<PAGE>

                                                                    EXHIBIT 10.4

                               SECURITY AGREEMENT
                                   (Borrower)

         THIS SECURITY AGREEMENT (this "AGREEMENT" or "SECURITY AGREEMENT") is
made effective the 1st day of October, 2003, by INTELLIGENT SYSTEMS CORPORATION,
a Georgia corporation, (the "PLEDGOR"), in favor of FIDELITY BANK, chartered
under the laws of the state of Georgia (the "LENDER").

                                   WITNESSETH:

         WHEREAS, the Lender has agreed to make a line of credit loan of up to
$1,500,000 (herein "LOAN") to the Pledgor pursuant to the terms and conditions
of a Loan Agreement of even date herewith (the "LOAN AGREEMENT") between the
Lender and the Pledgor; and

         WHEREAS, the Loan is evidenced by that certain Commercial Promissory
Note of even date herewith from the Pledgor and payable to the order of the
Lender in the face amount of $1,500,000 (the "NOTE"); and

         WHEREAS, the proceeds of the Loan are to be used by the Pledgor for
business purposes;

         WHEREAS, the Lender has required, as a condition to extending such
financial accommodations, the execution and delivery of this Agreement by the
Pledgor;

         NOW, THEREFORE, in order to secure the prompt payment of all past,
present, and future indebtedness, liabilities, and obligations of the Pledgor to
the Lender of any nature whatsoever in connection with the Loan, together with
all obligations of the Pledgor to the Lender hereunder and under any note, any
loan agreement, all contracts of suretyship, guaranty, or accommodation, and all
other obligations of the Pledgor to the Lender, however and wherever created,
arising, or evidenced, whether direct or indirect, absolute, contingent, or
otherwise, now or hereafter existing or due or to become due (collectively, the
"PLEDGOR'S LIABILITIES"), and the performance by the Pledgor of all the terms,
conditions, and provisions of this Agreement, the Loan Agreement and of any
other loan document previously, simultaneously, or hereafter executed and
delivered by the Pledgor and/or any other person, singly or jointly with another
person or persons, evidencing, securing, guarantying, or in connection with any
of the Pledgor's Liabilities (the "LOAN DOCUMENTS"), the Pledgor agrees with the
Lender as follows:

         1.       Collateral. To secure the payment and performance of the
Pledgor's Liabilities and the Pledgor's performance of its obligations under the
Loan Documents, the Pledgor hereby grants to the Lender a security interest in,
and security title to, the following property of the Pledgor:

<PAGE>

                  A.       Inventory. All of the Pledgor's inventory of every
description which is held by the Pledgor for sale of lease or is furnished by
the Pledgor under any contract of service or is held by the Pledgor as raw
materials, work in process, or materials used or consumed in a business, whether
now owned or hereafter acquired, wherever located, and a the same may now and
hereafter from time to time be constituted, together with all cash and non-cash
proceeds and products thereof (the "INVENTORY").

                  B.       Accounts. All of the Pledgor's accounts (including,
without limitation, all notes, notes receivable, drafts, acceptances, and
similar instruments and documents) whether now owned or hereafter acquired,
together with: (i) all cash and non-cash proceeds thereof, and (ii) all
returned, rejected, or repossessed goods, the sale or lease of which shall have
given or shall give rise to an account, and all cash and non-cash proceeds and
products of all such goods (the "ACCOUNTS").

                  C.       General Intangibles. All of the Pledgor's general
intangibles (including, without limitation, any proceeds from insurance policies
after payment of prior interests), patents, unpatented inventions, trade
secrets, copyrights, contract rights, goodwill, literary rights, rights to
performance, rights under licenses, choices-in-action, claims, information
contained in computer media (such as data bases, source and object codes, and
information therein) things in action, trademarks and trademarks applied for
(together with the goodwill associated therewith) and derivatives thereof, trade
names, including the right to make, use, and vend goods utilizing any of the
foregoing, and permits, licenses, certifications, authorizations and approvals,
and the rights of the Debtor thereunder, issued by any governmental, regulatory,
or private authority, agency, or entity whether now owned or hereafter acquired,
together with all cash and non-cash products thereof.

                  D.       Chattel Paper. All of the Pledgor's chattel paper,
whether now owned or hereafter existing, acquired, or created, together with:
(i) all moneys due and to become due thereafter, (ii) all cash and non-cash
proceeds thereof, and (iii) all returned, rejected, or repossessed goods, the
sale or lease of which shall have given or shall give rise to chattel paper, and
all cash and non-cash proceeds and products of all such goods. Additionally, the
Pledgor assigns and grants to the Lender a security interest in all property and
goods both now owned and hereafter acquired by the Pledgor which are sold,
leased, secured, are the subject of, or otherwise covered by, the Pledgor's
chattel paper, together with all rights incident to such property and goods and
all cash and non-cash proceeds thereof (the "CHATTEL PAPER").

                  E.       All Equipment and Fixtures. All of the Pledgor's
equipment, furniture and fixtures, whether now owned or hereafter acquired,
together with: (i) all additions, parts, fittings, accessories, special tools,
attachments, and accessions now and hereafter affixed thereto and/or used in
connection therewith, (ii) all replacements thereof and substitutions therefor,
and (iii) all cash and non-cash proceeds and products thereof (the "EQUIPMENT").

                  F.       Leasehold Improvements. All present and future
improvements made by Pledgor to any real estate leased or owned by Pledgor.

                                       2
<PAGE>

         The term "Collateral" as used herein means each and all of the items of
Collateral described above, and the term "proceeds" as used herein includes,
without limitation, the proceeds of all insurance policies covering all or any
part of such items of Collateral.

         2.       Title to Collateral. The Pledgor warrants and represents that
(i) it is the lawful owner of the Collateral, and has the full right, power, and
authority to convey, transfer, and grant the security title and security
interest in the Collateral granted herein to the Lender; (ii) all licenses
relating to the Collateral are fully paid, and, upon the occurrence of an Event
of Default and foreclosure by the Lender, the Lender shall have all rights of
the Pledgor to any Collateral licensed to the Pledgor or licensed by the
Pledgor; (iii) the Collateral is not, and so long as this Agreement is in effect
will not be, subject to any liens, claims, security interests, encumbrances,
taxes, or assessments, however described or denominated; (iv) no financing
statement, mortgage, notice of lien, deed of trust, deed to secure debt,
security agreement, or any other agreement or instrument creating an
encumbrance, lien, charge against any of the Collateral is in existence or on
file in any public office, other than financing statements (or other appropriate
security documentation) filed on behalf of the Lender; and (v) all information
with respect to the Collateral and the Pledgor's Liabilities, of any of them,
set forth in any written schedule, certificate, or other document at any time
heretofore or hereafter furnished by the Pledgor to the Lender, and all other
written information heretofore or hereafter furnished by the Pledgor to the
Lender, is and will be true and correct in all material respects as of the date
furnished.

         3.       Further Assurances. The Pledgor will defend its title to the
Collateral against all persons and will, upon request of the Lender: (i) furnish
such further assurances of title as may be required by the Lender; (ii) deliver
and execute or cause to be delivered and executed, in form and content
satisfactory to the Lender, any financing statements, notices, certificates of
title, and other documents and pay the cost of filing or recording the same in
all public offices deemed necessary by the Lender, as well as any recordation,
documentary, or transfer tax required by law to be paid in connection with such
filing or recording; and (iii) do such other acts as the Lender may request in
order to perfect, preserve, maintain, or continue the perfection of the Lender's
security interest in the Collateral and/or its priority.

         4.       Accounts, etc. Until such time as the Lender shall notify the
Pledgor in writing of the revocation of such power and authority, the Pledgor,
as agent for the Lender, will, at its own expense, diligently collect, as and
when due, all amounts owing under the Accounts, including the taking of such
action with respect to such collection as the Lender may requests from time to
time, and to hold in trust and segregate for the Lender all funds received from
the Accounts; provided, however, that until an Event of Default shall occur or
would occur but for the passage of time, or giving of notice, or both, the
Pledgor may use or consume in the ordinary course of its business any such
collections on the Accounts in any lawful manner not inconsistent with this
Agreement and the other Loan Documents. Upon an Event of Default hereunder which
has not been cured within any applicable cure period and during the continuance
of such uncured default, the Lender, however, may revoke such power and
authority and notify any parties obligated on any of the Accounts to make
payment to the Lender of any amounts due or to become due thereunder, and
enforce collection of performance under any of the Accounts by suit or
otherwise, and surrender, release, or exchange all or any part thereof, or
compromise or extend or renew for any period

                                       3
<PAGE>

(whether or not longer than the original period) any indebtedness thereunder or
evidenced thereby. After an Event of Default or upon request of the Lender, the
Pledgor will, at its own expense, notify any parties obligated on any of the
Accounts to make payments to the Lender and will hold in trust and immediately
forward to the Lender all payments received by the Pledgor in the form received,
with all necessary endorsements thereon for collection by the Lender.

         5.       Transfer and Other Liens. The Pledgor will not sell, lease,
transfer, exchange, or otherwise dispose of the Collateral, or any part hereof,
without the prior written consent of the Lender and will not permit any lien,
security interest, or other encumbrance to attach to the Collateral, or any part
thereof, other than those in favor of the Lender or those permitted by the
Lender in writing, except that the Pledgor may, in the ordinary course of its
business and in the absence of an Event of Default hereunder or notice by the
Lender to the Pledgor under Section 6 hereof, collect its Accounts and Chattel
Paper and sell its Inventory.

         6.       Financial Statements, Books, and Records. The Pledgor will:
(i) at all times maintain, in accordance with generally accepted accounting
principles consistently applied, accurate and complete books and records
pertaining to the operation, business affairs, and financial condition of the
Pledgor and pertaining to the Collateral and any contracts and collections
relating to the Collateral; (ii) furnish to the Lender promptly upon request,
certified by an officer of the Pledgor and in the form and content and at the
intervals specified by the Lender, such financial statements, reports,
schedules, and other information with respect to the operation, business
affairs, and financial condition of the Pledgor as required pursuant to the Loan
Agreement; (iii) at all reasonable times, and without hindrance or delay, permit
the Lender or any person designated by the Lender to enter any place of business
of the Pledgor or any other premises where any books, records, and other data
concerning the Pledgor and/or the Collateral may be kept and to examine, audit,
inspect, and make extracts from and photocopies of any such books, records, and
other data; (iv) furnish to the Lender promptly upon request, certified by an
officer of the Pledgor and in the form and content specified by the Lender,
lists of purchasers of inventory, aging of accounts, aggregate cost or wholesale
market value of inventory, schedules of equipment, and other data concerning the
Collateral as the Lender may from time to time specify; and (v) mark its books
and records in a manner satisfactory to the Lender so that the Lender's rights
in and to the Collateral will be shown.

         7.       Name of Pledgors, Places of Business, and Location of
Collateral. The Pledgor represents and warrants that its correct legal name is
as specified on the signature lines of this Agreement, and each legal or trade
name of the Pledgor for the previous five (5) years (if different from the
Pledgor's current legal name) is as specified below the signature lines of this
Agreement. Without the prior written consent of the Lender, the Pledgor will not
change its name, dissolve, merge, or consolidate with any other person. The
Pledgor warrants that the address of the Pledgor's chief executive office and
the address of each other place of business of the Pledgor are as specified
below the signature lines of this Agreement. Except for mobile equipment and
motor vehicles, the Collateral and all books and records pertaining to the
Collateral have been, are, and will be located at the Pledgor's chief executive
office specified below or at any other place of business which may be specified
below. The Pledgor will immediately advise the Lender in writing of the opening
of

                                       4
<PAGE>

any new place of business and of any change in the location of the places where
the Collateral or any part thereof, or the books and records concerning the
Collateral or any part thereof, are kept.

         8.       Care of Collateral. The Pledgor will maintain the Collateral
in first-class condition excepting any loss, damage, or destruction which is
fully covered by proceeds of insurance and will not do or permit anything to be
done to the collateral that may impair its value or that may violate the terms
of any insurance covering the Collateral or any part thereof, normal wear and
tear excepted. The Lender shall have no duty to, and the Pledgor hereby releases
the Lender from all claims for loss or damage caused by the failure to, collect
or enforce any Account of Chattel Paper or to preserve rights against prior
parties to the Collateral. The Pledgor will use the Collateral for lawful
purposes only, with all reasonable care and caution and in conformity with all
applicable laws, ordinances, and regulations.

         9.       Insurance. The Pledgor will insure such of the Collateral as
specified by the Lender against such casualties and risks in such form and
amount and with such companies as may from time to time be required by the
Lender. All insurance proceeds shall be payable to the Lender, and such policies
or certificates thereon or duplicates thereof shall immediately be deposited
with the Lender. The Pledgor will pay all premiums due or to become due for such
insurance and hereby assigns to the Lender any returned or unearned premiums
which may be due upon cancellation of insurance coverage. The Lender is hereby
irrevocably: (i) appointed the Pledgor's attorney-in-fact (which appointment is
coupled with an interest and is irrevocable) to endorse any draft or check which
may be payable to the Pledgor in order to collect such returned or unearned
premiums or the proceeds of insurance and (ii) authorized to apply such
insurance premiums for payment of the Pledgor's Liabilities, when due, in such
order of application as the Lender may determine.

         10.      Taxes. The Pledgor will pay as and when due and payable all
taxes, levies, license fees, assessments, and other impositions levied on the
Collateral or any part thereof or for its use and operation.

         11.      Equipment Not Fixtures. The Pledgor warrants that all
Equipment which constitutes a part of the Collateral is personalty and is not
and will not be affixed to real estate in such manner as to become a fixture or
part of such real estate, except with respect to such items of Equipment which
may become fixtures in the normal course of Pledgor's business in constructing
leasehold improvements. The Pledgor will use its best efforts to furnish to the
Lender a written waiver by the record owner of such real estate of all interest
in such equipment and a written subordination to the Lender's security interest
and lien by any person who has a lien on or security interest in such real
estate which is or may be superior to the Lender's security interest hereunder.

         12.      Specific Assignments. Promptly upon request by the Lender, the
Pledgors will execute and deliver to the Lender written assignments,
endorsements, and/or schedules, in form and content satisfactory to the Lender,
of specific Chattel Paper and Accounts or groups of Accounts or Chattel Paper,
but the security interest of the Lender hereunder shall not be limited in any
way by such assignments.

                                       5
<PAGE>

         13.      Delivery of Chattel Paper. The Pledgors will promptly upon
request by the Lender deliver, assign, and endorse to the Lender all Chattel
Paper and all other documents held by the Pledgors in connection herewith.

         14.      Government Contracts. If any Account or Chattel Paper arises
out of a contract or contracts with the United States of America or any
department, agency, or instrumentality thereof, the Pledgor shall immediately
notify the Lender thereof in writing and execute any instruments or take any
steps required by the Lender in order that all moneys due or to become due under
such contract or contracts shall be assigned to the Lender and notice thereof
given under the Federal Assignment of Claims Act or other applicable law.

         15.      Collateral Account. If all or any part of the collateral at
any time consists of Inventory, Accounts, or Chattel Paper, the Pledgor will,
upon the request of the Lender at any time after the occurrence of an Event of
Default hereunder, deposit or cause to be deposited to a bank account designated
by the Lender and from which the Lender alone has power of access and withdrawal
(the "COLLATERAL ACCOUNt") all checks, drafts, cash, and other remittances in
payment or on account of payment of such Inventory, Accounts, or Chattel Paper
and the cash proceeds of any returned goods, the sale or lease of which gave
rise to an Account or Chattel Paper (all of the foregoing herein collectively
referred to as "ITEMS OF PAYMENT"). The Pledgor shall deposit the Items of
Payment for credit to the Collateral Account within two (2) business days of the
receipt thereof, and in precisely the form received, except for the endorsement
of the Pledgor where necessary to permit the collection of the Items of Payment,
which endorsement the Pledgor hereby agrees to make. Pending such deposit, the
Pledgor will not commingle any of the Items of Payment with any of its other
funds or property but will hold them separate and apart. The Lender may at any
from time to time apply the whole or any part of the collected funds credited to
the Collateral Account against the Pledgor's Liabilities or credit such
collected funds to a banking account of the Pledgor with the Lender, the order
and method of such application to be in the discretion of the Lender.

         16.      Rights of Lender and Duties of Pledgors. If all or any part of
the Collateral at any time consists of Inventory, Accounts, or Chattel Paper,
the Lender may at any time and from time to time after the occurrence of an
Event of Default hereunder (a) notify the account debtors obligated on any of
the Collateral to make payments thereon directly to the Lender, and to take
control of the cash and non-cash proceeds of any such Collateral; (b) charge to
any banking account of the Pledgors with the Lender any Item of Payment credited
to the Collateral Account which is dishonored by the drawee or maker thereof;
(c) compromise, extend, or renew any of the Collateral or deal with the same as
it may deem advisable; (d) release, make exchanges or substitutions for, or
surrender all or any part of the Collateral; (e) remove from the Pledgors'
places of business all books, records, ledger sheets, correspondence, invoices,
and documents relating to or evidencing any of the Collateral or, without cost
or expense to the Lender, make such use of the Pledgor's place(s) of business as
may be reasonably necessary to administer, control, and collect the Collateral;
(f) repair, alter, or supply goods, if any, necessary to fulfill in whole or in
part the purchase order of any account debtor; (g) demand, collect, receipt for,
and give renewals, extensions, discharges, and releases of any of the
Collateral; (h) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral; (i) settle,

                                       6
<PAGE>

renew, extend, compromise, compound, exchange, or adjust claims with respect to
any of the Collateral or any legal proceedings brought with respect thereto; (j)
endorse the name of the Pledgor upon any Items of Payment relating to the
collateral or upon any proof of claim in bankruptcy against an account debtor;
and (k) receive and open all mail addressed to the Pledgor and, if an Event of
Default exists hereunder, notify postal authorities to change the address for
the delivery of mail to the Pledgor to such address as the Lender may designate;
and for purposes of taking the actions described in Subsections (a) through (k)
the Pledgor hereby irrevocably appoints the Lender as its attorney-in-fact
(which appointment being coupled with an interest is irrevocable while any of
Pledgor's Liabilities remain unpaid), with power of substitution, in the name of
the Lender or in the name of the Pledgor or otherwise, for the use and benefit
of the Lender, but at the cost and expense of the Pledgor and without notice to
the Pledgor. The Pledgor will: (i) make no material change to the terms of any
sale or lease of Inventory or of any Account or Chattel Paper without the prior
written permission of the Lender; (ii) on demand, make available in form
acceptable to the Lender shipping documents and delivery receipts evidencing the
shipment of goods which gave rise to the sale or lease of Inventory or of an
Account of Chattel Paper, completion certificate, or other proof of the
satisfactory performance of services which gave rise to the sale or lease of
Inventory or of an Account or Chattel Paper, copies of the invoices arising out
of the sale or lease of Inventory or for an Account, and the Pledgor's copy of
any written contract or order from which the sale or lease of Inventory, an
Account, or Chattel Paper arose; and (iii) when requested, advise the Lender
whenever an account debtor returns or refuses to retain any goods, the sale or
lease of which gave rise to an Account or Chattel Paper, and will comply with
any instructions which the Lender may give regarding the sale or other
disposition of such returns.

         17.      Performance by Lender. After an Event of Default hereunder
which has not been cured within any applicable cure period and during the
continuance of such uncured default, if the Pledgor fails to perform, observe,
or comply with any of the conditions, terms, or covenants contained in this
Agreement, the Lender, without notice to or demand upon the Pledgor and without
waiving or releasing any of the Pledgor's Liabilities or any Event of Default,
may (but shall be under no obligation to) at any time thereafter perform such
conditions, terms, or covenants for the account and at the expense of the
Pledgor, and may enter upon any place of business or other premises of the
Pledgor for that purpose and take all such action thereon as the Lender may
consider necessary or appropriate for such purpose. All sums paid or advanced by
the Lender in connection with the foregoing and all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred in connection therewith (collectively, the "EXPENSE PAYMENTS") together
with interest thereon at a simple per annum rate of interest which is equal to
the then highest rate of interest charged on the principal of any of the
Pledgor's Liabilities, plus one percent (1%) per annum (but in no event higher
than the maximum interest rate permitted by applicable law), from the date of
payment until repaid in full, shall be paid by the Pledgor to the Lender on
demand and shall constitute and become a part of the Pledgor's Liabilities
secured hereby.

         18.      Default. The occurrence of any one or more of the following
events shall constitute an event of default (an "EVENT OF DEFAULT") under this
Agreement: (i) failure of the Pledgor to pay any of the Pledgor's Liabilities as
and when due and payable; (ii) failure of the Pledgor to perform, observe, or
comply with any of the provisions of this Agreement or of any of the other Loan

                                       7
<PAGE>

Documents; (iii) the occurrence of an Event of Default (as defined therein)
under any of the other Loan Documents; (iv) any information contained in any
financial statement, application, schedule, report, or any other document given
by the Pledgor or by any other person in connection with the Pledgor's
Liabilities, with the Collateral, or with any of the Loan Documents is not in
all material respects true and accurate or the Pledgor or such other person
omitted to state any material fact or any fact necessary to make such
information not misleading; (v) the Pledgor is generally not paying debts as
such debts become due; (vi) the filing of any petition for relief under any
provision of the Federal Bankruptcy Code or any similar state law is brought by
or against the Pledgor; (vii) an application for the appointment of a receiver
for, the making of a general assignment for the benefit of creditors by or the
insolvency of, the Pledgor and not dismissed within forty-five (45) days; (viii)
the dissolution, merger, consolidation, or reorganization of the Pledgor; (i)
suspension of the operation of the Pledgor's present business; (j) transfer of a
substantial part (determined by market value) of the Pledgor's property; (k)
sale, transfer, or exchange, either directly or indirectly, of a controlling
stock interest of the Pledgor; (l) termination or withdrawal of any guaranty for
the Pledgor's Liabilities; (m) the Pension Benefit Guaranty Corporation
commences proceedings under Section 4042 of the Employee Retirement Income
Security Act of 1974 (ERISA), as amended, to terminate any employee pension
benefit plan of the Pledgor; (n) the determination in good faith by the Lender
in its reasonable judgement that a material adverse change has occurred in the
financial condition of the Pledgor from the condition set forth in the most
recent financial statement of the Pledgor heretofore furnished to the Lender, or
from the financial condition of the Pledgor as heretofore most recently
disclosed to the Lender in any other manner; or (o) a default occurs or in the
event a default exists under any document or instrument executed by any
Guarantor of the Pledgor's Liabilities, including, without limitation, any
Guaranty Agreement, any Security Agreement or any other similar document or
instrument.

         19.      Rights and Remedies upon Default. Upon the occurrence of an
Event of Default hereunder (and in addition to all of its other rights, powers,
and remedies under this Agreement), the Lender may, at its option, and upon
written notice to the Pledgor, declare the unpaid balance of the Pledgor's
Liabilities to be immediately due and payable. The occurrence or non-occurrence
of an Event of Default shall in no manner impair the ability of the Lender to
demand payment of any portion of the Pledgor's Liabilities which are payable on
demand. The Lender shall have all the rights and remedies of a secured party
under the Uniform Commercial Code and other applicable law in the State of
Georgia. Upon the occurrence of an Event of Default hereunder, the Pledgor, upon
demand by the Lender, shall assemble the Collateral and make it available to the
Lender at a place designated by the Lender which is mutually convenient to both
parties. Upon the occurrence of an Event of Default hereunder, the Lender or its
agents may enter upon the Pledgor's premises to take possession of the
Collateral, to remove it, to render it unusable, or to sell of otherwise dispose
of it, all without judicial process or proceedings.

         Any written notice of the sale, disposition, or other intended action
by the Lender with respect to the Collateral which is required by applicable
laws and is sent by certified mail, postage prepaid, to the Pledgor at the
address of the Pledgor's chief executive office specified below, or such other
address of the Pledgor which may from time to time be shown on the Lender's
records, at least five (5) days prior to such sale, disposition, or other
action, shall constitute reasonable notice to the Pledgor. The Pledgor shall pay
on demand all costs and expenses, including, without

                                       8
<PAGE>

limitation, reasonable attorneys' fees and expenses, incurred by or on behalf of
the Lender: (i) in enforcing the Pledgor's Liabilities; and (ii) in connection
with the taking, holding, preparing for sale or other disposition, selling,
managing, collecting, or otherwise disposing of the Collateral. All of such
costs and expenses (collectively, the "LIQUIDATION COSTS") together with
interest thereon at a simple per annum rate of interest which is equal to the
then highest rate of interest charged on the principal of any of the Pledgor's
Liabilities, plus one percent (1%) per annum (but in no event higher than the
maximum interest rate permitted by law), from the date of payment until repaid
in full, shall be paid by the Pledgor to the Lender on demand and shall
constitute and become a part of the Pledgor's Liabilities secured hereby. Any
proceeds of sale or other disposition of the Collateral will be applied by the
Lender to the payment of Liquidation Costs and Expense Payments, and any balance
of such proceeds will be applied by the Lender to the payment of the remaining
Pledgor's Liabilities in such order and manner of application as the Lender may
from time to time in its sole discretion determine.

         20.      Remedies Cumulative. Each right, power, and remedy of the
Lender as provided for in this Agreement or in the other Loan Documents or now
or hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the other Loan Documents or now
or hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by the Lender or any one or more of such
rights, powers, or remedies shall not preclude the simultaneous or later
exercise by the Lender of any or all such other rights, powers, or remedies.

         21.      Waiver. No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant, or agreement or of the
other Loan Documents, or to exercise any right, power, or remedy consequent upon
a breach thereof, shall constitute a waiver of any such term, condition,
covenant, or agreement or of any such breach, or such term, condition, covenant,
or agreement or of any such breach, or preclude the Lender from exercising any
such right, power, or remedy at any later time or times. By accepting payment
which does not fully repay any indebtedness then due and payable with respect to
any of the Pledgor's Liabilities, the Lender shall not be deemed to have waived
the right either to require payment when due of all other Pledgor's Liabilities
or to declare an Event of Default for failure to effect such payment of any such
other Pledgor's Liabilities. The Pledgor waives presentment, notice of dishonor,
and notice of non-payment with respect to Accounts and Chattel Paper.

         THE PLEDGORS HEREBY ACKNOWLEDGE THAT THE LIABILITIES AROSE OUT OF A
"COMMERCIAL TRANSACTION" AS THIS TERM IS DEFINED IN O.C.G.A. SECTION
44-14-260(1) CONCERNING FORECLOSURE OF MORTGAGES ON PERSONALTY, AND AGREES THAT
IN THE EVENT OF ANY DEFAULT, THE LENDER SHALL HAVE THE RIGHT TO AN IMMEDIATE
WRIT OF POSSESSION WITHOUT NOTICE OF HEARING AND KNOWINGLY AND INTELLIGENTLY
WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO ANY NOTICE AND POSTING OF A BOND BY THE
LENDER PRIOR TO SEIZURE BY THE LENDER, ITS TRANSFEREES, ASSIGNS, OR SUCCESSORS
IN INTEREST, OF THE COLLATERAL OR ANY PORTION THEREOF. THIS IS INTENDED BY THE
PLEDGOR AS A "WAIVER" AS THIS TERM IS DEFINED IN O.C.G.A. SECTION 44-14-260(3)
RELATING TO FORECLOSURE OF MORTGAGES ON PERSONALTY.

                                       9
<PAGE>

         22.      Miscellaneous. Time is of the essence of this Agreement. The
section headings of this Agreement are for convenience only and shall not limit
or otherwise affect any of the terms hereof. Neither this Agreement nor any
term, condition, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge, or
termination is sought. This Agreement shall be governed by the laws of the State
of Georgia and shall be binding upon the Pledgor and its heirs, executors,
administrators, legal representatives, successors, and assigns, and shall inure
to the benefit of the Lender and its successors and assigns. As used herein, the
singular number shall include the plural, the plural the singular, and the use
of the masculine, feminine, or neuter gender shall include all genders, as the
context may require, and the term "person" shall include an individual, a
corporation, an association, a partnership, a trust, and an organization.
Invalidation of any one or more of the provisions of their Agreement shall in no
way affect any of the other provisions hereof, which shall remain in full force
and effect. All references herein to any document, instrument, or agreement
shall be deemed to refer to such document, instrument, or agreement as the same
may be amended, modified, restated, supplemented, or replaced from time to time.
Unless varied by this Agreement, all terms used herein which are defined by the
Georgia Uniform Commercial Code shall have the same meanings hereunder as
assigned to them by the Georgia Uniform Commercial Code.

         IN WITNESS WHEREOF, the Pledgor has caused its duly authorized officers
to execute this Agreement and to affix its corporate seal hereto, as of the day
and year first written above.

                                   PLEDGOR:

                                   Intelligent Systems Corporation, a Georgia
                                   corporation

                                   By:__________________________________________
                                       Bonnie L. Herron, Chief Financial Officer

                                   Attested:____________________________________
                                            Its Secretary

                                           [CORPORATE SEAL]

                                       10
<PAGE>

                                   LENDER:

                                   FIDELITY BANK

                                   By:__________________________________________
                                          Its:__________________________________

                                                         (BANK SEAL)

Address(es) where Collateral is
is to be located:

4355 Shackleford Road
Norcross, Georgia  30093

Previous legal and/or trade
name(s) of the Pledgor:

None.

                                       11