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.


 

















 


(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: 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

  



 

















 


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.