EXHIBIT 10.1

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT (“Agreement”) is entered into as of October 23,
2006, by and between Sparta Commercial Services, Inc., a Nevada corporation (the
“Company”), and Jeffrey Bean (the “Optionee”).

RECITALS

Whereas, in recognition of services as Director, the Company grants to you stock
options on the terms and conditions set forth herein;

AGREEMENT

It is hereby agreed as follows:

1.    GRANT OF OPTION. The Company grants Optionee the right, privilege, and
option (the “Options”) up to 500,000 shares of the Company’s common stock, par
value $.001 per share (the “Common Stock”), in the manner and subject to the
conditions hereinafter provided. The time the Options shall be deemed granted,
sometimes referred to herein as the “date of grant,” shall be the date of
execution of this Agreement.

2.    SERVICES TO THE COMPANY. The exercisability of the Options are subject to
certain conditions of service of the Optionee to the Company. Nothing contained
in this Agreement shall obligate the Company to employ or have another
relationship with the Optionee.

3.    OPTION PERIOD. Subject to the vesting schedule herein, the Options shall
be exercisable at any time during the period commencing with the date of this
Agreement and expiring on the fifth year anniversary date of this Agreement,
October 23, 2011, unless earlier terminated pursuant to this Section and/or
Section 14 of this Agreement, or if said day is a day on which banking
institutions are authorized by law to close, then on the next succeeding day
which shall not be such a day, by presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, together with all
Federal and state taxes applicable upon such exercise, if any. The vesting
schedule for the Options is as follows:

 
October 23, 2006 
 
40% vested 
   
October 23, 2007 
 
60 % vested 
   
October 23, 2008 
 
80% vested 
   
October 23, 2009 
 
100% vested 
 

provided, however, that with respect to each vesting date, no vesting shall
occur unless the Optionee is a director serving on the Company’s Board of
Directors on such date. The unvested portion of the Options will terminate
automatically and without further notice immediately upon the Optionee ceasing
(voluntary or involuntary) to serve on the Company’s Board of Directors.

4.    AMOUNT OF PURCHASE PRICE. The purchase price per Share for each share
which the Optionee is entitled to purchase under the Options shall be $0.12
(based on 110% of the closing price per share of the Company’s Common Stock on
October 23, 2006 of $0.11).

5.    METHOD OF EXERCISE. The Options shall be exercisable by the Optionee by
giving written notice to the Company of the election to purchase and of the
number of Shares the Optionee elects to purchase, such notice to be accompanied
by such other executed instruments or documents as may be required by the Board
of Directors pursuant to this Agreement, and unless otherwise directed by the
Board of Directors, the Optionee shall at the time of such exercise tender the
purchase price of the Shares he has elected to purchase. The Optionee may
purchase less than the total number of Shares for which the Option is
exercisable, provided that a partial exercise of an Option may not be for less
than One Hundred (100) Shares. If the Optionee shall not purchase all of the
Shares which he is entitled to purchase under the Options, his right to purchase
the remaining unpurchased Shares shall continue until expiration of the Options.
The Options shall be exercisable with respect of whole Shares only, and
fractional Share interests shall be disregarded.

 
 

--------------------------------------------------------------------------------

 
 
6.    PAYMENT OF PURCHASE PRICE. At the time of the Optionee’s notice of
exercise of the Options, the Optionee shall tender in cash or by certified or
bank cashier’s check payable to the Company, the purchase price for all Shares
then being purchased. If authorized by the Company’s Board of Director,
alternative means of payment may be permitted, to the extent such means are
permissible under federal securities laws.

7.    ISSUANCE OF STOCK CERTIFICATES. Upon receipt of the materials delivered by
the Optionee indicating exercise of the Options, the Company shall, as promptly
as practicable and in any event within five (5) business days thereafter,
execute and deliver, or cause to be executed and delivered, to the Optionee a
certificate or certificates representing the aggregate number of Shares
specified in such notice or form together with cash in lieu of any fractional
share as hereinafter provided. The certificate or certificates so delivered
shall be in such denomination or denominations as may be specified in such
notice or form and shall be registered in the name of the Optionee or such other
name as shall be designated (together with an address) in such notice or form.
Such certificate(s) shall be deemed to have been issued and the Optionee or any
other person so designated to be named therein shall be deemed to have become a
holder of record of such Shares as of the exercise date. The Company shall pay
all expenses and other charges payable in connection with the preparation,
issuance and delivery of share certificates under this Section except that, in
the case such share certificates shall be registered in a name or names other
than the name of the Optionee, funds sufficient to pay all share transfer taxes
which shall be payable upon issuance of such share certificate or certificates
shall be paid by the Optionee at the time the notice of exercise hereinabove is
delivered to the Company.

8.    SHARES FULLY PAID. All Shares shall be, when issued, duly authorized,
validly issued and non-assessable.

9.    NO IMPAIRMENT. The Company will not, by amendment of its charter or though
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Options, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Optionee of the Options against impairment. Notwitstanding the
foregoing, in the event of a “change of control”, the Options shall vest
immediately in their entirety.

For purpurposes hereof, a “change of control” shall be deemed to occur if and
when:

(i)    any person, including a “person” as such term is used in Section 14(d)(2)
of the 1934 Act (a “Person”), is or becomes a beneficial owner (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 35 percent (35%) or more of the combined voting power
of the Company’s then outstanding securities;

(ii)    any plan or proposal for the dissolution or liquidation of the Company
is adopted by the stockholders of the Company;

(iii)    individuals who, as of the effective date of this Agreement, constitute
the Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the effective date of this Agreement whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act)
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;

 
2

--------------------------------------------------------------------------------

 
 
(iv)    all or substantially all of the assets of the Company are sold,
transferred or distributed; or

(v)    there occurs a reorganization, merger, consolidation or other corporate
transaction involving the Company (a “Transaction”), in each case, with respect
to which the stockholders of the Company immediately prior to such Transaction
do not, immediately after the Transaction, own more than 50 percent (50%) of the
combined voting power of the Company or other corporation resulting from such
Transaction in substantially the same respective proportions as such
stockholders’ ownership of the voting power of the Company immediately before
such Transaction.

10.    RESERVATION OF SHARES. The Company hereby agrees that, during the time
period the Options are exercisable, there shall be reserved for issuance and/or
delivery upon exercise of the Options such number of shares of its common stock
as shall be required for issuance or delivery upon exercise of the Options.

11.    FRACTIONAL SHARES. With respect to any fraction of a Share called for
upon any exercise hereof, the Optionee agrees to waive the Optionee’s right to
such fractional Shares. As such, no fractional Shares or scrip representing
fractional Shares shall be issued upon the exercise of the Options.

12.    ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the term
“Adjustment Event” means an event pursuant to which the outstanding shares of
the Company are increased, decreased or changed into, or exchanged for a
different number or kind of shares or securities, without receipt of
consideration by the Company, through reorganization, merger, business
combination, recapitalization, reclassification, stock split, reverse stock
split, stock dividend, stock consolidation or otherwise. Upon the occurrence of
an Adjustment Event, (i) appropriate and proportionate adjustments shall be made
to the number and kind and exercise price for the shares subject to the Options,
and (ii) appropriate amendments to this Agreement shall be executed by the
Company and the Optionee if the Board of Directors in good faith determines that
such an amendment is necessary or desirable to reflect such adjustments. If
determined by the Board of Directors to be appropriate, in the event of an
Adjustment Event which involves the substitution of securities of a corporation
other than the Company, the Board of Directors shall make arrangements for the
assumptions by such other corporation of the Options. Notwithstanding the
foregoing, any such adjustment to the Options shall be made without change in
the total exercise price applicable to the unexercised portion of the Options,
but with an appropriate adjustment to the number of shares, kind of shares and
exercise price for each share subject to the Options. The good faith
determination by the Board of Directors as to what adjustments, amendments or
arrangements shall be made pursuant to this Section, and the extent thereof,
shall be final and conclusive, provided that the Options herein are adjusted in
a manner that is no less favorable than the manner of adjustment used as to any
other options issued by the Company to its employees, directors, consultants or
in any transaction. No fractional Shares shall be issued on account of any such
adjustment or arrangement.

13.    RIGHTS OF THE OPTIONEE. The Optionee shall not be entitled to the
privileges of stock ownership as to any Shares not actually issued and delivered
to the Optionee. No Shares shall be purchased upon the exercise of any Options
unless and until, in the opinion of the Company’s counsel, any then applicable
requirements of any laws, or governmental or regulatory agencies having
jurisdiction, and of any exchanges upon which the stock of the Company may be
listed shall have been fully complied with.

14.    EFFECT OF DEATH OF THE OPTIONEE. If the Optionee dies, all Options shall
expire six (6) months thereafter. During such six (6) month period (or such
shorter period prior to the expiration of the Option by its own terms), such
Options may be exercised by the executor or administrator or the person or
persons to whom the Option is transferred by will or the applicable laws of
descent and distribution, as the case may be, but only to the extent such
Options were exercisable on the date the Optionee died.

15.    NONTRANSFERABILITY OF OPTIONS. The Options, and any interest therein or
in the Common Stock underlying the Option, shall not be transferable, either
voluntarily or by operation of law, otherwise than by will or the laws of
descent and distribution, and shall be exercisable during the Optionee’s
lifetime only by the Optionee. The Options, and any interest therein or in the
Common Stock underlying the Option, may not be assigned, transferred (except as
provided above), pledged, or hypothecated in any way, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Options contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Options, shall be null and void and without effect.

 
3

--------------------------------------------------------------------------------

 
 
16.    SECURITIES LAWS COMPLIANCE. The Company will diligently endeavor to
comply with all applicable securities laws before any stock is issued pursuant
to the Options. Without limiting the generality of the foregoing, the Company
may require from the Optionee such investment representation or such agreement,
if any, as counsel for the Company may consider necessary in order to comply
with the Securities Act of 1933 as then in effect, and may require that the
Optionee agree that any sale of the Shares will be made only in such manner as
is permitted by the Board of Directors. The Optionee shall take any action
reasonably requested by the Company in connection with registration or
qualification of the Shares under federal or state securities laws.

17.    SECURITIES SUBJECT TO LEGEND. If deemed necessary by the Company’s
counsel, all certificates issued to represent the Options and/or the Shares
purchased upon exercise of the Options shall bear such appropriate legend
conditions as counsel for the Company shall require in substantially the
following form:

 
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY BE TRANSFERRED ONLY
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (B) IN
ACCORDANCE WITH THE ACT AND SUBJECT TO RECEIPT OF AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER THAT THE PROPOSED TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE ACT.”

18.    REPRESENTATIONS OF OPTIONEE.

(a)    SOPHISTICATION OF OPTIONEE. The Optionee acquired the Options for
investment and not with a view to the sale or distribution thereof, and the
Optionee has no commitment or present intention to liquidate the Company or to
sell or otherwise dispose of the Options or the underlying Shares. The Optionee
represents and warrants that, by reason of financial, tax and business
sophistication, income, net assets, education, background and business acumen,
the Optionee has the experience and knowledge in business and financial matters
to evaluate the risks and merits attendant to an investment decision in the
Company, either singly or through the aid and assistance of a competent
professional, and is fully capable of bearing the economic risk of loss of the
total investment pursuant to this Agreement. The Optionee represents and
warrants to the Company that the Optionee has been an employee of the Company
and is fully familiar with its business and oeprations and has been provided
with, and has had access to, all material information about the Company.

(b)    LOCK-UP RESTRICTIONS. The Optionee hereby agrees to any lockup of the
Shares which the Board of Directors of the Company requests when requested by an
investment banker or underwriter providing financing to the Company.

19.    MISCELLANEOUS.

(a)    Binding Effect. This Agreement shall bind and inure to the benefit of the
successors, assigns, transferees, agents, personal representatives, heirs and
legatees of the respective parties.

(b)    Further Acts. Each party agrees to perform any further acts and execute
and deliver any documents which may be necessary to carry out the provisions of
this Agreement.

(c)    Amendment. This Agreement may be amended at any time by the written
agreement of the Company and the Optionee.

(d)    Syntax. Throughout this Agreement, whenever the context so requires, the
singular shall include the plural, and the masculine gender shall include the
feminine and neuter genders. The headings and captions of the various Sections
hereof are for convenience only and they shall not limit, expand or otherwise
affect the construction or interpretation of this Agreement.

 
4

--------------------------------------------------------------------------------

 
 
(e)    Choice of Law. The parties hereby agree that this Agreement has been
executed and delivered in the State of New York and shall be construed, enforced
and governed by the laws thereof. This Agreement is in all respects intended by
each party hereto to be deemed and construed to have been jointly prepared by
the parties and the parties hereby expressly agree that any uncertainty or
ambiguity existing herein shall not be interpreted against either of them.

(f)    Severability. In the event that any provision of this agreement shall be
held invalid or unenforceable, such provision shall be severable from, and such
invalidity or unenforceability shall not be construed to have any effect on, the
remaining provisions of this agreement.

(g)    Notices. All notices and demands between the parties hereto shall be in
writing and shall be served either by registered or certified mail, and such
notices or demands shall be deemed given and made forty-eight (48) hours after
the deposit thereof in the United States mail, postage prepaid, addressed to the
party to whom such notice or demand is to be given or made, and the issuance of
the registered receipt therefor. If served by telegraph, such notice or demand
shall be deemed given and made at the time the telegraph agency shall confirm to
the sender, delivery thereof to the addressee. All notices and demands to the
Optionee or the Company may be given to them at the following addresses:

If to the Optionee:
Jeffrey Bean

  49 Kings Highway North 

  Westport, CT 06880 

  Fax: 203-256-0828 

   

If to Corporation:  Sparta Commercial Services, Inc. 

  462 Seventh Ave, 20th Floor 

  New York, NY 10018 

  Fax: 212-239-2822 

Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.

(h)    Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof, this Agreement
supersedes all prior and contemporaneous agreements and understandings of the
parties, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as set
forth or referred to herein. No supplement, modification or waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.

(i)    Attorneys’ Fees. In the event that any party to this Agreement institutes
any action or proceeding, including, but not limited to, litigation or
arbitration, to preserve, to protect or to enforce any right or benefit created
by or granted under this Agreement, the prevailing party in each respective such
action or proceeding shall be entitled, in addition to any and all other relief
granted by a court or other tribunal body, as may be appropriate, to an award in
such action or proceeding of that sum of money which represents the attorneys’
fees reasonably incurred by the prevailing party therein in filing or otherwise
instituting and in prosecuting or otherwise pursuing or defending such action or
proceeding, and, additionally, the attorneys’ fees reasonably incurred by such
prevailing party in negotiating any and all matters underlying such action or
proceeding and in preparation for instituting or defending such action or
proceeding.

[signature page follows]
 
 
5

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be
duly executed by its authorized agent on the day and year first above written.
 

        SPARTA COMMERCIAL SERVICES, INC.  
   
   
    By:   /s/ Anthony L. Havens   Name: Anthony L. Havens   Title: President

 
Should the foregoing be acceptable to you, please sign and return to the
undersigned a copy of this Agreement bearing the date of your acceptance by
October 31, 2006 Failure to do so will result in automatic cancellation of this
Agreement.

               /s/ Jeffrey Bean   Jeffrey Bean (the “Optionee”)

 
Dated: October 23, 2006

 
6

--------------------------------------------------------------------------------