their executive officers, to the extent that compensation exceeds $1 million per covered officer in any fiscal year. The limitation applies only to compensation which is not considered to be performance based. Non-performance based compensation paid to the Company’s executive officers for the 2003 fiscal year did not exceed the $1 million limit per officer, and the Compensation Committee does not anticipate that the non-performance based compensation to be paid to the Company’s executive officers for the 2003 fiscal year will exceed that limit. Because it is unlikely that the cash

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      The Board did not modify any action or recommendation made by the Compensation Committee with respect to executive compensation for the 2003 fiscal year. It is the opinion of the Compensation Committee that the executive compensation policies and plans provide the necessary total remuneration program to properly align the Company’s performance and the interests of the Company’s stockholders through the use of competitive and equitable executive compensation in a balanced and reasonable manner, for both the short and long term.

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AUDIT COMMITTEE REPORT

      The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any of our other filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this report by reference therein, and shall not be deemed to be soliciting material or otherwise deemed filed under either such Act.

      The Audit Committee is currently composed of four directors, two of whom are independent. The duties and responsibilities of a member of the Audit Committee are in addition to his duties as a member of the Board.

      The Audit Committee operates under a written charter . A copy of the Audit Committee Charter is attached as Appendix A to this proxy statement. The Board and the Audit Committee believe that the Audit Committee Charter complies with the current standards set forth in SEC regulations. There may be further action by the SEC during the current year on several matters that affect all audit committees. The Board and the Audit Committee continue to follow closely further developments by the SEC in the area of the functions of audit committees and will make additional changes to the Audit Committee Charter and the policies of the Audit Committee as required or advisable as a result of these new rules and regulations.

      The Audit Committee’s primary duties and responsibilities are:

      Management is responsible for the company’s internal controls and the financial reporting process. The company’s independent auditor is responsible for performing an independent audit of the company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.

      The company is planning to form an internal management group, reporting to the Chief Executive Officer and the Audit Committee, that is charged with guiding the Company in meeting the various requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

      The Audit Committee has begun to implement procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to each of the matters assigned to it under its charter. The Audit Committee did not meet during 2003, but met in early 2004 with respect to the financial statements and financial condition of the Company for fiscal years 2002 and 2003.

      In overseeing the preparation of the Company’s financial statements, the Audit Committee met with both management and the Company’s outside auditors to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee discussed the statements with both management and the outside auditors. The Audit Committee’s review included discussion with the outside auditors of matters required to be discussed pursuant to Statements on Auditing Standards No. 61 and 90 (Communication with Audit Committees).

      With respect to the company’s outside auditors, the Audit Committee, among other things, discussed with Weinberg & Company, P.A. matters relating to its independence, including the written disclosures made to the Audit Committee as required by the Independence Standards Board Standard No. 1 (Independence

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      On the basis of these reviews and discussions, the Audit Committee recommended to the Board that the Board approve the inclusion of the Company’s audited financial statements in the 10-KSB for filing with the SEC.

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STOCKHOLDER PROPOSALS

      From time to time stockholders present proposals that may be proper subjects for inclusion in a proxy statement and for consideration at an annual meeting. Under the rules of the SEC, to be included in the proxy statement for our 2005 annual meeting of stockholders, proposals must be received by us no later than January 10, 2005.

ANNUAL REPORT ON FORM 10-K

      We filed our Annual Report on Form 10-KSB with the SEC on March 15, 2004. A copy of the 10-KSB has been mailed to all stockholders along with this proxy statement. Stockholders may obtain additional copies of the 10-KSB and the exhibits thereto, without charge, by writing to the Corporate Secretary at our principal executive offices at 5125 Lankershim Boulevard, North Hollywood, CA 91601.

OTHER MATTERS

      Management does not know of any matters to be presented at the 2004 Annual Meeting other than those set forth herein and in the Notice accompanying this proxy statement. If a stockholder vote is necessary to transact any other business at the 2004 Annual Meeting, the proxyholders intend to vote their proxies in accordance with their best judgment related to such business.

      It is important that your shares be represented at the 2004 Annual Meeting, regardless of the number of shares that you hold. YOU ARE, THEREFORE, URGED TO EXECUTE PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE THAT HAS BEEN ENCLOSED FOR YOUR CONVENIENCE. Stockholders who are present at the 2004 Annual Meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and allow their proxies to be voted.

	By Order of the Board of Directors,
	EDWARD L. MASRY
	Chairman of the Board and Chief Executive Officer

May 3, 2004

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SAVE THE WORLD AIR, INC.

Shareholders Meeting May 24th, 2004 at 10:00 am

Hilton Hotel Los Angeles/Universal City

Directions from Los Angeles International Airport (LAX):

      1. Merge onto I-405 N.

Directions from Los Angeles/Downtown:

      1. Merge onto CA-110 N toward PASADENA.

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CHARTER FOR THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Purpose:

      The purpose of the Audit Committee of the Board of Directors of Save the World Air, Inc. (the “Company”) shall be to:

In addition, the Audit Committee will undertake those specific duties and responsibilities listed below and such other duties as the Board of Directors may from time to time prescribe.

Membership:

      The Audit Committee members will be appointed by, and will serve at the discretion of, the Board of Directors. The Audit Committee will consist of at least three members of the Board of Directors. Members of the Audit Committee must meet the following criteria (as well as any additional criteria required by the SEC):

Authority and Responsibilities:

      In addition to any other responsibilities which may be assigned from time to time by the Board of Directors, the responsibilities of the Audit Committee shall include:

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Limitations Inherent in the Audit Committee’s Role:

      It’s not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor.

      It is also not the duty of the Audit Committee to resolve disagreements, if any, between management and the outside auditors or to assure compliance with laws and regulations and the Company’s policies generally. Furthermore, it is the responsibility of the CEO and senior management to avoid and minimize the Company’s exposure to risk, and while the Audit Committee is responsible for reviewing with management the guidelines and policies to govern the process by which risk assessment and management is undertaken, the Audit Committee is not the sole body responsible.

Meetings:

      The Audit Committee will meet at least four times each year. The Audit Committee may establish its own schedule, which it will provide to the Board of Directors in advance.

      The Audit Committee will meet separately with the Chief Executive Officer and separately with the Chief Financial Officer of the Company at such times as are appropriate to review the financial affairs of the Company. The Audit Committee will meet separately with the independent auditors of the Company, at such times as it deems appropriate, but not less than quarterly, to fulfill the responsibilities of the Audit Committee under this charter.

Minutes:

      The Audit Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board of Directors.

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Compensation:

      Members of the Audit Committee shall receive such fees, if any, for their service as Audit Committee members as may be determined by the Board of Directors in its sole discretion. Such fees may include retainers, per meeting fees and special fees for service as Chair of the Audit Committee. Fees may be paid in such form of consideration as is determined by the Board of Directors, which may include cash, deferred payment, stock or stock options.

      Members of the Audit Committee may not receive any compensation from the Company except the fees that they receive for service as a member of the Board of Directors or any committee thereof.

Delegation of Authority:

      The Audit Committee may, from time to time, delegate its authority to approve non-audit services on a preliminary basis to one or more designated members of the Audit Committee, provided that such designees present any such approval to the full Audit Committee for ratification at the next scheduled meeting.

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CHARTER FOR THE NOMINATING AND CORPORATE GOVERNANCE

Purpose:

      The purpose of the Nominating and Corporate Governance Committee of the Board of Directors (the “Board”) of Save the World Air, Inc. (the “Company”) shall be to ensure that the Board is properly constituted to meet its fiduciary obligations to stockholders and the Company, and that the Company has and follows appropriate governance standards.

      To carry out this purpose, the Nominating and Corporate Governance Committee shall: (i) identify prospective director nominees and recommend to the Board the director nominees for the next annual meeting or special meeting of stockholders at which directors are to be elected, and recommend individuals to the Board to fill any vacancies or newly created directorships that may occur between such meetings; (ii) develop and recommend to the Board the governance principles applicable to the Company; (iii) oversee the evaluation of the Board and management from a corporate governance perspective; (iv) identify and recommend to the Board directors for membership on Board committees; (v) oversee and set compensation for the Company’s directors; and (vi) review the Company’s reporting in documents filed with the Securities and Exchange Commission, to the extent related to corporate governance and other matters set forth in this charter.

Membership:

      The members of the Nominating and Corporate Governance Committee will be appointed by the Board, will serve at the discretion of the Board and may be removed by the Board at any time. The Nominating and Corporate Governance Committee shall consist of at least two members. The Board shall designate the Chairperson of the Nominating and Corporate Governance Committee.

Authority and Responsibilities:

      In addition to any other responsibilities which may be assigned from time to time by the Board, the Nominating and Corporate Governance Committee is authorized to undertake, and has responsibility for, the following matters.

      The Nominating and Corporate Governance Committee shall conduct searches for qualified individuals for membership on the Company’s Board. As vacancies or newly created positions occur, the Nominating and Corporate Governance Committee shall recommend individuals for membership on the Company’s Board of Directors and directors for appointment to the committees of the Board. In making its recommendations, the Nominating and Corporate Governance Committee must:

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      At least annually, the Nominating and Corporate Governance Committee shall (i) review and assess the performance of the Board and its committees, and senior management of the Company; and (ii) report such assessments, including any recommendations for proposed changes, to the Board.

      At least annually, the Nominating and Corporate Governance Committee shall review and approve compensation (including stock option grants and other equity-based compensation) for the Company’s directors. In so reviewing and approving director compensation, the Committee shall:

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      The Nominating and Corporate Governance Committee shall review the Company’s reporting in documents filed with the Securities and Exchange Commission, to the extent specifically related to corporate governance and the other matters set forth in this charter.

      The Nominating and Corporate Governance Committee shall report to the Board at least annually. This report shall include a review of any recommendations or issues that arise with respect to Board or committee nominees or membership, Board or management performance, corporate governance or any other matters that the Nominating and Corporate Governance Committee deems appropriate or is requested to be included by the Board.

      At least annually, the Nominating and Corporate Governance Committee shall (i) review and assess the adequacy of this charter and recommend any proposed changes to the Board for approval; and (ii) evaluate its own performance and report to the Board on such evaluation.

Procedures:

      The Committee shall meet as often as it determines is appropriate to carry out its responsibilities under this charter, but not less frequently than quarterly. The Chairperson of the Nominating and Corporate Governance Committee, in consultation with the other Committee members, shall determine the frequency and length of the Committee meetings and shall set meeting agendas consistent with this charter.

      The Nominating and Corporate Governance Committee is authorized to retain (without further Board approval) special legal, accounting or other advisors and may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to meet with any members of, or advisors to, the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has the sole authority to retain and terminate any search firm to assist in identifying director candidates, including sole authority to approve all such search firm’s fees and other retention terms.

      The Nominating and Corporate Governance Committee may, to the fullest extent permitted by applicable law or regulation, form and delegate its authority to subcommittees of the Committee when it deems appropriate and in the best interests of the Company.

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SAVE THE WORLD AIR, INC.

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SAVE THE WORLD AIR, INC.

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ALL CAPITALIZED TERMS USED IN THIS PLAN SHALL HAVE THE MEANINGS SET FORTH IN THE “GLOSSARY OF TERMS” ATTACHED AS Appendix “A” WHICH IS HEREBY INCORPORATED BY THIS REFERENCE

SAVE THE WORLD AIR, INC.

      1.1     Purpose. The purpose of the Save The World Air, Inc. 2004 Stock Option Plan (this “Plan”) is to benefit and strengthen Save The World Air, Inc. (the “Company”), its shareholders, and its Parents and Subsidiaries by encouraging stock ownership by selected key employees, directors, consultants and advisers; assisting the Company and its Parents and Subsidiaries in attracting and retaining key personnel; and providing to participating personnel added incentive for high levels of performance to expand and improve the earnings of the Company and its Parents and Subsidiaries. This Plan will provide a means whereby (a) such employees may purchase shares of the Stock of the Company pursuant to Incentive Stock Options (“ISOs”) and (b) such employees or other persons may purchase shares of Stock pursuant to Non-Qualified Stock Options (“NQSOs”).

      1.2     Effective Date. This Plan shall be effective from the date that this Plan is approved at a meeting of the Board of Directors of the Company (the “Board”) (or, if approval is effected by a unanimous written consent of the Board, such date as is specified in the consent), subject to approval hereof within twelve (12) months before or after such date by shareholders of the Company holding not less than a majority of the voting power of the Company voting in person or by proxy at a duly held shareholders’ meeting.

      1.3     Plan Not Exclusive. This Plan is not exclusive and the Company may have other plans, programs and arrangements for the grant of stock options, the issuance of shares or other non-cash compensation, or payment of cash bonuses or other compensation; and this Plan does not require that any Participant be precluded from participation in such other plans, programs and arrangements.

      1.4     Choice of Law. The laws of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan, regardless of the choice of law provisions of California or any other jurisdiction and regardless of where the Company or any Participant may now or hereafter be formed, do business, or reside.

      2.1     Maximum Number of Shares. The stock to be offered under this Plan shall be shares of the Company’s authorized but unissued Stock, and the aggregate number of shares of Stock to be delivered upon exercise of all Stock Options granted under this Plan shall not exceed One Million Five Hundred Thousand (1,500,000), subject to adjustment as provided in Section hereof. If any Stock Option shall terminate or expire for any reason without having vested under Section hereof and been exercised in full under Section hereof, the unpurchased shares subject thereto shall again be available for purposes of the foregoing limitation.

      2.2     Reservation of Shares of Stock. The Company during the term of this Plan shall at all times reserve and keep available the number of shares of Stock necessary to satisfy the requirements of this Plan.

      3.1     Committee. This Plan shall be administered by a committee consisting of three (3) or more persons who shall be selected by the Board from time to time (the “Committee”).

           3.1.1 Powers and Duties. Subject to the express provisions of this Plan or an applicable Stock Option Agreement and in addition to such other powers as are described in this Plan, the Committee shall have the authority to (a) construe and interpret this Plan, and to define the terms used herein; (b) prescribe, amend, and rescind rules and regulations relating to administration of this Plan; (c) determine the duration and purposes of leaves of absence that may be granted to Participants without constituting a cessation of their

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           3.1.2 Voting. Any action of the Committee with respect to administration of this Plan shall be taken pursuant to a majority vote, or to the unanimous written consent, of its members. Two (2) members of the Committee shall constitute a quorum for the transaction of business.

      3.2     Limitations on Liability

           3.2.1 Release. No member of the Committee shall be liable, responsible or accountable in damages or otherwise to the Company or its Parent or Subsidiaries, or any Participant or any of such Participant’s successors or assigns, for any act or omission by such member performed or omitted in good faith pursuant to the authority granted to such member by this Plan; provided, that such Committee member is not guilty of fraud, bad faith, or gross negligence. No amendment or repeal of this Section affects any liability or alleged liability of any member of the Committee for any acts, omissions, or conduct that occurred prior to such amendment or repeal.

           3.2.2 Indemnification. To the maximum extent permitted by law, the Company shall indemnify, defend, and hold harmless each member of the Committee from any liability, loss, claim, expense or damage incurred by such member by reason of any act performed or omitted to be performed by such member in connection with the Committee, including costs and attorney’s fees and any amounts expended in the settlement of any claims of liability, loss or damage; provided, that nothing in this Section shall relieve the party seeking indemnity from liability for fraud, bad faith, or gross negligence. No amendment or repeal of this Section affects any rights to indemnity for any acts, omissions, or conduct that occurred prior to such amendment or repeal.

      4.1     Eligibility. All employees, directors, consultants and advisers of the Company or of any Parent or Subsidiary shall be eligible for selection to participate in this Plan.

      4.2     Selection. Subject to the express provisions of this Plan, the Board pursuant to recommendations by the Committee, or the Committee if expressly authorized by the Board, shall select (a) those individuals to whom Stock Options shall be granted from the eligible class described in Section hereof; (b) the terms and provisions of the respective Stock Option Agreement (which terms need not be identical with respect to each Participant or with respect to Stock Options granted to any one Participant); (c) whether such Stock Options will be Incentive Stock Options or Non-Qualified Stock Options; (d) the Exercise Price; (e) the times at which such Stock Options shall be granted and become vested; and (f) the number of shares of Stock subject to each Stock Option.

      4.3     Successive Grants. A person who has been granted a Stock Option may, if such person is otherwise eligible under Section hereof, be granted additional Stock Options.

      4.4     Limits on Incentive Stock Options. No Incentive Stock Option may be granted to any person who, at the time the ISO is granted, does not meet both the following requirements:

           4.4.1 Employee. Such person (whether or not a Ten Percent Shareholder) must be an employee of the Company or a Parent or Subsidiary thereof.

           4.4.2 Ten Percent Shareholder. Such person cannot be a Ten Percent Shareholder; provided, that an ISO may nonetheless be issued to such person if the Exercise Price complies with Section hereof and if the term of such ISO complies with Section hereof.

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      Notwithstanding the discretion granted to the Board or the Committee under this Plan, and in addition to such terms and conditions as are imposed by Section hereof, any grant of a Stock Option shall be subject to the following terms and conditions:

      5.1     Stock Option Agreement. Each Stock Option shall be evidenced by a Stock Option Agreement which shall (a) specify the number of shares of Stock subject to the Stock Option; (b) specify whether the Stock Option is an ISO or NQSO; (c) set forth the Exercise Price; and (d) contain each of the provisions and agreements specifically required to be contained therein under the Plan and such other terms and conditions as are deemed necessary or desirable by the Board (or the Committee, if authorized) and are not inconsistent with this Plan. A purported grant of a Stock Option shall be null and void ab initio and of no effect whatsoever unless evidenced by a Stock Option Agreement signed by a duly-authorized officer of the Company and by the applicable Participant.

      5.2     Date of Grant. The date that a Stock Option is granted shall be set forth in the applicable Stock Option Agreement and shall be (a) the day of the meeting of the Board (or meeting of the Committee, if authorized) in which the action described in Section hereof is taken (or, if such action is taken by unanimous written consent by the Board or Committee, as the case may be, the date that the last member of the Board or Committee signs such consent), or (b) if later, such date as is specified in the action by the Board or Committee described in Section hereof.

      5.3     Exercise Price. The Exercise Price for a share of Stock subject to a Stock Option shall be as follows:

           5.3.1 ISO Issued to Ten Percent Shareholder. If an ISO is granted to a Ten Percent Shareholder, the Exercise Price must be at least one hundred and ten percent (110%) of the Fair Market Value of the Stock on the date the ISO is granted.

           5.3.2 Other ISOs. If an ISO is granted to a person other than a Ten Percent Shareholder, the Exercise Price must be at least one hundred percent (100%) of the Fair Market Value of the Stock on the date the ISO is granted.

           5.3.3 Non-Qualified Stock Options. The Exercise Price with respect to an NQSO shall be as determined by the Board (or the Committee, if authorized).

      5.4     Continued Employment. The Board (or the Committee, if authorized) may, in its discretion, include in any Stock Option Agreement a condition that the Participant shall agree to remain in the employ of, and to render such services to, the Company or any Parent or Subsidiary thereof for such period as shall be specified in such Agreement; provided, that no Stock Option Agreement shall (a) impose upon the Company or any Parent or Subsidiary any obligation to employ the Participant for any period; (b) interfere in any way with the right of the Company or any Parent or Subsidiary thereof to reduce such Participant’s compensation; or (c) impose terms on the Company or any Parent or Subsidiary thereof that are more onerous to such employer than those contained in a written employment agreement between such employer on the one hand and such Participant on the other hand.

      5.5     Vesting; Installments. A Stock Option may be exercised only if and to the extent vested, subject to acceleration as provided under Section hereof. A Stock Option may vest immediately or according to such schedule as the Board (or the Committee, if authorized) may determine, but subject to the following provisions:

           5.5.1 Limits on Incentive Stock Options. With respect to an Incentive Stock Option, the aggregate Fair Market Value of shares of Stock (such Fair Market Value to be determined as of the date that such ISO is granted) with respect to which such ISO is exercisable for the first time by a Participant during any calendar year (taking into account incentive stock options as defined under section 422 of the Code granted to such Participant under any other plan maintained by the Company or a Parent or Subsidiary) shall at no time exceed One Hundred Thousand Dollars ($100,000).

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           5.5.2 No Fractional Shares. No installment of a Stock Option shall be exercisable except with respect to a whole share, and fractional shares shall be disregarded except that they may be accumulated.

      5.6     No Obligation to Exercise. The granting of a Stock Option shall not impose an obligation on the Participant to exercise such Stock Option.

      5.7     Transferability

           5.7.1 In General. Except as provided in Section hereof, all Stock Options shall, by their terms, be non-transferable by the Participant, either voluntarily or by operation of law, otherwise than by Will or the laws of descent and distribution, and shall be exercisable during the Participant’s lifetime only by the Participant, regardless of any community property interest therein of the spouse of the Participant or such spouse’s successors in interest. If the spouse of the Participant shall have acquired a community property interest in any such Stock Option, the Participant or the Participant’s permitted successors in interest may exercise the Stock Option on behalf of the spouse of the Participant or such spouse’s successors in interest.

           5.7.2 Non-Qualified Stock Options. The Board (or Committee, if authorized) may provide in a Stock Option Agreement that a Non-Qualified Stock Option (but not an Incentive Stock Option) may be transferred under the following terms and conditions:

                5.7.2.1 A Participant may transfer an NQSO only to (a) a trust of which such individual is a grantor, provided that the named beneficiaries of such trust shall include only such person and/or members of such person’s Family (and such a trust shall be unrestricted as to the identity of the trustee or trustees); (b) a corporation, partnership or limited liability company; provided, that the owners of equity interests in the foregoing shall consist solely of one or a combination of such person, member(s) of such person’s Family, or one or more trusts described in the foregoing clause (a); or (c) as an outright gift one or more members of such person’s Family.

                5.7.2.2 The transferor Participant and the transferee shall execute and acknowledge such assignments or other instruments as the Board (or the Committee, if authorized) may reasonably request, in form and substance reasonably satisfactory to the Board or Committee, to confirm or memorialize such transfer.

                5.7.2.3 The transferor Participant or transferee shall provide the Board (or the Committee, if authorized) with the name, address, and taxpayer identification number of the transferee and such other information as the Board or Committee shall request to prepare tax returns and other filings reflecting such transfer as are required by the Code or otherwise.

                5.7.2.4 The transferor Participant or transferee shall, at such person’s expense, furnish the Board (or the Committee, if authorized) with an opinion of counsel in form and substance satisfactory to the Board or Committee to the effect that such transfer, and the issuance of shares of Stock to the transferee upon exercise of the NQSO transferred, will comply with federal or state securities laws (including, without limitation, any exemption thereunder pursuant to which the Company has caused such NQSO or share to be issued).

                5.7.2.5 The transferee shall have executed and acknowledged the Stock Option Agreement to which the transferor Participant is a party and shall have assumed all obligations and liabilities of the transferor Participant thereunder.

      5.8     Time Limitation. Each Stock Option and all rights associated therewith shall expire on such date as the Board (or the Committee, if authorized) may determine, and shall be subject to earlier termination as provided herein, but subject to the following provisions:

           5.8.1 ISO Issued to Ten Percent Shareholder. If an ISO is granted to a Ten Percent Shareholder, the ISO shall expire no later than five (5) years after the date such ISO is granted.

           5.8.2 Other ISOs. If an ISO is granted to a person other than a Ten Percent Shareholder, the ISO shall expire no later than ten (10) years after the date such ISO is granted.

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      5.9     Cessation of Employment

           5.9.1 In General. Subject to Sections and hereof, if a Participant ceases to be employed by the Company or any Subsidiary or Parent thereof, such Participant may, subject to the time limitations in Section hereof, exercise such Participant’s Stock Options to the extent that such Participant was entitled to exercise them on the date of such cessation (a) within one (1) year after such cessation if such cessation results from the Disability of such Participant, or (b) otherwise within ninety (90) days after such cessation; provided, that the applicable Stock Option Agreement may allow the Board (or the Committee, if authorized) to cancel any Stock Option in the event of a cessation described in clause (b) of this Section during such ninety (90) day period if the Participant engages in employment or activities contrary, in the reasonable opinion of the Board (or the Committee, if authorized), to the best interests of the Company or a Subsidiary or Parent thereof.

           5.9.2 Termination for Cause. If a Participant is terminated as an officer or employee of the Company or any Parent or Subsidiary thereof for Cause, such Participant’s Stock Options shall terminate immediately; provided, however, that the Board (or the Committee, if authorized) may, in its sole and absolute discretion, within ten (10) days of such termination, waive the expiration of such Stock Options by giving written notice of such waiver at such Participant’s last known address. In the event of such waiver, such Participant may exercise a Stock Option only to such extent, for such time, and upon such terms and conditions as if such Participant had been subject to Section hereof.

      5.10     Death of Participant. If a Participant dies while employed by the Company or any Subsidiary or Parent thereof, or during the period described in clause (a) or clause (b) of Section hereof as applicable, then, subject to the time limitations in Section hereof, such Participant’s Stock Options shall expire within one (1) year after the date of death; and the executor or administrator of such Participant’s estate, or the person or persons to whom such Participant’s rights under the Stock Options shall have passed by Will or by the applicable laws of descent and distribution, shall have the right to exercise such Stock Option to the extent that such Participant was entitled to exercise such Stock Option on the date of death.

      5.11     Notification of Corporate Transaction. The Board (or the Committee, if authorized) shall notify each Participant of the pendency of a Corporate Transaction a reasonable time before such Corporate Transaction is to occur, and each Participant (or such other person entitled to exercise a Stock Option under Section hereof) shall have the right, at any time prior to such Corporate Transaction, to exercise any Stock Options of such person to the extent that such Stock Options are otherwise exercisable under the terms of this Plan or applicable Stock Option Agreement.

           5.11.1 Termination of Stock Options. All Stock Options shall terminate as of the Effective Date of the Corporate Transaction unless provision is made in connection with such Corporate Transaction (which provision shall be solely at the option of such successor corporation or parent or subsidiary corporation) for (a) assumption of the Company’s obligations under any Stock Options theretofore granted, or (b) substitution for such Stock Options of new options covering stock of a successor employer corporation or a parent or subsidiary corporation thereof (with appropriate adjustments as to the number and kinds of shares subject to the Stock Options).

           5.11.2 Acceleration. Acceleration of Stock Options in contemplation of such Corporate Transaction shall not be permitted except in the following circumstances:

                5.11.2.1 Upon the occurrence of a Corporate Transaction in which the assets or voting securities of the Company are acquired by a person whose equity securities are registered under section 12 of the Exchange Act, then any Stock Option held by any person who would be considered an affiliate of the Company under the “pooling of interests” rules promulgated by the Financial Accounting Standards Board shall, without any action by the Board or Committee, become immediately exercisable, and the Board (or the Committee, if authorized) may determine that either clause (b) of Section hereof shall apply or that the Participants shall, upon the Effective Date of such Corporate Transaction, be entitled to receive cash for each Stock Option equal to the difference between the Exercise Price of such Stock Option and the Value of Consideration attributable to each share of Stock in connection with such Corporate Transaction.

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                5.11.2.2 Upon the occurrence of a Corporate Transaction in which the assets or voting securities of the Company are acquired by a person whose equity securities are not registered under section 12 of the Exchange Act, including a “Rule 13e-3 transaction,” as such term is defined by Rule 13e-3 promulgated under the Exchange Act, then all Stock Options granted hereunder shall, without any action by the Board or Committee, become immediately exercisable and the Participants shall, upon the Effective Date of such Corporate Transaction, be entitled to receive cash for each Stock Option equal to the difference between the Exercise Price of such Stock Option and the Value of Consideration attributable to each share of Stock in connection with such Corporate Transaction.

                5.11.2.3 Under no circumstances shall any such acceleration cause an otherwise unvested portion of an ISO to become exercisable in violation of Section hereof.

      5.12     Compliance With Securities and Tax Laws. No Stock Option shall be granted and no shares of Stock shall be issued under this Plan except in compliance with all applicable federal and state securities and tax laws and regulations and in compliance with rules of stock exchanges on which the Stock may be listed. In furtherance of the foregoing and not in order to limit the generality of the foregoing in any way:

           5.12.1 Representation. The Company, as a condition to the issuance of such shares, may require the person exercising such Stock Option to represent and warrant at the time of such exercise that any shares of Stock acquired upon exercise are being acquired only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required under any applicable law, regulation or rule of any governmental agency.

           5.12.2 Notice of Sale. Each Stock Option Agreement shall require the person acquiring shares pursuant to the exercise of a Stock Option to give the Company notice of any sale or other disposition of any such shares not less than ten (10) days after such sale or other disposition.

           5.12.3 Withholding. Each Stock Option Agreement shall contain an acknowledgment by the Participant that the Company, in order to fulfill its withholding obligations under any federal, state or local tax law (including, without limitation, upon the disposition by a person of shares of Stock acquired pursuant to the exercise of an ISO within two (2) years of the granting of the ISO or within one (1) year after exercise of the ISO; upon a Participant’s exercising an ISO more than three (3) months after such Participant has ceased to be an employee of the Company or a Parent or Subsidiary; or upon the exercise by a person of an NQSO) may (a) withhold such sums from other compensation due the Participant, (b) require such Participant to pay to the Company such amounts as a condition to the delivery of shares pursuant to exercise of the Stock Option, or (c) sell shares that would otherwise be delivered to such Participant upon exercise of the Stock Option in order to raise cash in the necessary amount.

      6.1     Purchase Right. Each Stock Option shall entitle a Participant to receive, upon exercise in the manner described in Section hereof, up to the number of shares of Stock subject to such Stock Option subject to adjustment as provided in Section hereof. From such exercise date, the Participant shall be entitled to the issuance of a stock certificate evidencing such Participant’s ownership of such Stock (but subject to Section hereof). No person entitled to exercise any Stock Option granted under this Plan shall have any of the rights or privileges of a shareholder of the Company (including, without limitation, rights to distributions, voting rights, inspection rights, dissenter’s rights, rights to bring a derivative action, or other rights of a shareholder under applicable corporate law) in respect of any shares of Stock issuable upon exercise of such Stock Option until and only to the extent such Stock Options are exercised and certificates representing such shares shall have been issued and delivered.

      6.2     Manner of Exercise and Payment. A Participant shall exercise a Stock Option, if at all, by giving (a) written notice of such exercise to the Committee specifying (i) the number of shares of Stock with respect to which such Stock Option is being exercised and (ii) if the Participant owns a combination of ISOs and NQSOs, and/or successive Stock Options, which Stock Options are being exercised, together with (b) payment of the full purchase price for such shares (in the manner provided in Section hereof) equal to the

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           6.2.1 Effective Date of Exercise. The date upon which such written notice is given and payment of the full purchase price is received by the Committee shall be the exercise date for such Stock Option.