EXECUTIVES SERVICES
                               -------------------
                                    AGREEMENT
                                    ---------


                                     BETWEEN
                                     -------


                                  CATUITY INC.
                                  ------------


                                       AND
                                       ---



                            DAVID LANCELOT MACHATTIE
                            ------------------------
                                      SMITH
                                      -----

                                  (1 JUNE 2001)
                                  -------------





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                                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



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   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



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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;




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           '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.




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           (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




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                      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%)



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           (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


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           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.



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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.


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(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




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        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



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        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.




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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



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         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.


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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.



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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)



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                                   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
--------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------




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                      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



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                  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.


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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.



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         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;


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         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.



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Source: OneCLE Business Contracts.