AFFINITY TECHNOLOGY GROUP INC, DEF 14A, 1999-04-28

AFFINITY TECHNOLOGY GROUP INC
DEF 14A, 1999-04-28
COMPUTER INTEGRATED SYSTEMS DESIGN

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Schedule 14(a) Information

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No.)

Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]

Check the appropriate box:

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

Affinity Technology Group, Inc.
(Name of Registrant as Specified in Charter)

---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):______
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.

[ ] Check box is any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>

[Logo]

April 28, 1999

Dear Stockholders of Affinity Technology Group, Inc.:

On behalf of the Board of Directors of Affinity Technology Group, Inc.,
it is my pleasure to invite you to attend the 1999 Annual Meeting of
Stockholders of Affinity Technology Group, Inc., to be held at the Columbia
Museum of Art, at the corner of Main and Hampton Streets, Columbia, South
Carolina, on Friday, May 28, 1999, at 10:00 a.m., local time.

The principal business of the meeting will be the election of
directors, the consideration of two proposed amendments to our stock option plan
and the ratification of the appointment of independent auditors. In addition, we
plan to review the Company's business during the past year and our outlook for
the current year.

This booklet, which contains the Notice of Annual Meeting and the Proxy
Statement, describes the business to be transacted at the meeting and provides
certain other information about the Company and its directors and executive
officers which you should consider when voting your shares.

It is important that your shares be represented at the meeting, whether
or not you plan to attend. In order to be certain that your shares will be voted
at the meeting, please complete, date and sign the accompanying proxy card and
return it in the enclosed postage prepaid envelope, which requires no postage if
mailed in the United States.

I look forward to seeing you at the meeting.

Very truly yours,
/s/ R. Murray Smith
R. Murray Smith
President and Chief Executive Officer

<PAGE>

AFFINITY TECHNOLOGY GROUP, INC.
1201 Main Street, 20th Floor
Suite 2080
Columbia, SC 29201

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Affinity Technology Group, Inc.:

The Annual Meeting of the Stockholders of Affinity Technology Group,
Inc. (the "Company"), will be held at the Columbia Museum of Art, at the corner
of Main and Hampton Streets, Columbia, South Carolina, on Friday, May 28, 1999,
at 10:00 a.m. Eastern Daylight Saving Time, for the following purposes:

o To elect six members to the Board of Directors;

o To consider and vote upon a proposal to amend the 1996 Stock
Option Plan of Affinity Technology Group, Inc. (the "1996
Option Plan"), to increase the number of shares issuable
thereunder from 1,900,000 shares to 2,900,000;

o To consider and vote upon a proposal to amend the 1996 Option
Plan to permit participation by non-employee directors in the
1996 Option Plan;

o To consider and vote upon a proposal to ratify the appointment
of Ernst & Young LLP as independent auditors for the year
ending December 31, 1999; and

o To transact such other business as may properly come before
the meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on April 1,
1999, as the record date for the determination of stockholders entitled to vote
at the meeting. Accordingly, only stockholders who are holders of record at the
close of business on that date are entitled to notice of and to vote at the
meeting.

A list of stockholders entitled to vote at the Annual Meeting will be
open for examination by any stockholder for any purpose germane to the Annual
Meeting during ordinary business hours for a period of ten days prior to the
Annual Meeting at the principal executive offices of the Company at 1201 Main
Street, Suite 2080, Columbia, South Carolina.

By order of the Board of Directors:
/s/ R. Murray Smith
R. Murray Smith
President and Chief Executive Officer

You are urged to complete, date and sign the accompanying proxy card
and to return it promptly in the enclosed envelope, which requires no postage if
mailed in the United States.

April 28, 1999

<PAGE>

GENERAL INFORMATION
Proxy Solicitation

This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Affinity Technology Group, Inc. (the "Company"), of
proxies to be voted at the 1999 Annual Meeting of Stockholders of the Company to
be held at the Columbia Museum of Art, at the corner of Main and Hampton
Streets, Columbia, South Carolina, on Friday, May 28, 1999, at 10:00 a.m.
Eastern Daylight Saving Time. The entire cost of such solicitation will be borne
by the Company. In addition to solicitation by mail, arrangements will be made
with brokerage houses and other custodians, nominees and fiduciaries to send
proxy materials to their principals, and the Company may reimburse them for
their expenses in doing so. Personal solicitations may be conducted by
directors, officers and employees of the Company. This Proxy Statement and
accompanying proxy card will be mailed to stockholders on or about April 28,
1999.

Voting Procedures

The Company's common stock, par value $0.0001 per share ("Common
Stock"), is the only outstanding voting security of the Company. Holders of
record of the Common Stock at the close of business on April 1, 1999, are
entitled to vote at the Annual Meeting and are entitled to one vote for each
share held. At the close of business on April 1, 1999, there were 29,499,673
shares of Common Stock outstanding.

Under Article II, Section 6 of the Amended and Restated By-Laws of the
Company (the "By-Laws"), the holders of a majority of the shares of Common Stock
entitled to vote at the Annual Meeting, present in person or represented by
proxy, constitute a quorum for the transaction of business at the Annual
Meeting. The By-Laws further provide that if a quorum is initially present, the
stockholders of the Company may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum, if any action taken is approved by a majority of the stockholders
initially constituting a quorum for the meeting. Abstentions, shares that are
withheld as to voting with respect to one or more of the nominees for director
and shares held by a broker, as nominee, that are voted at the discretion of
such broker on any matter will be counted in determining the existence of a
quorum.

Under the Company's By-Laws, directors are elected by a plurality of
the votes of shares of Common Stock present in person or represented by proxy at
the Annual Meeting and entitled to vote on the election of directors. Shares
that are withheld as to voting with respect to a nominee for director will not
be treated as votes cast with respect to the election of directors. The
proposals to approve the amendments to the 1996 Stock Option Plan of Affinity
Technology Group, Inc. (the "1996 Option Plan"), and the proposal to ratify the
appointment of independent auditors for the year ending December 31, 1999, will
be approved if they receive the affirmative vote of the holders of a majority of
shares of Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote on such matters. For such purposes, abstentions
will be treated as shares present and entitled to vote and, consequently, will
be treated as a vote against such proposals. However, shares held of record by a
broker, as nominee, that are not voted on such proposals will not be treated as
shares present and entitled to vote on such proposals and, accordingly, will not
affect the outcome of such proposals.

Voting of Proxies

The shares represented by the accompanying proxy card and entitled to
vote will be voted if the proxy card is properly signed and received by the
Secretary of the Company prior to the meeting. Where a choice is specified on
any proxy card as to the vote on any matter to come before the meeting, the
proxy will be voted in accordance with such specification. Where no choice is
specified, the proxy will be voted for the election of the persons nominated to
serve as the directors of the Company named in this Proxy Statement, for the
proposal to amend the 1996 Option Plan to increase the number of shares issuable
thereunder from 1,900,000 to 2,900,000, for the proposal to amend the 1996
Option Plan to permit non-employee directors to participate in the plan, for the
proposal to ratify the appointment of Ernst & Young LLP as independent auditors
for the year ending December 31, 1999, and in such manner as the persons named
on the enclosed proxy card in their discretion determine upon such other
business as may properly come before the meeting or any adjournment thereof. Any
stockholder giving a proxy has the right to revoke it at any time before it is
voted by giving written notice to the Secretary of the Company, by attending the
meeting and giving notice of his or her intention to vote in person or by
executing and delivering to the Company a proxy bearing a later date.

<PAGE>

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of April 1, 1999, by: (i) each
director and nominee for director of the Company; (ii) each executive officer of
the Company named under the caption "Executive Compensation--Summary
Compensation Table," below; (iii) each person who is known by the Company to
beneficially own more than five percent of the outstanding shares of Common
Stock (a "five percent stockholder"); and (iv) all directors and executive
officers as a group. Except as set forth in the footnotes to the table below,
each of the stockholders identified in the table below has sole voting and
investment power over the shares beneficially owned by such person. Except as
noted in the footnotes to the following table, the address of each five percent
stockholder is 1201 Main Street, 20th Floor, Suite 2080, Columbia, South
Carolina, 29201.

Percent of
Number of Shares Outstanding
DIRECTORS AND EXECUTIVE OFFICERS Beneficially Owned Shares Owned
- -------------------------------- ------------------ ------------
<S> <C> <C>
Jeff A. Norris (1) 8,607,392 29.2%
Alan H. Fishman (2)(3) 2,767,077 9.4%
Peter R. Wilson (3) 434,099 1.5%
Robert M. Price (2)(3) 248,691 *
R. Murray Smith (4) 157,500 *
Edward J. Sebastian (2)(3)(5) 148,574 *
Terrence J. Sabol, Sr. (6) 80,300 *
John D. Rogers (7) 51,340 *
Joseph A. Boyle (8) 21,500 *
Paul E. Adams - -

Directors and executive officers as a group (10 persons) (10) 12,516,473 42.4%

OTHER FIVE PERCENT STOCKHOLDERS
Carolina First Corporation (10) 5,999,706 20.3%
shapeType20fFlipH0fFlipV0shapePath4fFillOK0fFilled0fArrowheadsOK1
</TABLE>

* Indicates less than one percent.
(1) Includes 2,650,000 shares of Common Stock held by the Norris Family
Limited Partnership and 95,400 shares of Common Stock held by the J&L
Extended Family Limited Partnership.
(2) Includes 8,480, 8,480 and 6,360 shares of Common Stock issuable upon the
exercise of options granted under the 1995 Stock Option Plan of Affinity
Technology Group, Inc.(the "1995 Option Plan"), to Messrs. Fishman,
Price and Sebastian, respectively.
(3) Includes 20,699 shares of Common Stock issuable upon the exercise of
options granted under the Non-employee Directors' Stock Option Plan of
Affinity Technology Group, Inc. (the "Directors' Option Plan"), to each of
Messrs. Fishman, Price, Sebastian and Wilson.
(4) Includes 150,000 shares of Common Stock issuable upon the exercise of
options, of which 100,000 shares are issuable upon exercise of options
granted to Mr. Smith under the 1996 Option Plan and 50,000 shares are
issuable upon exercise of options granted to Mr. Smith in connection with
his employment as President and Chief Executive Officer of the Company.
(5) Includes 2,000 shares of Common Stock held by Mr. Sebastian's wife, over
which he shares voting and investment control.
(6) Includes 79,500 shares of Common Stock issuable upon exercise of options
granted under the 1995 Option Plan and 100 shares of Common Stock held by
the son of Mr. Sabol.
(7) Includes 40,000 shares of Common Stock issuable upon the exercise of
options granted under the 1996 Option Plan.
(8) Includes 14,000 shares of Common Stock issuable upon the exercise of
options granted under the 1996 Option Plan.
(9) Includes 389,616 shares of Common Stock issuable upon the exercise of
options granted under the 1995 Option Plan, the 1996 Option Plan, the
Directors' Option Plan and a stock option agreement between the Company
and R. Murray Smith.
(10) Based on information set forth in a Schedule 13 D/A filed by Carolina
First Corporation with the Securities and Exchange Commission. Carolina
First Corporation's address is Post Office Box 1029, Greenville,
South Carolina, 29602.

<PAGE>

Carolina First Corporation

On November 8, 1995, the Company issued a warrant (the "Carolina First
Warrant") to Carolina First Corporation ("Carolina First") that entitled
Carolina First to purchase an aggregate of 6,666,340 shares of Common Stock of
the Company for a purchase price of approximately $0.0001 per share. The terms
of the Carolina First Warrant provided, among other things, that such warrant
could not be exercised by Carolina First into a number of shares of Common Stock
equal to or greater than five percent of all outstanding shares of Common Stock
of the Company unless Carolina First obtained the written consent of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"). During
1997, Carolina First obtained the consent of the Federal Reserve Board to
exercise the Carolina First Warrant in full, and at April 1, 1999, Carolina
First had exercised the warrant into an aggregate of 3,195,000 shares of Common
Stock of the Company (including 666,634 shares of Common Stock transferred by
Carolina First to certain of its officers in late 1995). At April 1, 1999, the
Carolina First Warrant was exercisable into an additional 3,471,340 shares of
Common Stock of the Company. As a bank holding company, Carolina First may be
required by the Federal Reserve Board to reduce its ownership of Common Stock of
the Company to less than five percent of the Company's outstanding shares of
Common Stock if the Company engages in any business activity determined by the
Federal Reserve Board to be impermissible for a bank holding company.

Potential Change in Control

Jeff A. Norris, a member of the Board of Directors of the Company, has
advised the Company that he has sold an aggregate of approximately 2.0 million
shares of Common Stock in part to reduce the amounts outstanding under a
personal loan. Mr. Norris currently beneficially owns approximately 8.6 million
shares of Common Stock, or approximately 29.2% of the outstanding shares of
Common Stock. Of these, 5.9 million shares are pledged for such loan, which is
payable on demand at any time at the discretion of the lender. The foreclosure
upon and/or subsequent sale in public markets of a substantial number of shares
of Common Stock owned by Mr. Norris could cause a change in control of the
Company and could have an adverse effect on the market price of the Common
Stock.

BOARD OF DIRECTORS

The business and affairs of the Company is managed by or under the
direction of the Board of Directors, as provided by Delaware law and the
Company's By-Laws. The directors establish overall policies and standards for
the Company and review the performance of management. The directors are kept
informed of the Company's operations at meetings of the Board, through reports
and analyses and through discussions with management.

Meetings of the Board

The Board of Directors meets on a regularly scheduled basis and met
nine times during the year ended December 31, 1998. During 1998, all directors
participated in at least 75% of the aggregate of all meetings of the Board of
Directors and of the Committees of the Board of Directors on which they served.

Committees of the Board

The Board of Directors has established an Audit Committee and a
Compensation Committee. There is no nominating committee of the Board of
Directors.

The Audit Committee, established in 1996, has the authority to
recommend the annual appointment of the Company's independent auditors, with
whom the Audit Committee reviews the scope of audit and non-audit assignments
and related fees, the accounting principles used by the Company in financial
reporting and the adequacy of the Company's internal control procedures. The
members of the Audit Committee, which met once during the year ended December
31, 1998, are Dr. Peter R. Wilson (Chairman), Robert M. Price and Edward J.
Sebastian.

<PAGE>

The Compensation Committee has the authority, among other things, to:
(i) determine the cash and non-cash compensation of each of the Company's
executive officers and any other employee with an annual salary in excess of
$100,000; (ii) consider and recommend to the Board such general and specific
employee equity and other incentives as it may from time to time deem advisable;
and (iii) administer the Company's stock option plans. The members of the
Compensation Committee, which met seven times during the year ended December 31,
1998, are Alan H. Fishman (Chairman), Robert M. Price and Dr. Peter R. Wilson.

Nominees for Director

Article III, Section 2 of the By-Laws of the Company provides that the
Board of Directors shall consist of at least three and no more than fifteen
members, which number will be determined, from time to time, by resolution
adopted by the Board of Directors of the Company. The Board of Directors has set
the number of directors at six. The six persons named below are nominated to
serve on the Board of Directors until the 2000 Annual Meeting of Stockholders or
until their successors are elected and qualified. Each nominee is currently a
director of the Company.

The age and a brief biographical description of each nominee for director are
set forth below.

Alan H. Fishman (53), Chairman, has been a director of the Company since March
1995 and became Chairman of the Board in April 1996. Formerly Chief Financial
Officer of Chemical Bank from 1979 to 1983, he founded Columbia Financial
Partners, L.P., an investment firm that specializes in the area of financial
services assets, in February 1992 and serves as its Managing Partner. Between
March 1990 and February 1992, he was a Managing Partner of Adler & Shaykin, a
private investment firm. Mr. Fishman earned a bachelor's degree at Brown
University and a master's degree in economics at Columbia University Graduate
School of Business. Mr. Fishman also serves as a member of the Board of
Directors of Keyspan Energy Corporation, a public utility company.

Jeff A. Norris (38), founder of the Company, served as the Company's Chief
Executive Officer from March 1994 to May 1998 and has been a director of the
Company since March 1994. Mr. Norris currently is President of Jeff A. Norris
and Associates, an investment and trading firm. Prior to founding the Company,
Mr. Norris was employed as a salesman by Digital Equipment Corporation for nine
years. Mr. Norris received a bachelor's degree in finance from the University of
South Carolina and earned a Masters of Business Administration at the Fuqua
School of Business at Duke University.

Robert M. Price, Jr. (68), has served as a director of the Company since
November 1994. He has been President of PSV, Inc., a technology consulting
business located in Burnsville, Minnesota, since 1990. Between 1961 and 1990,
Mr. Price served in various executive positions, including Chairman and Chief
Executive Officer, with Control Data Corporation, a mainframe computer
manufacturer and business services provider. Mr. Price is a graduate of Duke
University, and earned a master's degree at the Georgia Institute of Technology.
Mr. Price is a director of International Multifoods Inc., Public Service Company
of New Mexico, Fourth Shift Corporation and Tupperware Corporation.

Edward J. Sebastian (52), has served as a director of the Company since July
1995. Mr. Sebastian has been Chairman of the Board and Chief Executive Officer
of Resource Bancshares Mortgage Group, Inc. ("RBMG"), a publicly traded
residential mortgage company, since he organized it as a division of Republic
National Bank in May 1989. Mr. Sebastian has also been Chairman of the Board and
Chief Executive Officer of Resource Bancshares Corporation, now a wholly owned
subsidiary of RBMG, since it was founded by him in September 1986. Resource
Bancshares Corporation has owned specialty asset companies engaging in
commercial mortgage banking, credit card transaction processing and origination
and small ticket equipment leasing. In addition, Mr. Sebastian serves as
Chairman of a number of wholly owned subsidiaries of Resource Bancshares
Corporation and serves as a director of First Sun South Corporation, Baker
Communications Fund, Southeast Bank Fund and Founders Fund, Inc. Mr.
Sebastian earned a bachelor's degree at Pennsylvania State University.

<PAGE>

R. Murray Smith (55), has served as a director of the Company since July 1998,
and became President and Chief Executive Officer of the Company in May 1998.
Before joining the Company, Mr. Smith was President and Chief Executive Officer
of Adaptive Decision Systems, a firm he established in 1987, which develops
custom systems for credit scoring, behavior scoring, target marketing, and fraud
detection. Before founding Adaptive Decision Systems, Mr. Smith was Senior Vice
President of Avco Financial Services in Irvine, California from 1983 to 1987. He
was previously an executive with The St. Paul Companies in St. Paul, Minnesota
from 1977 to 1983 and a consultant with McKinsey and Company from 1971 to 1977.
Mr. Smith earned a Masters of Business Administration at Harvard University and
a bachelor's degree from Davidson College.

Dr. Peter R. Wilson (46), has been a director of the Company since March
1994. Mr. Wilson served as Secretary of the Company from March 1994 until
February 1996 and has been an Associate Professor at the Fuqua School of
Business at Duke University since September 1991. He was an Assistant Professor
at New York University's Stern School of Business between January 1983 and
August 1991. Dr. Wilson teaches in the areas of financial accounting, financial
reporting, financial statement analysis and strategic cost management. He earned
a bachelor's degree and a Ph.D., in accounting at the University of North
Carolina.

Compensation of Directors

In April 1999, the Board of Directors adopted a policy under which all
non-employee directors of the Company (Messrs. Fishman, Norris, Price, Sebastian
and Wilson) will receive a fee of $2,000 for each meeting attended in person and
$500 for each meeting attended by teleconference. In addition, assuming the
proposal to amend the 1996 Option Plan to permit non-employee directors to
participate in the plan is adopted by the stockholders of the Company at the
Annual Meeting, each non-employee director will also receive an annual grant,
effective on the fifth business day after each annual stockholders' meeting, of
an option to acquire 5,000 shares of Common Stock, beginning in 1999. Each such
option will be exercisable at the closing sales price of shares of Common Stock
on the business day immediately prior to the date of grant, will be immediately
exercisable and will have a term of five years from the date of grant. The Board
of Directors may determine to change the Company's policy for compensating
non-employee directors, including the number and terms of options to be granted
to directors, at any time and for any reason. All directors are reimbursed for
out-of-pocket expenses incurred in attending any Board of Directors or Committee
meetings.

The Company also has adopted the Non-employee Directors' Stock Option
Plan of Affinity Technology Group, Inc., (the "Directors' Option Plan"), under
which directors who are not employees of the Company or any of its subsidiaries
are entitled to receive an initial award ("Initial Awards") in the form of an
option to purchase shares of Common Stock having an aggregate fair market value
of $50,000 and a subsequent award ("Annual Awards") in each year in the form of
an option to purchase shares of Common Stock having an aggregate fair market
value of $15,000. The Directors' Option Plan authorizes the issuance of no more
than 100,000 shares of Common Stock, and there are currently no shares of Common
Stock available for grant under the Directors' Option Plan. During 1997, each of
the Company's non-employee directors (Messrs. Fishman, Price, Sebastian and
Wilson) was granted an Initial Award consisting of an option to purchase 12,903
shares of Common Stock of the Company at $3.88 per share under the Directors'
Option Plan. During 1998, each of the Company's non-employee directors (Messrs.
Fishman, Price, Sebastian and Wilson) was granted an Annual Award consisting of
an option to purchase 12,097 shares of Common Stock of the Company at $1.22 per
share under the Directors' Option Plan.

During 1995, certain non-employee directors of the Company (Messrs.
Fishman, Price and Sebastian) were each granted an option to purchase 10,600
shares of Common Stock at an exercise price of approximately $0.44 per share. In
addition, the Company currently subleases office space in New York, New York
from a partnership of which Mr. Fishman is the Managing Partner. Further, a
subsidiary of the Company has entered into an agreement with RBMG, of which Mr.
Sebastian serves as Chairman of the Board and Chief Executive Officer, pursuant
to which a subsidiary of the Company will underwrite, process and sell mortgage
loans to RBMG. See "Certain Transactions."

<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the annual and
long-term compensation earned by the current and former Chief Executive Officer
and the four most highly compensated executive officers other than the Chief
Executive Officer (the "Named Executives") for services rendered to the Company
and its subsidiaries in all capacities for the years ended December 31, 1998,
1997 and 1996.

Long Term
Compensation
Awards
Annual Compensation Securities Underlying
Name and Principal Position Year Salary (1) Bonus Options/SARs (#)
<S> <C> <C> <C> <C>
R. Murray Smith 1998 $188,182(2) $100,000(3) 750,000
President and Chief Executive 1997 - - -
Officer 1996 - - -
Jeff A. Norris 1998 169,615 - -
Former President and Chief 1997 175,000 - -
Executive Officer 1996 175,000 - -
Joseph A. Boyle 1998 169,615 - 225,000(5)
Senior Vice President, Chief 1997 175,000 - 102,500
Financial Officer and Treasurer 1996 48,478 75,000(4) 67,500
John D. Rogers 1998 169,615 - 125,000
Senior Vice President 1997 175,000 44,089(4) 100,000
1996 116,777 - -
Terrence J. Sabol, Sr. 1998 152,692 - 125,000
Senior Vice President - Technology 1997 111,154 - -
1996 85,237 - 132,500
Paul E. Adams 1998 72,019 - 200,000
Senior Vice President - Sales 1997 - - -
and Marketing 1996 - - -

</TABLE>

- -------------------

(1) Effective November 1, 1998, the Compensation Committee implemented a base
salary reduction program for each executive officer of the Company. Under
the program, the base salary paid to Messrs. Smith, Norris, Boyle, Rogers
and Adams was reduced by 20 percent, and the base salary paid to Mr. Sabol
was reduced by 10 percent. Such measures were part of the Company's overall
efforts to reduce cash expenses during 1998.
(2) Mr. Smith became President and Chief Executive Officer of the Company in
May 1998. In March and April 1998, Mr. Smith rendered consulting services
to the Company. During 1998, Mr. Smith was paid approximately
$56,000 pursuant to the terms of his consulting arrangement with the
Company, and such amount is included in the salary shown as earned by Mr.
Smith during 1998.
(3) Reflects a bonus paid in connection with Mr. Smith's employment with the
Company.
(4) Reflects a relocation bonus paid in connection with Mr. Boyle's and Mr.
Rogers's employment with the Company.
(5) Certain of such options were issued in exchange for outstanding options
held by Mr. Boyle. See "Option Repricings."

<PAGE>

Option/SAR Grants in Last Fiscal Year

The following table sets forth certain information with respect to
stock options granted to the Named Executives during the year ended December 31,
1998, and the hypothetical "value" of these options to the Named Executives
assuming an annual compound stock price appreciation of 5% and 10% from the date
such options were granted over the full option term (10 years). The actual value
realized may be greater than or less than the potential realizable values set
forth in the table.

Individual Grants Potential Realizable
--------------------------------------------------------------
Percent of Value
Number of Total at Assumed Annual Rates of
Securities Options/SARs Exercise Stock Price
Underlying Granted to or Base Appreciation for Option
Options/SARs Employees in Price Expiration Term
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ----------- ------ ---- --- ------ --- -------
<S> <C> <C> <C> <C> <C> <C>
R. Murray Smith 750,000 (1) 41.8% $ 0.94 7/29/2008 $ 443,370 $ 1,123,588
Joseph A. Boyle 125,000 (2) 7.0% 0.94 7/29/2008 73,895 187,265
100,000 (3) 5.6% 0.50 10/5/2008 31,445 79,687
John D. Rogers 125,000 (2) 7.0% 0.94 7/29/2008 73,895 187,265
Terrence J. Sabol, Sr. 125,000 (2) 7.0% 0.94 7/29/2008 73,895 187,265
Paul E. Adams 200,000 (4) 11.1% 0.94 7/20/2008 118,232 299,624

- ----------------------- ----------------- ----------------- ----------- -------------- ------------- ---------------
</TABLE>

(1) Such options vest and become exercisable in five equal installments on May
14, 1999, 2000, 2001, 2002 and 2003, and will immediately vest and become
exercisable in the event there is a change in control of the Company.
(2) Such options vest and become exercisable in five equal installments on July
29, 1999, 2000, 2001, 2002 and 2003, and will immediately vest and become
exercisable in the event there is a change in control of the Company.
(3) Such options vest and become exercisable in five equal installments on
October 5, 1999, 2000, 2001, 2002 and 2003, and will immediately vest and
become exercisable in the event there is a change in control of the
Company. Such options were granted by the Company in exchange for options
to acquire an aggregate of 100,000 shares of Common Stock held by Mr.
Boyle. See "Option Repricings."
(4) Such options vest and become exercisable in five equal installments on July
7, 1999, 2000, 2001, 2002 and 2003, and will immediately vest and become
exercisable in the event there is a change in control of the Company.

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values

The following table sets forth the number of shares of the Company's
Common Stock covered by outstanding stock options held by each of the Named
Executives at December 31, 1998. None of the Named Executives exercised any
outstanding options during the year ended December 31, 1998.

Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
<S> <C> <C>
R. Murray Smith - / 750,000 $ 0 / $ 0
Joseph A. Boyle 14,000 / 281,000 $ 0 / $ 0
John D. Rogers 20,000 / 205,000 $ 0 / $ 0
Terrence J. Sabol, Sr. 53,000 / 204,500 $ 9,625 / $ 14,437
Paul E. Adams - / 200,000 $ 0 / $ 0
</TABLE>

<PAGE>

Option Repricings

The Company has historically issued stock options under the 1996 Option
Plan with an exercise price equal to the market price of the Company's Common
Stock on the date of grant. Accordingly, stock options provide value only when
the market price of the Company's Common Stock increases over time and is in
excess of the exercise price. During 1998, the Company gave certain employees,
including one executive officer, the opportunity to exchange options granted
under the 1996 Option Plan for new options exercisable at lower prices. Stock
options that were replaced had exercise prices ranging from $2.63 to $11.88. The
replacement options vest in five equal annual installments over the five year
period following the date of grant.

The following table sets forth certain information with respect to
outstanding stock options held by an executive officer of the Company that were
repriced during 1998. No options were repriced by the Company during any period
prior to 1998. For further information with respect to such option repricing,
see "Report of the Compensation Committee and President and Chief Executive
Officer on Executive Compensation."

Ten Year Option/SAR Repricings
Number of Length of
Securities Market Price Exercise Original Term
Underlying of Stock at Price at Remaining at
Options/SARs Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended (#) Amendment Amendment ($) Price Amendment(1)
- ---- ---- ----------- --------- ------------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Boyle 10/5/98 67,500 $ 0.50 $ 11.88 $ 0.50 7.9 Years
Senior Vice 10/5/98 32,500 0.50 7.38 0.50 8.3 Years
President, Chief
Financial Officer
and Treasurer

- ------------------------- -------- ----------------- ---------------- ------------------ ----------- -----------------
</TABLE>

(1) Replacement options issued in exchange for outstanding options vest in five
equal annual installments during the five year period following the date of
grant (October 5, 1998), and expire ten years following the date of grant.

Compensation Committee Interlocks and Insider Participation

No interlocking relationships exist between the Company's Board of
Directors or Compensation Committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past. The Company currently sub-leases office space in New York,
New York on a month-to-month basis from a partnership of which Mr. Fishman is
the Managing Partner. Also, Surety Mortgage, Inc., a wholly owned subsidiary of
the Company ("Surety"), has entered into an agreement with Resource Bancshares
Mortgage Group, Inc. ("RBMG"), pursuant to which Surety processes mortgage loans
for RBMG. Edward J. Sebastian, who served on the Compensation Committee during
part of 1998, is Chairman of the Board and Chief Executive Officer of RBMG. See
"Certain Transactions." R. Murray Smith, the Company's President and Chief
Executive Officer, took part in the process of determining compensation paid to
certain executive officers during 1998. See "Report of the Compensation
Committee and President and Chief Executive Officer on Executive Compensation."

<PAGE>

PERFORMANCE GRAPH

The graph set forth below compares, for the period beginning
immediately after the Company's initial public offering on April 26, 1996, the
"cumulative stockholder return" to stockholders of the Company as compared with
the return of The Nasdaq Stock Market Index (U.S. Companies) (the "Nasdaq Market
Index") and of the Hambrecht & Quist Technology Index ("H&Q Technology Index"),
the Company's industry index. "Cumulative stockholder return" has been computed
assuming an investment of $100, at the beginning of the period indicated, in the
Common Stock of the Company and the stock of the companies included in the
Nasdaq Market Index and the H&Q Technology Index, and assuming the reinvestment
of dividends.

Affinity Technology
Nasdaq Market H&Q Technology Group, Inc.
Index
Index
<S> <C> <C> <C>
April 26, 1996 $100.00 $100.00 $100.00
June 30, 1996 100.08 94.08 65.38
September 30, 1996 103.63 99.87 91.38
December 31, 1996 108.72 107.09 50.00
March 31, 1997 102.82 102.08 41.38
June 30, 1997 121.67 122.86 29.85
September 30, 1997 142.24 148.90 29.85
December 31, 1997 133.38 125.55 18.31
March 31, 1998 156.06 152.02 17.31
June 30, 1998 160.58 155.64 6.46
September 30, 1998 145.38 138.35 3.85
December 31, 1998 187.50 195.29 4.85

</TABLE>

<PAGE>

REPORT OF THE COMPENSATION COMMITTEE AND
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ON
EXECUTIVE COMPENSATION

This report has been prepared to describe the Company's executive
compensation policies and the basis for the compensation earned by the Company's
President and Chief Executive Officer during the year ended December 31, 1998.

Overview

The Compensation Committee of the Board of Directors of the Company was
formed in July 1995 to approve certain matters with respect to compensation paid
to highly compensated employees of the Company, including executive officers.
The Committee, which currently consists of three non-employee directors, has the
authority, among other things, to: (i) determine the cash and non-cash
compensation of each of the Company's executive officers and any other employee
with an annual salary in excess of $100,000; (ii) consider and recommend to the
Board such general and specific employee equity and other incentives as it may
from time to time deem advisable; and (iii) administer the Company's stock
option plans. The Committee currently consists of Alan H. Fishman (Chairman),
Robert M. Price and Dr. Peter R. Wilson.

The Company's executive compensation policy has been designed to
attract qualified executives to fill key management positions and to offer such
executives equity incentives that provide them with the right to share in any
future appreciation in the market price of the Company's Common Stock. As
discussed in more detail below, compensation paid to the Company's executive
officers primarily reflects discussions between the Company and such officers at
the time such officers were offered employment with the Company.

Components of Compensation

Executive compensation presently consists of base salaries and options
to acquire Common Stock of the Company. In addition, the Company from time to
time pays relocation and other forms of signing bonuses to executives to entice
them to accept employment with the Company.

Base Salaries. As indicated above, the base salary initially paid by
the Company to its executive officers primarily reflects negotiations between
the Company and each such officer at the time such officer was offered
employment with the Company. For one executive officer hired during 1998, R.
Murray Smith played a role in such negotiations and determined, after consulting
with certain members of the Compensation Committee, the amount of compensation
to offer such individual, which amount was based primarily on base salaries paid
to other executive officers of the Company, an assessment of prevailing market
rates and the compensation earned by such individual in his former employment.
To date, there has been no established relationship between executive
compensation and operating performance or the compensation practices of peer
companies. The Compensation Committee believes that competition for qualified
executives in the industry in which the Company operates is intense.

During 1998, the Compensation Committee did not increase the base
salary paid to any of its executive officers. Effective November 1, 1998, the
Compensation Committee implemented a base salary reduction program for each
executive officer of the Company. Under such program, the base salary paid to
Messrs. Smith, Norris, Boyle, Rogers and Adams was reduced by twenty percent
(20%), and the base salary paid to Mr. Sabol was reduced by ten percent (10%).
Such measures were part of the Company's overall efforts to reduce cash expenses
during 1998.

<PAGE>

Options. By awarding stock options to executive officers that otherwise
do not have a significant equity interest in the Company, the Company attempts
to align the interests of its executive officers with those of the Company's
stockholders. The Compensation Committee has not adopted any objective criteria
that relate the number of options granted to executive officers to the Company's
performance. However, the Company has attempted to use its option plan to offer
a significant component of potential compensation paid to executive officers,
many of whom the Company believes would require additional cash compensation in
the absence of stock options. During 1998, the Compensation Committee determined
to award additional options to certain executive officers to increase their
equity interests in the Company and their participation in future stock price
increases. The Compensation Committee has determined not to grant stock options
to Jeff A. Norris since Mr. Norris already has a significant equity interest in
the Company

Option Repricing

In October 1998, the Compensation Committee determined to authorize the
grant of options to acquire 100,000 shares of Common Stock to Joseph A. Boyle,
the Company's Senior Vice President, Chief Financial Officer and Treasurer, in
exchange for existing options held by Mr. Boyle to acquire 100,000 shares of the
Company's Common Stock that were exercisable at prices substantially in excess
of the prevailing market price of the Company's Common Stock at that time. The
new options are exercisable at a price of $0.50 per share, vest in five equal
annual installments over the five year period following the date of grant and
expire if not exercised on the tenth anniversary of the date of grant. The
options exchanged by Mr. Boyle for the new options consisted of two separate
grants, one of which was awarded on September 12, 1996, and was exercisable at
$11.88 per share, and the other of which was awarded on January 16, 1997, and
was exercisable at $7.38 per share. The options exchanged by Mr. Boyle vested in
five equal annual installments following the date of grant and expired on the
tenth anniversary of the date of grant.

The Committee's decision to authorize the repricing of options held by
Mr. Boyle was based upon several factors, including the fact that options held
by Mr. Boyle were exercisable at prices substantially in excess of options held
by certain other executive officers. The Committee also considered the
significant contributions made by Mr. Boyle to the Company, the desire to retain
Mr. Boyle's services and the fact that Mr. Boyle has not received a salary
increase since his employment with the Company in August 1996.

Compensation Paid to the Chief Executive Officer

The salary and bonus paid to R. Murray Smith during 1998 reflect
negotiations between the Company and Mr. Smith at the time of his employment
with the Company in May 1998. However, Mr. Smith's initial base salary of
$225,000 has been reduced to $180,000 to reflect the executive salary reduction
program implemented in November 1998. Compensation paid to the Company's former
President and Chief Executive Officer, Jeff A. Norris, reflects the same rate of
base salary paid by the Company to Mr. Norris in 1997, adjusted in November 1998
to reflect the executive salary reduction program. Following the replacement of
Mr. Norris as President and Chief Executive Officer in May 1998, the Company
determined to retain Mr. Norris's services to assist the Company from time to
time as needed. This arrangement was terminated effective May 15, 1999.

Section 162(m) of the Internal Revenue Code of 1986, as amended, limits
to $1 million the deductible amount of compensation paid to any Named Executive
unless certain actions are taken by the Company. Generally, the Company's stock
option plans have been designed to qualify for a deduction without limitation
under these rules. However, the Company's stock option agreement with R. Murray
Smith covering 250,000 shares of Common Stock may not qualify for a deduction
under Section 162(m). Due to current salary levels, the Company believes that it
is unlikely that the application of these rules will prevent the Company from
claiming a deduction for the amount of compensation paid to executive officers,
except for compensation that may be earned by Mr. Smith under his stock option
agreement.

This report is submitted by the Compensation Committee and the
President and Chief Executive Officer of the Company.

Compensation Committee: President and Chief Executive Officer:
Alan H. Fishman (Chairman) R. Murray Smith
Robert M. Price
Dr. Peter R. Wilson

<PAGE>

CERTAIN TRANSACTIONS

The Company currently sub-leases office space in New York, New York on
a month-to-month basis from a partnership of which Mr. Fishman, a director of
the Company, is the Managing Partner. The monthly rentals under the arrangement
currently are $5,000. During 1998, the Company recorded aggregate lease expense
of $60,000 under such lease for the twelve months ended December 31, 1998.

During 1996, the Company entered into a lease agreement with Carolina
First with respect to the rental of automated loan machines. Pursuant to a
contract termination agreement between Carolina First and the Company, amounts
due the Company totaling approximately $505,000 were discharged in consideration
of a $50,000 payment by Carolina First to the Company and the return of the
automated loan machines to the Company. Carolina First is the beneficial owner
of in excess of five percent of the outstanding shares of Common Stock. See
"Security Ownership of Management and Certain Beneficial Owners."

During February 1998, Surety entered into an agreement with RBMG
pursuant to which Surety underwrites and processes mortgage loans in accordance
with guidelines specified by RBMG. Surety receives a fee from RBMG for the
underwriting and processing services performed. During the year ended December
31, 1998, Surety processed and sold to RBMG approximately $18,300,000 in
mortgage loans resulting in approximately $330,000 in revenue for Surety. Edward
J. Sebastian, who is a director of the Company, is Chairman of the Board and
Chief Executive Officer of RBMG.

PROPOSALS TO BE VOTED UPON

Election of Directors

The six individuals set forth under the caption "Board of
Directors-Nominees for Director" have been nominated by the Board of Directors
for election at the 1999 Annual Meeting of Stockholders. Each nominee for
director has indicated that he is willing and able to serve as a director, if
elected. However, if any nominee should become unable to serve or for good cause
will not serve, the persons named on the enclosed proxy card will vote for such
other nominees and substituted nominees as designated by the Board of Directors.

Proposal to Amend the 1996 Option Plan to Increase the Number of Shares of
Common Stock Available for Issuance from 1,900,000 to 2,900,000

In April 1999, the Board of Directors adopted an amendment to the
Company's 1996 Option Plan, subject to stockholder approval at the 1999 Annual
Meeting of Stockholders, to increase the number of shares of Common Stock
available for issuance thereunder from 1,900,000 to 2,900,000. The Board of
Directors believes that stock options are important to attract and to encourage
the continued employment and service of key individuals. The purpose of this
amendment is to ensure that the Company has flexibility to meet its foreseeable
future needs for awards to be granted under the 1996 Option Plan. As of March
31, 1999, 1,623,650 options to purchase shares were outstanding under the 1996
Option Plan, leaving only 276,350 shares available for future stock option
grants. Options outstanding at March 31, 1999 have per share exercise prices
ranging from $0.50 to $7.38, or a weighted average per share exercise price of
$1.55, and expire ten years from the date of grant on dates ranging from January
2007 to October 2008 (unless exercised prior to that time). At April 1, 1999,
the closing sale price of the Common Stock was $1.63 per share.

As directed by the Board of Directors, the stockholders of the Company
will be asked to consider and vote on the foregoing amendment to the 1996 Option
Plan. Unless otherwise instructed on the proxy, properly executed proxies will
be voted in favor of approving the foregoing amendment to the 1996 Option Plan.
The affirmative vote of a majority of the votes present in person or represented
by proxy at the Annual Meeting is required to approve this amendment. The Board
of Directors recommends that the stockholders vote FOR this amendment to the
1996 Option Plan.

<PAGE>

Proposal to Amend the 1996 Option Plan to Permit Non-employee Directors to
Participate

In April 1999, the Board of Directors adopted an amendment to the
Company's 1996 Option Plan, subject to stockholder approval at the 1999 Annual
Meeting of Stockholders, to permit non-employee directors to participate in the
1996 Option Plan. The purpose of this amendment is to ensure that the Company
has the ability to compensate non-employee directors in stock. Currently, there
are no shares of Common Stock available for issuance under the Directors' Option
Plan, which formerly has been used by the Company to compensate its non-employee
directors. If this amendment is adopted by the stockholders at the Annual
Meeting, starting in 1999 the Company plans to grant to each non-employee
director, effective on the fifth business day after each annual meeting of
stockholders, an option to acquire 5,000 shares of Common Stock exercisable at
the closing market price of shares of Common Stock on the business day before
the date of grant. Such options will have a term of five years and will be
immediately exercisable.

As directed by the Board of Directors, the stockholders of the Company
will be asked to consider and vote on the foregoing amendment to the 1996 Option
Plan. Unless otherwise instructed on the proxy, properly executed proxies will
be voted in favor of approving the foregoing amendment to the 1996 Option Plan.
The affirmative vote of a majority of the votes present in person or represented
by proxy at the 1999 Annual Meeting of Stockholders is required to approve this
amendment. The Board of Directors recommends that the stockholders vote FOR this
amendment to the 1996 Option Plan.

The following table sets forth the options that would be awarded in
1999 and each year thereafter to non-employee directors if this amendment to the
1996 Option Plan is approved.

New Plan Benefits
Non-employee Director Number of Shares
---------------------- ----------------
<S> <C>
Alan H. Fishman 5,000
Jeff A. Norris 5,000
Robert M. Price 5,000
Edward J. Sebastian 5,000
Peter R. Wilson 5,000
=====================
Total non-employee director group 25,000
---------------------------------------- =====================
</TABLE>

Summary of the 1996 Option Plan

The following is a description of the 1996 Option Plan as amended and
restated in April 1999. The summary, however, does not purport to be a complete
description of all of the provisions of the 1996 Option Plan.

The purpose of the 1996 Option Plan is to encourage and enable selected
individuals to acquire or to increase their holdings of Common Stock of the
Company in order to promote a closer identification of their interests with
those of the Company and its stockholders, thereby further stimulating their
efforts to enhance the efficiency, soundness, profitability, growth and
stockholder value of the Company. Approximately 87 employees are currently
eligible to participate in the 1996 Option Plan (excluding five non-employee
directors who would become eligible to participate if the amendment described
above is adopted by stockholders). If stockholders approve the proposed
amendments to the 1996 Option Plan, options to purchase an aggregate of
1,276,350 shares of Common Stock would be available for future stock option
grant under the 1996 Option Plan to employees, independent contractors and
non-employee directors of the Company. It is not possible to determine at this
time the awards that may be made to employees of the Company. The estimated
number of options to be granted to non-employee directors is set forth above
under "Proposal to Amend the 1996 Option Plan to Permit Non-employee Directors
to Participate."

The 1996 Option Plan permits the granting of both incentive stock
options (i.e., options that meet the requirements of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code")) ("Incentive Options")
and nonqualified stock options (i.e., options that do not meet such
requirements) ("Nonqualified Options"). Options granted to employees are usually
designated as Incentive Options, whereas options granted to independent
contractors and non-employee directors will be Nonqualified Options.

An Incentive Option may not have an exercise price less than the fair
market value of the Common Stock on the date of grant or an exercise period that
exceeds 10 years from the date of grant, and is subject to certain other
limitations that allow the optionee to qualify for favorable tax treatment.
Nonqualified Options may have an exercise price less than the fair market value
of the underlying Common Stock on the date of grant, but like Incentive Options,
are limited to an exercise period of no longer than 10 years.

The exercise price of an option may be paid in: (i) cash; (ii) shares
owned by the optionee at the time of exercise; (iii) shares of Common Stock
withheld upon exercise, subject to certain limitations; or (iv) any combination
of cash and shares. Shares tendered or withheld in payment upon the exercise of
an option shall be valued at their fair market value on the date of exercise, as
determined by the Administrator in accordance with the provisions of the 1996
Option Plan. In addition, an optionee may pay all or a portion of the exercise
price by delivery of a properly executed written notice of exercise to the
Company and delivery to a broker of written notice of exercise and irrevocable
instructions to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price.

Except to the extent, if any, as may be permitted by the Code, Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or any successor statute or rule, an option is not transferable (including by
pledge or hypothecation) other than by will or the laws of intestate succession,
and an option is exercisable during the optionee's lifetime only by the
optionee. If an optionee is subject to Section 16 of the Exchange Act, shares
acquired upon the exercise of an option will not, without the consent of the
Administrator, be transferable (including by pledge or hypothecation) until the
expiration of six months after the date the option was granted. In addition, the
Administrator may impose such restrictions on any shares acquired upon exercise
of options granted under the 1996 Option Plan as it may deem advisable,
including, without limitation, voting restrictions, restrictions on transfer,
repurchase options in the option agreement or otherwise, and transfer and other
restrictions as necessary to ensure compliance with the Securities Act of 1933,
as amended (the "Securities Act") and any blue sky or securities laws applicable
to such shares.

As a general matter, no option granted to an optionee who was an
employee of the Company at the time of the grant may be exercised unless the
optionee is, at the time of exercise, an employee of the Company and has been an
employee continuously since the date the option was granted. The employment
relationship of an optionee is treated as continuing intact for any period that
the optionee is on military or sick leave or other bona fide leave of absence,
provided that the period of such leave does not exceed 90 days or, if longer, as
long as the optionee's right to reemployment is guaranteed either by statute or
by contract. The employment relationship of an optionee will also be treated as
continuing intact while the optionee is not in active service because of
"disability," as defined in the 1996 Option Plan. If the employment of the
optionee is terminated for any reason other than for "cause," as defined in the
1996 Option Plan, his option may be exercised to the extent exercisable on the
date of such termination of employment, except that the Administrator may in its
discretion accelerate the date for exercising all or any part of the option
which was not otherwise exercisable on the date of such termination of
employment. In the event of the optionee's death, such option will be
exercisable by such person or persons as shall have acquired the right to
exercise the option by will or by the laws of intestate succession. If the
employment of the optionee is terminated for "cause," his option will lapse and
no longer be exercisable as of the effective time and date of his termination of
employment as determined by the Administrator.

<PAGE>

Under the Company's policy for compensating non-employee directors, no
option that is granted to a non-employee director may be exercised unless the
optionee is a member of the Board of Directors at the time of exercise and has
been a director continuously since the date of grant. However, if a director
dies, any portion of his option that was exercisable at the time of death may be
exercised within 180 days of the date of death. Moreover, a director generally
will have 30 days following the date of any other termination of service as a
director to exercise all or any portion of his options exercisable at the time
of termination.

All options granted under the 1996 Option Plan will become immediately
exercisable in the event of a "change of control" of the Company, as defined in
the plan. Generally, a "change in control" refers to a merger of the Company
with any other corporation or any similar transaction, an event which causes any
person (or a group of people acting together) to beneficially own at least 51
percent of the outstanding shares of Common Stock of the Company or a change in
a majority of the Board of Directors of the Company during a twelve month
period. The 1996 Option Plan may be amended or terminated by action of the Board
of Directors, except that the stockholders of the Company must approve any
amendment that would materially increase the number of shares that may be issued
under the plan, materially change the requirements for eligibility to receive
options under the plan or materially increase the benefits to participants under
the plan. No option may be granted under the 1996 Option Plan after April 1,
2006.

Generally, no income will be recognized by an optionee who receives an
Incentive Option until shares of stock acquired upon the exercise of an option
are sold. Upon sale of such shares, the optionee will generally be taxed. If the
shares are sold more than two years from the date of grant and one year from the
date of exercise, the optionee will recognize capital gains measured by the
difference between the fair market value of the shares at the time of such sale
and the option price. If shares are sold before expiration of the required
holding periods, the optionee will recognize ordinary income generally measured
as the excess of the fair market value of the shares on the date of exercise
over the option price, and any additional gain or loss on such sale will be
long-term or short-term capital gain or loss, depending on the holding period.
For Nonqualified Options, an optionee will not recognize any taxable income at
the time of grant but will, upon exercise, recognize ordinary income measured by
the excess of the then fair market value of the shares over the exercise price.
Upon resale of such shares, any difference between the sales price and the
exercise price, to the extent not recognized as ordinary income as provided
above, will be treated as capital gain or loss. The Company generally will not
be entitled to a tax deduction for Incentive Options but will be entitled to a
tax deduction for Nonqualified Options in an amount equal to the ordinary income
recognized by an optionee upon exercise of such options.

Appointment of Independent Auditors

The firm of Ernst & Young LLP, Greenville, South Carolina, has been
appointed by the Board of Directors of the Company as independent auditors for
the year ending December 31, 1999, subject to ratification of that appointment
by the stockholders of the Company. Ernst & Young LLP has acted as independent
auditors for the Company since January 1996. Representatives of Ernst & Young
LLP are expected to be present at the Annual Meeting with the opportunity to
make a statement if they so desire and will also be available to respond to
appropriate questions.

The persons named on the accompanying proxy card intend to vote in
favor of the ratification of the appointment of Ernst & Young LLP as independent
auditors for the year ending December 31, 1999, unless a contrary choice is
indicated on the enclosed proxy card. The Board of Directors unanimously
recommends that each stockholder vote FOR this proposal.

<PAGE>

PROPOSALS BY STOCKHOLDERS

Under certain conditions, stockholders may request the Company to
include a proposal for action at a forthcoming meeting of the stockholders of
the Company in the proxy material of the Company for such meeting. All proposals
of stockholders intended to be presented at the 2000 Annual Meeting of
Stockholders of the Company must be received by the Company no later than
December 30, 1999, for inclusion in the Proxy Statement and proxy card relating
to such meeting.

In addition, under Article II, Section 9 of the Company's By-Laws,
nominations for election as a director of the Company and proposals for
stockholder action must be made in writing and be delivered or mailed to the
Secretary of the Company (i) in the case of an annual meeting of stockholders
that is called for a date that is within 30 days before or after the anniversary
date of the immediately preceding annual meeting of stockholders, not less than
60 days nor more than 90 days prior to such anniversary date and (ii) in the
case of an annual meeting of stockholders that is called for a date that is not
within 30 days before or after the anniversary date of the immediately preceding
annual meeting of stockholders, or in the case of a special meeting of
stockholders, not later than the close of business on the tenth day following
the day on which the notice of meeting was mailed or public disclosure of the
date of the meeting was made, whichever occurs first. Such notification must
contain a written statement of the stockholder's proposal and of the reasons
therefor, and, in the case of a nomination for director, nominations must
contain the following information to the extent known by the notifying
stockholder: (a) the name, age and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the nominee's qualifications
to serve as a director; (d) the name and residence address of the notifying
stockholder; and (e) the number of shares owned by the notifying stockholder.
Nominations or proposals not made in accordance with these procedures may be
disregarded by the chairman of the meeting in his discretion, and upon his
instructions all votes cast for each such nominee or for such proposal may be
disregarded.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors and certain officers of the Company, and persons who own more
than 10% of the outstanding shares of the Company's Common Stock, to file with
the Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock. Such persons are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on the review of the copies of such reports furnished to
the Company by such persons and their written representations that such reports
accurately reflect all reportable transactions and holdings, the Company
believes that during 1998, all such persons filed such reports on a timely
basis, with the following exceptions: Alan H. Fishman, a director of the
Company, reported late on a Form 4 filed on January 27, 1999, one purchase of
Common Stock made in December 1998, and John D. Rogers, an executive officer of
the Company, reported late on a Form 4 filed on February 8, 1999, seven sales of
Common Stock made during January, May and July of 1998.

OTHER MATTERS

The management of the Company knows of no other business which will be
presented for consideration at the Annual Meeting. However, if other matters are
properly presented at the meeting, it is the intention of the persons named on
the accompanying proxy card to vote such proxies in accordance with their best
judgment.

By order of the Board of Directors.
/s/ R. Murray Smith
R. Murray Smith
President and Chief Executive Officer

<PAGE>

April 28, 1999

Appendix A

PROXY CARD
AFFINITY TECHNOLOGY GROUP, INC.
1201 Main Street, 20th Floor
Columbia, SC 29201-3201

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Alan H. Fishman and R. Murray Smith, as agents,
each with the power to appoint his substitute, and hereby authorizes each of
them to represent and to vote, as designated on the reverse side, all the shares
of Common Stock of Affinity Technology Group, Inc. held by the undersigned on
April 1, 1999 at the 1999 Annual Meeting of the Stockholders to be held on May
28, 1999 at 10:00 a.m. at the Columbia Museum of Art, corner of Main and Hampton
Streets, Columbia, South Carolina, and at any adjournment thereof.

(see other side)
FOLD AND DETACH HERE

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================================================================================
[X] Please mark your votes as indicated in this example.
================================================================================

1. ELECTION OF DIRECTORS

[ ] FOR all nominees listed
(except as marked to the contrary)

[ ] WITHHOLD AUTHORITY
to vote for all nominees listed

(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
--------------------------------------------
Alan H. Fishman, Jeff A. Norris, Robert M. Price, Jr.,
Edward J. Sebastian, R. Murray Smith, Peter R. Wilson

2. PROPOSAL TO APPROVE AMENDMENT OF THE 1996 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE THEREUNDER
FROM 1,900,000 TO 2,900,000.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. PROPOSAL TO APPROVE AMENDMENT OF THE 1996 STOCK OPTION PLAN TO PERMIT
PARTICIPATION BY NON-EMPLOYEe DIRECTORS.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS, FOR THE YEAR ENDING DECEMBER 31, 1999.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

5. IN THEIR DISCRETION, THE PROXY AGENTS ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

This proxy, when properly dated and executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted for all the nominees for director named above and for
Proposals 2, 3 and 4.

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

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

- ------------------------------------------
Signature if held jointly

DATED: ______________________________ , 1999
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
FOLD AND DETACH HERE

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