Document:

Exhibit 10.11

    
      

    

    SECURITY
      AGREEMENT

     

    SECURITY
      AGREEMENT (this “Agreement”),
      dated
      as of June 30, 2006, by and among Shearson Financial Network, Inc., a Nevada
      corporation (“Company”),
      and
      the secured parties signatory hereto and their respective endorsees, transferees
      and assigns (collectively, the “Secured
      Party”).
      

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      pursuant to a Securities Purchase Agreement, dated the date hereof, between
      Company and the Secured Party (the “Purchase
      Agreement”),
      Company has agreed to issue to the Secured Party and the Secured Party has
      agreed to purchase from Company certain of Company’s 6% Callable Secured
      Convertible Notes, due three years from the date of issue (the “Notes”),
      which
      are convertible into shares of Company’s Common Stock, par value $.001 per share
      (the “Common
      Stock”).
      In
      connection therewith, Company shall issue the Secured Party certain Common
      Stock
      purchase warrants (the “Warrants”);
      and

     

    WHEREAS,
      in order to induce the Secured Party to purchase the Notes, Company has agreed
      to execute and deliver to the Secured Party this Agreement for the benefit
      of
      the Secured Party and to grant to it a first priority security interest in
      certain property of Company to secure the prompt payment, performance and
      discharge in full of all of Company’s obligations under the Notes and exercise
      and discharge in full of Company’s obligations under the Warrants.

     

    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

     

    1.    
Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “general
      intangibles”
and
      “proceeds”)
      shall
      have the respective meanings given such terms in Article 9 of the
      UCC.

     

    (a)    “Collateral”
means
      the collateral in which the Secured Party is granted a security interest by
      this
      Agreement and which shall include the following, whether presently owned or
      existing or hereafter acquired or coming into existence, and all additions
      and
      accessions thereto and all substitutions and replacements thereof, and all
      proceeds, products and accounts thereof, including, without limitation, all
      proceeds from the sale or transfer of the Collateral and of insurance covering
      the same and of any tort claims in connection therewith:

     

    (i)    All
      Goods
      of the Company, including, without limitations, all machinery, equipment,
      computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture,
      special and general tools, fixtures, test and quality control devices and other
      equipment of every kind and nature and wherever situated, together with all
      documents of title and documents representing the same, all additions and
      accessions thereto, replacements therefor, all parts therefor, and all
      substitutes for any of the foregoing and all other items used and useful in
      connection with the Company’s businesses and all improvements thereto
      (collectively, the “Equipment”);
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii)   All
      Inventory of the Company; and

     

    (iii)   
        All
      of
      the Company’s contract rights and general intangibles, including, without
      limitation, all partnership interests, stock or other securities, licenses,
      distribution and other agreements, computer software development rights, leases,
      franchises, customer lists, quality control procedures, grants and rights,
      goodwill, trademarks, service marks, trade styles, trade names, patents, patent
      applications, copyrights, deposit accounts, and income tax refunds
      (collectively, the “General
      Intangibles”);
      and

     

    (iv)  
         All
      Receivables of the Company including all insurance proceeds, and rights to
      refunds or indemnification whatsoever owing, together with all instruments,
      all
      documents of title representing any of the foregoing, all rights in any
      merchandising, goods, equipment, motor vehicles and trucks which any of the
      same
      may represent, and all right, title, security and guaranties with respect to
      each Receivable, including any right of stoppage in transit; and

     

    (v)   
         All
      of
      the Company’s documents, instruments and chattel paper, files, records, books of
      account, business papers, computer programs and the products and proceeds of
      all
      of the foregoing Collateral set forth in clauses (i)-(iv) above.

     

    (b)    “Company”
shall
      mean, collectively, Company and all of the subsidiaries of Company, a list
      of
      which is contained in Schedule
      A,
      attached hereto.

     

    (c)    “Obligations”
means
      all of the Company’s obligations under this Agreement and the Notes, in each
      case, whether now or hereafter existing, voluntary or involuntary, direct or
      indirect, absolute or contingent, liquidated or unliquidated, whether or not
      jointly owed with others, and whether or not from time to time decreased or
      extinguished and later decreased, created or incurred, and all or any portion
      of
      such obligations or liabilities that are paid, to the extent all or any part
      of
      such payment is avoided or recovered directly or indirectly from the Secured
      Party as a preference, fraudulent transfer or otherwise as such obligations
      may
      be amended, supplemented, converted, extended or modified from time to
      time.

     

    (d)    “UCC”
means
      the Uniform Commercial Code, as currently in effect in the State of New
      York.

     

    2.    
Grant
      of Security Interest.
      As an
      inducement for the Secured Party to purchase the Notes and to secure the
      complete and timely payment, performance and discharge in full, as the case
      may
      be, of all of the Obligations, the Company hereby, unconditionally and
      irrevocably, pledges, grants and hypothecates to the Secured Party, a continuing
      security interest in, a continuing first lien upon, an unqualified right to
      possession and disposition of and a right of set-off against, in each case
      to
      the fullest extent permitted by law, all of the Company’s right, title and
      interest of whatsoever kind and nature in and to the Collateral (the
“Security
      Interest”).

     

    
      
        
        

      

      
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    3.    
Representations,
      Warranties, Covenants and Agreements of the Company.
      The
      Company represents and warrants to, and covenants and agrees with, the Secured
      Party as follows: 

     

    (a)    The
      Company has the requisite corporate power and authority to enter into this
      Agreement and otherwise to carry out its obligations thereunder. The execution,
      delivery and performance by the Company of this Agreement and the filings
      contemplated therein have been duly authorized by all necessary action on the
      part of the Company and no further action is required by the Company. This
      Agreement constitutes a legal, valid and binding obligation of the Company
      enforceable in accordance with its terms, except as enforceability may be
      limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
      affecting the enforcement of creditor’s rights generally.

     

    (b)    The
      Company represents and warrants that it has no place of business or offices
      where its respective books of account and records are kept (other than
      temporarily at the offices of its attorneys or accountants) or places where
      Collateral is stored or located, except as set forth on Schedule
      A
      attached
      hereto;

     

    (c)    The
      Company is the sole owner of the Collateral (except for non-exclusive licenses
      granted by the Company in the ordinary course of business), free and clear
      of
      any liens, security interests, encumbrances, rights or claims, and is fully
      authorized to grant the Security Interest in and to pledge the Collateral,
      except as set forth on Schedule
      C.
      There
      is not on file in any governmental or regulatory authority, agency or recording
      office an effective financing statement, security agreement, license or transfer
      or any notice of any of the foregoing (other than those that have been filed
      in
      favor of the Secured Party pursuant to this Agreement) covering or affecting
      any
      of the Collateral, except as set forth on Schedule
      C.
      So long
      as this Agreement shall be in effect, the Company shall not execute and shall
      not knowingly permit to be on file in any such office or agency any such
      financing statement or other document or instrument (except to the extent filed
      or recorded in favor of the Secured Party pursuant to the terms of this
      Agreement), except as set forth on Schedule
      C.

     

    (d)    No
      part
      of the Collateral has been judged invalid or unenforceable. No written claim
      has
      been received that any Collateral or the Company’s use of any Collateral
      violates the rights of any third party. There has been no adverse decision
      to
      the Company’s claim of ownership rights in or exclusive rights to use the
      Collateral in any jurisdiction or to the Company’s right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of the Company, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority. 

     

    (e)    The
      Company shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Party at least 30 days prior to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements and other necessary documents have been filed
      and recorded and other steps have been taken to perfect the Security Interest
      to
      create in favor of the Secured Party valid, perfected and continuing first
      priority liens in the Collateral. 

     

    
      
        
        

      

      
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    (f)    
This
      Agreement creates in favor of the Secured Party a valid security interest in
      the
      Collateral securing the payment and performance of the Obligations and, upon
      making the filings described in the immediately following sentence, a perfected
      first priority security interest in such Collateral. Except for the filing
      of
      financing statements on Form-1 under the UCC with the jurisdictions indicated
      on
Schedule
      B,
      attached hereto, no authorization or approval of or filing with or notice to
      any
      governmental authority or regulatory body is required either (i) for
      the grant by the Company of, or the effectiveness of, the Security Interest
      granted hereby or for the execution, delivery and performance of this Agreement
      by the Company or (ii) for
      the perfection of or exercise by the Secured Party of its rights and remedies
      hereunder. 

     

    (g)    On
      the
      date of execution of this Agreement, the Company will deliver to the Secured
      Party one or more executed UCC financing statements on Form-1 with respect
      to
      the Security Interest for filing with the jurisdictions indicated on
Schedule
      B,
      attached hereto and in such other jurisdictions as may be requested by the
      Secured Party.

     

    (h)    Except
      as
      set forth on Schedule
      C,
      the
      execution, delivery and performance of this Agreement does not conflict with
      or
      cause a breach or default, or an event that with or without the passage of
      time
      or notice, shall constitute a breach or default, under any agreement to which
      the Company is a party or by which the Company is bound. No consent (including,
      without limitation, from stock holders or creditors of the Company) is required
      for the Company to enter into and perform its obligations
      hereunder.

     

    (i)    
The
      Company shall at all times maintain the liens and Security Interest provided
      for
      hereunder as valid and perfected first priority liens and security interests
      in
      the Collateral in favor of the Secured Party until this Agreement and the
      Security Interest hereunder shall terminate pursuant to Section 11. The Company
      hereby agrees to defend the same against any and all persons. The Company shall
      safeguard and protect all Collateral for the account of the Secured Party.
      At
      the request of the Secured Party, the Company will sign and deliver to the
      Secured Party at any time or from time to time one or more financing statements
      pursuant to the UCC (or any other applicable statute) in form reasonably
      satisfactory to the Secured Party and will pay the cost of filing the same
      in
      all public offices wherever filing is, or is deemed by the Secured Party to
      be,
      necessary or desirable to effect the rights and obligations provided for herein.
      Without limiting the generality of the foregoing, the Company shall pay all
      fees, taxes and other amounts necessary to maintain the Collateral and the
      Security Interest hereunder, and the Company shall obtain and furnish to the
      Secured Party from time to time, upon demand, such releases and/or
      subordinations of claims and liens which may be required to maintain the
      priority of the Security Interest hereunder. 

     

    (j)    
The
      Company will not transfer, pledge, hypothecate, encumber, license (except for
      non-exclusive licenses granted and sales made by the Company in the ordinary
      course of business), sell or otherwise dispose of any of the Collateral without
      the prior written consent of the Secured Party.

     

    
      
        
        

      

      
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    (k)    The
      Company shall keep and preserve its Equipment, Inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

     

    (l)    
The
      Company shall, within ten (10) days of obtaining knowledge thereof, advise
      the
      Secured Party promptly, in sufficient detail, of any substantial change in
      the
      Collateral, and of the occurrence of any event which would have a material
      adverse effect on the value of the Collateral or on the Secured Party’s security
      interest therein.

     

    (m)       The
      Company shall promptly execute and deliver to the Secured Party such further
      deeds, mortgages, assignments, security agreements, financing statements or
      other instruments, documents, certificates and assurances and take such further
      action as the Secured Party may from time to time request and may in its sole
      discretion deem necessary to perfect, protect or enforce its security interest
      in the Collateral including, without limitation, the execution and delivery
      of a
      separate security agreement with respect to the Company’s intellectual property
      (“Intellectual
      Property Security Agreement”)
      in
      which the Secured Party has been granted a security interest hereunder,
      substantially in a form acceptable to the Secured Party, which Intellectual
      Property Security Agreement, other than as stated therein, shall be subject
      to
      all of the terms and conditions hereof.

     

    (n)    The
      Company shall permit the Secured Party and its representatives and agents to
      inspect the Collateral at any time, and to make copies of records pertaining
      to
      the Collateral as may be requested by the Secured Party from time to
      time.

     

    (o)    The
      Company will take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

     

    (p)    The
      Company shall promptly notify the Secured Party in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by the
      Company that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Party hereunder.

     

    (q)    All
      information heretofore, herein or hereafter supplied to the Secured Party by
      or
      on behalf of the Company with respect to the Collateral is accurate and complete
      in all material respects as of the date furnished.

     

    (r)    
Schedule
      A
      attached
      hereto contains a list of all of the subsidiaries of Company.

     

    4.    
Defaults.
      The
      following events shall be “Events
      of Default”:

     

    (a)    The
      occurrence of an Event of Default (as defined in the Notes) under the
      Notes;

     

    
      
        
        

      

      
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    (b)    Any
      representation or warranty of the Company in this Agreement or in the
      Intellectual Property Security Agreement shall prove to have been incorrect
      in
      any material respect when made; 

     

    (c)    The
      failure by the Company to observe or perform any of its obligations hereunder
      or
      in the Intellectual Property Security Agreement for ten (10) days after receipt
      by the Company of notice of such failure from the Secured Party;
      and

     

    (d)    Any
      breach of, or default under, the Warrants.

     

    5.    
Duty
      To Hold In Trust.
      Upon
      the occurrence of any Event of Default and at any time thereafter, the Company
      shall, upon receipt by it of any revenue, income or other sums subject to the
      Security Interest, whether payable pursuant to the Notes or otherwise, or of
      any
      check, draft, note, trade acceptance or other instrument evidencing an
      obligation to pay any such sum, hold the same in trust for the Secured Party
      and
      shall forthwith endorse and transfer any such sums or instruments, or both,
      to
      the Secured Party for application to the satisfaction of the
      Obligations.

     

    6.    
Rights
      and Remedies Upon Default.
      Upon
      occurrence of any Event of Default and at any time thereafter, the Secured
      Party
      shall have the right to exercise all of the remedies conferred hereunder and
      under the Notes, and the Secured Party shall have all the rights and remedies
      of
      a secured party under the UCC and/or any other applicable law (including the
      Uniform Commercial Code of any jurisdiction in which any Collateral is then
      located). Without limitation, the Secured Party shall have the following rights
      and powers:

     

    (a)    The
      Secured Party shall have the right to take possession of the Collateral and,
      for
      that purpose, enter, with the aid and assistance of any person, any premises
      where the Collateral, or any part thereof, is or may be placed and remove the
      same, and the Company shall assemble the Collateral and make it available to
      the
      Secured Party at places which the Secured Party shall reasonably select, whether
      at the Company’s premises or elsewhere, and make available to the Secured Party,
      without rent, all of the Company’s respective premises and facilities for the
      purpose of the Secured Party taking possession of, removing or putting the
      Collateral in saleable or disposable form.

     

    (b)    The
      Secured Party shall have the right to operate the business of the Company using
      the Collateral and shall have the right to assign, sell, lease or otherwise
      dispose of and deliver all or any part of the Collateral, at public or private
      sale or otherwise, either with or without special conditions or stipulations,
      for cash or on credit or for future delivery, in such parcel or parcels and
      at
      such time or times and at such place or places, and upon such terms and
      conditions as the Secured Party may deem commercially reasonable, all without
      (except as shall be required by applicable statute and cannot be waived)
      advertisement or demand upon or notice to the Company or right of redemption
      of
      the Company, which are hereby expressly waived. Upon each such sale, lease,
      assignment or other transfer of Collateral, the Secured Party may, unless
      prohibited by applicable law which cannot be waived, purchase all or any part
      of
      the Collateral being sold, free from and discharged of all trusts, claims,
      right
      of redemption and equities of the Company, which are hereby waived and
      released.

     

    
      
        
        

      

      
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    7.    
Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder shall be applied first, to the expenses of retaking, holding, storing,
      processing and preparing for sale, selling, and the like (including, without
      limitation, any taxes, fees and other costs incurred in connection therewith)
      of
      the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
      Secured Party in enforcing its rights hereunder and in connection with
      collecting, storing and disposing of the Collateral, and then to satisfaction
      of
      the Obligations, and to the payment of any other amounts required by applicable
      law, after which the Secured Party shall pay to the Company any surplus
      proceeds. If, upon the sale, license or other disposition of the Collateral,
      the
      proceeds thereof are insufficient to pay all amounts to which the Secured Party
      is legally entitled, the Company will be liable for the deficiency, together
      with interest thereon, at the rate of 15% per annum (the “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Secured Party to collect
      such deficiency. To the extent permitted by applicable law, the Company waives
      all claims, damages and demands against the Secured Party arising out of the
      repossession, removal, retention or sale of the Collateral, unless due to the
      gross negligence or willful misconduct of the Secured Party.

     

    8.    
Costs
      and Expenses. The
      Company agrees to pay all out-of-pocket fees, costs and expenses incurred in
      connection with any filing required hereunder, including without limitation,
      any
      financing statements, continuation statements, partial releases and/or
      termination statements related thereto or any expenses of any searches
      reasonably required by the Secured Party. The Company shall also pay all other
      claims and charges which in the reasonable opinion of the Secured Party might
      prejudice, imperil or otherwise affect the Collateral or the Security Interest
      therein. The Company will also, upon demand, pay to the Secured Party the amount
      of any and all reasonable expenses, including the reasonable fees and expenses
      of its counsel and of any experts and agents, which the Secured Party may incur
      in connection with (i) the
      enforcement of this Agreement, (ii) the
      custody or preservation of, or the sale of, collection from, or other
      realization upon, any of the Collateral, or (iii) the
      exercise or enforcement of any of the rights of the Secured Party under the
      Notes. Until so paid, any fees payable hereunder shall be added to the principal
      amount of the Notes and shall bear interest at the Default Rate.

     

    9.    
Responsibility
      for Collateral.
      The
      Company assumes all liabilities and responsibility in connection with all
      Collateral, and the obligations of the Company hereunder or under the Notes
      and
      the Warrants shall in no way be affected or diminished by reason of the loss,
      destruction, damage or theft of any of the Collateral or its unavailability
      for
      any reason. 

     

    
      
        
        

      

      
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    10.       Security
      Interest Absolute.
      All
      rights of the Secured Party and all Obligations of the Company hereunder, shall
      be absolute and unconditional, irrespective of: (a) any
      lack of validity or enforceability of this Agreement, the Notes, the Warrants
      or
      any agreement entered into in connection with the foregoing, or any portion
      hereof or thereof; (b) any
      change in the time, manner or place of payment or performance of, or in any
      other term of, all or any of the Obligations, or any other amendment or waiver
      of or any consent to any departure from the Notes, the Warrants or any other
      agreement entered into in connection with the foregoing; (c) 
      any exchange, release or nonperfection of any of the Collateral, or any release
      or amendment or waiver of or consent to departure from any other collateral
      for,
      or any guaranty, or any other security, for all or any of the Obligations;
      (d) any
      action by the Secured Party to obtain, adjust, settle and cancel in its sole
      discretion any insurance claims or matters made or arising in connection with
      the Collateral; or (e) any
      other circumstance which might otherwise constitute any legal or equitable
      defense available to the Company, or a discharge of all or any part of the
      Security Interest granted hereby. Until the Obligations shall have been paid
      and
      performed in full, the rights of the Secured Party shall continue even if the
      Obligations are barred for any reason, including, without limitation, the
      running of the statute of limitations or bankruptcy. The Company expressly
      waives presentment, protest, notice of protest, demand, notice of nonpayment
      and
      demand for performance. In the event that at any time any transfer of any
      Collateral or any payment received by the Secured Party hereunder shall be
      deemed by final order of a court of competent jurisdiction to have been a
      voidable preference or fraudulent conveyance under the bankruptcy or insolvency
      laws of the United States, or shall be deemed to be otherwise due to any party
      other than the Secured Party, then, in any such event, the Company’s obligations
      hereunder shall survive cancellation of this Agreement, and shall not be
      discharged or satisfied by any prior payment thereof and/or cancellation of
      this
      Agreement, but shall remain a valid and binding obligation enforceable in
      accordance with the terms and provisions hereof. The Company waives all right
      to
      require the Secured Party to proceed against any other person or to apply any
      Collateral which the Secured Party may hold at any time, or to marshal assets,
      or to pursue any other remedy. The Company waives any defense arising by reason
      of the application of the statute of limitations to any obligation secured
      hereby.

     

    11.   Term
      of Agreement.
      This
      Agreement and the Security Interest shall terminate on the date on which all
      payments under the Notes have been made in full and all other Obligations have
      been paid or discharged. Upon such termination, the Secured Party, at the
      request and at the expense of the Company, will join in executing any
      termination statement with respect to any financing statement executed and
      filed
      pursuant to this Agreement. 

     

    12.   Power
      of Attorney; Further Assurances.

     

    (a)    The
      Company authorizes the Secured Party, and does hereby make, constitute and
      appoint it, and its respective officers, agents, successors or assigns with
      full
      power of substitution, as the Company’s true and lawful attorney-in-fact, with
      power, in its own name or in the name of the Company, to, after the occurrence
      and during the continuance of an Event of Default, (i) endorse
      any notes, checks, drafts, money orders, or other instruments of payment
      (including payments payable under or in respect of any policy of insurance)
      in
      respect of the Collateral that may come into possession of the Secured Party;
      (ii) to
      sign and endorse any UCC financing statement or any invoice, freight or express
      bill, bill of lading, storage or warehouse receipts, drafts against debtors,
      assignments, verifications and notices in connection with accounts, and other
      documents relating to the Collateral; (iii) to
      pay or discharge taxes, liens, security interests or other encumbrances at
      any
      time levied or placed on or threatened against the Collateral; (iv) to
      demand, collect, receipt for, compromise, settle and sue for monies due in
      respect of the Collateral; and (v) generally,
      to do, at the option of the Secured Party, and at the Company’s expense, at any
      time, or from time to time, all acts and things which the Secured Party deems
      necessary to protect, preserve and realize upon the Collateral and the Security
      Interest granted therein in order to effect the intent of this Agreement, the
      Notes and the Warrants, all as fully and effectually as the Company might or
      could do; and the Company hereby ratifies all that said attorney shall lawfully
      do or cause to be done by virtue hereof. This power of attorney is coupled
      with
      an interest and shall be irrevocable for the term of this Agreement and
      thereafter as long as any of the Obligations shall be outstanding.

     

    
      
        
        

      

      
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    (b)    On
      a
      continuing basis, the Company will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, in the proper filing and recording places in any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      B,
      attached hereto, all such instruments, and take all such action as may
      reasonably be deemed necessary or advisable, or as reasonably requested by
      the
      Secured Party, to perfect the Security Interest granted hereunder and otherwise
      to carry out the intent and purposes of this Agreement, or for assuring and
      confirming to the Secured Party the grant or perfection of a security interest
      in all the Collateral.

     

    (c)    The
      Company hereby irrevocably appoints the Secured Party as the Company’s
      attorney-in-fact, with full authority in the place and stead of the Company
      and
      in the name of the Company, from time to time in the Secured Party’s discretion,
      to take any action and to execute any instrument which the Secured Party may
      deem necessary or advisable to accomplish the purposes of this Agreement,
      including the filing, in its sole discretion, of one or more financing or
      continuation statements and amendments thereto, relative to any of the
      Collateral without the signature of the Company where permitted by
      law.

     

    13.   Notices.
      All
      notices, requests, demands and other communications hereunder shall be in
      writing, with copies to all the other parties hereto, and shall be deemed to
      have been duly given when (i) if
      delivered by hand, upon receipt, (ii) if
      sent by facsimile, upon receipt of proof of sending thereof, (iii) if
      sent by nationally recognized overnight delivery service (receipt requested),
      the next business day or (iv) if
      mailed by first-class registered or certified mail, return receipt requested,
      postage prepaid, four days after posting in the U.S. mails, in each case if
      delivered to the following addresses:

     

    
      	
              If
                to the Company:

            	
              Shearson
                Financial Network, Inc.

            

    

    6330
      S.
      Sandhill Rd., Suite 8 

    Las
      Vegas, NV 89120

    Attention:
      Chief Executive Officer 

    Telephone:
      (702) 868-7941 

    Facsimile:
      (702) 868-7945

     

    
      	
              With
                a copy to:

            	
              Sichenzia
                Ross Friedman Ference LLP

            

    

    1065
      Avenue of the Americas

    New
      York,
      NY 10018

    Attention:
      Gregory Sichenzia, Esq.

    Telephone:
      (212) 930-9700

    Facsimile:
      (212) 930-9725

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
      	
              If
                to the Secured Party:

            	
              AJW
                Partners, LLC

            

    

    AJW
      Offshore, Ltd.

    AJW
      Qualified Partners, LLC

    New
      Millennium Capital Partners II, LLC

    1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New York 11576

    Attention:
      Corey Ribotsky

    Facsimile:
      516-739-7115

    

    
      	
              With
                a copy to:

            	
              Ballard
                Spahr Andrews & Ingersoll, LLP

            

    

    1735
      Market Street, 51st
      Floor

    Philadelphia,
      Pennsylvania 19103

    Attention:
      Gerald J. Guarcini, Esq. 

    Facsimile:
      215-864-8999

    

    14.   Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Secured Party shall have the right,
      in its sole discretion, to pursue, relinquish, subordinate, modify or take
      any
      other action with respect thereto, without in any way modifying or affecting
      any
      of the Secured Party’s rights and remedies hereunder.

     

    15.   Miscellaneous.

     

    (a)    No
      course
      of dealing between the Company and the Secured Party, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Party, any
      right, power or privilege hereunder or under the Notes shall operate as a waiver
      thereof; nor shall any single or partial exercise of any right, power or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

     

    (b)    All
      of
      the rights and remedies of the Secured Party with respect to the Collateral,
      whether established hereby or by the Notes or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

     

    (c)    This
      Agreement constitutes the entire agreement of the parties with respect to the
      subject matter hereof and is intended to supersede all prior negotiations,
      understandings and agreements with respect thereto. Except as specifically
      set
      forth in this Agreement, no provision of this Agreement may be modified or
      amended except by a written agreement specifically referring to this Agreement
      and signed by the parties hereto.

     

    (d)    In
      the
      event that any provision of this Agreement is held to be invalid, prohibited
      or
      unenforceable in any jurisdiction for any reason, unless such provision is
      narrowed by judicial construction, this Agreement shall, as to such
      jurisdiction, be construed as if such invalid, prohibited or unenforceable
      provision had been more narrowly drawn so as not to be invalid, prohibited
      or
      unenforceable. If, notwithstanding the foregoing, any provision of this
      Agreement is held to be invalid, prohibited or unenforceable in any
      jurisdiction, such provision, as to such jurisdiction, shall be ineffective
      to
      the extent of such invalidity, prohibition or unenforceability without
      invalidating the remaining portion of such provision or the other provisions
      of
      this Agreement and without affecting the validity or enforceability of such
      provision or the other provisions of this Agreement in any other
      jurisdiction.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (e)    No
      waiver
      of any breach or default or any right under this Agreement shall be considered
      valid unless in writing and signed by the party giving such waiver, and no
      such
      waiver shall be deemed a waiver of any subsequent breach or default or right,
      whether of the same or similar nature or otherwise.

     

    (f)
    This
      Agreement shall be binding upon and inure to the benefit of each party hereto
      and its successors and assigns.

     

    (g)    Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

     

    (h)    This
      Agreement shall be construed in accordance with the laws of the State of New
      York, except to the extent the validity, perfection or enforcement of a security
      interest hereunder in respect of any particular Collateral which are governed
      by
      a jurisdiction other than the State of New York in which case such law shall
      govern. Each of the parties hereto irrevocably submit to the exclusive
      jurisdiction of any New York State or United States Federal court sitting in
      Manhattan county over any action or proceeding arising out of or relating to
      this Agreement, and the parties hereto hereby irrevocably agree that all claims
      in respect of such action or proceeding may be heard and determined in such
      New
      York State or Federal court. The parties hereto agree that a final judgment
      in
      any such action or proceeding shall be conclusive and may be enforced in other
      jurisdictions by suit on the judgment or in any other manner provided by law.
      The parties hereto further waive any objection to venue in the State of New
      York
      and any objection to an action or proceeding in the State of New York on the
      basis of forum non conveniens.

     

    (i)    
EACH
      PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
      ANY
      CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE
      OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY
      BE
      FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT,
      INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS
      AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
      THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A
      BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN
      ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THIS
      WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
      REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
      SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL
      FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
      NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
      ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
      RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
      A
      LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
      THE
      COURT. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (j)    
This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
      be
      duly executed on the day and year first above written.

     

    
      	 	
              SHEARSON
                FINANCIAL NETWORK, INC.

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Michael A. Barron

            
	 	 	
              Michael
                A. Barron

            
	 	 	
              Chief
                Executive Officer 

            
	 	 	 
	 	 	 
	 	
              AJW
                PARTNERS, LLC

            
	 	
              By:  
                SMS Group, LLC

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Corey S. Ribotsky

            
	 	 	
              Corey
                S. Ribotsky

            
	 	 	
              Manager

            
	 	 	 
	 	 	 
	 	
              AJW
                OFFSHORE, LTD.

            
	 	
              By:  
                First Street Manager II, LLC

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Corey S. Ribotsky

            
	 	 	
              Corey
                S. Ribotsky

            
	 	 	
              Manager

            
	 	 	 
	 	 	 
	 	
              AJW
                QUALIFIED PARTNERS, LLC

            
	 	
              By:  
                AJW Manager, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Corey S. Ribotsky

            
	 	 	
              Corey
                S. Ribotsky

            
	 	 	
              Manager

            
	 	 	 
	 	 	 
	 	
              NEW
                MILLENNIUM CAPITAL PARTNERS II, LLC

            
	 	
              By:  
                First Street Manager II, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Corey S. Ribotsky

            
	 	 	
              Corey
                S. Ribotsky

            
	 	 	
              Manager

            

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    SCHEDULE
      A

     

    Principal
      Place of Business of the Company:

     

    6330
      S.
      Sandhill Road, Suite 6

    Las
      Vegas, NV 89120

    

    

    Locations
      Where Collateral is Located or Stored:

     

    Shearson
      Home Loans

    6330
      S.
      Sandhill Road, Suite 6

    Las
      Vegas, NV 89120

    

    

    List
      of Subsidiaries of the Company:

     

    Shearson
      Home Loans

    eHomeCredit
      Corp

    Continental
      Home Loans Inc.

    Real
      Property Technologies

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    SCHEDULE
      B

    Jurisdictions:
      Nevada

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    SCHEDULE
      C

     

    None

     

    16EU ENERGY PRINCIPALS' AGREEMENT

      THIS EU  ENERGY  PRINCIPALS'  AGREEMENT  (this  "Agreement"),  is made and
entered into as of July 3, 2006 by and among Stephen Bircher ("Bircher"), Keeley
Services Limited ("Keeley"), Laikadog Holdings Ltd. ("Laikadog"),  Rayna Limited
("Rayna") and Wellsford  Management Limited  ("Wellsford"),  and, Michael Porter
("Porter") on the one hand ("collectively "EU Energy Principals"), and Composite
Technology Corporation, a Nevada Corporation ("Buyer").

                                    RECITALS

A. The Buyer and  substantially  all  shareholders of EU Energy including the EU
Energy  Principals  have entered  into a Share  Exchange  Agreement  (the "Share
Exchange  Agreement")  pursuant  to which the  shareholders  of EU Energy plc, a
company  organized under the laws of the United Kingdom ("EU Energy") and Porter
shall exchange their equity securities for newly-issued  stock of the Buyer (the
"Transaction").

B.  Bircher,   Keeley,  Rayna,  Wellsford,   and  Laikadog  (collectively,   the
"Shareholders")  shall  be  shareholders  of  the  Buyer  upon  closing  of  the
Transaction and Porter will be the President of the Buyer.

C. In order to induce the Buyer to complete the  Transaction,  the  Shareholders
have  agreed to the  lock-up  provisions  relating  to all of the  shares of the
common  stock of the  Buyer  owned,  as of the date of the  closing  date of the
Transaction  (the "Closing  Date"),  by each of the Shareholders as set forth in
this Agreement ("Locked Up Shares").

D. The Shareholders  have further agreed that their  outstanding  Company common
stock may be used to satisfy any indemnification obligations pursuant to Section
9 of the Share Exchange Agreement.

      NOW,  THEREFORE,  in  consideration  of the mutual  promises and covenants
herein contained, and other valuable consideration,  the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

                                    AGREEMENT

1.  Lock-Up.  For a  period  of 12  months  following  the  closing  date of the
Transaction (the "Lock-Up  Period"),  each of the Shareholders  shall not make a
Transfer of the Locked Up Shares; provided however, that in each month after the
Closing Date,  1/12th of the Locked Up Shares held by each Shareholder  shall be
relieved  from such  restriction,  such that by the 12th month after the Closing
Date,  all of the Locked Up Shares shall no longer be bound by this  obligation;
provided,  however,  that  Shareholder  may not Transfer  more than 1/6th of the
Locked Up Shares  during any 30 day  period of the  Lock-Up  Period.  "Transfer"
shall mean transfer, sell, assign, pledge, hypothecate,  give, create a security
interest in or lien on, place in trust  (voting trust or  otherwise),  or in any
other way  encumber or dispose of,  directly  or  indirectly  and whether or not
voluntarily, without the express prior written consent of the Buyer.

2.  Injunctive  Relief.  The Parties  agree that a breach of this  Agreement may
cause the Buyer irreparable harm for which monetary damages are not adequate. In
addition to all other available  legal remedies,  the Buyer shall have the right
to injunctive relief to enforce this Agreement.

                                       1
<PAGE>

3. Other Restrictions.

      (a) Legends.  Each Shareholder's Locked Up Shares shall be divided equally
into 12 separate stock certificates  ("Stock  Certificate").  In addition to any
other legends required to be placed on each outstanding certificate representing
the  Locked  Up  Shares,  each  of the  Shareholders  hereby  agrees  that  each
outstanding  stock  certificate  representing  the  Locked Up Shares  during the
Restricted Period shall bear a legend reading substantially as follows:

                  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
                  THE TERMS AND CONDITIONS SET FORTH IN A EU ENERGY PRINCIPALS'
                  AGREEMENT, DATED AS OF JUNE 3, 2006 COPIES OF WHICH MAY BE
                  OBTAINED FROM THE ISSUER. NO TRANSFER OF SUCH SECURITIES WILL
                  BE MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED BY
                  EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT. THE
                  COMPANY ACKNOWLEDGES THAT THIS LEGEND (BUT THIS LEGEND ONLY)
                  RELATING TO THE EU ENERGY PRINCIPALS AGREEMENT MAY BE REMOVED
                  AT ANY TIME AFTER [Legend Termination Date]"

      Each  of  the  12  Stock  Certificates  shall  bear  a  different  "Legend
Termination Date" ranging from the one-month  anniversary of the Closing Date to
the 12-month anniversary of the Closing.

      (b) Termination of Restrictive  Legends.  The restrictions  referred to in
Section 1 shall cease and terminate in their  entirety at the end of the Lock-Up
Period. Whenever such restrictions shall cease and terminate as to any Locked Up
Shares,  the  Shareholder  holding such shares shall be entitled to receive from
the Buyer,  in exchange for such legended  certificates,  without  expense,  new
certificates  for a like  number of Locked Up Shares not  bearing the legend set
forth in Section 3(a), provided however, that if any Claim has been made against
the  Shareholder  for any  breach  of the  Share  Exchange  Agreement,  then the
Shareholder  will not be able to  remove  the  legend  on that  number of shares
sufficient to satisfy the extent of such Claim.

      (c) Copy of Agreement.  A copy of this  Agreement  shall be filed with the
corporate  secretary of the Buyer and with the  Transfer  Agent of the Buyer and
shall be kept with the  records  of the Buyer  and shall be made  available  for
inspection by any shareholders of the Buyer.

      (d) Recordation. The Buyer shall not record upon its books any Transfer to
any person except Transfers in accordance with this Agreement.

4. Indemnification. In the event that a Shareholder is required to indemnify the
Buyer under Section 9 of the Share Exchange Agreement,  the Locked Up Shares may
be surrendered to the Buyer to satisfy such indemnification obligations.

5. Compliance With Applicable  Regulations.  The Shareholders and Porter warrant
and  confirm  that  they  shall  comply  in all  respects  with any  regulations
applicable  to the  disclosure  of their  share  holdings  in the  Buyer and the
transfer of such shares.

6. Specific  Performance.  The  Shareholders  acknowledge that there would be no
adequate  remedy  at  law  if  any  Shareholder  fails  to  perform  any  of its
obligations hereunder,  and accordingly agree that the Buyer, in addition to any
other remedy to which it may be entitled at law or in equity,  shall be entitled
to compel specific  performance of the obligations of any Shareholder under this
Agreement in accordance  with the terms and  conditions of this  Agreement.  Any
remedy under this Section 5 is subject to certain equitable  defenses and to the
discretion of the court before which any proceedings therefor may be brought.

                                       2
<PAGE>

7. Notices. All notices, statements, instructions or other documents required to
be given hereunder  shall be in writing and shall be given either  personally or
by mailing the same in a sealed envelope,  first-class mail, postage prepaid and
either certified or registered,  return receipt requested,  or by telecopy,  and
shall be  addressed  to the Buyer at its  principal  offices  and to one or more
Shareholders  at the  respective  addresses  furnished  to  the  Buyer  by  such
Shareholders.

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

9.  Recapitalizations  and Exchanges  Affecting  Shares.  The provisions of this
Agreement  shall apply,  to the full extent set forth herein with respect to the
Shares, to any and all shares of capital stock or equity securities of the Buyer
which may be issued by reason of any stock dividend,  stock split, reverse stock
split, combination, recapitalization, reclassification or otherwise.

10.  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance  with the laws of the State of  California as applied to contracts to
be performed in California.

11.  Waiver of Trial by Jury.  ANY RIGHT TO TRIAL BY JURY  WITH  RESPECT  TO ANY
CLAIM OR ACTION  ARISING  OUT OF THIS  AGREEMENT  OR IN  CONNECTION  HEREWITH IS
HEREBY WAIVED.

12.  Descriptive  Headings,   Etc.  The  headings  in  this  Agreement  are  for
convenience  of  reference  only and  shall not limit or  otherwise  affect  the
meaning  of  terms  contained  herein.  Unless  the  context  of this  Agreement
otherwise requires,  references to "hereof," "herein," "hereby," "hereunder" and
similar terms shall refer to this entire Agreement.

13.  Amendment.  This Agreement may not be amended or supplemented  except by an
instrument in writing signed by each of the parties hereto.

14. Severability. If any term or provision of this Agreement shall to any extent
be  invalid or  unenforceable,  the  remainder  of this  Agreement  shall not be
affected  thereby,  and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.

15.  Complete  Agreement;  Counterparts.  This Agreement  constitutes the entire
agreement and supersedes all other agreements and  understandings,  both written
and oral,  among the parties or any of them,  with respect to the subject matter
hereof.  This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts,  each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.

16.  Independent  Termination.  This  Agreement  is  independent  of  any  other
agreement and will terminate on its own terms.

        ******THE SIGNATURES OF THE PARTIES APPEAR ON THE NEXT PAGE******

                                       3
<PAGE>

IN  WITNESS  WHEREOF,  the  parties  have  executed  this EU Energy  Principals'
Agreement on the above written date.

 "Major Shareholders"
Stephen Bircher                                  Michael Porter
/s/ Stephen Bircher                              /s/ Michael Porter
-----------------------------------              -------------------------------
                                                 By:
                                                 Title:
Address:                                         Address:
------------------------------------------------ -------------------------------

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

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

Keeley Services Limited                          Laikadog Holdings Limited

/s/ Ian Zant-Boer                                /s/ Ian Zant-Boer
-------------------------------                  -------------------------------
By: Ian Zant-Boer                                By: Ian Zant-Boer
Title:Power of Attorney                          Title:Power of Attorney

Address:                                         Address:
------------------------------------------------ -------------------------------

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

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

Rayna Limited                                    Wellsford Management Limited

/s/ Ian Zant-Boer                                /s/ Ian Zant-Boer
----------------------------------               -------------------------------
By: Ian Zant-Boer                                By: Ian Zant-Boer
Title:Power of Attorney                          Title:Power of Attorney
________________________________________________
Address:                                         Address:

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

                                       4
<PAGE>

             [signature page of the EU Energy Principals' Agreement]

COMPOSITE TECHNOLOGY CORPORATION

By:/s/ Benton Wilcoxon
   ----------------------------------------
   Benton Wilcoxon, Chief Executive Officer

                                       5

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