SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-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):
[ ] 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:
INTELLIGENT
SYSTEMS
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 23, 2002 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 2005 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 on Friday, April 5,
2002 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 2001
Annual Report to Shareholders is enclosed.
By order of the Board of Directors,
/s/ Bonnie L. Herron
BONNIE L. HERRON
Secretary
April 12, 2002
PLEASE COMPLETE AND RETURN THE ENCLOSED
PROXY PROMPTLY SO THAT YOUR VOTE MAY BE RECORDED.
INTELLIGENT
SYSTEMS
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 23, 2002
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 2002 Annual Meeting of Shareholders of
Intelligent Systems Corporation and any adjournment thereof. The Annual Meeting
will be held on May 23, 2002 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 12, 2002. 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 5, 2002. On that date, we had
outstanding and entitled to vote 4,495,530 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. If a broker, bank, custodian,
nominee or other record holder of our common stock indicates on a proxy that it
does not have discretionary authority to vote certain shares on a particular
matter, the shares held by that record holder (referred to as "broker
non-votes") will also be counted as present in determining whether we have 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 prior to the Annual Meeting,
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.
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, 2002, and the
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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(a) CLASS(a)
---------------------------------------------- ----------------------------------- ----------------- ---------------
J. Leland Strange 4355 Shackleford Road 727,794(b) 16.2%
Chairman of the Board, President, CEO Norcross, GA 30093
Wallace R. Weitz & Company(c) 1125 South 103rd St., Suite 600 456,166 10.1%
Omaha, NE 68124
Donald A. McMahon 4,000 *
Director
James V. Napier 13,600 *
Director
John B. Peatman 3,780 *
Director
Parker H. Petit 13,827 *
Director
Francis A. Marks 111,900 2.5%
Vice President
Bonnie L. Herron 63,825 1.4%
Vice President, Chief Financial Officer
and Corporate Secretary
All Directors and Executive Officers 1,029,986(d) 22.8%
as a Group (8 persons)
a. Except as otherwise noted, beneficial ownership is determined on the
basis of 4,495,530 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 96,953 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 28, 2002, Wallace R. Weitz and
Company, an Investment Advisor registered under Section 203 of the
Investment Advisers Act of 1940, reported beneficial ownership of
456,166 shares of common stock, of which the firm has the sole power
to vote and to dispose of all of such 456,166 shares.
d. Includes 29,014 shares reserved for issuance to officers and directors
pursuant to stock options that were exercisable at March 15, 2002 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. The amounts reported above for Messrs.
McMahon, Napier, Peatman and Petit include 2,500 shares each for stock
options exercisable at March 15, 2002.
ADDITIONAL INFORMATION
Any record or beneficial owner of our common stock as of April 5, 2002
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, 2001, 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 5, 2002, 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.
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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 2005
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 and broker
non-votes 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 either of the nominees withdraws or for any reason or 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 either nominee 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.
The nominees 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,
2002.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO ELECT THE NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AGE POSITION / PRINCIPAL OCCUPATION (PERCENT OF CLASS)
------------------------------ ------- ------------------------------------------------- ----------------------------
NOMINEES FOR ELECTION TO
SERVE UNTIL THE 2005
ANNUAL MEETING
Donald A. McMahon(1.2.) 71 Director, Retired 4,000 *
Parker H. Petit(1.) 62 Director, Chairman, President and Chief Executive 13,827 *
Officer of Matria Healthcare, Inc.
INCUMBENT DIRECTOR ELECTED
TO SERVE UNTIL THE
2004 ANNUAL MEETING
John B. Peatman(2.) 67 Director, Professor of Electrical Engineering 3,780 *
at Georgia Institute of Technology
INCUMBENT DIRECTORS ELECTED
TO SERVE UNTIL THE
2003 ANNUAL MEETING
James V. Napier(1.2.) 65 Director, former Chairman of the Board of 13,600 *
Scientific-Atlanta, Inc.
J. Leland Strange 60 Director, Chairman of the Board, President, 727,794 16.2%
Chief Executive Officer
* Less than one percent; share amount includes 2,500 shares pursuant to
stock options exercisable at March 15, 2002
1. Audit committee
2. Compensation committee
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,
a soft drink beverage firm.
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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 November 2000. He serves as a director of Scientific-Atlanta, McKesson
Corporation, Vulcan Materials Company, Engelhard Corporation, Personnel Group
of America, Inc. and Wabtec Corporation.
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, and a director 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 a director of Logility, Inc.
Mr. Strange has served as President since 1983 and Chief Executive
Officer and Chairman of the Board of Directors since 1985. He serves as a
director of Allied Holdings, Inc.
There are no family relationships among any of the company's directors
and executive officers.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met six times during the year ended December
31, 2001. 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 three times 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 did not meet in 2001, 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 80 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 28, 2002.
NAME AGE POSITION / PRINCIPAL OCCUPATION
-------------------------------- ---------------------- -----------------------------------------------------------
J. William Goodhew, III 64 Vice President
Bonnie L. Herron 54 Vice President, Chief Financial Officer and Secretary
Francis A. Marks 68 Vice President
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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.
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
---------------------------------- --------------- --------------------------------------------- ---------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation
$ $ $
---------------------------------- --------------- ------------------- ------------------------- ---------------------
J. Leland Strange 2001 250,000 150,000 3,750 )1.)
President & CEO 2000 239,423 150,000 485,226 (1.2.)
1999 194,726 -- 1,974 (1.)
Francis A. Marks 2001 130,000 -- 975 (1.)
Vice President 2000 130,000 2,500 55,133 (1.3.)
1999 130,040 2,500 1,950 (1.)
Bonnie L. Herron 2001 125,000 25,000 1,875 (1.)
Vice Pres., CFO & Secretary 2000 122,519 25,000 55,099 (1.3.)
1999 103,297 -- 1,600 (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.
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
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.
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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 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
last grants of options to executive officers were in 1996 and the Plan expired
in December 2001.
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
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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 are earned by the named executives based on achievement
of 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 was 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, 2001 and the Plan
expired in December 2001. The Board of Directors expects to consider and
recommend to shareholders the adoption of a new stock option plan in the future
but no decision with respect to such a plan has been made. The named executive
officers each exercised all of their stock options in 2000 and currently do not
have any unexercised stock options.
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 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 sale of an affiliate company, Risk Laboratories,
which resulted in a gain of $8.6 million for the company. Mr. Strange earned a
bonus of $150,000 in 2001 related to the sale of an affiliate company, PaySys,
in a transaction that resulted in a gain of $17.8 million for the company. 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
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Committee considered his base salary, the number of shares owned by Mr.
Strange, and the number of options granted to other executives.
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 2001. None of these
individuals is a present or former officer or employee of the company.
AUDIT COMMITTEE REPORT
The Board of Directors has adopted the Audit Committee Charter, which
meets the revised requirements of The American Stock Exchange ("AMEX"). The
Audit Committee Charter includes 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 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.
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 2001, 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,
2001 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 the written disclosures and
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, 2001 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
James V. Napier (Chair)
Parker H. Petit
Donald A. McMahon
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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
---------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
------ ------ ------ ------ ------ -----
INTELLIGENT SYSTEMS CORPORATION 100.00 162.50 56.25 133.33 119.81 108.28
AMEX MARKET VALUE 100.00 125.32 134.49 176.81 165.72 150.81
S & P TECHNOLOGY SECTOR 100.00 126.09 218.11 381.99 229.38 174.89
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. 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
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the copies of such forms received by us, we believe that, during the fiscal
year ended December 31, 2001, 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, 2001. 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, 2002. We
expect to make this decision by mid-year.
AUDIT FEES
During the fiscal year ended December 31, 2001, we were billed an
aggregate of $89,000 for services rendered by our independent auditors for
audit services.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES; ALL OTHER FEES
During the fiscal year ended December 31, 2001, Arthur Andersen did not
perform or bill the company for any services other than the audit services
described above.
CERTAIN TRANSACTIONS
On January 5, 2000, three officers of the company exercised stock options
and issued to the company promissory notes bearing interest at the rate of
seven percent per annum 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 issued the company a promissory note for
$380,000 representing the total exercise price of his options. Bonnie L.
Herron, Vice President and Chief Financial Officer, and Francis A. Marks, Vice
President, each issued the company a promissory note for $258,750 representing
the total exercise price of their respective options. The loans were repaid at
various dates in 2000 and 2001 and no amounts are outstanding as of December
31, 2001.
In April 2001, J. Leland Strange, a director, and President and Chief
Executive Officer of the company, participated as a common stockholder in the
sale of all of the outstanding preferred and common stock of PaySys
International, Inc., a former affiliate company, to First Data Corporation
("FDC"). The company sold its interest in PaySys to FDC for $17.8 million as
part of the sale transaction. Mr. Strange's shares, which he had owned since
1983 prior to the company's investment in PaySys in 1994, represented less than
one percent of PaySys' outstanding shares. The proceeds from the sale of his
PaySys stock were $594,000, which was based on the same price per share paid to
all common shareholders of PaySys by FDC.
Each of the named officers of the company participated on a pro rata
basis with other shareholders of the company pursuant to the company's tender
offer on July 12, 2001. In addition, each officer sold shares of common stock
to the company at $4.20 per share (which was the closing price of the company's
common stock on July 20, 2001, the sale date) to meet the requirements of
Section 302 of the Internal Revenue Code for capital gains treatment of
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shares sold by the officers in the tender offer. J. Leland Strange, a director,
President and Chief Executive Officer, and the beneficial owner of more than 5
percent of the company's common stock, sold 47,619 shares for a total sales
price of $200,000; Bonnie L. Herron, Vice President and Chief Financial
Officer, sold 47,619 shares for a total sales price of $200,000; and Francis A.
Marks, Vice President, sold 18,500 shares for a total sales price of $77,700.
The officers previously reported these sale transactions on Forms 4 filed with
the Securities and Exchange Commission.
On March 14, 2002, the shareholders of Risk Laboratories, a former
affiliate of the company, sold their remaining ownership interests to the same
buyer that had purchased majority control of Risk in March of 2000. The company
and J. William Goodhew, a vice president of the company and minority
shareholder in Risk, each sold their respective ownership interests along with
all other minority shareholders in the $6 million transaction. Mr. Goodhew's
pro rata share of the sale proceeds was $429,600 and the company's pro rata
share was $474,000. The company previously sold most of its ownership in Risk
in several transactions totaling $10.7 million in proceeds.
SHAREHOLDERS' PROPOSALS FOR ANNUAL MEETING IN 2003
Shareholders intending to present proposals at the Annual Meeting of
Shareholders in 2003 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 January 23, 2003 to be eligible for inclusion in
the proxy statement and form of proxy for the Annual Meeting of Shareholders in
2003. 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 January 23, 2003.
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 12, 2002
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[LOGO INTELLIGENT SYSTEMS]
Notice of Annual Meeting
and
Proxy Statement
Annual Meeting of Shareholders
4355 Shackleford Road
Norcross, Georgia
Thursday, May 23, 2002
4:00 P.M.
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 May 23, 2002 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 5, 2002 as directed on the
reverse, and in their discretion, upon such other matters as may come before the
meeting.
SEE REVERSE
TO BE SIGNED ON REVERSE SIDE SIDE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
INTELLIGENT SYSTEMS CORPORATION
MAY 23, 2002
-- Please Detach and Mail in the Envelope Provided --
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE.
1. Election of Directors:
[ ] FOR [ ] WITHHELD
NOMINEES: Donald A. McMahon
Parker H. Petit
The following person is being nominated to the Company's Board of Directors:
____________________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED.
IF NO INSTRUCTIONS ARE SPECIFIED, THE
PROXY WILL BE VOTED "FOR" PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY
SIGNATURE(S)
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DATE
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SIGNATURE(S)
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DATE
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NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or guardian,
please give full title as such. If the signer is a corporation, the full
corporate name should be signed by a duly authorized officer.