VDC COMMUNICATIONS INC
EX-10.54
<DOCUMENT>
<TYPE>EX-10.54
<SEQUENCE>10
<FILENAME>0010.txt
<DESCRIPTION>EX-10.54
<TEXT>

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT, dated as of August 25, 2000, is made and given
by OMNETRIX INTERNATIONAL, INC.., a Colorado corporation (the "Grantor"), to VDC
TELECOMMUNICATIONS, INC, a Delaware corporation (the "Secured Party").

                                    RECITALS
                                    --------

         A. The Grantor and the Secured  Party have  entered into a Purchase and
Sale Agreement  dated as of August 25, 2000 (the "Purchase and Sale  Agreement")
pursuant to which the Secured Party has agreed to extend to the Grantor  certain
credit  accommodations  consisting of a loan evidenced by a Promissory Note (the
"Note") for  Grantor's  purchase of the Secured  Party's  Purchased  Assets,  as
described in Exhibit "C" of the Purchase and Sale Agreement (the "Assets").

         B. It is a condition  precedent to the  obligation of the Secured Party
to extend credit  accommodations  pursuant to the terms of the Purchase and Sale
Agreement that this Agreement be executed and delivered by the Grantor.

         C.  The  Grantor  finds  it  advantageous,  desirable  and in its  best
interests  to comply  with the  requirement  that it execute  and  deliver  this
Agreement to the Secured Party.

         NOW, THEREFORE, in consideration of the promises and commitments herein
and in order to induce the  Secured  Party to enter into the  Purchase  and Sale
Agreement and to extend credit  accommodations  to the Grantor  thereunder,  the
Grantor hereby agrees with the Secured Party for its benefit as follows:

         Section 1.  Defined Terms.
                     -------------

                  1(a) The  following  terms  which are  defined in the  Uniform
         Commercial Code in effect in the State of Colorado ("Uniform Commercial
         Code" or  "UCC") on the date  hereof  are used  herein  as so  defined:
         Account,  Account Debtor, Chattel Paper, Document,  Equipment,  General
         Intangibles, Instrument, Inventory and Proceeds.

                  1(b) As used in this Agreement, the following terms shall have
the meanings indicated:

                  "Collateral"  shall mean all  property  and rights in property
                  -----------
         now owned or hereafter at any time  acquired by the Grantor,  including
         rights in the  Assets,  in or upon which a Security  Interest is hereby
         granted to the Secured  Party by the Grantor under this  Agreement.  To
         the extent not otherwise included, the Collateral shall include (i) all
         substitutions and replacements for and proceeds and products of any and
         all of the  foregoing  property,  and,  in the case of all  goods,  all
         accessions, accessories,  attachments, parts, equipment and repairs now
         or hereafter attached or affixed to or used in connection with any such
         goods, (ii) all warehouse receipts, bills of lading and other documents
         of title now or  hereafter  covering  such goods,  (iii) all  insurance

<PAGE>

         policies  covering any Collateral and all claims to payment under,  and
         proceeds  of any  insurance  policies,  and  (iv) all  books,  records,
         manuals, programs,  software, systems and storage media relating to any
         of the foregoing property.

                  "Event of Default"  shall have the meaning  given to such term
                  -----------------
         in Section 16 hereof.

                  "Financing  Statement"  shall have the  meaning  given to such
                  ---------------------
         term in Section 4 hereof.

                  "Lien" shall mean any  security  interest,  mortgage,  pledge,
                  -----
         lien,  charge,  encumbrance,  title  retention  agreement  or analogous
         instrument  or device  in, of or on any  assets  or  properties  of the
         Person referred to.

                  "Obligations"  shall mean all  indebtedness,  liabilities  and
                  ------------
         obligations  of the Grantor  under the Purchase and Sale  Agreement and
         the Note to the  Secured  Party,  whether for  performance,  principal,
         interest,  fees,  out-of-pocket costs and expenses of the Secured Party
         including  the  reasonable  fees and expenses of counsel to the Secured
         Party,  costs and  expenses  of  perfecting  and  maintaining  security
         interests,  costs of  collection,  reimbursement  of funds  advanced to
         protect Collateral,  or otherwise,  including the Grantor's obligations
         on the Note, the Purchase and Sale  Agreement,  all  liabilities of the
         Grantor under this Agreement, and in all cases whether due or to become
         due, and whether now existing or hereafter arising or incurred.

                  "Person" shall mean any individual, corporation,  partnership,
                  -------
         joint venture, firm, association,  trust, unincorporated  organization,
         government or governmental agency or political subdivision or any other
         entity, whether acting in an individual, fiduciary or other capacity.

                  "Security  Interest" shall have the meaning given such term in
                  -------------------
         Section 2 hereof.

         Section 2. Grant of Security Interest.  As security for the payment and
                    --------------------------
performance of all of the Obligations,  the Grantor hereby grants to the Secured
Party a security  interest  (the  "Security  Interest")  in all of the Grantor's
rights,  title,  and interests in and to the Collateral,  including all personal
property and fixtures of the Grantor,  whether now or hereafter owned, existing,
arising or acquired and wherever located,  including,  without  limitation,  all
Accounts, all Chattel Paper, all Contracts,  all documents,  all Equipment,  all
General  Intangibles,  all  Instruments,  all Inventory;  and, to the extent not
otherwise included, all Proceeds and products of any and all of the foregoing.

         Section 3. Title to  Collateral.  The  Grantor has (or will have at the
                    --------------------
time it acquires  rights in Collateral  hereafter  acquired or arising) and will
maintain so long as the Security Interest may remain outstanding,  title to each
item of Collateral (including the Proceeds and products thereof), free and clear
of all Liens  except the Security  Interest  and except  Liens  permitted by the
Purchase and Sale Agreement.  The Grantor will defend the Collateral against all
claims or demands of all Persons  (other than the Secured  Party)  claiming  the
Collateral  or  any  interest  therein.  To the  best  of  the  Secured  Party's
knowledge,  as of the date of execution of this Security Agreement, no effective

                                       2
<PAGE>

financing  statement or other  similar  document  used to perfect and preserve a
security  interest under the laws of any jurisdiction (a "Financing  Statement")
covering all or any part of the  Collateral is on file in any recording  office,
except  such as may have been filed in favor of the  Secured  Party  relating to
this Agreement or to perfect Liens permitted by the Purchase and Sale Agreement.

         Section 4. Disposition of Collateral.  The Grantor will not sell, lease
                    -------------------------
or  otherwise  dispose of, or discount or factor with or without  recourse,  any
Collateral, except, as may be conducted in the ordinary course of business, sale
of items of Inventory, or the replacement of furniture,  fixtures and equipment,
with  furniture,   fixtures,  and  equipment  of  like  kind  and  equal  value.
Notwithstanding this Section,  Grantor will not sell, lease, pledge or otherwise
dispose of the Assets.

         Section 5. Name, Offices, Location of Collateral.  The Grantor will not
                    -------------------------------------
permit the Collateral to be located in any state or area in which,  in the event
of such  location,  a financing  statement  covering  such  Collateral  would be
required to be, but has not in fact been, filed in order to perfect the Security
Interest. The Grantor will not change the name of its business or corporation or
the  location  of its place of business  or the  Collateral.  The chief place of
business and chief executive  office and the office where it keeps its books and
records concerning the Accounts and General Intangibles and the originals of all
Chattel Paper, Documents and Instruments are located at its address set forth on
the  signature  page hereof.  All of the Assets,  Equipment and Inventory is and
shall be located  within the state of  Colorado.  The Grantor  will  immediately
notify the Secured Party of any additional  state in which any item of Inventory
or  Equipment is  hereafter  located.  The Grantor will from time to time at the
request of the Secured  Party provide the Secured Party with current lists as to
the locations of the Equipment  and  Inventory.  The Grantor will not change its
name or the location of it chief place of business and chief  executive  office,
or use any trade name or style in any state  other  than the state of  Colorado,
unless the Secured  Party has been given at least 30 days prior  written  notice
thereof and the Grantor has  executed and  delivered to the Bank such  Financing
Statements  and other  instruments  required  or  appropriate  to  continue  the
perfection of the Security Interest.

         Section 6.  Rights to  Payment.  Except as the  Grantor  may  otherwise
                     ------------------
advise the Secured Party in writing,  each  Account,  Chattel  Paper,  Document,
General Intangible, and Instrument constituting or evidencing Collateral is (or,
in the case of all future Collateral, will be when arising or issued) the valid,
genuine  and  legally  enforceable  obligation  of the  Account  Debtor or other
obligor named therein or in the Grantor's  records  pertaining  thereto as being
obligated to pay or perform such  obligation.  Without the Secured Party's prior
written consent,  the Grantor will not agree to any  modifications,  amendments,
subordinations,  cancellations  or  terminations  of the obligations of any such
Account Debtors or other obligors except in the ordinary course of business. The
Grantor  will  perform  and  comply  in  all  material  respects  with  all  its
obligations  under its Contracts and exercise promptly and diligently its rights
thereunder.


         Section 7.  Further Assurances.
                     ------------------

                                       3
<PAGE>

                  7(a)  The  Grantor  agrees  that  from  time to  time,  at its
         expense,  it will promptly execute and deliver all further  instruments
         and documents,  and take all further  action,  that may be necessary or
         that the Secured Party may reasonably  request, in order to perfect and
         protect the Security Interest granted or purported to be granted hereby
         or to enable the Secured  Party to exercise  and enforce its rights and
         remedies  hereunder with respect to any Collateral  (but any failure to
         request or assure that the Grantor  execute and deliver such instrument
         or  documents  or to take such  action  shall not  affect or impair the
         validity,  sufficiency  or  enforceability  of this  Agreement  and the
         Security  Interest,  regardless of whether any such item was or was not
         executed and  delivered  or action  taken in a similar  context or on a
         prior occasion).  Without limiting the generality of the foregoing, the
         Grantor  will:  (i)  deliver  and  pledge  to the  Secured  Party,  all
         Instruments  and  Documents,  duly  indorsed  or  accompanied  by  duly
         executed  instruments of transfer or assignment,  with full recourse to
         the  Grantor,  all in form and  substance  satisfactory  to the Secured
         Party; (ii) execute and file such Financing  Statements or continuation
         statements in respect thereof,  or amendments  thereto,  and such other
         instruments  or notices,  as may be necessary or  desirable,  or as the
         Secured Party may request, in order to perfect,  preserve,  and enhance
         the Security  Interest  granted or purported to be granted hereby;  and
         (iii) obtain waivers, in form satisfactory to the Secured Party, of any
         claim  to any  Collateral  from  any  landlords  or  mortgagees  of any
         property where any Inventory or Equipment is located.

                  7(b) The Grantor  hereby  authorizes the Secured Party to file
         one or more Financing Statements or continuation  statements in respect
         thereof,  and  amendments  thereto,  relating to all or any part of the
         Collateral without the signature of the Grantor where permitted by law.
         A photocopy or other  reproduction  of this  Agreement or any Financing
         Statement  covering  the  Collateral  or  any  part  thereof  shall  be
         sufficient as a Financing Statement where permitted by law.

                  7(c) The Grantor will  furnish to the Secured  Party from time
         to time statements and schedules further identifying and describing the
         Collateral and such other reports in connection  with the Collateral as
         the Secured Party may reasonably request,  all in reasonable detail and
         in form and substance reasonably satisfactory to the Secured Party.

         Section 8. Taxes and Claims.  The Grantor  will  promptly pay all taxes
                    ----------------
and other governmental charges levied or assessed upon or against any Collateral
or upon or against the  creation,  perfection  or  continuance  of the  Security
Interest,  as well as all other claims of any kind (including  claims for labor,
material and supplies) against or with respect to the Collateral,  except to the
extent (a) such taxes,  charges or claims are being  contested  in good faith by
appropriate proceedings, (b) such proceedings do not involve any material danger
of the sale, forfeiture or loss of any of the Collateral or any interest therein
and (c) such taxes,  charges or claims are  adequately  reserved  against on the
Grantor's books in accordance with generally accepted accounting principles.

         Section 9. Books and Records. The Grantor will keep and maintain at its
                    -----------------
own cost and  expense  satisfactory  and  complete  records  of the  Collateral,
including a record of all payments  received and credits granted with respect to
the Collateral.

                                       4
<PAGE>

         Section 10. Inspection, Reports,  Verifications.  The Grantor will upon
                     -----------------------------------
notice  and  at  all   reasonable   times  permit  the  Secured   Party  or  her
representatives to examine or inspect any Collateral, any evidence of Collateral
and the Grantor' books and records concerning the Collateral,  wherever located.
The Secured Party or her designee is authorized to contact  Account  Debtors and
other Persons  obligated on any such  Collateral from time to time to verify the
existence, amount and/or terms of such Collateral.

         Section  11.  Notice of Loss.  The  Grantor  will  promptly  notify the
                       --------------
Secured  Party  of any  loss  of or  material  damage  to any  material  item of
Collateral  or of any  substantial  adverse  change,  known to  Grantor,  in any
material item of Collateral or the prospect of payment or performance thereof.

         Section  12.  Insurance.  The  Grantor  will  keep  the  Equipment  and
                       ---------
Inventory insured against "all risks" for the full replacement cost or $370,000,
whichever  is  greater,  with no  deductible  and with an  insurance  company or
companies satisfactory to the Secured Party, the policies to protect the Secured
Party as her  interests  may appear and name the Secured Party as loss payee and
additional  insured,  with such policies or certificates with respect thereto to
be  delivered to the Secured  Party.  Each such policy or the  certificate  with
respect thereto shall provide that such policy shall not be cancelled or allowed
to lapse  unless at least 30 days prior  written  notice is given to the Secured
Party.

         Section  13.  Action by the Secured  Party.  If the Grantor at any time
                       ----------------------------
fails to perform or observe any of the foregoing  agreements,  the Secured Party
shall have (and the Grantor hereby grants to the Secured Party) the right, power
and authority (but not the duty) upon ten (10) days written notice to Grantor to
perform or observe such agreement on behalf and in the name,  place and stead of
the Grantor (or, at the Secured Party's option, in the Secured Party's name) and
to take any and all other actions which the Secured  Party may  reasonably  deem
necessary to cure or correct such failure (including,  without  limitation,  the
payment of taxes,  the satisfaction of Liens, the procurement and maintenance of
insurance,  the  execution of  assignments,  security  agreements  and Financing
Statements, and the indorsement of instruments); and the Grantor shall thereupon
pay to the  Secured  Party on demand the amount of all monies  expended  and all
costs and expenses  (including  reasonable  attorneys'  fees and legal expenses)
incurred  by  the  Secured  Party  in  connection  with  or as a  result  of the
performance or observance of such agreements or the taking of such action by the
Secured Party, together with interest thereon from the date expended or incurred
at the highest lawful rate then  applicable to any of the  Obligations,  and all
such monies  expended,  costs and expenses and interest thereon shall be part of
the Obligations secured by the Security Interest.

         Section 14. Insurance  Claims.  As additional  security for the payment
                     -----------------
and  performance of the  Obligations,  the Grantor hereby assigns to the Secured
Party any and all  monies  (including  proceeds  of  insurance  and  refunds  of
unearned  premiums)  due or to become  due  under,  and all other  rights of the
Grantor with  respect to, any and all  policies of insurance  now or at any time
hereafter  covering  the  Collateral  or any  evidence  thereof or any  business
records or valuable papers pertaining  thereto.  At any time,  whether before or
after the  occurrence  of any Event of Default,  the Secured Party may (but need
not),  in the Secured  Party's  name or in Grantor's  name,  execute and deliver

                                       5
<PAGE>

proofs of claim,  receive all such monies,  indorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim  against  the issuer of any such  policy.  Notwithstanding  any of the
foregoing,  so long as no Event of Default  exists the Grantor shall be entitled
to all insurance  proceeds with respect to Equipment or Inventory  provided that
such proceeds are applied to the cost of replacement Equipment or Inventory.

         Section 15. The Secured  Party's  Duties.  The powers  conferred on the
                     ----------------------------
Secured Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Secured Party
shall be deemed to have  exercised  reasonable  care in the  safekeeping  of any
Collateral  in  her  possession  if  such   Collateral  is  accorded   treatment
substantially  equal to the safekeeping  which the Secured Party accords her own
property  of like kind.  Except for the  safekeeping  of any  Collateral  in her
possession  and the  accounting  for  monies and for other  properties  actually
received  by her  hereunder,  the Secured  Party  shall have no duty,  as to any
Collateral,  as  to  ascertaining  or  taking  action  with  respect  to  calls,
conversions,  exchanges,  maturities,  tenders or other matters  relative to any
Collateral,  whether or not the Secured Party has or is deemed to have knowledge
of such matters,  or as to the taking of any necessary  steps to preserve rights
against  any  Persons or any other  rights  pertaining  to any  Collateral.  The
Secured  Party  will  take  action  in the  nature  of  exchanges,  conversions,
redemption,  tenders  and the like  requested  in  writing by the  Grantor  with
respect to the Collateral in the Secured Party's possession if the Secured Party
in its  reasonable  judgment  determines  that such  action  will not impair the
Security  Interest or the value of the Collateral,  but a failure of the Secured
Party to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care.

         Section 16. Default. Each of the following occurrences shall constitute
                     -------
an Event of Default under this Agreement:  (a) the Grantor shall fail to observe
or perform  and  failure to cure any  covenant or  agreement  applicable  to the
Grantor under this Agreement;  or (b) any representation or warranty made by the
Grantor  in  this  Agreement  or in any  financial  statements,  or  reports  or
certificates  heretofore or at any time  hereafter  submitted by or on behalf of
the  Grantor to the Secured  Party shall prove to have been false or  materially
misleading  when made;  or (c) the Grantor  shall fail to observe or perform and
failure to cure any covenant or agreement  applicable  to the Grantor  under the
Purchase  and Sale  Agreement;  or (d) any failure by the Grantor to perform and
failure to cure under the  Promissory  Note  identified in the Purchase and Sale
Agreement.

         Section  17.  Remedies  on  Default.  Upon  the  occurrence of an Event
                       ---------------------
of  Default  and  at  any  time thereafter:

                  17(a) The Secured  Party may  exercise and enforce any and all
         rights and remedies available upon default under the Uniform Commercial
         Code.

                  17(b) The Secured Party shall have the right to enter upon and
         into and take possession of all or such part or parts of the properties
         of the Grantor,  as may be necessary or  appropriate in the judgment of
         the  Secured  Party to permit or enable the  Secured  Party to store or
         sell all or any part of the Collateral, as the Secured Party may elect,
         and to use and operate said  properties  for said purposes and for such
         length of time as the Secured Party may deem  necessary or  appropriate


                                       6
<PAGE>

         for said purposes  without the payment of any  compensation  to Grantor
         therefor. The Secured Party may require the Grantor to, and the Grantor
         hereby  agrees that it will,  at its  expense  and upon  request of the
         Secured  Party  forthwith,  assemble all or part of the  Collateral  as
         directed  by the  Secured  Party and make it  available  to the Secured
         Party at a place or places to be designated by the Secured Party.

                  17(c) If notice to the Grantor of any intended  disposition of
         Collateral  or  any  other  intended  action  is  required  by law in a
         particular   instance,   such  notice  shall  be  deemed   commercially
         reasonable if given in the manner specified for the giving of notice in
         Section  22  hereof  at least ten  calendar  days  prior to the date of
         intended  disposition  or  other  action,  and the  Secured  Party  may
         exercise or enforce any and all other  rights or remedies  available by
         law or  agreement  against  the  Collateral,  against the  Grantor,  or
         against any other Person or property.

         Section  18.  Remedies  as to  Certain  Rights  to  Payment.  Upon  the
                       ---------------------------------------------
occurrence of an Event of Default and failure to cure and at any time thereafter
the Secured Party may notify any Account Debtor or other Person obligated on any
Accounts or other  Collateral that the same have been assigned or transferred to
the Secured Party and that the same should be performed as requested by, or paid
directly to, the Secured  Party,  as the case may be. The Grantor  shall join in
giving such notice, if the Secured Party so requests.  The Secured Party may, in
the Secured Party's name or in the Grantor's name,  demand,  sue for, collect or
receive any money or property at any time payable or  receivable  on account of,
or securing,  any such Collateral or grant any extension to, make any compromise
or  settlement  with or otherwise  agree to waive,  modify,  amend or change the
obligation of any such Account  Debtor or other  Person.  If any payments on any
such  Collateral  are  received  by the  Grantor  after an Event of Default  has
occurred, such payments shall be held in trust by the Grantor as the property of
the Secured Party and shall not be commingled  with any funds or property of the
Grantor and shall be forthwith  remitted to the Secured Party for application on
the Obligations.

         Section 19. Application of Proceeds.  All cash proceeds received by the
                     -----------------------
Secured Party in respect of any sale of,  collection from, or other  realization
upon all or any part of the  Collateral  may, in the  discretion  of the Secured
Party,  be held by the Secured Party as  collateral  for, or then or at any time
thereafter be applied in whole or in part by the Secured Party  against,  all or
any part of the Obligations (including,  without limitation, any expenses of the
Secured Party payable pursuant to Section 20 hereof).

         Section 20.  Costs and  Expenses;  Indemnity.  The Grantor  will pay or
                      -------------------------------
reimburse the Secured Party on demand for all out-of-pocket  expenses (including
in each case all filing and recording fees and taxes and all reasonable fees and
expenses of counsel and of any experts and agents) incurred by the Secured Party
in  connection  with  the  creation,   perfection,   protection,   satisfaction,
foreclosure  or  enforcement  of the  Security  Interest  and  the  preparation,
administration, continuance, amendment or enforcement of this Agreement, and all
such costs and expenses shall be part of the Obligations secured by the Security
Interest.  The Grantor shall  indemnify and hold the Secured Party harmless from
and against any and all claims,  losses and  liabilities  (including  reasonable
attorneys'  fees) growing out of or resulting  from this  Agreement  (including,
without  limitation,  enforcement  of this  Agreement)  or the  Secured  Party's

                                       7
<PAGE>

actions pursuant hereto.  Any liability of the Grantor to indemnify and hold the
Secured Party harmless  pursuant to the preceding  sentence shall be part of the
Obligations  secured by the Security  Interest.  The  obligations of the Grantor
under this Section 20 shall survive any termination of this Agreement.

         Section 21. Waivers;  Remedies. This Agreement can be waived, modified,
                     ------------------
amended,  terminated or discharged,  and the Security  Interest can be released,
only  explicitly in a writing  signed by the Secured  Party.  A waiver so signed
shall be effective  only in the specific  instance and for the specific  purpose
given.  Mere  delay or  failure  to act  shall  not  preclude  the  exercise  or
enforcement  of any rights and  remedies  available  to the Secured  Party.  All
rights  and  remedies  of the  Secured  Party  shall  be  cumulative  and may be
exercised  singly in any order or  sequence,  or  concurrently,  at the  Secured
Party's  option,  and the  exercise or  enforcement  of any such right or remedy
shall  neither be a  condition  to nor bar the  exercise or  enforcement  of any
other.

         Section 22. Notices.  Any notice or other communication to any party in
                     -------
connection  with this Agreement  shall be in writing and shall be sent by manual
delivery,  telegram, telex, facsimile transmission,  overnight courier or United
States mail (postage  prepaid)  addressed to such party at the address specified
on the signature page hereof,  or at such other address as such party shall have
specified to the other party  hereto in writing.  All periods of notice shall be
measured from the date of delivery thereof if manually delivered,  from the date
of sending thereof if sent by telegram,  telex or facsimile  transmission,  from
the first  business day after the date of sending if sent by overnight  courier,
or from four days after the date of mailing if mailed.

         Section 23. Grantor  Acknowledgments.  The Grantor hereby  acknowledges
                     ------------------------
that (a) it has been advised by its counsel in the  negotiation,  execution  and
delivery of this Agreement,  (b) the Secured Party has no fiduciary relationship
to the Grantor,  the relationship being solely that of debtor and creditor,  and
(c) no joint venture exists between the Grantor and the Secured Party.

         Section 24. Continuing  Security  Interest;  Assignments under Purchase
                     -----------------------------------------------------------
and Sale  Agreement.  This  Agreement  shall (a)  create a  continuing  security
-------------------
interest  in the  Collateral  and shall  remain in full force and  effect  until
payment in full of the  Obligations  and the expiration of the  obligations,  if
any, of the Secured Party to extend credit accommodations to the Grantor, (b) be
binding upon the Grantor,  their  successors  and assigns,  and (c) inure to the
benefit  of,  and be  enforceable  by,  the  Secured  Party and her  successors,
transferees,  and  assigns.  Upon  payment  in full of the  Obligations  and the
expiration   of  any   obligation   of  the  Secured   Party  to  extend  credit
accommodations  to the  Grantor,  the  Security  Interest  granted  hereby shall
terminate  and all rights to the  Collateral  shall revert to the  Grantor,  its
successors and assigns. Upon any such termination, the Secured Party will return
to the Grantor,  its successors or assigns,  such of the Collateral as shall not
have been sold or otherwise applied pursuant to the terms hereof and execute and
deliver to the  Grantor,  its  successors  or  assigns,  such  documents  as the
Grantor,  its  successors or assigns shall  reasonably  request to evidence such
termination.  Any reversion or return of  Collateral  upon  termination  of this
Agreement and any instruments of transfer or termination shall be at the expense
of the Grantor,  its successors and assigns and shall be without warranty by, or
recourse on, the Secured Party.

                                       8
<PAGE>

         Section 25. Governing Law and Construction. THE VALIDITY,  CONSTRUCTION
                     ------------------------------
AND  ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF  COLORADO,  WITHOUT  GIVING  EFFECT TO CONFLICT OF LAWS  PRINCIPLES  THEREOF,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR  PERFECTION  OF THE SECURITY  INTEREST
HEREUNDER,  OR REMEDIES HEREUNDER,  IN RESPECT OF ANY PARTICULAR  COLLATERAL ARE
MANDATORILY  GOVERNED  BY THE LAWS OF A  JURISDICTION  OTHER  THAN THE  STATE OF
COLORADO.  Whenever  possible,  each  provision of this  Agreement and any other
statement,  instrument or  transaction  contemplated  hereby or relating  hereto
shall be  interpreted  in such  manner as to be  effective  and valid under such
applicable law, but, if any provision of this Agreement or any other  statement,
instrument or transaction  contemplated  hereby or relating hereto shall be held
to be prohibited or invalid under such  applicable  law, such provision shall be
ineffective  only to the  extent  of such  prohibition  or  invalidity,  without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or any other statement,  instrument or transaction contemplated hereby
or relating hereto.

         Section 26.  Consent to  Jurisdiction  and Venue.  AT THE OPTION OF THE
                      -----------------------------------
SECURED  PARTY,  THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR COLORADO
STATE COURT SITTING IN THE CITY AND COUNTY OF DENVER,  COLORADO; AND THE GRANTOR
CONSENT TO THE  JURISDICTION  AND VENUE OF ANY SUCH COURT AND WAIVE ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT OR PROPER.

         Section 27. Counterparts.  This Agreement may be executed in any number
                     ------------
of counterparts, each of which when so executed and delivered shall be deemed an
original,  but all such  counterparts  together shall constitute but one and the
same instrument.

         Section 28. General.  All representations  and warranties  contained in
                     -------
this  Agreement  or in any other  agreement  between the Grantor and the Secured
Party shall survive the  execution,  delivery and  performance of this Agreement
and the creation and payment of the Obligations. The Grantor waive notice of the
acceptance of this  Agreement by the Secured  Party.  Captions in this Agreement
are for reference and convenience  only and shall not affect the  interpretation
or meaning of any provision of this Agreement.

         Section 29. Guaranty by Shareholders.  All of the Grantor's commitments
                     ------------------------
and obligations  hereunder have been unconditionally  guaranteed pursuant to the
terms of a written guaranty made and executed by William Van Vliet.

                                       9
<PAGE>

         IN WITNESS WHEREOF,  the Grantor has caused this Security  Agreement to
be duly executed and delivered as of the date first above written.

                                    GRANTOR:

                                    OMNETRIX  INTERNATIONAL,  INC.,  a  Colorado
                                    corporation

                                    By: /s/ William Van Vliet
                                       -----------------------------------------
                                            William Van Vliet
                                            President

                                       10
</TEXT>
</DOCUMENT>
