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Employment Agreement - Catuity Inc. and Robert Kosnik

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                           [CATUITY INC. LETTERHEAD]

Wednesday, 17 May 2000
Mr. Robert Kosnik
1189 Greenleaf Drive
Rochester Hills, MI 48309-1722

Re: Your Employment Agreement with Catuity, Inc.

Dear Rob:

Catuity Inc., a Delaware corporation ("Catuity"), is pleased to offer you a
position as its Vice President, Sales & Marketing 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
incentives and other programs.

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 June
5, 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 President and CEO of Catuity.
          This offer is for a full-time position, located at the principal
          offices of Catuity 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 $12,500 per month, which is an
          annualized salary of US $150,000, 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 periodically reviewed by the President
          and CEO in conjunction with your annual performance review.


          The cash performance bonus plan, if any, (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 the
          President and CEO. Your first year cash performance bonus will be
          determined by March 15, 2001 and paid in full by March 30, 2001. If no
          bonus program is awarded in 2000, you will be entitled to a guaranteed
          bonus of $15,000 payable in full by March 31, 2001.

<PAGE>   2

          (c) STOCK OPTION GRANT.

          On the date you first report to work, Catuity will issue you stock
          options under our Stock Option Plan, exercisable at the actual trading
          price of Catuity shares at the close of business on the date you start

          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 150,000 shares of Common
          Stock in Catuity. The stock options will have the following vesting
          provisions (i.e. options will not be exercisable until vested):

          (i)  50,000 options will vest upon the date you first report to work
               with Catuity; and

          (ii) 5,000 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 01 July 2000 and concluding on 30 June


          You will be eligible to participate in, without limitation, the
          retirement plans and medical, dental, life and disability insurance
          plans being established for Catuity. In addition, you will be
          entitled, without loss of compensation, to three weeks of vacation
          during the first three years of your employment, and four weeks of
          vacation during the fourth 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.


          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 six months written notice (it being Catuity's right to pay
          base salary equal to six months 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

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          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.


          You will be able to voluntarily terminate your employment and this
          Agreement at anytime, provided that you must give Catuity at least
          four 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.

    4.    OTHER MATTERS.

          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

Rob, 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/ Michael V. Howe
                                        Michael V. Howe
                                        Catuity, Inc.

Attachment: Employee Invention Assignment and Confidentiality Agreement


/s/ Robert Kosnik
Robert Kosnik

Date signed     5-17-00
                                                                          Page 3

<PAGE>   4


     In consideration of my employment with Catuity Inc., a Delaware corporation
(the "Company"), I Robert Kosnik hereby represent to, and agree with the Company
as follows:

     1. DISCLOSURE OF INVENTIONS. From and after the date I first become
employed with the Company, I will promptly disclose in confidence to the Company
all inventions, improvements, designs, original works of authorship, formulas,
processes, compositions of matter, computer software programs, databases, mask
works, and trade secrets ("Inventions"), whether or not patentable,
copyrightable, or protectable as trade secrets, that are made or conceived or
first reduced to practice or created by me, either alone or jointly with others,
during the period of my employment.

copyrightable works prepared by me within the scope of my employment by the
Company are "works for hire" under the federal Copyright Act and that the
Company will be considered the author thereof. I agree that all inventions will
be the sole and exclusive property of the Company and are hereby assigned by me
to the Company.

     3. INVENTIONS EXCEPTION. For the purposes hereof, "inventions" will not
include an invention that I developed entirely on my own time without using the
company's equipment, supplies, facilities, or trade secret information except
for those inventions that either: (1) relate at the time of conception or
reduction to practice of the invention to the company's business, or actually or
demonstrably anticipated research or development of the company, or (2) result
from any work performed by me for the company.

     4. ASSIGNMENT OF OTHER RIGHTS. I hereby irrevocably transfer and assign to
the Company: (a) all worldwide patents, patent applications, copyrights, mask
works, trade secrets and other intellectual property rights in any Invention:
and (b) any and all "Moral Rights" (as defined below) that I may have in or with
respect to any Invention. I also hereby forever waive and agree never to assert
any and all Moral Rights I may have in or with respect to any Invention, even
after termination of my work on behalf of the Company. For purposes of this
Agreement, "Moral Rights" means any claim authorship of an Invention or any
rights to restrain or object to any modification of any Invention, and any
similar right, existing under judicial or statutory law of any country in the
world, or under any treaty, regardless of whether or not such right is
denominated or generally referred to as a "moral right."

     5. ASSISTANCE. I will assist the Company, at the Company's request, in
obtaining for itself and in enforcing patents, copyrights, mask work rights, and
other legal protections for the Company's Inventions in any and all countries. I
will execute any documents that the Company may reasonably request for use in
obtaining or enforcing such patents, copyrights, mask work rights, trade secrets
and other legal protections. My obligations under this Section 5 will continue
beyond the termination of my employment with the Company, provided that the
Company will compensate me at a reasonable rate after such termination for
reasonable out-of-pocket expenses actually spent by me at the Company's request
on such assistance. I hereby appoint the Secretary of the Company as my
attorney-in-fact to execute documents on my behalf for this purpose.

employment by the Company creates a relationship of confidence and trust with
respect to any information of a confidential or secret nature that may be
disclosed to me by the Company that relates to the business of the Company or to
the business of any parent, subsidiary, affiliate, customer or supplier of the
Company or any other party with whom the Company agrees to hold information of
such party in confidence ("Proprietary Information'). Such Proprietary
Information includes, without limitation, strategies, financial information,
forecasts, personnel information and customer lists. At all times, both during
my employment and after its termination, I will keep and hold all such
Proprietary Information in strict confidence and trust, and I will not use or
disclose any of such

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<PAGE>   5

except to the extent necessary to perform my duties as an employee of the
Company. Upon termination of my employment with the Company, I will promptly
deliver to the Company all documents and materials of any nature pertaining to
my work with the Company and I will not take with me any documents of materials
or copies thereof containing any Proprietary Information.

     7. NO BREACH OF PRIOR AGREEMENT. I represent that my performance of all the
terms of this Agreement and of my duties as an employee of the Company will not
breach any invention assignment, proprietary information or similar agreement
with any former employer or other party. I represent and agree that I will not
bring with me to the Company or use in the performance of my duties for the
Company and documents or materials of a former employer that are not generally
available to the public or that have not been legally transferred to the

     8. NOTIFICATION. I hereby authorize the Company to notify my actual or
future employers of the terms of this Agreement and my responsibilities

     9. NON-SOLICITATION. During, and for a period of one (1) year after
termination of, my employment with the Company, I will not solicit any
suppliers, customers, employees or consultants of the Company to cease their
relations with the Company.

     10. INJUNCTIVE RELIEF. I understand that in the event of a breach or
threatened breach of this Agreement by me that the Company may suffer
irreparable harm and will therefore be entitled to injunctive relief to enforce
this Agreement.

     11. GOVERNING LAW. This Agreement will be governed and interpreted in
accordance with the internal laws of the state in which the Company's principal
office is located in the United States as of the start date of your employment,
excluding that body of law governing conflicts of law.

CATUITY INC.                                    EMPLOYEE:

By: /s/ Michael V. Howe                         By: /s/ Robert Kosnik
   -------------------------------------           ---------------------------
Name: Michael V. Howe                           (Signature)

Title: President & CEO                          Name: Robert Kosnik

Date signed:                                    Date signed: 5-17-00

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