<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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
INTELLIGENT SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[INTELLIGENT SYSTEMS LOGO]
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
770/381-2900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
YOU ARE INVITED TO the Annual Meeting of Shareholders of Intelligent
Systems Corporation on Friday, June 11, 1999 at 4:00 p.m., local time, at our
offices at 4355 Shackleford Road, Norcross, Georgia. At the Annual Meeting,
Shareholders will consider and vote on:
1. The election of two directors to the Board of Directors to
serve until the 2002 Annual Meeting.
2. Other matters that may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business Friday, April 9, 1999
will receive this notice and be entitled to vote at the meeting or any
adjournment thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed with this mailing. 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. Our 1998
Annual Report to Shareholders is enclosed.
By order of the Board of Directors,
/s/ BONNIE L. HERRON
BONNIE L. HERRON
Secretary
April 30, 1999
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE
MAY BE RECORDED.
<PAGE> 3
[INTELLIGENT SYSTEMS LOGO]
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 11, 1999
We are sending this Proxy Statement to the shareholders of Intelligent
Systems Corporation in connection with the solicitation of proxies by the Board
of Directors to be voted at the 1999 Annual Meeting of Shareholders of
Intelligent Systems Corporation and any adjournment thereof. The Annual Meeting
will be held on June 11, 1999 at our corporate offices located at 4355
Shackleford Road, Norcross, Georgia, at 4:00 p.m., local time. We expect to mail
this Proxy Statement and the accompanying proxy to shareholders on or about
April 30, 1999.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of common
stock of Intelligent Systems Corporation, $.01 par value per share. Each share
entitles 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 9, 1999. On that date, we had outstanding
and entitled to vote 5,104,467 shares of common stock, with each share entitled
to one vote.
QUORUM
A majority of the outstanding shares of our common stock must be present,
in person or by proxy, to constitute a quorum at the Annual Meeting. We will
treat shares that are withheld or abstain from voting as present at the Annual
Meeting for purposes of determining a quorum.
PROXIES
At the Annual Meeting, the persons named as proxies will vote all properly
executed proxy cards delivered in connection with this solicitation and not
revoked 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 NOMINEES. If any other matters properly come
before the Annual Meeting, the persons named as proxies will vote upon such
matters according to their judgment.
You may revoke your proxy card delivered in connection with this
solicitation at any time by:
- giving written notice to the Secretary of the company at 4355 Shackleford
Road, Norcross, Georgia 30093, or
- executing and delivering to the Secretary a later dated proxy, or
- voting in person at the Annual Meeting.
You cannot revoke your proxy as to any matter upon which, prior to such
revocation, a vote has been cast in accordance with the authority conferred by
such proxy.
We will pay all expenses incurred in connection with the solicitation of
proxies. Such costs include charges by brokers, fiduciaries and custodians for
forwarding proxy materials to beneficial owners of stock held in their names.
<PAGE> 4
We may solicit proxies by mail, telephone and personal contact by directors,
officers and employees of the company without additional compensation.
PRINCIPAL SHAREHOLDERS, DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
The following table contains information concerning the only persons who
are known to us to be beneficial owners of more than 5 percent of our common
stock as of February 26, 1999, and the ownership of our 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 600 559,200 11.0%
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
Bonnie L. Herron 174,557(e) 3.3%
Vice President & Corporate Secretary
All Directors and Executive Officers 1,869,609(f) 32.4%
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
and (ii) 230,000 shares reserved for issuance to Mr. Strange pursuant to
stock options that were exercisable at February 26, 1999 or within sixty
days of such date. Although Mr. Strange may be deemed to be the beneficial
owner of the shares owned by his wife, he disclaims any beneficial interest
in the shares.
(c) In a Schedule 13G filed February 10, 1999, Wallace R. Weitz and Company, an
Investment Advisor registered under Section 203 of the Investment Advisers
Act of 1940, reported beneficial ownership of 559,200 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 26, 1999 or within sixty
days of such date.
(e) Includes 170,000 shares reserved for issuance to Ms. Herron pursuant to
stock options that were exercisable at February 26, 1999 or within sixty
days of such date.
(f) Includes 660,000 shares reserved for issuance to executive officers
pursuant to stock options that were exercisable at February 26, 1999 or
within sixty days of such date.
-2-
<PAGE> 5
ADDITIONAL INFORMATION
Any record or beneficial owner of our common stock as of April 9, 1999 may
request a copy of our Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 1998, including
financial statements and schedules. 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 is not a shareholder of record on April
9, 1999, the person must state that he or she is a beneficial owner of common
stock of the company on that date. We will provide copies of any exhibits to the
Form 10-K upon request and upon the payment of our expenses in furnishing such
exhibits.
PROPOSAL NO. 1 -- THE ELECTION OF TWO DIRECTORS
NOMINEES
At the Annual Meeting of Shareholders, shareholders will elect two
directors to the Board of Directors to serve a three-year term until the 2002
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. Therefore, shares that are withheld or abstain from voting will have no
effect on the outcome of the vote. Unless contrary instructions are given, the
persons named as proxies will vote the shares represented by a signed proxy card
"FOR" the nominees.
If a nominee withdraws or for any reason is not able to serve as a
director, the proxy will be voted for another person designated by the Board of
Directors as substitute nominee, but in no event will the proxy be voted for
more than two nominees. The Board of Directors has no reason to believe that the
nominees will not serve if elected.
The Board of Directors has nominated the persons named below to serve as
directors of the company. The nominees are currently directors of the company.
Each nominee gave us the following information concerning his current age, other
directorships, positions with the company, principal employment and shares of
our common stock beneficially owned as of February 26, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO ELECT THE TWO NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AGE POSITION / PRINCIPAL OCCUPATION (PERCENT OF CLASS)
- ------------------------------ ------- ------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
NOMINEES FOR ELECTION TO SERVE UNTIL THE 2002 ANNUAL MEETING
Donald A. McMahon(1,2) 68 Director, Retired 1,500 *
Parker H. Petit(1) 59 Chairman of the Board of Matria Healthcare, Inc. 14,200 *
INCUMBENT DIRECTORS ELECTED TO SERVE UNTIL THE 2000 ANNUAL MEETING
James V. Napier(1,2) 62 Director, Chairman of the Board of 11,100 *
Scientific-Atlanta, Inc.
J. Leland Strange 57 Director, Chairman of the Board, President, 1,304,972 24.5%
Chief Executive Officer
INCUMBENT DIRECTOR ELECTED TO SERVE UNTIL THE 2001 ANNUAL MEETING
John B. Peatman(2) 64 Director, Professor of Electrical Engineering 1,280 *
at Georgia Institute of Technology
</TABLE>
* Less than one percent.
(1) Audit committee
(2) Compensation committee
-3-
<PAGE> 6
Mr. McMahon has served as a director 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 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 Information
Enterprises, Inc., Atlantic Southeast Airlines, Inc., Logility, Inc. and Norrell
Corporation.
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.
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 met four times during the year ended December
31, 1998. 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 our 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 1998, 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 our non-director executive
officers as of February 26, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION / PRINCIPAL OCCUPATION
- -------------------------------------------------------------------------------
<S> <C> <C>
Henry H. Birdsong 40 Chief Financial Officer
J. William Goodhew, III 61 Vice President
Bonnie L. Herron 51 Vice President and Corporate Secretary
Francis A. Marks 65 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 was appointed Vice President in 1983 and also serves as
President of our ChemFree subsidiary.
Ms. Herron joined the company in 1982 as Director of Planning at one or
our subsidiaries and subsequently at the corporate level. She was elected
Corporate Secretary in 1987 and Vice President in 1990.
The Board of Directors elects the executive officers annually following
the annual meeting of the shareholders to 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 1998 218,932 -- -- 2,344
President & CEO 1997 206,359 -- -- 2,375
1996 191,065 -- 130,000 2,375
Francis A. Marks 1998 126,437 47,832 -- 2,320
Vice President 1997 122,273 -- -- 1,834
1996 122,985 -- 80,000 1,870
Bonnie L. Herron 1998 96,028 4,783 -- 1,484
Vice President & Secretary 1997 85,039 -- -- 1,275
1996 81,596 -- 80,000 1,223
</TABLE>
* Includes contributions to the respective accounts of the executive officers
pursuant to the terms of our Tax-Deferred Savings and Protection Plan (the
"401(k) Plan"). Such amounts are fully vested.
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 81,250 / 0
Francis A. Marks - 0 - - 0 - 170,000 / 0 73,125 / 0
Bonnie L. Herron - 0 - - 0 - 170,000 / 0 73,125 / 0
</TABLE>
* Based on the difference between the exercise price and the closing sales
price per share for the Common Stock on December 31, 1998 of $1.6875, as
reported by the American Stock Exchange.
-5-
<PAGE> 8
COMPENSATION OF DIRECTORS
Non-employee directors earn $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, we adopted the Change in Control Plan for
Officers 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"
means 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 reviews and
approves compensation paid by the company to its executive officers. The
Compensation Committee reviews compensation of the executive officers annually,
with input from the Chief Executive Officer. The 1991 Stock 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 cap
on the deductibility of compensation over $1 million for proxy-named executive
officers. Given our current level of executive compensation, it is not now
necessary to consider this issue.
The basic goal of our compensation program for executive officers is
to:
- fairly compensate executive officers in line 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 1998 and 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. Because the company is not a
traditional operating company with readily identifiable comparative companies,
the Compensation Committee determines the base salary. 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 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. In 1998, two executives earned cash incentives for
achievement of a specific subsidiary transaction. In 1997, cash incentives were
part of the total compensation plan but none were earned by the named
executives. 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.
Our 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 our 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 our
overall performance and price of the company's common stock. The Committee
intends for the number of options granted to an individual executive to provide
an adequate financial incentive over a three to five year time frame and to
provide the executives with an equity interest in the company. 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 that 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 our common stock. Because the trading price
met the vesting targets in 1997, the options became fully vested in 1997. The
Committee did not award any options in 1997 or 1998.
It is our policy 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, the Committee considers a number of
subjective factors in setting Mr. Strange's compensation. Some factors
considered are the nature, scope and variety of his responsibilities; his
contribution to increasing the value of the company's minority-owned companies;
the trading price of our common stock and the company's financial results and
condition. The Compensation Committee believes Mr. Strange's compensation is
appropriate in consideration of the scope of his position and the performance of
the company. In late 1998, Mr. Strange voluntarily asked the Board to reduce his
base salary by approximately 13 percent effective in January 1999. In 1997, the
increase in Mr. Strange's total compensation was in part due to his 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 of options granted to other executives. The Plan
Committee believes the
-7-
<PAGE> 10
options provide a reasonable financial incentive and directly tie increases in
Mr. Strange's total compensation to increases in shareholder value.
COMPENSATION COMMITTEE PLAN COMMITTEE
Donald A. McMahon Donald A. McMahon
James V. Napier James V. Napier
John B. Peatman John B. Peatman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McMahon, Napier and Peatman served as members of the
Compensation Committee and the Plan Committee in 1998. None of these individuals
is a present or former officer or employee of the company.
PERFORMANCE GRAPH
The line graph below compares the cumulative total shareholder return
on our 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
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
<S> <C> <C> <C> <C> <C> <C>
INTELLIGENT SYSTEMS CORPORATION 100 110 110 155 252 87
AMEX MARKET VALUE 100 91 115 122 148 151
S&P TECHNOLOGY SECTOR 100 117 168 238 300 519
</TABLE>
- - $100 INVESTED ON 12/31/93 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 our
executive officers and directors and persons who own more than ten percent of
our common stock, as well as certain affiliates of these persons, to file
initial reports of ownership of our common stock and changes in such ownership
with the Securities and Exchange Commission and the American Stock Exchange. The
Securities and Exchange Commission also requires executive officers, directors
and persons owning more than ten percent of our common stock to furnish us with
copies of all Section 16(a) forms they file. Based solely on our review of the
copies of such forms received by us, we believe that, during the fiscal year
ended December 31, 1998, our executive officers, directors, and owners of more
than ten percent of our common stock complied with all applicable filing
requirements in a timely manner.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, Atlanta, Georgia, acted as our principal independent
public accountants for the fiscal year ended December 31, 1998. We expect that
representatives of Arthur Andersen LLP will be present at the shareholders'
meeting. They will have the opportunity to make a statement if they desire to do
so and to respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR ANNUAL MEETING IN 2000
Shareholders intending to present proposals at the Annual Meeting of
Shareholders in 2000 should submit these proposals to the Secretary of the
company by certified mail, return receipt requested, at our offices in Norcross,
Georgia on or before December 18, 1999 to be eligible for inclusion in the proxy
statement and form of proxy for the Annual Meeting of Shareholders in 2000. Our
bylaws contain advance notice provision that states that, among other things, in
order for business to be brought properly before an annual meeting of
shareholders by a shareholder, the shareholder must have given timely notice of
the business in writing to the Secretary of the company. To be timely a
shareholder's notice must be delivered or mailed to and received at our
principal offices by December 18, 1999.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors is not aware of any matter other than those stated
above that are to be brought before the meeting. However, if any other matter
should be presented for consideration and voting, the persons named in the
enclosed form of proxy intend 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
/s/ BONNIE L. HERRON
BONNIE L. HERRON
Secretary
Norcross, Georgia
April 30, 1999
-9-
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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 11, 1999 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 9, 1999 as
directed on the reverse, and in their discretion, upon such other matters as
may come before the meeting.
SEE REVERSE
SIDE
(TO BE SIGNED ON REVERSE SIDE)
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
INTELLIGENT SYSTEMS CORPORATION
June 11, 1999
Please Detach and Mail in the Envelope Provided
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<CAPTION>
A [X] Please mark your
votes as in this
example.
<S> <C> <C> <C> <C>
FOR WITHHELD
1. Election of [ ] [ ] Nominees: Donald A. McMahon THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
Directors. Parker H. Petit INSTRUCTIONS ARE SPECIFIED, THE PROXY WILL
BE VOTED "FOR" PROPOSAL 1.
The following person is being nominated to the
Company's Board of Directors:
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SIGNATURE(S) DATE SIGNATURE(S) DATE
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NOTE: Please sign exactly as name appears above. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, the full corporate name should be signed by a duly
authorized officer.
</TABLE>
