SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No. ____________)

X Filed by the Registrant
Filed by a Party other than the Registration

Check the appropriate box:

Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12

WATERSIDE
CAPITAL
CORPORATION
(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

$125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A

Fee computed on table below per Exchange Act Rules 14a6(i)(4) and O-11.

1)Title of each class of securities to which transaction applies:

Common Stock

2)Aggregate number of securities to which transaction applies:

3)Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

4)Proposed maximum aggregate value of transaction:

5)Total fee paid:

Fee paid previously by written preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1)Amount Previously Paid:

2)Form Schedule or Registration Statement No.:

3)Filing Party:

4)Date Filed:

WATERSIDE CAPITAL CORPORATION
A SMALL BUSINESS INVESTMENT COMPANY

300 East Main Street
Norfolk, Virginia 23510

September 1, 1998

Dear Shareholder:

You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of Waterside Capital Corporation that will be held at the
Chesapeake Conference Center, 900 Greenbrier Circle, Chesapeake, Virginia 23320
at 10:00 a.m. Eastern Time on Thursday, October 22, 1998.

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 Peat Marwick 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 1998 Annual Meeting of Shareholders and we hope you
will attend the meeting or be represented by proxy.

Sincerely,

J. ALAN LINDAUER, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

300 East Main Street o Suite 1380 o Norfolk, Virginia 23510 o (757) 626-1111 o
(757) 626-0114 Fax o E-mail to wtcc@erols.com

NASDAQ SYMBOL WSCC

WATERSIDE CAPITAL CORPORATION
300 EAST MAIN STREET SUITE 1380
NORFOLK, VIRGINIA 23510

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 22, 1998

TO THE SHAREHOLDERS:

NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of
Waterside Capital Corporation will be held at held at the Chesapeake Conference
Center, 900 Greenbrier Circle, Chesapeake, Virginia 23320 at 10:00 a.m. Eastern
Time on Thursday, October 22, 1998 for the following purposes:

1. To elect 21 directors to hold office for a term of one year and until
their respective successors are elected and qualified;

2. To amend the Company's Articles of Incorporation as set forth in the
form of Amended Articles of Incorporation attached as EXHIBIT A;

3. To approve the Company's 1998 Employee Stock Option Plan, a copy of
which is attached as EXHIBIT B;

4. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for 1999; and

5. 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 14, 1998 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

GERALD T. MCDONALD, SECRETARY

Norfolk, Virginia
September 1, 1998

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 held at the
Chesapeake Conference Center, 900 Greenbrier Circle, Chesapeake, Virginia 23320
at 10:00 a.m. Eastern Time on Thursday, October 22, 1998 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 14, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. This Proxy is being mailed on or about September 1, 1998.

REVOCABILITY OF PROXY

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 Reliance Trust Company to assist in the solicitation of proxies
from brokers and nominees and in the counting of proxies. The Company will pay
Reliance Trust 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 of the Company may solicit Proxies personally, by telephone
or by telegram 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 1,420,900 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote on each matter
presented at the Annual Meeting.

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 purpose of the Annual Meeting, this means that the 21 director nominees
with the most affirmative votes will be elected. Under the laws of Virginia,
the Company's state of incorporation, "shares present in person or represented
by proxy and entitled to vote" are determinative of the outcome of the matter
subject to vote. Abstentions are considered "shares present in person or
represented by proxy," but broker non-votes are not, based on the Company's
understanding of Virginia law and the Company's Articles of Incorporation and
Bylaws.

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 Reliance Trust Company, which will act as the inspector of
elections.

Unless specified otherwise, the Proxy will be voted as follows:

(1) FOR the election of the 21 nominees to serve as directors of the
Company for a one-year term and until their respective successors are
duly elected and qualified;

(2) FOR the amendment of the Company's Articles of Incorporation as set
forth in the form of Amended Articles of Incorporation attached hereto
as EXHIBIT A;

(3) FOR approval of the Company's 1998 Employee Stock Option Plan, a copy
of which is attached hereto as EXHIBIT B; and

(4) FOR the ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for 1999;

Management is not aware of any other matters to be presented for action at the
Annual Meeting, but if such matters are properly presented, this proxy will be
voted in the discretion of the Proxy holders "for" or "against" such other
matters as may properly come before the Annual Meeting.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of August 14, 1998 relating
to the beneficial ownership of the Company's Common Stock by (i) each of the
Company's directors and the executive officer identified in the Compensation
Table who own Common Stock, (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.

BENEFICIAL OWNERSHIP OF COMMON STOCK

NAME AND ADDRESS OF BENEFICIAL OWNER (1) AMOUNT OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------------------------------- -------------------------------- -----------------

J. Alan Lindauer ............................................ 53,700(2) 3.8
J.W. Whiting Chisman, Jr. ................................... 30,050 2.1
Eric L. Fox ................................................. 5,000 *
Ernest F. Hardee ............................................ 22,800 1.6
Robert I. Low ............................................... 2,900 *
Peter M. Meredith, Jr. ...................................... 39,100(3) 2.8
Richard G. Ornstein ......................................... 10,000 *
James E. Andrews ............................................ 10,000 *
Jeffrey R. Ellis ............................................ 9,500 *
Roger L. Frost .............................................. 10,000(4) *
Henry U. Harris, III ........................................ 6,000(5) *
Harold J. Marioneaux, Jr. ................................... 5,000 *
Augustus C. Miller .......................................... 11,200 *
Juan M. Montero, II ......................................... 27,700(6) 1.9
R. Scott Morgan, Sr. ........................................ 1,000 *
Jordan E. Slone ............................................. 14,000(7) 1.0
SAFECO Asset Management Company
P.O. Box 34890
Seattle, Washington 98124-1890 ............................. 175,000 12.3
All officers and directors as a Group (25 persons) .......... 253,420 17.8

- ----------
(1) All directors and the executive officer identified above receive mail at
the Company's corporate executive offices at 300 East Main Street, Suite
1380, Norfolk, Virginia 23510.

(2) Includes 40,000 shares held by Hometown Bank & Co. for the J. Alan Lindauer
Profit Sharing Plan and 9,000 shares which Mr. Lindauer has the right to
acquire within 60 days through the exercise of options granted under the
1998 Employee Plan, subject to the approval of the 1998 Employee Plan at
the Annual Meeting.

(3) Includes (i) 10,000 shares held by Meredith Realty Company, L.L.C., of
which Mr. Meredith is a member, (ii) 19,000 shares held by Pomar Holding
Company, L.L.C., of which Mr. Meredith is a member, (iii) 3,500 shares
owned by Mr. Meredith's wife, and (iv) 4,000 shares held in trust for the
benefit of Mr. Meredith's two sons.

(4) Includes 10,000 shares held by Goodman & Company 401(k) Profit Sharing Plan
for the benefit of Mr. Frost.

(5) Includes 5,000 shares held by DanSan, a general partnership, of which Mr.
Harris is one of two general partners.

(6) All of which are held by Juan M. Montero II M.D. P.C. Profit Sharing and
Money Purchase Pension Plan for benefit of Dr. Montero.

(7) All of which are held by Garden Capital Acquisitions, LLC of which Mr.
Slone is a member.

*Represents less than one percent (1%) interest.

PROPOSAL 1. ELECTION OF DIRECTORS

The Company's Board of Directors is currently comprised of 22 members.
Directors serve for a term of one year and hold office until their successors
are duly elected and qualify. One of the current members of the Board of
Directors has informed the Board that he will resign as a member of the Board
effective upon the date of the Annual Meeting. The Board of Directors
recommends that the 21 remaining members of the Board of Directors be
re-elected and Proxies received will be voted for the election of these 21
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 Proxy 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 has been selected as a nominee pursuant to a
contract between the Company and Scott & Stringfellow. 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.

NOMINEES

JAMES E. ANDREWS, 59, 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.

DONNA C. BENNETT, 36, has served as a director of the Company since
September 1996. She is a Vice-President of First Union Bank and has been
employed since 1985 with First Union Bank, or its predecessors, in various
capacities.

J. W. WHITING CHISMAN, JR., 56,. has served as a director of the Company
since February 1994. Since 1988, he has been President of Dare Investment
Company, a land developer and investor in equities.

JEFFREY R. ELLIS, 53, has served as a director of the Company since August
1997. Between 1973 and 1986, Mr. Ellis was the President and Chief Executive
Officer of Ridgewell Caterers, Inc. Since 1986, he has been a private investor.

ERIC L. FOX, 51, has served as a director of the Company since July 1993
and as Secretary/Treasurer since September 1996. 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.

ROGER L. FROST, 65, 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.

ERNEST F. HARDEE, 57, 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 has also served
as a director of Branch Bank & Trust Corp. since 1995.

HENRY U. HARRIS, III, 45, 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, 58, 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. Since 1986, Mr.
Lindauer has been President of JTL, Inc., a business consulting firm. Mr.
Lindauer is a Certified Management Consultant.

ROBERT I. LOW, 60, 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.

HAROLD J. MARIONEAUX, JR., 42, has served as a director of the Company
since November 1994. Since 1990, he has practiced as a dental surgeon and since
1993 has acted as a certified financial planner.

PETER M. MEREDITH, JR., 45, 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.

CHARLES H. MERRIMAN, 62, has served as a director of the Company since
March 1998. He is currently a Managing Director with Scott & Stringfellow, an
investment banking firm, where he has served in various capacities since 1972.

AUGUSTUS C. MILLER, 63, 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.

PAUL F. MILLER, 66, has served as a director of the Company since May
1994. Since 1987, he has served as Director of Planning and Development for the
City of Newport News, Virginia.

JUAN M. MONTERO, II, 55, 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., 51, has served as a director of the Company since
September 1997. Since 1995, Mr. Morgan has been 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.

JAMES W. NOEL, JR., 41, has served as a director of the Company since
August 1994. Since 1993, Mr. Noel has been the Executive Director of the York
County Industrial Development Authority. Between 1991 and 1993, he served in
various capacities with the City of Portsmouth, Virginia.

RICHARD G. ORNSTEIN, 55, 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.

RICHARD A. SCHREIBER, 56, has served as a director of the Company since
May 1995. Since 1994, he has been President and Chief Executive Officer of the
Virginia Eastern Shore Corporation, which is engaged in development of business
for the Eastern Shore of Virginia. Between 1980 and 1993, he was Vice-President
and Chief Executive Officer of Colonial Williamsburg Hotel Properties, Inc.

JORDAN E. SLONE, 35, 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.

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 five meetings during
fiscal year 1998. In accordance with the Rules of the Nasdaq National Market
System, all of the members of the Board of Directors except Mr. Lindauer are
independent directors. During fiscal year 1998, each member of the Board of
Directors other than Messrs. Jeffrey R. Ellis, Harold J. Marioneaux, Jr., Roger
L. Frost, Augustus L. Miller, Paul F. Miller, Juan M. Montero, II and James W.
Noel, Jr. who are nominees, and Mr. Matthew James who is not a nominee,
participated in at least 75% of all meetings of the Board of Directors and at
least 75% of all meetings of the applicable committees during the period for
which he or she was a director. Effective July 1, 1998, directors will receive
$100 for each Board and Committee meeting attended. Prior to July 1, 1998,
directors did not receive any compensation for attending Board of Directors
meetings. Directors who are also employees of the Company receive no additional
compensation for serving 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.

COMMITTEES

The Board of Directors has established Executive, Audit and
Compensation/Stock Option Committees (the "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 a member 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 14 times during 1998. Members of the Executive Committee (except
Mr. Lindauer) received $50 for each Executive Committee meeting they attended
in 1998. The members of the Executive Committee are Messrs. Chisman, Fox,
Hardee, Lindauer, Low, Meredith, Merriman, and Ornstein. The Audit Committee is
empowered by the Board of Directors to, among other things, recommend the firm
to be employed by the Company as its independent auditor and to consult with
such auditor regarding audits and the adequacy of internal accounting controls.
The Audit Committee held two meetings in 1998. The members of the Audit
Committee are Mr. Low, Ms. Bennett, and Mr. Frost. 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 1998. The members of the Compensation Committee are Messrs. Chisman,
Hardee, and Meredith.

IDENTIFICATION OF DIRECTOR-NOMINEES

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 earned during fiscal year 1998 by each director and Mr. Lindauer,
the Company's President and Chief Executive Officer. No other officer of the
Company received aggregate compensation from the Company during fiscal year
1998 in excess of $60,000.

COMPENSATION TABLE

TOTAL COMPENSATION
FROM FUND AND FUND
AGGREGATE COMPENSATION COMPLEX PAID
NAME OF PERSON POSITION FROM FUND TO DIRECTORS
- ------------------------------------------------ ------------------------ -------------------

J. W. Whiting Chisman, Jr.
Director ...................................... $ 500 $ 500
Eric L. Fox
Director ...................................... 650 650
Ernest F. Hardee
Director ...................................... 500 500
J. Alan Lindauer
President and Chief Executive Officer ......... 104,000 104,000
Director ...................................... -0- -0-
Robert I. Low
Director ...................................... 650 650
Peter M. Meredith, Jr.
Director ...................................... 500 500
Charles H. Merriman
Director ...................................... 50 50
Richard G. Ornstein
Director ...................................... 450 450

LINDAUER EMPLOYMENT AGREEMENT

Mr. Lindauer is employed as the Company's President and Chief Executive
Officer under an employment agreement dated January 1, 1998 ("Lindauer
Employment Agreement"). The Lindauer Employment Agreement expires on December
31, 2002, unless terminated earlier in accordance with its terms. Mr. Lindauer
is paid an annual salary of $130,000. The Lindauer Employment Agreement
includes a two-year covenant not to compete with the Company within the
Commonwealth of Virginia and a one-year employee nonsolicitation clause and
imposes certain non-disclosure obligations on Mr. Lindauer with respect to the
Company's confidential and proprietary information.

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 SEC 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 1997 were met in a timely manner by its directors, officers and
greater than 10% beneficial owners.

PROPOSAL 2. APPROVAL OF AMENDMENT TO AND RESTATEMENT OF ARTICLES OF
INCORPORATION

The Board of Directors has unanimously approved, and recommends to
stockholders that they consider and approve, a proposal to amend the Company's
Articles of Incorporation to comply with changes made by the Small Business
Administration ("SBA") to certain regulations applicable to the Company ("SBA
Regulations"). As a Small Business Investment Company ("SBIC") seeking leverage
("SBA Leverage") under the SBA Regulations, the Company is subject to, among
others, SBA Regulations that define events of default under the terms of SBA
Leverage and the SBA's corresponding remedies. In 1996, certain of the SBA
Regulations were reorganized and renumbered by the SBA. As requested by the
SBA, the Company is asking its shareholders to approve this amendment to its
Articles of Incorporation to reflect these changes and to enable the Company to
take full advantage of SBA Leverage. Aware that the Company would be
recommending this amendment to its Articles of Incorporation and recognizing
the technical nature of this amendment, the SBA has allowed the Company to
borrow certain funds under the SBA Leverage program.

The Virginia Stock Corporation Act requires that two-thirds or more of the
shareholders' approve the amendment to the Company's Articles of Incorporation.
If the proposed amendment is approved, the amendment to the Company's current
Articles of Incorporation attached as Exhibit A will be filed with the Virginia
State Corporation Commission and become part of its charter documents. The
Company cannot predict what action, if any, the SBA would take regarding the
Company's ability to borrow funds from the SBA under the SBA Leverage program
if the proposed amendment is not approved.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO REFLECT THE CHANGES
MADE TO THE SBA REGULATIONS

PROPOSAL 3. APPROVAL OF 1998 EMPLOYEE STOCK OPTION PLAN

INTRODUCTION

On January 27, 1998, the Board of Directors of the Company adopted the
1998 Employee Stock Option Plan (the "Employee Plan"), subject to approval of
the Company's stockholders. The purpose of the Employee Plan is to support the
business goals of the Company and to attract, retain and motivate management
officials of high caliber by providing incentives to associate more closely the
interests of certain officers and key executives of the Company with the
interests of the Company's shareholders. A copy of the Employee Plan is
attached as Exhibit B to this Proxy Statement, and the summary description of
the Employee Plan set forth below is qualified in its entirety by reference to
the full text of the Employee Plan.

PURPOSE AND ELIGIBLE PARTICIPANTS

Participants shall be limited to those officers and other key employees of
the Company who are in positions in which their decisions, actions, and counsel
significantly contribute to the success of the Company. Directors of the
Company who are not otherwise officers or employees of the Company shall not be
participants. Outside directors are not eligible for participation in the
Employee Plan.

SHARES AVAILABLE

The aggregate number of shares of the Company's Common Stock that may be
issued under the Employee Plan for awards during its term is 100,000. Common
Stock related to awards that are forfeited, terminated, expire unexercised, or
are settled in such manner that all or some of the shares covered by an award
under the Employee Plan are not issued to a participant shall immediately
become available for awards under the Employee Plan. In the event of any change
in the outstanding Common Stock of the Company by reason of a stock dividend or
distribution, recapitalization, merger, consolidation, split-up, combination,
exchange of shares or the like, the number of shares of Common Stock which may
be issued under the Employee Plan, as well as shares issuable pursuant to
outstanding awards, shall be adjusted appropriately.

ADMINISTRATION OF THE EMPLOYEE PLAN

The Employee Plan is administered and interpreted by the Compensation
Committee, which currently consists of three directors. A person may serve on
the Compensation Committee only if he or she is not eligible to

receive a grant of an award under the Employer Plan and has not in fact
received such an award for at least one year before his or her appointment and
otherwise satisfies the definition of a "disinterested person" for purposes of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and satisfies the requirements of an "outside director" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
No member of the Compensation Committee may receive awards under the Employee
Plan. The Compensation Committee has full and final authority in its
discretion: (i) to make and adopt rules and regulations for the administration
of the Employee Plan; (ii) to conclusively interpret the provisions of the
Employee Plan and to decide all questions of fact arising in its application;
(iii) to determine the employees to whom awards shall be made under the
Employee Plan; (iv) to determine the type of award to be made and the amount,
size and terms of each such award (including, but not limited to, any exercise
price, grant price, or purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions relating to transferability or
forfeiture, exercisability, or settlement of an award, and waivers or
accelerations thereof, based in each case on such conditions as the
Compensation Committee shall determine); (v) to determine the time when awards
will be granted; (vi) to prescribe from time to time the form, and the terms,
provisions and conditions not inconsistent with the Employee Plan, of any award
agreement; (vii) to determine whether, to what extent and under what
circumstances Common Stock of the Company deliverable with respect to an award
will be deferred automatically, at the election of the Compensation Committee,
or at the election of the participant; and (viii) to make all other
determinations necessary or advisable for the administration of the Employee
Plan. The Compensation Committee may designate persons other than its members
to carry out its responsibilities under such conditions or limitations as it
may set, other than its authority with regard to benefits granted to employees
who are officers or directors of the Company for purposes of Section 16 of the
Exchange Act.

FORMS AND PROVISIONS OF AWARDS

The Compensation Committee may grant from time to time long-term incentive
awards in the form of non-qualified stock options or incentive stock options,
separately or in combination, as it deems appropriate and in the best interest
of the Company under the circumstances. Payment for Company Common Stock
acquired through exercise of a non-qualified stock option or an incentive stock
option may be made in cash or, unless the Compensation Committee determines
otherwise at or prior to the time of exercise, Company Common Stock at fair
market value as determined pursuant to the Employee Plan, or a combination of
cash and Common Stock. A further description of the Employee Plan's provisions
concerning the various forms of awards under the Employee Plan is set forth
below.

INCENTIVE STOCK OPTIONS. The option price of incentive stock options and
the period during which each incentive stock option can be exercise is fixed by
the Compensation Committee, but in no case can the price be less than 100% of
the market value of the shares at the time the incentive stock option is
granted. In the event that a participant ceases to be an employee of the
Company for any reason other than death, disability, retirement or involuntary
separation without cause, all incentive stock options granted to the
participant will lapse unless otherwise determined by the Compensation
Committee. In the event employment ceases because a participant dies, retires
or becomes disabled prior to expiration of the participant's incentive stock
option without having fully exercised such incentive stock option, the
participant shall have the right to exercise the incentive stock option during
its term, to the extent that the incentive stock option was exercisable on the
date employment ceased. The Compensation Committee, however, in its discretion,
may provide that any incentive stock options outstanding but not yet
exercisable upon the death, disability or retirement of the participant may
become exercisable in accordance with a schedule determined by the Compensation
Committee. If employment ceases because a participant is involuntarily
separated without cause prior to expiration of the participant's incentive
stock option without having fully exercised such incentive stock option, the
participant shall have the right to exercise the incentive stock option during
its term within a period of three months after the date employment so ceased,
to the extent that the incentive stock option was exercisable on the date
employment ceased, or during such other period and subject to such terms as may
be determined by the Compensation Committee.

NON-QUALIFIED STOCK OPTIONS. The option price of non-qualified stock
options and the period during which each non-qualified stock option can be
exercised is fixed by the Compensation Committee, but in no case can the price
be less than 100% of the fair market value of the shares at the time the option
is granted. In the event that participant ceases to be an employee of the
Company for any reason other than death, disability, retirement or "involuntary
separation without cause" (as defined in the Employee Plan), all non-qualified
stock options granted to the participant will lapse unless otherwise determined
by the Committee. In the event employment

ceases because a participant dies, retires or becomes disabled prior to
expiration of the participant's non-qualified stock option without having fully
exercised such non-qualified stock option, the participant shall have the right
to exercise the non-qualified stock option during its term, to the extent that
the non-qualified stock option was exercisable on the date employment ceased.
The Committee, however, in its discretion, may provide that any non-qualified
stock options outstanding but not yet exercisable upon the death, disability or
retirement of the participant may become exercisable in accordance with a
schedule determined by the Committee. If employment ceases because a
participant is involuntarily separated without cause prior to expiration of the
participant's non-qualified stock option without having fully exercised such
non-qualified stock option, the participant shall have the right to exercise
the non-qualified stock option during its term within a period of three months
after the date employment so ceased, to the extent that the non-qualified stock
option was exercisable on the date employment ceased, or during such other
period and subject to such terms as may be determined by the Committee.

CHANGE OF CONTROL

If there is a Change of Control of the Company, all outstanding stock
options under the Employee Plan shall become exercisable immediately prior to
the consummation of the Change of Control. A Change of Control of the Company
shall be deemed to have occurred upon the happening of any of the following
events:

(1) the acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either the then
outstanding shares of Common Stock of the Company or the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors, but excluding, for this
purpose, any such acquisition by the Company or any of its subsidiaries, or
any employee benefit plan (or related trust) of the Company, or any
corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of Common Stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Common Stock and voting securities of the
Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of
the then outstanding shares of Common Stock of the Company or the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, as the case may be;

(2) individuals who constitute the Company's Board of Directors (the
"Incumbent Board") (cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office is
in connection with an actual or threatened "election contents" relating to
the election of the directors of the Company (as such term is used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or

(3) approval by the Company's shareholders of a reorganization, merger
or consolidation of the Company, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the Common Stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of Common Stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or of a complete liquidation or
dissolution of the Company or of the sale or other disposition of all or
substantially all of the assets of the Company.

TERM OF PLAN; AMENDMENTS; TERMINATION

The Employee Plan became effective on January 27, 1998, subject to
approval of the Employee Plan by the Company's shareholders. The Employee Plan
will remain in effect until all awards under the Employee Plan

have been satisfied, but no award may be granted more than ten years after the
effective date of the Employee Plan. The Board of Directors may amend, alter,
suspend or terminate the Employee Plan or the Committee's authority to grant
awards under the Employee Plan, except that any such amendment or termination
shall be subject to the ratification or approval of the Company's shareholders
within one year after Board action if shareholder ratification or approval is
required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Company's Common Stock may
then be listed or quoted. Any amendment, alteration, suspension or termination
of the Employee Plan shall not, without the consent of a participant, affect
the participant's rights under any award previously granted.

FEDERAL INCOME TAX CONSEQUENCES

GRANTS OF OPTIONS, RIGHTS AND AWARDS. The grant of a non-qualified stock
option or an incentive stock option does not result in income for the grantee
or in a deduction for the Company. The exercise of a non-qualified stock option
results in ordinary income for the optionee and a deduction for the Company
measured by the difference between the option price and the fair market value
of the shares received at the time of exercise. Income tax withholding is
required.

EXERCISE OF OPTION, RIGHTS AND AWARDS. The exercise of an incentive stock
option does not result in income for the optionee. However, the excess of the
fair market value on the exercise date over the option price of the shares is
an "item of adjustment" for alternative minimum tax purposes. When an optionee
sells shares acquired by exercise of an incentive stock option, the optionee's
gain (the excess of sales proceeds over option price) upon the sale will be
taxes as capital gain provided the optionee (i) exercises the option while an
employee of the Company or a subsidiary or within three months after
termination of such employment for reasons other than death or disability and
(ii) the sale is not within two years after the date of grant nor within one
year after the transfer of shares upon exercise. If the exercise is after such
three month period or the subsequent sale is before the expiration of either
the two year or the one year period, the optionee generally will realize
ordinary income in the year of exercise or the disqualifying sale.

SUBSEQUENT SALES. A sale of shares of the Company's common stock more than
one year after their receipt as described above will result in long-term gain
or loss to the holder.

OPTION LIMITATIONS. For compensation realized by any of the executive
officers named in the Compensation Table to be deductible by the Company, IRS
regulations under Section 162(m) require any stock option plan to state the
maximum number of options that can be granted during a fiscal year. The
Employee Plan now has a limit of 25,000 options per fiscal year. Although the
Company does not expect to grant this number of options on a regular basis, the
Company does expect that this will be the maximum number of options that would
be necessary to recruit an outstanding top executive.

SUMMARY OF BENEFITS UNDER THE EMPLOYEE PLAN

It is not possible to state the number of options that might be granted in
the future under the Employee Plan to a particular individual. The following
table sets forth the number of options and option prices for options granted
during the last fiscal year, subject to the approval of this Plan at the 1998
Annual Meeting.

NUMBER OF
NAME AND POSITION OPTIONS GRANTED GRANT PRICE
- ---------------------------------------------------------- ----------------- ------------

J. Alan Lindauer
President and Chief Executive Officer ................... 25,000 $ 11.03
Robert P. Louthan
Vice President .......................................... 10,000 11.00
Gerald T. McDonald
Secretary/Treasurer and Chief Financial Officer ......... 20,000 11.00
Michael C. Huffman
Business Development Officer ............................ 10,000 11.00
Mark Sommer
Controller .............................................. 12,500 11.00
All other Executive Officers as a group .................. -0- --
All other employees including current officers who are not
Executive Officers ...................................... -0- --

Outside Directors are not eligible for participation in the Employee Plan.

The Board of Directors believes that stock options are a competitive
necessity in its industry to attract and retain employees with the skill,
intelligence, education and experience on whose success the Company is largely
dependent. Stock options are used by the Company as a major element of the
compensation package for many different levels of employees because they foster
proprietary identification with the Company and encourage them to exert maximum
efforts for its success.

APPROVAL OF THE EMPLOYEE PLAN BY THE SHAREHOLDERS REQUIRES THE AFFIRMATIVE
VOTE OF THE MAJORITY OF THE VOTES CAST AT THE ANNUAL MEETING. FAILURE TO
APPROVE THIS PROPOSAL WILL RESULT IN TERMINATION OF THE PLAN.

THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE EMPLOYEE PLAN.

PROPOSAL 4. RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors, upon recommendation of its Audit Committee,
intends to appoint KPMG Peat Marwick LLP as the firm of independent certified
public accountants to audit the financial statements of the Company for the
fiscal year ending June 30, 1999, and the Board of Directors desires that such
appointment be ratified by the shareholders. KPMG Peat Marwick LLP has audited
the financial statements of the Company since June 30, 1997

Ratification by the shareholders of KPMG Peat Marwick LLP requires the
affirmative vote of the majority of the votes cast at the Annual Meeting.
Abstentions will count as no votes.

A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting and available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS AUDITORS.

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 the Proxy will be voted on such matters
in accordance with the discretion of the holders of such proxy.

SUBMISSION OF PROPOSALS FOR 1999

The next Annual Meeting of Shareholders will be held on or about October
21, 1999. Any shareholder who wishes to submit a proposal for consideration at
that meeting, and who wishes to have such proposal included

in the Company's proxy statement for that meeting by July 1, 1999, must submit
the proposal in writing to J. Alan Lindauer, President and Chief Executive
Officer, at 300 East Main Street, Suite 1380, Norfolk, VA 23510.

GENERAL

The Company's 1998 Annual Report to Shareholders accompanies this Proxy
Statement. The 1998 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 N-SAR for the year
ended June 30, 1998 (the "Form N-SAR"), as filed with the Securities and
Exchange Commission, without charge. Please direct written requests for a copy
of the Form N-SAR to: J. Alan Lindauer, President and Chief Executive Officer,
Waterside Capital Corporation, 300 East Main Street, Suite 1380, Norfolk, VA
23510.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY

By Order of the Board of Directors

September 1, 1998

EXHIBIT A TO PROXY STATEMENT

ARTICLES OF AMENDMENT
OF
WATERSIDE CAPITAL CORPORATION

Pursuant to Section 13.1-710 of the Code of Virginia of 1950, as amended,
the following information is provided:

1. The name of the Corporation is Waterside Capital Corporation.

2. Article VIII, Section 8.1 is hereby deleted from the Articles of
Incorporation and replaced with the following section:

8.1 Upon the occurrence of any of the events specified in 13 C.F.R.
107.1810(d)(1)-(6), 107.1810(f)(1)-(3), 107.1820(b) or 107.1820(c) as
determined by the SBA, SBA shall have the right, and the corporation consents
to, SBA's exercise of such right:

(i) upon written notice, to require the corporation to replace, with
individuals approved by SBA, one or more of the Corporation's officers and/or
such number of members of the Corporation's Executive Committee as is
sufficient to constitute a majority of such Executive Committee; or

(ii) to obtain the appointment of SBA or its designee as receiver of the
corporation pursuant to 311(c) of the SBIC Act for the purpose of continuing
to operate the Corporation.

3. Pursuant to Section 13.1-710 of the Code of Virginia of 1950, as
amended, the Board of Directors of the Corporation submitted this amendment to
the shareholders at the Annual Meeting of the shareholders on October 22, 1998.

4. Pursuant to Section 13.1-654 of the Code of Virginia of 1950, as
amended, the Shareholders of the Corporation adopted this amendment at the
Annual Meeting of the Shareholders. Holders of shares of common stock were
eligible to vote on the adoption of the amendment. At the close of business on
August 14, 1998, the date fixed by the Board of Directors as the record date
for the meeting of the shareholders, 1,420,900 shares of common stock were
outstanding. Of those shares, were voted for the amendment, were
voted against the amendment and abstained. The number of shares of common
stock voted for the amendment was sufficient to approve the amendment.

Dated the day of , 1998.

WATERSIDE CAPITAL CORPORATION

By--------------------------------

J. Alan Lindauer, President

EXHIBIT B TO PROXY STATEMENT

WATERSIDE CAPITAL CORPORATION

1998 EMPLOYEE STOCK OPTION PLAN

1. PURPOSE

The purpose of the Waterside Capital Corporation 1998 Employee Stock
Option Plan (the "Plan") is to support the business goals of the Company and to
attract, retain, and motivate key employees of the Company by providing
incentives that closely align their interests with the interests of the
Company's shareholders. These objectives are accomplished by making Awards
under the Plan, thereby providing Participants with a proprietary interest in
the growth and performance of the Company.

2. DEFINITIONS

2.1 "AWARD" shall mean the grant of any form of stock option to a Plan
Participant pursuant to such terms, conditions, performance requirements, and
limitations as the Committee may establish in order to fulfill the objectives
of the Plan.

2.2 "AWARD AGREEMENT" shall mean an agreement between the Company and a
Participant that sets forth the terms, conditions, performance requirements,
and limitations applicable to an Award.

2.3 "BOARD" shall mean the Board of Directors of the Company.

2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.

2.5 "COMMITTEE" shall mean the Compensation/Stock Option Committee of
the Board. If at any time no Committee shall be in office, then the functions
of the committee specified in the Plan shall be exercised by the Board.

2.6 "COMPANY" shall mean Waterside Capital Corporation, a corporation
organized under the laws of the Commonwealth of Virginia, and its subsidiaries,
including subsidiaries of subsidiaries.

2.7 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, or any successor thereto.

2.8 "FAIR MARKET VALUE" shall mean as of any given date, the average of
the bid and ask prices for each of the preceding twenty (20) business days of
the Stock on the Nasdaq SmallCap Market.

2.9 "INVOLUNTARY SEPARATION WITHOUT CAUSE" shall mean a termination of
employment by the Company for reasons other than substantial failure to perform
duties, material violation of Company policies, unethical activities,
misconduct, fraud, or commission of an illegal act; provided, that, Involuntary
Separation without Cause does not include a resignation or a voluntary
separation from employment, in either case initiated by a Participant.

2.10 "PARTICIPANT" shall mean an employee of the Company to whom an
Award has been made under the Plan.

2.11 "PLAN" shall mean the Waterside Capital Corporation 1998 Employee
Stock Option Plan.

2.12 "STOCK" shall mean the Common Stock, $1.00 par value share, of the
Company.

3. EFFECTIVE DATE AND DURATION OF THE PLAN

The effective date of the Plan is January 27, 1998, subject to approval of
the Plan by the shareholders of the Company. The Plan shall remain in effect
until all Awards under the Plan have been satisfied by the issuance of shares,
but no Award shall be granted more than ten years after the effective date of
the Plan.

4. CAPITAL STOCK AVAILABLE FOR AWARDS

The number of shares of common stock of the Company for which Awards may
be granted under the Plan shall not exceed 100,000. As soon as possible after
adoption of the Plan by the Company's shareholders, the Company shall take
whatever actions are necessary to file required documents with the U.S.
Securities and Exchange Commission and any other appropriate governmental
authorities and stock exchanges to make shares of stock available for issuance
pursuant to Awards. Stock related to Awards that are forfeited, terminated,
expire
2

unexercised, or are settled in such manner that all or some of the shares
covered by an Award under this Plan are not issued to a Participant shall
immediately become available for Awards under this Plan.

5. ADMINISTRATION

The Plan shall be administered and interpreted by the Committee, which
shall consist of not less than two persons appointed by the Board from among
its members. A person may serve on the Committee only if he or she is not
eligible and has not received a grant of an Award under the Plan for at least
one year before his or her appointment and satisfies the requirements of an
"outside director" for purposes of Section 162(m) of the Code. No member of the
Committee may receive Awards under the Plan. Without limiting the foregoing,
the Committee shall have full and final authority in its discretion: (i) to
make, adopt, amend, and rescind rules and regulations for the administration of
the Plan; (ii) to conclusively interpret the provisions of the Plan and to
decide all questions of fact arising in its application; (iii) to determine the
employees to whom Awards shall be made under the Plan; (iv) to determine the
type of Award to be made and the amount, size and terms of each such Award
(including, but not limited to, any restriction or condition, any schedule for
lapse of restrictions or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waivers or accelerations
thereof, and waiver of performance conditions relating to an Award, based in
each case on such conditions as the Committee shall determine); (v) to
determine the time when Awards will be granted; (vi) to prescribe from time to
time the form, and the terms, provisions and conditions not inconsistent with
the Plan, of any Award Agreement; (vii) to determine whether, to what extent,
and under what circumstances cash or common stock of the Company or a
combination thereof payable or deliverable with respect to an Award will be
deferred automatically, at the election of the Board, or at the election of a
Participant; and (viii) to make all other determinations necessary or advisable
for the administration of the Plan. The Committee may designate persons other
than its members to carry out its responsibilities under such conditions or
limitations as it may set, other than its authority with regard to benefits
granted to employees who are officers or directors of the Company for purposes
of Section 16 of the Exchange Act.

6. ELIGIBILITY

Participants shall be limited to those officers and other key employees of
the Company who are in positions in which their decisions, actions and efforts
significantly contribute to the success of the Company. Directors of the
Company who are not otherwise officers or employees of the Company shall not be
Participants.

7. AWARDS UNDER THE PLAN

The Committee shall determine the type or types of Awards to be made to
each Participant and shall set forth in each Award Agreement the terms,
conditions, and limitations applicable to each Award. Awards may be granted
singly, in combination or in tandem. Awards may also be made in combination or
in tandem with, in replacement of, or as alternatives to, grants or rights
under any other employee plan of the Company, including the plan of any
acquired entity.

8. INCENTIVE STOCK OPTIONS

Incentive stock options, or substitutes therefor, are options to purchase
shares of common stock of the Company which, in addition to being subject to
applicable terms, conditions, and limitations established by the Committee,
comply with Section[00a0]422 of the Code. Incentive stock options shall be
evidenced by Award Agreements which shall contain in substance the following
terms and conditions:

8.1 OPTION PRICE. The purchase price per share of stock deliverable upon
the exercise of an incentive stock option shall not be less than 100% of the
Fair Market Value of the stock on the day the incentive stock option is
granted, as determined by the Committee.

8.2 EXERCISE OF OPTION. Each Award Agreement pursuant to which incentive
stock options are granted shall state the period or periods of time within
which the incentive stock option may be exercised by the Participant, in whole
or in part, which shall be such period or periods of time as may be determined
by the Committee, provided that the exercise period shall not end later than
ten years after the date of the grant of the incentive stock option.

8.3 NONTRANSFERABILITY. Each Award Agreement shall state that the
incentive stock option is not transferable other than by will or the laws of
descent and distribution, and during the lifetime of the Participant is
exercisable only by the Participant.

8.4 PAYMENT FOR SHARES. Stock purchased pursuant to an incentive stock
option shall be paid for in full in cash or, unless the Committee determines
otherwise at or prior to the time of exercise, common stock of the Company at
Fair Market Value or a combination thereof, in an amount or having a combined
value equal to the aggregate purchase price for the shares subject to the
incentive stock option or portion thereof being exercised.

8.5 RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that a
Participant ceases to be an employee of the Company for any reason other than
death, disability, retirement (including early retirement) or Involuntary
Separation without Cause, all incentive stock options granted to the
Participant shall lapse forthwith or at such other time as determined by the
Committee. In the event employment ceases because a Participant dies, retires,
becomes disabled, or is Involuntarily Separated without Cause, prior to
expiration of the Participant's incentive stock option, without having fully
exercised such incentive stock option, the Participant shall have the right to
exercise the incentive stock option during its term within a period of three
months after the date employment so ceased, to the extent that the incentive
stock option was exercisable on the date employment ceased.

8.6 INDIVIDUAL LIMITATIONS.

8.6.1 Notwithstanding anything herein to the contrary, to the extent
that the aggregate Fair Market Value (determined as of the time the option is
granted) of stock for which any Participant is granted incentive stock options
that are exercisable for the first time during any calendar year (under all
such plans of the Company) shall exceed $100,000 (such excess to be determined
by taking incentive stock options into account in the order in which granted),
such incentive stock options to such extent shall be treated as options which
are not incentive stock options.

8.6.2 Notwithstanding anything herein to the contrary, no incentive
stock option shall be granted to any individual if at the time the incentive
stock option is to be granted the individual owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
or of any parent or subsidiary corporation unless at the time such incentive
stock option is granted the option price is at least 110% of the Fair Market
Value of the stock subject to the incentive stock option and such incentive
stock option by its terms is not exercisable after the expiration of five years
from the date such incentive stock option is granted.

8.7 Code Compliance. Each Award Agreement pursuant to which incentive
stock options are granted shall contain such other terms, conditions and
provisions as the Committee may determine to be necessary or desirable in order
to qualify such option as a tax-favored option within the meaning of Section
422 of the Code, or the regulations thereunder. Notwithstanding Section[00a0]16
hereof, the Board shall have the power without further approval to amend the
terms of the Plan or any Awards or Award Agreements thereunder for such
purpose.

9. NON-QUALIFIED STOCK OPTIONS

Non-qualified stock options, or substitutes therefor, are options to
purchase shares of common stock of the Company which are not intended to comply
with Section[00a0]422 of the Code. Non-qualified stock options shall be
evidenced by Award Agreements which shall contain in substance the following
terms and conditions:

9.1 OPTION PRICE. The purchase price per share of stock deliverable upon
the exercise of a non-qualified stock option shall be not less than 100% of the
Fair Market Value of the stock on the day the non-qualified stock option is
granted, as determined by the Committee.

9.2 EXERCISE OF OPTION. Each Award Agreement pursuant to which
non-qualified stock options are granted shall state the period or periods of
time within which the non-qualified stock option may be exercised by the
Participant, in whole or in part, which shall be such period or periods of time
as may be determined by the Committee at the time of grant, provided that the
exercise period shall not end later than ten years after the date of the grant
of the non-qualified stock option.

9.3 PAYMENT FOR SHARES. Stock purchased pursuant to a non-qualified
stock option shall be paid for in full in cash or, unless the Committee
determines otherwise at or prior to the time of exercise, in common stock of
the Company at Fair Market Value or a combination of cash and such common
stock, in an amount or having a combined value equal to the aggregate purchase
price for the shares subject to the non-qualified stock option or portion
thereof being exercised.

9.4 RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that a
Participant ceases to be an employee of the Company for any reason other than
death, disability, retirement (including early retirement) or Involuntary
Separation without Cause, all non-qualified stock options granted to such
Participant shall lapse forthwith or at

such other time as determined by the Committee. In the event employment ceases
because a Participant dies, retires, or becomes disabled, or is Involuntarily
Separated without Cause prior to expiration of the Participant's non-qualified
stock option without having fully exercised such non-qualified stock option,
the Participant shall have the right to exercise the non-qualified stock option
during its term within a period of three months after the date employment so
ceased, to the extent that the non-qualified stock option was exercisable on
the date employment ceased.

9.5 CASHLESS EXERCISE. To the extent permitted under the applicable laws
and regulations under Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder, and with the consent of the Committee, the
Company agrees to cooperate in a "cashless exercise" of a non-qualified stock
option. The cashless exercise shall be effected by the Participant delivering
to a registered securities broker acceptable to the Company instructions to
sell a sufficient number of shares of stock to cover the costs and expenses
associated therewith.

10. GENERAL RESTRICTIONS

10.1 CONDITIONS ON COMPANY'S OBLIGATIONS. The Company's obligations with
respect to each Award under the Plan shall be subject to the requirement that,
if at any time the Committee shall determine that (i) the listing, registration
or qualification of the shares of common stock subject or related thereto upon
any securities exchange or under any state or federal law, (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of shares of common
stock, is necessary or desirable as a condition of or in connection with the
granting of such Award, such Award may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.

10.2 PER EMPLOYEE LIMITATION ON STOCK OPTIONS. Notwithstanding anything
in this Plan to the contrary, no Participant shall receive incentive stock
options and non-qualified stock options that, in the aggregate, grant the
Participant the option to purchase in excess of 25,000 shares of common stock
of the Company in any given year the Plan is in effect.

11. RIGHTS TO TERMINATE EMPLOYMENT

Nothing in the Plan or in any Award Agreement or other agreement entered
into pursuant to the Plan shall confer upon any Participant the right to
continue in the employment of the Company or affect any right which the Company
may have to terminate the employment of such Participant.

12. WITHHOLDING

Whenever the Company proposes or is required to issue or transfer shares
of common stock under the Plan, the Company shall have the right to require the
Participant to remit to the Company an amount sufficient to satisfy any
federal, state and/or local tax withholding requirements prior to the delivery
of any certificate for such shares or, in the discretion of the Committee, the
Company may withhold from the shares to be delivered shares sufficient to
satisfy all or a portion of such tax withholding requirements.

13. NONTRANSFERABILITY

No Award under the Plan shall be assignable or transferable by the
Participant other than by will or by the laws of descent and distribution.
During the life of the Participant, all Awards shall be exercisable only by
such person or by such Participant's guardian or legal representative.

14. NON-UNIFORM DETERMINATION

The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive Awards, the form, amount
and timing of such Awards, the terms, provisions and conditions of such Awards,
the agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made by it selectively among
Participants who receive, or are eligible to receive, Awards under the Plan,
whether or not such persons are similarly situated.

15. ADJUSTMENTS

In the event of any change in the outstanding common stock of the Company
by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, in which
the number of shares held by Company shareholders prior to such event is
affected by such event, then the Committee shall adjust the number of shares of
common stock which may be issued under the Plan and shall

provide for an equitable adjustment of any outstanding Award or the number or
kind of shares issuable pursuant to an outstanding Award under the Plan.
Notwithstanding the foregoing, all changes in the outstanding common stock of
the Company shall be considered in determining the number of shares of
outstanding common stock of the Company for purposes of Section 4 of this Plan.

16. AMENDMENT

The Board may amend, alter, suspend or terminate the Plan or the
Committee's authority to grant Awards under the Plan, except that any such
amendment, alteration, suspension or termination shall be subject to the
ratification or approval of the Company's shareholders within one year after
Board action if such shareholder ratification or approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the common stock of the Company may then be
listed or quoted, or if the Board otherwise, in its discretion, determines for
any other reason to submit such changes to the Plan to shareholders for
approval or ratification. The amendment, alteration, suspension or termination
of the Plan shall not, without the consent of a Participant, affect the
Participant's rights under an Award previously granted.

17. CHANGE OF CONTROL

17.1 Notwithstanding any other provision of the Plan, if there is a
Change of Control, as defined below, of the Company, all outstanding stock
options shall become exercisable immediately prior to the consummation of the
Change of Control.

17.2 A "Change of Control" of the Company shall be deemed to have
occurred upon the happening of any of the following events:

17.2.1 when any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), (other than the Company or a subsidiary of the
Company or any Company employee benefit plan, including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding securities without the consent of a majority
of the Board;

17.2.2 the occurrence of any transaction or event relating to the
Company required to be described pursuant to the requirements of Item 6(e) of
Schedule 14A of the Exchange Act.;

17.2.3 when, during a period of two consecutive years during the
existence of the Plan, the individuals who, at the beginning of such period,
constitute the Board of Directors of the Company cease for any reason other
than death to constitute at least a two-thirds majority thereof, provided
however, that a director who was not a director at the beginning of such period
shall be deemed to have satisfied the two-year requirement if such director was
elected by, or on the recommendation of, at least two-thirds of the directors
who were directors at the beginning of such period (either actually or by prior
operation of this section); or

17.2.4 the occurrence of a transaction requiring shareholder approval
for the acquisition of the Company by an entity other than the Company through
purchase of assets, or by merger, or otherwise.

18. EFFECT ON OTHER PLANS

Participation in the Plan shall not affect an employee's eligibility to
participate in any other benefit or incentive plan of the Company, and any
Awards made pursuant to the Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided.

19. COMPLIANCE WITH EXEMPTIVE RULES UNDER SECTION 16 OF THE EXCHANGE ACT

It is the intent of the Company that transactions involving equity
securities under the Plan by persons subject to Section 16 of the Exchange Act
be exempt under Rule 16b-3 under the Exchange Act. Accordingly, if any
provision of the Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to such a transaction, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements with respect to such transaction.

20. GOVERNING LAW

The Plan and all awards made and actions taken hereunder shall be governed
by and construed in accordance with the laws of the Commonwealth of Virginia,
except to the extent federal law and the rules of regulations promulgated
thereunder by the SEC apply.

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WATERSIDE CAPITAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 22, 1998

The undersigned, having received the Annual Report to Shareholders and the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement dated
September 1, 1998, 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 14, 1998, at the Annual Meeting of Shareholders to be
held on October 22, 1998, and any adjournment thereof.

1. To elect 21 directors to hold office for a term of one year and until their
respective successors are elected and qualified;

[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to
(except as deleted below) vote for all of the
nominees listed below

NOMINEES: James E. Andrews, Donna C. Bennett, J.W. Whiting Chisman, Jr.,
Jeffrey R. Ellis, Eric L. Fox, Roger L. Frost, Ernest F. Hardee, Henry U.
Harris, III, J. Alan Lindauer, Robert I. Low, Harold J. Marioneaux, Jr., Peter
M. Meredith, Jr., Charles H. Merriman, Augustus C. Miller, Paul F. Miller, Juan
M. Montero, II, R. Scott Morgan, Sr., James W. Noel, Jr., Richard G. Ornstein,
Richard A. Schreiber and Jordan E. Slone

2. To amend the Company's Articles of Incorporation as set forth in the form of
the Amended Articles of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. To approve the Company's 1998 Employee Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN

4.To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN

(TO BE SIGNED ON THE REVERSE SIDE)

5. 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, 2, 3 AND 4.

--------------------------------
Signature

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.