| | |
| | EdmundRhett Jr., MD - 605Jr.MD — 756 shares owned by his wife; and Thomas C.Stevenson, III - 19,020 III- an aggregate of 20,478 shares held by him as co-trustee under a Marital Trust, and 2,990 shares held by him as co-trustee of a QTip Trust. All such indirectly owned shares are included in the totals of the number of shares set forth in the above table and beneficially owned by the Directors and Nominees. |
4
As a group, all Directors, and Executive Officers (including Hugh C. Lane, Jr., President and Chief Executive Officer; Fleetwood S. Hassell Executive Vice President; and William L. Hiott, Jr., Executive Vice President and Treasurer) are seventeensixteen in number and beneficially own an aggregate of 877,4841,004,277 shares, representing 28.38%25.40% of the issued and outstanding Common Stock of the Company. All of these shares beneficially owned by the Directors, Nominees and Executive Officers are currently owned.
Independence of Directors
With the exception of Hugh C. Lane, Jr., Fleetwood S. Hassell, and William L. Hiott, Jr., all Executive Officers of the Company, and Charles G. Lane, brother of Hugh C. Lane, Jr., all of the Directors proposed to be elected are independent and they constitute a majority of the Board of Directors.
Election of Directors
One director, Nathaniel I. Ball, III, Executive Vice President and Secretary, retired July 31, 2005. Sixteen Directors, constituting the current Board of Directors, will be elected at the Annual Meeting, each to hold office for one year and until a successor shall have been duly elected or appointed and shall have qualified. In addition the Nominating Committee of the Company Board of Directors recommended at its’ December 15, 2005 meeting to approve Fleetwood S. Hassell, Executive Vice President, for nomination to the Board of Directors. This recommendation was approved by the Board of Directors and will be voted on at the annual meeting. In the absence of instructions to the contrary, shares of Common Stock represented by properly executed proxies will be voted for the seventeensixteen Nominees listed on pages 6 and 7, all of whom are recommended by the Nominating Committee and the Board of Directors of the Company and have consented to be named and to serve if elected.
The Company does not presently know of anything that would preclude any Nominee from serving; however, should any Nominee for any reason become unable or unwilling to serve as a Director, the number of Directors to be elected will be reduced accordingly.
The name of each Nominee designated by the Board of Directors of the Company for election as a Director of the Company and certain information provided by such Nominee to the Company are set forth in the table below. Eight of the current Nominees served as initial Directors of the Bank from October 22, 1986, when the Bank’s charter was issued until the first Annual Meeting of Shareholders on April 14, 1987, and were elected to serve a one year term at such Annual Meeting. John M. Tupper was first elected as a Director of the Bank during 1993. All of the above nineeight Directors of the Bank were elected to serve one-year terms at subsequent Annual Meetings. All of the above nineeight Directors of the Bank were elected Directors of the Company upon its organization in 1995. Alan I. Nussbaum, MD and Edmund Rhett, Jr., MD, were first elected as Directors of the Company during 1999. Dr. Linda J. Bradley and Steve D. Swanson wereBradley-McKee, CPA was first elected as Directorsa Director of the Company during 2002. They were all re-elected as Directors of the Company to serve one year terms at subsequent Annual Meetings. Graham M. Eubank, Jr., Richard W. Hutson, Jr. and Malcolm M. Rhodes, MD were elected pursuant to the By-Laws of the Company on December 16, 2004, and were elected to serve one year terms at the subsequent annual meeting. All ofmeetings. Fleetwood S. Hassell was elected pursuant to the above current Nominees served as DirectorsBy-Laws of the Company from April 12,on December 15, 2005, and was elected to serve one year terms at subsequent annual meetings. Glen B. Haynes, DVM was elected pursuant to the dateBy-Laws of the last Annual Meeting of shareholders.Company on December 14, 2006 and was elected to serve a one year term on April 10, 2007.
5
| | | | | | | | | | |
| | | | | | Positions and | | | | |
| | | | | | Offices Held | | | | Business Experience |
| | | | | | With | | Family | | 1987-20051987-2008 and |
Name | | Age | | Corporation | | Relationship | | Other Directorships |
| | | | | | | | | | |
| | | | | | | | | | |
Dr. Linda J. Bradley,Bradley- McKee, CPA | | | 5557 | | | Director | | None | | Director, MS in Accountancy Program –— College of Charleston (education) 1998-2006;1998 — 2007; Chairman, Dept. of Accountancy 1999-2004; Associate Professor 1999-2006;1999 — 2008; Assistant Professor 1993-19991993 — 1999 |
| | | | | | | | | | |
C. Ronald Coward | | | 7072 | | | Director | | None | | Chairman, Coward Hund Construction Company, Inc. (construction) 2004-2006;2004-2008; President, 1976-2004 |
| | | | | | | | | | |
Graham M. Eubank, Jr. | | | 3840 | | | Director | | None | | President, Palmetto Ford, Inc. (retail automobile) 2000-2006;2000-2008; Vice President 1996-2000 |
| | | | | | | | | | |
T. Dean Harton | | | 6062 | | | Director | | None | | President, Hawthorne Corporation (management and investment) 2007-2008 Vice-Chairman, Piedmont Hawthorne Holdings, Inc. (aviation) 2004-2006; President, Piedmont Hawthorne Holdings, Inc. 1999-2004; President, Hawthorne Corporation (aviation) 1986-1999 |
| | | | | | | | | | |
Fleetwood S. Hassell | | | 4648 | | | Executive Vice President | | Brother-in-law Charles G. Lane, Director | | The Bank of South Carolina (banking) 1986-20061986-2008 |
| | | | | | | | | | |
Glen B. Haynes, DVM | | | 53 | | | Director | | None | | Westbury Veterinary Clinic (Veterinary) 1984 — 2008 |
| | | | | | | | | | |
William L. Hiott, Jr. | | | 6163 | | | Executive Vice President, Treasurer, Director | | None | | The Bank of South Carolina (banking) 1986-20061986-2008 |
| | | | | | | | | | |
Katherine M. Huger | | | 6466 | | | Director | | None | | Emerita Professor of Economics, Charleston Southern University; Assistant Professor of Economics, Charleston Southern University (education) 1972-2004 |
| | | | | | | | | | |
Richard W. Hutson, Jr. | | | 4850 | | | Secretary Director | | None | | Manager, William M. Means Company Insurance, LLC (insurance) 1998-2006;1998-2008; Sole Proprietor, William M. Means Insurance Co. (insurance) 1992-1998 |
| | | | | | | | | | |
Charles G. Lane | | | 51 | | | Director | | Brother of Hugh C. Lane, Jr.; Brother-in-law Fleetwood S. Hassell, Executive Vice President | | Managing Member – Holcombe, Fair & LLC (real estate) 1996-2006; Associate – Holcombe & Fair Realtors 1987-1996 |
| | | | | | | | | | |
Hugh C. Lane, Jr. | | | 58 | | | President, Chief Exec. Officer, Director | | Brother of Charles G. Lane | | The Bank of South Carolina (banking) 1986-2006 |
6
| | | | | | | | | | |
| | | | | | Positions and | | | | |
| | | | | | Offices Held | | | | Business Experience |
| | | | | | With | | Family | | 1987-20051987-2008 and |
Name | | | Age | | | Corporation | | Relationship | | Other Directorships |
| | | | | | | | | | |
| | | | | | | | | | |
Charles G. Lane | | | 53 | | | Director | | Brother of Hugh C. Lane, Jr.; Brother-in-law Fleetwood S. Hassell, Executive Vice President | | Managing Member — Holcombe, Fair & Lane, LLC (real estate) 1996 — 2008; Associate — Holcombe & Fair Realtors 1987 — 1996 |
| | | | | | | | | | |
Hugh C. Lane, Jr. | | | 60 | | | President, Chief Exec. Officer, Director | | Brother of Charles G. Lane | | The Bank of South Carolina (banking) 1986-2008 |
| | | | | | | | | | |
Louise J. Maybank | | | 6668 | | | Director | | None | | Active in community programs |
| | | | | | | | | | |
Alan I. Nussbaum, MD | | | 5456 | | | Director | | None | | Physician in private practice with Rheumatology Associates, PA |
| | | | | | | | | | |
Edmund Rhett, Jr., MD | | | 5860 | | | Director | | None | | Physician in private practice as Edmund Rhett, Jr., PA 2007-2008; Physician in private obstetrical practice with Low Country Obstetrics & Gynecology, PA 1977-2007 |
| | | | | | | | | | |
Malcolm M. Rhodes, MD | | | 4749 | | | Director | | None | | Physician in private practice with Parkwood Pediatric Group |
| | | | | | | | | | |
Thomas C. Stevenson, III | | | 5557 | | | Director | | None | | President, Fabtech, Inc. (metal fabrication) 1991-2006;1991-2008; Private Investor 1990-91; Chairman of the Board –— Stevenson Hagerty, Inc. (diversified holding company)1984-1990 |
| | | | | | | | | | |
Steve D. Swanson | | | 38 | | | Director | | None | | President, Automated Trading Desk, Inc. (automated limit order stock trading) 1989-2006 |
| | | | | | | | | | |
John M. Tupper | | | 64 | | | Director | | None | | President, Tupperway Tire and Service, Inc. (retail tires and service) 1980-2006 |
7
Committees of the Board of Directors
Hugh C. Lane, Jr. presently serves as President of the Board of Directors. The Board has four committees: the Executive/Long-Range Planning Committee, resulting from the merger of the Executive Committee and the Long-Range Planning Committee in 2004, the Compensation Committee, the Nominating Committee, and the Audit and Compliance Committee. The Compensation Committee and the Nominating Committee were established at the regular monthly meeting of the Board of Directors on December 18, 2003.
The Executive/Long-Range Planning Committee consists of the President of the Company and seven designated Directors. The President of the Company chairs the Committee. At present, the fixed membership of the Committee consists of C. Ronald Coward, T. Dean Harton, Fleetwood S. Hassell, William L. Hiott, Jr., Charles G. Lane, Hugh C. Lane, Jr., Alan I. Nussbaum, MD, and Steve D. Swanson.Thomas C. Stevenson, III. During 2005,2007, this Committee held fivetwo meetings. In addition to long-range and strategic planning, the principal function of the Committee is to exercise all authority of the Board of Directors in the management and affairs of the Company and the Bank. In addition, the Executive Committee acts on behalf of the entire Board of the Company between the regular Board Meetings.
The Audit and Compliance Committee reviews and examines detailed reports of the internal auditor for the Bank; meets periodically with the internal auditor; reviews reports of regulatory bodies having jurisdiction over the Company and the Bank; evaluates internal accounting
7
controls; recommends and approves the engagement and continuation of engagement of independent auditors, the scope of their work and the fees for their services; and meets with and considers recommendations of the independent auditors for the Company and the Bank. The Audit and Compliance Committee consists of Dr. Linda J. Bradley,Bradley-McKee, CPA, C. Ronald Coward, Graham M. Eubank, Jr., Glen B. Haynes, Katherine M. Huger, Alan I. Nussbaum, MD, and Malcolm M. Rhodes, MD, and John M. Tupper, all independent Directors of the Company. The Audit and Compliance Committee met sixfive times during 2005.2007.
The Compensation Committee consists of T. Dean Harton, Thomas C. Stevenson, III and Steve D. Swanson,Graham M. Eubank, Jr., all independent Directors of the Company. The function of the Compensation Committee is to recommend the compensation of Executive Officers to the Directors of the Company. The Compensation Committee met once during 2005.2007.
The Nominating Committee consists of C. Ronald Coward, Graham M. Eubank, Jr. and Edmund Rhett, Jr., MD and John M. Tupper, all independent Directors of the Company. The function of the Nominating Committee is to recommend a slate of proposed Directors to the Board of Directors of the Company. The Nominating Committee has adopted a written Charter. The Charter was attached as Exhibit A to the 2005 Proxy Statement. The Nominating Committee met two times during 2005.2007.
Report of the Audit and Compliance Committee of the Board of Directors
Membership and Role of the Audit and Compliance Committee
The Audit and Compliance Committee (the “Audit Committee”) presently consists of seven members of the Board of Directors. During 2005,2007, the Audit Committee held sixfive meetings. The Audit Committee operates under a written charter adopted by the Board of Directors. The charter was attached as Exhibit A to the 2004 Proxy Statement. Members are considered to be independent of the Company under applicable rules and regulations, including Rule 4200(a) (15) of the National Association of Securities Dealers.
Review of the Company’s Audited Financial Statements for the Fiscal Year Ended December 31, 20052007
The Audit Committee has reviewed and discussed with management the audited financial statements of the Company for the fiscal year ended December 31, 2005.2007. The Audit Committee has discussed with KPMG LLP,Elliott Davis, LLC, the Company’s independent public accountants, the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
8
The Audit Committee has also received the written disclosures and the letter from KPMG LLPElliott Davis, LLC required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and the Audit Committee has discussed the independence of KPMG LLPElliott Davis, LLC with that firm. Based on the Audit Committee’s review and discussions mentioned above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 20052007 for filing with the Securities and Exchange Commission.
| | | | |
| | Submitted by: | | |
| | | | |
| | Alan I. Nussbaum, MD, Chairman | | Katherine M. Huger |
| | Dr. Linda J. Bradley, CPA | | Submitted by: Alan I. Nussbaum, MD, Chairman Dr. Linda J. Bradley-McKee, CPA C. Ronald Coward Graham M. Eubank, Jr. Glen B. Haynes Katherine M. Huger Malcolm M. Rhodes, MD |
| | C. Ronald Coward | | John M. Tupper |
| | Graham M. Eubank, Jr. | | |
8
Nominations for Director
Nominations, other than those made by the Nominating Committee of the Company, shall be made in writing and shall be delivered or mailed to the President of the Company not less than 14 days nor more than 50 days prior to any meeting of Shareholders calling for election of Directors; provided however, that if less than 21 days notice of the meeting is given to Shareholders, such nomination shall be mailed or delivered to the President of the Company not later than the close of business on the 7th day following the day on which the Notice of Meeting was mailed. Nominations not made according to these procedures will be disregarded.
Nominating Committee Policy for Shareholder Nominations
The Nominating Committee has a policy with regard to consideration of any Director candidates recommended by security holders and that policy is to consider any and all such recommendations. The Nominating Committee has adopted specific minimum qualifications which the Nominating Committee believes must be met by a Nominating Committee recommended Nominee for a position on the Company’s Board of Directors, and those are that such Nominee must be generally recognized as successful in such Nominee’s business or community efforts, have a generally recognized reputation for honesty and integrity, have demonstrated such Nominee’s commitment to the community in which the Company and its subsidiary Bank operates and have demonstrated in meetings with the Nominating Committee such Nominee’s commitment to the best interests of the Company, its subsidiary Bank, and its and their officers, directors, employees and shareholders. The Nominating Committee’s process for identifying and evaluating Nominees for Director of the Company and its subsidiary Bank, including Nominees recommended by security holders, is to investigate whether or not such Nominee meets the specific minimum qualifications adopted as a policy by the Nominating Committee through contacts the members of the Nominating Committee have in their community. There are no differences in the manner in which the Nominating Committee evaluates Nominees for Director based on whether the Nominee is recommended by a security holder.
The Company does not utilize or pay a fee to any third party to evaluate Nominees for Director.
Directors’ Meetings
The Board of Directors of the Company held six meetings (including all regularly scheduled and special meetings) during the year ended December 31, 2005.2007. No Director during such yearDirectors attended fewer than 75% of the aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings held by all committees of the Board of Directors on which he or she served.
9
Compensation of Executive Officers and Directors
The following table sets forth all remuneration (including remuneration under any contract, authorization or arrangement, whether or not set forth in a formal document) paid during the year ended December 31, 2005,2007, by the Bank to the fourthree Executive Officers of the Company and the Bank, and one retired Executive Officer of the Company and Bank, whose cash remuneration from the Bank exceeded $100,000.00 dollars for their services in all capacities. Such Executive Officers receive no compensation from the Company as Executive Officers or as Directors or in any other capacity.
9
SUMMARY COMPENSATION TABLE
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Annual Compensation | | Long Term Compensation Awards | |
Name and | | | | | | | | | | | | | Other | | | | | | All Other | |
Principal | | | | | | | | | | | | | Annual | | | | | | Compen- |
Position | | Year | | | Salary | | | Bonus | | Compensation(1) | | Options/SARS(2) | | sation(3) | |
Hugh C. Lane, Jr. | | | 2005 | | | $ | 166,652.67 | | | | — | | | $ | 6,001.86 | | | | 0 | | | $ | 18,687.27 | |
CEO & President | | | 2004 | | | | 159,830.69 | | | | — | | | | 6,123.74 | | | | 0 | | | | 11,351.58 | |
| | | 2003 | | | | 153,500.00 | | | | — | | | | 5,300.64 | | | | 0 | | | | 9,528.83 | |
|
Nathaniel I. Ball, III | | | 2005 | | | $ | 159,999.84 | | | | — | | | $ | 5,902.96 | | | | 0 | | | $ | 17,567.20 | |
Executive Vice President & | | | 2004 | | | | 152,851.45 | | | | — | | | | 4,302.24 | | | | 0 | | | | 10,855.90 | |
Secretary (retired) | | | 2003 | | | | 147,000.00 | | | | — | | | | 4,397.40 | | | | 0 | | | | 9,125.61 | |
|
Fleetwood S. Hassell | | | 2005 | | | $ | 104,876.35 | | | | — | | | $ | 6,279.94 | | | | 0 | | | $ | 11,857.11 | |
Executive Vice President(4) | | | | | | | | | | | | | | | | | | | | | | | | |
|
William L. Hiott, Jr. | | | 2005 | | | $ | 158,523.47 | | | | — | | | $ | 5,369.66 | | | | 0 | | | $ | 17,589.31 | |
Executive Vice President | | | 2004 | | | | 152,851.45 | | | | — | | | | 4,302.24 | | | | 0 | | | | 10,855.90 | |
| | | 2003 | | | | 147,000.00 | | | | — | | | | 4,397.40 | | | | 0 | | | | 9,125.61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Nonqualified | | | | |
| | | | | | | | | | | | | | | | | | Non-Equity | | Deferred | | All | | |
Name and Principal | | | | | | | | | | | | | | Stock | | Option | | Incentive Plan | | Compensation | | Other | | |
Position | | Year | | Salary (1) | | Bonus(2) | | Awards | | Awards | | Compensation | | Earnings | | Compensation(3) | | Total |
Hugh C. Lane, Jr. President and Chief Executive Officer | | | 2007 | | | | 200,001.37 | | | | 1,600.00 | | | | | | | | | | | | 18,136.27 | | | | 219,737.64 | |
| | | 2006 | | | | 190,000.00 | | | | 1,600.00 | | | | | | | | | | | | 21,630.52 | �� | | | 213,130.52 | |
| | | 2005 | | | | 166,652.67 | | | | 100.00 | | | | | | | | | | | | 18,687.27 | | | | 185,439.94 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
William L. Hiott, Jr. Executive Vice President and Treasurer | | | 2007 | | | | 175,001.53 | | | | 1,600.00 | | | | | | | | | | | | 15,887.26 | | | | 192,488.79 | |
| | | 2006 | | | | 167,000.00 | | | | 1,600.00 | | | | | | | | | | | | 19,033.98 | | | | 187,533.98 | |
| | | 2005 | | | | 158,523.47 | | | | 100.00 | | | | | | | | | | | | 17,589.31 | | | | 176,212.78 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fleetwood S. Hassell Executive Vice President | | | 2007 | | | | 135,001.45 | | | | 1,600.00 | | | | | | | | | | | | 12,288.81 | | | | 148,890.26 | |
| | | 2006 | | | | 120,000.00 | | | | 1,600.00 | | | | | | | | | | | | 13,728.00 | | | | 135,228.00 | |
| | | 2005 | | | | 104,876.35 | | | | 100.00 | | | | | | | | | | | | 11,857.11 | | | | 116,833.46 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nathaniel I. Ball, III Retired Executive Vice President and Secretary | | | 2007 | | | | | | | | | | | | | | | | | | | | 140,600.00 | (4) | | | 140,600.00 | |
| | | 2006 | | | | | | | | | | | | | | | | | | | | 149,649.09 | (4) | | | 146,649.09 | |
| | | 2005 | | | | 159,999.84 | | | | | | | | | | | | | | | | 17,567.20 | | | | 177,567.04 | |
| | |
(1)1) | | Includes same life, disability, dentalThe Compensation Committee consisting of Graham M. Eubank, Jr., T. Dean Harton and health insurance benefitsThomas C. Stevenson, compared salaries for similar positions at similar sized banks within South Carolina as all other employeeswell as the overall bank and individual performance. Once the salary levels were established by the Compensation Committee, the salaries were recommended to the Board of the Bank who work at least 30 hours a week.Directors for approval. |
|
(2)2) | | Amounts shown represent the numberThe bonus consists of shares underlying incentive stock options granted, as adjusted for a 10% stock dividend effective on July 15, 2003$100 bonus presented to all employees at Christmas in 2005, 2006 and 2007 and a 10% stock distribution effective April 29, 2005.$1,500 bonus presented to all employees employed before July 1, 2005 and July 1, 2006. |
|
(3)3) | | AmountsOn November 2, 1989, the Bank adopted an Employee Stock Ownership Plan and Trust Agreement (the “Plan”) to provide retirement benefits to eligible employees for long and faithful service. The other compensation represents the amount contributed to the Bank’s ESOP. |
|
(4)4) | | Fleetwood S. Hassell was promoted to Executive Vice PresidentNathaniel I. Ball, III, retired on August 16,July 31, 2005. The amount reported in 2007 and 2006 represents severance pay. |
10
Non-officer Directors of the Company received $100.00 for each meeting of the Board of Directors of the Company attended and non-officer Directors of the Bank received $250.00 for each meeting of the Board of Directors of the Bank attended and $100.00 for each Company or Bank Board Committee meeting attended.
On November 2, 1989, the Bank adopted an Employee Stock Ownership Plan and Trust Agreement (the “Plan”) to provide retirement benefits to eligible employees for long and faithful service.
An employee of the Bank is eligible to become a participant in the ESOP upon reaching 21 years of age and upon completioncredited with one year of 1,000service (1,000 hours of service). The employee may enter the plan on the January 1st that occurs nearest the date on which the employee first satisfies the age and service in a plan year.requirements described above. No contributions by employees are permitted. The amount and time of contributions are at the sole discretion of the Board of Directors of the Bank. The contribution for all participants is based solely on each participant’s respective regular or base salary and wages paid by the Bank including commissions, bonuses and overtime, if any.
A participant becomes vested in the ESOP based upon completion of fivethe employee’s credited years of service,service. The vesting schedule is as defined in the Plan. There is no vesting prior to the completion of five years of service.follows;
| | | | | | | | |
| | | | • | | 1 year of service | | 0% Vested |
| | | | • | | 2 Years of Service | | 25% Vested |
| | | | • | | 3 Years of Service | | 50% Vested |
| | | | • | | 4 Years of Service | | 75% Vested |
| | | | • | | 5 Years of Service | | 100% Vested |
The Plan became effective as of January 1, 1989.1989 and amended effective January 1, 2007 and approved by the Board of Directors on January 18, 2007. This amendment was made to comply with the Pension Protection Act of 2006.
10
The Board of Directors of the Bank approved the contribution of $300,000.00$288,000.00 to the ESOP for the fiscal year ended December 31, 2005.2007. The contribution was made during 2005.2007. T. Dean Harton, Sheryl G. Sharry and Hugh C. Lane, Jr., currently serve as Plan Administrators and as Trustees for the Plan. The Plan currently owns 198,159224,129 shares or 6.41%5.67% of the Company’s Common Stock.
During the fiscal year ended December 31, 2005,2007, the Company had no plans or arrangements pursuant to which any Executive Officer, Director or Principal Shareholder received contingent remuneration or personal benefits other than the contingent remuneration and life, disability, dental and health insurance benefits. Life, disability, dental and health insurance benefits referred to inare available for all employees of the footnotes to the preceding table.Bank who work at least 30 hours a week.
OPTION AWARDS
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Equity Incentive | | | | | | | |
| | | | | | Number of | | | Plan Awards: | | | | | | | |
| | Number of Securities | | | Securities | | | Number of Securities | | | | | | | |
| | Underlying | | | Underlying | | | Underlying | | | | | | | |
| | Unexercised Options | | | Unexercised Options | | | Unexercised | | | Option Exercise | | | Option Expiration | |
Name | | Exercisable | | | Unexercisable | | | Unearned Options | | | Price | | | Date | |
Hugh C. Lane, Jr. | | — | | | — | | | — | | | — | | | — | |
William L. Hiott, Jr. | | — | | | — | | | — | | | — | | | — | |
Fleetwood S. Hassell | | — | | | — | | | — | | | — | | | — | |
11
On April 14, 1998, the Shareholders of the Company approved an Incentive Stock Option Plan for the benefit of eligible officers and employees of the Bank and reserved a total 180,000 shares. On April 16, 1998, the Bank granted options to purchase Common Stock in the aggregate amount of 146,000 shares to 52 employees of the Bank (including officers, such Directors as are also employees and other employees) pursuant to the Incentive Stock Option Plan. These grants included those to Hugh C. Lane, Jr., Nathaniel I. Ball, III and William L. Hiott, Jr., and Fleetwood S. Hassell, Executive Officers and Directors and Fleetwood S. Hassell,Nathaniel I. Ball, III, (retired) Executive Vice President.Officer and Director. As adjusted for a 10% stock dividend paid on May 15, 1998, 198,000 shares were being held in reserve.
As of July 10, 2000, all of the option holders, including the above Executive Officers, terminated their existing stock options. There was no obligation on the part of the Company or The Bank of South Carolina to issue additional or replacement options. No options were exercised in 1998, 1999 or 2000. On May 14, 2001, the Bank granted options to purchase Common Stock in the aggregate amount of 152,350 shares to 45 employees of the Bank (including officers, such Directors as are also employees and other employees) pursuant to the Incentive Stock Option Plan. These grants included those to Hugh C. Lane, Jr., Nathaniel I. Ball, III., and William L. Hiott, Jr., and Fleetwood S. Hassell, Executive Officers and Directors and Fleetwood S. Hassell,Nathaniel I. Ball, III, (retired) Executive Vice President.Officer and Director. Except for those options granted to Hugh C. Lane, Jr. as described below, all of the options were granted at an exercise price of $13.50 per share. No additional options were granted during 2001. Additional options forOptions to purchase 9,500 shares were granted at an exercise price of $14.925 per share to 4 employees of the Bank during 2002. Options forto purchase 13,500 shares with an exercise price of $14.20 per share were granted to 13 employees in 2003. Options forto purchase 4,000 shares with an exercise price of $14.00 were granted to one employee in 2004. No options were exercised during 2001, 2002, 2003 or 2004. Options to purchase 32,500 shares with an exercise price of $16.62 were granted to twenty-one employees in 2006. Options to purchase 5,000 shares with an exercise price of $15.99 and options to purchase 5,000 shares with an exercise price of 15.51 were granted to two employees in 2007.
As adjusted for a 10% stock dividend effective on July 15, 2003, and a 10% stock distribution effective April 29, 2005 and a 25% stock dividend effective on April 28, 2006, there are currently 239,58029,791 shares being held in reserve. There are currently outstanding optionoptions to purchase 19,96515,879 shares at an option price of $12.27$9.39 per share, 12,705options to purchase 82,884 shares at an option price of $11.74$8.92 per share, 123,240options to purchase 28,000 shares at an option price of $11.15$16.62 per share, 2,420options to purchase 5,000 shares at an option price of $12.34$15.99 per share and options to purchase 5,000 shares at an option price of $15.51 per share resulting in total outstanding options to purchase 158,330136,763 shares at the prices set forth above.
As adjusted for a 10% stock dividend effective on July 15, 2003, and a 10% stock distribution effective April 29, 2005 and a 25% stock dividend effective April 28, 2006, options for 19,964to purchase 44,853 shares with an exercise price of $11.15$8.92 per share, options for 3,025to purchase 11,343 shares with an exercise price of $11.74 per share, and$9.87, options for 4,440to purchase 4,537 shares with an exercise price of $12.73$9.39 per share, and options for 2,420to purchase 5,500 shares with an exercise price of $12.34$9.26 per share, and options to purchase 4,500 shares with an exercise price of $16.62 per share have expired. There were no32,500 options granted during 2005.2006 with an exercise price of $16.62. During 2007, there were 5,000 options granted with an exercise price of $15.99 and 5,000 options granted with an exercise price of $15.51.
On October 2, 2005, Nathaniel I. Ball, III (retired) Executive Officer and Director, in accordance with the Incentive Stock Option Plan, exercised his options to purchase 16,637 shareshares of common stock. The stock was purchased with the redemption of 10,300 shares of Bank of South Carolina Corporation common stock (personally held) with a price of $18.00 a share and the payment of $225 cash. TheOn May 14, 2006 in accordance with the Incentive Stock Option Plan, options to purchase 67,220 shares of common stock became exercisable. Hugh C. Lane, Jr. exercised his option to purchase 24,956 shares at $9.82 per share. Twenty-four employees, including William L. Hiott, Jr. Executive Vice President and Treasurer and Fleetwood S. Hassell, Executive Vice President, exercised their option to purchase 39,846 shares of common stock at $8.92 per share. William L. Hiott purchased 4,159 shares and Fleetwood S. Hassell purchased 2,495 shares. On December 4, 2006 Janice Flynn, former Senior Vice President exercised her options to purchase 6,655 shares at $8.92 per share and 3,025 shares at $9.87 per share. Her shares became fully vested due to permanent disability. On May 14, 2007 in accordance with the Incentive Stock Option Plan, options to purchase 27,488 shares at $8.92 per share became exercisable. Twenty employees, including William L. Hiott, Jr., Executive Vice President and Treasurer and Fleetwood S. Hassell, Executive Vice President, exercised their options to purchase 24,257 shares of common stock at $8.92 per share. William L. Hiott, Jr. purchased 4,159 shares and Fleetwood S. Hassell purchased 2,495 shares. All stock options were fully vested and fully exercisable.
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Hugh C. Lane, Jr., President and Chief Executive Officer, was granted the option to purchase 16,500 shares of Common Stock of the Company pursuant to the Incentive Stock Option Plan at a price of $14.85 per share. This option isThe options were exercisable on May 14, 2006 and expireswould have expired if not exercised on that date. William L. Hiott, Jr., Executive Vice President and Treasurer, was granted the option to purchase 13,750 shares of Common Stock of the Company and Fleetwood S. Hassell, Executive Vice President was granted the option to purchase 8,250 pursuant to the Incentive Stock Option Plan at a price of $13.50 per share. All of these options arebecame exercisable in five 20% increments beginning on and for the year following May 14, 2006, with an additional 20% to be exercisable on and for the year following each successive anniversary. The right to exercise each such 20% of each option is cumulative and will not expire until the 10thanniversary of the date of the grant.
As adjusted for a 10% stock dividend effective on July 15, 2003, and a 10% stock distribution effective on April 29, 2005 Hugh C. Lane,and a 25% stock dividend effective April 28, 2006, William L. Hiott, Jr. now, Executive Vice President and Treasurer, has the option to purchase 19,965 shares of Common Stock of the Company at a price of $12.27 per share, William L. Hiott, Jr. now has the option to purchase 16,63712,478 shares at a price of $11.15$8.92 per share and Fleetwood S. Hassell, nowExecutive Vice President, has the option to purchase 9,9827,487 shares at a price of $11.15$8.92 per share.
Shown below is information with respect to unexercisedshare and 5,000 shares at a price of $16.62. The options to purchase Common Stock5,000 shares at a price of the Company held by the named Executive Officers at December 31, 2005.
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| | | | | | | | | | Number of Securities | | Value of Unexercised |
| | | | | | | | | | Underlying Unexercised | | In-the-Money |
| | | | | | | | | | Options/SARS | | Options/SARS |
| | # of Shares | | | | | | at Year-End(#) | | at Year-End($) |
| | Acquired | | Value | | | | |
| | On Exercise | | Realized($) | | Exercisable | | Unexercisable | | Exercisable | | Unexercisable |
Hugh C. Lane, Jr. | | | 0 | | | | 0 | | | | 0 | | | | 19,965 | | | | 0 | | | $ | 380,333 | |
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Nathaniel I. Ball, III | | | 16,637 | | | $ | 185,650 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
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Fleetwood S Hassell | | | 0 | | | | 0 | | | | 0 | | | | 9,982 | | | | 0 | | | $ | 190,157 | |
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William L. Hiott, Jr. | | | 0 | | | | 0 | | | | 0 | | | | 16,637 | | | | 0 | | | $ | 316,935 | |
$16.62 per share were granted to Fleetwood S. Hassell on May 17, 2006.In the event of a prospective reorganization, consolidation or sale of substantially all of the assets or any other form of corporate reorganization in which the Company would not be the surviving entity or in the event of the acquisition, directly or indirectly, of the beneficial ownership of 24% of the Common Stock of the Company or the making, orally or in writing, of a tender offer for, or any request or invitation for tender of, or any advertisement making or inviting tenders of the Company stock by any person, all options in effect at that time would accelerate so that all options would become immediately exercisable and could be exercised within one year immediately following the date of acceleration but not thereafter.
In the case of termination of employment of an option holder other than involuntary termination without just cause, retirement, death or legal disability, the option holder may exercise the option only with respect to those shares of Common Stock as to which he or she has become vested. The option holder may exercise the option with respect to such shares no more than 30 days after the date of termination of employment (but in any event prior to the expiration date).
In the event that the option holder’s employment is terminated without just cause, the option shall become fully vested and fully exercisable as of the date of his or her termination without regard to the five year initial vesting and exercisability or to the 20% annual increments thereafter.schedule. The option holder may exercise the option following an involuntary termination without just cause until the expiration date of the option.
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In the event the option holder remains in the continuous employ of the Company or any subsidiary from the date of the grant until the option holder’s retirement, the option shall become fully vested and fully exercisable as of the date of his or her retirement without regard to the five year initial vesting and exercisability or to the 20% annual increments thereafter.schedule. The option holder may exercise the option following his or her retirement until the expiration date.
In the event the option holder remains in the continuous employ of the Company or a subsidiary from the date of the grant until his or her death, the option shall become fully vested and fully exercisable as of the date of death without regard to the five year initial vesting and exercisability or the 20% annual increments thereafter.schedule. The person or persons entitled to exercise the option following the option holder’s death may exercise the option until the expiration date.
In the event the option holder remains in the continuous employ of the Company or any subsidiary from the date of the grant until the date of his or her legal disability, the option shall become fully vested and fully exercisable as of the date of his or her termination of employment on account of his or her legal disability without regard to the five year initial vesting and exercisability or to the 20% annual increments thereafter.schedule. The option holder may exercise the option following such termination of employment until the expiration date.
The Stock Incentive Plan provides for adjustment in the number of shares of Common Stock authorized under the Plan or granted to an optioneeemployee to protect against dilution in the event of changes in the Company’s capitalization, including stock splits and dividends.
Shown below is information with respect to unexercised options to purchase Common Stock of the Company held by the named Executive Officers at December 31, 2007.
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| | | | | | | | | | Number of Securities | | Value of Unexercised |
| | | | | | | | | | Underlying Unexercised | | In-the-Money |
| | # of Shares | | | | | | Options/SARS | | Options/SARS |
| | Acquired | | Value | | at Year-End (#) | | at Year-End (#) |
| | On Exercise | | Realized ($) | | Exercisable | | Unexercisable | | Exercisable | | Unexercisable |
Hugh C. Lane, Jr. | | | 24,956 | | | | 245,068 | | | | 0 | | | | 0 | | | | 0 | | | $ | 0 | |
Fleetwood S. Hassell | | | 4,990 | | | | 44,511 | | | | 0 | | | | 12,487 | | | | 0 | | | $ | 177,066 | |
William L. Hiott, Jr. | | | 8,318 | | | | 74,197 | | | | 0 | | | | 12,478 | | | | 0 | | | $ | 176,938 | |
Transactions and Relations with Directors, Executive Officers, and their Associates and Affiliates of Directors
DIRECTOR COMPENSATION
| | | | | | | | |
| | FEES EARNED | | | | |
NAME | | OR PAID IN CASH | | | TOTAL | |
Dr. Linda J. Bradley-McKee, CPA | | $ | 4,650 | | | $ | 4,650 | |
C. Ronald Coward | | $ | 6,250 | | | $ | 6,250 | |
Graham M. Eubank, Jr. | | $ | 4,950 | | | $ | 4,950 | |
T. Dean Harton | | $ | 4,050 | | | $ | 4,050 | |
Fleetwood S. Hassell | | | — | | | | — | |
Glen B. Haynes, DVM | | $ | 5,350 | | | $ | 5,350 | |
William L. Hiott, Jr. | | | — | | | | — | |
Katherine M. Huger | | $ | 5,250 | | | $ | 5,250 | |
Richard W. Hutson, Jr. | | $ | 6,150 | | | $ | 6,150 | |
Charles G. Lane, Jr. | | $ | 6,000 | | | $ | 6,000 | |
Hugh C. Lane, Jr. | | | — | | | | — | |
Louise J. Maybank | | $ | 5,550 | | | $ | 5,550 | |
Alan I. Nussbaum, MD | | $ | 6,400 | | | $ | 6,400 | |
Edmund Rhett, Jr. MD | | $ | 5,800 | | | $ | 5,800 | |
Malcolm M. Rhodes, MD | | $ | 5,800 | | | $ | 5,800 | |
Thomas C. Stevenson, III | | $ | 6,000 | | | $ | 6,000 | |
Steve D. Swanson (1) | | $ | 2,400 | | | $ | 2,400 | |
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1) | | Steve D. Swanson resigned from the Board of Directors during 2007 as the result of a conflict of interest due to the sale of his business. |
Non-officer Directors of the Company received $150.00 for each meeting of the Board of Directors of the Company attended and non-officer Directors of the Bank received $300.00 for each meeting of the Board of Directors of the Bank attended and $150.00 for each Company or Bank Board Committee meeting attended.
The Company does not have any existing continuing contractual relationships with any Director, Nominee for election as Director or Executive Officer of the Company or the Bank, or any Shareholder owning, directly or indirectly, more than 5% of the shares of Common Stock of the Company, or any associate of the foregoing persons. Directors, Executive Officers, Nominees for election as Directors, and members of the immediate family of any of the foregoing have had in the past, have at present, and will have in the future, customer relationships with the Bank. Such transactions have been and will continue to be made in the ordinary course of business, made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and such transactions did not and will not involve more than the normal risk of collectability or present other unfavorable features.
Fleetwood S. HassellLouise J. Maybank, Director, failed to file onetwo Form 44’s in a timely manner.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
On November 17, 2005, the appointment of KPMG, LLP as independent auditor was terminated effective upon the completion of the audit of the Company’s financial statements as of and for the year ending December 31, 2005 and the issuance of KPMG LLP’s report thereon. The decision to change accountants to Elliott Davis, LLC was approved by the audit committeeAudit Committee of the boardBoard of directors.Directors and ratified by the Shareholders at the 2006 and 2007 Annual Shareholders Meetings. At the 20062008 Annual Shareholders’ Meeting the following resolution will be subject to ratification by a simple majority vote of shares represented at the meeting:
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RESOLVED, that the selection of Elliott Davis, LLC as the independent certified public accountants of Bank of South Carolina Corporation (the “Company”) and its sole subsidiary, The Bank of South Carolina (the “Bank”), for the fiscal year ending December 31, 2006, | | | RESOLVED, that the selection of Elliott Davis, LLC as the independent certified public accountants of Bank of South Carolina Corporation (the “Company”) and its sole subsidiary, The Bank of South Carolina (the “Bank”), for the fiscal year ending December 31, 2008, is hereby ratified. |
If ratification is not achieved, the selection of an independent certified public accountant will be reconsidered and made by the Board of Directors. Even if selection is ratified, the Board of Directors reserves the right to, and in its discretion may, direct the appointment of any other independent certified public accounting firm at any time if the Board decides that such a change would be in the best interests of the Company and its Shareholders.
The services provided by KPMG LLP includeand Elliott Davis, LLC included the examination and reporting of the financial status of the Company and the Bank. These services have been furnished at customary rates and terms. There are no existing direct or indirect agreements or understandings that fix a limit on current or future fees for these audit services.
KPMG LLP assisted in the preparation of the Company’s and Bank’s tax returns for the fiscal years ending December 31, 1995 through 2005. Elliott Davis, LLC assisted in the preparation of the Company’s and Bank’s tax returns for the fiscal year ending December 31, 2006 and 2007. These non-audit services were routine in nature and did not compose more than 25% of the total fees paid to KPMG LLP in 2005.2005 or Elliott Davis, LLC in 2006 or 2007.
A representative of KPMG LLPElliott Davis, LLC is expected to attend the Annual Shareholders’ Meeting with the opportunity to make a statement, if desired, and is expected to be available to respond to appropriate questions.
Before the independent certified public accountants of the Company and the Bank are engaged to render non-audit services for the Company or the Bank, each engagement is approved by the Audit Committee. All of the audit and tax services provided by KPMG LLPElliott Davis, LLC for the fiscal year ending December 31, 20052007 were preapproved by the Audit Committee.
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Audit Fees
KPMG’sElliott Davis, LLC’s aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements and for the reviews of the financial statements included in the Company’s Form 10-KSB and Quarterly Reports on Form 10-QSB were $39,775$54,800 in 2007 and $33,500 in 2006. KPMG, LLP billed $10,000 in 2006, for 2005 and $47,000professional services rendered for 2004.the review of Company’s annual financial statements for the year ended December 31, 2006.
Tax Fees
KPMG’sElliott Davis, LLC’s fees for tax compliance services were $11,200 for 2005$7,000 in 2007 and $11,724 for 2004.$7,695 in 2006.
The Audit Committee of the Board of Directors has determined that the provision of tax services is compatible with maintaining the accountant’s independence.
OTHER MATTERS
Management is not aware of any matters to come before the meeting that will require the vote of Shareholders other than those matters indicated in the Notice of Meeting and this Proxy Statement.
However, if any other matter calling for Shareholder action should properly come before the meeting or any adjournments thereof, those persons named as proxies in the enclosed Proxy Form will vote thereon according to their best judgment.
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PENDING LITIGATION
There isIn the opinion of management, there are no legal proceedings pending other than routine litigation involvingincidental to its business including amounts which are not material to the Company.financial condition of the Company and the Bank. To the knowledge of management, no proceedings have been instituted or are contemplated by or against any government authority against or by the Company or the Bank.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board of Directors has adopted a process by which security holders may send communications to the Board of Directors of the Company. That process is for any security holder to send a written communication to Hugh C. Lane, Jr., President, Bank of South Carolina Corporation, 256 Meeting Street, Charleston, South Carolina 29401, or to fax such communication to Hugh C. Lane, Jr., President, at (843) 724-1513. A security holder is free to address any communication to any Director at the address of such Director set forth in this Proxy Statement. Any communication from a security holder received by the President shall be sent to all Members of the Executive Committee and, if any member of the Executive Committee so directs, will be sent to all members of the Board of Directors.
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ANNUAL REPORT
The Annual Report for the fiscal year ended December 31, 2005,2007, filed with the Securities and Exchange Commission on Form 10-KSB, is mailed herewith to all Shareholders.
SHAREHOLDER PROPOSALS FOR THE 20072009 ANNUAL SHAREHOLDERS’ MEETING
Shareholder proposals, if any, for inclusion in the Proxy Statement relating to the 20072009 Annual Shareholders’ meeting, must be addressed to and received in the office of the President no later than December 8, 2006.5, 2008.
By Order of the Board of Directors
/s/Richard W. Hutson, Jr.
Richard W. Hutson, Jr.
Secretary
February 23, 200628, 2008
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PROXY CARD
BANK OF SOUTH CAROLINA CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 11, 20068, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL PERSONS BY THESE PRESENTS THAT I, the undersigned Shareholder of Bank of South Carolina Corporation (the Company) do hereby appoint Edmund Rhett, Jr., MD, Richard W. Hutson, Jr. and Louise J. Maybank, (no officer or employee of the Company or any subsidiary may be appointed), or any one of them, with full power to act alone, my true and lawful attorney(s) with full power of substitution, to vote on behalf of the undersigned all shares of common stock of the Company which the undersigned would be entitled to vote at the Annual Meeting of Shareholders of the Company to be held at The Bank of South Carolina, 256 Meeting Street, Charleston, South Carolina on Tuesday, April 11, 2006,8, 2008, at 2:00 p.m., or at any adjournments or postponements thereof, with all the powers the undersigned would possess if personally present upon the following matters:
The Board of Directors recommends a vote “FOR” proposals 1, 2 and 2.3.
1. | | ELECTION OF DIRECTORS |
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| 1. | | | ELECTION OF DIRECTORS |
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| | | | oFORall nominees listed below (except as marked to the contrary below).
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| | | | oWITHHOLD AUTHORITYto vote for all nominees listed below. |
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| | | | Dr. Linda J. Bradley,Bradley-McKee, CPA, C. Ronald Coward, Graham M. Eubank, T. Dean Harton, Fleetwood S. Hassell, Glen B. Haynes, DVM, William L. Hiott, Jr., Katherine M. Huger, Richard W. Hutson, Jr., Charles G. Lane, Hugh C. Lane, Jr., Louise J. Maybank, Alan I. Nussbaum, MD, Edmund Rhett, Jr., MD, Malcolm M. Rhodes, MD,MD., Thomas C. Stevenson, III., Steve D. Swanson and John M. Tupper |
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| | | | (INSTRUCTION:To withhold authority to vote for any individual nominee, write the nominee’s name in the space provided below.) |
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| 2. | | | APPROVAL OF ELLIOTT DAVIS, LLCas the Company’s independent auditors for the fiscal year ending December 31, 2006.2008. |
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| | | | oFOR oAGAINST oABSTAIN |
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| 3. | | | The transaction of such other business as may properly come before the meeting. |
Each properly executed proxy will be voted in accordance with specifications made hereon. If no specification is made, the shares represented by this Proxy will be voted “FOR” the nominees, “FOR” Elliott Davis, LLC and in the discretion of the Proxies, on any other business as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Company’s 20052007 Annual Report on Form 10-KSB as filed with the Securities and Exchange Commission and the accompanying Notice of Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore given.
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| | Dated: ___________________________________, 2006 | | , 2008 |
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| | Signature(s) of Shareholder(s) |
| | Please date and sign exactly as name appears hereon. Executors, Administrators, Trustees, etc., must so indicate when signing. If shares are held jointly, both owners should sign. |