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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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[
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Definitive
Additional Materials
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[
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Soliciting
Material Pursuant to §240
14a-12
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[X
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No
fee required.
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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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[
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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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1. |
electing
four (4) members of our board of
directors;
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2. |
appointment
of our auditors; and
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3. |
transacting
any other business that may properly come before the meeting or any
adjournment or adjournments
thereof.
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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 26, 2006
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1. |
by
delivering a written notice of revocation to the Secretary of our
corporation;
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2. |
by
submitting a duly executed proxy bearing a later date;
or
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3. |
by
attending our annual meeting and expressing the desire to vote your
common
shares in person (attendance at our annual meeting will not in and
of
itself revoke a proxy).
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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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47
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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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52
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Director
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February
12, 1998
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L.
William Seidman
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85
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Director
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October
13, 1999
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Jacqueline
Pace
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62
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Director
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November
27, 2000
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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 under NASD
Rule
4200(a)(15), as amended; 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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(1)
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reviewed
and discussed with our corporation's management the audited consolidated
financial statements, management’s assessment of the effectiveness of the
corporation’s internal control over financial reporting, and the
independent accountants’ evaluation of the corporation’s internal control
over financial reporting;
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(2)
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discussed
with the independent accountants the matters described in Statement
of
Auditing Standards No. 61, as
amended;
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(3)
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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
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(4)
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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, 2006, based on the review and discussions referred
to
above.
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AUDIT
COMMITTEE
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Greg
A. MacRae
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L.
William Seidman
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Jacqueline
Pace
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Name
and Age of Executive Officers
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Position
with Our Corporation and Work History
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Patrick
H. Gaines
Age:
47
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President
since March 31, 1992, Chief Executive Officer since February 9,
2000 and
Director since 1990
Patrick
H. Gaines has been our President since March 31, 1992, our Chief
Executive
Officer since February 9, 2000 and a member of our board of directors
since 1990. Mr. Gaines is also the President and a director of
each of our
subsidiaries (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.
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Richard
R. Schulz
Age:
35
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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 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.
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Carolyn
L. Gaines
Age:
39
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Secretary
since February 1995
Carolyn
L. Gaines has served as 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.
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Robert
E. Peyton
Age:
48
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Executive
Vice-President of LML Payment Systems Corp. since April,
2001
Robert
E. Peyton has been employed as Executive Vice-President of our
subsidiary,
LML Payment Systems Corp., since April 1, 2001. Prior to that,
commencing
in 1996, Mr. Peyton served as the President of Phoenix EPS, Inc.
Mr.
Peyton remained as the President of Phoenix EPS, Inc. following
our
acquisition of Phoenix EPS, Inc. on July 9,
2000.
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COMPENSATION
COMMITTEE
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Greg
A. MacRae
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L.
William Seidman
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Jacqueline
Pace
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Name
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Number
of Options
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Greg
A. MacRae
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25,000(1)
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L.
William Seidman
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25,000
(2)
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Robin
Martin
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25,000(3)
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Jacqueline
Pace
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25,000(4)
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(1)
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We
granted options to Mr. MacRae to purchase 25,000 common shares in
the
capital of our corporation on August 24, 2005, all of which vest
on August
24, 2006. The options are exercisable at a price of $4.52 per share
and
expire on August 24, 2010.
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(2)
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We
granted options to Mr. Seidman to purchase 25,000 common shares in
the
capital of our corporation on August 24, 2005, all of which vest
on August
24, 2006. The options are exercisable at a price of $4.52 per share
and
expire on August 24, 2010.
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(3)
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We
granted options to Mr. Martin to purchase 25,000 common shares in
the
capital of our corporation on August 24, 2005, all of which were
to vest
on August 24, 2006. The options were exercisable at a price of $4.52
per
share and were to expire on August 24, 2010. These options were forfeited
upon Mr. Martin’s resignation from our Board of Directors effective March
31, 2006,
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(4)
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We
granted options to Ms. Pace to purchase 25,000 common shares in the
capital of our corporation on August 24, 2005, all of which vest
on August
24, 2006. The options are exercisable at a price of $4.52 per share
and
expire on August 24, 2010.
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Number
of securities to be issued upon exercise of outstanding
options
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Weighted
average exercise price of outstanding options and
warrants
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Number
of securities remaining available for future issuance under equity
compensation plans
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||||
Equity
compensation plans approved by security holders
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1,629,500(1)
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$5.32
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2,266,967(2)
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Equity
compensation plans not approved by security holders
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-
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-
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-
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Total
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1,629,500
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$5.32
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2,266,967
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(1)
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Comprised
of 1,101,000 common shares to be issued upon exercise of outstanding
options as
at March 31, 2006
under the 1996 Stock Option Plan and 528,500 common shares to
be issued
upon exercise of outstanding options as at March 31, 2006 under
the 1998
Stock Incentive Plan.
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(2)
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Comprised
of 291,000 common shares which remain available for future issuance
as
at March 31, 2006 under
the 1996 Stock Option Plan and 1,975,967 common shares which
remain
available for future issuance as
at March 31, 2006 under
the 1998 Stock Incentive
Plan.
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SUMMARY
COMPENSATION TABLE
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|||||||||
Long
Term Compensation
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|||||||||
Annual
Compensation
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Awards(1)
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||||||||
Name
and Principal Position
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Fiscal
Year Ended
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Salary
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Other
Annual Compensation(2)
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Securities
Underlying
Options/SAR's
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|||||
Patrick
H. Gaines
President,
CEO and Director
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2006
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$120,000(3)
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-
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75,000
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|||||
2005
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$120,000(3)
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-
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250,000
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||||||
2004
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$120,000
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-
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-
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Robert
E. Peyton
Executive
Vice- President of Information Technology of LML Payment Systems
Corp.
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2006
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$120,000
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$1,473(4)
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-
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2005
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$120,000
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$4,292(4)
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-
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||||||
2004
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$135,000
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$5,431(4)
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-
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(1)
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Other
than indicated below or otherwise in this proxy statement, we have
not
granted any restricted shares or restricted share units, stock
appreciation rights ("SAR's") or long term incentive plan payouts
to the
named officers and directors during the fiscal years
indicated.
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(2)
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The
value of perquisites and other personal benefits, securities and
property
for the named officers that do not exceed the lesser of $50,000 or
10% of
the total of the annual salary and bonus are not reported
herein.
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(3)
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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.
Mr.
Gaines’ annual compensation for the fiscal years ended March 31, 2005 and
2006 is presented in the Summary Compensation Table in United States
dollars for comparative purposes, based on an exchange rate of $1.40
Canadian to $1.00 U.S.
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(4)
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Represents
matching payments made by the Corporation to Mr. Peyton's account
under
the Corporation's 401(k) plan.
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Individual
Grants
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Potential
Realizable Value at Assumed Annual Rates of Stock Price Appreciation
for
Option Term
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|||||||||||
Name
(a)
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Number
of Securities Underlying Option/SAR’s Granted (b)
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Percent
of Total Options/SAR’s Granted to Employees in Fiscal Year
(c)
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Exercise
or Base Price ($/Sh) (d)
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Expiration
Date (e)
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5%
($) (f)
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10%
($) (g)
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||||||
Patrick
H. Gaines President, CEO and Director
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75,000(1)
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50%
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$4.52
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August
24, 2010
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$93,750
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$207,000
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Name
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Shares
Acquired on Exercise (#)
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Value
Realized ($)
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Number
of Shares of Common Stock Underlying Unexercised Options at March
31, 2006
Exercisable/ Unexercisable
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Value
of Unexercised In-the-Money Options at March 31, 2006 Exercisable/
Unexercisable(1)
|
||||
Patrick
H. Gaines
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-
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-
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325,000(2)/-
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$939,000/-
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||||
Robert
E. Peyton
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-
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-
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80,000(3)/-
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$299,200/-
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(1)
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The
values for “in-the-money” options are calculated by determining the
difference between the fair market value of the securities underlying
the
options as of March 31, 2006 and the exercise price of the individual’s
options. The closing bid price on March 31, 2006 was $8.74 per
share.
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(2)
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Comprised
of: (a) 250,000 options which are exercisable at a price of $6.25
per
share, and will expire on April 1, 2009, and (b) 75,000 options
which are
exercisable at a price of $4.52 per share and will expire on August
24,
2010.
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(3)
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The
options are exercisable at a price of $5.00 per share until they
expire on
August 19, 2007.
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Shares
of Common Stock Beneficially Owned
|
||||
Name
and Address of Beneficial Owner
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Amount
and Nature of Beneficial Ownership
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Percent
of Class(1)
|
||
Patrick
H. Gaines (President/CEO/Director)
#21018
11-200 Burrard Street
Vancouver,
British Columbia
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749,894(2)
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3.7%
|
||
Greg
A. MacRae (Director)
18284
- 73rd Avenue
Surrey,
British Columbia
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105,000(3)
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*
|
||
L.
William Seidman (Director)
Suite
800 - 1025 Connecticut Ave. N.W.
Washington,
D.C.
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105,000(4)
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*
|
||
Jacqueline
Pace (Director)
P.O.
Box 141
Bailey,
MS
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80,500(5)
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*
|
||
Robert
E. Peyton
4141
N. Granite Reef Rd.,
Scottsdale,
AZ 85251
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696,999(6)
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3.4%
|
||
The
Estate of Robert E. Moore
c/o
Mr. Howard J. Kellough
2800
- 1055 Dunsmuir St.
Vancouver,
British Columbia
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5,086,018(7)
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25.2%
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||
Directors
and Executive Officers as a Group
(7
persons)
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2,069,505(8)
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9.8%
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(1)
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Based
on 20,207,094 shares of common stock issued and outstanding as of
June 30,
2006. 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 30,
2006, 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.
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(2)
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Includes
325,000 options exercisable within sixty days of June 30, 2006. 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. Also includes shares held by companies
controlled by Mr. Gaines as
follows:
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(a)
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Keats
Investments Ltd.: 168,400 shares
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(b)
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397389
British Columbia Ltd.: 51,622
shares
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(c)
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Does
not include any shares beneficially held by Carolyn L. Gaines, Mr.
Gaines’
spouse
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(3)
|
Includes
80,000 options exercisable within sixty days of June 30, 2006.
On September
5, 2001, we granted to Mr. MacRae options to purchase 10,000 common
shares
in the capital of our corporation, all of which vested on September
5,
2002. These options are exercisable at a price of $4.62 per share
and
expire on September 5, 2006. On September 4, 2002, we granted to
Mr.
MacRae options to purchase 10,000 common shares in the capital of
our
corporation, all of which vested on September 4, 2003. These options
are
exercisable at a price of $5.90 per share and expire on September
4, 2007.
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 will
vest on
August 24, 2006. These options are exercisable at a price of $4.52
per
share and expire on August 24,
2010.
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(4)
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Includes
80,000 options exercisable within sixty days of June 30, 2006. On
September 5, 2001, we granted to Mr. Seidman options to purchase
10,000
common shares in the capital of our corporation, all of which vested
on
September 5, 2002. These options are exercisable at a price of $4.62
per
share and expire on September 5, 2006. On September 4, 2002, we granted
to
Mr. Seidman options to purchase 10,000 common shares in the capital
of our
corporation, all of which vested on September 4, 2003. These options
are
exercisable at a price of $5.90 per share and expire on September
4, 2007.
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 will
vest 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 will
vest on
August 24, 2006. These options are exercisable at a price of $4.52
per
share and expire on August 24,
2010.
|
(5)
|
Includes
80,000 options exercisable within sixty days of June 30, 2006. On
September 5, 2001, we granted to Ms. Pace options to purchase 10,000
common shares in the capital of our corporation, all of which vested
on
September 5, 2002. These options are exercisable at a price of $4.62
per
share and expire on September 5, 2006. On September 4, 2002, we granted
to
Ms Pace options to purchase 10,000 common shares in the capital of
our
corporation, all of which vested on September 4, 2003. These options
are
exercisable at a price of $5.90 per share and expire on September
4, 2007.
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 will
vest on
August 24, 2006. These options are exercisable at a price of $4.52
per
share and expire on August 24,
2010.
|
(6)
|
Includes
80,000 options exercisable within sixty days of June 30, 2006. On
August
19, 2002, we granted to Mr. Peyton options to purchase 80,000 common
shares in the capital of our corporation, of which 20,000 options
vested
on August 9, 2002 and 10,000 options vested on each of February 19,
2003,
August 19, 2003, February 19, 2004, August 19, 2004, February 19,
2005 and
August 19, 2005. The options are exercisable at a price of $5.00
per share
and expire on August 19, 2007.
|
(7)
|
Includes
1,383,005 shares held by companies controlled by Mr. Moore’s Estate as
follows:
|
(a)
|
716377
Alberta Ltd.: 1,233,332 shares
|
(b)
|
Lancia
Investments Ltd.: 106,437 shares
|
(c)
|
719774
Alberta Ltd.: 43,236 shares
|
(8)
|
Includes
915,000 options exercisable within sixty days of June 30, 2006. Includes
shares beneficially owned by Carolyn L. Gaines and shares beneficially
owned by Richard R. Schulz, who are executive officers of our corporation
but who are not named executive officers for the purposes of this
proxy
statement.
|
By
Order of the Board of Directors:
|
|
Patrick
H. Gaines
|
|
President
and CEO
|
|
Dated:
July 26, 2006
|
[LOGO]
LML
PAYMENT SYSTEMS INC.
1680
- 1140 WEST PENDER STREET
VANCOUVER,
BC V6E 4G1
|
VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 PM Eastern Time the day
before the
cut-off date or meeting date. Have your proxy card in hand when
you access
the web site and follow the instructions to obtain your records
and to
create an electronic voting instruction form.
|
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If
you would like to reduce the costs incurred by LML Payment Systems
Inc. in
mailing proxy materials you can consent to receiving all future
proxy
statements, proxy cards and annual reports electronically via
e-mail or
the Internet. To sign up for electronic delivery please follow
the
instruction above to vote using the Internet and, when prompted,
indicate
that you agree to receive or access shareholder communications
electronically in future years.
|
|
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions
up until
11:59 PM Eastern Time the day before the cut-off date or meeting
date.
Have your proxy card in hand when you call and then follow the
instructions.
|
|
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid
envelope
we have provided or return it to LML Payment Systems Inc., c/o
ADP, 51
Mercedes Way, Edgewood, NY 11717.
|
1.
Election of Directors
|
For
All
|
Withhold
All
|
For
All Except
|
To
withhold authority to vote for any individual nominee, mark “For All
Except” and write the nominee’s name on the line below
|
|
Nominees:
|
|||||
01
Patrick H. Gaines
|
|||||
02
Jacqueline Pace
|
|
|
|
||
03
Greg A. MacRae
|
|||||
04
L. William Seidman
|
For
|
Against
|
Abstain
|
||
1. Appointment
of Auditors
Appointment
of Grant Thornton LLP as Auditors
|
|
|
|
Authorized
Signature(s) - Sign here - This section must be completed for
your
instructions to be executed.
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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Yes
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No
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HOUSEHOLDING
ELECTION - Please
indicate if you consent to receive certain future investor communications
in a single package per household.
|
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Signature
[PLEASE SIGN WITHIN BOX]
|
Date
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Signature
(Joint Owners}
|
Date
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