<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____________________)
Filed by the Registrant / x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTELLIGENT SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
<PAGE> 2
INTELLIGENT
SYSTEMS
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
770/381-2900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Shareholders of
Intelligent Systems Corporation (the "Company") will be held on Friday, June 12,
1998 at 4:00 p.m., local time, at the Company's offices, 4355 Shackleford Road,
Norcross, Georgia, for the purpose of considering and voting upon:
1. The election of one director to the Board of Directors to serve
until the 2001 Annual Meeting.
2. Such other matters as may properly come before the meeting or
any adjournment thereof.
Only shareholders of record at the close of business Friday, April 24,
1998, will be entitled to notice of and to vote at the meeting or any
adjournment thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. To ensure a quorum for the meeting, please sign, date and
return the proxy promptly in the enclosed business reply envelope. If you attend
the meeting, you may revoke your proxy and vote in person. The Company's 1997
Annual Report to Shareholders is enclosed.
By order of the Board of Directors,
BONNIE L. HERRON
Secretary
May 4, 1998
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE
MAY BE RECORDED.
<PAGE> 3
INTELLIGENT
SYSTEMS
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 12, 1998
This Proxy Statement is furnished to the shareholders of Intelligent
Systems Corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the 1998 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") and any
adjournment thereof. The Annual Meeting will be held on June 12, 1998 at the
Company's offices located at 4355 Shackleford Road, Norcross, Georgia, at 4:00
p.m., local time. It is anticipated that this Proxy Statement and the
accompanying proxy will be mailed to shareholders on or about May 4, 1998.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $.01 par value per share, with each share entitling its
owner to one vote on each matter submitted to the shareholders. The record of
shareholders entitled to vote at the Annual Meeting was taken as of the close of
business on Friday, April 24, 1998. On that date the Company had outstanding and
entitled to vote 5,104,467 shares of Common Stock, with each share entitled to
one vote.
QUORUM
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum at the
Annual Meeting. Shares which are withheld or abstain from voting will be treated
as present at the Annual Meeting for purposes of determining a quorum.
PROXIES
All properly executed proxy cards delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Shareholders should specify their choices with regard to the
proposal to be voted upon on the accompanying proxy card. IF NO SPECIFIC
INSTRUCTIONS ARE GIVEN WITH REGARD TO THE MATTER TO BE VOTED UPON, THEN THE
SHARES REPRESENTED BY A SIGNED PROXY CARD WILL BE VOTED "FOR" THE ELECTION OF
THE DIRECTOR NOMINEE. If any other matters properly come before the Annual
Meeting, the persons named as proxies will vote upon such matters according to
their judgment.
All proxy cards delivered pursuant to this solicitation are revocable at
any time at the option of the persons executing them by giving written notice to
the Secretary of the Company at 4355 Shackleford Road, Norcross, Georgia 30093,
or by executing and delivering to the Secretary a later dated proxy, or by
voting in person at the Annual Meeting, except that any such revocation shall
not be effective as to any matter upon which, prior to such revocation, a vote
shall have been cast pursuant to the authority conferred by such proxy.
All expenses incurred in connection with the solicitation of proxies will
be borne by the Company. Such costs include charges by brokers, fiduciaries and
custodians for forwarding proxy materials to beneficial owners of stock held in
their names. Solicitation may be undertaken by mail, telephone and personal
contact by directors, officers and employees of the Company without additional
compensation.
-1
<PAGE> 4
PRINCIPAL SHAREHOLDERS, DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information concerning the only
persons who are known to the Company to be beneficial owners of more than 5
percent of the Company's Common Stock as of February 28, 1998, and the ownership
of the Common Stock as of that date by each director, each executive officer
named in the Summary Compensation Table and by all directors and officers as a
group.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
BENEFICIAL OWNER ADDRESS OWNED CLASS A.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J. Leland Strange 4355 Shackleford Road 1,304,972 b. 24.5%
Chairman of the Board, President, CEO Norcross, GA 30093
Wallace R. Weitz & Company c. 1125 South 103rd St., Suite 600 550,000 10.7%
Omaha, NE 68124
Donald A. McMahon 1,500 *
Director
James V. Napier 11,100 *
Director
John B. Peatman 1,280 *
Director
Parker H. Petit 14,200 *
Director
Francis A. Marks 205,000 d. 3.9%
Vice President
J. William Goodhew, III 132,000 e. 2.5%
Vice President
All Directors and Executive Officers 1,859,609f. 32.3%
as a Group (9 persons)
</TABLE>
a. Except as otherwise noted, percentage is determined on the basis of
5,104,467 shares of Common Stock issued and outstanding plus securities
deemed outstanding pursuant to Rule 13 d - 3 (d) (1) of the Securities
Exchange Act of 1934, as amended. An asterisk indicates beneficial
ownership of less than 1 percent.
b. Includes (i) 130,104 shares owned by Jane H. Strange, Mr. Strange's wife,
with respect to which shares Mr. Strange may be deemed to be the beneficial
owner, but as to which he disclaims any beneficial interest, and (ii)
230,000 shares reserved for issuance to Mr. Strange pursuant to stock
options that were exercisable at February 28, 1998 or within sixty days of
such date.
c. In a Schedule 13G filed February 11, 1998, Wallace R. Weitz and Company, an
Investment Advisor registered under Section 203 of the Investment Advisers
Act of 1940, reported beneficial ownership of 550,000 shares of Common
Stock, all of which the firm has the sole power to vote and to dispose of.
d. Includes 170,000 shares reserved for issuance to Mr. Marks pursuant to
stock options that were exercisable at February 28, 1998 or within sixty
days of such date.
e. Includes 85,000 shares reserved for issuance to Mr. Goodhew pursuant to
stock options that were exercisable at February 28, 1998 or within sixty
days of such date.
f. Includes 655,000 shares reserved for issuance to executive officers
pursuant to stock options that were exercisable at February 28, 1998 or
within sixty days of such date.
-2-
<PAGE> 5
ADDITIONAL INFORMATION
The Company will furnish without charge a copy of its Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the fiscal year
ended December 31, 1997, including financial statements and schedules, to any
record or beneficial owner of its Common Stock as of April 24, 1998 who requests
a copy of such report. Any request for the Form 10-K should be in writing
addressed to: Bonnie L. Herron, Vice President and Secretary, Intelligent
Systems Corporation, 4355 Shackleford Road, Norcross, Georgia 30093. If the
person requesting the Form 10-K was not a shareholder of record on April 24,
1998, the request must include a representation that such person was a
beneficial owner of Common Stock of the Company on that date. Copies of any
exhibits to the Form 10-K will be furnished on request and upon the payment of
the Company's expenses in furnishing such exhibits.
PROPOSAL NO. 1 -- THE ELECTION OF ONE DIRECTOR
NOMINEE
At the Annual Meeting of Shareholders, one director will be elected to the
Board of Directors of the Company to serve a three-year term until the 2001
Annual Meeting of Shareholders. The other directors' terms expire at the Annual
Meeting of Shareholders listed below for each category of directors or until
their earlier death, resignation or removal from office. Directors are elected
by a plurality of the shares present and voting at the meeting. A "plurality"
means that the individuals who receive the largest number of votes cast are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Accordingly, shares that are withheld or abstain from voting will have
no effect on the outcome of the vote. Unless contrary instructions are given,
the proxies will be voted for the nominee.
In the event that the nominee withdraws or for any reason is not able to
serve as a director, the proxy will be voted for such other person as may be
designated by the Board of Directors as substitute nominee, but in no event will
the proxy be voted for more than one nominee. The Board of Directors has no
reason to believe that the nominee will not serve if elected.
The Board of Directors has nominated the person named below to serve as a
director of the Company. The nominee is currently a director of the Company. The
nominee has supplied the Company with the following information concerning his
current age, other directorships, positions with the Company, principal
employment and shares of Common Stock of the Company beneficially owned by such
nominee as of February 28, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO ELECT THE ONE NOMINEE LISTED BELOW AS A DIRECTOR OF THE COMPANY.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AGE POSITION / PRINCIPAL OCCUPATION (PERCENT OF CLASS)
- ------------------------------ ------- ------------------------------------------------- ----------------------------
NOMINEE FOR ELECTION TO SERVE UNTIL THE 2001 ANNUAL MEETING
<S> <C> <C> <C> <C>
John B. Peatman2. 63 Director, Professor of Electrical Engineering 1,280 *
at Georgia Institute of Technology
INCUMBENT DIRECTORS ELECTED TO SERVE UNTIL THE 1999 ANNUAL MEETING
Donald A. McMahon1.2. 67 Director, Retired 1,500 *
Parker H. Petit1. 58 Chairman of the Board of Matria Healthcare, Inc. 14,200 *
INCUMBENT DIRECTORS ELECTED TO SERVE UNTIL THE 2000 ANNUAL MEETING
James V. Napier1.2. 61 Director, Chairman of the Board of 11,100 *
Scientific-Atlanta, Inc.
J. Leland Strange 56 Director, Chairman of the Board, President, 1,304,972 24.5%
Chief Executive Officer
</TABLE>
* Less than one percent.
1. Audit committee
2. Compensation committee
-3-
<PAGE> 6
Mr. McMahon has served as a director of the Company since 1981. He retired
in 1984 from the position of President and Chief Executive Officer of Royal
Crown Companies and serves as a director of Norrell Corporation and Richton
International.
Mr. Napier has served as a director since 1982. Mr. Napier is Chairman of
the Board and a director of Scientific-Atlanta, Inc., a firm involved in cable
television electronics and satellite-based communication networks. He also
serves as a director of H.B.O. & Company, Vulcan Materials Company, Engelhard
Corporation, Personnel Group of America, Inc. and Westinghouse Air Brake
Company.
Dr. Peatman has served as a director since 1979 and has been a Professor
of Electrical Engineering at the Georgia Institute of Technology since 1964.
Mr. Petit has served as a director since July 1996. Mr. Petit has served
as Chairman of the Board of Matria Healthcare, Inc., an obstetrical home care
and maternity management services company since March 1996. Mr. Petit was
founder and Chairman of the Board of Healthdyne, Inc., Matria's predecessor,
from 1970 to March 1996. He also serves as a director of Healthdyne
Technologies, Inc., Healthdyne Information Enterprises, Inc., Atlantic Southeast
Airlines, Inc. and Logility, Inc.
Mr. Strange has served as President since 1983, Chief Executive Officer
and Chairman of the Board of Directors since 1985, and Chief Financial Officer
from November 15, 1991 to October 1995. Mr. Strange also serves as a director of
IQ Software Corporation and Healthdyne Technologies, Inc.
There are no family relationships among any of the Company's directors and
executive officers.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met four times during the year ended
December 31, 1997. The Audit Committee of the Board of Directors, which met once
during the last fiscal year, consists of Messrs. McMahon, Napier and Petit. The
Audit Committee recommends the appointment of the Company's independent auditors
and meets with the auditors to review their report on the financial operations
of the Company. The Board has a Compensation Committee consisting of Messrs.
McMahon, Napier and Peatman which met once during the last year. The
Compensation Committee reviews and makes recommendations concerning the
appropriate compensation level for the officers of the Company and any changes
in the Company's various benefit plans. The Plan Committee, which did not meet
in 1997, is responsible for administering the 1991 Stock Option Plan. The Plan
Committee has the same members as the Compensation Committee. All directors
attended all of the meetings of the Committees of the Board on which they serve
and at least 75 percent of the meetings of the Board of Directors.
EXECUTIVE OFFICERS
The following information is provided about the non-director executive
officers of the Company as of February 28, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION/PRINCIPAL OCCUPATION
---------------------------------------------------------------------------------------------
<S> <C> <C>
Henry H. Birdsong 39 Chief Financial Officer
J. William Goodhew, III 60 Vice President
Bonnie L. Herron 50 Vice President and Corporate Secretary
Francis A. Marks 64 Vice President
</TABLE>
-4-
<PAGE> 7
Mr. Birdsong joined the Company in 1988 as Controller and Tax Manager,
following six years of experience in various positions in public accounting. He
was appointed Chief Financial Officer in October 1995.
Mr. Goodhew joined the Company in January 1997 as Vice President. He was
president of Peachtree Software, Inc. from 1985 through 1996.
Mr. Marks joined the Company in May 1982 as Vice President of Product Line
Programs after 26 years with IBM Corporation in a variety of managerial and
executive positions. He served as Vice President and General Manager of one of
the Company's former subsidiaries and was appointed Vice President in 1983.
Ms. Herron joined the Company in 1982 as Director of Planning at a
subsidiary of the Company and subsequently at the Company. She has served as
Division Manager of a subsidiary and was elected Secretary in 1987 and Vice
President in 1990.
The executive officers of the Company are elected annually by the Board of
Directors following the annual meeting of the shareholders and serve for a term
of one year or until they are removed, replaced or resign.
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION AWARDS
- -------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (i)
All Other
Name and Principal Position Year Salary Bonus Option/SARs Compensation *
$ $ # $
- ----------------------------- ----------- -------------- -------------- --------------------------- -----------------
<S> <C> <C> <C> <C> <C>
J. Leland Strange 1997 206,359 -- -- 2,375
President & CEO 1996 191,065 -- 130,000 2,375
1995 152,065 39,000 130,000 1. 2,700
Francis A. Marks 1997 122,273 -- -- 1,834
Vice President 1996 122,985 -- 80,000 1,870
1995 92,273 30,000 80,000 1. 2,164
J. William Goodhew, III 1997 115,385 -- -- --
Vice President 1996 -- -- 100,000 --
</TABLE>
* Includes contributions to the respective accounts of the executive officers
pursuant to the terms of the Company's Tax-Deferred Savings and Protection
Plan (the "401(k) Plan"). Such amounts are fully vested.
1. Options granted in 1995 were canceled and replacement grants were made in
1996.
OPTION EXERCISES AND YEAR-END VALUES TABLE
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
FY-End FY-End*
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
# $ # $
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. Leland Strange -0- -0- 230,000/0 683,750/0
Francis A. Marks -0- -0- 170,000/0 527,500/0
J. William Goodhew, III 15,000 25,313 85,000/0 143,438/0
</TABLE>
* Based on the difference between the exercise price and the closing sales
price per share for the Common Stock on December 31, 1997 of $4.625, as
reported by the American Stock Exchange.
-5-
<PAGE> 8
COMPENSATION OF DIRECTORS
Non-employee directors are paid $8,000 per year plus a fee of $2,000 per
meeting day. Total compensation is capped at $16,000 annually. Effective January
1, 1992, the Company adopted the Outside Directors' Retirement Plan which
provides for each nonemployee director, upon resignation from the Board after
reaching the age of 65, to receive a lump sum cash payment equal to $5,000 for
each full year of service as a director of the Company (and its predecessors and
successors) up to $50,000.
CHANGE-IN-CONTROL ARRANGEMENTS
Effective January 1, 1992, the Company adopted the Change in Control Plan
for Officers (the "Change in Control Plan") so that if control of the Company
changes in the future, management would be free to act on behalf of the Company
and its shareholders without undue concern for the possible loss of future
compensation. A "change in control" is defined to mean either: (i) the
accumulation by an unrelated person of beneficial ownership of more than 25
percent of the Company's Common Stock, (ii) the sale of all or substantially all
of the Company's assets to an unrelated person, in a merger or otherwise, or
(iii) a change of control within the meaning of the rules promulgated by the
Securities and Exchange Commission.
Under the Change in Control Plan, if an officer terminates after a change
in control, the officer would receive a lump sum cash payment in an amount equal
to twice the total of (i) such officer's base annual salary at the time of
termination, (ii) the cash value of annual benefits, and (iii) such officer's
bonus for the most recent year, if any. Additionally, upon a change in control,
all options shall vest and the exercise period for all options becomes the
longer of (i) one year after the date of termination or (ii) the exercise period
specified in the officer's option agreement. The right to such benefits would
lapse one year after the occurrence of the last change in control event to occur
if there were no actual termination during that period. Currently, J. Leland
Strange, Francis A. Marks and Bonnie L. Herron are the only officers designated
by the Board to participate in the Change in Control Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for reviewing and approving compensation paid by the
Company to the executive officers of the Company. The Compensation Committee
reviews compensation of the executive officers annually, with input from the
Chief Executive Officer. The 1991 Stock Plan Committee (the "Plan Committee") is
responsible for administering the 1991 Stock Incentive Plan, including selecting
individuals who will receive stock option grants and determining the timing,
pricing and amounts of the options granted. The Plan Committee reviewed and
granted stock options to executive officers in 1991, 1995 and 1996. Both
Committees are comprised of three nonemployee directors of the Company.
The Securities and Exchange Commission requires that all compensation
committees discuss how the companies that they serve intend to deal with the
newly enacted cap on the deductibility of compensation over $1 million for
proxy-named executive officers. Given the Company's current level of executive
compensation, it is not now necessary to consider this issue.
The basic goal of the Company's compensation program for executive
officers is to:
- fairly compensate executive officers commensurate with their
responsibilities and contribution to the Company
- reward management for achievement of financial or other measurable
goals of the Company and specified subsidiaries, where the
contribution of the executive can be tied to operations under his
control
- align management's compensation with shareholder interests as
measured by stock price appreciation
-6-
<PAGE> 9
In 1997, the compensation of executive officers consisted of a base
salary, a cash incentive, and long-term compensation consisting of stock
options. In 1996, the compensation plan included a base salary and long-term
compensation consisting of stock options. In 1995, the compensation of the named
executive officers included a base salary, a cash incentive plan, and long-term
compensation consisting of stock options. Because the Company is not a
traditional operating company with readily identifiable comparative companies,
the base salary is determined by the Compensation Committee. The Committee
intends the base salary to be in the median range for persons with similar
experience and scope of responsibility. The Committee considers a number of
subjective factors including the nature, scope and variety of responsibilities
of each executive as well as the Company's financial results and condition. The
Committee considers an individual executive's performance in a variety of
functions which may include line responsibility for established as well as
start-up companies, corporate development activities (including acquisitions and
investments), completion of significant transactions, contribution to and
management of the Company's minority-owned partnership businesses and other
corporate functions.
Cash incentives, when included in the compensation plan, are earned by the
named executives based on achievement of specified goals of the Company as a
whole or those subsidiaries or projects for which the named executive has
management responsibility. Cash incentives were earned in 1995 based on a
combination of achievement of performance measures at certain subsidiaries for
which the individual executives had responsibility as well as overall corporate
results. In 1996, a cash incentive was not part of the executives' compensation
for several reasons. There were changes in responsibility during the year and a
significant amount of the executives' responsibilities were with start-up
subsidiaries and minority-owned companies, in which there was no direct
measurable financial result which could be tied to the executive's performance.
In 1997, cash incentives were part of the total compensation plan but none were
earned by the named executives.
The Company's long-term incentive compensation plan is based on the
1991 Stock Incentive Plan which is designed to reward executives for increases
in the market price of the Company's stock, thus linking the interest of
executives and shareholders. The Plan Committee, in its sole discretion, grants
options to those individuals whose contribution is most likely to have an impact
on the Company's overall performance and price of the Company's common stock.
The number of options granted to an individual executive is designed to provide
an adequate financial incentive over a three to five year time frame and to
provide equity interest in the Company to its executives. The number of options
granted to an executive officer depends upon a subjective evaluation of the
individual's contribution to the Company. In 1996, the Plan Committee canceled
stock options which had been granted in 1995 to executive officers and re-issued
the same number of options in 1996 in order to provide favorable tax treatment
of the options as incentive stock options. The canceled options had an exercise
price of $2.07 per share compared to $2.25 for the replacement options. The
vesting schedule of most of the options granted in 1996 was tied to increases in
the trading price of the Company's common stock. Because the trading price met
the vesting targets in 1997, the options became fully vested in 1997.
It is the policy of the Company to provide executives with the same
benefits provided to all other employees with respect to medical, dental, life
insurance and 401(k) plans.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee reviews the compensation of the Chief
Executive Officer annually. Mr. Strange, the largest shareholder of the Company,
does not have an employment agreement with the Company. Since there are no
directly comparable peer group companies, in setting Mr. Strange's compensation
the Committee considers a number of subjective factors including the nature,
scope and variety of his responsibilities, his contribution to increasing the
value of the Company's minority-owned companies and the trading price of the
Company stock, as well as the Company's financial results and condition. The
Compensation Committee believes Mr. Strange's compensation is appropriate in
consideration of the scope of Mr. Strange's position and the performance of the
Company. In 1997, the increase in Mr. Strange's total compensation was in part
due to Mr. Strange's contribution to increasing the value of one of the
Company's investments. Mr. Strange was awarded stock options in 1991 and 1996
under the same conditions as described above for all executive officers. In
determining the number of options granted, the Plan Committee considered his
base salary, the number of shares owned by Mr. Strange, and the number
-7-
<PAGE> 10
of options granted to other executives. The Plan Committee believes the options
provide a reasonable financial incentive and directly tie increases in Mr.
Strange's total compensation to increases in shareholder value.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE PLAN COMMITTEE
<S> <C>
Donald A. McMahon Donald A. McMahon
James V. Napier James V. Napier
John B. Peatman John B. Peatman
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McMahon, Napier and Peatman served as members of the Compensation
Committee and the Plan Committee in 1997. None of these individuals is a present
or former officer or employee of the Company.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of the companies on the AMEX Market
Value Index and the S&P Technology Sector Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG INTELLIGENT SYSTEMS, THE S&P TECHNOLOGY SECTOR INDEX AND THE AMEX
MARKET VALUE INDEX
TOTAL RETURN COORDINATES
<TABLE>
<CAPTION>
Total Return - Data Summary
Research Data Group
INS
Cumulative Total Return
------ ------ -------- --------- -------- --------
12/92 12/93 12/94 12/95 12/96 12/97
<S> <C> <C> <C> <C> <C> <C> <C>
INTELLIGENT SYS CORP NEW INS 100.00 110.71 121.43 121.43 171.43 278.57
AMEX MARKET VALUE IXAX 100.00 119.52 108.63 137.32 146.10 177.20
S & P TECHNOLOGY SECTOR ITES 100.00 123.01 143.37 206.51 292.98 369.42
</TABLE>
* $100 invested on 12/31/92 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
-8-
<PAGE> 11
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's executive officers and directors and persons who own more than ten
percent of the Company's Common Stock, as well as certain affiliates of such
persons, to file initial reports of ownership of the Company's Common Stock and
changes in such ownership with the Securities and Exchange Commission and the
American Stock Exchange. Executive officers, directors and persons owning more
than ten percent of the Company's Common Stock are required by Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, the Company believes that, during the fiscal year ended December
31, 1997, all filing requirements applicable to its executive officers,
directors, and owners of more than ten percent of the Company's Common Stock
were complied with in a timely manner.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, Atlanta, Georgia, acted as the Company's principal
independent public accountants for the fiscal year ended December 31, 1997.
Representatives of Arthur Andersen LLP are expected to be present at the
shareholders' meeting and will have the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be presented at the Company's 1999
Annual Meeting of Shareholders should be submitted to the Secretary of the
Company by certified mail, return receipt requested and must be received by the
Company at its offices in Norcross, Georgia on or before December 18, 1998 to be
eligible for inclusion in the Company's proxy statement and form of proxy for
that meeting.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors knows of no matters other than those stated above
which are to be brought before the meeting. However, if any other matter should
be presented for consideration and voting, it is the intention of the persons
named in the enclosed form of proxy to vote the proxy in accordance with their
judgment of what is in the best interest of the Company.
By order of the Board of Directors
BONNIE L. HERRON
Secretary
Norcross, Georgia
May 4, 1998
-9-
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APPENDIX
INTELLIGENT SYSTEMS CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned, a shareholder of common stock, $.01 par value (the "Common
Stock") of Intelligent Systems Corporation, a Georgia corporation (the
"Company") hereby appoints J. Leland Strange and Bonnie L. Herron, and each of
them with full power of substitution, proxies to vote at the Annual Meeting of
Stockholders of the Company to be held on June 12, 1988 at 4:00 p.m., local
time, and at any adjournment or adjournments thereof, hereby revoking any
proxies heretofore given, to vote all shares of Common Stock of the Company
held or owned by the undersigned as of the record date, April 24, 1988 as
directed on the reverse, and in their discretion, upon such other matters as
may come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
[SEE REVERSE SIDE]
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[X] Please mark your
votes as in this
example.
ELECTION
OF FOR WITHHELD NOMINEE: John B. Peatman
DIRECTOR: [ ] [ ]
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS
ARE SPECIFIED, THE PROXY WILL BE VOTED "FOR" PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
SIGNATURE(S) DATE SIGNATURE(S) DATE
------------ ---------- -------------- ----------
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If the signer is a corporation, the full
corporate name should be signed by a duly authorized officer.
