Document:

Unassociated Document

    Assignment
Contract

    

    Contract
Object: Entecavir

    Entecavir
Capsules

    Entecavir
Tablets

    Category:
Chemical Medicine Class VI

     

    Assignor
(hereinafter referred as Party A): Hainan Zhonghe Peptide Drugs Research &
Development Co., Ltd.

    
      Address:
Free Trade Zone, No.168 Nanhai Avenue, Haikou City, Hainan Province,
China

    

    
      Legal
Representative: Zongzhen Zhou

    

    
      Reference:
Zongzhen Zhou

    

    
      Tell:
+86898 6680 2208   Fax: +86898 6680 2211

    

    
      Email:
Sunny@zhonghe.net

    

    

    Assignee
(hereinafter referred as Party B): Hainan Zhonghe Pharmaceutical Co.,
Ltd.

    
      Address:
Free Trade Zone, No.168 Nanhai Avenue, Haikou City, Hainan Province,
China

    

    
      Legal
Representative: Xueyun Cui

    

    
      Reference:
Zhuo Lin

    

    
      Tell:
+86898 6680 2833   Fax: +86898 6680 2833

    

    
      Email:
Lingel_2000@yahoo.com

    

    

    Date:
March 23, 2009

    Signed
at: Haikou City, Hainan Province

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    In
accordance with “Contract Law of the People’s Republic of China”, “Provisions
for Drug Registration” issued by State Food and Drug Administration (herein
after referred as SFDA), PRC, both the assignor and the assignee (hereinafter
referred as “the Parties”) have, based on the real, fully express of their
wishes, through equal consultation, entered into the contract (hereinafter
referred as “the Contract”) concerning issues related to technical materials and
achievement, rights and interest, payment, default liabilities of the technology
as stated in this Contract, both Parties have agreed as follows:

    

    Article
1 Object of Assignment (Technological Secret)

    
      
        	
                1.1

              	
                Content
      of technology transferred to Party B by Party
A

              

      

    

    
       

      Name of Object: Entecavir,
Entecavir Capsules (0.5mg; 1mg), Entecavir Tablets (0.5mg; 1mg) (hereinafter
referred as “the Contract Object”)

    

    

    
      Technical Specification and
Parameter: Party A shall finish all researching and developing work
(except for clinical trial) before applying for production in accordance with
“Provisions for Drug Registration” issued by SFDA and related technical
guidelines and requirements. Party A ensures to deliver all of its technical
materials used for applying for clinical trial and product, manufacturing
process of drug substance, as well as formula and manufacturing process of
pharmaceutical preparations of the Contract Object to Party B, until Party B
obtains the Drug Approval Number (Letter of Approval for Drug Registration) and
successfully trial-manufactures 3 batches of eligible products in a row
independently.

    

    

    
      Industrialization level of
Technological Secret: Party A ensures that the formula and manufacturing
process of the Contract Object reach industrialization level and ensure that the
formula of pharmaceutical preparations and manufacturing process of drug
substance and pharmaceutical preparations used for applying for drug
registration are the same with those are entering into
market.

    

    

    Technical Service and Technical
Guidance: Party A shall give the Party B’s personnel free technical
training to ensure Party B’s personnel master the formal manufacturing process
of the Contract Object; Party A shall provided free instruction to Party B’s
personnel to ensure Party B’s personnel manufacture 3 batches of the Contract
Object which meet the quality standards in a row.

    

    
      	
              1.2

            	
              New
      Medicine Certificate, Letter of Approval for Drug Registration, Drug
      Approval Number and all proprietary rights of the Contract Object shall be
      transferred to Party B exclusively.

            

    

    

    
      	
              1.3

            	
              Both
      Parties agree that the application of production to Center for Drug
      Evaluation of SFDA shall be under Party B’s
  name.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Article
2 Obligations of Both Parties

    

    
      
        	
                2.1

              	
                Party
      B shall pay Party A assignment fee in conformity with the Contract’s
      term.

              

      

    

    

    
      	
              2.2

            	
              Party
      B has the obligation to cooperate Party A in applying for drug
      registration and clinical testing.

            

    

    

    
      	
              2.3

            	
              Party
      A ensures to provide Party B the whole, completed, up-to-requirement
      documentation including dossiers for registration application, original
      data of development, map and samples, etc. of the Contract Object in
      accordance with registration requirements within 60 days after signature
      of this Contract. Party A ensures the Contract Object pass the process
      performed by Hainan Medical Appliance Administration and SFDA including
      acceptance of drug registration, on-site inspection, review and approval
      for registration, clinical trial, and production
  approval.

            

    

    

    
      	
              2.4

            	
              Party
      A shall be responsible for applying for registration and answering all
      technical questions likely to be posed by SFDA’s Center for Drug
      Evaluation during process of application and ensures to complete relevant
      test and supplement new technical dossiers within the specified timeline
      without compensation till conform to registration
      requirements.

            

    

    

    
      	
              2.5

            	
              Party
      A ensures all dossiers for registration application, original data of
      development, map and samples conformed with the regulation of active
      Provisions for Drug Registration and relevant regulations, related
      technical guidelines and requirements as well. Party A ensures the
      authenticity, standardization, dependability and integrity of technical
      information delivered thereby.

            

    

    

    
      	
              2.6

            	
              Party
      A ensures the Contract Object having obtained Drug Clinical Trial Approval
      before the signing date of this
Contract.

            

    

    

    
      	
              2.7

            	
              Party
      A shall provide Party B free instruction in time to hand over
      manufacturing process of the Contract Object before and during Party A’s
      manufacturing samples for clinical trial and on-site examination of
      production for drug registration to ensure Party B’s ability of
      trial-manufacturing 3 batches of the Contract Object in a row. Party A has
      the responsibility to cooperate Party B in solving problems about formula
      and manufacturing process in production of Contract
  Object.

            

    

    

    
      	
              2.8

            	
              Party
      B shall, under Party A’s direction, manufacture samples for clinical trial
      and 3 batches of samples for registration inspection at Party A’s expense.
      Party B shall give Party A at least 10 day’s advance notice for Party A’s
      personnel to hand over the
technology.

            

    

    

    
      	
              2.9

            	
              Party
      B has the right to carry out further improvement on the Technology Secret
      after assignment, any new technological achievements with substantive or
      productive progress accomplished thus shall remain the property of Party
      B.

            

    

    

    
      	
              2.10

            	
              Party
      A shall provide Party B all technological dossiers of any further
      improvement or development of the Technology Secret in writing in a timely
      manner. All improvement on Technology Secret accomplished thereby shall
      remain property of Party B and may not transferred by Party A to any other
      party without the written approval of Party
B.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              2.11

            	
              Party
      A ensures that the Technology Secret is practicable and reliable and does
      not encroach the third party’ legal rights. In case of accusation by third
      party of encroachment upon their legal right, Party A shall bear full
      responsibility for all consequences arisen therefrom and compensate for
      Party B’s economical losses.

            

    

    

    
      	
              2.12

            	
              Party
      A shall not, during the term of this Contract, apply for patent for the
      Technology Secret or make the Technology Secret public in other way
      without Party B’s written consent. Party A shall be responsible for
      preparation of the Contract related patent in time pursuant to developing
      progress of the Contract Object and delivery to Party B who shall be in
      charge of related application and expenses incurred thereby. Party B shall
      be applicant and patentee thereafter and Party A’s personnel inventors.
      Party B has the right to use the patent without compensation, however
      shall pay Party A’s inventors for preparation of the patent, the actual
      fee will be negotiated separately depending on content of patent
      declared.

            

    

    

    Article
3 Terms of Payment

    The total
assignment fee under this Contract is RMB 60 million paid in installments
according to project progress as below:

    

    
      	
               
      

            	
              
                o

              

            	
              Eighty
      percent (80%) of total price, namely RMB 48 million shall be paid to Party
      A within 30 working days after obtaining Drug Clinical Trial Approval
      issued by SFDA.

            

    

    
      	
               
      

            	
              
                o

              

            	
              Ten
      percent (10%) of total price, namely RMB 6 million shall be paid to Party
      A within 20 working days after filing a registration application to Center
      for Drug Evaluation of SFDA.

            

    

    
      	
               
      

            	
              
                o

              

            	
              Ten
      percent (10%) of total price, namely RMB 6 million shall be paid to Party
      A within 20 working days after obtaining production approval (Drug
      Approval Number).

            

    

    

    Article
4 Default Clause

    
      
        	
                4.1

              	
                Either
      of the two Parties who fail to fulfill the Contract in according to the
      terms specified herein will be deemed break the Contract and shall take
      the breach responsibilities in below
manners:

              

      

    

    

    
      	
               
      

            	
              
                o

              

            	
              If
      the Contract Object fails to get New Medicine Certificate or Drug Approval
      Number due to Party A’s reason (e.g. technology or patent violation, fails
      to hand over dossiers for registration application within the timeline
      specified by Contract, etc.), Party A shall return Party B entire already
      paid assignment fee and already paid registration inspection fee,
      evaluation and approval fee, clinical trial fee (subject to invoice)
      within 20 working days at one time, the Contract will automatically be
      terminated, the Contract Object shall be Party A ‘s property and Party B
      shall return all technical
materials.

            

    

    

    
      	
               
      

            	
              
                o

              

            	
              If
      Party B fails to obtain Drug Approval Number due to Party B’s reason (e.g.
      fails to apply for registration within specified timeline, production
      conditions fails to meet required standards, etc.), Party A shall not bear
      the responsibility and is entitled to reserve fees already paid by Party
      B. The Contract will automatically be terminated, Party B may dispose the
      Contract Object by its own means.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              
                o

              

            	
              Under
      the circumstance that Party A fails to finish and hand over the jobs
      specified in Clause 3, 4, Article 2 or other relative terms of this
      Contract, Party B is entitled to deduct a penalty equal to 1% of total
      price from unpaid assignment fee for each day of delay. If Party A fails
      to finish and hand over the above mentioned jobs within 4 months after
      specified timeline, Party B has the right to terminate the Contract, Party
      A shall return entire already paid fee by Party B within 20 working days
      and pay Party B overdue penalty.

            

    

    

    
      	
               
      

            	
              
                o

              

            	
              Under
      the circumstance that Party B fails to pay the assignment fee within
      timeline specified by this Contract, it shall be charged a penalty equal
      to 0.01% of overdue amount for per day of
delay.

            

    

    

    
      	
               
      

            	
              
                o

              

            	
              Party
      A shall keep secret certain contents limited by this Contract and shall
      not transfer the Technology Secret to any third party, otherwise shall
      return Party B entire already paid fee by Party B at one time and pay
      Party B a penalty equal to 5% of total assignment
  fee.

            

    

    

    
      
        	
                4.2

              	
                The
      Parties shall consult whether to continue this Contract after the breaking
      party bear its default
responsibility.

              

      

    

    

    Article
5 Others

    
      
        	
                5.1

              	
                Any
      incapacity or unnecessary of executing this Contract due to force majeure
      is subject to negotiation between two Parties for
    dissolution.

              

      

    

    

    
      
        	
                5.2

              	
                During
      the period of this Contract, Party A appoints Zongzhen Zhou as its project
      reference, Party B appoints Zhuo Lin as its project reference. References
      shall be responsible for:

              

      

    

    
       

      
        	
                 

              	
                
                  o

                

              	
                Keep
      in touch and resolve problems in
time.

              

      

    

    
       

      
        	
              	
                
                  o

                

              	
                Report
      the project progress.

              

      

    

     

    Either of
the two Parties who change reference shall make the other party known in
writing, otherwise shall bear the responsibilities arisen therefrom and
compensate the losses incurred.

    

    
      
        	
                5.3

              	
                Party
      A shall deliver technological materials of the Contract Object in both
      writing and soft copy.

              

      

    

    

    
      
        	
                5.4

              	
                Change
      of this Contract or amendment of article shall be done through negotiation
      between two Parties separately in written form and taken as
      appendices.

              

      

    

    

    
      
        	
                5.5

              	
                Both
      Parties must strictly voluntarily observe the terms of this Contract. Any
      outstanding issue not stipulated under this Contract shall be subject to
      negotiation between two Parties based on the principle of sincerity. In
      case of consultation or negotiation fails, appeal to people’s
      court.

              

      

    

    

    
      
        	
                5.6

              	
                This
      Contract is in quadruplicates, with each party hold two originals with
      equal legal validity.

              

      

    

    

    
      
        	
                5.7

              	
                This
      Contract comes into force on the date of signing and ceases to be effect
      till both Parties fulfill their
  responsibilities.

              

      

    

    

    

    
      Party A:
Hainan Zhonghe Peptide Drugs Research & Development Co.,
Ltd.

    

    

    
      Legal
Representative: /s/
Authorized Representative

    

    

    

    

    Party B:
Hainan Zhonghe Pharmaceutical Co., Ltd.

    

    
      Legal
Representative: /s/
Authorized RepresentativeUnassociated Document

    
      Exhibit
10.1

       

      PREFERRED STOCK PURCHASE
AGREEMENT

       

      This
Preferred Stock Purchase Agreement (“Agreement”) is
entered into and effective as of July 29, 2009 (“Effective Date”), by
and among Sparta Commercial Services, Inc., a Nevada corporation (“Company”), and
Optimus Capital Partners, LLC, a Delaware limited liability company, dba Optimus
Special Situations Capital Partners, LLC (including its designees, successors
and assigns, “Investor”).

       

      RECITALS

       

      A.  The
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue to Investor, and Investor shall purchase from
the Company, from time to time as provided herein, up to $5,000,000.00 of shares
of Series B Preferred Stock; and

       

      B.  The
offer and sale of the Securities provided for herein are being made without
registration under the Act, in reliance upon the provisions of Section 4(2) of
the Act, Regulation D promulgated under the Act, and such other exemptions from
the registration requirements of the Act as may be available with respect to any
or all of the purchases of Securities to be made hereunder.

       

      AGREEMENT

       

      In
consideration of the premises, the mutual provisions of this Agreement, and
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, Company and Investor agree as follows:

       

      ARTICLE 1

      DEFINITIONS

       

      1.1  Definitions.
In
addition to the terms defined elsewhere in this Agreement:  (a)
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Certificate of Designations, and (b) the following terms
have the meanings indicated in this Section
1.1:

       

      “Act” means the
Securities Act of 1933, as amended.

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Act.  With
respect to Investor, without limitation, any Person owning, owned by, or under
common ownership with Investor, and any investment fund or managed account that
is managed on a discretionary basis by the same investment manager as Investor
will  be deemed to be an Affiliate.

       

      “Agreement” means this
Preferred Stock Purchase Agreement.

       

      “Automatic
Termination” has the meaning set forth in Section
3.1.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Change in Control”
has the meaning set forth within the definition of Fundamental Transaction,
below.

       

      “Certificate of
Designations” means the certificate to be filed with the Secretary of
State of the State of Nevada, in the form attached hereto as Exhibit
B.

       

      “Closing” means any
one of (i) the Commitment Closing and (ii) each Tranche Closing.

       

      “Commitment Closing”
has the meaning set forth in Section
2.2(a).

       

      “Commitment Fee” means
a non-refundable fee of $250,000.00, payable by Company to Investor on the first
Tranche Closing Date in cash or by wire transfer of immediately available funds
to an account designated by the Investor.  Notwithstanding any other
provision, the Commitment Fee shall be delivered within 6 months from the
Effective Date even if the first Tranche Closing Date has not occurred, and is
non-refundable.

       

      “Common Stock” means
the common stock, par value $0.001 per share, of the Company, and any
replacement or substitute thereof, or any share capital into which such Common
Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

       

      “Company Termination”
has the meaning set forth in Section
3.2.

       

      “Delisting Event”
means any time during the term of this Agreement, that the Common Stock is not
listed for and actively trading on a Trading Market, or is suspended or delisted
with respect to the trading of shares of Common Stock on a Trading
Market.

       

      “DTC” means The
Depository Trust Company, or any successor performing substantially the same
function for Company.

       

      “DWAC Shares” means
all Warrant Shares issued or issuable to Investor or any Affiliate, successor or
assign of Investor, pursuant to the Transaction Documents, for which a
registration statement registering for resale such Warrant Shares has become
effective or which are Rule 144 Eligible, all of which shall be issued in
electronic form, without restriction on resale, and delivered by the transferor
thereof to any specified Deposit/Withdrawal At Custodian (DWAC) account with DTC
under its Fast Automated Securities Transfer (FAST) Program or any similar
program hereafter adopted by DTC performing substantially the same function, in
accordance with irrevocable instructions issued to and countersigned by the
Transfer Agent, in the form attached hereto as Exhibit
C.

       

      “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Fundamental Transaction” means
and shall be deemed to have occurred at such time upon any of the following
events:

       

      (i)  a
consolidation, merger or other business combination or event or transaction
following which the holders of Common Stock immediately preceding such
consolidation, merger, combination or event either (a) no longer hold a majority
of the shares of Common Stock or (b) no longer have the ability to elect a
majority of the board of directors of the Company (a “Change in
Control”);

       

      (ii)  the
sale or transfer (other than to a majority or wholly owned subsidiary of the
Company) of all or substantially all of the Company’s assets, other than in the
ordinary course of business; or

       

      (iii)  a
purchase, tender or exchange offer made to the holders of the outstanding shares
of Common Stock (other than pursuant to an “option repricing” or similar event
for compensation purposes).

       

      “GAAP” means United
States generally accepted accounting principles applied on a consistent basis
during the periods involved.

       

      “Indebtedness” means
(a) any liabilities for borrowed money or amounts owed in excess of $250,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $250,000 due under leases required to be
capitalized in accordance with GAAP.

       

      “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

       

      “Lock-Up Agreements”
means an agreement in the form attached as Exhibit D, executed
by each of the Company’s executive officers, directors and beneficial owners of
10% or more of the Common Stock, precluding each such Person from participating
in any sale of the Common Stock from the Tranche Notice Date through the Tranche
Closing Date.

       

      “Material Adverse
Effect” includes any material adverse effect on (i) the legality,
validity or enforceability of any Transaction Document, (ii) the results of
operations, assets, business, prospects or financial condition of the Company
and its Subsidiary, taken as a whole, or (iii) a the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document.

       

      “Material Agreement”
includes any material loan agreement, financing agreement, equity investment
agreement or securities instrument to which Company is a party, any material
agreement or instrument to which Company and Investor or any Affiliate of
Investor is a party, and any other material agreement listed, or required to be
listed, on any of Company’s reports filed or required to be filed with the SEC,
including without limitation Forms 10-K, 10-Q or 8-K.

       

      “Maximum Placement”
means $5,000,000.00.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Maximum Tranche
Amount” means, subject to any other applicable limitations set forth in
this Agreement, the Maximum Placement less the amount of any previously noticed
and funded Tranches.

       

       “Officer’s Closing
Certificate” means a certificate in customary form reasonably acceptable
to the Investor, executed by an authorized officer of the Company.

       

      “Opinion” means an
opinion from Company’s independent legal counsel, in the form attached as Exhibit E, to be
delivered in connection with the Commitment Closing and any Tranche
Closing.

       

      “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

       

      “Preferred Shares”
means shares of Series B Preferred Stock of the Company provided for in the
Certificate of Designations, to be issued to Investor pursuant to this
Agreement.

       

      “Pricing Period” means
the 5 Trading Days immediately prior to a Tranche Notice Date.

       

      “Prospectus” includes
each prospectus (within the meaning of the Act) related to the sale or offering
of any Warrant Shares, including without limitation any prospectus contained
within the Registration Statement.

       

      “Registration
Statement” means a valid, current and effective registration statement
registering for sale the Warrant Shares, and except where the context otherwise
requires, means the registration statement, as amended, including (i) all
documents filed as a part thereof or incorporated by reference therein, and (ii)
any information contained or incorporated by reference in a prospectus filed
with the SEC in connection with such registration statement, to the extent such
information is deemed under the Act to be part of the registration
statement.

       

      “Regulation D” means
Regulation D promulgated under the Act.

       

      “Required Approval”
means any approval of the Trading Market or the Company’s stockholders required
to be obtained by Company prior to issuing the Securities pursuant to any
applicable rules of the Trading Market.

       

      “Required Tranche
Documents” has the meaning set forth in Section
2.3(e).

       

      “Rule 144” means Rule
144 promulgated by the SEC pursuant to the Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect.

       

      “Rule 144 Eligible”
means eligible for immediate resale under Rule 144 without limitation on the
amount of securities sold under Rule 144(e) and without  requiring
discharge by payment in full of any promissory notes given to Company prior to
the sale of the securities under Rule 144(d)(2)(iii).

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “SEC” means the United
States Securities and Exchange Commission.

       

      “SEC Reports” includes
all reports required to be filed by the Company under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the Effective Date (or such shorter period as the Company was required
by law to file such material).

       

      “Securities” includes
the Warrants and Preferred Shares issuable pursuant to this Agreement and the
Warrant Shares issuable pursuant to the Warrants.

       

      “Series A Redeemable
Preferred Stock” means the shares of Series A Redeemable Preferred Stock
of the Company outstanding as of the Effective Date.

       

      “Series B Preferred
Stock” means shares of Series B Preferred Stock of the Company provided
for in the Certificate of Designations, to be issued to Investor pursuant to
this Agreement.

       

      “Subsidiary” means any
Person the Company owns or controls, or in which the Company, directly or
indirectly, owns a majority of the capital stock or similar interest that would
be disclosable pursuant to Regulation S-K, Item 601(b)(21).

       

      “Termination Date”
means the earlier of (i) the date that is one year after the Effective Date, or
(ii) the Tranche Closing Date on which the sum of the aggregate Tranche Purchase
Price for all Tranche Shares equals the Maximum Placement.

       

      “Termination Notice”
has the meaning as set forth in Section
3.2.

       

      “Trading Day” means
any day on which the Common Stock is traded on the Trading Market; provided that
it shall not include any day on which the Common Stock is (a) scheduled to trade
for less than 5 hours, or (b) suspended from trading.

       

      “Trading Market” means
the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market, the
NASDAQ Global Select Market, the NYSE Amex, or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock, but does not include the Pink Sheets inter-dealer electronic quotation
and trading system.

       

      “Tranche” has the
meaning set forth in Section
2.3.

       

      “Tranche Amount” means
the amount of any individual put purchase, as specified by the Company, and
shall not exceed the Maximum Tranche Amount.

       

      “Tranche Closing” has
the meaning set forth in Section
2.3(f).

       

      “Tranche Closing Date”
has the meaning set forth in Section
2.3(f).

       

      “Tranche Notice” has
the meaning set forth in Section
2.3(b).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Tranche Notice Date”
has the meaning set forth in Section
2.3(b).

       

      “Tranche Purchase
Price” has the meaning set forth in Section 2.3(b), and
shall be specified in writing by the Company.

       

      “Tranche Share Price”
means $10,000.00 per Preferred Share.  Company may not put fractional
Preferred Shares.

       

      “Tranche Shares” means
the Preferred Shares that are purchased by Investor pursuant to a
Tranche.

       

      “Transaction
Documents” include this Agreement and the Exhibits hereto and
thereto.

       

      “Transfer Agent” means
Jersey Transfer & Trust Co., or any successor transfer agent for the Common
Stock.

       

      “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

       

      “Warrants” means the
warrants issuable under this Agreement, in the form attached hereto as Exhibit A, to
purchase shares of Common Stock.

       

      ARTICLE 2

      PURCHASE AND
SALE

       

      2.1  Agreement to
Purchase.  Subject
to the terms and conditions herein and the satisfaction of the conditions to
closing set forth in this ARTICLE 2:

       

      (a)  Investor hereby
agrees to purchase such amounts of Preferred Shares as the Company may, in its
sole and absolute discretion, from time to time elect to issue and sell to
Investor according to one or more Tranches pursuant to Section 2.3 below;
and

       

      (b)  The Company
agrees to issue the Commitment Fee and the Warrants to Investor as provided
below.

       

      2.2  Investment
Commitment

       

      (a)  Investment
Commitment. The closing of this Agreement (the “Commitment Closing”)
shall be deemed to occur when this Agreement has been duly executed by both
Investor and the Company, and the other Conditions to the Commitment Closing set
forth in Section
2.2(b) have been met.  

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (b)  Conditions to Investment
Commitment. As a condition precedent to the Commitment Closing, all of
the following (the “Conditions to Commitment
Closing”) shall have been satisfied prior to or concurrently with the
Company’s execution and delivery of this Agreement:

       

      (i)  the following
documents shall have been delivered to Investor:  (A) this Agreement,
executed by the Company; (B) a Secretary’s Certificate as to (x) the resolutions
of the Company’s board of directors authorizing this Agreement and the
Transaction Documents, and the transactions contemplated hereby and thereby, (y)
a copy of the Company’s current Certificate of Incorporation, and (z) a copy of
the Company’s current Bylaws; (C) the Certificate of Designations executed by
the Company and accepted by the Secretary of State of Nevada; (D) the Opinion;
and (E) a copy of the press release announcing the transactions contemplated by
this Agreement and Current Report on Form 8-K describing the transaction
contemplated by this Agreement;

       

      (ii)  other
than for losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company’s business prospects or financial
condition since the date of the last SEC Report filed by the Company, including
but not limited to incurring material liabilities;

       

      (iii)  the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects and the Company shall have delivered an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

       

      (iv)  Investor
shall have entered into Stock Loan Agreements with lending stockholders of the
Company who are parties thereto (each, a “Lending Stockholder,” and,
collectively, the “Lending Stockholders”) in the form attached hereto as Exhibit
G (each, a “Stock Loan Agreement”), and received the Borrowed Shares (as defined
in the Stock Loan Agreement) pursuant thereto; and

       

      (v)  any
Required Approval has been obtained.

       

      (c)  Investor’s Obligation to
Purchase. Subject to the prior satisfaction of all conditions set forth
in this Agreement, following the Investor’s receipt of a validly delivered
Tranche Notice, the Investor shall be required to purchase from the Company a
number of Tranche Shares equal to the permitted Tranche Share Amount, in the
manner described below.

       

      2.3  Tranches to
Investor

       

      (a)  Procedure to Elect a
Tranche. Subject to the Maximum Tranche Amount, the Maximum Placement and the other conditions
and limitations set forth in this Agreement, at any time beginning on the
Effective Date, the Company may, in its sole and absolute discretion, elect to
exercise one or more tranches of puts (each a “Tranche”) according
to the following procedure, provided that each subsequent Tranche Notice Date
after the first Tranche Notice Date shall be no sooner than 5 Trading Days
following the preceding Tranche Notice Date.

       

      (b)  Delivery of Tranche
Notice. The Company shall deliver an irrevocable written notice (the
“Tranche
Notice”) the form of which is attached hereto as Exhibit F (the date
of such Tranche Notice being the “Tranche Notice
Date”), to Investor stating that the Company shall exercise a Tranche and
stating the number of Preferred Shares which the Company will sell to Investor
at the Tranche Share Price, and the aggregate purchase price for such Tranche
(the “Tranche Purchase
Price”).  A Tranche Notice may be delivered by the Company to
Investor before 9:30 a.m. Eastern time on any Trading Day via facsimile or
electronic mail, with confirming copy by overnight carrier.  A Tranche
Notice delivered after such time or on a non-Trading Day shall be deemed
delivered on the following Trading Day.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (c)  Issuance of
Warrants.  On each Tranche Notice Date, the Company shall issue
a Warrant, in the form attached hereto as Exhibit A, to acquire
that portion of Warrant Shares equal in value to 135.0% of the Tranche Purchase
Price, at an exercise price equal to the closing bid price for the Common Stock
on the Trading Day immediately preceding the Tranche Notice
Date.  Each Warrant shall have a term of 5 years from
issuance.

       

      (d)  Conditions Precedent to
Right to Deliver a Tranche Notice.  The right of the Company to
deliver a Tranche Notice is subject to the satisfaction, on the date of delivery
of such Tranche Notice, of each of the following conditions:

       

      (i)  the Common
Stock shall be listed for and currently trading on the Trading Market, and to
the Company’s knowledge there is no notice of any suspension or delisting with
respect the trading of the shares of Common Stock on such market or
exchange;

       

      (ii)  the
representations and warranties of the Company set forth in this Agreement are
true and correct in all material respects as if made on such date (provided,
however, that any information disclosed by the Company in a filing with the SEC
after the Effective Date but prior to the date of the Tranche Notice shall be
deemed to update the Disclosure Schedules), and no material default shall have
occurred under this Agreement, or any other agreement with Investor, any
Affiliate of Investor, or any other Material Agreement (excluding the Company’s
promissory notes of up to and including $250,000 total with any parties other
than Investor or any Affiliate of Investor), and the Company shall deliver an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

       

      (iii)  other than
losses incurred in the ordinary course of business, there have been no material
adverse changes in the Company’s business prospects or financial condition since
the Commitment Closing, including but not limited to incurring material
liabilities;

       

      (iv)  the
Company is not, and will not be as a result of the applicable Tranche, in
default of any Material Agreement;

       

      (v)  there
is not then in effect any law, rule or regulation prohibiting or restricting the
transactions contemplated by any of the Transaction Documents, or requiring any
consent or approval which shall not have been obtained, nor is there any pending
or threatened proceeding or investigation which may have the effect of
prohibiting or adversely affecting any of the transactions contemplated by this
Agreement; no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or adopted by any court
or governmental authority of competent jurisdiction that prohibits the
transactions contemplated by this Agreement, and no actions, suits or
proceedings shall be in progress, pending or, to the Company’s knowledge
threatened, by any person (other than Investor or any Affiliate of Investor),
that seek to enjoin or prohibit the transactions contemplated by this
Agreement;

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (vi)  all
Warrant Shares that were the subject of an Exercise Notice (as defined in the
Warrant) that was previously delivered to the Company shall have been timely
delivered in accordance with such Exercise Notice;

       

      (vii)  all
previously-issued Warrant Shares are DWAC Shares, are DTC eligible, and can be
immediately converted into electronic form without restriction on
resale;

       

      (viii)  Company
is in material compliance with all reporting requirements to maintain listing on
the Trading Market;

       

      (ix)  Company shall
have a current, valid, and effective Registration Statement permitting the
lawful resale of all issuable Warrant Shares, or all such shares are, or within
one year of the Effective Date will become, Rule 144 Eligible;

       

      (x)  Company has
provided notice of its delivery of the Tranche Notice to all signatories of a
Lock-Up Agreement as required under the Lock-Up Agreement;

       

      (xi)  the aggregate
number of Warrant Shares issuable upon exercise of the Warrant issued at that
Tranche Notice Date, aggregated with all other shares of Common Stock deemed
beneficially owned by the Investor and its Affiliates would not result in the
Investor owning more than 9.99% of all Common Stock outstanding on the Tranche
Notice Date, as determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder; and

       

      (xii)  pursuant to
the terms of the Stock Loan Agreements, Investor shall have Borrowed Shares, all
of which will be issued in original certificated form, bearing no restrictive
legend and will be accompanied by stock powers executed in blank with a
medallion signature guarantee, and an amount of Borrowed Shares equal to at
least 150% of the Tranche Purchase Price shall have been converted into
electronic form into a DTC account designated by Investor by such Tranche Notice
Date.

       

      (e)  Documents to be Delivered at
Tranche Closing. The Closing of any Tranche and Investor’s obligations
hereunder shall additionally be conditioned upon the delivery to Investor of
each of the following (the “Required Tranche
Documents”) on or before the applicable Tranche Closing
Date:

       

      (i)  a number of
Preferred Shares equal to the Tranche Purchase Price divided by the Tranche
Share Price shall have been delivered to Investor or an account specified by
Investor for the Tranche Shares;

       

      (ii)  the following
executed documents:  Opinion, Officer’s Certificate and Lock-Up
Agreements;

       

      (iii)  a “Use of
Proceeds” certificate, signed by an officer of the Company, and setting forth
how the Tranche Purchase Price will be applied by the Company;

       

      (iv)  all Warrant
Shares shall have been timely delivered in accordance with any Exercise Notice
delivered to Company prior to the Tranche Closing Date;

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (v)  all documents,
instruments and other writings required to be delivered by the Company to
Investor on or before the Tranche Closing Date pursuant to any provision of this
Agreement or in order to implement and effect the transactions contemplated
herein; and

       

      (vi)  payment of a
$5,000.00 non-refundable administrative fee to Investor’s counsel, by offset
against the Tranche Amount, or wire transfer of immediately available
funds.

       

      (f)  Mechanics of Tranche
Closing.  Each of the Company and Investor shall deliver all
documents, instruments and writings required to be delivered by either of them
pursuant to Section
2.3(e) of this Agreement at or prior to each Tranche Closing. Subject to
such delivery and the satisfaction of the conditions set forth in Section 2.3(d) as of
the Tranche Closing Date, the closing of the purchase by Investor of Preferred
Shares shall occur by 5:00 p.m. Eastern time, on the date which is 10 Trading
Days following the Tranche Notice Date (each a “Tranche Closing
Date”) at the offices of Investor.  On or before each Tranche
Closing Date, Investor shall deliver to the Company, in cash or immediately
available funds, the Tranche Purchase Price to be paid for such Tranche
Shares.  The closing (each a “Tranche Closing”) for
each Tranche shall occur on the date that both (i) the Company has delivered to
Investor all Required Tranche Documents, and (ii) Investor has delivered to the
Company the Tranche Purchase Price.

       

      (g)  Limitation on Obligations to
Purchase and Sell.  Notwithstanding anything herein to the
contrary, in the event the closing price of the Common Stock during the 9
Trading Days following the Tranche Notice Date falls below 75.0% of the closing
bid price on the day prior to the Tranche Notice Date:  (i) Investor
may, at its option, and without penalty, decline to purchase the applicable
Tranche Shares on the Tranche Closing Date, and return to the Company all
Warrants issued in connection with such Tranche Notice that remain unexercised;
or (ii) Company may, at its option, and without penalty, terminate the Tranche
Notice and decline to sell the applicable Tranche Shares on the Tranche Closing
Date.

       

      2.4  Maximum
Placement.  Investor
shall not be obligated to purchase any additional Tranche Shares once the
aggregate Tranche Purchase Price paid by Investor equals the Maximum
Placement.

       

      2.5  Share
Sufficiency.  On
or before the date on which the Warrants become exercisable, the Company shall
have a sufficient number of duly authorized shares of Common Stock for issuance
in such amount as may be required to fulfill its obligations pursuant to the
Transaction Documents and any outstanding agreements with Investor and any
Affiliate of Investor.

       

      
        
          
          

        

        
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      ARTICLE 3

      TERMINATION

       

      3.1  Automatic
Termination..  This
Agreement and the Company’s right to initiate subsequent Tranches to Investor
under this Agreement shall terminate permanently (each, an “Automatic
Termination”) upon the occurrence of any of the following:

       

      (a)  if, at any
time, either the Company or any director or executive officer of the Company has
engaged in a transaction or conduct related to the Company that has resulted in
(i) a SEC enforcement action, or (ii) a civil judgment or criminal conviction
for fraud or misrepresentation, or for any other offense that, if prosecuted
criminally, would constitute a felony under applicable law;

       

      (b)  on any date
after a Delisting Event that lasts for an aggregate of 20 Trading Days
during any calendar year;

       

      (c)  if at any time
the Company has filed for and/or is subject to any bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors instituted by or against
the Company or any subsidiary of the Company;

       

      (d)  the Company is
in breach or default of any Material Agreement, which default could have a
Material Adverse Effect;

       

      (e)  the Company is
in breach or default of any material provision of this Agreement, any
Transaction Document, or any agreement with Investor or any Affiliate of
Investor;

       

      (f)  upon the
occurrence of a Fundamental Transaction;

       

      (g)  so long as any
Preferred Shares are outstanding, the Company effects or publicly announces its
intention to create a security senior to the Series B Preferred Stock, or
substantially altering the capital structure of the Company in a manner that
materially adversely affects the rights or preferences of the Series B Preferred
Stock; and

       

      (h)  on the
Termination Date.

       

      3.2  Company
Termination.  The
Company may at any time in its sole discretion terminate (a “Company Termination”)
this Agreement and its right to initiate future Tranches by providing 30 days
advanced written notice (“Termination Notice”)
to Investor.

       

      3.3  Effect of
Termination.  The
termination of this Agreement will have no effect on any Warrant Shares,
Preferred Shares, Warrants or DWAC Shares previously issued, delivered or
credited, or on any rights of any holder thereof.  Notwithstanding any
other provision, all fees paid to Investor or its counsel are
non-refundable.

       

      ARTICLE 4

      REPRESENTATIONS AND
WARRANTIES

       

      4.1  Representations and
Warranties of the Company.  .  The
Company hereby represents and warrants to, and as applicable covenants with,
Investor as of each Closing:

       

      (a)  Subsidiaries.  As
of the date hereof, the Company’s only Subsidiary is Sparta Funding LLC, a
Delaware limited liability company.  The Company owns, directly or
indirectly, all of the capital stock or other equity interests of its
Subsidiary, and all of such directly or indirectly owned capital tock or other
equity interests are owned free and clear of any Liens.  All the
issued and outstanding shares of capital stock of its Subsidiary are duly
authorized, validly issued, fully paid, non-assessable and free of preemptive
and similar rights to subscribe for or purchase
securities.  

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (b)  Organization and
Qualification.  Each of the Company and its Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as applicable, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents, except where
such violation could not, individually or in the aggregate, constitute a
Material Adverse Effect.  Each of the Company and its Subsidiary is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not have or reasonably be expected to result in a Material Adverse
Effect and no proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.

       

      (c)  Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder or thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than the filing of the Certificate of
Designations.  Each of the Transaction Documents has been, or upon
delivery will be, duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies.  

       

      (d)  No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (e)  Filings, Consents and
Approvals.  Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than the filing of the Certificate of Designations, appropriate filings
under the Exchange Act, and filings with the State of Nevada regarding the
issuance of new shares of stock, each of which has been (or if not yet required
to be filed shall be) timely filed.

       

      (f)  Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens.  The Company has reserved from its duly authorized capital
stock an amount of shares of preferred stock at least equal to the amount of
Preferred Shares that could be issued pursuant to the terms of the Transaction
Documents.  The Company has obtained written consent from a majority
of the stockholders of its issued and outstanding Common Stock to increase the
number of authorized shares of Common Stock in sufficient number such that the
Company will, twenty days following the circulation of its Schedule 14C (as that
term is defined in the regulations promulgated under the Exchange Act)
disclosing such written consent, have reserved from its duly authorized capital
stock an amount of shares of Common Stock sufficient for the issuance of the
Common Stock that could be issued pursuant to the terms of the Transaction
Documents.

       

      (g)  Capitalization.

       

      (i)  Except as set
forth in Section
4.1(g)(ii), the capitalization of the Company is as described in the
Company’s most recently filed SEC Report and the Company has not issued any
capital stock since such filing.  Except as set forth in Section 4.1(g)(ii),
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.  Except as a result of the
purchase and sale of the Securities or as set forth in Section 4.1(g)(ii),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
securities convertible into or exercisable for shares of Common
Stock.  The issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than Investor) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange, or reset price under
such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of
any stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the shares of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (ii)  The Company
last filed an SEC Report on Form 10-Q for the quarterly period ended January 31,
2009 (the “Last Report
Filing Date”).  Since the Last Report Filing Date, the Company
has issued 6,817,165 of Common Stock.  Furthermore, as of the
Effective Date: (i) there are 16,635,453 shares of Common Stock to be issued
pursuant to the terms and conditions of the Series A Redeemable Preferred Stock;
(ii) the holders of the Company’s 8%, 10% and 12% convertible notes have the
right to convert the principal thereof and accrued interest thereon into
8,906,719 shares of Common Stock; (iii) there are 13,981,484 options and
warrants outstanding; and (iv) there are certain convertible notes with
outstanding principal and accrued interest thereon that the Company intends to
convert, prior to the first Tranche Notice Date, into approximately 95,027,696
shares of Common Stock.

       

      (h)  SEC Reports; Financial
Statements.  The Company has filed all required SEC Reports for
the two years preceding the Effective Date (or such shorter period as the
Company was required by law to file such SEC Reports) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.

       

      (i)  Material
Changes.

       

      (i)  Since the date
of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in the SEC Reports or as set forth in Section 4.1(g)(ii) or
Section
4.1(i)(ii), (A) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse
Effect, (B) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (y) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC, (C) the Company
has not altered its method of accounting, (D) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (E) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company equity
incentive plans.  The Company does not have pending before the SEC any
request for confidential treatment of information.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (ii)  Since the Last
Report Filing Date, the Company has issued $556,000.00 of notes payable, of
which $516,000.00 are 8% convertible notes described in Section 4.1(g)(ii), and
$40,000.00. are 10% bridge notes.

       

      (j)  Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”), which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities, or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor to the
knowledge of the Company any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the
Company.  The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Act.

       

      (k)  Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.

       

      (l)  Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other similar agreement or instrument to which it is a party or
by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse Effect.

       

      (m)  Regulatory
Permits.  The Company and its Subsidiary possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

       

      
        
          
          

        

        
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      (n)  Title to
Assets.  Except for all property, real or personal that is
subject to any of the agreements between the Company and any of New World Lease
Funding, DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main,
Glenn Little, and JMM Foundation, Inc., the Company and its Subsidiary have good
and marketable title in fee simple to all real property owned by them that is
material to the business of the Company and its Subsidiary and good and
marketable title in all personal property owned by them that is material to the
business of the Company and its Subsidiary, in each case free and clear of all
Liens, except for Liens that do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and its Subsidiary and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and its Subsidiary are held by them under valid, subsisting
and enforceable leases of which the Company and its Subsidiary are in
compliance.

       

      (o)  Patents and
Trademarks.  The Company and its Subsidiary have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).  Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights of the Company or its Subsidiary.

       

      (p)  Insurance.  The
Company and its Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and its Subsidiary are
engaged, including but not limited to directors and officers insurance coverage
at least equal to the Maximum Placement.  To the best of Company’s
knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

       

      (q)  Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any
equity incentive plan of the Company.

       

      
        
          
          

        

        
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      (r)  Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002, which are applicable to
it as of the date of the Commitment Closing.  The Company and its
Subsidiary maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of the date prior to
the filing date of the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no significant changes in the Company’s internal controls
or, to the Company’s knowledge, in other factors that could materially affect
the Company’s internal controls.

       

      (s)  Certain
Fees.  Except for the payment of the Commitment Fee, no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement.  Investor shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section 4.1(s) that
may be due in connection with the transactions contemplated by this
Agreement.

       

      (t)  Private Placement.
Assuming the accuracy of Investor representations and warranties set forth in
Section 4.2, no
registration under the Act is required for the offer and sale of the Securities
by the Company to Investor as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of any
Trading Market.

       

      (u)  Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.

       

      
        
          
          

        

        
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      (v)  Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Act of any securities of the Company, except for the
holders of the Series A Redeemable Preferred Stock and as otherwise set forth in
the Transaction Documents.

       

      (w)  Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12 of the Exchange Act, and the Company has taken no action designed to,
or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration.  The Company has not, in the 12 months preceding the
Effective Date, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

       

      (x)  Application of Takeover
Protections.  The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to Investor as a
result of Investor and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the
Company’s issuance of the Securities and Investor’s ownership of the
Securities.

       

      (y)  Disclosure.  Except
with respect to the information that will be, and to the extent that it actually
is timely publicly disclosed by the Company pursuant to Section 2.2(b)(i)E,
the Company confirms that, neither the Company nor any other Person acting on
its behalf has provided Investor or its agents or counsel with any information
that constitutes or might constitute material, non-public information, including
without limitation this Agreement and the Exhibits and Schedules
hereto.  The Company understands and confirms that Investor will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company.  All disclosure provided to Investor
regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, furnished by or on behalf
of the Company with respect to the representations and warranties made herein
are true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. 

       

      (z)  No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the Act or which could
violate any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading Market.

       

      
        
          
          

        

        
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      (aa)  Financial
Condition.  In connection with the transactions contemplated by
the Transaction Documents, the Company (i) was solvent at all relevant times
prior to the Effective Date and was not rendered insolvent by such transactions,
(ii) after giving effect to such transactions, is able to pay its debts as they
mature, (iii) was not left with unreasonably small capital for the business in
which it is engaged and proposes to be engaged, (iv) did not and does not have
any intent to hinder, delay, or defraud any of its creditors, (v) had a valid
business reason for such transactions, and (vi) received new value therefor and
consideration therefor constituting reasonably equivalent value and fair market
value consideration.

       

      (bb)  Tax
Status.  The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.  The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, statue or
local tax.  None of the Company’s tax returns is presently being
audited by any taxing authority.

       

      (cc)  No General Solicitation or
Advertising.  Neither the Company nor, to the knowledge of the
Company, any of its directors or officers (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to the sale of the Securities, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Securities under
the Act or made any “directed selling efforts” as defined in Rule 902 of
Regulation S.

       

      (dd)  Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

       

      (ee)  Acknowledgment Regarding
Investor’s Purchase of Securities.  The Company acknowledges
and agrees that Investor is acting solely in the capacity of arm’s length
purchaser with respect to this Agreement and the transactions contemplated
hereby.  The Company further acknowledges that Investor is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by Investor or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to Investor’s purchase of the
Securities.  The Company further represents to Investor that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.

       

      
        
          
          

        

        
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      (ff)  Accountants.  The
Company’s accountants are set forth in the SEC Reports.  To the
Company’s knowledge, such accountants are an independent registered public
accounting firm as required by the Act.

       

      (gg)  No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company, and the Company is current with respect to any fees owed to its
accountants and lawyers.

       

      (hh)  Registration Statements and
Prospectuses.

       

      (i)  Company will
use commercially reasonable efforts to file within 45 calendar days after each
Tranche Closing Date (or as soon as possible thereafter), cause to become
effective as soon as possible thereafter, and remain effective until all Warrant
Shares have been sold or are Rule 144 Eligible, a Registration Statement for the
sale of the Warrant Shares underlying the Warrants issued to Investor on such
Tranche Closing Date.  Each Registration Statement shall comply when
it becomes effective, and, as amended or supplemented, at the time of any
Tranche Notice Date, Tranche Closing Date, or issuance of any Warrant Shares,
and at all times during which a prospectus is required by the Act to be
delivered in connection with any sale of Warrant Shares, will comply, in all
material respects, with the requirements of the Act.  

       

      (ii)   Each
Registration Statement, as of its respective effective time, will not, as
applicable, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.

       

      (iii)  Each
Prospectus will comply, as of its date and the date it  will be filed
with the SEC,  and, at the time of any Tranche Notice Date, Tranche
Closing Date, or issuance of any Warrant Shares, and at all times during which a
prospectus is required by the Act to be delivered in connection with any sale of
Warrant Shares, will comply, in all material respects, with the requirements of
the Act.

       

      (iv)  At no time
during the period that begins on the date a Prospectus is filed with the SEC and
ends at the time a prospectus is no longer required by the Act to be delivered
in connection with any sale of Warrant Shares did or will any such Prospectus,
as then amended or supplemented, include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and at no time during such period will such Prospectus, as then
amended or supplemented, include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.

       

      
        
          
          

        

        
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      (v)  Each
Registration Statement will meet, and the offering and sale of the Warrant
Shares as contemplated hereby complies with, and will comply with, the
requirements of Rule 415(a)(1)(i) under the Act.

       

      (vi)  The Company
has not, directly or indirectly, used or referred to any “free writing
prospectus” (as defined in Rule 405 under the Act) except in compliance with
Rules 164 and 433 under the Act.

       

      (vii)  The Company
is not an “ineligible issuer” (as defined in Rule 405 under the Act) as of the
eligibility determination date for purposes of Rules 164 and 433 under the Act
with respect to the offering of the Warrant Shares contemplated by any
Registration Statement, without taking into account any determination by the SEC
pursuant to Rule 405 under the Act that it is not necessary under the
circumstances that the Company be considered an “ineligible
issuer.”

       

      (ii)  Stock Loan
Agreements.  None of the Lending Stockholders are, or within 90
days of the Effective Date have been, Affiliates of the Company.  No
Lending Stockholder or any Affiliate of any Lending Stockholder has been, or
will be, compensated by the Company, or to the Company’s knowledge any Person,
in any manner, directly or indirectly, for entering into a Stock Loan Agreement
except as expressly set forth therein.  The execution, delivery and
performance of the Stock Loan Agreements, the consummation the transactions
contemplated by the Stock Loan Agreements, the borrowing and receipt of the
Borrowed Shares, and any subsequent sale of any Borrowed Shares as permitted by
the Stock Loan Agreements do not and will not conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company,
or to the Company’s knowledge any Lending Stockholder or other Person, is
subject, including without limitation Section 5 of the Act and other federal and
state securities laws and regulations.

       

      4.2  Representations and
Warranties of Investor. Investor hereby represents and warrants as of the
Effective Date as follows:

       

      (a)  Organization;
Authority.  Investor is an entity validly existing and in good
standing under the laws of the jurisdiction of its organization with full right,
company power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder.  The execution, delivery and performance by
Investor of the transactions contemplated by this Agreement have been duly
authorized by all necessary company or similar action on the part of
Investor.  Each Transaction Document to which it is a party has been
(or will be) duly executed by Investor, and when delivered by Investor in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of Investor, enforceable against it in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (b)  Investor
Status.  At the time Investor was offered the Securities, it
was, and at the Effective Date it is:  (i) an “accredited investor” as
defined in Rule 501(a) under the Act.

       

      (c)  Experience of
Investor.  Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Investor is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

       

      (d)  General
Solicitation.  Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

       

      (e)  Acquisition for Investment
Purposes.  Investor is acquiring its interest in the Securities
for its own account, and not as a nominee for any Person other than Investor and
its Affiliates.  Investor is not acquiring the Preferred Shares or the
Warrants with a view to or for sale or transfer in connection with any
distribution of the Preferred Shares or the Warrants under the Act; provided, however, that the
disposition of its property shall at all times be within its
control.

       

      (f)  Use of Borrowed
Shares.  Investor will not sell, short sell, or short sell
against the box the Borrowed Shares until after the time the Company is required
to disclose the terms of the transactions contemplated hereby pursuant to Section 5.4
hereof.

       

      The
Company acknowledges and agrees that Investor does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
4.2.

       

      ARTICLE 5

      OTHER AGREEMENTS OF THE
PARTIES

       

      5.1  Transfer
Restrictions

       

      (a)  The Securities
may only be disposed of in compliance with state and federal securities
laws.  In connection with any transfer of Securities other than (i)
pursuant to an effective Registration Statement or Rule 144, (ii) to the
Company, (iii) to an Affiliate of Investor, or (iv) in connection with a pledge
as contemplated in Section 5.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of Luce Forward Hamilton & Scripps LLP (“Luce Forward”), or
other counsel selected by the transferor and reasonably acceptable to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Act.

       

      
        
          
          

        

        
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      (b)  Investor agrees
to the imprinting, so long as is required by this Section 5.1, of the
following legend, or substantially similar legend, on any certificate evidencing
Securities other than DWC Shares:

       

      NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

       

      The
Company agrees to cause such legend to be removed immediately upon effectiveness
of a Registration Statement, or when any Warrant Shares are eligible for sale
under Rule 144.  Company further acknowledges and agrees that Investor
may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Act and who agrees to be bound by the
provisions of this Agreement and, if required under the terms of such
arrangement, Investor may transfer pledged or secured Securities to the pledgees
or secured parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such
pledge.  At Investor’s reasonable expense, the Company will execute
and deliver such documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities.

       

      5.2  Furnishing of
Information.  As
long as Investor owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the Effective Date
pursuant to the Exchange Act.  Upon the request of Investor, the
Company shall deliver to Investor a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to Investor and make publicly
available in accordance with Rule 144(c) such information as is required for
Investor to sell the Securities under Rule 144.  The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell such Securities without registration under the Act within the
limitation of the exemptions provided by Rule 144.

       

      5.3  Integration.  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Act of the sale of the Securities to
Investor or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market such that it
would require stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.

       

      
        
          
          

        

        
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      5.4  Securities Laws Disclosure;
Publicity.  The
Company shall, by 8:30 a.m. Eastern time on the Trading Day following the
Effective Date, issue a press release or if required file a Current Report on
Form 8-K, in each case reasonably acceptable to Investor, disclosing the
material terms of the transactions contemplated hereby.  The Company
and Investor shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither the Company nor
Investor shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any such
press release of Investor, or without the prior consent of Investor, with
respect to any such press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by
law or Trading Market regulations, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Investor, or include the name of Investor in any
filing with the SEC or any regulatory agency or Trading Market, without the
prior written consent of Investor, except (i) as required by federal securities
law in connection with any registration statement under which the Warrant Shares
are registered, and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide Investor
with prior notice of such disclosure permitted under subclause (i) or
(ii).

       

      5.5  Shareholders Rights
Plan.  No
claim will be made or enforced by the Company or, to the knowledge of the
Company, any other Person that Investor is an “Acquiring Person” under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that Investor could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company
and Investor. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act of 1940, as
amended.

       

      5.6  Non-Public
Information.  The
Company represents and warrants that neither it nor any Person acting on its
behalf has, and covenants and agrees that neither it nor any other Person acting
on its behalf will, provide Investor or its agents or counsel with any
information that the Company believes or reasonably should believe constitutes
material non-public information, unless prior thereto Investor shall have
executed a written agreement regarding the confidentiality and use of such
information.  On and after the Effective Date, neither Investor nor
any Affiliate Investor shall have any duty of trust or confidence that is owed
directly, indirectly, or derivatively, to the Company or the shareholders of the
Company, or to any other Person who is the source of material nonpublic
information regarding the Company, including without limitation the Transaction
Documents.  The Company understands and confirms that Investor shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.

       

      
        
          
          

        

        
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      5.7  Reimbursement.  If
Investor becomes involved in any capacity in any proceeding by or against any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by Investor to or with any
current stockholder), solely as a result of Investor’s acquisition of the
Securities under this Agreement, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred, or will assume the defense of Investor
in such matter.  The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of Investor who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such Affiliate and
any such Person.  The Company also agrees that neither Investor nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement, except with respect to information provided to
the Company in writing by Investor or its representatives for use in preparing
the Registration Statement.

       

      5.8  Indemnification of
Investor.  Subject
to the provisions of this section, the Company will indemnify and hold Investor
and any Warrant holder, their Affiliates and attorneys, and each of their
directors, officers, shareholders, partners, employees, agents, and any person
who controls Investor within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (collectively, the “Investor Parties” and
each an “Investor
Party”), harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation (collectively, “Losses”) that any Investor Party may
suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents, (b) any action instituted
against any Investor Party, or any of them or their respective Affiliates, by
any stockholder of the Company who is not an Affiliate of an Investor Party,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of Investor’s
representation, warranties or covenants under the Transaction Documents or any
agreements or understandings Investor may have with any such stockholder or any
violations by Investor of state or federal securities laws or any conduct by
Investor which constitutes fraud, gross negligence, willful misconduct or
malfeasance), (c)  any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement (or in a Registration
Statement as amended by any post-effective amendment thereof by the Company) or
arising out of or based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and/or (d) any untrue statement or alleged untrue
statement of a material fact included in any Prospectus ( or any amendments or
supplements to any Prospectus ), in any free writing prospectus, in any “issuer
information” (as defined in Rule 433 under the Act) of the Company, or in any
Prospectus together with any combination of one or more of the  free
writing prospectuses, if any, or arising out of or based upon any omission or
alleged omission to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that Company shall not be obligated to
indemnify any Investor Party for any Losses finally adjudicated to be caused
solely by a false statement of material fact contained within written
information provided by such Investor Party expressly for the purpose of
including it in the Registration Statement.

       

      
        
          
          

        

        
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      If any
action shall be brought against an Investor Party in respect of which indemnity
may be sought pursuant to this Agreement, such Investor Party shall promptly
notify the Company in writing, and the Company shall have the right to assume
the defense thereof with counsel of its own choosing.  The Investor
Parties shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Investor Parties except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict with respect to
the dispute in question on any material issue between the position of the
Company and the position of the Investor Parties such that it would be
inappropriate for one counsel to represent the Company and the Investor
Parties.  The Company will not be liable to the Investor Parties under
this Agreement (i) for any settlement by an Investor Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is either attributable to Investor’s breach of any of the
representations, warranties, covenants or agreements made by Investor in this
Agreement or in the other Transaction Documents or is a result of any
information provided by Investor or its representatives to Company in writing
for inclusion in the Registration Statement.

       

      5.9  Indemnification of
Company.  Subject
to the provisions of this Section 5.9, the
Investor will indemnify and hold the Company and its officers, directors and
Affiliates (collectively, the “Company Parties” and
each a “Company
Party”), harmless from any and all Losses that any Company Party may
suffer or incur, solely to the extent relating to written information furnished
by Investor expressly for use in connection with a Registration Statement, where
such written information is finally adjudicated by an award from a court of
competent jurisdiction or a binding arbitration award to contain (a) a knowingly
untrue statement of a material fact contained in such information, or (b) an
intentional omission from such information or information necessary to make the
information provided not misleading.

       

      If any
action described in the foregoing paragraph shall be brought against a Company
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Company Party shall promptly notify the Investor in writing, and the
Investor shall have the right to assume the defense thereof with counsel of its
own choosing.  The Company Parties shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the Company
Parties except to the extent that (i) the employment thereof has been
specifically authorized by the Investor in writing in advance, or (ii) the
Investor has failed after a reasonable period of time to assume such defense and
to employ counsel.  The Investor will not be liable to the Company
Parties under this Agreement (i) for any settlement by a Company Party effected
without the Investor’s prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent, that a loss,
claim, damage or liability is attributable to Company’s breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents.

       

      
        
          
          

        

        
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      5.10  Reservation of
Securities.  The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction
Documents.

       

      5.11  Limited
Standstill.  The
Company will deliver to Investor on or before each Tranche Closing Date, and
will honor and enforce the provisions of, the Lock-Up Agreements with the
Company’s executive officers, directors and beneficial owners of 10% or more of
the Common Stock.

       

      5.12  Issuance of Additional
Securities.  The
Company shall not issue additional Common Stock or securities convertible into
Common Stock to any Person other than: (i) to Investor or any Affiliate of
Investor; (ii) in connection with the Company's 2005 Stock Incentive
Compensation Plan; (iii) in connection with the Company's 2009 Consultant Stock
Plan; (iv) in connection with the issuance of 125,000 shares of Common Stock
pursuant to the employment agreement with Richard P. Trotter; (v) in connection
with the issuance of up to 875,000 shares of Common Stock upon the exercise of
options granted to Richard P. Trotter; (vi) in connection with the issuance of
up to 4,000,000 shares of Common Stock upon the exercise of options granted to
Anthony W. Adler; (vii) in connection with the issuance of up to 500,000 shares
of Common Stock upon the exercise of options granted to Jeffrey Bean; (viii) in
connection with the issuance of up to 100,000 shares of Common Stock upon the
exercise of options granted to Loofbourrow and Associates; (ix) in connection
with the issuance of up to 7,881,484 shares of Common Stock upon the exercise of
outstanding warrants; (x) in connection with the issuance of the Company's
securities to any employee, officer, director, or consultant in exchange for
loans or services provided or to be provided to the Company; (xi) in connection
with the issuance of up to 75,000,000 shares of Common Stock in exchange for the
Company’s outstanding notes; (xii) in connection with the issuance of up to
$750,000.00 in value of the Company’s shares of Common Stock and warrants to be
issued pursuant to that certain Private Placement Memorandum, dated as of April
21, 2009, by the Company; (xiii) in connection with the issuance of securities
in an amount up to $250,000.00 in value for working capital purposes; and (xiv)
in connection with the issuance of Common Stock pursuant to an exemption under
Section 3 of the Act; provided, however, that the Company shall not be limited
in the issuance of additional Common Stock or securities convertible into Common
Stock if (a) the aggregate Tranche Purchase Price for all Tranche Shares equals
the Maximum Placement, or (b) the Company is unable to deliver a Tranche Notice
because the aggregate number of shares of Common Stock deemed beneficially owned
by the Investor and its Affiliates (as determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
equals or exceeds 9.99% of all Common Stock outstanding on the date the Company
would deliver a Tranche Notice.

       

      5.13  Prospectus Availability and
Changes.  The
Company will make available to Investor upon request, and thereafter from time
to time will furnish Investor, as many copies of any Prospectus (or of the
Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the applicable
Registration Statement) as Investor may request for the purposes contemplated by
the Act; and in case Investor is required to deliver  a prospectus
after the nine-month period referred to in Section 10(a)(3) of the Act in
connection with the sale of the Warrant Shares, or after the time a
post-effective amendment to the applicable Registration Statement is required
pursuant to Item 512(a) of Regulation S-K under the Act, the Company will
prepare, at its expense, promptly upon request such amendment or amendments to
the Registration Statement and the Prospectus as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act or Item 512(a)
of Regulation S-K under the Act, as the case may be.

       

      
        
          
          

        

        
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      The
Company will advise Investor promptly of the happening of any event within the
time during which a Prospectus is required to be delivered under the Act which
could require the making of any change in the Prospectus then being used so that
the Prospectus would not include an untrue statement of material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, and to
advise Investor promptly if, during such period, it shall become necessary to
amend or supplement any Prospectus to cause such Prospectus to comply with the
requirements of the Act, and in each case, during such time, to prepare and
furnish, at the Company’s expense, to Investor promptly such amendments or
supplements to such Prospectus as may be necessary to reflect any such change or
to effect such compliance.

       

      5.14  Required
Approval.  No
transactions contemplated under this Agreement or the Transaction Documents
shall be consummated for an amount that would require approval by any Trading
Market or Company stockholders under any approval provisions, rules or
regulations of any Trading Market applicable to the Company, unless and until
such approval is obtained.  Company shall use best efforts to obtain
any required approval as soon as possible.

       

      5.15  Activity
Restrictions. For so long as Investor or any of
its Affiliates holds any Preferred Shares, Warrants or Warrant Shares, neither
Investor nor any Affiliate will:  (i) vote any shares of Common Stock
owned or controlled by it, solicit any proxies, or seek to advise or influence
any Person with respect to any voting securities of the Company; (ii) engage or
participate in any actions, plans or proposals which relate to or would result
in (a) acquiring additional securities of the Company, alone or together with
any other Person, which would result in beneficially owning or controlling more
than 9.99% of the total outstanding Common Stock or other voting securities of
the Company, (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Company or any of its subsidiaries, (c)
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries, (d) any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board, (e) any material
change in the present capitalization or dividend policy of the Company, (f) any
other material change in the Company’s business or corporate structure,
including but not limited to, if the Company is a registered closed-end
investment company, any plans or proposals to make any changes in its investment
policy for which a vote is required by Section 13 of the Investment Company Act
of 1940, (g) changes in the Company’s charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any Person, (h) causing a class of securities of the
Company to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association, (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant  to Section
12(g)(4) of the Act, or (j) any action, intention, plan or arrangement similar
to any of those enumerated above; or (iii) request the Company or its directors,
officers, employees, agents or representatives to amend or waive any provision
of this Section
5.15.

       

      
        
          
          

        

        
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      5.16  Registration.  In
the event that all Warrant Shares that Company may then be required to make
available to Investor are not, by the one-year anniversary of the Effective
Date, made available to Investor as DWAC Shares without restriction on resale
(i) pursuant to an effective Registration Statement, or (ii) as Rule 144
Eligible, Company shall, at Investor’s election in Investor’s sole discretion,
exercise the Company’s Redemption Option provided for in Section 6 of the
Certificate of Designations to effectuate the repurchase of any outstanding
Preferred Shares.

       

      ARTICLE 6

      MISCELLANEOUS

       

      6.1  Fees and
Expenses.  Except
for the $20,000.00 non-refundable document preparation fee previously paid by
the Company to counsel for Investor, the receipt of which is hereby
acknowledged, and the $5,000.00 non-refundable administrative fee payable to
counsel for Investor at each Tranche Closing, or as may be otherwise provided in
this Agreement, each party shall pay the fees and expenses of its own advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of the Transaction Documents.  The Company acknowledges
and agrees that Luce Forward solely represents Investor, and does not represent
the Company or its interests in connection with the Transaction Documents or the
transactions contemplated thereby.  The Company shall pay all stamp
and other taxes and duties levied in connection with the sale of the Securities,
if any.

       

      6.2  Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of:  (a) the date of transmission, if such
notice or communication is delivered via facsimile or electronic mail prior to
5:30 p.m. Eastern time on a Trading Day and an electronic confirmation of
delivery is received by the sender, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered later than 5:30 p.m.
Eastern time or on a day that is not a Trading Day, (c) 3 Trading Days following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given.  The addresses for such notices and communications are
those set forth following the signature page hereof, or such other address as
may be designated in writing hereafter, in the same manner, by such
Person.

       

      6.3  Amendments;
Waivers.  No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Investor or,
in the case of a waiver, by the party against whom enforcement of any such
waiver is sought.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

       

      
        
          
          

        

        
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      6.4  Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof

       

      6.5  Successors and
Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of Investor.  Investor may assign any or all of its rights
under this Agreement to any Affiliate or, with the prior written consent of the
Company, to any other Person.

       

      6.6  No Third-Party
Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set forth
in Section 5.8.

       

      6.7  Governing
Law.  All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law that would require or permit the application of
the laws of any other jurisdiction.  Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York.  Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  The
parties hereby waive all rights to a trial by jury.  If either party
shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses reasonably incurred in connection with the
investigation, preparation and prosecution of such action or
proceeding.

       

      6.8  Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery, exercise and/or conversion of the Securities, as
applicable.

       

      6.9  Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

       

      
        
          
          

        

        
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      6.10  Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

       

      6.11  Replacement of Securities.  If
any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.  The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.

       

      6.12  Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of Investor and the Company will be
entitled to specific performance under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.

       

      6.13  Payment Set
Aside.  To
the extent that the Company makes a payment or payments to Investor pursuant to
any Transaction Document or Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

       

      6.14  Liquidated
Damages.  The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and
payable shall have been canceled.

       

      
        
          
          

        

        
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      6.15  Time of the
Essence.  Time
is of the essence with respect to all provisions of this Agreement that specify
a time for performance.

       

      6.16  Construction.  The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.

       

      6.17  Entire
Agreement.  This
Agreement, together with the exhibits hereto, contains the entire agreement and
understanding of the parties, and supersedes all prior and contemporaneous
agreements, term sheets, letters, discussions, communications and
understandings, both oral and written, which the parties acknowledge have been
merged into this Agreement.  No party, representative, attorney or
agent has relied upon any collateral contract, agreement, assurance, promise,
understanding or representation not expressly set forth
hereinabove.  The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any Person’s reliance on any
such assurance.

       

      
        
          
          

        

        
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      IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

       

      

      SPARTA
COMMERCIAL SERVICES, INC.

      

      
      

       

      
        	By:	/s/ A.L.
      Havens	 
	Name:	Anthony
    Havens	 
	Title:	C.E.O.              	 

      

       

       

      
        
          	By:	/s/ Sandra L.
      Ahman	 
	Name:	Sandra L.
      Ahman	 
	Title:	Secretary	 

        

      

       

       

      OPTIMUS
SPECIAL SITUATIONS CAPITAL PARTNERS, LLC

      

       

      
        
          	By:	/s/ Terren S.
      Peizer	 
	Name:	Terren S.
      Peizer	 
	Title:	Managing
      Director   	 

        

         

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

           

        

      

      Exhibit
A

       

      Form
of Warrant

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

       

       

      Sparta
Commercial Services, Inc.

       

      Warrant
To Purchase Common Stock

       

      
        	Warrant No.:
      2009-[_____]           	
                 Issuance
      Date:  July 24, 2009

              
	 	 
	Number of Warrant
      Shares:  [_______________]      	
                 Initial
      Exercise Price:  [$_____]

              

      

       

       

      Sparta
Commercial Services, Inc., a Nevada corporation (“Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, [_______________], the holder
hereof or its designees or assigns (“Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any
time or times on or after the earlier of (a) the date on which a registration
statement registering for resale the Warrant Shares (as defined below) becomes
effective and (b) the date that is six (6) months after the Issuance Date set
forth above (such date specified in clauses (a) or (b) above, as applicable, the
“Exercisable
Date”), but not after 11:59 p.m. Eastern time on the fifth anniversary of
the Issuance Date, that number of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock set forth above (the “Warrant
Shares”).  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in ARTICLE 13
hereof.  

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      ARTICLE 1

      EXERCISE OF
WARRANT.

       

      1.1  Mechanics
of Exercise.  Subject to the terms and conditions hereof, this
Warrant may be exercised by the Holder in accordance with the immediately
preceding paragraph on any day on or after the Exercisable Date, in whole or in
part, by (i) delivery of a written notice to the Company, in the form attached
hereto as Appendix
1 (the “Exercise Notice”), of
the Holder’s election to exercise this Warrant and (ii) payment to the Company
of an amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise
Price”) in cash or by wire transfer of immediately available funds, by
the issuance and delivery of a recourse promissory note substantially in the
form attached hereto as Appendix 2 (each, a
“Recourse
Note”), or, if applicable, by cashless exercise pursuant to Section
1.3.  The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder.  Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares.  On the same Trading Day on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (the
“Exercise Delivery
Documents”) by 10:30 a.m. Eastern time, or the following Trading Day if
received after such time or on a non-Trading Day, the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery
Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”) and
credit such aggregate number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
The Depository Trust Company (DTC) Fast Automated Securities Transfer (FAST)
Program through its Deposit Withdrawal Agent Commission (DWAC) system, time
being of the essence.  Upon delivery of the Exercise Delivery
Documents, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date such Warrant Shares are credited to
the Holder’s DTC account.  If this Warrant is submitted in connection
with any exercise pursuant to this Section 1.1 and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than one Trading Day after any exercise and
return of the previously issued Warrant, at its own expense issue a new Warrant
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised.  No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number.  The Company shall pay any and
all taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.

       

      1.2  Exercise
Price.  For purposes of this Warrant, “Exercise Price” means
an amount per Warrant Share equal to the Closing Sale Price of a Share of Common
Stock on the Trading Day immediately preceding the Issuance Date, subject to
adjustment as provided herein.

       

      
        
          
          

        

        
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      1.3  Cashless
Exercise.  Notwithstanding anything contained herein to the
contrary, if at any time there is not a current, valid and effective
registration statement covering the Warrant Shares that are the subject of the
Exercise Notice (the “Unavailable Warrant
Shares”), the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares
of Common Stock determined according to the following formula (a “Cashless
Exercise”):

       

      Net
Number = (B-C) x
A

       B

       

      For
purposes of the foregoing formula:

      

      A = the
total number of shares with respect to which this Warrant is then being
exercised.

      

      B = the
average of the Closing Sale Prices of the shares of Common Stock (as reported by
Bloomberg) for the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise Notice.

      

      C = the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

       

      1.4  Company’s
Failure to Timely Deliver Securities.  If the Company
shall fail for any reason or for no reason to timely credit the Holder’s balance
account with DTC for such number of shares of Common Stock to which the Holder
is entitled upon the Holder’s exercise of this Warrant, then, in addition to all
other remedies available to the Holder, the Company shall pay in cash to the
Holder on each day that the issuance of such shares of Common Stock is not
timely effected an amount equal to 1.5% of the product of (A) the sum of the
number of shares of Common Stock not issued to the Holder on a timely basis and
to which the Holder is entitled and (B) the Closing Sale Price of the shares of
Common Stock on the Trading Day immediately preceding the last possible date
which the Company could have issued such shares of Common Stock to the Holder
without violating Section
1.1.  In addition to the foregoing, if after the Company’s
receipt of the facsimile copy of a Exercise Notice the Company shall fail to
timely credit the Holder’s balance account with DTC for the number of shares of
Common Stock to which the Holder is entitled upon the Holder’s exercise
hereunder, and the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In”), then the
Company shall, within one Trading Day after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”), at
which point the Company’s obligation to credit such Holder’s balance account
with DTC shall terminate, or (ii) promptly honor its obligation to credit such
Holder’s balance account with DTC and pay cash to the Holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number
of shares of Common Stock sold by Holder in satisfaction of its obligations,
times (B) the Closing Bid Price on the date of exercise.

       

      
        
          
          

        

        
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      1.5  Exercise
Limitation.  Notwithstanding
any other provision, at no time may the Holder exercise this Warrant such that
the number of Warrant Shares to be received pursuant to such exercise aggregated
with all other shares of Common Stock then owned by the Holder beneficially or
deemed beneficially owned by the Holder would result in the Holder owning more
than 4.99% of all of such Common Stock as would be outstanding on such Exercise
Date, as determined in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder.  In addition, as of any
date, the aggregate number of shares of Common Stock into which this Warrant is
exercisable within 61 days, together with all other shares of Common Stock then
beneficially owned (as such term is defined in Rule 13(d) under the Exchange
Act) by Holder and its affiliates, shall not exceed 9.99% of the total
outstanding shares of Common Stock as of such date.  At no time when
the number of Warrant Shares then owned by the Holder, when aggregated with all
other shares of Common Stock then owned by the Holder beneficially or deemed
beneficially owned by the Holder, would result in the Holder owning more than
1.0% of all outstanding Common Stock will Holder vote or cause to be voted any
such shares.

       

      1.6  Restrictions.  For so long as
Holder holds any Warrant Shares, Holder will not:  (i) vote any shares
of Common Stock owned or controlled by it, solicit any proxies, or seek to
advise or influence any Person with respect to any voting securities of the
Company; (ii) engage or participate in any actions, plans or proposals which
relate to or would result in (a) acquiring additional securities of the Company,
alone or together with any other Person, which would result in beneficially
owning or controlling more than 9.99% of the total outstanding Common Stock or
other voting securities of the Company, (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving Company
or any of its subsidiaries, (c) a sale or transfer of a material amount of
assets of the Company or any of its subsidiaries, (d) any change in the present
board of directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board, (e) any material change in the present capitalization or
dividend policy of the Company, (f) any other material change in the Company’s
business or corporate structure, including but not limited to, if the Company is
a registered closed-end investment company, any plans or proposals to make any
changes in its investment policy for which a vote is required by Section 13 of
the Investment Company Act of 1940, (g) changes in the Company’s charter, bylaws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any Person, (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association, (i) a class of equity securities of
the Company becoming eligible for termination of registration
pursuant  to Section 12(g)(4) of the Act, or (j) any action,
intention, plan or arrangement similar to any of those enumerated above; or
(iii) request the Company or its directors, officers, employees, agents or
representatives to amend or waive any provision of this Section
1.6.

       

      1.7  Disputes.  In the case of a
dispute as to the determination of the Exercise Price or the arithmetic
calculation of the Warrant Shares, the Company shall promptly issue to the
Holder the number of Warrant Shares that are not disputed and resolve such
dispute in accordance with Section
12.

       

      
        
          
          

        

        
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      1.8  Insufficient
Authorized Shares.  If at any time
while any of the Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the Warrants at least a
number of shares of Common Stock equal to 110% of the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the Warrants then outstanding (the “Required Reserve
Amount”) (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for the
Warrants then outstanding.  Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than 90 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock.  In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

       

      ARTICLE 2

      ADJUSTMENT UPON SUBDIVISION
OR COMBINATION OF COMMON STOCK.

       

      If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately
increased.  If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any adjustment under this ARTICLE 2 shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

       

      ARTICLE 3

      PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS

       

      3.1  Purchase
Rights.  In addition to
any adjustments pursuant to ARTICLE 2 above, if
at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

       

      
        
          
          

        

        
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      3.2  Fundamental
Transactions.  The
Company shall not enter into or be party to a Fundamental Transaction unless the
Successor Entity assumes in writing all of the obligations of the Company under
this Warrant in accordance with the provisions of this Section 3.2 pursuant to
written agreements in form and substance satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Warrants in exchange for such
Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the shares of
Common Stock reflected by the terms of such Fundamental Transaction, and
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and satisfactory to the Required
Holders.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) purchasable upon the exercise of this Warrant prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant.  In addition to and not in substitution
for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been exercised immediately
prior to such Fundamental Transaction.  Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Required Holders.  The provisions of this Section 3.2  shall
apply similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      3.3  Notwithstanding
the foregoing, in the event of a Fundamental Transaction other than one in which
the Successor Entity is a Public Successor Entity that assumes this Warrant such
that this Warrant shall be exercisable for the publicly traded common stock of
such Public Successor Entity, at the request of the Holder delivered before the
90th day after such Fundamental Transaction, the Company (or the Successor
Entity) shall purchase this Warrant from the Holder by paying to the Holder,
within five (5) Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), cash in an amount equal to the value of
the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black Scholes Option
Pricing Model using a volatility equal to the 100 day average historical price
volatility prior to the date of the public announcement of such Fundamental
Transaction.

       

      ARTICLE 4

      NONCIRCUMVENTION

       

      The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, 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 this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the Exercise Price then in effect, (ii)
shall take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any
of the SPA Warrants are outstanding, take all action necessary to reserve and
keep available out of its authorized and unissued shares of Common Stock, solely
for the purpose of effecting the exercise of the SPA Warrants, 110% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of the SPA Warrants then outstanding (without regard to any
limitations on exercise).

       

      ARTICLE 5

      WARRANT HOLDER NOT DEEMED A
STOCKHOLDER

       

      Except as
otherwise specifically provided herein, the Holder, solely in such Person’s
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant.  In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this ARTICLE 5, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.

       

      
        
          
          

        

        
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      ARTICLE 6

      REISSUANCE OF
WARRANTS

       

      6.1  Transfer
of Warrant.  If this Warrant
is to be transferred, the Holder shall surrender this Warrant to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new Warrant, registered as the Holder may request, representing the
right to purchase the number of Warrant Shares being transferred by the Holder
and, if less then the total number of Warrant Shares then underlying this
Warrant is being transferred, a new Warrant to the Holder representing the right
to purchase the number of Warrant Shares not being transferred.

       

      6.2  Lost,
Stolen or Mutilated Warrant.  Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant representing the right to purchase the Warrant Shares then
underlying this Warrant.

       

      6.3  Exchangeable
for Multiple Warrants.  This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given.

       

      6.4  Issuance
of New Warrants.  Whenever the
Company is required to issue a new Warrant pursuant to the terms of this
Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii)
shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 6.1 or Section 6.3, the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.

       

      
        
          
          

        

        
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      ARTICLE 7

      NOTICES

       

      Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 6.2 of the
Purchase Agreement.  The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason
therefore.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the shares of Common Stock,
(B) with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock as such or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the
Holder.

       

      ARTICLE 8

      AMENDMENT AND
WAIVER

       

      Except as
otherwise provided herein, the provisions of this Warrant may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Required Holders; provided that no such action may increase the
exercise price of any SPA Warrant or decrease the number of shares or class of
stock obtainable upon exercise of any SPA Warrant without the written consent of
the Holder.  No such amendment shall be effective to the extent that
it applies to less than all of the holders of the SPA Warrants then
outstanding.

       

      ARTICLE 9

      GOVERNING
LAW

       

      This
Warrant shall be governed by and construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

       

      ARTICLE 10

      CONSTRUCTION;
HEADINGS

       

      This
Warrant shall be deemed to be jointly drafted by the Company and the Holder and
shall not be construed against any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

       

      
        
          
          

        

        
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      ARTICLE 11

      DISPUTE
RESOLUTION

       

      In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within 2
Trading Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder.  If the Holder and the Company are
unable to agree upon such determination or calculation of the Exercise Price or
the Warrant Shares within three Trading Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within 2 Trading Days submit via facsimile (a) the disputed determination of the
Exercise Price or arithmetic calculation to an independent, reputable investment
bank or independent registered public accounting firm selected by Holder subject
to Company’s approval, which may not be unreasonably withheld or delayed, or (b)
the disputed arithmetic calculation of the Warrant Shares to the Company’s
independent registered public accounting firm.  The Company shall
cause at its expense the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than 3 Trading Days from the time it receives the
disputed determinations or calculations.  Such investment bank’s or
accountant’s determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error. 

       

      ARTICLE 12

      REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF

       

      The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder right to pursue actual damages for
any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.

       

      
        
          
          

        

        
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      ARTICLE 13

      DEFINITIONS

       

      For
purposes of this Warrant, the following terms shall have the following
meanings:

       

      13.1  “Approved Stock Plan”
means any employee benefit plan now existing or hereafter adopted which has been
approved by the Board of Directors of the Company, pursuant to which the
Company’s securities may be issued to any employee, officer, director or
consultant for services provided to the Company.

       

      13.2  “Bloomberg” means
Bloomberg Financial Markets.

       

      13.3  “Closing Bid Price”
and “Closing Sale
Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Trading
Market, as reported by Bloomberg, or, if the Trading Market begins to operate on
an extended hours basis and does not designate the closing bid price or the
closing trade price, as the case may be, then the last bid price or last trade
price, respectively, of such security prior to 4:00 p.m., Eastern time, as
reported by Bloomberg, or, if the Trading Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price or the Closing Sale Price, as the case may be, of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder.  If the Company and the Holder are unable
to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to ARTICLE 11.  All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

       

      13.4  “Common Stock” means
(i) the Company’s shares of Common Stock, par value $0.001 per share, and (ii)
any share capital into which such Common Stock shall have been changed or any
share capital resulting from a reclassification of such Common
Stock.

       

      13.5  “Common Stock Deemed
Outstanding” means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding pursuant to Sections 2.1.1 and 2.1.2 hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock owned or held
by or for the account of the Company or issuable upon exercise of the SPA
Warrants.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      13.6  “Convertible
Securities” means any stock or securities (other than Options) directly
or indirectly convertible into or exercisable or exchangeable for shares of
Common Stock.

       

      13.7  “Eligible Market”
means the Trading Market, The New York Stock Exchange, Inc., The NASDAQ Global
Select Market, The NASDAQ Global Market, The NASDAQ Capital Market, the NYSE
Amex Stock Exchange or the OTC Bulletin Board, but does not include the Pink
Sheets.

       

      13.8  “Fundamental
Transaction” means and shall be deemed to have occurred at such time upon
any of the following events:  (i) a consolidation, merger or other
business combination or event or transaction following which the holders of
Common Stock immediately preceding such consolidation, merger, combination or
event either (a) no longer hold a majority of the shares of Common Stock or (b)
no longer have the ability to elect a majority of the board of directors of the
Company; (ii) the sale or transfer (other than to a majority or wholly owned
subsidiary of the Company) of all or substantially all of the Company’s assets,
other than in the ordinary course of business; or (iii) a purchase, tender or
exchange offer made to the holders of the outstanding shares of Common Stock
(other than pursuant to an “option repricing” or similar event for compensation
purposes).

       

      13.9  “Options” means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.

       

      13.10  “Parent Entity” of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

       

      13.11  “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

       

      13.12  “Purchase Agreement”
means the Preferred Stock Purchase Agreement dated July 24, 2009, by and among
the Company and the investors referred to therein.

       

      13.13  “Trading Market” means
the NYSE Amex.

       

      13.14  “Public Successor
Entity” means a Successor Entity that is a publicly traded corporation
whose stock is quoted or listed for trading on an Eligible Market.

       

      13.15  “Required Holders”
means the Holders of the SPA Warrants representing at least a majority of shares
of Common Stock underlying the SPA Warrants then outstanding.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      13.16  “SPA Warrant(s)” means
a warrant to purchase Common Stock of the Company issued pursuant to the
Purchase Agreement.

       

      13.17  “Successor Entity”
means the Person (or, if so elected by the Required Holders, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction or the Person
(or, if so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.

       

      13.18  “Trading Day” means
any day on which the Common Stock is traded on an Eligible Market; provided that
it shall not include any day on which the Common Stock (a) is suspended from
trading, or (b) is scheduled to trade on such exchange or market for less than 5
hours.

       

      IN
WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to
be duly executed as of the Issuance Date set out above.

       

       

       

      
        	 	SPARTA COMMERCIAL
      SERVICES, INC.
	 	 	 
	 	 	 
	 	By: 	 
	 	Name:	 
	 	Title:	 

      

       

      
        
          	 	By: 	 
	 	Name:	 
	 	Title:	 

        

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      APPENDIX
1

       

      EXERCISE
NOTICE

       

      

       

      SPARTA
COMMERCIAL SERVICES, INC.

       

      The
undersigned hereby exercises the right to purchase ________________ shares of
Common Stock (“Warrant
Shares”) of Sparta Commercial Services, Inc., a Nevada corporation
(“Company”),
evidenced by the attached Warrant to Purchase Common Stock (“Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.  The Holder intends that payment of the
Exercise Price shall be made as:

       

      ___   Cash
Exercise with respect to ____________ Warrant Shares

      

      ___   Cashless
Exercise with respect to ____________ Warrant Shares

      

      ___   Recourse
Note Exercise with respect to ____________ Warrant Shares

      

        Please
issue

      

      ___   A
certificate or certificates representing said shares of Common Stock in the
name   specified below

      

      
        
          	
                	
                  ___ 

                	
                   
      Said shares in electronic form to the Deposit/Withdrawal at Custodian
      (DWAC) account with Depository Trust Company (DTC) specified
      below.

                

        

      

       

      
        
          	 	 
	 	 	 
	By: 	 	 
	Name:	 	 
	Title:	 	 

        

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

      

       

      ACKNOWLEDGMENT

       

      The
Company hereby acknowledges the foregoing Exercise Notice and hereby directs
[_______________________________]
to issue the above indicated number of shares of Common Stock as specified
above, in accordance with the Transfer Agent Instructions dated July 24, 2009
from the Company, and acknowledged and agreed to by the transfer
agent.

       

      
        	 	SPARTA COMMERCIAL
      SERVICES, INC.
	 	 	 
	 	By: 	 
	 	Name:	 
	 	Title:	 

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      APPENDIX
2

       

      FORM OF
NOTE

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SECURED
PROMISSORY NOTE

       

      
        	$[_____________]              	
                 Date:  [________],
      20[__]

              

      

       

      FOR VALUE
RECEIVED, [_____________]
(“Borrower”)
promises to pay to the order of Sparta Commercial Services, Inc. (“Lender”), at [________], or at such
other place as Lender may from time to time designate in writing, the principal
sum of $[________], with
interest, as follows:

      

      1.  Interest.  The
principal balance outstanding, from time to time, shall bear interest from and
after the date hereof at the rate of 2.0% per year.  Interest shall be
calculated on a simple interest basis and the number of days elapsed during the
period for which interest is being calculated.  Interest not paid when
due shall be added to the principal.

       

      2.  Payments.  If
not sooner paid, the entire unpaid principal balance, interest thereon and any
other charges due and payable under this Note shall be due and payable on the
fourth anniversary of the date of this Note (“Maturity Date”);
provided, however, that in no event shall this Note be due or payable at any
time that (a) Lender is in default of any preferred stock purchase agreement for
Series B Preferred Stock or any Warrant issued pursuant thereto, any loan
agreement or other material agreement, or (b) there are any shares of Series B
Preferred Stock of Lender issued or outstanding.  Borrower shall have
the right to prepay all or any part of the principal balance of this Note at any
time without penalty or premium.  In the event that Lender redeems all
or a portion of any shares of Series B Preferred Stock then held by Borrower,
Borrower shall apply, and Lender may offset, the proceeds of any such redemption
to pay down the accrued interest and outstanding principal of this
Note.  All payments shall be first be applied to interest, then to
reduce the outstanding principal.

       

      3.  Full Recourse
Note.  THIS IS A FULL RECOURSE PROMISSORY
NOTE.  Accordingly, notwithstanding that Borrower’s obligations under
this Note are secured by the Collateral, in the event of a material default
hereunder, Lender shall have full recourse to all the other assets of
Borrower.  Moreover, Lender shall not be required to proceed against
or exhaust any Collateral, or to pursue any Collateral in any particular order,
before Lender pursues any other remedies against Borrower or against any of
Borrower’s assets.

       

      4.  Security

       

      a.  Pledge.  As
security for the due and prompt payment and performance of all payment
obligations under this Note and any modifications, replacements and extensions
hereof (collectively, “Secured
Obligations”), Borrower hereby pledges and grants a security interest to
Lender in all of Borrower’s right, title, and interest in and to all of the
following, now owned or hereafter acquired or arising (together the “Collateral”):

       

      i.  Publicly
traded shares of common stock, preferred stock, bonds, notes and/or debentures
(collectively, “Pledged Securities”)
with a fair market value on the date hereof at least equal to the principal
amount of this Note, based upon the trading price of such securities on the OTC
Bulletin Board, NASDAQ Capital Market, NASDAQ Global Market, NASDAQ Global
Select Market, NYSE Amex, or New York Stock Exchange;

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      ii.  all
rights of Borrower with respect to or arising out of the Pledged Securities,
including voting rights, and all equity and debt securities and other property
distributed or distributable with respect thereto as a result of merger,
consolidation, dissolution, reorganization, recapitalization, stock split, stock
dividend, reclassification, exchange, redemption, or other change in capital
structure; and

       

      iii.  all
proceeds, replacements, substitutions, accessions and increases in any of the
Collateral.

       

      b.  Replacement
Securities.  So long as any Secured Obligations remain
outstanding, in the event that Borrower sells or disposes of any Pledged
Securities, Borrower shall promptly provide replacement securities of equal or
greater value.

       

      c.  Rights With Respect to
Distributions.  So long as no default shall have occurred and
be continuing under this Note, Borrower shall be entitled to receive any and all
dividends and distributions made with respect to the Pledged Securities and any
other Collateral.  However, upon the occurrence and during the
continuance of any default, Lender shall have the sole right (unless otherwise
agreed by Lender) to receive and retain dividends and distributions and apply
them to the outstanding balance of this Note or hold them as Collateral, at
Lender’s election.  

       

      d.  Voting
Rights.  So long as no default shall have occurred and be
continuing under this Note, Borrower shall be entitled to exercise all voting
rights pertaining to the Pledged Securities and any other
Collateral.  However, upon the occurrence and during the continuance
of any default, all rights of Borrower to exercise the voting rights that
Borrower would otherwise be entitled to exercise with respect to the Collateral
shall cease and (unless otherwise agreed by Lender) all such rights shall
thereupon become vested in Lender, which shall thereupon have the sole right to
exercise such rights.

       

      e.  Financing Statement; Further
Assurances.  Borrower agrees, concurrently with executing this
Note, that Lender may file a UCC-1 financing statement relating to the
Collateral in favor of Lender, and any similar financing statements in any
jurisdiction in which Lender reasonably determines such filing to be
necessary.  Borrower further agrees that at any time and from time to
time Borrower shall promptly (i) provide a comfort letter to Company’s auditors
regarding the fair market value of the Collateral, and (ii) execute and deliver
all further instruments and documents that Lender may request in order to
perfect and protect the security interest granted hereby, or to enable Lender to
exercise and enforce its rights and remedies with respect to any Collateral
following an event of default.  In addition, following an event of
default, Borrower shall deliver the Collateral, including original certificates
or other instruments representing the Pledged Securities, to Lender to hold as
secured party, and execute a securities account control agreement.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      f.  Powers of
Lender.  Borrower hereby appoints Lender as Borrower’s true and
lawful attorney-in-fact to perform any and all of the following acts, which
power is coupled with an interest, is irrevocable until the Secured Obligations
are paid and performed in full, and may be exercised from time to time by Lender
in its discretion:  To take any action and to execute any instrument
which Lender may deem reasonably necessary or desirable to accomplish the
purposes of this Section 4f and, more
broadly, this Note including, without limitation:  (i) to exercise
voting and consent rights with respect to Collateral in accordance with this
Note, (ii) to receive, endorse and collect all instruments or other forms of
payment made payable to Borrower representing any dividend, interest payment or
other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same,
when and to the extent permitted by this Note, (iii) to perform or cause the
performance of any obligation of Borrower hereunder in Borrower’s name or
otherwise, (iv) during the continuance of any default hereunder, to liquidate
any Collateral pledged to Lender hereunder and to apply proceeds thereof to the
payment of the Secured Obligations or to place such proceeds into a cash
collateral account or to transfer the Collateral into the name of Lender, all at
Lender’s sole discretion, (v)  to enter into any extension,
reorganization or other agreement relating to or affecting the Collateral, and,
in connection therewith, to deposit or surrender control of the Collateral, (vi)
to accept other property in exchange for the Collateral, (vii) to make any
compromise or settlement Lender deems desirable or proper, and (viii) to execute
on Borrower’s behalf and in Borrower’s name any documents required in order to
give Lender a continuing first lien upon the Collateral or any part
thereof.

       

      5.  Additional
Terms

       

      a.  No
Waiver.  The acceptance by Lender of payment of a portion of
any installment when due or an entire installment but after it is due shall
neither cure nor excuse the default caused by the failure of Borrower timely to
pay the whole of such installment and shall not constitute a waiver of Lender’s
right to require full payment when due of any future or succeeding
installments.

       

      b.  Default.  Any
one or more of the following shall constitute a “default” under this
Note:  (i) a default in the payment when due of any amount hereunder,
(ii) Borrower’s refusal to perform any material term, provision or covenant
under this Note, (iii) the commencement of any liquidation, receivership,
bankruptcy, assignment for the benefit of creditors or other debtor-relief
proceeding by or against Borrower, or subject to Section 4(b), the Collateral is
transferred by Borrower without being replaced by Pledged Securities of equal or
greater fair market value on the date of transfer, and (iv) the levying of any
attachment, execution or other process against Borrower, or subject to Section 4(b) the
Collateral or any material portion thereof.

       

      c.  Default
Rights

       

      i.  Upon
the occurrence of any payment default Lender may, at its election, declare the
entire balance of principal and interest under this Note immediately due and
payable.  A delay by Lender in exercising any right of acceleration
after a default shall not constitute a waiver of the default or the right of
acceleration or any other right or remedy for such default.  The
failure by Lender to exercise any right of acceleration as a result of a default
shall not constitute a waiver of the right of acceleration or any other right or
remedy with respect to any other default, whenever
occurring.  

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      ii.  Further,
upon the occurrence of any material non-monetary default, following 30 days
notice from Lender to Borrower specifying the default and demanded manner of
cure for any non-monetary default, Lender shall thereupon and thereafter have
any and all of the rights and remedies to which a secured party is entitled
after a default under the applicable Uniform Commercial Code, as then in
effect.  In addition to its other rights and remedies, Borrower agrees
that, upon the occurrence of default, Lender may in its sole discretion do or
cause to be done any one or more of the following:

       

      (a)  Proceed
to realize upon the Collateral or any portion thereof as provided by law, and
without liability for any diminution in price which may have occurred, sell the
Collateral or any part thereof, in such manner, whether at any public or private
sale, and whether in one lot as an entirety, or in separate portions, and for
such price and other terms and conditions as is commercially reasonable given
the nature of the Collateral.

       

       

      (b)  If
notice to Borrower is required, give written notice to Borrower at least ten
days before the date of sale of the Collateral or any portion
thereof.

       

      (c)  Transfer
all or any part of the Collateral into Lender’s name or in the name of its
nominee or nominees.

       

      (d)  Vote
all or any part of the Collateral (whether or not transferred into the name of
Lender ) and give all consents, waivers and ratifications in respect of the
Collateral and otherwise act with respect thereto, as though Lender were the
outright owner thereof.

       

      iii.  Borrower
acknowledges that all or part of foreclosure of the Collateral may be restricted
by state or federal securities laws, Lender may be unable to effect a public
sale of all or part of the Collateral, that a public sale is or may be
impractical and inappropriate and that, in the event of such restrictions,
Lender thus may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire the Collateral for their own account, for investment and not with a
view to its distribution or resale.  Borrower agrees that if
reasonably necessary Lender may resort to one or more sales to a single
purchaser or a restricted or limited group of purchasers.  Lender
shall not be obligated to make any sale or other disposition, unless the terms
thereof shall be satisfactory to it.

       

      iv.  If,
in the opinion of Lender based upon written advice of counsel, any consent,
approval or authorization of any federal, state or other governmental agency or
authority should be necessary to effectuate any sale or other disposition of any
Collateral, Borrower shall execute all such applications and other instruments
as may reasonably be required in connection with securing any such consent,
approval or authorization, and will otherwise use its commercially reasonable
best efforts to secure the same.

       

      v.  The
rights, privileges, powers and remedies of Lender shall be cumulative, and no
single or partial exercise of any of them shall preclude the further or other
exercise of any of them.  Any waiver, permit, consent or approval of
any kind by Lender of any default hereunder, or any such waiver of any
provisions or conditions hereof, must be in writing and shall be effective only
to the extent set forth in writing.  Any proceeds of any disposition
of the Collateral, or any part thereof, may be applied by Lender to the payment
of expenses incurred by Lender in connection with the foregoing, and the balance
of such proceeds shall be applied by Lender toward the payment of the Secured
Obligations.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      d.  No Oral Waivers or
Modifications.  No provision of this Note may be waived or
modified orally, but only in a writing signed by Lender and
Borrower.

       

      e.  Attorney
Fees.  The prevailing party in any action by Lender to collect
any amounts due under this Note shall be entitled to recover its reasonable
attorneys fees and costs.

       

      f.  Governing
Law.  This Note has been executed and delivered in, and is to
be construed, enforced, and governed according to the internal laws of, the
State of New York without regard to its principles of conflict of laws that
would require or permit the application of the laws of any other
jurisdiction.

       

      g.  Severability.  Whenever
possible, each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law.  However, if any
provision of this Note shall be held to be prohibited by or invalid under
applicable law, it shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of that provision or the other
provisions of this Note.

       

      h.  Entire
Agreement.  This Note contains the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such
matters.

       

      
        
          	 	 
	 	 	 
	By: 	 	 
	Name:	 	 
	Title:	 	 

        

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Exhibit
B

       

      Certificate
of Designations

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SPARTA
COMMERCIAL SERVICES, INC.

       

      CERTIFICATE
OF DESIGNATIONS OF PREFERENCES,

      RIGHTS
AND LIMITATIONS

      OF

      SERIES B
PREFERRED STOCK

       

      The
undersigned, [_______________] and
[_______________]
hereby certify that:

       

      1.  They
are the [_______________] and
[_______________],
respectively, of Sparta Commercial Services,
Inc., a Nevada corporation (the “Corporation”).

       

      2.  The
Corporation is authorized to issue 10,000,000 shares of
preferred stock. 35,850 have been designated as Series A of which 125 are issued
and outstanding.

       

      3.  The
following resolutions were duly adopted by the Board of Directors:

       

      WHEREAS,
the Certificate of Incorporation of the Corporation provides for a class of its
authorized stock known as preferred stock, comprised of 10,000,000 shares,
$0.001 par value
per share (the Preferred Stock”),
issuable from time to time in one or more series;

       

      WHEREAS,
the Board of Directors of the Corporation is authorized to fix the dividend
rights, dividend rate, voting rights, conversion rights, rights and terms of
redemption and liquidation preferences of any wholly unissued series of
Preferred Stock and the number of shares constituting any series and the
designation thereof, of any of them; and

       

      WHEREAS,
it is the desire of the Board of Directors of the Corporation, pursuant to its
authority as aforesaid, to fix the rights, preferences, restrictions and other
matters relating to a series of Preferred Stock, which shall consist of up to
1,000 shares of
the Preferred Stock which the Corporation has the authority to issue, as
follows:

       

      NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for
the issuance of a series of Preferred Stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of Preferred
Stock as follows:

       

      TERMS OF
PREFERRED STOCK

       

      1.  Designation, Amount and Par
Value.  The series of Preferred Stock shall be designated as
the Corporation’s Series B Preferred Stock (the “Series B Preferred Stock”) and
the number of shares so designated shall be 1,000 (which shall
not be subject to increase without the consent of all of the holders of the
Series B Preferred Stock (each a “Holder” and
collectively, the “Holders”).  Each
share of Series B Preferred Stock shall have a par value of $0.001 per share.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      2.  Ranking.  The
Series B Preferred Stock shall, with respect to dividend rights and rights upon
liquidation, winding-up or dissolution, rank:

       

      a.  senior
to the Corporation’s common stock, par value $0.001 per share (“Common Stock”), the
Series A Redeemable Preferred Stock, and any other class or series of Preferred
Stock of the Corporation (collectively, together with any warrants, rights,
calls or options exercisable for or convertible into such Preferred Stock, the
“Junior
Shares”); and

       

      b.  junior
to all existing and future indebtedness of the Corporation.

       

      3.  Dividends and Other
Distributions.  Commencing on the date of the issuance of any
such shares of Series B Preferred Stock (each respectively an “Issuance Date”),
Holders of Series B Preferred Stock shall be entitled to receive dividends on
each outstanding share of Series B Preferred Stock (“Dividends”), which
shall accrue in shares of Series B Preferred Stock at a rate equal to 10.0% per annum from
the Issuance Date.  Accrued Dividends shall be payable upon redemption
of the Series B Preferred Stock in accordance with Section
6.

       

      a.  Any
calculation of the amount of such Dividends payable pursuant to the provisions
of this Section 3 shall be made
based on a 365-day year and on the number of days actually elapsed during the
applicable calendar quarter, compounded annually.

       

      b.  So
long as any shares of Series B Preferred Stock are outstanding, no dividends or
other distributions will be paid, declared or set apart with respect to any
Junior Shares.  The Common Stock shall not be redeemed while the
Series B Preferred Stock is outstanding.

       

      4.  Protective
Provision.  So long as any shares of Series B Preferred Stock
are outstanding, the Corporation shall not, without the affirmative approval of
the Holders of a majority of the shares of the Series B Preferred Stock then
outstanding, (a) alter or change adversely the powers, preferences or rights
given to the Series B Preferred Stock or alter or amend this Certificate of
Designations, (b) authorize or create any class of stock ranking as to
distribution of assets upon a liquidation senior to or otherwise pari passu with
the Series B Preferred Stock, (c) amend its certificate or articles of
incorporation or other charter documents in breach of any of the provisions
hereof, (d) increase the authorized number of shares of Series B Preferred
Stock, (e) liquidate, dissolve or wind-up the business and affairs of
the  Corporation, or effect any Deemed Liquidation Event (as defined
below), or (f) enter into any agreement with respect to the
foregoing.  

       

      a.  A
“Deemed Liquidation
Event” shall mean:  (i) a merger or consolidation in which the
Corporation is a constituent party or a subsidiary of the Corporation is a
constituent party and the Corporation issues shares of its capital stock
pursuant to such merger or consolidation, except any such merger or
consolidation involving the Corporation or a subsidiary in which the shares of
capital stock of the Corporation outstanding immediately prior to such merger or
consolidation continue to represent, or are converted into or exchanged for
shares of capital stock that represent, immediately following such merger or
consolidation, at least a majority, by voting power, of the capital stock of the
surviving or resulting corporation or if the surviving or resulting corporation
is a wholly owned subsidiary of another corporation immediately following such
merger or consolidation, the parent corporation of such surviving or resulting
corporation; or (ii) the sale, lease, transfer, exclusive license or other
disposition, in a single transaction or series of related transactions, by the
Corporation or any subsidiary of the Corporation of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole,  or
the sale or disposition (whether by merger or otherwise) of one or more
subsidiaries of the Corporation if substantially all of the assets of the
Corporation and its subsidiaries taken as a whole are held by such subsidiary or
subsidiaries, except where such sale, lease, transfer, exclusive license or
other disposition is to a wholly owned subsidiary of the
Corporation.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      b.  The
Corporation shall not have the power to effect a Deemed Liquidation Event
referred to in Section 4(a) unless the agreement or plan of merger or
consolidation for such transaction provides that the consideration payable to
the stockholders of the Corporation shall be allocated among the holders of
capital stock of the Corporation in accordance with Section
5.

       

      5.  Liquidation.

       

      a.  Upon
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, after payment or provision for payment of debts and other
liabilities of the Corporation, before any distribution or payment shall be made
to the holders of any Junior Shares by reason of their ownership thereof, the
Holders of Series B Preferred Stock shall first be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount with respect to each share of Series B Preferred Stock equal to $10,000.00 (the
“Original Series B
Issue Price”), plus any accrued but unpaid Dividends thereon
(collectively, the “Series B Liquidation
Value”).  If, upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the amounts payable with
respect to the shares of Series B Preferred Stock are not paid in full, the
holders of shares of Series B Preferred Stock shall share equally and ratably in
any distribution of assets of the Corporation in proportion to the liquidation
preference and an amount equal to all accumulated and unpaid Dividends, if any,
to which each such holder is entitled

       

      b.  After
payment has been made to the Holders of the Series B Preferred Stock of the full
amount of the Series B Liquidation Value, any remaining assets of the
Corporation shall be distributed among the holders of the Corporation’s Junior
Shares in accordance with the Corporation’s Certificates of Designation and
Certificate of Incorporation.

       

      c.  If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation shall be insufficient to make payment in full to all Holders,
then such assets shall be distributed among the Holders at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.

       

      6.  Redemption.

       

      a.  Corporation’s Redemption
Option.  Upon or after the fifth anniversary of the initial
Issuance Date, the Corporation shall have the right, at the Corporation’s
option, to redeem all or a portion of the shares of Series B Preferred Stock, at
a price per share of the Series B Preferred Stock equal to the Series B
Liquidation Value (the “Corporation Redemption
Price”).

       

      b.  Mechanics of
Redemption.  If the Corporation elects to redeem any of the
Holders’ Series B Preferred Stock then outstanding, it shall deliver written
notice thereof via facsimile and overnight courier (“Notice of Redemption at
Option of Corporation”) to each Holder, which Notice of Redemption at
Option of Corporation shall indicate (A) the number of shares of Series B
Preferred Stock that the Corporation is electing to redeem and (B) the
Corporation Redemption Price.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      c.  Payment of Redemption
Price.  Upon receipt by any Holder of a Notice of Redemption at
Option of Corporation, such Holder shall promptly submit to the Corporation such
Holder’s Series B Preferred Stock certificates.  Upon receipt of such
Holder’s Series B Preferred Stock certificates, the Corporation shall pay the
Corporation Redemption Price in cash to such Holder. 

       

      7.  Transferability. The
Series B Preferred Stock may only be sold, transferred, assigned, pledged or
otherwise disposed of (“Transfer”) in
accordance with state and federal securities laws.  The Corporation
shall keep at its principal office, or at the offices of the Transfer Agent, a
register of the Series B Preferred Stock.  Upon the surrender of any
certificate representing Series B Preferred Stock at such place, the
Corporation, at the request of the record Holder of such certificate, shall
execute and deliver (at the Corporation’s expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate.  Each such new
certificate shall be registered in such name and shall represent such number of
shares as is requested by the Holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.

       

      8.  Miscellaneous.

       

      a.  Notices.  Any
and all notices to the Corporation shall be addressed to the Corporation’s
President or Chief Executive Officer at the Corporation’s principal place of
business on file with the Secretary of State of the State of
Nevada.  Any and all notices or other communications or deliveries to
be provided by the Corporation to any Holder hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Corporation, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this section prior to 5:30 p.m. Eastern
time, (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this section later than 5:30 p.m. but prior to 11:59 p.m. Eastern
time on such date, (iii) the second business day following the date of mailing,
if sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.

       

      b.  Lost or Mutilated Preferred
Stock Certificate.  Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of Series B Preferred Stock, and in the case
of any such loss, theft or destruction upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the Holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory) or in the case of any such mutilation upon surrender of such
certificate, the Corporation shall, at its expense, execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      c.  Headings.  The
headings contained herein are for convenience only, do not constitute a part of
this Certificate of Designations and shall not be deemed to limit or affect any
of the provisions hereof.

       

      RESOLVED,
FURTHER, that the chairman, chief executive officer, president or any
vice-president, and the secretary or any assistant secretary, of the Corporation
be and they hereby are authorized and directed to prepare and file a Designation
of Preferences, Rights and Limitations of Series B Preferred Stock in accordance
with the foregoing resolution and the provisions of Nevada law.

       

      IN
WITNESS WHEREOF, the undersigned have executed this Certificate this 24th day of
July 2009.

       

      
        
          	By: 	 	 
	Name:	Anthony L. Havens	 
	Title:	President and CEO	 

        

      

       

       

      
        
          	By: 	 	 
	Name:	Sandra L. Ahman	 
	Title:	Vice President and Secretary	 

        

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Exhibit
C

       

      Transfer
Agent Instructions

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

                      [                      ],
2009

      Jersey
Transfer & Trust Co.

      201
Bloomfield Avenue, Suite 26

      Verona,
NJ 07044

      Attn:
Jeffrey Manger

       

      
        	
                Re: 

              	
                Sparta
      Commercial Services, Inc.

              

      

      Request
for Issuance of Ten Common Stock Certificates

      

      Dear
Sirs:

       

      Sparta
Commercial Services, Inc., a Nevada corporation (the “Company”), requests the
issuance of __ common stock certificates, each certificate [bearing a standard
restrictive legend/to be issued without restrictive legend], in the names of the
entities and amounts below as set forth in accordance with the opinion of
[counsel’s name] dated July 24, 2009 (copy enclosed).  Such shares are
part of a number of shares reserved for issuance by the Company pursuant to that
certain Preferred Stock Purchase Agreement between the Company and Optimus
Capital Partners, LLC, a Delaware limited liability company, dba Optimus Special
Situations Capital Partners, LLC (including its designees, successors and
assigns) dated as of July 24, 2009.

       

      
      

       

      
        	Name
      of Stockholder	Number of Shares of Common
      Stock

      

       

       

      All of
the issued certificates are to be delivered to:

      

       

      If you
have any questions, please call me at 212-239-2666.

       

       

      
      

       

      
        	 	

                Yours
      truly,

                 

                 

                

                Sandra
      L. Ahman

                Secretary

              

      

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
      

      [LETTERHEAD
OF HARLEY & DEICKLER LLP]

       

                    July
24, 2009

      

      

      Jersey
Transfer & Trust Co.

      201
Bloomfield Avenue, Suite 26

      Verona,
NJ 07044

      Attn:
Jeffrey Manger

      

        Re:
Sparta Commercial
Services, Inc (the “Company”).

      

      Dear
Sirs:

      

      We are
counsel to the Company, a Nevada corporation.  You have requested our
opinion with respect to the issuance of ____________ shares of the Company’s
Common Stock, par value $.001 per share (the “Shares”) to _______________
pursuant to a [partial] conversion of that certain Warrant dated
_________________, 2009 and issued to ___________________ (the
“Warrant”).

      

      In
connection with this opinion, we have relied upon, among other things,
representations from the officers of the Company concerning the issuance of such
Shares by the Company.  We also have examined the Articles of
Incorporation and By-Laws of the Company and certain documents and actions by
the Board of Directors of the Company as well as the Warrant.

      

      In
rendering this opinion letter, except for the matters that are specifically
addressed in any opinion expressed below, we have assumed (i) the authenticity
of all documents submitted to us as originals or as copies thereof, the
conformity to the originals of all documents submitted to us as copies, the
genuineness of all signatures and the legal capacity of natural persons and (ii)
the necessary adequacy and fairness of any consideration for the
Shares.  Each assumption herein is made and relied upon with your
permission and without independent investigation.

      

      In
rendering this opinion letter, we do not express any opinion concerning any law
other than the laws of the State of Nevada, and the federal securities and other
laws that we deem necessary to our opinion.  We do not express any
opinion herein with respect to any matter not specifically

      addressed
in the opinion expressed below, including without limitation (i) any statute,
regulation or provision of law of any county, municipality or other political
subdivision or any agency or instrumentality thereof or (ii) the securities or
tax laws of any jurisdiction.

      

      On the
basis of the foregoing, we are of the opinion that the Shares may be issued to
_________________; [provided that the certificate representing the Shares bears
a restrictive legend pursuant to Rule 144 of the Securities Act of 1933, as
amended]. [Insert once Warrant Shares are registered or 144 Eligible – “We
confirm that the Shares should not be subject to any stop-transfer restrictions
and shall otherwise be freely transferable on the books and records of the
Company”]
Upon such issuance, the Shares shall be fully paid and
non-assessable.

      

      This
opinion letter is rendered for the sole benefit of each addressee hereof with
respect to the matters specifically addressed herein, and no other person or
entity is entitled to rely hereon. Copies of this opinion letter may not be made
available, and this opinion letter may not be quoted or referred to in any other
document, to any other person or entity without our prior written
consent.

       

       

      
        	 	

                Very
      truly yours,

                HARLEY
      & DEICKLER LLP

                

                By:
      _______________________

              

      

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      Exhibit
D

       

      Lock-Up
Agreement

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      July 24, 2009

       

      Optimus
Special Situations Capital Partners, LLC

      11150
Santa Monica Boulevard, Suite 1500

      Los
Angeles, CA 90025

       

      Ladies
and Gentlemen:

       

      This
Lock-Up Agreement is being delivered to you in connection with the Preferred
Stock Purchase Agreement dated as of July 24, 2009 (“Purchase Agreement”)
and entered into by and among Sparta Commercial Services, Inc., a Nevada
corporation (“Company”) and Optimus
Special Situations Capital Partners, LLC, a Delaware limited liability company
(“Investor”),
with respect to the purchase without registration under the Securities Act of
1933, as amended (the “Act”), in reliance on
Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder, of
shares of the Company’s Series B Preferred Stock and related
Securities.  Capitalized terms used herein without definition shall
have the respective meanings ascribed to them in the Purchase
Agreement.

       

      In order
to induce Investor to enter into the Purchase Agreement, the undersigned agrees
that, for a period of ten Trading Days beginning on each date the Company
delivers a Tranche Notice to Investor (the “Tranche Notice Date”)
and ending on the Tranche Closing Date pursuant to the terms of the Purchase
Agreement (the “Lock-up Period”), the
undersigned will not, without the prior written consent of Investor, (a) sell,
offer to sell, contract or agree to sell, hypothecate, pledge, grant any option
to purchase or otherwise dispose of or agree to dispose of, directly or
indirectly, in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder (the “Exchange Act”) with
respect to, any Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock, or warrants or other rights to purchase Common
Stock or any such securities, or any securities substantially similar to the
Common Stock, (b) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or any such securities, or warrants or other rights to purchase
Common Stock, whether any such transaction is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise or (c) publicly
announce an intention to effect any transaction specified in clause (a) or
(b).

       

      The
foregoing sentence shall not apply to (a) bona fide gifts, provided the
recipient thereof agrees in writing to be bound by the terms of this Lock-Up
Agreement, (b) dispositions to any trust for the direct or indirect benefit of
the undersigned and/or the immediate family of the undersigned, provided that
such trust agrees in writing to be bound by the terms of this Lock-Up Agreement,
(c) sales made pursuant to any written sales plans established prior to the date
of this Lock-Up Agreement in conformity with the requirements of Rule 10b5-1(c)
promulgated under the Exchange Act or (d) exercise of options for Common Stock
and the disposition (whether by sale, gift or otherwise) of Common Stock
underlying such options.  Notwithstanding subsection (a) above,
the undersigned may make a bona fide gift of up to 10,000 shares of Common Stock
to a charity or other non-profit entity and such charity or entity shall not be
required to be bound by the terms of this Lock-Up Agreement; provided, however,
that in the event the undersigned exercises options during the Lock-Up Period,
the undersigned may not, during the Lock-Up Period, dispose of the number of
shares of Common Stock underlying such exercised options equal to the number of
shares of Common Stock gifted by the undersigned pursuant to this sentence
during the Lock-Up Period.  For purposes of this paragraph, “immediate
family” shall mean the undersigned and the spouse, any lineal descendent,
father, mother, brother or sister of the undersigned.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      The
Company agrees to provide the undersigned with notice that the Company has
delivered a Tranche Notice to Investor prior to, or simultaneous with, its
delivery of the Tranche Notice to Investor.  Such notice shall provide
the undersigned with the Tranche Notice Date and clearly indicate the beginning
of the Lock-up Period.

       

      Upon the
termination of the Purchase Agreement, this Lock-Up Agreement shall be
terminated and the undersigned shall be released from its obligations
hereunder.

       

      
      

       

      
        	 	

                Sincerely,

                 

                

                _______________________________

                Stockholder

              

      

       

       

      Acknowledged
and Agreed:

       

      Sparta
Commercial Services, Inc.

       

    

    
      
        	By: 	 	 
	Name:	 	 
	Title:	 	 

      

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      Exhibit
E

       

      Opinion

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        [LETTERHEAD
OF HARLEY & DEICKLER LLP]

      

       

      July 24,
2009

       

      Optimus
Special Situations Capital Partners, LLC

      11150
Santa Monica Boulevard, Suite 1500

      Los
Angeles, CA 90025

       

      Re::
Sparta Commercial
Services, Inc.

      

      Ladies
and Gentlemen:

       

      We are
counsel to Sparta Commercial Services, Inc., a Nevada corporation (“Company”),
in connection with the sale and issuance of (a) up to 500 shares of its Series B
Preferred Stock, par value $0.001 per share (“Preferred Shares”), along with (b)
warrants (the “Warrants”) to purchase shares of the Company’s common stock, par
value $0.001 per share (“Common Stock”), and (c) shares of Common Stock issuable
upon exercise of the Warrants (the “Warrant Shares”), and together with the
Preferred Shares and the Warrants, the “Securities”), to Optimus Special
Situations Capital Partners, LLC, a Delaware limited liability company
(“Investor”), pursuant to the terms of the Preferred Stock Purchase Agreement
dated as of July 24, 2009 (“Agreement”), by and between Company and
Investor.  Capitalized terms not otherwise defined herein have the
meanings set forth in the Agreement.

       

      In
rendering this opinion letter, as to relevant factual matters we have examined:
the Agreement and the forms of Transaction Documents attached as exhibits to the
Agreement. In addition, we have examined the Articles of Incorporation, as
amended, and by-laws of the Company, the resolutions adopted by the Company’s
Board of Directors authorizing the Agreement, the issuance of the Securities,
the Certificate of Designations for the Preferred Shares and such other
documents as we have considered relevant, including, where we have deemed
appropriate, representations or certifications of officers of parties thereto or
public officials.  In rendering this opinion letter, except for the
matters that are specifically addressed in any opinion expressed below, we have
assumed (i) the authenticity of all documents submitted to us as originals or as
copies thereof, the conformity to the originals of all documents submitted to us
as copies, the genuineness of all signatures and the legal capacity of natural
persons, (ii) the enforceability (as limited by bankruptcy and other insolvency
laws) and, with respect thereto and to any other matter herein to which
relevant, any necessary entity power and authority, authorization, execution,
authentication, payment and delivery of, under and with respect to all documents
to which this opinion letter relates, (iii) the necessary ownership of and/or
other rights and interests in assets, and the necessary adequacy and fairness of
any consideration therefor, (iv) the accuracy of and compliance by the parties
thereto with the representations, warranties and covenants as to factual matters
contained in any document, (v) the conformity of the underlying assets and
related documents to the requirements of any agreement to which this opinion
letter relates and (vi) that there is not any other verbal or written agreement
that modifies or supplements the agreements expressed in any document to which
this opinion letter relates in a manner that affects the correctness of any
opinion expressed below.  Each assumption herein is made and relied
upon with your permission and without independent investigation.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      In
rendering this opinion letter, each opinion expressed and assumption relied upon
herein with respect to the enforceability of any right or obligation is subject
to (i) general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance and injunctive relief, regardless of whether considered in
a proceeding in equity or at law, (ii) bankruptcy, insolvency,
receivership, reorganization, liquidation, voidable preference, fraudulent
conveyance and transfer, moratorium and other similar laws affecting the rights
of creditors or secured parties, (iii) the effect of certain laws, regulations
and judicial and other decisions upon (a) the availability and enforceability of
certain remedies, including the remedies of specific performance and self-help,
and provisions purporting to waive the obligation of good faith, materiality,
fair dealing, diligence, reasonableness or objection to judicial jurisdiction,
venue or forum and (b) the enforceability of any provision the violation of
which would not have any material adverse effect on the performance by any party
of its obligations under any agreement and (iv) public policy considerations
underlying United States federal securities laws, to the extent that such public
policy considerations limit the enforceability of any provision of any agreement
which purports or is construed to provide indemnification with respect to
securities law violations.  However, the non-enforceability of any
provisions referred to in foregoing clause (iii) will not, taken as a whole,
materially interfere with the practical realization of the benefits of the
rights and remedies included in any such agreement which is the subject of any
opinion expressed below, except for the consequences of any judicial,
administrative, procedural or other delay which may be imposed by, relate to or
arise from applicable laws, equitable principles and interpretations
thereof.

       

      This
opinion letter is based upon our review of the documents referred to
herein.  We have conducted no independent investigation with respect
to the facts contained in such documents and relied upon in rendering this
opinion letter.  We also note that, other than the Company, we do not
represent any of the parties to the transactions to which this opinion letter
relates or any of their affiliates in connection with matters other than certain
transactions.  However, the attorneys in this firm who are directly
involved in the representation of parties to the transactions to which this
opinion letter relates have no actual present knowledge of the inaccuracy of any
fact relied upon in rendering this opinion letter.  In addition, if we
indicate herein that any opinion is based on our knowledge, our opinion is based
solely on the actual present knowledge of such attorneys.

       

      In
rendering this opinion letter, we do not express any opinion concerning any law
other than the laws of the State of New York, the federal laws of the United
States and Title 7, Chapter 78, of the Nevada Revised Statutes.  Any
opinion expressed below to the effect that any agreement is valid, binding and
enforceable relates only to an agreement that designates therein the laws of the
State of New York as the governing law thereof.  We do not express any
opinion herein with respect to any matter not specifically addressed in the
opinions expressed below, including without limitation (i) any statute,
regulation or provision of law of any county, municipality or other political
subdivision or any agency or instrumentality thereof or (ii) the securities or
tax laws of any jurisdiction.  We express no opinion with respect to
(i) any provision of the Agreements to the extent such provision purports to
prohibit a party from pledging, transferring or granting a security interest in
or to any rights granted to a party under any of the Agreements, or (ii) any
provision of any agreement which purports to grant a pledge or security interest
in any rights in or to any other agreement which by its terms restricts a
party’s ability to pledge, transfer or grant a security interest in such
rights.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      Based
upon and subject to the foregoing, it is our opinion that:

       

      1.  Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Nevada.

      

      2.  The
Securities are duly authorized, the Preferred Shares and Warrants are, and when
issued in accordance with the terms and conditions of the Agreement the Warrant
Shares will be, validly issued, fully paid and non-assessable.  The
issuance of the Securities will not be subject to any statutory or contractual
preemptive rights of any stockholder of the Company.

      

      3.  Company
has the corporate power and authority to (a) execute, deliver and perform all of
its obligations under the Agreement and the Transaction Documents, and (b)
issue, sell and deliver each of the Securities.

      

      4.  The
execution, delivery and performance of the Agreement and the Transaction
Documents have been duly authorized by all necessary corporate action on the
part of Company, and have been duly executed and delivered by
Company.

      

      5.  The
execution and delivery of the Transaction Documents by Company does not, and
Company’s performance of its obligations thereunder will not (a) violate the
Articles of Incorporation or by-laws of Company, as in effect on the date
hereof, (b) violate in any material respect any federal or state law, rule or
regulation, or judgment, order or decree of any state or federal court or
governmental or administrative authority, in each case that, to our knowledge,
is applicable to Company or its properties or assets and which could have a
material adverse effect on Company’s business, properties, assets, financial
condition or results of operations or prevent the performance by Company of any
material obligation under the Agreement, or (c) require the authorization,
consent, approval of or other action of, notice to or filing or qualification
with, any state or federal governmental authority, except as have been, or will
be, made or obtained.

      

      6.  The
execution, delivery and performance of the Stock Loan Agreements, the
consummation of the transactions contemplated by the Stock Loan Agreements, the
borrowing and receipt of the Borrowed Shares, and any subsequent sale of any of
the Borrowed Shares as permitted by the Stock Loan Agreements do not and will
not conflict with or result in a violation of Section 5 of the Securities Act of
1933, as amended, including the rules and regulations promulgated
thereunder.

      

      The
opinion set forth in paragraph 1 has been issued, with your consent, entirely in
reliance upon the Certificate of Good Standing of the Company issued by the
Secretary of State of Nevada on July 14, 2009 and the certified copy of the
Articles of  Incorporation of the Company issued by the Secretary of
State of Nevada on July __, 2009, copies of which are attached hereto as Exhibit A and Exhibit B,
respectively.

      

      The
opinion set forth in paragraph 6 has been issued, with your consent, entirely in
reliance upon the representations and warranties of the parties to the Stock
Loan Agreements and the assumption that the parties thereto strictly shall
comply with the terms and conditions of the Stock Loan Agreements.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      This
opinion letter is rendered for your benefit with respect to the matters
specifically addressed herein, and no other person or entity is entitled to rely
hereon. Copies of this opinion letter may not be made available, and this
opinion letter may not be quoted or referred to in any other document made
available, to any other person or entity except (i) to any applicable rating
agency, institution providing credit enhancement or liquidity support, or
governmental authority including without limitation the Securities and Exchange
Commission in filings made in connection with the Transaction Documents, (ii) to
any accountant or attorney for any person or entity entitled hereunder to rely
hereon or to whom or which this opinion letter may be made available as provided
herein, (iii) to any and all persons, without limitation, in connection with the
disclosure of the tax treatment and tax structure of the transaction to which
this opinion letter relates, (iv) in order to comply with any subpoena, order,
regulation, ruling or request of any judicial, administrative, governmental,
supervisory or legislative body or committee or any self-regulatory body
(including any securities or commodities exchange or the Financial Industry
Regulatory Authority, Inc.) and (v) as otherwise required by law; provided that
none of the foregoing is entitled to rely hereon unless an addressee
hereof.  We assume no obligation to revise, supplement or withdraw
this opinion letter, or otherwise inform any addressee hereof, or other person
or entity, with respect to any change occurring subsequent to the delivery
hereof in any applicable fact or law or any judicial or administrative
interpretation thereof, even though such change may affect a legal analysis or
conclusion contained herein.  In addition, no attorney-client
relationship exists or has existed by reason of this opinion letter between our
firm and you or any other person or entity

       

      
        	 	Very truly yours,
      

                 

                HARLEY
      & DEICKLER LLP

                

                By:_______________________

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      Exhibit
F

       

      Tranche
Notice

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Dated:
[________],
20[__]

       

      

      Optimus
Special Situations Capital Partners, LLC

      11150
Santa Monica Boulevard, Suite 1500

      Los
Angeles, CA 90025

       

      Re:  Tranche
Notice

       

      Ladies
& Gentlemen:

       

      Pursuant
to the July 24, 2009 Preferred Stock Purchase Agreement (“Agreement”) between
Sparta Commercial Services, Inc., a Nevada corporation (“Company”), and
Optimus Special Situations Capital Partners, LLC (“Investor”), Company
hereby elects to exercise a Tranche.  Capitalized terms not otherwise
defined herein shall have the meanings defined in the Agreement.

       

      At the
Tranche Closing, Company will sell to Investor [___________] Preferred
Shares at $10,000.00 per share for a Tranche
Amount of $[___________].

       

      On behalf
of Company, the undersigned hereby certifies to Investor as
follows:

       

      1.  The
undersigned is a duly authorized officer of Company;

       

      2.  The
above Tranche Amount does not exceed the Maximum Tranche Amount;
and

       

      3.  All
of the conditions precedent to the right of the Company to deliver a Tranche
Notice set forth in Section 2.3(d) of the
Agreement have been satisfied.

       

      IN
WITNESS WHEREOF, the Company has executed and delivered this Tranche Notice as
of the date first written above.

       

       

      
        	
              	SPARTA COMMERCIAL
      SERVICES, INC.
	 	 	 
	 	By: 	 
	 	Name:	 
	 	Title:	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Exhibit
G

       

      Stock
Loan Agreement

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      STOCK LOAN
AGREEMENT

       

      This
Stock Loan Agreement (“Agreement”) is
entered into and effective as of __________, 2009
(“Effective
Date”), by and between the undersigned stockholder (“Lending Stockholder”) of
Sparta Commercial Services, Inc. a Nevada corporation (“Company”), and
Optimus Capital Partners, LLC, a Delaware limited liability company, dba Optimus
Special Situations Capital Partners, LLC (including its designees, successors
and assigns, “Borrower”).

       

      RECITALS

       

      A
..  Lending Stockholder holds shares of common stock of
Company.  In light of Lending Stockholder’s substantial equity
interest in Company, it is in the best interests of Lending Stockholder to
execute this Agreement, inasmuch as Lending Stockholder will derive substantial
direct and indirect benefits from the commitment made to Company pursuant to a
Preferred Stock Purchase Agreement to be entered into between Borrower and
Company as of the Effective Date (the “Purchase
Agreement”).

       

      B.  As
a condition to Borrower entering into the Purchase Agreement, Lending
Stockholder desires to enter into this Agreement and, in order to assist in
protecting the value of its investment in Company, desires to induce Borrower to
enter into the Purchase Agreement.

       

      C.  Borrower
desires to borrow and, as a material inducement to Borrower to enter into the
Purchase Agreement, Stockholder desires to lend shares of common stock of
Company to Borrower on the terms and conditions contained herein.

       

      AGREEMENT

       

      NOW,
THEREFORE, IN CONSIDERATION of the premises, the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, Lending Stockholder and Borrower
agree as follows:

       

      1.  Borrowed
Shares.  Stockholder hereby lends to Borrower __________ shares
(“Borrowed
Shares”) of freely tradable common stock, par value $0.001, of
Company.  The Borrowed Shares will be issued in original certificated
form bearing no restrictive legend, and will be accompanied by stock powers
executed in blank with a medallion signature guarantee.  At any time
or from time to time after receipt, Borrower may sell, transfer, assign,
encumber or otherwise dispose of the Borrowed Shares in any manner, at any time,
and for any consideration, in Borrower’s sole discretion; provided, however, that
Borrower shall not vote any Borrowed Shares on any matter.

       

      2.  Fee.  Borrower
shall pay to Lending Stockholder a fee of $1,000.00 in cash or by wire transfer
of immediately available funds.

       

      3.  Interest.  Unless
and until all Borrowed Shares are returned to Lending Stockholder as provided
below, outstanding Borrowed Shares will accrue interest at One Percent (1.0%)
per annum, with the Borrowed Shares valued at the volume weighted average price
(VWAP), calculated based upon the ratio of the aggregate value of the common
stock of Company traded on the Trading Market (as defined in the Purchase
Agreement) to the total volume of such stock traded on such market for such date
(or the nearest preceding date), for the 5 trading days immediately preceding
the Effective Date.  Interest is payable if, as and when Borrowed
Shares are returned to Lending Stockholder, in cash or at Borrower’s sole
election in freely tradable shares of common stock of the Company.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      4.  Return.  The Borrowed
Shares, or an equal number of freely tradable shares of common stock of the
Company, shall be returned to Lending Stockholder three trading days after the
earlier of the date that (i) a registration statement allowing the lawful resale
without restriction of all shares of common stock of the Company held by or on
behalf of, or issuable upon the exercise of warrants held by, Borrower is
declared effective by the U.S. Securities and Exchange Commission, and, to the
extent any of the warrants are exercised, all such shares are issued to a DWAC
account with DTC specified by Borrower, (ii) all shares of common stock of the
Company held by or on behalf of, or issuable on the exercise of warrants held
by, Borrower may be resold without restriction in accordance with Rule 144 under
the Act,  and, to the extent any of the warrants are exercised, all
such shares are issued to a DWAC account with DTC specified by Borrower, or
(iii) is the one (1) year anniversary of the Effective Date.

       

      5.  Pre-payment.  Borrower may
return the Borrowed Shares to the Lending Stockholder, in whole or in part, at
any time or from time to time, without penalty or premium.

       

      6.  Representations
and Warranties.  Lending Stockholder hereby represents,
warrants and covenants to Borrower as follows:

       

      a)  Lending
Stockholder has all necessary power and authority to (a) execute, deliver and
perform all of its obligations under this Agreement, and (b) lend and deliver
the Borrowed Shares.  Lending Stockholder has such knowledge and
experience in business and financial matters that it is able to protect its own
interests and evaluate the risks and benefits of entering into this
Agreement.

       

      b)  The execution,
delivery and performance of this Agreement by Lending Stockholder has been duly
authorized by all requisite action on the part of Lending Stockholder, and has
been duly executed and delivered by Lending Stockholder.

       

      c)  The execution
and delivery by the Lending Stockholder of this Agreement does not, and Lending
Stockholder’s performance of its obligations thereunder will not (i) violate any
charter documents of Lending Stockholder, as in effect on the date hereof, (ii)
require any authorization, consent, approval of or other action of, notice to or
filing or qualification with any state or federal governmental authority, except
as have been, or will be, made or obtained prior to execution hereof, (iii)
violate in any material respect any state or federal law, rule, regulation or
ordinance or any judgment, order or decree of any state or federal court or
governmental or administrative authority to which Lending Stockholder or to
Lending Stockholder’s knowledge Borrower or any other person, is subject,
including without limitation Section 5 of the Securities Act of 1933, as
amended, and other federal and state securities laws and
regulations.

       

      d)  Lending
Stockholder is not, and within 90 days of the Effective Date has not been, (i)
an officer, director, representative or affiliate of Company, (ii) directly or
indirectly, through one or more intermediaries, in control of, controlled by, or
under common control with Company, or (iii) alone or together with any group, in
beneficial ownership or control of more than 9.99% of the total outstanding
voting securities of the Company.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      e)  Except as
expressly stated herein, Lending Stockholder is not, directly or indirectly,
receiving any consideration from or being compensated in any manner by, and will
not at any time in the future accept any consideration or compensation from,
Company, any affiliate of Company, or any other person for entering into this
Agreement or lending the Borrowed Shares.

       

      7.  Fees and
Expenses.  Each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.

       

      8.  Notices.  Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified on the signature
page prior to 5:30 p.m. Eastern time on a business day and an electronic
confirmation of delivery is received by the sender, (b) the next business day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section 8 on a
day that is not a business day or later than 5:30 p.m. Eastern time on any
business day, (c) three business days following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given.  The
addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such person.

       

      9.  Construction.  The headings
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

       

      10.  Successors
and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted
assigns.

       

      11.  No
Third-Party Beneficiaries.  This Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.

       

      12.  Governing
Law.  All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof.  Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by
law.  The parties hereby waive all rights to a trial by
jury.  If either party shall commence an action or proceeding to
enforce any provisions of this Agreement, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      13.  Survival.  The
representations and warranties contained herein shall survive the closing of the
transactions contemplated herein and the delivery of the Borrowed
Shares.

       

      14.  Execution.  This Agreement
may be executed in two or more counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

       

      15.  Severability.  If any provision
of this Agreement is held to be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

       

      16.  Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Borrower or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.  No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      17.  Activity
Restrictions.  Until after the
Borrower has returned all Borrowed Shares to the Lending Stockholder, neither
Borrower nor its affiliates will:  (i) vote any shares of common stock
of the Company owned or controlled by it, solicit any proxies, or seek to advise
or influence any person with respect to any voting securities of the Company;
(ii) engage or participate in any actions, plans or proposals which relate to or
would result in (a) acquiring additional securities of the Company, alone or
together with any other person, which would result in beneficially owning or
controlling more than 9.99% of the total outstanding common stock or other
voting securities of the Company, (b) an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving Company or any of its
subsidiaries, (c) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries, (d) any change in the present board of
directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board, (e) any material change in the present capitalization or dividend policy
of the Company, (f) any other material change in the Company’s business or
corporate structure, including but not limited to, if the Company is a
registered closed-end investment company, any plans or proposals to make any
changes in its investment policy for which a vote is required by Section 13 of
the Investment Company Act of 1940, (g) changes in the Company’s charter, bylaws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person, (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association, (i) a class of equity securities of
the Company becoming eligible for termination of registration
pursuant  to Section 12(g)(4) of the Act, or (j) any action,
intention, plan or arrangement similar to any of those enumerated above; or
(iii) request the Lending Stockholder to amend or waive any provision of this
Section 17.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      18.  Entire
Agreement.  This Agreement contains the entire agreement and
understanding of the parties, and supersedes all prior and contemporaneous
agreements, understandings, communications and discussions, both oral and
written.  No party, representative, attorney or agent has relied upon
any collateral contract, agreement, assurance, promise, understanding or
representation not expressly set forth herein above.  The parties
hereby waive all rights and remedies, at law and in equity, arising out of,
relating to, or which may arise as the result of, any person’s
reliance on any such assurance.  The parties acknowledge that all
prior agreements have been merged into this Agreement.

       

      IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

       

      Lending
Stockholder:

       

      
        	Name:	 	 
	 	 	 
	By:	 	 
	 	 	 
	Its	 	 

      

       

      
        	
              	

                Borrower:

                

                OPTIMUS
      SPECIAL SITUATIONS CAPITAL PARTNERS, LLC

              
	 	 	 
	 	By: 	 
	 	 	 
	 	Its:	 

      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      Addresses
for Notice

       

       

       

       

      
        
          	To
  Stockholder:
	 
	Name:	 	 
	 	 	 
	Address:	 	 
	 	 	 
	 	 	 
	 	 	 
	Fax No.:	 	 
	 	 	 
	Email:	 	 
	 	 	 
	with a
      copy to:	 
	 	 	 
	

                  Name:

                	 	 
	 	 	 
	Address:	 	 
	 	 	 
	 	 	 
	 	 	 
	Fax No.:	 	 
	 	 	 
	Email:	 	 

        

         

      

      
        	 	

                To
      Borrower:

                 

                Optimus
      Special Situations Capital Partners, LLC

                11150
      Santa Monica Boulevard, Suite 1500

                Los
      Angeles, CA 90025

                Attention:  Terry
      Peizer

                Fax
      No.:  (310) 444-5300

                Email:  info@optimuscg.com

                 

                with
      a copy to:

                

                Luce
      Forward Hamilton & Scripps LLP

                601
      South Figueroa Street, Suite 3900

                Los
      Angeles, CA 90017

                Attention:  John
      C. Kirkland, Esq.

                Fax
      No.:  (213) 452-8035

                Email:  jkirkland@luce.com

              

      

       

      
        
          
          

        

        
          7

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