SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by
the Registrant [ X ]
Filed by
a Party other than the Registrant [ ]
Check the
appropriate box:
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[
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[ X ]
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Definitive
Proxy Statement
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to Exchange Act Rule
14a-12
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LML
PAYMENT SYSTEMS INC.
(Name of
Registrant as Specified in Its Charter)
Not
Applicable
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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[ X
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee if offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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LML
PAYMENT SYSTEMS INC.
Suite
1680 - 1140 West Pender Street
Vancouver,
British Columbia V6E 4G1
NOTICE
OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD ON AUGUST 7, 2008
TO
THE HOLDERS OF COMMON SHARES OF LML PAYMENT SYSTEMS INC.
The
annual and special meeting of the shareholders of LML Payment Systems Inc. will
be held at The Hyatt Regency Vancouver, 655 Burrard Street, Vancouver, British
Columbia, on August 7, 2008, at 10:00 a.m. local time, for the purposes
of:
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1.
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electing
four (4) members of our board of
directors;
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2.
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appointment
of our auditors;
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3.
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to
consider and, if thought fit, with or without amendment, to approve a
special resolution to amend the Articles of the Corporation by changing
the corporate name of the Corporation from “LML Payment Systems Inc.”, to
“Beanstream Internet Commerce Inc.”, or such other name as the directors
in their absolute discretion may determine and which is acceptable to the
regulatory authorities; and
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4.
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transacting
any other business that may properly come before the meeting or any
adjournment or adjournments
thereof.
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The
record date for our annual and special meeting is June 25, 2008. Only
shareholders of record at the close of business on June 25, 2008 are entitled to
notice of, and to vote at, our annual and special meeting, and any adjournment
or postponement of our annual and special meeting.
A copy of
our Annual Report to Shareholders for our fiscal year ended March 31, 2008
accompanies this notice.
Our board
of directors hopes that you will find it convenient to attend our annual and
special meeting in person, but whether or not you attend, please mark, sign,
date and return the enclosed Form of Proxy immediately to ensure that your
common shares are represented at our annual and special
meeting. Returning your proxy does not deprive you of the right to
attend our annual and special meeting and vote your common shares in
person.
PLEASE
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.
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By
Order of the Board of Directors:
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Patrick
H. Gaines
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President
and CEO
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Dated: July
2, 2008
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PROXY
STATEMENT
ANNUAL
AND SPECIAL MEETING OF SHAREHOLDERS OF LML PAYMENT SYSTEMS INC.
August
7, 2008
LML
Payment Systems Inc.
Suite
1680 - 1140 West Pender Street
Vancouver,
British Columbia V6E 4G1
The
accompanying Form of Proxy is solicited on behalf of the board of directors of
LML Payment Systems Inc. to be used at our annual and special meeting to be held
at The Hyatt Regency Vancouver, 655 Burrard Street, Vancouver, British Columbia,
on August 7, 2008, at 10:00 a.m. local time. This proxy statement,
accompanying Form of Proxy, Notice of Meeting and Annual Report to Shareholders
on Form 10-K for the fiscal year ended March 31, 2008 are first being mailed to
shareholders on or about July 2, 2008.
We will
bear the expense of this solicitation. Certain of our directors,
officers and employees may solicit the return of proxies by mail, telephone,
facsimile or other similar means without additional
compensation. Requests will also be made of brokerage houses and
custodians, nominees or fiduciaries to forward proxy material at our expense to
the beneficial owners of stock held of record by such persons. Our
transfer agent, Computershare Investor Services Inc. (“Computershare”), has
agreed to assist us in the tabulation of proxies and the counting of votes at
our annual and special meeting.
All of a
shareholder's common shares registered in the same name will be represented by
one proxy.
WHO
CAN VOTE
Only
shareholders of record as of the close of business on June 25, 2008 are entitled
to receive notice of, attend and vote at our annual and special
meeting. As of June 16, 2008, there were 26,341,832 common shares in
the capital of our corporation issued and outstanding owned by approximately 389
shareholders of record. We have no other voting securities
outstanding. Each shareholder of record on June 25, 2008 is
entitled to one vote for each common share held.
HOW
YOU CAN VOTE
Common shares cannot be voted at our
annual and special meeting unless the holder of record is present in person or
represented by proxy. A shareholder has the right to attend our
annual and special meeting at the time and place set forth in the Notice of
Annual and Special Meeting and to vote their shares directly at the
meeting. In the alternative, a shareholder may appoint a person to
represent such shareholder at our annual and special meeting by completing the
enclosed Form of Proxy, which authorizes a person other than the holder of
record to vote on behalf of the shareholder, and returning it to our transfer
agent, Computershare Investor Services Inc., 6th Floor, 530 - 8th Avenue, S.W.,
Calgary, Alberta T2P 3S8 (facsimile (403) 267-6529) in the enclosed
envelope. All shareholders are urged to mark, sign, date and
promptly return the enclosed Form of Proxy by mail in the enclosed envelope, or
by telephone or electronically via the Internet, after reviewing the information
contained in this proxy statement. Valid proxies will be voted at our annual and
special meeting and at any postponements or adjournments thereof as you direct
in the proxy, provided that such proxies are received by Computershare no later
than 5:00pm Eastern Time on August 5, 2008 or at least 24 hours prior to any
adjournment of the annual and special meeting, or deposited with the Chair of
the annual and special meeting on the day of the annual and special meeting or
any adjournment thereof prior to the time of voting.
The
common shares represented by the proxy will be voted, or withheld from voting,
as directed in the proxy. If no direction is given and the proxy is
validly executed, the proxy will be voted FOR the election of the nominees for
our board of directors set forth in this proxy statement; FOR the
appointment of our independent auditors, Grant Thornton LLP.; and FOR the
approval of a special resolution to amend the Articles of the Corporation by
changing the corporate name of the Corporation from “LML Payment Systems Inc.”
to “Beanstream Internet Commerce Inc.”. If any other matters
properly come before our annual and special meeting, the persons authorized
under the proxies will vote upon such other matters in accordance with their
best judgment, pursuant to the discretionary authority conferred by the
proxy.
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ADVICE
TO BENEFICIAL HOLDERS OF COMMON SHARES
THE
INFORMATION SET FORTH IN THIS SECTION IS OF SIGNIFICANT IMPORTANCE TO MANY
SHAREHOLDERS OF OUR CORPORATION AS A SUBSTANTIAL NUMBER OF SHAREHOLDERS DO NOT
HOLD SHARES IN THEIR OWN NAME.
Shareholders
who do not hold their shares in their own name (referred to in this proxy
statement as “beneficial shareholders”) should note that only proxies deposited
by shareholders whose names appear on the records of our corporation as the
registered holders of common shares can be recognized and acted upon at our
annual and special meeting. If common shares are listed in an account
statement provided to a shareholder by a broker, then in almost all cases, those
common shares will not be registered in the shareholder's name on the records of
our corporation. Such common shares will more likely be registered
under the name of the shareholder's broker or an agent of that
broker. In the United States, the vast majority of such shares are
registered under the name of Cede & Co. as nominee for The Depositary Trust
Company (which acts as depositary for many U.S. brokerage firms and custodian
banks), and in Canada, under the name of CDS & Co. (the registration name
for The Canadian Depository for Securities Limited, which acts as nominee for
many Canadian brokerage firms). Beneficial shareholders should ensure
that instructions respecting the voting of their common shares are communicated
to the appropriate person.
Applicable
regulatory policy requires intermediaries/brokers to seek voting instructions
from beneficial shareholders in advance of shareholders'
meetings. Every intermediary/broker has its own mailing procedures
and provides its own return instructions to clients, which should be carefully
followed by beneficial shareholders in order to ensure that their common shares
are voted at our annual and special meeting. The majority of brokers
now delegate responsibility for obtaining instructions from clients to
Broadridge Financial Solutions, Inc. (“Broadridge U.S.”) (formerly known as ADP
Investor Communication Services) in the United States and Broadridge Investor
Communications Solutions, Canada (“Broadridge Canada”) (formerly known as ADP
Investor Communications Canada) in Canada. Broadridge U.S. and
Broadridge Canada typically apply a special sticker to proxy forms, mail those
forms to the beneficial shareholders and ask beneficial shareholders to return
the proxy forms to Broadridge U.S. for the United States and Broadridge
Canada for Canada. Broadridge U.S. and Broadridge Canada then
tabulate the results of all instructions received and provide appropriate
instructions respecting the voting of shares to be represented at our annual and
special meeting. A beneficial shareholder receiving a
Broadridge U.S. proxy or a Broadridge Canada proxy cannot use that proxy to
vote common shares directly at our annual and special meeting - the proxy must
be returned to Broadridge U.S. or Broadridge Canada, as the case may be,
well in advance of our annual and special meeting in order to have the common
shares voted.
Although
a beneficial shareholder may not be recognized directly at our annual and
special meeting for the purposes of voting common shares registered in the name
of his broker (or agent of the broker), a beneficial shareholder may attend our
annual and special meeting as proxyholder for the registered shareholder and
vote the common shares in that capacity. Beneficial shareholders who
wish to attend our annual and special meeting and indirectly vote their common
shares as proxyholder for the registered shareholder should enter their own
names in the blank space on the instrument of proxy provided to them and return
the same to their broker (or the broker's agent) in accordance with the
instructions provided by such broker (or agent), well in advance of our annual
and special meeting.
Alternatively,
a beneficial shareholder may request in writing that his or her broker send to
the beneficial shareholder a legal proxy which would enable the beneficial
shareholder to attend our annual and special meeting and vote his or her common
shares.
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QUORUM
A quorum
of shareholders is necessary to take action at our annual and special
meeting. A minimum of one person present in person or represented by
proxy and holding at least 33 1/3 percent of the outstanding common shares as at
June 25, 2008 will constitute a quorum for the transaction of business at our
annual and special meeting. However, if a quorum is not present, the
shareholders present at our annual and special meeting have the power to adjourn
the meeting until a quorum is present. At any such adjourned meeting
at which a quorum is present or represented by proxy, any business may be
transacted that might have been transacted at the original
meeting. Broker non-votes occur when a nominee holding common shares
for a beneficial owner of those common shares has not received voting
instructions from the beneficial owner with respect to a particular matter and
such nominee does not possess or choose to exercise discretionary authority with
respect thereto. Broker non-votes and abstentions will be included in
the determination of the number of common shares present at our annual and
special meeting for quorum purposes but will not be counted as votes cast on any
matter presented at our annual and special meeting.
YOUR VOTE
IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO MARK, DATE, SIGN AND RETURN THE
ACCOMPANYING FORM OF PROXY WHETHER OR NOT YOU PLAN TO ATTEND OUR ANNUAL AND
SPECIAL MEETING. IF YOU PLAN TO ATTEND OUR ANNUAL AND SPECIAL MEETING
TO VOTE IN PERSON AND YOUR SHARES ARE REGISTERED WITH OUR TRANSFER AGENT
(COMPUTERSHARE INVESTOR SERVICES INC.) IN THE NAME OF A BROKER OR BANK, YOU MUST
SECURE A PROXY FROM THE BROKER OR BANK ASSIGNING VOTING RIGHTS TO YOU FOR YOUR
COMMON SHARES.
REVOCATION
OF PROXIES
You may
revoke your proxy at any time prior to the start of our annual and special
meeting in three ways:
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1.
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by
delivering a written notice of revocation to the Corporate Secretary of
our corporation;
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2.
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by
submitting a duly executed proxy bearing a later date;
or
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3.
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by
attending our annual and special meeting and expressing the desire to vote
your common shares in person (attendance at our annual and special meeting
will not in and of itself revoke a
proxy).
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CURRENCY
Except
where otherwise indicated, all dollar ($) amounts referred to in this proxy
statement are expressed in U.S. dollars.
PROPOSAL
ONE - ELECTION OF DIRECTORS
Our
Restated Articles of Incorporation provide that the number of directors shall be
determined by resolution of our board of directors and set out in the notice
calling the annual and special meeting of shareholders provided that the number
of directors may be not less than three (3) or more than fifteen
(15). The number of our directors has been set at four (4). All of
our current directors are standing for re-election at our annual and special
meeting. Each director who is elected will serve until an annual
meeting is held for the fiscal period ending March 31, 2009, until his or her
successor has been elected and qualified, or until the director's earlier death,
resignation or removal. Each nominee has consented to being named in this proxy
statement and to serve if elected. We have no reason to believe that
any of the nominees will be unable to serve if elected, but if any of them
should become unable to serve as a director, and if our board of directors
designates a substitute nominee, the persons named in the accompanying Form of
Proxy will vote for the substitute nominee designated by our board of directors,
unless a contrary instruction is given in the Form of Proxy.
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Directors
are elected by a plurality of votes cast in person or by proxy at our annual and
special meeting. Votes may be cast in favor or
withheld. Votes that are withheld will be excluded entirely from the
vote and will have no effect. Votes that are withheld for a
particular nominee will be excluded from the vote for that nominee
only.
NOMINEES
The
persons nominated to be directors are listed below. All of the
nominees are currently directors. The following information as of
June 9, 2008, which has been provided by the individuals named, is submitted
concerning the nominees named for election as directors:
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Name
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Age
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Position
with the Corporation
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Date
Position First Held
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Patrick
H. Gaines
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49
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President,
Chief Executive Officer and Director
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1990
- Director; March 31, 1992 – President; February 9, 2000 –
CEO
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Greg
A. MacRae
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54
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Director
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February
12, 1998
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L.
William Seidman
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87
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Director
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October
13, 1999
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Jacqueline
Pace
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64
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Director
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November
27, 2000
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Patrick
H. Gaines
Patrick
H. Gaines has been President of LML Payment Systems Inc. (the “Corporation”)
since March 31, 1992, and Chief Executive Officer since February 9, 2000, and a
member of the Corporation’s board of directors since 1990. Mr. Gaines
is the Chairman and a director of the Corporation’s subsidiary Beanstream
Internet Commerce Inc., and is the President and a director of the following
subsidiaries of the Corporation: LML Corp., Legacy Promotions Inc., LHTW
Properties, Inc., LML Patent Corp. and LML Payment Systems Corp. In
addition to his position as President of LML Corp., LML Patent Corp. and LML
Payment Systems Corp., he is also the Chief Executive Officer of each of those
subsidiaries.
Greg
A. MacRae
Greg A.
MacRae is currently employed as the President of CSI Capital Solutions Inc., a
position he has held since September 1996. Mr. MacRae has been a
director of North Group Limited since July, 2002, Starfire Minerals Inc. since
April, 2005 and Shoreham Resources Ltd. since October 2007. Prior to his
position with CSI Capital Solutions Inc., between February 1985 and September
1996, Mr. MacRae was the Senior Account Manager of the Corporate Services
Department at Montreal Trust Company of Canada (now Computershare Investor
Services Inc.).
L.
William Seidman
L.
William Seidman has been employed as the chief commentator for CNBC-TV since
December 1992. Mr. Seidman also serves as the publisher of Bank
Director and Board Member magazines, and has consulted with numerous
organizations, including Deposit Corporation of Japan, Tiger Management, J.P.
Morgan Inc., The World Bank, BDO Seidman and The Capital Group. Mr.
Seidman served on the White House staff of President Gerald R. Ford as Assistant
for Economic Affairs from 1974 to 1977, and served President Ronald Reagan as
co-chair of the White House Conference on Productivity in 1983 and
1984. Mr. Seidman also served as the first Chairman of the Resolution
Trust Company from 1989 to 1991 and the fourteenth Chairman of the FDIC from
1985 to 1991. Mr. Seidman is also on the board of directors of Par
Pharmaceuticals Inc.
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Jacqueline
Pace
Since
January 2000, Jacqueline Pace has been self-employed as an
attorney. Prior to that, between November 1998 and January 2000, Ms.
Pace was employed as an attorney by Baker & Hostetler, and from November
1991 to November 1998, she was employed as an attorney by Pillsbury Madison
& Sutro. Ms. Pace holds a Juris Doctor degree from Emory
University School of Law, and a Bachelor of Arts degree from The American
University.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES SET FORTH IN PROPOSAL ONE.
MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
During
the fiscal year ended March 31, 2008, our board of directors held nine (9)
meetings and acted one (1) time by written consent. The meetings were
attended by all of our directors either in person or by
teleconference. Messrs. MacRae and Seidman and Ms. Pace are
independent directors within the meaning of the listing standards of the NASDAQ
Stock Market. Our independent directors meet regularly following most
directors’ meetings. During the fiscal year ended March 31, 2008, our
independent directors held nine (9) meetings, and attended such meetings either
in person or by teleconference.
For the
fiscal year ended March 31, 2008, the board of directors had four (4) standing
committees: the Audit Committee, the Compensation Committee, the
Nominating and Corporate Governance Committee and the Stock Option Plan
Administration Committee.
From time
to time the Board has also established special committees of the Board whose
purposes are to provide oversight regarding various corporate transactions or
initiatives, as the case may be.
Audit
Committee
We have a
separately designated standing Audit Committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, and
Section 173 of the Business
Corporations Act (Yukon).
During
the fiscal year ended March 31, 2008, the members of the Audit Committee
included Greg A. MacRae (Chair), L. William Seidman and Jacqueline Pace. During
the fiscal year ended March 31, 2008, the Audit Committee met five (5) times.
The meetings were attended by all of the members of the committee either in
person or by teleconference.
The
function of the Audit Committee is set out in its written charter, and includes
reviewing and approving the scope of audit procedures employed by our
independent auditors, approving in advance all audit and permitted non-audit
services performed by the independent auditors and the scope and cost of their
annual audit, reviewing the independent auditors' opinions on the adequacy of
internal controls and quality of financial reporting, and reviewing our
accounting and reporting principles, policies and practices, as well as its
accounting, financial and operating controls. The Audit Committee also reports
to our board of directors with respect to such matters and approves the
selection of independent auditors.
The
board of directors has determined that each member of the Audit Committee is
financially literate, that the Audit Committee has at least one member who is an
"audit committee financial expert", as defined by the Securities and Exchange
Commission and that L. William Seidman is an "Audit Committee financial
expert".
The
board of directors has determined that all of the members of the Audit Committee
are independent within the meaning of the listing standards of The NASDAQ Stock
Market.
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Compensation
Committee
We have a
separately designated standing Compensation Committee. During the
fiscal year ended March 31, 2008, the members of the Compensation Committee
included Jacqueline Pace (Chair), Greg A. MacRae, and L. William
Seidman. Our Compensation Committee met two (2) times and acted one
time by written consent during the fiscal year ended March 31, 2008 and all
members attended such meetings.
The
Compensation Committee's duties are set out in its written charter and include
developing policies that are designed to offer competitive compensation
opportunities for our executive officers that are based on personal performance,
individual initiative and achievement, as well as assisting in attracting and
retaining qualified executives. The Compensation Committee also endorses the
position that stock ownership by management and stock-based compensation
arrangements are beneficial in aligning management's and shareholders' interests
in the enhancement of shareholder value.
The
Board has determined that all of the members of the Compensation Committee are
independent within the meaning of the listing standards of The NASDAQ Stock
Market.
Nominating and Corporate
Governance Committee
We have a
separately designated standing Nominating and Corporate Governance
Committee. During the fiscal year ended March 31, 2008, the members
of LML’s Nominating and Corporate Governance Committee included L. William
Seidman (Chair), Greg A. MacRae and Jacqueline Pace. The Nominating and
Corporate Governance Committee met one (1) time during the fiscal year ended
March 31, 2008 and all of the members of the committee attended the meeting in
person or by teleconference. Our Nominating and Corporate Governance
Committee's duties are set out in its written charter which sets forth its
primary responsibilities of developing criteria for evaluating and selecting new
directors to serve on our board of directors, recommending nominees for election
as directors to our board of directors, the evaluation of the qualifications and
independence of directors and members of the various committees of our board of
directors and the development and recommendation to our board of directors of
corporate governance principles applicable to our corporation.
The
Nominating and Corporate Governance Committee will seek highly qualified,
independent candidates who combine a broad spectrum of experience and expertise
with a reputation for integrity. Candidates should have experience in
positions with a high degree of responsibility and be leaders in the companies
or institutions with which they are affiliated. The Nominating and
Corporate Governance Committee will consider candidates recommended by our
directors, members of management and shareholders.
The
committee will consider nominees recommended by shareholders if such proposed
nominations are submitted to our corporation in writing by shareholders no later
than 120 days before the first anniversary of the date of the proxy statement
sent to shareholders in connection with the previous year’s annual
meeting. The Nominating and Corporate Governance Committee believes
this deadline is reasonable, and in the best interests of the corporation and
our shareholders, because it ensures that the committee has sufficient time to
properly evaluate all proposed candidates. Shareholder
recommendations may be submitted to the Corporate Secretary of the corporation
at 1140 West Pender Street, Suite 1680, Vancouver, British Columbia, Canada, V6E
4G1, and they will be forwarded to the Nominating and Corporate Governance
Committee members for their consideration. Any such recommendation should
include the following information:
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a)
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the
number of shares of our corporation held by the shareholder making the
recommendation;
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b)
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the
name and address of the candidate;
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c)
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a
brief biographical description of the candidate, including his or her
occupation for at least the last five years, and a statement of the
candidate’s qualifications, taking into account the qualification
requirements set forth above;
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d)
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information
regarding the recommended candidate relevant to a determination of whether
the recommended candidate would be considered independent within the
meaning of the listing standards of The NASDAQ Stock Market;
and
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e)
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the
candidate's signed consent to serve as a director if elected and to be
named in the proxy statement.
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Once we
receive the recommendation, we may request additional information from the
candidate about the candidate's independence, qualifications and other
information that would assist the Nominating and Corporate Governance Committee
in evaluating the candidate, as well as certain information that must be
disclosed about the candidate in our corporation’s proxy statement, if
nominated. Candidates must complete and return the questionnaire within the
timeframe provided to be considered for nomination by the
committee. Candidates recommended by shareholders that comply
with these procedures will receive the same consideration that candidates
recommended by the Nominating and Corporate Governance Committee and management
receive.
The board
of directors has determined that all of the members of the Nominating and
Corporate Governance Committee are independent within the meaning of the listing
standards of The NASDAQ Stock Market.
Stock Option Plan
Administration Committee
We have a
separately designated standing Stock Option Plan Administration Committee.
During the fiscal year ended March 31, 2008, the members of our Stock Option
Plan Administration Committee included Patrick H. Gaines (Chair), Jacqueline
Pace and Greg A. MacRae. During the fiscal year ended March 31, 2008,
our Stock Option Plan Administration Committee acted seven (7) times by written
consent. The function of the Stock Option Plan Administration
Committee is to oversee both our 1996 Stock Option Plan and our 1998 Stock
Incentive Plan. The committee has sole discretion as to the
interpretation and construction of any provision of the 1996 Stock Option Plan
and the 1998 Stock Incentive Plan, and the determination of the terms and
conditions with respect to any grant made pursuant to both the 1996 Stock Option
Plan and the 1998 Stock Incentive Plan.
Other
Committees
From time
to time the Board has established special committees of the Board whose purposes
are to provide oversight regarding various corporate transactions or
initiatives, as the case may be.
Corporate Governance and
Ethics Information
The
charters of our audit, compensation, and Nominating and Corporate Governance
Committees can be viewed on our website at the following
address: http://www.lmlpayment.com/html/governance.html. We have
adopted a Code of Ethics applicable to our principal executive officer,
principal financial officer, controller and others performing similar
functions. Our Code of Ethics also applies to all of our other
employees and to our directors. Our Code of Ethics is available on
our website located at www.lmlpayment.com
under the heading “Investor Relations; Corporate Governance”. We
intend to satisfy any disclosure requirements pursuant to Item 5.05 of Form 8-K
regarding any amendment to, or a waiver from, certain provisions of our Code of
Ethics by posting such information on our website (unless we are otherwise
required to file a Form 8-K under the rules and regulations of The NASDAQ Stock
Market).
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REPORT
OF THE AUDIT COMMITTEE
The
Securities and Exchange Commission rules now require our corporation to include
in our proxy statement a report from the Audit Committee of our board of
directors. The following report concerns the Audit Committee's
activities regarding oversight of our corporation's financial reporting and
auditing process. For the fiscal year ended March 31, 2008, the Audit
Committee has:
|
|
(1)
|
reviewed
and discussed with our corporation's management our audited consolidated
financial statements;
|
|
|
(2)
|
discussed
with the independent accountants the matters described in Statement of
Auditing Standards No. 61, as
amended;
|
|
|
(3)
|
received
the written disclosures and the letter from the independent accountants
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as amended, and has discussed with the
independent accountants their independence;
and
|
|
|
(4)
|
recommended
to our board of directors that the audited financial statements be
included in our corporation's Annual Report on Form 10-K for the period
ended March 31, 2008, based on the review and discussions referred to
above.
|
|
AUDIT
COMMITTEE
|
|
|
Greg
A. MacRae
|
|
|
L.
William Seidman
|
|
|
Jacqueline
Pace
|
DIRECTOR
COMMUNICATIONS
Shareholders
may contact any of our directors, including any committee of the board of
directors or the entire board of directors, by writing to “The Board of
Directors of LML Payment Systems Inc.”, c/o LML Payment Systems Inc., Suite
1680-1140 West Pender Street, Vancouver, British Columbia, Canada, V6E
4G1.
AUDIT
COMMITTEE COMMUNICATIONS
Shareholders
may contact the Chair of the Audit Committee, Mr. MacRae, regarding any
complaints or concerns related to the corporation's accounting practices,
internal controls or auditing matters by writing to “Chair of the Audit
Committee of LML Payment Systems Inc.”, c/o LML Payment Systems Inc., Suite
1680-1140 West Pender Street, Vancouver, British Columbia, Canada, V6E
4G1. Our corporation’s process for collecting and organizing all
communications received by us from our shareholders has been approved by a
majority of our independent directors.
ANNUAL
AND SPECIAL MEETING ATTENDANCE
We have
not adopted a formal policy with respect to the members of our board of
directors attending our annual and/or special meetings, however all of the
members of our board of directors attended our annual meeting on August 8,
2007.
- 8
-
EXECUTIVE
OFFICERS
As of
June 16, 2008 we had four (4) executive officers, as follows:
|
Name
and Age of Executive Officers
|
Position
with Our Corporation and Work History
|
||
|
Patrick
H. Gaines
Age: 49
|
President
since March 31, 1992, Chief Executive Officer since February 9, 2000 and
Director since 1990
Patrick
H. Gaines has been President of LML Payment Systems Inc. (the
“Corporation”) since March 31, 1992, and Chief Executive Officer since
February 9, 2000, and a member of the Corporation’s board of directors
since 1990. Mr. Gaines is the Chairman and a director of the
Corporation’s subsidiary Beanstream Internet Commerce Inc., and is the
President and a director of the following subsidiaries of the Corporation:
LML Corp., Legacy Promotions Inc., LHTW Properties, Inc., LML Patent Corp.
and LML Payment Systems Corp. In addition to his position as
President of LML Corp., LML Patent Corp. and LML Payment Systems Corp., he
is also the Chief Executive Officer of each of those
subsidiaries. Mr. Gaines is married to Carolyn L. Gaines, our
Corporate Secretary.
|
||
|
Richard
R. Schulz
Age:
37
|
Controller
(Chief Accounting Officer) since June 2002
Richard
R. Schulz has been employed as our Controller and Chief Accounting Officer
since June 2002. Mr. Schulz also serves as the Chief Accounting
Officer and director of all of our subsidiaries. Mr.
Schulz was employed with our corporation as the Assistant Controller from
August 2001 to June 2002. Prior to that, Mr. Schulz was
self-employed as a financial consultant with RRS Consulting from June 1,
2000 to July 31, 2001, and prior to that he was employed as a senior staff
accountant with Dale Matheson Carr-Hilton Chartered Accountants from May
1, 1992 to May 31, 2000.
|
||
|
Carolyn
L. Gaines
Age: 41
|
Corporate
Secretary since February 1995
Carolyn
L. Gaines has served as Corporate Secretary of our corporation and certain
of our subsidiaries since February 1995, and has served our corporation
and our subsidiaries in various administrative capacities since 1989. Mrs.
Gaines is married to Patrick H. Gaines, our President and Chief Executive
Officer.
|
||
|
Craig
Thomson
Age:43
|
Chief
Executive Officer and President of Beanstream Internet Commerce Inc. since
July 2007
Craig
Thomson has been President and Chief Executive Officer of Beanstream
Internet Commerce Inc., a subsidiary of LML Payment Systems Inc, since
July 1, 2007. Prior to that, Mr. Thomson served as Beanstream’s
President and CEO since July 2000. In 1999, Mr. Thomson
received the prestigious "Entrepreneur of the Year Award" in
manufacturing, wholesale and distribution for Pacific Canada by Ernst and
Young. Mr. Thomson holds a degree in Computer Engineering from the Royal
Military College of Canada.
|
- 9
-
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs.
MacRae and Seidman and Ms. Pace served as members of the Compensation Committee
during the last fiscal year. None of these persons: (a) is a current
or former officer or employee of LML, or of any of its subsidiaries; or (b)
since the beginning of our fiscal year ended March 31, 2007, participated,
either directly or indirectly, in any transaction or any series of transactions
to which LML or any of its subsidiaries was or is a party, and which involved an
amount in excess of the lesser of (i) $120,000 or (ii) one percent of the
average of our total assets at year-end for our last two completed fiscal
years. During the last fiscal year, no executive officer of LML
served as a member of the board of directors or as a member of the Compensation
Committee of another entity one of whose executive officers served as a member
of LML’s board of directors or Compensation Committee.
COMPENSATION
OF DIRECTORS
The
following table sets forth for each director certain information concerning the
compensation of independent (non-employee) directors as of March 31,
2008
DIRECTOR
COMPENSATION
|
Name
|
Fees
Earned or
Paid
in Cash ($)
|
Option
Awards(1)
($)
|
Total
($)
|
||||
|
Greg
A. MacRae
|
$14,500
|
$42,571(2)
|
$57,071
|
||||
|
Jacqueline
Pace
|
$12,000
|
$42,571(2)
|
$54,571
|
||||
|
L.
William Seidman
|
$12,000
|
$42,571
(2)
|
$54,571
|
_______________________
|
|
(1)
|
The
amounts reported in the “Option Awards” column reflect the dollar amount
of expense recognized for financial statement reporting purposes for the
fiscal year ended March 31, 2008, in accordance with SFAS 123R. For additional
information relating to the assumptions used in the calculation of these
amounts please refer to Note 5 in our financial statements for the second
quarter of the fiscal year ended March 31, 2008, included in our Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on
November 9, 2007. The amounts in this column reflect our
accounting expense for these awards, and may not correspond to the actual
value that will be recognized by the independent directors. On
August 8, 2007, each of the independent directors was granted 25,000 stock
options at an exercise price of $3.16 per share. On August 30,
2006, each of the independent directors was granted 25,000 stock options
at an exercise price of $3.62 per share. Options granted to our
independent directors vest on the first anniversary of the date of
grant.
|
|
|
(2)
|
This
amount consists of (i) $23,704 related to 25,000 options granted in August
2007; and (ii) $18,867 related to 25,000 options granted in August
2006.
|
We pay an
annual director's fee to each of our independent directors as follows: cash
compensation in the amount of $12,000 and a grant of 25,000 stock options for
services rendered as a director in the fiscal year. The annual
director's fee is paid pursuant to a compensation plan that we adopted for our
independent directors during the fiscal year ended March 31, 2005. The stock
options awarded under the plan vest on the first anniversary date of their
issuance. The $12,000 cash component is payable annually on the date of our
annual meeting and the options are to be awarded on the same
date. We do not compensate employee directors for their service
as directors.
We
pay the Chairman of our Audit Committee an annual retainer for this position in
the amount of $2,500, in recognition of the increased responsibilities of this
role specifically as related to the requirements of the Sarbanes-Oxley Act of
2002. The Compensation Committee approved this fee for the Chairman
of the Audit Committee during the fiscal year ended March 31, 2007.
Directors
are entitled to reimbursement for reasonable travel and other out-of-pocket
expenses incurred in connection with attendance at board or committee meetings.
The board of directors may award special remuneration to any director
undertaking any special services on behalf our corporation other than services
ordinarily required of a director. Other than as indicated in this Proxy
Statement, no director received and/or accrued any compensation for his or her
services as a director, including committee participation and/or special
assignments.
- 10
-
EQUITY
COMPENSATION PLAN INFORMATION
We have a
1996 Stock Option Plan and a 1998 Stock Incentive Plan (collectively, our “Stock
Option Plans”). Our 1996 Stock Option Plan currently permits the
granting of up to 6,000,000 options (which may be incentive stock options or
non-qualified stock options) to purchase our common stock. Our 1998
Stock Incentive Plan currently permits the granting of up to 6,000,000 awards
(including stock options, stock appreciation rights, restricted stock and other
stock-based awards) to purchase or acquire our common stock. Our
Stock Option Plans are currently administered by our Stock Option Plan
Administration Committee, which has the sole discretion to determine the terms
and conditions of options or other awards granted pursuant to our Stock Option
Plans and to interpret and administer the Stock Option Plans.
The
following table provides a summary of the number of options granted under our
Stock Option Plans, the weighted average exercise prices and the number of
options remaining available for issuance, all as at March 31, 2008.
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted-average
exercise price of outstanding options and warrants
|
Number
of securities remaining available for future issuance under equity
compensation plans
|
|||||||||||
|
Equity
compensation plans approved by security holders
|
$ | 4,207,500 | (1) | $ | 3.73 | $ | 5,649,717 | (2) | |||||
|
Equity
compensation plans not approved by security holders (3)
|
400,000 | 3.40 | N/A | ||||||||||
|
Total
|
4,607,500 | 5,649,717 | |||||||||||
_______________________
|
|
(1)
|
Comprised
of 3,390,000 common shares to be issued upon exercise of outstanding
options as at March 31, 2008 under the 1996 Stock Option Plan and 817,500
common shares to be issued upon exercise of outstanding options as at
March 31, 2008 under the 1998 Stock Incentive
Plan.
|
|
|
(2)
|
Comprised
of 1,002,000 common shares which remain available for future issuance as
at March 31, 2008 under the 1996 Stock Option Plan, and 4,647,717 common
shares which remain available for future issuance as at March 31, 2008
under the 1998 Stock Incentive
Plan.
|
|
|
(3)
|
These
securities consist of warrants issued to Ladenburg Thalmann & Co.,
Inc. who acted as the placement agent and financial advisor to LML in
connection with the private placement transaction with Millennium Partners
LLP completed on March 31, 2008. The warrants are exercisable
for 400,000 shares of LML’s common stock for a period of five years from
March 26, 2008 at a price of $3.40 per
share.
|
During
the fiscal year ended March 31, 2008, stock options to acquire an aggregate of
2,595,000 shares of common stock were granted under our 1996 Stock Option Plan,
none of which had expired on or before March 31, 2008, and awards to acquire an
aggregate of 180,000 shares of common stock were granted under our 1998 Stock
Incentive Plan, none of which had expired on or before March 31,
2008. Of the options granted under the 1996 Stock Option Plan during
the fiscal year ended March 31, 2008, options to purchase 25,000 shares of our
common stock at an exercise price of $3.16 per share were granted to one of our
directors, and options to purchase a total of 1,620,000 shares of our common
stock at an exercise price of $3.00 were granted to three executive officers of
our corporation, one of whom is also a director of our corporation; and options
to purchase a total of 300,000 shares of our common stock at an exercise price
of $3.90 per share were granted to an executive officer of one of our
subsidiaries (who is also a Named Executive Officer). Of the options
granted under our 1998 Stock Incentive Plan during the fiscal year ended March
31, 2008, options to purchase 50,000 shares of our common stock at an exercise
price of $3.16 were granted to two of our directors, and options to purchase a
total of 50,000 shares of our common stock at an exercise price of $3.90 per
share were granted to a former executive officer of one our subsidiaries (who
was also a Named Executive Officer).
- 11
-
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
The
following Compensation Discussion and Analysis describes the material elements
of compensation for our executive officers identified in the Summary
Compensation Table, whom we refer to in this Proxy Statement as our “Named
Executive Officers.” The Compensation Committee of the Board is
governed by its charter adopted by our board of directors on June 8, 2004 and
makes all decisions for the total direct compensation—that is, the base salary,
performance related bonuses, and stock option awards—of all of our executive
officers (including Named Executive Officers) who are employed by LML, including
Patrick H. Gaines, our Chief Executive Officer (and a Named Executive Officer),
Richard R. Schulz, our Controller and Chief Accounting Officer (and a Named
Executive Officer), and Carolyn L. Gaines, our Corporate Secretary (and a Named
Executive Officer). Patrick H. Gaines, our Chief Executive Officer,
makes all of the decisions regarding the total direct compensation of all of the
executive officers of our subsidiaries, including Craig Thomson, Chief Executive
Officer and President of our subsidiary Beanstream Internet Commerce Inc., and
Robert E. Peyton, formerly the Executive Vice-President of our subsidiary LML
Payment Systems Corp., both of whom were Named Executive Officers during the
fiscal year ended March 31, 2008, and are identified in the Summary Compensation
Table.
The
day-to-day design and administration of the compensation policies applicable to
our employees in general are handled by our Human Resources and Accounting
departments. The Stock Option Plan Administration Committee of the
Board, in consultation with our Compensation Committee and our Human Resources
and Accounting Departments, is responsible for the determination of option
awards to the employees (including Named Executive Officers) of LML and its
subsidiaries.
Compensation
Philosophy
We
believe that our success depends in large part on our ability to attract and
retain qualified executive officers. As part of our efforts to
satisfy the need to attract, retain and motivate the individuals who possess the
skills necessary to grow our business, our management and our Compensation
Committee believe that our compensation programs should reflect our compensation
philosophy. This philosophy includes the following core beliefs:
|
·
|
our
executive officers should be rewarded fairly and competitively through a
mix of short-term compensation (i.e., base salary and performance-related
bonuses) and long-term compensation (i.e., stock option
grants);
|
|
·
|
our
compensation programs should be flexible in order to meet the needs of our
business and should be reviewed periodically, as appropriate, by our
Compensation Committee;
|
|
·
|
stock
ownership by our executive officers demonstrates an economic stake in our
business that aligns the interests of our executive officers with those of
our shareholders; and
|
|
·
|
our
executive officers should share appropriately with investors in the value
that their results help to create.
|
While a
key component of our compensation philosophy is to pay our executive officers
(including our Named Executive Officers) an annual cash salary as well as a
performance-related bonus that is competitive among our peer group, we believe
that short-term financial rewards alone are not sufficient to attract and retain
our executive officers (including our Named Executive Officers) and that a
properly designed long-term compensation program is a necessary component of
recruitment and retention of these individuals. We currently have two
long-term incentive plans (our 1996 Stock Option Plan and our 1998 Stock
Incentive Plan) that give our Compensation Committee, together with our Stock
Option Plan Administration Committee, the ability to provide appropriate
long-term incentives to our executive officers (including our Named Executive
Officers).
The
Compensation Committee has engaged the services of Equilar Inc. for purposes of
providing independent compensation data to the Compensation Committee in its
compensation review for fiscal 2009.
- 12
-
Role
of Executive Officers in Determining Compensation
As stated
above, the Compensation Committee makes all final decisions for the total direct
compensation of all of our executive officers (including Named Executive
Officers) who are employed by LML, and Patrick H. Gaines, our CEO, makes all
final decisions for the total direct compensation of all executive officers
(including Named Executive Officers) who are employed by our
subsidiaries.
With
respect to the compensation of our executive officers (including Named Executive
Officers) who are employed by us, the Compensation Committee determines the
annual base salary, the performance related bonuses, any adjustment from the
prior year’s base salary and performance related bonus for each executive
officer and the award of any stock options. In
addition Mr. Gaines
makes all of the decisions with respect to the
compensation of our executive officers (including Mr. Thomson and Mr.
Peyton, who are both Named Executive
Officers) who were employed
by our subsidiaries during the fiscal year ended March 31, 2008.
The
Compensation Committee and Mr. Gaines, in making the compensation decisions
described above, rely on information and analyses provided to them by our Human
Resources and Accounting Departments, including information and analyses
regarding (i) the performance, productivity and, where applicable, achievement
of individual and/or corporate goals and objectives by the respective executive
officers and (ii) the compensation paid to executive officers with comparable
titles and responsibilities who are employed by companies within our peer group
(including Efunds Corp, Global Payments Inc., Cybersource Corp. and Electronic
Clearing House Inc.).
We have also reviewed executive
compensation data from Equilar with respect to our peer group which has shown
that, historically, our total executive compensation levels have been below that
of all of these peers, after taking into account the different scales of
operations of those companies, all of which are substantially larger than
LML.
Employment
Arrangements
The
Compensation Committee completed its evaluation of employment agreements between
the Corporation and Mr. Gaines, Mr. Schulz and Mrs. Gaines as part of its review
of executive performance and compensation in the fourth quarter of the fiscal
year ended March 31, 2008. Following the completion of this
performance review and evaluation, the Corporation entered into employment
agreements with each of Mr. Gaines, Mr. Schulz and Mrs. Gaines on March 31,
2008.
In keeping with our compensation
philosophy, the compensation components included in the employment agreements
for Mr. Gaines, Mr. Schulz and Mrs. Gaines consist of (i) base salary, (ii)
performance related bonuses (in the case of Mr. Gaines and Mr. Schulz), and
(iii) stock options. The employment agreements also include
provisions with respect to the executive officers’ termination or a change in
control of the Corporation. Please see “Potential Payments upon
Termination or Change in Control”.
Mr. Thomson’s employment agreement was
established by management on July 2, 2007, in connection with the acquisition of
the Corporation’s subsidiary Beanstream Internet Commerce Inc., and was
principally the result of negotiations between Mr. Thomson and the Corporation
as part of that acquisition. Mr. Thomson’s employment agreement
establishes the base salary to be paid to Mr. Thomson and includes provisions
with respect to his termination. Please see “Potential Payments upon Termination
or Change in Control”.
- 13
-
Components
of Executive Compensation
As discussed above, compensation paid
to our executive officers (including our Named Executive Officers) is generally
comprised of three components: (i) base salary, (ii) performance related
bonuses, and (iii) long-term compensation in the form of stock
options. Decisions regarding base salary, performance related
bonuses, and stock option awards for our Named Executive Officers are based
on the objectives of our compensation philosophy described above and, in
particular, are designed to motivate these executives to achieve our business
goals and reward the executives for achieving these goals.
Specific compensation levels for our
executive officers (including our Named Executive Officers) are determined by
consideration of a number of factors, including each officer's initiative and
contribution to our overall corporate performance and the officer's managerial
abilities and performance in any special projects that the officer may have
undertaken. Subjective considerations of individual performance are considered
in establishing both base and incentive compensation.
The Compensation Committee also
considers our financial position and cash flow in making compensation
decisions. In addition, the Compensation Committee also considers the
overall compensation paid to executive officers of companies within LML’s peer
group who have comparable titles and responsibilities, after making allowances
for the different scales of operations of those other companies as compared to
our corporation. The peer group that has traditionally been
considered by the Compensation Committee consists principally of companies
operating in the financial services/transaction processing industry, including
Efunds Corp, Global Payments Inc., Cybersource Corp. and Electronic Clearing
House Inc.
Base
Salary
We
provide our executive officers (including our Named Executive Officers) with
base salary to compensate them for services rendered during the
year. Ensuring that each executive officer is paid a competitive base
salary that reflects the individual's level of responsibility is an important
consideration in setting executive compensation. These base salaries
are based on experience, skills, job responsibilities and individual
contribution, with consideration given to the compensation paid to executive
officers of companies within LML’s peer group who have comparable titles and
responsibilities. Salary levels are typically considered
annually as part of our performance review process as well as upon a promotion
or other change in job responsibility.
The
members of the Compensation Committee, relying on their significant current and
past business experience, make reasoned subjective determinations as to merit
based increases to salaries for our executive officers (including our Named
Executive Officers) based on a number of factors, including (i) an assessment of
each individual’s performance during the prior year and (ii) the base salaries
paid to comparable executives within LML’s peer group. Mr. Gaines’
employs the same principles and philosophies in determining base salaries for
the executive officers of our subsidiaries, including Mr. Thomson and Mr.
Peyton, both Named Executive Officers who were employed by our subsidiaries
during the fiscal year ended March 31, 2008.
Bonuses
The Compensation Committee has
determined that performance-related bonuses are an important component of
overall executive compensation for Messrs. Gaines and Schulz, both Named
Executive Officers, based on its executive performance reviews and its review of
overall compensation paid to comparable executives within LML’s peer
group. The bonuses are based on the Corporation’s achievement of
reasonable performance goals established by the Compensation Committee for each
such fiscal year (or portion) which may include targets related to our earnings
before interest, taxes, depreciation and amortization (“EBITDA”). The
Compensation Committee will establish objective criteria to be used to determine
the extent to which performance goals have been satisfied. As of
March 31, 2008, the Compensation Committee had not yet determined the basis for
the performance related bonuses. No determination has been made yet by the
Compensation Committee or Mr. Gaines as to whether a performance-based bonus
plan will be established for Mr. Thomson.
The
performance related bonuses for Mr. Gaines and Mr. Schulz were determined by the
Compensation Committee. For more information, see “Employment
Arrangements”.
- 14
-
Stock Option
Awards
Stock
option awards are an integral component of the compensation package for our
executive officers, including our Named Executive Officers. Our
Compensation Committee determines the grant of stock option awards for our
executive officers (including our Named Executive Officers) who are employed by
LML and directs our Stock Option Plan Administration Committee to carry out the
grant of such option awards. Mr. Gaines, who is the chairman of the Stock Option
Plan Administration Committee, does not cast a vote as a member of the Stock
Option Plan Administration Committee with respect to the grant of options to
either himself or Mrs. Gaines, his spouse, as the case may be.
In the
case of LML’s subsidiaries, the Stock Option Plan Administration Committee
determines and grants stock option awards for executive officers (including
our Named Executive Officers). In making their
determinations as to stock option awards, the Compensation Committee and the
Stock Option Plan Administration Committee take into account (i) the current
base salary (and any proposed increases) for the executive officers (including
the Named Executive Officers), (ii) any performance-related bonuses
that have been awarded to the executives, and (iii) the level of stock options
and other long-term compensation awarded to executives with comparable titles
and job responsibilities within LML’s peer group, as well as the total
compensation being paid to those executives relative to the total compensation
received by LML’s executives.
Setting
Fiscal 2008 Compensation for our Named Executive Officers
Our Compensation Committee met two (2)
times and acted one (1) time by written consent during the fiscal year ended
March 31, 2008 to, among other things, discuss and set compensation levels for
our executive officers (including Named Executive Officers) employed by
LML.
The fiscal 2008 compensation levels for
our Named Executive Officers set by our Compensation Committee (in the case of
Mr. Gaines, Mr. Schulz and Mrs. Gaines) and by Mr. Gaines (in the case of Mr.
Peyton) were dependent in large part on the prior years’ compensation levels of
those officers, which is discussed in more detail below. In the case
of Mr. Thomson, the compensation was set by management on July 1, 2007 in
connection with the acquisition of the Corporations subsidiary Beanstream
Internet Commerce Inc., and was principally the result of negotiations between
Mr. Thomson and the Corporation as part of that acquisition.
Historical Compensation
Levels of Named Executive Officers Prior to Fiscal
2008
During the fiscal year ended March 31,
2001, the Compensation Committee established Mr. Gaines’ base annual salary at
$150,000. In formulating compensation levels for Mr. Gaines (and our
other executive officers) for the 2001 fiscal year, the Compensation Committee
took into consideration the compensation paid to comparable executives within
LML’s peer group in the financial services/transaction processing industry
(including Concord EFS, Efunds Corp, PMT Services Inc. and Electronic Clearing
House Inc.), after making allowances for the different scales of operations of
these other companies as compared to our corporation. The
Compensation Committee did not retain an independent compensation consultant,
nor did the Compensation Committee rely upon any formal study or review of
comparable companies in our corporation's industry in formulating compensation
levels and policies for the 2001 fiscal year (or for any fiscal year
since).
During the year ended March 31, 2002,
Mr. Gaines voluntarily agreed to a 20% reduction in his base annual salary to
$120,000. This reduction, which took effect at the midpoint of the
fiscal year, resulted in Mr. Gaines’ actual salary for the year ended March 31,
2002 being $135,000. During the years ended March 31, 2003 and 2004,
his base annual salary was $120,000. On March 30, 2004, the
Compensation Committee determined that, for administrative reasons, Mr. Gaines’
salary be changed from United States dollars to Canadian
dollars. This resulted in Mr. Gaines’ annual compensation of $120,000
U.S. becoming $168,000 Canadian for the fiscal years ended March 31, 2005 and
2006.
- 15
-
During the year ended
March 31, 2007 the Compensation Committee reviewed Mr. Gaines’ base
salary and his compensation history taking into consideration that Mr. Gaines’
base salary, since it was first established at US$150,000 by the Compensation
Committee in fiscal 2001, had never been increased and Mr. Gaines had
voluntarily agreed to a reduction in salary of 20% in fiscal 2002. In
light of these and other factors (including the compensation levels of
comparable executives within LML’s peer group), on August 30, 2006, the
Compensation Committee increased Mr. Gaines’ annual base salary from CDN$168,000
to CDN$181,000. This increase, which took effect part way through the
fiscal year, resulted in Mr. Gaines’ actual salary for the year ended March 31,
2007 being CDN$175,583.
The base salary for Mr.
Schulz was established by management on August 1, 2001 upon commencement of his
employment with our corporation in the position of Assistant
Controller. In setting Mr. Schulz’s initial compensation level, our
management took into consideration the compensation paid to comparable
executives within LML’s peer group. On August 24,
2005, the Compensation Committee reviewed Mr. Schulz’s annual base salary,
taking into consideration his past performance and the compensation paid to
comparable executives within LML’s peer group, Upon completion of this
evaluation, the Compensation Committee increased Mr. Schulz’s annual base salary
to from CDN$72,000 to CDN$87,000. This
increase, which took effect part way through the fiscal year, resulted in Mr.
Schulz’s actual salary for the fiscal year ended March 31, 2006 being
CDN$81,375. On August 30, 2006, the Compensation Committee reviewed
Mr. Schulz’s base salary and compensation history. The Compensation
Committee noted in particular that the completion of any of the potential
mergers or business combination transactions that LML was evaluating at that
time would likely result in significantly increased future responsibilities for
Mr. Schulz. In light of Mr. Schulz’s past performance and the
anticipated future increase in his job responsibilities, on August 30, 2006, the
Compensation Committee increased Mr. Schulz’s annual base salary from CDN$87,000
to CDN$101,000. This increase, which took effect part way through the fiscal
year, resulted in Mr. Schulz’s actual salary for the fiscal year ended March 31,
2007 being CDN$95,166.
The Compensation Committee
established Mrs. Gaines’ base annual
salary during the fiscal year ended March
31, 2001. In
formulating compensation levels for Mrs. Gaines (and our other
executive officers) for the 2001 fiscal year, the Compensation Committee took
into consideration the compensation paid to comparable executives within LML’s
peer group. On August 24,
2005, the Compensation Committee reviewed Mrs. Gaines’ base salary, taking into
consideration her past performance and the compensation paid to comparable
executives within LML’s peer group, Upon completion of this evaluation, the
Compensation Committee increased Mrs. Gaines’ base salary from CDN$49,920 to
CDN$54,912. This increase, which took effect part way through the
fiscal year, resulted in Mrs. Gaines’ actual salary for the fiscal year ended
March 31, 2006 being CDN$53,040. On August 30, 2006, the Compensation Committee
reviewed Mrs. Gaines’ base salary, taking into consideration her past
performance and the compensation paid to comparable executives within LML’s peer
group, Upon completion of this evaluation, the Compensation Committee increased
Mrs. Gaines’ base salary from CDN$54,912 to CDN$61,000. This increase, which
took effect part way through the fiscal year, resulted in Mrs. Gaines’ actual
salary for the fiscal year ended March 31, 2007 being CDN$58,717.
The base salary for Mr. Peyton, who was
employed by a subsidiary of LML, was established by management in July 2000 in
connection with the acquisition of the subsidiary by LML and was principally the
result of negotiations between Mr. Peyton and LML as part of the
acquisition. Mr. Peyton was party to an employment agreement with the
subsidiary (LML Payment Systems Corp.) from July 9, 2000 until July 9, 2006,
when the agreement expired in accordance with its terms (although he remained
employed with the same title, position and responsibilities as he had under the
employment agreement until November 15, 2007). Mr. Peyton received an
annual salary of $150,000 during the fiscal year ended March 31,
2003. During the year ended March 31, 2004, Mr. Peyton voluntarily
agreed to a 20% reduction in his base annual salary to $120,000. This
reduction, which took effect at the midpoint of the fiscal year, resulted in Mr.
Peyton's actual base annual salary for the year ended March 31, 2004 being
$135,000. Mr. Peyton received an annual salary of $120,000 during the
fiscal years ended March 31, 2005 and 2006.
In May 2006, Mr. Gaines reviewed Mr.
Peyton’s base salary and his compensation history. In reviewing Mr.
Peyton’s compensation history, Mr. Gaines noted that Mr. Peyton voluntarily
agreed to a reduction in salary of 20% in fiscal 2004 and had not received any
base compensation increases since such time. In light of these and
other factors, (including the compensation levels of comparable executives
within LML’s peer group), Mr. Gaines increased Mr. Peyton’s annual base salary
to $180,000 per year effective May 1, 2006. In addition, Mr. Gaines recommended
the grant of 50,000 stock options to Mr. Peyton, which were granted to Mr.
Peyton by the Stock Option Plan Administration Committee on October 5,
2006. These stock options have an exercise price of $2.95 per share
and expire on October 5, 2011.
- 16
-
Fiscal 2008 Compensation Levels of
Named Executive Officers
During the fourth quarter of the fiscal
year ended March 31, 2008, the Compensation Committee completed its performance
evaluation of the Corporation’s executive officers (including the Named
Executive Officers) and determined that it would be in the best interests of the
Corporation to enter into Employment Agreements with Messrs. Gaines and Schulz
and Mrs. Gaines. These agreements were entered into on March 31,
2008.
In setting compensation levels for
fiscal 2008 for Mr. Gaines, the Compensation Committee noted that Mr. Gaines’
annual base salary had not been increased since August, 2006 and, since that
time, the Corporation had successfully completed the acquisition of Beanstream
Internet Commerce Inc., resulting in a significant improvement in the
Corporation’s revenues for the fiscal year ended March 31,
2008. In light of these and other factors (including
the compensation levels of comparable executives within LML’s peer group), the
Compensation Committee increased Mr. Gaines’ annual base salary from CDN$181,000 to
CDN$200,000. This increase, which took effect on September 24,
2007, resulted
in Mr. Gaines’ actual salary for the year ended March 31, 2008 being
CDN$190,896. Mr. Gaines is also eligible to earn a cash bonus
of up to 35% of his base salary, based upon objective criteria to be established
by the Compensation Committee to be used in determining the extent to which
performance goals have been satisfied. As of March 31, 2008, the
Compensation Committee had not yet determined the basis for the performance
related bonus. No performance related bonus was paid to Mr. Gaines
during the fiscal year ended March 31, 2008.
In setting compensation levels for
fiscal 2008 for Mr. Schulz, the Compensation Committee noted that Mr. Schulz’
annual base salary had not been increased since August 2006 and, since that
time, the Corporation had successfully completed the acquisition of Beanstream
Internet Commerce Inc., resulting in an increase in Mr. Schulz’s role and
responsibilities with the Corporation for the fiscal year ended March 31,
2008. In light of these and other factors (including
the compensation levels of comparable executives within LML’s peer group), the
Compensation Committee increased Mr. Schulz’s annual base salary from CDN$101,000 to
CDN$120,000. This increase, which took effect on September 24,
2007, resulted
in Mr. Schulz’s actual salary for the year ended March 31, 2008 being
CDN$110,896. Mr. Schulz is also eligible to earn a cash bonus
of up to 15% of his base salary, based upon objective criteria to be established
by the Compensation Committee to be used in determining the extent to which
performance goals have been satisfied. As of March 31, 2008, the
Compensation Committee had not yet determined the basis for the performance
related bonus. No performance related bonus was paid to Mr. Schulz
during the fiscal year ended March 31, 2008.
In setting compensation levels for
fiscal 2008 for Mrs. Gaines, the Compensation Committee noted that Mrs. Gaines
annual base salary had not been increased since August 2006 and, since that
time, the Corporation had successfully completed the acquisition of Beanstream
Internet Commerce Inc., resulting in an increase in Mrs. Gaines
responsibilities with the Corporation for the fiscal year ended March 31,
2008. In light of
these
and other
factors (including the compensation levels of comparable executives within LML’s
peer group), the Compensation Committee increased Mrs. Gaines’ annual
base
salary from
CDN$61,000 to CDN$71,000. This increase, which took effect on
September 24, 2007, resulted in Mrs. Gaines’
actual salary for the year ended March 31, 2008 being
CDN$66,208.
In
addition to these increases in base salary for Mr. Gaines, Mr. Schulz, and Mrs.
Gaines and performance–related bonuses for Mr. Gaines and Mr. Schulz, on March
31, 2008, the Compensation Committee also recommended the grant of 1,200,000
stock options to Mr. Gaines and 210,000 stock options to each of Mr. Schulz and
Mrs. Gaines which were granted to them by the Stock Option Plan Administration
Committee on March 31, 2008. All of these stock options have an
exercise price of $3.00 per share and expire on March 31, 2018. Mr.
Gaines’ stock options vest as to 240,000 stock options
on March 31,
2008, and an
additional 240,000 stock options on each of the first, second, third, and fourth
anniversaries
of the date of the Option Grant. Mr. Schulz’s
and Mrs. Gaines’ stock options vest as to 70,000 stock options on March 31,
2008, and an additional 70,000 stock options on each of the first and second
anniversaries of the date of the Option Grant.
- 17
-
On
October 4, 2007, the Stock Option Plan Administration Committee granted Mr.
Peyton 50,000 stock options, of which 12,500 options vested on October 4,
2007 and 6,250 options vested on April 4, 2008 and 6,250 options will vest
on each of October 4, 2008, April 4, 2009, October 4, 2009, April 4, 2010 and
October 4, 2010. These stock options have an exercise price of $3.90
per share and expire on October 4, 2012. Mr. Peyton resigned as Executive
Vice-President of the Corporation’s subsidiary LML Payment Systems Corp. on
November 15, 2007. However, subsequent to his resignation, Mr. Peyton
continued to provide certain services to the Corporation’s subsidiary on a
consulting basis and on March 27, 2008, the Corporation and Mr. Peyton entered
into a Support Services and Software Licensing Letter Agreement with respect to
the consulting services Mr. Peyton continues to provide to LML Payment Systems
Corp. As a result of his continuing status as a consultant to the
Corporation’s subsidiary, LML Payment Systems Corp., all of Mr. Peyton’s stock
options which have not already expired, continue to vest as scheduled and will
expire in accordance with their terms.
Mr. Thomson’s employment agreement was
established by management on July 2, 2007 in connection with the acquisition of
the Corporations subsidiary Beanstream Internet Commerce Inc., and was
principally the result of negotiations between Mr. Thomson and the Corporation
as part of that acquisition. Pursuant to the employment agreement
with the Corporation’s subsidiary, Mr. Thomson receives an annual salary of
CDN$135,000. In October 2007,
Mr. Gaines reviewed Mr. Thomson’s base salary and brief compensation history
with the Corporation. In light of the acquisition and Mr. Thomson’s
increased responsibilities, upon Mr. Gaines recommendation, the Stock Option
Plan Administration Committee granted Mr. Thomson 300,000 stock options on
October 4, 2007, of which 50,000 options vested on April 4, 2008 and an
additional 50,000 options will vest on each of October 4, 2008, April 4, 2009,
October 4, 2009, April 4, 2010 and October 4, 2010. These stock
options have an exercise price of $3.90 per share and expire on October 4,
2012. Along with the Corporation's other named executive officers, no
performance related bonus was paid to Mr. Thomson during the fiscal year ended
March 31, 2008.
Perquisites
Our Named
Executive Officers are not entitled to any benefits that are not otherwise
available to all of our employees. We do not provide pension
arrangements, post-retirement health coverage, or similar benefits for our Named
Executive Officers or other employees.
401(k)
Plan
We do not
provide pension arrangements or post-retirement health coverage for our Named
Executive Officers. Our Named Executive Officers who are U.S. residents are
eligible to participate in our 401(k) plan. We provide a matching
contribution to eligible Named Executive Officers. See “Summary
Compensation Table” below.
Nonqualified Deferred
Compensation
We do not
provide any nonqualified defined contribution or other deferred compensation
plans.
Compensation
Committee Report
The
Compensation Committee of the Board has reviewed this Compensation Discussion
and Analysis and has discussed this analysis with management. Based on its
review and discussions with management, the committee recommended to our Board
that the Compensation Discussion and Analysis be included in this proxy
statement. This report is provided by the following independent
directors, who comprise the committee:
|
COMPENSATION
COMMITTEE
|
|
|
L.
William Seidman
|
|
|
Greg
A. MacRae
|
|
|
Jacqueline
Pace
|
- 18
-
Summary
of Compensation of Executive Officers
The following table
summarizes the compensation that LML paid during the fiscal years ended March
31, 2008, March 31, 2007 and March 31, 2006 to its Principal Executive Officer,
its Principal Financial Officer and to three “Named Executive Officers”,
one of whom was Executive Vice-President of LML’s subsidiary, LML Payment
Systems Corp., and one of whom is Chief Executive Officer and President of LML’s
subsidiary Beanstream Internet Commerce Inc.
Summary Compensation
Table
|
Name
and Principal Position
|
Fiscal
Year Ended
|
Salary
(US$)
|
Option
Awards
(US$)
|
(1)
|
All
Other Compensation (US$)
|
Total
(US$)
|
|||||||||||||||||||||
|
Patrick
H. Gaines,
President,
CEO and
Director
|
2008
|
$ | 184,899 | (2)(3) | $ | 344,417 | (4) | $ | - | $ | 529,316 | ||||||||||||||||
|
2007
|
154,194 | (2)(5) | 91,214 | (6) | - | 245,408 | |||||||||||||||||||||
|
2006
|
140,783 | (2)(7) | - | - | 140,783 | ||||||||||||||||||||||
|
Richard
R. Schulz, Controller,
Principal
and Financial Officer
|
2008
|
107,412 | (2)(3) | 100,474 | (4) | - | 207,886 | ||||||||||||||||||||
|
2007
|
83,573 | (2)(5) | 146,941 | (6) | - | 230,514 | |||||||||||||||||||||
|
2006
|
68,192 | (2) | - | - | 68,192 | ||||||||||||||||||||||
|
Carolyn
L. Gaines,
Corporate
Secretary
|
2008
|
64,156 | (2)(3) | 100,473 | (4) | - | 164,629 | ||||||||||||||||||||
|
2007
|
51,554 | (2)(5) | 108,939 | (6) | - | 160,493 | |||||||||||||||||||||
|
2006
|
44,448 | (2) | - | - | 44,448 | ||||||||||||||||||||||
|
Craig
Thomson,
Chief
Executive Officer and President of Beanstream Internet Commerce
Inc.
|
2008
|
121,012 | (2)(8) | 89,256 | (4) | - | 210,268 | ||||||||||||||||||||
|
Robert
E. Peyton,
Executive
Former Vice-President of Information Technologies of LML Payment Systems
Corp.
|
2008
|
117,000 | (9) | 39,180 | (4)(6) | 16,055 | (10) |
|
172,235 | ||||||||||||||||||
|
2007
|
173,076 | 11,785 | (6) | 1,730 | (11) |
|
186,591 | ||||||||||||||||||||
|
2006
|
120,000 | - | 1,473 | (11) |
|
121,473 | |||||||||||||||||||||
_______________________
|
(1)
|
The
amounts reported in the “Option Awards” column reflect the dollar amount
of expense recognized for financial statement reporting purposes for the
fiscal years ended March 31, 2007 and 2008, in accordance with SFAS 123R.
Other than indicated below or otherwise in this Proxy Statement, we have
not granted any restricted shares or restricted share units, stock
appreciation rights ("SARs") or long term incentive plan payouts to the
named officers and directors during the fiscal years
indicated.
|
|
(2)
|
Mr.
Gaines’, Mr. Schulz’s and Mrs. Gaines’ salaries are paid in Canadian
dollars and, for purposes of reporting such in this table, have been
converted to U.S. dollars at the exchange rates of 0.838, 0.878
and 0.969 being the average exchange rates for each of the
fiscal years ended March 31, 2006, 2007 and 2008
respectively. Mr. Thomson’s salary is also paid in Canadian
dollars and, for purposes of reporting such in this table, has been
converted to U.S. dollars at the exchange rate of 0.989, being
the average exchange rate for the period from July 1, 2007 (when Mr.
Thomson’s employment began with LML) to March 31,
2008.
|
|
(3)
|
On
March 31, 2008, the Compensation Committee increased Mr. Gaines’ annual
base salary, effective September 24, 2007, from CDN $181,000 for the
fiscal year ended March 31, 2008, to CDN $200,000 per year, Mr. Schulz’s
annual base salary, effective September 24, 2007, from CDN $101,000 for
the fiscal year ended March 31, 2008, to CDN $120,000 per year and Mrs.
Gaines’ annual base salary, effective September 24, 2007, from CDN $61,000
for the fiscal year ended March 31, 2008, to CDN $71,000 per
year.
|
|
(4)
|
For
additional information relating to the assumptions used in the calculation
of these amounts for Messrs. Gaines, Schulz, Thomson and Peyton, and Mrs.
Gaines refer to Note 11 in our financial statements for the fiscal year
ended March 31, 2008, included in our Annual Report on Form 10-K filed
with the SEC on June 19, 2008.
|
|
(5)
|
On
August 30, 2006, the Compensation Committee increased Mr. Gaines’ annual
base salary from Cdn.$168,000 for the fiscal year ended March 31, 2006 to
Cdn.$181,000 for the fiscal year ended March 31, 2007, and Mr. Schulz’s
annual base salary from Cdn. $87,000 for the fiscal year ended March 31,
2006 to $101,000 for the fiscal year ended March 31, 2007 and Mrs.
Gaines’ annual base salary from Cdn. $54,912 for the fiscal year ended
March 31, 2006 to Cdn$61,000 for the fiscal year ended March 31,
2007.
|
- 19
-
|
(6)
|
For
additional information relating to the assumptions used in the calculation
of these amounts for Messrs. Gaines, Schulz and Mrs. Gaines, refer to Note
3 in our financial statements for the second quarter of the fiscal year
ended March 31, 2007, included in our Quarterly Report on Form 10-Q filed
with the SEC on November 8, 2006. For additional information
relating to the assumptions used in the calculation of these amounts for
Mr. Peyton, refer to Note 3 to our financial statements for the third
quarter of the fiscal year ended March 31, 2007, included in our Quarterly
Report on Form 10-Q filed with the SEC on February 9,
2007.
|
|
(7)
|
On
March 30, 2004, the Compensation Committee determined that, for
administrative reasons, Mr. Gaines’ salary be changed from United States
dollars to Canadian dollars. This resulted in Mr. Gaines’ annual
compensation of US$120,000 becoming Cdn.$168,000 for the fiscal years
ended March 31, 2005 and 2006.
|
|
(8)
|
Mr.
Thomson is party to an employment agreement with the Corporation’s
subsidiary Beanstream Internet Commerce Inc., which was principally the
result of negotiations between Mr. Thomson and the Corporation as part of
the acquisition of Beanstream Internet Commerce Inc., on July 2,
2007.
|
|
(9)
|
During
the fiscal year ended March 31, 2008, Mr. Robert E. Peyton was employed as
Executive Vice-President of the Corporation’s subsidiary, LML Payment
Systems Corp., from April 1, 2001 to November 15, 2007. Mr. Peyton
resigned as Executive Vice President of the Corporation’s subsidiary, LML
Payment Systems Corp., on November 15, 2007. Subsequent to Mr. Peyton’s
resignation he continued to provide certain services to the Corporation’s
subsidiary on a consulting basis. On March 27, 2008, the
Corporation and Mr. Peyton entered into a Support Services and Software
Licensing Letter Agreement with respect to the consulting services Mr.
Peyton continues to provide to LML Payment Systems Corp. The compensation
amounts for Mr. Peyton for 2008 do not include the amount of any
consulting fees paid to Mr. Peyton.
|
|
(10)
|
Represents
$1,170 in matching payments made by LML to Mr. Peyton’s account under the
Corporation’s 401(k) plan and $14,885 in accrued vacation pay paid to Mr.
Peyton upon his resignation as Executive Vice-President of the
Corporation’s subsidiary, LML Payment Systems
Corp.
|
|
(11)
|
Represents
matching payments made by LML to Mr. Peyton’s account under the
Corporation’s 401(k)
plan.
|
- 20
-
|
|
Grants
of Plan-Based Awards During the Fiscal Year Ended March 31,
2008
|
Grants of Plan-Based
Awards
|
Name
|
Grant
Date
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
(1) |
Exercise
or Base Price of Option Awards
(US$/Sh)
|
Grant
Date Fair Value of Option Awards
(US$)
|
(2) | ||||||||
|
Patrick
H. Gaines
President,
CEO and Director
|
March
31, 2008
|
1,200,000 | $ | 3.00 | 1,719,264 | |||||||||
|
Richard
R. Schulz
Controller
and Principal Financial Officer
|
March
31, 2008
|
210,000 | 3.00 | 300,871 | ||||||||||
|
Carolyn
L. Gaines
Corporate
Secretary
|
March
31, 2008
|
210,000 | 3.00 | 300,871 | ||||||||||
|
Craig
Thomson
Chief
Executive Officer and President of Beanstream Internet Commerce
Inc.
|
October
4, 2007
|
300,000 | 3.90 | 546,507 | ||||||||||
|
Robert
E. Peyton
Former
Executive Vice-President of Information Technology of LML Payment Systems
Corp.
|
October
4, 2007
|
50,000 | 3.90 | 91,085 | ||||||||||
_______________________
|
(1)
|
The
amount reported for Mr. Gaines for the fiscal year ended March 31, 2008 is
related to stock options to purchase 1,200,000 common shares granted on
March 31, 2008, of which 240,000 options vested on March 31,
2008.
|
|
|
The
amount reported for Mr. Schulz for the fiscal year ended March 31, 2008 is
related to stock options to purchase 210,000 common shares granted on
March 31, 2008, of which 70,000 options vested on March 31,
2008.
|
|
|
The
amount reported for Mrs. Gaines for the fiscal year ended March 31, 2008
is related to stock options to purchase 210,000 common shares granted on
March 31, 2008, of which 70,000 options vested on March 31,
2008.
|
|
|
The
amount reported for Mr. Thomson for the fiscal year ended March 31, 2008
is related to stock options to purchase 300,000 common shares granted on
October 4, 2007, of which 50,000 options vested on April 4,
2008.
|
|
|
The
amount reported for Mr. Peyton is related to stock options to purchase
50,000 common shares granted on October 4, 2007, of which 12,500 options
vested on October 4, 2007 and 6,250 options vested on April 4,
2008.
|
|
(2)
|
Represents
the total SFAS 123R grant date fair value of the
grant.
|
- 21
-
Outstanding
Equity Awards at March 31, 2008
Outstanding Equity Awards At
Fiscal Year-End
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
||||||||||||||
|
Patrick
H. Gaines
|
250,000 | - | $ | 6.25 |
April
1, 2009
|
|||||||||||||
| 75,000 | - | 4.52 |
August
24, 2010
|
|||||||||||||||
| 50,000 | - | 3.62 |
August
30, 2011
|
|||||||||||||||
| 240,000 | 960,000 | (1) | 3.00 |
March
31, 2018
|
||||||||||||||
|
Richard
R. Schulz
|
80,000 | - | 6.25 |
April
1, 2009
|
||||||||||||||
| 25,000 | - | 4.52 |
August
24, 2010
|
|||||||||||||||
| 25,000 | - | 3.62 |
August
30, 2011
|
|||||||||||||||
| 70,000 | 140,000 | (2) | 3.00 |
March
31, 2018
|
||||||||||||||
|
Carolyn
L. Gaines
|
50,000 | - | 6.25 |
April
1, 2009
|
||||||||||||||
| 50,000 | - | 4.52 |
August
24, 2010
|
|||||||||||||||
| 25,000 | - | 3.62 |
August
30, 2011
|
|||||||||||||||
| 70,000 | 140,000 | (2) | 3.00 |
March
31, 2018
|
||||||||||||||
|
Craig
Thomson
|
0 | 300,000 | (3) | 3.90 |
October
4, 2012
|
|||||||||||||
| Robert E. Peyton | 25,000 | 25,000 | (4) | 2.95 |
October
5, 2011
|
|||||||||||||
| 12,500 | 37,500 | (5) | 3.90 |
October
4, 2012
|
||||||||||||||
_______________________
|
(1)
|
These options
will vest as to 240,000 stock options on each of March 31, 2009, March 31,
2010, March 31, 2011 and March 31,
2012.
|
|
(2)
|
These
options will vest as to 70,000 stock options on each of March 31, 2009 and
March 31, 2010.
|
|
(3)
|
These
options will vest as to 50,000 options on each of April 4, 2008, October
4, 2008, April 4, 2009, October 4, 2009, April 4, 2010 and October 4,
2010.
|
|
(4)
|
These
options will vest as to 6,250 options on each of April 5, 2008, October 5,
2008, April 5, 2009 and October 5,
2009.
|
|
(5)
|
These
options will vest as to 6,250 shares April 4, 2008, October 4, 2008, April
4, 2009, October 4, 2009, April 4, 2010, and October 4,
2010
|
Option
Exercises and Stock Vested at March 31, 2008
There were no options exercised by any
Named Executive Officers during the fiscal year ended March 31,
2008. We have not awarded stock to any Named Executive
Officers.
Potential
Payments upon Termination or Change in Control
Pursuant to the terms of the employment
agreement entered into on March 31, 2008 between the Corporation and Mr. Gaines,
in the event of Mr. Gaines’ involuntary termination or termination without
cause, Mr. Gaines will be eligible to receive (i) a lump sum severance payment
equal to two (2) years’ current base salary plus two (2) times the last annual
bonus he received; and (ii) immediate vesting of all the granted but unexpired
stock options awarded to Mr. Gaines. In addition, in the event such involuntary
termination or termination without cause occurs following a change of control of
LML, Mr. Gaines will also be eligible to receive a lump sum payment equal to
three and one-half per cent (3.5%) of the total consideration paid to/for the
Corporation.
- 22
-
Pursuant to the terms of the employment
agreement entered into on March 31, 2008 between the Corporation and Mr. Schulz,
in the event of Mr. Schulz’s termination following a change in control of LML,
his involuntary termination, or termination without cause, Mr. Schulz will be
eligible to receive (i) a lump sum severance payment equal to two (2) years’
current base salary plus two (2) times the last annual bonus he received; and
(ii) immediate vesting of all the granted but unexpired stock options awarded to
Mr. Schulz.
Pursuant to the terms of the employment
agreement entered into on March 31, 2008 between the Corporation and Mrs.
Gaines, in the event of Mrs. Gaines’ termination following a change in control
of LML, her involuntary termination, or termination without cause, Mrs. Gaines
will be eligible to receive (i) a lump sum severance payment equal to her base
salary and accrued vacation pay through to the date of termination; (ii)
two (2) years’ current base salary; and (iii) immediate vesting of all the
granted but unexpired stock options awarded to Mrs. Gaines.
In addition, Mr. Gaines, Mr. Schulz and
Mrs. Gaines’ participation in the Corporation’s group insurance benefit plans
(which are provided to all eligible employees of the Corporation) will be
continued by the Corporation for a period of two (2) years following the date of
termination or until any of them replaces such plans, whichever is
earlier.
The terms of Mr. Gaines, Mr. Schulz and
Mrs. Gaines’ employment agreements also include non-compete provisions in favor
of the Corporation. Pursuant to these provisions, in the event of the
termination of employment by any one of them without good reason (as defined in
the employment agreements), or termination with cause, they are not to engage in
or become associated with, any business or other endeavour that is carrying on a
Competitive Activity, as defined in the employment agreements, in any country in
which the Corporation has significant business operations, until the twelve (12)
month anniversary of the date of termination.
Pursuant to the terms of the employment
agreement entered into between the Corporation’s subsidiary, Beanstream Internet
Commerce Inc. and Mr. Thomson, in the event of Mr. Thomson’s termination
following his involuntary termination or termination without cause, Mr. Thomson
will be eligible to receive six (6) months current base salary. Mr.
Thomson’s employment agreement also contains non-compete provisions in favour of
Beanstream. Pursuant to these provisions, for a period of one year
following any termination of Mr. Thomson’s employment, he is not to be retained,
employed, engaged in, assist in any way or have a financial or other interest in
any business or other entity whose business is, in any way, electronic payment
processing, risk management as it relates to this processing, electronic
authentication or payment risk management services. In addition, he
is not to solicit, entice or persuade any customer, client or industry or
marketing partner to cease doing business with Beanstream or to do business with
any competitor of Beanstream. He is also not to solicit, entice or
persuade any employee, consultant or other retained person of Beanstream to
terminate their employment or consulting or other relationship with
Beanstream.
For more information, see “Employment
Arrangements”.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires that LML’s executive officers and
directors and persons who own more than 10% of a registered class of LML’s
equity securities file with the Securities and Exchange Commission initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common stock and other equity
securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and
greater than 10% shareholders are required by the Securities and Exchange
Commission regulations to furnish the Corporation with copies of all Section
16(a) reports they file.
To the best of the Corporation’s
knowledge, all executive officers and directors and greater than 10%
shareholders filed the required reports in a timely manner during the fiscal
year ended March 31, 2008.
- 23
-
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of June 16, 2008, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each director, director nominee and named executive officer, and by the
directors and executive officers as a group. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise
indicated.
|
Shares
of Common Stock Beneficially Owned
|
|||||
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class(1)
|
|||
|
Patrick
H. Gaines (President/CEO/Director)
1680
– 1140 West Pender St. Vancouver, British
Columbia
|
1,032,914(2)
|
3.8%
|
|||
|
Richard
R. Schulz (Controller and Chief Accounting Officer)
1680
– 1140 West Pender St. Vancouver, British
Columbia
|
200,000(3)
|
*
|
|||
|
Carolyn
L. Gaines (Corporate Secretary)
1680
– 1140 West Pender St. Vancouver, British
Columbia
|
242,112(4)
|
*
|
|||
|
Greg
A. MacRae (Director)
613
– 375 Water St. Vancouver, British Columbia
|
135,000(5)
|
*
|
|||
|
L.
William Seidman (Director)
Suite
800 - 1025 Connecticut Ave. N.W. Washington, D.C.
|
135,000(6)
|
*
|
|||
|
Jacqueline
Pace (Director)
P.O.
Box 141 Bailey, MS
|
110,500(7)
|
*
|
|||
|
Craig
Thomson (President and Chief Executive Officer of Beanstream Internet
Commerce Inc.)
302
– 2659 Douglas Street, Victoria, British Columbia
|
899,469(8)
|
3.5%
|
|||
|
Robert
E. Peyton
27629
N. 66th
Way
Scottsdale,
Arizona
|
666,999(9)
|
2.6%
|
|||
|
The
Estate of Robert E. Moore
c/o
Mr. Howard J. Kellough
2800
– 1055 Dunsmuir St. Vancouver, British Columbia
|
4,743,912
(10)
|
18.0%
|
|||
|
Millennium
Partners, L.P
c/o
Millennium Management LLC
666
Fifth Avenue, 8th
Floor, New York, NY
|
4,000,000
(11)
|
15.2%
|
|||
|
Directors
and Executive Officers as a Group (7 persons)
|
2,754,995(12)
|
9.9%
|
|||
|
|
*
|
Indicates
less than 1%
|
_______________________
|
|
(1)
|
Based
on 26,341,832 shares of common stock issued and outstanding as of June 16,
2008. Except as otherwise indicated, we believe that the
beneficial owners of the common stock listed above, based on information
furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to
securities. Shares of common stock subject to options or
warrants currently exercisable, or exercisable within 60 days of June 16,
2008, are deemed outstanding for purposes of computing the percentage
ownership of the person holding such option or warrants, but are not
deemed outstanding for purposes of computing the percentage ownership of
any other person.
|
- 24
-
|
|
(2)
|
On
April 1, 2004, we granted to Mr. Gaines options to purchase 250,000 common
shares in the capital of our corporation. The options vested on
April 1, 2004, are exercisable at a price of $6.25 per share, and expire
on April 1, 2009. On August 24, 2005 we granted to Mr. Gaines options to
purchase 75,000 common shares in the capital of our
corporation. The options vested on August 24, 2005, are
exercisable at a price of $4.52 per share and expire on August 24, 2010.
On August 30, 2006 we granted to Mr. Gaines options to purchase 50,000
common shares in the capital of our corporation. The options
vested on August 30, 2006, are exercisable at a price of $3.62 per share
and expire on August 30, 2011. On March 31, 2008, we granted Mr. Gaines
options to purchase 1,200,000 common shares in the capital of our
corporation, of which 240,000 options vested on March 31, 2008 and an
additional 240,000 options will vest on each of March 31, 2009, March 31,
2010, March 31, 2011 and March 31, 2012. The options are
exercisable at a price of $3.00 per share and will expire on March 31,
2018.
|
|
|
Also
includes shares held by companies controlled by Mr. Gaines as
follows:
|
|
|
(a)
|
Keats
Investments Ltd.: 168,400
shares
|
|
|
(b)
|
397389
British Columbia Ltd.: 16,622
shares
|
|
|
(c)
|
Does
not include 242,112 shares (including 195,000 options exercisable within
sixty days of June 16, 2008) that are beneficially held by Carolyn L.
Gaines, Mr. Gaines’ spouse
|
|
|
(3)
|
On
April 1, 2004, we granted to Mr. Schulz options to purchase 80,000 common
shares in the capital of our corporation. The options vested as
to 5,000 options on April 1, 2004, and 12,500 options on each of October
1, 2004, April 1, 2005, October 1, 2005, April 1, 2006, October 1, 2006
and April 1, 2007, are exercisable at a price of $6.25 per share, and
expire on April 1, 2009. On August 24, 2005 we granted to Mr. Schulz
options to purchase 25,000 common shares in the capital of our
corporation. The options vested on August 24, 2005, are
exercisable at a price of $4.52 per share and expire on August 24, 2010.
On August 30, 2006 we granted to Mr. Schulz options to purchase 25,000
common shares in the capital of our corporation. The options
vested on August 30, 2006, are exercisable at a price of $3.62 per share
and expire on August 30, 2011. On March 31, 2008, we granted Mr. Schulz
options to purchase 210,000 common shares in the capital of our
corporation, of which 70,000 options vested on March 31, 2008 and an
additional 70,000 options will vest on each of March 31, 2009 and March
31, 2010. The options are exercisable at a price of $3.00 per
share and will expire on March 31,
2018.
|
|
|
(4)
|
On
April 1, 2004, we granted to Mrs. Gaines options to purchase 50,000 common
shares in the capital of our corporation. The options vested as
to 5,000 options on April 1, 2004, and 7,500 options on each of October 1,
2004, April 1, 2005, October 1, 2005, April 1, 2006, October 1,
2006 and April 1, 2007, are exercisable at a price of $6.25 per
share, and expire on April 1, 2009. On August 24, 2005 we granted to Mrs.
Gaines options to purchase 50,000 common shares in the capital of our
corporation. The options vested on August 24, 2005, are
exercisable at a price of $4.52 per share and expire on August 24, 2010.
On August 30, 2006 we granted to Mrs. Gaines options to purchase 25,000
common shares in the capital of our corporation. The options
vested on August 30, 2006, are exercisable at a price of $3.62 per share
and expire on August 30, 2011. On March 31, 2008, we granted Mrs. Gaines
options to purchase 210,000 common shares in the capital of our
corporation, of which 70,000 options vested on March 31, 2008 and an
additional 70,000 options will vest on each of March 31, 2009 and March
31, 2010. The options are exercisable at a price of $3.00 per
share and will expire on March 31,
2018.
|
|
|
(5)
|
On
August 20, 2003, we granted to Mr. MacRae options to purchase 10,000
common shares in the capital of our corporation, all of which vested on
August 20, 2004. These options are exercisable at a price of $4.74 per
share and expire on August 20, 2008. On August 25, 2004, we
granted to Mr. MacRae options to purchase 25,000 common shares in the
capital of our corporation, all of which vested on August 25,
2005. These options are exercisable at a price of $5.08 per
share and expire on August 25, 2009. On August 24, 2005, we granted to Mr.
MacRae options to purchase 25,000 common shares in the capital of our
corporation, all of which vested on August 24, 2006. These
options are exercisable at a price of $4.52 per share and expire on August
24, 2010. On August 30, 2006, we granted to Mr. MacRae options to purchase
25,000 common shares in the capital of our corporation, all of which
vested on August 30, 2007. These options are exercisable at a
price of $3.62 per share and expire on August 30, 2011. On August 8, 2007,
we granted to Mr. MacRae options to purchase 25,000 common shares in the
capital of our corporation, all of which will vest on August 8,
2008. These options are exercisable at a price of $3.16 per
share and expire on August 8, 2012.
|
|
|
(6)
|
On
August 20, 2003, we granted to Mr. Seidman options to purchase 10,000
common shares in the capital of our corporation, all of which vested on
August 20, 2004. These options are exercisable at a price of $4.74 per
share and expire on August 20, 2008. On August 25, 2004, we
granted to Mr. Seidman options to purchase 25,000 common shares in the
capital of our corporation, all of which vested on August 25,
2005. These options are exercisable at a price of $5.08 per
share and expire on August 25, 2009. On August 24, 2005, we granted to Mr.
Seidman options to purchase 25,000 common shares in the capital of our
corporation, all of which vested on August 24, 2006. These
options are exercisable at a price of $4.52 per share and expire on August
24, 2010. On August 30, 2006, we granted to Mr. Seidman options to
purchase 25,000 common shares in the capital of our corporation, all of
which vested on August 30, 2007. These options are exercisable
at a price of $3.62 per share and expire on August 30, 2011. On August 8,
2007, we granted to Mr. Seidman options to purchase 25,000 common shares
in the capital of our corporation, all of which will vest on August 8,
2008. These options are exercisable at a price of $3.16 per
share and expire on August 8, 2012.
|
|
|
(7)
|
On
August 20, 2003, we granted to Ms. Pace options to purchase 10,000 common
shares in the capital of our corporation, all of which vested on August
20, 2004. These options are exercisable at a price of $4.74 per share and
expire on August 20, 2008. On August 25, 2004, we granted to
Ms. Pace options to purchase 25,000 common shares in the capital of our
corporation, all of which vested on August 25, 2005. These
options are exercisable at a price of $5.08 per share and expire on August
25, 2009. On August 24, 2005, we granted to Ms. Pace options to purchase
25,000 common shares in the capital of our corporation, all of which
vested on August 24, 2006. These options are exercisable at a
price of $4.52 per share and expire on August 24, 2010. On August 30,
2006, we granted to Ms. Pace options to purchase 25,000 common shares in
the capital of our corporation, all of which vested on August 30,
2007. These options are exercisable at a price of $3.62 per
share and expire on August 30, 2011. On August 8, 2007, we granted to Ms.
Pace options to purchase 25,000 common shares in the capital of our
corporation, all of which will vest on August 8, 2008. These
options are exercisable at a price of $3.16 per share and expire on August
8, 2012.
|
- 25
-
|
|
(8)
|
On
October 4, 2007 we granted to Mr. Thomson 300,000 common shares in the
capital of the corporation, of which 50,000 options vested
on April 4, 2008, and 50,000 options will vest on each of
October 4, 2008, April 4, 2009, October 4, 2009, April 4, 2010 and October
4, 2010. The options are exercisable at a price of $3.90 per
share and expire on October 4,
2012.
|
Also
includes shares held by companies controlled by Mr. Thomson, and shares held by
his spouse, as follows:
|
|
(a)
|
588267
BC Ltd.: 840,436 shares
|
|
|
(b)
|
Owned
by spouse: 9,033 shares
|
|
|
(9)
|
Includes
50,000 options exercisable within sixty days of June 16,
2008. On October 5, 2006 we granted to Mr. Peyton options to
purchase 50,000 common shares in the capital of our corporation, of which
12,500 options vested on October 5, 2006 and 6,250 options vested on each
of April 5, 2007, October 5, 2007 and April 5, 2008, and 6,250
options will vest on each of October 5, 2008, April 5, 2009 and
October 5, 2009. The options are exercisable at a price of
$2.95 per share and expire on October 5, 2011. On October 4, 2007 we
granted to Mr. Peyton options to purchase 50,000 common shares in the
capital of our corporation, of which 12,500 options vested on October 4,
2007 and 6,250 options vested on April 4, 2008 and 6,250 options will vest
on each of October 4, 2008, April 4, 2009, October 4, 2009, April 4,
2010 and October 4, 2010. The options are exercisable at a
price of $3.90 per share and expire on October 4, 2012. Mr.
Peyton ceased to be an executive officer of the Corporation upon his
resignation as Executive Vice President of the Corporation’s subsidiary,
LML Payment Systems Corp., on November 15, 2007 and, as a result, the
number of shares being reported in this table as beneficially owned by Mr.
Peyton is based on the last Form 4 filed by Mr. Peyton with the SEC on
October 5, 2007. The Corporation has no knowledge, other than
the exercise of options, of the sale or acquisition of shares of the
Corporation made by Mr. Peyton following February 14, 2008, such date
being ninety days following the date of his
resignation.
|
|
(10)
|
Includes
1,233,332 shares held by 716377 Alberta Ltd., a company controlled by Mr.
Moore’s Estate.
|
|
|
(11)
|
On
March 26, 2008, LML Payment Systems Inc. entered into a definitive
Securities Purchase Agreement with Millennium Partners, LLP
(“Purchaser”). Under the Securities Purchase Agreement, LML and
the Purchaser completed a private placement transaction pursuant to which
the Purchaser acquired 4,000,000 common shares of the Corporation for an
aggregate purchase price of $7,200,000, or $1.80 per
share.
|
|
(12)
|
Includes
1,390,000 options exercisable within sixty days of June 16,
2008.
|
PROPOSAL
TWO - APPOINTMENT OF INDEPENDENT AUDITORS
Grant
Thornton LLP of Vancouver, British Columbia, Canada, has been selected by our
board of directors and Audit Committee to serve as our independent auditors for
the fiscal year ending March 31, 2009. Grant Thornton LLP was
appointed by our Audit Committee to serve as our independent auditors effective
July 12, 2004. It is proposed that the remuneration to be paid to the
independent auditors be fixed by our Audit Committee.
During
the two most recent fiscal years there were no disagreements between us and
Grant Thornton LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which
disagreement or disagreements, if not resolved to the satisfaction of the
independent auditors, would have caused it to make reference to the subject
matter of the disagreement or disagreements in connection with its report on the
financial statements for such years.
All
services provided by Grant Thornton LLP in the fiscal year ended March 31, 2008
have been reviewed with our Audit Committee to confirm that the performance of
such services is consistent with the regulatory requirements for auditor
independence.
A
representative of Grant Thornton LLP is not expected to be present at our annual
and special meeting, nor is a representative of Grant Thornton LLP expected to
make a statement. In the event that a representative of Grant
Thornton LLP is present at our annual and special meeting, such representative
or representatives will have an opportunity to make a statement if such
representative or representatives so desire, and will be available to respond to
appropriate questions by shareholders. The affirmative vote of a majority of the
common shares represented in person or by proxy at our annual and special
meeting is required to approve this proposal.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPOINTMENT
OF GRANT THORNTON LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH
31, 2009.
- 26
-
AUDIT
FEES
As at May
31, 2008, Grant Thornton LLP had billed our corporation aggregate fees of
CDN$215,500 for: professional services rendered for the audit of our annual
financial statements included in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2008; the audit of our corporation’s internal control over
financial reporting; and the attestation of management’s report on the
effectiveness of internal control over financial reporting. In addition,
for the review of our financial statements included in our Quarterly Reports on
Form 10-Q for the quarterly periods ended June 30, 2007, September 30, 2007, and
December 31, 2007, the aggregate fees billed by Grant Thornton LLP were
CDN$50,000.
As at May
31, 2007, Grant Thornton LLP had billed our corporation aggregate fees of
CDN$163,000 for professional services rendered for the audit of our annual
financial statements included in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2007. In addition, for the review of our financial
statements included in our Quarterly Reports on Form 10-Q for the quarterly
periods ended June 30, 2006, September 30, 2006, and December 31, 2006, the
aggregate fees billed by Grant Thornton LLP were CDN$45,000.
AUDIT-RELATED
FEES
During
the fiscal years ended March 31, 2007 and 2008, there were no audit-related fees
billed to our corporation by Grant Thornton LLP which are not otherwise reported
under the caption “Audit Fees” above. “Audit-related fees” are fees
for assurance and related services that are reasonably related to the
performance of the audit or review of our corporation’s financial
statements.
TAX
FEES
During
the fiscal years ended March 31, 2008 and 2007, we did not engage Grant Thornton
LLP to provide us with any services related to tax compliance, tax advice or tax
planning.
ALL
OTHER FEES
During
the fiscal year ended March 31, 2008, the aggregate fees billed for services by
Grant Thornton LLP that did not constitute audit fees, audit-related fees or tax
fees were CDN$58,000. These fees relate primarily to consultation
with respect to the accounting and disclosure treatment of the Corporation’s
acquisition of Beanstream Internet Commerce Inc.
During
the fiscal year ended March 31, 2007, the aggregate fees billed for services by
Grant Thornton LLP that did not constitute audit fees, audit-related fees or tax
fees were CDN$26,400. These fees related primarily to consultation
with respect to the accounting and disclosure treatment of the Corporation’s
patent litigation, settlement and licensing activities.
PRE-APPROVAL
POLICIES OF AUDIT COMMITTEE
Our Audit
Committee has adopted a policy governing the pre-approval by the Audit Committee
of all services, audit and non-audit, to be provided to the corporation by its
independent auditors. Under the policy, the Audit Committee has
pre-approved the provision by the corporation’s independent auditors of specific
audit, audit-related, tax and other non-audit services as being consistent with
auditor independence. Requests or applications to provide services
that require the specific pre-approval of the Audit Committee must be submitted
to the Audit Committee by the independent auditors, and the independent auditors
must advise the Audit Committee as to whether, in the independent auditor’s
view, the request or application is consistent with the Securities and Exchange
Commission’s rules on auditor independence. The Audit Committee may
delegate either type of pre-approval authority to one or more of its members,
and has currently delegated such authority to the chairman of the Audit
Committee. All audit and non-audit services performed by our
independent registered public accounting firm during the fiscal year ended March
31, 2008 and March 31, 2007 were pre-approved in accordance with this
policy.
- 27
-
PROPOSAL THREE – CORPORATE
NAME CHANGE
The shareholders of the Corporation are
being asked to consider, and if thought fit, to approve a special resolution,
with or without amendment, to change the corporate name of the Corporation from
“LML Payment Systems Inc.” to “Beanstream Internet Commerce Inc.” or such other
corporate name as the directors, in their absolute discretion, may determine and
which is acceptable to the regulatory authorities.
The text of the special resolution, in
substantially the form to be presented to shareholders, subject to such
amendments, not affecting the general intent of the special resolution, as may
be required by the regulatory authorities or by counsel for the Corporation, is
as follows:
“RESOLVED, as a Special
Resolution, that:
|
|
(a)
|
the
Articles of the Corporation be amended by changing the corporate name of
the Corporation from “LML Payment Systems Inc.” to “Beanstream Internet
Commerce Inc.”, or such other corporate name as may be determined by the
directors and which is acceptable to the regulatory authorities;
and
|
|
|
(b)
|
any
director or officer of the Corporation be and is hereby authorized and
directed, for and on behalf of the Corporation, to execute and
deliver all such documents as are necessary or desirable in order to
effect such change of corporate
name.
|
The affirmative vote of at least
two-thirds of the common shares represented in person or by proxy at our annual
and special meeting is required in order for the Corporation to change its
corporate name.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" AMENDING THE
CORPORATION’S ARTICLES TO CHANGE THE CORPORATE NAME OF THE CORPORATION FROM “LML
PAYMENT SYSTEMS INC.” TO “BEANSTREAM INTERNET COMMERCE INC.”, OR SUCH OTHER NAME
AS THE DIRECTORS IN THEIR ABSOLUTE DISCRETION MAY DETERMINE AND WHICH IS
ACCEPTABLE TO THE REGULATORY AUTHORITIES.
INCLUSION
OF FUTURE SHAREHOLDER PROPOSALS IN PROXY MATERIALS
All
proposals of shareholders intended to be included in our proxy statement and
form of proxy relating to our annual meeting of shareholders for the year ending
March 31, 2009 (the "2009 Annual Meeting") must be received by our corporation
no later than March 4, 2009 (assuming that the 2009 Annual Meeting is held on a
date that is within 30 days from the anniversary date of our annual and special
meeting of shareholders to be held on August 7, 2008). All such
proposals must comply with the requirements of Rule 14a-8 of Regulation 14A of
the Securities Exchange Act of 1934 and Section 138 of the Business Corporations
Act (Yukon), both of which set forth specific requirements and limitations
applicable to nominations and proposals at annual meetings of
shareholders.
For any
shareholder proposal that is not submitted for inclusion in our proxy statement
and form of proxy relating to the 2009 Annual Meeting pursuant to the processes
of Rule 14a-8 of the Securities Exchange Act of 1934 or any proposal that is
submitted under Section 138 of the Business Corporations Act (Yukon), notice of
such proposal must be received by our corporation no later than May 18, 2009
(assuming that the 2009 Annual Meeting is held on a date that is within 30 days
from the anniversary date of our annual and special meeting of shareholders to
be held on August 7, 2008); otherwise, we may exercise, pursuant to Rule
14a-4(c)(1) of the Securities Exchange Act of 1934, discretionary voting
authority under proxies we solicit for the 2008 Annual Meeting.
All
shareholder proposals, notices and requests should be made in writing and sent
via registered, certified or express mail, to our corporation at Suite 1680,
1140 West Pender Street, Vancouver, British Columbia V6E 4G1
Attention: Carolyn Gaines, Corporate Secretary.
With
respect to business to be brought before the annual and special meeting to be
held on August 7, 2008, we have not received any notices from shareholders that
we were required to include in this proxy statement.
- 28
-
“HOUSEHOLDING”
OF PROXY MATERIAL
The
Securities and Exchange Commission has adopted rules that permit companies and
intermediaries (e.g. brokers) to satisfy the delivery requirements for proxy
statements and annual reports to shareholders with respect to two or more
shareholders sharing the same address by delivering a single copy of those
documents addressed to those shareholders. This process, which is
commonly referred to as “householding”, potentially means extra conveniences for
security holders and cost savings for companies.
This
year, a number of brokers with accountholders who are shareholders of our
corporation will be “householding” our proxy materials. As indicated
in the notice previously provided by these brokers to shareholders of our
corporation, a single proxy statement and a single annual report to shareholders
will be delivered to multiple shareholders sharing an address unless contrary
instructions have been received from an affected shareholder. Once
you have received notice from your broker that they will be “householding”
communications to your address, “householding” will continue until you are
notified otherwise or until you revoke your consent. If at any time,
you no longer wish to participate in “householding” and would prefer to receive
a separate proxy statement and/or a separate annual report to shareholders,
please notify your broker, or call us at 604-689-4440 or write to us at LML
Payment Systems Inc., Suite 1680, 1140 West Pender Street, Vancouver, British
Columbia, Canada, V6E 4G1, Attn: Corporate Secretary. We will deliver
promptly upon written or oral request a separate copy of the proxy
statement and/or a separate annual report to shareholders, as applicable,
to a shareholder at a shared address to which a single copy of the documents was
delivered.
Shareholders
who currently receive multiple copies of the proxy statement and/or a separate
annual report to shareholders at their address and would like to request
“householding” of their communications should contact their broker.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as described under the heading “Executive Compensation”, since the
beginning of the fiscal year ended March 31, 2007, we have not been a party to
any transaction, proposed transaction, or series of transactions in which the
amount involved exceeds the lesser of (i) $120,000 or (ii) one percent of the
average of our total assets at year-end for our last two completed fiscal years,
and in which, to our knowledge, any of the following persons had, or will have,
a direct or indirect material interest: any director or executive officer of our
corporation; any nominee for election as a director of our corporation; any
beneficial owner of more than five percent of the outstanding shares of our
common stock; or any member of the immediate family of any of the foregoing
persons.
All
transactions with related persons are reviewed, approved and ratified by the
Audit Committee of our board of directors. The Audit Committee is in
the process of adopting a written policy with respect to the review, approval
and ratification of transactions with related persons.
ANNUAL
REPORT AND FINANCIAL STATEMENTS
Attention
is directed to the financial statements contained in our Annual Report to
Shareholders on Form 10-K for the year ended March 31, 2008. A copy
of the Annual Report to Shareholders on Form 10-K has been sent, or is
concurrently being sent, to all shareholders of record as of June 25,
2008.
AVAILABILITY
OF FORM 10-K
A
copy of our Annual Report on Form 10-K for the fiscal year ended March 31, 2008,
which has been filed with the Securities and Exchange Commission, including the
financial statements, but without exhibits, is available on our website at www.lmlpayment.com by
clicking on “investor relations” and will be provided without charge to any
shareholder or beneficial owner of our common shares upon written request to
Carolyn L. Gaines, Corporate Secretary, LML Payment Systems Inc., Suite 1680 -
1140 West Pender Street, Vancouver, British Columbia V6E 4G1.
- 29
-
REGISTRAR
AND TRANSFER AGENT
Our
registrar and transfer agent is Computershare Investor Services Inc., 6th Floor,
530 - 8th Avenue, S.W., Calgary, Alberta, Canada, T2P 3S8 (facsimile (403)
267-6529).
SUBMITTING
A PROXY VIA THE INTERNET OR BY TELEPHONE
For
Shares Directly Registered in the Name of the Shareholder
Shareholders with shares registered
directly with Computershare Investor Services Inc. may submit a proxy to vote
those shares telephonically or via the Internet by following the instructions on
the proxy card that they receive.
For
Shares Registered in the Name of a Broker or a Bank
A number
of brokers and banks are participating in a program provided through Broadridge
Financial Solutions, Inc. (formerly known as ADP Investor Communication
Services) in the United States and Broadridge Investor Communications Solutions,
Canada (formerly known as ADP Investor Communications Canada) that offers
telephone and Internet voting options. This program is different from
the program provided by Computershare for shares registered directly in the name
of shareholders. If your shares are held in an account with a broker
or a bank participating in the Broadridge Solutions program, you may provide
voting instructions to the broker or bank holding your shares telephonically by
calling the telephone number shown on the voting form received from your broker
or bank, or via the Internet at Broadridge Solutions’ website (www.proxyvote.com).
OTHER
MATTERS TO COME BEFORE THE MEETING
In
addition to the matters to be voted upon by the shareholders of our common
shares, we will receive and consider both the Report of the Board of Directors
to the Shareholders, and the financial statements of our corporation for the
years ended March 31, 2008, March 31, 2007 and March 31, 2006, together with the
auditors report thereon. These matters do not require
shareholder approval, and therefore shareholders will not be required to vote
upon these matters.
Except
for the above-noted matters, our board of directors does not intend to bring any
other matters before the meeting and does not know of any matters that will be
brought before the meeting by others. If other matters properly come
before the meeting, it is the intention of the persons named in the solicited
proxy to vote the proxy on such matters in accordance with their good
judgment.
IT IS IMPORTANT THAT PROXIES
BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE URGED TO MARK,
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY.
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By
Order of the Board of Directors:
/s/
Patrick H. Gaines
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Patrick
H. Gaines
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President
and CEO
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Dated: July
2, 2008
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- 30
-
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Computershare
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9th
Floor, 100 University Avenue
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Toronto, Ontario M5J
2Y1
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www.computershare.com
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000001
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Sam
Sample
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123
Samples Street
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Security
Class:COMMON-NEW
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Sampletown
SS X9X X9X
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Holder
Account Number
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C9999999999 I
N D
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Form
of Proxy - Annual and Special Meeting to be held on August 7, 2008
This
Form of Proxy is solicited by and on behalf of Management.
Notes
to proxy
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1.
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Every
holder has the right to appoint some other person or company of their
choice, who need not be a holder, to attend and act on their behalf at the
meeting. If you wish to appoint a person or company other than the persons
whose names are printed herein, please insert the name of your chosen
proxyholder in the space provided (see
reverse).
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2.
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If
the securities are registered in the name of more than one owner (for
example, joint ownership, trustees, executors, etc.), then all those
registered should sign this proxy. If you are voting on behalf of a
corporation or another individual you may be required to provide
documentation evidencing your power to sign this proxy with signing
capacity stated.
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3.
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This
proxy should be signed in the exact manner as the name appears on the
proxy.
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4.
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If
this proxy is not dated, it will be deemed to bear the date on which it is
mailed by Management to the holder.
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5.
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The securities represented by
this proxy will be voted as directed by the holder, however, if such a
direction is not made in respect of any matter, this proxy will be voted
as recommended by
Management.
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6.
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The
securities represented by this proxy will be voted or withheld from
voting, in accordance with the instructions of the holder, on any ballot
that may be called for and, if the holder has specified a choice with
respect to any matter to be acted on, the securities will be voted
accordingly.
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7.
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This
proxy confers discretionary authority in respect of amendments to matters
identified in the Notice of Meeting or other matters that may properly
come before the meeting.
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8.
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This
proxy should be read in conjunction with the accompanying documentation
provided by Management.
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Proxies
submitted must be received by 5:00 pm, Eastern Time, on Tuesday, August 5,
2008.
VOTE
USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
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To
Vote Using the Telephone
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To
Vote Using the Internet
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Call
the number listed BELOW from a touch-tone
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Got
o the following web site:
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Telephone.
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www.investorvote.com
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1-866-732-VOTE
(8683) Toll Free
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If
you vote by telephone or the Internet, DO NOT mail back this proxy.
Voting by mail may be the only
method for securities held in the name of a corporation or securities being
voted on behalf of another individual.
Voting by mail or by Internet
are the only methods by which a holder may appoint a person as
proxyholder other than the Management nominees named on the reverse of this
proxy. Instead of mailing this proxy, you may choose one of the two voting
methods outlined above to vote this proxy.
To
vote by telephone or the Internet, you will need to provide your CONTROL NUMBER,
HOLDER ACCOUNT NUMBER and ACCESS NUMBER listed below.
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CONTROL
NUMBER
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014249
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HOLDER
ACCOUNT NUMBER
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C9999999999
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ACCESS
NUMBER
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99999
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+ SAM
SAMPLE
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C9999999999 | ||
| IND C05 |
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Appointment
of Proxyholder
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|||
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I/We, being holder(s) of LML
Payment Systems Inc. hereby appoint: Patrick H. Gaines, or failing
him, Greg A. MacRae
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or
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Enter
the name of the person you are appointing if this person is someone other
than the foregoing.
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as my/our
proxyholder with full power of substitution and to vote in accordance with the
following direction (or if no directions have been given, as the proxyholder
sees fit) and all other matters that may properly come before the Annual and
Special Meeting of LML Payment
Systems Inc. to be held at The Hyatt Regency Vancouver, 655 Burrard
Street, Vancouver, British Columbia on August 7, 2008 at 10:00 a.m. local time
and at any adjournment thereof.
VOTING
RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER
THE BOXES
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1.
Election of Directors
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||||||||
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For
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Withhold
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For
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Withhold
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For
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Withhold
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|||
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01.
Patrick H. Gaines
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□
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□
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02.
Greg A. MacRae
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□
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□
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03.
Jacqueline Pace
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□
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□
|
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04.
L. William Seidman
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□
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□
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For
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Withhold
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2.Appointment
of Auditors
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To
appoint Grant Thornton LLP as Auditors of the Corporation for the ensuing
year and authorizing the Directors to fix their
remuneration.
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□
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□
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For
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Against
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3.Corporate
Name Change
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To
approve a special resolution to amend the Articles of the Corporation by
changing the corporate name of the Corporation from “LML Payment Systems
Inc.” to “Beanstream Internet Commerce Inc.” or such other name as the
directors in their absolute discretion may determine and which is
acceptable to the regulatory authorities.
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□
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□
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Authorized
Signature(s) - This section must be completed for your instructions to be
executed.
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Signature
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Date
|
||
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I/We
authorize you to act in accordance with my/our instructions set out above.
I/We hereby revoke any proxy previously given with respect to the Meeting.
If no voting instructions
are indicated above, this Proxy will be voted as recommended by
Management.
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Mm/dd/yy
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Interim Financial
Statements - Mark this box if you would like to receive interim
financial statements and accompanying Management’s Discussion and Analysis
by mail.
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□
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Annual Financial Statements -
Mark this box if you would NOT like to receive the Annual Report
and accompanying Management’s Discussion and Analysis by
mail.
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□
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If you
are not mailing back your proxy, you may register online to receive the above
financial report(s) by mail at www.computershare.com/mailinglist.
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