exv10w1



 





Exhibit 10.1




Secured Promissory Note



For good value, CATUITY, INC., a Delaware corporation, (“Borrower”) promises to pay to the order
of GOTTBETTER CAPITAL MASTER, LTD. (“Holder”) an amount equal to the Principal Balance (as
defined below), together with interest at the rate of 12% per annum on the unpaid balance, paid in
the following manner:



1. Principal Amount and Offsets. This promissory note (the “Note”) is for an amount equal
to $75,000. (the “Initial Principal Amount”).



2. Term, Interest and Payments. The term of this Note is for the earlier of six months
from the date hereof, after which this Note shall become due and payable in full or upon a sale of
any of the Company’s assets, including its Australian Loyalty Magic subsidiary, the proceeds of
such sale, before being applied to satisfy any other obligations of the Company, shall be applied
first to the repayment of the original Convertible Notes issued to the Lenders on November 22, 2006
and then to the repayment of this Promissory Note. The principal balance shall accrue interest at
a rate of 12% per annum, compounded monthly, beginning on July 5, 2007 until the principal is paid.
This Note may be prepaid at any time, in whole or in part, without penalty. Payments shall be
first applied to accrued interest and the balance to principal.



3. Acceleration. This Note shall, at the option of the Holder hereof upon written notice
to the Borrower, become immediately due and payable in full upon the:





(a) Failure to make any payment within fifteen (15) days of its due date.




(b) Breach of any security interest, mortgage, loan agreement, pledge agreement or guarantee
granted as collateral security for this Note.




(c) Filing by the Borrower of an assignment for the benefit of creditors, bankruptcy or
other form of insolvency, or by suffering an involuntary petition in bankruptcy or
receivership not vacated within thirty (30) days.




(d) Any breach of the provisions of the provisions of Sections 5 or 6 of this Note.


4. Default. If this Note shall be in default and placed for collection, the Borrower
shall pay all reasonable attorney fees and costs of collection. Payments shall be made to such
address as may from time to time be designated by the Holder. If there is an event of default
declared under this Note or any of the Transaction Documents, as defined in the Securities Purchase
Agreement among the Holder, Bridgepointe Master Fund Ltd. (“Bridgepointe”) and the Borrower, dated
November 21, 2006, the Borrower shall use it best efforts to cause its Board of Directors to
immediately appoint and install three new directors that are proposed and approved by the then
Holders, and to cause the three independent directors on the Borrower’s Board of Directors to
resign




 









 







immediately thereafter. The new directors will be qualified under the relevant market or exchange
rules and the Securities and Exchange Commission



5. Security. As security for the Note, the Borrower and each of its subsidiaries will
execute a Joinder Agreement to the Security Agreement, dated the date hereof, with the Holder and
Bridgepointe that will provide a first lien security interest on the collateral described in the
Security Agreement, dated November 21, 2006, between the Borrower and each of its subsidiaries, on
the one hand, and the Holder, on the other.



6. Special Issues. Holder will designate Michael Chorske (the “Lenders Designee”)
with the Holder to represent the Holder in reviewing, approving the sale of computer hardware,
office furniture and similar items which will not exceed $25,000 in any one transaction.
Additionally, the Lenders Designee will approve the use of proceeds from such sales. The interest
due on July 1, 2007 under the Senior Secured Convertible Note (“Note”) between the Borrower and the
Holder dated November 22, 2006 shall be deferred until August 1, 2007 and the Holder agrees not to
declare an event of default for any reason under the Note prior to August 1, 2007, with the
exception of a) resignation of all of the independent members of the Board of the Borrower or b)
the Borrower files for Bankruptcy. The Borrower shall use its best efforts to cause Debra Hoopes
to agree to not initiate a legal action that might cause bankruptcy proceedings as it relates to
the Borrower’s obligation per her employment contract so long as she is not be sued by the Holder
and so long as she is treated equitably in any final settlement with other unsecured creditors. In
the event the Independent members of the Board of the Borrower does not meet the requirements of
NASDAQ, the Board, in consultation with the Holder will nominate qualified individuals to fill the
Board seats.



7. Waiver of Demand and Presentment. The Borrower, and all other parties to this note,
whether as endorsers, guarantors or sureties, shall remain fully bound until this note is paid and
waive demand, presentment and protest and all notices thereto and further agree to remain bound,
notwithstanding any extension, modification, waiver, or other indulgence or discharge or release of
any obligor hereunder or exchange, substitution, or release of any collateral granted as security
for this note. No modification or indulgence by the Holder hereof shall be binding unless in
writing; and any indulgence on any one occasion shall not be an indulgence for any other or future
occasion. The rights of the Holder hereof shall be cumulative and not necessarily successive.



8.  Governing Law; Jurisdiction; Jury Trial. This note shall take effect as a sealed
instrument under the law of the State of New York. All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause the application of
the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New
York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith
or




2









 







with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.




Dated: July 5, 2007




	 	 	 
	BORROWER:

	 	HOLDER:
	CATUITY, INC., a Delaware Corporation

	 	GOTTBETTER CAPITAL MASTER, LTD., a Cayman Islands Exempted Company
	 
	 	 
	By:                                                             

	 	By:                                                             
	John Racine

	 	Adam S. Gottbetter, Director
	President & CEO

	 	488 Madison Avenue, 12th Floor	 
	300 Preston Ave., Suite 302

		New York, NY 10022	 
	Charlottesville, VA 22902

		Telephone: 212.400.6990
	FAX : 1.734.943.6850

	 	Fax: 212.400.6999
	







3