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EXHIBIT 10.1
EMPLOYMENT AGREEMENT BETWEEN
CATUITY INC. AND GRAHAM MCSTAY
This
Employment Agreement is made and entered into as of March 15,
2007
between Catuity Inc. (the "Company"), a Delaware corporation, and
Graham McStay
(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 March 15, 2007
(the
"Commencement Date") and end on March 14, 2010, unless further
extended or
earlier terminated as hereinafter set forth. Commencing on March
15, 2010 and on
March 14 of each year thereafter, the term of Executive's
employment shall be
extended for consecutive additional one-year terms unless either
party notifies
the other at least six months before termination of the
then-current term that
the notifying party does not wish the Agreement to be extended.
3.
DUTIES AND RESPONSIBILITIES. Executive shall serve with the duties
of
Chief Executive Officer and President of Loyalty Magic (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. Executive shall devote substantially all of his working
time and
effort to the business and affairs of Company, except that he may
as hereinafter
provided serve as a member of the board of directors of other
companies,
charities, civic organizations and professional organizations.
4.
SERVICE ON BOARD OF DIRECTORS. The parties do not presently
contemplate
that Executive shall serve on the Board of the Company. However, if
the Board
determines otherwise during the term of this Agreement, Executive
shall serve,
if and when elected, and re-elected, as a member of the Board of
Company or of
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
may
devote reasonable periods of time to serve as a member of the board
of directors
or of a committee of any organization involving no conflict of
interest with
Company, and he may engage in charitable, civic and community
activities and
manage his personal investments; provided that such activities do
not materially
interfere with the regular performance of his duties and
responsibilities under
this Agreement.
6.
PLACE OF EMPLOYMENT. Executive shall have his office, and perform
his
duties, within 50 Kilometers of the center of Melbourne, Victoria
Australia and
he shall not be required to move from the metropolitan Melbourne,
Victoria
Australia area; provided that, he shall from
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time to time be required to travel when necessary in carrying out
Company's
business. Executive acknowledges that Company maintains offices and
employees in
locations in the US and Australia, and that accordingly significant
and regular
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 Melbourne, Victoria
Australia
facility as well as reimbursement, upon proper accounting, of
reasonable
expenses and disbursements incurred by him in the course of his
duties
(including professional dues). All expense reimbursements will be
subject to
compliance with Australian Tax authorities so as to be deductible
as ordinary
and necessary business expenses, and in 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 Eighty Thousand
dollars AUD
($180,000) per year (inclusive of 9% Superannuation). The CEO and
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. Annual
leave will be accrued at the rate of 4 weeks per annum. Sick leave
entitlements
will be based upon accrual of 8 days per annum. All existing
accrued leave
(annual, sick and long service leave) will be rolled over. Standard
long service
leave and other legislated entitlements will stand.
9.
OTHER BENEFITS. Executive shall be entitled to participate in all
bonus
or incentive plans and stock purchase plans in such manner as such
plans apply
to officers and senior executives of the Company generally, and in
all employee
benefits, including disability insurance coverage, medical and
fringe benefit
plans currently maintained, or hereafter adopted, by the Company
for Loyalty
Magic, as such plans may be amended or terminated from time to time
in
accordance with their terms, in the same manner as such plans apply
to officers
and senior executives of Company of comparable or lesser position
generally.
10.
INCENTIVE COMPENSATION.
(a)
Company shall compute the volume weighted average trading price
of
Company's common stock on the Nasdaq Small Cap Market during the
thirty calendar
days preceding (and ending on) March 15, 2007. This price is
referred to
hereafter as the "Initial Market Price".
(b)
Company hereby grants to Executive non-qualified options to
acquire
10,000 shares of Company stock, expiring ten years after the
Commencement Date
at a strike price equal to the Initial Market Price. The 10,000
options will
vest on the following schedule: 25% on March 15, 2007; 25% on March
15, 2008;
25% on March 15, 2009 and the remaining 25% on March 15, 2010.
These options are
to be taken up at the discretion of the Executive.
(c)
The Company will award 15,000 shares of restricted stock to
Executive
on March 15, 2007. One-half of these restricted shares will vest
based on
achieving the Board approved 2007 budgeted Earnings Before Interest
and Taxes
(EBIT) for Loyalty Magic, subject to audit. The other half will
vest based on
achieving the Board approved 2008 budgeted Earnings Before Interest
and Taxes
(EBIT) for Loyalty Magic, subject to audit.
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(d)
The Executive will be eligible for an annual bonus plan for each
full
year of this Agreement where Loyalty Magic achieves EBIT levels
compared to a
Board-approved annual business plan (including the effect of
bonuses subject to
audit), he will receive a bonus payable in shares of Company common
stock
("Bonus Shares") valued at the 30-day VWAP for December 1 through
31 of the year
for which the bonus is computed. The base bonus will be equal to 25
percent of
"eligible salary", according to "eligible salary" and bonus
parameters to be
designated by the Board prior to the beginning of the bonus year.
The base bonus
will be adjusted up or down in accordance with the base bonus
multiplier below.
There will be no bonus paid for achievement of less than 90% of
EBIT. Company
shall compute and pay the bonus on or before April 15 of each year
for the prior
year. For 2007, this is based on an EBIT target of $83,000 AUD.
<TABLE>
<CAPTION>
% of EBIT target achieved Base Bonus Multiplier
------------------------- ---------------------
<S>
<C>
<90%
-0-
90% but < 100%
.75
100% but <120%
1.0
120% but <140%
1.25
140% and over
1.50
</TABLE>
(e)
If the Company has at least nine months operating positive cash
flow at
the time of the award, Executive may elect to receive 50% of the
bonus amount in
cash and reduce the Bonus Shares proportionally.
(f)
All equity grants or options will carry customary provisions to
adjust
the share amounts and/or exercise or trigger prices to
appropriately and
equitably respond to capital changes such as stock splits,
dividends,
recapitalizations and the like.
(g)
Company shall reasonably cooperate with Executive in handling
withholding tax obligations in respect of the foregoing
incentive/equity
compensation items, so as to minimize the adverse effects on
Executive of any
requisite withholding tax obligations. These means and methods may
include
cooperation in ensuring legal resale capabilities for shares, use
of shares to
satisfy withholding obligations (if share sales by Executive are
impermissible,
and if such a device is then permitted, and with due regard given
to Company's
liquidity position).
11.
NON DISPARAGEMENT OF EXECUTIVE. Company shall not disparage
Executive's
reputation or good name during or after the term of this
Agreement.
12.
TERMINATION.
(a)
Executive may voluntarily terminate his employment hereunder at
any
time, on 90 days' notice without cause or "Good Reason" (as defined
below), or
with Good Reason as provided in Section 13(b) below.
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(b)
Company may terminate this Agreement and the employment of
Executive at
any time, with or without "Cause" (as defined below), on 90 days'
notice.
(c)
Either Company or Executive may terminate this Agreement after
the
"Disability" (as defined below) of Executive, on 90 days'
notice.
(d)
This Agreement will terminate on Executive's death.
13.
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 grounds 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
