Unassociated Document


    EMPLOYMENT
      AGREEMENT BETWEEN

    CATUITY
      INC. AND ALFRED H. (JOHN) RACINE

    


    This
      Employment Agreement is made and entered into as of October 31, 2007 between
      Catuity Inc. (the “Company”), a Delaware corporation, and Alfred H. (John)
      Racine (the “Executive”).

    


    1. Employment.
      Company
      hereby employs Executive, and Executive hereby accepts employment with Company,
      on the terms and conditions hereinafter set forth. 

    


    2. Term.
      The
      term of this Agreement will commence on November 1, 2007 (the “Commencement
      Date”) and end on March 31, 2008 and will automatically renew for one more
      six-month term if the company has not completed a material transaction or
      earlier terminated as hereinafter set forth. This agreement shall have a final
      expiration date of October 31, 2008, unless extended by act of the board of
      Catuity. 

    


    3. Duties
      and Responsibilities.
      Executive shall serve with the duties of President, CEO and Director (or in
      such
      other position as may be mutually agreed upon by Executive and the Board) and
      shall have such responsibilities, duties and authority as may be assigned to
      him
      by the Board.

    


    4. Service
      on Board of Directors.
      The
      Executive shall serve on the Board of Directors of the Company and any of its
      subsidiaries, affiliates or divisions, and as an officer of any subsidiary,
      affiliate or division, if elected. When this Agreement terminates, Executive
      will, if requested by the Board of Company, tender his resignation from any
      and
      all such Board positions.

    


    5. Outside
      Activities.
      During
      the term of this Agreement, Executive is free to advise, volunteer or otherwise
      provide compensated services to other companies or organizations so long as
      such
      activities do not materially interfere with the completion of his duties and
      responsibilities. This work may include work for shareholders and lenders to
      the
      Company.

    


    6. Place
      of Employment.
      Executive shall have him office, and perform him duties, within 75 miles of
      the
      center of Charlottesville, Virginia and he shall not be required to move from
      the metropolitan Charlottesville, Virginia area; provided that, he shall from
      time to time be required to travel when necessary in carrying out Company’s
      business. Executive acknowledges that travel will be required to dispatch his
      normal duties.

    


    7. Reimbursement
      of Expenses and Furnishing of Services to Executive.
      During
      the term of this Agreement, Executive shall be entitled to, including but
      without limitation, an office at the company’s corporate headquarters, as well
      as reimbursement, upon proper accounting, of reasonable expenses and
      disbursements incurred by him in the course of his duties). All expense
      reimbursements will be subject to compliance with IRS regulations so as to
      be
      deductible as ordinary and necessary business expenses, and to compliance with
      Company’s normal policies and practices. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    8. Base
      Salary Compensation.
      During
      the term of Executive’s employment, he shall be paid a minimum base salary of
      One Hundred Thousand Dollars
      ($100,000) per year. The Board shall review Executive’s salary at least
      annually, and may increase Executive’s salary from time to time in their
      discretion, and if so increased, such salary shall not be decreased thereafter
      during the term of this Agreement. The Executive has held his current position
      since joining the Company on in September 2004. With this contract, the
      Executive has accepted a reduced compensation package. The Company confirms
      that, in addition to its ongoing obligations under this contract, the Executive
      is owed Sixty-Seven Thousand Five Hundred and Twenty-Five Dollars ($67,525.00)
      in unpaid compensation.

    


    9. Other
      Benefits.
      The
      Company will make timely reimbursement to the Executive for 100% of the cost
      of
      private health insurance.

     

    
      
        10.
          Non
          Disparagement of Executive. Company
          shall not disparage Executive’s reputation or good name during or after the term
          of this Agreement. 

      

    

     

    
      
        11.
          Termination.
          

      

    

     

    (a) Executive
      may voluntarily terminate his employment hereunder at any time, on 30 days’
notice with or without cause.

     

    (b) Company
      may terminate this Agreement and the employment of Executive at any time, with
      or without “Cause” (as defined below), on 30 days’ notice.

    


    (c) Either
      Company or Executive may terminate this Agreement after the “Disability” (as
      defined below) of Executive, on 30 days’ notice.

    


    (d) This
      Agreement will terminate on Executive’s death.

     

    12. Termination
      Definitions. 

    


    (a) “Cause”
      means
      (i)
      the Executive’s commission of acts or omissions constituting active and
      deliberate dishonesty as determined by the Board of Directors, (ii) Executive’s
      actual receipt of an improper benefit or profit in money, property or services,
      or (iii) if the Executive continuously fails to perform his duties under this
      Agreement in any material manner after receipt of notice of such failure from
      the Company specifying how he has so failed to perform. The Company may at
      its
      option terminate this Agreement for Cause by giving written notice of
      termination to the Executive without prejudice to any other remedy to which
      the
      Company may be entitled at law, in equity, or under this Agreement. The notice
      of termination required by this Section shall specify the ground for the
      termination and shall be supported by a statement of all relevant facts. In
      the
      event of termination of this Agreement for Cause, the Executive shall be
      entitled to no further compensation or other benefits under this Agreement,
      except as to that portion of any unpaid salary and other benefits accrued and
      earned by him hereunder up to and including the effective date of such
      termination.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (b) 
      For
      purposes of this Agreement, a "Change in Control" shall be deemed to have
      occurred:

    


    (i) if
      any
      person or group of persons acting together (other than (a) the Company or any
      person (I) who as of the date hereof was a director or officer of the Company,
      or (II) whose shares of Common Stock of the Company are treated as "beneficially
      owned" by any such director or officer, or (b) any institutional investor
      (filing reports under Section 13(g) rather than 13(d) of the Securities Exchange
      Act of 1934, as amended, including any employee benefit plan or employee benefit
      trust sponsored by the Company)), becomes a beneficial owner, directly or
      indirectly, of securities of the Company representing fifty percent (50%) or
      more of either the then-outstanding Common Stock of the Company or the combined
      voting power of the Company's then-outstanding voting securities (other than
      as
      a result of an acquisition of securities directly from the Company);


    


    (ii) if
      the
      Company sells all or substantially all of the Company's assets to any person
      (other than a wholly--owned subsidiary of the Company formed for the purpose
      of
      changing the Company's corporate domicile);

    


    (iii) if
      the
      Company merges or consolidates with another person as a result of which the
      shareholders of the Company immediately prior to such merger or consolidation
      would beneficially own (directly or indirectly), immediately after such merger
      or consolidation, securities of the surviving entity representing less than
      fifty percent (50%) of the then outstanding voting securities of the surviving
      entity; or

    


    (iv) if
      the
      new directors appointed to the Board during any twelve-month period constitute
      a
      majority of the members of the Board, unless (I) the directors who were in
      office for at least twelve (12) months prior to such twelve-month period (the
      "Incumbent Directors") plus (II) the new directors who were recommended or
      appointed by a majority of the Incumbent Directors constitutes a majority of
      the
      members of the Board.

    


    (v) For
      purposes of this paragraph a “person” includes an individual, a partnership, a
      corporation, an association, an unincorporated organization, a trust or any
      other entity.

    


    (d) “Disability”
      means the inability of Executive due to accident or illness to perform the
      essential functions of his job despite reasonable accommodations by Company,
      where such inability is reasonably expected to last longer than 90 days. If
      Executive is covered by a long-term disability insurance policy, then
“Disability” shall mean the long term disability of Executive (or comparable
      term) as defined in the applicable long-term disability insurance
      policy.

    


    13. Compensation
      After Termination. 

     

    (a) If
      there
      has been a Change in Control prior to the termination date, Executive’s
      compensation shall be as follows:

    


    (i) Company
      shall pay Executive an amount equal to salary at his then-current rate for
      the
      greater of 12 months or the balance of the term of this Agreement. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (b) If
      this
      Agreement is terminated due to Executive’s death or Disability, Executive’s
      compensation shall be as follows:

    


    (i) Company
      shall pay Executive an amount equal to 12 months’ salary at his then-current
      salary rate. 

    


    (c) If
      Company terminates this Agreement with Cause, Executive’s compensation shall be
      as follows:

    


    (i) Company
      shall pay Executive only for cash compensation earned up to the date of
      termination. 


    


    (d) If
      this
      Agreement ends at the normal expiration of a term, then:

    


    (i) Company
      shall pay Executive only for cash compensation earned up to the date of
      termination. 

    


    (e) Notwithstanding
      anything to the contrary contained herein, in the event it shall be determined
      that any compensation payment or distribution by the Company to or for the
      benefit of the Executive would be subject to the excise tax imposed by Section
      4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Change
      in Control severance payment will be reduced to the extent necessary so that
      no
      excise tax will be imposed, but only if to do so would result in the Executive
      retaining a larger amount, on an after-tax basis, taking into account the excise
      and income taxes imposed on all payments made to the Executive
      hereunder.

    


    14. Indemnification.
      In
      addition to any indemnification provided by the By-Laws of Company or otherwise,
      Company shall indemnify and provide reasonable advances for expenses to
      Executive, to the fullest extent permitted by the laws of the State of Delaware,
      if Executive is made a party to any threatened, pending or completed action,
      suit or proceeding, whether civil, criminal, administrative or investigative,
      by
      reason of the fact that Executive is or was an officer, director or employee
      of
      Company or any subsidiary or affiliate thereof, in which capacity Executive
      is
      or was serving at Company’s request, against expenses, judgments, fines and
      amounts paid in settlement incurred by him in connection with such action,
      suit
      or proceeding. Company shall exercise its reasonable commercial efforts to
      maintain directors’ and officers’ insurance coverage as well as all other
      appropriate malpractice and professional liability coverage on behalf of
      Executive during the term of this Agreement at Company’s expense, in a manner
      and coverage substantially similar to the D&O insurance currently in effect.
      Subject to requirements of any applicable insurance coverage, Executive shall
      have the absolute right to engage counsel reasonably acceptable to Company
      and
      at legal rates deemed reasonably acceptable to Company, for the above-referenced
      actions. Executive shall give prompt notice to Company of any claims made
      against him for which he will seek indemnification. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    15. Amendment
      or Modification Waiver.
      No
      provision of this Agreement may be amended, modified or waived, unless such
      amendment, modification or waiver shall be authorized by the Board or any
      authorized committee of the Board, and shall be agreed to in writing, signed
      by
      Executive and by an officer of Company thereunto duly authorized. Except as
      otherwise specifically provided in this Agreement, no waiver by either party
      hereto of any breach by the other party hereto of any condition or provision
      of
      this Agreement to be performed by such other party shall be deemed a waiver
      of a
      subsequent breach of such condition or provision or a waiver of a similar or
      dissimilar provision or condition at the same or any prior or subsequent time.
      

    


    16. Severability.
      In the
      event that any provision or portion of this Agreement shall be determined to
      be
      invalid or unenforceable for any reason, the remaining provisions and portions
      of this Agreement shall be unaffected thereby and shall remain in full force
      and
      effect to the fullest extent provided by law. 

    


    17. Successors.
      This
      Agreement shall be binding upon any successor of Company and such successor
      shall be deemed substituted for Company under the terms of this Agreement;
      but
      any such substitution shall not relieve Company of any of its obligations
      hereunder. As used in this Agreement, the term “successor” shall include any
      person, firm, corporation or like business entity which at any time, whether
      by
      merger, purchase or otherwise, acquires all or substantially all of the assets
      or business of Company. This Agreement may not be otherwise assigned by Company
      without Executive’s written consent.

    


    18. Confidential
      Information.
      Executive agrees not to disclose, either while in Company’s employ or at any
      time thereafter, to any person not employed by Company or not engaged to render
      services to Company any confidential agreement obtained by him while in the
      employ of Company, including, without limitation, any of Company’s inventions,
      processes, methods of distribution, customers or trade secrets; provided,
      however, that this provision shall not preclude Executive from use or disclosure
      of information known generally to the public or of information not considered
      confidential by persons engaged in the business conducted by Company or from
      disclosure required by law or court order. 

    


    19. Withholding.
      Anything to the contrary notwithstanding, all payments required to be made
      by
      Company hereunder to Executive or his estate or beneficiary shall be subject
      to
      the withholding of such amounts, if any, relating to tax and other payroll
      deductions as Company may reasonably determine it should withhold pursuant
      to
      any applicable law or regulation. In lieu of withholding such amounts, Company
      may accept other provisions to the end that it has sufficient funds to pay
      all
      taxes required by law to be withheld in respect to any of such payments.


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    20. Notices.
      For the
      purpose of this Agreement, notices, demands or other communications provided
      for
      herein shall be in writing and shall be deemed to have been duly given when
      delivered or (unless other specified) mailed by United States Certified Mail,
      return receipt requested, postage prepaid, addressed as follows: 

    


    to
      Executive: Alfred
      H.
      (John) Racine

    622
      Wilder Drive 

    Charlottesville,
      VA 22901

    


    to
      Company: Catuity
      Inc.

    2340
      Commonwealth Drive, Suite C

    Charlottesville,
      VA 22901

    


    or
      to
      such other address as any party may have furnished to the other in writing
      in
      accordance therewith, except that notices of change of address shall be
      effective only upon receipt. 

    


    21. Construction
      With Delaware Law.
      The
      validity, interpretation, construction and performance of this Agreement shall
      be governed by the laws of the State of Delaware. 

    


    22. Entire
      Agreement of Parties.
      This
      Agreement contains the entire agreement of the parties and no party shall be
      liable and bound except as provided herein, but this instrument does not
      replace, rescind or abrogate any other agreement or plan between the parties
      which may now be or may hereinafter become effective.

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      day
      and year first above written.

     

    
      	 	 	 
	 	CATUITY INC.
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Clifford
              W. Chapman, Jr.,
	 	Director and Chairman, Compensation
              Committee


    

     

    
      	 	 	 
	 	“Company”
	 
 	 
 	 
 
	
            	         
              	
            
	 	
              
Alfred
              H. (John)
              Racine
	 	“Executive”