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<SEC-DOCUMENT>0000912057-01-007849.txt : 20010322
<SEC-HEADER>0000912057-01-007849.hdr.sgml : 20010322
ACCESSION NUMBER:		0000912057-01-007849
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010321

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INTRUSION COM INC
		CENTRAL INDEX KEY:			0000736012
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER COMMUNICATIONS EQUIPMENT [3576]
		IRS NUMBER:				751911917
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		
		SEC FILE NUMBER:	000-20191
		FILM NUMBER:		1573027

	BUSINESS ADDRESS:	
		STREET 1:		1101 ARAPAHO ROAD
		CITY:			RICHARDSON
		STATE:			TX
		ZIP:			75081
		BUSINESS PHONE:		9722346400

	MAIL ADDRESS:	
		STREET 1:		1101 ARAPAHO ROAD
		CITY:			RICHARDSON
		STATE:			TX
		ZIP:			75081

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ODS NETWORKS INC
		DATE OF NAME CHANGE:	19970507

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	OPTICAL DATA SYSTEMS INC
		DATE OF NAME CHANGE:	19950517
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>a2040873z10-k405.txt
<DESCRIPTION>10-K405
<TEXT>

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

(MARK ONE)

<TABLE>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                         COMMISSION FILE NUMBER 0-20191

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

                              INTRUSION.COM, INC.

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                             <C>
                DELAWARE                                     75-1911917
        (State of incorporation)                 (IRS Employer Identification No.)

         1101 EAST ARAPAHO ROAD                                75081
           RICHARDSON, TEXAS                                 (zip code)
(Address of principal executive offices)
</TABLE>

      (Registrant's telephone number, including area code): (972) 234-6400

          Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

          Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $0.01 PAR VALUE
                                (Title of class)

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

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

    As of February 27, 2001, the aggregate market value of the Registrant's
voting stock held by non-affiliates of the Registrant was approximately
$59,862,086 (affiliates being, for these purposes only, directors, executive
officers and holders of more than 5% of Registrant's Common Stock). As of
February 27, 2001, 20,529,894 shares of the Registrant's Common Stock were
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Registrant's definitive Proxy Statement filed in connection
with the Registrant's 2001 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Form 10-K.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                              INTRUSION.COM, INC.
                                     INDEX

<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                      --------
<S>                     <C>                                                           <C>
PART I
Item 1.                 Business....................................................      3
Item 2.                 Properties..................................................     14
Item 3.                 Legal Proceedings...........................................     14
Item 4.                 Submission of Matters to a Vote of Security Holders.........     14

PART II
Item 5.                 Market for Registrant's Common Equity and Related
                          Stockholder Matters.......................................     14
Item 6.                 Selected Financial Data.....................................     15
Item 7.                 Management's Discussion and Analysis of Financial Condition      16
                          And Results of Operations.................................
Item 7A.                Quantitative and Qualitative Disclosures About Market
                          Risk......................................................     21
Item 8.                 Financial Statements and Supplementary Data.................     21
Item 9.                 Changes in and Disagreements with Accountants on Accounting      21
                          and Financial Disclosure..................................

PART III
Item 10.                Directors and Executive Officers of the Registrant..........     22
Item 11.                Executive Compensation......................................     22
Item 12.                Security Ownership of Certain Beneficial Owners and
                          Management................................................     22
Item 13.                Certain Relationships and Related Transactions..............     22

PART IV
Item 14.                Exhibits, Financial Statement Schedules, and Reports on Form
                          8-K.......................................................     22

Signatures              ............................................................     24
</TABLE>

                                       2
<PAGE>
                                     PART I

ITEM 1.  BUSINESS.

    In addition to the historical information contained herein, the discussion
in this Form 10-K contains certain forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, that involve risks and uncertainties, such as
statements concerning: growth and anticipated operating results, developments in
Intrusion.com's markets and strategic focus; new products and product
enhancements; potential acquisitions and the integration of acquired businesses,
products and technologies; strategic relationships and future economic and
business conditions. The cautionary statements made in this Form 10-K should be
read as being applicable to all related forward-looking statements whenever they
appear in this Form 10-K. Intrusion.com's actual results could differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed under the section captioned "Factors That May Affect Future Results of
Operations" in Item 1 of this Form 10-K as well as those cautionary statements
and other factors set forth elsewhere herein.

GENERAL

    We develop, market and support a family of security software and appliances
that address vital security issues facing organizations deploying business
applications over the Internet or internally via Intranets. We currently provide
e-security solutions including intrusion detection systems, security assessment
systems, virtual private network appliances and firewall appliances.

    We market and distribute our products through a direct sales force to
end-users, distributors and by numerous domestic and international system
integrators, service providers and value-added resellers. Our end-user customers
include high-technology, manufacturing, telecommunications, retail,
transportation, health care, insurance, entertainment, utilities and energy
companies, government agencies, financial institutions, and academic
institutions.

    Our company was organized in Texas in September 1983 and reincorporated in
Delaware in October 1995. For more than 15 years, we provided local area
networking equipment and were known as Optical Data Systems or ODS Networks. On
April 17, 2000, we announced plans to sell, or otherwise dispose of, our
networking divisions which include our Essential Communications division and our
local area networking assets. In accordance with these plans, we have accounted
for these businesses as discontinued operations. On June 1, 2000, we changed our
name from ODS Networks, Inc. to Intrusion.com, Inc. and our NASDAQ ticker symbol
from ODSI to INTZ to reflect our focus on e-security solutions.

    Our principal executive offices are located at 1101 E. Arapaho Road,
Richardson, Texas 75081, and our telephone number is (972) 234-6400. References
to "we", "us", "our" or "Intrusion.com" refer to Intrusion.com, Inc. and its
subsidiaries.

RECENT DEVELOPMENTS

    In January 2001, we announced an agreement to sell our discontinued IS
(Infinite Switch) 6000 product line to Shanghai Video and Audio Electronics
Co., Ltd. ("SVA"). Under the agreement, all existing IS 6000 inventory, design
specifications, manufacturing documentation and equipment are to be acquired by
SVA. Additionally, we will provide technical support to SVA for 12 months. Under
the terms of the agreement, subject to appropriate government approval, we will
receive $6 million in the first quarter of 2001.

    In January 2001, we announced an agreement to establish a joint venture with
SVA. The new venture, Shanghai SVA Intrusion.com Joint Venture, will
manufacture, market, distribute and sell our

                                       3
<PAGE>
security products in China (PRC Mainland) under an exclusive multi-year
licensing agreement. Subject to appropriate government approvals, the joint
venture is expected to be established in the first quarter of 2001 and under
terms of the Agreement, we will receive $4.75 million in the first half of 2001.

INDUSTRY BACKGROUND

    In the last decade, network computing has evolved from local-area networks
to global systems communicating through open Internet connections. The
widespread adoption of open computing environments, such as the Internet,
enables organizations to increase revenue and reduce costs with electronic
business-to-business and business-to-consumer transactions, business process
re-engineering and secure messaging for telecommuters and widely distributed
workforces.

    Although open computing environments such as the Internet have many business
advantages, their openness and accessibility make these systems, and the
integrity of the information that is stored on them, vulnerable to security
threats. These systems can be breached by computer hackers, curious or
disgruntled employees, contractors and competitors who may compromise or destroy
sensitive information within the system or otherwise disrupt the normal
operation of the system. In addition, open computing environments such as the
Internet are complex and typically involve a variety of hardware, operating
systems and applications provided by numerous vendors. Each addition or change
to the hardware, operating system or application may introduce new
vulnerabilities and security risks to the system.

    Enterprises are therefore adopting a variety of security solutions to meet
the challenge posed by malicious intruders, curious hackers and disgruntled
employees. To be effective, an organization requires an enterprise-wide
information risk management process that can be managed centrally and
implemented on a distributed basis. Organizations seek a set of individual,
best-of-breed solutions designed to work standalone and in concert with one
another to provide an integrated view of their security status. These solutions
often include:

    - firewalls to control the flow of data between an internal network and
      outside networks or the Internet;

    - virtual private network ("VPN") systems to protect information during
      transmission and provide authentication of users;

    - security assessment systems to identify potential security risks by
      comparing security policy with actual system configuration;

    - intrusion detection systems to monitor the packet traffic on network
      segments to identify and respond to security breaches; and

    - a comprehensive reporting system to automate the analysis and correlation
      of data generated by multiple security applications.

    As e-business and open computing environments continue to expand, security
management will become an essential system on the network. We are poised to take
advantage of this requirement for robust security technologies.

INTRUSION.COM SOLUTION AND PRODUCTS

    Intrusion.com's approach to the challenges of information security is to
develop, market and support a family of intrusion detection and security
assessment software and firewall and VPN appliances for deployment by
enterprises and use by security service providers. We seek to protect
information assets from attack and misuse and to safeguard data integrity.
Implementing adequate perimeter defense, monitoring network traffic, profiling
user behavior and responding rapidly to network intrusions are critical elements
for the protection of information integrity.

                                       4
<PAGE>
SECURITY SOFTWARE PRODUCTS

SECURENET PRO-TM-

    Intrusion.com's SecureNet Pro, introduced in July 2000, is a sophisticated
network intrusion detection system ("NIDS"). SecureNet Pro allows security
administrators to automatically monitor high speed network traffic, detect and
respond to suspicious activity, and respond to internal and external network
abuse. The SecureNet Pro architecture enables the recognition and response to a
large number of attack patterns on high-speed networks. Additionally, SecureNet
Pro provides for complete packet analysis, resulting in fewer false positives,
thereby increasing the efficiency and effectiveness of security personnel. When
a SecureNet Pro sensor detects an attack or misuse, it transmits an alarm to the
SecureNet Pro console for administrative review. In addition, SecureNet Pro can
respond immediately to an attack or misuse by terminating a connection, sending
e-mail or pager alerts, recording the session or taking other user-definable
actions. Its easy-to-use interface, monitoring and reporting capabilities
increase the effectiveness of security professionals and enable them to secure
their networks efficiently.

SECURITYANALYST-TM-

    Intrusion.com's SecurityAnalyst is a security assessment system that helps
to address security risks through identification of security weaknesses and
deviations from security policies for Microsoft and Novell servers and
workstations. SecurityAnalyst identifies security weaknesses by comparing actual
computer configurations with an organization's security policy as well as
industry "best practices." SecurityAnalyst enables fast, easy-to-use security
compliance audits and provides more than 60 comprehensive reports, ranging from
executive-level security report cards to a detailed identification of security
risks and corrective actions.

    Maintaining an effective security policy requires ongoing verification that
the written policies are being complied with. SecurityAnalyst gives a
big-picture view that generates measurable data about security policy compliance
while providing comprehensive reporting capabilities. SecurityAnalyst evaluates
the security health of the network in six critical areas: password strength,
access control, user account restrictions, system monitoring, data integrity and
data confidentiality.

SECUREENTERPRISE-TM-

    Intrusion.com's SecureEnterprise is a centralized security monitoring
system. SecureEnterprise blends the data from a variety of disparate systems,
infrastructure devices and applications in a multivendor environment to enable
security administrators to assess security events across a network.

    With the gigabytes of data generated by hundreds of agents and devices,
getting value from the data produced by myriad security devices has become
increasingly complex and burdensome for time-constrained security professionals.
SecureEnterprise enables security administrators to see the macro view of
security events within networks and systems. A centralized security analysis
tool that delineates itself with statistical behavioral profiling,
SecureEnterprise detects anomalies and user misuse by analyzing data from
firewalls, intrusion detection systems, routers, and workstations. By
integrating audit and event data from these various sources into a single,
standardized data-set, SecureEnterprise increases staff efficiencies, enables
deeper security system analysis, and makes daily evaluation and assessment
reviews easier.

                                       5
<PAGE>
SECURITY APPLIANCES

SECURECOM-TM- PERIMETER DEFENSE SYSTEM (PDS) SERIES

    Effective deployment of a security strategy involves installation,
configuration, validation, and implementation of all systems. The optimal
solution is a combined software/appliance solution that enables optimized
performance, effectively leverages personnel and reduces the total cost of
ownership to the enterprise.

    As organizations expand their operations to include remote offices, regional
divisions, branch locations and telecommuters, securing the enterprise becomes
more complex. The need to deploy complete, cost-effective security solutions
that enable centralized management is paramount. Intrusion.com offers integrated
security software/appliance solutions that allow businesses to more easily
secure their networks by enabling a variety of complementary security
technologies.

    The SecureCom PDS Series of security appliances are Linux-based platforms
integrating pre-configured software to secure enterprise networks reliably and
affordably. These innovative perimeter defense systems deliver security software
solutions to the managed service provider, large enterprise, small business, or
enterprise remote offices.

    While many security platforms can be difficult or costly to manage, a PDS
appliance delivers Web-based setup and administration with centralized policy
management. The PDS Series enables the deployment of complementary
technologies--firewall, VPN and network intrusion detection systems, and needs
only a Web browser for easy, centralized administration.

    - The SecureNet PDS integrates Intrusion.com's SecureNet Pro network
      intrusion detection software with the PDS 2300 for cost-effective
      installation that can extend across the network. Its easy-to-use interface
      increases administrative efficiencies.

    - The PDS 2315 offers the full version of Check Point Software Technologies'
      VPN-1/FireWall-1 software. Designed for larger user environments, the PDS
      2315 enables a variety of centralized security management options.

    - The PDS 2110 features Check Point's VPN-1/FireWall-1 SmallOffice software
      for the 5-to-50 user environment, and it needs only a Web browser for
      easy, centralized administration.

SECURECOM 8000 SERIES

    The SecureCom 8000 Series is a family of security platforms that includes
both stand-alone gateways and intelligent modular chassis solutions. This
multivendor security platform integrates routing, firewall software, intrusion
detection systems, virtual private networking, LAN connectivity and other
security application modules in a multiblade 19" rack-mountable appliance.

SECURECOM 6000 SERIES

    The SecureCom 6000 Series is a field-deployable, fault-tolerant platform
that integrates network and application servers, routing, firewall software,
intrusion detection systems, virtual private networking and LAN connectivity
into a single, compact unit. Utilized in numerous military operations, this
flexible chassis-based system greatly reduces equipment complexity and is
reliable in battlefield conditions.

THIRD-PARTY PRODUCTS

    We believe that it is beneficial to work with third parties with
complementary technologies to provide integrated solutions to our customers. As
we also compete with these technology partners in

                                       6
<PAGE>
certain segments of the market, there can be no assurance that we will have
access to all of the third-party products which may be desirable in order to
offer fully integrated solutions to our customers.

CUSTOMER SERVICES

    In addition to offering best-of-breed security products, we also offer a
wide range of services, including design and configuration, project planning and
management, training, security analysis and installation and maintenance.

PRODUCT DEVELOPMENT

    The data security industry is characterized by rapidly changing technology,
standards and customer demands. We believe that our future success depends in
large part upon the timely enhancement of existing products as well as the
development of technologically advanced new products which meet industry
standards, perform successfully and achieve market acceptance. We are currently
developing and marketing next-generation data security products. We are also
investing in the development of products which comply with emerging industry
standards and are continuously engaged in testing to ensure that our products
interoperate with other manufacturers' products which comply with industry
standards.

    During 2000, 1999 and 1998, our research and development expenditures were
$13.1 million, $8.2 million and $2.8 million, respectively. All of our
expenditures for hardware and software research and development costs have been
expensed as incurred. At December 31, 2000, we had 59 employees engaged in
research and product development.

MANUFACTURING AND SUPPLIES

    Our operational strategy relies on outsourcing of manufacturing of
components, assembly and certain other operations to reduce fixed costs and to
provide flexibility in meeting market demand.

    Our internal manufacturing operations consist primarily of replication of
software on CDs, packaging, final assembly, testing and quality control of
subassemblies and finished units. Materials used in our manufacturing processes
include semiconductors such as microprocessors, memory chips and application
specific integrated circuits ("ASICs"), printed circuit boards, power supplies
and enclosures.

INTELLECTUAL PROPERTY AND LICENSES

    Our success and our ability to compete is dependent, in part, upon our
proprietary technology. While we have applied for certain patents, we do not
hold any issued patents and currently rely on a combination of contractual
rights, trade secrets and copyright laws to establish and protect our
proprietary rights in our products. We have also entered into confidentiality
agreements with our employees and enter into non-disclosure agreements with our
suppliers, resellers and certain customers to limit access to and disclosure of
proprietary information. There can be no assurance that the steps taken by us to
protect our intellectual property will be adequate to prevent misappropriation
of our technology or that our competitors will not independently develop
technologies that are substantially equivalent or superior to our technology.

    We have entered into several software and product license agreements. These
license agreements provide us with additional software and hardware components
that add value to our security products. These license agreements do not provide
proprietary rights which are unique or exclusive to us and are generally
available to other parties on the same or similar terms and conditions, subject
to payment of applicable license fees and royalties.

                                       7
<PAGE>
    On September 30, 1999, we entered a technology licensing agreement with RSA
Security Inc. ("RSA") under which we are the exclusive licensee of RSA's Kane
security products in North America and Europe. The Kane security products
include SecurityAnalyst, a host-based security assessment tool. We are
responsible for marketing, sales, support, maintenance and development for the
Kane security software.

SALES, MARKETING AND CUSTOMERS

    We market and distribute our products primarily through a direct sales force
to end users supplemented by numerous domestic and international distributors,
system integrators and value added resellers. At December 31, 2000, our sales
and marketing organization consisted of 131 individuals, including managers,
sales representatives, marketing personnel and technical support personnel.

    FIELD SALES FORCE.  Our direct sales organization focuses on major account
sales, promotes our products to current and potential customers, and monitors
evolving customer requirements. Our channel sales force promotes our products to
distributors, system integrators and value added resellers. The field sales and
technical support force provides training and technical support to our resellers
and end users and assists our customers to design secure data networking
solutions.

    We currently conduct sales and marketing efforts from our principal office
in Richardson (Dallas), Texas; through domestic field offices located in the
following metropolitan areas: Anaheim, Atlanta, Boston, Denver, San Diego,
Vancouver and Vienna (Washington, D.C.); and through foreign sales offices
located in the following countries: Canada, England, France, Germany, Japan,
Malaysia, New Zealand and South Korea.

    DISTRIBUTORS.  We have signed distribution agreements with distributors in
the United States, Europe and Asia. In general, these relationships are
non-exclusive. Distributors typically maintain an inventory of our products.
Under these agreements, we provide certain protection to the distributors for
their inventory of our products for price reductions as well as products that
are slow-moving or have been discontinued. Recognition of sales to distributors
and related gross profits are deferred until the merchandise is resold by the
distributors.

    RESELLERS.  Domestic and international system integrators and value added
resellers (collectively, "resellers") sell our products as stand-alone solutions
to end users and integrate our products with products sold by other vendors into
data security systems that are sold to end users. Our field sales force and
technical support organization provide support to these resellers. Our
agreements with resellers are non-exclusive, and our resellers generally sell
other products which may compete with our products. Resellers may place higher
priority on products of other suppliers who are larger than and have more name
recognition than Intrusion.com, and there can be no assurance that resellers
will continue to sell and support our products.

    FOREIGN SALES.  We believe that rapidly evolving international markets are
important sources of future net sales. Our export sales are currently being made
through a direct sales force supplemented by international resellers in Europe,
Asia, Latin America and Canada. Export sales accounted for approximately 19.2%,
14.0% and 25.3% of net sales in 2000, 1999 and 1998, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this report for a geographic breakdown of our product
revenue in 2000, 1999 and 1998. Sales to foreign customers and resellers
generally have been made in United States dollars.

    MARKETING.  We have implemented several methods to market our products,
including regular participation in trade shows and seminars, advertisement in
trade journals, telemarketing, distribution of sales literature and product
specifications and ongoing communication with our resellers and installed base
of end-user customers.

                                       8
<PAGE>
    CUSTOMERS.  Our end-user customers include manufacturing, high-technology,
telecommunications, retail, transportation, health care, insurance,
entertainment, utilities and energy companies, government agencies, financial
institutions and academic institutions. Sales to certain customers and groups of
customers can be impacted by seasonal capital expenditure approval cycles, and
sales to customers within certain geographic regions can be subject to seasonal
fluctuations in demand.

    Although we sell our products to many customers, direct sales to seven such
resellers and end-user customers, iGov.com, TRW Systems & Information Technology
("TRW"), AT&T Corp. ("AT&T"), Federal Data Corporation ("Federal Data"), NCR
Corp. ("NCR"), Comstor, Inc. ("Comstor") and Concentric Network Corp.
("Concentric") have each accounted for 10% or more of our net sales in at least
one of the past three fiscal years as indicated in the following schedule.

<TABLE>
<CAPTION>
                                                                        PERCENTAGE OF NET SALES
                                                                  ------------------------------------
CUSTOMER                                                            2000          1999          1998
- --------                                                          --------      --------      --------
<S>                                                               <C>           <C>           <C>
iGov.com....................................................        14.2%         21.3%          4.0%
TRW.........................................................        24.1           7.4           0.0
AT&T........................................................         0.2          10.9           7.8
Federal Data................................................         1.9          16.0           0.0
NCR.........................................................         0.3           0.8          17.3
Comstor.....................................................         0.0          12.1           0.0
Concentric..................................................         0.1           0.0          11.9
</TABLE>

    A large portion of the products sold to iGov.com, TRW and Federal Data
during the periods shown were integrated with other products or services and
sold to U.S. government customers by those system integrators. No other customer
accounted for 10% or more of our net sales in 2000, 1999 or 1998, respectively.
The loss of any of these customers could have a material adverse effect on
Intrusion.com and our operating results if not replaced.

    Most of our business with U.S. government agencies is on a fixed-price
basis. Government contracts customarily include provisions which provide for
cancellation at the convenience of the government. In addition, upon
cancellation by the government, we generally would be entitled to reimbursement
of costs incurred, plus a pro rata share of profit. We have never received a
cancellation of a material government contract and have no reason to anticipate
any such cancellation. The products sold, characteristics and business risks
associated with our sales to U.S. government agencies do not differ materially
from those associated with sales of our products to commercial customers.

    BACKLOG.  We believe that only a small portion of our order backlog is
noncancelable and that the dollar amount associated with the noncancelable
portion is immaterial. We purchase our products based upon our forecast of
customer demand and maintain inventories of sub-assemblies and finished products
in advance of receiving firm orders from customers. Orders are generally
fulfilled within two to eight weeks following receipt of an order. Due to the
generally short cycle between order and shipment and occasional
customer-initiated changes in delivery schedules or cancellation of orders which
are made without significant penalty, we do not believe that our backlog as of
any particular date is indicative of future net sales.

    CUSTOMER SUPPORT, SERVICE AND WARRANTY.  We service, repair and provide
technical support for our products. The Intrusion.com field sales and technical
support force work closely with resellers and end-user customers on-site and by
telephone to assist with pre- and post-sales support services such as network
security design, system installation and technical consulting. By working
closely with our customers, Intrusion.com employees gain a thorough
understanding of end-user requirements and provide input to the product
development process.

                                       9
<PAGE>
    We warrant all of our products against defects in materials and workmanship
for periods ranging from 90 days to 12 months. Before and after expiration of
the product warranty period, we offer both on-site and factory-based support,
parts replacement and repair services. Extended warranty services are separately
invoiced on a time and materials basis or under an annual maintenance contract.

COMPETITION

    The market for data security solutions is intensely competitive and subject
to frequent product introductions with improved price/performance
characteristics. Industry suppliers compete in areas such as conformity to
existing and emerging industry standards, interoperability with networking and
other security products, management and security capabilities, performance,
price, ease of use, scalability, reliability, flexibility, product features and
technical support. We believe that our solutions-oriented approach (combining
security network design services, Intrusion.com products and third-party
products to provide superior, secure networking systems to customers) provides
us with a competitive advantage with large organizations with complex security
requirements.

    There are numerous companies competing in various segments of the data
security markets. Our principal competitors include Internet Security
Systems, Inc. ("ISS"), Cisco Systems, Inc. ("Cisco"), Symantec Corp.
("Symantec"), Cabletron Systems, Inc. ("Cabletron"), Nokia Corporation
("Nokia"), Nortel Networks ("Nortel"), Network Associates, Inc. ("Network
Assoc."), SonicWALL, Inc. ("SonicWALL") and WatchGuard Technologies, Inc.
("WatchGuard"). Several of our competitors have substantially greater financial,
technical, sales and marketing resources, better name recognition and a larger
customer base than we do. In addition, many of our competitors offer customers a
broader product line which provides a more comprehensive networking and security
solution than we currently offer. Even if we do introduce advanced products
which meet evolving customer requirements in a timely manner, there can be no
assurance that our new products will gain market acceptance.

    Certain companies in the data security industry have expanded their product
lines or technologies in recent years as a result of acquisitions. Further, more
companies have developed products which conform to existing and emerging
industry standards and have sought to compete on the basis of price. We
anticipate increased competition from large networking equipment vendors which
are expanding their capabilities in the data security market. For example in
2000, Symantec acquired Axent Technologies, Nokia acquired Ramp Networks, Inc.
and Cabletron acquired Network Security Wizards. We anticipate increased
competition from private "start-up" companies that have developed or are
developing advanced security products. Increased competition in the security
industry could result in significant price competition, reduced profit margins
or loss of market share, any of which could have a material adverse effect on
our business, operating results and financial condition. There can be no
assurance that we will be able to compete successfully in the future with
current or new competitors.

EMPLOYEES

    As of December 31, 2000, we employed a total of 294 persons, including 131
in sales, marketing and technical support, 35 in manufacturing and operations,
59 in research and product development, 30 in administration and finance, and 39
in the our discontinued networking operations.

    None of our employees are represented by a labor organization, and we are
not a party to any collective bargaining agreement. We have not experienced any
work stoppages and consider our relations with our employees to be good.

    Competition in the recruiting of personnel in the networking and data
security industry is intense. We believe that our future success will depend in
part on our continued ability to hire, motivate and retain qualified management,
sales and marketing, and technical personnel. To date, we have not experienced
significant difficulties in attracting and retaining qualified employees.

                                       10
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

    In addition to the other information in this Form 10-K, the following
factors should be considered in evaluating Intrusion.com and our business.

    TECHNOLOGICAL CHANGES.  The market for our products is characterized by
frequent product introductions, rapidly changing technology and continued
evolution of new industry standards. The market for security products requires
our products to be compatible and interoperable with products and architectures
offered by various vendors, including other security products, networking
products, workstation and personal computer architectures and computer and
network operating systems. Our success will depend to a substantial degree upon
our ability to develop and introduce in a timely manner new products and
enhancements to our existing products that meet changing customer requirements
and evolving industry standards. The development of technologically advanced
products is a complex and uncertain process requiring high levels of innovation
as well as the accurate anticipation of technological and market trends. There
can be no assurance that we will be able to identify, develop, manufacture,
market and support new or enhanced products successfully in a timely manner.
Further, we or our competitors may introduce new products or product
enhancements that shorten the life cycle of or obsolete our existing product
lines, any of which could have a material adverse effect on our business,
operating results and financial condition.

    MARKET ACCEPTANCE.  We are pursuing a strategy to increase the percentage of
our revenue generated through indirect sales channels including distributors,
value added resellers, system integrators, original equipment manufacturers and
managed service providers. There can be no assurance that our products will gain
market acceptance in these indirect sales channels. Further, competition among
security companies to sell products through these indirect sales channels could
result in significant price competition and reduced profit margins.

    We are also pursuing a strategy to further differentiate our product line by
introducing complementary security products and incorporating new technologies
into our existing product line. There can be no assurance that we will
successfully introduce these products or that such products will gain market
acceptance. We anticipate competition from networking companies, network
security companies and others in each of our product lines. We anticipate that
profit margins will vary among our product lines and that product mix
fluctuations could have an adverse effect on our overall profit margins.

    ACQUISITIONS.  ISS, Cisco, Symantec, Cabletron, Nokia, Nortel and other
competitors have recently acquired several security companies with complementary
technologies, and we anticipate that such acquisitions will continue in the
future. These acquisitions may permit such competitors to accelerate the
development and commercialization of broader product lines and more
comprehensive solutions than we currently offer. In the past, we have relied
upon a combination of internal product development and partnerships with other
security vendors to provide competitive solutions to customers. Certain of the
recent and future acquisitions by our competitors may have the effect of
limiting our access to commercially significant technologies. Further, the
business combinations and acquisitions in the security industry are creating
companies with larger market shares, customer bases, sales forces, product
offerings and technology and marketing expertise. There can be no assurance that
we will be able to compete successfully in such an environment.

    In September 1998, we completed an acquisition of certain assets of the
Computer Misuse and Detection System ("CMDS") Division from Science Applications
International Corporation ("SAIC"), a privately held company in San Diego,
California. On September 30, 1999, we entered a technology licensing agreement
with RSA under which we are the exclusive licensee of RSA's Kane Security
products in North America and Europe. On June 30, 2000, we acquired
MimeStar, Inc. ("MimeStar"), a Virginia corporation. MimeStar developed an
advanced, network based intrusion detection system

                                       11
<PAGE>
called SecureNet Pro-TM-. The stockholder of MimeStar received $3 million in
cash with an additional $1 million in cash and 95,969 shares of our common stock
(which was valued at approximately $1 million on the date of the merger) placed
in escrow, payable to the stockholder of MimeStar within one year subject to
indemnification and other conditions. We may, in the future, acquire or invest
in additional companies, business units, product lines, or technologies to
accelerate the development of products and sales channels complementary to our
existing products and sales channels. Acquisitions involve numerous risks,
including: difficulties in assimilation of operations, technologies, and
products of the acquired companies; risks of entering markets in which we have
no or limited direct prior experience and where competitors in such markets have
stronger market positions; the potential loss of key employees of the acquired
company; and the diversion of our attention from normal daily operation of our
business. There can be no assurance that any other acquisition or investment
will be consummated or that such acquisition or investment will be realized.

    PRODUCT TRANSITIONS.  Once current security products have been in the market
place for a period of time and begin to be replaced by higher performance
products (whether of our design or a competitor's design), we expect the net
sales of such products to decrease. In order to achieve revenue growth in the
future, we will be required to design, develop and successfully commercialize
higher performance products in a timely manner. There can be no assurance that
we will be able to introduce new products and gain market acceptance quickly
enough to avoid adverse revenue transition patterns during current or future
product transitions. Nor can there be any assurance that we will be able to
respond effectively to technological changes or new product announcements by
competitors, which could render portions of our inventory obsolete.

    Our goal is to transition an increasing proportion of our revenue from
hardware products (which accounted to 81% of our net sales in 2000) to our
software products or solutions that include both our hardware and software
products. Such a transition would improve our gross profit margins. Our ability
to achieve our revenue and product mix objectives over the next several quarters
will largely depend upon the extent to which these product lines are accepted in
the security marketplace. There can be no assurance that we will improve our
product mix, nor can we assure an improvement in gross profit margins.

    MANUFACTURING AND SUPPLIERS.  Our operational strategy relies on outsourcing
of product assembly and certain other operations. There can be no assurance that
we will effectively manage our third-party contractors or that these contractors
will meet our future requirements for timely delivery of products of sufficient
quality and quantity. Further, we intend to introduce a number of new products
and product enhancements in 2001 which will require that we rapidly achieve
volume production of those new products by coordinating our efforts with those
of our suppliers and contractors. The inability of the third-party contractors
to provide us with adequate supplies of high-quality products could cause a
delay in our ability to fulfill orders and could have an adverse effect on our
business, operating results and financial condition.

    All of the materials used in our products are purchased under contracts or
purchase orders with third parties. While we believe that many of the materials
used in the production of our products are generally readily available from a
variety of sources, certain components such as microprocessors and mother boards
are available from one or a limited number of suppliers. The lead times for
delivery of components vary significantly and can exceed twelve weeks for
certain components. If we should fail to forecast our requirements accurately
for components, we may experience excess inventory or shortages of certain
components which could have an adverse effect on our business and operating
results. Further, any interruption in the supply of any of these components, or
the inability to procure these components from alternative sources at acceptable
prices within a reasonable time, could have an adverse effect on our business
and operating results.

                                       12
<PAGE>
    INTELLECTUAL PROPERTY AND LICENSES.  There are many patents held by
companies which relate to the design and manufacture of data security systems.
Potential claims of infringement could be asserted by the holders of those
patents. We could incur substantial costs in defending ourself and our customers
against any such claim regardless of the merits of such claims. In the event of
a successful claim of infringement, we may be required to obtain one or more
licenses from third parties. There can be no assurance that we could obtain the
necessary licenses on reasonable terms.

    THIRD-PARTY PRODUCTS.  We believe that it is beneficial to work with third
parties with complementary technologies to broaden the appeal of our security
products. These alliances allow Intrusion.com to provide integrated solutions to
our customers by combining Intrusion.com developed technology with third-party
products. As we also compete with these technology partners in certain segments
of the market, there can be no assurance that we will have access to all of the
third-party products which may be desirable or necessary in order to offer fully
integrated solutions to Intrusion.com customers.

    DEPENDENCE ON KEY CUSTOMERS. A relatively small number of customers have
accounted for a significant portion of our revenue. U.S. government agencies,
large system integrators and managed service providers are expected to continue
to account for a substantial portion of our net revenue. We continuously face
competition from ISS, Cisco, Symantec, Cabletron, Nokia, Network Assoc.,
SonicWALL, WatchGuard and others for U.S. government security projects and
corporate security installations. Any reduction or delay in sales of our
products to these customers could have a material adverse effect on our
operating results.

    INTERNATIONAL OPERATIONS.  Our international operations may be affected by
changes in demand resulting from fluctuations in currency exchange rates and
local purchasing practices, including seasonal fluctuations in demand, as well
as by risks such as increases in duty rates, difficulties in distribution,
regulatory approvals and other constraints upon international trade. Our sales
to foreign customers are subject to export regulations. In particular, certain
sales of our data security products require clearance and export licenses from
the U.S. Department of Commerce under these regulations. Any inability to obtain
such clearances or any required foreign regulatory approvals on a timely basis
could have a material adverse effect on our operating results.

    IMPACT OF GOVERNMENT CUSTOMERS.  A significant portion of our revenue is
derived from sales to the U.S. government, either directly by Intrusion.com or
through system integrators and other resellers. Sales to the government present
risks in addition to those involved in sales to commercial customers, including
potential disruptions due to appropriation and spending patterns and the
government's reservation of the right to cancel contracts and purchase orders
for its convenience.

    GENERAL.  Sales of our products fluctuate, from time to time, based on
numerous factors, including customers' capital spending levels and general
economic conditions. While certain industry analysts believe that there is a
significant market for data security products, there can be no assurance as to
the rate or extent of the growth of such market or the potential adoption of
alternative technologies. Future declines in data security product sales as a
result of general economic conditions, adoption of alternative technologies or
any other reason could have a material adverse effect on our business, operating
results and financial condition.

    Due to the factors noted above and in "Management's Discussion and Analysis
of Financial Condition and Results of Operations", our future earnings and
common stock price may be subject to significant volatility, particularly on a
quarterly basis. Past financial performance should not be considered a reliable
indicator of future performance and investors should not use historical trends
to anticipate results or trends in future periods. Any shortfall in revenue and
earnings from the levels anticipated by securities analysts could have an
immediate and significant effect on the trading price of our common stock in any
given period. Also, we participate in a highly dynamic industry which often
results in volatility of our common stock price.

                                       13
<PAGE>
ITEM 2.  PROPERTIES.

    Our headquarters is located in a modern, two-story building in Richardson,
Texas, with an aggregate of approximately 95,000 square feet of floor space.
This facility includes our corporate administration, manufacturing, marketing,
research and development, sales and technical support personnel. We occupy this
facility under a lease, the base term of which expires in February 2005, with
two seven-year options to extend the lease term, subject to compliance with
certain conditions. We also lease a separate warehouse facility consisting of
approximately 8,000 square feet, adjacent to our headquarters, under a lease
that expires in June 2002.

    Personnel of the Essential division (part of the our discontinued
operations) are located in a 15,120 square foot leased property in Albuquerque,
New Mexico. The lease will expire in February 2009. Research and development,
administrative, manufacturing, marketing and sales personnel occupy this
property.

    Much of our security software research and development staff is located in
an 11,400 square foot leased property in San Diego, California. The lease will
expire in August 2002. Research and development, sales and administrative
personnel occupy this facility.

    We have a sales office located in Vienna, Virginia occupying a 9,747 square
foot leased property. The lease will expire in April 2004, with a five-year
option to extend the lease term, subject to compliance with certain conditions.

    In addition, we lease small amounts of office space for sales and technical
support personnel domestically in California, Colorado, Georgia, Massachusetts
and Washington, and internationally in Canada, England, France, Germany,
Malaysia, New Zealand and South Korea. We also opened an office in Tokyo, Japan,
in January 2001, under an initial 6-month lease. With the addition of the Japan
office, we believe that the existing facilities at December 31, 2000 will be
adequate to meet our requirements through 2001. See Note 6 of Notes to
Consolidated Financial Statements for additional information regarding our
obligations under leases.

ITEM 3.  LEGAL PROCEEDINGS.

    We are not a party to any material litigation and are not aware of any
threatened litigation which would have a material adverse effect on
Intrusion.com, our operating results or our financial position.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    There were no matters submitted to a vote of security holders of
Intrusion.com during the fourth quarter of 2000.

                                    PART II

ITEM 5.  MARKET FOR INTRUSION.COM'S COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS.

    Our common stock is traded on The Nasdaq Stock Market (National Market
System) under the symbol "INTZ". Prior to June 1, 2000, our symbol was "ODSI".
As of February 27, 2001 there were approximately 230 holders of record of the
common stock. The following table sets forth, for the periods indicated, the
high and low per share sales prices for the common stock, as reported by The
Nasdaq Stock Market.

<TABLE>
<CAPTION>
                                                            2000                           1999
                                                  ------------------------      --------------------------
                                                     HIGH          LOW              HIGH           LOW
                                                  ----------   -----------      ------------   -----------
<S>                                               <C>          <C>              <C>            <C>
First Quarter...................................  $31 1/2      $8 11/16         $ 5 5/8        $2 1/2
Second Quarter..................................   24           7 9/16            4 3/8         2 1/2
Third Quarter...................................   17 1/4       9                 7 15/32       3 15/16
Fourth Quarter..................................   12 1/2       2 7/8            14 15/16       4 7/8
</TABLE>

                                       14
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA.

    The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 of this Form 10-K and the consolidated
statements and notes thereto included in Item 14 of this Form 10-K. Continuing
operations consisted of our information security business which began operations
in 1998. Discontinued operations are composed of our local area networking
divisions which were discontinued in April 2000.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                        ----------------------------------------------------
                                                          2000       1999       1998       1997       1996
        (IN THOUSANDS, EXCEPT PER SHARE DATA)           --------   --------   --------   --------   --------
<S>                                                     <C>        <C>        <C>        <C>        <C>

INCOME STATEMENT DATA:
Revenue...............................................  $ 23,210   $  7,963   $  1,920   $    --    $    --
Cost of Sales.........................................    19,009      3,877        968        --         --
                                                        --------   --------   --------   -------    -------
Gross profit..........................................     4,201      4,086        952        --         --
Operating expenses:
  Sales and marketing.................................    27,740     12,236     17,806        --         --
  Research and development............................    13,073      8,171      2,847        --         --
  In-process research and development.................        --         --      1,047 (1)      --       --
  General and administrative..........................     5,865      2,466        731        --         --
  Amortization of intangibles.........................       975        547        272        --         --
                                                        --------   --------   --------   -------    -------
Operating loss........................................   (43,452)   (19,334)   (21,751)       --         --
Interest income, net..................................     3,301      1,104      1,398        --         --
Other income (expense)................................    66,335 (2)       --   (1,122)       --         --
                                                        --------   --------   --------   -------    -------
Income (loss) before income taxes.....................    26,184    (18,230)   (21,475)       --         --
Income taxes provision (benefit)......................     1,999         --     (3,104)       --
                                                        --------   --------   --------   -------    -------
Income (loss) from continuing operations..............    24,185    (18,230)   (18,371)       --         --
Income (loss) from discontinued operations, net of
  tax.................................................      (974)     6,190     (7,379)   (4,937)    11,051
                                                        --------   --------   --------   -------    -------
Net income (loss).....................................  $ 23,211   $(12,040)  $(25,750)  $(4,937)   $11,051
                                                        ========   ========   ========   =======    =======
Basic earnings (loss) per share, continuing
  operations..........................................  $   1.23   $  (0.98)  $  (1.07)  $  0.00    $  0.00
                                                        ========   ========   ========   =======    =======
Diluted earnings (loss) per share, continuing
  operations..........................................  $   1.18   $  (0.98)  $  (1.07)  $  0.00    $  0.00
                                                        ========   ========   ========   =======    =======
Basic earnings (loss) per share.......................  $   1.18   $  (0.65)  $  (1.50)  $ (0.30)   $  0.68
                                                        ========   ========   ========   =======    =======
Dilutive earnings (loss) per share....................  $   1.13   $  (0.65)  $  (1.50)  $ (0.30)   $  0.66
                                                        ========   ========   ========   =======    =======
Weighted average shares outstanding
  --Basic.............................................    19,624     18,565     17,190    16,437     16,261
                                                        ========   ========   ========   =======    =======
  --Diluted...........................................    20,478     18,565     17,190    16,437     16,825
                                                        ========   ========   ========   =======    =======
BALANCE SHEET DATA:
<CAPTION>
                                                          2000       1999       1998       1997       1996
                                                        --------   --------   --------   --------   --------
<S>                                                     <C>        <C>        <C>        <C>        <C>
Working capital.......................................  $ 52,514   $ 66,578   $ 31,763   $51,847    $54,529

Total assets..........................................    92,414    120,502     61,710    77,178     81,935

Total liabilities.....................................    13,627     38,925     12,204    10,799     10,997

Total stockholders' equity............................    78,787     81,577     49,506    66,379     70,938
</TABLE>

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

(1) The write-off of acquired in-process research and development in the year
    ending December 31, 1998, is comprised of approximately $1.0 million
    resulting from the acquisition of Computer Misuse and Detection System
    assets from Science Applications International Corporation.

(2) Other income for the year ending December 31, 2000 comprised primarily of a
    $66.4 million pre-tax gain realized on the sale of Alteon WebSystems, Inc.
    common stock.

    See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Notes to the Consolidated Financial Statements.

                                       15
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995

    This Annual Report, other than historical information, may include
forward-looking statements, including statements with respect to financial
results, product introductions, market demand, sales channels, industry trends,
sufficiency of cash resources and certain other matters. These statements are
made under the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 and involve risks and uncertainties which could cause actual
results to differ materially from those in the forward-looking statements,
including those discussed in the section entitled "Factors That May Affect
Future Results of Operations" in Item 1 and elsewhere in this Annual Report on
Form 10-K and other filings with the Securities and Exchange Commission.

OVERVIEW

    We develop, market and support a family of security software and appliances
that address vital security issues facing organizations deploying business
applications over the Internet or internally via Intranets. We currently provide
e-security solutions including intrusion detection systems, security assessment
systems, virtual private network appliances and firewall appliances. On June 1,
2000, we changed our name from ODS Networks, Inc. to Intrusion.com, Inc. and our
NASDAQ ticker symbol from ODSI to INTZ to reflect our focus on e-security
solutions. During the second quarter of 2000, we announced our plan to sell, or
otherwise dispose of, our networking divisions which includes our Essential
Communications division and our local area networking assets and began
accounting for these networking divisions as discontinued operations. Given our
change in strategy, our results of operations prior to 2000 do not necessarily
reflect our current business.

RESULTS OF OPERATIONS

    The following tables set forth, for the periods indicated, certain financial
data as a percentage of net sales.

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                              ------------------------------------
                                                                2000          1999          1998
                                                              --------      --------      --------
<S>                                                           <C>           <C>           <C>
Net sales...................................................    100.0%        100.0%         100.0%
Cost of Sales...............................................     81.9          48.7           50.4
                                                               ------        ------       --------
Gross profit................................................     18.1          51.3           49.6
Operating expenses:
  Sales and marketing.......................................    119.5         153.7          927.4
  Research and development..................................     56.3         102.6          148.3
  In-process research and development.......................      0.0           0.0           54.5
  General and administrative................................     25.3          31.0           38.1
  Amortization of intangibles...............................      4.2           6.9           14.2
                                                               ------        ------       --------
Operating loss..............................................   (187.2)       (242.9)      (1,132.9)
Interest income, net........................................     14.2          13.9           72.8
Other income (expense)......................................    285.8           0.0          (58.4)
                                                               ------        ------       --------
Income (loss) before income taxes...........................    112.8        (229.0)      (1,118.5)
Income taxes provision (benefit)............................      8.6           0.0         (161.7)
                                                               ------        ------       --------
Income (loss) from continuing operations....................    104.2        (229.0)        (956.8)
Income (loss) from discontinued operations, net of tax......     (4.2)         77.7         (384.3)
                                                               ------        ------       --------
Net income (loss)...........................................    100.0        (151.3)      (1,341.1)
                                                               ======        ======       ========
</TABLE>

                                       16
<PAGE>
<TABLE>
<CAPTION>
                                                                2000          1999          1998
                                                              --------      --------      --------
<S>                                                           <C>           <C>           <C>
Domestic sales..............................................     80.8%         86.0%          74.7%

Export sales to:
  Europe....................................................      7.6           8.3            9.5
  Canada....................................................      2.7           0.1            2.9
  Asia......................................................      7.4           5.6           12.9
  Latin America.............................................      1.5           0.0            0.0
                                                               ------        ------       --------
Net sales...................................................    100.0%        100.0%         100.0%
                                                               ======        ======       ========
</TABLE>

2000 COMPARED WITH 1999

NET SALES

    Net sales increased 191.5% to $23.2 million in 2000 from $8.0 million in
1999. Our increased revenue is attributed to several factors including:
increased sales in our SecureCom product line, SecurityAnalyst availability for
all of 2000 compared to only the fourth quarter of 1999, and new product
introductions of SecureNet Pro and PDS 2100.

    Export sales in 2000 increased to $4.5 million, or 19.2% of net sales,
compared to $1.1 million, or 14.0% of net sales in 1999 primarily due to greater
international acceptance of our security products.

    Sales to iGov.com in 2000 and 1999 were 14.2% and 21.3%, respectively of net
sales. Sales to TRW in 2000 and 1999 were 24.1% and 7.4%, respectively of net
sales. Sales to AT&T in 2000 and 1999 were 0.2% and 10.9%, respectively of net
sales. Sales to Federal Data in 2000 and 1999 were 1.9% and 16.0%, respectively
of net sales. Sales to Comstor in 2000 and 1999 were 0.0% and 12.1%,
respectively of net sales. In addition, a portion of our sales to iGov.com, TRW,
Federal Data and other corporations were resold by those organizations to
various agencies of the U.S. government.

GROSS PROFIT

    Gross profit increased 2.8% to $4.2 million in 2000 from $4.1 million in
1999. As a percentage of net sales, gross profit decreased to 18.1% for 2000
from 51.3% in 1999. This decrease is primarily associated to an increase in our
operations infrastructure, which includes operations management, supply chain
management, purchasing, quality, order entry, planning and other related
functions as well as certain period costs associated with starting up new
products and processes.

    Gross profit as a percentage of net sales is impacted by several factors,
including shifts in product mix, changes in channels of distribution, sales
volume, fluctuations in manufacturing costs, pricing strategies, and
fluctuations in sales of integrated third-party products.

SALES AND MARKETING

    Sales and marketing expenses increased 126.7% to $27.7 million in 2000 from
$12.2 million in 1999 as we expanded our sales and marketing programs and staff
to support more products and new channels. As a percentage of net sales, sales
and marketing expenses decreased to 119.5% in 2000 from 153.7% in 1999. We
expect sales and marketing expenses to increase in 2001 compared to 2000 as we
continue to invest in sales and marketing programs and personnel. We expect
sales and marketing expenses, as a percentage of net sales, to decrease in 2001
compared to 2000. Sales and marketing expenses may vary as a percentage of net
sales in the future.

                                       17
<PAGE>
RESEARCH AND DEVELOPMENT

    Research and development expenses increased 60.0% to $13.1 million, or 56.3%
of net sales, in 2000 compared to $8.2 million, or 102.6% of net sales, in 1999.
Much of this increase was to support product development of new products
including SecureNet Pro, SecurityAnalyst and the PDS 2100. Our research and
development costs are expensed in the period in which they are incurred. We
expect research and development expenses to increase in 2001 compared to 2000 as
we continue to invest in security software and appliances. The Company expects
research and development, as a percentage of net sales, to decrease in 2001
compared to 2000. Research and development expenses may vary as a percentage of
net sales in the future.

GENERAL AND ADMINISTRATIVE

    General and administrative expenses, excluding amortization expenses,
increased 137.8% to $5.9 million in 2000 from $2.5 million in 1999 primarily due
to the shift of general and administrative personnel from our discontinued
operations to our continuing operations. As a percentage of net sales, general
and administrative expenses decreased to 25.3% in 2000 from 31.0% in 1999. We
expect general and administration expenses to increase in 2001 compared to 2000
to support the sales and marketing and research and development infrastructure.
General and administrative expenses may vary as a percentage of net sales in the
future.

AMORTIZATION OF INTANGIBLES

    Amortization of intangibles increased to $1.0 million in 2000 from
$0.5 million in 1999, due to the acquisition of MimeStar in June 2000. We expect
amortization expense to increase in 2001 to reflect a full year amortization of
MimeStar intangibles. Amortization expenses may vary as a percentage of net
sales in the future.

INTEREST INCOME, NET

    Net interest income increased to $3.3 million in 2000 from $1.1 million in
1999 primarily due to an increase in average cash and interest-bearing
investment balances related to our sale of Alteon WebSystems' common stock,
generating gross proceeds of $67.1 million in the first quarter of 2000. As a
percentage of net sales, net interest income was 14.2% and 13.9% in 2000 and
1999, respectively. We expect net interest income to decrease in 2001 compared
to 2000 as we expect our average cash and interest-bearing investment balances
to decline for 2001 when compared to 2000. Net interest income may vary in the
future based on our cash flow and rate of return on investments.

INCOME TAXES

    Our effective income tax rate was 7.6% in 2000 compared to an income tax
rate of 0% in 1999. We fully utilized our net operating loss carryback in 1998.
We did not record an income tax benefit in 1999 related to the net operating
losses which can be carried forward to offset taxable income in future years.
Due to our sale of Alteon WebSystems' common stock in 2000, we recognized the
tax benefit of the 1999 net operating loss carryforward in 2000. See Note 9 of
the Notes to Consolidated Financial Statements.

1999 COMPARED WITH 1998

NET SALES

    Net sales increased 314.7% to $8.0 million in 1999 from $1.9 million in
1998. This increase occurred as we began focusing more resources on our security
products compared to our networking and high performance switching products (now
discontinued operations).

                                       18
<PAGE>
    Export sales in 1999 increased to $1.1 million, or 14.0% of net sales,
compared to $0.5 million, or 25.3% of net sales in 1998 primarily due to greater
international acceptance of our security products.

    Sales to iGov.com in 1999 and 1998 were 21.3% and 4.0%, respectively of net
sales. Sales to AT&T in 1999 and 1998 were 10.9% and 7.8%, respectively of net
sales. Sales to Federal Data in 1999 and 1998 were 16.0% and 0.0%, respectively
of net sales. Sales to NCR in 1999 and 1998 were 0.8% and 17.3%, respectively of
net sales. Sales to Comstor in 1999 and 1998 were 12.1% and 0.0%, respectively
of net sales. Sales to Concentric in 1999 and 1998 were 0.0% and 11.9%,
respectively of net sales. In addition, a portion of our sales to iGov.com,
Federal Data and other corporations were resold by those organizations to
various agencies of the U.S. government.

GROSS PROFIT

    Gross profit increased 329.2% to $4.1 million in 1999 from $1.0 million in
1998. As a percentage of net sales, gross profit remained relatively flat at
51.3% for 1999 compared to 49.6% in 1998.

    Gross profit as a percentage of net sales is impacted by several factors,
including shifts in product mix, changes in channels of distribution, sales
volume, fluctuations in manufacturing costs, pricing strategies, and
fluctuations in sales of integrated third-party products.

SALES AND MARKETING

    Sales and marketing expenses decreased 31.3% to $12.2 million in 1999 from
$17.8 million in 1998. As a percentage of net sales, sales and marketing
expenses decreased to 153.7% in 1999 from 927.4% in 1998.

RESEARCH AND DEVELOPMENT

    Research and development expenses increased 187.0% to $8.2 million in 1999
from $2.8 million in 1998 as we continued to develop additional security
products, primarily SecureEnterprise, which was acquired from SAIC in
September 1998. As a percentage of net sales, research and development expenses
decreased to 102.6% in 1999 from 148.3% in 1998. The Company's research and
development costs are expensed in the period in which they are incurred.

IN-PROCESS RESEARCH AND DEVELOPMENT

    In 1998, we incurred one-time charges totaling $1.0 million associated with
the acquisition of certain assets of SAIC. Such charges were necessary in order
to expense the purchased in-process research and development that had not yet
reached technological feasibility.

GENERAL AND ADMINISTRATIVE

    General and administrative expenses, excluding amortization expenses,
increased 237.3% to $2.5 million in 1999 from $0.7 million in 1998. As a
percentage of net sales, general and administrative expenses decreased to 31.0%
in 1999 from 38.1% in 1998.

AMORTIZATION OF INTANGIBLES

    Amortization of intangibles increased to $0.5 million in 1999 from
$0.3 million in 1998 to reflect a full year amortization related to the
acquisition of certain assets of SAIC in September 1998. As a percentage of net
sales, amortization of intangibles decreased to 6.9% in 1999 from 14.2% in 1998.

                                       19
<PAGE>
INTEREST INCOME, NET

    Net interest income decreased to $1.1 million in 1999 from $1.4 million in
1998 primarily due to a decrease in the average cash and interest-bearing
investment balances.

INCOME TAXES

    Our effective income tax rate was 0% in 1999 compared to an income tax
benefit of 14.5% in 1998. We fully utilized our net operating loss carryback in
1998. We did not record an income tax benefit in 1999 related to the net
operating losses which can be carried forward to offset taxable income in future
years. We recognize the benefit of our net operating loss carryforwards at such
time as we generate taxable income and can be assured that such net operating
loss carryforwards can be utilized. See Note 9 of the Notes to Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

    Our principal sources of liquidity at December 31, 2000 were $20.3 million
of cash and cash equivalents, $17.5 million of short-term investments and
$7.6 million of investments with a stated maturity beyond one year. As of
December 31, 2000, working capital was $52.5 million compared to $66.6 million
as of December 31, 1999.

    Net cash flows used in operating activities in 2000 were $49.8 million,
primarily due to an operating loss for the year, increased accounts receivable
and inventories, and a decrease in accounts payable. Future fluctuations in
accounts receivable, inventory balances and accounts payable will be dependent
upon several factors, including but not limited to quarterly sales, timely
collection of accounts receivable, and the accuracy of our forecasts of product
demand and component requirements.

    Net cash provided by investing activities in 2000 was $40.4 million,
consisting of $67.1 million in proceeds from the sale of securities available
for sale, offset by $16.2 million for net purchases of investments,
$6.4 million for purchases of property and equipment and $4.0 for the purchase
of MimeStar.

    Net cash provided by financing activities in 2000 was $17.1 million,
consisting of the receipt of $1.2 million for a note receivable and
$15.9 million related to the exercise of warrants and certain employee stock
options.

    At December 31, 2000, we did not have any material commitments for capital
expenditures. During 2000, we funded our operations through cash, cash
equivalents and investments.

    We believe that our cash, cash equivalents and investment balances will
provide sufficient cash resources to finance our operations and currently
projected capital expenditures through 2001. However, there can be no assurance
our cash resources will be sufficient for 2001.

    We intend to explore the possible acquisitions of businesses, products and
technologies that are complementary to our existing business. We are continuing
to identify and prioritize additional security technologies which we may wish to
develop, either internally or through the licensing or acquisition of products
from third parties. While we engage from time to time in discussions with
respect to potential acquisitions, there can be no assurances that any such
acquisitions will be made or that we will be able to successfully integrate any
acquired business. In order to finance such acquisitions, it may be necessary
for us to raise additional funds through public or private financings. Any
equity or debt financings, if available at all, may be on terms which are not
favorable to us and, in the case of equity financings, may result in dilution to
our stockholders.

                                       20
<PAGE>
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    Foreign Exchange.  Our revenue originating outside the U.S. in 2000, 1999
and 1998 was 19.2%, 14.0% and 25.3% of total revenues, respectively. Revenues
generated from the European region in 2000, 1999 and 1998 were 7.6%, 8.3% and
9.5% of total revenues, respectively. Revenues generated from the Asia region in
2000, 1999 and 1998 were 7.4%, 5.6% and 12.9% of total revenues, respectively.
International sales are generated primarily from our foreign sales subsidiaries
in the local countries and are typically denominated in U.S. dollars. These
subsidiaries incur most of their expenses in the local currency.

    Our international business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions, changes
in political climate, differing tax structures, import and export regulations,
other regulations and restrictions, and foreign exchange rate volatility.
Accordingly, our results could be materially adversely impacted by changes in
these or other factors. The effect of foreign exchange rate fluctuations on our
business in 2000, 1999 and 1998 was not material.

    Interest Rates.  We invest our cash in a variety of financial instruments,
including bank time deposits, fixed rate obligations of corporations,
municipalities, and state and national governmental entities and agencies. These
investments are denominated in U.S. dollars. Cash balances in foreign currencies
overseas are operating balances and are invested in short-term time deposits of
the local operating bank.

    Interest income on our investments is carried in "Interest income, net". We
account for our investment instruments in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). All of the cash equivalents and short-term
investments are treated as available-for-sale under SFAS 115.

    Investments in fixed rate interest earning instruments carry a degree of
interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates. Due in part to these
factors, our future investment income may fall short of expectations due to
changes in interest rates or we may suffer losses in principal if forced to sell
securities which have seen a decline in market value due to changes in interest
rates. Our investment securities are held for purposes other than trading.
Certain of the investment securities had maturities in excess of one year. The
weighted-average interest rate on investment securities at December 31, 2000 was
6.1%. The fair value of investments held at December 31, 2000 approximated
amortized cost.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The information required by this item is included in Part IV Item 14(a)(1
and 2).

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.

    Not applicable.

                                       21
<PAGE>
                                    PART III

    Certain information required by Part III is omitted from this Form 10-K
because we will file a definitive Proxy Statement for our 2001 annual meeting of
stockholders pursuant to Regulation 14A (the "Proxy Statement") no later than
120 days after the end of the fiscal year covered by this Form 10-K, and certain
information to be included therein is incorporated herein by reference.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF INTRUSION.COM.

    The information regarding Directors and Executive Officers of Intrusion.com
appearing under the captions "Election of Directors", "Compliance with
Section 16 Reporting Requirements" and "Executive Officers" contained in the
Proxy Statement is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

    The information set forth under the caption "Executive Compensation"
contained in the Proxy Statement is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" contained in the Proxy Statement is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Not applicable.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

    (a) 1.  CONSOLIDATED FINANCIAL STATEMENTS.

    The following consolidated financial statements of Intrusion.com, Inc. and
subsidiaries, are submitted as a separate section of this report (See F-pages,
and are incorporated by reference in Item 8:

<TABLE>
<CAPTION>
                                                              PAGE NO.
                                                              --------
<S>                                                           <C>
Report of Independent Auditors..............................    F-1
Consolidated Balance Sheets at December 31, 2000 and 1999...    F-2
Consolidated Statements of Operations for the years ended
  December 31, 2000, 1999 and 1998..........................    F-3
Consolidated Statements of Stockholders' Equity for the
  years ended December 31, 2000, 1999 and 1998..............    F-4
Consolidated Statements of Cash Flows for the years ended
  December 31, 2000, 1999 and 1998..........................    F-5
Notes to Consolidated Financial Statements..................    F-6

2.  FINANCIAL STATEMENT SCHEDULES.

<CAPTION>
                                                              PAGE NO.
                                                              --------
<S>                                                           <C>
SCHEDULE II--Valuation and Qualifying Accounts..............    S-1
</TABLE>

    All other schedules are omitted because they are either not required or not
applicable or the required information is shown in the Consolidated Financial
Statements or Notes thereto.

                                       22
<PAGE>
    (b)    REPORTS ON FORM 8-K.

    None

    (c)    EXHIBITS

    The following Exhibits are filed herewith pursuant to Item 601 of
Regulation S-K or incorporated herein by reference to previous filings as noted:

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                              DESCRIPTION OF EXHIBIT
- ---------------------   ------------------------------------------------------------
<C>                     <S>
        2.1(5)          Certificate of Ownership and Merger Merging Intrusion.com,
                          Inc. into ODS Networks, Inc.
        3.1(5)          Amended and Restated Certificate of Incorporation of the
                          Registrant.
        3.2(5)          Bylaws of the Registrant.
        4.1(5)          Specimen of Common Stock Certificate.
       10.1(1)          Lease Agreement, dated September 12, 1989, between G.D.A.F.
                          Associates and The Registrant for the Registrant's
                          headquarters.
       10.2(1)          1983 Incentive Stock Option Plan of Intrusion.com, Inc.
                          (formerly ODS Networks, Inc. and Optical Data Systems,
                          Inc.), as amended.
       10.3(1)          1987 Incentive Stock Option Plan of Intrusion.com,
                          Inc.(formerly ODS Networks, Inc. and Optical Data Systems,
                          Inc.), as amended.
       10.4(1)          Form of Indemnification Agreement.
       10.5(2)          1995 Stock Option Plan of Intrusion.com, Inc. (formerly ODS
                          Networks, Inc. and Optical Data Systems, Inc.).
       10.6(2)          1995 Non-Employee Directors Stock Option Plan of
                          Intrusion.com, Inc. (formerly ODS Networks, Inc. and
                          Optical Data Systems, Inc.).
       10.7(3)          Supplemental Lease Agreement, dated March 7, 1995, between
                          G.D.A.F. Assoc., subsequently assigned to CIIF Assoc. II
                          Limited Partnership, Landlord, and the Registrant, as
                          Tenant, relative to the Registrant's Headquarters.
       10.8(4)          Registration Rights Agreement, dated as of September 25,
                          1998, by and between the Registrant and Science
                          Applications International Corporation.
       10.9(4)          Stockholder and Voting Agreement, dated as of September 25,
                          1998, by and among Science Applications International
                          Corporation, the Registrant and certain stockholders of
                          the Registrant.
      10.10(4)          Strategic Alliance Agreement, dated as of September 25,
                          1998, by and between Science Applications International
                          Corporation and the Registrant.
      10.11(4)          Software Royalty, Grant Back and Improvements License
                          Agreement, dated as of September 25, 1998, by and between
                          Science Applications International Corporation and the
                          Registrant.
      10.12(4)          PartnersPlus Agreement, dated September 25, 1998, by and
                          between the Registrant and Science Applications
                          International Corporation.
      10.13(5)          Amended and Restated Intrusion.com 401(k) Savings Plan.
      10.14(5)          1997 Employee Stock Purchase Plan of Intrusion.com, Inc. as
                          amended January 17, 2001.
        21(5)           List of Subsidiaries of the Registrant.
        23(5)           Consent of Independent Auditors.
        27(5)           Financial Data Schedule.
</TABLE>

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

(1) Filed as an Exhibit in the Registrant's Registration Statement on Form S-1,
    as amended (File No. 33-6899) which was declared effective on May 21, 1992,
    by the Securities and Exchange Commission, which Exhibit is incorporated
    herein by reference.

(2) Filed as an Exhibit to the Registrant's definitive Proxy Statement in
    connection with the solicitation of proxies for its 1995 Annual Meeting of
    Stockholders (File No. 0-20191), which Exhibit is incorporated herein by
    reference.

(3) Filed as an Exhibit in the Registrant's Annual Report on Form 10-K, for the
    fiscal year ended December 31, 1995 (File No. 0-20191), which Exhibit is
    incorporated herein by reference.

(4) Filed as an Exhibit in the Registrant's Current Report on Form 8-K (Item 5),
    dated October 13, 1998 (File No. 0-20191), which Exhibit is incorporated
    herein by reference.

(5) Filed herewith.

                                       23
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
Dated: March 21, 2001                                  INTRUSION.COM, INC.
                                                       (Registrant)

                                                       By:            /s/ TIMOTHY W. KINNEAR
                                                            -----------------------------------------
                                                                        Timothy W. Kinnear
                                                              PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                                                  (PRINCIPAL EXECUTIVE OFFICER)
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                   SIGNATURE                                     TITLE                      DATE
                   ---------                                     -----                      ----
<C>                                               <S>                                  <C>
               /s/ G. WARD PAXTON
     --------------------------------------       Chairman of the Board                March 21, 2001
                 G. Ward Paxton                     and Director

             /s/ TIMOTHY W. KINNEAR
     --------------------------------------       President, Chief Executive           March 21, 2001
               Timothy W. Kinnear                   Officer and Director

                /s/ T. JOE HEAD
     --------------------------------------       Vice Chairman of the Board           March 21, 2001
                  T. Joe Head                       and Director

                                                  Vice President, Chief Financial
               /s/ JAY R. WIDDIG                    Officer, Treasurer and Secretary
     --------------------------------------         (Principal Financial and           March 21, 2001
                 Jay R. Widdig                      Accounting Officer)

                /s/ J. FRED BUCY
     --------------------------------------       Director                             March 21, 2001
                  J. Fred Bucy

               /s/ GRANT A. DOVE
     --------------------------------------       Director                             March 21, 2001
                 Grant A. Dove

             /s/ DONALD M. JOHNSTON
     --------------------------------------       Director                             March 21, 2001
               Donald M. Johnston
</TABLE>

                                       24
<PAGE>
                           ANNUAL REPORT ON FORM 10-K
                                 ITEM 14(A)(1)
                          LIST OF FINANCIAL STATEMENTS
                          YEAR ENDED DECEMBER 31, 2000
                              INTRUSION.COM, INC.
                               RICHARDSON, TEXAS
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders,

Intrusion.com, Inc.

    We have audited the accompanying consolidated balance sheets of
Intrusion.com, Inc., and subsidiaries (the "Company") as of December 31, 2000,
and 1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 2000. Our audits also included the financial statement schedule
included in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Intrusion.com, Inc., and its subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information therein.

                                          [SIG]

Dallas, Texas
January 17, 2001

                                      F-1
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                    (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
ASSETS
Current Assets:
  Cash and cash equivalents.................................  $20,345    $ 12,602
  Securities available for sale.............................       --      67,633
  Short-term investments....................................   17,506       6,100
  Accounts receivable, net of allowance for doubtful
    accounts and returns of $919 in 2000 and $1,171 in
    1999....................................................    6,887       5,404
  Income taxes receivable...................................    1,743          --
  Inventories (Note 4)......................................    8,359       5,534
  Deferred taxes--current (Note 9)..........................    3,764          --
  Other current assets......................................    1,714       1,392
  Net current assets from discontinued operations...........    3,958       5,158
                                                              -------    --------
Total current assets........................................   64,276     103,823
Property and Equipment
  Machinery and equipment...................................   13,223       7,211
  Furniture and fixtures....................................    1,573       1,364
  Leasehold improvements....................................    1,125       1,060
                                                              -------    --------
                                                               15,921       9,635
Accumulated depreciation....................................   (8,787)     (7,043)
                                                              -------    --------
                                                                7,134       2,592
Long-term investments.......................................    7,575       2,750
Goodwill and intangible assets, net (Note 4)................    7,634       3,508
Other assets................................................      361         684
Net non-current assets from discontinued operations.........    5,434       7,145
                                                              -------    --------
TOTAL ASSETS................................................  $92,414    $120,502
                                                              =======    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable and accrued expenses (Note 4)............  $ 9,884    $ 11,901
  Deferred revenue..........................................    1,878       2,039
  Deferred taxes--current (Note 9)..........................       --      23,305
                                                              -------    --------
Total current liabilities...................................   11,762      37,245
Deferred taxes--noncurrent (Note 9).........................    1,841       1,669
Capital lease obligation....................................       24          11
Commitments and contingencies (Note 6)......................       --          --
Stockholders' Equity (Note 10):
  Preferred stock, $.01 par value:
    Authorized shares--5,000
    No shares issued and outstanding........................       --          --
  Common stock, $.01 par value:
    Authorized shares--80,000
    Issued shares--20,525 in 2000 and 18,623 in 1999
    Outstanding shares--20,485 in 2000 and 18,583 in 1999...      205         186
  Additional paid-in-capital................................   46,916      29,996
  Common stock held in Treasury, at cost--40 shares in 2000
    and 1999................................................     (362)       (362)
  Net unrealized gain on securities available for sale......       --      44,083
  Retained earnings.........................................   32,453       9,242
  Note receivable from stockholder..........................       --      (1,177)
  Foreign currency translation adjustments..................     (425)       (391)
                                                              -------    --------
Total stockholders' equity..................................   78,787      81,577
                                                              -------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................  $92,414    $120,502
                                                              =======    ========
</TABLE>

                            See accompanying notes.

                                      F-2
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net sales...................................................  $ 23,210   $  7,963   $  1,920
Cost of sales...............................................    19,009      3,877        968
                                                              --------   --------   --------
Gross profit................................................     4,201      4,086        952
Operating expenses:
  Sales and marketing.......................................    27,740     12,236     17,806
  Research and development..................................    13,073      8,171      2,847
  In-process research and development.......................        --         --      1,047
  General and administrative................................     5,865      2,466        731
  Amortization of intangibles...............................       975        547        272
                                                              --------   --------   --------
Operating loss..............................................   (43,452)   (19,334)   (21,751)
Interest income, net........................................     3,301      1,104      1,398
Other income (expense)......................................    66,335         --     (1,122)
                                                              --------   --------   --------
Income (loss) from continuing operations before income
  taxes.....................................................    26,184    (18,230)   (21,475)
Income taxes provision (benefit)............................     1,999         --     (3,104)
                                                              --------   --------   --------
Income (loss) from continuing operations....................    24,185    (18,230)   (18,371)
Income (loss) from discontinued operations, net of tax......      (974)     6,190     (7,379)
                                                              --------   --------   --------
Net income (loss)...........................................  $ 23,211   $(12,040)  $(25,750)
                                                              ========   ========   ========
Basic earnings (loss) per share, continuing operations......  $   1.23   $  (0.98)  $  (1.07)
                                                              ========   ========   ========
Diluted earnings (loss) per share, continuing operations....  $   1.18   $  (0.98)  $  (1.07)
                                                              ========   ========   ========
Basic earnings (loss) per share.............................  $   1.18   $  (0.65)  $  (1.50)
                                                              ========   ========   ========
Diluted earnings (loss) per share...........................  $   1.13   $  (0.65)  $  (1.50)
                                                              ========   ========   ========
Weighted average shares outstanding
  --Basic...................................................    19,624     18,565     17,190
                                                              ========   ========   ========
  --Diluted.................................................    20,478     18,565     17,190
                                                              ========   ========   ========
</TABLE>

                            See accompanying notes.

                                      F-3
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
NUMBER OF SHARES -- ISSUED
  Balance, beginning of year................................    18,623    18,513      16,486
  Issuance of common stock under warrants, stock option and
    purchase plans..........................................     1,902       110         121
  Issuance of common stock for Essential Communication
    acquisition.............................................        --        --         306
  Issuance of common stock for acq. of certain assets from
    SAIC....................................................        --        --       1,600
                                                              --------   -------    --------
  Balance, end of year......................................    20,525    18,623      18,513
                                                              --------   -------    --------
NUMBER OF SHARES -- OUTSTANDING
  Balance, beginning of year................................    18,583    18,513      16,486
  Issuance of common stock under warrants, stock option and
    purchase plans..........................................     1,902       110         121
  Issuance of common stock for Essential Communication
    acquisition.............................................        --        --         306
  Repurchase of common stock into treasury..................        --       (40)         --
  Issuance of common stock for acq. of certain assets from
    SAIC....................................................        --        --       1,600
                                                              --------   -------    --------
  Balance, end of year......................................    20,485    18,583      18,513
                                                              --------   -------    --------
COMMON STOCK
  Balance, beginning of year................................  $    186   $   185    $    165
  Issuance of common stock under warrants, stock option and
    purchase plans..........................................        19         1           1
  Issuance of common stock for Essential Communication
    acquisition.............................................        --        --           3
  Issuance of common stock for acq. of certain assets from
    SAIC....................................................        --        --          16
                                                              --------   -------    --------
  Balance, end of year......................................  $    205   $   186    $    185
                                                              --------   -------    --------
ADDITIONAL PAID-IN CAPITAL
  Balance, beginning of year................................  $ 29,996   $29,551    $ 19,488
  Issuance of common stock under warrants, stock option and
    purchase plans..........................................    15,312       378         383
  Issuance of common stock for Essential Communication
    acquisition.............................................        --        --       2,941
  Issuance of common stock for acq. of certain assets from
    SAIC....................................................        --        --       6,704
  Issuance of common stock for MimeStar acquisition.........     1,000        --          --
  Tax benefit derived from exercise of employee stock
    options.................................................       608        67          35
                                                              --------   -------    --------
  Balance, end of year......................................  $ 46,916   $29,996    $ 29,551
                                                              --------   -------    --------
TREASURY SHARES
  Balance, beginning of year................................  $   (362)  $    --    $     --
  Purchase of treasury shares...............................        --      (362)         --
                                                              --------   -------    --------
  Balance, end of year......................................  $   (362)  $  (362)   $     --
                                                              --------   -------    --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
  Balance, beginning of year................................  $ 43,692   $  (323)   $   (306)
  Foreign currency translation adjustment (a)...............       (34)      (68)        (17)
  Unrealized gain from securities available for sale (b)....   (44,083)   44,083          --
                                                              --------   -------    --------
  Balance, end of year......................................  $   (425)  $43,692    $   (323)
                                                              --------   -------    --------
NOTE RECEIVABLE FROM STOCKHOLDER
  Balance, beginning of year................................  $ (1,177)  $(1,189)   $     --
  Loan to stockholder.......................................        --        --      (1,265)
  Repayments on stockholder loan............................     1,177        12          76
                                                              --------   -------    --------
  Balance, end of year......................................  $     --   $(1,177)   $ (1,189)
                                                              --------   -------    --------
RETAINED EARNINGS
  Balance, beginning of year................................  $  9,242   $21,282    $ 47,032
  Net income (loss) (c).....................................    23,211   (12,040)    (25,750)
                                                              --------   -------    --------
  Balance, end of year......................................  $ 32,453   $ 9,242    $ 21,282
                                                              --------   -------    --------
TOTAL STOCKHOLDERS' EQUITY..................................  $ 78,787   $81,577    $ 49,506
                                                              ========   =======    ========
TOTAL COMPREHENSIVE INCOME (LOSS) (A+B+C)...................  $(20,906)  $31,975    $(25,767)
                                                              ========   =======    ========
</TABLE>

                            See accompanying notes.

                                      F-4
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Operating Activities:
  Net income (loss).........................................  $23,211    $(12,040)  $(25,750)
  Adjustments to reconcile net income (loss) to net cash
    used in operating activities:
    Sale of property and equipment..........................       --          (7)        --
    Gain on sale of available for sale securities...........  (66,355)         --         --
    Depreciation and amortization...........................    4,555       3,840      4,601
    In-process research and development.....................       --          --      3,347
    Impaired investment in affiliate........................       --          --      1,122
    Non-cash restructuring charge...........................       --          --      3,460
    Provision for deferred income taxes.....................   (4,219)        763        979
    Provision for doubtful accounts and returns.............       --          85        147
    Changes in operating assets and liabilities:
      Accounts receivable...................................   (1,483)        776      3,115
      Income tax receivable.................................   (1,571)      4,749     (1,555)
      Inventories...........................................   (1,625)     (1,430)     5,755
      Other assets..........................................        2      (1,135)       349
      Accounts payable and accrued expenses.................   (2,118)      4,201     (1,924)
      Deferred revenue......................................     (161)     (1,084)     1,061
                                                              -------    --------   --------
Net cash used in operating activities.......................  (49,764)     (1,282)    (5,293)

Investing Activities:
  Equity investment in affiliate............................       --          --     (1,250)
  Acquisitions (net of cash required).......................   (4,000)         --     (5,604)
  Proceeds from sale of property and equipment..............       --       2,611         --
  Proceeds from sale of available for sale securities.......   67,055          --         --
  Purchases of available for sale investments...............  (57,504)    (16,372)    (4,043)
  Maturities of available for sale investments..............   41,273      12,282     17,118
  Purchases of property and equipment.......................   (6,412)     (1,446)    (2,333)
                                                              -------    --------   --------
Net cash provided by (used in) investing activities.........   40,412      (2,925)     3,888

Financing Activities:
  Issuance of common stock and warrants.....................       --          --      1,500
  Note receivable secured by company's common stock.........    1,177          12     (1,189)
  Repayment of line of credit...............................       --          --       (400)
  Exercise of warrants and employee stock options...........   15,939         445        384
  Capital lease obligation..................................       13          (9)         7
  Purchase of treasury stock................................       --        (362)        --
                                                              -------    --------   --------
Net cash provided by financing activities...................   17,129          86        302
                                                              -------    --------   --------
Effect of foreign currency translation adjustment on cash
  and cash equivalents......................................      (34)        (68)       (17)
Net increase (decrease) in cash and cash equivalents........    7,743      (4,189)    (1,120)
Cash and cash equivalents at beginning of period............   12,602      16,791     17,911
                                                              -------    --------   --------
Cash and cash equivalents at end of period..................  $20,345    $ 12,602   $ 16,791
                                                              =======    ========   ========
</TABLE>

                            See accompanying notes.

                                      F-5
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  DESCRIPTION OF BUSINESS

    Intrusion.com, Inc. ("Intrusion.com", the "Company" or the "Registrant")
develops, markets and supports a family of security software and appliances that
address vital security issues facing organizations deploying business
applications over the Internet or internally via Intranets. The Company
currently provides e-security solutions including intrusion detection systems,
security assessment systems, virtual private network appliances and firewall
appliances.

    The Company markets and distributes its products through a direct sales
force to end-users, distributors and by numerous domestic and international
system integrators, service providers and value-added resellers. The Company's
end-user customers include manufacturing, high-technology, telecommunications,
retail, transportation, health care, insurance, entertainment, utilities and
energy companies, government agencies, financial institutions, and academic
institutions.

    The Company was organized in Texas in September 1983 and reincorporated in
Delaware in October 1995. For more than 15 years, the Company provided local
area networking equipment and was known as Optical Data Systems or ODS Networks.
On April 17, 2000, the Company announced plans to sell, or otherwise dispose of,
its networking divisions which include its Essential Communications division and
its local area networking assets. In accordance with these plans, the Company
has accounted for these businesses as discontinued operations. On June 1, 2000,
the Company changed its name from ODS Networks, Inc. to Intrusion.com, Inc. and
its NASDAQ ticker symbol from ODSI to INTZ to reflect its focus on e-security
solutions.

    The Company's principal executive offices are located at 1101 E. Arapaho
Road, Richardson, Texas 75081, and its telephone number is (972) 234-6400.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of
Intrusion.com, Inc. and its wholly-owned subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation.

CASH EQUIVALENTS

    The Company considers cash and all highly liquid investments purchased with
an original or remaining maturity of less than three months as of the balance
sheet date to be cash equivalents.

SHORT-TERM INVESTMENTS

    The Company's short-term investments consist of U.S. government obligations,
government agencies, and corporate securities with maximum maturities of one
year. Short-term investments are classified as available for sale. These
investments are valued at market value, which approximates amortized cost. The
difference between fair market value and amortized cost is not material.

RISK CONCENTRATION

    Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash-equivalents,
investments and accounts receivable. The Company places its investments in U.S.
government obligations, corporate securities and money market funds.
Substantially

                                      F-6
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
all of the Company's cash, cash equivalents and investments are maintained with
two major financial institutions.

    The Company sells its products to customers in diversified industries
worldwide, primarily in North America, Europe, Asia and Latin America.
Fluctuations in currency exchange rates and adverse economic developments in
foreign countries could adversely effect the Company's operating results. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral. The Company maintains reserves
for potential credit losses and such losses, in the aggregate, have not exceeded
management expectations.

    While the Company believes that many of the materials used in the production
of its products are generally readily available from a variety of sources,
certain components are available from one or a limited number of suppliers. The
inability of any supplier or manufacturer to fulfill supply requirements of the
Company could impact future results.

INVENTORIES

    Inventories are stated at the lower of cost or market. Cost is computed
using standard cost, which approximates actual cost on a first-in, first-out
basis. Management estimates the allowance required to state inventory at the
lower of cost or market. There is a risk that the Company will forecast demand
for its products and market conditions incorrectly and produce excess
inventories. Therefore, there can be no assurance that the Company will not
produce excess inventory and incur inventory lower of cost or market charges in
the future.

PROPERTY AND EQUIPMENT

    Property and equipment is stated at cost and depreciated on a straight-line
basis over the estimated useful lives of the assets. Such lives vary from 3 to
20 years. Leasehold improvements are amortized over the shorter of their useful
lives or the terms of the leases. Repair and maintenance costs are expensed as
incurred.

LONG-TERM INVESTMENTS

    Long-term investments consist of U.S. government and corporate obligations
with maturities which range up to two years from December 31, 2000. Long-term
investments are classified as available for sale. These investments are valued
at market value, which approximates amortized cost. The difference between fair
value and amortized cost is not material.

GOODWILL AND OTHER INTANGIBLE ASSETS

    Goodwill represents the excess of purchase price and related direct costs
over the value assigned to the net tangible and specifically identifiable
intangible assets of businesses acquired. Goodwill is being amortized using the
straight-line method over 7 years. Intangibles generally relate to software and
developed technology acquired in a purchase business combination or an
acquisition of assets. Intangibles are being amortized over their estimated
useful lives, generally estimated at 7 years. Annual amortization expense
related to goodwill and other intangible assets for the years ended
December 31, 2000 and 1999 was $1.0 million and $0.5 million, respectively.

                                      F-7
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    The Company assesses whether its goodwill and other intangible assets are
impaired as required by Statement of Financial Accounting Standard ("SFAS")
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSET AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, based on the evaluation of undiscounted projected cash
flows through the remaining amortization period. If an impairment exists, the
amount of such impairment is calculated based on the estimated fair value of the
asset.

FOREIGN CURRENCY TRANSLATION

    The Company's international subsidiaries use their local currencies as their
functional currencies. Assets and liabilities are translated at the exchange
rate in effect at the balance sheet date, and income and expense accounts at
average exchange rates during the year. Resulting translation adjustments are
recorded directly to a separate component of stockholders' equity.

ACCOUNTING FOR STOCK OPTIONS

    The Company has elected to continue to follow APB Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES, (APB 25) and related interpretations in
accounting for its employee stock options. Under APB 25, if the exercise price
of an employee's stock option equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The Financial Accounting Standards Board (FASB) has issued SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, which provides for either recognition
or disclosure of a hypothetical charge for stock options. The Company did not
recognize any charge in its income statement, but has provided the required
disclosure in Note 10.

NET INCOME PER SHARE

    The Company reports two separate earnings per share numbers, basic EPS and
diluted EPS with additional disclosure made between continuing and discontinued
operations. Diluted EPS includes the dilutive impact of employee stock options
and warrants.

REVENUE RECOGNITION

    The Company generally recognizes product revenue upon shipment of product.
The Company accrues for estimated warranty costs, sales returns and other
allowances at the time of shipment based on its experience. Revenue from
maintenance contracts is deferred and recognized over the contractual period the
services are performed. To date, warranty costs and sales returns have not been
material. There is a risk that technical issues on new products could result in
unexpected warranty costs and returns.

    The Company recognizes software revenue from the licensing of its software
products in accordance with Statement of Position ("SOP") No. 97-2 "Software
Revenue Recognition" and SOP 98-9 "Modification of 97-2, Software Revenue
Recognition, with respect to certain transactions" whereby revenue from the
licensing of the Company's products is not recognized until all four of the
following have been met: i) execution of a written purchase order, license
agreement or contract; ii) shipment of the product has occurred; iii) the
license fee is fixed and determinable; and iv) collectibility is probable. The
Company defers and recognizes maintenance and support revenue over the term of
the contract period, which is generally one year.

                                      F-8
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    The Company has signed distribution agreements with distributors in the
United States, Europe and Asia. In general, these relationships are
non-exclusive. Distributors typically maintain an inventory of Intrusion.com
products. Under these agreements, Intrusion.com provides certain protection to
the distributors for their inventory of Intrusion.com products for price
reductions as well as products that are slow-moving or have been discontinued by
the Company. Recognition of sales to distributors and related gross profits are
deferred until the merchandise is resold by the distributors.

ADVERTISING COSTS

    Advertising expense is charged to operations in the period in which such
costs are incurred. Total advertising included in sales and marketing expenses
was $1.3 million, $0.1 million and $0.4 million for the years ended
December 31, 2000, 1999 and 1998, respectively.

RESEARCH AND DEVELOPMENT COSTS

    The Company incurs research and development costs that relate primarily to
the development of new security software, appliances and integrated solutions,
and major enhancements to existing services and products. Research development
costs are comprised primarily of salaries and related benefits expenses,
contract labor and prototype and other related expenses.

    Software development costs are included in research and development and are
expensed as incurred. Statement of Financial Accounting Standards No. 86,
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE
MARKETED, requires that software development costs incurred subsequent to
reaching technological feasibility be capitalized, if material. If the process
of developing a new product or major enhancement does not include a detailed
program design, technological feasibility is determined only after completion of
a working model. To date, the period between achieving technological feasibility
and the general availability of such software has been short, and the software
development costs qualifying for capitalization have been insignificant.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Estimates are used for, but not limited
to, the accounting for doubtful accounts, sales discounts, sales returns,
distribution revenue, warranty costs, inventory obsolescence, depreciation and
taxes. Actual results could differ from these estimates.

INCOME TAXES

    The income tax provision is based on pretax financial accounting income or
loss. The Company accounts for income taxes pursuant to SFAS No. 109, ACCOUNTING
FOR INCOME TAXES, which uses the liability method to calculate deferred income
taxes. Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax basis of assets and
liabilities and their reported amounts. The realization of deferred tax assets
is based on historical tax positions and expectations about future taxable
income. The liability method also requires the recognition of future tax
benefits such as net operating loss carryforwards, to the extent that
realization of such benefits is more likely than not.

                                      F-9
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATION

    Certain amounts in prior year financial statements have been reclassified to
conform with current year presentation.

NEW ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS 133, as amended by SFAS 138, is effective
for fiscal years beginning after June 15, 2000. The adoption of SFAS 133 as of
January 1, 2001 is not expected to have a material impact on the financial
position or results of operations of the Company because the Company has no
derivatives or hedges.

3.  BUSINESS COMBINATIONS AND ACQUISITION OF ASSETS

    On September 25, 1998, the Company completed an acquisition of certain
assets from Science Applications International Corporation ("SAIC"), a
privately-held company in San Diego, California. The Company acquired certain
assets of the Computer Misuse and Detection System ("CMDS") Division of SAIC and
certain other information security products under development. In exchange for
the CMDS assets, the information security products under development and
$1.5 million dollars in cash, Intrusion.com issued to SAIC 1.6 million shares of
the Company's common stock and warrants to purchase an additional 1.5 million
shares of its common stock. Two separate warrants each grant SAIC the right to
purchase 750,000 shares of Intrusion.com common stock. The first warrant had an
exercise price of $8.00 per share and a term of 18 months and was exercised on
March 23, 2000. The second warrant had an exercise price of $10.50 per share and
a term of 24 months and was exercised on September 22, 2000. Intrusion.com's
acquisition has been accounted for as a purchase of software, in-process
research and development and certain other assets. The transaction value of
approximately $6.9 million less the $1.5 million cash received was allocated to
the net assets acquired based on their estimated fair market value. Assets
acquired included approximately $1.1 million of in-process research and
development, $0.1 million of other intangible assets and approximately
$4.2 million of purchased software to be amortized over seven years on a
straight-line basis. During 1998, the Company recognized a one-time charge of
$0.7 million (net of taxes), or $0.04 per share, for the write-off of the
acquired in-process research and development. The acquisition of certain assets
of SAIC does not meet the reporting requirements for pro forma financial
information.

    On September 30, 1999, the Company entered a technology licensing agreement
with RSA Security Inc. ("RSA") under which the Company is the exclusive licensee
of RSA's Kane Security Products in North America and Europe. The Kane Security
Products include the Kane SecurityAnalyst, a security assessment tool, and the
Kane Security Monitor, a host based intrusion detection tool. The Company is
responsible for marketing, sales, support, maintenance and development for Kane
Security software.

    On June 30, 2000, the Company acquired MimeStar, Inc. ("MimeStar"), a
Virginia corporation. MimeStar developed an advanced, network based intrusion
detection system called SecureNet Pro-TM-. The acquisition, accounted for using
the purchase method, was affected by the merger of a wholly

                                      F-10
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  BUSINESS COMBINATIONS AND ACQUISITION OF ASSETS (CONTINUED)
owned subsidiary of the Company ("Merger Sub") with and into MimeStar, pursuant
to an Agreement and Plan of Merger, by and among the Company, MimeStar, the
Merger Sub and the sole stockholder of MimeStar (the "Merger"). Pursuant to the
Merger, the stockholder of MimeStar received $3 million in cash with an
additional $1 million in cash and 95,969 shares of the Company's common stock
(which was valued at approximately $1 million on the date of the Merger) placed
in escrow, payable to the stockholder of MimeStar within one year subject to
indemnification and other conditions. Transaction costs for this acquisition
totaled approximately $100,000. The acquisition costs of $5.1 million were
capitalized as purchased software, goodwill and other intangibles and are being
amortized over seven years beginning on July 1, 2000.

4.  BALANCE SHEET DETAIL (IN THOUSANDS)

INVENTORIES

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Raw materials...............................................   $1,550     $  410
Work in process.............................................    1,350        762
Finished products...........................................    4,231      3,478
Demonstration systems.......................................    1,228        884
                                                               ------     ------
Net inventory--continuing operations........................   $8,359     $5,534
                                                               ======     ======
Net inventory--discontinued operations......................   $3,958     $5,158
                                                               ======     ======
</TABLE>

INTANGIBLE ASSETS, NET

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
CMDS purchased software.....................................  $ 4,136     $4,136
CMDS intangible asset.......................................      135        135
MimeStar goodwill...........................................      450         --
MimeStar purchased software.................................    3,610         --
MimeStar intangible asset...................................    1,040         --
                                                              -------     ------
Gross intangibles--continuing operations....................    9,371      4,271
Accumulated amortization....................................   (1,737)      (763)
                                                              -------     ------
Net intangibles--continuing operations......................  $ 7,634     $3,508
                                                              =======     ======
Net intangibles--discontinued operations....................  $ 3,935     $5,515
                                                              =======     ======
</TABLE>

                                      F-11
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  BALANCE SHEET DETAIL (IN THOUSANDS) (CONTINUED)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Trade accounts payable......................................   $5,892    $ 8,229
Accrued sales commissions...................................      547        527
Accrued incentive bonus.....................................      100        108
Accrued vacation............................................      920        863
Accrued property taxes......................................       51        222
Accrued warranty expense....................................      475        475
Other (individually less than 5% of current liabilities)....    1,899      1,477
                                                               ------    -------
                                                               $9,884    $11,901
                                                               ======    =======
</TABLE>

5.  NOTE RECEIVABLE FROM STOCKHOLDER

    Note receivable from stockholder of $1.2 million at December 31, 1999
represents amounts loaned to an officer during the third quarter of 1998 secured
by the Company's common stock. These amounts were classified as contra-equity
because in the event the officer failed to remit payment, the Company would have
received shares of the Company's common stock. On February 28, 2000, the officer
repaid the Company in full including principal of $1.2 million and interest of
approximately $98,000.

6.  COMMITMENTS AND CONTINGENCIES

LEASES

    The Company leases office space for its corporate headquarters in
Richardson, Texas under an operating lease, the base term of which expires in
February 2005, with two seven-year options to extend the term of the lease,
subject to compliance with certain conditions. The Company also leases a
separate warehouse facility adjacent to its headquarters under a lease which
expires in June 2002. The Company leases office space in Albuquerque, New Mexico
for Essential (discontinued operations) under an operating lease that expires in
February 2009. The Company leases office space in San Diego, California for a
portion of its security software research and development staff under an
operating lease that expires in August 2002. In addition, the Company leases
office space for its U.S. and international sales and engineering offices. Total
rental expense of $1.9 million, $1.8 million and $2.3 million was charged to
operations during 2000, 1999, and 1998, respectively.

                                      F-12
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  COMMITMENTS AND CONTINGENCIES (CONTINUED)
    Future minimum lease payments consisted of the following on December 31,
2000 (in thousands):

<TABLE>
<CAPTION>
                                                        CONTINUING   DISCONTINUED
                                                        OPERATIONS    OPERATIONS
                                                        ----------   ------------
<S>                                                     <C>          <C>
2001..................................................    $1,674        $  169
2002..................................................     1,329           169
2003..................................................     1,138           169
2004..................................................       973           169
2005..................................................       149           169
Thereafter............................................        --           529
                                                          ------        ------
                                                          $5,263        $1,374
                                                          ======        ======
</TABLE>

7.  DISCONTINUED OPERATIONS

    In the second quarter of 2000, the Company discontinued its networking
operations and, accordingly, has shown the networking operations as discontinued
in the accompanying financial statements. Certain prior year information has
been reclassified to conform with the current presentation. While the Company
does not expect a significant gain or loss from these dispositions, the Company
presently cannot reasonably estimate the amount of the gain or loss. Such gain
or loss, if any, will be realized at the time of final disposition.

    The following represents a summary of assets classified as discontinued
operations (In thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             -------------------
                                                               2000       1999
                                                             --------   --------
<S>                                                          <C>        <C>
Inventories, net...........................................   $3,958    $ 5,158
Property and equipment, net................................    1,499      1,629
Intangible assets, net.....................................    3,935      5,515
Other......................................................       --          1
                                                              ------    -------
                                                              $9,392    $12,303
                                                              ======    =======
</TABLE>

                                      F-13
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  DISCONTINUED OPERATIONS (CONTINUED)
    The following represents a summary of net income (loss) from discontinued
operations (In thousands):

<TABLE>
<CAPTION>
                                                     2000       1999       1998
                                                   --------   --------   --------
<S>                                                <C>        <C>        <C>
Net Sales........................................  $16,856    $49,988    $72,690
Cost of sales....................................   10,693     28,227     49,262
                                                   -------    -------    -------
Gross profit.....................................    6,163     21,761     23,428

Operating expenses...............................    7,446     15,578     32,048
                                                   -------    -------    -------
Operating profit (loss)..........................   (1,283)     6,183     (8,620)
Other, net.......................................        1          7         --
                                                   -------    -------    -------
Income (loss) before income taxes................   (1,282)     6,190     (8,620)
Income tax benefit...............................     (308)        --     (1,241)
                                                   -------    -------    -------

Income (loss) from discontinued operations.......  $  (974)   $ 6,190    $(7,379)
                                                   =======    =======    =======
</TABLE>

8.  EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK PURCHASE PLAN

    On April 24, 1997, the Company adopted an Employee Stock Purchase Plan (the
"Purchase Plan") under which 0.5 million shares of common stock have been
reserved for issuance. Eligible employees may designate not more than 10% of
their compensation to be deducted each pay period for the purchase of common
stock under the Purchase Plan. The Purchase Plan was amended January 17, 2001 to
increase the maximum number of shares that can be purchased per participant from
500 shares to 1,000 shares per offering. Each participant may purchase up to
2,000 shares in any one calendar year. On January 31 and July 31 of each
calendar year, shares of common stock are purchased with the employees' payroll
deductions over the immediately preceding six months at a price per share of 85%
of the lesser of the market price of the common stock on the purchase date or
the market price on the first day of the six-month period. The Purchase Plan
will terminate no later than April 24, 2007. A total of 71,163 shares have been
issued under the Purchase Plan as of December 31, 2000. Subsequent to
December 31, 2000, 21,615 shares of stock were issued under the Purchase Plan
for an aggregate purchase price of approximately $136,000 related to the
purchase period which commenced on August 1, 2000 and ended on January 31, 2001.

EMPLOYEE 401(K) PLAN

    The Company has adopted a plan known as the Intrusion.com 401(k) Savings
Plan (formerly the ODS 401(k) Savings Plan) (the "Plan") to provide retirement
and incidental benefits for its employees. The Plan covers substantially all
employees who meet minimum age and service requirements. As allowed under
Section 401(k) of the Internal Revenue Code, the Plan provides tax deferred
salary deductions for eligible employees.

    Employees may contribute from 1% to 19% of their annual compensation to the
Plan, limited to a maximum amount as set by the Internal Revenue Service. The
Company matches employee contributions at the rate of $0.25 per each $1.00 of
contribution on the first 4% of deferred

                                      F-14
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.  EMPLOYEE BENEFIT PLANS (CONTINUED)
compensation. Company matching contributions to the Plan were approximately
$120,000, $112,000, and $119,000 in 2000, 1999 and 1998, respectively.

9.  INCOME TAXES

    Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 2000, 1999
and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets:
  Foreign subsidiaries net operating loss carryforward......  $   341    $    382
  Net operating loss carryover..............................    1,592       6,135
  Minimum tax credit........................................       --         410
  Book over tax depreciation................................      273         273
  Intangibles...............................................      595         501
  Equity investments........................................      458         459
  Vacation accrual..........................................      386         348
  Allowance for doubtful accounts and returns...............      413         430
  Warranty accrual..........................................      174         174
  Inventory.................................................    2,615       2,575
  Deferred revenue..........................................       --          34
  Other.....................................................      176         215
                                                              -------    --------
    Deferred tax assets.....................................    7,023      11,936
  Valuation allowance for deferred tax assets...............   (1,932)    (11,936)
                                                              -------    --------
    Deferred tax assets, net of allowance...................    5,091          --
                                                              -------    --------
Deferred tax liabilities:
  Intangibles...............................................      668         938
  Unrealized gain on securities held for sale...............       --      22,850
  Other.....................................................    2,500       1,186
                                                              -------    --------
    Total deferred tax liabilities..........................    3,168      24,974
                                                              -------    --------
Net deferred tax assets (liabilities).......................  $ 1,923    $(24,974)
                                                              =======    ========

Current deferred assets (liabilities).......................  $ 3,764    $(23,305)
Noncurrent deferred assets (liabilities)....................  $(1,841)   $ (1,669)
                                                              -------    --------
Net deferred tax assets (liabilities).......................  $ 1,923    $(24,974)
                                                              =======    ========
</TABLE>

    Deferred tax assets are required to be reduced by a valuation allowance if
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Realization of the future benefits related to the deferred
tax assets is dependent on many factors, including the Company's ability to
recover taxes previously paid and to generate taxable income within the near to
medium term. Management has considered these factors in determining the
valuation allowance in 2000.

                                      F-15
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  INCOME TAXES (CONTINUED)
    Significant components of the provision for income taxes for the years ended
2000, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000       1999        1998
                                                              --------   ---------   --------
<S>                                                           <C>        <C>         <C>
Income tax provision
  Federal:
    Current.................................................   $4,864    $     --    $(5,630)
    Deferred................................................   (5,270)         --      1,478
  State:
    Current.................................................      236          --        200
    Deferred................................................    1,861          --       (433)
  Foreign:
    Current.................................................       --          --         40
                                                               ------    ---------   -------
                                                               $1,691    $     --    $(4,345)
                                                               ======    =========   =======
</TABLE>

    Income tax expense (benefit) is included in the consolidated financial
statements for the years ended 2000, 1999 and 1998 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000       1999        1998
                                                              --------   ---------   --------
<S>                                                           <C>        <C>         <C>
Continuing Operations.......................................   $1,999    $     --    $(3,104)
Discontinued Operations.....................................     (308)         --     (1,241)
                                                               ------    ---------   -------
                                                               $1,691    $     --    $(4,345)
                                                               ======    =========   =======
</TABLE>

    The reconciliation of income tax computed at the statutory rate for the
years ended 2000, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                           ------------------------------
                                                             2000       1999       1998
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Reconciliation of income tax provision to statutory rate:
  Income tax expense (benefit) at statutory rate.........   $8,716    $(4,131)   $(10,513)
  State income taxes, net of federal income tax
  benefit................................................    1,393         --        (151)
  Utilization of NOLs and credits not previously
  benefited..............................................   (4,953)        --          --
  Increase (decrease) in valuation allowance.............   (4,373)     4,075       5,136
  In-process research and development....................       --         --         805
  Goodwill amortization..................................      164        193         132
  Minimum tax credit.....................................     (361)        --          --
  Other..................................................    1,105       (137)        246
                                                            ------    -------    --------
                                                            $1,691    $    --    $ (4,345)
                                                            ======    =======    ========
</TABLE>

    At December 31, 2000, the Company had federal net operating loss
carryforwards of $2.6 million for income tax purposes that begin to expire in
2008 and are subject to the ownership change limitations under Internal Revenue
Code Section 382. The Company also has $27.0 million of state net

                                      F-16
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  INCOME TAXES (CONTINUED)
operating loss carryforwards. Net operating loss carryforwards of the foreign
subsidiaries of $0.7 million at December 31, 2000 are available for offset only
against taxable income generated by the foreign subsidiaries.

    The Company has made income tax payments of $6.2 million, $0.1 million and
$0.1 million during 2000, 1999 and 1998, respectively.

10.  STOCK, STOCK OPTIONS AND WARRANTS

    On September 25, 1998, in connection with the Company's acquisition of
certain assets from Science Applications International Corporation ("SAIC"), the
Company issued to SAIC 1.6 million shares of the Company's common stock and
warrants to purchase an additional 1.5 million shares of its common stock. Two
separate warrants each grant SAIC the right to purchase 750,000 shares of its
common stock. The first warrant had an exercise price of $8.00 per share and a
term of 18 months. The second warrant had an exercise price of $10.50 per share
and a term of 24 months. On March 23, 2000, SAIC exercised the first warrant for
750,000 at an exercise price of $8.00 per share. On September 22, 2000, SAIC
exercised the remaining 750,000 shares at an exercise price of $10.50 per share.

    On May 7, 1998, in connection with the Company's acquisition of Essential,
the Company issued approximately 306,000 shares of the Company's common stock
for all outstanding shares of Essential capital stock, and the Company issued
approximately 104,000 stock options in exchange for all unexpired and
unexercised options to acquire Essential capital stock. At December 31, 2000,
there are 27,543 options outstanding from the Essential assumed options.

    At December 31, 2000, the Company has four stock-based compensation plans,
which are described below. These plans were developed to retain and attract key
employees and directors.

    The Company established an Incentive Stock Option Plan in 1983, which
provides for the issuance of options to key employees of the Company to purchase
common stock of the Company. The 1983 Incentive Stock Option Plan was terminated
on November 10, 1993.

    In 1987, an additional Incentive Stock Option Plan was established with
similar provisions to allow for further issuance of options. The 1987 Incentive
Stock Option Plan was terminated on January 26, 1997. The 1983 and 1987 plans
each provided for the issuance of up to 1.2 million shares of common stock upon
exercise of options granted pursuant to the plans.

    In 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan")
which provides for the issuance of up to 1.6 million shares of common stock upon
exercise of options granted pursuant to the 1995 Plan. On April 19, 2000, the
stockholders approved a 850,000 share increase to the 1995 Plan, which increased
the overall shares available for issuance pursuant to the plan to 2,450,000
shares. The 1995 Plan provides for the issuance of both non-qualified and
incentive stock options to employees, officers, and employee-directors of the
Company.

    In 1995, the Company adopted the 1995 Non-employee Director Stock Option
Plan (the "1995 Non-employee Director Plan") which provides for the issuance of
up to 160,000 shares of common stock upon exercise of options granted pursuant
to the 1995 Non-employee Director Plan. The Plan provides for the issuance of
non-qualified stock options to non-employee directors.

                                      F-17
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  STOCK, STOCK OPTIONS AND WARRANTS (CONTINUED)
    In 2000, 1995 and 1994, options to purchase 20,000 shares, 60,000 shares,
and 12,000 shares, respectively, were granted to directors. The terms and
exercise prices of these options are similar to the incentive stock options.

    Common shares reserved for future issuance under all of the stock option
plans and employee stock purchase plans total approximately 3 million shares at
December 31, 2000.

    The Compensation Committee of the Board of Directors determines the term of
each option, option exercise price within limits set forth in the plans, number
of shares for which each option is granted and the rate at which each option is
exercisable (generally ratably over three or five years from grant date).
However, the exercise price of any incentive stock option may not be less than
the fair market value of the shares on the date granted (or less than 110% of
the fair market value in the case of optionees holding more than 10% of the
voting stock of the Company), and the term cannot exceed ten years (five years
for incentive stock options granted to holders of more than 10% of the Company's
voting stock).

    A summary of the Company's stock option activity and related information for
the years ended December 31, 2000, 1999 and 1998, is as follows:

<TABLE>
<CAPTION>
                                                    2000                     1999                     1998
                                           ----------------------   ----------------------   ----------------------
                                                         WEIGHTED                 WEIGHTED                 WEIGHTED
                                            NUMBER OF    AVERAGE     NUMBER OF    AVERAGE     NUMBER OF    AVERAGE
                                           OPTIONS (IN   EXERCISE   OPTIONS (IN   EXERCISE   OPTIONS (IN   EXERCISE
                                           THOUSANDS)     PRICE     THOUSANDS)     PRICE     THOUSANDS)     PRICE
                                           -----------   --------   -----------   --------   -----------   --------
<S>                                        <C>           <C>        <C>           <C>        <C>           <C>
Outstanding at beginning of year.........     1,454       $7.83        1,683       $7.53         1,572      $14.34
Granted..................................     1,087       11.60          479        4.95         2,358        4.36
Exercised................................      (275)       4.47          (91)       3.26          (101)       2.69
Cancelled................................      (677)      10.10         (617)       6.77        (2,146)       9.76
                                              -----                    -----                    ------
Outstanding at end of year...............     1,589       10.03        1,454        7.83         1,683        7.53
                                              =====                    =====                    ======
Options exercisable at end of year.......       454                      551                       535
</TABLE>

    Information related to stock options outstanding at December 31, 2000, is
summarized below:

<TABLE>
<CAPTION>
                                         OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                             --------------------------------------------   -------------------------
                                                  WEIGHTED       WEIGHTED                    WEIGHTED
                             OUTSTANDING AT       AVERAGE        AVERAGE    EXERCISABLE AT   AVERAGE
                              12/31/00 (IN       REMAINING       EXERCISE    12/31/00 (IN    EXERCISE
  RANGE OF EXERCISE PRICES     THOUSANDS)     CONTRACTUAL LIFE    PRICE       THOUSANDS)      PRICE
  ------------------------   --------------   ----------------   --------   --------------   --------
  <S>                        <C>              <C>                <C>        <C>              <C>
  1.88$- $ 7.50......              597         7.77 years         $ 4.38          271         $ 3.82
  8.00 - 12.81.......              600         9.08 years          10.46           25           8.42
  13.00 - 31.25......              392         6.28 years          17.96          158          20.86
                                 -----                                            ---
                                 1,589         7.90 years          10.03          454          10.00
                                 =====                                            ===
</TABLE>

    SFAS No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION, requires the
disclosure of pro forma net income and earnings per share information computed
as if the Company had accounted for its employee stock options granted
subsequent to December 31, 1994, under the fair value method set

                                      F-18
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  STOCK, STOCK OPTIONS AND WARRANTS (CONTINUED)
forth in SFAS 123. The fair value for these options was estimated using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                                         EMPLOYEE STOCK OPTIONS
                                                                  ------------------------------------
                                                                    2000          1999          1998
                                                                  --------      --------      --------
<S>                                                               <C>           <C>           <C>
Expected dividend yield.....................................         0.0%          0.0%          0.0%
Risk-free interest rate.....................................         6.7%          5.5%          4.8%
Expected volatility.........................................       120.0%         70.0%         70.0%
Expected life (in years)....................................         2.0           2.0           2.0
</TABLE>

    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. In addition, because
SFAS 123 is applicable only to options granted subsequent to December 31, 1994,
the pro forma information does not reflect the pro forma effect of all previous
stock option grants of the Company, and thus the pro forma information is not
necessarily indicative of future amounts until SFAS 123 is applied to
outstanding stock options.

    Information relating to the fair value of option grants made during 2000,
1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Options granted (all with exercise price equal to fair value
  of common stock):
  Number of options (in thousands)..........................    1,087       479      2,358
  Weighted average exercise price per share.................   $11.60     $4.95      $4.36
  Weighted average fair value of stock options grants per
    Black-Sholes option valuation model.....................   $ 8.40     $2.44      $2.24
</TABLE>

    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. For purposes
of pro forma disclosure, the Company assumed that it would not receive a tax
deduction or tax benefit for financial reporting purposes related to incentive
stock options. In management's opinion, the pro forma disclosure is not
necessarily indicative of the net financial effect, assuming the Company was
required to expense the fair value of employee stock options, because an
incentive stock option often generates a tax deduction for the Company whereby
the stock option holder does not comply with the holding period requirements
under applicable tax laws. The Company's pro forma information follows (in
thousands, except earnings per share information):

<TABLE>
<CAPTION>
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Pro forma net income (loss).................................  $20,511    $(12,884)  $(27,201)
Pro forma earnings per share................................  $  1.00    $  (0.69)  $  (1.58)
</TABLE>

                                      F-19
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.  EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Numerator:
Net income (loss)...........................................  $23,211    $(12,040)  $(25,750)
                                                              -------    --------   --------
Numerator for basic and diluted earnings per share..........  $23,211    $(12,040)  $(25,750)
Income (loss) from continuing operations....................  $24,185    $(18,230)  $(18,371)
                                                              -------    --------   --------
Numerator for basic and diluted earnings per share,
  continuing operations.....................................  $24,185    $(18,230)  $(18,371)
Denominator:
Denominator for basic earnings per share--weighted average
  common shares outstanding.................................   19,624      18,565     17,190
Effect of dilutive securities:
  Stock options and warrants................................      854          --         --
                                                              -------    --------   --------
Denominator for diluted earnings per share--adjusted
  weighted average common shares outstanding................   20,478      18,565     17,190
                                                              =======    ========   ========
Basic earnings (loss) per share, continuing Operations......  $  1.23    $  (0.98)  $  (1.07)
                                                              =======    ========   ========
Diluted earnings (loss) per share, continuing Operations....  $  1.18    $  (0.98)  $  (1.07)
                                                              =======    ========   ========
Basic earnings (loss) per share.............................  $  1.18    $  (0.65)  $  (1.50)
                                                              =======    ========   ========
Diluted earnings (loss) per share...........................  $  1.13    $  (0.65)  $  (1.50)
                                                              =======    ========   ========
</TABLE>

    Total stock options and warrants outstanding in 2000, 1999 and 1998 that are
not included in the diluted earnings per share computation due to the
antidilutive effect are 378 thousand, 3 million, and 3.2 million, respectively.
Such options are excluded due to the Company incurring a net loss per share in
that year or due to exercise prices exceeding the average market value of the
Company's common stock in the applicable period.

12.  OTHER INCOME

    The Company held 770,745 shares of the common stock of Alteon
WebSystems, Inc. ("Alteon") (Nasdaq:ATON) valued at $67.6 million as of
December 31, 1999. Alteon, previously a privately-held company, announced its
initial public offering of 4 million shares of its common stock at $19 per share
on September 24, 1999.

    The Company's accounting of this investment was in accordance with Financial
Accounting Standard No. 115 (FAS 115), "Accounting for Certain Investments in
Debt and Equity Securities". Under FAS 115, the Company's investment in Alteon,
which was classified as securities available-for-sale, was presented at its fair
value as of December 31, 1999, which was $87.75 per share or $67.6 million. On
March 2, 2000, the Company sold its investment of 770,745 shares of Alteon
common stock for $87.00 per share, net of applicable expenses, generating cash
of approximately $67.1 million. The disposition of this stock generated a
pre-tax gain of approximately $66.4 million which was recognized as other
income.

                                      F-20
<PAGE>
                      INTRUSION.COM, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.  MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION

    The Company's continuing operations are concentrated in one segment--the
design, development, marketing and support of data security via a suite of
security software and appliances. Sales to customers exceeding 10% of total
sales were as follows: 2000--$3.3 million to iGov.com and $5.6 million to TRW;
1999--$1.7 million to iGov.com, $0.9 million to AT&T, $1.3 million to Federal
Data and $1.0 million to Comstor; 1998--$0.3 million to NCR and $0.2 million to
Concentric.

    Export sales, primarily to Europe, Asia, Latin America and Canada, were
$4.5 million in 2000, $1.1 million in 1999 and $0.5 million in 1998. No
significant long-lived assets were deployed outside of the United States.

14.  SUBSEQUENT EVENTS

    In January 2001, the Company announced an agreement to sell its IS (Infinite
Switch) 6000 discontinued product line to Shanghai Video and Audio Electronics
Co., Ltd. ("SVA"). Under the agreement, all existing IS 6000 inventory, design
specifications, manufacturing documentation and equipment are to be acquired by
SVA. Additionally, Intrusion.com will provide technical support to SVA for
12 months. Under the terms of the agreement, subject to appropriate government
approval, Intrusion.com will receive $6 million in the first quarter of 2001.

    In January 2001, the Company announced an agreement to establish a joint
venture with SVA. The new venture, Shanghai SVA Intrusion.com Joint Venture
("SVA/Intrusion.com JV) will manufacture, market, distribute and sell
Intrusion.com products in China (PRC Mainland) under an exclusive multi-year
licensing agreement. Subject to appropriate government approvals, the joint
venture will be established in the first quarter of 2001 and under terms of the
Agreement, Intrusion.com will receive $4.75 million in the first half of 2001.

                                      F-21
<PAGE>
                          SUPPLEMENTAL FINANCIAL DATA

SUMMARIZED QUARTERLY DATA (UNAUDITED)
  (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                          2000
                                                  ----------------------------------------------------
                                                   Q1(1)        Q2         Q3         Q4       TOTAL
                                                  --------   --------   --------   --------   --------
<S>                                               <C>        <C>        <C>        <C>        <C>
Continuing Operations:
Revenue.........................................  $ 6,997    $ 5,123    $ 6,456    $ 4,634    $23,210
Gross profit(2).................................    1,965        773      1,410         53      4,201
Net income (loss)...............................   46,379     (7,027)    (7,066)    (8,101)    24,185
Net income (loss) per share--Basic..............     2.48      (0.36)     (0.36)     (0.40)      1.23
Net income (loss) per share--Diluted............     2.48      (0.36)     (0.36)     (0.40)      1.18
Discontinued Operations:
Income (loss), net of tax.......................     (240)       154       (486)      (402)      (974)
Net income (loss) per share--Basic..............    (0.01)      0.01      (0.02)     (0.02)     (0.05)
Net income (loss) per share--Diluted............    (0.01)      0.01      (0.02)     (0.02)     (0.05)

<CAPTION>
                                                                          1999
                                                  ----------------------------------------------------
                                                     Q1         Q2         Q3         Q4       TOTAL
                                                  --------   --------   --------   --------   --------
<S>                                               <C>        <C>        <C>        <C>        <C>
Continuing Operations:
Revenue.........................................  $   423    $ 2,953    $ 1,192    $ 3,395    $ 7,963
Gross profit(2).................................      266      1,396        644      1,780      4,086
Net loss........................................   (4,406)    (3,422)    (5,087)    (5,315)   (18,230)
Net loss per share--basic.......................    (0.24)     (0.18)     (0.27)     (0.29)     (0.98)
Net loss per share--diluted.....................    (0.24)     (0.18)     (0.27)     (0.29)     (0.98)
Discontinued Operations:
Income (loss), net of tax.......................    2,158      3,568      1,228       (764)     6,190
Net income (loss) per share--Basic..............     0.12       0.19       0.07      (0.04)      0.33
Net income (loss) per share--Diluted............     0.12       0.19       0.07      (0.04)      0.33
</TABLE>

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

(1) The results for the first quarter of 2000 include a $66.4 million pre-tax
    gain realized on the sale of Alteon WebSystems, Inc. common stock.

(2) Gross profit is impacted by several factors, including shifts in product
    mix, changes in channels of distribution, sales volume, fluctuations in
    manufacturing costs, pricing strategies, and fluctuations in sales of
    integrated third-party products. Gross profit decreased, as a percentage of
    net sales, from 1999 to 2000 primarily due to an increase in the Company's
    operations infrastructure, which includes operations management, supply
    chain management, purchasing, quality, order entry, planning and other
    related functions as well as certain period costs associated with starting
    up new products and processes.

                                      F-22
<PAGE>

                                  SCHEDULE II

                     INTRUSION.COM, INC, AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>

                                    Balance      Charged to                                   Balance
                                    at beg.      costs and                   Additions       at end of
                                   of period      expense      Transfers    (Deductions)      period
                                   ---------      -------      ---------    ------------      ------
<S>                                <C>           <C>           <C>          <C>              <C>
Year ended December 31, 1998
Deducted from a sset accounts:
  Allowance for doubtful accounts
   and returns                      $    758     $     146     $    74(2)   $   (98)(1)      $    880

Year ended December 31, 1999
Deducted from asset accounts:
  Allowance for doubtful accounts
   and returns                      $    880     $      85     $     -      $   206 (3)      $  1,171

Year ended December 31, 2000
Deducted from asset accounts:
  Allowance for doubtful accounts
   and returns                      $  1,171     $       -     $     -      $  (252)(1)      $    919

</TABLE>


(1) Uncollectible accounts written off.

(2) Reserves related to acquisition of Essential Communication Corporation.

(3) Unapplied cash, net of write-offs.










                                      S-1



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>2
<FILENAME>a2040873zex-2_1.txt
<DESCRIPTION>EXHIBIT 2.1
<TEXT>

<PAGE>

                                   EXHIBIT 2.1

                       CERTIFICATE OF OWNERSHIP AND MERGER

                                     MERGING

                               INTRUSION.COM, INC.

                                      INTO

                               ODS NETWORKS, INC.


                     ODS Networks, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), under and in
accordance with Section 253 of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify:

                     FIRST: That the Corporation was incorporated pursuant to
the DGCL on August 30, 1995 under the name of "Optical Data Systems, Inc."

                     SECOND: That the Corporation owns 100% of the outstanding
shares of each class of capital stock of Intrusion.com, Inc., which was
incorporated pursuant to the DGCL on February 21, 2000 ("INTRUSION").

                     THIRD: That the Board of Directors of the Corporation (the
"BOARD") has, pursuant to resolutions duly adopted at a telephonic meeting of
the Board dated April 17 , 2000 and filed with the minutes of the Board,
authorized and approved the merger of Intrusion with and into the Corporation
(the "MERGER"). Such resolutions have not been modified or rescinded and are in
full force and effect on the date hereof. A true and correct copy of such
resolutions are attached hereto as EXHIBIT A.

                     FIFTH: That the Corporation shall be the surviving
corporation in the Merger (the "SURVIVING CORPORATION").

                     SIXTH: That the Merger shall be effective on June 1, 2000
at 8:00 a.m., Eastern Standard Time.

                     SEVENTH: That the Certificate of Incorporation of the
Corporation, as amended and in effect on the date hereof, shall be the
Certificate of Incorporation of the Surviving Corporation; provided, however,
that at the effective time of the Merger, Article One of the Certificate of
Incorporation of the Surviving Corporation shall be amended in its entirety to
read as follows: "The name of the corporation is Intrusion.com, Inc." The
Surviving Corporation's Certificate of Incorporation, as amended hereby, is
restated as shown in EXHIBIT B attached hereto.

<PAGE>


                     IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Ownership and Merger on behalf of the Corporation on May 15,
2000.



                                         ODS NETWORKS, INC.



                                            /s/ JAY R. WIDDIG
                                         -----------------------------------
                                         Jay Widdig, Chief Financial Officer






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>3
<FILENAME>a2040873zex-3_1.txt
<DESCRIPTION>EXHIBIT 3.1
<TEXT>

<PAGE>



                                   EXHIBIT 3.1

                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                               INTRUSION.COM, INC.
                                FORMERLY KNOWN AS
                               ODS NETWORKS, INC.

                                   ARTICLE ONE

                                      NAME

                     The name of the corporation is Intrusion.com, Inc. (the
"Corporation").

                                   ARTICLE TWO

                               PERIOD OF DURATION

                     The period of duration of the Corporation is perpetual or
until dissolved or merged or consolidated in some lawful manner.

                                  ARTICLE THREE

                               PURPOSE AND POWERS

                     Section 1. PURPOSE. The purpose for which the corporation
is organized is to engage in any lawful acts or activities for which
corporations may be organized under the General Corporation Law of the State of
Delaware (the "DGCL").

                     Section 2. POWERS. Subject to any specific written
limitations or restrictions imposed by the DGCL, by other law, or by this
Certificate of Incorporation, and solely in furtherance thereof, but not in
addition to the purposes set forth in Section 1 of this Article, the Corporation
shall have and exercise all of the powers specified in the DGCL, which powers
are not inconsistent with this Certificate of Incorporation.

                                  ARTICLE FOUR

                  CAPITALIZATION, PREEMPTIVE RIGHTS AND VOTING

                     Section 1. AUTHORIZED SHARES. The Corporation shall have
authority to issue two classes of shares to be designated respectively, "Common
Stock" and "Preferred Stock." The total number of shares of capital stock which
the Corporation shall have authority to issue is EIGHTY-FIVE MILLION
(85,000,000), of which EIGHTY MILLION (80,000,000) shall be Common Stock and
FIVE MILLION (5,000,000) shall be Preferred Stock. Each share of Common Stock
shall have a par value of ONE CENT ($.01), and each share of Preferred Stock
shall have a par value of ONE CENT ($.01).

<PAGE>

                     The Preferred Stock authorized by this Certificate of
Incorporation may be issued from time to time in one or more series, at the
discretion of the Board of Directors without Stockholder approval, with each
such series to consist of such number of shares and to have such voting powers
(whether full or limited, or no voting powers) and such designations, powers,
preferences and relative, participating, optional, redemption, conversion,
exchange or other special rights, and such qualifications, limitations or
restrictions thereof, as shall be stated in the resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors
prior to the issuance thereof. The Board of Directors is hereby expressly vested
with the authority, to the fullest extent now or hereafter provided by law, to
adopt any such resolution or resolutions. Each share of any series of Preferred
Stock shall be identical with all other shares of such series, except as to the
date from which dividends, if any, shall accrue.

                     Section 2. PREEMPTIVE RIGHTS. No holder of shares of
capital stock of the Corporation shall, as such holder, have any right to
purchase or subscribe for any capital stock of any class which the Corporation
may issue or sell, whether or not exchangeable for any capital stock of the
Corporation of any class or classes, whether issued out of unissued shares
authorized by this Certificate of Incorporation as originally filed or by any
amendment thereof, or out of shares of capital stock of the Corporation acquired
by it after the issue thereof; nor shall any holder of shares of capital stock
of the Corporation, as such holder, have any right to purchase, acquire or
subscribe for any securities which the Corporation may issue or sell whether or
not convertible into or exchangeable for shares of capital stock of the
Corporation of any class or classes, and whether or not any such securities have
attached or appurtenant thereto warrants, options or other instruments which
entitle the holders thereof to purchase, acquire or subscribe for shares of
capital stock of any class or classes.

                     Section 3. VOTING. In the exercise of voting privileges,
each holder of shares of the Common Stock of the Corporation shall be entitled
to one (1) vote for each share held in his name on the books of the Corporation,
and each holder of any series of Preferred Stock of the Corporation shall have
such voting rights, if any, as shall be specified for such series. In all
elections of Directors of the Corporation, cumulative voting is expressly
prohibited. As such, each holder of shares of capital stock of the Corporation
entitled to vote at the election of Directors shall have the right to vote, in
person or by proxy, all or any portion of such shares for or against each
individual Director to be elected and shall not be entitled to vote for or
against any one Director more than the aggregate number of shares held by such
holder which are entitled to vote on the election of Directors. With respect to
any action to be taken by the Stockholders of the Corporation as to any matter
other than the election of Directors, the affirmative vote of the holders of a
majority of the shares of the capital stock of the Corporation entitled to vote
thereon and represented in person or by proxy at a meeting of the Stockholders
at which a quorum is present shall be sufficient to authorize, affirm, ratify or
consent to such action.

                     Section 4. NO STOCKHOLDER ACTION BY CONSENT. Any action
required by the DGCL to be taken by the Stockholders shall be taken only at a
duly called annual or special meeting of the Stockholders at which a quorum is
present, and may not be taken without a meeting, without prior notice, and
without a vote, by a consent or consents in writing setting forth the action so
taken signed by the holder or holders of a majority of the outstanding shares of
the capital stock of the Corporation entitled to vote thereon.

<PAGE>

                                  ARTICLE FIVE

                           REGISTERED OFFICE AND AGENT

                     Section 1. REGISTERED OFFICE. The street address of the
registered office of the Corporation is 1209 Orange Street, Wilmington, New
Castle County, Delaware.

                     Section 2. REGISTERED AGENT. The name of the initial
registered agent of the Corporation at such address is The Corporation Trust
Company.

                                   ARTICLE SIX

                                    DIRECTORS

                     Section 1. BOARD OF DIRECTORS. The business and affairs of
the Corporation shall be managed by or be under the direction of the Board of
Directors which shall consist of not less than one Director, the exact number of
which shall be determined in accordance with the Bylaws of the Corporation. The
number of Directors of the Corporation may from time to time be changed in
accordance with the Bylaws of the Corporation and the DGCL. A Director shall
hold office until the next annual meeting of the Stockholders of the Corporation
and until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Any Director elected to fill a vacancy not resulting from an increase in the
number of Directors shall have the same remaining term as that of his
predecessor. A Director elected by the Board of Directors to fill a newly
created Directorship resulting from an increase in the number of Directors shall
hold office until the next annual meeting of the Stockholders of the Corporation
and until his successor shall be elected and shall qualify.

                     Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect Directors at an
annual or special meeting of Stockholders, the election, term of office, filling
of vacancies and other features of such Directorships shall be governed by the
terms of the Certificate of Designations applicable thereto, and such Directors
so elected shall not be divided into classes unless expressly provided by such
terms. Further, any such Directors elected by one or more classes or series of
Preferred Stock may be removed at any time, with or without cause (except as
other provided in Section 4 of this Article below), by, and only by, the
affirmative vote of the holders of record of a majority of the outstanding
shares of such class or series given at a special meeting if such Stockholders
called for such purpose.

                     Section 2. LIMITATION ON LIABILITY OF DIRECTORS. Pursuant
to Section 102(b)(7) of the DGCL, a Director of the Corporation shall not be
personally liable to the Corporation or its Stockholders for monetary damages
for breach of fiduciary duty as a Director, except for liability (1) for any
breach of the Director's duty of loyalty to the Corporation or its Stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) under Section 174 of the DGCL; or
(4) for any transaction from which the Director derived an improper personal
benefit. If the DGCL or other applicable provision of Delaware law hereafter is
amended to authorize further elimination or limitation of the liability

<PAGE>


of Directors, then the liability of a Director of this Corporation, in addition
to the limitation on personal liability provided herein, shall be limited to
the fullest extent permitted by the DGCL or other applicable provision of
Delaware law as amended. Any repeal or modification of this Section 2 by the
Stockholders of this Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a Director of the
Corporation existing at the time of such repeal or modification.

                     Section 3. ELECTION AND REMOVAL OF DIRECTORS. Election of
Directors need not be by written ballot. Any Director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of Directors, except as
otherwise provided by law and except if the directors of the Corporation are
ever divided into two or three classes, any Director may be removed only for
cause by the holders of a majority of the shares then entitled to vote at an
election for such class of Directors.

                                  ARTICLE SEVEN

                      SPECIAL POWERS OF BOARD OF DIRECTORS

                     In furtherance and not in limitation of the powers
conferred under the DGCL, the Board of Directors is expressly authorized:

           1.        To adopt, amend or repeal the Bylaws of the Corporation;

           2.        To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation;

           3.        To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose, and to
abolish any such reserve in the manner in which it was created;

           4.        By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the Directors of the
Corporation; the board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee; any such committee, to the extent provided in the
resolution or in the Bylaws of the Corporation, shall have and may exercise any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except to the extent that the DGCL
requires a particular matter to be authorized by the Board of Directors, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; provided, however, the Bylaws may provide that in the absence or
disqualification of any member of the committee or committees, the member or
members thereof present at any meeting and not disqualified form voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member; and

           5.        When and as authorized by the affirmative vote of the
holders of a majority of the stock issued and outstanding having voting power
given at a Stockholders meeting duly called upon such notice as is required by
statute, to sell, lease or exchange all or substantially all of the property
and assets of the Corporation, including its goodwill and its corporate
franchises, upon

<PAGE>


such terms and conditions and for such consideration, which may consist in
whole or in part of money or property, including shares of stock in, and/or
other securities of, any other corporation or corporations, as the Board of
Directors shall deem expedient and in the best interests of the Corporation.

                                  ARTICLE EIGHT

                           ADDITIONAL POWERS IN BYLAWS

                     The Corporation may in its Bylaws confer powers and
authorities upon the Board of Directors in addition to the foregoing and those
expressly conferred upon them by the DGCL.

                                  ARTICLE NINE

               TRANSACTIONS WITH INTERESTED DIRECTORS AND OFFICERS

                     No contract or transaction between the Corporation and one
or more of its Directors or Officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of the Directors or Officers of the Corporation are directors, officers or
partners, or have a financial interest, shall be void or voidable solely by
reason of such relationship, or solely because the Director or Officer is
present at or participates in the meeting of the Board of Directors of the
Corporation or committee thereof that authorizes the contract or transaction, or
solely because his or their votes are counted for such purposes, if any one of
the following conditions are met:

           1.        The material facts concerning the relationship or interest
of the Director or Officer and the material facts concerning the contract or
transaction are disclosed or are known to the Board of Directors of the
Corporation or the committee thereof that considers the contract or
transaction, and the Board of Directors of the Corporation or committee thereof
in good faith authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or

           2.        The material facts concerning the relationship or interest
of the Director or Officer and the material facts concerning the contract or
transaction are disclosed or are known to the Stockholders of the Corporation
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by the Stockholders of the Corporation at any annual or
special meeting of Stockholders called for that purpose; or

           3.        The contract or transaction is fair to the Corporation at
the time it is authorized, approved or ratified by the Board of Directors of
the Corporation, a committee thereof, or the Stockholders of the Corporation.

                     Common or interested Directors may be counted in
determining the presence of a quorum at a meeting or the Board of Directors of
the Corporation or of a committee thereof that authorizes such contract or
transaction.

<PAGE>

                                   ARTICLE TEN

                                 INDEMNIFICATION

                     Section 1. MANDATORY INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. Each person who was or is made a party or is threatened to be made a
party to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit, or proceeding (the
"Proceeding"), by reason of the fact that he is or was an Officer or a Director
of the Corporation, or who, while a Director or Officer of the Corporation, is
or was serving at the request of the Corporation as a Director, Officer,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by the DGCL against
all judgments, penalties (including excise and similar taxes), fines,
settlements, and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such Proceeding. Such right shall be
a contract right and shall include the right to require advancement by the
Corporation of reasonable expenses (including attorneys' fees) incurred in
defending any such Proceeding in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of such Proceeding shall be made by the Corporation only upon delivery to the
Corporation of a written affirmation by such person of his good faith belief
that he has met the standard of conduct necessary for indemnification under the
DGCL and a written undertaking, by or on behalf of such person, to repay all
amounts so advanced if it should be ultimately determined that such person has
not satisfied such requirements.

                     Section 2. NATURE OF INDEMNIFICATION. The indemnification
and advancement of expenses provided for herein shall not be deemed exclusive of
any rights permitted by law to which a person seeking indemnification may be
entitled under any Bylaw, agreement, vote of Stockholders or otherwise, and
shall continue as to a person who has ceased to be a Director or Officer of the
Corporation and shall inure to the benefit of the heirs, executors and
administrators of such a person.

                     Section 3. INSURANCE. The Corporation shall have power to
purchase and maintain insurance or another arrangement on behalf of any person
who is or was a Director, Officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a Director, Officer,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article or the DGCL.

<PAGE>

                                 ARTICLE ELEVEN

                           ARRANGEMENT WITH CREDITORS

                     Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its Stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or Stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the Stockholders or class of Stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the Stockholders or class of Stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
Stockholders or class of Stockholders, of this Corporation, as the case may be,
and also on this Corporation.

                                 ARTICLE TWELVE

                               AMENDMENT OF BYLAWS

                     The Board of Directors of the Corporation shall have the
power to adopt, alter, amend or repeal the Bylaws of the Corporation.
Notwithstanding the preceding, the Stockholders of the Corporation shall also
have the power to adopt, alter, amend or repeal the Bylaws of the Corporation.

                                ARTICLE THIRTEEN

                                   AMENDMENTS

                     The Corporation reserves the right to amend, alter, change
or repeal any provision continued in this Certificate of Incorporation or in its
Bylaws in the manner now or hereafter prescribed by the DGCL or this Certificate
of Incorporation, and all rights conferred on Stockholders herein are granted
subject to this reservation.

                                ARTICLE FOURTEEN

                                    CAPTIONS

                     The captions used in this Certificate of Incorporation are
for convenience only and shall not be construed in interpreting the provisions
hereof.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>4
<FILENAME>a2040873zex-3_2.txt
<DESCRIPTION>EXHIBIT 3.2
<TEXT>

<PAGE>















                                   Exhibit 3.2

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


                               CORPORATE BYLAWS OF

                               INTRUSION.COM, INC.

                            (A DELAWARE CORPORATION)


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

<PAGE>

                                TABLE OF CONTENTS

                               CORPORATE BYLAWS OF
                               INTRUSION.COM, INC.
                            (A DELAWARE CORPORATION)


<TABLE>

<S>                                                                           <C>
ARTICLE 1 NAME AND OFFICES....................................................1
     1.1   Name...............................................................1
     1.2   Registered Office and Agent........................................1
           (a)    Registered Office...........................................1
           (b)    Registered Agent............................................1
           (c)    Change of Registered Office or Agent........................1
     1.3   Other Offices......................................................1
ARTICLE 2 STOCKHOLDERS........................................................1
     2.1   Place of Meetings..................................................1
     2.2   Annual Meeting.....................................................2
     2.3   Special Meetings...................................................2
     2.4   Notice.............................................................2
     2.5   Voting List........................................................2
     2.6   Quorum.............................................................2
     2.7   Requisite Vote.....................................................3
     2.8   Withdrawal of a Quorum.............................................3
     2.9   Voting at Meeting..................................................3
           (a)    Voting Power................................................3
           (b)    Exercise of Voting Power....................................3
           (c)    Election of Directors.......................................4
     2.10  Record Date........................................................4
     2.11  No Action Without Meetings.........................................4
     2.12  Preemptive Rights..................................................4
ARTICLE 3 DIRECTORS...........................................................4
     3.1   Management Powers..................................................4
     3.2   Number and Qualification...........................................4
     3.3   Election and Term..................................................5
     3.4   Voting on Directors................................................5
     3.5   Vacancies and New Directorships....................................5
     3.6   Removal............................................................5
     3.7   Meetings...........................................................6
           (a)    Place.......................................................6
           (b)    Annual Meeting..............................................6
           (c)    Regular Meetings............................................6
           (d)    Special Meetings............................................6
           (e)    Notice and Waiver of Notice.................................6
           (f)    Quorum......................................................6
           (g)    Requisite Vote..............................................6
     3.8   Action Without Meetings............................................6
     3.9   Committees.........................................................7
           (a)    Designation and Appointment.................................7

                                       i

<PAGE>

           (b)    Members; Alternate Members; Terms...........................7
           (c)    Authority...................................................7
           (d)    Records.....................................................7
           (e)    Change in Number............................................7
           (f)    Vacancies...................................................7
           (g)    Removal.....................................................7
           (h)    Meetings....................................................7
           (i)    Quorum; Requisite Vote......................................8
           (j)    Compensation................................................8
           (k)    Action Without Meetings.....................................8
           (l)    Responsibility..............................................8
     3.10  Compensation.......................................................8
     3.11  Maintenance of Records.............................................8
     3.12  Interested Directors and Officers..................................8
ARTICLE 4 NOTICES.............................................................9
     4.1   Method of Notice...................................................9
     4.2   Waiver.............................................................9
     4.3   Exception to Requirement of Notice.................................9
ARTICLE 5 OFFICERS AND AGENTS................................................10
     5.1   Designation.......................................................10
     5.2   Election of Officers..............................................10
     5.3   Qualifications....................................................10
     5.4   Term of Office....................................................10
     5.5   Authority.........................................................10
     5.6   Removal...........................................................10
     5.7   Vacancies.........................................................10
     5.8   Compensation......................................................11
     5.9   Chairman of the Board.............................................11
     5.10  Vice Chairman.....................................................11
     5.11  Chief Executive Officer...........................................11
     5.12  Chief Operating Officer...........................................11
     5.13  President.........................................................12
     5.14  Vice Presidents...................................................12
     5.15  Secretary.........................................................12
     5.16  Assistant Secretaries.............................................12
     5.17  Treasurer.........................................................12
     5.18  Assistant Treasurers..............................................13
ARTICLE 6 INDEMNIFICATION....................................................13
     6.1   Mandatory Indemnification.........................................13
     6.2   Determination of Indemnification..................................14
     6.3   Advance of Expenses...............................................14
     6.4   Permissive Indemnification........................................15
     6.5   Nature of Indemnification.........................................15
     6.6   Insurance.........................................................15
ARTICLE 7 STOCK CERTIFICATES AND TRANSFER REGULATIONS........................16
     7.1   Description of Certificates.......................................16

                                      ii

<PAGE>

     7.2   Entitlement to Certificates.......................................16
     7.3   Signatures........................................................16
     7.4   Issuance of Certificates..........................................16
     7.5   Payment for Shares................................................17
           (a)    Consideration..............................................17
           (b)    Valuation..................................................17
           (c)    Effect.....................................................17
           (d)    Allocation of Consideration................................17
     7.6   Subscriptions.....................................................17
     7.7   Record Date.......................................................17
     7.8   Registered Owners.................................................18
     7.9   Lost, Stolen or Destroyed Certificates............................18
           (a)    Proof of Loss..............................................18
           (b)    Timely Request.............................................18
           (c)    Bond.......................................................18
           (d)    Other Requirements.........................................18
     7.10  Registration of Transfers.........................................18
           (a)    Endorsement................................................18
           (b)    Guaranty and Effectiveness of Signature....................19
           (c)    Adverse Claims.............................................19
           (d)    Collection of Taxes........................................19
           (e)    Additional Requirements Satisfied..........................19
     7.11  Restrictions on Transfer and Legends on Certificates..............19
           (a)    Shares in Classes or Series................................19
           (b)    Restriction on Transfer....................................19
           (c)    Unregistered Securities....................................19
ARTICLE 8 GENERAL PROVISIONS.................................................20
     8.1   Dividends.........................................................20
           (a)    Declaration and Payment....................................20
           (b)    Record Date................................................20
     8.2   Reserves..........................................................20
     8.3   Books and Records.................................................21
     8.4   Annual Statement..................................................21
     8.5   Contracts and Negotiable Instruments..............................21
     8.6   Fiscal Year.......................................................21
     8.7   Corporate Seal....................................................21
     8.8   Resignations......................................................21
     8.9   Amendment of Bylaws...............................................22
     8.10  Construction......................................................22
     8.11  Telephone Meetings................................................22
     8.12  Table of Contents; Captions.......................................22

</TABLE>

                                     iii

<PAGE>


                                CORPORATE BYLAWS

                                       OF

                               INTRUSION.COM, INC.
                            (A DELAWARE CORPORATION)

                                    ARTICLE 1

                                NAME AND OFFICES

           1.1 NAME. The name of the Corporation is INTRUSION.COM, INC.,
hereinafter referred to as the "Corporation."

           1.2 REGISTERED OFFICE AND AGENT. The Corporation shall establish,
designate and continuously maintain a registered office and agent in the State
of Delaware, subject to the following provisions:

               (a) REGISTERED OFFICE. The Corporation shall establish and
           continuously maintain in the State of Delaware a registered office
           which may be, but need not be, the same as its place of business.

               (b) REGISTERED AGENT. The Corporation shall designate and
           continuously maintain in the State of Delaware a registered agent,
           which agent may be either an individual resident of the State of
           Delaware whose business office is identical with such registered
           office, or a domestic corporation or a foreign corporation
           authorized to transact business in the State of Delaware, having a
           business office identical with such registered office.

               (c) CHANGE OF REGISTERED OFFICE OR AGENT. The Corporation may
           change its registered office or change its registered agent, or
           both, upon the filing in the Office of the Secretary of State of
           Delaware of a statement setting forth the facts required by law, and
           executed for the Corporation by its President, a Vice President or
           other duly authorized officer.

           1.3 OTHER OFFICES. The Corporation may also have offices at such
other places within and without the State of Delaware as the Board of Directors
may, from time to time, determine the business of the Corporation may require.

ARTICLE 2

STOCKHOLDERS

           2.1 PLACE OF MEETINGS. Each meeting of the stockholders of the
Corporation is to be held at the principal offices of the Corporation or at such
other place, either within or without the State of Delaware, as may be specified
in the notice of the meeting or in a duly executed waiver of notice thereof.


                                       1
<PAGE>


           2.2 ANNUAL MEETING. The annual meeting of the stockholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held at such date, time and place as
may be designated each by resolution of the Board of Directors, provided,
however, that the failure to hold the annual meeting within the designated
period of time or on the designated date shall not work a forfeiture or
dissolution of the Corporation.

           2.3 SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board, the Chief Executive Officer or the President. The notice of a special
meeting shall state the purpose or purposes of the proposed meeting and the
business to be transacted at any such special meeting of stockholders, and shall
be limited to the purposes stated in the notice therefor.

           2.4 NOTICE. Written or printed notice of the meeting stating the
place, day and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Board of Directors,
the Chairman of the Board, the Chief Executive Officer, the President, or the
Secretary, to each stockholder of record entitled to vote at such meeting as
determined in accordance with the provisions of Section 2.10 hereof. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
Mail, with postage thereon prepaid, addressed to the stockholder entitled
thereto at his address as it appears on the stock transfer books of the
Corporation.

           2.5 VOTING LIST. The officer or agent having charge and custody of
the stock transfer books of the Corporation, shall prepare, at least ten (10)
days before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, arranged in alphabetical order and showing
the address of each stockholder and the number of shares having voting
privileges registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of not less than ten (10) days
prior to such meeting either at the principal office of the Corporation or at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the entire time of the meeting. The original stock
ledger or transfer book, or a duplicate thereof, shall be prima facie evidence
as to identity of the stockholders entitled to examine such list or stock
ledger or transfer book and to vote at any such meeting of the stockholders.
The failure to comply with the requirements of this Section shall not effect
the validity of any action taken at such meeting.

           2.6 QUORUM. The holders of a majority of the shares of the capital
stock issued and outstanding entitled to vote thereat, represented in person or
by proxy, shall be requisite and shall constitute a quorum at all meetings of
the stockholders for the transaction of business except as otherwise provided
by statute or by the Certificate of Incorporation or by these Bylaws. If,
however, such quorum shall not be present or represented at any such meeting of
the stockholders, the stockholders entitled to vote thereat, present in person,
or represented by proxy, shall have the power to adjourn the meeting, from time
to time, without notice other than


                                       2
<PAGE>


announcement at the meeting, until a quorum shall be present or represented. At
such reconvened meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the reconvened meeting;
a notice of said meeting shall be given to each stockholder entitled to vote at
said meeting.

           2.7 REQUISITE VOTE. With respect to any action to be taken by the
stockholders on any matter other than the election of directors, the affirmative
vote of the holders of a majority of the outstanding shares of capital stock
entitled to vote on that matter represented in person or by proxy at a meeting
of the stockholders at which a quorum is present shall be the act of the
stockholders.

           2.8 WITHDRAWAL OF QUORUM. If a quorum is present at the time of
commencement of any meeting, the stockholders present at such duly convened
meeting may continue to transact any business which may properly come before
said meeting until adjournment thereof, notwithstanding the withdrawal from such
meeting of sufficient holders of the shares of capital stock entitled to vote
thereat to leave less than a quorum remaining.

           2.9 VOTING AT MEETING. Voting at meetings of stockholders shall be
conducted and exercised subject to the following procedures and regulations:

               (a) VOTING POWER. In the exercise of voting power with respect
           to each matter properly submitted to a vote at any meeting of
           stockholders, each stockholder of the capital stock of the
           Corporation having voting power shall be entitled to one (1) vote
           for each such share held in his name on the books of the
           Corporation, except to the extent otherwise specified by the
           Certificate of Incorporation or Certificate of Designations
           pertaining to a series of preferred stock.

               (b) EXERCISE OF VOTING POWER. Each stockholder entitled to vote
           at a meeting or to express consent or dissent to corporate action in
           writing without a meeting may vote either in person or authorize
           another person or persons to act for him by proxy duly appointed by
           instrument in writing subscribed by such stockholder or by his duly
           authorized attorney-in-fact; provided, however, no such appointment
           of proxy shall be valid, voted or acted upon after the expiration of
           three (3) years from the date of execution of such written
           instrument of appointment, unless otherwise stated therein. A proxy
           shall be revocable unless expressly designated therein as
           irrevocable and coupled with an interest. Proxies coupled with an
           interest include the appointment as proxy of: (a) a pledgee; (b) a
           person who purchased or agreed to purchase or owns or holds an
           option to purchase the shares voted; (c) a creditor of the
           Corporation who extended its credit under terms requiring the
           appointment; (d) an employee of the Corporation whose employment
           contract requires the appointment; or (e) a party to a voting
           agreement created under Section 218 of the General Corporation Law
           of Delaware, as amended. Each proxy shall be filed with the
           Secretary of the Corporation prior to or at the time of the meeting.
           Any vote may be taken by voice vote or by show of hands unless
           someone entitled to vote at the meeting objects, in which case
           written ballots shall be used.


                                       3
<PAGE>


                (c) ELECTION OF DIRECTORS. In all elections of Directors
           cumulative voting shall be prohibited.

           2.10 RECORD DATE. As more specifically provided in Article 7, Section
7.7 hereof, the Board of Directors may fix in advance a record date for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be less than ten (10) nor more than sixty (60) days
prior to such meeting. In the absence of any action by the Board of Directors
fixing the record date, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day before the day on which notice of the meeting is given, or,
if notice is waived, at the close of business on the day before the meeting is
held.

           2.11 NO ACTION WITHOUT MEETINGS. Any action permitted or required to
be taken at a meeting of the stockholders of the Corporation shall be taken only
at a duly called and convened annual or special meeting of the stockholders of
the Corporation at which a quorum is present, and may not be taken without a
meeting, without prior notice, and without a vote, by a consent or consents in
writing setting forth the action so taken signed by the holder or holders of a
majority of the outstanding stock entitled to vote thereon.

         2.12 PREEMPTIVE RIGHTS. No holder of shares of capital stock of the
Corporation shall, as such holder, have any right to purchase or subscribe for
any capital stock of any class which the Corporation may issue or sell, whether
or not exchangeable for any capital stock of the Corporation of any class or
classes, whether issued out of unissued shares authorized by the Certificate of
Incorporation, as amended, or out of shares of capital stock of the Corporation
acquired by it after the issue thereof; nor shall any holder of shares of
capital stock of the Corporation, as such holder, have any right to purchase,
acquire or subscribe for any securities which the Corporation may issue or sell
whether or not convertible into or exchangeable for shares of capital stock of
the Corporation of any class or classes, and whether or not any such securities
have attached or appurtenant thereto warrants, options or other instruments
which entitle holders thereof to purchase, acquire or subscribe for shares of
capital stock of any class or classes.

ARTICLE 3

DIRECTORS

         3.1 MANAGEMENT POWERS. The powers of the Corporation shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, its Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statue or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.

         3.2 NUMBER AND QUALIFICATION. The Board of Directors shall consist of
not less than three (3) members nor more than eleven (11) members; provided,
however, the initial Board of Directors shall consist of five (5) members.
Directors need not be residents of the State of Delaware nor stockholders of the
Corporation. Each Director shall qualify as a Director


                                       4
<PAGE>


following election as such by agreeing to act or acting in such capacity. The
number of Directors shall be fixed, and may be increased or decreased, from
time to time by resolution of the Board of Directors without the necessity of a
written amendment to the Bylaws of the Corporation; provided, however, no
decrease shall have the effect of shortening the term of any incumbent Director.

         3.3 ELECTION AND TERM. Members of the Board of Directors shall hold
office until the annual meeting of the stockholders of the Corporation and until
their successors shall have been elected and qualified. At the annual meeting of
stockholders, the stockholders entitled to vote in an election of Directors
shall elect Directors to hold office until the next succeeding annual meeting of
the stockholders. Each Director shall hold office for the term for which he is
elected, and until his successor shall be elected and qualified or until his
death, resignation or removal, if earlier.

         3.4 VOTING ON DIRECTORS. Directors shall be elected by the vote of the
holders of a plurality of the shares entitled to vote in the election of
Directors and represented in person or by proxy at a meeting of stockholders at
which a quorum is present. Cumulative voting in the election of Directors is
expressly prohibited.

         3.5 VACANCIES AND NEW DIRECTORSHIPS. Vacancies and newly created
directorships resulting from any increase in the authorized number of Directors
elected by all the stockholders having the right to vote as a single class may
be filled by the affirmative vote of a majority of the Directors then in office,
although less than a quorum, or by a sole remaining Director, or by the
requisite vote of the stockholders at an annual meeting of the stockholders or
at a special meeting of the stockholders called for that purpose, and the
Directors so elected shall hold office until their successors are elected and
qualified. If the holders of any class or classes of stock or series of stock of
the Corporation are entitled to elect one or more Directors by the Certificate
of Incorporation or Certificate of Designations applicable to such class or
series, vacancies and newly created directorships of such class or classes or
series may be filled by a majority of the Directors elected by such class or
classes or series thereof then in office, or by a sole remaining Director so
elected, and the Directors so elected shall hold office until the next election
of the class for which such Directors shall have been chosen, and until their
successors shall be elected and qualified. For purposes of these Bylaws, a
"vacancy" shall be defined as an unfilled directorship arising by virtue of the
death, resignation or removal of a Director theretofore duly elected to service
in such capacity in accordance with the relevant provisions of these Bylaws.

           3.6 REMOVAL. Except as hereinafter stated, any Director may be
removed either for or without cause at any duly convened special or annual
meeting of stockholders, by the affirmative vote of a majority in number of
shares of the stockholders present in person or by proxy at any meeting and
entitled to vote for the election of such Director, provided notice of intention
to act upon such matter shall have been given in the notice calling such
meeting. Notwithstanding the preceding, if the Directors of the Corporation are
ever divided into two or three classes, any Director may be removed only for
cause by the affirmative vote of a majority in number of shares of the
stockholders present in person or by proxy at any meeting and entitled to vote
for the election of such Director, provided notice of intention to act upon such
matter shall have been given in the notice calling such meeting.


                                       5
<PAGE>


           3.7 MEETINGS. The meetings of the Board of Directors shall be held
and conducted subject to the following regulations:

               (a) PLACE. Meetings of the Board of Directors of the
           Corporation, annual, regular or special, are to be held at the
           principal office or place of business of the Corporation, or such
           other places, either within or without the State of Delaware, as may
           be specified in the respective notices, or waivers of notices,
           thereof.

               (b) ANNUAL MEETING. The Board of Directors shall meet each year
           immediately after the annual meeting of the stockholders, at the
           place where such meeting of the stockholders has been held (either
           within or without the State of Delaware), for the purpose of
           organization, election of officers, and consideration of any other
           business that may properly be brought before the meeting. No notice
           of any kind to either old or new members of the Board of Directors
           for such annual meeting shall be required.

               (c) REGULAR MEETINGS. Regular meetings of the Board of Directors
           may be held without notice at such time and at such place as shall
           from time to time be determined and designated by the Board.

               (d) SPECIAL MEETINGS. Special meetings of the Board of Directors
           may be called by the Chairman of the Board, the Chief Executive
           Officer or the President of the Corporation on notice of two (2)
           days to each Director either personally or by mail or by telegram,
           telex or facsimile transmission and delivery. Special meetings of
           the Board of Directors shall be called by the Chairman of the Board
           or the President or Secretary in like manner and on like notice on
           the written request of two (2) Directors.

               (e) NOTICE AND WAIVER OF NOTICE. Attendance of a Director at any
           meeting shall constitute a waiver of notice of such meeting, except
           where a Director attends for the express purpose of objecting to the
           transaction of any business because the meeting is not lawfully
           called or convened. Neither the business to be transacted at, nor
           the purpose of, any regular meeting of the Board of Directors need
           be specified in the notice or waiver of notice of such meeting.

               (f) QUORUM. At all meetings of the Board of Directors, a
           majority of the number of Directors shall constitute a quorum for
           the transaction of business, unless a greater number is required by
           law or by the Certificate of Incorporation. If a quorum shall not be
           present at any meeting of Directors, the Directors present thereat
           may adjourn the meeting, from time to time, without notice other
           than announcement at the meeting, until a quorum shall be present.

               (g) REQUISITE VOTE. In the exercise of voting power with respect
           to each matter properly submitted to a vote at any meeting of the
           Board of Directors, each Director present at such meeting shall have
           one (1) vote. The act of a majority of the Directors present at any
           meeting at which a quorum is present shall be the act of the Board
           of Directors.

           3.8 ACTION WITHOUT MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
by law to be taken at any


                                       6
<PAGE>


meeting of the Board of Directors, or any committee thereof, may be taken
without a meeting, if prior to such action a written consent thereto is signed
by all members of the Board or of such committee, as the case may be, and such
written consent is filed in the minutes or proceedings of the Board of
Directors or committee.

           3.9 COMMITTEES. Committees designated and appointed by the Board of
Directors shall function subject to and in accordance with the following
regulations and procedures:

               (a) DESIGNATION AND APPOINTMENT. The Board of Directors may, by
           resolution adopted by a majority of the entire Board, designate and
           appoint one or more committees under such name or names and for such
           purpose or function as may be deemed appropriate.

               (b) MEMBERS; ALTERNATE MEMBERS; TERMS. Each committee thus
           designated and appointed shall consist of one or more of the
           Directors of the Corporation, one of whom, in the case of the
           Executive Committee, shall be the Chief Executive Officer of the
           Company. The Board of Directors may designate one or more of its
           members as alternate members of any committee, who may, subject to
           any limitations imposed by the entire Board, replace absent or
           disqualified members at any meeting of that committee. The members
           or alternate members of any such committee shall serve at the
           pleasure of and subject to the discretion of the Board of Directors.

               (c) AUTHORITY. Each committee, to the extent provided in the
           resolutions of the Board creating same, shall have and may exercise
           such of the powers and authority of the Board of Directors in the
           management of the business and affairs of the Corporation as the
           Board of Directors may direct and delegate, except, however, those
           matters which are required by statute to be reserved unto or acted
           upon by the entire Board of Directors.

               (d) RECORDS. Each such committee shall keep and maintain regular
           records or minutes of its meetings and report the same to the Board
           of Directors when required.

               (e) CHANGE IN NUMBER. The number of members or alternate members
           of any committee appointed by the Board of Directors, as herein
           provided, may be increased or decreased (but not below two) from
           time to time by appropriate resolution adopted by a majority of the
           entire Board of Directors.

               (f) VACANCIES. Vacancies in the membership of any committee
           designated and appointed hereunder shall be filled by the Board of
           Directors, at a regular or special meeting of the Board of
           Directors, in a manner consistent with the provisions of this
           Section 3.9.

               (g) REMOVAL. Any member or alternate member of any committee
           appointed hereunder may be removed by the Board of Directors by the
           affirmative vote of a majority of the entire Board, whenever in its
           judgment the best interests of the Corporation will be served
           thereby.

               (h) MEETINGS. The time, place and notice (if any) of committee
           meetings shall be determined by the members of such committee.


                                       7
<PAGE>


               (i) QUORUM; REQUISITE VOTE. At meetings of any committee
           appointed hereunder, a majority of the number of members designated
           by the Board of Directors shall constitute a quorum for the
           transactions of business. The act of a majority of the members and
           alternate members of the committee present at any meeting at which a
           quorum is present shall be the act of such committee, except as
           otherwise specifically provided by statute or by the Certificate of
           Incorporation or by these Bylaws. If a quorum is not present at a
           meeting of such committee, the members of such committee present may
           adjourn the meeting from time to time, without notice other than an
           announcement at the meeting, until a quorum is present.

               (j) COMPENSATION. Appropriate compensation for members and
           alternate members of any committee appointed pursuant to the
           authority hereof may be authorized by the action of a majority of
           the entire Board of Directors pursuant to the provisions of Section
           3.10 hereof.

               (k) ACTION WITHOUT MEETINGS. Any action required or permitted to
           be taken at a meeting of any committee may be taken without a
           meeting if a consent in writing, setting forth the action so taken,
           is signed by all members of such committee. Such consent shall have
           the same force and effect as a unanimous vote at a meeting. The
           signed consent, or a signed copy, shall become a part of the record
           of such committee.

               (l) RESPONSIBILITY. Notwithstanding any provision to the
           contrary herein, the designation and appointment of a committee and
           the delegation of authority to it shall not operate to relieve the
           Board of Directors, or any member thereof, of any responsibility
           imposed upon it or him by law.

           3.10 COMPENSATION. By appropriate resolution of the Board of
Directors, the Directors may be reimbursed their expenses, if any, of attendance
at each meeting of the Board of Directors and may be paid a fixed sum (as
determined from time to time by the vote of a majority of the Directors then in
office) for attendance at each meeting of the Board of Directors or a stated
salary as Director, or both. No such payment shall preclude any Director from
serving the Corporation in another capacity and receiving compensation therefor.
Members of special or standing committees may, by appropriate resolution of the
Board of Directors, be allowed similar reimbursement of expenses and
compensation for attending committee meetings.

           3.11 MAINTENANCE OF RECORDS. The Directors may keep the books and
records of the Corporation, except such as required by law to be kept within the
State, outside the State of Delaware or at such place or places as they may,
from time to time, determine.

         3.12 INTERESTED DIRECTORS AND OFFICERS. No contract or other
transaction between the Corporation and one or more of its Directors or
officers, or between the Corporation and any firm which one or more of its
Directors or officers are members or employees, or in which they are interested,
or between the Corporation and any corporation or association of which one or
more of its Directors or officers are stockholders, members, directors,
officers, or employees, or in which they are interested, shall be void or
voidable solely for this reason, or solely because of the presence of such
Director or Directors or officer or officers at the meeting of the Board of
Directors of the Corporation, which acts upon, or in reference to, such
contract, or transaction, if


                                       8
<PAGE>


(a) the material facts of such relationship or interest shall be disclosed or
known to the Board of Directors and the Board of Directors shall, nevertheless
in good faith, authorize, approve and ratify such contract or transaction by a
vote of a majority of the Directors present, such interested Director or
Directors to be counted in determining whether a quorum is present, but not to
be counted in calculating the majority of such quorum necessary to carry such
vote; (b) the material facts of such relationship or interest as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by the vote of the stockholders; or (c) the contract or transaction
is fair to the Corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof or the stockholders.
The provisions of this Section shall not be construed to invalidate any
contract or other transaction which would otherwise be valid under the common
and statutory law applicable thereto.

ARTICLE 4

NOTICES

           4.1 METHOD OF NOTICE. Whenever under the provisions of the General
Corporation Law of Delaware or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any Director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing and delivered personally, through the United States mail, by a
recognized delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such Director or stockholder, at
his address or telex or facsimile transmission number, as the case may be, as it
appears on the records of the Corporation, with postage and fees thereon
prepaid. Such notice shall be deemed to be given at the time when the same shall
be deposited in the United States Mail or with an express delivery service or
when transmitted by telegram, telex or facsimile transmission or personally
delivered, as the case may be.

           4.2 WAIVER. Whenever any notice whatever is required to be given
under the provisions of the General Corporation Law of Delaware or under the
provisions of the Certificate of Incorporation or these Bylaws, a waiver thereof
in writing signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Attendance by such person or persons, whether in person
or by proxy, at any meeting requiring notice shall constitute a waiver of notice
of such meeting, except where such person attends the meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.

         4.3 EXCEPTION TO REQUIREMENT OF NOTICE. Any notice required to be given
to any stockholder under any provision of the General Corporation Law of the
State of Delaware, the Certificate of Incorporation or these Bylaws need not be
given to the stockholder if: (1) notice of two consecutive annual meetings and
all notices of meetings held during the period between those annual meetings, if
any, or (2) all (but in no event less than two) payments (if sent by first class
mail) of dividends or interest on securities during a twelve-month period have
been mailed to that person, addressed at his address as shown on the records of
the Corporation, and have been returned undeliverable. Any action or meeting
taken or held without notice to such person shall have the same force and effect
as if the notice had been duly given and, if the action taken


                                       9
<PAGE>


by the Corporation is reflected in any certificate filed with the Secretary of
State, that certificate need not state that notice was not given to persons to
whom notice was not required to be given pursuant to this Section. If such a
person delivers to the Corporation, a written notice setting forth his then
current address, the requirement that notice be given to that person shall be
reinstated.

ARTICLE 5

OFFICERS AND AGENTS

           5.1 DESIGNATION. The officers of the Corporation shall be chosen by
the Board of Directors and shall consist of the offices of:

               (a) President and Secretary; and

               (b) Such other offices and officers (including a Chairman of the
           Board, Vice Chairman, Chief Executive Officer, Chief Operating
           Officer, one or more additional Vice Presidents and a Treasurer) and
           assistant officers and agents as the Board of Directors shall deem
           necessary.

           5.2 ELECTION OF OFFICERS. Each officer designated in Section 5.1(a)
hereof shall be elected by the Board of Directors on the expiration of the term
of office of such officer, as herein provided, or whenever a vacancy exists in
such office. Each officer or agent designated in Section 5.1(b) above may be
elected by the Board of Directors at any meeting.

           5.3 QUALIFICATIONS. No officer or agent need be a stockholder of the
Corporation or a resident of Delaware. No officer or agent is required to be a
Director, except the Chairman of the Board. Any two or more offices may be held
by the same person.

           5.4 TERM OF OFFICE. Unless otherwise specified by the Board of
Directors at the time of election or appointment, or by the express provisions
of an employment contract approved by the Board, the term of office of each
officer and each agent shall expire on the date of the first meeting of the
Board of Directors next following the annual meeting of stockholders each year.
Each such officer or agent, unless elected or appointed to an additional term,
shall serve until the expiration of the term of his office or, if earlier, his
death, resignation or removal.

           5.5 AUTHORITY. Officers and agents shall have such authority and
perform such duties in the management of the Corporation as are provided in
these Bylaws or as may be determined by resolution of the Board of Directors not
inconsistent with these Bylaws.

           5.6 REMOVAL. Any officer or agent elected or appointed by the Board
of Directors may be removed with or without cause by the Board of Directors
whenever in its judgment the best interests of the Corporation will be served
thereby. Such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.

           5.7 VACANCIES. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal or otherwise) shall be filled by the Board of
Directors.


                                      10
<PAGE>

           5.8 COMPENSATION. The compensation of all officers and agents of the
Corporation shall be fixed from time to time by the Board of Directors .

           5.9 CHAIRMAN OF THE BOARD. If a Chairman of the Board is elected,
he shall be chosen from among the Directors. The Chairman of the Board shall
have the power to call special meetings of the stockholders and of the
Directors for any purpose or purposes, and he shall preside at all meetings
of the Board of Directors, unless he shall be absent or unless he shall, at
his election, designate the Vice-Chairman, if one is elected, to preside in
his stead. The Chairman of the Board shall submit a report as to the
operations of the Corporation for the preceding fiscal year to the Board of
Directors as soon as practicable in each year and, with the Chief Executive
Officer, to the stockholders at or prior to each annual meeting of the
stockholders, and the Chairman of the Board shall from time to time report to
the Board of Directors matters within his knowledge which the interest of the
Corporation may require to be so reported. The Chairman of the Board shall
advise and counsel the Chief Executive Officer and other officers of the
Corporation and shall exercise such powers and perform such duties as shall
be assigned to or required by him from time to time by the Board of Directors.

           5.10 VICE CHAIRMAN. The Vice Chairman, if one is elected, shall have
the power to call special meetings of the stockholders and of the Directors for
any purpose or purposes, and, in the absence of the Chairman of the Board, the
Vice Chairman shall preside at all meetings of the Board of Directors unless he
shall be absent. The Vice Chairman shall advise and counsel the other officers
of the Corporation and shall exercise such powers and perform such duties as
shall be assigned to or required of him from time to time by the Board of
Directors.

           5.11 CHIEF EXECUTIVE OFFICER. Subject to the supervision of the Board
of Directors, the Chief Executive Officer, if one is elected, shall have general
supervision, management, direction and control of the business and affairs of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The Chief Executive Officer shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise executed
and except where the execution thereof shall be expressly delegated by the Board
of Directors to some other officer or agent of the Corporation. The Chief
Executive Officer shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board and the Vice Chairman, at all meetings of
the Board of Directors. The Chief Executive Officer shall be ex officio a member
of the Executive Committee, if any, of the Board of Directors. The Chief
Executive Officer shall have the general powers and duties of management usually
vested in the office of chief executive officer of a corporation and shall
perform such other duties and possess such other authority and powers as the
Board of Directors may from time to time prescribe. The Chief Executive Officer
shall have general supervision and direction of all other officers, agents and
employees of the Corporation to see that their respective duties are properly
performed. In the event no individual is elected to the office of Chief
Operating Officer, the Chief Executive Officer shall have the powers and perform
the duties of the Chief Operating Officer.

           5.12 CHIEF OPERATING OFFICER. Subject to the supervision of the Board
of Directors, the Chief Operating Office, if one is elected, shall have general
supervision of the day to day operations of the Corporation. The Chief Operating
Officer shall be ex officio a member of the Executive Committee, if any, of the
Board of Directors. The Chief Operating Officer shall have

                                        11
<PAGE>

the general powers and duties of management usually vested in the office of
chief operating officer of a corporation and shall perform such other duties
and possess such other authority and powers as the Board of Directors may
from time to time prescribe.

           5.13 PRESIDENT. In the absence or disability of the Chief Executive
Officer, the President shall perform all of the duties of the Chief Executive
Officer and when so acting shall have all the powers and be subject to all the
restrictions upon the Chief Executive Officer, including the power to sign all
instruments and to take all actions when the Chief Executive Officer is
authorized to perform by the Board of Directors or the Bylaws. The President
shall have the general powers and duties usually vested in the office of
president of a corporation and shall perform such other duties and possess such
other authority and powers as the Board of Directors may from time to time
prescribe or as the Chief Executive Officer may from time to time delegate.

           5.14 VICE PRESIDENTS. The Vice President, or if there shall be more
than one, the Vice Presidents in the order determined by the majority vote of
the Board of Directors, shall, in the prolonged absence or disability of the
President, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe or as the Chief Executive Officer may from time
to time delegate.

           5.15 SECRETARY. The Secretary shall be the custodian of and shall
maintain the corporate books and records and shall record or see to the proper
recording of all proceedings of the meetings of the stockholders and the Board
of Directors of the Corporation in a book to be maintained for that purpose and
shall perform like duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board, the Chief Executive Officer, or the President. The Secretary shall
have custody of the corporate seal of the Corporation, and the Secretary, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature. The Secretary shall have the authority to
sign stock certificates and shall perform all duties usually vested in the
office of the secretary of a corporation and shall perform such other duties and
possess such other powers as the Board of Directors may from time to time
prescribe or as the Chief Executive Officer may from time to time delegate.

           5.16 ASSISTANT SECRETARIES. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors, shall in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe or as the Chief Executive Officer may from time to time delegate.

           5.17 TREASURER. The Treasurer shall be the chief accounting and
financial officer of the Corporation and shall have control of and shall be
responsible for all matters pertaining to the accounts and finances of the
Corporation. The Treasurer shall audit all payrolls and vouchers of

                                        12
<PAGE>

the Corporation and shall direct the manner of certifying the same; shall
supervise the manner of keeping all vouchers for payments by the Corporation
and all other documents relating to such payments; shall receive, audit and
consolidate all operating and financial statements of the Corporation and its
various departments, shall have supervision of the books of account of the
Corporation, their arrangement and classification, shall supervise the
accounting and auditing practices of the Corporation and shall have charge of
all matters relating to taxation. The Treasurer shall have the care and
custody of all monies, funds and securities of the Corporation; shall deposit
or cause to be deposited all such funds in and with such depositories as the
Board of Directors shall from time to time direct or as shall be selected in
accordance with procedures established by the Board of Directors; shall
advise upon all terms of credit granted by the Corporation; shall be
responsible for the collection of all its accounts and shall cause to be kept
full and accurate accounts of all receipts and disbursements of the
Corporation. The Treasurer shall have the power to endorse for deposit or
collection or otherwise all checks, drafts, notes, bills of exchange and
other commercial paper payable to the Corporation and to give proper receipts
or discharges for all payments to the Corporation. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer (and Chairman of the Board, if one is elected)
and the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money, and
other property of whatever kind in his possession or under his control owned
by the Corporation. The Treasurer shall perform such other duties and have
such other authority and powers as to the Board of Directors may from time to
time prescribe or as the Chief Executive Officer may from time to time
delegate.

           5.18 ASSISTANT TREASURER. The Assistant Treasurer, or if there be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe or as the Chief Executive Officer may from time to time delegate.

ARTICLE 6

INDEMNIFICATION

           6.1 MANDATORY INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party, or who was or is a witness without being
named a party, to any threatened, pending or completed action, claim, suit or
proceeding, whether civil, criminal, administrative or investigative, any appeal
in such an action, suit or proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding (a "Proceeding"), by reason of
the fact that such individual is or was a Director or officer of the
Corporation, or while a Director or officer of the Cooperation is or was serving
at the request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
corporation, partnership, trust, employee benefit plan or other enterprise,
shall be

                                        13
<PAGE>

indemnified and held harmless by the Corporation from and against any
judgments, penalties (including excise taxes), fines, amounts paid in
settlement and reasonable expenses (including court costs and attorneys' fees)
actually incurred by such settlement and reasonable expenses (including court
costs and attorneys' fees) actually incurred by such person in connection with
such Proceeding if it is determined that he acted in good faith and reasonably
believed (i) in the case of conduct in his official capacity on behalf of the
Corporation that his conduct was in the Corporation's best interests, (ii) in
all other cases, that his conduct was not opposed to the best interests of the
Corporation, and (iii) with respect to any Proceeding which is a criminal
action, that he had no reasonable cause to believe his conduct was unlawful;
provided, however, that in the event a determination is made that such person
is liable to the Corporation or is found liable on the basis that personal
benefit was improperly received by such person, the indemnification is limited
to reasonable expenses actually incurred by such person in connection with the
Proceeding and shall not be made in respect of any Proceeding in which such
person shall have been found liable for willful or intentional misconduct in
the performance of his duty to the Corporation. The termination of any
Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself be determinative of whether
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any Proceeding which is a criminal action, had reasonable
cause to believe that his conduct was unlawful. A person shall be deemed to
have been found liable in respect of any claim, issue or matter only after the
person shall be been so adjudged by a court of competent jurisdiction after
exhaustion of all appeals therefrom.

           6.2 DETERMINATION OF INDEMNIFICATION. Any indemnification under the
foregoing Section 6.1 (unless ordered by a court of competent jurisdiction)
shall be made by the Corporation only upon a determination that
indemnification of such person is proper in the circumstances by virtue of the
fact that it shall have been determined that such person has met the
applicable standard of conduct. Such determination shall be made (1) by a
majority of a quorum consisting of Directors who at the time of the vote are
not named defendants or respondents in the Proceeding; (2) if such quorum
cannot be obtained, by a majority vote of a committee of the Board of
Directors, designated to act in the matter by a majority of all Directors,
consisting of two or more Directors who at the time of the vote are not named
defendants or respondents in the Proceeding; (3) by special legal counsel (in
a written opinion) selected by the Board of Directors or a committee of the
Board by a vote as set forth in Subsection (1) or (2) of this Section, or, if
such quorum cannot be established, by a majority vote of all Directors (in
which Directors who are named defendants or respondents in the Proceeding may
participate); or (4) by the stockholders of the Corporation in a vote that
excludes the shares held by Directors who are named defendants or respondents
in the Proceeding.

           6.3 ADVANCE OF EXPENSES. Reasonable expenses, including court costs
and attorneys' fees, incurred by a person who was or is a witness or who was or
is named as a defendant or respondent in a Proceeding, by reason of the fact
that such individual is or was a Director or officer of the Corporation, or
while a Director or officer of the Corporation is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another corporation,
partnership, trust, employee benefit plan or other enterprise, shall be paid by
the Corporation at reasonable intervals in advance of the final disposition of
such Proceeding, and without the determination set forth in

                                        14

<PAGE>

Section 6.2, upon receipt by the Corporation of a written affirmation by such
person of his good faith belief that he has met the standard of conduct
necessary for indemnification under this Article 6, and a written undertaking
by or on behalf of such person to repay the amount paid or reimbursed by the
Corporation if it is ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article 6. Such written
undertaking shall be an unlimited obligation of such person and it may be
accepted without reference to financial ability to make repayment.

           6.4 PERMISSIVE INDEMNIFICATION. The Board of Directors of the
Corporation may authorize the Corporation to indemnify employees or agents of
the Corporation, and to advance the reasonable expenses of such persons, to
the same extent, following the same determinations and upon the same
conditions as are required for the indemnification of and advancement of
expenses to Directors and officers of the Corporation.

           6.5 NATURE OF INDEMNIFICATION. The indemnification and advancement
of expenses provided hereunder shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under the
Certificate of Incorporation, these Bylaws, any agreement, vote of stockholder
or disinterested Directors or otherwise, both as to actions taken in an
official capacity and as to actions taken in any other capacity while holding
such office, shall continue as to a person who has ceased to be a Director,
officer, employee or agent of the Corporation and shall inure to the benefit
of the heirs, executors and administrators of such person.

           6.6 INSURANCE. The Corporation shall have the power and authority
to purchase and maintain insurance or another arrangement on behalf of any
person who is or was a Director, officer, employee or agent of the
Corporation, or who is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary or another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, against any liability, claim, damage, loss or risk asserted
against such person and incurred by such person in any capacity or arising out
of the status of such person as such, irrespective of whether the Corporation
would have the power to indemnify and hold such person harmless against such
liability under the provisions hereof. If the insurance or other arrangement
is with a person or entity that is not regularly engaged in the business of
providing insurance coverage, the insurance or arrangement may provide for
payment of a liability with respect to which the Corporation would not have
the power to indemnify the person only if including coverage for the
additional liability has been approved by the stockholders of the Corporation.
Without limiting the power of the Corporation to procure or maintain any kind
of insurance or other arrangement, the Corporation may, for the benefit of
persons indemnified by the Corporation, (1) create a trust fund; (2) establish
any form of self-insurance; (3) secure its indemnity obligation by grant of a
security interest or other lien on the assets of the Corporation; or (4)
establish a letter of credit, guaranty, or surety arrangement. The insurance
or other arrangement may be procured, maintained, or established within the
Corporation or with any insurer or other person deemed appropriate by the
Board of Directors regardless of whether all or part of the stock or other
securities of the insurer or other person are owned in whole or in part by the
Corporation. In the absence of fraud, the judgment of the Board of Directors
as to the terms and conditions of the insurance or other arrangement and the
identity of the insurer or other person participating in the arrangement shall
be

                                        15
<PAGE>

conclusive and the insurance or arrangement shall not be voidable and shall
not subject the Directors approving the insurance or arrangement to liability,
on any ground, regardless of whether the Directors participating in the
approval is a beneficiary of the insurance or arrangement.

ARTICLE 7

STOCK CERTIFICATES AND TRANSFER REGULATIONS

           7.1 DESCRIPTION OF CERTIFICATES. The Shares of the capital stock of
the Corporation shall be represented by certificates in the form approved by
the Board of Directors and signed in the name of the Corporation by the
Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer, the President or a Vice President and the Secretary or an Assistant
Secretary of the Corporation, and sealed with the seal of the Corporation or a
facsimile thereof. Each certificate shall state on the face thereof the name
of the holder, the number and class of shares, the par value of shares covered
thereby or a statement that such shares are without par value, and such other
matters as are required by law. At such time as the Corporation may be
authorized to issue shares of more than one class, every certificate shall set
forth upon the face or back of such certificate a statement of the
designations, preferences, limitations and relative rights of the shares of
each class authorized to be issued, as required by the laws of the State of
Delaware, or may state that the Corporation will furnish a copy of such
statement without charge to the holder of such certificate upon receipt of a
written request therefor from such holder.

           7.2 ENTITLEMENT TO CERTIFICATES. Every holder of the capital stock
in the Corporation shall be entitled to have a certificate signed in the name
of the Corporation by the Chairman of the Board, the Chief Executive Officer,
the Chief Operating Officer, the President or a Vice President and the
Secretary or an Assistant Secretary of the Corporation, certifying the class
of capital stock and the number of shares represented thereby as owned or held
by such stockholder in the Corporation.

           7.3 SIGNATURES. The signatures of the Chairman of the Board, the
Chief Executive Officer, the Chief Operating Officer, the President, the Vice
President, the Secretary or the Assistant Secretary upon a certificate may be
facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been placed upon any such certificate
or certificates, shall cease to serve as such officer or officers of the
corporation, whether because of death, resignation, removal or otherwise,
before such certificate or certificates are issued and delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by
the Corporation and be issued and delivered with the same effect as though the
person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to
serve as such officer or officers of the Corporation.

           7.4 ISSUANCE OF CERTIFICATES. Certificates evidencing shares of its
capital stock (both treasury and authorized but unissued) may be issued for
such consideration (not less than par value, except for treasury shares which
may be issued for such consideration) and to such persons as the Board of
Directors may determine from time to time. Shares shall not be issued until
the full amount of the consideration, fixed as provided by law, has been paid.

                                        16
<PAGE>

           7.5 PAYMENT FOR SHARES. Consideration for the issuance of shares
shall be paid, valued and allocated as follows:

               (a) CONSIDERATION. The consideration for the issuance of shares
           shall consist of any tangible or intangible benefit to the
           Corporation, including cash, promissory notes, services performed,
           contracts for services to be performed, or other securities of the
           Corporation.

               (b) VALUATION. In the absence of fraud in the transaction, the
           determination of the Board of Directors as to the value of
           consideration received shall be conclusive.

               (c) EFFECT. When consideration, fixed as provided by law, has
           been paid, the shares shall be deemed to have been issued and shall
           be considered fully paid and nonassessable.

               (d) ALLOCATION OF CONSIDERATION. The consideration received for
           shares shall be allocated by the Board of Directors, in accordance
           with law, between the stated capital and capital surplus accounts.

           7.6 SUBSCRIPTIONS. Unless otherwise provided in the subscription
agreement, subscriptions of shares, whether made before or after organization
of the Corporation, shall be paid in full in such installments and at such
times as shall be determined by the Board of Directors. Any call made by the
Board of Directors for payment on subscriptions shall be uniform as to all
shares of the same class and series. In case of default in the payment of any
installment or call when payment is due, the Corporation may proceed to
collect the amount due in the same manner as any debt due to the Corporation.

           7.7 RECORD DATE. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive a distribution by the Corporation
(other than a distribution involving a purchase or redemption by the
Corporation or any of its own shares) or a share dividend, or in order to make
a determination of stockholders for any other proper purpose, the Board of
Directors may fix a record date for any such determination of stockholders,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) days, and in the case of a meeting of
stockholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If no record date is fixed for the determination of stockholders entitled to
notice of or to vote at a meeting of stockholders, or stockholders entitled to
receive a distribution (other than a distribution involving a purchase or
redemption by the Corporation of any of its own shares) or a share dividend,
the date before the date on which notice of the meeting is mailed or the date
on which the resolution of the Board of Directors declaring such distribution
or share dividend is adopted, as the case may be, shall be the record date for
such determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this Section, such determination shall be applied to any adjournment thereof.

                                        17
<PAGE>

           7.8 REGISTERED OWNERS. Prior to due presentment for registration of
transfer of a certificate evidencing shares of the capital stock of the
Corporation in the manner set forth in Section 7.10 hereof, the Corporation
shall be entitled to recognize the person registered as the owner of such
shares on its books (or the books of its duly appointed transfer agent, as the
case may be) as the person exclusively entitled to vote, to receive notices
and dividends with respect to, and otherwise exercise all rights and powers
relative to such shares; and the Corporation shall not be bound or otherwise
obligated to recognize any claim, direct or indirect, legal or equitable, to
such shares by any other person, whether or not it shall have actual, express
or other notice thereof, except as otherwise provided by the laws of Delaware.

           7.9 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation shall
issue a new certificate in place of any certificate for shares previously
issued if the registered owner of the certificate satisfies the following
conditions:

               (a) PROOF OF LOSS. Submits proof in affidavit form satisfactory
           to the Corporation that such certificate has been lost, destroyed or
           wrongfully taken;

               (b) TIMELY REQUEST. Requests the issuance of a new certificate
           before the Corporation has notice that the certificate has been
           acquired by a purchaser for value in good faith and without notice
           of an adverse claim;

               (c) BOND. Gives a bond in such form, and with such surety or
           sureties, with fixed or open penalty, as the Corporation may direct,
           to indemnify the Corporation (and its transfer agent and registrar,
           if any) against any claim that may be made or otherwise asserted by
           virtue of the alleged loss, destruction, or theft of such
           certificate or certificates; and

               (d) OTHER REQUIREMENTS. Satisfies any other reasonable
           requirements imposed by the Corporation.

           In the event a certificate has been lost, apparently destroyed or
wrongfully taken, and the registered owner of record fails to notify the
Corporation within a reasonable time after he has notice of such loss,
destruction, or wrongful taking, and the Corporation registers a transfer (in
the manner hereinbelow set forth) of the shares represented by the certificate
before receiving such notification, such prior registered owner of record
shall be precluded from making any claim against the Corporation for the
transfer required hereunder or for a new certificate.

           7.10 REGISTRATION OF TRANSFERS. Subject to the provisions hereof,
the Corporation shall register the transfer of a certificate evidencing shares
of its capital stock presented to it for transfer if:

               (a) ENDORSEMENT. Upon surrender of the certificate to the
           Corporation (or its transfer agent, as the case may be) for transfer,
           the certificate (or an appended stock power) is properly endorsed by
           the registered owner, or by his duly authorized legal representative
           or attorney-in-fact, with proper written evidence of the authority
           and appointment of such representative, if any, accompanying the
           certificate;

                                        18
<PAGE>

               (b) GUARANTY AND EFFECTIVENESS OF SIGNATURE. The signature of
           such registered owner or his legal representative or
           attorney-in-fact, as the case may be, has been guaranteed by a
           national banking association or member of the New York Stock
           Exchange, and reasonable assurance in a form satisfactory to the
           Corporation is given that such endorsements are genuine and
           effective;

               (c) ADVERSE CLAIMS. The Corporation has no notice of an adverse
           claim or has otherwise discharged any duty to inquire into such a
           claim;

               (d) COLLECTION OF TAXES. Any applicable law (local, state or
           federal) relating to the collection of taxes relative to the
           transaction has been complied with; and

               (e) ADDITIONAL REQUIREMENTS SATISFIED. Such additional
           conditions and documentation as the Corporation (or its transfer
           agent, as the case may be) shall reasonably require, including
           without limitation thereto, the delivery with the surrender of such
           stock certificate or certificates of proper evidence of succession,
           assignment or other authority to obtain transfer thereof, as the
           circumstances may require, and such legal opinions with reference to
           the requested transfer as shall be required by the Corporation (or
           its transfer agent) pursuant to the provisions of these Bylaws and
           applicable law, shall have been satisfied.

           7.11 RESTRICTIONS ON TRANSFER AND LEGENDS ON CERTIFICATES.

               (a) SHARES IN CLASSES OR SERIES. If the Corporation is
           authorized to issue shares of more than one class, the certificate
           shall set forth, either on the face or back of the certificate, a
           full or summary statement of all of the designations, preferences,
           limitations, and relative rights of the shares of each such class
           and, if the Corporation is authorized to issue any preferred or
           special class in series, the variations in the relative rights and
           preferences of the shares of each such series so far as the same
           have been fixed and determined, and the authority of the Board of
           Directors to fix and determine the relative rights and preferences
           of subsequent series. In lieu of providing such a statement in full
           on the certificate, a statement on the face or back of the
           certificate may provide that the Corporation will furnish such
           information to any stockholder without charge upon written request
           to the Corporation at its principal place of business or registered
           office and that copies of the information are on file in the office
           of the Secretary of State.

               (b) RESTRICTION ON TRANSFER. Any restrictions imposed by the
           Corporation on the sale or other disposition of its shares and on
           the transfer thereof must be copied at length or in summary form on
           the face, or so copied on the back and referred to on the face, of
           each certificate representing shares to which the restriction
           applies. The certificate may however state on the face or back that
           such a restriction exists pursuant to a specified document and that
           the Corporation will furnish a copy of the document to the holder of
           the certificate without charge upon written request to the
           Corporation at its principal place of business.

               (c) UNREGISTERED SECURITIES. Any security of the Corporation,
           including, among others, any certificate evidencing shares of the
           capital stock of the Corporation or

                                        19
<PAGE>

           warrants to purchase shares of capital stock of the Corporation,
           which is issued to any person without registration under the
           Securities Act of 1933, as amended, or the Blue Sky laws of any
           state, shall not be transferable until the Corporation has been
           furnished with a legal opinion of counsel with reference thereto,
           satisfactory in form and content to the Corporation and its counsel,
           to the effect that such sale, transfer or pledge does not involve a
           violation of the Securities Act of 1933, as amended, or the Blue Sky
           laws of any state having jurisdiction. The certificate representing
           the security shall bear substantially the following legend:

              THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
              REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
              APPLICABLE STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE
              PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED,
              SOLD OR TRANSFERRED UNTIL EITHER (i) A REGISTRATION STATEMENT
              UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES
              LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE
              CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE
              TO THE CORPORATION AND ITS COUNSEL THAT REGISTRATION UNDER SUCH
              SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
              REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.

ARTICLE 8

GENERAL PROVISIONS

           8.1 DIVIDENDS. Subject to the provisions of the General Corporation
Law of Delaware, as amended, and the Certificate of Incorporation, dividends
of the Corporation shall be declared and paid pursuant to the following
regulations:

               (a) DECLARATION AND PAYMENT. Dividends on the issued and
           outstanding shares of capital stock of the Corporation may be
           declared by the Board of Directors at any regular or special
           meeting and may be paid in cash, in property, or in shares of
           capital stock. Such declaration and payment shall be at the
           discretion of the Board of Directors.

               (b) RECORD DATE. The Board of Directors may fix in advance a
           record date for the purpose of determining stockholders entitled to
           receive payment of any dividend, such record date to be not more
           than sixty (60) days prior to the payment date of such dividend, or
           the Board of Directors may close the stock transfer books for such
           purpose for a period of not more than sixty (60) days prior to the
           payment date of such dividend. In the absence of action by the
           Board of Directors, the date upon which the Board of Directors
           adopts the resolution declaring such dividend shall be the record
           date.

           8.2 RESERVES. There may be created by resolution of the Board of
Directors out of the surplus of the Corporation such reserve or reserves as
the Board of Directors from time to time, in its discretion, think proper to
provide for contingencies, or to repair or maintain any

                                        20
<PAGE>

property of the Corporation, or for such other purposes as the Board of
Directors shall think beneficial to the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.

           8.3 BOOKS AND RECORDS. The Corporation shall maintain correct and
complete books and records of account and shall prepare and maintain minutes
of the proceedings of its stockholders, its Board of Directors and each
committee of its Board of Directors. The Corporation shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of original issuance of shares issued by
the Corporation and a record of each transfer of those shares that have been
presented to the Corporation for registration or transfer. Such records shall
contain the names and addresses of all past and present stockholders and the
number and class of the shares issued by the Corporation held by each.

           8.4 ANNUAL STATEMENT. The Board of Directors shall present at or
before each annual meeting of stockholders a full and clear statement of the
business and financial condition of the Corporation, including a reasonably
detailed balance sheet and income statement under current date.

           8.5 CONTRACTS AND NEGOTIABLE INSTRUMENTS. Except as otherwise
provided by law or these Bylaws, any contract or other instrument relative to
the business of the Corporation may be executed and delivered in the name of
the Corporation and on its behalf by the Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer or the President of the
Corporation. The Board of Directors may authorize any other officer or agent
of the Corporation to enter into any contract or execute and deliver any
contract in the name and on behalf of the Corporation, and such authority may
be general or confined to specific instances as the Board of Directors may
determine by resolution. All bills, notes, checks or other instruments for the
payment of money shall be signed or countersigned by such officer, officers,
agent or agents and in such manner as are permitted by these Bylaws and/or as,
from time to time, may be prescribed by resolution of the Board of Directors.
Unless authorized to do so by these Bylaws or by the Board of Directors, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement, or to pledge its credit, or to
render it liable pecuniarily for any purpose or to any amount.

           8.6 FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year.

           8.7 CORPORATE SEAL. The Corporation seal shall be in such form as
may be determined by the Board of Directors. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.

           8.8 RESIGNATIONS. Any Director, officer or agent may resign his
office or position with the Corporation by delivering written notice thereof
to the Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer, the President or the Secretary. Such resignation shall be effective
at the time specified therein, or immediately upon delivery if no time is
specified. Unless otherwise specified therein, an acceptance of such
resignation shall not be a necessary prerequisite of its effectiveness.

                                        21
<PAGE>

           8.9 AMENDMENT OF BYLAWS. These Bylaws may be altered, amended, or
repealed and new Bylaws adopted at any meeting of the Board of Directors or
stockholders at which a quorum is present, by the affirmative vote of a
majority of the Directors or stockholders, as the case may be, present at such
meeting, provided notice of the proposed alteration, amendment, or repeal be
contained in the notice of such meeting.

           8.10 CONSTRUCTION. Whenever the context so requires herein, the
masculine shall include the feminine and neuter, and the singular shall
include the plural, and conversely. If any portion or provision of these
Bylaws shall be held invalid or inoperative, then, so far as is reasonable and
possible: (1) the remainder of these Bylaws shall be considered valid and
operative, and (2) effect shall be given to the intent manifested by the
portion or provision held invalid or inoperative.

           8.11 TELEPHONE MEETINGS. Stockholders, Directors or members of any
committee may hold any meeting of such stockholders, Directors or committee by
means of conference telephone or similar communications equipment which
permits all persons participating in the meeting to hear each other and
actions taken at such meetings shall have the same force and effect as if
taken at a meeting at which persons were present and voting in person. The
Secretary of the Corporation shall prepare a memorandum of the action taken at
any such telephonic meeting.

           8.12 TABLE OF CONTENTS; CAPTIONS. The table of contents and
captions used in these Bylaws have been inserted for administrative
convenience only and do not constitute matter to be construed in
interpretation.

               IN DUE CERTIFICATION WHEREOF, the undersigned, being the
Secretary of INTRUSION.COM, INC., confirms the adoption and approval of the
foregoing restated Bylaws, effective as of the 1st day of June 2000.


                                                /s/    JAY R. WIDDIG
                                        ---------------------------------------
                                        Jay R. Widdig, SECRETARY


                                        22
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>5
<FILENAME>a2040873zex-4_1.txt
<DESCRIPTION>EXHIBIT 4.1
<TEXT>

<PAGE>
<TABLE>
<S>                                   <C>                                    <C>
NUMBER                                              INTRUSION                              SHARES
 C                                                      .COM
INCORPORATED UNDER THE LAWS           SECURITY SOLUTIONS FOR A .COM WORLD (TM)          COMMON STOCK
OF THE STATE OF DELAWARE
                                                                                      CUSIP 46121E 10 6
THIS CERTIFICATE IS TRANSFERABLE IN                                          SEE REVERSE FOR CERTAIN DEFINITIONS
RIDGEFIELD PARK, NJ OR NEW YORK, NY             INTRUSION.COM, INC.              AND RESTRICTIONS ON TRANSFER

THIS CERTIFIES THAT




is the OWNER of

               FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF

                                                INTRUSION.COM, INC.

(herein called the "Corporation") transferable on the books of the Corporation by the holder hereof, in person
or by duly authorized attorney, upon surrender of this Certificate properly endorsed or accompanied by a proper
assignment. This Certificate and the shares represented hereby are issued under and shall be held subject to all
of the provisions of the Certificate of Incorporation and the By-laws of the Corporation, and all amendments
thereto, copies of which are on file at the principal offices of the Corporation and the Transfer Agent, to all
of which the holder of this Certificate, by acceptance hereof, assents. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar of the Corporation.

        IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures of its duly authorized officers
and its facsimile seal to be hereunto affixed.

        /s/ TIMOTHY W. KINNEAR          INTRUSION.COM, INC.     DATED:
PRESIDENT AND CHIEF EXECUTIVE OFFICER        CORPORATE          COUNTERSIGNED AND REGISTERED:
          /s/ JAY R. WIDDIG                    SEAL                     CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
              SECRETARY                      DELAWARE                                                   TRANSFER AGENT
                                                                                                         AND REGISTRAR
                                                                BY
                                                                                                  AUTHORIZED SIGNATURE
</TABLE>
<PAGE>

                               INTRUSION.COM, INC.

        The Certificate of Incorporation of the Corporation on file in the
Office of the Secretary of State of Delaware sets forth a full statement of
(i) all of the designations, preferences, limitations and relative rights of
the shares of each class of capital stock authorized to be issued, (ii) the
authority of the Board of Directors to fix and determine the relative rights
and preferences of the shares of preferred stock which the Corporation is
authorized to issue in series and, if and to the extent fixed and determined,
the relative rights and preferences of any such series, (iii) the denial to
stockholders of preemptive rights to acquire unissued or treasury shares or
other securities of the Corporation and (iv) the denial to stockholders of the
right to cumulate votes in any election of directors of the Corporation. The
Corporation will furnish a copy of such statement to the record holder of this
Certificate without charge on written request to the Corporation at its
principal place of business or to the Transfer Agent and Registrar.

        The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<S>                                             <C>
TEN COM--as tenants in common                   UNIF GIFT MIN ACT--.......Custodian........
TEN ENT--as tenants by the entireties                               (Cust)         (Minor)
JT TEN--as joint tenants with right of                            under Uniform Gifts to Minors
        survivorship and not as tenants                           Act..........................
        in common                                                              (State)

    Additional abbreviations may also be used though not in the above list.

        For Value Received,_______________________hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________

___________________________________________________________________________________________________________
            PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE

___________________________________________________________________________________________________________

___________________________________________________________________________________________________________

_____________________________________________________________________________________________________Shares
of the Common Stock represented by the within Certificate and do(es) hereby irrevocably constitute and
appoint____________________________________________________________________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with full power of substitution in
the premises.

Dated _____________________________
                                                X ____________________________________________
                     NOTICE:                                      (SIGNATURE)
              THE SIGNATURE(S) TO THIS
              ASSIGNMENT MUST
              CORRESPOND WITH
              THE NAME(S) AS WRITTEN
              UPON THE FACE OF THE
              CERTIFICATE IN EVERY
              PARTICULAR, WITHOUT
              ALTERATION OR
              ENLARGEMENT OR ANY               X ____________________________________________
              CHANGE WHATEVER.                                    (SIGNATURE)

                                                ________________________________________________
                                                THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
                                                GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
                                                SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
                                                WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
                                                MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.
                                                ________________________________________________
                                                SIGNATURE(S) GUARANTEED BY:



                                                ________________________________________________
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>6
<FILENAME>a2040873zex-10_13.txt
<DESCRIPTION>EXHIBIT 10.13
<TEXT>

<PAGE>

                                  EXHIBIT 10.13

                              AMENDED AND RESTATED

                        INTRUSION.COM 401(k) SAVINGS PLAN

WHEREAS, Intrusion.com, Inc. (hereinafter referred to as the "Employer")
heretofore adopted the Intrusion.com 401(k) Savings Plan (hereinafter
referred to as the "Plan") for the benefit of its eligible Employees; and

WHEREAS, the Employer reserved the right to amend the Plan; and

WHEREAS, the Employer desires to amend the Plan; and

WHEREAS, it is intended that the Plan is to continue to be a qualified plan
under Section 401(a) of the Internal Revenue Code for the exclusive benefit
of the Participants and their Beneficiaries;

NOW, THEREFORE, the Plan is hereby amended by restating the Plan in its
entirety as follows:

<PAGE>

                                TABLE OF CONTENTS

ARTICLE ONE--DEFINITIONS
     1.1      Account
     1.2      Administrator
     1.3      Beneficiary
     1.4      Break in Service
     1.5      Code
     1.6      Compensation
     1.7      Disability
     1.8      Effective Date
     1.9      Employee
     1.10     Employer
     1.11     Employment Date
     1.12     Highly-Compensated Employee
     1.13     Hour of Service
     1.14     Leased Employee
     1.15     Nonhighly-Compensated Employee
     1.16     Normal Retirement Date
     1.17     Participant
     1.18     Plan
     1.19     Plan Year
     1.20     Trust
     1.21     Trustee
     1.22     Valuation Date
     1.23     Year of Service

ARTICLE TWO--SERVICE DEFINITIONS AND RULES
     2.1      Year of Service
     2.2      Break in Service
     2.3      Leave of Absence
     2.4      Hours of Service on Return to Employment
     2.5      Service in Excluded Job Classifications or with Related Companies

ARTICLE THREE--PLAN PARTICIPATION
     3.1      Participation
     3.2      Re-employment of Former Participant
     3.3      Termination of Eligibility

<PAGE>

ARTICLE FOUR--ELECTIVE DEFERRALS, EMPLOYER CONTRIBUTIONS,
              ROLLOVERS AND TRANSFERS FROM OTHER PLANS
     4.1      Elective Deferrals
     4.2      Employer Contributions
     4.3      Rollovers and Transfers of Funds from Other Plans
     4.4      Timing of Contributions

ARTICLE FIVE--ACCOUNTING RULES
     5.1      Investment of Accounts and Accounting Rules
     5.2      Participants Omitted in Error

ARTICLE SIX--VESTING, RETIREMENT AND DISABILITY BENEFITS
     6.1      Vesting
     6.2      Forfeiture of Nonvested Balance
     6.3      Return to Employment Before Distribution of Vested Account Balance
     6.4      Normal Retirement
     6.5      Disability

ARTICLE SEVEN--MANNER AND TIME OF DISTRIBUTING BENEFITS
     7.1      Manner of Payment
     7.2      Time of Commencement of Benefit Payments
     7.3      Furnishing Information
     7.4      Minimum Distribution Rules for Installment Payments
     7.5      Amount of Death Benefit
     7.6      Designation of Beneficiary
     7.7      Distribution of Death Benefits
     7.8      Eligible Rollover Distributions

ARTICLE EIGHT--LOANS AND IN-SERVICE WITHDRAWALS
     8.1      Loans
     8.2      Hardship Distributions
     8.3      Withdrawals After Age 59-1/2

ARTICLE NINE--ADMINISTRATION OF THE PLAN
     9.1      Plan Administration
     9.2      Claims Procedure
     9.3      Trust Agreement

<PAGE>

ARTICLE TEN--SPECIAL COMPLIANCE PROVISIONS
    10.1      Distribution of Excess Elective Deferrals
    10.2      Limitations on 401(k) Contributions
    10.3      Nondiscrimination Test for Employer Matching Contributions
    10.4      Limitation on the Multiple Use Alternative

ARTICLE ELEVEN--LIMITATION ON ANNUAL ADDITIONS
    11.1      Rules and Definitions

ARTICLE TWELVE--AMENDMENT AND TERMINATION
    12.1      Amendment
    12.2      Termination of the Plan

ARTICLE THIRTEEN--TOP-HEAVY PROVISIONS
     13.1 Applicability
     13.2 Definitions
     13.3 Allocation of Employer Contributions and Forfeitures for a Top-Heavy
          Plan Year
     13.4 Vesting

ARTICLE FOURTEEN--MISCELLANEOUS PROVISIONS
    14.1      Plan Does Not Affect Employment
    14.2      Successor to the Employer
    14.3      Repayments to the Employer
    14.4      Benefits not Assignable
    14.5      Merger of Plans
    14.6      Investment Experience not a Forfeiture
    14.7      Distribution to Legally Incapacitated
    14.8      Construction
    14.9      Governing Documents
    14.10     Governing Law
    14.11     Headings
    14.12     Counterparts
    14.13     Location of Participant or Beneficiary Unknown

<PAGE>

ARTICLE FIFTEEN--MULTIPLE EMPLOYER PROVISIONS
    15.1      Adoption of the Plan
    15.2      Service
    15.3      Plan Contributions
    15.4      Transferring Employees
    15.5      Delegation of Authority
    15.6      Termination

<PAGE>

                            ARTICLE ONE--DEFINITIONS

For purposes of the Plan, unless the context or an alternative definition
specified within another Article provides otherwise, the following words and
phrases shall have the definitions provided:

1.1 "ACCOUNT" shall mean the individual bookkeeping accounts maintained for a
Participant under the Plan which shall record (a) the Participant's
allocations of Employer contributions, (b) amounts of Compensation deferred
to the Plan pursuant to the Participant's election, (c) any amounts
transferred to this Plan under Section 4.3 from another qualified retirement
plan, and (d) the allocation of Trust investment experience.

1.2 "ADMINISTRATOR" shall mean the Plan Administrator appointed from time to
time in accordance with the provisions of Article Nine hereof.

1.3 "BENEFICIARY" shall mean any person, trust, organization, or estate
entitled to receive payment under the terms of the Plan upon the death of a
Participant.

1.4 "BREAK IN SERVICE" shall mean the twelve (12)-month computation period
specified in Article Two.

1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

1.6 "COMPENSATION" shall mean the compensation paid to a Participant by the
Employer for the Plan Year, but exclusive of stock options, car allowances,
relocation reimbursements, any program of deferred compensation or additional
benefits payable other than in cash and any compensation received prior to
his becoming a Participant in the Plan. Compensation shall include any
amounts deferred under a salary reduction agreement in accordance with
Section 4.1 or under a Code Section 125 plan maintained by the Employer.

In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Participant taken into account under the Plan shall not
exceed the OBRA `93 annual compensation limit. The OBRA `93 annual
compensation limit is $150,000, as adjusted by the Secretary of the Treasury
or his delegate for increases in the cost of living in accordance with
Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding twelve (12) months,
over which Compensation is determined (determination period) beginning in
such calendar year. If a determination period consists of fewer than twelve
(12) months, the OBRA `93 annual compensation limit shall be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is twelve (12).

<PAGE>

Any reference in the Plan to the limitation under Section 401(a)(17) of the
Code shall mean the OBRA `93 annual compensation limit set forth in this
provision.

If Compensation for any prior determination period is taken into account in
determining a Participant's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA `93
annual compensation limit in effect for that prior determination period.

For purposes of determining who is a Highly-Compensated Employee,
Compensation shall mean compensation as defined in Code Section 414(q)(7).

1.7 "DISABILITY." Disability shall mean a "permanent and total" disability
incurred by a Participant while in the employ of the Employer. For this
purpose, a permanent and total disability shall mean suffering from a
physical or mental condition that, in the opinion of the Administrator and
based upon appropriate medical advice and examination, can be expected to
result in death or can be expected to last for a continuous period of no less
than twelve (12) months. The condition must be determined by the
Administrator to prevent the Participant from engaging in substantial gainful
employment. Receipt of a Social Security disability award shall be deemed
proof of disability.

1.8 "EFFECTIVE DATE." The Effective Date of this restated Plan, on and after
which it supersedes the terms of the existing Plan document, is April 1,
1997, except where the provisions of the Plan shall otherwise specifically
provide. The rights of any Participant who separated from the Employer's
Service prior to this date shall be established under the terms of the Plan
and Trust as in effect at the time of the Participant's separation from
Service, unless the Participant subsequently returns to Service with the
Employer. Rights of spouses and Beneficiaries of such Participants shall also
be governed by those documents.

1.9 "EMPLOYEE" shall mean a common law employee of the Employer who, for the
entire period of his employment, was also treated as a common law employee on
the payroll records of the Employer.

1.10 "EMPLOYER" shall mean Intrusion.com, Inc. and any subsidiary or
affiliate which is a member of its "related group" (as defined in Section
2.5) which has adopted the Plan (a "Participating Affiliate"), and shall
include any successor(s) thereto which adopt this Plan. Any such subsidiary
or affiliate of Intrusion.com, Inc. may adopt the Plan with the approval of
its board of directors (or noncorporate counterpart) subject to the approval
of Intrusion.com, Inc. The provisions of this Plan shall apply equally to
each Participating Affiliate and its Employees except as specifically set
forth in the Plan; provided, however, notwithstanding any other provision of
this Plan, the amount and timing of contributions under Article 4 to be made
by any Employer which is a Participating Affiliate shall be made subject to
the approval of Intrusion.com, Inc. For purposes hereof, each Participating
Affiliate shall be deemed to have appointed Intrusion.com, Inc. as its agent
to act on its behalf in all matters relating to the administration,
amendment, termination of the Plan and the investment of the assets of the
Plan. For purposes of the Code and ERISA, the Plan as maintained by

<PAGE>

Intrusion.com, Inc. and the Participating Affiliates shall constitute a
single plan rather than a separate plan of each Participating Affiliate. All
assets in the Trust shall be available to pay benefits to all Participants
and their Beneficiaries.

1.11 "EMPLOYMENT DATE" shall mean the first date as of which an Employee is
credited with an Hour of Service, provided that, in the case of a Break in
Service, the Employment Date shall be the first date thereafter as of which
an Employee is credited with an Hour of Service.

1.12 "HIGHLY-COMPENSATED EMPLOYEE" shall mean any Employee of the Employer
who:

     (a)  was a five percent (5%) owner of the Employer (as defined in Code
          Section 416(i)(1)) during the "determination year" or "look-back
          year"; or

     (b)  earned more than $80,000 (as increased by cost-of-living adjustments)
          of Compensation from the Employer during the "look-back year" and, if
          the Employer elects, was in the top twenty percent (20%) of Employees
          by Compensation for such year.

An Employee who separated from Service prior to the "determination year"
shall be treated as a Highly-Compensated Employee for the "determination
year" if such Employee was a Highly-Compensated Employee when such Employee
separated from Service, or was a Highly-Compensated Employee at any time
after attaining age fifty-five (55).

For purposes of this Section, the "determination year" shall be the Plan Year
for which a determination is being made as to whether an Employee is a
Highly-Compensated Employee. The "look-back year" shall be the twelve (12)
month period immediately preceding the "determination year". However, if
permitted by applicable law and if the Employer shall elect, the "look-back
year" shall be the calendar year ending with or within the Plan Year for
which testing for the determination of which Employees are Highly-Compensated
Employees is being performed, and the "determination year" (if applicable)
shall be the period of time, if any, which extends beyond the "look-back
year" and ends on the last day of the Plan Year for which such testing is
being performed (the "lag period"). If the "lag period" is less than twelve
(12) months, the dollar threshold amounts specified in (b) above shall be
pro-rated based upon the number of months in the "lag period".

1.13  "HOUR OF SERVICE" shall mean:

     (a)  each hour for which an Employee is paid or entitled to payment for the
          performance of duties for the Employer. These hours shall be credited
          to the Employee for the computation period in which the duties are
          performed; and

     (b)  each hour for which an Employee is paid, or entitled to payment, by
          the Employer on account of a period of time during which no duties are
          performed (irrespective of whether the employment relationship has
          terminated) due to vacation, holiday, illness, incapacity (including
          disability), layoff, jury duty, involuntary military duty, or leave of
          absence. No more than five hundred and one (501) Hours of Service
          shall be credited under this

<PAGE>

          subsection for any single continuous period during which no duties
          are performed (whether or not such period occurs in a single
          computation period). Hours under this subsection shall be calculated
          and credited pursuant to Section 2530.200b-2(b) and (c) of the
          Department of Labor Regulations which are incorporated herein by this
          reference; and

     (c)  each hour for which back pay, irrespective of mitigation of damages,
          is either awarded or agreed to by the Employer. The same Hours of
          Service shall not be credited both under subsection (a) or subsection
          (b), as the case may be, and under this subsection (c). These hours
          shall be credited to the Employee for the computation period or
          periods to which the award or agreement pertains rather than the
          computation period in which the award, agreement, or payment is made.

In crediting Hours of Service for Employees who are paid on an hourly basis,
the "actual" method shall be utilized. For this purpose, the "actual" method
shall mean the determination of Hours of Service from records of hours worked
and hours for which the Employer makes payment or for which payment is due
from the Employer, subject to the limitations enumerated above. In crediting
Hours of Service for Employees who are not paid on an hourly basis, the
"weeks of employment" method shall be utilized. Under this method, an
Employee shall be credited with forty-five (45) Hours of Service for each
week for which the Employee would be required to be credited with at least
one (1) Hour of Service pursuant to the provisions enumerated above.

1.14 "LEASED EMPLOYEE" shall mean any person who, pursuant to an agreement
between the Employer and any other person or organization, has performed
services for the Employer (determined in accordance with Code Section
414(n)(6)) on a substantially full-time basis for a period of at least one
(1) year and where such services are performed under the primary direction
and control of the Employer. A person shall not be considered a Leased
Employee if the total number of Leased Employees does not exceed twenty
percent (20%) of the Nonhighly-Compensated Employees employed by the
Employer, and if any such person is covered by a money purchase pension plan
providing (a) a nonintegrated employer contribution rate of at least ten
percent (10%) of compensation, as defined in Section 11.1(b)(2) of the Plan
but including amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Code Sections
125, 402(g) or 403(b), (b) immediate participation, and (c) full and
immediate vesting.

1.15 "NONHIGHLY-COMPENSATED EMPLOYEE" shall mean an Employee of the Employer
who is not a Highly-Compensated Employee.

1.16 "NORMAL RETIREMENT DATE" shall mean a Participant's sixty-fifth (65th)
birthday or, if later, the fifth (5th) anniversary of the Participant's
commencement of initial Plan participation.

1.17 "PARTICIPANT" shall mean any Employee who has satisfied the eligibility
requirements of Article Three and who is participating in the Plan.

<PAGE>

1.18 "PLAN" shall mean the Amended and Restated Intrusion.com 401(k) Savings
Plan, as set forth herein and as may be amended from time to time.

1.19 "PLAN YEAR" shall mean the twelve (12)-consecutive month period
beginning January 1 and ending December 31.

1.20 "TRUST" shall mean the Trust Agreement entered into between the Employer
and the Trustee forming part of this Plan, together with any amendments
thereto. "Trust Fund" shall mean any and all property held by the Trustee
pursuant to the Trust Agreement, together with income therefrom.

1.21 "TRUSTEE" shall mean the Trustee or Trustees appointed by the Employer,
and any successors thereto.

1.22 "VALUATION DATE" shall mean the date or dates established by the
Administrator for the valuation of the assets of the Plan. In no event shall
the assets of the Plan be valued less frequently than once each Plan Year.

1.23 "YEAR OF SERVICE" OR "SERVICE" and the special rules with respect to
crediting Service are in Article Two of the Plan.

<PAGE>

                   ARTICLE TWO--SERVICE DEFINITIONS AND RULES

Service is the period of employment credited under the Plan. Definitions and
special rules related to Service are as follows:

2.1 YEAR OF SERVICE. An Employee shall be credited with a Year of Service for
each Plan Year in which he is credited with at least one thousand (1,000)
Hours of Service.

Any Employee who was employed by Essential Communications Corporation
("Essential Communications") as of the date of its acquisition by the
Employer, shall be credited with any prior service with Essential
Communications in determining such Employee's Year(s) of Service.

Any Employee who was employed by Science Applications International
Corporation ("SAIC") as of the date of the Employer's acquisition of certain
operating assets of SAIC, shall be credited with any prior service with SAIC
in determining such Employee's Year(s) of Service.

2.2 BREAK IN SERVICE. A Break in Service shall be a twelve (12)-month
computation period (as used for measuring Years of Service) in which an
Employee or Participant is not credited with at least five hundred and one
(501) Hours of Service.

2.3 LEAVE OF ABSENCE. A Participant on an unpaid leave of absence pursuant to
the Employer's normal personnel policies shall be credited with Hours of
Service at his regularly-scheduled weekly rate while on such leave, provided
the Employer acknowledges in writing that the leave is with its approval.
These Hours of Service shall be credited only for purposes of determining if
a Break in Service has occurred and, unless specified otherwise by the
Employer in writing, shall not be credited for eligibility to participate in
the Plan, vesting, or qualification to receive an allocation of Employer
contributions. Hours of Service during a paid leave of absence shall be
credited as provided in Section 1.13.

For any individual who is absent from work for any period by reason of the
individual's pregnancy, birth of the individual's child, placement of a child
with the individual in connection with the individual's adoption of the
child, or by reason of the individual's caring for the child for a period
beginning immediately following such birth or adoption, the Plan shall treat
as Hours of Service, solely for determining if a Break in Service has
occurred, the following Hours of Service:

     (a)  the Hours of Service which otherwise normally would have been credited
          to such individual but for such absence; or

     (b)  in any case where the Administrator is unable to determine the Hours
          of Service, on the basis of an assumed eight (8) hours per day.

In no event shall more than five hundred and one (501) of such hours be credited
by reason of such period of absence. The Hours of Service shall be credited in
the computation period (used for

<PAGE>

measuring Years of Service) which starts after the leave of absence begins.
However, the Hours of Service shall instead be credited in the computation
period in which the absence begins if it is necessary to credit the Hours of
Service in that computation period to avoid the occurrence of a Break in
Service.

2.4 HOURS OF SERVICE ON RETURN TO EMPLOYMENT. An Employee who returns to
employment after a Break in Service shall retain credit for his pre-Break
Years of Service; provided, however, that if a Participant incurs five (5) or
more consecutive Breaks in Service, any Years of Service performed thereafter
shall not be used to increase the nonforfeitable interest in his Account
accrued prior to such five (5) or more consecutive Breaks in Service.

2.5  SERVICE IN EXCLUDED JOB CLASSIFICATIONS OR WITH RELATED COMPANIES.

          (a)  SERVICE WHILE A MEMBER OF AN INELIGIBLE CLASSIFICATION OF
               EMPLOYEES. An Employee who is a member of an ineligible
               classification of Employees shall not be eligible to participate
               in the Plan while a member of such ineligible classification.
               However, if any such Employee is transferred to an eligible
               classification, such Employee shall be credited with any prior
               periods of Service completed while a member of such an ineligible
               classification both for purposes of determining his Years of
               Service and his "Months of Service" under Section 3.1. For this
               purpose, an Employee shall be considered a member of an
               ineligible classification of Employees for any period during
               which: (i) he is a Leased Employee; or (ii) he is employed in a
               job classification which is excluded from participating in the
               Plan under Section 3.1 below.

          (b)  SERVICE WITH RELATED GROUP MEMBERS. For each Plan Year in which
               the Employer is a member of a "related group", as hereinafter
               defined, all Service of an Employee with any one or more members
               of such related group shall be treated as employment by the
               Employer for purposes of determining the Employee's Years of
               Service under Section 2.1 and his Months of Service under Section
               3.1. The transfer of employment by any such Employee to another
               member of the related group shall not be deemed to constitute a
               retirement or other termination of employment by the Employee for
               purposes of the Plan, but the Employee shall be deemed to have
               continued in employment with the Employer for purposes hereof.
               For purposes of this subsection (b), "related group" shall mean
               the Employer and all corporations, trades or businesses (whether
               or not incorporated) which constitute a controlled group of
               corporations with the Employer, a group of trades or businesses
               under common control with the Employer, or an affiliated service
               group which includes the Employer, within the meaning of Section
               414(b), Section 414(c), or Section 414(m), respectively, of the
               Code or any other entity required to be aggregated under Code
               Section 414(o).

          (c)  CONSTRUCTION. This Section is included in the Plan to comply with
               the Code provisions regarding the crediting of Service, and not
               to extend any additional rights to Employees in ineligible
               classifications other than as required by the Code and
               regulations thereunder.

<PAGE>

                        ARTICLE THREE--PLAN PARTICIPATION

3.1 PARTICIPATION. All Employees participating in the Plan prior to the
Plan's restatement shall continue to participate, subject to the terms hereof.

Each other Employee shall become a Participant under the Plan effective as of
the first day of the month following the Employee's Employment Date.

In no event, however, shall any Employee (or other individual) participate
under the Plan while he is: (i) employed as an independent contractor on the
payroll records of the Employer (regardless of any subsequent
reclassification by the Employer, any governmental agency or court); (ii)
employed as a Leased Employee; or (iii) employed as a nonresident alien who
receives no earned income (within the meaning of Section 911(d)(2) of the
Code) from the Employer which constitutes income from sources within the
United States (within the meaning of Section 816(a)(3) of the Code).

Notwithstanding the foregoing provisions of this Section 3.1, any Employee
who was employed by Essential Communications Corporation ("Essential
Communications") as of the date of its acquisition by the Employer, shall be
credited with any prior service with Essential Communications in determining
such Employee's Month(s) of Service. In this regard, any such Employee who
was credited with at least three (3) Months of Service pursuant to the
preceding sentence, shall become a Participant under the Plan as of May 29,
1998, or as soon as administratively practical thereafter, subject to the
terms hereof.

Notwithstanding the foregoing provisions of this Section 3.1, any Employee
who was employed by Science Applications International Corporation ("SAIC")
as of the date of the Employer's acquisition of certain operating assets of
SAIC, shall be credited with any prior service with SAIC in determining such
Employee's Month(s) of Service. In this regard, any such Employee who was
credited with at least three (3) Months of Service pursuant to the preceding
sentence, shall become a Participant under the Plan as of October 1, 1998, or
as soon as administratively practical thereafter, subject to the terms
hereof."

3.2 RE-EMPLOYMENT OF FORMER PARTICIPANT. A Participant whose participation
ceased because of termination of employment with the Employer shall
participate as soon as administratively possible following his re-employment.

3.3 TERMINATION OF ELIGIBILITY. In the event a Participant is no longer a
member of an eligible class of Employees and he becomes ineligible to
participate, such Employee shall participate as soon as administratively
possible following his return to an eligible class of Employees.

In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee shall
participate as soon as administratively possible thereafter, if such Employee
has satisfied the eligibility requirements of Section 3.1 and would have
otherwise previously become a Participant.

<PAGE>

            ARTICLE FOUR--ELECTIVE DEFERRALS, EMPLOYER CONTRIBUTIONS,
                    ROLLOVERS AND TRANSFERS FROM OTHER PLANS

4.1  ELECTIVE DEFERRALS.

      (a)     ELECTIONS. A Participant may elect to defer a portion of his
              Compensation for a Plan Year. The amount of a Participant's
              Compensation that is deferred in accordance with the Participant's
              election shall be withheld by the Employer from the Participant's
              Compensation on a ratable basis throughout the Plan Year. The
              amount deferred on behalf of each Participant shall be contributed
              by the Employer to the Plan and allocated to the Participant's
              Account.

      (b)     CHANGES IN ELECTION. A Participant may prospectively elect to
              change or revoke the amount (or percentage) of his elective
              deferrals during the Plan Year by filing a written election with
              the Employer, or via a telephone "voice response" system
              designated by the Administrator, provided that a written
              confirmation is forwarded in response to such oral request.

      (c)     LIMITATIONS ON DEFERRALS. No Participant shall defer an amount
              which exceeds $9,500 (or such amount as adjusted for
              cost-of-living increases under Section 402(g) of the Code) for any
              calendar year ending with or within the Plan Year.

      (d)     ADMINISTRATIVE RULES. All elections made under this Section 4.1,
              including the amount and frequency of deferrals, shall be subject
              to the rules of the Administrator which shall be consistently
              applied and which may be changed from time to time.

4.2  EMPLOYER CONTRIBUTIONS.

     (a)  EMPLOYER MATCHING CONTRIBUTIONS. For each Plan Year, the Employer may
          contribute to the Plan, on behalf of each Participant, a discretionary
          matching contribution equal to a percentage (as determined by the
          Employer's board of directors) of the elective deferrals made by each
          such Participant. The amount, if any, of the Employer matching
          contribution for any Plan Year shall be made at the discretion of the
          board of directors of the Employer. The Employer's board of directors
          may also determine to suspend or reduce its contributions under this
          Section for any Plan Year or any portion thereof. Allocations under
          this Section shall be subject to the special rules of Section 13.3 in
          any Plan Year in which the Plan is a Top-Heavy Plan (as defined in
          Section 13.2(c)).

          Notwithstanding the foregoing provisions of this Section 4.2(a),
          if a Participant's elective deferrals for a Plan Year reach the
          maximum amount set out in Section 4.1(c) and, as a result, the
          Participant is not eligible to make elective deferrals to the Plan
          for the balance of such Plan Year, if such Participant is employed
          by the Employer on the last day of such Plan Year, such
          Participant shall receive a supplemental matching contribution
          following the close of such Plan Year in an amount equal to the
          percentage (as determined by the Employer's board of directors for
          such Plan Year) of the Participant's Compensation

<PAGE>

          contributed to the Plan as elective deferrals for such Plan Year,
          minus the amount of the Employer matching contribution previously
          made on behalf of such Participant for such Plan Year.

     (b)  ADDITIONAL EMPLOYER CONTRIBUTIONS. Additional Employer contributions
          may be made at the discretion of the Employer's board of directors for
          any Plan Year, subject to limits for tax deductions under the Code and
          provided that the special allocation in Section 13.3 has been
          satisfied if the Plan is a Top-Heavy Plan (as defined in Section
          13.2(c)).

     (c)  ELIGIBILITY FOR ADDITIONAL EMPLOYER CONTRIBUTIONS. To be eligible for
          an allocation of additional Employer contributions under Section
          4.2(b) for a Plan Year, a Participant must have been credited with at
          least one thousand (1,000) Hours of Service in the Plan Year;
          provided, however, that if the Participant's failure to be credited
          with at least one thousand (1,000) Hours of Service is due to the
          Participant's Disability, death or retirement on or after his Normal
          Retirement Date during the Plan Year, such Participant shall
          nevertheless be entitled to share in the allocation of any additional
          Employer contributions for such Plan Year.

     (d)  ALLOCATION OF ADDITIONAL EMPLOYER CONTRIBUTIONS. Any contribution made
          under Section 4.2(b) shall be allocated among the Accounts of eligible
          Participants in accordance with the ratio that each such eligible
          Participant's Compensation bears to the total Compensation of all such
          eligible Participants for the Plan Year.

     (e)  Notwithstanding anything herein to the contrary, in any situation
          where the exclusion of certain Participants from receiving an
          allocation of any additional Employer contributions hereunder would
          result in the Plan failing to satisfy minimum coverage requirements
          under applicable provisions of the Code or income tax regulations,
          then the following shall apply:

          (1)    Such affected Participants shall receive an allocation of
                 additional Employer contributions in order of priority
                 based upon the number of Hours of Service rendered during
                 the Plan Year by each Participant, so that an individual
                 Participant who has rendered more Hours of Service during
                 the Plan Year shall be first deemed an eligible
                 Participant, and so on, until the minimum required number
                 of eligible Participants is reached to satisfy the
                 requirements for qualification of this Plan.

          (2)    If two individuals referred to in subsection (1) have the
                 same number of Hours of Service, then they shall be deemed
                 eligible Participants in order of a priority based upon the
                 earliest Employment Date with the Employer.

4.3 ROLLOVERS AND TRANSFERS OF FUNDS FROM OTHER PLANS. With the approval of
the Administrator, there may be paid to the Trustee amounts which have been
held under other plans qualified under Code Section 401 either (a) maintained
by the Employer which have been discontinued or terminated with respect to
any Employee, or (b) maintained by another employer with respect to which any
Employee has ceased to participate. Any such transfer or rollover may also be
made by means of an Individual Retirement Account qualified under Section 408
of the Code, where the Individual Retirement Account was used as a conduit
from the former plan. Any amounts so

<PAGE>

transferred on behalf of any Employee shall be nonforfeitable and shall be
maintained under a separate Plan account, to be paid in addition to amounts
otherwise payable under this Plan. The amount of any such account shall be
equal to the fair market value of such account as adjusted for income,
expenses, gains, losses, and withdrawals attributable thereto.

Notwithstanding anything contained herein to the contrary, in no event shall
the Administrator accept on behalf of any Employee a transfer of funds from a
qualified plan which would subject the Plan to the provisions of Section
401(a)(11) of the Code.

An Employee who would otherwise be eligible to participate in the Plan but
for the failure to satisfy the age and/or service requirement for
participation as set forth under Section 3.1, shall be eligible to complete a
rollover to the Plan. Such an Employee shall also be eligible to obtain a
loan or withdrawal in accordance with the provisions of Article Eight prior
to satisfying such age and/or service requirement.

4.4 TIMING OF CONTRIBUTIONS. Employer contributions shall be made to the Plan
no later than the time prescribed by law for filing the Employer's Federal
income tax return (including extensions) for its taxable year ending with or
within the Plan Year. Elective deferrals under Section 4.1 shall be paid to
the Plan as soon as administratively possible, but no later than the time
prescribed by applicable law, following receipt of such deferrals by the
Administrator.

<PAGE>

                         ARTICLE FIVE--ACCOUNTING RULES

5.1  INVESTMENT OF ACCOUNTS AND ACCOUNTING RULES.

     (a)  INVESTMENT FUNDS. The investment of Participants' Accounts shall be
          made in a manner consistent with the provisions of the Trust. The
          Administrator, in its discretion, may allow the Trust to provide for
          separate funds for the directed investment of each Participant's
          Account, including an Employer stock fund.

     (b)  PARTICIPANT DIRECTION OF INVESTMENTS. In the event Participants'
          Accounts are subject to their investment direction, each Participant
          may direct how his Account is to be invested among the available
          investment funds in the percentage multiples established by the
          Administrator. In the event a Participant fails to make an investment
          election, with respect to all or any portion of his Account, the
          Trustee shall invest all or such portion of his Account in the
          investment fund to be designated by the Administrator. A Participant
          may change his investment election, with respect to future
          contributions and, if applicable, forfeitures, and/or amounts
          previously accumulated in the Participant's Account, in writing, on
          such form as the Administrator shall specify, or via a telephone
          "voice response" system designated by the Administrator, provided that
          a written confirmation is forwarded in response to such oral request.
          Any such change in a Participant's investment election shall be
          effective at such time as may be prescribed by the Administrator. If
          the Plan's recordkeeper or investment manager is changed, the
          Administrator may suspend the Participants' investment direction of
          their Accounts.

     (c)  ALLOCATION OF INVESTMENT EXPERIENCE. As of each Valuation Date, the
          investment fund(s) of the Trust shall be valued at fair market value,
          and the income, loss, appreciation and depreciation (realized and
          unrealized), and any paid expenses of the Trust attributable to such
          fund shall be apportioned among Participants' Accounts within the fund
          based upon the value of each Account within the fund as of the
          preceding Valuation Date.

     (d)  ALLOCATION OF CONTRIBUTIONS. Employer contributions shall be allocated
          to the Account of each eligible Participant as of the last day of the
          period for which the contributions are made or as soon as
          administratively practical thereafter. Elective deferrals shall be
          allocated to the Account of each Participant as soon as
          administratively practical following receipt of such contributions by
          the Administrator.

     (e)  MANNER AND TIME OF DEBITING DISTRIBUTIONS. For any Participant who is
          entitled to receive a distribution from his Account, such distribution
          shall be made in accordance with the provisions of Section 7.2. The
          amount distributed shall be based upon the fair market value of the
          Participant's vested Account as of the Valuation Date preceding the
          distribution.

5.2 PARTICIPANTS OMITTED IN ERROR. In the event a Participant is not allocated a
share of the Employer contribution as a result of an administrative error in any
Plan Year, the Employer may elect to either (a) make an additional contribution
on behalf of such omitted Participant in an appropriate amount, or (b) deduct
the appropriate amount from the next succeeding Employer

<PAGE>

contribution and/or forfeitures and allocate such amount to the Participant's
Account prior to making the allocations set forth under Section 5.1(d).

            ARTICLE SIX--VESTING, RETIREMENT AND DISABILITY BENEFITS

6.1 VESTING. A Participant shall at all times have a nonforfeitable (vested)
right to his Account derived from elective deferrals, Employer "fail-safe"
contributions under Section 10.2, and rollovers or transfers from other
plans, as adjusted for investment experience. Except as otherwise provided
with respect to Normal Retirement, Disability, or death, a Participant shall
have a nonforfeitable (vested) right to a percentage of the value of his
Account derived from Employer matching contributions under Section 4.2(a) and
additional Employer contributions under Section 4.2(b) as follows:

<TABLE>
<CAPTION>
               YEARS OF SERVICE                         VESTED PERCENTAGE
               ----------------                         -----------------
<S>                                                     <C>
               LESS THAN 1 YEAR                                  0%
               1 YEAR BUT LESS THAN 2                           20%
               2 YEARS BUT LESS THAN 3                          40%
               3 YEARS BUT LESS THAN 4                          60%
               4 YEARS BUT LESS THAN 5                          80%
               5 YEARS AND THEREAFTER                          100%
</TABLE>

6.2 FORFEITURE OF NONVESTED BALANCE. The nonvested portion of a Participant's
Account, as determined in accordance with Section 6.1, shall be forfeited as
of the earlier of (i) the date on which the Participant receives distribution
of his vested Account or (ii) the last day of the Plan Year in which the
Participant incurs five (5) consecutive Breaks in Service. The amount
forfeited shall be used to reduce Employer contributions under Section 4.2.

If the Participant returns to the employment of the Employer prior to
incurring five (5) consecutive Breaks in Service, and prior to receiving
distribution of his vested Account, the nonvested portion shall be restored.
However, if the nonvested portion of the Participant's Account was allocated
as a forfeiture as the result of the Participant receiving distribution of
his vested Account balance, the nonvested portion shall be restored if:

     (a)  the Participant resumes employment prior to incurring five (5)
          consecutive Breaks in Service; and

     (b)  the Participant repays to the Plan, as of the earlier of (i) the date
          which is five (5) years after his reemployment date or (ii) the date
          which is the last day of the period in which the Participant incurs
          five (5) consecutive Breaks in Service, an amount equal to the total
          distribution derived from Employer contributions under Section 4.2
          and, if applicable, Section 13.3.

The nonvested amount shall be restored to the Participant's Account, without
interest or adjustment for interim Trust valuation experience, by a special
Employer contribution or from the next succeeding Employer contribution and
forfeitures, as appropriate.

<PAGE>

6.3 RETURN TO EMPLOYMENT BEFORE DISTRIBUTION OF VESTED ACCOUNT BALANCE. If
distribution is made to an Employee of less than the Employee's entire vested
Account, and if the Employee returns to Service, a separate record shall be
maintained of said Account balance. The Employee's vested interest at any
time in this separate account shall be an amount equal to the formula
P(AB+D)-D, where P is the vested percentage at the relevant time, AB is the
Account balance at the relevant time, and D is the amount of the distribution
made to the Employee.

6.4 NORMAL RETIREMENT. A Participant who is in the employment of the Employer
at his Normal Retirement Date shall have a nonforfeitable interest in one
hundred percent (100%) of his Account, if not otherwise one hundred percent
(100%) vested under the vesting schedule in Section 6.1. A Participant who
continues employment with the Employer after his Normal Retirement Date shall
continue to participate under the Plan.

6.5 DISABILITY. If a Participant incurs a Disability, the Participant shall
have a nonforfeitable interest in one hundred percent (100%) of his Account,
if not otherwise one hundred percent (100%) vested under the vesting schedule
in Section 6.1. Payment of such Participant's Account balance shall be made
at the time and in the manner specified in Article Seven, following receipt
by the Administrator of the Participant's written distribution request.

<PAGE>

             ARTICLE SEVEN--MANNER AND TIME OF DISTRIBUTING BENEFITS

7.1 MANNER OF PAYMENT. The Participant's vested Account shall be distributed
to the Participant (or to the Participant's Beneficiary in the event of the
Participant's death) by any of the following methods, as elected by the
Participant or, when applicable, the Participant's Beneficiary:

      (a)     in a single lump-sum payment; or

      (b)     provided the Participant's vested Account exceeds $5,000, in
              monthly, quarterly, semi-annual or annual installments, subject to
              the minimum distribution rules of Section 7.4.

However, if any portion of a Participant's vested Account is invested in the
Employer stock fund, the Participant may elect to receive such portion of his
Account, in a single sum payment, in the form of shares of stock; provided,
however, that fractional shares and the cash equivalent portions of such fund
shall be distributed in cash.

7.2 TIME OF COMMENCEMENT OF BENEFIT PAYMENTS. Distribution of the
Participant's Account balance for a Participant who terminates employment on
or after his Normal Retirement Date, or as a result of his Disability, may be
made or commence as soon as administratively possible thereafter; provided,
however, that if the amount required to be distributed cannot be ascertained
by such date, distribution shall be made no later than sixty (60) days after
the earliest date on which such amount can be ascertained; and provided,
further, that, subject to the following provisions of this Section 7.2,
distribution shall not be made or commence unless the Participant otherwise
requests in writing. In such event, distribution shall commence as soon as
administratively practical following receipt by the Administrator of the
Participant's written request.

Notwithstanding the foregoing, if the Participant's vested Account does not
exceed $5,000, the Participant's vested Account shall be distributed to the
Participant (or, in the event of the Participant's death, his Beneficiary) in
a lump-sum payment as soon as administratively practicable following the date
the Participant retires, dies or otherwise separates from Service.

Notwithstanding any provision contained herein to the contrary, a Participant
who is not vested in any portion of his Account balance attributable to
Employer contributions shall be deemed to have received distribution of such
portion of his Account as of the end of the Plan Year in which he incurs a
Break in Service.

A Participant who terminates employment after his Normal Retirement Date may
elect to defer receipt of his Account. In no event, however, shall
distribution under the Plan be made or commence later than the April 1st
following the end of the calendar year in which the Participant attains age
seventy and one-half (70-1/2) or, except for a Participant who is a five
percent (5%) owner of the Employer (within the meaning of Section 401(a)(9)
of the Code), if later, the April 1st following the calendar year in which
the Participant retires or otherwise separates from Service.

<PAGE>

7.3 FURNISHING INFORMATION. Prior to the payment of any benefit under the
Plan, each Participant or Beneficiary may be required to complete such
administrative forms and furnish such proof as may be deemed necessary or
appropriate by the Employer, Administrator, and/or Trustee.

7.4 MINIMUM DISTRIBUTION RULES FOR INSTALLMENT PAYMENTS. If a distribution is
made in installments the following rules shall apply:

     (a)  PAYMENTS TO PARTICIPANT OR TO PARTICIPANT AND SURVIVING SPOUSE.
          Payment shall commence no later than a date provided for in Section
          7.2. The amount to be distributed each year shall be at least equal to
          the vested balance in the Participant's Account as of the preceding
          Valuation Date multiplied by the following fraction: the numerator
          shall be one (1) and the denominator shall be the life expectancy of
          the Participant (or the joint life expectancies of the Participant and
          the Participant's spouse) determined as of the Valuation Date
          preceding the first payment and reduced by one for each succeeding
          year.

     (b)  PAYMENTS TO PARTICIPANT AND NON-SPOUSE BENEFICIARY. Payment shall
          commence no later than a date provided for in Section 7.2. The amount
          to be distributed each year shall be at least equal to the vested
          balance in the Participant's Account as of the preceding Valuation
          Date multiplied by the following fraction: the numerator shall be one
          (1) and the denominator shall be the joint life expectancies of the
          Participant and the Participant's Beneficiary computed as of the
          Valuation Date preceding the first payment and reduced by one (1) for
          each succeeding year. Payments shall be restricted under this option
          to insure compliance with the minimum distribution incidental death
          benefit requirement of Section 401(a)(9) of the Code and the
          regulations promulgated thereunder.

     (c)  PAYMENTS TO BENEFICIARY. Payment shall commence no later than a date
          provided for in Section 7.7. The amount to be distributed each year
          shall be at least equal to the vested balance in the Participant's
          Account as of the preceding Valuation Date multiplied by the following
          fraction: the numerator shall be one (1) and the denominator shall be
          the life expectancy of the Participant's Beneficiary computed as of
          the Valuation Date preceding the first payment and reduced by one (1)
          for each succeeding year.

     (d)  RECALCULATION OF LIFE EXPECTANCY. If distribution is to be made over
          the life expectancy of the Participant or, where the Participant's
          spouse is his Beneficiary, the life expectancy of the Participant's
          surviving spouse, or the joint life expectancies of the Participant
          and his spouse, such life expectancy or joint life expectancies, at
          the election of the Participant or his surviving spouse, as the case
          may be, may be recalculated annually. Any such election shall be
          irrevocable as to the Participant (and spouse, if applicable) and
          shall apply to all subsequent years. In no event, however, shall the
          life expectancy of a non-spouse Beneficiary be recalculated.

7.5  AMOUNT OF DEATH BENEFIT.

     (a)  DEATH BEFORE TERMINATION OF EMPLOYMENT. In the event of the death of a
          Participant while in the employ of the Employer, vesting in the
          Participant's Account shall be one hundred

<PAGE>

          percent (100%), if not otherwise one hundred percent (100%) vested
          under Section 6.1, with the credit balance of the Participant's
          Account being payable to his Beneficiary.

     (b)  DEATH AFTER TERMINATION OF EMPLOYMENT. In the event of the death of a
          former Participant after termination of employment, but prior to the
          complete distribution of his vested Account balance under the Plan,
          the undistributed vested balance of the Participant's Account shall be
          paid to the Participant's Beneficiary.

7.6 DESIGNATION OF BENEFICIARY. Each Participant shall file with the
Administrator a designation of Beneficiary to receive payment of any death
benefit payable hereunder if such Beneficiary should survive the Participant.
However, no Participant who is married shall be permitted to designate a
Beneficiary other than his spouse unless the Participant's spouse has signed
a written consent witnessed by a Plan representative or a notary public,
which provides for the designation of an alternate Beneficiary.

Subject to the above, Beneficiary designations may include primary and
contingent Beneficiaries, and may be revoked or amended at any time in
similar manner or form, and the most recent designation shall govern. In the
absence of an effective designation of Beneficiary, or if the Beneficiary
dies before complete distribution of the Participant's vested Account, all
amounts shall be paid to the surviving spouse of the Participant, if living,
or otherwise to the Participant's estate. Notification to Participants of the
death benefits under the Plan and the method of designating a Beneficiary
shall be given at the time and in the manner provided by regulations and
rulings under the Code.

7.7 DISTRIBUTION OF DEATH BENEFITS. Distribution of any death benefit
hereunder shall be made within one (1) year of the Participant's death or, in
the case of a surviving spouse, within a reasonable time after the
Participant's death or, if the surviving spouse so elects and if the
Participant's vested Account exceeds $3,500, no later than the date on which
the Participant would have reached age seventy and one-half (70-1/2). If a
surviving spouse dies before distributions to the spouse begin, this
paragraph shall be applied as if the surviving spouse were the Participant.

To the extent payments are not designated to or for the benefit of a natural
person, or if payments commence after the required time, the following
distribution modes shall be available:

     (a)  a lump sum payable at any time within five (5) years of the
          Participant's death; and

     (b)  payments of installments at such time and in such amount as determined
          by the Beneficiary, provided that all amounts must be paid from the
          Trust within five (5) years of the Participant's death.

If a Participant dies after payments have commenced, any survivor's benefit
must be paid no less rapidly than the method of payment in effect at the time
of the Participant's death.

<PAGE>

7.8  ELIGIBLE ROLLOVER DISTRIBUTIONS.  Notwithstanding the foregoing
provisions of this Article Seven, the provisions of this Section 7.8 shall
apply to distributions made under the Plan.

     (a)  A distributee may elect, at the time and in the manner prescribed by
          the Administrator, to have any portion of an eligible rollover
          distribution paid directly to an eligible retirement plan specified by
          the distributee in a direct rollover.

     (b)  Definitions:

           (i) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover distribution
               is any distribution of all or any portion of the balance to the
               credit of the distributee, except that an eligible rollover
               distribution does not include: any distribution that is one of a
               series of substantially equal periodic payments (not less
               frequently than annually) made for the life (or life expectancy)
               of the distributee or the joint lives (or joint life
               expectancies) of the distributee and the distributee's designated
               Beneficiary, or for a specified period of ten (10) years or more;
               any distribution to the extent such distribution is required
               under Section 401(a)(9) of the Code; and the portion of any
               distribution that is not includable in gross income (determined
               without regard to the exclusion for net unrealized appreciation
               with respect to employer securities).

          (ii) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan is an
               individual retirement account described in Section 408(a) of the
               Code, an individual retirement annuity described in Section
               408(b) of the Code, an annuity plan described in Section 403(a)
               of the Code or a qualified trust described in Section 401(a) of
               the Code, that accepts the distributee's eligible rollover
               distribution. However, in the case of an eligible rollover
               distribution to the surviving spouse, an eligible retirement plan
               is an individual retirement account or individual retirement
               annuity.

         (iii) DISTRIBUTEE. A distributee includes an Employee or former
               Employee. In addition, the Employee's or former Employee's
               surviving spouse and the Employee's or former Employee's spouse
               or former spouse who is the alternate payee under a qualified
               domestic relations order, as defined in Section 414(p) of the
               Code, are distributees with regard to the interest of the spouse
               or former spouse.

          (iv) DIRECT ROLLOVER. A direct rollover is a payment by the Plan to
               the eligible retirement plan specified by the distributee.

     (c)  If a distribution is one to which Sections 401(a)(11) and 417 of the
          Code do not apply, such distribution may commence less than 30 days
          after the notice required under Section 1.411(a)-11(c) of the Income
          Tax Regulations is given, provided that:

           (i) the Administrator clearly informs the Participant that the
               Participant has a right to a period of at least 30 days after
               receiving the notice to consider the decision of whether or not
               to elect a distribution (and, if applicable, a particular
               distribution option), and

          (ii) the Participant, after receiving the notice, affirmatively elects
               a distribution.

<PAGE>

                 ARTICLE EIGHT--LOANS AND IN-SERVICE WITHDRAWALS

8.1  LOANS.

     (a)  PERMISSIBLE AMOUNT AND PROCEDURES. Upon the application of a
          Participant, the Administrator may, in accordance with a uniform and
          nondiscriminatory policy, direct the Trustee to grant a loan to the
          Participant, which loan shall be secured by the Participant's vested
          Account balance. The Participant's signature shall be required on a
          promissory note. In determining a rate of interest on such loan, the
          Administrator may refer to the rate of interest used for obligations
          of a comparable nature by commercial lending institutions within a
          radius of fifty (50) miles of the Employer's principal place of
          business. Participant loans shall be treated as segregated
          investments, and interest repayments shall be credited only to the
          Participant's Account.

     (b)  LIMITATION ON AMOUNT OF LOANS. A Participant's loan shall not exceed
          the lesser of:

          (1)    $50,000, which amount shall be reduced by the highest
                 outstanding loan balance during the preceding twelve
                 (12)-month period; or

          (2)    one-half (1/2) of the vested value of the Participant's
                 Account (excluding any portion thereof invested in the
                 Employer stock fund), determined as of the Valuation Date
                 preceding the date of the Participant's loan.

Any loan must be repaid within five (5) years, unless made for the purpose of
acquiring the primary residence of the Participant, in which case such loan
may be repaid over a longer period of time not to exceed fifteen (15) years.
The repayment of any loan must be made in at least quarterly installments of
principal and interest. If a Participant defaults on any outstanding loan,
the unpaid balance, and any interest due thereon, shall become due and
payable in accordance with the terms of the underlying promissory note;
provided, however, that such foreclosure on the promissory note and
attachment of security shall not occur until a distributable event occurs in
accordance with the provisions of Article Seven.

If a Participant terminates employment while any loan balance is outstanding,
the unpaid balance, and any interest due thereon, shall become due and
payable in accordance with the terms of the underlying promissory note. If
such amount is not paid to the Plan, it shall be charged against the amounts
that are otherwise payable to the Participant or the Participant's
Beneficiary under the provisions of the Plan.

In the case of a Participant who has loans outstanding from other plans of
the Employer (or a member of the Employer's related group (within the meaning
of Section 2.5(b)), the Administrator shall be responsible for reporting to
the Trustee the existence of said loans in order to aggregate all such loans
within the limits of Section 72(p) of the Code.

8.2 HARDSHIP DISTRIBUTIONS. In the case of a financial hardship resulting
from a proven immediate and heavy financial need, a Participant may receive a
distribution not to exceed the lesser

<PAGE>

of (i) the vested value of the Participant's Account, without regard to
earnings on his elective deferrals, and excluding any amounts invested in the
Employer stock fund, determined as of the Valuation Date immediately
preceding such withdrawal request, or (ii) the amount necessary to satisfy
the financial hardship. The amount of any such immediate and heavy financial
need may include any amounts necessary to pay Federal, state or local income
taxes or penalties reasonably anticipated to result from the distribution.
Such distribution shall be made in accordance with nondiscriminatory and
objective standards consistently applied by the Administrator. Hardship
distributions under this Section shall be deemed to be the result of an
immediate and heavy financial need if such distribution is to (a) pay
expenses for medical care (as described in Section 213(d) of the Code)
previously incurred by the Participant, the Participant's spouse, or any
dependents of the Participant (as defined in Section 152 of the Code), or to
permit the Participant, the Participant's spouse, or any dependents of the
Participant to obtain such medical care, (b) purchase the principal residence
of the Participant (excluding mortgage payments), (c) pay tuition and related
educational fees for the next twelve (12) months of post-secondary education
for the Participant, Participant's spouse, or any of the Participant's
dependents or (d) prevent the eviction of the Participant from his principal
residence or foreclosure on the Participant's principal residence.
Distributions paid pursuant to this Section shall be deemed to be made as of
the Valuation Date immediately preceding the hardship distribution, and the
Participant's Account shall be reduced accordingly.

The provisions of this Section (relating to hardship distributions) are
intended to comply with Treasury Regulations issued under Section 401(k) of
the Code, and shall be so interpreted.

No hardship distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such other
facts as are known to the Administrator, determines that the following
conditions are satisfied:

     (a)  The distribution is not in excess of the amount of the immediate and
          heavy financial need of the Participant; and

     (b)  The Participant has obtained all distributions, other than hardship
          distributions, and all non-taxable loans currently available under all
          plans maintained by the Employer.

Following a hardship distribution, the Participant's elective deferrals shall
be suspended under the Plan, and all other plans maintained by the Employer,
for at least twelve (12) months after receipt of the hardship distribution.
In addition, the Participant's elective deferrals under the Plan, and all
other plans maintained by the Employer, for the Participant's taxable year
immediately following the taxable year of the hardship distribution shall not
exceed an amount equal to the applicable limit under Code Section 402(g) for
such next taxable year, less the amount of such Participant's elective
deferrals for the taxable year of the hardship distribution.

8.3 WITHDRAWALS AFTER AGE 59-1/2. After attaining age fifty-nine and one-half
(59-1/2), a Participant, by giving written notice to the Administrator, may
withdraw from the Plan a sum (a) not in excess of the credit balance of his
vested Account, excluding any amounts invested in the Employer stock fund, as
of the Valuation Date preceding such notice and (b) not less than such
minimum amount as the Administrator may establish from time to time to
facilitate administration of the Plan.

<PAGE>

Any such withdrawals shall be made in accordance with nondiscriminatory and
objective standards consistently applied by the Administrator.

<PAGE>

                    ARTICLE NINE--ADMINISTRATION OF THE PLAN

9.1 PLAN ADMINISTRATION. The Employer shall be the Plan Administrator,
hereinbefore and hereinafter called the Administrator, and "named fiduciary"
(for purposes of Section 402(a)(1) of the Employee Retirement Income Security
Act of 1974, as amended from time to time) of the Plan, unless the Employer,
by action of its board of directors, shall designate a person or committee of
persons to be the Administrator and named fiduciary. The administration of
the Plan, as provided herein, including a determination of the payment of
benefits to Participants and their Beneficiaries, shall be the responsibility
of the Administrator; provided, however, that the Administrator may delegate
any of its powers, authority, duties or responsibilities to any person or
committee of persons. In the event more than one party shall act as
Administrator, all actions shall be made by majority decisions. In the
administration of the Plan, the Administrator may (a) employ agents to carry
out nonfiduciary responsibilities (other than Trustee responsibilities), (b)
consult with counsel, who may be counsel to the Employer, and (c) provide for
the allocation of fiduciary responsibilities (other than Trustee
responsibilities) among its members. Actions dealing with fiduciary
responsibilities shall be taken in writing and the performance of agents,
counsel and fiduciaries to whom fiduciary responsibilities have been
delegated shall be reviewed periodically.

The expenses of administering the Plan and the compensation of all employees,
agents, or counsel of the Administrator, including accounting fees,
recordkeeper's fees, and the fees of any benefit consulting firm, shall be
paid by the Plan, or shall be paid by the Employer if the Employer so elects.
To the extent required by applicable law, compensation may not be paid by the
Plan to full-time Employees of the Employer.

In the event the Employer pays the expenses of administering the Plan, the
Employer may seek reimbursement from the Plan for the payment of such
expenses. Reimbursement shall be permitted only for Plan expenses paid by the
Employer within the last twelve (12)-month period.

The Administrator shall obtain from the Trustee, not less often than
annually, a report with respect to the value of the assets held in the Trust
Fund, in such form as may be required by the Administrator.

The Administrator shall administer the Plan and adopt such rules and
regulations as, in the opinion of the Administrator, are necessary or
advisable to implement and administer the Plan and to transact its business.

9.2 CLAIMS PROCEDURE. Pursuant to procedures established by the
Administrator, adequate notice in writing shall be provided to any
Participant or Beneficiary whose claim for benefits under the Plan has been
denied within ninety (90) days of receipt of such claim. Such notice shall be
written in a manner calculated to be understood by the claimant, shall advise
the claimant the right to administrative review, and shall set forth the
specific reason for such denial, the specific references to the pertinent
Plan provisions on which the denial is based, and a description of any
additional material or information necessary to perfect the claim, and an
explanation of why such material or information is necessary. If such review
is requested by the claimant or his authorized representative within ninety
(90) days after receipt by the claimant of written notification of denial of
his claim, the Administrator shall afford a reasonable opportunity for a full
and fair review by the Administrator of

<PAGE>

the decision denying the claim. The review shall focus on the additional
facts, legal interpretations or material, if any, presented by the claimant.
A hearing at its place of business may be scheduled by the Administrator, but
a hearing is not required under the review procedure.

9.3 TRUST AGREEMENT. The Trust Agreement entered into by and between the
Employer and the Trustee, including any supplements or amendments thereto, or
any successor Trust Agreement, is incorporated by reference herein.

<PAGE>

                   ARTICLE TEN--SPECIAL COMPLIANCE PROVISIONS

10.1 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS. If the amount of any elective
deferrals made by a Participant exceeds the dollar limitation of Section
4.1(c), then the excess amount, and any income allocable thereto, shall be
distributed to such Participant subject to the requirements of applicable law.

10.2  LIMITATIONS ON 401(k) CONTRIBUTIONS.

      (a)     AVERAGE ACTUAL DEFERRAL PERCENTAGE TEST. Amounts contributed as
              elective deferrals under Section 4.1(a), and any "fail-safe"
              contributions made under this Section, are considered to be
              amounts deferred pursuant to Section 401(k) of the Code. For
              purposes of this Article, these amounts are referred to as the
              "deferred amounts." For purposes of the "average actual deferral
              percentage test" described below, such deferred amounts must be
              made before the last day of the twelve (12)-month period
              immediately following the Plan Year to which the contributions
              relate. The Employer shall maintain records sufficient to
              demonstrate satisfaction of the average actual deferral percentage
              test and the deferred amounts used in such test.

              As of the last day of each Plan Year, the deferred amounts for the
              Plan Year for the Participants who are Highly-Compensated
              Employees shall satisfy either of the following tests:

              (1)    The average actual deferral percentage for the eligible
                     Participants who are Highly-Compensated Employees shall not
                     exceed the average actual deferral percentage for eligible
                     Participants who are Nonhighly-Compensated Employees
                     multiplied by 1.25; or

              (2)    The average actual deferral percentage for eligible
                     Participants who are Highly-Compensated Employees shall not
                     exceed the average actual deferral percentage of eligible
                     Participants who are Nonhighly-Compensated Employees
                     multiplied by two (2), provided that the average actual
                     deferral percentage for eligible Participants who are
                     Highly-Compensated Employees does not exceed the average
                     actual deferral percentage for eligible Participants who
                     are Nonhighly-Compensated Employees by more than two (2)
                     percentage points, or such lesser amount as the Secretary
                     of the Treasury shall prescribe to prevent the multiple use
                     of this alternative limitation with respect to any
                     Highly-Compensated Employee.

<PAGE>

For purposes of the above tests, the "actual deferral percentage" shall mean
the ratio (expressed as a percentage) that the deferred amounts, which are
allocated to the Participant's Account as of any day in the Plan Year, on
behalf of each eligible Participant for the Plan Year bears to the eligible
Participant's compensation, as defined in Code Section 414(s) and the
regulations promulgated thereunder. The "average actual deferral percentage"
shall mean the average (expressed as a percentage) of the actual deferral
percentages of the eligible Participants in each group. "Eligible
Participant" shall mean each Employee who is eligible to participate in the
Plan under Section 3.1.

For purposes of this Section 10.2, the actual deferral percentage for any
eligible Participant who is a Highly-Compensated Employee for the Plan Year
and who is eligible to have elective deferrals allocated to his account under
two (2) or more plans or arrangements described in Code Section 401(k) that
are maintained by the Employer or any employer who is a related group member
(within the meaning of Section 2.5(b)) shall be determined as if all such
deferrals were made under a single arrangement. In the event that this Plan
satisfies the requirements of Code Section 410(b) only if aggregated with one
(1) or more other plans, or if one (1) or more other plans satisfy the
requirements of Code Section 410(b) only if aggregated with this Plan, then
the provisions of this Section 10.2 shall be applied by determining the
actual deferral percentage of eligible Participants as if all such plans were
a single plan.

The determination and treatment of deferred amounts and the actual deferral
percentage of any Participant shall be subject to the prescribed requirements
of the Secretary of the Treasury.

In the event the average actual deferral percentage test is not satisfied for
a Plan Year, the Employer, in its discretion, may make a special "fail-safe"
contribution for certain eligible Participants who are Nonhighly Compensated
Employees, to be allocated among their Accounts in proportion to their
Compensation for the Plan Year

      (b)  DISTRIBUTIONS OF EXCESS CONTRIBUTIONS.

           (1)    IN GENERAL. If the average actual deferral percentage test
                  of Section 10.2(a) is not satisfied for a Plan Year, then
                  the "excess contributions", and income allocable thereto,
                  shall be distributed, to the extent required under Treasury
                  regulations, no later than the last day of the Plan Year
                  following the Plan Year for which the excess contributions
                  were made. However, if such excess contributions are
                  distributed later than two and one-half (2-1/2) months
                  following the last day of the Plan Year in which such
                  excess contributions were made, a ten percent (10%) excise
                  tax shall be imposed upon the Employer with respect to such
                  excess contributions.

                  Notwithstanding the foregoing, to the extent otherwise
                  required to comply with the requirements of Section
                  401(a)(4) of the Code and the regulations thereunder,
                  vested matching contributions may be forfeited.

<PAGE>

           (2)    EXCESS CONTRIBUTIONS. For purposes of this Section, "excess
                  contributions" shall consist of the excess of the aggregate
                  amount of deferred amounts made by or on behalf of the
                  affected Highly-Compensated Employee over the maximum
                  amount of all such contributions permitted under the test
                  under Section 10.2(a). In reducing the excess contribution
                  hereunder, the reduction shall be first applied to the
                  Highly-Compensated Employee with the highest percentage
                  under Section 10.2(a). If reductions are further required
                  to comply with Section 10.2(a), such reductions shall be
                  applied to the Highly-Compensated Employee with the next
                  highest percentage, and so forth until the
                  nondiscrimination test of Section 10.2(a) is satisfied.

           (3)    DETERMINATION OF INCOME. The income allocable to excess
                  contributions shall be determined by multiplying the income
                  allocable to the Participant's deferred amounts for the
                  Plan Year by a fraction, the numerator of which is the
                  excess contributions made on behalf of the Participant for
                  the Plan Year, and the denominator of which is the sum of
                  the Participant's Account balances attributable to the
                  Participant's deferred amounts on the last day of the Plan
                  Year.

           (4)    MAXIMUM DISTRIBUTABLE AMOUNT. The excess contributions to
                  be distributed to a Participant shall be adjusted for
                  income and, if there is a loss allocable to the excess
                  contribution, shall in no event be less than the lesser of
                  the Participant's Account under the Plan or the
                  Participant's deferred amounts for the Plan Year. Excess
                  contributions shall be distributed from that portion of the
                  Participant's Account attributable to such deferred amounts
                  to the extent allowable under Treasury regulations.

10.3  NONDISCRIMINATION TEST FOR EMPLOYER MATCHING CONTRIBUTIONS.

     (a)  AVERAGE CONTRIBUTION PERCENTAGE TEST. The provisions of this Section
          shall apply if Employer matching contributions are made in any Plan
          Year under Section 4.2(a).

          As of the last day of each Plan Year, the average contribution
          percentage for Highly-Compensated Employees for the Plan Year shall
          satisfy either of the following tests:

          (1)  The average contribution percentage for eligible Participants who
               are Highly-Compensated Employees shall not exceed the average
               contribution percentage for eligible Participants who are
               Nonhighly-Compensated Employees for the Plan Year multiplied by
               1.25; or

<PAGE>

          (2)  The average contribution percentage for eligible Participants who
               are Highly-Compensated Employees shall not exceed the average
               contribution percentage for eligible Participants who are
               Nonhighly-Compensated Employees for the Plan Year multiplied by
               two (2), provided that the average contribution percentage for
               eligible Participants who are Highly-Compensated Employees does
               not exceed the average contribution percentage for eligible
               Participants who are Nonhighly-Compensated Employees by more than
               two (2) percentage points or such lesser amount as the Secretary
               of the Treasury shall prescribe to prevent the multiple use of
               this alternative limitation with respect to any
               Highly-Compensated Employee.

For purposes of the above tests, the "average contribution percentage" shall
mean the average (expressed as a percentage) of the contribution percentages
of the "eligible Participants" in each group. The contribution percentage"
shall mean the ratio (expressed as a percentage) that the sum of Employer
matching contributions and elective deferrals (to the extent such elective
deferrals are not used to satisfy the average actual deferral percentage test
of Section 10.2) under the Plan on behalf of the eligible Participant for the
Plan Year bears to the eligible Participant's compensation (as defined in
Code Section 414(s) and the regulations promulgated thereunder) for the Plan
Year. "Eligible Participant" shall mean each Employee who is eligible to
participate in the Plan under Section 3.1.

For purposes of this Section 10.3, the contribution percentage for any
eligible Participant who is a Highly-Compensated Employee for the Plan Year
and who is eligible to have Employer matching contributions or elective
deferrals allocated to his account under two (2) or more plans described in
Section 401(a) of the Code or under arrangements described in Section 401(k)
of the Code that are maintained by the Employer or any member of the
Employer's related group (within the meaning of Section 2.5(b)), shall be
determined as if all such contributions and elective deferrals were made
under a single plan.

In the event that this Plan satisfies the requirements of Section 410(b) of
the Code only if aggregated with one (1) or more other plans, or if one (1)
or more other plans satisfy the requirements of Section 410(b) of the Code
only if aggregated with this Plan, then the provisions of this Section 10.3
shall be applied by determining the contribution percentages of eligible
Participants as if all such plans were a single plan.

The determination and treatment of the contribution percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.

     (b)  DISTRIBUTION OF EXCESS EMPLOYER MATCHING CONTRIBUTIONS.

          (1)  IN GENERAL. If the nondiscrimination tests of Section 10.3(a) are
               not satisfied for a Plan Year, then the "excess contributions",
               and any income allocable thereto, shall be forfeited, if
               otherwise forfeitable, no later than the last day of the Plan
               Year following the Plan Year for which the nondiscrimination
               tests are not satisfied, and shall be used to reduce Employer
               contributions under Section 4.2(a). To the extent that such
               "excess contributions" are nonforfeitable, such excess
               contributions shall be distributed to the Participant on whose
               behalf the excess contributions were made no later than the last
               day of the Plan Year following the Plan Year for which such
               "excess contributions" were made. However, if such excess
               contributions are

<PAGE>

               distributed later than two and one-half (2-1/2) months following
               the last day of the Plan Year in which such excess contributions
               were made, a ten percent (10%) excise tax shall be imposed upon
               the Employer with respect to such excess contributions. For
               purposes of the limitations of Section 11.1(b)(1) of the Plan,
               excess contributions shall be considered annual additions.

          (2)  EXCESS CONTRIBUTIONS. For purposes of this Section, "excess
               contributions" shall consist of the excess of the amount of
               Employer matching contributions and elective deferrals (to the
               extent not used to satisfy the average actual deferral percentage
               test of Section 10.2) made on behalf of the affected
               Highly-Compensated Employee over the maximum amount of all such
               contributions permitted under the nondiscrimination tests under
               Section 10.3(a). In reducing the excess contribution hereunder,
               the reduction shall be first applied to the Highly-Compensated
               Employee with the highest percentage under Section 10.3(a). If
               reductions are further required to comply with Section 10.3(a),
               such reductions shall be applied to the Highly-Compensated
               Employee with the next highest percentage, and so forth until the
               nondiscrimination tests of Section 10.3(a) are satisfied.

          (3)  DETERMINATION OF INCOME. The income allocable to excess
               contributions shall be determined by multiplying the income
               allocable to the Employer matching contributions and such
               elective deferrals by a fraction, the numerator of which is the
               excess contributions on behalf of the Participant for the Plan
               Year, and the denominator of which is the sum of the
               Participant's Account balances attributable to Employer matching
               contributions and such elective deferrals, on the last day of the
               Plan Year.

10.4 LIMITATION ON THE MULTIPLE USE ALTERNATIVE. The sum of the average
actual deferral percentage of Highly-Compensated Employees under Section
10.2(a) and the average contribution percentage of Highly-Compensated
Employees under Section 10.3(a) shall not exceed the "aggregate limit", as
defined in Section 401(m)(9) of the Code and the regulations promulgated
thereunder.

If the aggregate limit is exceeded, the average contribution percentage of
the Highly-Compensated Employees shall be reduced in accordance with the
provisions of Section 10.3(b). In lieu of reducing the average contribution
percentage, the Administrator may reduce the average actual deferral
percentage of the Highly-Compensated Employees in accordance with the
provisions of Section 10.2(b). The reductions under this Section shall be
made only to the extent necessary to comply with the restrictions on the
multiple use of the "alternative limitation" within the meaning of Code
Section 401(m)(9).

<PAGE>


                 ARTICLE ELEVEN--LIMITATION ON ANNUAL ADDITIONS

11.1  RULES AND DEFINITIONS.

     (a)  RULES. The following rules shall limit additions to Participants'
          Accounts:

          (1)  If the Participant does not participate, and has never
               participated, in another qualified plan maintained by the
               Employer, the amount of annual additions which may be credited to
               the Participant's Account for any limitation year shall not
               exceed the lesser of the "maximum permissible" amount (as
               hereafter defined) or any other limitation contained in this
               Plan. If the Employer contribution that would otherwise be
               allocated to the Participant's Account would cause the annual
               additions for the limitation year to exceed the maximum
               permissible amount, the amount allocated shall be reduced so that
               the annual additions for the limitation year shall equal the
               maximum permissible amount.

          (2)  Prior to determining the Participant's actual compensation for
               the limitation year, the Employer may determine the maximum
               permissible amount for a Participant on the basis of a reasonable
               estimation of the Participant's compensation for the limitation
               year, uniformly determined for all Participants similarly
               situated.

          (3)  As soon as is administratively feasible after the end of the
               limitation year, the maximum permissible amount for the
               limitation year shall be determined on the basis of the
               Participant's actual compensation for the limitation year.

          (4)  If there is an excess amount, the excess shall be disposed of as
               follows:

               (A)  Any nondeductible voluntary Employee after-tax contributions
                    and, to the extent elected by the Administrator pursuant to
                    a nondiscriminatory procedure, elective deferrals under
                    Section 4.1(a), and any earnings thereon, to the extent they
                    would reduce the excess amount, shall be returned to the
                    Participant.

               (B)  If an excess amount still exists after the application of
                    subparagraph (A), and the Participant is covered by the Plan
                    at the end of the limitation year, the excess amount in the
                    Participant's Account shall be used to reduce Employer
                    contributions (including any allocation of forfeitures, if
                    applicable) for such Participant in the next limitation
                    year, and each succeeding limitation year if necessary;

               (C)  If an excess amount still exists after the application of
                    subparagraphs (A) and (B), and the Participant is not
                    covered by the Plan at the end of the limitation year, the
                    excess amount shall be held unallocated in a suspense
                    account and applied to reduce future Employer contributions
                    (including allocation of any forfeitures) for all remaining
                    Participants in the next limitation year, and each
                    succeeding limitation year if necessary.


<PAGE>

               (D)  If a suspense account is in existence at any time during the
                    limitation year pursuant to this Section 11.1(a)(4), it
                    shall not participate in the allocation of the Trust's
                    investment gains and losses. In addition, all amounts held
                    in the suspense account shall be allocated and reallocated
                    to Participants' Accounts before any Employer or Employee
                    contributions may be made for the limitation year.

          (5)  If, in addition to this Plan, the Participant is covered under
               another defined contribution plan maintained by the Employer, or
               a welfare benefit fund, as defined in Code Section 419(e),
               maintained by the Employer, or an individual medical account, as
               defined in Code Section 415(1)(2), maintained by the Employer
               which provides an annual addition, the annual additions which may
               be credited to a Participant's account under all such plans for
               any such limitation year shall not exceed the maximum permissible
               amount. Benefits shall be reduced under any discretionary defined
               contribution plan before they are reduced under any defined
               contribution pension plan. If both plans are discretionary
               contribution plans, they shall first be reduced under this Plan.
               Any excess amount attributable to this Plan shall be disposed of
               in the manner described in Section 11.1(a)(4).

          (6)  If the Employer maintains, or at any time maintained, a qualified
               defined benefit plan covering any Participant in this Plan, the
               sum of the Participant's defined benefit plan fraction and
               defined contribution plan fraction shall not exceed 1.0 in any
               limitation year. The annual additions which may be credited to
               the Participant's Account under this Plan for any limitation year
               shall be limited so that if the limitations of Code Section
               415(e) become applicable, benefits under a defined benefit plan
               shall have first been provided before benefits under a defined
               contribution plan are provided.

          (7)  In any Plan Year in which the Plan becomes a Super Top-Heavy Plan
               (as defined in Section 13.2(b)), the denominators of the defined
               benefit fraction and defined contribution fraction shall be
               computed using one hundred percent (100%) of the maximum dollar
               limitation instead of one hundred and twenty-five percent (125%).

          (8)  In any year in which the Plan is a Top-Heavy Plan (as defined in
               Section 13.2(c)) (but not a Super Top-Heavy Plan), the
               limitations shall be similarly reduced, subject to the special
               provisions of Section 13.3, which provide for the use of the one
               hundred and twenty-five percent (125%) limitation subject to the
               added minimum allocations.

     (b)  DEFINITIONS.

          (1)  ANNUAL ADDITIONS: The following amounts credited to a
               Participant's Account for the limitation year shall be treated as
               annual additions:

               (A)  Employer contributions;

               (B)  Elective deferrals;

<PAGE>

               (C)  Employee after-tax contributions, if any;

               (D)  Forfeitures, if any; and

               (E)  Amounts allocated after March 31, 1984 to an individual
                    medical account, as defined in Section 415(l)(2) of the
                    Code, which is part of a defined benefit plan maintained by
                    the Employer. Also, amounts derived from contributions paid
                    or accrued after December 31, 1985 in taxable years ending
                    after such date which are attributable to post-retirement
                    medical benefits allocated to the separate account of a Key
                    Employee, as defined in Section 419A(d)(3), and amounts
                    under a welfare benefit fund, as defined in Section 419(e),
                    maintained by the Employer, shall be treated as annual
                    additions to a defined contribution plan.

                     For this purpose, any excess amount applied under Section
                     11.1(a)(4) in the limitation year to reduce Employer
                     contributions shall be considered annual additions for such
                     limitation year.

          (2)  COMPENSATION: For purposes of determining maximum permitted
               benefits under this Section, compensation shall include all of a
               Participant's earned income, wages, salaries, and fees for
               professional services, and other amounts received for personal
               services actually rendered in the course of employment with the
               Employer, including, but not limited to, commissions paid to
               salesmen, compensation for services on the basis of a percentage
               of profits, commissions on insurance premiums, tips and bonuses,
               and excluding the following:

               (A)  Employer contributions to a plan of deferred compensation
                    which are not included in the Employee's gross income for
                    the taxable year in which contributed, or Employer
                    contributions under a simplified employee pension plan
                    (funded with individual retirement accounts or annuities) to
                    the extent such contributions are deductible by the
                    Employee, or any distributions from a plan of deferred
                    compensation;

               (B)  Amounts realized from the exercise of a nonqualified stock
                    option, or when restricted stock (or property) held by the
                    Employee either becomes freely transferable or is no longer
                    subject to a substantial risk of forfeiture;

               (C)  Amounts realized from the sale, exchange, or other
                    disposition of stock acquired under a qualified stock
                    option; and

               (D)  Other amounts which received special tax benefits, or
                    contributions made by the Employer (whether or not under a
                    salary reduction agreement) toward the purchase of an
                    annuity described in Section 403(b) of the Code (whether or
                    not the amounts are actually excludable from the gross
                    income of the Employee).

<PAGE>

               Compensation shall be measured on the basis of compensation paid
               in the limitation year.

          (3)  DEFINED BENEFIT FRACTION: This shall mean a fraction, the
               numerator of which is the sum of the Participant's projected
               annual benefits under all the defined benefit plans maintained or
               previously maintained by the Employer, and the denominator of
               which is the lesser of one hundred and twenty-five percent (125%)
               of the dollar limitation in effect for the limitation year under
               Section 415(b)(1)(A) of the Code or one hundred and forty percent
               (140%) of the highest average compensation including any
               adjustment under Code Section 415(b).

          (4)  DEFINED CONTRIBUTION FRACTION: This shall mean a fraction, the
               numerator of which is the sum of the annual additions to the
               Participant's account under all the defined contribution plans
               (whether or not terminated), welfare benefit funds, and
               individual medical accounts maintained by the Employer for the
               current and all prior limitation years, and the denominator of
               which is the sum of the maximum aggregate amounts for the current
               and all prior limitation years of Service with the Employer,
               regardless of whether a defined contribution plan was maintained
               by the Employer.

               The maximum aggregate amount in any limitation year is the lesser
               of one hundred and twenty-five percent (125%) of the dollar
               limitation then in effect under Section 415(c)(1)(A) of the Code
               or thirty-five (35%) of the Participant's compensation for such
               year.

               If the Employee, as of the end of the first day of the first
               limitation year beginning after December 31, 1986, was a
               participant in one (1) or more defined contribution plans
               maintained by the Employer which were in existence on May 5,
               1986, the numerator of this fraction shall be adjusted if the
               sum of this fraction and the defined benefit fraction would
               otherwise exceed 1.0 under the terms of this Plan. Under the
               adjustment, an amount equal to the product of (i) the excess of
               the sum of the fractions over 1.0 and (ii) the denominator of
               this fraction, will be permanently subtracted from the
               numerator of this fraction. The adjustment is calculated using
               the fractions as they would be computed as of the end of the
               last limitation year beginning before January 1, 1987, and
               disregarding any changes in the terms and conditions of the
               Plan made after May 5, 1986, but using the Code Section 415
               limitation applicable to the first limitation year beginning on
               or after January 1, 1987.

               The annual addition for any limitation year beginning before
               January 1, 1987, shall not be recomputed to treat all Employee
               contributions as annual additions.

          (5)  DEFINED CONTRIBUTION DOLLAR LIMITATION: This shall mean the
               greater of $30,000 or one-fourth (1/4) of the defined benefit
               dollar limitation of Section 415(b)(1) of the Code in effect for
               the limitation year.

<PAGE>

          (6)  EMPLOYER: This term refers to the Employer that adopts this Plan,
               and all members of a controlled group of corporations (as defined
               in Section 414(b) of the Code, as modified by Section 415(h)),
               commonly-controlled trades or businesses (as defined in Section
               414(c), as modified by Section 415(h)), or affiliated service
               groups (as defined in Section 414(m)) of which the Employer is a
               part, or any other entity required to be aggregated with the
               Employer under Code Section 414(o).

          (7)  HIGHEST AVERAGE COMPENSATION: This means the average compensation
               for the three (3) consecutive limitation years with the Employer
               that produces the highest average.

          (8)  LIMITATION YEAR: This shall mean the Plan Year.

          (9)  MAXIMUM PERMISSIBLE AMOUNT: This shall mean an amount equal to
               the lesser of the defined contribution dollar limitation or
               twenty-five percent (25%) of the Participant's compensation for
               the limitation year. If a short limitation year is created
               because of an amendment changing the limitation year to a
               different twelve (12)-consecutive month period, the maximum
               permissible amount shall not exceed the defined contribution
               dollar limitation multiplied by the following fraction:

                  Number of months in the short limitation year
                  ---------------------------------------------
                                       12

          (10) PROJECTED ANNUAL BENEFIT: This is the annual retirement benefit
               (adjusted to an actuarially equivalent straight life annuity if
               such benefit is expressed in a form other than a straight life
               annuity or qualified joint and survivor annuity) to which the
               Participant would be entitled under the terms of the plan,
               assuming:

               (A)  the Participant will continue employment until normal
                    retirement age under the plan (or current age, if
                    later), and

               (B)  the Participant's compensation for the current
                    limitation year and all other relevant factors used to
                    determine benefits under the plan will remain constant
                    for all future limitation years.


<PAGE>


                    ARTICLE TWELVE--AMENDMENT AND TERMINATION

12.1 AMENDMENT. The Employer, by resolution of its board of directors, (or, to
the extent permitted by resolution of such board of directors, by action of a
duly authorized officer of the Employer) shall have the right to amend, alter or
modify the Plan at any time, or from time to time, in whole or in part. Any such
amendment shall become effective under its terms upon adoption by the Employer.
However, no amendment affecting the duties, powers or responsibilities of the
Trustee may be made without the written consent of the Trustee. No amendment
shall be made to the Plan which shall:

      (a)     make it possible (other than as provided in Section 14.3) for any
              part of the corpus or income of the Trust Fund (other than such
              part as may be required to pay taxes and administrative expenses)
              to be used for or diverted to purposes other than the exclusive
              benefit of the Participants or their Beneficiaries;

      (b)     decrease a Participant's account balance or eliminate an optional
              form of payment with respect to benefits accrued as of the later
              of (i) the date such amendment is adopted, or (ii) the date the
              amendment becomes effective; or

      (c)     alter the schedule for vesting in a Participant's Account with
              respect to any Participant with three (3) or more Years of Service
              without his consent or deprive any Participant of any
              nonforfeitable portion of his Account.

Notwithstanding the other provisions of this Section or any other provisions of
the Plan, any amendment or modification of the Plan may be made retroactively if
necessary or appropriate to conform to or to satisfy the conditions of any law,
governmental regulation, or ruling, and to meet the requirements of the Employee
Retirement Income Security Act of 1974, as it may be amended.

12.2 TERMINATION OF THE PLAN. The Employer, by resolution of its board of
directors, reserves the right at any time and in its sole discretion to
discontinue payments under the Plan and to terminate the Plan. In the event the
Plan is terminated, or upon complete discontinuance of contributions under the
Plan by the Employer, the rights of each Participant to his Account on the date
of such termination or discontinuance of contributions, to the extent of the
fair market value under the Trust Fund, shall become fully vested and
nonforfeitable. The Employer shall direct the Trustee to distribute the Trust
Fund in accordance with the Plan's distribution provisions to the Participants
and their Beneficiaries, each Participant or Beneficiary receiving a portion of
the Trust Fund equal to the value of his Account as of the date of distribution.
These distributions may be implemented by the continuance of the Trust and the
distribution of the Participants' Account shall be made at such time and in such
manner as though the Plan had not terminated, or by any other appropriate
method, including rollover into Individual Retirement Accounts. Upon
distribution of the Trust Fund, the Trustee shall be discharged from all
obligations under the Trust and no Participant or Beneficiary shall have any
further right or claim therein. If a partial termination of the Plan is deemed
to have occurred, this Section shall apply only to those Participant's affected
by such partial termination.


<PAGE>


                     ARTICLE THIRTEEN--TOP-HEAVY PROVISIONS

13.1 APPLICABILITY. The provisions of this Article shall become applicable only
for any Plan Year in which the Plan is a Top-Heavy Plan (as defined in Section
13.2(c)). The determination of whether the Plan is a Top-Heavy Plan shall be
made each Plan Year by the Administrator.

13.2  DEFINITIONS.  For purposes of this Article, the following definitions
shall apply:

          (a)  "KEY EMPLOYEE": "Key Employee" shall mean any Employee or former
               Employee (and the Beneficiaries of such Employee) who, at any
               time during the determination period, was (1) an officer of the
               Employer earning compensation (as defined in Section 416(i) of
               the Code) in excess of fifty percent (50%) of the dollar
               limitation under Section 415(b)(1)(A) of the Code, (2) an owner
               (or considered an owner under Section 318 of the Code) of both
               more than a one-half percent (1/2%) interest in the Employer and
               one of the ten (10) largest interests in the Employer if such
               individual's compensation exceeds the dollar limitation under
               Section 415(c)(1)(A) of the Code, (3) a five percent (5%) owner
               of the Employer, or (4) a one percent (1%) owner of the Employer
               who has an annual compensation of more than $150,000. For
               purposes of this Section, annual compensation shall mean
               compensation as defined in Code Section 415(c)(3), but including
               amounts contributed by the Employer pursuant to a salary
               reduction agreement which are excludable from the Employee's
               income under Code Sections 125, 402(g), 402(h) or 403(b). The
               determination period of the Plan is the Plan Year containing the
               "determination date" as defined in Section 13.2(c)(4) and the
               four (4) preceding Plan Years.

               The determination of who is a Key Employee (including the terms
               "5% owner" and "1% owner") shall be made in accordance with
               Section 416(i)(1) of the Code and the regulations thereunder.

          (b)  "SUPER TOP-HEAVY PLAN": The Plan shall constitute a "Super
               Top-Heavy Plan" if it meets the test for status as a Top-Heavy
               Plan, where "90%" is substituted for "60%" at each place in
               Section 13.2(c).

          (c)  "TOP-HEAVY PLAN":

     (1) The Plan shall constitute a "Top-Heavy Plan" if any of the following
conditions exist:

          (A)  The top-heavy ratio for the Plan exceeds sixty percent (60%) and
               the Plan is not part of any required aggregation group or
               permissive aggregation group of plans; or

          (B)  The Plan is part of a required aggregation group of plans (but is
               not part of a permissive aggregation group) and the top-heavy
               ratio for the group of plans exceeds sixty percent (60%); or

<PAGE>

          (C)  The Plan is a part of a required aggregation group of plans and
               part of a permissive aggregation group and the top-heavy ratio
               for the permissive aggregation group exceeds sixty percent (60%).

     (2)  If the Employer maintains one (1) or more defined contribution plans
          (including any simplified employee pension plan funded with individual
          retirement accounts or annuities) and the Employer maintains or has
          maintained one (1) or more defined benefit plans which have covered or
          could cover a Participant in this Plan, the top-heavy ratio is a
          fraction, the numerator of which is the sum of account balances under
          the defined contribution plans for all Key Employees and the actuarial
          equivalents of accrued benefits under the defined benefit plans for
          all Key Employees, and the denominator of which is the sum of the
          account balances under the defined contribution plans for all
          Participants and the actuarial equivalents of accrued benefits under
          the defined benefit plans for all Participants. Both the numerator and
          denominator of the top-heavy ratio shall include any distribution of
          an account balance or an accrued benefit made in the five (5)-year
          period ending on the determination date and any contribution due to a
          defined contribution pension plan but unpaid as of the determination
          date. In determining the accrued benefit of a non-Key Employee who is
          participating in a plan that is part of a required aggregation group,
          the method of determining such benefit shall be either (i) in
          accordance with the method, if any, that uniformly applies for accrual
          purposes under all plans maintained by the Employer or any member of
          the Employer's related group (within the meaning of Section 2.5(b)),
          or (ii) if there is no such method, as if such benefit accrued not
          more rapidly than the slowest accrual rate permitted under the
          fractional accrual rate of Code Section 411(b)(1)(C).

     (3)  For purposes of (1) and (2) above, the value of account balances and
          the actuarial equivalents of accrued benefits shall be determined as
          of the most recent Valuation Date that falls within or ends with the
          twelve (12)-month period ending on the determination date. The account
          balances and accrued benefits of a Participant who is not a Key
          Employee but who was a Key Employee in a prior year shall be
          disregarded. The accrued benefits and account balances of Participants
          who have performed no Hours of Service with any Employer maintaining
          the plan for the five (5)-year period ending on the determination date
          shall be disregarded. The calculations of the top-heavy ratio, and the
          extent to which distributions, rollovers, and transfers are taken into
          account shall be made under Section 416 of the Code and regulations
          issued thereunder. Deductible Employee contributions shall not be
          taken into account for purposes of computing the top-heavy ratio. When
          aggregating plans, the value of account balances and accrued benefits
          shall be calculated with reference to the determination dates that
          fall within the same calendar year.

<PAGE>

     (4)  DEFINITION OF TERMS FOR TOP-HEAVY STATUS:

               (A)  "TOP-HEAVY RATIO" shall mean the following:

                    (1)  If the Employer maintains one or more defined
                         contribution plans (including any simplified employee
                         pension plan funded with individual retirement accounts
                         or annuities) and the Employer has never maintained any
                         defined benefit plans which have covered or could cover
                         a Participant in this Plan, the top-heavy ratio is a
                         fraction, the numerator of which is the sum of the
                         account balances of all Key Employees as of the
                         determination date (including any part of any account
                         balance distributed in the five (5)-year period ending
                         on the determination date), and the denominator of
                         which is the sum of the account balances (including any
                         part of any account balance distributed in the five
                         (5)-year period ending on the determination date) of
                         all Participants as of the determination date. Both the
                         numerator and the denominator shall be increased by any
                         contributions due but unpaid to a defined contribution
                         pension plan as of the determination date.

               (B)  "PERMISSIVE AGGREGATION GROUP" shall mean the required
                    aggregation group of plans plus any other plan or plans of
                    the Employer which, when considered as a group with the
                    required aggregation group, would continue to satisfy the
                    requirements of Section 401(a)(4) and/or 410 of the Code.

               (C)  "REQUIRED AGGREGATION GROUP" shall mean (i) each qualified
                    plan of the Employer (including any terminated plan) in
                    which at least one Key Employee participates, and (ii) any
                    other qualified plan of the Employer which enables a plan
                    described in (i) to meet the requirements of Section
                    401(a)(4) and/or 410 of the Code.

               (D)  "DETERMINATION DATE" shall mean, for any Plan Year
                    subsequent to the first Plan Year, the last day of the
                    preceding Plan Year. For the first Plan Year of the Plan,
                    "determination date" shall mean the last day of that Plan
                    Year.

               (E)  "VALUATION DATE" shall mean the last day of the Plan Year.

               (F)  Actuarial equivalence shall be based on the interest and
                    mortality rates utilized to determine actuarial equivalence
                    when benefits are paid from any defined benefit plan. If no
                    rates are specified in said plan, the following shall be
                    utilized: pre- and post-retirement interest -- five percent
                    (5%); post-retirement mortality based on the Unisex Pension
                    (1984) Table as used by the Pension Benefit Guaranty
                    Corporation on the date of execution hereof.

<PAGE>

13.3  ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES FOR A TOP-HEAVY
PLAN YEAR.

               (a)  Except as otherwise provided below, in any Plan Year in
                    which the Plan is a Top-Heavy Plan, the Employer
                    contributions and forfeitures allocated on behalf of any
                    Participant who is a non-Key Employee shall not be less than
                    the lesser of three percent (3%) of such Participant's
                    compensation (as defined in Section 11.1(b)(2)) or the
                    largest percentage of Employer contributions and forfeitures
                    as a percentage of the Key Employee's Compensation,
                    allocated on behalf of any Key Employee for that Plan Year.
                    This minimum allocation shall be made even though, under
                    other Plan provisions, the Participant would not otherwise
                    be entitled to receive an allocation or would have received
                    a lesser allocation for the Plan Year because of
                    insufficient Employer contributions under Section 4.2, the
                    Participant's failure to complete one thousand (1,000) Hours
                    of Service or the Participant's failure to make elective
                    deferrals under Section 4.1.

               (b)  The minimum allocation under this Section shall not apply to
                    any Participant who was not employed by the Employer on the
                    last day of the Plan Year.

               (c)  The minimum allocation under this Section shall be offset
                    and reduced by any allocation of contributions and
                    forfeitures under Section 4.2, and under any other defined
                    contribution plan (if such contributions are not matching
                    contributions under Code Section 401(m)) with a Plan Year
                    ending in the same calendar year as the Valuation Date.

               (d)  For purposes of the Plan, a non-Key Employee shall be any
                    Employee or Beneficiary of such Employee, any former
                    Employee, or Beneficiary of such former Employee, who is not
                    or was not a Key Employee during the Plan Year ending on the
                    determination date, nor during the four (4) preceding Plan
                    Years.

               (e)  If no defined benefit plan has ever been part of a
                    permissive or required aggregation group of plans of the
                    Employer, the contributions and forfeitures under this step
                    shall be offset by any allocation of contributions and
                    forfeitures under any other defined contribution plan of the
                    Employer with a Plan Year ending in the same calendar year
                    as this Plan's Valuation Date.

               (f)  There shall be no duplication of the minimum benefits
                    required under Code Section 416. Benefits shall be provided
                    under defined contribution plans before under defined
                    benefit plans. If a defined benefit plan (active or
                    terminated) is part of the permissive or required
                    aggregation group of plans, the allocation method of
                    subparagraph (a) above shall apply, except that "3%" shall
                    be increased to "5%."

               (g)  There shall be no duplication of the minimum benefits
                    required under Code Section 416. Benefits shall be provided
                    under defined contribution plans before defined benefit
                    plans. If a defined benefit plan (active or terminated) is
                    part of the permissive or required aggregation group of
                    plans, and if any Participant in the Plan would have his
                    benefits limited due to the application of the Code
                    limitation rule in Section 11.1 in a Plan Year in which the
                    Plan is a Top-Heavy Plan but not a Super Top-Heavy Plan, the
                    allocation

<PAGE>

                    method of subparagraph (f) above shall apply,
                    except that "5%" shall be increased to "7.5%."

13.4 VESTING. The provisions contained in Section 6.1 relating to vesting shall
continue to apply in any Plan Year in which the Plan is a Top-Heavy Plan, and
apply to all benefits within the meaning of Section 411(a)(7) of the Code except
those attributable to Employee contributions and elective deferrals under
Section 4.1, including benefits accrued before the effective date of Section 416
and benefits accrued before the Plan became a Top-Heavy Plan. Further, no
reduction in vested benefits may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year and the vesting schedule is amended. In
addition, if a Plan's status changes from a Top-Heavy Plan to that of a
non-Top-Heavy Plan, a Participant with three (3) Years of Service shall continue
to have his vested rights determined under the schedule which he selects, in the
event the vesting schedule is subsequently amended.

Payment of a Participant's vested Account balance under this Section shall be
made in accordance with the provisions of Article Seven.


<PAGE>


                   ARTICLE FOURTEEN--MISCELLANEOUS PROVISIONS

14.1 PLAN DOES NOT AFFECT EMPLOYMENT. Neither the creation of this Plan, any
amendment thereto, the creation of any fund nor the payment of benefits
hereunder shall be construed as giving any legal or equitable right to any
Employee or Participant against the Employer, its officers or Employees, or
against the Trustee. All liabilities under this Plan shall be satisfied, if at
all, only out of the Trust Fund held by the Trustee. Participation in the Plan
shall not give any Participant any right to be retained in the employ of the
Employer, and the Employer hereby expressly retains the right to hire and
discharge any Employee at any time with or without cause, as if the Plan had not
been adopted, and any such discharged Participant shall have only such rights or
interests in the Trust Fund as may be specified herein.

14.2 SUCCESSOR TO THE EMPLOYER. In the event of the merger, consolidation,
reorganization or sale of assets of the Employer, under circumstances in which a
successor person, firm, or corporation shall carry on all or a substantial part
of the business of the Employer, and such successor shall employ a substantial
number of Employees of the Employer and shall elect to carry on the provisions
of the Plan, such successor shall be substituted for the Employer under the
terms and provisions of the Plan upon the filing in writing with the Trustee of
its election to do so.

14.3 REPAYMENTS TO THE EMPLOYER. Notwithstanding any provisions of this Plan to
the contrary:

     (a)  Any monies or other Plan assets attributable to any contribution made
          to this Plan by the Employer because of a mistake of fact shall be
          returned to the Employer within one (1) year after the date of
          contribution.

     (b)  Any monies or other Plan assets attributable to any contribution made
          to this Plan by the Employer shall be refunded to the Employer, to the
          extent such contribution is predicated on the deductibility thereof
          under the Code and the income tax deduction for such contribution is
          disallowed. Such amount shall be refunded within one (1) taxable year
          after the date of such disallowance or within one (1) year of the
          resolution of any judicial or administrative process with respect to
          the disallowance. All Employer contributions hereunder are expressly
          contributed based upon such contributions' deductibility under the
          Code.

However, the provisions of this Section shall not apply to elective deferrals
made by a Participant under Section 4.1.

14.4 BENEFITS NOT ASSIGNABLE. Except as provided in Section 414(p) of the Code
with respect to "qualified domestic relations orders," the rights of any
Participant or his Beneficiary to any benefit or payment hereunder shall not be
subject to voluntary or involuntary alienation or assignment.

<PAGE>

With respect to any "qualified domestic relations order" relating to the Plan,
the Plan shall permit distribution to an alternate payee under such order at any
time, irrespective of whether the Participant has attained his "earliest
retirement age" (within the meaning of Section 414(p)(4)(B) of the Code) under
the Plan. A distribution to an alternate payee prior to the Participant's
attainment of his earliest retirement age shall, however, be available only if:
(1) the order specifies distribution at that time or permits an agreement
between the Plan and the alternate payee to authorize an earlier distribution;
and (2) if the present value of the alternate payee's benefit under the Plan
exceeds $3,500, the order requires the alternate payee to consent to any
distribution occurring prior to the Participant's attainment of his earliest
retirement age. Nothing in this paragraph shall, however, give a Participant a
right to receive distribution at a time otherwise not permitted under the Plan
nor does it permit the alternate payee to receive a form of payment not
otherwise permitted under the Plan or under said Section 414(p) of the Code.

14.5 MERGER OF PLANS. In the case of any merger or consolidation of this Plan
with, or transfer of the assets or liabilities of the Plan to, any other plan,
the terms of such merger, consolidation or transfer shall be such that each
Participant would receive (in the event of termination of this Plan or its
successor immediately thereafter) a benefit which is no less than what the
Participant would have received in the event of termination of this Plan
immediately before such merger, consolidation or transfer.

14.6 INVESTMENT EXPERIENCE NOT A FORFEITURE. The decrease in value of any
Account due to adverse investment experience shall not be considered an
impermissible "forfeiture" of any vested balance.


14.7 DISTRIBUTION TO LEGALLY INCAPACITATED. In the event any benefit is payable
to a minor or to a person deemed to be incompetent or to a person otherwise
under legal disability, or who is by sole reason of advanced age, illness, or
other physical or mental incapacity incapable of handling the disposition of his
property, the Administrator, may direct the Trustee to apply all or any portion
of such benefit directly to the care, comfort, maintenance, support, education
or use of such person or to pay or distribute the whole or any part of such
benefit to (a) the spouse of such person, (b) the parent of such person, (c) the
guardian, committee, or other legal representative, wherever appointed, of such
person, (d) the person with whom such person shall reside, (e) any other person
having the care and control of such person, or (f) such person. The receipt of
any such payment or distribution shall be a complete discharge of liability for
Plan obligations.

14.8 CONSTRUCTION. Wherever appropriate, the use of the masculine gender shall
be extended to include the feminine and/or neuter or vice versa; and the
singular form of words shall be extended to include the plural; and the plural
shall be restricted to mean the singular.

14.9 GOVERNING DOCUMENTS. A Participant's rights shall be determined under the
terms of the Plan as in effect at the Participant's date of separation from
Service.

<PAGE>

14.10 GOVERNING LAW. The provisions of this Plan shall be construed under the
laws of the state of the situs of the Trust, except to the extent such laws are
preempted by Federal law.

14.11 HEADINGS. The Article headings and Section numbers are included solely for
ease of reference. If there is any conflict between such headings or numbers and
the text of the Plan, the text shall control.

14.12 COUNTERPARTS. This Plan may be executed in any number of counterparts,
each of which shall be deemed an original; said counterparts shall constitute
but one and the same instrument, which may be sufficiently evidenced by any one
counterpart.

14.13 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN. In the event that all or
any portion of the distribution payable to a Participant or to a Participant's
Beneficiary hereunder shall, at the expiration of five (5) years after it shall
become payable, remain unpaid solely by reason of the inability of the
Administrator to ascertain the whereabouts of such Participant or Beneficiary,
after sending a registered letter, return receipt requested, to the last known
address, and after further diligent effort, the amount so distributable shall be
treated as a forfeiture under the Plan. In the event a Participant or
Beneficiary is located subsequent to the reallocation of his Account balance,
such Account balance shall be restored in accordance with the provisions of
Section 6.2.

<PAGE>

                  ARTICLE FIFTEEN--MULTIPLE EMPLOYER PROVISIONS

15.1 ADOPTION OF THE PLAN. With the consent of the board of directors of
Intrusion.com, Inc., this Plan may be adopted by any other corporation or entity
that is not a member of the Employer's "related group" (as defined in Section
2.5) for its employees, which adopting employer shall be known as a
"Participating Employer." All assets may either be held within the Trust Fund,
or each Participating Employer may maintain a separate trust fund attributable
to its portion of Plan assets. Separate accounting shall be maintained for the
Accounts of Employees of each adopting Participating Employer.

15.2 SERVICE. For purposes of vesting, eligibility to participate in the Plan,
and determining eligibility for allocation of Participating Employer
contributions, an Employee shall be credited with all of his Hours of Service
with any Participating Employer which has adopted the Plan after the effective
date of that adoption. Pre-adoption service will be credited in accordance with
the rules in Article Two for such periods of time when the Employees were part
of a controlled group of corporations, trades or businesses under common control
or affiliated service group. These rules may be modified by an instrument of
adoption.

15.3 PLAN CONTRIBUTIONS. All contributions made by a Participating Employer, as
provided for in this Plan and unless modified by an instrument of adoption,
shall be determined separately by each Participating Employer, and shall be paid
to and held by the Trustee for the exclusive benefit of the Employees of such
Participating Employer and the Beneficiaries of such Employees, subject to all
the terms and conditions of this Plan. Any forfeiture by an Employee of a
Participating Employer subject to allocation during each Plan Year shall be
allocated only for the exclusive benefit of the Participants of such
Participating Employer in accordance with the provisions of this Plan, unless
modified by an instrument of adoption].

15.4 TRANSFERRING EMPLOYEES. The Administrator shall adopt equitable procedures
whereby contributions and forfeitures are equitably allocated in the case of
Employees transferring from the employment of one Participating Employer to
another Participating Employer. Similarly, rules shall be adopted whereby
Account records may be transferred from the records of one Participating
Employer to another Participating Employer.

15.5 DELEGATION OF AUTHORITY. Each Participating Employer shall be deemed to
have appointed Intrusion.com, Inc. as its agent to act on its behalf in all
matters relating to the administration, amendment, termination of the Plan and
the investment of the assets of the Plan.


15.6 TERMINATION. Any termination of the Plan or discontinuance of contributions
by any one Participating Employer shall operate with regard only to the
Participants employed by that Participating Employer. All Employees affected
thereby shall have a one hundred percent (100%) nonforfeitable interest in their
Accounts.

<PAGE>

In the event any Participating Employer terminates its participation in this
Plan, or in the event that any such Participating Employer shall cease to exist
through sale, reorganization or bankruptcy, the Trust fund shall be allocated by
the Trustee, in accordance with the direction of the Administrator, into
separate Trust funds. The amount to be allocated to the Trust of the terminating
Participating Employer shall be equal to the value of the Account balances of
its Participants as of the most recent date as of which Plan assets were valued
under Article Five, unless a special valuation is agreed to by the Administrator
and the terminating Participating Employer.


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




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>7
<FILENAME>a2040873zex-10_14.txt
<DESCRIPTION>EXHIBIT 10.14
<TEXT>

<PAGE>

                                  EXHIBIT 10.14

                               INTRUSION.COM, INC.

                        1997 EMPLOYEE STOCK PURCHASE PLAN
                           AS AMENDED JANUARY 17, 2001

1.  PURPOSE:

       The Intrusion.com 1997 Employee Stock Purchase Plan (the "Plan") is
intended to provide a method whereby employees of Optical Data Systems, Inc., a
Delaware corporation (the "Company"), and its subsidiaries will have an
opportunity to acquire an equity interest in the Company through the purchase of
shares of the Common Stock of the Company. It is the intention of the Company
that the rights to purchase Common Stock of the Company granted under the Plan
be considered options issued under an "employee stock purchase plan" as that
term is defined in Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
Section 423(b) of the Code.

2. DEFINITIONS:

           (a) "Compensation" shall mean cash compensation including
       straight-time earnings, commissions, payments for overtime, shift
       premium, bonuses and other incentive payments, but excluding relocation
       allowances and non-cash compensation.

           (b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

           (c) "Common Stock" shall refer to the class of stock which, as of the
       effective date of this Plan, is designated as common stock of the
       Company.

           (d) "Committee" shall mean the Compensation Committee appointed by
       the Board of Directors in accordance with Section 3 of the Plan.

           (e) "Employee" shall mean any person who is customarily employed on a
       full-time or part-time basis by the Company or a subsidiary of the
       Company, and is regularly scheduled to work 20 hours or more per week and
       five months or more per calendar year.

           (f) "Market Value" of the Company's Common Stock shall be determined
       by the lower of the closing price per share of the Common Stock on the
       Offering Commencement Date or Offering Termination Date for each Offering
       on which trading occurred on the NASDAQ National Market System (or other
       quotation system or stock exchange on which the Common Stock then
       trades), or, if on either of such dates no closing price was reported, on
       the last preceding date on which a closing price of the Common Stock was
       reported. In the event the Common Stock is not publicly traded on an
       Offering Commencement Date or Offering Termination Date, the
       determination of its Market Value shall be made by the Committee in such
       manner as it deems appropriate.

           (g) "Offering" shall have the meaning as described in Section 4 of
       the Plan.

           (h) "Offering Commencement Date" shall mean the date on which each
       Offering under the Plan commences.

           (i) "Offering Termination Date" shall mean each July 31 and January
       31 on which each Offering terminates.

           (j) "Option" shall mean an option to purchase Common Stock granted
       under the Plan.

<PAGE>

           (k) "Participant" shall refer to an eligible Employee who
       participates in the Plan in accordance with the provisions contained
       herein.

           (l) "Stock Administrator" shall mean an Employee or Employees
       designated by the Committee to perform certain day-to-day administrative
       functions to implement the Plan.

3.  ADMINISTRATION:

       The Plan shall be administered by the Compensation Committee (the
Committee) of the Company appointed by the Board of Directors of the Company
(the "Board of Directors"). Members of the Committee shall not be full-time or
part-time employees of the Company. Accordingly, no member of the Committee
shall be eligible to purchase Common Stock under the Plan. Subject to the
express provisions of the Plan, the Committee shall have plenary authority in
its discretion to interpret and construe any and all provisions of the Plan, to
adopt rules and regulations for administering the Plan, and to make all other
determinations deemed necessary or advisable for administering the Plan. The
Committee's determination on the foregoing matters shall be conclusive. Any
member of the Committee may resign by submitting a letter of resignation to the
Board of Directors. Further, the Board of Directors may from time to time
appoint members of the Committee in substitution for, or in addition to, members
previously appointed and may fill vacancies in the Committee. The Committee may
correct any defect or omission or reconcile any inconsistency in the Plan, in
the manner and to the extent it shall deem desirable. Any decision or
determination reduced to writing and signed by a majority of the members of the
Committee shall be effective as if it had been made by a majority vote at a
meeting of the Committee duly called and held.

       The Committee may designate an Employee or Employees to serve as Stock
Administrator to implement the provisions of, and interpretations by the
Committee, of the Plan. In absence of the designation by the Committee of a
Stock Administrator, any reference herein to the Stock Administrator shall be
deemed to be a reference to the Committee.

4.  OFFERINGS:

       The Plan will be implemented by two six-month offerings per year
commencing each February 1 and August 1 (each, an "Offering"). The first
Offering under the Plan shall begin on August 1, 1997 and will terminate January
31, 1998. Subsequent Offerings will begin on each successive February 1 and
August 1, terminating on the next following July 31 and January 31 thereafter,
respectively.

5.  SHARES SUBJECT TO THE PLAN:

       The maximum number of shares of Common Stock issuable under the Plan
shall be 500,000, subject to adjustment in accordance with Section 13 hereof.
The maximum number of shares of Common Stock issuable in each Offering shall be
100,000 plus all unissued shares from prior Offerings, not to exceed 500,000,
subject to adjustment in accordance with Section 13 hereof. If the total number
of shares of Common Stock for which Options are exercised on any Offering
Termination Date exceeds the maximum number of shares for the applicable
Offering, the Committee shall make a pro rata allocation of the shares available
for delivery and distribution in as nearly a uniform manner as shall be
practicable and as it shall determine to be equitable, and the balance of
payroll deductions credited to the account of each Participant under the Plan
shall be held in each such Participant's account for the purchase of shares
under the next Offering under the Plan unless a Participant elects to withdraw
from the Plan.

6.  TERM OF PLAN:

       The Plan shall become effective on the date on which the Company's
stockholders approve the adoption of the Plan. Unless earlier terminated
pursuant to the provisions of Section 12 hereof, the Plan shall continue in
effect for a term of ten (10) years from the date of adoption of the Plan by the
Company's

<PAGE>

stockholders; provided, however, that the termination of this Plan shall not
affect any shares of Common Stock issued or any outstanding and unexpired
option granted under this Plan.

7.  ELIGIBILITY AND PARTICIPATION:

INITIAL ELIGIBILITY: Any Employee who shall have completed ninety (90) days
employment with the Company or a subsidiary of the Company shall be eligible to
participate in Offerings under the Plan which commence on or after such ninety
day period of employment has concluded, provided Employee is still employed with
the Company. Directors who are not full-time or part-time officers or Employees
are not eligible to participate in the Plan.

LEAVE OF ABSENCE: For purposes of participation in the Plan, a person on leave
of absence shall be deemed to be an Employee for the first 90 days of such leave
of absence and such Employee's employment shall be deemed to have terminated at
the close of business on the 90th day of such leave of absence unless such
Employee shall have returned to regular full-time or part-time employment prior
to close of business on the 90th day. Termination by the Company of any
Employee's leave of absence other than by such Employee's return to full-time,
or part-time employment, shall terminate an Employee's employment for all
purposes of the Plan and shall terminate such Employee's participation in the
Plan and right to exercise any Options.

RESTRICTIONS ON PARTICIPATION: Notwithstanding any provisions of the Plan to the
contrary, no Employee shall be permitted to purchase Common Stock under the
Plan:

           (a) if, immediately after the grant, such Employee would own stock
       and/or hold outstanding options or other rights to purchase capital stock
       of the Company possessing 5% or more of the total combined voting power
       or fair market value (as determined by the Committee) of all outstanding
       shares of capital stock of the Company (for purposes of this paragraph,
       the rules of Section 424(d) of the Code shall apply in determining stock
       ownership of any employee), or

           (b) which permits such Employee's rights to purchase capital stock
       under all employee stock purchase plans of the Company to accrue at a
       rate which exceeds $25,000 in fair market value of the capital stock of
       the Company (determined at the time such option or right is granted) for
       each calendar year in which such option or right is outstanding.

PARTICIPATION: An eligible Employee may become a Participant by completing an
authorization form (an "Authorization") for payroll deduction and providing the
Authorization to the Company within the time specified in the Offering in such
form as the Stock Administrator provides. Payroll deduction for a Participant
shall commence on the applicable Offering Commencement Date when the
authorization for a payroll deduction becomes effective. Once a Participant is
enrolled, he will automatically be enrolled as a Participant in all Offerings
unless the Participant terminates enrollment, becomes ineligible, or the Plan is
terminated.

8.  PAYROLL DEDUCTIONS:

AMOUNT OF DEDUCTION: An eligible Employee may become a Participant in an
Offering by delivering a completed Authorization to the Stock Administrator
within the time period specified which shall authorize payroll deductions of up
to 10% (in increments of 1%) of such Participant's Compensation during the
Offering, not to exceed the maximum number of shares that each Participant can
purchase in each Offering (1,000 shares of Common Stock).

PARTICIPANT'S ACCOUNT: All payroll deductions made for a Participant shall be
credited to his account under the Plan and applied toward the exercise of the
Option and the purchase price of the underlying shares of Common Stock allocable
to such Participant for each Offering Period on each applicable Offering
Termination Date. At any time during an Offering period, a Participant may
terminate his payroll deduction. A Participant may not make any separate cash
payment into such account except when on leave

<PAGE>

of absence and then only as provided in this Section 8. Other than
discontinuing participation, a Participant may not otherwise change the terms
of his participation in an Offering. No interest shall accrue to any balance
of money credited to the account of a Participant under the Plan.
Specifically, a Participant may not change his payroll deduction percentage
for such Offering.

LEAVE OF ABSENCE: If a Participant takes a leave of absence, such Participant
shall have the right to elect: (i) to withdraw the balance of the
Participant's account, (ii) to discontinue contributions to the Plan but
remain a Participant in the Plan during the first 90 days of such leave of
absence, or (iii) to remain a Participant in the Plan during the first 90 days
of such leave of absence, authorizing deductions to be made from payment by
the Company to the Participant during such leave of absence. If the
Participant agrees to remain a Participant in the Plan during such leave of
absence, the Participant agrees to make cash payments to the Plan at the end
of each payroll period to the extent that amounts payable by the Company to
such Participant are insufficient to meet such Participant's authorized
payroll deduction.

PARTICIPANTS SUBJECT TO SECTION 16 OF THE EXCHANGE ACT: Notwithstanding the
other provisions of this Plan, except the provisions set forth in Section 7, any
Participant subject to the requirements of Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules promulgated
thereunder, shall not have the opportunity to withdraw or discontinue payroll
deductions with respect to an Offering after such Participant completes an
Authorization and the Offering period has commenced, provided that such
Participant remains an Employee and subject to such requirements.

9.  GRANT OF OPTION:

       On the Offering Commencement Date, a participating Employee shall be
deemed to have been granted an Option (each, an "Option") to purchase a maximum
number of shares of Common Stock equal to an amount determined as follows: an
amount equal to (i) that percentage of the Employee's Compensation which he has
elected to have withheld up to 10% multiplied by (ii) the Participant's
Compensation during the period of the Offering (iii) divided by 85% of the
Market Value of the Common Stock. Notwithstanding any provision herein to the
contrary, the maximum number of shares of Common Stock that each Participant can
purchase in each Offering is 1,000, subject to adjustment pursuant to the
provisions of Section 13 hereof.

10.  EXERCISE OF OPTION:

AUTOMATIC EXERCISE: On each Offering Termination Date, each Participant's
accumulated payroll deduction (without any increase for interest) will be
applied to the purchase of whole shares of Common Stock in accordance with the
formula in Section 9, up to a maximum of 1,000 shares of Common Stock per
employee. No fractional shares shall be issued upon the exercise of Options
granted under the Plan. The amount, if any, of accumulated payroll deductions
remaining in each Participant's account after the purchase of whole shares of
Common Stock will be held in each such Participant's account for the purchase of
shares under the next Offering under the Plan unless a Participant elects to
withdraw from the Plan.

NON-TRANSFERABILITY OF OPTION: During a Participant's lifetime, Options held by
such Participant under the Plan shall be exercisable only by that Participant.

DELIVERY OF STOCK: As promptly as is practicable after the Offering Termination
Date of each Offering, the Company will deliver to each Participant, as
appropriate, the Common Stock purchased upon exercise of Participant's option.

11.  WITHDRAWAL:

GENERAL: A Participant may withdraw payroll deductions credited to his account
under the Plan at any time by giving written notice to the Stock Administrator
of the Company. All of the Participant's payroll deductions credited to the
account will be paid promptly after receipt of the notice of withdrawal and no

<PAGE>

further payroll deductions will be made from the Participant's pay during such
Offering. The Company may treat any attempt to borrow by an Employee on the
security of accumulated payroll deductions as an election to withdraw such
payroll deductions.

EFFECT ON SUBSEQUENT PARTICIPATION: A Participant's withdrawal from any Offering
will not have any effect upon his eligibility to participate in any succeeding
Offering or in any similar plan which may hereafter be adopted by the Company.

TERMINATION OF EMPLOYMENT: Upon termination of the Participant's employment for
any reason, including retirement (but excluding death while in the employ of the
Company or continuation of a leave of absence for a period beyond 90 days), the
payroll deductions credited to the participant's account will be returned to the
Participant or, in the case of death subsequent to termination of employment, to
the person or persons entitled to receive such payroll deductions as determined
in accordance with the provisions of Section 14 hereof.

TERMINATION OF EMPLOYMENT DUE TO DEATH: Upon termination of the Participant's
employment because of death, the Participant's beneficiary shall have the right
to elect, by written notice given to the Stock Administrator prior to the
earlier of the Offering Termination Date or the expiration of a period of sixty
(60) days commencing with the date of the death of the Participant, either:

           (a) to withdraw all of the payroll deductions credited to the
       Participant's account under the Plan, or

           (b) to exercise the Participant's option for the purchase of Common
       Stock on the Offering Termination Date next following the date of the
       Participant's death for the purchase of the number of whole shares of
       Common Stock which the accumulated payroll deductions in the
       Participant's account at the date of the Participant's death will
       purchase in accordance with the formula set forth in Section 9 hereof,
       and any excess in such account will be returned to said beneficiary,
       without interest.

       In the event that no such written notice of election shall be duly
received by the Stock Administrator of the Company, the beneficiary shall
automatically be deemed to have elected, pursuant to paragraph (b), to exercise
the participant's option.

LEAVE OF ABSENCE: A Participant on leave of absence shall continue to be a
Participant in the Plan so long as such Participant is on continuous leave of
absence; provided, however, any Participant who has been on leave of absence for
more than 90 days and who is therefore not an Employee for the purpose of the
Plan shall not be entitled to participate in any Offering commencing after the
90th day of such leave of absence. Notwithstanding any other provisions of the
Plan, unless a Participant on leave of absence returns to regular full-time or
part-time employment with the Company or subsidiary of the Company, as
applicable, at the earlier of (a) the termination of such leave of absence or
(b) the 90th day of such leave of absence, such Participant's participation in
the Plan shall terminate on whichever of such dates first occurs, and the
payroll deductions credited to the Participant's account will be returned to the
Participant without interest.

12.  AMENDMENT AND TERMINATION:

       The Board of Directors shall have complete power and authority to
terminate or amend the Plan at any time; provided, however, that the Board of
Directors shall not, without the approval of the stockholders of the Company,
(i) materially increase the benefits accruing to Participants under the Plan,
(ii) increase the maximum number of shares of Common Stock which may be issued
under the Plan, (iii) materially modify requirements as to the class of
Employees eligible to participate in the Plan, or (iv) permit the members of the
Committee to participate in the Plan. No termination, modification, or amendment
of the Plan may adversely affect the rights of a Participant having an
outstanding Option under the Plan without the consent of such Participant.

<PAGE>

13.  RECAPITALIZATION OR REORGANIZATION:

       If, at any time while any Options are outstanding, the outstanding shares
of Common Stock have increased, decreased, changed into, or been exchanged for a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock split, reverse
stock split, stock dividend, or similar transaction, appropriate and
proportionate adjustments may be made by the Committee in the number and/or kind
of shares which are subject to purchase under outstanding Options and the
exercise price or prices applicable to such outstanding Options.

       Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the holder of each Option then outstanding under the Plan
shall thereafter be entitled to receive at the next Offering Termination Date
upon the exercise of such Options for each share as to which such Option shall
be exercised, as nearly as reasonably may be determined, the cash, securities
and/or property which a holder of one share of the Common Stock was entitled to
receive upon and at the time of such transaction. The Board of Directors shall
take such steps in connection with such transaction as it shall deem necessary
to assure that all Participants shall receive the cash, securities and/or
property as to which they may thereafter be entitled.

14.  MISCELLANEOUS:

HOLDING PERIOD: An Employee must notify the Company promptly if the Employee
disposes of Common Stock acquired under the Plan within two years of the date
Options were granted hereunder to purchase such Common Stock.

RESTRICTIONS ON EXERCISE: Common Stock shall not be issued pursuant to the
exercise of an Option, unless the exercise of such Option and the issuance and
delivery of such shares of Common Stock pursuant thereto shall comply with all
relevant provisions of law, including, without limitations, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or quotation system upon
which the Common Stock may then be traded, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

       As a condition to the exercise of an Option, the Company may require the
Participant to represent and warrant at the time of such exercise that such
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.

REGISTRATION OF STOCK: Common Stock to be delivered to a Participant under the
Plan will be registered in the name of the Participant, or, if the Participant
so directs by written notice to the Stock Administrator of the Company prior to
the Offering Termination Date, in the names of the Participant and one such
other person as may be designated by the Participant as joint tenants with
rights of survivorship or as tenants by the entireties, to the extent permitted
by applicable law.

DESIGNATION OF BENEFICIARY: A Participant may file a written designation of
beneficiary who is to receive any Common Stock and/or payroll deductions
remaining in such Participant's account. Such designation of beneficiary may be
changed by the Participant at any time by written notice to the Stock
Administrator. Upon the death of a Participant and upon receipt by the Stock
Administrator of proof of identity and existence at the Participant's death of a
beneficiary validly designated by him under the Plan, the Company shall deliver
Common Stock and/or payroll deductions remaining in such Participant's account
to such beneficiary. In the event of death of a Participant and in the absence
of a beneficiary designated under the Plan who is living at the time of such
Participant's death, the Stock Administrator shall deliver such Common Stock
and/or remaining payroll deductions to the executor or administrator of the
estate of the

<PAGE>

Participant, or if no such executor or administrator has been appointed to the
knowledge of the Stock Administrator, the Stock Administrator may deliver such
Common Stock and/or remaining payroll deductions to the spouse or to any one
or more dependents of the Participant as the Committee may designate. No
beneficiary shall, prior to death of the Participant, acquire any interest in
the stock or payroll deductions credited to the Participant's account.

TRANSFERABILITY: Neither payroll deductions credited to a Participant's account
nor any rights to exercise an Option or to receive Common Stock under the Plan
may be assigned, transferred, pledged or otherwise disposed of in any way by a
Participant other than by will or the laws of descent and distribution. Any such
attempted assignment, transfer, pledge or other disposition shall be without
effect, except that the Committee may treat such act as an election by a
Participant to withdraw his from an Offering or from the Plan.

PARTICIPANT'S INTEREST IN OPTION STOCK: Each Participant shall not have any
rights or interest in the shares of Common Stock exercisable under an Option
until such Option has been exercised in accordance with the provisions of the
Plan.

USE OF FUNDS: All payroll deductions received or held by the Company under this
Plan may be used by the Company for any corporate purpose and the Company shall
not be obligated to segregate such payroll deductions from other Company assets.

NO EMPLOYMENT RIGHTS: The Plan does not, directly or indirectly, create any
right for the benefit of any Employee or class of Employees to purchase any
shares under the Plan, or create in any Employee or class of Employees any right
with respect to continuation of employment by the Company or any subsidiary of
the Company, and it shall not be deemed to interfere in any way with the
Company's right to terminate, or otherwise modify, an Employee's employment at
any time.

STOCKHOLDER RIGHTS: The holder of an option under this Plan shall have no rights
as a stockholder with respect to the shares of Common Stock covered by such
option until the due exercise of such option and the date of issuance of one or
more certificates registered in the name of such option holder evidencing such
shares.

SECURITIES LAWS: With respect to persons subject to Section 16 of the Exchange
Act, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Board of Directors or the Committee
fails to so comply, it shall be deemed null and void to the extent permitted by
law and deemed advisable by the Committee.

GOVERNING LAW: The provisions of this Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>8
<FILENAME>a2040873zex-21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>

<PAGE>


                                   EXHIBIT 21

                      INTRUSION.COM, INC. AND SUBSIDIARIES
                         SUBSIDIARIES OF THE REGISTRANT

     The following table lists the subsidiaries of the Registrant as of February
28, 2001, the state or other jurisdiction of incorporation and the names under
which such subsidiaries do business. The Registrant owns all of the outstanding
voting securities of each subsidiary.

<TABLE>
<CAPTION>
                                         Jurisdiction                       Name under
                                             of                         which Subsidiary
          Name of Subsidiary             Organization                   is doing business
- -------------------------------------   --------------       -------------------------------------
<S>                                     <C>                  <C>
 Intrusion.com, Inc.                       Delaware                   Intrusion.com, Inc.
 Optical Data Systems, Inc.                 Nevada                Optical Data Systems, Inc.
 ODS, Inc.                                  Nevada                         ODS, Inc.
 Optical Data Systems - Texas, Inc.          Texas            Optical Data Systems - Texas, Inc.
 Intrusion.com GmbH                         Germany                    Intruson.com GmbH
 Intrusion.com Limited                  United Kingdom               Intrusion.com Limited
 Intrusion.com Ltd.                     United Kingdom                Intrusion.com Ltd.
 Intrusion.com SARL                         France                    Intrusion.com SARL
 Optical Data Systems, Ltda                 Brazil                Optical Data Systems, Ltda
 Optical Data Systems (Barbados) Ltd.      Barbados          Optical Data Systems (Barbados) Ltd.
 Intrusion.com Sdn. Bhd.                   Malaysia                 Intrusion.com Sdn. Bhd.
 ODS Investments, Inc.                      Nevada                   ODS Investments, Inc.

</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>9
<FILENAME>a2040873zex-23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>

<PAGE>




                                   EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

     We consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 33-58570) pertaining to the 1983 Incentive Stock Option Plan of
Intrusion.com, Inc. and the 1987 Incentive Stock Option Plan of Intrusion.com,
Inc., the Registration Statement (Form S-8, No. 33-34476) pertaining to the 1995
Stock Option Plan of Intrusion.com, Inc., the Registration Statement (Form S-8,
No. 33-34484) pertaining to the 1995 Non-employee Director Stock Option Plan of
Intrusion.com, Inc., the Registration Statement (Form S-8, No. 33-42927)
pertaining to the 1997 Employee Stock Purchase Plan of Intrusion.com, Inc., the
Registration Statement (Form S-8, No. 33-80898) pertaining to the Intrusion.com
401(k) Savings Plan of Intrusion.com, Inc. and the Registration Statement (Form
S-8, No. 333-53813) pertaining to the Essential Communication Corporation 1996
Stock Option Plan of our report dated January 17, 2001, of Intrusion.com, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 2000.

                                                          /s/ Ernst & Young LLP

Dallas, Texas
March 20, 2001

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>10
<FILENAME>a2040873zex-27.txt
<DESCRIPTION>EXHIBIT 27 FDS
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES
F-2 AND F-3 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-START>                             JAN-01-2000
<PERIOD-END>                               DEC-31-2000
<CASH>                                          20,345
<SECURITIES>                                    17,506
<RECEIVABLES>                                    7,806
<ALLOWANCES>                                       919
<INVENTORY>                                      8,359
<CURRENT-ASSETS>                                64,276
<PP&E>                                          15,921
<DEPRECIATION>                                   8,787
<TOTAL-ASSETS>                                  92,414
<CURRENT-LIABILITIES>                           11,762
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           205
<OTHER-SE>                                      78,582
<TOTAL-LIABILITY-AND-EQUITY>                    92,414
<SALES>                                         23,210
<TOTAL-REVENUES>                                23,210
<CGS>                                           19,009
<TOTAL-COSTS>                                   19,009
<OTHER-EXPENSES>                                47,653
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                  28
<INCOME-PRETAX>                                 26,184
<INCOME-TAX>                                     1,999
<INCOME-CONTINUING>                             24,185
<DISCONTINUED>                                   (974)
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    23,211
<EPS-BASIC>                                       1.18
<EPS-DILUTED>                                     1.13


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
