Document:

Exhibit 10.4

 

INTRUSION INC.

 

STOCK ISSUANCE AGREEMENT

 

AGREEMENT made
this            day of                               ,
by and between Intrusion Inc., a Delaware corporation, and                                         ,
a Participant in the Corporation’s 2005 Stock Incentive Plan.

 

All
capitalized terms in this Agreement shall have the meaning assigned to them in
this Agreement or in the attached Appendix.

 

A.                                    PURCHASE OF SHARES

 

1.                                       PURCHASE.  Participant hereby purchases                           
shares of Common Stock (the “Purchased Shares”) pursuant to the provisions of
the Stock Issuance Program at the purchase price of $                    
per share (the “Purchase Price”).

 

2.                                       PAYMENT.  Concurrently with the delivery of this
Agreement to the Corporation, Participant shall pay the Purchase Price for the
Purchased Shares in cash or check payable to the Corporation and shall deliver
a duly executed blank Assignment Separate from Certificate (in the form
attached hereto as Exhibit I) with respect to the Purchased Shares.

 

3.                                       STOCKHOLDER
RIGHTS.  Until such time as the
Corporation exercises the Repurchase Right, Participant (or any successor in
interest) shall have all the rights of a stockholder (including voting,
dividend and liquidation rights) with respect to the Purchased Shares, subject,
however, to the transfer restrictions of this Agreement.

 

4.                                       ESCROW.  The Corporation shall have the right to hold
the Purchased Shares in escrow until those shares have vested in accordance
with the Vesting Schedule.

 

5.                                       COMPLIANCE
WITH LAW.  Under no circumstances shall
shares of Common Stock or other assets be issued or delivered to Participant
pursuant to the provisions of this Agreement unless, in the opinion of counsel
for the Corporation or its successors, there shall have been compliance with
all applicable requirements of applicable securities laws, all applicable
listing requirements of any stock exchange or quotation system on which the
Common Stock is at the time listed for trading and all other requirements of
law or of any regulatory bodies having jurisdiction over such issuance and
delivery.

 

B.                                    TRANSFER RESTRICTIONS

 

1.                                       RESTRICTION
ON TRANSFER.  Except for any Permitted
Transfer, Participant shall not transfer, assign, encumber or otherwise dispose
of any of the Purchased Shares which are subject to the Repurchase Right.

 

2.                                       RESTRICTIVE
LEGEND.  The stock certificate for the
Purchased Shares shall be endorsed with the following restrictive legend:

 

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE UNVESTED AND SUBJECT TO CERTAIN REPURCHASE RIGHTS GRANTED TO THE
CORPORATION AND ACCORDINGLY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF
A WRITTEN AGREEMENT DATED                               ,
                      
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). 
A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE CORPORATION’S PRINCIPAL
CORPORATE OFFICES.”

 

3.                                       TRANSFEREE
OBLIGATIONS.  Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound
by the provisions of this Agreement and that the transferred shares are subject
to the Repurchase Right to the same extent such shares would be so subject if
retained by Participant.

 

C.                                    REPURCHASE RIGHT

 

1.                                       GRANT.  The Corporation is hereby granted the right
(the “Repurchase Right”), exercisable at any time during the ninety (90)-day
period following the date Participant ceases for any reason to remain in
Service, to repurchase at the Repurchase Price any or all of the Purchased
Shares in which Participant is not, at the time of his or her cessation of
Service, vested in accordance with the Vesting Schedule set forth in
Paragraph C.3 of this Agreement or the special vesting acceleration provisions
of Paragraph C.5 of this Agreement (such shares to be hereinafter referred to
as the “Unvested Shares”).

 

2.                                       EXERCISE
OF THE REPURCHASE RIGHT.  The Repurchase
Right shall be exercisable by written notice delivered to each Owner of the
Unvested Shares prior to the expiration of the ninety (90)-day exercise period.  The notice shall indicate the number of
Unvested Shares to be repurchased, the Repurchase Price per share and the date
on which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice. 
The certificates representing the Unvested Shares to be repurchased
shall be delivered to the Corporation on the closing date specified for the
repurchase.  Concurrently with the
receipt of such stock certificates, the Corporation shall pay to Owner, in cash
or cash equivalent (including the cancellation of any purchase-money
indebtedness), an amount equal to the Repurchase Price for the Unvested Shares
to be repurchased from Owner.

 

3.                                       TERMINATION
OF THE REPURCHASE RIGHT.  The Repurchase
Right shall terminate with respect to any Unvested Shares for which it is not
timely exercised under Paragraph C.2.  In
addition, the Repurchase Right shall terminate and cease to be exercisable with
respect to any and all Purchased Shares in which Participant vests in
accordance with the following Vesting Schedule:

 

(i)                                     Upon
Participant’s completion of one (1) year of Service measured from                            ,
                           ,
Participant shall acquire a vested interest in,

 

2

 

and the Repurchase Right shall
lapse with respect to, twenty-five percent (25%) of the Purchased Shares.

 

(ii)                                  Participant
shall acquire a vested interest in, and the Repurchase Right shall lapse with
respect to, the remaining Purchased Shares in a series of thirty-six (36)
successive equal monthly installments upon Participant’s completion of each
additional month of Service over the thirty-six (36)-month period measured from
the initial vesting date under subparagraph (i) above.

 

4.                                       RECAPITALIZATION.  Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right and any escrow
requirements hereunder, but only to the extent the Purchased Shares are at the
time covered by such right or escrow requirements.  Appropriate adjustments to reflect such distribution
shall be made to the number and/or class of securities subject to this
Agreement and to the Repurchase Price per share to be paid upon the exercise of
the Repurchase Right in order to reflect the effect of any such
Recapitalization upon the Corporation’s capital structure; provided, however, that the aggregate
Repurchase Price shall remain the same.

 

5.                                       CHANGE
IN CONTROL.

 

(a)                                  Immediately prior to the consummation of any Change
in Control, the Repurchase Right shall automatically lapse in its entirety and
the Purchased Shares shall vest in full, except to the extent the Repurchase
Right is to be assigned to the successor corporation (or parent thereof) or is
otherwise to be continued in full force and effect pursuant to the terms of the
Change in Control transaction.

 

(b)                                 To the extent the Repurchase Right remains in effect
following a Change in Control, such right shall apply to the new capital stock
or other property (including any cash payments) received in exchange for the
Purchased Shares in consummation of the Change in Control, but only to the
extent the Purchased Shares are at the time covered by such right.  Appropriate adjustments shall be made to the
Repurchase Price per share payable upon exercise of the Repurchase Right to
reflect the effect (if any) of the Change in Control upon the Corporation’s
capital structure; provided,
however, that the aggregate Repurchase Price shall remain the same.  The new securities or other property
(including cash payments) issued or distributed with respect to the Purchased
Shares in consummation of the Change in Control shall immediately be deposited
in escrow with the Corporation (or the successor entity) and shall not be
released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.

 

D.                                    SPECIAL TAX ELECTION

 

1.                                       SECTION 83(B) ELECTION.  Under Code Section 83, the excess of the
fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date.  For this purpose, the term “forfeiture
restrictions” includes the right of

 

3

 

the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase
Right.  Participant may elect under Code Section 83(b) to
be taxed at the time the Purchased Shares are acquired, rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions.  Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement.  Even if the fair market value of the
Purchased Shares on the date of this Agreement equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future.  THE FORM FOR
MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO.  PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE
THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.

 

2.                                       FILING
RESPONSIBILITY.  PARTICIPANT ACKNOWLEDGES
THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY, AND NOT THE CORPORATION’S, TO
FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF PARTICIPANT
REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR
HER BEHALF.

 

E.                                      GENERAL PROVISIONS

 

1.                                       ASSIGNMENT.  The Corporation may assign the Repurchase
Right to any person or entity selected by the Board, including (without
limitation) one or more stockholders of the Corporation.

 

2.                                       AT
WILL EMPLOYMENT.  Nothing in this
Agreement or in the Plan shall confer upon Participant any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Participant) or of Participant, which rights are hereby
expressly reserved by each, to terminate Participant’s Service at any time for
any reason, with or without cause.

 

3.                                       NOTICES.  Any notice required to be given under this
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the U.S. 
mail, registered or certified, postage prepaid and properly addressed to
the party entitled to such notice at the address indicated below such party’s
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph to
all other parties to this Agreement.

 

4.                                       NO
WAIVER.  The failure of the Corporation
in any instance to exercise the Repurchase Right shall not constitute a waiver
of any other repurchase rights that may subsequently arise under the provisions
of this Agreement or any other agreement between the Corporation and
Participant.  No waiver of any breach or
condition of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature.

 

5.                                       CANCELLATION
OF SHARES.  If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration

 

4

 

for the
Purchased Shares to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the person from whom such shares are
to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance
with this Agreement).  Such shares shall
be deemed purchased in accordance with the applicable provisions hereof, and
the Corporation shall be deemed the owner and holder of such shares, whether or
not the certificates therefor have been delivered as required by this
Agreement.

 

6.                                       PARTICIPANT
UNDERTAKING.  Participant hereby agrees
to take whatever additional action and execute whatever additional documents
the Corporation may deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on either Participant or
the Purchased Shares pursuant to the provisions of this Agreement.

 

7.                                       AGREEMENT
IS ENTIRE CONTRACT.  This Agreement
constitutes the entire contract between the parties hereto with regard to the
subject matter hereof.  This Agreement is
made pursuant to the provisions of the Plan and shall in all respects be
construed in conformity with the terms of the Plan.

 

8.                                       GOVERNING
LAW.  This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas without
resort to that State’s conflict-of-laws rules.

 

9.                                       COUNTERPARTS.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

 

10.                                 SUCCESSORS
AND ASSIGNS.  The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Corporation
and its successors and assigns and upon Participant, Participant’s assigns and
the legal representatives, heirs and legatees of Participant’s estate, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof.

 

5

 

IN WITNESS
WHEREOF, the parties have executed this Agreement on the day and year first
indicated above.

 

	
   

  	
  INTRUSION INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  Address:

  	
  1101 E.
  Arapaho Road

  	
   

  
	
   

  	
   

  	
  Richardson,
  TX 75081

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PARTICIPANT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
								

 

 

SPOUSAL ACKNOWLEDGEMENT

 

The
undersigned spouse of the Participant has read and hereby approves the
foregoing Stock Issuance Agreement.  In
consideration of the Corporation’s granting the Participant the right to
acquire the Purchased Shares in accordance with the terms of such Agreement,
the undersigned hereby agrees to be irrevocably bound by all the terms of such
Agreement, including (without limitation) the right of the Corporation (or its
assigns) to purchase any Purchased Shares in which the Participant is not
vested at the time of his or her termination of Service.

 

	
   

  	
  Participant’s
  Spouse

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

EXHIBIT I

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE
RECEIVED                                                    
hereby sell(s), assign(s) and transfer(s) unto Intrusion Inc. (the “Corporation”),
                                          
(                           )
shares of the Common Stock of the Corporation standing in his or her name on
the books of the Corporation represented by Certificate No.                
herewith and do(es) hereby irrevocably constitute and appoint                                                                     
as his or her Attorney-in-Fact to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.

 

	
  Dated:
  ___________________, ____.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
				

 

 

 

 

INSTRUCTION: 
Please do not fill in any blanks other than the signature line.  Please sign exactly as you would like your
name to appear on the issued stock certificate. 
The purpose of this assignment is to enable the Corporation to exercise
the Repurchase Right without requiring additional signatures on the part of
Participant.

 

 

 

EXHIBIT II

 

SECTION 83(B) TAX ELECTION

 

This statement is being made under Section 83(b) of the
Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.

 

(1)                                  The
taxpayer who performed the services is:

 

Name:  

Address:

Taxpayer Ident. No.:

 

(2)                                  The
property with respect to which the election is being made is                           
shares of the common stock of Intrusion Inc.

 

(3)                                  The
property was issued on                                     ,
                           .

 

(4)                                  The
taxable year in which the election is being made is the calendar year                                                              .

 

(5)                                  The
property is subject to a repurchase right pursuant to which the issuer has the
right to acquire the property at the LOWER of the purchase price paid per share
or the fair market value per share, if for any reason taxpayer’s service with
the issuer terminates.  The issuer’s
repurchase right will lapse in a series of annual and monthly installments over
a forty-eight (48)-month period ending on                                         ,                         .

 

(6)                                  The
fair market value at the time of transfer (determined without regard to any
restriction other than a restriction which by its terms will never lapse) is $                       
per share.

 

(7)                                  The
amount paid for such property is $                       
per share.

 

(8)                                  A
copy of this statement was furnished to Intrusion Inc. for whom taxpayer
rendered the services underlying the transfer of property.

 

(9)                                  This
statement is executed on                                                          ,
                  .

 

	
   

  	
   

  	
   

  	
   

  
	
  Spouse (if any)

  	
   

  	
  Taxpayer

  	
   

  

 

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER
WITH WHICH TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE
MADE WITHIN THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK ISSUANCE
AGREEMENT.  THIS FILING SHOULD BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.  PARTICIPANT MUST RETAIN TWO (2) COPIES
OF THE COMPLETED FORM FOR FILING WITH HIS OR HER FEDERAL AND STATE TAX
RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL COPY FOR HIS OR HER RECORDS.

 

 

APPENDIX

 

The following
definitions shall be in effect under the Agreement:

 

A.                                   “Agreement” shall mean
this Stock Issuance Agreement.

 

B.                                     “Board” shall mean the
Corporation’s Board of Directors.

 

C.                                     “Change in Control” shall mean a change in ownership or
control of the Corporation effected through any of the following transactions:

 

(i)                                     a
merger, consolidation or other reorganization approved by the Corporation’s
stockholders, unless securities
representing more than 50% of the total combined voting power of the voting
securities of the successor corporation are immediately thereafter beneficially
owned, directly or indirectly, by the persons who beneficially owned the
Corporation’s outstanding voting securities immediately prior to such
transaction;

 

(ii)                                  the
sale, transfer or other disposition of all or substantially all of the
Corporation’s assets; or

 

(iii)                               the
acquisition, directly or indirectly by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation), of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than 50% of the total combined voting power of the
Corporation’s outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders.

 

D.                                    “Common Stock” shall
mean shares of the Corporation’s common stock, par value $0.01 per share.

 

E.                                      “Code” shall mean the
Internal Revenue Code of 1986, as amended.

 

F.                                      “Corporation” shall
mean Intrusion Inc., a Delaware corporation, and any corporate successor to all
or substantially all of the assets or voting stock of Intrusion Inc. which has
by appropriate action assumed the Plan.

 

G.                                     “Employee” shall mean
an individual who is in the employ of the Corporation (or any Parent or
Subsidiary), subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.

 

H.                                    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

 

I.                                         “Fair Market Value”
per share of Common Stock on any relevant date shall be determined in
accordance with the following provisions:

 

(i)                                     If
the Common Stock is at the time traded on the Nasdaq Stock Market, then the
Fair Market Value shall be the closing selling price per share of Common Stock

 

 

on the date in question, as
such price is reported by the National Association of Securities Dealers on the
Nasdaq Stock Market and published in The
Wall Street Journal.  If there
is no closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.

 

(ii)                                  If
the Common Stock is at the time listed on any stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on
the date in question on the stock exchange determined by the Plan Administrator
to be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange and published in The Wall Street  Journal.  If there is
no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

 

(iii)                               If
the Common Stock is at the time neither listed on any stock exchange or the
Nasdaq Stock Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.

 

J.                                        “Owner” shall mean
Participant and all subsequent holders of the Purchased Shares who derive their
chain of ownership through a Permitted Transfer from Participant.

 

K.                                    “Parent” shall mean
any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

 

L.                                      “Participant” shall
mean the person to whom the Purchased Shares are issued under the Stock
Issuance Program.

 

M.                                 “Permitted Transfer”
shall mean (i) a gratuitous transfer of the Purchased Shares, provided and only if Participant obtains
the Corporation’s prior written consent to such transfer, (ii) a transfer
of title to the Purchased Shares effected pursuant to Participant’s will or the
laws of inheritance following Participant’s death or (iii) a transfer to
the Corporation in pledge as security for any purchase-money indebtedness
incurred by Participant in connection with the acquisition of the Purchased
Shares.

 

N.                                    “Plan” shall mean the
Corporation’s 2005 Stock Incentive Plan.

 

O.                                    “Plan Administrator”
shall mean either the Board or a committee of the Board acting in its
administrative capacity under the Plan.

 

P.                                      “Purchase Price” shall
have the meaning assigned to such term in Paragraph A.l.

 

Q.                                    “Purchased Shares”
shall have the meaning assigned to such term in Paragraph A.l

 

 

R.                                     “Recapitalization”
shall mean any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the Corporation’s
outstanding Common Stock as a class without the Corporation’s receipt of
consideration.

 

S.                                      “Repurchase Price”
shall mean the Purchase Price paid per share for the Purchased Shares.

 

T.                                     “Repurchase Right”
shall mean the right granted to the Corporation in accordance with Article C.

 

U.                                    “Service” shall mean
the Participant’s performance of services for the Corporation (or any Parent or
Subsidiary) in the capacity of an Employee, a non-Employee member of the board
of directors or an independent contractor. 
Service shall not be deemed to cease during a period of military leave,
sick leave or other personal leave approved by the Corporation; provided,
however, that except to the extent otherwise required by law, no Service credit
shall be given for purposes of the Vesting Schedule hereunder for any
period the Participant is on a leave of absence.

 

V.                                     “Stock Issuance Program”
shall mean the Stock Issuance Program under the Plan.

 

W.                                “Subsidiary” shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

X.                                    “Vesting Schedule”
shall mean the vesting schedule specified in Paragraph C.3, pursuant
to which the Purchased Shares are to vest in a series of installments over
Participant’s period of Service.

 

Y.                                     “Unvested Shares”
shall have the meaning assigned to such term in Paragraph C.1.Exhibit 10.5

 

INITIAL GRANT

 

INTRUSION INC.

 

NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR

AUTOMATIC STOCK OPTION

 

Notice is hereby given of the following option grant (the “Option”) to
purchase shares of the Common Stock of Intrusion Inc. (the “Corporation”):

 

	
  OPTIONEE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GRANT DATE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GRANT
  NUMBER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NUMBER OF
  OPTION SHARES:

  	
   

  	
  10,000
  shares of common stock

  
	
   

  	
   

  	
   

  
	
  EXERCISE
  PRICE:

  	
   

  	
  $                            per
  share

  
	
   

  	
   

  	
   

  
	
  EXPIRATION
  DATE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TYPE OF
  OPTION:

  	
   

  	
  Non-Statutory
  Stock Option

  
	
   

  	
   

  	
   

  
	
  EXERCISE
  SCHEDULE:

  	
   

  	
  The Option
  shall vest and become exercisable for one-third of the Option Shares upon
  Optionee’s completion of each year of service as a member of the Corporation’s
  Board of Directors (the “Board”) over the three-year period measured from the
  Grant Date. In no event shall the Option become exercisable for any
  additional Option Shares after Optionee’s cessation of Board service.

  

 

Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the automatic option grant program under
the Intrusion Inc. 2005 Stock Incentive Plan (the “Plan”).  Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Automatic
Stock Option Agreement attached hereto as EXHIBIT A.  Optionee hereby acknowledges receipt of a
copy of the official prospectus for the Plan in the form attached hereto as EXHIBIT B.  A copy of the Plan is available upon request
made to the Corporate Secretary at the Corporation’s principal offices.

 

 

NO IMPAIRMENT OF RIGHTS.  Nothing
in this Notice or the attached Automatic Stock Option Agreement or in the Plan
shall interfere with or otherwise restrict in any way the rights of the
Corporation and the Corporation’s stockholders to remove Optionee from the
Board at any time in accordance with the provisions of applicable law.

 

DEFINITIONS.  All capitalized
terms in this Notice shall have the meaning assigned to them in this Notice or
in the attached Automatic Stock Option Agreement.

 

	
  DATED:
  ____________ ,_____

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTRUSION
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
						

 

ATTACHMENTS

EXHIBIT A – AUTOMATIC STOCK OPTION AGREEMENT

EXHIBIT B - PLAN SUMMARY AND PROSPECTUS

 

2

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