EXHIBIT 10.2


 


PLACEMENT AGENCY AGREEMENT


 


This Placement Agency Agreement (this “Agreement”) is
made and entered into as of December 2, 2005 (the “Effective Date”), by
and between Intrusion Inc., a Delaware corporation (the “Company”), and
Stonegate Securities, Inc., a Texas corporation (“Stonegate”).


 


WHEREAS, the Company desires to retain Stonegate as
its non-exclusive placement agent, and Stonegate is willing to act in such
capacity, in each case subject to the terms and conditions of this Agreement.


 


NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the Company and Stonegate (each a “Party”
and collectively, the “Parties”) hereby agree as follows:


 


1.             RETENTION OF STONEGATE; SCOPE OF SERVICES.


 


(a)           Subject to
the terms and conditions set forth herein, the Company hereby retains Stonegate
to act as the non-exclusive placement agent to the Company during the Contract
Period (as defined in Section 2 below), and Stonegate hereby agrees to be
so retained.


 


(b)           As the non-exclusive
placement agent to the Company, Stonegate will have the non-exclusive right
during the Contract Period to identify for the Company prospective accredited
investors, as such term is defined in Rule 501 of the Securities Act of
1933, as amended (the “Securities Act”) (such accredited investors being
collectively, the “Purchasers” and each, individually, a “Purchaser”), in one
or more placement (each, a “Placement” and collectively, the “Placements”) of
equity securities to be issued by the Company, the type and dollar amount being
as mutually agreed to by the Parties (the “Securities”).


 


(c)           Terms of
the Placements shall be as set forth in subscription documents, including any
stock purchase or subscription agreement, escrow agreement, registration rights
agreement, warrant agreement and/or other documents to be executed and
delivered in connection with each Placement (collectively, the “Subscription
Documents”).  The Placements are intended
to be exempt from the registration requirements of the Securities Act, pursuant
to Regulation D (“Regulation D”) of the rules and regulations of the
Securities and Exchange Commission (the “SEC”) promulgated under the Securities
Act.


 


(d)           Stonegate
will act on a best efforts basis and will have no obligation to purchase any of
the Securities offered in any Placement. During the Contract Period, Stonegate
shall have the non-exclusive right to arrange for all sales of Securities in
the Placements, including without limitation the non-exclusive right to
identify potential buyers for the Securities. 
All Purchasers and sales of Securities in the Placements 


 


1





















 


shall be subject to the approval of the Company, which approval may be
withheld, in whole or in part, in the Company’s sole discretion.


 


2.             CONTRACT PERIOD AND TERMINATION.


 


(a)           Stonegate
shall act as the Company’s non-exclusive placement agent under this Agreement
for a period commencing on the Effective Date, and continuing until terminated
by either Party upon 10 days notice to the other Party (the “Contract Period”).


 


(b)           Upon
termination, neither party will have any further obligation under this
Agreement, except as provided in Sections 5, 6, 7, 8, 9 and 10 hereof.


 


3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.


 


The company represents and warrants that it has full power and
authority to enter into this Agreement and to perform its obligations
hereunder.  This Agreement is enforceable
against the Company in accordance with its terms, subject to applicable laws
governing bankruptcy, insolvency and creditors’ rights generally.  The Agreement does not conflict with,
violate, cause a default, right of termination, or acceleration (whether
through the passage of time or otherwise) under any contract, agreement, or understanding
binding upon the Company or any subsidiary of the Company.


 


4.             COVENANTS OF THE COMPANY.


 


The Company covenants and agrees as follows:


 


(a)           Neither
the Company nor any affiliate of the Company (as defined in Rule 501(b) of
the Securities Act) will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) of the Company which will be integrated with the sale of the Securities in
a manner which would require the registration under the Securities Act of the
Securities.


 


(b)           Any and
all filings and documents required to be filed in connection with or as a
result of the Placements pursuant to federal and state securities laws are the
responsibility of the Company and will be filed by the Company, other than NASD
or other regulatory filings required to be made by Stonegate or a particular
Purchaser, which shall be the sole obligation of Stonegate or such Purchaser,
as applicable.


 


(c)           Any press
release to be issued by the Company announcing or referring to any Placement
shall, at the request of Stonegate, identify Stonegate as the placement
agent.  Subject to prior review of the
Company, Stonegate shall be permitted to publish a tombstone or similar
advertisement upon completion of each Placement identifying itself as the
Company’s placement agent with respect thereto; provided, that each such
advertisement does not constitute a general solicitation under federal
securities laws and otherwise complies with the requirements of the Securities
Act.  This Agreement shall not be filed
publicly by the Company without the prior written consent of Stonegate, unless
required by applicable law or regulation.


 


2





















 


5.             FURNISHING OF COMPANY INFORMATION;
CONFIDENTIALITY.


 


(a)           In
connection with Stonegate’s activities hereunder on the Company’s behalf, the
Company shall furnish Stonegate with all reasonable information concerning the
Company and its operations that Stonegate deems necessary or appropriate (the “Company
Information”) and shall provide Stonegate with reasonable access to the Company’s
books, records, officers, directors, employees, accountants and counsel.  The Company acknowledges and agrees that, in
rendering its services hereunder, Stonegate will be using and relying upon the
Company Information without independent verification thereof or independent
appraisal of any of the Company’s assets and may, in its sole discretion, use
additional information contained in public reports or other information
furnished by the Company or third parties.


 


(b)           Stonegate
agrees that the Company Information will be used solely for the purpose of
performing its services hereunder. 
Subject to the limitations set forth in subsection (c) below,
Stonegate will keep the Company Information provided hereunder confidential and
will not disclose such Company Information or any portion thereof, except (i) to
a third party contacted by Stonegate on behalf of, and with the prior approval
of, the Company pursuant hereto who has agreed to be bound by a confidentiality
agreement satisfactory in form and substance to the Company, or (ii) to
any other person for which the Company’s consent to disclose such Company
Information has been obtained.  Further,
Stonegate acknowledges that certain Confidential Information may constitute
material non-public information (as defined in Regulation FD) and agrees to,
and to cause its officer, directors, employees and affiliates to, refrain from
trading in the Company’s common stock until such information is made publicly
available by the Company.


 


(c)           Stonegate’s
confidentiality obligations under this Agreement shall not apply to any portion
of the Company Information which (i) at the time of disclosure to
Stonegate or thereafter is generally available to and known by the public
(other than as a result of a disclosure directly or indirectly by Stonegate in
violation of this Agreement); (ii) was available to Stonegate on a
non-confidential basis from a source other than the Company, provided that such
source is not and was not bound by a confidentiality agreement with the
Company; (iii) has been independently acquired or developed by Stonegate
without violating any of its obligations under this Agreement; or (iv) the
disclosure of which is legally compelled (whether by deposition, interrogatory,
request for documents, subpoena, civil or administrative investigative demand
or other similar process).  In the event
that Stonegate becomes legally compelled to disclose any of the Company
Information, Stonegate shall provide the Company with prompt prior written
notice of such requirement so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the terms of this
Agreement.


 


(d)           The
obligations of the Parties under this Section 5 shall survive the
termination of this Agreement for 12 months.


 


3





















 


6.             FEES AND EXPENSES.


 


(a)           As
compensation for services rendered by Stonegate in connection with the
Placements, the Company agrees to pay Stonegate a fee (the “Agency Fee”) of: (i) six
percent (6%) of the gross proceeds from the sale of Securities in the
Placements (on a cumulative basis) to Purchasers other than officers,
directors, employees or affiliates of the Company or their respective
affiliates or any individuals who participate in the Placement as a result of
an introduction from any such person (such Purchasers, being “Qualified
Purchasers”).  The Agency Fee shall be
paid immediately upon the closing of each sale of Securities by the Company.


 


(b)           Upon
execution of this Agreement by the Parties, the Company shall deliver to
Stonegate $5,000 as a non-accountable and non-refundable expense allowance to
compensate Stonegate for its initial diligence efforts, which such amount shall
be credited against any amounts payable to Stonegate pursuant to Section 6(a).


 


(c)           The
Company shall also promptly reimburse Stonegate for all reasonable
out-of-pocket expenses incurred by Stonegate and its directors, officers and employees
in connection with the performance of Stonegate’s services under this
Agreement.  For these purposes, “out-of-pocket
expenses” shall include, but not be limited to long distance telephone,
facsimile, courier, mail, supplies, travel and similar expenses; provided,
however, that no director, officer or employee of Stonegate shall undertake any
travel for or on behalf of the Company without the prior authorization of the
Company.


 


(d)           Upon
closing of the Placement and execution and delivery of evidence of its status
as an accredited investor in form and substance reasonably acceptable to the
Company and its counsel, the Company agrees to issue to Stonegate a Securities
Purchase Warrant (the “Representative’s Warrant”) entitling the holder(s)
thereof to purchase an amount of shares of the Company’s common stock equal to
six percent (6%) of the gross proceeds received in the Placement from Qualified
Purchasers at an exercise price equal to the per share exercise price of the
underlying the warrants received by the Qualified Purchasers relative to their
investment in the Placement (or if no such warrants are issued, the conversion
price of any convertible securities or the per share purchase price of any
common stock, as applicable) issued in the Placement).  The Representative’s Warrant shall be
exercisable for a period of five (5) years at an exercise price per share
equal to the price at which the Securities are sold to Purchasers.  The Representative’s Warrant shall otherwise
be substantially in the form of Exhibit A attached hereto.


 


(e)           The
obligations of the Parties under this Section 6 shall survive the
termination of this Agreement for any reason.


 


7.             INDEMNIFICATION.


 


(a)           The
Company agrees to indemnify and hold Stonegate harmless from and against any
and all losses, claims, damages or liabilities (or actions, including
securityholder actions, in respect thereof) related to or arising out of
Stonegate’s engagement hereunder or its role in connection herewith, and will
reimburse Stonegate for all reasonable expenses (including reasonable costs,
expenses, awards and counsel fees 


 


4





















 


and/or judgments) as they are incurred by Stonegate in connection with
investigating, preparing for or defending any such action or claim, whether or
not in connection with pending or threatened litigation in which Stonegate is a
party.  The Company will not, however, be
responsible for any claims, liabilities, losses, damages or expenses which are
finally judicially determined to have resulted primarily from the bad faith,
gross negligence or willful misconduct , or reckless disregard of its
obligations or duties of or by Stonegate or any of its officers, directors or
employees (collectively, “Excluded Claims”). 
The Company also agrees that Stonegate shall not have any liability to
the Company for or in connection with such engagement, except for any such
liability for losses, claims, damages, liabilities or expenses incurred by the
Company that result primarily from an Excluded Claim .  In the event that the foregoing indemnity is
unavailable (except by reason of an Excluded Claim), then the Company shall
contribute to amounts paid or payable by Stonegate in respect of its losses,
claims, damages and liabilities in such proportion as appropriately reflects
the relative benefits received by, and fault of, the Company and Stonegate in
connection with the matters as to which such losses, claims, damages or
liabilities relate, and other equitable considerations.  The foregoing shall be in addition to any
rights that Stonegate may have at common law or otherwise and shall extend upon
the same terms to and inure to the benefit of any director, officer, employee,
agent or controlling person of Stonegate. 
The Company hereby consents to personal jurisdiction, service and venue
in any court in which any claim which is subject to this agreement is brought
against Stonegate or any other person entitled to indemnification or
contribution under this subsection (a).


 


(b)           Stonegate
agrees to indemnify and hold the Company harmless from and against any and all
losses, claims, damages or liabilities (or actions, including securityholder
actions, in respect thereof) which are finally judicially determined to have
resulted primarily from the bad faith, gross negligence or willful misconduct
of Stonegate, and will reimburse the Company for all reasonable expenses
(including reasonable costs, expenses, awards and counsel fees and/or
judgments) as they are incurred by the Company in connection with investigating,
preparing for or defending any such action or claim, whether or not in
connection with pending or threatened litigation in which the Company is a
party.  In the event that the foregoing
indemnity is unavailable, then Stonegate shall contribute to amounts paid or
payable by the Company in respect of its losses, claims, damages and
liabilities in such proportion as appropriately reflects the relative benefits
received by, and fault of, the Company and Stonegate in connection with the
matters as to which such losses, claims, damages or liabilities relate, and
other equitable considerations.  The
foregoing shall be in addition to any rights that the Company may have at
common law or otherwise and shall extend upon the same terms to and inure to
the benefit of any director, officer, employee, agent or controlling person of
the Company.  Stonegate hereby consents
to personal jurisdiction, service and venue in any court in which any claim,
which is subject to this agreement, is brought against the Company or any other
person entitled to indemnification or contribution under this subsection (b).


 


(c)           The
obligations of the Parties under this Section 7 shall survive the
termination of this Agreement.


 


5





















 


8.             NON-CIRCUMVENTION.


 


The Company hereby agrees that, for a period of one year from the end
of the Contract Period or other termination of this Agreement, the Company will
not enter into any agreement, transaction or arrangement with any of Qualified
Purchasers (including their agents, principals and affiliates and the accounts
and funds which they manage or advise) which Stonegate has introduced, directly
or indirectly, to the Company pursuant to a meeting, telephone call, any
written communication, or by e mail, as Qualified Purchasers of the Securities
in the Placements (collectively, the “Stonegate Contacts”), regardless of
whether a transaction is consummated with such prospective purchasers, unless
the Company notifies Stonegate in writing of the agreement, transaction or
arrangement, and pays Stonegate a fee equal to the Agency Fee for securities of
the Company sold to Stonegate Contacts.


 


9.             GOVERNING LAW.


 


THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS
PROVISIONS THEREOF.


 


10.          ARBITRATION.


 


Stonegate and the Company will attempt to settle any claim or
controversy arising out of this Agreement through consultation and negotiation
in good faith and a spirit of mutual cooperation.  Any dispute which the parties cannot resolve
may then be submitted by either party to binding arbitration in Dallas, Texas
under the rules of the American Arbitration Association for
resolution.  Nothing in this paragraph
will prevent either party from resorting to judicial proceedings if (a) good
faith efforts to resolve the dispute under these procedures have been
unsuccessful or (b) interim relief from a court is necessary to prevent
serious and irreparable injury.


 


11.          NO WAIVER.


 


The failure or neglect of any party hereto to insist, in any one or
more instances, upon the strict performance of any of the terms or conditions
of this Agreement, or waiver by any party of strict performance of any of the
terms or conditions of this Agreement, shall not be construed as a waiver or
relinquishment in the future of such term or condition, but the same shall
continue in full force and effect.


 


12.          SUCCESSORS AND ASSIGNS.


 


The benefits of this Agreement shall inure to the benefit of the
Parties, their respective successors, assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the Parties shall be
binding upon their respective successors and assigns.  This Agreement may not be assigned by either
Party without the express written consent of the other Party, which consent
shall not be unreasonably withheld.


 


6





















 


13.          NOTICES.


 


All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be delivered personally or
sent by certified mail, return receipt requested, recognized overnight delivery
service, or facsimile as follows:


 


 


If to the Company:


 


IntrusionInc.

1101 East Arapaho Road


Richardson, TX 75081

Facsimile: (972) – 234-1467


Attention: G. Ward Paxton, Chairman, CEO


 


If to Stonegate:


 


Stonegate Securities, Inc.

5940 Sherry Lane, Suite 410

Dallas, Texas  75225

Facsimile: (214) 987-1981

Attention: Scott Griffith, President


 


Either Party may change its address or facsimile number set forth above
by giving the other Party notice of such change in accordance with the
provisions of this Section 13. A notice shall be deemed given (a) if
by personal delivery, on the date of such delivery, (b) if by certified mail,
on the date shown on the applicable return receipt, (c) if by overnight
delivery service, on the day after the date delivered to the service, or (d) if
by facsimile, on the date of transmission.


 


14.          NATURE OF RELATIONSHIP.


 


The Parties intend that Stonegate’s relationship to the Company and the
relationship of each director, officer, employee or agent of Stonegate to the
Company shall be that of an independent contractor and not as an employee of
the Company or an affiliate thereof. 
Nothing contained in this Agreement shall constitute or be construed to
be or create a partnership or joint venture between Stonegate and the Company
or their respective successors or assigns. 
Neither Stonegate nor any director, officer, employee or agent of
Stonegate shall be considered to be an employee of the Company by virtue of the
services provided hereunder.


 


15.          MISCELLANEOUS


 


(a)           Stonegate
reserves the right to solicit the assistance of outside dealers (“Dealers”) to
assist in the offer and sale of the Placements; provided, however, (i) that
any such Dealers agree in writing to be bound by the terms of the applicable
Placement and (ii) no such assistance shall constitute a general
solicitation to purchase the 


 


7





















 


Company’s securities. It is understood that Stonegate, in its sole
discretion, shall be entitled to pay over to any such Dealers any portion of
the compensation received by Stonegate hereunder.  The Company shall have no financial liability
for any fees or expenses of any such Dealers.


 


16.          CAPTIONS.


 


The Section titles herein are for reference purposes only and do
not control or affect the meaning or interpretation of any term or provision
hereof.


 


17.          AMENDMENTS.


 


No alteration, amendment, change or addition hereto shall be binding or
effective unless the same is set forth in a writing signed by a duly authorized
representative of each Party.


 


18.          PARTIAL INVALIDITY.


 


If it is finally determined that any term or provision hereof is
invalid or unenforceable, (a) the remaining terms and provisions hereof
shall be unimpaired, and (b) the invalid or unenforceable term or
provision shall be replaced by a term or provision that is valid and
enforceable and that comes as close as possible to expressing the intention of
the invalid or unenforceable term or provision.


 


19.          ENTIRE AGREEMENT.


 


This Agreement embodies the entire agreement and understanding of the
Parties and supersedes any and all prior agreements, arrangements and
understandings relating to the matters provided for herein.


 


20.          COUNTERPARTS.


 


This Agreement may be executed in one or more counterparts, each of
which shall be an original, but all of which together shall be considered one
and the same agreement.


 


[Remainder of Page Intentionally Left Blank]


 


8





















 


IN WITNESS WHEREOF, this Agreement has been executed
as of the date first written above by duly authorized representatives of the
Company and Stonegate.


 


	
   

  	
   

  	
  INTRUSION INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ G. Ward Paxton

  
	
   

  	
   

  	
  Title:

  	
  President : CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STONEGATE SECURITIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jesse B. Shelmire, IV

  
	
   

  	
   

  	
  Title:

  	
  CEO