Document:

Auxilio 10.2 CambriaWarrant

    THIS
      WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE
      TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT
      TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
      AND
      ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

     

    WARRANT
      TO PURCHASE COMMON STOCK 

     

    Date:
      October 25, 2006

    

    THIS
      WARRANT CERTIFIES THAT, for the agreed upon value of $10.00 and for other good
      and valuable consideration, CAMBRIA INVESTMENT FUND, L.P., a California limited
      partnership (“Holder”),
      and
      the other Holders described on Schedule 1 of the Agreement (as defined below),
      is entitled to purchase a total of up to 750,000 shares of common stock (the
      “Shares”)
      of
      AUXILIO, INC., a Nevada corporation (“Company”).
      Company and Holder have entered into a Loan and Security Agreement of even
      date
      herewith (the “Agreement”),
      pursuant to which Holder agreed to make a loan to Company in the amount of
      up to
      $1,500,000 (the “Loan”),
      and
      Company agreed to issue this Warrant. This Warrant may be exercised at any
      time
      during the term hereof, at the initial exercise price per Share equal to the
      closing bid price of Company’s common stock as of the date of the Agreement,
      which amount is equal to $0.46 per share (the “Exercise
      Price”)
      as
      adjusted pursuant to Article
      2
      of this
      Warrant, subject to the provisions and upon the terms and conditions set forth
      in this Warrant (the “Warrant”).
      This
      Warrant gives Holder the right to purchase a total of up to 750,000 shares
      of
      common stock (the “Warrant
      Shares”),
      depending upon the amount drawn on the Loan. Upon the execution of this Warrant,
      300,000 of the 750,000 Warrant Shares shall immediately vest. Upon the initial
      advance of the Loan, an additional 30,000 Warrant Shares shall vest, and for
      each $100,000 drawn down on the Loan (starting at $101,000), an additional
      30,000 Warrant Shares shall vest. 

    

    ARTICLE
      1. EXERCISE

     

    1.1     Method
      of Exercise.
      Holder
      may exercise this Warrant by delivering a duly executed Notice of Exercise
      in
      substantially the form attached hereto as Appendix
      1
      to the
      principal office of Company. Unless Holder is exercising the conversion right
      set forth in Section
      1.2,
      Holder
      shall also deliver to Company a check for the aggregate Exercise Price for
      the
      Shares being purchased.

     

    1.2     Cashless
      Exercise.
      In lieu
      of exercising this Warrant as specified in Section
      1.1,
      Holder
      may from time to time convert this Warrant, in whole or in part, into a number
      of Shares determined by dividing (a) the aggregate fair market value of the
      Shares or other securities otherwise issuable upon exercise of this Warrant
      minus the aggregate Exercise Price of such Shares by (b) the fair market value
      of one Share. The fair market value of the Shares shall be determined pursuant
      to Section
      1.4.

     

    1.3     No
      Shareholder Rights.
      This
      Warrant does not entitle Holder to any voting rights as a shareholder of Company
      prior to the exercise hereof.

     

    1.4     Fair
      Market Value.
      If the
      Shares are traded in a public market, the fair market value of the Shares shall
      be the closing price of the Shares (or the closing price of Company’s stock into
      which the Shares are convertible) reported for the business day immediately
      before Holder delivers its Notice of Exercise to Company. If the Shares are
      not
      traded in a public market, the Board of Directors of Company shall determine
      the
      fair market value in its reasonable good faith judgment. The foregoing
      notwithstanding, if Holder advises the Board of Directors in writing that Holder
      disagrees with such determination, then Company and Holder shall promptly agree
      upon a reputable investment banking or public accounting firm to undertake
      such
      valuation. If the valuation of such investment banking or public accounting
      firm
      is greater than that determined by the Board of Directors, then all fees and
      expenses of such investment banking or public accounting firm shall be paid
      by
      Company. In all other circumstances, Holder shall pay such fees and
      expenses.

     

    1.5     Delivery
      of Certificate and New Warrant.
      Promptly after Holder exercises this Warrant, Company shall deliver to Holder
      certificates for the Shares acquired and, if this Warrant has not been fully
      exercised or converted and has not expired, a new Warrant representing the
      Shares not so acquired in exchange for Holder’s delivery to Company of this
      Warrant.

     

    1.6     Replacement
      of Warrants.
      On
      receipt of evidence reasonably satisfactory to Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of loss, theft or
      destruction, on delivery of an indemnity agreement reasonably satisfactory
      in
      form and amount to Company, or in the case of mutilation or surrender and
      cancellation of this Warrant, Company at its expense shall execute and deliver,
      in lieu of this Warrant, a new warrant of like tenor.

     

    1.7     Sale,
      Merger, or Consolidation of Company

     

    (a)     Acquisition.
      For the
      purpose of this Warrant, “Acquisition”
means
      any sale, license, or other disposition of all or substantially all of the
      assets of Company, or any reorganization, consolidation, or merger of Company
      where the holders of Company’s securities before the transaction beneficially
      own less than fifty percent (50%) of the outstanding voting securities of the
      surviving entity after the transaction.

     

    (b)     Assumption
      of Warrant.
      Upon
      the closing of any Acquisition, the successor entity shall assume the
      obligations of this Warrant, and this Warrant shall be exercisable for the
      same
      securities, cash, and property as would be payable for the Shares issuable
      upon
      exercise of the unexercised portion of this Warrant as if such Shares were
      outstanding on the record date for the Acquisition and subsequent closing.
      The
      Exercise Price shall be adjusted accordingly. If the successor entity refuses
      to
      assume this Warrant in connection with the Acquisition, the Company shall give
      Holder written notice at least 5 days prior to the closing of the Acquisition
      of
      such fact. In such event, notwithstanding any other provision of this Warrant
      to
      the contrary, Holder may immediately exercise this Warrant in the manner
      specified in this Warrant with such exercise effective immediately prior to
      closing of the Acquisition. If Holder elects not to exercise this Warrant,
      then
      this Warrant will terminate immediately prior to the closing of the
      Acquisition.

     

     

     

    ARTICLE
      2. ADJUSTMENTS TO THE SHARES.

     

    2.1     Stock
      Dividends, Splits, Etc.
      If
      Company declares or pays a dividend on its common stock (or the Shares if the
      Shares are securities other than common stock) payable in common stock, or
      other
      securities, subdivides the outstanding common stock into a greater amount of
      common stock, or, if the Shares are securities other than common stock,
      subdivides the Shares in a transaction that increases the amount of common
      stock
      into which the Shares are convertible, then upon exercise of this Warrant,
      for
      each Share acquired, Holder shall receive, without cost to Holder, the total
      number and kind of securities to which Holder would have been entitled had
      Holder owned the Shares of record as of the date the dividend or subdivision
      occurred.

     

    2.2     Reclassification,
      Exchange or Substitution.
      Upon
      any reclassification, exchange, substitution, or other event that results in
      a
      change of the number and/or class of the securities issuable upon exercise
      or
      conversion of this Warrant, Holder shall be entitled to receive, upon exercise
      or conversion of this Warrant, the number and kind of securities and property
      that Holder would have received for the Shares if this Warrant had been
      exercised immediately before such reclassification, exchange, substitution,
      or
      other event. Company or its successor shall promptly issue to Holder a new
      Warrant for such new securities or other property. The new Warrant shall provide
      for adjustments which shall be as nearly equivalent as may be practicable to
      the
      adjustments provided for in this Article
      2
      including, without limitation, adjustments to the Exercise Price and to the
      number of securities or property issuable upon exercise of the new Warrant.
      The
      provisions of this Section
      2.2
      shall
      similarly apply to successive reclassifications, exchanges, substitutions,
      or
      other events.

     

    2.3     Adjustments
      for Combinations, Etc.
      If the
      outstanding Shares are combined or consolidated, by reclassification or
      otherwise, into a lesser number of shares, the Exercise Price shall be
      proportionately increased.

     

    2.4     Adjustments
      for Dilutive Issuances.
      If at
      any time while this Warrant is outstanding, the Company issues or sells shares
      of Common Stock for a consideration per share less than the then Exercise Price
      or for no consideration (such lower price, the “Base Share Price” and such
      issuances collectively, a “Dilutive Issuance”), then, the Exercise Price shall
      be reduced to a price equal to the quotient obtained by dividing (1) an amount
      equal to the sum of (a) the total number of shares of Common Stock outstanding
      immediately prior to such issuance, multiplied by the Exercise Price in effect
      immediately prior to such issuance, and (b) the consideration received by the
      Company upon such issuance, by (2) the total number of shares of Common Stock
      outstanding immediately after the issuance of such Common Stock (as set forth
      in
      this clause (ii), the “Quotient”). Such adjustment shall be made whenever such
      shares of Common Stock are issued. Upon each adjustment of the Exercise Price
      pursuant to the provisions of this Section, the number of Warrant Shares
      issuable upon the exercise of each Warrant shall be adjusted to the nearest
      full
      amount by multiplying a number equal to the Exercise Price in effect immediately
      prior to such adjustment by the number of Warrant Shares issuable upon exercise
      of the Warrants immediately prior to such adjustment and dividing the product
      so
      obtained by the Quotient. Notwithstanding anything to the contrary herein,
      this
      Section 2.4 shall not apply to the following (1) the granting of options to
      employees, officers, directors or consultants of the Company pursuant to any
      stock option plan or other written compensatory agreement duly adopted by a
      majority of the members of the Board of Directors of the Company or a majority
      of the members of a committee of non-employee directors established for such
      purpose, or (2) the shares of Common Stock issued upon conversion of the notes
      issued to the Laurus Master Fund LTD, provided that such notes have not been
      amended since the date hereof, or (3) the issuance of securities in connection
      with acquisitions, joint ventures, arrangements related to the Company’s
      operations and strategic relationships, or other strategic investments, the
      primary purpose of which is not to raise capital.

     

    2.5     No
      Impairment.
      Company
      shall not, by amendment of its Certificate of Incorporation or through a
      reorganization, transfer of assets, consolidation, merger, dissolution, issue,
      or sale of securities or any other voluntary action, avoid or seek to avoid
      the
      observance or performance of any of the terms to be observed or performed under
      this Warrant by Company, but shall at all times in good faith assist in carrying
      out of all the provisions of this Article
      2
      and in
      taking all such action as may be necessary or appropriate to protect Holder’s
      rights under this Article against impairment. If Company takes any action
      affecting the Shares or its common stock other than as described above that
      adversely affects Holder’s rights under this Warrant, the Exercise Price shall
      be adjusted downward and the number of Shares issuable upon exercise of this
      Warrant shall be adjusted upward in such a manner that the aggregate Exercise
      Price of this Warrant is unchanged.

     

    2.6     Fractional
      Shares.
      No
      fractional Shares shall be issuable upon exercise or conversion of the Warrant
      and the number of Shares to be issued shall be rounded down to the nearest
      whole
      Share. If a fractional share interest arises upon any exercise or conversion
      of
      the Warrant, Company shall eliminate such fractional share interest by paying
      Holder an amount computed by multiplying the fractional interest by the fair
      market value of a full Share.

     

    2.7     Certificate
      as to Adjustments.
      Upon
      each adjustment of the Exercise Price, Company at its expense shall promptly
      compute such adjustment, and furnish Holder with a certificate of its chief
      financial officer setting forth such adjustment and the facts upon which such
      adjustment is based. Company shall, upon written request, furnish Holder a
      certificate setting forth the Exercise Price in effect upon the date thereof
      and
      the series of adjustments leading to such Exercise Price.

     

    ARTICLE
      3.  REPRESENTATIONS
      AND COVENANTS OF THE COMPANY.

     

    3.1     Representations
      and Warranties.
      Company
      hereby represents and warrants to Holder that all Shares which may be issued
      upon the exercise of the purchase right represented by this Warrant and all
      securities, if any, issuable upon conversion of the Shares, shall, upon
      issuance, be duly authorized, validly issued, fully paid and nonassessable,
      and
      free of any liens and encumbrances except for restrictions on transfer provided
      for herein or under applicable federal and state securities laws.

     

    3.2     Notice
      of Certain Events.
      If
      Company proposes at any time (a) to declare any dividend or distribution upon
      its common stock, whether in cash, property, stock or other securities and
      whether or not a regular cash dividend; (b) to offer for subscription pro rata
      to the holders of any class or series or other rights; (c) to effect any
      reclassification or recapitalization of common stock; (d) to merge or
      consolidate with or into any other corporation, or sell, lease, license, or
      convey all or substantially all of its assets, or to liquidate, dissolve or
      wind
      up; or (e) to offer holders of registration rights the opportunity to
      participate in an underwritten Public Offering of Company’s securities for cash,
      then, in connection with each such event, Company shall give Holder (1) the
      same
      notice as is given to holders of Company’s common stock of the date on which a
      record will be taken for such dividend, distribution or subscription rights
      (and
      specifying the date on which the holders of common stock will be entitled
      thereto) or for determining rights to vote, if any, in respect of the matters
      referred to in (c) and (d) above; (2) in the case of the matters referred to
      in
      (c) and (d) above the same notice as is given to holders of Company’s common
      stock on the date when the same will take place (and specifying the date on
      which the holders of common stock will be entitled to exchange their common
      stock for securities or other property deliverable upon the occurrence of such
      event); and (3) in the case of the matter referred to in (e) above, the same
      notice as is given to the holders of such registration rights. For the purpose
      of this Warrant, a “Public Offering” means the sale of Company’s common stock
      pursuant to a registration statement under the Securities Act of 1933, as
      amended (the “Securities Act”, for an underwritten public offering (other than a
      registration statement on Form S-8, Form S-4 or comparable forms), which results
      in aggregate cash proceeds (prior to underwriters’ commissions and expenses) to
      Company of more than $5,000,000. 

     

    3.3     Information
      Rights.
      So long
      as Holder holds this Warrant and/or any of the Shares, Company shall deliver
      to
      Holder promptly after mailing, copies of all notices or other written
      communications to the shareholders of Company.

     

    3.4     Registration
      Under Securities Act of 1933, as amended - “Piggyback” Registration
      Rights.
      If at
      any time Company shall determine to register under the Securities Act (including
      pursuant to a demand of any security holder of Company exercising registration
      rights) any of its common stock (except securities to be issued solely in
      connection with any acquisition of any entity or business, shares issuable
      solely pursuant to employee benefit plans eligible for registration on Form
      S-8
      or shares to be registered on any registration statement that does not permit
      secondary sales), it shall send to Holder written notice of such determination
      at least twenty (20) days prior to each such filing and, if within ten (10)
      days
      after receipt of such notice, any Holder shall so request in writing, Company
      shall use its reasonable best efforts to include in such registration statement
      (to the extent permitted by applicable regulation) all or any part of the Shares
      (collectively referred to in this Section
      3.4
      as
      "Securities")
      that
      such Holder requests to be registered. If any Holder disapproves of the terms
      of
      such underwriting, such Holder may elect to withdraw therefrom by written notice
      to Company and the underwriter. Company shall use its reasonable best efforts
      to
      cause the managing underwriter or underwriters of a proposed underwritten
      offering (the "Company
      Underwriter")
      to
      permit Holders who have requested to participate in the registration for such
      offering to include such Securities in such offering. Notwithstanding the
      foregoing, if the Company Underwriter delivers a written opinion to Holders
      that
      the total amount or kind of securities which they, Company and any other persons
      intend to include in such offering (the "Total
      Securities")
      is
      sufficiently large so as to prevent Company from effecting a successful offering
      of the Total Securities, then the amount or kind of securities to be offered
      for
      the account of anyone other than Company shall be excluded from the underwriting
      by reason of the underwriter’s marketing limitation to the extent so required by
      such limitation as follows: (a) first, the securities (which shall include
      the Securities held by such stockholders distributing their securities through
      such underwriting shall be excluded in a manner such that the number of any
      shares that may be included by such holders are allocated in proportion, as
      nearly as practicable to the amounts of such securities proposed to be offered
      by such persons in such registration, (b) if after all securities held by
      such stockholders have been excluded and additional shares shall be excluded,
      Registrable Securities of such stockholders distributing their Registrable
      Securities through such underwriting shall be excluded in a manner such that
      the
      number of any Registrable Securities that may be included by such holders are
      allocated in proportion, as nearly as practicable to the amounts of Registrable
      Securities held by such holders; and (c) if after securities held by such
      stockholders have been excluded and additional shares shall be excluded,
      securities of Company shall be excluded. Notwithstanding the provisions of
      this
Section
      3.4,
      Company
      shall have the right, at any time after it shall have given written notice
      pursuant to this Section 3.4
      (irrespective of whether a written request for inclusion of Securities shall
      have been made), to elect not to file any such proposed registration statement
      or to withdraw or terminate the same after the filing and prior to the effective
      date thereof.

     

    (a)     Effectiveness.
      If
      necessary to permit distribution of the Securities, Company shall use its
      reasonable best efforts to maintain the effectiveness for up to one (1) year
      of
      the registration statement pursuant to which any of the Securities are being
      offered, and from time to time will amend or supplement such registration
      statement and the prospectus contained therein as and to the extent necessary
      to
      comply with the Securities Act and any applicable state securities statute
      or
      regulation. Notwithstanding the foregoing, if the registration by Company of
      the
      resale of Securities is eligible for Form S-3 or any successor to such form,
      Company shall use its best efforts to maintain the effectiveness of the
      registration statement until all registered Securities are sold. Holder shall
      notify Company promptly of the completion of the offering of its Securities
      under any such effective registration statement.

     

    (i)     Company
      shall not be required to effect a registration statement pursuant to this
Section
      3.4
      after
      Company has previously effected two (2) registrations pursuant to this
Section
      3.4,
      and
      such registrations have been declared or ordered effective; or

     

    (ii)     If
      requested by Company or a representative of the underwriters of common stock
      (or
      other securities) of Company, each Holder shall not sell or otherwise transfer
      or dispose of any common stock (or other securities) of Company held by such
      Holder (other than those included in a registration statement) for a period
      specified by the representative of the underwriters, not to exceed one hundred
      eighty (180) days following the effective date of a registration statement
      of
      Company filed under the Securities Act for Company’s
      initial
      Public Offering of common stock.

     

    (b)     Further
      Obligations of Company.
      Whenever, under the preceding paragraphs of this Section
      3.4,
      Company
      is required hereunder to register Securities, it agrees that it shall also
      do
      the following:

     

    (i)     Furnish
      to each selling Holder such copies of each preliminary and final prospectus
      and
      any other documents as such Holder may reasonably request to facilitate the
      public offering of its Securities;

     

    (ii)     Use
      its
      reasonable best efforts to register or qualify the Securities to be registered
      pursuant to this Section
      3.4
      under
      the applicable securities or blue sky laws of such jurisdictions as any selling
      Holder may reasonably request; and

     

    (iii)     Permit
      each
      selling Holder or such Holder's counsel or other representatives to inspect
      and
      copy such corporate documents and records as may reasonably be requested by
      them
      in connection with such registration.

     

    (c)     Expenses.
      Except
      for underwriters' discounts and brokerage commissions allocable to the
      Securities, Company shall bear all costs and expenses of each registration
      contemplated in Section
      3.4
      including, but not limited to, printing, legal (including the reasonable fees
      and expenses of one counsel to Holders) and accounting fees and expenses,
      Securities Exchange Commission and National Association of Securities Dealers
      filing fees and Blue Sky fees and expenses in any jurisdiction in which the
      securities to be offered are to be registered or qualified.

     

    (d)     Transfer
      of Registration Rights.
      The
      registration rights of Holders of Securities under this Section
      3.4
      shall
      inure to the benefit of and be exercisable by any transferee of
      Securities.

     

    ARTICLE
      4. REPRESENTATIONS AND WARRANTIES OF HOLDER

     

    Holder
      hereby represents and warrants to Company that this Warrant is being acquired
      as
      an investment and not with a view to distribute. Holder is an “Accredited
      Investor” as defined in Regulation D under the Securities Act.

     

    ARTICLE
      5. MISCELLANEOUS.

     

    5.1     Term.
      This
      Warrant is exercisable, in whole or in part, at any time and from time to time
      on or before the seventh (7th)
      anniversary of the date first set forth above. 

     

    5.2     Legends.
      This
      Warrant and the Shares (and the securities issuable, directly or indirectly,
      upon conversion of the Shares, if any) shall be imprinted with a legend in
      substantially the following form:

     

    (a)     THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
      REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
      REQUIRED.

     

    (b)     Any
      legend
      required by the Blue Sky laws of any state to the extent such laws are
      applicable to this Warrant and the Shares.

     

    5.3      Compliance
      with Securities Laws on Transfer.
      This
      Warrant and the Shares issuable upon exercise of this Warrant (and the
      securities issuable, directly or indirectly, upon conversion of the Shares,
      if
      any) may not be transferred or assigned in whole or in part without compliance
      with applicable federal and state securities laws by the transferor and the
      transferee (including, without limitation, the delivery of investment
      representation letters and legal opinions reasonably satisfactory to Company,
      as
      reasonable requested by Company). Notwithstanding the preceding, Holder may
      grant a participation interest in the Warrant, or the Shares, without Company’s
      consent.

     

    5.4     Transfer
      Procedure.
      Except
      as otherwise provided herein, and subject to the provisions of Section
      5.2,
      Holder
      may, with the written consent of Company, which consent shall not be
      unreasonably withheld, transfer all or part of this Warrant or the Shares
      issuable upon exercise of this Warrant (or the securities issuable, directly
      or
      indirectly, upon conversion of the Shares, if any) by giving Company notice
      of
      the portion of the Warrant being transferred setting forth the name, address
      and
      taxpayer identification number of the transferee and surrendering this Warrant
      to Company for reissuance to the transferee(s) (and Holder if applicable).
      Notwithstanding the foregoing, Holder may transfer all or part of this Warrant
      or the Shares issuable upon exercise of this Warrant (or the securities
      issuable, directly or indirectly, upon conversion of the Shares, if any) without
      consent of Company in the following instances;

     

    (a)     transfers
      to any holders of Company common stock or other Company securities as of the
      date hereof;

     

    (b)     transfers
      to affiliates of Holder; and

     

    (c)     transfers
      subsequent to the effectiveness of a registration statement covering the
      Shares.

     

    5.5     Notices.
      All
      notices and other communications from Company to Holder, or vice versa, shall
      be
      deemed delivered and effective when given personally or mailed by first-class
      registered or certified mail, postage prepaid, at such address as may have
      been
      furnished to Company or Holder, as the case may be, in writing by Company or
      such Holder from time to time.

     

    5.6     Waiver.
      This
      Warrant and any term hereof may be changed, waived, discharged or terminated
      only by an instrument in writing signed by the party against which enforcement
      of such change, waiver, discharge or termination is sought.

     

    5.7     Attorneys’
      Fees.
      In the
      event of any dispute between the parties concerning the terms and provisions
      of
      this Warrant, the party prevailing in such dispute shall be entitled to collect
      from the other party all costs incurred in such dispute, including reasonable
      attorneys’ fees.

     

    5.8     Governing
      Law.
      This
      Warrant shall be governed by and construed in accordance with the laws of the
      State of California, without giving effect to its principles regarding conflicts
      of law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    “Company”

    

    AUXILIO,
      INC.,

    a
      Nevada
      corporation

    
 

     

    By:
      _____________________________     

    Name:
      Joseph J. Flynn

    Title:
      Chief Executive Officer

    

    

    “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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    APPENDIX
      1

     

    NOTICE
      OF EXERCISE

     

    1.     The
      undersigned hereby elects to purchase ___________ shares of the Common Stock
      of
      AUXILIO, INC. pursuant to the terms of the attached Warrant, and tenders
      herewith payment of the purchase price of such shares in full.

     

    1.     The
      undersigned hereby elects to convert the attached Warrant into Shares / cash
      {strike one} in the manner specified in the Warrant. This conversion is
      exercised with respect to _______________________ of the Shares covered by
      the
      Warrant.

     

    {Strike
      paragraph that does not apply.}

     

    2.     Please
      issue a certificate or certificates representing said shares in the name of
      the
      undersigned or in such other name as is specified below:

     

    ______________________________________

    (Name)

     

    ______________________________________

     

     

    ______________________________________

    (Address)

     

    3. The
      undersigned represents it is acquiring the shares solely for its own account
      and
      not as a nominee for any other party and not with a view toward the resale
      or
      distribution thereof except in compliance with applicable securities
      laws.

     

            By:
      _________________________________    

     

          
Name:
      ____________________________    

     

           Title:
      _____________________________     

     

    ____________________

    (Date)Exhib8it 10.1

    EXHIBIT
      10.1

    

    MICROCHIP
      TECHNOLOGY INCORPORATED

     

    CHANGE
      OF CONTROL SEVERANCE AGREEMENT

     

    This
      Change of Control Severance Agreement (the “Agreement”) is made and entered into
      by and between ________________ (the “Employee”) and Microchip Technology
      Incorporated (the “Company”), effective as of ________________, 2006 (the
“Effective Date”).

     

    RECITALS

     

    1.  It
      is
      expected that the Company from time to time will consider the possibility of
      an
      acquisition by another company or other change of control. The Board of
      Directors of the Company (the “Board”) recognizes that such consideration can be
      a distraction to the Employee and can cause the Employee to consider alternative
      employment opportunities. The Board has determined that it is in the best
      interests of the Company and its stockholders to assure that the Company will
      have the continued dedication and objectivity of the Employee, notwithstanding
      the possibility, threat or occurrence of a Change of Control (as defined herein)
      of the Company.

     

    2.  The
      Board
      believes that it is in the best interests of the Company and its stockholders
      to
      provide the Employee with an incentive to continue his or her employment and
      to
      motivate the Employee to maximize the value of the Company upon a Change of
      Control for the benefit of its stockholders.

     

    3.  The
      Board
      believes that it is imperative to provide the Employee with certain benefits
      upon a Change of Control and certain benefits upon the Employee’s termination of
      employment following a Change of Control. These benefits will provide the
      Employee with enhanced financial security and incentive and encouragement to
      remain with the Company notwithstanding the possibility of a Change of
      Control.

     

    4.  Certain
      capitalized terms used in the Agreement are defined in Section 5
      below.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the mutual covenants contained herein, the
      parties hereto agree as follows:

     

    1.  Term
      of Agreement.
      This
      Agreement shall terminate upon the date that all of the obligations of the
      parties hereto with respect to this Agreement have been satisfied.

     

    2.  At-Will
      Employment.
      The
      Company and the Employee acknowledge that the Employee’s employment is and shall
      continue to be at-will, as defined under applicable law, except as may otherwise
      be specifically provided under the terms of any written formal employment
      agreement or offer letter between the Company and the Employee (an “Employment
      Agreement”). If the Employee’s employment terminates prior to the Change of
      Control Period, the Employee shall not be entitled to any payments, benefits,
      damages, awards or compensation other than as provided by this Agreement, or
      under his or her Employment Agreement if any exists in writing, or as may
      otherwise be available in accordance with the Company’s established employee
      plans. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  Benefits.

     

    (a)  Benefits
      Upon a Change of Control.
      Immediately prior to consummation of a Change of Control the Employee shall
      receive the following benefit:

     

    (i)  Equity
      Compensation Acceleration.
      One
      hundred percent (100%) of the Employee’s outstanding stock options, stock
      appreciation rights, restricted stock units and other Company equity
      compensation awards (the “Equity Compensation Awards”) shall immediately vest
      and become exercisable. Any Company stock options and stock appreciation rights
      shall remain exercisable following the Employee’s employment termination for the
      period prescribed in the respective option and stock appreciation right
      agreements.

     

    (b)  Termination
      Other than for Cause During the Change of Control Period.
      If
      within the three-month period preceding or any time following a Change of
      Control (the “Change of Control Period”), the Employee ceases to be employed
      with the Company (or any parent or subsidiary of the Company) for any reason
      other than “Cause” (as defined herein), and the Employee signs, and does not
      revoke, a standard release of claims with the Company in a form acceptable
      to
      the Company (the “Release”), then the Employee shall receive the following
      severance from the Company:

     

    (i)   Severance
      Payment.
      The
      Employee shall be entitled to receive a lump-sum severance payment (less
      applicable withholding taxes) equal to (one/two) hundred percent of the
      Employee’s annual base salary (as in effect immediately prior to (A) the Change
      of Control, or (B) the Employee’s termination of employment, whichever is
      greater) plus
      (one/two)
      hundred percent of the Employee’s target bonuses for which Employee was or would
      have been eligible (for the fiscal year in which the Change of Control or the
      Employee’s termination occurs, whichever is greater.)

     

    (ii)  Continued
      Employee Benefits.
      Company-paid health, dental, vision, and life insurance coverage at the same
      level of coverage as was provided to such Employee immediately prior to
      termination and at the same ratio of Company premium payment to Employee premium
      payment as was in effect immediately prior to termination (the “Company-Paid
      Coverage”). If such coverage included the Employee’s eligible dependents
      immediately prior to termination, such dependents shall also be covered at
      Company expense. Company-Paid Coverage shall continue until the earlier of
      (A)
      (twelve/twenty-four) months from the date of termination, or (B) the date upon
      which the Employee and his dependents become covered under another employer’s
      group health, dental, vision, long-term disability or life insurance plans
      that
      provide Employee and his dependents with comparable benefits and levels of
      coverage. For purposes of Title X of to the Consolidated Budget Reconciliation
      Act of 1985 (“COBRA”), the date of the “qualifying event” for Employee and his
      or her dependents shall be the date upon which the Company-Paid Coverage
      terminates. Coverage in this Section is dependent on the valid and timely
      election of continued COBRA coverage under applicable law.

     

    (c)  Timing
      of Severance Payments.
      Except
      as otherwise provided herein, the severance payment to which Employee is
      entitled shall be paid by the Company to Employee in cash and in full, not
      later
      than ten (10) calendar days after the effective date of the Release. If the
      Employee should die before all amounts have been paid, such unpaid amounts
      shall
      be paid in a lump-sum payment (less any withholding taxes) to the Employee’s
      designated beneficiary, if living, or otherwise to the personal representative
      of the Employee’s estate.

     

    (d)  Termination
      for Cause; Termination Prior to Change of Control Period.
      In the
      event the Employee’s employment is terminated for Cause, or for any reason prior
      to the Change of Control Period, then the Employee shall not be entitled to
      receive severance and any other benefits except as may then be established
      under
      the Company’s existing written severance and benefits plans and practices or
      pursuant to other written agreements with the Company.

     

    
      
        
        

      

      
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    (e)  Internal
      Revenue Code Section 409A.
      Notwithstanding any other provision of this Agreement, if the Employee is a
“key
      employee” under Code Section 409A and a delay in making any payment or providing
      any benefit under this Agreement is required by Code Section 409A and any
      Treasury Regulations, and IRS guidance thereunder, or necessary in the good
      faith judgment of the Company, to avoid the Employee incurring additional tax
      under Section 409A, such payments shall not be made until the end of six (6)
      months following the date of the Employee’s separation from service in
      accordance with Code Section 409A.

     

    4.  Golden
      Parachute Excise Tax.

     

    (a)  Parachute
      Payments Equal to or Greater than 3.0 x Base Amount.
      In the
      event that the benefits provided for in this agreement or otherwise payable
      to
      Employee, including vesting acceleration upon a change of control pursuant
      to
      Company equity plans or any Employment Agreement which may exist
      (i) constitute “parachute payments” within the meaning of Section 280G of
      the Code, (ii) would be subject to the excise tax imposed by Section 4999
      of the Code, and (iii) the aggregate value of such parachute payments, as
      determined in accordance with Section 280G of the Code and the proposed Treasury
      Regulations thereunder (or the final Treasury Regulations, if they have then
      been adopted) is equal to or greater than the product obtained by multiplying
      three by Employee’s “base amount” within the meaning of Code Section 280G(b)(3),
      then (A) the benefits shall be delivered in full, and (B) the Employee shall
      receive a payment from the Company sufficient to pay such excise
      tax.

     

    (b)  280G
      Determinations.
      Unless
      the Company and the Employee otherwise agree in writing, the determination
      of
      Employee’s excise tax liability and the amount required to be paid under this
      Section 4 shall be made in writing by the Company’s independent auditors who are
      primarily used by the Company immediately prior to the Change of Control (the
      “Accountants”). For purposes of making the calculations required by this
      Section 4, the Accountants may make reasonable assumptions and
      approximations concerning applicable taxes and may rely on reasonable, good
      faith interpretations concerning the application of Sections 280G and 4999
      of
      the Code. The Company and the Employee shall furnish to the Accountants such
      information and documents as the Accountants may reasonably request in order
      to
      make a determination under this Section. The Company shall bear all costs the
      Accountants may reasonably incur in connection with any calculations
      contemplated by this Section 4.

     

    5.  Definition
      of Terms.
      The
      following terms referred to in this Agreement shall have the following
      meanings:

     

    (a)  Cause.
“Cause”
      shall mean (i) a willful act of personal dishonesty taken by the Employee
      in connection with his responsibilities as an employee and intended to result
      in
      substantial personal enrichment of the Employee, (ii) Employee being
      convicted of, or pleading nolo contendere to, a felony that is materially and
      demonstrably injurious to the Company, and (iii) following delivery to the
      Employee of a written demand for performance from the Company which describes
      the basis for the Company’s reasonable belief that the Employee has not
      substantially performed his duties, continued violations by the Employee of
      the
      Employee’s obligations to the Company which are demonstrably willful and
      deliberate on the Employee’s part. 

     

    For
      the
      purposes of this Section 5(a), no act or failure to act shall be considered
      “willful” unless done or omitted to be done in bad faith and without reasonable
      belief that the act or omission was in or not opposed to the best interests
      of
      the Company. Any act or failure to act based upon authority given pursuant
      to a
      resolution duly adopted by the Board of Directors of the Company or based upon
      the advice of counsel for the Company shall be conclusively presumed to be
      done
      or omitted to be done in good faith and in the best interests of the Company.
      Notwithstanding anything herein to the contrary, the Employee shall not be
      deemed to have been terminated for Cause unless and until there shall have
      been
      delivered to the Employee a copy of a resolution duly adopted by the affirmative
      vote of not less than three-quarters of the entire membership of the Board
      of
      Directors of the Company at a meeting of the Board called and held for the
      purpose (after reasonable notice to the Employee and an opportunity for the
      Employee with Employee’s counsel to be heard before the Board) finding that in
      the good faith opinion of the Board the Employee was properly terminated for
      Cause.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (b)  Change
      of Control.
“Change
      of Control” means
      the
      occurrence of any of the following:

     

    (i)  Any
      “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
      Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in
      Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
      representing fifty percent (50%) or more of the total voting power represented
      by the Company’s then outstanding voting securities; or

     

    (ii)  A
      change
      in the composition of the Board of Directors of the Company as a result of
      which
      fewer than a majority of the directors are “Incumbent Directors.” “Incumbent
      Directors” shall mean directors who either (A) are directors of the Company as
      of the date hereof, or (B) are elected, or nominated for election, to the Board
      of Directors with the affirmative votes (either by a specific vote or by
      approval of the proxy statement of the Company in which such person is named
      as
      a nominee for election as a director without objection to such nomination)
      of at
      least three-quarters of the Incumbent Directors at the time of such election
      or
      nomination (but shall not include an individual whose election or nomination
      is
      in connection with an actual or threatened proxy contest relating to the
      election of directors of the Company); or

     

    (iii)  The
      consummation of a merger or consolidation of the Company with any other
      corporation, other than a merger or consolidation which would result in the
      voting securities of the Company outstanding immediately prior thereto
      continuing to represent (either by remaining outstanding or by being converted
      into voting securities of the surviving entity) at least fifty percent (50%)
      of
      the total voting power represented by the voting securities of the Company
      or
      such surviving entity outstanding immediately after such merger or
      consolidation; or

     

    (iv)  The
      consummation of the sale, lease or other disposition by the Company of all
      or
      substantially all the Company’s assets.

     

    6.  Successors.

     

    (a)  The
      Company’s Successors.
      Any
      successor to the Company (whether direct or indirect and whether by purchase,
      merger, consolidation, liquidation or otherwise) to all or substantially all
      of
      the Company’s business and/or assets shall assume the obligations under this
      Agreement and agree expressly to perform the obligations under this Agreement
      in
      the same manner and to the same extent as the Company would be required to
      perform such obligations in the absence of a succession. For all purposes under
      this Agreement, the term “Company” shall include any successor to the Company’s
      business and/or assets which executes and delivers the assumption agreement
      described in this Section 6(a) or which becomes bound by the terms of this
      Agreement by operation of law.

     

    (b)  The
      Employee’s Successors.
      The
      terms of this Agreement and all rights of the Employee hereunder shall inure
      to
      the benefit of, and be enforceable by, the Employee’s personal or legal
      representatives, executors, administrators, successors, heirs, distributees,
      devisees and legatees.

     

    
      
        
        

      

      
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    7.  Notice.

     

    (a)  General.
      All
      notices and other communications required or permitted hereunder shall be in
      writing, shall be effective when given, and shall in any event be deemed to
      be
      given upon receipt or, if earlier, (i) five (5) days after deposit
      with the U.S. Postal Service or other applicable postal service, if delivered
      by
      first class mail, postage prepaid, (ii) upon delivery, if delivered by
      hand, (iii) one (1) business day after the business day of deposit with
      Federal Express or similar overnight courier, freight prepaid or
      (iv) one (1) business day after the business day of facsimile
      transmission, if delivered by facsimile transmission with copy by first class
      mail, postage prepaid, and shall be addressed (A) if to Employee, at
      his or her last known residential address and (B) if to the Company, at the
      address of its principal corporate offices (attention: Secretary), or in any
      such case at such other address as a party may designate by ten (10) days’
advance written notice to the other party pursuant to the provisions
      above.

     

    (b)  Notice
      of Termination.
      Any
      termination by the Company for Cause or as a result of a voluntary resignation
      shall be communicated by a notice of termination to the other party hereto
      given
      in accordance with Section 7(a) of this Agreement. Such notice shall indicate
      the specific termination provision in this Agreement relied upon, shall set
      forth in reasonable detail the facts and circumstances claimed to provide a
      basis for termination under the provision so indicated, and shall specify the
      termination date (which shall be not more than thirty (30) days after the giving
      of such notice). 

     

    8.  Miscellaneous
      Provisions.

     

    (a)  No
      Duty to Mitigate.
      The
      Employee shall not be required to mitigate the amount of any payment
      contemplated by this Agreement, nor shall any such payment be reduced by any
      earnings that the Employee may receive from any other source, except as set
      forth in Section 3(b)(ii)(B).

     

    (b)  Waiver.
      No
      provision of this Agreement shall be modified, waived or discharged unless
      the
      modification, waiver or discharge is agreed to in writing and signed by the
      Employee and by an authorized officer of the Company (other than the Employee).
      Employee
      and the Company agree to work in good faith to consider amendments to this
      Agreement which
      are
      necessary or appropriate to avoid imposition of any additional tax or income
      recognition under Section 409A prior to the actual payment of amounts to the
      Employee. The
      parties agree to cooperate with each other and to take reasonably necessary
      steps in this regard. No
      waiver
      by either party of any breach of, or of compliance with, any condition or
      provision of this Agreement by the other party shall be considered a waiver
      of
      any other condition or provision or of the same condition or provision at
      another time.

     

    (c)  Headings.
      All
      captions and section headings used in this Agreement are for convenient
      reference only and do not form a part of this Agreement.

     

    (d)  Entire
      Agreement.
      This
      Agreement, along with other written agreements relating to the subject matter
      hereof between Employee and a duly authorized Company officer constitute the
      entire agreement of the parties hereto and supersede in their entirety all
      prior
      representations, understandings, undertakings or agreements (whether oral or
      written and whether expressed or implied) of the parties with respect to the
      subject matter hereof.

     

    
      
        
        

      

      
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    (e)  Choice
      of Law; Arbitration.
      The
      validity, interpretation, construction and performance of this Agreement shall
      be governed by the laws of the State of Arizona. Any dispute or controversy
      arising under or in connection with this Agreement shall be settled exclusively
      by arbitration in Phoenix, Arizona, by three arbitrators in accordance with
      the
      then current rules of the American Arbitration Association. The prevailing
      party
      in any arbitration shall be entitled to injunctive relief to enforce the
      arbitration award. The parties agree to waive their right to have any dispute
      regarding this Agreement resolved in a court of law by judge or jury. The
      Judgment may be entered on the arbitrator’s award in any court having
      jurisdiction. This Section shall not prevent either party from seeking
      injunctive relief (or any other provisional remedy) relating to employee’s
      obligations under this Agreement. The Company shall bear the costs and expenses
      arising out of or in connection with any arbitration pursuant to this Section
      8(e), including Employee’s costs and reasonable attorney’s fees.

     

    (f)  Severability.
      The
      invalidity or unenforceability of any provision or provisions of this Agreement
      shall not affect the validity or enforceability of any other provision hereof,
      which shall remain in full force and effect.

     

    (g)  Withholding.
      All
      payments made pursuant to this Agreement will be subject to withholding of
      applicable income and employment taxes.

     

    (h)  Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall be deemed an
      original, but all of which together will constitute one and the same
      instrument.

     

    IN
      WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
      of
      the Company by its duly authorized officer, as of the day and year set forth
      below.

     

    

    
      	
               

              COMPANY

            	
               

              MICROCHIP
                TECHNOLOGY INC.

            
	 	
               

              By:

            	 
	 	
               

              Title:

            	 
	 	
               

              Date:

            	 
	 	 	 
	
               

              EMPLOYEE

            	
               

              By:

            	 
	 	
               

              Date:

            	 

    

        

     

    
      
        
        

      

      
        6

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