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<SEC-DOCUMENT>0000950144-05-003912.txt : 20050415
<SEC-HEADER>0000950144-05-003912.hdr.sgml : 20050415
<ACCEPTANCE-DATETIME>20050415142842
ACCESSION NUMBER:		0000950144-05-003912
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20050526
FILED AS OF DATE:		20050415
DATE AS OF CHANGE:		20050415
EFFECTIVENESS DATE:		20050415

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INTELLIGENT SYSTEMS CORP
		CENTRAL INDEX KEY:			0000320340
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-PREPACKAGED SOFTWARE [7372]
		IRS NUMBER:				581964787
		STATE OF INCORPORATION:			GA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09330
		FILM NUMBER:		05753262

	BUSINESS ADDRESS:	
		STREET 1:		4355 SHACKLEFORD RD
		CITY:			NORCROSS
		STATE:			GA
		ZIP:			30093
		BUSINESS PHONE:		4043812900

	MAIL ADDRESS:	
		STREET 1:		4355 SHACKLEFORD ROAD
		CITY:			NORCROSS
		STATE:			GA
		ZIP:			30093
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>g94343def14a.htm
<DESCRIPTION>INTELLIGENT SYSTEMS CORPORATION
<TEXT>
<HTML>
<HEAD>
<TITLE>INTELLIGENT SYSTEMS CORPORATION</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV align="center">
<B><FONT size="2">UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">SCHEDULE 14A</FONT></B>

<P align="center">
<FONT size="2">Proxy Statement Pursuant to Section 14(a) of
the Securities</FONT>

<DIV align="center">
<FONT size="2">Exchange Act of 1934 (Amendment No.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)</FONT>
</DIV>

<P align="left">
<FONT size="2">Filed by the Registrant&nbsp;
<FONT face="wingdings">&#254;</FONT>
</FONT>

<P align="left">
<FONT size="2">Filed by a Party other than the Registrant&nbsp;
<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left"><FONT size="2">
Check the appropriate box:
</font>





<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD align="left" valign="top">

<FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Preliminary
Proxy Statement</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2"><FONT face="wingdings">&nbsp;</FONT>&nbsp;
        </FONT></DIV>
        </TD>
</TR>


<TR>
        <TD colspan="3" align="left" valign="top">

<FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;<B>Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <FONT size="2"><FONT face="wingdings">&nbsp;</FONT>&nbsp;
        </FONT></DIV>
        </TD>
</TR>

<TR>
        <TD colspan="3" align="left" valign="top">
        <FONT size="2"><FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;Definitive
        Proxy Statement
        </FONT></TD>
</TR>

<TR>
        <TD colspan="3" align="left" valign="top">
        <FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Definitive
        Additional Materials
        </FONT></TD>
</TR>

<TR>
        <TD colspan="3" align="left" valign="top">
        <FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Soliciting
        Material Pursuant to &#167;240.14a-12
        </FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><font size="2">&nbsp;</FONT>


<DIV align="center"><FONT size="4"><B>Intelligent Systems Corp.</B></FONT>
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="center">
<FONT size="2">(Name of Registrant as Specified In Its Charter)
</FONT>
</DIV>

<P align="center">


<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="center">
<FONT size="2">(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
</FONT>
</DIV>

<P align="left">
<FONT size="2">Payment of Filing Fee (Check the appropriate box):
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="4%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2"><FONT face="wingdings">&#254;</FONT></FONT></TD>
        <TD align="left">
        <FONT size="2">No fee required.
        </FONT></TD>
</TR>

<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD><FONT size="2"><FONT face="wingdings">&#111;</FONT></FONT></TD>
        <TD align="left">
        <FONT size="2">Fee computed on table below per Exchange Act
        Rules&nbsp;14a-6(i)(4) and 0-11.
        </FONT></TD>
</TR>
</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)</FONT></TD>
        <TD align="left">
        <FONT size="2">Title of each class of securities to which
        transaction applies:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)</FONT></TD>
        <TD align="left">
        <FONT size="2">Aggregate number of securities to which
        transaction applies:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)</FONT></TD>
        <TD align="left">
        <FONT size="2">Per unit price or other underlying value of
        transaction computed pursuant to Exchange Act Rule&nbsp;0-11
        (set forth the amount on which the filing fee is calculated and
        state how it was determined):
        </FONT></TD>
</TR>

</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)</FONT></TD>
        <TD align="left">
        <FONT size="2">Proposed maximum aggregate value of transaction:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)</FONT></TD>
        <TD align="left">
        <FONT size="2">Total fee paid:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="4%"></TD>
        <TD width="96%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2"><FONT face="wingdings">&#111;</FONT></FONT></TD>
        <TD align="left">
        <FONT size="2">Fee paid previously with preliminary materials.
        </FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
</TR>

<TR valign="top">
        <TD><FONT size="2"><FONT face="wingdings">&#111;</FONT></FONT></TD>
        <TD align="left">
        <FONT size="2">Check box if any part of the fee is offset as
        provided by Exchange Act Rule&nbsp; 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.
        </FONT></TD>
</TR>
</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)</FONT></TD>
        <TD align="left">
        <FONT size="2">Amount Previously Paid:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)</FONT></TD>
        <TD align="left">
        <FONT size="2">Form, Schedule or Registration Statement No.:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)</FONT></TD>
        <TD align="left">
        <FONT size="2">Filing Party:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="9%"></TD>
        <TD width="91%"></TD>
</TR>

<TR valign="top">
        <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)</FONT></TD>
        <TD align="left">
        <FONT size="2">Date Filed:
        </FONT></TD>
</TR>
</TABLE>

<P align="right">
<HR size="1" width="91%" align="right" noshade>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">



<P align="center" style="font-size: 10pt"><IMG src="g94343g9434300.gif" alt="(INTELLIGENT SYSTEMS LOGO)">


<DIV align="center" style="font-size: 10pt"><B>4355 Shackleford Road</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Norcross, Georgia 30093</B></DIV>



<P align="center" style="font-size: 10pt"><B>NOTICE OF ANNUAL MEETING OF SHAREHOLDERS</B>



<P align="left" style="font-size: 10pt"><B>YOU ARE INVITED TO </B>attend the Annual Meeting of Shareholders of Intelligent Systems Corporation on
Thursday, May&nbsp;26, 2005 at 4:00 p.m., local time, at our corporate offices located at 4355
Shackleford Road, Norcross, Georgia 30093. At the Annual Meeting, shareholders will consider and
vote on:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">1.&nbsp;&nbsp;</TD>
    <TD>The election of one director to the Board of Directors to serve until the 2008
Annual Meeting; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">2.&nbsp;&nbsp;</TD>
    <TD>Other matters that may properly come before the meeting or any adjournment thereof.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Only shareholders of record at the close of business on Friday, April&nbsp;8, 2005 will receive notice
of and be entitled to vote at the meeting or any adjournment thereof.



<P align="left" style="font-size: 10pt">A Proxy Statement and a proxy solicited by the Board of Directors are enclosed with this mailing.
To ensure a quorum for the meeting and that your vote may be recorded, please sign, date and return
the proxy promptly in the enclosed business reply envelope. If you attend the meeting, you may
revoke your proxy and vote in person. Our 2004 Annual Report to Shareholders is enclosed.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By order of the Board of Directors,</TD>
</TR>

<TR valign="bottom">
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><IMG src="g94343g9434301.gif" alt="-s- Bonnie L. Herron"></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS">Bonnie L. Herron</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>April&nbsp;15, 2005</I>



<P align="center" style="font-size: 10pt"><B>Please complete and return the enclosed proxy promptly so that your vote may be recorded.</B>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000"> VOTING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001"> PROPOSAL 1 &#151; THE ELECTION OF ONE DIRECTOR</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002"> SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003"> CODE OF ETHICS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004"> INDEPENDENT PUBLIC ACCOUNTANTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005"> CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006"> SHAREHOLDERS&#146; PROPOSALS FOR ANNUAL MEETING IN 2006</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007"> OTHER MATTERS WHICH MAY COME BEFORE THE MEETING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008"> ADDITIONAL INFORMATION</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>







<P align="center" style="font-size: 10pt"><IMG src="g94343g9434300.gif" alt="(INTELLIGENT SYSTEMS LOGO)">



<P align="center" style="font-size: 10pt"><B>4355 Shackleford Road<BR>
Norcross, Georgia 30093</B>



<P align="center" style="font-size: 10pt"><B>PROXY STATEMENT<BR>
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 26, 2005</B>



<P align="left" style="font-size: 10pt">We are sending this Proxy Statement to the shareholders of Intelligent Systems Corporation (the
&#147;company&#148;) in connection with the solicitation of proxies by the Board of Directors to be voted at
the 2005 Annual Meeting of Shareholders of Intelligent Systems Corporation and any adjournment
thereof. The Annual Meeting will be held on May&nbsp;26, 2005 at our corporate offices located at 4355
Shackleford Road, Norcross, Georgia 30093 at 4:00 p.m. local time. We expect to first mail this
Proxy Statement and the accompanying proxy to shareholders on or about April&nbsp;15, 2005.


<!-- link1 " VOTING" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center" style="font-size: 10pt"><B>VOTING</B>



<P align="left" style="font-size: 10pt"><B>General</B>



<P align="left" style="font-size: 10pt">The securities that can be voted at the Annual Meeting consist of common stock of Intelligent
Systems Corporation, $.01 par value per share. Each share entitles its owner to one vote on each
matter submitted to the shareholders. The record of shareholders entitled to vote at the Annual
Meeting was taken as of the close of business on Friday, April&nbsp;8, 2005. On that date, we had
outstanding and entitled to vote 4,478,971 shares of common stock with each share entitled to one
vote.



<P align="left" style="font-size: 10pt"><B>Quorum</B>



<P align="left" style="font-size: 10pt">A majority of the outstanding shares of our common stock must be present, in person or by proxy, to
constitute a quorum at the Annual Meeting. We will treat shares that are withheld or abstain from
voting as present at the Annual Meeting for purposes of determining a quorum. If a broker, bank,
custodian, nominee or other record holder of our common stock indicates on a proxy that it does not
have discretionary authority to vote certain shares on a particular matter, the shares held by that
record holder (referred to as &#147;broker non-votes&#148;) will also be counted as present in determining
whether we have a quorum.



<P align="left" style="font-size: 10pt"><B>Proxies</B>



<P align="left" style="font-size: 10pt">At the Annual Meeting, the persons named as proxies will vote all properly executed proxy cards
delivered in connection with this solicitation and not revoked in accordance with the directions
given. Shareholders should specify their choices with regard to the proposal to be voted upon on
the accompanying proxy card. <B>If no specific instructions are given with regard to the matter to be
voted upon, then the shares represented by a signed proxy card will be voted &#147;FOR&#148; the election of
the director nominee. </B>If any other matters properly come before the Annual Meeting, the persons
named as proxies will vote upon such matters according to their judgment.



<P align="left" style="font-size: 10pt">Some of our shareholders hold their shares through a broker, bank, custodian or other nominee,
rather than directly in their own name. This is commonly referred to as holding shares in &#147;street
name.&#148; If you hold shares in street name, these proxy materials are being forwarded to you by your
broker, bank, custodian or other nominee, which is considered, with respect to such shares, to be
the shareholder of record. As the beneficial owner of shares held in street name, you have the
right to direct the nominee how such shares should be voted. You also have the right to attend the
Annual Meeting. However, since you are not the shareholder of record, you must first obtain a
signed proxy from the shareholder of record giving you the right to vote the shares




<P align="center" style="font-size: 10pt"> - 1 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<P align="left" style="font-size: 10pt">at the Annual Meeting. Your broker, bank, custodian or other nominee has enclosed or provided you a voting
instruction card for you to use in directing the nominee how to vote your shares or obtain a proxy
from the nominee.



<P align="left" style="font-size: 10pt">You may revoke your proxy card or voting instructions delivered in connection with this
solicitation at any time prior to voting at the Annual Meeting by:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>giving written notice to the Secretary of the company at 4355 Shackleford Road, Norcross,
Georgia 30093, for shareholders of record, or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>executing and delivering to the Secretary a later dated proxy or, for shares held in street
name, by submitting new voting instructions to your nominee, or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>voting in person at the Annual Meeting.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">You cannot revoke your proxy or voting instructions as to any matter upon which, prior to such
revocation, a vote has been cast in accordance with the authority conferred by such proxy or voting
instructions.



<P align="left" style="font-size: 10pt">We will pay all expenses incurred in connection with the solicitation of proxies. Such costs
include charges by brokers, fiduciaries and custodians for forwarding proxy materials to beneficial
owners of stock held in their names. We may solicit proxies by mail, telephone and personal
contact by directors, officers, and employees of the company without additional compensation.



<P align="left" style="font-size: 10pt"><B>Security Ownership of Principal Shareholders, Directors and Certain Executive Officers and Related
Stockholder Matters</B>



<P align="left" style="font-size: 10pt">The following table contains information concerning the only persons who are known to us to be
beneficial owners of more than 5&nbsp;percent of our common stock as of March&nbsp;31, 2005, and the
ownership of our common stock as of that date by each director, each executive officer named in the
Summary Compensation Table and by all directors and officers as a group.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="57%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Beneficial Owner</B></TD>
    <TD style="border-right: 1px solid #000000;border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Address</B></TD>
    <TD style="border-right: 1px solid #000000;border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Beneficially Owned </B><SUP style="font-size: 85%; vertical-align: text-top">a</SUP></TD>
    <TD style="border-right: 1px solid #000000;border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>of Class</B> <SUP style="font-size: 85%; vertical-align: text-top">a</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">J. Leland Strange
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">4355 Shackleford Road</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Chairman of the Board, President, CEO</I>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Norcross, GA 30093
</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">757,794 <SUP style="font-size: 85%; vertical-align: text-top">b</SUP>
</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16.8</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wallace R. Weitz &#038; Company <SUP style="font-size: 85%; vertical-align: text-top">c</SUP>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">1125 South 103rd St., Suite&nbsp;600
</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">668,966</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14.9</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Omaha, NE 68124</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James V. Napier, <I>Director</I>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">26,100</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John B. Peatman, <I>Director</I>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16,280</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Parker H. Petit, <I>Director</I>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">26,327</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Francis A. Marks, <I>Vice President</I>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">111,900</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.5</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bonnie L. Herron</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Vice
President, Chief Financial Officer<BR>
and Corporate Secretary</I>
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">72,158</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.6</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">All
Directors and Executive Officers<BR>
as a Group (7 persons)
</DIV></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">1,115,152 <SUP style="font-size: 85%; vertical-align: text-top">d</SUP>
</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24.2</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="2%" nowrap align="left">a.</TD>

    <TD width="98%">Except as otherwise noted, beneficial ownership is determined on the basis of 4,478,971
shares of common stock issued and outstanding plus securities deemed outstanding pursuant to
Rule&nbsp;13d-3(d)(1) of the Securities Exchange Act of 1934, as amended. Pursuant to the rules on
the Securities and Exchange Commission (the &#147;SEC&#148;), a person is deemed to beneficially own
shares of the company&#146;s common stock if that person has or shares &#147;voting power&#148;, which
includes the power to vote or to direct the voting of a security, or &#147;investment power&#148;, which
includes the power to dispose of or to direct the disposition of a security. An asterisk
indicates beneficial ownership of less than 1&nbsp;percent.</TD>
</TR>
 <TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%" nowrap align="left">b.</TD>
    <TD width="98%">Includes 96,953 shares owned by Jane H. Strange, Mr.&nbsp;Strange&#146;s wife. Mr.&nbsp;Strange disclaims
any beneficial interest in the shares.</TD>
</TR>
 <TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%" nowrap align="left">c.</TD>
    <TD width="98%">In a Schedule&nbsp;13G filed January&nbsp;12, 2005, Wallace R. Weitz and Company, an investment adviser
registered under Section&nbsp;203 of the Investment Advisers Act of 1940, reported beneficial
ownership of 668,966 shares of common stock, of which the firm has the sole power to vote and
to dispose.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD width="2%" nowrap align="left">d.</TD>
    <TD width="98%">Includes 130,680 shares reserved for issuance to officers and directors pursuant to stock
options that were exercisable at March&nbsp;31, 2005 or within sixty days of such date which are
deemed beneficially owned by such person pursuant to Rule&nbsp;13d-3(d)(1) of the Exchange Act.
The amounts reported above for Messrs.&nbsp;Napier, Peatman and Petit include 15,000 shares each
for shares underlying stock options exercisable at March&nbsp;31, 2005 or within sixty days of such
date. The amounts reported above for Mr.&nbsp;Strange and Ms.&nbsp;Herron include 30,000 and 22,333
shares, respectively, for shares underlying stock options exercisable at March&nbsp;31, 2005 or
within sixty days of such date.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"> - 2 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">






<P align="left" style="font-size: 10pt"><B>Securities Authorized for Issuance Under Equity Compensation Plans</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(c) Number of securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a) Number of securities to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b) Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">remaining available</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">be issued</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">exercise price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">for future issuance under equity</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">upon exercise of outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">outstanding options,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">compensation plans (excluding securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Plan category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">options, warrants and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">warrants and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">reflected in column (a))</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Effective August&nbsp;22, 2000, the company adopted the Non-Employee Director Stock Option Plan
(the &#147;Director Plan&#148;). Up to 200,000 shares of common stock may be issued under the Director Plan
to non-employee directors with each director receiving an initial grant of 5,000 options followed
by annual grants of 4,000 options on the date of each subsequent Annual Meeting. Non-qualified
stock options are granted at fair market value on the date of grant and vest 50&nbsp;percent on each of
the first and second anniversaries of the date of grant.


<!-- link1 " PROPOSAL 1 &#151; THE ELECTION OF ONE DIRECTOR" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="center" style="font-size: 10pt"><B>PROPOSAL 1 &#151; THE ELECTION OF ONE DIRECTOR</B>



<P align="left" style="font-size: 10pt"><B>Nominee</B>



<P align="left" style="font-size: 10pt">At the Annual Meeting of Shareholders, shareholders will elect one director to the Board of
Directors to serve a three-year term until the 2008 Annual Meeting of Shareholders. The other
directors&#146; terms expire at the Annual Meeting of Shareholders listed in the following table for
each category of directors, or until their earlier death, resignation or removal from office.
Directors are elected by a plurality of the shares present and voting at the meeting. A
&#147;plurality&#148; means that the individual who receives the largest number of votes cast is elected as
director up to the maximum number of directors to be chosen at the meeting. Therefore, shares that
are withheld or abstain from voting and broker non-votes will have no effect on the outcome of the
vote. Unless contrary instructions are given, the persons named as proxies will vote the shares
represented by a signed proxy card &#147;FOR&#148; the nominee.



<P align="left" style="font-size: 10pt">If the nominee withdraws for any reason or is not able to serve as a director, the proxy will be
voted for another person designated by the Board of Directors as substitute nominee, but in no
event will the proxy be voted for more than one nominee. The Board of Directors has no reason to
believe that the nominee will not serve if elected.



<P align="left" style="font-size: 10pt">The Board of Directors has nominated the person named in the following table to serve as a director
of the company. The nominee is currently a director of the company. The nominee and other
directors gave us the following information concerning their current age, other directorships,
positions with the company, principal employment and shares of our common stock beneficially owned
as of March&nbsp;31, 2005.



<P align="center" style="font-size: 10pt"> - 3 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<P align="left" style="font-size: 10pt">The Board of Directors recommends that shareholders vote &#147;FOR&#148; the proposal to elect the nominee
listed below as a director of the company.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares of Common Stock</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Beneficially Owned</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD style="border-bottom: 1px solid #000000" >&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD style="border-bottom: 1px solid #000000"> &nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position / Principal Occupation</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>(Percent of Class)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left"><B><I>Nominee for election to serve until the 2008 Annual Meeting</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Parker H. Petit <SUP style="font-size: 85%; vertical-align: text-top">1 &#038; 2</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">65</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Chairman, President and Chief Executive Officer of Matria
Healthcare, Inc.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">26,237</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left"><B><I>Incumbent director elected to serve until the 2007 Annual Meeting</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John B. Peatman <SUP style="font-size: 85%; vertical-align: text-top">1 &#038; 2</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">70</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Professor of
Electrical Engineering at
Georgia Institute of Technology
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16,280</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left"><B><I>Incumbent directors elected to serve until the 2006 Annual Meeting</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James Napier <SUP style="font-size: 85%; vertical-align: text-top">2</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">68</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, former Chairman of the Board of Scientific Atlanta, Inc.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">26,100</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">J. Leland Strange
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Chairman of the Board, President and Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">757,794</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16.8</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="2%" nowrap align="left">*</TD>
    <TD width="98%">Less than one percent; share amount includes 15,000 shares pursuant to stock options
exercisable at March&nbsp;31, 2005 or within sixty days of such date.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%" nowrap align="left">1.</TD>

    <TD width="98%">Audit Committee</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%" nowrap align="left">2.</TD>
    <TD width="98%">Compensation Committee</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><I>Mr.&nbsp;Napier </I>has served as a director since 1982.Mr.&nbsp;Napier served as Chairman of the Board of
Scientific-Atlanta, Inc., a firm involved in cable television electronics and satellite-based
communication networks, from 1993 until November&nbsp;2000. He serves as a director of
Scientific-Atlanta, McKesson Corporation, Vulcan Materials Company, Engelhard Corporation,
Personnel Group of America, Inc. and Wabtec Corporation. The Board of Directors has determined
that Mr.&nbsp;Napier is an independent director under applicable rules of the American Stock Exchange
(the &#147;AMEX &#147;).



<P align="left" style="font-size: 10pt"><I>Dr.&nbsp;Peatman </I>has served as a director since 1979 and has been a Professor of Electrical Engineering
at the Georgia Institute of Technology since 1964. The Board of Directors has determined that Dr.
Peatman is an independent director under applicable rules of the AMEX.



<P align="left" style="font-size: 10pt"><I>Mr.&nbsp;Petit </I>has served as a director since 1996. Mr.&nbsp;Petit has served as Chairman of the Board and a
director of Matria Healthcare, Inc., a comprehensive disease management services company listed on
the NASDAQ National Market, since March&nbsp;1996 and he has served as President and CEO of Matria since
October&nbsp;2000. Mr.&nbsp;Petit was founder and Chairman of the Board of Directors of Healthdyne, Inc.,
Matria&#146;s predecessor, from 1970 to 1996. He also serves as a director of Logility, Inc. The Board
of Directors has determined that Mr.&nbsp;Petit is an independent director under applicable rules of the
AMEX.



<P align="left" style="font-size: 10pt"><I>Mr.&nbsp;Strange </I>has served as our President since 1983 and our Chief Executive Officer and Chairman of
the Board of Directors since 1985. He serves as a director of Allied Holdings, Inc.



<P align="left" style="font-size: 10pt">There are no family relationships among any of the company&#146;s directors and executive officers.



<P align="left" style="font-size: 10pt"><B>Meetings and Committees of the Board of Directors</B>



<P align="left" style="font-size: 10pt">The Board of Directors met six times during the year ended December&nbsp;31, 2004 and acted by unanimous
consent one time. The Board of Directors has established an audit committee, a compensation
committee, and a plan committee, but has no nominating committee. The Audit Committee of the Board
of Directors met five times during 2004. During 2004, the Audit Committee consisted of Messrs.
Napier, Peatman and Petit. Beginning in 2005 the Audit Committee consists of Messrs.&nbsp;Peatman and
Petit. In 2004, the Audit Committee recommended the termination of the company&#146;s former
independent auditor and the appointment of the company&#146;s new independent auditor, met with the
independent auditor to review their report on the financial operations of the company and carried
out a number of other responsibilities, as outlined in the Amended Audit Committee Charter. Each
of the members of the Audit Committee is independent, as such term is defined in the listing
standards of the AMEX and the rules of the SEC, and the Audit Committee meets the composition
requirements of AMEX&#146;s listing standards for Small Business Issuers. The Board of Directors has
determined that Mr.&nbsp;Petit is an audit committee financial expert as defined by the rules of the
SEC, and is financially sophisticated as defined in the listing standards of AMEX. The Board of
Directors based this determination, in part, on Mr.&nbsp;Petit&#146;s



<P align="center" style="font-size: 10pt"> - 4 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<P align="left" style="font-size: 10pt">experience in actively supervising senior financial and accounting personnel and in overseeing the
preparation of financial statements as the Chief Executive Officer and Chairman of a
publicly-traded company. The publicly traded companies with which Mr.&nbsp;Petit has been associated
are larger and more complex than is Intelligent Systems.



<P align="left" style="font-size: 10pt">The Board has a Compensation Committee consisting of Messrs.&nbsp;Napier, Peatman and Petit, which met
once during the last year. The Compensation Committee reviews and makes recommendations concerning
the appropriate compensation level for the officers of the company and any changes in the company&#146;s
various benefit plans.



<P align="left" style="font-size: 10pt">The Plan Committee, which did not meet in 2004, is responsible for administering the 1991 Stock
Option Plan (the &#147;1991 Plan&#148;) and the 2003 Stock Incentive Plan (the &#147;2003 Incentive Plan&#148;). The
Plan Committee has the same members as the Compensation Committee. All directors attended all of
the meetings of the Committees of the Board on which they serve and all of the meetings of the
Board of Directors.



<P align="left" style="font-size: 10pt">The company does not currently have a standing nominating committee. Please see &#147;Nominations
Process&#148; below for information regarding the company&#146;s policies and procedures for director
nominations.



<P align="left" style="font-size: 10pt"><B>Executive Officers</B>



<P align="left" style="font-size: 10pt">The following information is provided about our non-director executive officers as of March&nbsp;15,
2005.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Position / Principal Occupation</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">J. William Goodhew, III
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bonnie L. Herron
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Chief Financial Officer and Secretary</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Francis A. Marks
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">71</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>Mr.&nbsp;Goodhew </I>joined the company in 1997 as Vice President. He was President of Peachtree
Software, Inc. from 1985 through 1996. He is former Chairman of the Board of Navision Software
A/S.



<P align="left" style="font-size: 10pt"><I>Mr.&nbsp;Marks </I>joined the company in May&nbsp;1982 as Vice President of Product Line Programs after 26&nbsp;years
with IBM Corporation in a variety of managerial and executive positions. He was appointed Vice
President in 1983 and also serves as President of ChemFree Corporation, one of our wholly owned
subsidiaries.



<P align="left" style="font-size: 10pt"><I>Ms.&nbsp;Herron </I>joined the company in 1982 as Director of Planning at one of our subsidiaries and
subsequently at the corporate level. She was elected Corporate Secretary in 1987, Vice President
in 1990, and Chief Financial Officer in 1999. She also serves as Executive Director of the
Intelligent Systems Incubator.



<P align="left" style="font-size: 10pt">The Board of Directors elects the executive officers to serve until they are removed, replaced or
resign.



<P align="left" style="font-size: 10pt"><B><I>Executive Compensation</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Summary Compensation Table</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Annual Compensation</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Salary</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Bonus</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Other Annual Compensation <SUP style="font-size: 85%; vertical-align: text-top">1.</SUP></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and Principal Position</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Year</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">$</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">$</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Leland Strange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">259,615</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,894</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>President &#038; Chief Executive Officer</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">250,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,385</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2002</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">250,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,750</TD>
</TR>

<TR valign="bottom">
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Francis A. Marks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">135,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Vice President</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">130,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2002</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">130,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>

<TR valign="bottom">
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonnie L. Herron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">140,192</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2,103</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Vice President, Chief Financial Officer &#038; Secretary</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">135,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,947</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2002</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">133,077</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,996</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="2%" nowrap align="left">1.</TD>
    <TD width="98%">Includes matching contributions by the company to the respective accounts of the executive
officers pursuant to the terms of our Tax-Deferred Savings and Protection Plan (the &#147;401(k)
Plan&#148;). Such amounts are fully vested.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"> - 5 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">






<P align="left" style="font-size: 10pt"><B><I>Option/SAR Grants in Last Fiscal Year</I></B>



<P align="left" style="font-size: 10pt">There were no options granted to officers in 2004.



<P align="left" style="font-size: 10pt"><B><I>Option Exercises and Year-End Values Table</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="8" style="border-bottom: 1px solid #000000"><B>Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Value of Unexercised</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">In-the-Money Options at</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Number of Unexercised</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FY-End <SUP style="font-size: 85%; vertical-align: text-top">1.</SUP></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Shares Acquired</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Options at FY-End</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Exercisable/</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">on Exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Value Realized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Exercisable/Unexercisable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Unexercisable</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">#</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">#</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Leland Strange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15,000/30,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7,650/15,300</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Francis A. Marks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0/0</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0/0</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonnie L. Herron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">- 0 -</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">11,667/23,333</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,950/11,900</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<HR size="1" width="18%" align="left" noshade color="#000000">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="2%" nowrap align="left">1.</TD>
    <TD width="98%">Based on the difference between the exercise price and the closing sales price per share for the Common Stock on
December&nbsp;31, 2004 of $2.02, as reported by the American Stock Exchange.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B><I>Compensation of Directors</I></B>



<P align="left" style="font-size: 10pt">Non-employee directors earn $8,000 per year plus a fee of $2,000 per meeting day. Total
compensation is capped at $16,000 annually. Effective January&nbsp;1, 1992, the company adopted the
Outside Directors&#146; Retirement Plan which provides for each non-employee director, upon resignation
from the Board after reaching the age of 65, to receive a lump sum cash payment equal to $5,000 for
each full year of service as a director of the company (and its predecessors and successors) up to
$50,000. Effective August&nbsp;22, 2000, the company adopted the Non-Employee Director Stock Option
Plan which provides for an initial grant to each director of 5,000 options to purchase common stock
of the company and annual grants of 4,000 options on the date of each subsequent Annual Meeting.
Options are granted at fair market value on the date of grant.



<P align="left" style="font-size: 10pt"><B><I>Change-in-Control Arrangements</I></B>



<P align="left" style="font-size: 10pt">Effective January&nbsp;1, 1992, we adopted the Change in Control Plan for Officers so that if control of
the company changes in the future, management would be free to act on behalf of the company and its
shareholders without undue concern for the possible loss of future compensation. A &#147;change in
control&#148; means either: (i)&nbsp;the accumulation by an unrelated person of beneficial ownership of more
than 25&nbsp;percent of the company&#146;s common stock, (ii)&nbsp;the sale of all or substantially all of the
company&#146;s assets to an unrelated person, in a merger or otherwise, or (iii)&nbsp;a change of control
within the meaning of any rules promulgated by the Securities and Exchange Commission.



<P align="left" style="font-size: 10pt">Under the Change in Control Plan, if the employment of an officer of the company terminates for any
reason within 12&nbsp;months of a change in control, the officer would receive a lump sum cash payment
in an amount equal to twice the total of (i)&nbsp;such officer&#146;s base annual salary at the time of
termination, (ii)&nbsp;the cash value of annual benefits, and (iii)&nbsp;such officer&#146;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)&nbsp;one year after the date of termination or
(ii)&nbsp;the exercise period specified in the officer&#146;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.



<P align="left" style="font-size: 10pt"><B><I>Compensation Committee Report on Executive Compensation</I></B>



<P align="left" style="font-size: 10pt">The Compensation Committee of the Board of Directors reviews and approves compensation paid by the
company to its executive officers. The Compensation Committee reviews compensation of the
executive officers annually with input from the Chief Executive Officer (other than for the Chief
Executive Officer). The Plan Committee is responsible for administering the 1991 Plan and the 2003
Incentive Plan, including selecting individuals who will receive stock option grants and
determining the timing, pricing and amounts of the options granted. Both committees are comprised
of two non-employee directors of the company.




<P align="center" style="font-size: 10pt"> - 6 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<P align="left" style="font-size: 10pt">Given our current level of executive compensation, it was not necessary for the Compensation
Committee to consider the cap on deductibility of compensation over $1&nbsp;million for named executive
officers.



<P align="left" style="font-size: 10pt">The basic goal of our compensation program for executive officers is to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>fairly compensate executive officers in line with their responsibilities and contributions to the company;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>reward management for achievement of financial or other measurable goals of the company and specified subsidiaries,
where the contribution of the executive can be tied to operations under his/her control; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>align management&#146;s compensation with shareholder interests as measured by stock price appreciation.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">The compensation of executive officers consists of a base salary, a cash bonus and long-term
compensation consisting of stock options. Because the company does not have readily identifiable
comparative companies, the Compensation Committee determines the base salary for non-CEO executive
officers with input from the Chief Executive Officer. 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&#146;s financial results and condition. The
Committee considers an individual executive&#146;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&#146;s minority-owned businesses and other corporate or
subsidiary functions.



<P align="left" style="font-size: 10pt">Cash bonuses are earned on an irregular basis by the named executives based on achievement of goals
of the company as a whole or those subsidiaries or projects for which the named executive has
management responsibility.



<P align="left" style="font-size: 10pt">Our long-term incentive compensation plan is based on the 2003 Incentive Plan, which is designed to
reward executives for increases in the market price of our stock, thus linking the interest of
executives and shareholders. The Plan Committee, in its sole discretion, grants options to those
individuals whose contribution is most likely to have an impact on our overall performance and
price of the company&#146;s common stock. The Committee intends for the number of options granted to an
individual executive to provide an adequate financial incentive over a three to five year time
frame and to provide the executives with an equity interest in the company. The number of options
granted to an executive officer depends upon a subjective evaluation of the individual&#146;s
contribution to the company. The Plan Committee granted an aggregate of 100,000 options to purchase
shares of the company&#146;s common stock in 2003. There were no options grants in 2004 or 2002. The
named executive officers currently have an aggregate of 80,000 unexercised stock options under the
2003 Plan.



<P align="left" style="font-size: 10pt">It is our policy to provide executives with the same benefits provided to all other employees with
respect to medical, dental, life insurance and 401(k) plans.



<P align="left" style="font-size: 10pt"><B><I>Chief Executive Officer Compensation</I></B>



<P align="left" style="font-size: 10pt">The Compensation Committee reviews the compensation of the Chief Executive Officer annually. Mr.
Strange, the largest shareholder of the company, does not have an employment agreement with the
company. Since there have not been directly comparable peer group companies, the Compensation
Committee considers a number of subjective factors in setting Mr.&nbsp;Strange&#146;s compensation. The
Compensation Committee considered the nature, scope and variety of his responsibilities; his
contribution to increasing the value of the company&#146;s majority and minority-owned companies; his
performance as chief executive of the company&#146;s CoreCard Software subsidiary; and the company&#146;s
financial results and condition. The Compensation Committee believes Mr.&nbsp;Strange&#146;s compensation is
appropriate in consideration of the scope of his position, the performance of the company and the
value of his contribution to the company&#146;s operations and affiliate companies. Mr.&nbsp;Strange was
awarded stock options in 2003 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.&nbsp;Strange, and the number of options granted to other
executives.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">COMPENSATION COMMITTEE
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PLAN COMMITTEE</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parker H. Petit
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parker H. Petit</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">John B. Peatman
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">John B. Peatman</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 7 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">


<P align="left" style="font-size: 10pt"><B><I>Compensation Committee Interlocks and Insider Participation</I></B>



<P align="left" style="font-size: 10pt">Messrs.&nbsp;Napier and Peatman served as members of the Compensation Committee and the Plan Committee
in 2004. Neither of these individuals is a present or former officer or employee of the company.



<P align="left" style="font-size: 10pt"><B><I>Audit Committee Report</I></B>



<P align="left" style="font-size: 10pt">In March&nbsp;2004, the Board of Directors amended the company&#146;s Audit Committee Charter. The Audit
Committee Charter includes organization and membership requirements, a statement of policy and the
Committee&#146;s authority and responsibilities. All members of the Audit Committee currently meet the
independence and qualification standards set forth in the AMEX listing standards.



<P align="left" style="font-size: 10pt">Management is responsible for our company&#146;s internal controls and the financial reporting process.
The independent auditors are responsible for performing an independent audit of the company&#146;s
consolidated financial statements in accordance with auditing standards generally accepted in the
United States and for issuing a report thereon. As outlined in more detail in the Audit Committee
Charter, the Audit Committee&#146;s responsibility is generally to approve all services provided by and
compensation paid to the independent auditors; review the adequacy of the company&#146;s internal and
disclosure controls and risk management practices; review and monitor the annual audit of the
financial statements including the financial statements produced and notes thereto; review SEC
filings containing the company&#146;s financial statements; regularly meet with the independent auditors
and management in separate sessions; and authorize investigations into any matter within the scope
of their responsibilities. During fiscal year 2004, among its other activities, the Audit
Committee:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>terminated the company&#146;s former independent auditors due to cost considerations;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>engaged the new independent auditors and established their compensation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>reviewed and discussed with management and the independent auditors the audited financial statements of the company as
of December&nbsp;31, 2004 and for the year then ended;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>discussed with the independent auditors the matters required to be discussed by auditing standards generally accepted
in the United States (SAS No.&nbsp;61); and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&#149;&nbsp;&nbsp;</TD>
    <TD>received from the independent auditors the written disclosures and written affirmation of their independence required
by Independence Standards Board Standard No.&nbsp;1 and discussed with the auditors the firm&#146;s independence.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Based upon the reviews and discussions summarized above, the Audit Committee recommended to the
Board of Directors (and the Board of Directors has approved) that the audited financial statements
be included in the Annual Report on Form&nbsp;10-KSB for the year ended December&nbsp;31, 2004 for filing
with the Securities and Exchange Commission.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AUDIT COMMITTEE</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parker H. Petit (Chair)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">John B. Peatman</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><B><I>Nominations Process</I></B>



<P align="left" style="font-size: 10pt">The Board of Directors has not appointed a standing nominating committee or adopted a formal
nominating committee charter because the Board of Directors has determined that due to the size,
make-up, independence, long tenure and low turnover of the current Board of Directors, there would
be limited benefit to the company or its shareholders to do so. Currently, James V. Napier, Parker
H. Petit and John B. Peatman, all of whom meet the applicable AMEX independence requirements,
participate in the consideration of director nominees. They met once during 2004. Messrs.&nbsp;Napier,
Petit and Peatman also nominate the officers of the company for election by the Board of Directors.



<P align="left" style="font-size: 10pt">The Board of Directors has never received a recommendation from a shareholder as to a candidate for
nomination to the Board of Directors and therefore has not previously formed a policy with respect
to consideration of such a candidate. However, it is the Board&#146;s intent to consider any security
holder nominees that may be put forth in the future. The Board has not identified any specific,
minimum qualifications or skills that it believes must be met by a nominee for director. It is the
intent of the Board to review from time to time the appropriate skills and characteristics of
directors in the context of the current make-up of the Board




<P align="center" style="font-size: 10pt"> - 8 -
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif">




<P align="left" style="font-size: 10pt">and the requirements and needs of the company at a given time. Given the current composition,
stability and size of the Board of Directors and the company, the fact that the director nominee is
standing for re-election and the fact that the Board has received no nominee candidates from
security holders, the Board has not considered other candidates for election at the upcoming Annual
Meeting of Shareholders. There is one vacancy on the Board of Directors at the present time due to
the retirement of a director as of December&nbsp;31, 2003, whose term on the Board extends until the
Annual Meeting of Shareholders in 2005. The Board has not presently named a nominee for the vacant
seat but may do so in the future. Security holders wishing to nominate a candidate for
consideration at the Annual Meeting of Shareholders in 2006 should submit the nominee&#146;s name,
affiliation and other pertinent information along with a statement as to why such person should be
considered for nomination. Such nominations should be addressed to the Board of Directors in care
of the Secretary of the company and be received no later than 120&nbsp;days before the date of the
Annual Meeting of Shareholders. The board will evaluate any such nominees in a manner similar to
that for all director nominees.



<P align="left" style="font-size: 10pt"><B><I>Communication Between Security Holders and the Board of Directors</I></B>



<P align="left" style="font-size: 10pt">Security holders wishing to communicate with members of the Board of Directors should send a letter
to the Secretary of the company with instructions as to which director(s) is to receive the
communication. The Secretary will forward the written communication to each member of the Board of
Directors identified by the security holder or, if no individual director is identified, to all
members of the Board of Directors. The company has not in the past required members of the Board
of Directors to attend each Annual Meeting of Shareholders because the formal meetings have been
attended by very few shareholders, and have generally been very brief and procedural in nature.
One of the company&#146;s directors attended the 2004 Annual Meeting of Shareholders. The board will
continue to monitor shareholder interest and attendance at future meetings and reevaluate this
policy as appropriate.


<!-- link1 " SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center" style="font-size: 10pt"><B>SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</B>



<P align="left" style="font-size: 10pt">Section&nbsp;16(a) of the Securities Exchange Act of 1934, as amended, and regulations of the Securities
and Exchange Commission thereunder require our executive officers and directors and persons who own
more than ten percent of our common stock, as well as certain affiliates of these persons, to file
initial reports of ownership of our common stock and changes in such ownership with the Securities
and Exchange Commission. The Securities and Exchange Commission also requires executive officers,
directors and persons owning more than ten percent of our common stock to furnish us with copies of
all Section&nbsp;16(a) forms they file. Based solely on our review of the copies of such forms received
by us, we believe that, during the fiscal year ended December&nbsp;31, 2004, the executive officers,
directors, and persons owning more than ten percent of our common stock complied with all
applicable filing requirements in a timely manner.


<!-- link1 " CODE OF ETHICS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center" style="font-size: 10pt"><B>CODE OF ETHICS</B>



<P align="left" style="font-size: 10pt">The company adopted a Code of Ethics that applies to all directors, officers, and employees. The
Code of Ethics is posted on our website at <U>www.intelsys.com</U>. The company discloses on its website,
within the time required by the rules of the SEC, any waivers of, or amendments to, the Code of
Ethics for the benefit of an executive officer.


<!-- link1 " INDEPENDENT PUBLIC ACCOUNTANTS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center" style="font-size: 10pt"><B>INDEPENDENT PUBLIC ACCOUNTANTS</B>



<P align="left" style="font-size: 10pt">On November&nbsp;22, 2004, the Audit Committee dismissed BDO Seidman, LLP as its independent public
accountants. The audit reports issued by BDO Seidman, LLP on the consolidated financial statements
of Intelligent Systems Corporation as of and for the fiscal years ended December&nbsp;31, 2002 and
December&nbsp;31, 2003 did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles. During the term of
their engagement from July&nbsp;3, 2002 through the date of their dismissal, there were no
disagreements between us and BDO Seidman, LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not resolved to BDO
Seidman&#146;s satisfaction, would have caused BDO Seidman to make reference to the subject matter of
the disagreements in connection with its reports on our consolidated financial statements for such
periods, nor have there been any reportable events as listed in Item&nbsp;304(a)(1)(<FONT style="font-variant: SMALL-CAPS">IV</FONT>) of
Regulation&nbsp;S-B. We provided BDO Seidman, LLP with a copy of the foregoing disclosures, and a
letter from BDO Seidman, LLP confirming its agreement with these disclosures was filed on November
24, 2004 on Form&nbsp;8-K.



<P align="center" style="font-size: 10pt"> - 9 -
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif">




<P align="left" style="font-size: 10pt">Effective November&nbsp;24, 2004, the Audit Committee appointed Tauber &#038; Balser, PC as the company&#146;s new
independent public accountants. Prior to its engagement of Tauber &#038; Balser, PC in 2004, the
company did not consult with Tauber &#038; Balser, PC with respect to any of the matters or reportable
events set forth in Item&nbsp;304(a)(2) of Regulation&nbsp;S-B.



<P align="left" style="font-size: 10pt">Tauber &#038; Balser, PC, Atlanta, Georgia, acted as our principal independent public accountants for
the fiscal year ended December&nbsp;31, 2004. We expect that representatives of Tauber &#038; Balser, PC
will be present at the Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and to respond to appropriate questions. The Audit Committee has not yet selected
auditors for the current fiscal year ending December&nbsp;31, 2005 because historically this decision is
made in the second quarter of the year. The following is a summary of fees and expenses billed to
the company by BDO Seidman, LLP, our former auditor, and Tauber &#038; Balser, PC for services rendered
for the fiscal years ended December&nbsp;31, 2003 and 2004:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>Audit Fees </B>- We were billed fees of $92,905 by BDO Seidman, LLP for the annual audit and
quarterly reviews of the consolidated financial statements for the year ended December&nbsp;31, 2003
and $39,510 for review of the first three quarters in the year ended December&nbsp;31, 2004. For
the audit of our financial statements for the fiscal year ended December&nbsp;31, 2004, we were
billed (or expect to be billed) fees of $75,000 to $85,000 by Tauber &#038; Balser, PC. Such
services were pre-approved by the Audit Committee.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>Audit-Related Fees </B>- These fees consist of fees billed for assurance and related services that
are reasonably related to the performance of the audit or review of the company&#146;s Financial
Statements and are not reported under &#147;Audit Fees&#148;. BDO Seidman, LLP billed us $6,000 related
to transition activities to the new auditors in 2004 and $7,500 related to their consent
included in our Form 10-KSB for the year ended December&nbsp;31, 2004. There were no such fees
billed in 2003.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>Fees for Tax Services </B>- We did not pay any fees for tax services to BDO Seidman, LLP or Tauber
&#038; Balser, PC during the two years ended December&nbsp;31, 2004.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>All Other Fees </B>- We were not billed any fees for any other services by BDO Seidman, LLP or
Tauber &#038; Balser, PC during the two years ended December&nbsp;31, 2004.

<!-- link1 " CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center" style="font-size: 10pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>



<P align="left" style="font-size: 10pt">In 2003, J. Leland Strange, a director, and President and Chief Executive Officer of the company,
participated as a common shareholder in the pro rata distribution of the escrow fund related to the
sale in April&nbsp;2001 of PaySys International, Inc. as described more fully in Note 2 to the
Consolidated Financial Statements. Mr.&nbsp;Strange, who had owned his shares in PaySys since 1983
prior to the company&#146;s investment in PaySys in 1994, received $149,106, which represented his pro
rata share of the escrow funds released.



<P align="left" style="font-size: 10pt">The lease on our headquarters and primary facility at 4355 Shackleford Road, Norcross, Georgia
expired May&nbsp;31, 2004. The former landlord was unwilling to renew this lease and had instead
expressed a desire to sell the facility. On June&nbsp;1, 2004, ISC Properties, LLC, an entity
controlled by our Chairman and Chief Executive Officer, J. Leland Strange, purchased the facility
from the former landlord and leased approximately 45&nbsp;percent of the facility to the company in
order to allow us to stay in the present facility and to avoid the disruption and expense of a
move. After careful consideration, the Board of Directors concluded that the lease transaction was
fair to the company and in the best interests of the company and its shareholders, and approved the
lease transaction between the company and ISC Properties, LLC effective June&nbsp;1, 2004. Mr.&nbsp;Strange
recused himself from deliberations concerning, and voting to approve, the lease transaction. In
connection with this approval, the Board of Directors waived the conflict of interest provisions of
our Code of Ethics as they apply to Mr.&nbsp;Strange in connection with the lease transaction. We also
evaluated the arrangement to determine if ISC Properties, LLC should be considered a Variable
Interest Entity (&#147;VIE&#148;) within the guidance of Financial Accounting Standards Board FIN No.&nbsp;46.
After carefully considering the characteristics of the relationship between the company and ISC
Properties, LLC, it was determined that ISC Properties, LLC did not meet the criteria of a VIE and,
as a result, ISC Properties, LLC is not consolidated with the company.



<P align="center" style="font-size: 10pt"> - 10 -
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">



<!-- link1 " SHAREHOLDERS&#146; PROPOSALS FOR ANNUAL MEETING IN 2006" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="center" style="font-size: 10pt"><B>SHAREHOLDERS&#146; PROPOSALS FOR ANNUAL MEETING IN 2006</B>



<P align="left" style="font-size: 10pt">Shareholders who wish to submit a proposal for inclusion in our proxy statement for the 2006 Annual
Meeting of Shareholders must submit such proposals so that they are received by the company no
later than December&nbsp;16, 2005. Such proposals must comply with Exchange Act Rule&nbsp;14a-8 and all
other applicable proxy rules and requirements contained in our bylaws relating to shareholder
proposals to be included in our proxy materials. Shareholders intending to present proposals at
the Annual Meeting of Shareholders in 2006 but who do not wish to submit the proposal for inclusion
in our proxy statement pursuant to Rule&nbsp;14a-8 should submit these proposals to the Secretary of the
company by certified mail, return receipt requested, at our offices in Norcross, Georgia on or
before December&nbsp;16, 2005. Our bylaws contain an advance notice provision that states that, among
other things, in order for business to be brought properly before an annual meeting of shareholders
by a shareholder, the shareholder must have given timely notice of the business in writing to the
Secretary of the company. To be timely under the Bylaws, a shareholder&#146;s notice must be received
at our principal offices by December&nbsp;16, 2005.


<!-- link1 " OTHER MATTERS WHICH MAY COME BEFORE THE MEETING" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="center" style="font-size: 10pt"><B>OTHER MATTERS WHICH MAY COME BEFORE THE MEETING</B>



<P align="left" style="font-size: 10pt">The Board of Directors is not aware of any matter other than those stated above that are to be
brought before the meeting. However, if any other matter should be presented for consideration and
voting, the persons named in the enclosed form of proxy intend to vote the proxy in accordance with
their judgment of what is in the best interest of the company.


<!-- link1 " ADDITIONAL INFORMATION" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center" style="font-size: 10pt"><B>ADDITIONAL INFORMATION</B>



<P align="left" style="font-size: 10pt"><B>Any record or beneficial owner of our common stock as of April&nbsp;8, 2005 may request a copy of our
Annual Report on Form&nbsp;10-KSB filed with the Securities and Exchange Commission for the fiscal year
ended December&nbsp;31, 2004, including financial statements and schedules. Any request for the Form
10-KSB should be in writing addressed to: Bonnie L. Herron, Intelligent Systems Corporation, 4355
Shackleford Road, Norcross, Georgia 30093. If the person requesting the Form&nbsp;10-KSB is not a
shareholder of record on April&nbsp;8, 2005, the person must state that he or she is a beneficial owner
of our common stock on that date. Shareholders may also view and download a copy of our Annual
Report on Form&nbsp;10-KSB from our web site at </B><U><B>www.intelsys.com</B></U><B>. We will provide copies of any
exhibits to the Form&nbsp;10-KSB upon request and upon the payment of our reasonable expenses in
furnishing such exhibits.</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By order of the Board of Directors,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><IMG src="g94343g9434301.gif" alt="-s- Bonnie L. Herron"></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS">Bonnie L. Herron</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Secretary</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Norcross, Georgia</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>April&nbsp;15, 2005</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 11 -
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif">


<P align="center" style="font-size: 10pt"><IMG src="g94343g9434300.gif" alt="(INTELLIGENT SYSTEMS LOGO )">



<P align="center" style="font-size: 10pt">Notice of Annual Meeting<BR>
and<BR>
Proxy Statement



<P align="center" style="font-size: 10pt">Annual Meeting of Shareholders<BR>
4355 Shackleford Road<BR>
Norcross, Georgia 30093



<P align="center" style="font-size: 10pt">Thursday, May&nbsp;26, 2005<BR>
4:00 P.M.




<P align="center" style="font-size: 10pt"> &nbsp;
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif">



<P align="center" style="font-size: 24pt"><B>INTELLIGENT SYSTEMS CORPORATION</B>



<div align="center" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>Proxy Solicited on behalf of Board of Directors</B></FONT></div>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned, a shareholder of common stock, $.01 par value (the &#147;Common Stock&#148;) of
Intelligent Systems Corporation, a Georgia corporation (the &#147;Company&#148;) hereby appoints J. Leland
Strange and Bonnie L. Herron, and each of them with full power of substitution, proxies to vote at
the Annual Meeting of Stockholders of the Company to be held on May&nbsp;26, 2005 at 4:00 p.m., local
time, and at any adjournment or adjournments thereof, hereby revoking any proxies heretofore given,
to vote all shares of Common Stock of the Company held or owned by the undersigned as of the record
date, April&nbsp;8, 2005 as directed on the reverse, and in their discretion, upon such other matters as
may come before the meeting.
 <p>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="84%"></TD>
    <TD width="1%"></TD>
    <TD width="15%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(To be Signed on Reverse Side)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="width: 100%; border: 1px solid black; padding: 8px;">
SEE REVERSE<BR>
SIDE</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif">



<P align="center" style="font-size: 10pt">Annual Meeting of Stockholders of



<P align="center" style="font-size: 10pt">INTELLIGENT SYSTEMS CORPORATION



<P align="center" style="font-size: 10pt">May&nbsp;26, 2005



<P align="center" style="font-size: 10pt"><B>Please date, sign and mail your<BR>
proxy card in the envelope<BR>
provided as soon as possible.</B>



<P align="center" style="font-size: 10pt"><FONT style="font-family: Wingdings">&#226;</FONT>Please detach along perforated line and mail in the envelope provided.<FONT style="font-family: Wingdings">&#226;</FONT>



<P align="center" style="font-size: 10pt">The Board of Directors recommends a vote &#147;FOR&#148; the election of one director.

<P align="center" style="font-size: 10pt">Please sign, date and return promptly in the enclosed envelope. Please mark your vote in blue or
black ink as shown here. <FONT style="font-family: Wingdings">&#120;</FONT>

<p>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">Election of one Director:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>This proxy will be voted as directed. If no
Instructions are specific, the proxy will be voted &#147;FOR&#148;
Proposal 1.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nominee &#150;<BR>Parker H. Petit</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings 2">&#163;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">For the Nominee</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings 2">&#163;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Withhold Authority for the Nominee</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left">To change the address on your account, please
check the box at right and indicate your new address
in the space above. Please note that changes to the
registered name(s) on the account may not be
submitted via this method.<br>
<FONT style="font-family: Wingdings 2">&#163;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Signature of Stockholder________________________________ Date________



<P align="left" style="font-size: 10pt">Signature of Stockholder________________________________ Date________



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Note: Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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