Document:

exhibit_10-1.htm

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    AMENDED
      AND RESTATED

    LOAN
      AND SECURITY AGREEMENT

    

    $1,500,000                                                                     El
      Segundo,
      California

                                                                               
Date:
      July 1,
      2007

    

    This
      Amended and Restated Loan and
      Security Agreement is entered into as of July 1, 2007 (this “Amended Loan
      Agreement” or this “Agreement”) by and among AUXILIO, INC., a Nevada
      corporation (“Company”), CAMBRIA INVESTMENT FUND, L.P., a California
      limited partnership (“CIF” or the “Holder”) and the other holders
      listed on Schedule 1 hereto (together, the
“Holders”).

    

    WHEREAS,
      the Company and the Holders previously entered into a Loan and Security
      Agreement dated as of October 25, 2006 (the “Original Loan Agreement”),
      which permitted the Company to borrow up to $1,500,000 from the Holders, and
      under the terms of which the Company borrowed a total of $745,000 (the
“Original Principal”) from such Holders.

    

    WHEREAS,
      the Company has requested that
      the Holders extend the maturity date of the Original Principal until May 1,
      2008, and the Holders have agreed to such extension in consideration for the
      terms and conditions set forth in this Amended Loan Agreement, which fully
      amends, restates and replaces the Original Loan Agreement.

    

    WHEREAS,
      as additional consideration
      for the extension of the Original Principal by the Holders, the Company has
      executed the Amended Warrant (as defined below), which accelerates the vesting
      of the warrant shares thereunder as described on Schedule 1.

    

    NOW,
      THEREFORE, THE PARTIES AGREE AS FOLLOWS:

    

    1.           Extension
      of Maturity Date; Interest; Warrants.

    

    (a)  The
      Company and the Holders agree that the maturity date of for the repayment of
      the
      Original Principal shall be May 1, 2008 (the “Original Principal Maturity
      Date”).  Upon the repayment of the Original Principal, the line of
      credit represented by the Original Principal shall be extinguished, and the
      amount available to the Company to borrow hereunder shall be reduced to $755,000
      (the “Future Principal”).   In the event that the Company
      borrows a portion of or all of the Future Principal from the Holders, the
      maturity date for the repayment of the Future Principal shall be December 31,
      2008 (the “Future Principal Maturity Date”, which, together with the
      Original Principal Maturity Date, may be referred to as a “Maturity
      Date”).    The Original Principal and the Future
      Principal shall be referred to herein as the “Loan”.  The
      Future Principal may only be drawn down by the Company if no Material Adverse
      Change (as defined below) shall have occurred.  As used herein,
“Material Adverse Change” means, when used in connection with the Company, any
      change or effect materially adverse to the business, financial condition or
      results of operations of the Company and its subsidiaries taken as a
      whole.

    

    (b)  The
      Company hereby promises to pay to the Holders at such place as Holder may
      specify, in lawful money of the United States of America, the Loan plus interest
      on the principal amount outstanding from time to time hereunder at a rate equal
      to the lesser of (i) the maximum lawful rate or (ii) twelve percent (12%) per
      year.    Interest on the outstanding principal balance shall
      accrue and be payable on the last day of each fiscal
      quarter.  Interest due and payable hereunder shall be computed on the
      basis of a year of 360 days and for the actual number of days
      elapsed.   All payments under this Agreement shall be applied
      first to fees and expenses, then to accrued but unpaid interest and then to
      principal.  Any principal or interest payments on this Agreement
      outstanding after the occurrence and during the continuance of a default under
      this Agreement shall bear interest at a rate equal to the lesser of (i) the
      lawful legal rate or (ii) five percent (5%) (computed annually) above the
      interest rate otherwise applicable under this Agreement.

    

    (c)  In
      connection with the Original Loan Agreement, the Company executed and delivered
      to the Holders a warrant to purchase 750,000 shares of common stock (the
“Original Warrant”).  As partial consideration for the Holders
      entering into this Amended Loan Agreement, the Company agrees that all Warrant
      Shares (as defined therein) shall vest thereunder as of the date
      hereof.   Concurrent with the execution of this Amended Loan
      Agreement, the Company shall execute and deliver an Amendment to Warrant to
      Purchase Common Stock (the

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Amended
      Warrant”), setting forth the terms of this Section
      1(c).  The Holders other than CIF agree that the Amended Warrant
      will be executed by the Company and CIF, as agent, on behalf of such
      Holders.

    

    (d)  As
      consideration for the extension of the Maturity Dates, the Company shall execute
      and deliver to the Holders a warrant (the “Additional Warrant”) to
      purchase 377,500 shares of common stock, all upon the terms and conditions
      set
      forth therein.  This Amended Loan Agreement, together with the
      Original Warrant (as amended by  the Amended Warrant) and the
      Additional Warrant, and any other documents delivered in connection with this
      Amended Loan Agreement, shall be referred to as the “Loan
      Documents”.   This Amended Loan Agreement shall fully amend,
      restate and replace the Original Loan Agreement.

    

    2.           Secured
      Agreement.  To secure repayment of all obligations evidenced by
      this Agreement and performance of all of Company’s obligations hereunder,
      Company, grants Holder a second priority security interest (subject to the
      first
      lien held by Laurus Master Fund, LTD) in all of Company’s inventory, accounts,
      equipment, cash, deposit accounts, securities, Intellectual Property (as defined
      in Exhibit A hereto), chattel paper, general intangibles and instruments,
      now existing or hereafter arising, and all proceeds thereof, as such terms
      are
      defined in the California Uniform Commercial Code (the “UCC”), whether
      now owned or hereafter acquired, or any value received in exchange for any
      of
      the foregoing (collectively, the “Collateral”) as set forth in Exhibit
      A.  Company shall take such actions as Holder reasonably requests
      from time to time to perfect or continue the second priority security interest
      granted hereunder including, without limitation, the filing of all necessary
      UCC
      financing statements in connection therewith.  Company shall not
      dispose of or encumber all or any substantial part of the Collateral, other
      than
      in the ordinary course of business, without the prior written consent of
      Holder.

    

    3.           Representations,
      Warranties and Covenants of Company.

    

    (a)
      Corporate Existence and Authority.  Company is and will
      continue to be duly organized, validly existing and in good standing under
      the
      laws of the jurisdiction of its incorporation or
      organization.  Company is and will continue to be qualified and
      licensed to do business in all jurisdictions in which any failure to do so
      would
      have a Material Adverse Change on Company.  Company has all requisite
      power to transact the business it transacts and proposes to transact, to execute
      and deliver this Agreement, and all other documents and agreements contemplated
      by this Agreement, and to perform the provisions of this Agreement and to
      consummate the transactions contemplated by this Agreement. The execution,
      delivery and performance of this Agreement, and all other documents and
      agreements contemplated by this Agreement, and the consummation of the
      transactions contemplated by this Agreement, have been duly authorized and
      approved by Company.  This Agreement, and all other documents and
      agreements contemplated by this Agreement have each been duly authorized,
      executed and delivered by, and each is the valid and binding obligation of,
      Company enforceable against Company in accordance with its terms, except as
      may
      be limited by applicable bankruptcy, reorganization, insolvency, moratorium
      or
      other similar laws or by legal or equitable principles relating to or limiting
      creditors’ rights generally.

    

    (b)
No
      Conflicts. Except as set forth on Schedule 3(b), the consummation of the
      transactions contemplated by this Agreement and the performance of the terms
      and
      provisions of this Agreement, and any other documents or agreements contemplated
      by this Agreement will not (i) contravene, result in any breach of, or
      constitute a default under any indenture, mortgage, deed of trust, bank loan
      or
      credit agreement, corporate charter, by-laws or other material agreement or
      instrument to which Company is a party or by which Company or any of its
      properties or the Collateral is bound,  (ii) conflict with or
      result in a breach of any of the terms, conditions or provisions of any order
      of
      any court, arbitrator or Federal, State, municipal or other governmental
      department, commission, board, bureau, agency or instrumentality, domestic
      or
      foreign (collectively, “Governmental Person”) applicable to Company or
      (iii) violate any material provision of any statute or other rule or regulation
      of any Governmental Person applicable to Company, which could have a material
      adverse effect on Company.

    

    (c)  Place
      of Business;
      Location of Collateral.  The address set forth in Section
      8(c) of this Agreement is Company’s chief executive
      office.  Company will give Holder prior written notice before opening
      any additional place of business or changing its chief executive
      office.  Holder acknowledges that portions of the Collateral are
      located in the field and are moved from time to time.   The
      Company will cooperate with Holder in (i) perfecting the security interests
      granted hereunder in all Collateral and (ii) in providing Holder, at Holder’s
      request, with current information regarding the whereabouts of the Collateral
      from time to time.

    
      
        
        

      

      
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    (d)  Title
      to Collateral;
      Permitted Liens.  Company is currently the sole owner of all the
      Collateral, except for those items and property which are leased by
      Company.  The Collateral now is and will remain free and clear of any
      and all liens, charges, security interests, encumbrances and adverse claims,
      except for the first priority security interest held by Laurus Master Fund
      LTD
      in all of the assets of the Company and any purchase money or lessor security
      interests in certain equipment  Holder now has, and will continue to
      have, a second-priority perfected and enforceable security interest in all
      of
      the Collateral, subject only to the purchase money or lessor security interests,
      contractual rights of set off under bank agreements, and the liens in favor
      of
      the other parties to the Intercreditor Agreement, and Company will at all times
      defend Holder and the Collateral against all claims of others (subject to the
      rights of Laurus Master Fund LTD and the holders of purchase money or lessor
      security interests in certain equipment, contractual rights of set off under
      bank agreements, and the liens in favor of the other parties to the
      Intercreditor Agreement).  So long as the loan is outstanding, none of
      the Collateral now is or will be affixed to any real property in such a manner,
      or with such intent, as to become a fixture.  Company is not and will
      not become a lessee under any real property lease pursuant to which the lessor
      may obtain any rights in any of the Collateral and no such lease now prohibits,
      restrains, impairs or will prohibit, restrain or impair Company’s right to
      remove any Collateral from the leased premises (subject to statutory rights
      of
      landlords).  Whenever any Collateral is located upon premises in which
      any third party has an interest (whether as owner, mortgagee, beneficiary under
      a deed of trust, lien or otherwise), Company shall, whenever requested by
      Holder, use its best efforts to cause such third party to execute and deliver
      to
      Holder, in form acceptable to Holder, such waivers and subordinations as Holder
      shall specify, so as to ensure that Holder’s rights in the Collateral are, and
      will continue to be, superior to the rights of any such third
      party.  Company will keep in full force and effect, and will comply
      with all the terms of, any lease of real property where any of the Collateral
      now or in the future may be located.

    

    (e)  Maintenance
      of
      Collateral.  Company will maintain the Collateral in good working
      condition, ordinary wear and tear excepted, and Company will not use the
      Collateral for any unlawful purposes.  Company will immediately advise
      Holder in writing of any material loss or damage to the Collateral.

    

    (f)  Books
      and
      Records.  Company has maintained and will maintain at Company’s
      chief executive office complete and accurate books and records, comprising
      an
      accounting system in accordance with generally accepted accounting
      principles.

    

    (g)  Financial
      Condition,
      Statements and Reports.  All financial statements now or in the
      future delivered to Holder have been, and will be, prepared in conformity with
      generally accepted accounting principles and now and in the future will fairly
      reflect the financial condition of Company, at the times and for the periods
      therein stated.  Between the last date covered by any such statement
      provided to Holder and the date hereof, there has been no Material Adverse
      Change of Company.  Company is now and will continue to be
      solvent.

    

    (h)  Compliance
      with
      Law.  Company has complied, and will comply, in all material
      respects, with all provisions of all applicable laws and regulations, including,
      but not limited to, those relating to Company’s ownership of real or personal
      property, the conduct and licensing of Company’s business, and all environmental
      matters.

    

    (i)  Litigation.  There
      is no claim, suit, litigation, proceeding or investigation pending or, to the
      best of Company’s knowledge, threatened by or against or affecting Company in
      any court or before any governmental agency, or any basis therefor known to
      Company, which could normally or reasonably be expected to result, either
      separately or in the aggregate, in a Material Adverse Change of
      Company.  Company will promptly inform Holder in writing of any claim,
      proceeding, litigation or investigation in the future threatened or instituted
      by or against Company.

    

    (j)  Use
      of
      Proceeds.  All proceeds of the loan shall be used solely for
      lawful business purposes.

    

    (k)
      Intellectual Property.  To its actual knowledge, Company
      possesses all material licenses, permits, franchises, authorizations, patents,
      copyrights, trademarks and trade names and any other tangible or intangible
      or
      intellectual property rights, or rights thereto, required to conduct its
      business substantially as now conducted and as currently proposed to be
      conducted, without actual knowledge of conflict with the rights of
      others.

    

    
      
        
        

      

      
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    (l)
      Indebtedness.  Except for the loan evidenced by this Agreement
      and the indebtedness identified on Schedule 3(l) or as otherwise
      disclosed in Company’s Quarterly Report on Form 10-QSB for the quarter
      ended,  March 31, 2007, which report was previously delivered to
      Holder, Company has no outstanding indebtedness of any kind (including
      contingent obligations, tax assessments and unusual forward or long-term
      commitments).

    

    (m)
Disclosure.  No
      representation or other statement made by Company to Holder contains any untrue
      statement of a material fact or omits to state a material fact necessary to
      make
      any statements made to Holder not misleading.

    

    (n)  Performance.  Company
      shall pay the principal of and interest on the loan evidenced by this Agreement
      in the manner provided in this Agreement.  The obligation of Company
      described in the preceding sentence is absolute and unconditional, irrespective
      of any tax or accounting treatment of such obligation including without
      limitation any documentary stamp, transfer, ad valorem or other taxes assessed
      by any jurisdiction in connection with this transaction.

    

    (o)  Stay,
      Extension and Usury Laws.  Company agrees (to the extent it may
      lawfully do so) that it will not at any time insist upon, plead or in any manner
      whatsoever claim or take the benefit or advantage of, any stay or extension
      law
      or any usury law or other law that would prohibit or forgive Company from paying
      all or a portion of the principal of, finance fee, or interest on the loan
      contemplated by this Agreement, wherever enacted, now or at any time hereinafter
      in force, or that may materially affect the covenants or the performance of
      this
      Agreement in any manner inconsistent with the provisions of this
      Agreement.  Company expressly waives all benefit or advantage of any
      such law.  If a court of competent jurisdiction prescribes that
      Company may not waive its rights to take the benefit or advantage of any stay
      or
      extension law or any usury law or other law in accordance with the prior
      sentence, then the obligation to pay interest on the principal shall be reduced
      to the maximum legal limit under applicable law governing the interest payable
      in connection with this Agreement, and any amount of interest paid by Company
      that is deemed illegal shall be deemed to have been a prepayment of principal
      on
      the loan.

    

    (p)  Taxes.  Company
      shall make all necessary tax filings and reports and pay prior to delinquency
      all taxes, assessments and governmental levies that may be imposed upon Company,
      except as contested in good faith and by appropriate proceedings or which will
      not result in a Material Adverse Change.

    

    (q)  Limitations
      on Indebtedness.  Other than amounts owing to Laurus Master Fund,
      LTD, without Holder’s prior written consent, Company shall not, directly or
      indirectly, create, incur, assume, suffer to exist or otherwise in any manner
      become liable or commit to become liable for any indebtedness other than
      Company’s obligations to Holder under this Agreement and indebtedness incurred
      in the ordinary course of business not in excess of US$50,000 in the
      aggregate.

    

    (r)  Insurance.  Company
      shall maintain insurance with responsible and reputable insurance companies
      or
      associations in such amounts and covering such risks as is usually carried
      by
      companies engaged in similar businesses and owning similar properties in the
      same general areas in which Company operates.

    

    (s)  Reports.  Company
      will provide Holder with quarterly financial statements within 45 days after
      the
      end of each quarter and such additional financial and other information as
      Holder may reasonably request from time to time; provided, that each such
      quarterly financial statement shall be deemed to have been delivered if the
      Company timely files with the Securities and Exchange Commission its quarterly
      or annual report covering such quarterly financial statements.

    

    (t)  Insurance.  Company
      will maintain insurance on the Collateral that includes a lender’s loss payable
      endorsement in favor of Holder as an additional loss payee.  Company
      will maintain insurance in a form acceptable to Holder relating to the
      Collateral and Company’s business in amounts and of a type that are customary to
      businesses similar to Company’s.

    
      
        
        

      

      
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    (u)  Consolidation.  Company
      will not merge or consolidate with any person or entity, or make any material
      investments in any person or entity, or dispose of substantially all of its
      assets without Holder’s prior written consent.

    

    (v)  Operations
      of the Company.  During the period of time that any amount under
      this Loan Agreement is unpaid and outstanding, Company shall, and shall cause
      each of its subsidiaries to, in all material respects, except as contemplated
      by
      this Loan Agreement, carry on its business in the usual and ordinary course
      in
      substantially the same manner as heretofore conducted and, to the extent
      consistent therewith, use reasonable efforts to preserve intact its current
      business organizations, keep available the services of its current officers
      and
      key employees and preserve its present relationships with customers, suppliers
      and others having significant business dealings with it.  Without
      limiting the generality of the foregoing, during such period, the Company shall
      not, and the Company shall cause its Subsidiaries not to, without the prior
      written consent of the Holder pursuant to the procedure set forth in Section
      3(v)(vii) below:

     

    (i)           (A) declare,
      set aside or pay any dividends on, or make any other actual, constructive or
      deemed distributions in respect of, any of its capital stock, or otherwise
      make
      any payments to its stockholders in their capacity as such, (B) split,
      combine or reclassify any of its capital stock or issue or authorize the
      issuance of any other securities in respect of, in lieu of or in substitution
      for shares of its capital stock, or (C) purchase, redeem or otherwise
      acquire any shares of its capital stock or any other securities thereof or
      any
      rights, warrants or options to acquire any such shares or other
      securities;

     

    (ii)           amend
      its articles or certificate of incorporation or bylaws or other similar
      organizational documents;

     

    (iii)           sell,
      lease, license, encumber or otherwise dispose of, or agree to sell, lease,
      encumber or otherwise dispose of, any of its assets, other than transactions
      that are in the ordinary course of business consistent with past practice or
      pursuant to licenses entered into in the ordinary course of business consistent
      with past practice, and, in any event, which involve assets which in the
      aggregate are not in excess of $50,000;

     

    (iv)           other
      than borrowings under this Loan Agreement and the loan of Laurus Master Fund,
      LTD, incur any indebtedness for borrowed money on terms less favorable to
      Company than those set forth in this Loan Agreement, or guarantee any such
      indebtedness or issue or sell any debt securities or warrants or rights to
      acquire any debt securities of the Company or its Subsidiaries on terms less
      favorable to Company than those set forth in this Loan Agreement, guarantee
      any
      debt securities of others, enter into any “keep-well” or other agreement to
      maintain any financial statement condition of another person or enter into
      any
      arrangement having the economic effect of any of the foregoing, or make any
      loans, advances or capital contributions to, or other investments in, any other
      person, other than to or in the Company or its Subsidiaries;

     

    (v)           increase
      the compensation payable or to become payable to its directors, officers or
      employees, except for increases required under employment agreements existing
      on
      the date hereof, or with respect to non-executive officer and non-director
      employees, in the ordinary course of business consistent with past practice
      and
      permitted under employment agreements, existing on the date hereof, or grant
      any
      severance or termination pay to, or enter into any employment or severance
      agreement, or establish, adopt, enter into, or amend or take action to enhance
      or accelerate any rights or benefits under, any collective bargaining, bonus,
      profit sharing, thrift, compensation, stock option, restricted stock, pension,
      retirement, deferred compensation, employment, termination, severance or other
      plan, agreement, trust, fund, policy or arrangement for the benefit of any
      director, officer or employee, except, in each case, as may be required by
      the
      terms of any such plan, agreement, trust, fund, policy or arrangement or to
      comply with applicable law or regulation;

     

    (vi)           knowingly
      violate or fail to perform any material obligation or duty imposed upon it
      by
      any applicable federal, state or local law, rule, regulation, guideline or
      ordinance;

     

    (vii)           other
      than in the ordinary course of business consistent with past practice, enter
      into, modify, amend or terminate any material contract or agreement to which
      the
      Company or any of its Subsidiaries is a party or waive, release or assign any
      material rights or claims;

     

    (viii)           Holder
      hereby designates Sandra Hahn (the “Agent Designee”), as the officer of
      Holder from which the Company must receive consent prior to taking (or any
      of
      its subsidiaries taking) the actions set forth in Section 3(v)
      hereof.  Within seventy-two (72) hours following receipt by the Agent
      Designee of written notice from Company’s designee of the Company’s (or any of
      its subsidiary’s) desire to take any actions set forth in Section 3(v),
      the Agent Designee shall respond to the Company in writing indicating whether
      Agent consents to such action.  If the Agent Designee fails to respond
      to the Company within such seventy-two (72) hour period, then Agent shall be
      deemed to have consented in writing to such requested actions for purposes
      of
Section 3(v) hereof.  Notwithstanding the forgoing, in the
      event that Michael D. Vanderhoof consents to a transaction described in
Section 3(v) in his role as a director then consent shall not otherwise
      be required hereunder.

     

    
      
        
        

      

      
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    4.           Prepayments.

    

    (a)  Optional.  Company
      may, from time to time, prepay the loan evidenced hereby, in whole or in part,
      so long as each partial prepayment of principal is equal to or greater than
      $10,000 and Company has given Holder two (2) or more business days’ written
      notice of such optional prepayment.  Any such optional prepayment of
      principal shall be without premium or penalty. Each prepayment of principal
      under this Section shall be accompanied by all interest then accrued and
      unpaid on the principal so prepaid.  Any principal prepaid pursuant to
      this Section shall be in addition to, and not in lieu of, all payments
      otherwise required to be paid under this Agreement at the time of such
      prepayment.  .

    

    (b)  Mandatory.  Unless
      otherwise agreed to by Holder, Company shall, subject to the consent of the
      Laurus Master Fund, such consent being required by that certain Subordination
      Agreement dated as of October 25, 2006, by and between the Company, Laurus
      Master Fund LTD and Cambria (the “Subordination Agreement”), prepay the loan to
      the extent of the net financing proceeds actually received by Company in the
      event that Company completes any financing transaction, including without
      limitation any public or private placements of debt or equity, that results
      in
      net proceeds to the Company in an amount in excess of $2,000,000 and that is
      unrelated to the exercise of:  (i) any existing stock option, (ii) the
      Company’s Incentive Stock Option Plans, or (iii) any existing contractual stock
      purchase right as of the date of this Agreement.

    

    
      	
               

            	
              5.

            	
              Optional
                Conversion.

            

    

    

    (a)   At
      Holders’ option, the Original Principal and all accrued interest under the loan
      evidenced by this Agreement shall be convertible, without the payment of any
      additional consideration by such Holders, into common stock of Company (the
      “Conversion Securities”).  In the event the Holders elect to
      convert the Original Principal into Conversion Securities, Company shall issue
      the Conversion Securities to Holder at a price per share equal to the “Exercise
      Price” as defined in the Original Warrant.  In addition, the Holders,
      at such Holders’ option, may convert the Future Principal and all accrued
      interest under the loan evidenced by this Agreement, without the payment of
      any
      additional consideration by such Holders, into Conversion
      Securities.  In the event the Holders elect to convert the Future
      Principal into Conversion Securities, Company shall issue the Conversion
      Securities to such Holders at a price per share equal to the “Exercise Price” as
      defined in the Additional Warrant.  The outstanding principal shall
      continue to accrue interest, and Company shall be obligated to pay such
      interest, according to the terms and conditions of this Agreement until the
      Conversion Date (as defined below).

    

    (b)  In
      order for the Holders
      to convert all amounts owing under this Agreement into equity, Holders shall
      deliver a written notice to Company that Holders elect to exercise such
      conversion.   Any conversion made at the election of Holders
      shall be deemed to have been made immediately prior to the close of business
      on
      the date Company is deemed to have received such notice, and the Holders or
      their nominees entitled to receive the equity shall be treated for all such
      purposes as the record holder or holders of such equity on such date (the
“Conversion Date”).  Company shall have no obligation to issue
      any fractional shares upon conversion.  Any fractional shares shall be
      rounded up to the nearest whole share.

    

    6.           Fees
      and Expenses.   Cambria Capital, LLC (“Cambria”) has
      served as placement agent in connection with the Loan, and the Company will
      pay
      Cambria an administrative and placement fee equal to 1.5% of the face amount
      of
      the Original Principal upon the date hereof.  In addition, CIF has
      served as agent on behalf of the Holders, and accordingly the Company will
      pay
      CIF an administrative and extension fee equal to 1.5% of the face amount of
      the
      Original Principal upon the date hereof.  Each party hereto shall pay
      its own costs and expenses,

    
      
        
        

      

      
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    including
      reasonable attorney’s fees, incurred in the preparation of this Agreement and
      the other documents executed in connection with this
      Agreement.  Company shall pay all reasonable and actual costs that the
      Holders may incur in enforcing this Agreement or exercising any rights with
      respect to the collateral, including without limitation reasonable attorneys’
fees and expenses.

    

    7.           Events
      of Default; Remedies.

    

    (a)  Events
      of Default Defined; Acceleration of Maturity.  If any of the
      following events (“Events of Default”) shall occur (for any reason
      whatsoever and whether it shall be voluntary or involuntary or by operation
      of
      law or otherwise):

    

    (i)  failure
      by the Company
      to make a payment of principal within ten days after the due date, whether
      at
      maturity or by reason of acceleration pursuant to the terms of this Agreement
      or
      by required prepayment;

    

    (ii)  failure
      by the Company
      to pay any interest accrued and owing within ten days after the applicable
      due
      date, or failure to pay any other liabilities or make any other payment, fee
      or
      charge provided for herein or in any other document contemplated hereby within
      ten days after the due date;

    

    (iii)  any
      representation or
      warranty made or deemed made by the Company in this Agreement shall prove to
      have been incorrect, untrue, or misleading in any material respect on the date
      when made or deemed to have been made; provided, however, that the
      Company shall have ten Business Days from notice of default to cure any such
      failure that is capable of cure before an Event of Default shall be deemed
      to
      have occurred under this Section;

    

    (iv)  failure
      by the Company
      to perform any of the covenants imposed by this Agreement; provided,
however, that the Company shall have ten Business Days from notice
      of the
      default to cure any such failure that is capable of cure before an Event of
      Default shall be deemed to have occurred under this Section;

    

    (v)  the
      Company shall (1)
      apply for or consent to the appointment of, or the taking of possession by,
      a
      receiver, custodian, trustee or liquidator of itself or of all or a substantial
      part of its property and assets, (2) be generally unable to pay its debts as
      such debts become due, (3) make a general assignment for the benefit of its
      creditors, (4) commence a voluntary case under the United States Bankruptcy
      Code
      or similar law or regulation (as now or hereafter in effect), (5) file a
      petition seeking to take advantage of any other law providing for the relief
      of
      debtors, (6) fail to controvert in a timely or appropriate manner, or acquiesce
      in writing to, any petition filed against it in an involuntary case under the
      United States Bankruptcy Code or other law or regulation, (7) dissolve, (8)
      take
      any corporate action under any applicable law analogous to any of the foregoing,
      or (9) take any corporate action for the purpose of effecting any of the
      foregoing;

    

    (vi)
      a proceeding or case shall be
      commenced, without the application or consent of Company in any court of
      competent jurisdiction, seeking (1) the liquidation, reorganization,
      dissolution, winding up or composition or readjustment of its debts, (2) the
      appointment of a trustee, receiver, custodian, liquidator or the like of it
      or
      for all or any substantial part of its assets, or (3) similar relief in respect
      of Company, under any law providing for the relief of debtors, and such
      proceeding or case shall continue undismissed, or unstayed and in effect, for
      a
      period of sixty (60) days; or an order for relief shall be entered in an
      involuntary case under the United States Bankruptcy Code or other similar law
      or
      regulation, against Company; or action under the laws of any jurisdiction
      affecting Company analogous to any of the foregoing shall be taken with respect
      to Company and shall continue unstayed and in effect for any period of sixty
      (60) days; or

    

    (vii)  final
      judgment for the
      payment of money shall be rendered by a court of competent jurisdiction against
      Company and Company shall not discharge the same or provide for its discharge
      in
      accordance with its terms, or procure a stay of execution thereof within sixty
      (60) days from the date of entry thereof and within said period of sixty (60)
      days, or such longer period during which execution of such judgment shall have
      been stayed, appeal therefrom and cause the execution thereof to be stayed
      during such appeal, and such judgment together with all other such judgments
      shall exceed in the aggregate US$50,000.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    then,
      subject to the rights of the Laurus Master Fund LTD contained in the
      Subordination Agreement,  (x) upon the occurrence of any Event of
      Default described in Section 7(a)(vi)  or (vii), the unpaid
      principal amount of the loan, together with the interest accrued thereon and
      all
      other amounts payable by Company under this Agreement, shall automatically
      become immediately due and payable, without presentment, demand, protest, notice
      of acceleration or intent to accelerate or other requirements of any kind,
      all
      of which are hereby expressly waived by Company or (y) upon the occurrence
      of
      any other Event of Default, Holder may, by notice to Company, declare the unpaid
      principal amount of the loan to be, and the same shall forthwith become, due
      and
      payable, together with the interest accrued thereon and all other amounts
      payable by Company hereunder.  Failure by Holder to indicate any Event
      of Default in any one notice shall not preclude Holder from indicating such
      omitted Event or Events of Default in future notices and shall not relieve
      Company of any liability under this Agreement, nor constitute a waiver of
      Holder’s rights under this Agreement.

    

    (b)  Suits
      for Enforcement.  If any Event of Default shall have occurred and
      be continuing, Holder may proceed to protect and enforce its rights against
      Company, subject to the terms of the Intercreditor Agreement, either by suit
      in
      equity or by action at law, or both, whether for the specific performance of
      any
      covenant or agreement contained in this Agreement or in aid of the exercise
      of
      any power granted in this Agreement, or Holder may proceed to enforce the
      payment by Company of all sums due under this Agreement or to enforce any other
      legal or equitable right of Holder including without limitation all rights
      of a
      secured party under the UCC.

    

    Company
      covenants that, if it shall default in the making of any payment due hereunder
      or in the performance or observance of any agreement contained in this
      Agreement, it will pay to Holder such further amounts, to the extent lawful,
      to
      cover any reasonable costs and expenses of collection or of otherwise enforcing
      Holder’s rights, including without limitation the reasonable counsel fees and
      costs and expenses incurred in connection with any restructuring, negotiation,
      refinancing, workout, bankruptcy or other similar transaction or
      proceeding.  The obligations set forth in this paragraph shall survive
      the payment in full of the loan.

    

    (c)  Remedies
      Cumulative.  No remedy herein conferred upon Holder is intended to
      be exclusive of any other remedy and each and every such remedy shall be
      cumulative and shall be in addition to every other remedy given hereunder or
      now
      or hereafter existing at law or in equity or by statute or
      otherwise.

    

    (d)  Remedies
      Not
      Waived.  No course of dealing between Company and any other person
      and no delay or failure in exercising any rights hereunder or under the loan
      in
      respect thereof shall operate as a waiver of Holder’s rights.

    

    8.           Miscellaneous.

    

    (a)  Reliance
      on and Survival of Representations.   All representations,
      warranties, covenants and agreements of Company herein shall be deemed to be
      material and to have been relied upon by Holder and shall survive the execution
      and delivery of this Agreement and of the securities, for so long as the loan
      remains outstanding.

    

    (b)  Successors
      and Assigns.  This Agreement shall bind and inure to the benefit
      of and be enforceable by Company, Holder and each of their respective successors
      and assigns, and, in addition, shall inure to the benefit of and be enforceable
      by each person who shall from time to time be a holder of the
      loan.  Holder shall be permitted to transfer the securities being sold
      hereunder in accordance with their terms and in accordance with applicable
      restrictions under applicable federal and state securities laws.

    

    (c)  Notices.  All
      notices and other communications provided for in this Agreement shall be in
      writing and delivered by registered or certified mail, postage prepaid, or
      delivered by overnight courier (for next business day delivery) or telecopied,
      addressed as follows, or at such other address as any of the parties hereto
      may
      hereafter designate by notice to the other parties given in accordance with
      this
Section:

    

    1)           if
      to Company:

     

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    Auxilio,
      Inc.

    27401
      Los
      Altos, Suite 100

    Mission
      Viejo, CA 92691

    Phone:
      949-614-0700

    Fax:
      949-614-0701

    

    

    
      	
               

            	
              2)

            	
              if
                to Holder:

            

    

    

    CAMBRIA
      INVESTMENT FUND, LP

    2321
      Rosecrans Avenue, Suite 4270

    El
      Segundo, CA  90245

    Fax:
      310.606.5555

    Phone:
      310.606.5556

    

    Any
      such
      notice or communication shall be deemed to have been duly given on the fifth
      day
      after being so mailed, the next business day after delivery by overnight
      courier, when received when sent by telecopy or upon receipt when delivered
      personally.

    

    (d)  Counterparts.  This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original but all of which together shall constitute one and the same
      instrument.  Signatures may be exchanged by telecopy, with original
      signatures to follow.  Each of the parties hereto agrees that it will
      be bound by its own telecopied signature and that it accepts the telecopied
      signatures of the other parties to this Agreement.  The original
      signature pages shall be forwarded to Holder or its counsel and Holder or its
      counsel will provide all of the parties hereto with a copy of the entire
      Agreement.

    

    (e)  Amendments.  This
      Agreement may only be amended by a writing duly executed by the parties
      hereto.

    

    (f)  Severability.
      If any term or provision of this Agreement or any other document executed in
      connection herewith shall be determined to be illegal or unenforceable, all
      other terms and provisions hereof and thereof shall neverthe­less remain
      effective and shall be enforced to the fullest extent permitted by applicable
      law.

    

    (g)  Governing
      Law; Submission to Process. THIS AGREEMENT AND ALL AMENDMENTS, SUPPLEMENTS,
      WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD
      TO PRINCIPLES OF CONFLICTS OF LAW.  THE COMPANY HEREBY IRREVOCABLY
      SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
      SITTING IN THE STATE OF CALIFORNIA AND AGREES AND CONSENTS THAT SERVICE OF
      PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY
      MEANS ALLOWED UNDER CALIFORNIA OR FEDERAL LAW.  THE COMPANY
      IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
      OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
      PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT
      IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

    

    (h)  Entire
      Agreement.  This Agreement and the other Loan Documents contain
      the entire Agreement of the parties hereto with respect to the transactions
      contemplated hereby and supersedes all previous oral and written, and all
      previous contemporaneous oral negotiations, commitments and
      understandings.

    

    (i)  Further
      Assurances.  Company agrees promptly to execute and deliver such
      documents and to take such other acts as are reasonably necessary to effectuate
      the purposes of this Agreement.

    

    (j)  Headings.  The
      headings contained herein are for reference purposes only and shall not affect
      in any way the meaning or interpretation of this Agreement.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    (k)  Assignments
      and
      Participations.  Company may not assign its rights or obligations
      hereunder or under the loan without the prior written consent of
      Holder.  Subject to compliance with applicable Federal and State
      Securities laws, Holder may assign all or any portion of the loan without the
      prior consent of Company.  Holder may sell or agree to sell to one or
      more other persons a participation in all or any part of any of the loan without
      the prior consent of Company.  Upon surrender of the loan, Company
      shall execute and deliver one or more substitute notes in such denominations
      and
      of a like aggregate unpaid principal amount or other amount issued to Holder
      and/or to Holder’s designated transferee or transferees.  Holder may
      furnish any information in the possession of Holder concerning Company, or
      any
      of its respective subsidiaries, from time to time to assignees and participants
      (including prospective assignees and participants).

    

    (l)  Waivers;
      Indemnity.  Company waives presentment and demand for payment,
      notice of dishonor, protest of this Agreement, notice of acceleration or intent
      to accelerate, and shall pay all costs of collection when incurred, including
      reasonable attorneys’ fees, costs and expenses.  Company shall
      indemnify and hold harmless from any claim, obligation or liability (including
      without limitation reasonable attorneys fees and expenses) arising out of this
      Agreement or the transactions contemplated under the Loan
      Documents.

    

    (m)  JURY
      WAIVER.  HOLDER AND COMPANY EACH WAIVES ANY RIGHT TO A JURY TRIAL
      OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF THE LOAN DOCUMENTS OR ANY OF
      THE
      TRANSACTIONS CONTEMPLATED HEREIN.

    

    (n)
Interest
      Payments.  Interest on the debt evidenced by this Agreement will
      not exceed the maximum rate or amount of non-usurious interest that may be
      contracted for, taken, reserved, charged, or received under law.  Any
      interest in excess of that maximum amount will be credited on the principal
      amount or, if the principal amount has been paid, refunded.  On any
      acceleration or required or permitted prepayment, any excess interest above
      the
      maximum lawful amount will be canceled automatically as of the acceleration
      or
      prepayment, or, if the excess interest has already been paid, credited on the
      principal amount, or, if the principal amount has been paid,
      refunded.  This provision overrides any conflicting provisions in this
      Agreement and all other instruments concerning the debt.

    

    

    [Signature
      page follows.]

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto
      have caused this Agreement to be executed as of the day and year set forth
      above.

    

    COMPANY:

    

    AUXILIO,
      INC.

    a
      Nevada corporation

    

    

    By:
      ________________________________

    Name:   Paul
      Anthony

    Title:  Chief
      Financial
      Officer

    

    

    

    HOLDERS:

    

    CAMBRIA
      INVESTMENT FUND,
      L.P.

    a
      California limited
      partnership

    

    By:  CAMBRIA
      INVESTMENT ADVISORS, LLC

    a
      California limited liability
      company,

    its
      general partner

    

    

    By:
      _____________________________

    Eric
      W. Richardson

    President

    

    

    

    __________________________________

    Donald
      Danks

    

    

    

    _________________________________

    Robert
      Burgess

    

    

    

    __________________________________

    James
      Burgess

    

    

    

    ___________________________________

    Andy
      Evans

    

    

    

    __________________________________

    Zav
      Liebling

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    

    

    __________________________________

    Jerry
      Broadway

    

    

    

    _________________________________

    Arthur
      Kaufman

    

    

    

    __________________________________

    Joseph
      Abrakjian

    

    

    

    ___________________________________

    Julius
      Frank, as Trustee of the Dr. Julius Frank Trust dated 8/6/2003

    

    

    

    __________________________________

    Jerome
      Pleet, as Trustee of the Jerome Pleet MD and Selma J. Pleet Living Trust UAD
      9/7/05

    

    

    

    

    _________________________________

    Levent
      Guven

    

    

    

    

    __________________________________

    S.
      Bruce
      Senor

    

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    The
      Collateral shall consist of all
      right, title and interest of Company, subject to the first priority security
      interest held by the Laurus Master Fund LTD in and to all of the assets of
      the
      Company,  in and to the following:

    

    (a)           All
      goods and equipment now owned or hereafter acquired, including, without
      limitation, all machinery, fixtures, vehicles (including motor vehicles and
      trailers), and any interest in any of the foregoing, and all attachments,
      accessories, accessions, replacements, substitutions, additions, and
      improvements to any of the foregoing, wherever located;

    

    (b)           All
      inventory, now owned or hereafter acquired, including, without limitation,
      all
      merchandise, raw materials, parts, supplies, packing and shipping materials,
      work in process and finished products including such inventory as is temporarily
      out of Company’s custody or possession or in transit and including any returns
      upon any accounts or other proceeds, including insurance proceeds, resulting
      from the sale or disposition of any of the foregoing and any documents of title
      representing any of the above, and Company’s books relating to any of the
      foregoing;

    

    (c)           All
      contract rights and general intangibles now owned or hereafter acquired,
      including, without limitation, all leases, license agreements, franchise
      agreements, blueprints, drawings, purchase orders, customer lists, route lists,
      infringements, claims, computer programs, computer discs, computer tapes,
      literature, reports, catalogs, design rights, income tax refunds, payments
      of
      insurance and rights to payment of any kind, all copyrights, copyright
      registrations and applications, copyright renewals or extensions, patents and
      patent applications, all reissues, divisions, continuations, renewals,
      extensions and continuations-in-part of all patents or patent applications,
      all
      trademarks, trade names, trade styles, service marks, logos, together with
      product lines and goodwill of the business connected with the use of, or
      otherwise symbolized by, each such trade name, trademark and service mark,
      trademark and service mark registrations and applications for trademark and
      service mark registrations, all renewals and extensions of any trademarks,
      trade
      names, trade styles, and service marks, all trade secret rights, including
      all
      rights to unpatented inventions, know-how, operating manuals, license rights
      and
      agreements and confidential information, all mask work or similar rights
      available for the protection of semiconductor chips, and all rights in the
      foregoing intellectual property to income, royalties, damages, and other
      payments, and all rights to sue for all past, present and future infringements,
      and all rights otherwise accruing under or pertaining to any of the foregoing
      throughout the world (“Intellectual Property”);

    

    (d)           All
      now existing and hereafter arising accounts, contract rights, royalties, license
      rights and all other forms of obligations owing to Company arising out of the
      sale or lease of goods, the licensing of technology or the rendering of services
      by Company, whether or not earned by performance, and any and all credit
      insurance, guaranties, and other security therefor, as well as all merchandise
      returned to or reclaimed by Company and Company’s books relating to any of the
      foregoing;

    

    (e)           All
      documents, cash, deposit accounts, securities, letters of credit, certificates
      of deposit, instruments and chattel paper now owned or hereafter acquired and
      Company’s books relating to the foregoing; and

    

    (f)           Any
      and all claims, rights and interests in any of the above and all substitutions
      for, additions and accessions to and proceeds thereof.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      1

    

    

    
      	
              First
                Name

            	
              Last
                Name

            	
              Company/Trustee

            	
               Loan
                Amt

            	
              Original
                Warrants ($0.46) - 50% coverage

            	
              Extension
                Warrants ($0.46) - 25% coverage

            	
              Total
                $0.46 Warrants

            	
              Total
                Warrant Coverage Percentage

            
	 	 	
              Cambria
                Investment Fund, LP

            	
               $     125,000

            	
                         62,500

            	
                     31,250

            	
                     93,750

            	
              75%

            
	
              Donald

            	
              Danks

            	 	
               $      25,000

            	
                         12,500

            	
                       6,250

            	
                     18,750

            	
              75%

            
	
              Robert

            	
              Burgess

            	 	
               $      25,000

            	
                         12,500

            	
                       6,250

            	
                     18,750

            	
              75%

            
	
              James

            	
              Burgess

            	 	
               $      25,000

            	
                         12,500

            	
                       6,250

            	
                     18,750

            	
              75%

            
	
              Andy

            	
              Evans

            	 	
               $      25,000

            	
                         12,500

            	
                       6,250

            	
                     18,750

            	
              75%

            
	
              Zav

            	
              Lieblinc

            	 	
               $      25,000

            	
                         12,500

            	
                       6,250

            	
                     18,750

            	
              75%

            
	
              Jerry

            	
              Broadway

            	 	
               $      20,000

            	
                         10,000

            	
                       5,000

            	
                     15,000

            	
              75%

            
	
              Arthur

            	
              Kaufman
                MD

            	 	
               $     100,000

            	
                         50,000

            	
                     25,000

            	
                     75,000

            	
              75%

            
	
              Joseph

            	
              Abrakjian

            	
              DOLCE
                VITA Inc.

            	
               $      50,000

            	
                         25,000

            	
                     12,500

            	
                     37,500

            	
              75%

            
	
              Julius

            	
              Frank,
                MD

            	 	
               $      50,000

            	
                         25,000

            	
                     12,500

            	
                     37,500

            	
              75%

            
	
              Jerome

            	
              Pleet,
                MD

            	
              Jerome
                Pleet MD and Selma J

              Pleet
                Living Trust UAD 9/7/05 TTEES

              Dated
                8/6/2003 Trustee: Dr. Julius Frank

            	
               $      25,000

            	
                         12,500

            	
                       6,250

            	
                     18,750

            	
              75%

            
	
              Levent

            	
              Guven

            	 	
               $      50,000

            	
                         25,000

            	
                     12,500

            	
                     37,500

            	
              75%

            
	
              S.
                Bruce    

            	Senor    	 	
               $     200,000

            	
                       
                100,000

            	
                   
                  50,000 

            	
                   
                 150,000 

            	75%

    

     

     

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    Schedule
      3(l)

    

    $2,800,000
      principal amount loan with Laurus Master Fund LTD; which loan is secured by
      a
      first priority interest in all of the assets of the Company.exhibit_10-2.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    AMENDMENT
      TO WARRANT TO PURCHASE
      COMMON STOCK

     

    This
      Amendment to Warrant to Purchase Common stock (this “Amendment”) is
      entered into as of July 1, 2007.  Reference is made to the Warrant to
      Purchase Common Stock dated as of October 25, 2006 (the “Original
      Warrant”) made by AUXILIO, INC. (the “Company”) in favor of CAMBRIA
      INVESTMENT FUND, L.P., a California limited partnership (“Holder”), and
      the other Holders (as defined therein).    As part of the
      consideration for the Holders entering into the Amended and Restated Loan and
      Security Agreement dated as of the date hereof, which, among other things
      extends the maturity date of the Original Principal (as defined therein), the
      Company agrees that all of the 750,000 Warrant Shares (as defined in the
      Original Warrant) shall all be fully vested as of the date hereof.

    

    Other
      than as described herein, the Company hereby ratifies and reaffirms all of
      the
      terms and conditions of the Original Warrant.

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
      as
      of the day and year set forth above.

     

    “Company”

    

    AUXILIO,
      INC.,

    a
      Nevada
      corporation

    

    

    By:____________________________________________________

    Name:

    Title:

    

    

    “Holder”

    

    CAMBRIA
      INVESTMENT FUND, L.P.

    a
      California limited
      partnership

    

    By:  CAMBRIA
      INVESTMENT
      ADVISORS, LLC

                            
      a California limited liability company,

        
                    its
      general partner

    

    

    By:
      _____________________________

    Eric
      W. Richardson,
      President

    

    
      
        1

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