<PAGE>
EXHIBIT 3.1
LML PAYMENT SYSTEMS INC.
1140 West Pender Street
Suite 1680
Vancouver, British Columbia,V6E 4G1
(604) 689-4440 (Telephone)
(604) 689-4413 (Facsimile)
NOTICE OF ANNUAL AND SPECIAL MEETING
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the annual and special meeting of LML
Payment Systems Inc. (the "Corporation") will be held at the offices of the
Corporation's solicitors, Messrs. Clark, Wilson, Suite 800, 885 West Georgia
Street, in the City of Vancouver, B.C. on Monday, the 18th day of September,
2000 at the hour of 11:00 o'clock in the forenoon (Vancouver time) to transact
the usual business of an annual meeting and for the following purposes:
1. To receive and consider the Report of the Directors;
2. To receive and consider the financial statements of the Corporation,
together with the auditor's report thereon for the fiscal year ended
March 31, 2000;
3. To elect directors to hold office until the next annual meeting of the
corporation, the Board of Directors having fixed the number of
directors at four (4) in accordance with the articles of the
Corporation;
4. To appoint auditors and to authorize the directors to fix their
remuneration;
5. To consider, and if thought fit, approve an ordinary resolution to
amend the Corporation's 1996 Stock Option Plan to increase the number
of common share purchase options granted or to be granted thereunder
from 2,500,000 common shares to 3,000,000 common shares;
6. To consider, and if thought fit, approve an ordinary resolution to
amend the Corporation's 1998 Stock Incentive Plan to increase the
number of common share purchase options granted or to be granted
thereunder from 1,000,000 common shares to 3,000,000 common shares;
7. To consider and, if thought fit, to approve a special resolution, the
full text of which is set out in the accompanying Information Circular
and Proxy Statement (the "Circular"), to reduce the stated capital of
the common shares of the Corporation by US$ 22,901,744, and to effect
such reduction by reducing the amount of the Corporation's deficit by
the same amount;
8. To consider, and if thought fit, to approve a special resolution, the
full text of which is set out in the Circular, to amend the articles
of the Corporation to permit meetings of shareholders of the
Corporation to be held outside the Yukon at
<PAGE>
-2-
Dallas, Texas or Phoenix, Arizona, in addition to the currently
permitted Vancouver, B.C. and Whitehorse, Yukon;
9. To consider, and if thought fit, to approve a special resolution, the
full text of which is set out in the Circular, to restate the articles
of incorporation of the Corporation, as amended, including the
amendment set forth in item 8 herein; and
10. To transact such further or other business as may properly come before
the meeting and any adjournment or adjournments thereof.
The accompanying Circular provides additional information relating to
the matters to be dealt with at the meeting and is deemed to form part of this
notice.
A shareholder entitled to attend and vote at the meeting is entitled
to appoint a proxy to attend and vote in his stead. If you are unable to attend
the meeting in person, please complete, sign and date the enclosed form of Proxy
and return it within the time and to the location in accordance with the
instructions set out in the form of Proxy and Circular accompanying this Notice.
Please advise the Corporation of any change in your address.
DATED at Vancouver, British Columbia, this 1st day of August, 2000.
By Order of the Board of
LML PAYMENT SYSTEMS INC
"PATRICK H .GAINES"
-------------------------------------
Patrick H. Gaines
President & CEO
<PAGE>
LML PAYMENT SYSTEMS INC.
1140 West Pender Street
Suite 1680
Vancouver, BC, V6E 4G1
(604) 689 4440 (Telephone)
(604) 689 4413 (Facsimile)
INFORMATION CIRCULAR AND PROXY STATEMENT
(As at August 1, 2000 except as indicated)
MANAGEMENT SOLICITATION
-----------------------
This Information Circular and Proxy Statement (the "Circular") is furnished
on or about August 1, 2000, in connection with the solicitation of proxies by
the management of LML Payment Systems Inc. (the "Corporation") for use at the
annual meeting (the "Meeting") of the Corporation to be held on Monday,
September 18, 2000. The solicitation will be by mail and possibly supplemented
by telephone or other personal contact to be made without special compensation
by regular officers and employees of the Corporation. The Corporation does not
reimburse shareholders, nominees or agents for the cost incurred in obtaining
from their principals authorization to execute forms of proxy. No solicitation
will be made by specifically engaged employees or soliciting agents. The cost of
solicitation will be borne by the Corporation.
All dollar amounts set forth in this Circular are expressed in United
States dollars unless otherwise specifically indicated.
REVOCABILITY OF PROXY
---------------------
The persons named in the enclosed form of proxy are directors of the
Corporation.
Any shareholder returning the enclosed form of proxy may revoke the same at
any time insofar as it has not been exercised. In addition to revocation in any
other manner permitted by law, a proxy may be revoked by an instrument in
writing executed by the shareholder or by his attorney authorized in writing or,
where the shareholder is a corporation, by a duly authorized officer, or
attorney, of the corporation, and delivered either to the office of the
Corporation or the registrar and transfer agent at least 24 hours prior to the
scheduled time of the Meeting at which such proxy is to be used, or with the
Chairman of the Meeting on the day of the Meeting, or any adjournment thereof,
and upon any such delivery the proxy is revoked.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
-------------------------------------------
The Corporation is authorized to issue 100,000,000 common shares without
par value, 150,000,000 Class "A" preference shares with a par value of $1.00
each and 150,000,000 Class "B" preference shares with a par value of $1.00 each.
As at August 1, 2000, 15,485,561 common shares were issued and outstanding.
There are no Class "A" preference shares or Class "B" preference shares
outstanding.
<PAGE>
-2-
Only the holders of common shares are entitled to vote at the Meeting and
the holders of common shares are entitled to one vote for each common share
held. Holders of common shares of record on August 1, 2000 will be entitled to
vote at the Meeting.
One person present in person being a shareholder entitled to vote or a duly
appointed proxy or representative for an absent shareholder so entitled
constitutes a quorum. Abstentions and broker's non-votes are considered present
for purposes of determining whether the quorum requirement is met. A broker's
non-vote occurs when a nominee does not have discretionary voting power and has
not received instructions from the beneficial owner. As directors are elected by
a plurality vote, the four (4) nominees receiving the highest votes total will
be elected and the outcome of the vote for directors will not be affected by
abstentions or broker's non-votes. All other proposals other than a special
resolution require the affirmative vote by a simple majority of the votes cast
in person or by proxy at the meeting and a special resolution requires the
approval by a majority not less than 2/3 of the votes cast at the Meeting. As
broker's non-votes will not be considered entitled to vote on these proposals, a
broker's non-vote will not affect the outcome of the vote on these proposals.
To the knowledge of the directors and senior officers of the Corporation,
the following persons beneficially own shares carrying more than 5% of the
voting rights attached to all shares of the Corporation:
<TABLE>
<CAPTION>
================================================================================================
Percentage of
No. of Common Outstanding
Name of Shareholder Shares Owned Common Shares
------------------------------------------------------------------------------------------------
<S> <C> <C>
Don Choquer 1,910,679/(1)/ 12.33%
10440 Gilmore Crescent
Richmond, B.C.
V6X 1X4
------------------------------------------------------------------------------------------------
Robert Moore 1,552,886/(2)(3)/ 10.02%
#1688-1140 Pender Street
Vancouver, BC
V6E 4G1
================================================================================================
</TABLE>
(1) 1,889,668 of these shares are held by companies controlled by Mr. Choquer.
(2) 1,545,220 of these shares are held by companies controlled by Mr. Moore.
(3) In addition to the shares listed above, a company controlled by Mr. Moore
holds 883,283 preference shares of the Corporation's subsidiary LHTW
Properties Inc. (the "LHTW Preference Shares") which are currently
convertible into 3,533,132 common shares of the Corporation. If all of the
warrants had been exercised and the LHTW Preference Shares had been
converted, Mr. Moore would hold, directly or indirectly, 5,086,018 common
shares of the Corporation representing 26.74% of the then outstanding
common shares of the Corporation.
VOTING OF PROXIES
-----------------
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) TO ATTEND AND ACT FOR HIM AND ON HIS BEHALF AT THE MEETING OTHER
THAN THE PERSONS DESIGNATED IN THE
<PAGE>
-3-
ACCOMPANYING FORM OF PROXY. TO EXERCISE THIS RIGHT THE SHAREHOLDER MAY INSERT
THE NAME OF THE DESIRED PERSON IN THE BLANK SPACE PROVIDED IN THE PROXY AND
STRIKE OUT THE OTHER NAMES OR MAY SUBMIT ANOTHER PROXY.
THE SHARES REPRESENTED BY PROXIES IN FAVOUR OF MANAGEMENT WILL BE VOTED ON
ANY POLL (SUBJECT TO ANY RESTRICTIONS THEY MAY CONTAIN) IN FAVOUR OF THE MATTERS
DESCRIBED IN THE PROXY.
ELECTION OF DIRECTORS
---------------------
The directors of the Corporation are elected at each annual meeting and
hold office until the next annual meeting or until their successors are
appointed. In the absence of instructions to the contrary, the enclosed proxy
will be voted for the nominees herein listed, all of whom are presently members
of the Board of Directors.
The Board of Directors have set the number of directors of the Corporation
at four (4). Management of the Corporation proposes to nominate each of the
following persons for election as a director. Information concerning such
persons, as furnished by the individual nominees, is as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
Approx. No. of Voting Date on which
Principal Occupation or Shares Beneficially the Nominee
Name, Country of Ordinary Employment and, if not an Owned, Directly or became a
Residence and Position Held with Elected Director, Occupation Indirectly, or % of outstanding Director of
the Company During the Past Five Years Controlled or Directed common shares the Company
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PATRICK H. GAINES President and CEO of the 449,894/(2)/ 2.90% March 31/92
Canada Corporation since March 1992
CEO, PRESIDENT and DIRECTOR
Age: 41
------------------------------------------------------------------------------------------------------------------------------------
WENDY J. OGILVIE/(1)/ Controller of the Corporation 149,100/(3)/ 0.96% Aug 19/97
Canada since January 1998
DIRECTOR and CONTROLLER
Age: 37
------------------------------------------------------------------------------------------------------------------------------------
GREG A. MACRAE/(1)/ President, CSI Capital 35,000 0.22% Feb 12/98
Canada Solutions Inc., September
DIRECTOR 1996 to present
Age: 46
------------------------------------------------------------------------------------------------------------------------------------
L.WILLIAM SEIDMAN/(1)/ Chief commentator for CNBC 0/(4)/ 0% Oct 13/99
USA since December 1992
DIRECTOR
Age: 79
====================================================================================================================================
</TABLE>
<PAGE>
-4-
(1) Member of the Audit Committee
(2) Of which 210,022 common shares of the Corporation are held by companies
controlled by Mr. Gaines. In addition, a company controlled by Mr. Gaines was
granted incentive stock options on April 12, 1999 entitling the purchase of up
to 110,000 common shares of the Corporation at a price of $3.00 per common
share, exercisable up to April 12, 2004. If these stock options were exercised,
Mr. Gaines would beneficially own, directly or indirectly, 559,894 common shares
of the Corporation, or 3.59% of the then outstanding common shares of the
Corporation.
(3) Of which 133,600 common shares of the Corporation are held by a company
controlled by Ms. Ogilvie.
(4) Mr. Seidman was granted incentive stock options on October 13, 1999
entitling the purchase of up to 240,000 common shares of the Corporation at a
price of $4.00 per common share, exercisable up to October 13, 2004. If these
stock options were exercised, Mr. Seidman would beneficially own, directly or
indirectly, 240,000 common shares of the Corporation, or 1.52% of the then
outstanding common shares of the Corporation.
As a group, the directors and officers of the Corporation own, directly or
indirectly, or exercise control or direction over approximately 665,106 of the
voting securities of the Corporation.
In the last fiscal year, the Board of Directors met eight times formally
and took action by unanimous consent twenty two times. Each director
participated in all of the meetings of the Board and of each committee of which
he or she is a member.
STATEMENT OF EXECUTIVE COMPENSATION
-----------------------------------
Particulars of compensation paid to:
(a) the Corporation's chief executive officer ("CEO");
(b) each of the Corporation's four most highly compensated executive
officers who were serving as executive officers at the end of the most
recently completed fiscal year and whose total salary and bonus
exceeds $100,000 per year; or
(c) any additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as an executive officer of the Corporation at the end of the
most recently completed fiscal year;
(each a "Named Executive Officer") is set out in the summary compensation
table below:
<TABLE>
<CAPTION>
=========================================================================================================================
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
-------------------------------------------------------------------------------------------------------------------------
Awards Payouts
-------------------------------------------------------------------------------------------------------------------------
Securities Restricted
Name and Under Shares or
Principal Other Annual Options/SARs Restricted All Other
Position Year Salary Bonus Compensation Granted Share Units LTIP Payouts Compensation
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick H. 2000 $66,432.00/(1)/ Nil Nil 110,000 Nil Nil Nil
-----------------------------------------------------------------------------------------------------------
Gaines 1999 $66,000.00/(1)/ Nil Nil Nil Nil Nil Nil
-----------------------------------------------------------------------------------------------------------
President & 1998 $25,687.50/(1)/ Nil /(2)/ 190,000 Nil Nil Nil
CEO
=========================================================================================================================
</TABLE>
1. All figures are in Canadian dollars.
<PAGE>
-5-
2. On March 10, 1998, a company controlled by Mr. Gaines was paid a bonus in
the form of share purchase warrants for the right to purchase up to 70,000
common shares of the Corporation, exercisable for up to two years at the price
of $1.00 per share during the first year and $1.20 per share during the second
year. These share purchase warrants were exercised by the company controlled by
Mr. Gaines during the 1999 fiscal year. The bonus was paid by the Corporation in
consideration for Mr. Gaines' company guaranteeing a loan of $350,000 to the
Corporation.
There were no Named Executive Officers serving as executive officers at the
end of the most recently completed fiscal year or executive officers who served
during the fiscal year whose salaries exceeded $100,000 per year.
There were no long term incentive plans in place for any Named Executive
Officer of the Corporation during the most recently completed fiscal year.
OPTIONS AND SARS
----------------
Options/SAR Grants During The Most Recently Completed Fiscal Year
-----------------------------------------------------------------
On April 12, 1999, the Corporation granted to a company controlled by the
Named Executive Officer, incentive stock options entitling the purchase of up to
110,000 common shares of the Corporation at a price of $3.00 per share,
exercisable up to April 12, 2004.
Aggregated Options/SAR Exercised During The Most Recently Completed Fiscal Year
-------------------------------------------------------------------------------
and Fiscal Year-End Option/SAR Values
-------------------------------------
During the most recently completed fiscal year, there were no incentive
stock options exercised by the Named Executive Officer and at fiscal year-end,
the Named Executive Officer held incentive stock options entitling the purchase
of up to 110,000 common shares of the Corporation at a price of $3.00 per share,
exercisable up to April 12, 2004.
There were no defined benefit or actuarial plans in place for any Named
Executive Officer during the most recently completed fiscal year.
There are no employment contracts or compensatory plans or arrangements
between the Corporation and a Named Executive Officer.
The Corporation has a compensation committee.
COMPENSATION OF DIRECTORS
-------------------------
Particulars of stock options granted to directors of the Corporation during
the most recently completed fiscal year are as follows:
<TABLE>
<CAPTION>
======================================================================================================
Exercise Price per Date of Grant
Name of Director No. of Shares Common Share Expiry Date
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Patrick H. Gaines 110,000 $3.00 April 12, 1999
April 12, 2004
------------------------------------------------------------------------------------------------------
L. William Seidman 240,000 $4.00 Oct 13, 1999
Oct 13, 2004
======================================================================================================
</TABLE>
<PAGE>
-6-
OTHER COMPENSATION TO DIRECTORS
-------------------------------
No other compensation was paid to directors of the Corporation during the
last completed fiscal year.
INDEBTEDNESS TO CORPORATION OF DIRECTORS AND SENIOR OFFICERS
------------------------------------------------------------
None of the directors and senior officers of the Corporation, proposed
nominees for election or associates of such persons is or has been indebted to
the Corporation or its subsidiaries at any time since the beginning of the last
completed fiscal year of the Corporation and no indebtedness remains outstanding
as at the date of this Circular.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
----------------------------------------------------------
Since April 1, 1999, being the commencement of the Company's last
completed fiscal year, none of the following persons has any material interest,
direct or indirect, in any transaction or proposed transaction which has
materially affected or will materially affect the Corporation or any of its
subsidiaries:
(a) any director or senior officer of the Corporation;
(b) any proposed nominee for election as a director of the
Corporation;
(c) any member holding, directly or indirectly, more than 5% of the voting
rights attached to all the shares of the Corporation; and
(d) any associate or affiliate of any of the foregoing persons.
APPOINTMENT OF AUDITOR
----------------------
Unless otherwise instructed, the proxies given pursuant to this
solicitation will be voted for the reappointment of Dale Matheson Carr-Hilton,
Chartered Accountants, of Vancouver, British Columbia, as auditor of the
Corporation to hold office until the close of the next annual meeting of the
Corporation. It is proposed that the remuneration to be paid to the auditor of
the Corporation be fixed by the Board of Directors.
Dale Matheson Carr-Hilton was first appointed auditor of the Corporation on
April 30, 1984. Representatives of Dale Matheson Carr-Hilton are not expected to
be present at the Meeting or expected to make a statement, however, they have
the opportunity to do so if they desire. If they are present, they will also be
available to respond to appropriate questions.
MANAGEMENT CONTRACTS
--------------------
There are no management functions of the Corporation or a subsidiary
thereof which are to any substantial degree performed by a person other than the
directors or senior officers of the Corporation or a subsidiary thereof.
-6-
<PAGE>
-7-
The management of the Corporation is not aware of any other matter to
come before the Meeting other than as set forth in the Notice of the Meeting.
If any other matter properly comes before the meeting, it is the intention of
the persons named in the enclosed form of Proxy to vote the shares represented
thereby in accordance with their best judgment on such matter.
OTHER BUSINESS
--------------
Proposed Amendment to 1996 Stock Option Plan
--------------------------------------------
The Corporation's 1996 stock option plan (the "1996 Stock Option
Plan") was first adopted by the shareholders of the Corporation in 1996. The
purpose of the 1996 Stock Option Plan is to advance the interests of the
Corporation by encouraging its directors, management and employees to increase
their proprietary interest in the Corporation and remain associated with the
Corporation and to furnish participants with an additional incentive in their
efforts on behalf of the Corporation. In 1999 the Corporation approved an
amendment to the 1996 Stock Option Plan increasing the number of common shares
issuable upon exercise of options granted thereunder to 2,500,000 common shares.
Management of the Corporation is now desirous of amending the 1996 Stock Option
Plan to increase the number of options to purchase common shares in the capital
of the Corporation from 2,500,000 common shares to 3,000,000 common shares,
because the Corporation's sales and the number of employees have both increased.
A total of 1,615,000 stock options have been granted under the 1996 Stock Option
Plan, of which 372,500 remain outstanding as at August 1, 2000. The shareholders
of the Corporation are being asked to consider and, if thought fit, pass the
following ordinary resolution:
"RESOLVED that the 1996 Stock Option Plan in the form approved
by the directors of the Corporation, pursuant to which the
maximum number of common shares which may be issued under the
1996 Stock Option Plan be increased from 2,500,000 common
shares to 3,000,000 common shares, be and the same is hereby
approved, subject to any amendment thereto requested or
required by the applicable regulatory authorities."
Administration and General Terms
The 1996 Stock Option Plan is currently administered by a Stock Option
Administration Committee (the "administrator") established by the Board of
Directors of the Corporation in December, 1999, and comprised of two members of
the Corporation's current Board of Directors. The administrator has sole
discretion as to the interpretation and construction of any provision of the
1996 Stock Option Plan and the determination of the terms and conditions granted
thereunder, although no participant may be granted options exceeding the maximum
number of shares permitted under the rules of any stock Exchange on which the
common shares are then listed or other regulatory body having jurisdiction (an
"Applicable Regulator"), which maximum number is presently 5% of the issued and
outstanding common shares of the Corporation on a non-diluted basis. The
exercise price of options issued under the 1996 Stock Option Plan shall not be
less than the price permitted by any Applicable Regulator and such price shall
be paid in cash or by certified check or bank draft. The term of each option
shall not exceed that permitted by any applicable Regulator, which is currently
ten years from the date of grant, and the
<PAGE>
-8-
right to exercise options is limited in the event the participant ceases, for
any reason, to be a director, officer, employee or consultant of the
Corporation. Options are generally not transferable or assignable.
1996 Stock Option Plan benefits
As of the date of this Circular, no executive officer, director and no
associates of any executive officer or director, has been granted any options
subject to shareholder approval of the proposed amendment to the 1996 Stock
Option Plan and no person has received or is currently expected to receive 5% of
the Awards issuable under the 1996 Stock Option Plan. A total of 372,500 options
are currently outstanding pursuant to the 1996 Stock Option Plan. The benefits
to be received pursuant to the 1996 Stock Option Plan by the Corporation's
executive officers, directors and employees are not determinable at this time.
Proposed Amendment to 1998 Stock Incentive Plan
-----------------------------------------------
The Corporation's 1998 stock incentive plan (the "1998 Stock Incentive
Plan") was first adopted by the shareholders of the Corporation in 1998. The
purpose of the 1998 Stock Incentive Plan is to advance the interests of the
Corporation by encouraging its directors, management and employees to increase
their proprietary interest in the Corporation and remain associated with the
Corporation and to furnish participants with an additional incentive in their
efforts on behalf of the Corporation. Management of the Corporation is now
desirous of amending the 1998 Stock Incentive Plan to increase the number of
options to purchase common shares in the capital of the Corporation from
1,000,000 common shares to 3,000,000 common shares, because the Corporation's
sales and the number of employees have both increased. A total of 805,000 stock
options have been granted under the 1998 Stock Incentive Plan, of which 750,000
remain outstanding as at August 1, 2000. The shareholders of the Corporation
are being asked to consider and, if thought fit, pass the following ordinary
resolution:
"RESOLVED that the 1998 Stock Incentive Plan in the form approved by
the directors of the Corporation, pursuant to which the maximum number
of common shares which may be issued under the 1998 Stock Incentive
Plan be increased from 1,000,000 common shares to 3,000,000 common
shares, be and the same is hereby approved, subject to any amendment
thereto requested or required by the applicable regulatory
authorities."
Administration and General Terms
The 1998 Stock Incentive Plan is currently administered by a Stock
Incentive Administration Committee (the "administrator") established by the
Board of Directors of the Corporation in December, 1999, and comprised of two
members of the Corporation's current Board of Directors. The administrator has
sole discretion as to the interpretation and construction of any provision of
the 1998 Stock Incentive Plan and the determination of the terms and conditions
granted thereunder, although no participant may be granted options exceeding the
maximum number of shares permitted under the rules of any Stock
<PAGE>
-9-
Exchange on which the common shares are then listed or other regulatory body
having jurisdiction (an "Applicable Regulator"), which maximum number is
presently 5% of the issued and outstanding common shares of the Corporation on a
non-diluted basis. The exercise price of options issued under the 1998 Stock
Incentive Plan shall not be less than the price permitted by any Applicable
Regulator and such price shall be paid in cash or by certified check or bank
draft. The term of each option shall not exceed that permitted by any applicable
Regulator, which is currently ten years from the date of grant, and the right to
exercise options is limited in the event the participant ceases, for any reason,
to be a director, officer, employee or consultant of the Corporation. Options
are generally not transferable or assignable.
1998 Stock Incentive Plan benefits
As of the date of this Circular, no executive officer, director and no
associates of any executive officer or director, has been granted any options
subject to shareholder approval of the proposed amendment to the 1998 Stock
Incentive Plan and no person has received or is currently expected to receive 5%
of the Awards issuable under the 1998 Stock Incentive Plan. A total of 750,000
options are currently outstanding pursuant to the 1998 Stock Incentive Plan. The
benefits to be received pursuant to the 1998 Stock Incentive Plan by the
Corporation's executive officers, directors and employees are not determinable
at this time.
Reduction of Stated Capital
---------------------------
The Corporation, although it is able to pay its liabilities as they become
due, has accumulated a large deficit since its inception. Section 39(1)(c) of
the Business Corporations Act (Yukon) provides for a reduction in stated capital
by an amount that is not represented by realizable assets. At the Meeting the
Shareholders will be asked to pass a special resolution to reduce the stated
capital of the Corporation's common shares by US$ 22,901,744 and to effect such
reduction by reducing the amount of the Corporation's deficit by the same
amount. The reduction of the stated capital of the Corporation's common shares
will reduce the Corporation's deficit and provide financial flexibility. The
following special resolution will be presented to the shareholders for approval
by a majority of not less than two thirds (2/3) of the votes cast in respect
thereof:
BE IT RESOLVED, as a special resolution, that the stated capital of the
common shares of LML Payment Systems Inc. (the "Corporation") be reduced
by US$ 22,901,744 and that such reduction be effected by reducing the
amount of the Corporation's deficit by the same amount.
The reduction in the stated capital of the Corporation's common shares
will result in a corresponding reduction in the paid up capital of such shares
for Canadian income tax purposes for each Shareholder. The Shareholders should
consult their own tax advisers in this regard.
Meetings of Shareholders
------------------------
The Shareholders are being asked to approve as a special resolution an
amendment of the articles of incorporation of the Corporation (the "Articles")
to permit meetings of
<PAGE>
-10-
shareholders of the Corporation to be held outside the Yukon at Dallas, Texas or
Phoenix, Arizona, in addition to the currently permitted Vancouver, B.C. and
Whitehorse, Yukon. The following special resolution will be presented to the
shareholders for approval by a majority of not less than two thirds (2/3) of the
votes cast in respect thereof:
BE IT RESOLVED, as a special resolution that:
1. paragraph 8(a) of the Articles be amended by adding Dallas, Texas or
Phoenix, Arizona as localities in which meetings of shareholders of
the Corporation may be held;
2. any director or officer of the Corporation be and is hereby authorized
to execute and deliver, for and on behalf of the Corporation, all such
documents and to do all such other acts and things as may be
considered necessary or desirable to give effect to this resolution
including, without limitation, the delivery of articles of amendment
in the prescribed form to the Yukon Registrar of Corporations.
Restated Articles of Incorporation
----------------------------------
The shareholders are being asked to approve as a special resolution, the
restating of the articles of incorporation of the Corporation (the "Articles"),
including the amendment set forth under the heading "Meetings of Shareholders"
herein. The following special resolution will be presented to the shareholders
for approval by a majority of not less than two thirds (2/3) of the votes cast
in respect thereof:
BE IT RESOLVED, as a special resolution that:
3. the Articles, as amended, including the amendment set forth herein
amending paragraph 8(a) of the Articles, be restated in the form
attached to this Special Resolution as "Schedule A", pursuant to the
Business Corporations Act (Yukon);
4. any director or officer of the Corporation be and is hereby authorized
to execute and deliver, for and on behalf of the Corporation, all such
documents and to do all such other acts and things as may be
considered necessary or desirable to give effect to this resolution
including, without limitation, the delivery of articles of amendment
in the prescribed form to the Yukon Registrar of Corporations.
OTHER MATTERS
-------------
The management of the Corporation is not aware of any other matters to
come before the Meeting other than as set forth in the Notice of the Meeting. If
any other matter properly comes before the Meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares represented
thereby in accordance with their best judgement on such matters.
<PAGE>
-11-
By Order of the Board of
LML PAYMENT SYSTEMS INC.
Per: "Patrick H. Gaines"
-------------------
Patrick H. Gaines
President & CEO
<PAGE>
"SCHEDULE A"
RESTATED ARTICLES OF INCORPORATION
----------------------------------
1. Name of the Corporation:
------------------------
LML PAYMENT SYSTEMS INC.
2. The classes and any number of shares that the Corporation is authorized to
--------------------------------------------------------------------------
issue:
------
Common shares
The Corporation is authorized to issue 100,000,000 common shares without
par value, 150,000,000 Class A Preferred Shares with a par value of $1.00
and 150,000,000 Class B Preferred Shares with a par value of $1.00 which
have the following rights and conditions:
The holders of all common shares shall be entitled:
(a) to vote at all meetings of shareholders of the Corporation except
meetings at which only holders of a specified class of shares are entitled
to vote;
(b) To receive, subject to the rights of the holders of another class of
shares, any dividend declared by the Corporation; and
(c) to receive, subject to the rights of the holders of another class of
shares, the remaining property of the Corporation on the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.
Class A Preferred Shares Issuable in Series
The Class A Preferred Shares of the Corporation shall have the rights and
shall be subject to the restrictions, conditions and limitations as
follows:
(a) The Corporation may issue Class A Preferred Shares in one or more
series;
(b) The directors may by resolution authorize Articles of Amendment of the
Corporation fixing the number of shares in, and determining the designation
of the shares of, each series of Class A Preferred Shares;
(c) The directors may by resolution authorize Articles of Amendment of the
Corporation creating, defining and attaching special rights and
restrictions to the shares of each series.
Class B Preferred Shares Issuable in Series
The Class B Preferred Shares of the Corporation shall have the rights and
shall be subject to the restrictions, conditions and limitations as
follows:
<PAGE>
-2-
(a) The Corporation may issue Class B Preferred Shares in one or more
series;
(b) The directors may by resolution authorize Articles of Amendment of the
Corporation fixing the number of shares in, and determining the designation
of shares of, each series of Class B Preferred Shares;
(c) The directors may by resolution authorize articles of Amendment of the
Corporation creating, defining and attaching special rights and
restrictions to the shares of each series.
3. Restrictions, if , any on share transfers:
------------------------------------------
N/A
4. Number (or minimum and maximum) of directors:
--------------------------------------------
Minimum of three and a maximum of fifteen. The number of directors shall be
determined by resolution of the board of directors as set out in the notice
calling the meeting provided that the number of directors may not be less
than the minimum number nor more than the maximum number set out in the
articles.
5. Restrictions, if any, on business the Corporation may carry on:
--------------------------------------------------------------
The Corporation is restricted from carrying on the business of a railway,
steamship, air transport, canal, telegraph, telephone or irrigation
company.
6. Other provisions, if any:
------------------------
(a) Shareholders meetings may be held in Vancouver, B.C, Whitehorse,
Yukon, Dallas, Texas or Phoenix, Arizona
(b) The directors may, between annual meetings, appoint one or more
additional directors of the Corporation, to serve until the next
annual meeting, but the number of additional directors shall not at
any time exceed one-third of the number of directors who held office
at the expiration of the last annual meeting of the Corporation.
The foregoing restated Articles of Incorporation correctly set out without
substantive change the corresponding provisions of the Articles of
Incorporation as amended and supersede the original Articles of
Incorporation.
<PAGE>
PROXY
Annual and Special Meeting of the shareholders of LML PAYMENT SYSTEMS INC, to be
held at the offices of Clark, Wilson, at Suite 800, 885 West Georgia Street,
Vancouver, B.C., V6C 3H1 on Monday, September 18, 2000, at 11:00 o'clock in the
Forenoon
The undersigned Shareholder of the Corporation hereby appoints, PATRICK H.
GAINES, the CEO, President, and a Director of the Corporation, or failing this
person, GREG A. MACRAE, a Director of the Corporation, or in the place of the
foregoing,_________________________ , (Print the Name) as proxyholder for and on
behalf of the Shareholder with the power of substitution to attend, act and vote
for and on behalf of the Shareholder in respect of all matters that may properly
come before the Meeting of the Shareholders of the Corporation and at every
adjournment thereof, to the same extent and with the same powers as if the
undersigned Shareholder were present at the said Meeting, or any adjournment
thereof.
The shareholder hereby directs the proxyholder to vote the securities of the
Corporation registered in the name of the shareholder as specified herein.
The undersigned Shareholder hereby revokes any proxy previously given to attend
and vote at said Meeting.
SIGN HERE: ___________________________________
Please Print Name: ___________________________________
Date: ___________________________________
THIS PROXY MAY NOT BE VALID UNLESS IT IS SIGNED AND DATED. SEE IMPORTANT
INFORMATION & INSTRUCTIONS ON REVERSE.
Resolutions (For full details of each item, please see the enclosed
Notice of Meeting and Information Circular)
For Against
1. To authorize the Directors to fix the remuneration to
be paid to the auditor of the Corporation __ ______
2. To approve an ordinary resolution to amend the
Corporation's 1996 Stock Option Plan to increase the
number of common share purchase options granted or to
be granted thereunder from 2,500,000 common shares to
3,000,000 common shares __ ______
3. To approve an ordinary resolution to amend the
Corporation's 1998 Stock Incentive Plan to increase
the number of common share purchase options granted
or to be granted thereunder from 1,000,000 common
shares to 3,000,000 common shares __ ______
4. To approve a special resolution, to reduce the stated
capital of the common shares of the Corporation by
US$ 22,901,744, and to effect such reducing by
reducing the amount of the Corporation's deficit by
the same amount __ ______
5. To approve a special resolution amending the articles
of the Corporation to permit meetings of shareholders
of the Corporation to be held outside the Yukon at
Dallas, Texas or Phoenix, Arizona, in addition to the
currently permitted Vancouver, B.C. and Whitehorse,
Yukon __ ______
6. To approve a special resolution to restate the
articles of incorporation of the Corporation, as __ ______
amended, including the amendment set forth in item 5 For Withhold
herein
7. Appointment of Auditors __ _____
8. To elect PATRICK H. GAINES as a Director __ _____
9. To elect WENDY J. OGILVIE as a Director __ _____
10. To elect GREG A. MACRAE as a Director __ _____
11. To elect L. WILLIAM SEIDMAN as a Director __ _____
<PAGE>
INSTRUCTIONS FOR COMPLETION OF PROXY
1. This Proxy is solicited by the Management of the Corporation.
2. This form of proxy ("Instrument of Proxy") may not be valid unless it is
-----------------------------
signed by the Shareholder or by his attorney duly authorized by him in
------
writing, or, in the case of a corporation, by a duly authorized officer or
representative of the corporation; and if executed by an attorney, officer,
or other duly appointed representative, the original or a notarial copy of
the instrument so empowering such person, or such other documentation in
support as shall be acceptable to the Chairman of the Meeting, must
accompany the Instrument of Proxy.
3. If this Instrument of Proxy is not dated in the space provided, authority is
----------------------------------------
hereby given by the Shareholder for the proxyholder to date this proxy on
the date on which it is received by Computershare Investor services.
4. A Shareholder who wishes to attend the Meeting and vote on the resolutions
in person, may do so as follows:
(a) If the Shareholder is registered as such on the books of the
Corporation, simply register the Shareholder's attendance with the
scrutineers at the Meeting.
(b) If the securities of a Shareholder are held by a financial institution,
(i) cross off the management appointees' names and insert the
Shareholder's name in the blank space provided; (ii) indicate a voting
choice for each resolution or, alternatively, leave the choices blank
if you wish not to vote until the Meeting; and (iii) sign, date and
return the Instrument of Proxy to the financial institution or its
agent. At the Meeting, a vote will be taken on each of the resolutions
set out on this Instrument of Proxy and the Shareholder's vote will be
counted at that time.
5. A Shareholder who is not able to attend the Meeting in person but wishes to
vote on the resolutions, may do either of the following:
(a) To appoint one of the management appointees named on the Instrument of
Proxy, leave the wording appointing a nominee as is, and simply sign,
date and return the Instrument of Proxy. Where no choice is specified
by a Shareholder with respect to a resolution set out on the Instrument
of Proxy, a management appointee acting as proxyholder will vote the
securities as if the Shareholder had specified an affirmative vote.
(b) To appoint another person, who need not be a Shareholder of the
Corporation, to vote according to the Shareholder's instructions, cross
off the management appointees' names and insert the Shareholder's
appointed proxyholder's name in the space provided, and then sign, date
and return the Instrument of Proxy. Where no choice is specified by the
Shareholder with respect to a resolution set out on the Instrument of
Proxy, this Instrument of Proxy confers discretionary authority upon
the Shareholder's appointed proxyholder.
6. The securities represented by this Instrument of Proxy will be voted or
withheld from voting in accordance with the instructions of the Shareholder
on any poll of a resolution that may be called for and, if the shareholder
specifies a choice with respect to any matter to be acted upon, the
securities will be voted accordingly. Further, if so authorized by this
Instrument of Proxy, the securities will be voted by the appointed
proxyholder with respect to any amendments or variations of any of the
resolutions set out on the Instrument of Proxy or matters which may properly
come before the Meeting as the proxyholder in its sole discretion sees fit.
7. If a registered Shareholder has returned the Instrument of Proxy, the
Shareholder may still attend the Meeting and may vote in person should the
Shareholder later decide to do so. However, to do so, the Shareholder must
record his/her attendance with the scrutineers at the Meeting and revoke the
Instrument of Proxy in writing.
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To be represented at the Meeting, this Instrument of Proxy must be RECEIVED at
the office of "COMPUTERSHARE INVESTOR SERVICES" by mail or by fax
-------------------------------
at least 24 hours prior to the scheduled time of the Meeting, or any
adjournment thereof, or with the Chairman of the Meeting on the day of
the Meeting, or any adjournment thereof.
The mailing address of Computershare Investor Services is Suite 600, 530 - 8th
Avenue, S.W., Calgary, Alberta, T2P 3S8, and its fax number is (403)267.6529
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