SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
WATERSIDE CAPITAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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WATERSIDE CAPITAL CORPORATION
A Small Business Investment Company
300 East Main Street, Suite 1380
Norfolk, Virginia 23510
September 10, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
of Waterside Capital Corporation that will be held at Nauticus, One Waterside
Drive, Norfolk, Virginia 23510 at 11:00 a.m. Eastern Time on October 29, 2001.
At the meeting, you will be asked to elect 16 Directors to serve one-year terms,
and to ratify the appointment of KPMG LLP as the Company's auditors for 2002.
Enclosed are a Notice of the Annual Meeting, a Proxy Card, and a Proxy
Statement containing information about the matters to be acted upon at the
meeting. Directors and officers of the Company as well as a representative of
KPMG LLP will be present at the Annual Meeting to respond to any questions our
shareholders may have.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
Accordingly, we urge you to sign and date the enclosed Proxy Card and promptly
return it to us in the enclosed, self-addressed, postage-paid envelope, even if
you are planning to attend the meeting. If you attend the meeting, you may vote
in person, even if you have previously returned a Proxy Card.
We look forward to the 2001 Annual Meeting of Shareholders, and we hope you
will attend the meeting or be represented by proxy.
Sincerely,
/s/ J. Alan Lindauer
J. ALAN LINDAUER, President and Chief
Executive Officer
WATERSIDE CAPITAL CORPORATION
300 EAST MAIN STREET, SUITE 1380
NORFOLK, VIRGINIA 23510
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
OCTOBER 29, 2001
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of Waterside
Capital Corporation (the "Company") will be held at Nauticus, One Waterside
Drive, Norfolk, Virginia 23510 at 11:00 a.m. Eastern Time on October 29, 2001
for the following purposes:
1. To elect 16 directors to hold office for a term of one year and until
their respective successors are elected and qualified;
2. To ratify the appointment of KPMG LLP as the Company's independent
auditors for 2002; and
3. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
Information concerning the matters to be acted upon at the meeting is set
forth in the accompanying Proxy Statement. The Board of Directors has
established the close of business on August 31, 2001 as the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof.
By Order of the Board of Directors
/s/ Gerald T. McDonald
Gerald T. McDonald, Secretary
Norfolk, Virginia
September 10, 2001
PLEASE COMPLETE, SIGN, AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN
PERSON OR THROUGH YOUR PROXY.
PROXY STATEMENT
This Proxy Statement and the enclosed proxy card ("proxy") are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Waterside Capital Corporation (the "Company") to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at Nauticus, One
Waterside Drive, Norfolk, Virginia 23510 at 11:00 a.m. Eastern Time on October
29, 2001 and at any adjournment thereof, for the purposes set forth in the
accompanying Notice of Meeting.
Only shareholders of record at the close of business on August 31, 2001
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement and proxy is being mailed to registered holders of the
Common Stock of the Company on or about September 10, 2001.
Revocability of Proxy
A shareholder may revoke his proxy at any time before its use. Accordingly,
execution of the enclosed proxy will not affect a shareholder's right to attend
the Annual Meeting and vote in person. If your proxy is properly signed,
received by the Company and not revoked by you, the shares to which it relates
will be voted at the Annual Meeting in accordance with your instructions. If a
shareholder does not return a signed proxy, his or her shares cannot be voted by
proxy.
Person Making the Solicitation
The cost of soliciting proxies will be borne by the Company. The Company
has retained Registrar and Transfer Company to assist in the solicitation of
proxies from brokers and nominees and in the counting of proxies. The Company
will pay Registrar and Transfer Company approximately $500 plus out-of-pocket
expenses for this assistance. In addition to solicitation by mail, the Company
will request banks, brokers, and other custodians, nominees and fiduciaries to
send proxy material to the beneficial owners and to secure their voting
instructions, if necessary. The Company, upon request, will reimburse them for
their expenses in so doing. Officers and employees of the Company may solicit
proxies personally, by telephone, telefacsimile or other means of electronic
transmission from some shareholders if proxies are not received promptly, for
which no additional compensation will be paid.
Voting Shares And Vote Required
On the Record Date, the Company had 1,581,430 shares of Common Stock
outstanding, each share having one vote on each matter presented at the Annual
Meeting. Only holders of the Company's Common Stock of record at the close of
business on August 31, 2001, will be entitled to vote. A majority of the shares
entitled to vote, represented in person or by proxy, will constitute a quorum
for the transaction of business at the Meeting. Abstentions and shares held in
street name ("Broker Shares") voted as to any matter at the Meeting will be
included in determining the number of shares present or represented at the
Meeting. Broker Shares that are not voted on any matter at the Meeting will not
be included in determining the number of shares present or represented at the
Meeting.
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All shareholder meeting proxies, ballots, and tabulations that identify
individual shareholders are kept confidential, and will not be available for
examination, nor will the identity or the vote of any shareholder be disclosed
except as may be necessary to meet legal requirements. Votes will be counted and
certified by Registrar and Transfer Company, which will act as the inspector of
elections.
Unless specified otherwise, your proxy will be voted as follows:
(1) FOR the election of the 16 nominees to serve as directors of the
Company for a one-year term and until their respective successors are
duly elected and qualified; and
(2) FOR the ratification of the appointment of KPMG LLP as independent
auditors for 2002;
The Company is not aware of any matters that are to come before the Meeting
other than those described in this Proxy Statement. However, if other matters do
properly come before the Meeting, it is the intention of the persons named in
the enclosed proxy card to vote such proxy in accordance with their best
judgment.
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Board of Directors is currently comprised of 18 members.
Directors serve for a term of one year and hold office until their successors
are duly elected and qualify. The Board of Directors recommends that the 16
nominees listed below be elected to the Board of Directors. All of such nominees
were previously elected Directors by the shareholders. Proxies received will be
voted for the election of these 16 nominees unless marked to the contrary. A
shareholder who desires to withhold voting of the proxy for the nominees may so
indicate on the proxy. Each of the nominees has consented to be named as a
nominee and has indicated his intent to serve if elected. If any nominee becomes
unable to serve, the proxies will be voted for a substitute nominee to be
designated by the Board of Directors, or the number of directors will be
reduced.
The following information relates to the nominees. There are no family
relationships among any of the nominees, nor among any of the nominees and any
officer. Charles H. Merriman, III has been selected as a nominee pursuant to a
contract between the Company and BB&T Capital Markets. Other than Mr. Merriman,
there is no understanding between any nominee and any other person pursuant to
which the nominee was selected. Each officer serves at the discretion of the
Board of Directors, subject to any employment contract rights.
Director Nominees
James E. Andrews, 63, has served as a director of the Company since May
1997. Since 1974, Mr. Andrews has been the principal owner of Anzell Automotive,
Inc., an automotive repair firm and franchisor of automotive repair shops.
J. W. Whiting Chisman, Jr., 60, has served as a director of the Company
since February 1994.
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Since 1988, he has been President of Dare Investment Company, a land developer
and investor in equities. Mr. Chrisman is a member of the Executive Committee
and the Compensation Committee.
Eric L. Fox, 54, has served as a director of the Company since July 1993.
In 1975, Mr. Fox joined the investment firm of Kidder, Peabody & Co. which was
acquired by Paine Webber in 1995. He is currently a Portfolio Manager of Paine
Webber.
Marvin S. Friedberg, 58, has served as a director since May 1999. Since
1989, he has served as a chief executive officer of Virginia Commonwealth
Trading Company, a firm engaged in international trading.
Roger L. Frost, 69, has served as a director of the Company since May 1997.
Between 1956 and 1997, he was an accountant with Goodman & Company, a firm of
Certified Public Accountants, from which he retired as a senior partner in 1997.
Mr. Frost is a member of the Audit Committee.
Ernest F. Hardee, 61, has served as a director of the Company since
September 1997. Since 1963, he has been President and Chief Executive Officer of
Hardee Realty Corporation, a real estate brokerage firm. He also served as a
director of Branch Bank & Trust Corp. from 1995 through early 1999. Mr. Hardee
is a member of the Executive Committee and the Compensation Committee.
Henry U. Harris, III, 48, has served as a director of the Company since
September 1997. Since 1980, he has been Portfolio Manager of Virginia Investment
Counselors, Inc., a financial consulting firm, of which he is now President.
Since 1991, he has been the vice-chairman of the Board of Directors of Heritage
Bank & Trust.
J. Alan Lindauer, 62, has served as a director since July 1993 and as
Chairman of the Executive Committee of the Company since December 1993 and since
March 1994 as its President and Chief Executive Officer. Mr. Lindauer is a
Certified Management Consultant.
Robert I. Low, 64, has served as a director of the Company since July 1993.
Mr. Low is a senior partner of Goodman & Company, a firm of Certified Public
Accountants. He has been with that firm since 1969. Mr. Low is a member of the
Executive Committee and the Audit Committee.
Peter M. Meredith, Jr., 49, has served as a director of the Company and as
Chairman of the Board of Directors since May 1994. Since 1978, he has served in
various executive capacities with Meredith Construction Company, Inc. Since
1995, he has been the Chairman of the Board of Directors of Heritage Bank. Mr.
Meredith is a member of the Executive Committee, Compensation Committee and the
Audit Committee.
Charles H. Merriman, III, 67, has served as a director of the Company since
March 1998. He is currently a Managing Director with BB&T Capital Markets, an
investment banking firm, where he has served in various capacities since 1972.
Mr. Merriman is a member of the Executive Committee.
3
Augustus C. Miller, 67, has served as a director of the Company since
August 1994. Since 1977, he has been President and Chief Executive Officer of
Miller Oil Co., Inc., a distributor of fuels.
Juan M. Montero, II, 59, has served as a director of the Company since July
1995. Since 1972, he has engaged in the private practice of general and thoracic
surgery.
R. Scott Morgan, Sr., 56, has served as a director of the Company since
September 1997. From 1995 through 1998, Mr. Morgan was Executive Vice President
and Corporate Banking Manager with the Corporate Banking Group of Branch Bank &
Trust Corp. Between 1992 and 1995, he was employed in various capacities with
Commerce Bank. Mr. Morgan has been the President of Towne Bank since 1999. Mr.
Morgan is a member of the Executive Committee.
Richard G. Ornstein, 59, has served as a director of the Company and a
member of the Executive Committee since September 1997. Since 1964, Mr. Ornstein
has been privately engaged in real estate management and development. Mr.
Ornstein is a member of the Executive Committee.
Jordan E. Slone, 39, has served as a director of the Company since July
1995. Since 1987, Mr. Slone has been Chairman and Chief Executive Officer of the
Harbor Group Companies, a diversified real estate and financial services firm.
Directors are elected by a "plurality" of shares of Common Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting. For
the purposes of the Annual Meeting, this means that the 16 director nominees
with the most affirmative votes will be elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE "FOR" THE DIRECTOR-
NOMINEES SET FORTH ABOVE.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of August 31, 2001 relating
to the beneficial ownership of the Company's Common Stock by (i) each of the
Company's directors and each executive officer identified in the Summary
Compensation Table ("Named Executive Officers"), (ii) each person (or group of
affiliated persons) who is known by the Company to own beneficially more than 5%
of the Common Stock, and (iii) all of the Company's directors and executive
officers as a group.
4
Beneficial Ownership of Common Stock
Name and Address of Beneficial Owner/(1)/ Amount of Beneficial Percent of Class/(2)/
--------------------------------------- -------------------- -------------------
Ownership/(2)/
--------------
James E. Andrews 15,584 1.0
J.W. Whiting Chisman, Jr. 35,249 2.2
Eric L. Fox 5,564 *
Marvin S. Friedberg 35,357 2.2
Roger L. Frost 32,751 2.1
Ernest F. Hardee 53,673/(3)/ 3.4
Henry U. Harris, III 4,987 *
J. Alan Lindauer 105,428/(4)/ 6.2
Robert I. Low 4,474 *
Gerald T. McDonald 56,532/(5)/ 3.3
Peter M. Meredith, Jr. 65,270/(6)/ 4.1
Charles H. Merriman, III 1,225 *
Augustus C. Miller 12,411 *
Juan M. Montero, II 30,852/(7)/ 2.0
R. Scott Morgan, Sr. 2,366 *
Richard G. Ornstein 11,179 *
Jordan E. Slone 15,831/(8)/ 1.0
Martin N. Speroni 21,010/(9)/ 1.2
Lex W. Troutman 25,990/(10)/ 1.5
All officers and directors as a Group 535,733 31.3
(19 persons)
______________
(1) All directors and the executive officers identified above receive mail at
the Company's corporate executive
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offices at 300 East Main Street, Suite 1380, Norfolk, Virginia 23510.
(2) The number of shares and percentages shown in the table are as of August
31, 2001, and are based on the 1,581,430 shares of Common Stock outstanding
on such date.
(3) Includes 5,462 shares owned by Mr. Hardee's wife and 5,277 held by a trust
for the benefit of his son.
(4) Includes 49,692 shares which Mr. Lindauer has the right to acquire within
60 days through the exercise of options granted under the 1998 Employee
Stock Option Plan, and 3,382 shares under the Company's 401(k) plan.
(5) Includes 44,127 shares which Mr. McDonald has the right to acquire within
60 days through the exercise of options granted under the 1998 Employee
Stock Option Plan and 5,664 shares under the Company's 401(k) plan.
(6) Includes (i) 11,130 shares held by Meredith Realty Company, L.L.C., of
which Mr. Meredith is a member, (ii) 35,462 shares held by Pomar Holding
Company, L.L.C., of which Mr. Meredith is a member, (iii) 4,118 shares
owned by Mr. Meredith's wife, and (iv) 4,452 shares held in trust for the
benefit of Mr. Meredith's children.
(7) All are held by Juan M. Montero II M.D. P.C. Profit Sharing and Money
Purchase Pension Plan for benefit of Dr. Montero.
(8) All except 200 shares are held by Garden Capital Acquisitions, LLC of which
Mr. Slone is a member.
(9) Includes 17,420 shares which Mr. Speroni has the right to acquire within 60
days through the exercise of options granted under the 1998 Employee Stock
Option Plan and 3,590 shares under the Company's 401(k) plan.
(10) Includes 21,130 shares which Mr. Troutman has the right to acquire within
60 days through the exercise of options granted under the 1998 Employee
Stock Option Plan and 2,634 under the Company's 401(k) plan.
*Represents less than one percent (1%) interest.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended June 30, 2001, the Company paid a fee of $70,000
to a limited liability company owned 25% by J. Alan Lindauer, the Company's
President and Chief Executive Officer and a director of the Company, and 25% by
Augustus C. Miller, a director of the Company, for the use of an airplane. The
Company believes the fees paid this partnership are at a fair market rate. This
arrangement has been approved by the disinterested members of the Board of
Directors.
Meetings and Committees of the Board of Directors
Meetings
The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors meets on a regularly scheduled basis during
the year to review significant developments affecting the Company and to act on
matters requiring approval by the Board of Directors. It also holds special
meetings when an important matter requires action by the Board of Directors
between scheduled meetings.
The Board of Directors held two meetings during fiscal year 2001. All of
the members of the Board of Directors except Mr. Lindauer are independent
directors. During fiscal year 2001, each member of the Board of Directors, other
than Messrs. Chisman, Meredith, Miller and Montero, who each attended
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only one meeting, participated in at least 75% of all meetings of the Board of
Directors.
Committees
The Board of Directors has established an Executive Committee ("Executive
Committee"), an Audit Committee ("Audit Committee") and a Compensation/Stock
Option Committee ("Compensation Committee"). The Company's Articles of
Incorporation provide for the appointment by the Board of Directors of an
Executive Committee comprised of not less than five nor more than nine members,
all of whom must be members of the Board of Directors. The Executive Committee
was constituted by the Board of Directors in December 1993 and, under Virginia
law, may exercise all the authority of the Board of Directors except that it may
not (i) approve or recommend to shareholders action that Virginia law requires
to be approved by shareholders, (ii) fill vacancies on the Board of Directors or
any committee, (iii) amend the Articles of Incorporation, (iv) adopt, amend, or
repeal the Bylaws, (v) approve a plan of merger, (vi) authorize or approve a
distribution, except according to a general formula or method prescribed by the
Board of Directors, or (vii) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation of the relative
rights, preferences and limitations of a class or series of shares within limits
specifically prescribed by the Board of Directors. The Executive Committee is
delegated the power, with certain exceptions, of the Board of Directors to act
in place of the full Board during all periods between regular meetings of the
Board.
The Executive Committee met eight times during 2001. All members of the
Executive Committee attended at least 75% of all Executive Committee meetings,
except for Messrs. Meredith, Morgan and Ornstein, in 2001. The members of the
Executive Committee are Messrs. Chisman, Hardee, Lindauer, Low, Meredith,
Merriman, Morgan, and Ornstein.
The Audit Committee held three meetings in 2001. At year-end, its members
were Robert I. Low, Roger L. Frost and Peter M. Meredith, Jr. The Board of
Directors has determined that all members of the Audit Committee are
independent, as defined by the National Association of Securities Dealers
listing standards. This committee:
. serves as an independent and objective monitor of the Company's
financial reporting process and internal control systems;
. appraises the efforts and effectiveness of the Company's
independent public accountants, including their independence and
professionalism;
. provides an efficient means for communication among the Board,
the independent public accounts, and the Company's financial and
senior management;
. recommends to the Board of Directors the engagement of, and the
fees to be paid to, the independent public accounts; and
. supervises the Company's compliance with applicable legal and
regulatory requirements.
7
The Audit Committee is governed by a written charter adopted by the
Committee and first approved by the Board of Directors in June 2000. The Audit
Committee last reviewed and reassessed the adequacy of the Charter in July 2001.
A copy of the Charter of the Audit Committee is attached to the Proxy Statement
as Exhibit A.
---------
The Compensation Committee makes recommendations to the Board of Directors
as to, among other things, the compensation of the Chief Executive Officer, each
officer who is also a director of the Company and designated other members of
senior management, as well as new compensation and stock plans. The Compensation
Committee met two times in 2001. The members of the Compensation Committee are
Messrs. Chisman, Hardee, and Meredith.
Identification of Director-Nominees
The Company has no nominating committee. The duties of selecting nominees
for Directors and executive officers is performed by the entire Board of
Directors. The Company will consider director-nominees recommended by
shareholders, although it has not actively solicited recommendations from
shareholders for nominees, nor has the Company established any procedure for
this purpose for the Annual Meeting.
EXECUTIVE AND DIRECTOR COMPENSATION
The table below sets forth certain information regarding cash and other
compensation paid during the fiscal years ended June 30, 1999, 2000 and 2001 to
each of the Named Executive Officers (the three highest compensated Officers
receiving more than $60,000 in annual compensation) in all capacities in which
they served.
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Summary Compensation Table
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(1)
Long-term
Compensation
Annual Compensation Awards
---------------------------------------------- -------------
Securities (2)
Underlying
Name and Principal Other Annual Options / All Other
Position Year Salary Bonus Compensation SARs(#) Compensation
------------------ ---- -------- -------- ------------ ------------ ------------
J. Alan Lindauer 2001 $150,000 $ 35,000 -- 15,000 $5,328
CEO & President 2000 140,000 40,000 -- 25,300 5,286
1999 130,000 20,000 -- -- 4,500
Gerald T. McDonald 2001 110,000 35,000 -- 15,000 4,811
CFO, Treasurer & Secretary 2000 102,500 35,000 -- 25,300 4,031
1999 95,000 20,000 -- -- 3,400
Lex W. Troutman 2001 100,000 30,000 -- 10,000 5,969
Business Development Officer 2000 80,000 101,300 -- 10,000 3,602
1999 70,000 71,250 -- 11,130 4,300
Martin N. Speroni 2001 100,000 30,000 -- 10,000 4,656
Director of Research 2000 90,000 30,000 -- 10,000 3,002
1999 46,668/(5)/ 10,000 -- 11,130 1,443
---------------------------------------------------------------------------------------------------------------------------------
(1) Amount represents stock options granted in the year indicated. Amount
includes the increase in the number of options granted as a result of the
5% stock dividend issued in March 1999, a 6% stock dividend issued in
January 2000.
(2) Includes 401(k) match and term life insurance premiums paid on behalf of
the named executive officers.
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STOCK OPTIONS
The following tables contain information concerning grants of stock options
to the Named Executive Officers during the fiscal year ended June 30, 2001,
exercises of stock options by the Named Executive Officers in such fiscal year
and the fiscal year-end value of all unexercised stock options held by the Named
Executive Officers.
Option/SAR Grants in Last Fiscal Year
--------------------------------------------------------------------------------------------------------------------------
Individual Grants
-----------------
--------------------------------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value ($)
--------------------------------------------------------------------------------------------------------------------------
J. Alan Lindauer January 8, $37,320
CEO, President 15,000 30% $4.125 2011
--------------------------------------------------------------------------------------------------------------------------
Gerald T. McDonald January 8, $37,320
CFO, Treasurer & Secretary 15,000 30% $4.125 2011
--------------------------------------------------------------------------------------------------------------------------
Martin N. Speroni January 8, $24,880
Director of Research 10,000 20% $4.125 2011
--------------------------------------------------------------------------------------------------------------------------
Lex W. Troutman January 8, $24,880
Business Development Officer 10,000 20% $4.125 2011
--------------------------------------------------------------------------------------------------------------------------
The Black-Scholes pricing model was used to determine the Grant Date Present
Value. The following assumptions were used in the calculation. Expected
volatility of 67.64%; risk-free rate of return 4.82%; no dividend yield; and a
time of exercise of 5 years.
10
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
----------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs options/SARs
at FY-end (#) at FY-end($)
----------------------------------------------------------------------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
----------------------------------------------------------------------------------------------------
J. Alan Lindauer
CEO & President --- --- 49,692/18,433 - / -
Gerald T. McDonald 44,127/18,433
CFO, Treasurer & Secretary --- --- - / -
Lex W. Troutman 21,130/10,000
Business Development Officer --- --- - / -
Martin N. Speroni --- --- 17,420/13,710 - / -
Business Development Officer
------------------------------------------------------------------------------------------------
11
Employment Agreements
Mr. Lindauer is employed as the Company's President and Chief Executive
Officer under an employment agreement dated January 1, 2001 (the "Lindauer
Employment Agreement"). The Lindauer Employment Agreement expires on January 31,
2004, unless terminated earlier in accordance with its terms. In addition, if a
change of control of the Company occurs during the period covered by the
Lindauer Employment Agreement, the term is automatically extended for a period
of 36 months beyond the month in which the change of control occurred. Mr.
Lindauer is paid an annual salary of $150,000. The Lindauer Employment
Agreement provides, should Mr. Lindauer leave employment with the Company, a
two-year covenant not to compete with the Company within the Commonwealth of
Virginia and a one-year employee nonsolicitation clause. It also imposes
certain non-disclosure obligations on Mr. Lindauer with respect to the Company's
confidential and proprietary information.
Mr. McDonald is employed as the Company's Treasurer and Chief Financial
Officer under an employment agreement dated January 1, 2001 (the "McDonald
Employment Agreement"). The McDonald Employment Agreement expires on January 31,
2004, unless terminated earlier in accordance with its terms. In addition, if a
change of control of the Company occurs during the period covered by the
McDonald Employment Agreement, the term is automatically extended for a period
of 36 months beyond the month in which the change of control occurred. Mr.
McDonald is paid an annual salary of $110,000. The McDonald Employment
Agreement provides, should Mr. McDonald leave employment with the Company, a
two-year covenant not to compete with the Company within the Commonwealth of
Virginia and a one-year employee nonsolicitation clause. It also imposes
certain non-disclosure obligations on Mr. McDonald with respect to the Company's
confidential and proprietary information.
Mr. Troutman is employed as the Company's Vice President and Business
Development Officer under an employment agreement dated January 1, 2001 (the
"Troutman Employment Agreement"). The Troutman Employment Agreement expires on
January 31, 2004, unless terminated earlier in accordance with its terms. In
addition, if a change of control of the Company occurs during the period covered
by the Troutman Employment Agreement, the term is automatically extended for a
period of 36 months beyond the month in which the change of control occurred.
Mr. Troutman is paid an annual salary of $100,000. The Troutman Employment
Agreement provides, should Mr. Troutman leave employment with the Company, a
two-year covenant not to compete with the Company within the Commonwealth of
Virginia and a one-year employee nonsolicitation clause. It also imposes
certain non-disclosure obligations on Mr. Troutman with respect to the Company's
confidential and proprietary information.
Mr. Speroni is employed as the Company's Vice President and Director of
Research under an employment agreement dated January 1, 2001 (the "Speroni
Employment Agreement"). The Speroni Employment Agreement expires on January 31,
2004, unless terminated earlier in accordance with its terms. In addition, if a
change of control of the Company occurs during the period covered by the Speroni
Employment Agreement, the term is automatically extended for a period of 36
months beyond the month in which the change of control occurred. Mr. Speroni is
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paid an annual salary of $100,000. The Speroni Employment Agreement provides,
should Mr. Speroni leave employment with the Company, a two-year covenant not to
compete with the Company within the Commonwealth of Virginia and a one-year
employee nonsolicitation clause. It also imposes certain non-disclosure
obligations on Mr. Speroni with respect to the Company's confidential and
proprietary information.
Directors' Compensation
During 2001, Directors and members of the Executive Committee receive $100
for each meeting they attend. Directors who are also employees of the Company
receive no compensation from the Company in their capacity as directors. The
Company reimburses all of its directors for travel and out of pocket expenses in
connection with their attendance at meetings of the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, officers and persons who beneficially own more than 10% of a
registered class of stock of the Company to file initial reports of ownership
(Forms 3) and reports of changes in beneficial ownership (Forms 4 and 5) with
the SEC and NASDAQ. Such persons are also required under the rules and
regulations promulgated by the Securities Exchange Commission to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that all reporting requirements under Section
16(a) for 2001 were met in a timely manner by its directors, officers and
greater than 10% beneficial owners.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, intends
to appoint KPMG LLP as the firm of independent certified public accountants to
audit the financial statements of the Company for the fiscal year ending June
30, 2002, and the Board of Directors desires that such appointment be ratified
by the shareholders. KPMG LLP has audited the financial statements of the
Company since June 30, 1997.
A representative of KPMG LLP will be present at the Annual Meeting. Such
representative will have an opportunity to make a statement if he so desires,
and will be available to respond to appropriate questions.
Ratification by the shareholders of KPMG LLP requires the affirmative vote
of the majority of the votes cast at the Annual Meeting.
13
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S AUDITORS.
Feed Paid To Principal Accountants
The following table reports the fees paid to the principal accountants,
KPMG LLP for services related to the fiscal year ended June 30, 2001:
For year ended
Description of Services June 30, 2001
----------------------- -------------
Audit fees $46,000
Quarterly Reviews under SAS 71 $21,400
Tax returns $ 3,650
All other fees $ 5,700
-------
Total fees paid $76,750
=======
Audit Committee Report
The Audit Committee of the Board of Directors ("Committee") has reviewed
and discussed with management the Company's audited financial statements for the
fiscal year ended June 30, 2001.
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing
an independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Committee's responsibility is to monitor and oversee the
processes.
The Committee has discussed with KPMG LLP, the independent auditors for the
Company, the matters required to be discussed by Statement on Auditing Standards
61, "Communications with Audit Committees," as amended.
The Committee also has received and reviewed the written disclosures and
letter from KPMG LLP required by the Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees," as amended, and has
discussed with KPMG LLP their independence.
14
Based on the review and discussions referred to above, the Committee
recommended to the Board of Directors that the financial statements referred to
above be incorporated by reference in the Company's Annual Report for the year
ended June 30, 2001, on Form 10-K filed with the Securities and Exchange
Commission.
Robert I. Low, Chairman
Roger L. Frost
Peter M. Meredith, Jr.
OTHER MATTERS
The Board of Directors does not know of any matters that will be presented
for action at the Annual Meeting other than those described above or matters
incident to the conduct of the Annual Meeting. If, however, any other matters
not presently known to management should come before the Annual Meeting, it is
intended that the shares represented by proxies will be voted on such matters in
accordance with the discretion of the holders of such proxies.
SHAREHOLDER PROPOSALS
Under the regulations of the Securities and Exchange Commission, proposals
of shareholders intended to be presented at the Company's 2002 Annual Meeting
must be received by the Secretary of the Company, at its principal executive
offices, 300 East Main Street, Suite 1380, Norfolk, Virginia 23510 no later than
June 13, 2002 in order for the proposal to be considered for inclusion in the
Company's Proxy Statement. Any proposal that is received by the Company after
June 13, 2002 will be considered untimely for consideration at the 2002 Annual
Meeting.
GENERAL
The Company's 2001 Annual Report to Shareholders accompanies this Proxy
Statement. The 2001 Annual Report to Shareholders does not form any part of the
material for the solicitation of proxies. Upon written request, the Company
will provide shareholders with a copy of its Report on Form 10-K and Form N-SAR
for the year ended June 30, 2001 (the "Form N-SAR"), as filed with the
Securities and Exchange Commission, without charge. Please direct written
requests for a copy of the Form 10-K and Form N-SAR to: Gerald T. McDonald,
Chief Financial Officer, Waterside Capital Corporation, 300 East Main Street,
Suite 1380, Norfolk, VA 23510.
15
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY
By Order of the Board of Directors
September 10, 2001
16
Exhibit A
---------
Audit Committee Charter
Organization
This charter governs the operations of the audit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate and at least one member shall have accounting or related
financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the annual independent audit of the
Company's financial statements, and the legal compliance and ethics programs as
established by management and the board. In so doing, it is the responsibility
of the committee to maintain free and open communication between the committee,
independent auditors, and management of the Company. In discharging its
oversight role, the committee is empowered to investigate any matter brought to
its attention with full access to all books, records, facilities, and personnel
of the company and the power to retain outside counsel, or other experts for
this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing conditions and circumstances. The committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as
a guide with the understanding that the
17
committee may supplement them as appropriate.
The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable to
the board and the audit committee, as representatives for the Company's
shareholders. The committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, recommend the replacement of
the independent auditors. The committee shall discuss with the auditors their
independence from management and the Company including the matters in the
written disclosures required by the Independence Standards Board and shall
consider the compatibility of nonaudit services with the auditors' independence.
Annually, the committee shall review and recommend to the board the selection of
the company's independent auditors, subject to shareholders' approval.
The committee shall discuss with the independent auditors the overall scope and
plans for their respective audits including the adequacy of staffing and
compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and mange business
risk, and legal and ethical compliance programs. Further, the committee shall
meet separately with the independent auditors, with and without management
present, to discuss the results of their examinations.
The committee shall review the interim financial statements with management and
the independent auditors prior to the filing of the Company's Quarterly Report
on Form 10-Q. Also, the committee shall discuss the result of the quarterly
review and any other matters required to be communicated to the committee by the
independent auditors under generally accepted auditing standards. The chair of
the committee may represent the entire committee for the purposes of this
review.
The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
(or the annual report to shareholders if distributed prior to the filing of Form
10-K), including their judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. Also, the committee
shall discuss the results of the annual audit and any other matters required to
be communicated to the committee by the independent auditors under generally
accepted auditing standards.
18
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE WATERSIDE CAPITAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD OCTOBER 29, 2001
The undersigned, having received the Annual Report to Shareholders and the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement dated
September 10, 2001, hereby appoints Ernest F. Hardee and Peter M. Meredith, Jr.
(each with the power to act alone) as proxies, with full power of substitution,
and hereby authorizes them to represent and vote, as directed below, all the
shares of the Common Stock of Waterside Capital Corporation held of record by
the undersigned on August 31, 2001, at the Annual Meeting of Shareholders to be
held on October 29, 2001, and any adjournment thereof.
With- For All
For hold Except
1. To elect 16 directors to hold office for [_] [_] [_]
a term of one year and until their
respective successors are elected and
qualified;
NOMINEES: James E. Andrews; J.W. Whiting Chisman, Jr., Eric L. Fox, Marvin
S. Friedberg, Roger L. Frost, Ernest F. Hardee, Henry U. Harris, III, J.
Alan Lindauer, Robert L. Low, Peter M. Meredith, Jr., Charles H. Merriman
III, Augustus C. Miller, Juan M. Montero, II, R. Scott Morgan, Sr., Richard
G. Ornstein, and Jordan E. Slone.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
________________________________________________________________________________
For Against Abstain
2. To ratify the appointment of KPMG [_] [_] [_]
Peat Marwick LLP as the Company's
independent auditors for 2002.
3. To act upon such other matters as may properly come before the meeting or
any adjournment thereof.
THIS PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS EXERCISE. THIS PROXY WHEN
PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. WHEN NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR 1 and 2.
---------------------------------
Please be sure to sign and date Date
this Proxy in the box below.
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------------Stockholder sign above-----------Co-holder (if any) sign above------
+ +
................................................................................
/ Detach above card, sign, date and mail in postage paid envelope provided. \
WATERSIDE CAPITAL CORPORATION
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NOTE: Please sign your name(s) exactly as they appear hereon. If signer is a
corporation, please sign the full corporate name by duly authorized officer. If
any attorney, guardian, administrator, executor, or trustee, please give full
title as such. If a partnership, sign in partnership name by authorized person.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
________________________________________
________________________________________
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