EXHIBIT 10.2


 


SECURITY AGREEMENT


 


This SECURITY AGREEMENT
(“Agreement”) is made and entered into as of May 7, 2014, by and among Rackwise, Inc., a Nevada corporation (the “Borrower”),
each subsidiary of the Borrower listed on the signature pages hereof (together with the Borrower, each a “Grantor”),
and the secured parties listed on the signature pages hereof.


 


WITNESSETH:


 


WHEREAS, pursuant
to that certain Subscription Agreement, dated as of May 7, 2014 (as such may be amended, restated, supplemented, or otherwise modified
from time to time, including all schedules thereto, collectively, the “Subscription Agreement”), by and among
the Borrower and each secured party listed on the Schedule of Purchasers attached thereto (each, a “Purchaser”, and
collectively, the “Purchasers”), the Borrower has agreed to sell, and each of the Purchasers has agreed to purchase,
severally and not jointly, the Notes;


 


WHEREAS, each
Grantor other than the Borrower is a direct or indirect wholly-owned Subsidiary of the Borrower and will receive direct and substantial
benefits from the purchase by each of the Secured Parties of the Notes; and


 


WHEREAS, it
is a condition precedent to the Purchasers purchasing the Notes that the Borrower and each other Grantor have granted a security
interest in and to the Collateral (as defined in this Agreement) to the Holders to secure all of the Borrower’s obligations
under the Subscription Agreement and the Notes, on the terms and conditions set forth in this Agreement; and


 


NOW, THEREFORE,
for and in consideration of the Subscription Agreement and the Notes, the other premises and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties covenant and agree
as follows:


 


1.                 
Definitions.


 


Capitalized terms used
herein without definition shall have the meanings ascribed to them in the Subscription Agreement. In addition to the words and
terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, unless the context
otherwise clearly requires:


 


“Accounts”
shall have the meaning given to that term in the Code and shall include without limitation all rights of each Grantor, whenever
acquired, to payment for goods sold or leased or for services rendered, whether or not earned by performance.


 






    	 



    	 



    

 


“Chattel Paper”
shall have the meaning given to that term in the Code and shall include without limitation all writings owned by each Grantor,
whenever acquired, which evidence both a monetary obligation and a security interest in or a lease of specific goods.


 


“Code”
shall mean the Uniform Commercial Code as in effect on the date of this Agreement and as amended from time to time, of the state
or states having jurisdiction with respect to all or any portion of the Collateral from time to time.


 


“Collateral”
shall mean (i) all tangible and intangible assets of each Grantor, including, without limitation, collectively the Accounts, Chattel
Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments, Intellectual Property, Inventory and
Investment Property of each Grantor, and (ii) Proceeds of each of them.


 


“Deposit Accounts”
shall have the meaning given to that term in the Code and shall include a demand, time, savings, passbook or similar account maintained
with a bank, savings bank, savings and loan association, credit union, trust company or other organization that is engaged in the
business of banking.


 


“Documents”
shall have the meaning given to that term in the Code and shall include without limitation all warehouse receipts (as defined by
the Code) and other documents of title (as defined by the Code) owned by each Grantor, whenever acquired.


 


“Equipment”
shall have the meaning given to that term in the Code and shall include without limitation all goods owned by each Grantor, whenever
acquired and wherever located, used or brought for use primarily in the business or for the benefit of each Grantor, and not included
in Inventory of each Grantor, together with all attachments, accessories and parts used or intended to be used with any of those
goods or Fixtures, whether now or in the future installed therein or thereon or affixed thereto, as well as all substitutes and
replacements thereof in whole or in part.


 


“Event of Default”
shall mean (i) any of the Events of Default described in the Notes or (ii) any default by a Grantor in the performance of its obligations
under this Agreement.


 


“Fixtures”
shall have the meaning given to that term in the Code, and shall include without limitation leasehold improvements.


 


“General Intangibles”
shall have the meaning given to that term in the Code and shall include, without limitation, all leases under which each Grantor,
now or in the future leases and or obtains a right to occupy or use real or personal property, or both, all of the other contract
rights of each Grantor, whenever acquired, and customer lists, choses in action, claims (including claims for indemnification),
books, records, patents, copyrights, trademarks, blueprints, drawings, designs and plans, trade secrets, methods, processes, contracts,
licenses, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and
claims under insurance policies, and computer information, software, records and data, and oil, gas, or other minerals before extraction
now owned or acquired after the date of this Agreement by each Grantor.


 






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“Holder”
means each Purchaser and any person to whom a Purchaser assigns all or any portion of a Note in accordance with the terms thereof.
The Holder or Holders owning a majority of the principal amount of the Notes (the “Majority Holders”) are authorized
to act on behalf of all of the Holders.


 


“Instruments”
shall have the meaning given to that term in the Code and shall include, without limitation, all negotiable instruments (as defined
in the Code), all certificated securities (as defined in the Code) and all other writings which evidence a right to the payment
of money now or after the date of this Agreement owned by each Grantor.


 


“Inventory”
shall have the meaning given to that term in the Code and shall include without limitation all goods owned by each Grantor, whenever
acquired and wherever located, held for sale or lease or furnished or to be furnished under contracts of service, and all raw materials,
work in process and materials owned by each Grantor, and used or consumed in each Grantor’s business, whenever acquired and
wherever located.


 


“Investment Property,”
“Securities Intermediary” and “Commodities Intermediary” each shall have the meaning set forth in the Code.


 


“Loan Documents”
shall mean collectively, this Agreement, the Notes, the Subscription Agreement, the Security Agreement, and all other agreements,
documents and instruments executed and delivered in connection therewith, as each may be amended, restated, supplemented, replaced
or otherwise modified from time to time in accordance with the terms thereof.


 


“Permitted Liens”
has the meaning specified therefor in Schedule 1(f) of the Subscription Agreement.


 


“Proceeds”
shall have the meaning given to that term in the Code and shall include without limitation whatever is received when Collateral
or Proceeds are sold, exchanged, collected or otherwise disposed of, whether cash or non-cash, and includes without limitation
proceeds of insurance payable by reason of loss of or damage to Collateral.


 


Capitalized terms not
otherwise defined in this Agreement or the Subscription Agreement shall have the meanings attributed to such terms in the Code.


 






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2.                 
Security Interest.


 


(a)        As security
for the full and timely payment of the Notes in accordance with the terms of the Subscription Agreement and the performance of
the obligations of the Borrower under the Subscription Agreement, the Notes and the other Transaction Documents, each Grantor agrees
that the Holders shall have, and each Grantor hereby grants and conveys to and creates in favor of the Holders, a security interest
under the Code in and to its Collateral, whether now owned or existing or hereafter acquired or arising and regardless of where
located. The security interest granted to the Holders in this Agreement shall be a senior security interest, prior and superior
to the rights of all third parties existing on or arising after the date of this Agreement, subject to the Permitted Liens.


 


(b)        All of the Equipment,
Inventory and Goods owned by each Grantor is located in the states as specified on Schedule I attached hereto (except to
the extent any such Equipment, Inventory or Goods is in transit or located at such Grantor’s job site in the ordinary course
of business). Except as disclosed on Schedule I, no material Collateral is in the possession of any bailee, warehousemen,
processor or consignee. Schedule I discloses such Borrower name as of the date hereof as it appears in official filings
in the state or province, as applicable, of its incorporation, formation or organization, the type of entity of Borrower (including
corporation, partnership, limited partnership or limited liability company), the organizational identification number issued by
Borrower’s state of incorporation, formation or organization (or a statement that no such number has been issued), and the
chief place of business, chief executive officer and the office where Borrower keeps its books and records. Each Grantor has only
one state or province, as applicable, of incorporation, formation or organization. Each Grantor does not do business and have not
done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule
I attached hereto.


 


3.                 
Provisions Applicable to the Collateral.


 


The parties agree that
the following provisions shall be applicable to the Collateral:


 


(a)        Each Grantor
covenants and agrees that at all times during the term of this Agreement it shall keep accurate and complete books and records
concerning the Collateral that is now owned by the Grantor.


 


(b)        The Holders
or their representatives shall have the right, upon reasonable prior written notice to a Grantor and during the regular business
hours of the Grantor, to examine and inspect the Collateral and to review the books and records of the Grantor concerning the Collateral
that is now owned or acquired after the date of this Agreement by the Grantor and to copy the same and make excerpts therefrom;
provided, however, that from and after the occurrence of an Event of Default, the rights of inspection and entry shall be subject
to the requirements of the Code.


 






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(c)        Each Grantor
shall at all times during the term of this Agreement keep the Equipment, Inventory and Fixtures that are now owned by each Grantor
in the states set forth on Schedule I or, upon written notice to the Holders, at such other locations for which the Holders
have filed financing statements, and in no other states without ten (10) days’ prior written notice to the Holders, except
that each Grantor shall have the right until one or more Events of Default shall occur to sell, move or otherwise dispose of Inventory
and other Collateral in the ordinary course of business.


 


(d)        Each Grantor
shall not move the location of its principal executive offices without prior written notification to the Collateral Agent.


 


(e)        Without the
prior written consent of the Holders, each Grantor shall not sell, lease or otherwise dispose of any Equipment or Fixtures, except
in the ordinary course of their business.


 


(f)        Promptly upon
request of the Majority Holders from time to time, each Grantor shall furnish the Holders with such information and documents regarding
the Collateral and each Grantor’s financial condition, business, assets or liabilities, at such times and in such form and
detail as the Holders may reasonably request.


 


(g)        During the term
of this Agreement, each Grantor shall deliver to the Majority Holders, upon their reasonable, written request from time to time,
without limitation,


 


(i)        all
invoices and customer statements rendered to account debtors, documents, contracts, chattel paper, instruments and other writings
pertaining to each Grantor’s contracts or the performance of each Grantor’s contracts,


 


(ii)        evidence
of each Grantor’s accounts and statements showing the aging, identification, reconciliation and collection thereof, and


 


(iii)        reports
as to each Grantor’s inventory and sales, shipment, damage or loss thereof, all of the foregoing to be certified by authorized
officers or other employees of each Grantor, and Borrower shall take all necessary action during the term of this Agreement to
perfect any and all security interests in favor of each Grantor and to assign to Holders all such security interests in favor of
each Grantor.


 


(h)        Notwithstanding
the security interest in the Collateral granted to and created in favor of the Holders under this Agreement, each Grantor shall
have the right until one or more Events of Default shall occur, at its own cost and expense, to collect the Accounts and the Chattel
Paper and to enforce their contract rights.


 


(i)        Subject to the
terms of the Permitted Liens, after the occurrence of an Event of Default, the Majority Holders shall have the right, in their
sole discretion, to give notice of the Holders’ security interest to account debtors obligated to each Grantor and to take
over and direct collection of the Accounts and the Chattel Paper, to notify such account debtors to make payment directly to the
Holders and to enforce payment of the Accounts and the Chattel Paper and to enforce each Grantor’s contract rights. It is
understood and agreed by each Grantor that the Majority Holders shall have no liability whatsoever under this subsection (i) except
for their own gross negligence or willful misconduct.


 






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(j)        At all times
during the term of this Agreement, each Grantor shall promptly deliver to the Holders, upon the written request of the Majority
Holders, all existing leases, and all other leases entered into by each Grantor from time to time, covering any material Equipment
or Inventory (the “Leased Inventory”) which is leased to third parties.


 


(k)        Each Grantor
shall not change its name, entity status, federal taxpayer identification number, or provincial organizational or registration
number, or the state under which it is organized without the prior written consent of the Majority Holders, which consent shall
not be unreasonably withheld, conditioned or delayed.


 


(l)        Each Grantor
shall not close any of its Deposit Accounts or open any new or additional Deposit Accounts without first giving the Holders at
least ten (10) days’ prior written notice thereof; however, the Majority Holders have the power to waive a portion of the
notice period if such waiver does not harm Holders’ security position.


 


(m)        Subject to restrictions
resulting from the Permitted Liens, each Grantor shall cooperate with the Majority Holders, at each Grantor’s reasonable
expense, in perfecting Holders’ security interest in any of the Collateral. Each Grantor agrees that from time to time, at
its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action,
that may be necessary or that the Majority Holders may reasonably request, in order to perfect and protect the security interests
granted or purported to be granted hereby or to enable the Holders to exercise and enforce their rights and remedies hereunder
with respect to any of the Collateral.


 


(n)        Subject to restrictions
resulting from the Permitted Liens, the Majority Holders may file any necessary financing statements and other documents they deem
reasonably necessary in order to perfect the Holders’ security interest without either Grantor’s signature. Each Grantor
grants to the Majority Holders a power of attorney for the sole purpose of executing any documents on behalf of each Grantor which
the Majority Holders deem reasonably necessary to perfect Holders’ security interest. Such power, coupled with an interest,
is irrevocable.


 






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4.                 
Actions with Respect to Accounts.


 


Each Grantor irrevocably
makes, constitutes and appoints the Majority Holders its true and lawful attorney-in-fact with power to sign its name and to take
any of the following actions after the occurrence and prior to the cure of an Event of Default, at any time without notice to either
Grantor and at each Grantor’s reasonable expense, subject to the terms of the Permitted Liens:


 


(a)        Verify the validity
and amount of, or any other matter relating to, the Collateral by mail, telephone, telegraph or otherwise;


 


(b)        Notify all account
debtors that the Accounts have been assigned to the Holders and that the Holders have a security interest in the Accounts;


 


(c)        Direct all account
debtors to make payment of all Accounts directly to the Holders;


 


(d)        Take control
in any reasonable manner of any cash or non-cash items of payment or proceeds of Accounts;


 


(e)        Receive, open
and respond to all mail addressed to each Grantor;


 


(f)        Take control
in any manner of any rejected, returned, stopped in transit or repossessed goods relating to Accounts;


 


(g)        Enforce payment
of and collect any Accounts, by legal proceedings or otherwise, and for such purpose the Holders may:


 


(i)                
Demand payment of any Accounts or direct any account debtors to make payment of Accounts directly to the Holders;


 


(ii)              
Receive and collect all monies due or to become due to each Grantor pursuant to the Accounts;


 


(iii)            
Exercise all of each Grantor’s rights and remedies with respect to the collection of Accounts;


 


(iv)            
Settle, adjust, compromise, extend, renew, discharge or release Accounts in a commercially reasonable manner;


 


(v)              
Sell or assign Accounts on such reasonable terms, for such reasonable amounts and at such reasonable times as the Holders
reasonably deem advisable;


 






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(vi)            
Prepare, file and sign each Grantor’s name or names on any Proof of Claim or similar documents in any proceeding filed
under federal or state bankruptcy, insolvency, reorganization or other similar law as to any account debtor;


 


(vii)          
Prepare, file and sign each Grantor’s name or names on any notice of lien, claim of mechanic’s lien, assignment
or satisfaction of lien or mechanic’s lien or similar document in connection with the Collateral;


 


(viii)        
Endorse the name of each Grantor upon any chattel papers, documents, instruments, invoices, freight bills, bills of lading
or similar documents or agreements relating to Accounts or goods pertaining to Accounts or upon any checks or other media of payment
or evidence of a security interest that may come into the Holders’ possession;


 


(ix)            
Sign the name or names of each Grantor to verifications of Accounts and notices of Accounts sent by account debtors to each
Grantor; or


 


(x)              
Take all other actions that the Holders reasonably deem to be necessary or desirable to protect each Grantor’s interest
in the Accounts.


 


(h)        Negotiate and
endorse any Document in favor of the Holders or their designees, covering Inventory which constitutes Collateral, and related documents
for the purpose of carrying out the provisions of this Agreement and taking any action and executing in the name(s) of Borrower
any instrument which the Majority Holders may reasonably deem necessary or advisable to accomplish the purpose hereof. Without
limiting the generality of the foregoing, the Majority Holders shall have the right and power to receive, endorse and collect checks
and other orders for the payment of money made payable to each Grantor representing any payment or reimbursement made under, pursuant
to or with respect to, the Collateral or any part thereof and to give full discharge to the same. Each Grantor does hereby ratify
and approve all acts of said attorney and agrees that said attorney shall not be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law, except for said attorney’s own gross negligence or willful misconduct.
This power, being coupled with an interest, is irrevocable until the Notes are paid in full (at which time this power shall terminate
in full) and each Grantor shall have performed all of its obligations under this Agreement. Each Grantor further agrees to use
its reasonable efforts to assist the Collateral Agent in the collection and enforcement of the Accounts and will not hinder, delay
or impede the Majority Holders in any manner in their collection and enforcement of the Accounts.


 






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5.                 
Preservation and Protection of Security Interest.


 


Each Grantor represents
and warrants that it has, and covenants and agrees that at all times during the term of this Agreement, it will have, good and
marketable title to the Collateral now owned by it free and clear of all mortgages, pledges, liens, security interests, charges
or other encumbrances, except for the Permitted Liens and those junior in right of payment and enforcement to that of the Holders
or in favor of the Holders, and shall defend the Collateral against the claims and demands of all persons, firms and entities whomsoever.
Assuming the Majority Holders have taken all required action to perfect a security interest in the Collateral as provided by the
Code, each Grantor represents and warrants that as of the date of this Agreement the Holders have, and that all times in the future
the Holders will have, a first priority perfected security interest in the Collateral, prior and superior to the rights of all
third parties in the Collateral existing on the date of this Agreement or arising after the date of this Agreement, subject to
the Permitted Liens. Except as permitted by this Agreement, each Grantor covenants and agrees that it shall not, without the prior
written consent of the Majority Holders (i) borrow against the Collateral or any portion of the Collateral from any other person,
firm or entity, except for borrowings which are subordinate to the rights of the Holders, (ii) grant or create or permit to attach
or exist any mortgage, pledge, lien, charge or other encumbrance, or security interest on, of or in any of the Collateral or any
portion of the Collateral except those in favor of the Holders or the Permitted Liens, (iii) permit any levy or attachment to be
made against the Collateral or any portion of the Collateral, except those subject to the Permitted Liens, or (iv) permit any financing
statements to be on file with respect to any of the Collateral, except financing statements in favor of the Holders or those with
respect to the Permitted Liens. Each Grantor shall faithfully preserve and protect the Holders’ security interest in the
Collateral and shall, at its own reasonable cost and expense, cause, or assist the Majority Holders to cause that security interest
to be perfected and continue perfected so long as the Notes or any portion of the Notes are outstanding, unpaid or executory. For
purposes of the perfection of the Holders’ security interest in the Collateral in accordance with the requirements of this
Agreement, each Grantor shall from time to time at the request of the Holders file or record, or cause to be filed or recorded,
such instruments, documents and notices, including assignments, financing statements and continuation statements, as the Majority
Holders may reasonably deem necessary or advisable from time to time in order to perfect and continue perfected such security interest.
Each Grantor shall do all such other acts and things and shall execute and deliver all such other instruments and documents, including
further security agreements, pledges, endorsements, assignments and notices, as the Majority Holders in their discretion may reasonably
deem necessary or advisable from time to time in order to perfect and preserve the priority of such security interest as a first
lien security interest in the Collateral prior to the rights of all third persons, firms and entities, subject to the Permitted
Liens and except as may be otherwise provided in this Agreement. Each Grantor agrees that a carbon, photographic or other reproduction
of this Agreement or a financing statement is sufficient as a financing statement and may be filed instead of the original.


 






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6.          Insurance.


 


Risk of loss of, damage
to or destruction of the Equipment, Inventory and Fixtures is on each Grantor. Each Grantor shall insure the Equipment, Inventory
and Fixtures against such risks and casualties and in such amounts and with such insurance companies as is ordinarily carried by
corporations or other entities engaged in the same or similar businesses and similarly situated or as otherwise reasonably required
by the Majority Holders in their sole discretion. In the event of loss of, damage to or destruction of the Equipment, Inventory
or Fixtures during the term of this Agreement, each Grantor shall promptly notify the Majority Holders of such loss, damage or
destruction. At the reasonable request of the Majority Holders, each Grantor’s policies of insurance shall contain loss payable
clauses in favor of each Grantor and the Holders as their respective interests may appear and shall contain provision for notification
of the Holders thirty (30) days prior to the termination of such policy. At the request of the Majority Holders, copies of all
such policies, or certificates evidencing the same, shall be deposited with the Holders. If any Grantor fails to effect and keep
in full force and effect such insurance or fail to pay the premiums when due, the Majority Holders may (but shall not be obligated
to) do so for the account of such Grantor and add the cost thereof to the Notes. The Majority Holders are irrevocably appointed
attorney-in-fact of each Grantor to endorse any draft or check which may be payable to each Grantor in order to collect the proceeds
of such insurance. Unless an Event of Default has occurred and is continuing, the Holders will turn over to each Grantor the proceeds
of any such insurance collected by the Holder on the condition that each Grantor apply such proceeds either (i) to the repair of
damaged Equipment, Inventory or Fixtures, or (ii) to the replacement of destroyed Equipment, Inventory or Fixtures with Equipment,
Inventory or Fixtures of the same or similar type and function and of at least equivalent value (in the sole judgment of the Majority
Holders), provided such replacement Equipment, Fixtures or Inventory is made subject to the security interest created by this Agreement
and constitutes a first lien security interest in the Equipment, Inventory and Fixtures subject only to Permitted Liens and other
security interests permitted under this Agreement, and is perfected by the filing of financing statements in the appropriate public
offices and the taking of such other action as may be necessary or desirable in order to perfect and continue perfected such security
interest. Any balance of insurance proceeds remaining in the possession of the Holders after payment in full of the Notes shall
be paid over to the applicable Grantor or its order.


 


7.          Maintenance and Repair.


 


Each Grantor shall
maintain the Equipment, Inventory and Fixtures, and every portion thereof, in good condition, repair and working order, reasonable
wear and tear alone excepted, and shall pay and discharge all taxes, levies and other impositions assessed or levied thereon as
well as the cost of repairs to or maintenance of the same. If any Grantor fails to do so, the Holders may (but shall not be obligated
to) pay the cost of such repairs or maintenance and such taxes, levies or impositions for the account of such Grantor and add the
amount of such payments to the principal of the Notes


 






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8.          Preservation of Rights against Third Parties; Preservation of Collateral in Holders’ Possession.


 


Until such time as
the Holders exercise their right to effect direct collection of the Accounts and the Chattel Paper and to effect the enforcement
of each Grantor’s contract rights, each Grantor assumes full responsibility for taking any and all commercially reasonable
steps to preserve rights in respect of the Accounts and the Chattel Paper and their contracts against prior parties. The Holders
shall be deemed to have exercised reasonable care in the custody and preservation of such of the Collateral as may come into its
possession from time to time if the Holders take such action for that purpose as the relevant Grantor shall request in writing,
provided that such requested action shall not, in the judgment of the Holders, impair the Holders’ security interest in the
Collateral or its right in, or the value of, the Collateral, and provided further that the Holders receive such written request
in sufficient time to permit the Holders to take the requested action.


 


9.          Events of Default and Remedies.


 


(a)        If any one or
more of the Events of Default shall occur or shall exist, the Majority Holders may then or at any time thereafter, so long as such
default shall continue, foreclose the lien or security interest in the Collateral in any way permitted by law, or upon twenty (20)
days’ prior written notice to the relevant Grantor, sell any or all Collateral at private sale at any time or place in one
or more sales, at such price or prices and upon such terms, either for cash or on credit, as the Majority Holders, in their sole
discretion, may elect, or sell any or all Collateral at public auction, either for cash or on credit, as the Majority Holders,
in their sole discretion, may elect, and at any such sale, the Majority Holders, on behalf of the Holders, may bid for and become
the purchaser of any or all such Collateral. Pending any such action the Majority Holders may liquidate the Collateral.


 


(b)        If any one or
more of the Events of Default shall occur or shall exist, the Majority Holders may then, or at any time thereafter, so long as
such default shall continue, grant extensions to, or adjust claims of, or make compromises or settlements with, debtors, guarantors
or any other parties with respect to Collateral or any securities, guarantees or insurance applying thereon, without notice to
or the consent of any Grantor, without affecting each Grantor’s liability under this Agreement or the Notes. Each Grantor
waives notice of acceptance, of nonpayment, protest or notice of protest of any Accounts or Chattel Paper, any of its contract
rights or Collateral and any other notices to which each Grantor may be entitled.


 


(c)        If any one or
more of the Events of Default shall occur or shall exist and be continuing, then in any such event, the Majority Holders shall
have such additional rights and remedies in respect of the Collateral or any portion thereof as are provided by the Code and such
other rights and remedies in respect thereof which they may have at law or in equity or under this Agreement, including without
limitation the right to enter any premises where Equipment, Inventory and/or Fixtures are located and take possession and control
thereof without demand or notice and without prior judicial hearing or legal proceedings, which each Grantor expressly waives.


 






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(d)        The Majority
Holders shall apply the Proceeds of any sale or liquidation of the Collateral, and, subject to Section 5, any Proceeds received
by the Majority Holders from insurance, first to the payment of the reasonable costs and expenses incurred by the Collateral Agent
in connection with such sale or collection, including without limitation reasonable attorneys’ fees and legal expenses; second
to the payment of the Notes, pro rata, whether on account of principal or interest or otherwise as the Collateral Agent, in its
sole discretion, may elect, and then to pay the balance, if any, to the relevant Grantor or as otherwise required by law. If such
Proceeds are insufficient to pay the amounts required by law, the Grantors shall be liable for any deficiency.


 


(e)        Upon the occurrence
of any Event of Default, each Grantor shall promptly upon written demand by the Majority Holders assemble the Equipment, Inventory
and Fixtures and make them available to the Holders at a place or places to be designated by the Majority Holders. The rights of
the Majority Holders under this paragraph to have the Equipment, Inventory and Fixtures assembled and made available to them is
of the essence of this Agreement and the Majority Holders may, at their election, enforce such right by an action in equity for
injunctive relief or specific performance, without the requirement of a bond.


 


10.          Defeasance.


 


Notwithstanding anything
to the contrary contained in this Agreement upon the earlier of (i) payment and performance in full of the Notes or (ii) the conversion
of the Notes, this Agreement shall terminate and be of no further force and effect and the Holders shall thereupon terminate their
security interest in the Collateral. Until such time, however, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns, provided that, without the prior written consent of the Majority Holders, no Grantor
may assign this Agreement or any of its rights under this Agreement or delegate any of its duties or obligations under this Agreement
and any such attempted assignment or delegation shall be null and void. This Agreement is not intended and shall not be construed
to obligate the Holders to take any action whatsoever with respect to the Collateral or to incur expenses or perform or discharge
any obligation, duty or disability of any Grantor.


 


11.          
Miscellaneous.


 


(a)        The provisions
of this Agreement are intended to be severable. If any provision of this Agreement shall for any reason be held invalid or unenforceable
in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction
or any other provision of this Agreement in any jurisdiction.


 






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(b)        No failure or
delay on the part of the Holders in exercising any right, remedy, power or privilege under this Agreement and the Notes shall operate
as a waiver thereof or of any other right, remedy, power or privilege of the Holders under this Agreement, the Notes or any of
the other Loan Documents; nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other
right, remedy, power or privilege or further exercise thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges of the Holders under this Agreement, the Notes and the other Loan Documents are cumulative
and not exclusive of any rights or remedies which they may otherwise have.


 


(c)        Unless otherwise
provided herein, all demands, notices, consents, service of process, requests and other communications hereunder shall be in writing
and shall be delivered in person or by overnight courier service, or mailed by certified mail, return receipt requested, addressed:


 


If to Borrower
or any other Grantor:  At the address for the Borrower set forth in the Subscription Agreement


 


If to the Holder:  At the address
for such Holder set forth in the Holder’s signature page to the Subscription Agreement or the address otherwise communicated
by such Holder to the Borrower in writing for such notice purposes.


 


Any such notice shall
be effective when delivered, if delivered by hand delivery, overnight courier service, or U.S. Mail return receipt requested.


 


(d)        The section
headings contained in this Agreement are for reference purposes only and shall not control or affect its construction or interpretation
in any respect.


 


(e)        Unless the context
otherwise requires, all terms used in this Agreement which are defined by the Code shall have the meanings stated in the Code.


 


(f)        The Code shall
govern the settlement, perfection and the effect of attachment and perfection of the Holders’ security interest in the Collateral,
and the rights, duties and obligations of the Holders and each Grantor with respect to the Collateral. This Agreement shall be
deemed to be a contract under the laws of the State of Colorado and the execution and delivery of this Agreement and, to the extent
not inconsistent with the preceding sentence, the terms and provisions of this Agreement shall be governed by and construed in
accordance with the laws of that State. EACH GRANTOR HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.


 






    	13



    	 



    

 


(g)        This Agreement
may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the
same instrument. All of such counterparts shall be read as though one, and they shall have the same force and effect as though
all the signers had signed a single page. In the event that any signature is delivered by facsimile transmission or by an e-mail
which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if
such signature page were an original thereof.


 


[Signature Page Follows]


 




    	14



    	 



    


 


IN WITNESS WHEREOF,
and intending to be legally bound, the parties have executed and delivered this Security Agreement as of the day and year set forth
at the beginning of this Security Agreement.


 


 





	GRANTORS:	RACKWISE, INC.,
a Nevada corporation
	 	 
	 	 
	 	By: 	/s/ Guy A. Archbold
	 	Name:
Title:	Guy A. Archbold
Chief Executive
Officer and President
	 	 	 
	 	 	 
	 	VISUAL NETWORK DESIGN, INC.,
a Delaware corporation
	 	 	 
	 	 	 
	 	By:	/s/ Guy A. Archbold
	 	Name:
Title:	Guy A. Archbold
Chief Executive Officer



 


 



[SECURED PARTIES SIGN BY EXECUTING
OMNIBUS SIGNATURE PAGE 


TO THE SUBSCRIPTION AGREEMENT]


 



    	[SIGNATURE PAGE TO SECURITY AGREEMENT]






    	 



    

 


Schedule I


 


		1.	State(s)/Jurisdictions in which Collateral is located:



 


California


North Carolina


 


		2.	Grantor Information:



 


	Grantor
	 
	
        Rackwise, Inc.

        a Nevada corporation

        NV Entity No.: E0404132010-9

         

        Executive Offices Address:

         

        2365 Iron Point Road, Suite 190

        Folsom, CA 95630

        Chief Executive Officer: Guy A. Archbold
	
        Visual Network Design, Inc.,

        a Delaware corporation

        NV Entity No.: 3612213

         

        Executive Offices Address:

         

        2365 Iron Point Road, Suite 190

        Folsom, CA 95630

        Chief Executive Officer: Guy A. Archbold