EXHIBIT 10.1

INTRUSION INC.
A DELAWARE CORPORATION

SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT

THE COMMON STOCK (“STOCK”) IN INTRUSION INC. (“COMPANY”) REFERRED TO IN THIS
SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND ARE BEING OFFERED
AND SOLD UNDER EXEMPTIONS PROVIDED THEREFROM INCLUDING SECTION 4(2) OF THE
SECURITIES ACT AND/OR REGULATION D THEREUNDER.

A PURCHASER OF STOCK SHOULD BE PREPARED TO BEAR THE ECONOMIC RISK OF THE
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE STOCK HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OR THE LAWS OF ANY OTHER JURISDICTION, AND,
THEREFORE, CANNOT BE SOLD UNLESS IT IS SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.  THERE IS NO OBLIGATION OF THE ISSUER TO
REGISTER THE STOCK UNDER THE SECURITIES ACT OR THE LAWS OF ANY OTHER
JURISDICTION.

On the basis of the terms and conditions set forth in this Subscription and
Investor Representation Agreement ( “Subscription Agreement”), the undersigned
investor ( “Investor”) proposes to make an investment in Intrusion Inc.
(“Company”) as follows:

1.                                      SUBSCRIPTION FOR STOCK.  SUBJECT TO THE
TERMS AND CONDITIONS HEREOF, THE INVESTOR HEREBY IRREVOCABLY SUBSCRIBES TO
PURCHASE 1,000,000 SHARES OF COMMON STOCK AT AN AGGREGATE PURCHASE PRICE OF
$0.40, OR A NUMBER OF SHARES AT A PRICE OF 110% OF THE AVERAGE CLOSING PRICE OF
THE COMPANY’S STOCK FOR THE 20 TRADING DAYS UP TO AND INCLUDING THE CLOSING DAY.

2.                                      THE INVESTOR ACKNOWLEDGES THAT THE STOCK
OFFERED HEREBY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK, INCLUDING, BUT
NOT NECESSARILY LIMITED TO, THE RISK FACTORS DESCRIBED ON EXHIBIT A ATTACHED
HERETO.  THE INVESTOR FURTHER ACKNOWLEDGES THAT AN INVESTMENT IN THE COMPANY IS
NOT SUITABLE FOR INVESTORS WHO CANNOT AFFORD TO LOSE THEIR ENTIRE INVESTMENT. 
THE INVESTOR HAS CAREFULLY CONSIDERED THESE RISK FACTORS BEFORE MAKING ITS
INVESTMENT DECISION.

3.                                      REPRESENTATIONS AND WARRANTIES OF THE
INVESTOR.  THE INVESTOR HEREBY REPRESENTS AND WARRANTS TO THE COMPANY AS
FOLLOWS:

(A)                                  ACCREDITED INVESTOR.  THE INVESTOR IS AN
“ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 PROMULGATED UNDER THE
SECURITIES ACT.

(B)                                  INVESTMENT INTENT.  THE INVESTOR IS
ACQUIRING THE STOCK FOR THE INVESTOR’S OWN ACCOUNT FOR INVESTMENT, WITH NO
INTENTION OF DISTRIBUTING OR SELLING ANY PORTION OF THE STOCK WITHIN THE MEANING
OF THE SECURITIES ACT, AND WILL NOT TRANSFER ANY STOCK IN VIOLATION OF THE
SECURITIES ACT OR THE THEN APPLICABLE RULES OR REGULATIONS THEREUNDER OR ANY
OTHER APPLICABLE LAW.  NO ONE OTHER THAN THE INVESTOR HAS ANY INTEREST IN OR ANY
RIGHT TO ACQUIRE THE STOCK.

(C)                                  ABILITY TO BEAR RISK.  THE INVESTOR’S
FINANCIAL CONDITION IS SUCH THAT THE INVESTOR IS ABLE TO BEAR THE RISK OF
HOLDING THE STOCK FOR AN INDEFINITE PERIOD OF TIME AND THE RISK OF LOSS OF THE
INVESTOR’S ENTIRE INVESTMENT IN THE STOCK.

(D)                                  EXPERIENCE.  THE INVESTOR HAS SUBSTANTIAL
EXPERIENCE IN EVALUATING AND INVESTING IN PRIVATE PLACEMENT TRANSACTIONS OF
SECURITIES IN COMPANIES SIMILAR TO THE COMPANY SO THAT THE INVESTOR IS CAPABLE
OF EVALUATING THE MERITS AND RISKS OF ITS INVESTMENT IN THE COMPANY AND HAS THE
CAPACITY TO PROTECT HIS, HER OR ITS OWN INTERESTS.

--------------------------------------------------------------------------------

(E)                                  FAMILIARITY WITH OFFERING DOCUMENTS.  THE
INVESTOR HAS RECEIVED, READ, UNDERSTOOD AND IS FAMILIAR WITH (I)  THE RISK
FACTORS ATTACHED HERETO ON EXHIBIT A, AND THIS SUBSCRIPTION AGREEMENT.  IN
PARTICULAR, THE INVESTOR HAS READ THE RISK FACTORS ATTACHED HERETO ON EXHIBIT A
AND UNDERSTANDS THAT THE INVESTOR’S INVESTMENT IN THE COMPANY INVOLVES A HIGH
DEGREE OF RISK.

(F)                                    INFORMATION.  THE COMPANY AND THE
COMPANY’S OFFICERS HAVE MADE AVAILABLE ALL ADDITIONAL INFORMATION THAT THE
INVESTOR HAS REQUESTED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
SUBSCRIPTION AGREEMENT, AND THE INVESTOR HAS HAD AN OPPORTUNITY TO DISCUSS THE
BUSINESS, MANAGEMENT AND FINANCIAL AFFAIRS OF THE COMPANY WITH MANAGEMENT AND
HAS HAD THE OPPORTUNITY TO REVIEW THE COMPANY’S FACILITIES.  NO REPRESENTATIONS
OR WARRANTIES HAVE BEEN MADE TO THE INVESTOR BY THE COMPANY OR ANY AGENT THEREOF
OTHER THAN AS SET FORTH IN THIS SUBSCRIPTION AGREEMENT.  THE INVESTOR HAS BEEN
AFFORDED AN OPPORTUNITY TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY
AND ITS OFFICERS CONCERNING THE TERMS AND CONDITIONS OF THE PURCHASE OF THE
STOCK AND THE OPPORTUNITY TO OBTAIN ANY ADDITIONAL INFORMATION (TO THE EXTENT
THE COMPANY HAS SUCH INFORMATION OR COULD ACQUIRE IT WITHOUT UNREASONABLE EFFORT
OR EXPENSE) NECESSARY TO VERIFY THE ACCURACY OF INFORMATION OTHERWISE FURNISHED
BY THE COMPANY OR ITS OFFICERS.  THE INVESTOR HAS INVESTIGATED THE ACQUISITION
OF THE STOCK TO THE EXTENT THE INVESTOR DEEMED NECESSARY OR DESIRABLE AND THE
COMPANY HAS PROVIDED THE INVESTOR WITH ANY ASSISTANCE THE INVESTOR HAS REQUESTED
IN CONNECTION THEREWITH.

(G)                                 DOMICILE.  THE ADDRESS SET FORTH BELOW IS
THE INVESTOR’S TRUE AND CORRECT DOMICILE.

(H)                                 EXEMPTION FROM SECURITIES ACT.  THE INVESTOR
UNDERSTANDS THAT THE STOCK HAS NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE
SECURITIES ACT OR ANY STATE SECURITIES ACT OR OTHER APPLICABLE LAW BY REASON OF
SPECIFIC EXEMPTIONS FOR PRIVATE OFFERINGS, THE AVAILABILITY OF WHICH DEPENDS
UPON, AMONG OTHER THINGS, THE BONA FIDE NATURE OF THE INVESTMENT INTENT AND THE
ACCURACY OF THE INVESTOR’S REPRESENTATIONS AS EXPRESSED HEREIN.  THE STOCK MAY 
NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER, SALE, ASSIGNMENT OR OTHER DISPOSITION IS PURSUANT TO THE TERMS OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ARE REGISTERED
UNDER ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

(I)                                    RESTRICTIONS ON TRANSFERABILITY.  THE
INVESTOR IS AWARE THAT THE INVESTOR’S RIGHTS TO TRANSFER THE STOCK OR ANY PART
THEREOF ARE RESTRICTED BY THE SECURITIES ACT, APPLICABLE STATE SECURITIES LAWS
AND LAWS OF OTHER JURISDICTIONS, AND THE ABSENCE OF A MARKET FOR THE STOCK.  THE
INVESTOR UNDERSTANDS THAT THERE ARE SUBSTANTIAL RESTRICTIONS ON THE
TRANSFERABILITY OF THE STOCK, INCLUDING RESTRICTIONS ON TRANSFER OF THE STOCK
UNDER THE COMPANY AGREEMENT; THE STOCK WILL NOT BE, AND INVESTORS IN THE STOCK
HAVE NO RIGHTS TO REQUIRE THAT THE STOCK BE, REGISTERED UNDER THE SECURITIES
ACT; THERE WILL BE NO PUBLIC MARKET FOR ANY OF THE SUBSCRIBED STOCK; THE
INVESTOR MAY NOT BE ABLE TO AVAIL ITSELF OF EXEMPTIONS AVAILABLE FOR RESALE OF
THE STOCK WITHOUT REGISTRATION, AND ACCORDINGLY, MAY HAVE TO HOLD THE STOCK
INDEFINITELY, AND IT MAY NOT BE POSSIBLE FOR THE INVESTOR TO LIQUIDATE AN
INVESTMENT IN THE STOCK.

(J)                                    RULE 144.  THE INVESTOR IS AWARE OF THE
PROVISIONS OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT, WHICH PERMITS
LIMITED RESALE OF SECURITIES PURCHASED IN A PRIVATE PLACEMENT SUBJECT TO THE
SATISFACTION OF CERTAIN CONDITIONS, INCLUDING, AMONG OTHER THINGS, THE EXISTENCE
OF A PUBLIC MARKET FOR THE SECURITIES, THE AVAILABILITY OF CERTAIN CURRENT
PUBLIC INFORMATION ABOUT THE COMPANY, THE RESALE OCCURRING NOT LESS THAN ONE
YEAR AFTER A PARTY HAS PURCHASED AND PAID FOR THE SECURITY TO BE SOLD, THE SALE
BEING EFFECTED THROUGH A “BROKER’S TRANSACTION” OR IN TRANSACTIONS DIRECTLY WITH
A “MARKET MAKER” AND THE NUMBER OF SECURITIES BEING SOLD DURING ANY THREE-MONTH
PERIOD NOT EXCEEDING SPECIFIED LIMITATIONS.

(K)                                AUTHORITY; BINDING OBLIGATION.  THE INVESTOR
HAS FULL POWER AND AUTHORITY TO MAKE THE REPRESENTATIONS REFERRED TO HEREIN, TO
PURCHASE THE STOCK PURSUANT TO THIS SUBSCRIPTION AGREEMENT, AND TO EXECUTE AND
DELIVER THIS SUBSCRIPTION AGREEMENT.  THIS SUBSCRIPTION AGREEMENT WHEN EXECUTED
AND DELIVERED BY THE INVESTOR WILL CONSTITUTE A VALID AND LEGALLY BINDING
OBLIGATION OF THE INVESTOR, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS, SUBJECT TO
LAWS OF GENERAL APPLICATION RELATING TO BANKRUPTCY, INSOLVENCY AND THE RELIEF OF
DEBTORS AND RULES OF LAW GOVERNING SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF OR
OTHER EQUITABLE REMEDIES.

--------------------------------------------------------------------------------

(L)                                    BROKER’S OF FINDER’S FEES.  THE COMPANY
HAS NOT INCURRED AND WILL NOT INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF ANY
ACTION TAKEN BY THE INVESTOR, ANY LIABILITY FOR BROKERAGE OR FINDERS’ FEES OR
AGENTS’ COMMISSIONS OR ANY SIMILAR CHARGES IN CONNECTION WITH THIS SUBSCRIPTION
AGREEMENT.

(M)                              NO GOVERNMENTAL APPROVAL.  THE INVESTOR
UNDERSTANDS THAT NO UNITED STATES FEDERAL OR STATE AGENCY OR AGENCY OF ANY OTHER
JURISDICTION HAS MADE ANY FINDING OR DETERMINATION AS TO THE FAIRNESS OF THE
TERMS OF THE OFFERING AND SALE OF THE STOCK.

(N)                                 NO ADVICE.  THE INVESTOR IS NOT RELYING ON
THE COMPANY OR ANY OF ITS EMPLOYEES, AGENTS OR REPRESENTATIVES FOR LEGAL,
INVESTMENT OR TAX ADVICE, AND THE INVESTOR HAS SOUGHT INDEPENDENT LEGAL,
INVESTMENT AND TAX ADVICE TO THE EXTENT THE INVESTOR HAS DEEMED NECESSARY OR
APPROPRIATE IN CONNECTION WITH THE INVESTOR’S DECISION TO SUBSCRIBE FOR STOCK. 
THE INVESTOR UNDERSTANDS AND AGREES THAT HE, SHE OR IT (AND NOT THE COMPANY)
SHALL BE RESPONSIBLE FOR HIS, HER OR ITS OWN TAX LIABILITY, IF ANY, THAT MAY
ARISE AS A RESULT OF THIS INVESTMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
SUBSCRIPTION AGREEMENT.

(O)                                  SURVIVAL; DUTY TO UPDATE.  THE FOREGOING
REPRESENTATIONS AND WARRANTIES ARE TRUE, ACCURATE AND COMPLETE AS OF THE DATE
HEREOF AND SHALL BE TRUE, ACCURATE AND COMPLETE AS OF THE COMPANY’S ACCEPTANCE
OF THE INVESTOR’S SUBSCRIPTION, AND SHALL SURVIVE SUCH ACCEPTANCE.  IF IN ANY
RESPECT SUCH REPRESENTATIONS AND WARRANTIES SHALL NOT BE TRUE, ACCURATE AND
COMPLETE PRIOR TO OR AT SUCH ACCEPTANCE, THE INVESTOR SHALL GIVE IMMEDIATE
NOTICE OF SUCH FACT TO THE COMPANY, BY FACSIMILE WITH WRITTEN CONFIRMATION OF
RECEIPT, SPECIFYING WHICH REPRESENTATIONS AND WARRANTIES ARE NOT TRUE, ACCURATE
AND COMPLETE AND THE REASONS THEREFOR.

4.                                      INDEMNIFICATION.  THE INVESTOR
ACKNOWLEDGES THAT THE INVESTOR UNDERSTANDS THE MEANING AND LEGAL CONSEQUENCES OF
THE REPRESENTATIONS AND WARRANTIES MADE BY THE INVESTOR HEREIN, AND THAT THE
COMPANY IS RELYING ON SUCH REPRESENTATIONS AND WARRANTIES IN MAKING ITS
DETERMINATION TO ACCEPT OR REJECT THIS SUBSCRIPTION.  THE INVESTOR HEREBY AGREES
TO INDEMNIFY AND HOLD HARMLESS THE COMPANY, EACH MANAGER, OFFICER AND EMPLOYEE
THEREOF AND EACH PERSON WHO CONTROLS THE COMPANY FROM AND AGAINST ANY AND ALL
LOSS, DAMAGE OR LIABILITY DUE TO OR ARISING OUT OF A BREACH  OR INACCURACY OF
ANY REPRESENTATION OR WARRANTY OF THE INVESTOR CONTAINED IN THIS SUBSCRIPTION
AGREEMENT.  ALL REPRESENTATIONS, WARRANTIES AND COVENANTS AND THE
INDEMNIFICATION CONTAINED IN THIS SUBSCRIPTION AGREEMENT SHALL SURVIVE THE
ACCEPTANCE OF THE SUBSCRIPTION AND THE ISSUANCE TO THE INVESTOR OF THE STOCK.

5.                                      TRANSFERABILITY.  THE INVESTOR AGREES
NOT TO TRANSFER OR ASSIGN THIS SUBSCRIPTION AGREEMENT, OR ANY INTEREST HEREIN,
AND FURTHER AGREES THAT THE ASSIGNMENT AND TRANSFER OF THE STOCK ACQUIRED
PURSUANT HERETO SHALL BE MADE ONLY IN ACCORDANCE WITH APPLICABLE LAW AND THE
COMPANY AGREEMENT.

6.                                      NO REVOCATION.  THE INVESTOR AGREES THAT
THIS SUBSCRIPTION AGREEMENT AND ANY AGREEMENT OF THE INVESTOR MADE HEREUNDER IS
IRREVOCABLE, AND THAT THIS SUBSCRIPTION AGREEMENT SHALL SURVIVE THE DEATH OR
DISABILITY OF THE INVESTOR.

7.                                      NOTICES.  ALL NOTICES OR OTHER
COMMUNICATIONS GIVEN OR MADE HEREUNDER SHALL BE IN WRITING AND SHALL BE
DELIVERED OR MAILED BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, OR DELIVERED BY FACSIMILE WITH WRITTEN CONFIRMATION OF RECEIPT
TO THE INVESTOR AT THE ADDRESS SET FORTH BELOW AND TO THE COMPANY, C/O INTRUSION
INC., 1101 E. ARAPAHO ROAD, SUITE 200, RICHARDSON, TEXAS 75081, TELEPHONE: 
972.234.6400, FAX 972.301.3892, OR AT SUCH OTHER PLACE AS THE COMPANY MAY
DESIGNATE BY WRITTEN NOTICE TO THE INVESTOR.

8.                                      EXPENSES.  THE INVESTOR WILL PAY THE
INVESTOR’S OWN EXPENSES RELATING TO THIS SUBSCRIPTION AGREEMENT AND THE PURCHASE
OF STOCK HEREUNDER.

9.                                      ENTIRE AGREEMENT; AMENDMENTS.  THIS
SUBSCRIPTION AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS BETWEEN THE PARTIES WITH
RESPECT TO ITS SUBJECT MATTER AND CONSTITUTES A COMPLETE AND EXCLUSIVE STATEMENT
OF THE TERMS OF THE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO ITS SUBJECT
MATTER.  NEITHER THIS SUBSCRIPTION AGREEMENT NOR ANY TERM HEREOF MAY BE CHANGED,
WAIVED, DISCHARGED OR TERMINATED ORALLY, WITHOUT THE WRITTEN CONSENT OF THE
INVESTOR AND THE COMPANY.

10.                               COUNTERPARTS.  THIS SUBSCRIPTION AGREEMENT MAY
BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL
AND ALL OF WHICH TAKEN TOGETHER SHALL CONSTITUTE ONE AGREEMENT.

--------------------------------------------------------------------------------

11.                               GOVERNING LAW.  THIS SUBSCRIPTION AGREEMENT
AND ALL AMENDMENTS HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PROVISIONS CONCERNING THE
CONFLICT OF LAWS.

12.                               SEVERABILITY.  SHOULD THERE EXIST OR ARISE A
CONFLICT BETWEEN ANY PROVISION OF THIS SUBSCRIPTION AGREEMENT AND ANY LAW,
STATUTE, ORDINANCE, ORDER OR REGULATION APPLICABLE TO THE ENFORCEMENT OF THIS
SUBSCRIPTION AGREEMENT, SUCH PROVISION OF THIS SUBSCRIPTION AGREEMENT SHALL BE
REFORMED TO THE MINIMUM EXTENT NECESSARY TO BRING IT WITHIN APPLICABLE LEGAL
REQUIREMENTS.  IF ONE OR MORE OF THE PROVISIONS IN THIS SUBSCRIPTION AGREEMENT
BECOME OR ARE FOUND BY ANY COURT TO BE VOID, VOIDABLE, OR UNENFORCEABLE, IN PART
OR IN WHOLE, THE REMAINING PROVISIONS SHALL CONTINUE IN FULL FORCE AND EFFECT. 
IF ANY PROVISION IS SO HELD VOID, VOIDABLE OR UNENFORCEABLE, THE INVESTOR AGREES
TO REPLACE SUCH PROVISION WITH A VALID AND ENFORCEABLE PROVISION THAT WILL
ACHIEVE, TO THE EXTENT POSSIBLE, THE ECONOMIC, BUSINESS AND OTHER PURPOSES OF
SUCH PROVISION.

13.                               HEADINGS.  THE HEADINGS IN THIS SUBSCRIPTION
AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY, AND SHALL NOT HAVE ANY BEARING
ON THE MEANING OF THIS SUBSCRIPTION AGREEMENT OR OF ANY PART HEREOF.

(Signature pages follow)

--------------------------------------------------------------------------------

 

Dated: December 28, 2006

 

 

 

 

 

 

[INVESTOR]

 

 

 

 

 

By:

 

/s/ G. Ward Paxton

 

 

Name:

 

G. Ward Paxton

 

 

Title:

 

President and CEO

 

 

 

 

 

 

 

 

 

 

BUSINESS ADDRESS:

 

 

 

 

 

 

1101 E. Arapaho Road

 

 

 

Richardson, TX 75081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FEDERAL TAX I.D. NUMBER OF ENTITY

 

 

 

 

 

 

 

ACCEPTED BY:

 

 

Intrusion Inc.

 

 

(a Delaware Corporation)

 

 

 

 

 

 

 

By:

/s/ Michael L. Paxton

 

 

 

Michael L. Paxton, Chief Financial Officer

 

 

 

--------------------------------------------------------------------------------

EXHIBIT A

RISK FACTORS

INVESTOR SHOULD READ AND UNDERSTAND ALL RISK FACTORS, AMONG OTHER ITEMS, AS
DESCRIBED IN THE COMPANY’S RECENT 10QSB AND 10KSB FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION.

--------------------------------------------------------------------------------