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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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTELLIGENT SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ x / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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INTELLIGENT
SYSTEMS
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
770/381-2900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Shareholders of
Intelligent Systems Corporation (the "Company") will be held on Friday, June 6,
1997 at 4:00 p.m., local time, at the Company's offices, 4355 Shackleford Road,
Norcross, Georgia, for the purpose of considering and voting upon:
1. The approval of an amendment to the Bylaws to provide
for the classification of the Board of Directors.
2. The election of five directors to constitute the Board
of Directors and to serve for the respective terms.
3. The approval of an amendment to the Intelligent Systems
Corporation 1991 Stock Incentive Plan increasing the total
number of shares of Common Stock that may be issued under the
Plan.
4. Such other matters as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business Friday, April 11,
1997, will be entitled to notice of and to vote at the meeting or any
adjournment thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. To ensure a quorum for the meeting, please sign, date and
return the proxy promptly in the enclosed business reply envelope. If you
attend the meeting, you may revoke your proxy and vote in person. The Company's
1996 Annual Report to Shareholders is enclosed for your information.
By order of the Board of Directors,
BONNIE L. HERRON
Secretary
April 18, 1997
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE
MAY BE RECORDED.
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INTELLIGENT
SYSTEMS
4355 SHACKLEFORD ROAD
NORCROSS, GEORGIA 30093
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 6, 1997
This Proxy Statement is furnished to the shareholders of Intelligent
Systems Corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the 1997 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") and any
adjournment thereof. The Annual Meeting will be held on June 6, 1997 at the
Company's offices located at 4355 Shackleford Road, Norcross, Georgia, at 4:00
p.m., local time. It is anticipated that this Proxy Statement and the
accompanying proxy will be mailed to shareholders on or about April 18, 1997.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $.01 par value per share, with each share entitling its
owner to one vote on each matter submitted to the shareholders. The record of
shareholders entitled to vote at the Annual Meeting was taken as of the close
of business on Friday, April 11, 1997. On that date the Company had
outstanding and entitled to vote 5,092,567 shares of Common Stock, with each
share entitled to one vote.
QUORUM
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum at
the Annual Meeting. Shares which are withheld or abstain from voting will be
treated as present at the Annual Meeting for purposes of determining a quorum.
PROXIES
All properly executed proxy cards delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Shareholders should specify their choices with regard to the
proposals to be voted upon on the accompanying proxy card. IF NO SPECIFIC
INSTRUCTIONS ARE GIVEN WITH REGARD TO THE MATTERS TO BE VOTED UPON, THEN THE
SHARES REPRESENTED BY A SIGNED PROXY CARD WILL BE VOTED "FOR" THE AMENDMENT TO
CLASSIFY THE BOARD OF DIRECTORS, "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES
AND "FOR" THE AMENDMENT TO THE COMPANY'S 1991 INCENTIVE STOCK OPTION PLAN. If
any other matters properly come before the Annual Meeting, the persons named as
proxies will vote upon such matters according to their judgment.
All proxy cards delivered pursuant to this solicitation are revocable at
any time at the option of the persons executing them by giving written notice
to the Secretary of the Company at 4355 Shackleford Road, Norcross, Georgia
30093, or by executing and delivering to the Secretary a later dated proxy, or
by voting in person at the
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Annual Meeting, except that any such revocation shall not be effective as to any
matter upon which, prior to such revocation, a vote shall have been cast
pursuant to the authority conferred by such proxy.
All expenses incurred in connection with the solicitation of proxies will
be borne by the Company. Such costs include charges by brokers, fiduciaries
and custodians for forwarding proxy materials to beneficial owners of stock
held in their names. Solicitation may be undertaken by mail, telephone and
personal contact by directors, officers and employees of the Company without
additional compensation.
PRINCIPAL SHAREHOLDERS, DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information concerning the only
persons who are known to the Company to be beneficial owners of more than 5% of
the Company's Common Stock as of February 28, 1997, and the ownership of the
Common Stock as of that date by each director, each executive officer named in
the Summary Compensation Table and by all directors and officers as a group.
SHARES PERCENT
BENEFICIALLY OF
BENEFICIAL OWNER ADDRESS OWNED CLASS a.
J. Leland Strange 4355 Shackleford Road
Chairman of the Board, President, CEO Norcross, GA 30093 1,283,340 b. 24.7%
Wallace R. Weitz & Company c. 9290 West Dodge Road #405 576,300 11.3%
Omaha, NE 68114
Donald A. McMahon
Director 1,500 *
James V. Napier
Director 11,100 *
John B. Peatman
Director 1,280 *
Parker H. Petit
Director -- --
Francis A. Marks
Vice President 125,000 d. 2.4%
All Directors and Executive Officers
as a Group (9 persons) 1,543,777 e. 28.7%
a. Except as otherwise noted, percentage is determined on the basis of
5,092,567 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%.
b. Includes (i) 108,368 shares held by Quadram Christian Foundation, Inc., a
nonprofit corporation of which Mr. Strange is a director; (ii) 130,104
shares owned by Jane H. Strange, Mr. Strange's wife, with respect to which
shares Mr. Strange may be deemed to be the beneficial owner, but as to
which he disclaims any beneficial interest, and (iii) 100,000 shares
reserved for issuance to Mr. Strange pursuant to stock options that were
exercisable at February 28, 1997 or within sixty days of such date.
c. In a Schedule 13G filed February 11, 1997, Wallace R. Weitz and Company,
an Investment Advisor registered under Section 203 of the Investment
Advisers Act of 1940, reported beneficial ownership of 576,300 shares of
Common Stock, all of which the firm has the sole power to vote and to
dispose of.
d. Includes 90,000 shares reserved for issuance to Mr. Marks pursuant to
stock options that were exercisable at February 28, 1997 or within sixty
days of such date.
e. Includes 285,000 shares reserved for issuance to executive officers
pursuant to stock options that were exercisable at February 28, 1997 or
within sixty days of such date.
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ADDITIONAL INFORMATION
The Company will furnish without charge a copy of its Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the fiscal year
ended December 31, 1996, including financial statements and schedules, to any
record or beneficial owner of its Common Stock as of April 11, 1997 who requests
a copy of such report. Any request for the Form 10-K should be in writing
addressed to: Bonnie L. Herron, Vice President and Secretary, Intelligent
Systems Corporation, 4355 Shackleford Road, Norcross, Georgia 30093. If the
person requesting the Form 10-K was not a shareholder of record on April 11,
1997, the request must include a representation that such person was a
beneficial owner of Common Stock of the Company on that date. Copies of any
exhibits to the Form 10-K will be furnished on request and upon the payment of
the Company's expenses in furnishing such exhibits.
PROPOSAL NO. 1 - AMENDMENT TO CLASSIFY THE BOARD OF DIRECTORS
The Board of Directors has unanimously approved and recommends that the
shareholders approve a proposed amendment to Section 3.2 of the Company's
Bylaws to provide for the classification of the Corporation's directors; that
is, dividing the board of directors into three classes, each of which serves
for a three year term, with only one class to be elected each year. The full
text of the Proposed Amendment is set forth as Exhibit A to this Proxy
Statement (the "Proposed Amendment"). The following description of the
Proposed Amendment is qualified in its entirety by reference to the text of the
Proposed Amendment as set forth in Exhibit A.
THE PROPOSED AMENDMENT
The Bylaws currently provide that the number of directors shall be fixed
by the resolution of the Board of Directors or shareholders. Currently, the
Board of Directors consists of five persons. The Proposed Amendment provides
that the Board of Directors will be divided into three classes, each class to
be as nearly equal in number as possible. It is planned that the Board of
Directors will currently continue to consist of five persons. Accordingly, if
the Proposed Amendment is adopted, one director will be elected for a term
expiring at the 1998 Annual Meeting; two directors will be elected for a term
expiring at the 1999 Annual Meeting; and two directors will be elected for a
term expiring at the 2000 Annual Meeting; and, in each case, until their
respective successors are duly elected and qualified. Starting with the 1998
Annual Meeting of Shareholders, one class will be elected each year for a
three-year term.
Under Georgia law, the Proposed Amendment, if adopted, may not be amended
except by the shareholders of the Company.
REASONS FOR THE PROPOSED AMENDMENT
The Proposed Amendment is designed to protect against rapid shifts in
control of the Board of Directors, to assist in assuring continuity in the
management, affairs and business strategies of the Company and to provide
adequate time for due deliberation of corporate alternatives.
Over the last several years there has been a trend towards the
accumulation of substantial stock positions in public corporations by outside
parties either with a view toward utilizing a controlling block of stock to
force a merger or consolidation or as a prelude to proposing a restructuring or
sale of all or part of a corporation or other similar extraordinary corporate
action requiring the approval of its board of directors. Rapid acquisition of
stock could also give an outside party the power to influence or control the
affairs of a subsidiary or another company in which the Company has an
interest. These actions are often undertaken without advance notice to or
consultation with management of the corporation. In many cases, such third
parties seek representation on the corporation's board of directors in order to
increase the likelihood that their proposals will be implemented by the
corporation. If the corporation resists the efforts to obtain representation
on the corporation's board, the outside parties may
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commence proxy contests to have themselves or their nominees elected to the
board in place of certain directors or the entire board.
It is believed that in many circumstances such efforts may not be
beneficial to the interests of a corporation and its shareholders, because they
may deprive the board of directors of the time and information necessary to
evaluate the proposal, measure such proposal against the Company's long-term
business plan, study alternative proposals and help ensure that the best price
is obtained if any transaction ultimately is undertaken. The Company is not
aware of any specific effort by a party to obtain control of the Company.
The Board of Directors believes that the Proposed Amendment is desirable
and in the best interests of the Company and its shareholders generally.
However, it should be noted that the Proposed Amendment would make a change in
directors more difficult at each election of directors even if this would be
beneficial to shareholders generally because the staggering of terms of
directors would have the effect of requiring at least two shareholder meetings,
instead of one, as at present, to effect a change in majority control of the
Board. In addition, Georgia law governing staggered boards prohibits removal
of incumbent directors except for cause.
The Proposed Amendment is consistent with Georgia corporate law, which
authorizes the classification of a board of directors into two or three
classes. Under Georgia law, if a vacancy occurs on the Board of Directors
such vacancy may be filled by the Board of Directors for the remainder of the
full term of the predecessor.
Because the Proposed Amendment to the Bylaws of the Company may have an
impact upon the rights of shareholders and may be characterized as an
anti-takeover measure, each shareholder should carefully study the description
of the Proposed Amendment contained herein and the text of the Proposed
Amendment as set forth in Exhibit A (the "Proposed Amendment") to this Proxy
Statement. The Company has authorized but undesignated shares of Special Stock
which may be issued by the Board of Directors from time to time without the
approval of shareholders and with rights and privileges which may adversely
affect the voting power of the Common Stock. There are presently no other
provisions in the Company's Restated Articles of Incorporation or Bylaws which
would commonly be characterized as anti-takeover measures although the Board of
Directors has recently amended certain Bylaw provisions to provide for a more
orderly presentation of shareholder proposals at annual or special meetings of
the shareholders. The Board of Directors is considering the adoption of a
shareholder rights plan under which a shareholder accumulating a large block of
the Company's stock in the future could suffer significant dilution if more
than a certain number of shares is acquired. Under Georgia law, the adoption
of such a plan would not require shareholder approval.
In order for the amendment to the Bylaws to be approved, the votes cast
favoring the amendment must exceed the votes cast opposing it. Accordingly,
shares that are withheld or abstain from voting will have no effect on the
outcome of the vote. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PROPOSED AMENDMENT.
PROPOSAL NO. 2 -- THE ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting of Shareholders, five directors constituting the
entire Board of Directors of the Company, are to be elected. If the Proposed
Amendment contained on Exhibit A is adopted, five directors will be elected for
the terms set forth below. If the Proposed Amendment is not adopted, five
directors will be elected to hold office until the next Annual Meeting of
Shareholders or until their successors are duly elected and qualified. In
either case, directors will be elected by a plurality of the shares present and
voting at the meeting. A "plurality" means that the individuals who receive
the largest number of votes cast are elected as directors up to the maximum
number of directors to be chosen at the meeting. Accordingly, shares that are
withheld or abstain from voting will have no effect on the outcome of the vote.
Unless contrary instructions are given, the proxies will be voted for the
nominees.
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In the event that any nominee withdraws or for any reason is not able to
serve as a director, the proxy will be voted for such other person as may be
designated by the Board of Directors as substitute nominee, but in no event
will the proxy be voted for more than five nominees. The Board of Directors
has no reason to believe that any nominee will not serve if elected.
The Board of Directors has nominated the five persons named below to serve
as directors of the Company. All of the nominees are currently directors of the
Company. The nominees have supplied the Company with the following information
concerning their current age, other directorships, positions with the Company,
principal employment and shares of Common Stock of the Company beneficially
owned by such nominees as of February 28, 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO ELECT THE FIVE NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
NAME AGE POSITION / PRINCIPAL OCCUPATION (PERCENT OF CLASS)
==================================================================================================
DIRECTORS TO BE ELECTED TO SERVE UNTIL THE 1998 ANNUAL MEETING
John B. Peatman 62 Director, Professor of 1,280 *
Electrical Engineering at
Georgia Institute of
Technology
DIRECTORS TO BE ELECTED TO SERVE UNTIL THE 1999 ANNUAL MEETING
Donald A. McMahon 66 Director, Private Investor 1,500 *
Parker H. Petit 57 Chairman of the Board of -- --
Matria Healthcare Inc.
DIRECTORS TO BE ELECTED TO SERVE UNTIL THE 2000 ANNUAL MEETING
James V. Napier 60 Director, Chairman of the 11,100 *
Board of Scientific-Atlanta,
Inc.
J. Leland Strange 55 Director, Chairman of the 1,283,340 24.7%
Board, President, Chief
Executive Officer
* Less than one percent.
Mr. McMahon has served as a director of the Company since 1981. He
retired in 1984 from the position of President and Chief Executive Officer of
Royal Crown Companies and serves as a director of Norrell Corporation.
Mr. Napier has served as a director since 1982. Mr. Napier is Chairman of
the Board and a director of Scientific-Atlanta, Inc., a firm involved in cable
television electronics and satellite-based communication networks. He also
serves as a director of H.B.O. & Company, Vulcan Materials Company, Engelhard
Corporation, Personnel Group of America, Inc. and Westinghouse Air Brake
Company. From July 1988 through 1992, Mr. Napier was Chairman and President of
Commercial Telephone Group, Inc., a telecommunications engineering design
company.
Dr. Peatman has served as a director since 1979 and has been a Professor
of Electrical Engineering at the Georgia Institute of Technology since 1964.
Mr. Petit has served as a director since July 1996. Mr. Petit has served
as Chairman of the Board of Matria Healthcare, Inc., an obstetrical home care
and maternity management services company since March 1996. Mr. Petit was
founder and Chairman of the Board of Healthdyne, Inc., Matria's predecessor,
from 1970 to March 1996. He also serves as a director of Healthdyne
Technologies, Inc., Healthdyne Information Enterprises, Inc. and Atlantic
Southeast Airlines, Inc.
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Mr. Strange has served as President since 1983, Chief Executive Officer
and Chairman of the Board of Directors since 1985, and Chief Financial Officer
from November 15, 1991 to October 1995. Mr. Strange serves as a director of IQ
Software Corporation and Healthdyne Technologies, Inc.
Each director has been elected to serve until the 1997 Annual Meeting of
Shareholders or until their earlier death, resignation or removal from office.
The executive officers of the Company are elected annually by the Board of
Directors following the annual meeting of the shareholders and serve for a term
of one year or until they are removed, replaced or resign. There are no family
relationships among any of the directors and executive officers.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met four times during the year ended
December 31, 1996. The Audit Committee of the Board of Directors consists of
Messrs. McMahon, Napier and Peatman, which met once during the last fiscal year.
The Audit Committee recommends the appointment of the Company's independent
auditors and meets with the auditors to review their report on the financial
operations of the Company. The Board has a Compensation Committee consisting of
Messrs. McMahon, Napier and Peatman which met twice 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
during the year, 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 Board of Directors and the
Committees of the Board on which they served.
EXECUTIVE OFFICERS
The following information is provided about the non-director executive
officers of the Company as of February 28, 1997.
NAME AGE POSITION / PRINCIPAL OCCUPATION
===============================================================================
Henry H. Birdsong 38 Chief Financial Officer
J. William Goodhew, III 59 Vice President
Bonnie L. Herron 49 Vice President and Corporate Secretary
Francis A. Marks 63 Vice President
Mr. Birdsong joined the Company in 1988 as Controller and Tax Manager,
following 6 years of experience in various positions in public accounting. He
was appointed Chief Financial Officer in October 1995.
Mr. Goodhew joined the Company in January 1997 as Vice President. He was
president of Peachtree Software, Inc. from 1985 through 1996.
Mr. Marks joined the Company in May 1982 as Vice President of Product Line
Programs after 26 years with IBM Corporation in a variety of managerial and
executive positions. He served as Vice President and General Manager of one of
the Company's former subsidiaries and was appointed Vice President in 1983.
Ms. Herron joined the Company in 1982 as Director of Planning at a
subsidiary of the Company and subsequently at the Company. She has served as
Division Manager of a subsidiary and was elected Secretary in 1987 and Vice
President in 1990.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
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(a) (b) (c) (d) (g) (i)
All Other
Name and Principal Position Year Salary Bonus Option/SARs Compensation *
$ $ # $
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J. Leland Strange 1996 191,065 -- 130,000 2,375
President & CEO 1995 152,065 39,000 130,000 1. 2,700
1994 161,450 10,000 -- 3,123
Francis A. Marks 1996 122,985 -- 80,000 1,870
Vice President 1995 92,273 30,000 80,000 1. 2,164
1994 100,490 5,000 -- 2,849
* Includes contributions to the respective accounts of the executive
officers pursuant to the terms of the Company's Tax-Deferred Savings and
Protection Plan. Such amounts are fully vested.
1. Options granted in 1995 were canceled and replacement grants were made in
1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM **
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(a) (b) (c) (d) (e) (f) (g) (h)
% of Total
Options/SARs
Granted to
Options/SARs Employees in Fiscal Exercise or Base Market
Name Granted* Year Price Price Expiration Date 5% 10%
# ($/Sh) ($/Sh) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------
J. Leland Strange 130,000 32% 2.25 2.25 08/20/06 183,952 466,170
Francis A. Marks 80,000 20% 2.25 2.25 08/20/06 113,201 286,874
* In 1996, the Company canceled the same number of options which had been
granted in 1995 at an exercise price of $2.07 per share and granted
replacement options at $2.25 per share. Options vest 100% on August 20,
2003 but may accelerate under certain conditions which include at least a
doubling of the market trading price of the stock compared to the grant
price. The exercise dates of these options will be accelerated upon a
change in control. Unvested options expire upon termination of employment
for any reason.
** Based on the difference between the exercise price and the market value
as determined by the market price per share on grant date at the stated
assumed rates of appreciation through 08/20/06.
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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)
Value of
Number of Unexercised
Unexercised Options In-the-Money
at Options at
FY-End FY-End*
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
# $ # $
- ---------------------------------------------------------------------------------------------------
J. Leland Strange 50,000 96,542 100,000 / 130,000 212,500 / 97,500
Francis A. Marks - 0 - - 0 - 90,000 / 80,000 191,250 / 60,000
* Based on the difference between the exercise price and the closing sales
price per share for the Common Stock on December 31, 1996 of $3.00, as
reported by the American Stock Exchange.
TEN-YEAR OPTION/SAR REPRICINGS
As more fully discussed in the Compensation Committee Report, in 1996 the
Company canceled options originally issued in 1995 and granted replacement
options in 1996 at a higher exercise price per share.
(a) (b) (c) (d) (e) (f) (g)
Length of Original
Number of Market Price of Exercise Price At Option Term
Option/SARs Stock at Time of Time of Repricing Remaining at Date
Repriced or Amended Repricing or or Amendment New Exercise Price of Repricing or
- ------------------------------------------------------------------------------------------------------------------------------------
J. Leland Strange 8/20/96 130,000 2.25 2.07 2.25 9 years
President
Francis A. Marks 8/20/96 80,000 2.25 2.07 2.25 9 years
Vice President
Bonnie L. Herron 8/20/96 80,000 2.25 2.07 2.25 9 years
Vice President
Henry H. Birdsong 8/20/96 20,000 2.25 2.07 2.25 9 years
CFO
COMPENSATION OF DIRECTORS
Non-employee directors are paid $8,000 per year plus a fee of $2,000 per
meeting day. Total compensation is capped at $16,000 annually. Effective
January 1, 1992, the Company adopted the Outside Directors' Retirement Plan
which provides for each nonemployee director, upon resignation from the Board
after reaching the age of 65, to receive a lump sum cash payment equal to
$5,000 for each full year of service as a director of the Company (and its
predecessors and successors) up to $50,000.
CHANGE-IN-CONTROL ARRANGEMENTS
Effective January 1, 1992, the Company adopted the Change in Control Plan
for Officers (the "Change in Control Plan") so that if control of the Company
changes in the future, management would be free to act on behalf
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of the Company and its shareholders without undue concern for the
possible loss of future compensation. A "change in control" is defined
to mean either: (i) the accumulation by an unrelated person of beneficial
ownership of more than 25 percent of the Company's Common Stock, (ii) the sale
of all or substantially all of the Company's assets to an unrelated person, in
a merger or otherwise, or (iii) a change of control within the meaning of the
rules promulgated by the Securities and Exchange Commission.
Under the Change in Control Plan, if an officer terminates after a change
in control, the officer would receive a lump sum cash payment in an amount
equal to twice the total of (i) such officer's base annual salary at the time
of termination, (ii) the cash value of annual benefits, and (iii) such
officer's bonus for the most recent year, if any. Additionally, upon a change
in control, all options shall vest and the exercise period for all options
becomes the longer of (i) one year after the date of termination or (ii) the
exercise period specified in the officer's option agreement. The right to such
benefits would lapse one year after the occurrence of the last change in
control event to occur if there were no actual termination during that period.
Currently, J. Leland Strange, Francis A. Marks and Bonnie L. Herron are the
only officers designated by the Board to participate in the Change in Control
Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for reviewing and approving compensation paid by the
Company to the executive officers of the Company. The Compensation Committee
reviews compensation of the executive officers annually, with input from the
Chief Executive Officer. The 1991 Stock Plan Committee (the "Plan Committee")
is responsible for administering the 1991 Stock Incentive Plan, including
selecting individuals who will receive stock option grants and determining the
timing, pricing and amounts of the options granted. The Plan Committee
reviewed and granted stock options to executive officers in 1991, 1995 and
1996. Both committees are comprised of three nonemployee directors of the
Company.
The Securities and Exchange Commission requires that all compensation
committees discuss how the companies that they serve intend to deal with the
newly enacted cap on the deductibility of compensation over $1 million for
proxy-named executive officers. Given the Company's current level of executive
compensation, it is not now necessary to consider this issue.
The basic goal of the Company's compensation program for executive
officers is to:
- fairly compensate executive officers commensurate with their
responsibilities and contribution to the Company
- reward management for achievement of financial goals of the Company
and specified subsidiaries, where the contribution of the executive
can be tied to operations under his control
- align management's compensation with shareholder interests as
measured by stock price appreciation
In 1996, the compensation of executive officers consisted of a base salary
and long-term compensation consisting of stock options. In 1994 and 1995, the
compensation of the named executive officers included a base salary, a cash
incentive plan, and long-term compensation consisting of stock options.
Because the Company has only two named executive officers and is not a
traditional operating company with readily identifiable comparative companies,
the base salary is determined by the Compensation Committee. The Committee
intends the base salary to be in the median range for persons with similar
experience and scope of responsibility. The Committee considers a number of
subjective factors including the nature, scope and variety of responsibilities
of each executive as well as the Company's financial results and condition.
The Committee considers an individual executive's performance in a variety of
functions which may include line responsibility for established as well as
start-up companies, corporate development activities (including acquisitions
and investments), completion of significant transactions, contribution to and
management of the Company's minority-owned partnership businesses and other
corporate functions.
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12
Cash incentives, when included in the compensation plan, are earned by the
named executives based on achievement of specified quarterly and annual
financial goals of the Company as a whole and those subsidiaries or projects
for which the named executive has management responsibility. Cash incentives
were earned in 1994 and 1995 based on a combination of achievement of
performance measures at certain subsidiaries for which the individual
executives had responsibility as well as overall corporate results. In 1996, a
cash incentive was not part of the executive's compensation for several
reasons. There were changes in responsibility during the year and a
significant amount of the executive's responsibilities were with start-up
subsidiaries and minority-owned companies, in which there was no direct
measurable financial result which could be tied to the executive's performance.
The Company's long-term incentive compensation plan is based on the 1991
Stock Incentive Plan which is designed to reward executives for increases in
the market price of the Company's stock, thus linking the interest of
executives and shareholders. The Plan Committee, in its sole discretion,
grants options to those individuals whose contribution is most likely to have
an impact on the Company's overall performance and price of the Company's
common stock. The number of options granted to an individual executive is
designed to provide an adequate financial incentive over a three to five year
time frame and to provide equity interest in the Company to its executives.
The number of options granted to an executive officer depends upon a subjective
evaluation of the individual's contribution to the company. In 1996, the Plan
Committee canceled stock options which had been granted in 1995 to executive
officers and re-issued the same number of options in 1996 in order to provide
favorable tax treatment of the options as incentive stock options. The
canceled options had an exercise price of $2.07 per share compared to $2.25 for
the replacement options. Prior to seven years from the date of grant, stock
options granted in 1996 to named executives will have value only if the stock
price more than doubles the grant price.
It is the policy of the Company to provide executives with the same
benefits provided to all other employees with respect to medical, dental, life
insurance and 401(k) plans.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee reviews the compensation of the Chief Executive
Officer annually. Mr. Strange, the largest shareholder of the Company, does not
have an employment agreement with the Company. Since there are no directly
comparable peer group companies, in setting Mr. Strange's compensation the
Committee considers a number of subjective factors including the nature, scope
and variety of his responsibilities, his contribution to increasing the value
of the Company's minority-owned companies, and the Company's financial results
and condition. The Compensation Committee believes Mr. Strange's compensation
is appropriate in consideration of the scope of Mr. Strange's position and the
performance of the Company. In 1996, Mr. Strange's total compensation was
approximately the same as in 1995. In 1996, the Company significantly reduced
its debt, increased stockholders' equity and achieved better overall financial
results than in the prior year. 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. Prior to
seven years from the date of grant, stock options granted in 1996 to Mr.
Strange will have value only if the stock price more than doubles the grant
price.
COMPENSATION COMMITTEE PLAN COMMITTEE
Donald A. McMahon Donald A. McMahon
James V. Napier James V. Napier
John B. Peatman John B. Peatman
- 11 -
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McMahon, Napier and Peatman served as members of the Compensation
Committee and the Plan Committee in 1996. None of these individuals is a
present or former officer or employee of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 2, 1996, J. Leland Strange, a director and President of the
Company, exercised an option to acquire 50,000 shares of Common Stock of the
Company. Mr. Strange turned in 14,894 shares at $2.9375 per share to the
Company to pay the exercise price and sold the remaining 35,106 shares to the
Company at $2.75 per share. The proceeds to Mr. Strange in this transaction
were $96,542. The sale had been approved in advance by the full Board of
Directors of the Company. The Company retired the 50,000 shares received in
this transaction.
PROPOSAL NO. 3 -- ADOPTION OF AN AMENDMENT TO THE 1991 STOCK INCENTIVE PLAN
INTRODUCTION
The Board of Directors has adopted a resolution approving and recommending
to the stockholders an amendment (the "Stock Option Amendment") to the
Company's 1991 Stock Incentive Plan (the "Stock Plan") that would increase the
total number of shares of the Company's Common Stock that may be issued under
the Stock Plan from 650,000 to 925,000. The complete text of the proposed
Stock Option Amendment is set forth in Exhibit B to this Proxy Statement.
As of the date hereof, there remain only 20,000 shares available for
option pursuant to the Stock Plan. The Stock Plan does not expire until
December 12, 2001. The Company's Board of Directors believes the Stock Plan can
be utilized effectively over the next several years to advance the Company's
interest only if additional shares are made available for option pursuant to
the Stock Plan.
GENERAL
The Stock Plan is intended to further the growth and development of the
Company by encouraging employees of the Company and its subsidiaries to obtain
a proprietary interest in the Company by purchasing its Common Stock. The
Company believes that the Stock Plan will help attract and retain employees,
and stimulate the efforts of such employees for the success of the Company and
its subsidiaries.
In December 1996, the Company granted 100,000 options to Mr. J. William
Goodhew, III, a newly elected vice president of the Company, subject to
stockholder approval of the proposed amendment. Presently only the five
executive officers of the Company participate in the Stock Plan and there are
no plans to issue additional options, other than those granted to Mr. Goodhew,
in the foreseeable future. For descriptions of certain options granted in
prior periods to other executive officers, refer to information provided under
the Executive Compensation section of the Proxy Statement.
ADMINISTRATION
The Stock Plan is administered by a committee appointed by the Board of
Directors of the Company from among its members and consists of at least two
members (the "Committee"). The Committee has full authority to (i) determine
the employees to whom options ("Options") and awards of restricted stock
("Restricted Stock") (collectively, "Stock Rights") will be granted, as well as
the terms of the Stock Rights and the number of shares of Common Stock awarded
or offered pursuant to such Stock Rights, (ii) determine whether an Option will
constitute an incentive stock option intended to qualify under Section 422 of
the Internal Revenue Code ("Incentive Stock Option") or a nonqualified option
not intended to qualify under Section 422 ("Nonqualified Stock Option") and
- 12 -
14
(iii) interpret the provisions of, and prescribe, amend and rescind any rules
and regulations relating to the Stock Plan.
ELIGIBILITY
Pursuant to the Stock Plan, employees of the Company or its subsidiaries,
including officers and directors who are also employees, are eligible for
consideration for the granting of Stock Rights by the Committee. Presently
five executive officers are participants in the Stock Plan.
SHARES AVAILABLE
Presently, the Stock Plan provides that the Committee may grant Stock
Rights with respect to a maximum of 650,000 shares of Common Stock, subject to
anti-dilution provisions contained in the Stock Plan. The proposed amendment
would increase the number of shares which could be issued to 925,000. On March
14, 1997, the closing sale price on the American Stock Exchange of the Common
Stock was $3 3/8 per share.
TERMS OF OPTIONS
Grant of Options
The Committee is authorized to grant to employees either Incentive Stock
Options or Nonqualified Stock Options, or both, for the purchase of Common
Stock.
Option Price
The purchase price of each share of Common Stock subject to an Option (the
"Option Price") will be determined by the Committee. However, the Option Price
may not be less than 50% of the fair market value of the Common Stock, or in
the case of an Incentive Stock Option less than the fair market value of the
Common Stock, in each case on the date the Option is granted. Additionally,
the Committee may not grant Incentive Stock Options to employees who own
beneficially more than 10% of the outstanding shares of Common Stock unless the
Option Price of such Options is at least 110% of the fair market value of the
Common Stock and the Options are not exercisable for more than five years.
Term and Exercise of Options
Each Option granted under the Stock Plan may be exercised on such dates,
during such periods and for such number of shares as determined by the
Committee. The term of any Option will be determined by the Committee, but in
the case of an Incentive Stock Option, the term may not exceed ten years from
the date of grant. Additionally, Options granted to an officer of the Company
may not be exercised for at least six months after the date of grant.
An Option granted under the Stock Plan may be exercised for less than the
full number of shares of Common Stock subject to such Option, but generally no
Option may be exercised for less than 100 shares unless the remaining shares
purchasable under the Option are less than 100 shares. Upon the exercise of an
Option, payment must be made in full in cash, or (if permitted by the
Committee) in shares of Common Stock already owned by the option holder (which
shares will be valued for such purpose on the basis of their fair market value
on the date of exercise) or in a combination of cash and shares.
- 13 -
15
Reload Options
In the discretion of the Committee, any Option may be accompanied by a
"Reload Option," which would be granted automatically to an option holder who
pays for all or part of the Option shares with shares of Common Stock. The
Reload Option would give the option holder the right to acquire the same number
of shares of Common Stock as used to pay for the original Option Shares. A
Reload Option is subject to all of the same terms and conditions as the
original Option, except that the Option Price for shares acquired pursuant to a
Reload Option will be equal to the fair market value of the Common Stock at the
time the original Option is exercised.
Transfers; Termination of Employment
Options granted under the Stock Plan will be nontransferable and
nonassignable except at death. The Committee is authorized to determine the
effect of the termination of an option holder's employment with the Company
(including its subsidiaries) upon such option holder's right to exercise an
Option, which may include immediate or deferred termination of such option
holder's rights under an Option or acceleration of the date at which an Option
may be exercised in full.
RESTRICTED STOCK
The Committee is authorized to award to employees of the Company or its
subsidiaries shares of Restricted Stock. Restricted stock is Common Stock that
is subject to restrictions and conditions established at the time of the award:
if these restrictions and conditions are not satisfied, the employee will
forfeit the Restricted Stock; if they are satisfied, the employee will hold the
Restricted Stock free and clear, subject to ordinary securities law
restrictions.
Shares of the Restricted Stock still subject to restriction will be
nontransferable and nonassignable except at death. The Committee is authorized
to determine the effect of the termination of employment with the Company
(including its subsidiaries) upon such holder's rights with respect to such
Restricted Stock, which may include immediate or deferred forfeiture of such
Restricted Stock or acceleration of the date at which any remaining
restrictions shall lapse.
TERMINATION AND AMENDMENT
The Stock Plan became effective on December 13, 1991 and will terminate on
December 12, 2001. The Board of Directors of the Company may amend the Stock
Plan at any time, provided that no amendment may be effected without the
approval of the shareholders of the Company if such amendment would (i)
materially increase the number of shares of Common Stock subject to the Stock
Plan; (ii) materially change or modify the class of persons that may
participate in the Stock Plan; or (iii) materially increase the benefits
accruing to participants under the Stock Plan. Additionally, no amendment may
be effected without the approval of the holders of Stock Rights if such
amendment would adversely affect, in any way, the rights of such participants
under the Stock Plan.
FEDERAL INCOME TAX CONSEQUENCES
An option holder will not have any tax consequences upon issuance or,
generally, upon exercise of an Incentive Stock Option. However, the exercise
of an Incentive Stock Option may result in tax consequences under some
circumstances.
First, if an option holder disposes of Common Stock acquired under an
Incentive Stock Option before the expiration of the requisite holding periods
(generally, two years after grant and one year after exercise), the option
holder will recognize ordinary income in an amount equal to the difference
between the Option Price and the lesser of (i) the fair market value of the
shares on the date of exercise and (ii) the price at which the shares are sold.
This amount will be taxed at ordinary income rates. If the sale price of the
shares is greater than their fair market value on the date of exercise, the
difference will be recognized as gain by the option holder and taxed at the
applicable
- 14 -
16
capital gains rate. If the holding period requirements have not been satisfied
for shares previously acquired through the exercise of an Incentive Stock Option
and the option holder uses these shares to pay the Option Price under an
Incentive or Nonqualified Stock Option, that use of the previously acquired
shares will be treated as a disposition of these shares subject to the tax
consequences described above in this paragraph.
An option holder also will have tax consequences upon exercise of an
Incentive Stock Option if, at the time of grant, the aggregate fair market
value of shares of the Common Stock subject to Incentive Stock Options which
first become exercisable by an option holder in any one calendar year exceeds
$100,000. If this occurs, the excess shares will be treated as though they are
subject to a Nonqualified Stock Option instead of an Incentive Stock Option.
Upon exercise of an Option with respect to these shares, the option holder will
have the tax consequences described below with respect to the exercise of
Nonqualified Stock Options.
Finally, except to the extent that an option holder has recognized income
with respect to the exercise of an Incentive Stock Option (as described in the
two preceding paragraphs), the amount by which the fair market value of a share
of Common Stock at the time of exercise exceeds the Option Price will be
included in determining an option holder's alternative minimum taxable income,
and may cause the option holder to incur an alternative minimum tax liability
in the year of exercise.
There will be no tax consequences to the Company upon issuance or,
generally, upon exercise of an Incentive Stock Option. However, to the extent
that an option holder recognizes ordinary income upon exercise, as described
above, the Company will have a deduction in the same amount.
Nonqualified Stock Options
Neither the Company nor the option holder will have any income tax
consequences upon the issuance of Nonqualified Stock Options. Generally, when
an option holder exercises Nonqualified Stock Options, the option holder
recognizes ordinary income in the amount by which the fair market value of the
shares at the time of exercise exceeds the Option Price for such shares. For
the Company's tax year in which the option holder exercises the Option, the
Company will have a deduction in the same amount as the ordinary income
recognized by the option holder.
If an option holder exercises a Nonqualified Stock Option by paying the
Option Price with previously acquired Common Stock, the option holder will
recognize income (relative to the new shares he or she is receiving) in two
steps. In the first step, a number of new shares equivalent to the number of
old shares tendered (in payment of the Nonqualified Stock Option exercised)
will be considered to have been exchanged in accordance with Section 1036 of
the Internal Revenue Code and the rulings thereunder, and no gain or loss will
be recognized. In the second step, with respect to the number of new shares
acquired in excess of the number of old shares tendered, the option holder will
recognize income on those new shares equal to their fair market value on the
date of exercise less any nonstock consideration tendered.
Restricted Stock
A holder of Restricted Stock will recognize income upon its receipt, but
generally only to the extent that it is not subject to a substantial risk of
forfeiture. If the Restricted Stock is subject to restrictions that lapse in
increments over a period of time (so that the holder becomes vested in a
portion of the shares as the restrictions lapse), the holder will recognize
income in any tax year only with respect to the shares that become
nonforfeitable during that year. The income recognized will be equal to the
fair market value of those shares, determined as of the time that the
restrictions on those shares lapse. That income generally will be taxable at
ordinary income tax rates. The Company generally will be entitled to a
deduction in an amount equal to the ordinary income recognized by the holder of
the Restricted Stock. Upon disposition of the shares of Restricted Stock, the
excess of the sales price of the shares over the fair market value of those
shares, determined as of the date the restrictions thereon lapsed, will be
treated as a capital gain.
- 15 -
17
To avoid taxation at the time Restricted Stock becomes nonforfeitable, as
described in the preceding paragraph, a holder of Restricted Stock may elect to
recognize ordinary income for the taxable year in which he receives an award of
Restricted Stock in an amount equal to the fair market value of all shares of
Restricted Stock awarded to him (even if the shares are subject to forfeiture).
For purposes of this election, fair market value will be determined as of the
date the award of Restricted Stock is made or, if later, the date the Restricted
Stock is transferred to the holder. The income recognized will be taxable at
ordinary income tax rates. The Company generally will be entitled to a
deduction in an amount equal to the amount of ordinary income recognized by the
holder at the time of his election. Upon disposition of the shares of
Restricted Stock, the excess of the sales price of the shares over the fair
market value of the shares on the date of award or transfer, as applicable,
will be treated as a capital gain.
RECENT GRANTS OF OPTIONS
During the year ended December 31, 1996, the Committee granted replacement
Options to purchase shares of Common Stock at an option price of $2.25 per
share to Mr. Marks (80,000 shares), Mr. Strange (120,000 shares), Ms. Herron
(80,000 shares) and Mr. Birdsong (20,000 shares). The Committee also granted
Options to purchase 100,000 shares to Mr. Goodhew at an option price of
$2.9375. Mr. Goodhew's option is subject to the approval of the amendment to
the Stock Plan by the shareholders.
In order for the amendment to the Stock Plan to be approved, the votes
cast favoring the amendment must exceed the votes cast opposing it.
Accordingly, shares that are withheld or abstain from voting will have no
effect on the outcome of the vote. THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO AMEND THE 1991 STOCK
INCENTIVE PLAN.
Performance Graph
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of the companies on the AMEX Market
Value Index and the S&P Technology Sector Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG INTELLIGENT SYSTEMS, THE S&P TECHNOLOGY SECTOR INDEX AND THE AMEX MARKET
VALUE INDEX
Cumulative Total Return
----------------------------------------
12/91 12/92 12/93 12/94 12/95 12/96
Intelligent Syn Corp INS 100 156 172 189 189 267
AMEX MARKET VALUE IAMX 100 101 121 110 139 267
S&P TECHNOLOGY SECTOR ITES 100 104 128 149 215 305
* $100 invested on 12/31/91 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
- 16 -
18
RESEARCH Total Return - Data Summary
INS
Cumulative Total Return
----------------------------------------
12/91 12/92 12/93 12/94 12/95 12/96
Intelligent Syn Corp INS 100 156 172 189 189 267
AMEX MARKET VALUE IAMX 100 101 121 110 139 267
S&P TECHNOLOGY SECTOR ITES 100 104 128 149 215 305
12-Feb-97 Page 1
19
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's executive officers and directors and persons who own more than ten
percent of the Company's Common Stock, as well as certain affiliates of such
persons, to file initial reports of ownership of the Company's Common Stock and
changes in such ownership with the Securities and Exchange Commission and the
American Stock Exchange. Executive officers, directors and persons owning more
than ten percent of the Company's Common Stock are required by Securities and
Exchange Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of
such forms received by it, the Company believes that, during the fiscal year
ended December 31, 1996, all filing requirements applicable to its executive
officers, directors, and owners of more than ten percent of the Company's
Common Stock were complied with in a timely manner.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, Atlanta, Georgia, acted as the Company's principal
independent public accountants for the fiscal year ended December 31, 1996.
Representatives of Arthur Andersen LLP are expected to be present at the
shareholders' meeting and will have the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders intended to be presented at the Company's 1998
Annual Meeting of Shareholders should be submitted to the Secretary of the
Company by certified mail, return receipt requested and must be received by the
Company at its offices in Norcross, Georgia on or before December 19, 1997 to
be eligible for inclusion in the Company's proxy statement and form of proxy
for that meeting.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors knows of no matters other than those stated above
which are to be brought before the meeting. However, if any other matter
should be presented for consideration and voting, it is the intention of the
persons named in the enclosed form of proxy to vote the proxy in accordance
with their judgment of what is in the best interest of the Company.
By order of the Board of Directors
BONNIE L. HERRON
Secretary
Norcross, Georgia
April 18, 1997
-17-
20
EXHIBIT A
PROPOSED AMENDMENT OF SECTION 3.2 OF THE
BYLAWS OF THE CORPORATION
RESOLVED, that the Bylaws of the Corporation, be amended by the deletion of
existing Section 3.2 and the substitution of the following text, so that
Section 3.2 shall be and read in its entirety as follows:
3.2 NUMBER, ELECTION AND TERM OF OFFICE. The number of directors of the
Corporation shall be fixed by resolution of the Board of Directors or of
the shareholders from time to time; provided, however, that no decrease in
the number of directors shall have the effect of shortening the term of an
incumbent director. The Board of Directors shall be divided into three
classes, Class I, Class II and Class III, as nearly equal in number as
possible. The term of office of the Directors in Class I shall expire at
the 1998 Annual Meeting of Shareholders. The term of office of the
Directors in Class II shall expire at the 1999 Annual Meeting of
Shareholders. The term of office of the Directors in Class III shall
expire at the 2000 Annual Meeting of Shareholders. At each Annual Meeting
of the Shareholders, Directors chosen to succeed those whose terms then
expire shall be elected for a term of office expiring at the third
succeeding Annual Meeting of Shareholders after the election. When the
number of Directors is changed, subject to any requirements of the Code,
any newly-created directorships or any decrease in directorships shall be
apportioned among the classes by the Board of Directors as to make all
classes as nearly equal in number as possible. A director shall hold
office until the Annual Meeting of Shareholders for the year in which his
or her term expires and until his or her successor shall be elected.
21
EXHIBIT B
PROPOSED AMENDMENT OF ARTICLE 5.1(A) OF THE
INTELLIGENT SYSTEMS CORPORATION
1991 STOCK INCENTIVE PLAN
RESOLVED, that the Intelligent Systems Corporation 1991 Stock Incentive Plan be
amended by the deletion of the existing Section 5.1(a) and the substitution of
the following text, so that Section 5.1(a) shall be and read in its entirety as
follows:
5.1 LIMITATIONS. Subject to any antidilution adjustment pursuant to the
provisions of Section 5.2 hereof, the maximum number of shares of Stock
that may be issued hereunder shall be 925,000. Shares subject to an
Option or issued as an Award may be either authorized and unissued shares
or shares issued and later acquired by the Company. The shares covered by
any unexercised portion of an Option that has terminated for any reason
(except as set forth in the following paragraph), or any forfeited portion
of an Award (except any portion as to which the Grantee has received, and
not forfeited, dividends or other benefits of ownership other that voting
rights) may again be optioned or awarded under the Plan, and such shares
shall not be considered as having been optioned or issued in computing the
number of shares of Stock remaining available for option or award
hereunder.
22
INTELLIGENT SYSTEMS CORPORATION
1991 STOCK INCENTIVE PLAN
[As adopted December 13, 1991]
23
INTELLIGENT SYSTEMS CORPORATION
1991 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ............................................ 1
(a) "Award" ................................................ 1
(b) "Board" ................................................ 1
(c) "Code" ................................................. 1
(d) "Committee" ............................................ 1
(e) "Company" .............................................. 1
(f) "Director" ............................................. 1
(g) "Disinterested Person" ................................. 1
(h) "Employee" ............................................. 1
(i) "Employer" ............................................. 1
(j) "Fair Market Value" .................................... 2
(k) "Grantee" .............................................. 2
(l) "ISO" .................................................. 2
(m) "1934 Act" ............................................. 2
(n) "Officer" .............................................. 2
(o) "Option" ............................................... 3
(p) "Option Agreement" ..................................... 3
(q) "Optionee" ............................................. 3
(r) "Option Price" ......................................... 3
(s) "Parent" ............................................... 3
(t) "Plan" ................................................. 3
(u) "Purchasable," ......................................... 3
(v) "Qualified Domestic Relations Order" ................... 3
(w) "Reload Option" ........................................ 3
(x) "Restricted Stock" ..................................... 3
(y) "Restriction Agreement" ................................ 3
(z) "Stock" ................................................ 4
(aa)"Subsidiary ........................................... 4
ARTICLE II THE PLAN............................................... 4
Section 2.1 Name ........................................... 4
Section 2.2 Purpose ........................................ 4
Section 2.3 Effective Date ................................. 4
Section 2.4 Termination Date ............................... 4
ARTICLE III ELIGIBILITY........................................... 4
i
24
TABLE OF CONTENTS (Cont'd)
Page
----
ARTICLE IV ADMINISTRATION ......................................... 5
Section 4.1 Duties and Powers of the Committee ............. 5
Section 4.2 Interpretation; Rules .......................... 5
Section 4.3 No Liability ................................... 5
Section 4.4 Majority Rule .................................. 5
Section 4.5 Company Assistance ............................. 6
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN ......................... 6
Section 5.1 Limitations .................................... 6
Section 5.2 Antidilution ................................... 6
ARTICLE VI OPTIONS ................................................ 8
Section 6.1 Types of Options Granted ....................... 8
Section 6.2 Option Grant and Agreement ..................... 8
Section 6.3 Optionee Limitations ........................... 8
Section 6.4 $100,000 Limitation ............................ 9
Section 6.5 Option Price ................................... 9
Section 6.6 Exercise Period ................................ 9
Section 6.7 Option Exercise ................................ 9
Section 6.8 Nontransferability of Option ................... 10
Section 6.9 Termination of Employment ...................... 10
Section 6.10 Employment Rights .............................. 11
Section 6.11 Certain Successor Options ...................... 11
Section 6.12 Conditions to Issuing Option Stock ............. 11
ARTICLE VII RESTRICTED STOCK ...................................... 12
Section 7.1 Awards of Restricted Stock ..................... 12
Section 7.2 Non-Transferability ............................ 12
Section 7.3 Lapse of Restrictions .......................... 12
Section 7.4 Termination of Employment ...................... 12
Section 7.5 Treatment of Dividends ......................... 13
Section 7.6 Delivery of Shares ............................. 13
ARTICLE VIII TERMINATION, AMENDMENT AND
MODIFICATION OF PLAN ........................................ 13
ARTICLE IX MISCELLANEOUS........................................... 14
Section 9.1 Replacement or Amended Grants .................. 14
Section 9.2 Forfeiture for Competition ..................... 14
Section 9.3 Plan Binding on Successors ..................... 14
Section 9.4 Gender ......................................... 14
Section 9.5 Headings Not a Part of Plan .................... 14
ii
25
INTELLIGENT SYSTEMS CORPORATION
1991 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
(a) "Award" shall mean a grant of Restricted Stock.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the United States Internal Revenue Code of 1986, as
amended, including effective date and transition rules (whether or not
codified). Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
(d) "Committee" shall mean a committee of at least two Directors appointed
from time to time by the Board, having the duties and authority set forth herein
in addition to any other authority granted by the Board; provided, however, that
with respect to any Options or Awards granted to an individual who is an
Officer, the Committee shall consist of at least two Directors (who need not be
members of the Committee with respect to Options or Awards granted to any other
individuals) who are Disinterested Persons, and all authority and discretion
shall be exercised by such Disinterested Persons, and references herein to the
"Committee" shall mean such Disinterested Persons insofar as any actions or
determinations of the Committee shall relate to or affect Options or Awards made
to or held by any Officer.
(e) "Company" shall mean Intelligent Systems Corporation, a Georgia
corporation.
(f) "Director" shall mean a member of the Board.
(g) "Disinterested Person" shall have the meaning set forth in Rule 16b-3
under the 1934 Act, as the same may be in effect from time to time, or in any
successor rule thereto, and shall be determined for all purposes under the Plan
according to interpretative or "no-action" positions with respect thereto issued
by the Securities and Exchange Commission.
(h) "Employee" shall mean any employee of the Company or any Subsidiary
of the Company.
(i) "Employer" shall mean the corporation that employs a Grantee.
26
(j) "Fair Market Value" of the shares of Stock on any date shall mean
(i) the closing sales price, regular way, or in the absence thereof
the mean of the last reported bid and asked quotations, on such date
on the exchange having the greatest volume of trading in the shares
during the thirty-day period preceding such date (or if such exchange
was not open for trading on such date, the next preceding date on
which it was open); or
(ii) if there is no price as specified in (i), the final reported
sales price or, if not reported, the mean of the closing high bid and
low asked prices in the over-the-counter market for the shares as
reported by the National Association of Securities Dealers Automatic
Quotation System or, if not so reported, then as reported by the
National Quotation Bureau Incorporated, or if such organization is not
in existence, by an organization providing similar services, on such
date (or if such date is not a date for which such system or
organization generally provides reports, then on the next preceding
date for which it does so); or
(iii) if there also is no price as specified in (ii), the price
determined by the Committee by reference to bid-and-asked quotations
for the shares provided by members of an association of brokers and
dealers registered pursuant to subsection 15(b) of the 1934 Act, which
members make a market in the shares, for such recent dates as the
Committee shall determine to be appropriate for fairly determining
current market value; or
(iv) if there also is no price as specified in (iii), the amount
determined in good faith by the Committee based on such relevant
facts, which may include opinions of independent experts, as may be
available to the Committee.
(k) "Grantee" shall mean an Employee who is an Optionee or who has
received an Award.
(l) "ISO" shall mean an Option that complies with and is subject to the
terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto.
(m) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
(n) "Officer" shall mean a person who constitutes an officer of the
Company for the purposes of Section 16 of the 1934 Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or
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"no-action" positions with respect thereto of the Securities and Exchange
Commission, as the same may be in effect or set forth from time to time.
(o) "Option" shall mean a contractual right to purchase Stock granted
pursuant to the provisions of Article VI hereof
(p) "Option Agreement" shall mean an agreement between the Company and an
Optionee setting forth the terms of an Option.
(q) "Optionee" shall mean a person to whom an Option has been granted
hereunder.
(r) Option Price" shall mean the price at which an Optionee may purchase a
share of Stock pursuant to an Option.
(s) "Parent" shall mean any corporation (other than the Employer) in an
unbroken chain of corporations ending with the Employer if, at the relevant
time, each of the corporations other than the Employer owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(t) "Plan" shall mean the 1991 Stock Incentive Plan of the Company.
(u) "Purchasable," when used to describe Stock, shall refer to Stock that
may be purchased by an Optionee under the terms of this Plan on or after a
certain date specified in the applicable Option Agreement.
(v) "Qualified Domestic Relations Order" shall have the meaning set forth
in the Code or in the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated under the Code or such Act.
(w) "Reload Option" shall mean an Option that is granted, without further
action of the Committee, (i) to an Optionee who surrenders or authorizes the
withholding of shares of Stock in payment of amounts specified in paragraphs
6.7(c) or 6.7(d) hereof, (ii) for the same number of shares as is so paid, (iii)
as of the date of such payment and at an Option Price equal to the Fair Market
Value of the Stock on such date, and (iv) otherwise on the same terms and
conditions as the Option whose exercise has occasioned such payment, subject to
such contingencies, conditions or other terms as the Committee shall specify at
the time such exercised Option is granted.
(x) "Restricted Stock" shall mean Stock issued, subject to restrictions, to
an Employee pursuant to Article VII hereof.
(y) "Restriction Agreement" shall mean the agreement setting forth the
terms of an Award, and executed by a Grantee as provided in Section 7.1 hereof.
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(z) "Stock" shall mean the $.01 par value common stock of the Company or,
in the event that the outstanding shares of such stock are hereafter changed
into or exchanged for shares of a different class of stock or securities of the
Company or some other corporation, such other stock or securities.
(aa) "Subsidiary" shall mean any corporation (other than the Employer) in
an unbroken chain of corporations beginning with the Employer if, at the
relevant time, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the Company's "1991 Stock Incentive
Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company, its shareholders, and any Subsidiary of the Company, by offering
certain Employees an opportunity to acquire or increase their proprietary
interests in the Company. Options and Awards will promote the growth and
profitability of the Company, and any Subsidiary of the Company, because
Grantees will be provided with an additional incentive to achieve the Company's
objectives through participation in its success and growth.
2.3 Effective Date. The Plan shall become effective on December 13, 1991.
2.4 Termination Date. No further Options or Awards shall be granted
hereunder on or after December 12, 2001, but all Options or Awards granted prior
to that time shall remain in effect in accordance with their terms; provided,
however, that the Plan shall terminate, and all Options or Awards theretofore
granted or awarded shall become void and may not be exercised, on December 13,
1992, if the shareholders of the Company shall not by that date have approved
the Plan's adoption.
ARTICLE III
ELIGIBILITY
The persons eligible to participate in this Plan shall consist only of
those Employees whose participation the Committee determines is in the best
interests of the Company.
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ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee.
(a) The Plan shall be administered by the Committee. The Committee
shall select one of its members as its Chairman and shall hold its meetings at
such times and places as it may determine. The Committee shall keep minutes of
its meetings and shall make such rules and regulations for the conduct of its
business as it may deem necessary. The Committee shall have the power to act by
unanimous written consent in lieu of a meeting, and shall have the right to meet
telephonically. In administering the Plan, the Committee's actions and
determinations shall be binding on all interested parties.
(b) The Committee shall have the power to grant Options or Awards in
accordance with the provisions of the Plan. Subject to the provisions of the
Plan, the Committee shall have the discretion and authority to determine those
individuals to whom Options or Awards will be granted and whether such Options
shall be accompanied by the right to receive Reload Options, the number of
shares of Stock subject to each Option or Award, such other matters as are
specified herein, and any other terms and conditions of an Option Agreement or
Restriction Agreement. Without limiting any of the foregoing, the adoption of
the Plan by the Board shall be deemed to be a delegation of its authority to
determine that the consideration received or to be received by the Company for
shares of Stock to be issued under Options or Awards is adequate.
(c) To the extent not inconsistent with the provisions of the Plan,
the Committee shall have the authority to amend or modify an outstanding Option
Agreement or Restriction Agreement, or to waive any provision thereof, provided
that the Grantee consents to such action.
4.2 Interpretation: Rules. Subject to the express provisions of the Plan,
the Committee also shall have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to make
all other determinations necessary or advisable in the administration of the
Plan, including, without limitation, the amending or altering of any Options or
Awards granted hereunder as may be required to comply with or to conform to any
federal, state or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of the
Committee shall be liable to any person for any act or determination made in
good faith with respect to the Plan or any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
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executed by all the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary in
the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations.
(a) Subject to any antidilution adjustment pursuant to the provisions
of Section 5.2 hereof, the maximum number of shares of Stock that may be issued
hereunder shall be 650,000. Shares subject to an Option or issued as an Award
may be either authorized and unissued shares or shares issued and later acquired
by the Company. The shares covered by any unexercised portion of an Option that
has terminated for any reason (except as set forth in the following paragraph),
or any forfeited portion of an Award (except any portion as to which the Grantee
has received, and not forfeited, dividends or other benefits of ownership other
than voting rights) may again be optioned or awarded under the Plan, and such
shares shall not be considered as having been optioned or issued in computing
the number of shares of Stock remaining available for option or award hereunder.
(b) Pursuant to rules adopted by the American Stock Exchange, unless
and until the shareholders of the Company have approved the adoption of the
Plan:
(i) options may not be granted nor Awards made with respect to
more than 5% of the outstanding Stock in any one year; and
(ii) all arrangements adopted by the Company in any 5-year period
(including but not limited to the Plan) shall not authorize, in the
aggregate, the issuance of more than 10% of the Stock.
In both cases, in calculating the percentage of Stock to be issued in the
aggregate, there shall be excluded from such calculations Stock previously
covered by Options, Awards and other arrangements that have expired or have been
canceled.
5.2 Antidilution.
(a) In the event that the outstanding shares of Stock are changed into
or exchanged for a different number or kind of shares or other securities of the
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Company by reason of merger, consolidation, reorganization, recapitalization,
reclassification, combination or exchange of shares, stock split or stock
dividend, or in the event that any spin-off, spin-out or other distribution of
assets materially affects the price of the Company's stock:
(i) The aggregate number and kind of shares of Stock for which
Options or Awards may be granted hereunder shall be adjusted
proportionately by the Committee; and
(ii) The rights of Optionees (concerning the number of shares
subject to Options and the Option Price) under outstanding Options and
the rights of the holders of Awards (concerning the terms and
conditions of the lapse of any then-remaining restrictions), shall be
adjusted proportionately by the Committee.
(b) If the Company shall be a party to any reorganization in which it
does not survive, involving merger, consolidation, or acquisition of the stock
or substantially all the assets of the Company, in its discretion the Committee
may:
(i) notwithstanding other provisions hereof, declare that all
Options granted under the Plan shall become exercisable immediately
notwithstanding the provisions of the respective Option Agreements
regarding exercisability, that all such Options shall terminate a
specified period of time after the Committee gives written notice of
the immediate right to exercise all such Options and of the decision
to terminate all Options not exercised within such period, and that
all then-remaining restrictions pertaining to Awards under the Plan
shall immediately lapse; and/or
(ii) notify all Grantees that all Options or Awards granted under
the Plan shall be assumed by the successor corporation or substituted
on an equitable basis with options or restricted stock issued by such
successor corporation.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in paragraph 5.2(b), the provisions of such
paragraph shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause all then-remaining restrictions pertaining to Awards
under the Plan to lapse, and shall cause every Option outstanding under the
Plan to terminate to the extent not exercised prior to the adoption of the plan
of dissolution or liquidation by the shareholders, provided that,
notwithstanding other provisions hereof, the Committee may declare all Options
granted under the Plan to be exercisable at any time on or before the fifth
business day following such adoption notwithstanding the provisions of the
respective Option Agreements regarding exercisability.
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(d) The adjustments described in paragraphs (a) through (c) of this
Section 5.2, and the manner of their application, shall be determined solely by
the Committee, and any such adjustment may provide for the elimination of
fractional share interests. The adjustments required under this Article V shall
apply to any successors of the Company and shall be made regardless of the
number or type of successive events requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. Within the limitations provided herein,
Options may be granted to one Employee at one or several times or to different
Employees at the same time or at different times, in either case under different
terms and conditions, as long as the terms and conditions of each Option are
consistent with the provisions of the Plan. Without limitation of the foregoing,
Options may be granted subject to conditions based on the financial performance
of the Company or any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted or modified hereunder
shall be evidenced (a) by either minutes of a meeting or a written consent of
the Committee, and (b) by a written Option Agreement executed by the Company and
the Optionee. The terms of the Option, including the Option's duration, time or
times of exercise, exercise price, whether the Option is intended to be an ISO,
and whether the Option is to be accompanied by the right to receive a Reload
Option, shall be stated in the Option Agreement. Separate Option Agreements
shall be used for Options intended to be ISO's and those not so intended, but
any failure to use such separate Agreements shall not invalidate, or otherwise
adversely affect the Optionee's rights under and interest in, the Options
evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an ISO to any
person who, at the time the ISO would be granted:
(a) is not an Employee; or
(b) owns or is considered to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Employer, or any
Parent or Subsidiary of the Employer; provided, however, that this limitation
shall not apply if at the time an ISO is granted the Option Price is at least
110% of the Fair Market Value of the Stock subject to such Option and such
Option by its terms would not be exercisable after the expiration of five years
from the date on which the Option is granted. For the purpose of this paragraph
(b), a person shall be considered to own (i) the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors and lineal descendants, (ii) the stock owned, directly
or indirectly, by or for a corporation, partnership, estate, or trust in
proportion to such person's stock interest, partnership interest or beneficial
interest therein, and
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(iii) the stock which such person may purchase under any outstanding options of
the Employer or of any Parent or Subsidiary of the Employer.
6.4 $100.000 Limitation. Except as provided below, the Committee shall not
grant an ISO to, or modify the exercise provisions of outstanding ISO's held by,
any person who, at the time the ISO is granted (or modified), would thereby
receive or hold any incentive stock options (as described in Code section 422)
of the Employer and any Parent or Subsidiary of the Employer, such that the
aggregate Fair Market Value (determined as of the respective dates of grant or
modification of each option) of the stock with respect to which such incentive
stock options are exercisable for the first time during any calendar year is in
excess of $100,000; provided, that the foregoing restriction on modification of
outstanding ISO's shall not preclude the Committee from modifying an outstanding
ISO if, as a result of such modification and with the consent of the Optionee,
such Option no longer constitutes an ISO; and provided that, if the $100,000
limitation described in this Section 6.4 is exceeded, an Option that otherwise
qualifies as an ISO shall be treated as an ISO up to the limitation and the
excess shall be treated as an Option not qualifying as an ISO. The preceding
sentence shall be applied by taking options intended to be ISO's into account in
the order in which they were granted.
6.5 Option Price. The Option Price under each Option shall be determined by
the Committee. However, the Option Price shall not be less than 50% of the Fair
Market Value of the Stock, or in the case of an ISO less than the Fair Market
Value of the Stock, in each case on the date that the Option is granted (or, in
the case of an ISO that is subsequently modified, on the date of such
modification).
6.6 Exercise Period. The period for the exercise of each Option granted
hereunder shall be determined by the Committee, but
(a) the Option Agreement with respect to each Option intended to be an
ISO shall provide that such Option shall not be exercisable after the expiration
of ten years from the date of grant (or modification) of the Option, and
(b) no Option granted to an Employee who is also an Officer shall be
exercisable prior to the expiration of six months from the date such Option is
granted, other than in the case of the death or disability of such Employee.
6.7 Option Exercise.
(a) Unless otherwise provided in the Option Agreement, an Option may
be exercised at any time or from time to time during the term of the Option as
to any or all whole shares that have become Purchasable under the provisions of
the Option, but not at any time as to less than 100 shares unless the remaining
shares that have become so Purchasable are less than 100 shares. The Committee
shall have the authority to prescribe in any Option Agreement that the Option
may be exercised only in accordance with a vesting schedule during the term of
the Option.
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(b) An Option shall be exercised by (i) delivery to the Treasurer of
the Company at its principal office of written notice of exercise with respect
to a specified number of shares of Stock, and (ii) payment to the Company at
that office of the full amount of the Option Price for such number of shares.
(c) The Option Price shall be paid in full upon the exercise of the
Option; provided, however, that the Committee may provide in an Option Agreement
that, in lieu of cash, all or any portion of the Option Price may be paid by
tendering to the Company shares of Stock duly endorsed for transfer and owned by
the Optionee, to be credited against the Option Price at the Fair Market Value
of such shares on the date of exercise (however, no fractional shares may be so
transferred, and the Company shall not be obligated to make any cash payments in
consideration of any excess of the aggregate Fair Market Value of shares
transferred over the aggregate Option Price).
(d) In addition to and at the time of payment of the Option Price, the
Optionee shall pay to the Company in cash the full amount of any federal, state
and local income, employment or other taxes required to be withheld from the
income of such Optionee as a result of such exercise; provided, however, that in
the discretion of the Committee any Option Agreement may provide that all or any
portion of such tax obligations, together with additional taxes not exceeding
the actual additional taxes to be owed by the Optionee as a result of such
exercise, may, upon the irrevocable election of the Optionee, be paid by
tendering to the Company whole shares of Stock duly endorsed for transfer and
owned by the Optionee, or by authorization to the Company to withhold shares of
Stock otherwise issuable upon exercise of the Option, in either case in that
number of shares having a Fair Market Value on the date of exercise equal to the
amount of such taxes thereby being paid, and subject to such restrictions as to
the approval and timing of any such election as the Committee may from time to
time determine to be necessary or appropriate to satisfy the conditions of the
exemption set forth in Rule 16b-3 under the 1934 Act.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until such
shares have been issued upon the exercise of the Option.
6.8 Nontransferability of Option. No Option or any rights therein shall be
transferable by an Optionee other than by will or the laws of descent and
distribution, or pursuant to a Qualified Domestic Relations Order. During the
lifetime of an Optionee, an Option granted to that Optionee shall be exercisable
only by such Optionee (or by such Optionee's guardian or other legal
representative, should one be appointed).
6.9 Termination of Employment. The Committee shall have the power to
specify, with respect to the Options granted to any particular Optionee, the
effect upon such Optionee's right to exercise an Option of the termination of
such Optionee's employment under various circumstances, which effect may include
immediate or deferred termination of such Optionee's rights under an Option, or
acceleration of the date at which an Option may be exercised in full.
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6.10 Employment Rights. Options granted under the Plan shall not be
affected by any change of employment so long as the Optionee continues to be an
Employee. Nothing in the Plan or in any Option Agreement shall confer on any
person any right to continue in the employ of the Company or any Subsidiary of
the Company, or shall interfere in any way with the right of the Company or any
such Subsidiary to terminate such person's employment at any time.
6.11 Certain Successor Options. To the extent not inconsistent with the
terms, limitations and conditions of Code section 422, and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company) may contain terms that differ
from those stated in this Article VI, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code section 424(a).
6.12 Conditions to Issuing Option Stock. The Company shall not be required
to issue or deliver any Stock purchased upon the full or partial exercise of any
Option granted hereunder prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares that the Company shall determine to be necessary or advisable under any
federal or state law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body, or the Company's
determination that an exemption is available from such registration or
qualification;
(c) The obtaining of any approval or other clearance from any federal
or state governmental agency that the Company shall determine to be necessary or
advisable; and
(d) The lapse of such reasonable period of time following exercise as
shall be appropriate for reasons of administrative convenience.
Unless the shares of Stock covered by the Plan shall be the subject of an
effective registration statement under the Securities Act of 1933, as amended,
stock certificates issued and delivered to Optionees shall bear such restrictive
legends as the Company shall deem necessary or advisable pursuant to applicable
federal and state securities laws.
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ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock.
(a) The Committee may grant Awards of Restricted Stock upon
determination by the Committee, acting pursuant to the delegation by the Board
of authority to make such determinations, that the value or other benefit to the
Company of the services of a Grantee theretofore performed or to be performed as
a condition of the lapse of restrictions applicable to such Restricted Stock, or
the benefit to the Company of the incentives created by the issuance thereof, is
adequate consideration for the issuance of such shares. Each Award shall be
governed by a Restriction Agreement between the Company and the Grantee. Each
Restriction Agreement shall contain such restrictions, terms and conditions as
the Committee may, in its discretion, determine, and may require that an
appropriate legend be placed on the certificates evidencing the subject
Restricted Stock.
(b) Shares of Restricted Stock granted pursuant to an Award hereunder
shall be issued in the name of the Grantee as soon as reasonably practicable
after the Award is granted, provided that the Grantee has executed the
Restriction Agreement governing the Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of such
shares. If a Grantee shall fail to execute the foregoing documents, within any
time period prescribed by the Committee, the Award shall be null and void. At
the discretion of the Committee, Restricted Stock issued in connection with an
Award shall be deposited together with the stock powers with an escrow agent
designated by the Committee. Unless the Committee determines otherwise and as
set forth in the Restriction Agreement, upon delivery of the Restricted Stock to
the escrow agent, the Grantee shall have all of the rights of a shareholder with
respect to such Restricted Stock, including the right to vote the Restricted
Stock and to receive all dividends or other distributions paid or made with
respect to the Restricted Stock.
7.2 Non-Transferability. Until any restrictions upon Restricted Stock
awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3,
such shares of Restricted Stock shall not be transferable other than by will or
the laws of descent and distribution, or pursuant to a Qualified Domestic
Relations Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
hereunder shall lapse at such time or times (but, with respect to any Award to
an Employee who is also an Officer, not less than six months after the date of
the Award) and on such terms and conditions as the Committee may, in its
discretion, determine at the time the Award is granted or thereafter.
7.4 Termination of Employment. The Committee shall have the power to
specify, with respect to each Award granted to any particular Employee, the
effect
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upon such Grantee's rights with respect to such Restricted Stock of the
termination of such Grantee's employment under various circumstances, which
effect may include immediate or deferred forfeiture of such Restricted Stock or
acceleration of the date at which any then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted Stock is
made the Committee may, in its discretion, determine that the payment to the
Grantee of any dividends, or a specified portion thereof, declared or paid on
such Restricted Stock shall be (i) deferred until the lapsing of the relevant
restrictions, and (ii) held by the Company for the account of the Grantee until
such time. In the event of such deferral, there shall be credited at the end of
each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum determined by the Committee. Payment
of deferred dividends, together with interest thereon, shall be made upon the
lapsing of restrictions imposed on such Restricted Stock, and any dividends
deferred (together with any interest thereon) in respect of Restricted Stock
shall be forfeited upon any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Within a reasonable period of time following the
lapse of the restrictions on shares of Restricted Stock, the Committee shall
cause a stock certificate to be delivered to the Grantee with respect to such
shares. Such shares shall be free of all restrictions hereunder, except that if
the shares of stock covered by the Plan shall not be the subject of an effective
registration statement under the Securities Act of 1933, as amended, such stock
certificates shall bear such restrictive legends as the Company shall deem
necessary or advisable pursuant to applicable federal and state securities laws.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, (i) cause the Committee to cease granting Options and
Awards, (ii) terminate the Plan, or (iii) in any respect amend or modify the
Plan; provided, however, that the Board (unless its actions are approved or
ratified by the shareholders of the Company within twelve months of the date the
Board amends the Plan) may not amend the Plan to:
(a) Materially increase the number of shares of Stock subject to the Plan;
(b) Materially change or modify the class of persons that may participate
in the Plan; or
(c) Otherwise materially increase the benefits accruing to participants
under the Plan.
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No termination, amendment or modification of the Plan shall affect
adversely an Optionee's rights under an Option Agreement or Restriction
Agreement without the consent of the Grantee or his legal representative.
ARTICLE IX
MISCELLANEOUS
9.1 Replacement or Amended Grants. At the sole discretion of the Committee,
and subject to the terms of the Plan, the Committee may modify outstanding
Options or Awards or accept the surrender of outstanding Options or Awards and
grant new Options or Awards in substitution for them. However no modification of
an Option or Award shall adversely affect a Grantee's rights under an Option
Agreement or Restriction Agreement without the consent of the Grantee or his
legal representative.
9.2 Forfeiture for Competition. If a Grantee provides services to a
competitor of the Company or any of its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent or otherwise, such
services being of a nature that can reasonably be expected to involve the skills
and experience used or developed by the Grantee while an Employee, then that
Grantee's rights under any Options outstanding hereunder shall be forfeited and
terminated, and any shares of Restricted Stock held by such Grantee subject to
remaining restrictions shall be forfeited, subject in each case to a
determination to the contrary by the Committee.
9.3 Plan Binding on Successors. The Plan shall be binding upon the
successors of the Company.
9.4 Gender. Whenever used herein, the masculine pronoun shall include the
feminine gender.
9.5 Headings Not a Part of Plan. Headings of Articles and Sections hereof
are inserted for convenience and reference, and do not constitute a part of the
Plan.
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APPENDIX
INTELLIGENT SYSTEMS CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned, a shareholder of common stock, $.01 par value (the "Common
Stock") of Intelligent Systems Corporation, a Georgia corporation (the
"Company") hereby appoints J. Leland Strange and Bonnie L. Herron, and each of
them with full power of substitution, proxies to vote at the Annual Meeting of
Stockholders of the Company to be held on June 6, 1997 at 4:00 p.m., local time,
and at any adjournment of 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 11, 1997 as directed on
the reverse, and in their discretion, upon such other matters as may come before
the meeting.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
40
[X] Please mark your
votes as in this
example.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
SPECIFIED, THE PROXY WILL BE VOTED "FOR" PROPOSAL 1, "FOR" THE
ELECTION OF EACH OF THE NOMINEES NAMED IN PROPOSAL 2, AND "FOR"
PROPOSAL 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
FOR WITHHELD NOMINEES: FOR AGAINST ABSTAIN
in the Proxy Statement 1. Approval of the amendment to [ ] [ ] [ ]
2. ELECTION [ ] [ ] the Company's Bylaws
OF J. Leland Strange
DIRECTORS Donald A. McMahan
For, except vote withheld from the James V. Napier 3. Approval of the amendment to [ ] [ ] [ ]
following nominee(s): John B. Peatman the Company's 1991 Stock
Parker H. Petit Incentive Plan
- -----------------------------------------------
SIGNATURE(S) DATE , 1997 SIGNATURE(S) DATE , 1997
------------------------- ------------ --------------------- ------------
NOTE: Please sign as your name appears hereon, Joint owners should each sing. 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.