Executives Services Agreement - Catuity Inc. and David Lancelot Machattie Smith
EXECUTIVES SERVICES
-------------------
AGREEMENT
---------
BETWEEN
-------
CATUITY INC.
------------
AND
---
DAVID LANCELOT MACHATTIE
------------------------
SMITH
-----
(1 JUNE 2001)
-------------
-------------------------------------------------------------------------------
1
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
TABLE OF CONTENTS
1 DEFINITIONS AND INTERPRETATION 4
1.1 DEFINITIONS 4
2 EMPLOYMENT 5
3 TERM 5
4 DUTIES OF EXECUTIVE 6
4.1 GENERAL DUTIES 6
4.2 DUTY TO REPORT 6
4.3 OUTSIDE DIRECTORSHIPS 6
5 REMUNERATION 6
5.1 BASIC SALARY PACKAGE 6
5.2 STARTING SALARY PACKAGE 7
5.3 SALARY PACKAGE REVIEW 7
5.4 NO DECREASE IN BASIC SALARY PACKAGE 8
5.5 DIRECTORS' FEES 8
6 SUPERANNUATION 8
7 EXISTING LOAN AGREEMENT 8
8 EXPENSES AND OTHER ENTITLEMENTS 8
8.1 EXPENSES 8
8.2 ENTITLEMENTS 9
8.3 FRINGE BENEFITS TAX 9
9 MAINTENANCE OF REMUNERATION 10
10 LEAVE ENTITLEMENTS 10
11 PAYMENT DURING ABSENCE ON MEDICAL GROUNDS 10
12 CONFIDENTIALITY 11
12.1 EXECUTIVE'S OBLIGATIONS 11
12.2 SURVIVAL OF OBLIGATIONS 11
13 RESTRICTIONS ON OTHER ACTIVITIES OF THE EXECUTIVE 11
13.1 INDUCEMENTS 11
13.2 OPTIONAL POST-EMPLOYMENT RESTRAINT 11
13.3 USE OF THE COMPANY NAME 12
14 TERMINATION 12
14.1 TERMINATION BY THE EXECUTIVE 12
14.2 TERMINATION BECAUSE OF INCAPACITY 13
14.3 IMMEDIATE TERMINATION BY THE COMPANY 13
-------------------------------------------------------------------------------
2
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
14.4 TERMINATION BY THE COMPANY 13
14.5 PAYMENTS ON TERMINATION OR FAILURE TO RENEW AGREEMENT 13
14.6 TERMINATION PAYMENTS 13
14.7 RESIGNATION AS DIRECTOR 14
14.8 OBLIGATIONS ON TERMINATION 14
15 SHARES AND OPTIONS 14
15.1 CONFIRMATION 14
15.2 NEW OPTIONS 14
16 INDEMNITY 14
17 GENERAL 15
17.1 NOTICES 15
17.2 GOVERNING LAW AND JURISDICTION 15
17.3 PROHIBITION, ENFORCEABILITY AND SEVERANCE 15
17.4 WAIVER 16
17.5 ENTIRE AGREEMENT 16
13. TAXATION 22
14. UNEXERCISED OPTIONS 22
15. CHANGE OF CONTROL 23
-------------------------------------------------------------------------------
3
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
THIS EXECUTIVE SERVICE AGREEMENT is made on 1 June 2001 between the following
parties:
CATUITY INC. of 2711 E Jefferson Drive, Detroit, Michigan 48207 USA ('COMPANY'),
AND
DAVID LANCELOT MACHATTIE SMITH of 24 View Street, Woollahra, New South Wales
2025 ('EXECUTIVE').
RECITALS
A. The Company is in the business of developing, marketing and operating
software solutions for loyalty programs integrated with the payment system
over POS and Internet. (the 'BUSINESS').
B. The Company and the Executive entered into an Employment Agreement dated 1
May 1995 ('1995 Agreement'), Executive Services Agreement dated 14 May 1997
('1997 Agreement') and an Executive Services Agreement dated 1 June 1999
('1999 Agreement) under which the Executive has been employed as the
Managing Director of the Company (the 'PREVIOUS AGREEMENTS').
C. The Company and the Executive have agreed to enter into this Agreement to
replace the Previous Agreements (only to the extent that this agreement
conflicts with the Previous Agreements) and to clarify the terms and
conditions of the Executive's continued employment as Chairman of the
Company.
THE PARTIES AGREE, in consideration of, among other things, the mutual promises
contained in this agreement:
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this agreement:
'BOARD' means the board of directors of the Company,
'GROUP' means the Company and any Group Company;
'GROUP COMPANY' means a 'related body corporate' of the Company as
that expression is defined in the Corporations Law;
'INFORMATION' means any information in respect of the Company's
Business which is not in the public domain and includes, but is not
limited to, any document, book, account, process, patent,
specification, drawing, design or know-how which is:
(a) supplied by the Company to the Executive; or
(b) generated by the Executive in the course of performing the
Executive's obligations;
'MONTH' means calendar month;
'SALARY REVIEW DATE' means 1 May of each year that this Agreement is
in effect;
-------------------------------------------------------------------------------
4
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
'SUBSIDIARY' means any 'subsidiary' of the Company as that expression
is defined in the Corporations Law,.
1.2 INTERPRETATION
In this agreement, headings are for convenience only and do not
affect the interpretation of this agreement and, unless the context
otherwise requires:
(a) a reference to termination of this agreement includes a
reference to termination of the Executive's contract of
employment;
(b) words importing the singular include the plural and vice
versa;
(c) words importing a gender include any gender;
(d) other parts of speech and grammatical forms of a word or
phrase defined in this agreement have a corresponding
meaning;
(e) an expression importing a natural person includes any
company, partnership, joint venture, association,
corporation or other body corporate and vice versa;
(f) a reference to any thing (including, but not limited to,
any right) includes a part of that thing;
(g) a reference to a party to a document includes that party's
successors and permitted assigns;
(h) a reference to a statute, regulation, proclamation,
ordinance or by-law includes all statutes, regulations,
proclamations, ordinances or by-laws varying,
consolidating or replacing it, and a reference to a
statute includes all regulations, proclamations,
ordinances and by-laws issued under that statute; and
(i) a reference to a document or agreement includes all
amendments or supplements to, or replacements or novations
of, that document or agreement.
2 EMPLOYMENT
(a) Under the Previous Agreements the Company appointed the
Executive as its Managing Director and the Executive
accepted that appointment with effect from 1 May 1995 (the
'Commencement Date'). The Executive became Chairman of the
Company in December 1999.
(b) The Executive continues to be employed as the Chairman of
the Company and from the date of this Agreement that
employment is on the terms contained in this Agreement.
3 TERM
(a) The appointment of the Executive as CEO & Managing
Director of the Company began on the Commencement Date
under the terms of the Previous Agreements and the
appointment of the Executive as Chairman was made in
December 1999.
-------------------------------------------------------------------------------
5
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
(b) The appointment of the Executive as an executive and,
subject to the board of Directors discretion, as Chairman
of the Company will continue until 1 June 2003, unless
terminated at some earlier time in accordance with the
terms of this Agreement.
4 DUTIES OF EXECUTIVE
4.1 GENERAL DUTIES
Subject to clause 4.3, the Executive must:
(a) devote the whole of the Executive's time, attention and
skill during normal business hours, and at other times as
reasonably necessary, to the duties of office and the
Executive shall not be entitled to receive any
remuneration for work performed outside such normal
business hours;
(b) faithfully and diligently perform the duties and exercise
the powers:
(i) consistent with the position of Chairman; and
(ii) assigned to the Executive by the Board; and
(c) promote the interests of the Company and any Group
Company.
4.2 DUTY TO REPORT
The Executive must:
(a) report directly to the Board or as directed by the Board;
(b) provide prompt and full information to the Board regarding
the conduct of the business of the Company by the
Executive; and
(c) comply with reasonable directions given to the Executive
by the Board.
4.3 OUTSIDE DIRECTORSHIPS
The Executive may accept appointment to, receive and retain
remuneration from and perform the reasonable duties associated with:
(a) one non executive directorship of an independent unrelated
company before 1 December 2001
(b) two non executive directorships of independent unrelated
companies after 1 December 2001;
5 REMUNERATION
5.1 BASIC SALARY PACKAGE
(a) During the period that the Executive serves the Company
under this
-------------------------------------------------------------------------------
6
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
Agreement, the Company must pay the Executive a basic
salary package, determined under this clause, the salary
component of which is payable fortnightly in arrears by
direct deposit into a bank account nominated by the
Executive, or as otherwise agreed between the parties.
(b) At the sole discretion of the Executive as to the nature
and amount of each component, payment by the Company of
the basic salary package may be by way of salary,
additional superannuation contributions, life insurance,
health and incapacity insurance, income protection
insurance or such other components as may otherwise be
agreed between the parties. Any fringe benefits tax
payable under the Fringe Benefits Tax Assessment Act 1986
(Cth) in respect of the nature of each component will be
included in the calculation of the basic salary package.
5.2 STARTING SALARY PACKAGE
The basic salary package for the period commencing on the date of
this Agreement is A$410,000.00 gross per annum.
5.3 SALARY PACKAGE REVIEW
(a) The basic salary package is subject to review on each
Salary Review Date or within 30 days of any Salary Review
Event.
(b) The basic salary package for the period after a review is
the amount per annum agreed between the parties.
(c) At each review, the basic salary package may be increased
having regard to:
(i) the cost of living;
(ii) the responsibilities of the Executive and
remuneration available in the workforce outside
the Company for a person with responsibilities
and experience equivalent to those of the
Executive;
(iii) the performance of the Executive;
(iv) the performance of the Company; and
(v) any increases awarded to employees of the
Company.
(d) In the absence of agreement under clause 5.3(b), the basic
salary package for the period after a Salary Review Date will be the
greater of.
(i) an amount equal to any percentage increase in
the All Groups Consumer Price Index ('CPI') for
Sydney as published by the Australian Bureau of
Statistics; or
(ii) the average increase granted across the
Company's employees, in respect of the 12-month
period preceding the Salary Review Date.
(iii) the basic salary specified in clause 5.2 plus
ten percent (10%)
-------------------------------------------------------------------------------
7
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
(e) The parties must commence review of the basic salary
package 1 month before the Salary Review Date, with a view
to the parties reaching an agreement for the purposes of
clause 5.3(b), by the Salary Review Date.
(f) A Salary Review Event will be any event that increases the
issued capital of the Company by more than 50%.
5.4 NO DECREASE IN BASIC SALARY PACKAGE
The basic salary package of the Executive must not decrease on any
salary package review.
5.5 DIRECTORS' FEES
The basic salary package includes directors' fees. In the event this
Agreement is terminated for whatever reason and the Executive remains
as a director of the Company, then director's fees shall be payable
to the Executive on a similar basis to other non-executive directors
or the Chairman as the case may be.
6 SUPERANNUATION
(a) The Company warrants that as at the date of this Agreement
the Company has fully complied with its obligations under
the Superannuation Guarantee Charge Legislation in relation
to the employment of the Executive since 1 May 1995.
(b) The Company must, during the continuation of this
Agreement, ensure that the minimum superannuation
contributions required to be made for the benefit of the
Executive by the Superannuation Guarantee Charge
Legislation are made to the trustees of a complying
superannuation fund (within the meaning of the Income Tax
Assessment Act 1936 (Cth)).
(c) The Company's superannuation contributions under this
clause 6 form part of the Executive's basic salary package
under clause 5 of this Agreement, except that any
increases after the date of this Agreement to the minimum
superannuation contribution required to be made for the
benefit of the Executive pursuant to the Superannuation
Guarantee Charge Legislation as at the date of this
Agreement will be paid by the Company in addition to, and
will not form part of, the Executive's basic salary
package under clause 5 of this Agreement. In addition the
Executive will be compensated (by way of increased basic
salary or otherwise) by the Company for any negative
financial impact of any other amendments to prevailing
superannuation legislation.
7 EXISTING LOAN AGREEMENT
(a) The Company acknowledges that the Limited Recourse Loan Agreement (as
amended by the 1999 Agreement) remains in force.
8 EXPENSES AND OTHER ENTITLEMENTS
8.1 EXPENSES
(a) The Company must reimburse the Executive for all reasonable work
related
-------------------------------------------------------------------------------
8
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
out-of-pocket expenses (approved by another director) incurred by the
Executive on Company Business, including but not limited to:
- telephone calls, rentals and charges; home facsimile
charges; internet and stock market reporting expenses, travelling
expenses; entertainment expenses; hotel expenses;
- car parking expenses;
- expenses associated with the use of the Executive's own car,
calculated at the rates allowed by the Australian Taxation Office
for the purposes of determining deductibility; and
- any other expenditure reasonably made by the Executive on
behalf of the Company.
(b) No amount may be reimbursed pursuant to clause 8.1 before the
Executive has provided written evidence of expenses incurred to the
Company.
(c) The Executive will be entitled to full reimbursement of all overseas
travel (business class), accommodation and other costs for the
Executive's wife on two trips with the Executive (each trip not to
exceed 30 days) at any time prior to 1 June 2004, notwithstanding the
early termination of the agreement for whatever reason.
8.2 ENTITLEMENTS
(a) In addition to the payments under clause 5, 6 and this clause 8, the
Company agrees to provide the Executive the following benefits:
- the Company will provide the Executive with a portable
computer, facsimile, mobile telephone, a high speed internet
service (cable if available) and access to Bloomberg or similar
stock market reporting services for use at home or out of the
office;
- the Company will provide the Executive with car parking at
or near the Company's premises;
- the Company will ensure that all overseas travel is at least
business class
- for the duration of his employment by the Company, the
Company will ensure that the Executive is covered by workers
compensation insurance as required by legislation and directors'
and officers' liability insurance world-wide; and
- the Company will pay all of the costs associated with the
parties entering into this Agreement, including payment of stamp
duty and up to $6,000 of the Executive's legal costs.
(b) In relation to the benefits at clauses 8.2(a) the Company will pay
all leasing and other costs associated therewith (including any
fringe benefits tax). In the event that the Executive pays for any
part of the costs associated with these benefits the Company will
reimburse the Executive for such amounts.
(c) In relation to the benefits at clause 8.2(a), on termination of this
Agreement for whatever reason the Executive may at his sole
discretion purchase such items from the Company at the depreciated
value of the items at the time of termination.
-------------------------------------------------------------------------------
9
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
8.3 FRINGE BENEFITS TAX
The Company must pay any fringe benefits tax payable under the Fringe Benefits
Tax Assessment Act 1986 (Cth) in relation to any remuneration or benefit
provided by the Company to the Executive under this Agreement except as
specifically referred to in Clause 5.1 (b).
9 MAINTENANCE OF REMUNERATION
If there is any change in:
(a) the corporate structure under which the Company or any Group Company
operates the Business;
(b) the accounting methods of the Company or its accountants or auditors,
which reduces or diminishes the total value of the remuneration payable to the
Executive, the Company must ensure that the total value of the remuneration
payable to the Executive is maintained at a level not less than that which
existed before the change.
10 LEAVE ENTITLEMENTS
(a) The Executive is entitled to public holidays, long service leave and
annual leave in conformity with statutory entitlements. The parties
agree that annual leave and long service leave shall be taken at such
time as is agreed by the parties provided that it does not unreasonably
inconvenience or disrupt the Business or the Company. In addition to
normal leave the Executive will be entitled to 2 working days of
special holiday leave for each overseas trip exceeding 7 days, up to a
maximum of 14 working days leave.
(b) The Company acknowledges that, at the date of this agreement, the
Executive is currently entitled to 42.3 working days holiday as part of
annual leave and that the Executive is entitled to long service leave
of 32.6 working days. If upon termination of the agreement for whatever
reason, the Executive is entitled to annual leave, long service leave
or special holiday leave, the Company will pay the Executive the full
entitlement upon such termination. At the election of the Executive,
such payments may be included in termination pay.
11 PAYMENT DURING ABSENCE ON MEDICAL GROUNDS
(a) Where the Executive is at any time incapacitated from performing his
duties for a period in excess of six months, where such incapacity is
due to illness, injury, accident or any other circumstance, the Company
may discontinue payment in whole or in part of the Executive's salary
until such time as the incapacity shall cease or the Executive's
employment is terminated in accordance with the terms of this
Agreement.
(b) The Company shall give written notice to the Executive of its
intention to discontinue payment of salary and the notice shall
specify the date from which payment of salary will be discontinued.
The notice may be given at any time after the expiration of six
months, so long as the incapacity remains.
(c) The Executive shall be entitled to no more than six months' sick
leave in total throughout the term of this Agreement and the Company
must continue to pay the Executive's salary in full during this
period.
-------------------------------------------------------------------------------
10
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
(d) The Executive shall undertake such medical checks and blood tests as
may be reasonably required to enable the Company to obtain Key Man
insurance or other insurance coverage over the life of the Executive.
12 CONFIDENTIALITY
12.1 EXECUTIVE'S OBLIGATIONS
The Executive must:
(a) keep any Information secret and confidential,
(b) take all reasonable and necessary precautions to maintain the secrecy
and prevent the disclosure of any Information; and
(c) not disclose Information to any third party without first obtaining the
written consent of the Board except, provided however that these
obligations do not to apply to Information:
(d) that is in the public domain other than through breach of this
Agreement;
(e) that the Executive is required by law to disclose;
(f) that is required to be disclosed by the Executive in the ordinary and
proper course of employment with the Company; or
(g) that has been disclosed to the Executive by a third party who is not
under any duty of confidentiality with respect to that Information.
12.2 SURVIVAL OF OBLIGATIONS
The Executive's obligations under this part survive the termination of the
Executive's employment with the Company.
13 RESTRICTIONS ON OTHER ACTIVITIES OF THE EXECUTIVE
13.1 INDUCEMENTS
Other than under this agreement or by mutual agreement with the Company, the
Executive must not accept any payment or other benefit as an inducement or
reward for any act in connection with the Business of the Company or any Group
Company.
13.2 OPTIONAL POST-EMPLOYMENT RESTRAINT
(a) The Executive and the Company agree that notwithstanding termination of
this agreement for whatever reason, the Company may, at its option
exercisable on or before the termination date of this agreement, pay the
Executive an additional one year's basic salary package as per clause 5
of this Agreement in consideration for the Executive agreeing to the
post-employment restraints in clause 13.2(d) of this Agreement.
(b) The Executive may elect to have the amount payable under clause 13.2(a)
paid monthly or in a lump sum on exercise of the option. If a lump sum
is elected, the lump sum shall be discounted by the Discount Rate. For
the purposes of this
-------------------------------------------------------------------------------
11
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
paragraph, the Discount Rate shall be equal to the Bank Bill Interest
Rate at the date of termination, plus three percentage points.
(c) The total amount referred to in clause 13.2(a) is payable in addition to
any other payment to the Executive under this Agreement.
(d) On exercise of the option by the Company, the Executive agrees that for
a period of 12 months from either:
(i) the expiry of the term of this Agreement; or
(ii) the date of termination (for any cause or by any means) of his
employment with the Company,
whichever is the first to occur, the Executive will not undertake or
carry on (either alone or in partnership) or be employed or interested,
whether directly or indirectly, in any capacity whatsoever, in the
Restraint Area, in a business which is the same as or substantially
similar to the Business or competes with the Company or the Business.
(e) In clause 13.2(d), 'Restraint Area' means:
(i) all countries in which the Company, or any related body
corporate of the Company, carry on business;
(ii) Australia;
(iii) New South Wales.
(f) Clause 13.2(d) has the effect of several separate and individual
covenants and restraints consisting of each separate covenant and
restraint set out in clause 13.2(d) combined with each separate area
set out in clause 13.2(e).
(g) If any of the several separate and independent covenants and
restraints referred to in clause 13.2(f) are or become invalid or
unenforceable for any reason, then that invalidity or
unenforceability will not effect the validity of enforceability of
any of the other separate and independent covenants and restraints.
13.3 USE OF THE COMPANY NAME
The Executive agrees with the Company that at any time after termination (for
any cause or by any means) of his employment with the Company, he will not use
the name of the Company or any Group Company for any purpose, in connection with
his own or any other name, in any way which might suggest his continued
association with the Company or any Group Company (other than as a shareholder
or director of the Company, if he continues so to be).
14 TERMINATION
14.1 TERMINATION BY THE EXECUTIVE
This Agreement may be terminated by the Executive at any time by the Executive
giving six months' notice in writing to the Company. If any one entity or
person, acting alone or in association with others,
a) lodges with the Company, or any parent of the Company, a substantial
shareholders notice
-------------------------------------------------------------------------------
12
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
indicating an interest or
b) in any way obtains an interest in
more than 30% of the issued capital of the Company, or any parent of the
Company, then the Executive may terminate this agreement at any time for a
period of six months following such event on three months written notice to the
Company.
14.2 TERMINATION BECAUSE OF INCAPACITY
This Agreement will automatically terminate if the Company gives notice to the
Executive in accordance with clause 11.
14.3 IMMEDIATE TERMINATION BY THE COMPANY
The Company may terminate this Agreement immediately if the Executive:
(a) is guilty of grave misconduct or wilful neglect in the unanimous opinion
of all other directors; or
(b) is of unsound mind or becomes liable to be dealt with under any law
relating to mental health.
14.4 TERMINATION BY THE COMPANY
(a) Subject to clauses 14.2 and 14.3, this Agreement may only be terminated
by the Company in accordance with this clause 14.4.
(b) If prior to 1 June 2003, the Company and the Executive have not entered
into an agreement for the continued employment of the Executive, then
this agreement will be deemed to have been terminated by the Company
effective from 1 September 2003 and the Executive will cease to be an
Executive of the Company from the 1 September 2003.
14.5 PAYMENTS ON TERMINATION OR FAILURE TO RENEW AGREEMENT
Upon termination of the Executive's employment by either party and for whatever
reason (including but not limited to clause 14.4), the Company shall:
(a) pay the Executive his then prevailing basic salary package for 12 months
from the effective date of termination notwithstanding that the
Executive no longer provides any services under this Agreement and
notwithstanding any other benefits or entitlements to which the
Executive is entitled under other terms of this Agreement. That amount
is to be paid monthly in advance in twelve equal instalments and is to
be secured by a bank guarantee, or such other instalments (or lump sum)
and security as otherwise mutually agreed by the parties.
(b) immediately pay the Executive all outstanding entitlements under this
Agreement including,but not limited to, unpaid salary due and payable up
to the effective date of termination and a sum representing any holiday,
special holiday or long service entitlements which have accrued, but not
been taken, up to and including that date; and
(c) facilitate the Executive in transferring to another superannuation fund
the balance standing to the credit of his superannuation fund hereunder.
-------------------------------------------------------------------------------
13
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
14.6 TERMINATION PAYMENTS
The Company will ensure that all and any termination payments under this
agreement, including payments under clause 13.2 and 14.5, minimise the
Executives personal tax liability in respect of such payments, but the Company
shall not be obligated to make any payment in such a form as to be non tax
deductible to the Company.
14.7 RESIGNATION AS DIRECTOR
(a) On termination of this Agreement by operation of clause 14.3, the
Executive must resign from office as a director of the Company or any
Group Company.
(b) On termination of this Agreement for any reason other than under
clause 14.3, the Executive shall be under no obligation to resign
from office as a director of the Company or any Group Company, but is
required to stand for reappointment as a director at the next meeting
at which any other person is required to stand for appointment or
reappointment as a director.
14.8 OBLIGATIONS ON TERMINATION
On termination of this Agreement, the Executive must return to the
Company immediately all tangible property of the Company or any Group
Company including, but not limited to, all books, documents, papers,
materials, credit cards, cars, computer records and keys held by the
Executive or under the Executive's control.
15 SHARES AND OPTIONS
15.1 CONFIRMATION
The Company and the Executive confirm that the Executive is entitled to
all shares and options referred to in the Previous Agreements under the
terms of such Previous Agreements and nothing in this agreement will
alter or otherwise effect the Executives rights, title and interest in
such shares and options. The Company further warrants that all shares
issued to the Executive have been (and in the case of shares issued as
a result of the exercise of option will be) registered with the US
Securities and Exchange Commission and that such shares are (or within
90 days in the case of shares issued as a result of the exercise of
options will be) freely tradeable on both and ASX and the Nasdaq Stock
Exchange.
In order to clarify the Previous Agreements and to correct an
administrative error, it is agreed by the parties that Schedule A of
the 1999 Agreement should reflect the shareholder resolutions passed at
the Annual Meeting of shareholders held in May 1999 and that Column 3,
Option Expiry Date of Schedule A of the 1999 Agreement should have read
(i) 24 June in replacement for 1 July in each case;
(ii) for the A$1.15 options, the year 2001 in replacement for 2002;
and
(iii) for the A$1.20 options, the year 2003 in replacement for 2004.
15.2 NEW OPTIONS
The Company warrants to the Executive that the options detailed in
Schedule A of
-------------------------------------------------------------------------------
14
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
this Agreement have been properly issued and will be issued under the
Company's Employee Share Option Plan, the Directors Share Option Plan
or such other plan as to ensure the shares issued as a result of the
exercise of the options are registered immediately upon issue and not
subject to any specific registration requirements of the SEC or any
other trading restrictions.
16 INDEMNITY
To the extent permitted by law, the Company indemnifies the Executive:
(a) against any liability incurred by him as an employee, officer
and or director of the Company, a subsidiary of the Company or
any parent of the Company to a person other than the Company
or a related body corporate of the Company; and
(b) against any loss, cost, damage, expense or liability which the
Executive suffers or incurs as a result of any litigation,
proceeding or judgment arising in connection with this
agreement, unless the liability, loss, cost, damage or expense
arises out of conduct on the part of the Executive which:
(a) is in material breach of this agreement;
(b) involves a lack of good faith, fraud, grave
misconduct or wilful neglect; or
(c) is contrary to the Company's express written
instructions in relation to the management of the
Company's business.
17 GENERAL
17.1 NOTICES
Any notice or other communication including, but not limited
to, any request, demand, consent or approval, to or by a party
to this agreement:
(a) must be in legible writing and in English addressed
as shown at the commencement of this agreement, or as
specified to the sender by any party by notice;
(b) where the sender is a company, must be signed by an
officer or under the common seal of the sender;
(c) is regarded as being given by the sender and received
by the addressee:
(i) if by delivery in person, when delivered to
the addressee;
(ii) if by post, three Business Days from and
including the date of postage/on delivery to
the addressee; or
(iii) if by facsimile transmission, whether or not
legibly received, when received by the
addressee, but if the delivery or receipt is
on a day which is not a Business Day or is
after 4.00 PM (addressee's time) it is
regarded as received at 9.00 am on the
following Business Day.
-------------------------------------------------------------------------------
15
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
17.2 GOVERNING LAW AND JURISDICTION
(a) This agreement is governed by the laws of New South
Wales.
(b) The parties irrevocably submit to the exclusive
jurisdiction of the courts of New South Wales.
17.3 PROHIBITION, ENFORCEABILITY AND SEVERANCE
(a) Any provision of, or the application of any provision
of, this agreement which is prohibited in any
jurisdiction is, in that jurisdiction, ineffective
only to the extent of that prohibition.
(b) Any provision of, or the application of any provision
of, this agreement which is void, illegal or
unenforceable in any jurisdiction does not affect the
validity, legality or enforceability of that
provision in any other jurisdiction or of the
remaining provisions in that or any other
jurisdiction.
(c) If a clause is void, illegal or unenforceable, it may
be severed without affecting the enforceability of
the other provisions in this agreement.
17.4 WAIVER
(a) The failure of either party at any time to require
performance by the other party of any provision of
this agreement does not affect the party's right to
require the performance at any time.
(b) The waiver by either party of a breach of any
provision must not be held to be a waiver of any
succeeding breach of the provision or a waiver of the
provision itself.
17.5 ENTIRE AGREEMENT
This agreement supersedes all previous agreements in respect
of the Executive's terms of employment by the Company and
embodies the entire agreement between the parties, except for
such terms of the Previous Agreements that relate to shares,
options and the Limited Recourse Loan.
-------------------------------------------------------------------------------
16
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
EXECUTED by the parties as an agreement.
SIGNED BY CATUITY INC. by authority of the
Board of Directors by its duly authorised
representative A.S. Dawson Director
in the presence of
A. S. Dawson; Director
Witness
SIGNED BY DAVID LANCELOT
MACHATTIE SMITH in the presence of
Signature of witness
David Lancelot Machattie Smith
Name of witness (print)
-------------------------------------------------------------------------------
17
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
SCHEDULE A
----------
--------------------------------------------------------------------------------------------------------------------------
DETAILS COLUMN 1 COLUMN 2. COLUMN 3.
NO. OF OPTION OPTION
OPTIONS EXERCISE PRICE EXPIRY DATE
--------------------------------------------------------------------------------------------------------------------------
Options to be unconditionally issued by the Company to 26,000 A$7.75 1 June 2009
the Executive on 1 June 2001
--------------------------------------------------------------------------------------------------------------------------
Options to vest at the rate of 2000 per month for the
duration of this agreement 48,000 A$7.75 1 June 2009
--------------------------------------------------------------------------------------------------------------------------
Options to vest on 1 June 2002 26,000 A$7.75 1 June 2009
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------
18
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
OTHER TERMS AND CONDITIONS OF OPTIONS
The terms and conditions of the options are as follows:
1. ENTITLEMENT
The Option holder is entitled to subscribe for one fully paid share of
common stock in the capital of the Company for each Option held.
2. ISSUE PRICE
No amount is payable on issue of the Options.
3. EXERCISE PRICE
The exercise price of each Option is the exercise price referred to in
Column 2 of Schedule A.
4. OPTION PERIOD
Each Option may be exercised in whole or in part at any time prior to
the Option Expiry Date set out in Column 3 of Schedule A. Any Option
that is not exercised will automatically expire on the Option Expiry
Date.
5. TRANSFERABILITY
The Options may be transferred at any time but only in accordance with
the Articles of Association of the Company.
6. PARTICIPATION IN BONUS ISSUES AND CASH ISSUES
6.1 If the Company makes a bonus issue of shares or other securities
convertible into shares of common stock pro rata to holders of such
shares (other than an issue in lieu of dividends or by way of dividend
reinvestment pursuant to any shareholder election), the Option holder
will be entitled to participate in such issue and the number and or
exercise price of the Options will be varied so that the Option holder
is not disadvantaged in any way from such issue of bonus shares or
other securities.
1.2 If the Company makes an offer to subscribe for cash of shares of common
stock pro rata to the holders of such shares the Option holder will be
entitled to participate in such offer, and the number and or exercise
price of the Options will be varied so that the Option holder is not
disadvantaged in any way from such issue of shares for cash
6.3 The Company must notify the Option holder at least 12 business days
before the books closing date for determining entitlements to an offer
referred to in Clauses 6.1 or 6.2 of:
a) the proposed terms of the issue of the offer, and
b) the right to have the terms of the Options varied under Clause
6.1 or 6.2 (as the
-------------------------------------------------------------------------------
19
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
case may be).
7. ADJUSTMENTS FOR BONUS ISSUES AND CASH ISSUES
7.1 If the Company is listed on any Stock Exchange and makes an offer for
cash of ordinary shares of common stock pro rata to the holders of
shares of common stock, the exercise price of each Option shall be
reduced by the value of the theoretical rights entitlement per cum
rights share (E) provided that the exercise price of each Option shall
not be reduced to less than the nominal value of the Company" shares of
common stock, where E is calculated in accordance with the following
formula:
E = P - (S + D)
-----------
N + 1
Where:
E = theoretical value of the rights entitlement attached to each share
(quoted cum rights).
P = the weighted average market price of fully paid shares of common
stock of the Company sold in the ordinary course of trading on any
Stock Exchange during the five trading days after the announcement of
the rights issue
S = subscription price (application money plus calls) for new shares
D = any dividends due but not yet paid on existing shares which will
not be payable in respect of new shares issued under the rights issue
N = number of cum rights shares required to be held to receive a right
to one new share
No change will be made to the number of shares to which the Option
holder is entitled.
7.2 If the Company makes a bonus issue of shares or other securities
convertible into shares of common stock pro rata to holders of such
shares (other than an issue in lieu of dividends or by way of dividend
reinvestment pursuant to any shareholder election), the number of
shares issued on exercise of each Option will include the number of
bonus shares that would have been issued if the Option had been
exercised prior to the books closing date for bonus shares. No change
will be made to the exercise price.
8. RECONSTRUCTION
In the event of a reconstruction (including consolidation,
sub-division, reduction or return) of the issued capital of the
Company, the number of Options or the exercise price of Options or both
shall be reconstructed (as appropriate) in a manner which would not
result in any benefits being conferred on the Option holders which are
not conferred on shareholders (subject to the provisions with respect
to rounding of entitlements as sanctioned by the meeting of
shareholders approving the reconstruction of capital) but in all
respects the terms for the exercise of Options shall remain unchanged.
-------------------------------------------------------------------------------
20
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
9) RANKING OF SHARES ALLOTTED ON EXERCISE OF OPTIONS
All share allotted pursuant to the exercise of Options will, subject to
the Memorandum and Articles of Association of the Company, rank in all
respects (including rights relating to dividends) pari passu with the
existing ordinary shares of the Company on issue at date of allotment.
10. METHOD OF EXERCISE OF OPTIONS
10.1 Options may be exercised by written notice to the Secretary of the
Company. The exercise notice must specify the number of shares required
to be allotted, which number must be a multiple of 1,000 if only part
of the Options are exercised, or if the total number of Options held is
less than 1,000, then the total of all Options held must be exercised.
Options will be deemed to have been exercised on the date that the
application is lodged with the Secretary of the Company.
10.2 The Option holder must pay the exercise price in full to the Company on
the date of the exercise of the Options.
10.3 The exercise of less than all of the Option holder's Options will not
prevent the Option holder from exercising an Option in respect of the
whole or any part of the balance of the entitlement under his remaining
Options.
10.4 On exercise of the Options the Option holder must surrender his Option
certificate to the Company in respect of those Options being exercised.
10.5 If the Option holder exercises less than the total number of Options
then registered in his name:
a) The Option holder must surrender his Option certificate to the
Company, and
b) the Company must cancel that Option certificate and issue to
the holder a new Option certificate in respect of the Option
holder's unexercised Options.
10.6 Within 10 days of receipt of the application for the exercise of
Options and payment by the Option holder of the exercise price of such
Options, the Company must issue and allot to the Option holder the
number of fully paid shares of commo stock in the capital of the
Company specified in the application.
10.7 If the Company is listed on the any Stock Exchange then it will as soon
as practicable after issue do all things necessary for the shares
issued upon exercise of Options by the Option holder to be granted
official quotation and to be freely tradeable on all Stock Exchanges
and. The Options are not to be listed on any Stock Exchange.
11. COMPULSORY ACQUISITION
If an entity ("Offeror") serves a notice on the option holder in
accordance with section 703(4) of the Corporations Law, all options,
which have not yet vested, become vested on the date that notice is
served on the option holder, irrespective of any unfulfilled conditions
of vesting.
-------------------------------------------------------------------------------
21
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
All options (including all existing options and all options that have
been vested by virtue of the preceding paragraph) will lapse on the
date 3 months after delivery of that notice.
Unless waived by written notice from the Company, the option holder
must accept an offer to acquire all options which remain unexercised
which is delivered in accordance with section 703(4) of the
Corporations Law. This obligation is conditional on the terms offered
by the Offeror being no less favourable than the offer price paid or
payable by the Offeror in connection with the acquisition of ordinary
shares in the Company under the Offeror's take-over scheme or take-over
announcement, adjusted to reflect the offer for options rather than
ordinary shares or on terms determined by a Court as contemplated by
section 703(8) of the Corporations Law.
12. OPTION EXPIRY DATE
Subject to clause 11, the Option Expiry Date is the option expiry date
referred to in Column 3 of Schedule A.
13. TAXATION
The Option holder is exclusively and solely responsible for all and any
tax that may be payable as a result of the issue and or exercise of the
Options and or the sale of shares resulting from the exercise of the
Options. The issuer makes no warranty or representation in respect of
any taxation that may be applicable to the issue and or exercise of the
Options and or the sale of shares resulting from the exercise of the
Options.
14. UNEXERCISED OPTIONS
(a) This clause 14 applies to all Unexercised Options. If there is any
inconsistency between this clause and the other provisions of these
Terms and Conditions in respect of the exercise of Unexercised Options,
this clause prevails to the extent of this inconsistency.
(b) If, at the time an Unexercised Option is exercised:
i) the Company is not listed on ASX; and
ii) the Company is a subsidiary of another company (the "Parent
Company") and
iii) the Parent Company is listed on ASX or any Approved Exchange
the Company may, instead of issuing shares in the capital of the
Company, elect to have the Parent Company issue one fully paid share of
common stock in the Parent Company for each Unexercised Option held.
(c) If the Company makes the election referred to in paragraph (b):
i) in lieu of the Option holder's entitlement under clause 1 to
subscribe for one fully paid share of common stock in the
capital of the Company for each Option held, the Option holder
will be issued one fully paid share of common stock of the
Parent Company for each Unexercised Option held;
-------------------------------------------------------------------------------
22
<PAGE>
David Mac.Smith Services Contract Confidential
-------------------------------------------------------------------------------
ii) in lieu of paying the exercise price to the Company in
accordance with Clause 10.2, the Option holder must pay the
full exercise price (which would have otherwise been payable
to the Company) to the Parent Company on the date of exercise
of the Unexercised Options and the Company is authorised to
pay over any such moneys received by it to the Parent Company
without further act or authority of the Option holder; and
iii) within 10 days of receipt of the application for the exercise
of the Unexercised Options and payment by the Option holder of
the exercise price of such Options, the Parent Company must
issue to the Option holder the number of fully paid shares of
common stock of the Parent Company specified in the
application; and
iv) to avoid doubt, the Option holder has no entitlement to be
issued or allotted any shares in the capital of the Company
upon exercise of the Unexercised Options.
(d) In this Clause 14:
"Unexercised Options" means all Options that have been granted but are
unexercised
15. CHANGE OF CONTROL
If any one entity or person, acting alone or in association with others,
a) lodges with the Company, or any parent of the Company, a substantial
shareholders notice indicating an interest or
b) in any way obtains an interest in
more than 30% of the issued capital of the Company, or any parent of the
Company, then all options, which have not yet vested, become immediately vested,
irrespective of any unfulfilled conditions of vesting.
-------------------------------------------------------------------------------
23