Exhibit 10.2

Executive Employment Agreement

This Executive Employment Agreement ("Agreement") is made effective as of
January 1, 2014 (“Effective Date”), by and between AUXILIO, Inc., a Nevada
corporation (“Company”) and Joseph Flynn ("Executive”).
 
The parties agree as follows:
 
1.           Employment.  Company hereby employs Executive, and Executive hereby
accepts such employment, upon the terms and conditions set forth herein.
 
2.           Duties.
 
2.1           Position.  Executive is employed as President and Chief Executive
Officer and shall have the duties and responsibilities assigned by the Company’s
Board of Directors, as may be reasonably assigned from time to time.  Executive
shall perform faithfully and diligently all duties assigned to
Executive.  Company reserves the right to modify Executive’s duties at any time
in its sole and absolute discretion.
 
2.2            Best Efforts/Full-time.  Executive will expend Executive’s best
efforts on behalf of Company and its subsidiaries, and will abide by all
policies and decisions made by Company, as well as all applicable federal, state
and local laws, regulations or ordinances.  Executive will act in the best
interest of Company at all times.  Executive shall devote Executive’s full
business time and efforts to the performance of Executive’s assigned duties for
Company, unless Executive notifies the Board of Directors in advance of
Executive’s intent to engage in other paid work and receives the Board of
Directors’ express written consent to do so.
 
3.           Term.
 
3.1           Initial Term.  The employment relationship pursuant to this
Agreement shall be for an initial term commencing on the Effective Date set
forth above and continuing until December 31, 2015 (“Initial Term”), unless
sooner terminated in accordance with paragraph 7 below.
 
3.2            Renewal.  On completion of the Initial Term specified in
subparagraph 3.1 above, this Agreement will automatically renew for subsequent
12 month terms unless either party provides advance written notice to the other
that such party does not wish to renew the Agreement for a subsequent 12
months.  In the event either party gives notice of nonrenewal pursuant to this
subparagraph 3.2, this Agreement will expire at the end of the current term.
 
4.           Compensation.
 
4.1           Base Salary.  As compensation for Executive’s performance of
Executive’s duties hereunder, Company shall pay to Executive an initial Base
Salary of $275,000 for the first year, payable in accordance with the normal
payroll practices of Company, less
 

 
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required deductions for state and federal withholding tax, social security and
all other employment taxes and payroll deductions.  In the event Executive’s
employment under this Agreement is terminated by either party, for any reason,
Executive will be entitled to receive Executive’s Base Salary prorated to the
date of termination.
 
4.2           Incentive Compensation.  Executive will be eligible to earn
incentive compensation in accordance with the provisions set forth in Exhibit A.
 
4.3           Equity Compensation.  From time to time, Executive will be granted
stock options to purchase shares of the Company’s Common Stock at an exercise
price equal to the fair market value of the stock on the date of grant.
 
5.           Customary Fringe Benefits.  Executive will be eligible for all
customary and usual fringe benefits generally available to executives of Company
subject to the terms and conditions of Company’s benefit plan
documents.  Company reserves the right to change or eliminate the fringe
benefits on a prospective basis, at any time, effective upon notice to
Executive.
 
6.           Business Expenses.  Executive will be reimbursed for all
reasonable, out-of-pocket business expenses incurred in the performance of
Executive’s duties on behalf of Company.  To obtain reimbursement, expenses must
be submitted promptly with appropriate supporting documentation in accordance
with Company’s policies.
 
7.           Termination of Executive’s Employment.
 
7.1           Termination for Cause by Company.  Although Company anticipates a
mutually rewarding employment relationship with Executive, Company may terminate
Executive’s employment immediately at any time for Cause.  For purposes of this
Agreement, “Cause” is defined as: (a) acts or omissions constituting gross
negligence, recklessness or willful misconduct on the part of Executive with
respect to Executive’s obligations or otherwise relating to the business of
Company; (b) Executive’s material breach of this Agreement; and (c) Executive’s
conviction or entry of a plea of nolo contendere for fraud, misappropriation or
embezzlement, or any felony or crime of moral turpitude.  In the event
Executive’s employment is terminated in accordance with this subparagraph 7.1,
Executive shall be entitled to receive Executive’s Base Salary prorated to the
date of termination.  All other Company obligations to Executive pursuant to
this Agreement will become automatically terminated and completely
extinguished.  Executive will not be entitled to receive the Severance Payment
described in subparagraph 7.3 below.
 
7.2           Termination Without Cause by Company/Severance; Change of Control.
 
(a)           Company may terminate Executive’s employment under this Agreement
without Cause at any time on thirty (30) days’ advance written notice to
Executive.  In the event of (i) such termination without Cause, or (ii)
Executive’s inability to perform the essential functions of Executive’s position
due to a mental or physical disability or Executive's death, or (iii) in the
event of the termination of Executive without Cause following a “Change of
Control” (as defined in Section 7.2(b) below), Executive will receive the Base
Salary then in effect,
 

 
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prorated to the date of termination, and a “Severance Payment” equivalent to
(a)  payment of compensation for an additional twelve months, payable in
accordance with Company’s regular payroll cycle or lump sum, (b) upon Officers
death, any expiration provisions for all options or warrants occur at the end of
the original term or expiration date of the option or warrant and not subject to
shorter limitations related to termination of Optionee’s Continuous Service
provisions, and (c) an additional provision of accelerating all unvested stock
options and warrants  provided that Executive:  (i)  complies with all surviving
provisions of this Agreement as specified in subparagraph 13.8 below; and (ii)
executes a full general release, releasing all claims, known or unknown, that
Executive may have against Company arising out of or any way related to
Executive’s employment or termination of employment with
Company.  Notwithstanding the foregoing, in the event the Company’s securities
are publicly traded on the date of Executive’s termination of employment, any
portion of the aggregate salary continuation payments described in clause
(ii)(a) of this Section 7.2 and any acceleration of unvested stock options and
warrants pursuant to clause (ii)(b) of this Section 7.2, which, if paid, would
exceed the Section 409A Safe Harbor Limit (as defined in Section 7.2(c) below),
such excess portion shall be paid to Executive in a lump sum on the first day of
the seventh calendar month immediately following the date of Executive’s
termination.
 
(b)           As used herein, “Change of Control” means:  (i) a sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving entity and in which the holders of the
Company’s outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) of the voting power of the entity surviving such transaction or,
where the surviving entity is a wholly-owned subsidiary of another entity, the
surviving entity’s parent; or (iii) a reverse merger in which the Company is the
surviving entity but the shares of common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities of the surviving entity’s parent, cash or
otherwise, and in which the holders of the Company’s outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
Company or, where the Company is a wholly-owned subsidiary of another entity.
 
(c)           As used herein, “Section 409A Safe Harbor Limit” means an amount
equal to two (2) times the lesser of (i) Executive’s annual rate of compensation
for the taxable year immediately preceding the taxable year in which Executive’s
employment is terminated by the Company or (ii) the dollar amount in effect
under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, for
the taxable year in which Executive’s employment is terminated.
 
(d)           In the event that the benefits provided to you under this
Agreement, and any other agreements, plans or arrangements to which you may be a
party with the Company, cause you to incur an excise tax under Section 4999 of
the Internal Revenue Code of 1986 (the “Code”) or any corresponding provisions
of applicable state tax law in connection with a Change of Control, then the
Company will pay you an additional amount sufficient to reimburse you for (i)
the excise tax imposed on such benefits, and (ii) the federal and state income,
employment and excise taxes, determined on a fully “grossed-up” basis, imposed
on the benefits payments provided.  The Company shall be entitled to withhold
from the payment required hereunder such
 

 
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taxes as it may be required to withhold under applicable tax law, and any such
withheld taxes shall be treated as paid to you hereunder.
 
7.3           Voluntary Resignation by Executive for Good
Reason/Severance.  Executive may voluntarily resign Executive’s position with
Company for Good Reason, at any time on thirty (30) days’ advance written
notice.  In the event of Executive’s resignation for Good Reason, Executive will
be entitled to receive the Base Salary then in effect, prorated to the date of
termination, and the Severance described in subparagraph 7.2. above, provided
Executive complies with all of the conditions in subparagraph 7.2. above.  All
other Company obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished.  Executive will be deemed
to have resigned for Good Reason in the following circumstances:  (a)  Company’s
material breach of this Agreement; (b)  Executive’s Base Salary is reduced by
more than 10% below Executive’s salary in effect at any time during the
preceding twelve months, unless the reduction is made as part of, and is
generally consistent with, a general reduction of senior executive salaries; (c)
Executive’s position and/or duties are modified so that Executive’s duties are
no longer consistent with the position of a Chief Executive Officer, or
Executive no longer reports to the Board of Directors; and (d)  Company
relocates Executive’s principal place of work to a location more than sixty (60)
miles from the location specified in subparagraph 2.3, without Executive’s prior
written approval.  Notwithstanding the foregoing, in the event the Company’s
securities are publicly traded on the date of Executive’s termination of
employment, any portion of the aggregate salary continuation payments described
in clause (ii)(a) of Section 7.2 above and any acceleration of unvested stock
options and warrants pursuant to clause (ii)(b) of this Section 7.3, which, if
paid, would exceed the Section 409A Safe Harbor Limit (as defined in Section
7.2(c) above), such excess portion shall be paid to Executive in a lump sum on
the first day of the seventh calendar month immediately following the date of
Executive’s termination.
 
7.4           Voluntary Resignation by Executive Without Good Reason.  Executive
may voluntarily resign Executive’s position with Company without Good Reason, at
any time after the Initial Term, on thirty (30) days’ advance written
notice.  In the event of Executive’s resignation without Good Reason, Executive
will be entitled to receive only the Base Salary for the thirty-day notice
period and no other amount for the remaining months of the current term, if
any.  All other Company obligations to Executive pursuant to this Agreement will
become automatically terminated and completely extinguished.  In addition,
executive will not be entitled to receive the Severance Payment described in
subparagraph 7.2 above.
 
7.5           Termination of Employment Upon Nonrenewal.  In the event either
party decides not to renew this Agreement for a subsequent 12 months in
accordance with subparagraph 3.2 above, the Agreement will expire, Executive’s
employment with Company will terminate and Executive will only be entitled to
Executive’s Base Salary paid through the last day of the current term. All other
Company obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished.  Executive will not be
entitled to the Severance Payment described in subparagraph 7.3 above.
 
8.           No Conflict of Interest.  During the term of Executive’s employment
with Company and during any period Executive is receiving payments from Company,
Executive
 

 
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must not engage in any work, paid or unpaid, that creates an actual or potential
conflict of interest with Company.  Such work shall include, but is not limited
to, directly or indirectly competing with Company in any way, or acting as an
officer, director, employee, consultant, stockholder, volunteer, lender, or
agent of any business enterprise of the same nature as, or which is in direct
competition with, the business in which Company is now engaged or in which
Company becomes engaged during the term of Executive’s employment with Company,
as may be determined by the Board of Directors in its sole discretion.  If the
Board of Directors believes such a conflict exists during the term of this
Agreement, the Board of Directors may ask Executive to choose to discontinue the
other work or resign employment with Company.  If the Board of Directors
believes such a conflict exists during any period in which Executive is
receiving payments pursuant to this Agreement, the Board of Directors may ask
Executive to choose to discontinue the other work or forfeit the remaining
severance payments.  In addition, Executive agrees not to refer any client or
potential client of Company to competitors of Company, without obtaining
Company’s prior written consent, during the term of Executive’s employment and
during any period in which Executive is receiving payments from Company pursuant
to this Agreement.
 
9.           Confidentiality and Proprietary Rights.  Executive agrees to read,
sign and abide by Company’s Employee Innovations and Proprietary Rights
Assignment Agreement, which is provided with this Agreement and incorporated
herein by reference.
 
10.           Non-Solicitation.
 
10.1           Nonsolicitation of Customers or Prospects.  Executive
acknowledges that information about Company’s customers is confidential and
constitutes trade secrets.  Accordingly, Executive agrees that during the term
of this Agreement and for a period of one (1) year after the termination of this
Agreement, Executive will not, either directly or indirectly, separately or in
association with others, interfere with, impair, disrupt or damage Company’s
relationship with any of its customers or customer prospects by soliciting or
encouraging others to solicit any of them for the purpose of diverting or taking
away business from Company.
 
10.2           Nonsolicitation of Company’s Employees.  Executive agrees that
during the term of this Agreement and for a period of one (1) year after the
termination of this Agreement, Executive will not, either directly or
indirectly, separately or in association with others, interfere with, impair,
disrupt or damage Company’s business by soliciting, encouraging or attempting to
hire any of Company’s employees or causing others to solicit or encourage any of
Company’s employees to discontinue their employment with Company.
 
11.           Injunctive Relief.  Executive acknowledges that Executive’s breach
of the covenants contained in paragraphs 8-10 (collectively “Covenants”) would
cause irreparable injury to Company and agrees that in the event of any such
breach, Company shall be entitled to seek temporary, preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting any
bond or other security.
 
12.           Agreement to Arbitrate.  To the fullest extent permitted by law,
Executive and Company agree to arbitrate any controversy, claim or dispute
between them arising out of or in
 

 
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any way related to this Agreement, the employment relationship between Company
and Executive and any disputes upon termination of employment, including but not
limited to breach of contract, tort, discrimination, harassment, wrongful
termination, demotion, discipline, failure to accommodate, family and medical
leave, compensation or benefits claims, constitutional claims; and any claims
for violation of any local, state or federal law, statute, regulation or
ordinance or common law.  Claims for workers’ compensation, unemployment
insurance benefits and Company’s right to obtain injunctive relief pursuant to
paragraph 11 above are excluded.  For the purpose of this agreement to
arbitrate, references to “Company” include all parent, subsidiary or related
entities and their employees, supervisors, officers, directors, agents, pension
or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators,
affiliates and all successors and assigns of any of them, and this agreement
shall apply to them to the extent Executive’s claims arise out of or relate to
their actions on behalf of Company.
 
12.1           Consideration.   The mutual promise by Company and Executive to
arbitrate any and all disputes between them rather than litigate them before the
courts or other bodies, provides the consideration for this agreement to
arbitrate.
 
12.2           Initiation of Arbitration.  Either party may exercise the right
to arbitrate by providing the other party with written notice of any and all
claims forming the basis of such right in sufficient detail to inform the other
party of the substance of such claims.  In no event shall the request for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claims would be barred by the applicable statute of
limitations.
 
12.3           Arbitration Procedure.  The arbitration will be conducted in
Irvine, California by a single neutral arbitrator and in accordance with the
then current rules for resolution of employment disputes of the American
Arbitration Association (“AAA”).  The parties are entitled to representation by
an attorney or other representative of their choosing.  The arbitrator shall
have the power to enter any award that could be entered by a judge of the trial
court of the State of California, and only such power, and shall follow the
law.  In the event the arbitrator does not follow the law, the arbitrator will
have exceeded the scope of his or her authority and the parties may, at their
option, file a motion to vacate the award in court.  The parties agree to abide
by and perform any award rendered by the arbitrator.  Judgment on the award may
be entered in any court having jurisdiction thereof.
 
12.4           Costs of Arbitration.  Each party shall bear one half the cost of
the arbitration filing and hearing fees, and the cost of the arbitrator.
 
13.           General Provisions.
 
13.1           Successors and Assigns.  The rights and obligations of Company
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company.  Executive shall not be entitled to assign
any of Executive’s rights or obligations under this Agreement.
 

 
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13.2           Waiver.  Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
or prevent that party thereafter from enforcing each and every other provision
of this Agreement.
 
13.3           Attorneys’ Fees.  Each side will bear its own attorneys’ fees in
any dispute unless a statutory section at issue, if any, authorizes the award of
attorneys’ fees to the prevailing party.
 
13.4           Severability.  In the event any provision of this Agreement is
found to be unenforceable by an arbitrator or court of competent jurisdiction,
such provision shall be deemed modified to the extent necessary to allow
enforceability of the provision as so limited, it being intended that the
parties shall receive the benefit contemplated herein to the fullest extent
permitted by law.  If a deemed modification is not satisfactory in the judgment
of such arbitrator or court, the unenforceable provision shall be deemed
deleted, and the validity and enforceability of the remaining provisions shall
not be affected thereby.
 
13.5           Interpretation; Construction.  The headings set forth in this
Agreement are for convenience only and shall not be used in interpreting this
Agreement.  This Agreement has been drafted by legal counsel representing
Company, but Executive has participated in the negotiation of its
terms.  Furthermore, Executive acknowledges that Executive has had an
opportunity to review and revise the Agreement and have it reviewed by legal
counsel, if desired, and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
 
13.6           Governing Law.  This Agreement will be governed by and construed
in accordance with the laws of the United States and the State of
California.  Each party consents to the jurisdiction and venue of the state or
federal courts in Irvine, California, if applicable, in any action, suit, or
proceeding arising out of or relating to this Agreement.
 
13.7           Notices.  Any notice required or permitted by this Agreement
shall be in writing and shall be delivered as follows with notice deemed given
as indicated:  (a) by personal delivery when delivered personally; (b) by
overnight courier upon written verification of receipt; (c ) by telecopy or
facsimile transmission upon acknowledgment of receipt of electronic
transmission; or (d) by certified or registered mail, return receipt requested,
upon verification of receipt.  Notice shall be sent to the addresses set forth
below, or such other address as either party may specify in writing.
 
13.8           Survival.  Sections 8 (“No Conflict of Interest”), 9
(“Confidentiality and Proprietary Rights”), 10 (Nonsolicitation), 11
(“Injunctive Relief”), 12 (“Agreement to Arbitrate”), 13 (“General Provisions”)
and 14 (“Entire Agreement”) of this Agreement shall survive Executive’s
employment by Company.
 
14.           Entire Agreement.  This Agreement, including the Employee
Innovations and Proprietary Rights Assignment Agreement incorporated herein by
reference and Company’s stock option plan and related option documents described
in paragraph 4.3 of this Agreement, constitutes the entire agreement between the
parties relating to this subject matter and supersedes
 

 
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all prior or simultaneous representations, discussions, negotiations, and
agreements, whether written or oral.  This Agreement may be amended or modified
only with the written consent of Executive and the Board of Directors of
Company.  No oral waiver, amendment or modification will be effective under any
circumstances whatsoever.
 
THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.
 
Dated: ________________________
 
 
 
    ________________________________________________________
Joseph Flynn
President & Chief Executive Officer
 
 
Dated: ________________________
 
 
 
 
 
 
 
By:______________________________________________________                                                                           
John D. Pace
Chairman of the Board of Directors
AUXILIO, Inc.
27401 Los Altos, Suite 100
Mission Viejo, CA  92691
 

 
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EXHIBIT A

INCENTIVE COMPENSATION PLAN

 
 
Incentive Compensation:

 
The Executive will be entitled to a Bonus Plan totaling up to $125,000 per year.
Payout is equal to the percentage achievement of target multiplied by the target
compensation.  A minimum achievement of 80% is required for any bonus payout and
a maximum payout of 120% of target.
 
 
1.
80% of bonus potential tied to Ebitda target of $4M for the year subject to
change by the Board based on future strategic initiatives currently being
investigated.

 
 
2.
20% of bonus potential tied to Service revenue run rate at the end of 2013 of
$48M.

Equity Compensation

Revise vesting schedule for warrants granted in January 2013 tied to 2014 and
2015 performance.  New vesting schedule for these options:

Shares
Vesting Date
Performance Target
100,000
January 1, 2015
Adjusted EBITDA of $4 million for FY 2014
100,000
January 1, 2016
Adjusted EBITDA target for FY 2015 of $6.3 million.
100,000
January 1, 2017
Adjusted EBITDA target for FY 2016 of $9.3 million.

 
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