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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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] 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 Its Charter)
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(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:
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(INTELLIGENT SYSTEMS LOGO)
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
YOU ARE INVITED TO attend the Annual Meeting of Shareholders of
Intelligent Systems Corporation on Thursday, May 17, 2001 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 one director to the Board of Directors to
serve until the 2004 Annual Meeting;
2. An amendment to the Articles of Incorporation to effect a
reverse stock split; and
3. Other matters that may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on Friday, April
6, 2001 will receive the 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 2000
Annual Report to Shareholders is enclosed.
By order of the Board of Directors,
/s/ BONNIE L. HERRON
-----------------------------------------
BONNIE L. HERRON
Secretary
April 17, 2001
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY
SO THAT YOUR VOTE MAY BE RECORDED.
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(INTELLIGENT SYSTEMS LOGO)
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 17, 2001
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 2001 Annual Meeting of Shareholders of
Intelligent Systems Corporation and any adjournment thereof. The Annual Meeting
will be held on May 17, 2001 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 17, 2001. Only one annual report and proxy statement will be delivered to
multiple shareholders who share the same address unless you request additional
copies. We will provide additional copies if you write to the Secretary of the
company and request additional copies at 4355 Shackleford Road, Norcross,
Georgia 30093 or if you call the secretary of the company at (770) 381-2900. You
may contact us at this address and telephone number to either specify that you
wish to receive separate copies in the future or, if you are already receiving
separate copies, to request only a single copy in the future.
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 6, 2001. On that date, we
had outstanding and entitled to vote 5,623,754 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 AND "FOR" THE REVERSE STOCK SPLIT.
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
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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. 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 March 15, 2001, 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.
SHARES PERCENT
BENEFICIALLY OF
BENEFICIAL OWNER ADDRESS OWNED CLASS(a)
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J. Leland Strange 4355 Shackleford Road 1,218,203(b) 21.7%
Chairman of the Board, President, CEO Norcross, GA 30093
Wallace R. Weitz & Company(c) 1125 South 103rd St., Suite 600 548,000 9.7%
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 175,000 3.1%
Vice President
Bonnie L. Herron 149,557 2.7%
Vice President, Chief Financial Officer
and Corporate Secretary
All Directors and Executive Officers 1,702,840(d) 30.2%
as a Group (8 persons)
a. Except as otherwise noted, percentage is determined on the basis of
5,623,754 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 130,104 shares owned by Jane H. Strange, Mr. Strange's wife. Rule
13d-3(d)(1) of the Securities Exchange Act of 1934, as amended, deems Mr.
Strange to be the beneficial owner of such shares owned by his wife. Mr.
Strange disclaims any beneficial interest in the shares.
c. In a Schedule 13G filed February 2, 2001, Wallace R. Weitz and Company, an
Investment Advisor registered under Section 203 of the Investment Advisers
Act of 1940, reported beneficial ownership of 548,000 shares of common
stock, of which the firm has the sole power to vote and to dispose of
all of such 548,000 shares.
d. Includes 19,014 shares reserved for issuance to an executive officer
pursuant to stock options that were exercisable at March 15, 2001 or within
sixty days of such date which are deemed beneficially owned by such person
pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as
amended.
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ADDITIONAL INFORMATION
Any record or beneficial owner of our common stock as of April 6, 2001
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, 2000, including
financial statements and schedules. Any request for the Form 10-K should be in
writing addressed to: Bonnie L. Herron, 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 6, 2001, 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 ONE DIRECTOR
NOMINEE
At the Annual Meeting of Shareholders, shareholders will elect one
director to the Board of Directors to serve a three-year term until the 2004
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 individual who receives the largest number of votes cast is
elected as director 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 the 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 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
director of the company. The nominee is currently a director of the company. The
nominee and other directors gave us the following information concerning their
current age, other directorships, positions with the company, principal
employment and shares of our common stock beneficially owned as of March 15,
2001.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO ELECT THE NOMINEE LISTED BELOW AS DIRECTOR OF THE COMPANY.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AGE POSITION/PRINCIPAL OCCUPATION (PERCENT OF CLASS)
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INCUMBENT DIRECTORS ELECTED TO SERVE UNTIL THE 2004 ANNUAL MEETING
John B. Peatman(2) 66 Director, Professor of Electrical Engineering 1,280 *
at Georgia Institute of Technology
NOMINEE FOR ELECTION TO SERVE UNTIL THE 2003 ANNUAL MEETING
James V. Napier(1)(2) 64 Director, former Chairman of the Board of 11,100 *
Scientific-Atlanta, Inc.
J. Leland Strange 59 Director, Chairman of the Board, President, 1,218,203 21.7%
Chief Executive Officer
INCUMBENT DIRECTORS ELECTED TO SERVE UNTIL THE 2002 ANNUAL MEETING
Donald A. McMahon(1)(2) 70 Director, Retired 1,500 *
Parker H. Petit(1) 61 Chairman, President and Chief Executive Officer 14,200 *
of Matria Healthcare, Inc.
* Less than one percent.
(1) Audit committee
(2) Compensation committee
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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 Richton International Inc.
Mr. Napier has served as a director since 1982. Mr. Napier served as
Chairman of the Board of Scientific-Atlanta, Inc., a firm involved in cable
television electronics and satellite-based communication networks, from 1993
until his retirement in November 2000. He serves as a director of
Scientific-Atlanta, McKesson H.B.O.C., 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, President and CEO 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 Directors of Healthdyne, Inc., Matria's
predecessor, from 1970 to March 1996. He also serves as Chairman of the Board of
Directors of Healthcare.com, Inc. and as a director of Healthdyne Information
Enterprises, Inc. and Logility, Inc.
Mr. Strange has served as President since 1983 and Chief Executive
Officer and Chairman of the Board of Directors since 1985.
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, 2000, and acted by unanimous consent one time. The Board of
Directors has established an audit committee, a compensation committee, and a
plan committee, but has no nominating committee. 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, meets with the independent
auditors to review their report on the financial operations of the company and
carries out a number of other responsibilities, as outlined in the Audit
Committee Charter. 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 met once in
2000, 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 all of the meetings of the Board of Directors.
EXECUTIVE OFFICERS
The following information is provided about our non-director executive
officers as of February 28, 2001.
NAME AGE POSITION/PRINCIPAL OCCUPATION
----------------------------------------------------------------------------------------------------------------
J. William Goodhew, III 63 Vice President
Bonnie L. Herron 53 Vice President, Chief Financial Officer and Secretary
Francis A. Marks 67 Vice President
Mr. Goodhew joined the company in January 1997 as Vice President. He
was President of Peachtree Software, Inc. from 1985 through 1996. He is former
Chairman of the Board of Navision Software A/S and serves as director of Ross
Systems, Inc.
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.
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Ms. Herron joined the company in 1982 as Director of Planning at one of
our subsidiaries and subsequently at the corporate level. She was elected
Corporate Secretary in 1987, Vice President in 1990, and Chief Financial Officer
in 1999.
The Board of Directors elects the executive officers to serve until
they are removed, replaced or resign.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
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(a) (b) (c) (d) (e)
Other Annual
Name and Principal Position Year Salary Bonus Compensation
$ $ $
-------------------------------------------------------------------------------------------------------------------
J. Leland Strange 2000 239,423 150,000 485,226(1)(2)
President & CEO 1999 194,726 -- 1,974(1)
1998 218,932 -- 2,344(1)
Francis A. Marks 2000 130,000 2,500 55,133(1)(3)
Vice President 1999 130,040 2,500 1,950(1)
1998 126,437 47,832 2,320(1)
Bonnie L. Herron 2000 122,519 25,000 55,099(1)(3)
Vice Pres., CFO & Secretary 1999 103,297 -- 1,600(1)
1998 96,028 4,783 1,484(1)
(1) Includes matching contributions by the company 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.
(2) Includes $482,500 non-cash compensation representing the difference between
the market price and the exercise price of non-qualified stock options on
the date of exercise.
(3) Includes $53,333 non-cash compensation representing the difference between
the market price and the exercise price of non-qualified stock options on
the date of exercise.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUES TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
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(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
# $ # $
---------------------------------------------------------------------------------------------------------------------
J. Leland Strange 230,000 482,500 - 0 - - 0 -
Francis A. Marks 170,000 378,750 - 0 - - 0 -
Bonnie L. Herron 170,000 378,750 - 0 - - 0 -
* Based on the difference between the exercise price and the closing
price per share of $3.75 on the date of exercise, January 5, 2000.
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 non-employee 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
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predecessors and successors) up to $50,000. Effective August 22, 2000, the
company adopted the Non-Employee Director Stock Option Plan which provides for
an initial grant to each director of 5,000 options to purchase common stock of
the company and annual grants of 4,000 options on the date of each subsequent
Annual Meeting. Options are granted at fair market value on the date of grant.
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 the employment of an officer of
the company terminates for any reason within 12 months of 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.
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 non-employee 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 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/her control
- align management's compensation with shareholder interests as
measured by stock price appreciation
The compensation of executive officers consists of a base salary, a
cash incentive and long-term compensation consisting of previously granted stock
options. Because the company does not have 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.
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Cash incentives 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.
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. The Committee did not award any
options to executives in the three years ended December 31, 2000.
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 have not
been 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 majority and
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 had
voluntarily asked the Board to reduce his base salary by approximately 13
percent effective in January 1999. In March 2000, the Board increased Mr.
Strange's annual salary to better align it with prevailing market rates, the
scope of his responsibilities, and the value of his contribution to the
company's operations and affiliate companies. Mr. Strange earned a bonus of
$150,000 in 2000 based on the successful sale of an affiliate company, Risk
Laboratories, which resulted in a gain of $8.6 million on the transaction. 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 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 2000. None of these individuals
is a present or former officer or employee of the company.
AUDIT COMMITTEE REPORT
In fiscal 2000, the Audit Committee prepared and recommended for
adoption by the Board of Directors the Audit Committee Charter, which meets the
revised requirements of The American Stock Exchange ("AMEX") issued in 2000. The
Audit Committee considered and included in the Audit Committee Charter many of
the recommendations of the 1999 Blue Ribbon Committee on Improving the
Effectiveness of Corporate Audit Committees, sponsored by the New York Stock
Exchange and the National Association of Securities Dealers. The Audit Committee
Charter is attached as Appendix A to this proxy statement. The Audit Committee
Charter includes organization and membership requirements, a statement of policy
and the Committee's authority and responsibilities. All members of the Audit
Committee currently meet the independence and qualification standards set forth
in the AMEX listing standards.
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Management is responsible for our company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and for issuing a report thereon. The Audit Committee's
responsibility is generally to monitor and oversee these processes, as described
in the Audit Committee's Charter. During fiscal year 2000, among its other
activities, the Audit Committee:
- reviewed and discussed with management and the independent auditors the
audited financial statements of the company as of December 31, 2000 and
for the year then ended
- discussed with the independent auditors the matters required to be
discussed by auditing standards generally accepted in the United States
- received from the independent auditors written affirmation of their
independence required by Independence Standards Board Standard No. 1
and discussed with the auditors the firm's independence
Based upon the review and discussion summarized above, the Audit Committee
recommended to the Board of Directors (and the board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
James V. Napier (Chair)
Parker H. Petit
Donald A. McMahon
PROPOSAL NO. 2 --TO AMEND ARTICLES OF INCORPORATION
TO EFFECT REVERSE STOCK SPLIT
GENERAL
On March 29, 2001, our Board of Directors approved, and recommended
that shareholders approve, an amendment to Article II of our Articles of
Incorporation (the "Amendment") to effect a reverse stock split (the "Reverse
Split") of the company's common stock (of which 5,623,754 shares were issued and
outstanding as of the close of business on the Record Date), whereby we would
issue one new share of common stock in exchange for not less than two nor more
than four shares of outstanding common stock. The Amendment also would reduce
proportionately the number of authorized shares of common stock. If approved,
the Amendment would be effective at the close of business on the date Articles
of Amendment (the "Articles of Amendment") are filed with the Secretary of State
of the State of Georgia (the "Effective Date"). The complete text of the
Articles of Amendment that would be filed in the office of the Secretary of
State of the State of Georgia to effect the Reverse Split is set forth in
Appendix B to this Proxy Statement. The text of the Articles of Amendment is
subject to amendment to include such changes as may be required by the office of
the Secretary of State of the State of Georgia and as the company's Board of
Directors deems necessary and advisable to effect the Reverse Split in the range
described above and the proportionate reduction in the number of authorized
shares of common stock.
EFFECT OF REVERSE SPLIT
If the shareholders approve the Amendment at the Annual Meeting, the
Board of Directors, in its discretion, will determine the appropriate number of
outstanding shares of common stock (the "Reverse Split Number") to be exchanged
for a single new share of common stock in the Reverse Split. The Reverse Split
Number will be from two to four, inclusive. The actual Reverse Split Number will
be determined in a manner that takes into consideration the factors described
under the subheading "Purpose of the Proposed Reverse Split" and the prevailing
market price of our common stock immediately prior to the Reverse Split.
Upon the Effective Date, each fixed number of shares of common stock of
the company ("Old Common Stock") equal to the Reverse Split Number issued and
outstanding will be combined, reclassified and changed into one fully paid and
non-assessable share of common stock ("New Common Stock"). Each holder of record
of a
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certificate representing shares of Old Common Stock will be entitled to receive,
upon surrender of such certificate, a certificate representing the number of
whole shares of New Common Stock to which the holder is entitled pursuant to the
Reverse Split. Any certificates for shares of Old Common Stock not so
surrendered shall be deemed to represent one share of New Common Stock for each
such fixed number of shares equal to the Reverse Split Number of Old Common
Stock previously represented by such certificate. No fractional shares of common
stock or scrip representing fractional shares will be issued as a result of the
Reverse Split. Although the absolute number of shares owned by each shareholder
will be reduced as a result of the Reverse Split, each such shareholder's voting
rights and pro rata equity interest in the company and its shares of outstanding
common stock will not be reduced, except for possible immaterial changes due to
the company's purchase of fractional shares as described below.
The Reverse Split also will effect a reduction in the aggregate number
of shares of common stock reserved for issuance upon exercise of options to
purchase the company's common stock. Each outstanding option will automatically
become an option to purchase the number of shares subject to the option
immediately prior to the Reverse Split divided by the Reverse Split Number, and
the exercise price will be proportionately adjusted to reflect the Reverse
Split. In addition, the shares available for issuance under the company's stock
option plan will be reduced to reflect the Reverse Split, and the other relevant
terms and provisions of the company's stock option plan will be appropriately
adjusted.
The Reverse Split will reduce the number of issued and outstanding
shares of the company's common stock. Except for changes resulting from the
receipt of cash in lieu of fractional shares as described below, the Reverse
Split will not change the equity interests of the shareholders in the company
and will not affect the relative rights of any shareholder or result in a
dilution or diminution of any shareholder's proportionate interest in the
company. Based on the modest size of the reverse split, Management does not
believe, nor does it intend, that the Reverse Split will result in a significant
number of shareholders being "cashed out" or otherwise eliminated as a
shareholder by virtue of holding less than one share after the Reverse Split.
The Amendment to effect the Reverse Split if approved will also reduce
the number of shares of common stock that the company is authorized to issue to
a round number equal to the number of shares of common stock currently
authorized (20,000,000) divided by the Reverse Split Number. The Amendment will
not affect or reduce the number of shares of Special Stock, which we are
authorized to issue. Presently we are authorized to issue 2,000,000 shares of
Special Stock.
If adopted, the Amendment will not affect the $.01 par value of the
company's common stock; however, an amount equal to the difference between the
aggregate par value of the Old Common Stock and the aggregate par value of the
New Common Stock will be transferred for financial accounting purposes from the
company's common stock account to the company's additional paid-in capital
account.
FRACTIONAL SHARES
Stockholders who otherwise would be entitled to receive fractional
shares because they hold a number of shares of Old Common Stock that is not
evenly divisible by the Reverse Split Number will be entitled, upon surrender of
certificates representing such shares, to a cash payment in lieu thereof at a
price equal to the fraction to which the shareholder would otherwise be entitled
multiplied by the closing price of New Common Stock on the Effective Date as
reported on The American Stock Exchange. The ownership of a fractional interest
will not give the holder thereof any voting, dividend or other rights, except to
receive payment therefore as described above.
PURPOSE OF THE PROPOSED REVERSE SPLIT
The Board of Directors believes that the Reverse Split should enhance
the acceptability of the company's common stock to the financial community and
the investing public. The common stock has been trading at a price between $3.00
and $4.00 per share for a number of months. With the shares trading in such a
range, small moves in absolute terms in the price-per-share of common stock
translate into disproportionately large swings in the price on a percentage
basis, and these swings tend to bear little relationship to the financial
condition and results of the
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12
company. Many leading brokerage firms are reluctant to recommend low-priced
stocks to their clients. Moreover, various regulations and policies restrict the
ability of shareholders to borrow against or "margin" low-priced stock and
declines in the stock price below certain levels may trigger unexpected margin
calls. Additionally, because brokers' commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on higher
priced stocks, the current share price of the common stock can result in an
individual shareholder paying transaction costs that represent a higher
percentage of total share value than would be the case if the company's share
price were higher. This factor may also limit the willingness of institutions to
purchase the company's stock. In addition, a variety of brokerage house policies
and practices tend to discourage individual brokers within those firms from
dealing in low-priced stocks. Some of those policies and practices pertain to
the payment of brokers' commissions and to time-consuming procedures that
function to make the handling of low-priced stocks unattractive to brokers from
an economic standpoint.
In the Board's view, these factors have contributed to relatively low
level of interest in the company on the part of investment analysts, brokers and
professionals, and individual investors, which tends to depress the market for
the common stock. The Board has thus proposed the Reverse Split as a means of
increasing the per-share market price of the common stock in the hope that these
problems will thereby be addressed. The decrease in the number of shares of
common stock outstanding as a consequence of the proposed Reverse Split should
increase the per share price of the common stock and may encourage greater
interest in the common stock and possibly promote greater liquidity for the
company's shareholders. However, the increase in the per share price of the
common stock as a consequence of the proposed Reverse Split may be
proportionately less than the decrease in the number of shares outstanding. In
addition, any increased liquidity due to any increased per share price could be
partially or entirely offset by the reduced number of shares outstanding after
the proposed Reverse Split. Moreover, the Reverse Split is expected to increase
the number of "odd-lot" common stockholdings (i.e., holdings of a number of
shares that are not divisible by 100), which may be more difficult to sell and
may also result in increased selling costs. Nevertheless, the proposed Reverse
Split could result in a price per share that adequately compensates for the
adverse impact of the market factors noted above. There can, however, be no
assurance that the market price of the common stock after the proposed Reverse
Split will increase in direct proportion to the ratio of the Reverse Split
(e.g., a 1:3 Reverse Split may not result in an increase in the pre-Reverse
Split market price by a multiple of three), or that such price will either
exceed or remain in excess of the current market price.
PROCEDURE FOR IMPLEMENTING THE REVERSE SPLIT
If the shareholders approve the Amendment at the Annual Meeting, the
Board, in its discretion, will determine as soon as practicable the Reverse
Split Number. The Articles of Amendment will become effective upon the close of
business on the date we file the Articles of Amendment with the Secretary of
State of the State of Georgia. Currently, management intends to effect the
Reverse Split as soon as practicable subsequent to receiving the requisite
shareholder approval. The Board expects that the filing will be made on or about
May 17, 2001. The company expects to notify shareholders of the effectiveness of
the Reverse Split and the Reverse Split Number by a press release. Each
shareholder of record as of the close of business on the Effective Date will be
entitled to receive, upon surrender of a certificate of shares of Old Common
Stock, a new stock certificate representing the number of whole shares of the
company's New Common Stock to which the holder shall be entitled pursuant to the
Reverse Split. For example, if the Reverse Split Number determined by the Board
is three and a shareholder owned 300 shares of the company's Old Common Stock on
the Effective Date, upon surrender of the certificate for 300 shares, the
company would mail to the shareholder a share certificate for 100 shares of the
company's New Common Stock. Any certificates for shares of Old Common Stock not
so surrendered after the Effective Date shall be deemed to represent one share
of New Common Stock for each such fixed number equal to the Reverse Split Number
of Old Common Stock previously represented by such certificate. Holders of
fractional share interests will be entitled to receive cash in lieu of
fractional shares as described above. The company expects that its transfer
agent will act as exchange agent (the "Exchange Agent") for purposes of
implementing the exchange of stock certificates. Shortly after the Effective
Date, each holder of an outstanding certificate theretofore representing shares
of Old Common Stock will receive from the Exchange Agent instructions for the
surrender of such certificate to the Exchange Agent. No new certificates or cash
in lieu of fractional shares will be issued to a shareholder until such
shareholder has surrendered to the Exchange Agent such shareholder's outstanding
certificates together with a properly completed
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13
and executed letter of transmittal. Stockholders should not destroy any stock
certificate and should not submit any certificate until requested to do so by
the company or the Exchange Agent.
REQUIRED VOTE
Under Georgia law, shareholders holding a majority of the shares of our
common stock that are outstanding and entitled to vote, whether or not
represented in person or by proxy at the annual meeting, must vote in favor of
the proposed Reverse Split. As a result, abstentions and broker non-votes are
equivalent to a vote against the proposed Reverse Split.
NO APPRAISAL RIGHTS
Under Georgia law, shareholders of the company are not entitled to
appraisal rights with respect to the proposed Reverse Split.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion generally describes certain federal income tax
consequences of the proposed Reverse Split to shareholders of the company. The
following does not address any foreign, state, local tax or minimum income or
other federal tax consequences of the proposed Reverse Split. Moreover, the
federal income tax consequences of the Reverse Split will vary among
shareholders. In addition, the actual consequences for each shareholder will be
governed by the specific facts and circumstances pertaining to such
shareholder's acquisition and ownership of the common stock. Thus, the company
makes no representations concerning the tax consequences for any of its
shareholders and recommends that each shareholder consult with his own tax
advisor concerning the tax consequences of the Reverse Split, including federal,
state and local or other income tax. The company has not sought and will not
seek an opinion of counsel or a ruling from the Internal Revenue Service
regarding the federal income tax consequences of the proposed Reverse Split.
However, the company believes that, because the Reverse Split is not part of a
plan to periodically increase a shareholder's proportionate interest in the
assets or earnings and profits of the company, the proposed Reverse Split will
have the following income tax effects:
1. A shareholder will not recognize taxable gain or loss as a result of
the Reverse Split, except to the extent a shareholder receives cash in
lieu of fractional shares. Cash payments in lieu of a fractional share
of New Common Stock should be treated as if the fractional share were
issued to the shareholder and then redeemed by the company for cash.
Generally, a shareholder receiving such payment should recognize gain
or loss equal to the difference, if any, between the amount of cash
received and the shareholder's basis in the fractional share. Such gain
or loss generally will be capital gain or loss.
2. In the aggregate, the shareholder's basis in New Common Stock will
equal his basis in the shares of Old Common Stock exchanged therefore
(but not including the basis allocated to a fractional share for which
the shareholder is entitled to receive cash), and such shareholder's
holding period for New Common Stock will include the holding period for
Old Common Stock exchanged therefore if the shares of Old Common Stock
were capital assets in the hands of such shareholder.
3. The proposed Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the company will not recognize any gain or
loss as a result of the Reverse Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" THE
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION TO EFFECT THE REVERSE SPLIT
AND TO REDUCE PROPORTIONATELY THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
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PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder
return on our common stock, based on the market price of our common stock
together with dividends paid to holders of our 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
Cumulative Total Return
---------------------------------------------------------------------------------
12/95 12/96 12/97 12/98 12/99 12/00
INTELLIGENT SYSTEMS CORPORATION 100.00 141.18 229.41 79.41 188.24 169.15
AMEX MARKET VALUE 100.00 101.59 127.06 136.38 174.22 179.02
S & P TECHNOLOGY SECTOR 100.00 141.87 178.89 309.44 541.93 325.43
* $100 invested on 12/31/95 in stock or index - including reinvestment of dividends. Fiscal year ending December 31.
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, 2000, 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, 2000. 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. The Board of
Directors has not yet selected auditors for the current fiscal year ending
December 31, 2001.
AUDIT FEES
During the fiscal year ended December 31, 2000, the company was billed
for an aggregate of $72,400 for services rendered by Arthur Andersen LLP, the
company's independent auditor, for the audit of the annual financial statements
and an aggregate of $10,200 for services rendered for reviewing the interim
financial statements in the company's Forms 10-Q for the year ended December 31,
2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES; ALL OTHER FEES
During the fiscal year ended December 31, 2000, Arthur Andersen did not
perform or bill the company for any services other than the audit services
described above.
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CERTAIN TRANSACTIONS
In 1999, J. William Goodhew, Vice President of the company, invested
$100,000 in Risk Laboratories, LLC, a business in which Intelligent Systems
Corporation owned an equity interest. The terms of the transaction were
negotiated between Mr. Goodhew and Risk Laboratories at arm's length on terms
similar to those offered to other third parties. On March 21, 2000, as part of
the transaction in which the company sold the majority of its interest in Risk
Laboratories, Mr. Goodhew sold part of his interest for the same valuation as
other shareholders of Risk Laboratories.
On January 5, 2000, three officers of the company exercised stock
options and issued to the company promissory notes in payment of the exercise
price. J. Leland Strange, President and Chief Executive Officer of the company
and the beneficial owner of greater than 5% of our common stock, exercised
options to acquire 230,000 shares of common stock and issued the company a
promissory note for $380,000 representing the total exercise price of the
options. Bonnie L. Herron, Vice President and Chief Financial Officer, and
Francis A. Marks, Vice President, each exercised options to acquire 170,000
shares of common stock and each issued the company a promissory note for
$258,750 representing the total exercise price of their respective options.
During 2000, the officers repaid part or all of their respective notes by
selling to the company shares of common stock acquired on exercise of stock
options. On April 7, 2000, Mr. Strange, Mr. Marks and Ms. Herron surrendered
46,769, 30,000 and 25,000 shares of common stock, respectively, to the company,
which the company valued at $8.125 per share based on the fair market value of
such shares on the date of sale. At December 31, 2000, the principal balance of
the promissory notes of Mr. Strange, Mr. Marks and Ms. Herron are $0, $15,000
and $55,625, respectively. The original one-year term has been extended until
December 31, 2001 for the outstanding notes. Each of the notes is secured by a
pledge of the common stock acquired upon exercise of the option and bears
interest at the rate of seven percent (7%) per annum.
SHAREHOLDERS' PROPOSALS FOR ANNUAL MEETING IN 2002
Shareholders intending to present proposals at the Annual Meeting of
Shareholders in 2002 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 13, 2001 to be eligible for inclusion in the proxy
statement and form of proxy for the Annual Meeting of Shareholders in 2002. Our
bylaws contain an 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 under the
Bylaws, a shareholder's notice must be received at our principal offices by
December 13, 2001.
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 17, 2001
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APPENDIX A
INTELLIGENT SYSTEMS CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE: The Audit Committee is a committee of the Board of Directors of
Intelligent Systems Corporation. Its primary function is to assist
the Board in fulfilling its oversight responsibilities by reviewing
the financial information which will be provided to the Shareholders,
the Securities and Exchange Commission, and others, the company's
systems of internal controls which management and the Board have
established, and the Audit Process.
RESPONSIBILITIES: In meeting its responsibilities, the Audit Committee is
expected to:
1. Provide an open avenue of communication between the audit committee,
the independent accountant and the Board of Directors.
2. Annually review and update the Committee's charter as may be required.
3. Recommend to the Board the independent accountant's appointment and
review and approve the discharge of the independent accountant.
4. Confirm and assure the independence of the independent accountant.
5. Inquire of management and the independent accountant about significant
risks or exposures and assess the steps management has taken to
minimize such risk to the company.
6. Consider, in consultation with the independent accountant and the
company's financial management, the external audit scope and plan.
7. Consider with management and the independent accountant the rationale
for employing audit firms other than the principal independent
accountant.
8. Consider and review with the independent accountant:
A. The adequacy of the company's internal controls.
B. The adequacy of the company's risk management and cost of
insurance in connection thereto.
C. Any significant findings and recommendations of the
independent accountant together with management's responses
thereto.
9. Meet with management and the independent accountants at the completion
of the annual examination to review:
A. The company's annual financial statements and footnotes,
including their accuracy, completeness and overall quality.
B. The independent accountant's audit of the financial statements
and their report thereon.
C. Any significant changes required in the independent
accountant's audit plan.
D. Any serious difficulties or disputes with management
encountered during the course of the audit.
E. Other matters related to the conduct of the audit, which are
to be communicated to the Committee under generally accepted
auditing standards.
10. Review filings with the SEC and other published documents containing
the company's financial statements and consider whether the information
contained in these documents is consistent with the information
contained in the financial statements.
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11. On a quarterly basis, as necessary, review and discuss with the
independent auditors any significant changes, transactions, events or
changes in accounting estimates, if any.
12. Review with the independent accountant the results of their review of
the company's monitoring compliance with the company's code of conduct
when established by the company.
13. Review legal and regulatory matters that may have a material impact on
the financial statements, related company compliance policies, and
programs and reports received from regulators.
14. Meet with the independent accountant and management in separate
executive sessions to discuss any matters that the Committee or these
groups believe should be discussed privately with the Audit Committee.
15. Report Committee actions to the full Board of Directors with such
recommendations, as the Committee may deem appropriate.
16. The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities. The Committee shall be empowered to retain
independent counsel, accountants, or others to assist it in the conduct
of any investigation.
17. The Committee shall meet at least one time per year or more frequently
as circumstances require. The Committee may ask members of management
or others to attend the meeting and provide pertinent information as
necessary.
18. The Committee will perform such other functions as assigned by law, the
company's charter or by-laws or the Board of Directors.
MEMBERSHIP: The membership of the Audit Committee shall consist of at least
three members, each of whom shall be independent members of the
Board of Directors and financially literate. Furthermore, at
least one member of the Audit Committee shall have accounting or
related financial management experience. Members of the Audit
Committee serve at the pleasure of the Board and Audit Committee
members and the Committee chairman shall be designated by the
full Board of Directors.
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APPENDIX B
AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INTELLIGENT SYSTEMS CORPORATION
1. The name of the Corporation is Intelligent Systems Corporation.
2. Article II of the Corporation's Articles of Incorporation shall be
amended by the addition of the following provision at the beginning of
Article II:
"Simultaneously with the effective date of this amendment (the
"Effective Date"), each [Reverse Split Number] shares of the Corporation's
common stock, issued and outstanding immediately prior to the Effective Date
(the "Old Common Stock") shall, automatically and without any action on the part
of the holder thereof, be reclassified as and changed, pursuant to a reverse
stock split (the "Reverse Stock Split"), into one share of the Corporation's
outstanding common stock (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a certificate or
certificates which immediately prior to the Effective Date represented
outstanding shares of Old Common Stock (the "Old Certificates," whether one or
more) shall be entitled to receive upon surrender of such Old Certificates to
the Corporation's transfer agent for cancellation, a certificate or certificates
(the "New Certificates," whether one or more) representing the number of whole
shares of the New Common Stock into and for which the shares of the Old Common
Stock formerly represented by such Old Certificates so surrendered, are
reclassified under the terms hereof. From and after the Effective Date, Old
Certificates shall thereupon be deemed for all corporate purposes to evidence
ownership of New Common Stock in the appropriately reduced whole number of
shares. No certificates or scrip representing fractional share interests in New
Common Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights of a shareholder of the
Corporation. In lieu of any fraction of a share of New Common Stock to which the
holder would otherwise be entitled, the holder will receive a cash payment in
U.S. dollars equal to such fraction multiplied by [Reverse Split Number] times
the closing price of New Common Stock on the Effective Date as reported on The
American Stock Exchange. If more than one Old Certificate shall be surrendered
at one time for the account of the same shareholder, the number of full shares
of New Common Stock for which New Certificates shall be issued shall be computed
on the basis of the aggregate number of shares represented by the Old
Certificates so surrendered. In the event that the Corporation's transfer agent
determines that a holder of Old Certificates has not surrendered all his
certificates for exchange, the transfer agent shall carry forward any fractional
share until all certificates of that holder have been presented for exchange
such that payment for fractional shares to any one person shall not exceed the
value of one share. If any New Certificate is to be issued in a name other than
that in which it was issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the stock
transfer tax stamps to the Old Certificates so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the person or persons
requesting such exchange shall affix any requisite stock transfer tax stamps to
the Old Certificates surrendered, or provide funds for their purchase, or
establish to the satisfaction of the transfer agent that such taxes are not
payable. From and after the Effective Date, the amount of capital shall be
represented by the shares of the New Common Stock into which and for which the
shares of the Old Common Stock are reclassified, until thereafter reduced or
increased in accordance with applicable law. All references elsewhere in the
Amended and Restated Articles of Incorporation to the "Common Stock" shall,
after the Effective Date, refer to the `New Common Stock'."
3. This amendment shall become effective upon the close of business on
the date on which it is filed with the Secretary of State of the State of
Georgia.
4. The Board of Directors of Intelligent Systems Corporation approved
the foregoing amendment on March 29, 2001 and recommended it to the
shareholders of the corporation for approval. The shareholders approved the
foregoing amendment at their annual meeting of shareholders held May 17, 2001
in accordance with the provisions of Section 1003 of the Georgia Business
Corporation Code.
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(INTELLIGENT SYSTEMS LOGO)
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA
THURSDAY, MAY 17, 2001
4:00 P.M.