Catuity Signs a Multi-Year Loyalty Software Development and Cross License Agreement with Visa U.S.A.

Business Editors

DETROIT--(BUSINESS WIRE)--Oct. 25, 2001

Catuity, Inc. (NASDAQ: CTTY; ASE: CAT) today announced that it has entered into a multi-faceted development and cross-licensing contract with Visa U.S.A.

Under the agreement, effective October 1, 2001, Catuity will undertake new development work on its loyalty system, provide Visa with on-going technical support and provide a license to Visa U.S.A. for its suite of loyalty software and technology. Catuity will also receive from Visa a license to the new Visa technology developed under this agreement, which it will market to Visa member banks and merchants. The contract provides current revenue to Catuity of over $4 million and could provide significant additional value to Catuity in the coming years, as acceptance of smart Visa cards grows.

Catuity's loyalty software is a component of the smart Visa Technology platform introduced in September 2000. FleetBoston Financial Corporation, Providian Financial Corporation and Retailers National Bank, al division of Target Corporation, incorporate Catuity's software into the smart Visa cards that are currently being issued. Catuity's software allows merchants to deploy loyalty programs that are tied to the payment process at the point of sale, using conventional magnetic stripe or newly developed smart cards. Visa estimates over 7.0 million smartVisa cards will be in circulation by the end of 2001.

Catuity's software provides Visa member banks with a software engine from which they can create new products offering greater consumer value. "Visa is committed to providing our member banks and merchants with powerful loyalty programs that give consumers greater convenience and value," said Patrick Gauthier, Senior Vice President, Smart Card Applications, Visa U.S.A. "Working with Catuity, a leading provider in smart loyalty technologies, Visa is developing services that consumers and merchants will find valuable, accelerating the deployment of smart cards at the point of sale."

"We are enthusiastic about the smart Visa program and are pleased with our continuing relationship with Visa U.S.A.," said Michael Howe, President and CEO of Catuity, Inc., which was founded in Sydney, Australia and is now headquartered in Detroit, Michigan. "The integration of loyalty and payment systems is a complex undertaking, and when accomplished, merchants and card issuers will benefit from advanced tools to create multiple loyalty programs on a smart Visa card. The Catuity system is currently the most advanced in the market and our people are dedicated to developing the integration required to make this happen."

Using Catuity's software system merchants and card issuers will be able to deliver valuable loyalty building incentives at the point of sale benefiting customers with better targeted and more timely rewards, utilizing a broad array of widely used and time tested promotions. Card issuers will benefit by providing to cardholders the added value and convenience offered by the ability to aggregate multiple reward programs on their payment card.

Jonathan Adams, Catuity's Vice President of product development said, "The Catuity system allows merchants and card issuers to create programs that will help raise revenue and build loyal customers through targeted promotions delivered in a more timely and economic manner than has been accomplished before. Working together Visa and Catuity are integrating payment and loyalty to provide a flawless consumer and merchant experience at the time of the sale."

The agreement extends the relationship between Visa and Catuity with the issuance of warrants to Visa to purchase up to 300,000 shares of Catuity common stock at an exercise price of $3.69. The warrants will conditionally vest over time as a function of Catuity's software licensing revenues and the final group will vest when Catuity receives a minimum of $14 million in cumulative North American license revenue prior to December 31, 2004.

The company is currently reviewing its forward-looking statements as a result of this contract and other customer activity and will release further information in the next week.

Catuity, Inc. (www.catuity.com) is a leading provider of loyalty software systems. The Catuity software includes an integrated suite of applications that provide loyalty, ticketing, access control and membership. The Catuity Loyalty System is ubiquitous in that it can operate on any device, any card program and with any payment process, including stored value, smart cards and wireless applications. Catuity unites the brick-and-mortar retailer with the Internet to enable cross-sell capabilities with consistent brand imaging across all channels.

In conjunction with the provisions of the "Safe Harbor" section of the Private Securities Litigation Reform Act of 1995, this release may contain forward-looking statements pertaining to future anticipated projected plans, performance and developments, as well as other statements relating to future operations. All such forward-looking statements are necessarily only estimates of future results and there can be no assurance that actual results will not materially differ from expectations. Further information on potential factors that could affect Catuity, Inc. is included in the Company's Form 10-K, which is filed with the U.S. Securities & Exchange Commission.