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 1,190,476 SHARES
OF COMMON STOCK AT A PURCHASE PRICE OF $0.42 PER SHARE, DETERMINED BY 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.

 

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(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.

 

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(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.

 

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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)

 

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Dated: September 26, 2007

 

 

 

 

[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

 

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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.

 

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