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)
57-0991269
(I.R.S. Employer Identification No.)
---------------------------------------------------------
(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):______
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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April 27, 2000
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 2000 Annual Meeting of Stockhold-
ers 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 26, 2000, at 10:00 a.m., local time.
The principal business of the meeting will be the election of directors
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,
Joseph A. Boyle
President and
Chief Executive Officer
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 26, 2000,
at 10:00 a.m. local time for the following purposes:
o To elect six members to the Board of Directors;
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, 2000; 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 10,
2000, 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:
Joseph A. Boyle
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 27, 2000
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 2000 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 26, 2000, at 10:00 a.m. local
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 27, 2000.
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 10, 2000, 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 10, 2000, there were 30,013,913
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 proposal
to ratify the appointment of independent auditors for the year ending December
31, 2000, will be approved if it receives 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 matter. For such purposes,
abstentions will be treated as shares present and entitled to vote and,
consequently, will be treated as a vote against such proposal. However, shares
held of record by a broker, as nominee, that are not voted on such proposal will
not be treated as shares present and entitled to vote on such proposal and,
accordingly, will not affect the outcome of such proposal.
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 and for the
proposal to ratify the appointment of Ernst & Young LLP as independent auditors
for the year ending December 31, 2000, 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.
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, 2000, by: (i) each
director and nominee for director of the Company; (ii) each current 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.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding
DIRECTORS AND EXECUTIVE OFFICERS Beneficially Owned Shares Owned
- -------------------------------- ------------------ ------------
<S> <C> <C>
Alan H. Fishman (1) 2,598,498 8.66%
Peter R. Wilson (2) 168,400 *
Robert M. Price (3) 232,274 *
R. Murray Smith 0 -
Edward J. Sebastian (4) 148,642 *
Terrence J. Sabol, Sr. (5) 131,800 *
Joseph A. Boyle (6) 80,500 *
John D. Rogers (7) 83,360 *
Directors and executive officers as a group (8 persons) 3,443,474 11.47%
OTHER FIVE PERCENT STOCKHOLDERS
Carolina First Corporation (8) 5,224,706 17.41%
Jeff A. Norris (9) 3,042,667 10.14%
</TABLE>
[FN]
* Indicates less than one percent.
(1) Includes options to acquire 40,600 shares of Common Stock.
(2) Includes options to acquire 30,000 shares of Common Stock.
(3) Includes options to acquire 40,600 shares of Common Stock.
(4) Includes options to acquire 38,400 shares of Common Stock
and also includes 2,000 shares of Common Stock held by
Mr.Sebastian's wife, over which he shares voting and
investment control.
(5) Includes options to acquire 131,000 shares of Common Stock.
(6) Includes options to acquire 73,000 shares of Common Stock.
(7) Includes options to acquire 75,000 shares of Common Stock.
(8) 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.
(9) Includes 1,570,000 shares of Common Stock held by the Norris Family
Limited Partnership, 27,700 shares of Common Stock held by the J&L
Extended Family Limited Partnership, and 48,192 shares held by
Mr. Norris' wife. Mr. Norris has disclaimed beneficial ownership
of the shares held by the Norris Family Limited Partnership and
the J&L Extended Family Limited Partnership. Mr. Norris' address
is 145 Mansfield Circle, Lexington, SC 29073.
</FN>
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 10, 2000, 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) and 775,000 shares sold
by Carolina First in the open market in March 2000. At April 10, 2000, 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.
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 14
times during the year ended December 31, 1999. Except for Edward J. Sebastian,
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 during 1999.
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, 1999, are Dr. Peter R. Wilson (Chairman), Robert M. Price and Edward J.
Sebastian.
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 three times during the year ended December 31,
1999, 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 2001 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. Mr.
Fishman has also served as the President and Chief Executive Officer and a
director of ContiFinancial Corporation, a consumer finance company, since July
1999. 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.
Joseph A. Boyle (46) became President and Chief Executive Officer of the Company
in January 2000 and a director in March 2000. Mr. Boyle has also served as Chief
Financial Officer of the Company since September 1996. Mr. Boyle held the title
of Senior Vice President from September 1996 to January 2000 and Treasurer from
May 1997 to January 2000. From May 1997 to July 1998, Mr. Boyle also served as
Secretary of the Company. Prior to joining the Company, Mr. Boyle served as
Price Waterhouse, LLP's engagement partner for most of its Kansas City, Missouri
financial services clients and as a member of the firm's Mortgage Banking Group.
Mr. Boyle was employed by Price Waterhouse, LLP from June 1982 to August 1996.
Robert M. Price (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 served as Chairman of the Board and Chief Executive Officer
of Resource Bancshares Mortgage Group, Inc. ("RBMG"), a publicly traded
residential mortgage company, from the time he organized it as a division of
Republic National Bank in May 1989 until December 1999. Mr. Sebastian was also
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 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.
R. Murray Smith (55) has served as a director of the Company since July 1998,
and formerly served as the President and Chief Executive Officer of the Company
from May 1998 until January 2000. Before joining the Company, Mr. Smith was
President and Chief Executive Officer of Adaptive Decision Systems, a firm he
established in 1987 which developed 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, 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, in 1999 the 1996
Option Plan was amended to permit non-employee directors to participate in the
plan. Under the Company's director compensation policy, each non-employee
director is entitled to 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. 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 previously subleased 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 served as Chairman of the Board and Chief Executive Officer during
1999, pursuant to which a subsidiary of the Company will underwrite, process and
sell mortgage loans to RBMG. See "Certain Transactions."
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, 1999,
1998, and 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation Securities Underlying
Name and Principal Position Year Salary (1) Bonus Other Options/SARs (#)
- --------------------------- ---- ----------- ----- ----- ----------------
<S> <C> <C> <C> <C> <C>
Joseph A. Boyle 1999 $140,000 $ - $ - -
President, Chief Executive Officer, 1998 169,615 - - 225,000(2)
and Chief Financial Officer 1997 175,000 - - 102,500
John D. Rogers 1999 140,000 - - -
Senior Vice President 1998 169,615 - - 125,000
1997 175,000 - 44,089(3) 100,000
Terrence J. Sabol, Sr. 1999 140,000 - - -
Senior Vice President - Technology 1998 152,692 - - 125,000
1997 111,154 - - -
R. Murray Smith 1999 180,000 34,046(4) 27,879(5) -
Former President and Chief Executive 1998 188,182(6) 100,000(7) - 750,000
Officer 1997 - - - -
Paul Adams 1999 108,702(8) - - -
Senior Vice President 1998 72,019 - - 200,000
- ------------------------------------------ ---------- ----------------- --------------- ---------------- -------------------------
</TABLE>
[FN]
(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, 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) Certain of such options were issued in exchange for outstanding options
held by Mr. Boyle.
(3) Reflects a relocation bonus paid in connection with Mr. Rogers' employment
with the Company.
(4) Reflects a bonus paid to Mr. Smith to cover his 1998 tax liability
resulting from his 1998 travel and temporary living expense reimbursement.
(5) Reflects temporary living and travel expenses paid to Mr.Smith during 1999.
(6) 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
$56,000 pursuant to the terms of his consulting arrangement with the
Company, and such amount is included in the salary shown as earned by
Mr. Smith during 1998.
(7) Reflects a bonus paid in connection with Mr. Smith's employment with the
Company.
(8) Mr. Adams resigned from the Company in September 1999.
</FN>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth the number of shares of the Company's
Common Stock covered by outstanding stock options held by each of the Named
Executives at December 31, 1999. None of the Named Executives exercised any
outstanding options during the year ended December 31, 1999.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
<S> <C> <C>
R. Murray Smith 150,000/500,000 $ 0/ 0
Joseph A. Boyle 73,000/222,000 3,750/15,000
John D. Rogers 40,000/185,000 0/ 0
Terrence J. Sabol, Sr. 79,500/178,000 19,406/12,937
Paul E. Adams - 0/ 0
</TABLE>
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 previously sub-leased office space in New York,
New York on a month-to-month basis from a partnership of which Mr. Fishman is
the Managing Partner. Such arrangement was terminated in January 2000. Mr.
Fishman is Chairman of the Compensation Committee. See "Certain Transactions."
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 Chase Hambrecht & Quist Technology Index ("Chase 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 Chase H&Q Technology
Index, and assuming the reinvestment of dividends.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
Chase H&Q Technology
Nasdaq Market Index Affinity Technology
-----
Index Group, Inc.
----- -- -----------
<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
March 31, 1999 210.36 212.69 11.78
June 30, 1999 230.16 251.90 13.46
September 30, 1999 235.41 266.48 6.01
December 31, 1999 339.75 436.15 5.29
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
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, 1999.
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 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.
During 1999, in consideration of the Company's financial situation, 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, 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.
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 1999, the Compensation Committee did not
award any additional options to any executive officers of the Company.
Compensation Paid to the Chief Executive Officer
The salary paid to Mr. Smith during 1999 reflects the same salary in
effect for Mr. Smith at the end of 1998. The salary and bonus paid to Mr. 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 was reduced to $180,000 to reflect the executive salary
reduction program implemented in November 1998.
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. 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.
This report is submitted by the Compensation Committee of the Company.
Compensation Committee:
Alan H. Fishman (Chairman)
Robert M. Price
Dr. Peter R. Wilson
CERTAIN TRANSACTIONS
During 1999, the Company sub-leased 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 rental under the arrangement
was $5,000. During 1999, the Company recorded aggregate lease expense of $60,000
under such lease for the twelve months ended December 31, 1999. This arrangement
was terminated in January 2000.
During February 1998, Surety Mortgage, Inc. ("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, 1999, Surety processed and sold to RBMG approximately
$12,400,000 in mortgage loans resulting in approximately $286,000 in revenue for
Surety. Edward J. Sebastian, who is a director of the Company, served as
Chairman of the Board and Chief Executive Officer of RBMG during most of 1999.
In May 1998, the Company entered into an arrangement with Jeff A.
Norris, the Company's founder and former President and Chief Executive Officer,
under which the Company retained Mr. Norris' services to assist the Company from
time to time. Such arrangement was terminated in May 1999. During 1999, the
Company paid Mr. Norris $70,325 under such arrangement.
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 2000 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.
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, 2000, 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, 2000, unless a contrary choice is
indicated on the enclosed proxy card. The Board of Directors unanimously
recommends that each stockholder vote FOR this proposal.
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 2001 Annual Meeting of
Stockholders of the Company must be received by the Company no later than
December 26, 2000 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 1999, all such persons filed such reports on a timely
basis, with the following exceptions:
Jeff A. Norris, a 10% shareholder of the Company, reported late on a Form 4
filed on June 10, 1999, several sales of Common Stock made in May 1999; Peter R.
Wilson, a director of the Company, reported late on a Form 4 filed on October 8,
1999, seven sales of Common Stock made during August 1999; and Carolina First, a
10% shareholder of the Company, failed to report certain sales made in March
2000.
OTHER MATTERS
The management of the Company knows of no other business that 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.
Joseph A. Boyle
President and Chief Executive Officer
April 27, 2000
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 Joseph A. Boyle, 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 10, 2000 at the 2000 Annual Meeting of the Stockholders to be held on May
26, 2000 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
[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.)
--------------------------------------------
Joseph A. Boyle, Alan H. Fishman, Robert M. Price,
Edward J. Sebastian, R. Murray Smith, Peter R. Wilson
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS, FOR THE YEAR ENDING DECEMBER 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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
Proposal 2.
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: ______________________________ , 2000
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
FOLD AND DETACH HERE
