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Employment Agreement - Catuity Inc. and Michael Howe

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                            [CATUITY INC. LETTERHEAD]

December 5, 1999

Mr. Michael Howe
62 Hampton Road,
Grosse Pointe Shores MI 48230

        Re:  Your Employment Agreement with Catuity, Inc.

Dear Michael:

Catuity Inc., a Delaware corporation (`Catuity'), is pleased to offer you a
position as its President and Chief Executive Officer on the terms set forth in
this letter agreement. As you know, Catuity is the parent company of Chip
Application Technologies Limited ("C.A.T."), an Australian company that has, we
believe, developed some highly competitive network application software for
merchant incentive and other program. Catuity is listed on the Australian Stock
Exchange and proposes to apply for listing on NASDAQ.

This agreement will be effective as of the date hereof (the "Effective Date")
subject to your acceptance by execution of a counterpart copy of this letter
where indicated below. Your start date of employment will be no later than
January 15, 2000. Your right to receive salary, bonus, benefits, shares, etc.
will commence with your start date of employment.


        In this position, you will report to the Board of Directors of Catuity.
        Your specific duties and responsibilities will be determined by the
        Board from time to time but will include executive management of Catuity
        and its subsidiaries, development and implementation of strategy and
        investment community relations. This offer is for a full-time position,
        located at the principal offices of Catuity located in the United States
        (to be determined by the board in consultation with you and currently
        anticipated to be either Denver, Colorado or Detroit, Michigan) except
        as travel to other locations (including overseas locations) may be
        necessary to fulfill your responsibilities. You also will execute
        Catuity's standard form of Employee Invention Assignment and
        Confidentiality Agreement, which is attached.


        (a) SALARY.

        Your initial base salary will be US$20,000 per month, which is an
        annualized salary of US$240,000, and is payable in accordance with
        Catuity's customary payroll practice as in effect from time to time;
        your salary commences on the date you first report for work with
        Catuity. This salary will be reviewed by the Board in conjunction with
        your annual performance review, but will not decline.

<PAGE>   2


        Your cash performance bonus plan (commencing for calendar year 2000)
        will be determined each year at the time of budget review as determined
        by the Board of Directors, in consultation with you. Your first year
        cash performance bonus will be fixed at US$60,000 to be paid in four
        equal installments on 31 March, 30 June, 30 September and 31 December,


        On the date you first report to work with Catuity, Catuity will be issue
        you stock options under our Stock Option Plan (currently being
        finalized), exercisable at the lower of

        (i)    the weighted average trading price of Catuity shares on the
               Australian Stock Exchange for the 30 days immediately prior to
               NASDAQ listing (converted to US$ at 0.65); and

        (ii)   the weighted average trading price of Catuity shares on the
               NASDAQ market for the 30 days immediately following NASDAQ
               listing and

        (iii)  The weighted average trading price of Catuity shares on the
               Australian Stock Exchange for the month of January 20900
               (converted to US$ at 0.65).

        but not less than 85% of the fair market value of Catuity shares as of
        date of grant.

        All options will have an expiry date of the earlier of 31 December 2008
        and the date six months after cessation of your employment with Catuity,
        subject to additional provisions of the Plan.

        In total you will be issued stock options on 315,000 shares of Common
        Stock (adjusted for any stock splits) in Catuity. The stock options will
        have the following vesting provisions (i.e. options will not be
        exercisable until vested):

        (i)    75,000 options will vest upon the date you first report to work
               with Catuity; and

        (ii)   12,000 options will vest at the end of each quarter, conditioned
               upon your continued employment by Catuity on the last day of each
               quarter, commencing on 31 March 2000 and concluding on 31
               December 2004.


        You will be eligible to participate in, without limitation, the
        retirement plans and medical, dental, life and disability insurance
        plans being established for Catuity; Catuity will reimburse you for
        those costs that you incur to exercise your COBRA rights to extend your
        existing insurance coverage until the effective date of your Catuity
        insurance coverage, which Catuity insurance coverage, will be provided
        for the term of this Agreement. In addition, you will be entitled,
        without loss of compensation, to three weeks of vacation during the
        first year of your employment, three weeks of vacation during the second
        year of your employment, and four weeks of vacation during the third and
        each successive year of your employment. You may only accrue unused
        vacation up to a maximum of six weeks; otherwise, additional vacation
        will cease to accrue until you reduce the accrued, unused amount through
        use of vacation.

<PAGE>   3

        You will further be entitled, at Catuity's expense, to be reimbursed for
        10 economy class return airfares from Detroit to the location of
        Catuity's principal office in the United States (if other than Detroit)
        in each year of employment.


        Catuity will pay reasonable relocation expenses, to the extent
        necessary, for you to relocate to within the proximity of the principle
        offices of Catuity in the United States when the location of these
        offices is determined.


        The term of this agreement is for a period of five years commencing upon
        the Effective Date.


        Catuity may only terminate your employment and this agreement without
        notice by reason of Termination for Cause. For purposes of this
        agreement, "TERMINATION FOR CAUSE" will mean termination of your
        employment by Catuity's Board, after consultation with you, for your
        dishonesty, fraud, gross negligence in performance of your duties,
        material breach of this agreement or any other contractual or fiduciary
        obligation to Catuity or under any policy or procedure of Catuity,
        intentional engagement in acts seriously detrimental to Catuity's
        operations or your being charged by governmental authorities with a
        felony. Upon your Termination for Cause by Catuity, you will be entitled
        to receive cash and other compensation, which has accrued through the
        date of termination, only,


        Catuity may only terminate your employment and this agreement without
        cause on one year's written notice (it being Catuity's right to pay base
        salary equal to one year's amount, in lieu of notice, in order to effect
        immediate termination; in such case, you will be obligated, in accepting
        such payment, to release Catuity from all other obligations other than
        Catuity's obligation to pay cash and other compensation, which has
        accrued through the date of termination to which you may be entitled.
        including 50% of the options entitlement for the year of termination.


        Your employment with Catuity and this agreement will also terminate upon
        your death or by reason of your Incapacity Due to Disability. For
        purposes of this agreement, "INCAPACITY DUE TO DISABILITY" means if, at
        the end of any month, you are unable to perform substantially all of
        your duties under this agreement in the normal and regular manner due to
        illness, injury or mental or physical incapacity, and you have been
        unable or will be unable, in the good-faith judgement of the Catuity
        Board, so to perform for either (1) four consecutive full calendar
        months, or (2) 90 or more of the normal working days during any 12
        consecutive full calendar months. Nothing in this paragraph shall alter
        Catuity's obligations under applicable law, which may, in certain
        circumstances, result in the suspension or alteration of the foregoing
        time periods. Upon your termination for death or Incapacity Due to
        Disability, you will be entitled to receive cash and other compensation
        which has accrued through the date of termination.


<PAGE>   4

        You will be able to voluntarily terminate your employment and this
        Agreement at any time, provided that you must give Catuity at least six
        months advance written notice. Upon your voluntary termination, you will
        be entitled to receive cash and other compensation, which has accrued
        through the date of termination.


        You will not bring with you, or use, in the performance of your duties
        hereunder any confidential or proprietary material of any former
        employer, nor violate any lawful obligation to any former employer in
        the performance of your duties hereunder.

        Under your signature below, this will become our binding agreement with
        respect to the subject matter of this letter, superseding in their
        entirety all other or prior agreements and negotiations between us as to
        the subject matter of this letter, will be binding upon and inure to the
        benefit of our respective successors and assigns (although none of your
        rights or obligations hereunder is assignable), and your heirs,
        administrators and executors, will be governed by Delaware law, and may
        only be amended in a writing signed by you and Catuity.

Mike, we are very excited to have you join us and look forward to working with
you. I think we can have an exciting next few years.


                                       /S/ DAVID L. MAC SMITH
                                       David L. Mac Smith
                                       Catuity, Inc.

Attachment: Employee Invention Assignment and Confidentiality Agreement


Michael V. Howe

Date signed: _________________________