Document:

exh10_2.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    

     

    
      	
               Exhibit
      10.2

            

    

     

    THIS
AGREEMENT is entered into this 31st day of
March, 2008, to be effective as at the 24th day of
September, 2007 (the “Effective Date”)

    

    BETWEEN:

    

    LML
Payment Systems Inc., a company incorporated pursuant to the laws of British
Columbia and carrying on business at 1680 - 1140 West Pender Street, Vancouver,
BC V6E 4G1 (the “Company”)

    

    AND:

    

    RICHARD
SCHULZ, of 3950 Blantyre Place, North Vancouver, British Columbia, V7G 2G5 (the
“Executive”)

    

    WHEREAS:

    

    
      	
              A.

            	
              The
      Executive is the Chief Accounting Officer of the
  Company;

            

    

    

    
      	
              B.

            	
              The
      Company recognizes that the Executive’s talents and abilities are unique
      and have been integral to the success of the Company and thus wishes to
      secure the ongoing services of the Executive on the terms and conditions
      set forth herein;

            

    

    

    NOW
THEREFORE, in consideration of the premises and the mutual covenants set forth
below, the parties agree as follows:

    

    
      	
              1.

            	
              EMPLOYMENT
      TERM

            

    

    

    
      	
              1.1

            	
              The
      employment of the Executive shall commence on the Effective Date and shall
      continue until terminated as hereinafter provided (the
      “Term”).

            

    

    

    
      	
              1.2

            	
              Despite
      the provisions of paragraphs 1.1 hereof, either the Executive or the
      Company may terminate the Executive’s employment at any time without
      notice for cause. Cause shall mean any serious, culpable conduct, deemed
      cause under the common law of the Province of British Columbia.
      (“Cause”)

            

    

    

    
      	
              2.

            	
              SERVICES

            

    

    

    
      	
              2.1

            	
              The
      Executive agrees to perform the duties and responsibilities of Chief
      Accounting Officer of the Company. The Executive’s duties will include the
      day-to-day accounting management of the Company, attendance
      at  Board meetings and Board committee meetings, as required,
      and such other incidental duties and responsibilities as may be reasonably
      required by the Company and assigned to the Executive by the Board or
      Chief Executive Officer from time to time (hereinafter collectively
      referred to as the “Services”).

            

    

    

    
      	
              2.2

            	
              The
      Executive shall devote substantially all of his working time, attention
      and energies during normal business hours (other than absences due to
      illness or vacation) to the performance of his duties for the Company.
      Notwithstanding the above, the Executive shall be permitted, to the extent
      that such activities do not substantially interfere with the performance
      of his duties and responsibilities hereunder or violate Sections 12, 13 or
      14 of this Agreement, to

            

    

    

    
      	
               
      

            	
              (a)

            	
              manage
      his personal, financial and legal
affairs,

            

    

    

    
      	
               
      

            	
              (b)

            	
              serve
      on civic or charitable boards or committees (it being expressly understood
      and agreed that the Executive’s continuing to serve on any such board
      and/or committees on which he is serving, or with which he is otherwise
      associated, as of the Effective Date, shall be deemed not to interfere
      with the performance of his duties and responsibilities under this
      Agreement),

            

    

    

    
      	
               
      

            	
              (c)

            	
              serve
      on boards of other companies; and

            

    

    

    
      	
               
      

            	
              (d)

            	
              make
      personal appearances and lectures, and the Executive shall be entitled to
      receive and retain all remuneration received by him from the items listed
      in clauses 2.2(a) through (d) of this
Section.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              3.

            	
              PLACE
      OF PERFORMANCE

            

    

    

    
      	
              3.1

            	
              During
      the Term, the Company shall maintain executive offices for the Executive
      in Vancouver, British Columbia, Canada and the Executive shall not be
      required to relocate to any other location. During the Term, the Company
      shall provide the Executive with an office and staff in the above offices
      consistent with the practices of the Company immediately prior to the
      Effective Date.

            

    

    

    
      	
              4.

            	
              COMPENSATION

            

    

    

    
      	
              4.1

            	
              The
      Company agrees to pay to the Executive a base salary of not less than CDN
      $120,000.00 per year (“Base Salary”). The Base Salary shall be paid in
      approximately equal installments in accordance with the Company’s
      customary payroll practices. If the Company increases the Base Salary,
      such increased Base Salary shall then constitute the Base Salary for all
      purposes of this Agreement.

            

    

    

    
      	
              4.2

            	
              For
      each full fiscal year of the Company that begins and ends during the Term,
      and for the portion of the fiscal year of the Company that begins in 2007
      (“Fiscal Year 2008”), the Executive shall be eligible to earn an annual
      cash bonus (the “Annual Bonus”) of up to fifteen per cent (15%) of the
      Base Salary based on the achievement by the Company of reasonable
      performance goals established by the Compensation Committee for each such
      fiscal year (or portion) which may include targets related to the earnings
      before interest, taxes, depreciation and amortization (“EBITDA”) of the
      Company. The Compensation Committee shall, prior to the execution of this
      Agreement, establish objective criteria to be used to determine the extent
      to which performance goals have been
satisfied.

            

    

    

    
      	
              5.

            	
              BENEFITS

            

    

    

    
      	
              5.1

            	
              During
      the Term, the Executive (and his eligible spouse and dependants) shall be
      entitled to participate in all the welfare benefit plans and programs
      maintained by the Company from time to time for the benefit of its senior
      executives, including, without limitation, all medical, hospitalization,
      dental, disability, accidental death and dismemberment and travel accident
      insurance plans and programs. In addition, during the Term, the Executive
      shall be eligible to participate in all pensions, retirement, savings and
      other employee benefit plans and programs maintained from time to time by
      the Company for the benefit of its senior executives, other than any
      annual cash incentive plan. The policy documents of such benefit plans
      shall determine benefit
entitlement.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              6.

            	
              EXPENSES

            

    

    

    
      	
              6.1

            	
              In
      accordance with the policies formulated by the Company from time to time,
      the Executive shall be reimbursed for all reasonable traveling, business
      and entertainment expenses actually and properly incurred by the Executive
      in connection with the performance of his duties and functions, including,
      without limitation, first class transportation. For all such expenses the
      Executive shall keep proper accounts and shall furnish statements and
      receipts to the Company in a timely
manner.

            

    

    

    
      	
              7.

            	
              AUTOMOBILES

            

    

    

    
      	
              7.1

            	
              The
      Company shall provide the Executive with automobiles consistent with the
      practices of the Company immediately prior to the commencement of the
      Term.

            

    

    

    
      	
              8.

            	
              VACATION

            

    

    

    
      	
              8.1

            	
              The
      Executive shall be entitled to four weeks’
      vacation.  Vacation not taken during the applicable fiscal year
      may be carried over to the next following fiscal
  year.

            

    

    

    
      	
              9.

            	
              STOCK
      OPTIONS

            

    

    

    
      	
              9.1

            	
              The
      Executive shall be entitled to maintain his current stock options and
      shall be entitled to participate in the Company’s stock option plans as
      determined by the Compensation Committee from time to time, and shall be
      entitled to immediately receive 210,000 stock options, pursuant to the
      terms of the Company’s stock option plan, which will provide for the
      vesting of 70,000 stock options per year, with a ten (10) year exercise
      term, and immediate vesting of all stock options upon a  Control
      Change (as defined in paragraph 11.1
below)

            

    

    

    
      	
              10.

            	
              ILLNESS,
      DISABILITY, OR DEATH

            

    

    

    
      	
              10.1

            	
              The
      Executive’s employment hereunder shall terminate upon his
      death.

            

    

    

    
      	
              10.2

            	
              If
      the Executive’s employment is terminated by his death, the Company shall
      provide to the Executive’s beneficiary, legal representatives or estate,
      as the case may be, a lump sum as set out in Section 11.7
      below.

            

    

    

    
      	
              11.

            	
              TERMINATION
      OF EMPLOYMENT

            

    

    

    
      	
              11.1

            	
              In
      this section:

            

    

    

    
      	
               
      

            	
              (a)

            	
              "Control
      Change" means the occurrence of any of the following
    events:

            

    

    

    
      	
              (i)  

            	
              any
      Person acquiring twenty percent (20%) or more of the issued and
      outstanding shares of the Company;
or

            

    

    

    
      	
              (ii)  

            	
              any
      Person making an offer to purchase all or substantially all of the assets
      of the Company,

            

    

    

    
      	
               
      

            	
              provided
      that for the purpose of the foregoing definition, "Person" means a third
      party that is operating at arm's length from the Executive.  For
      greater certainty, "Person" shall not include any person, partnership,
      corporation or other entity with which the Executive is involved directly
      or indirectly as principal, agent, shareholder, officer, employee or in
      any other manner whatsoever.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              11.2

            	
              The
      Executive may terminate his employment for good reason (“Good Reason”)
      after giving the Company detailed written notice thereof, if the Company
      shall have failed to cure the event or circumstance constituting Good
      Reason within 10 business days after receiving such notice. Good Reason
      shall mean the occurrence of any of the following without the written
      consent of the Executive:

            

    

    

    
      	
               
      

            	
              (a)

            	
              a
      Control Change;

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      assignment to the Executive of duties inconsistent with this Agreement or
      a change in his titles or
authority;

            

    

    

    
      	
               
      

            	
              (c)

            	
              any
      failure by the Company to comply with Sections 4, 5, or 9 in a material
      way;

            

    

    

    
      	
               
      

            	
              (d)

            	
              a
      material decrease in the Executive’s Base Salary, Annual Bonus, benefits
      or incentives;

            

    

    

    
      	
               
      

            	
              (e)

            	
              the
      requirement of the Executive to relocate to a location other than that
      provided in Section 3 hereof;

            

    

    

    
      	
               
      

            	
              (f)

            	
              the
      failure of the Company to comply with and satisfy Section 16 of
      this  Agreement; or

            

    

    

    
      	
               
      

            	
              (g)

            	
              any
      material fundamental breach of this Agreement by the
    Company.

            

    

    

    
      	
              11.3

            	
              The
      Executive’s right to terminate his employment for Good Reason shall expire
      if the Executive has not tendered his resignation from the Company for
      Good Reason within 30 business days of his providing written notice
      thereof to the Company.

            

    

    

    
      	
              11.4

            	
              The
      Company may terminate the Executive’s employment at any time for Cause
      without notice or payment in lieu of notice, save and except that Cause
      shall not exist unless and until the Company has delivered to the
      Executive a copy of a resolution duly adopted by a majority of the Board
      (excluding the Executive for purposes of determining such majority) at a
      meeting of the Board called and held for such purpose after reasonable
      notice to the Executive and an opportunity for the Executive, together
      with his counsel, to be heard before the Board, finding that in the good
      faith opinion of the Board that Cause exists, and specifying the
      particulars thereof in detail. This Section 11.4 shall not prevent the
      Executive from challenging in any court of competent jurisdiction the
      Board’s determination that Cause exists or that the Executive has failed
      to cure any act (or failure to act) that purportedly formed the basis for
      the Board’s determination.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              11.5

            	
              The
      Company shall have the right to terminate the Executive’s employment
      hereunder without Cause by providing to the Executive notice of
      termination as set out in Section
11.7.

            

    

    

    
      	
              11.6

            	
              Any
      termination of the Executive’s employment by the Company shall be
      communicated by written notice of termination to the
      Executive.

            

    

    

    
      	
              11.7

            	
              In
      the event that the Executive’s employment terminates during the Term, the
      Company shall provide the Executive with the payments and benefits set
      forth below. The Executive acknowledges and agrees that the payments set
      forth in this Section 11.7 constitute liquidated damages for termination
      of his employment during the Term.

            

    

    

    
      	
               
      

            	
              (a)

            	
              If
      the Executive’s employment is terminated by the Company without Cause, or
      the Executive terminates his employment for Good
  Reason,

            

    

    

    
      	
               
      

            	
              (i)

            	
              the
      Company shall pay to the Executive on or before the date of termination
      (the “Date of Termination”) a lump sum equal
to

            

    

    

    
      	
               
      

            	
              A.

            	
              Base
      Salary and accrued vacation pay through to the Date of Termination;
      plus

            

    

    

    
      	
               
      

            	
              B.

            	
              Two
      (2) years’ current Base Salary plus two (2) times the Executive’s last
      Annual Bonus;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      Company shall, consistent with past practice, reimburse the Executive
      pursuant to Section 6 for business expenses incurred but not paid prior to
      such termination of his employment;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              upon
      the Date of Termination all of the Executive’s granted but unexpired stock
      options shall vest forthwith; and

            

    

    

    
      	
               
      

            	
              (iv)

            	
              the
      Company shall continue the welfare benefit plan and programs described in
      Section 5 above for two (2) years’ following the Date of Termination, or
      until the Executive replaces such plans and programs, whichever is
      earlier.

            

    

    

    
      	
              11.8

            	
              If
      the Executive’s employment is terminated by the Company for Cause or by
      the Executive other than for Good Reason, then the Company shall provide
      the Executive with any compensation earned by the Executive to the Date of
      Termination including any accrued obligations owing to the Executive
      pursuant to the provisions of Sections 4, 5, 6, 8 and 9 hereof and shall
      have no further obligation to the Executive
  hereunder.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              12.

            	
              CONFIDENTIAL
      INFORMATION AND COMPANY PROPERTY

            

    

    

    
      	
              12.1

            	
              For
      purposes of this Agreement, the term “Confidential Information” means all
      of the following materials and information (whether or not reduced to
      writing and whether or not patentable or protectible by copyright) which
      the Executive receives, received access to, conceived or developed, in
      whole or part, directly or indirectly, in connection with his employment
      with the Company or in the course of his employment with the Company (in
      any capacity, whether executive, managerial, planning, technical, sales,
      research, development, manufacturing, engineering or otherwise) or through
      the use of any of the Company’s facilities or
  resources:

            

    

    

    
      	
               
      

            	
              (a)

            	
              business
      plans, strategies, tactics, policies, resolutions, patent applications,
      trademark applications, trade name applications and industrial design
      applications;

            

    

    

    
      	
               
      

            	
              (b)

            	
              litigation,
      negotiations or contractual
arrangements;

            

    

    

    
      	
               
      

            	
              (c)

            	
              financial
      information, including, but not limited to, cost, pricing, performance
      data, debt arrangements, equity structure, interests and
      holdings;

            

    

    

    
      	
               
      

            	
              (d)

            	
              operational
      and scientific information, including, but not limited to, marketing
      research techniques, trade secrets, product specifications, data, data
      base information, know-how, methodologies, formulae, models, compositions,
      processes, improvements, devices, inventions, discoveries, concepts,
      ideas, designs, sketches, photographs, graphs, drawings, notes, samples,
      past, current and planned research and development, systems, structures
      and architectures and related processes (collectively the
      “Works”);

            

    

    

    
      	
               
      

            	
              (e)

            	
              marketing
      information, including, but not limited to, current and planned marketing
      activities, methods and processes, marketing strategies, advertising
      strategies, customer or client lists, current and anticipated customer or
      client requirements, price lists and methodologies, marketing research
      methodologies, market studies, sales and marketing plans and information
      concerning customers, clients or suppliers, and strategies for attracting
      and dealing with customers or clients, including information relevant to
      the design and implementation of marketing plans and advertising
      campaigns;

            

    

    

    
      	
               
      

            	
              (f)

            	
              personnel
      information, including, but not limited to, the names and backgrounds of
      key personnel, personnel lists, résumés, personnel data, including
      information about compensation and benefits, organization structure,
      performance evaluations of personnel of the Company and personnel training
      techniques and materials;

            

    

    

    
      	
               
      

            	
              (g)

            	
              any
      and all information concerning the business and affairs of the Company
      which the Company treats as proprietary and confidential and which is not
      in the public domain;

            

    

    

    
      	
               
      

            	
              (h)

            	
              any
      other information, however documented, of the Employer that is a trade
      secret under any applicable legislation or at common law;
    and

            

    

    

    
      	
               
      

            	
              (i)

            	
              all
      ideas which are derived from or related to the Executive’s access to or
      knowledge of any of the above enumerated materials and
      information.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              12.2

            	
              Failure
      to make any of the Confidential Information as confidential, proprietary
      or protected information does not affect its status as part of the
      Confidential Information under the terms of this
  Agreement.

            

    

    

    
      	
              12.3

            	
              For
      purposes of this Agreement, the information that would otherwise be
      Confidential Information which is or becomes publicly available without
      breach of:

            

    

    

    
      	
               
      

            	
              (a)

            	
              this
      Agreement;

            

    

    

    
      	
               
      

            	
              (b)

            	
              any
      other agreement or instrument to which the Company is a part or a
      beneficiary; or

            

    

    

    
      	
               
      

            	
              (c)

            	
              any
      duty owed to the Company by the Executive or any third
    party;

            

    

    

    
      	
               
      

            	
              (“Available
      Information”)

            

    

    

    
      	
               
      

            	
              is
      not Confidential Information, provided, however, that the Executive
      acknowledges and agrees that if the Executive seeks to disclose, divulge,
      reveal, report, publish, transfer or use, for any purpose, any Available
      Information, the Executive bears the burden of proving that such
      information is Available
Information.

            

    

    

    
      	
              12.4

            	
              For
      purposes of this Agreement, the term “Intellectual Property” means all
      works, trademarks, trademark applications, patents, patent applications,
      copyright materials, trade names, trade name applications, industrial
      designs, and applications to register
designs.

            

    

    

    
      	
              12.5

            	
              The
      Executive acknowledges that as a result of his employment by the Company,
      the Executive may use, acquire or add to Confidential Information or
      Intellectual Property.

            

    

    

    
      	
              12.6

            	
              The
      Executive shall not at any time during or following the Term of the
      Executive’s employment by the Company, directly or indirectly, disclose,
      divulge, reveal, report, publish, transfer or use for any purpose any of
      the Confidential Information, except with the prior written consent of the
      Company, or except if the Executive is acting as an employee of the
      Company solely for the benefit of the Company in connection with the
      Company’s business and in accordance with the Company’s business practices
      and employment policies.

            

    

    

    
      	
              12.7

            	
              Disclosure
      of any Confidential Information is not prohibited if the disclosure is
      directly pursuant to a valid and existing order of a court or other
      governmental body or agency within Canada; provided, however,
      that:

            

    

    

    
      	
               
      

            	
              (a)

            	
              the
      Executive shall first have given prompt notice to the Company of any
      possible or prospective order (or proceedings pursuant to which any order
      may result); and

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      Company shall have been afforded a reasonable opportunity to prevent or
      limit any disclosure.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              12.8

            	
              The
      Executive acknowledges and agrees that all rights, title and interest in
      any Confidential Information or Intellectual Property remains the
      exclusive property of the Company. Accordingly, the Executive specifically
      agrees and acknowledges that he has no interest in the Confidential
      Information or Intellectual Property, notwithstanding the fact that the
      Executive may have created or contributed to the creation of or his name
      is used in association with such Confidential Information or Intellectual
      Property.

            

    

    

    
      	
              13.

            	
              NON-COMPETITION

            

    

    

    
      	
              13.1

            	
              During
      the Term and until the 12 month anniversary of the Date of Termination, if
      the Executive’s employment is terminated by the Company for Cause or the
      Executive terminates employment without Good Reason, the Executive shall
      not engage in or become associated with any business or other endeavour
      that engages in any country in which the Company has significant business
      operations as of the Date of Termination to a significant degree in a
      business that directly competes with all or any substantial part of the
      Company’s business of:

            

    

    

    
      	
               
      

            	
              (a)

            	
              financial
      payment processing specializing in providing end to end cheque processing
      solutions including,

            

    

    

    
      	
               
      

            	
              (b)

            	
              electronic
      cheque conversation (whereby paper cheques are converted into electronic
      transactions at the point of
purchase),

            

    

    

    
      	
               
      

            	
              (c)

            	
              electronic
      cheque re-presentment (whereby returned paper cheques are represented for
      payment electronically),

            

    

    

    
      	
               
      

            	
              (d)

            	
              electronic
      cheque verification, and

            

    

    

    
      	
               
      

            	
              (e)

            	
              cheque
      collection. (collectively “Competitive
  Activity”)

            

    

    

    
      	
              13.2

            	
              A
      Competitive Activity shall not
include:

            

    

    

    
      	
               
      

            	
              (a)

            	
              any
      speaking engagement to the extent that such speaking engagement does not
      promote or endorse a product or service of the
  Business,

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      writing of any book or articles relating to subjects other than Business,
      or

            

    

    

    
      	
               
      

            	
              (c)

            	
              the
      television, video or movie business so long as such business does not
      relate to the Business.

            

    

    

    
      	
              13.3

            	
              The
      Executive shall be considered to have become “associated with a
      Competitive Activity” if he becomes involved as an owner, employee,
      officer, director, independent contractor, agent, partner, advisor or in
      any other capacity calling for the rendition of the Executive’s personal
      services, with any individual, partnership, corporation or other
      organization that is engaged in a Competitive Activity and his involvement
      relates to a significant extent to the Competitive Activity of such
      entity; provided, however, that the Executive shall not be prohibited
      from:

            

    

    

    
      	
               
      

            	
              (a)

            	
              owning
      less than five percent of any publicly traded corporation, whether or not
      such corporation is in competition with the Company,
  or

            

    

    

    
      	
               
      

            	
              (b)

            	
              serving
      as a director of a corporation or other entity the primary business of
      which is not a Competitive
Activity.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              14.

            	
              NON-SOLICITATION

            

    

    

    
      	
              14.1

            	
              During
      the Term, and for 12 months after the Date of Termination if the
      Executive’s employment is terminated by the Company for Cause or the
      Executive terminates employment without Good Reason, the Executive will
      not, directly or indirectly, solicit for employment by other than the
      Company any person (other than any personal secretary or assistant hired
      to work directly for the Executive) employed by the Company or its
      affiliated companies, nor will the Executive, directly or indirectly,
      solicit for employment by other than the Company any person known by the
      Executive (after reasonable inquiry) to be employed at the time by the
      Company or its affiliated
companies.

            

    

    

    
      	
              14.2

            	
              If,
      at any time, the provisions of Sections 13 or 14 shall be determined to be
      invalid or unenforceable by reason of being vague or unreasonable as to
      area, duration or scope of activity, Sections 13 or 14 shall be considered
      divisible and shall become and be immediately amended to only such area,
      duration and scope of activity as shall be determined to be reasonable and
      enforceable by the court or other body having jurisdiction over the
      matter; and the Executive agrees that Sections 13 and 14 as so amended
      shall be valid and binding as though any invalid or unenforceable
      provision had not been included
herein.

            

    

    

    
      	
              15.

            	
              INJUNCTIVE
      RELIEF

            

    

    

    
      	
              15.1

            	
              In
      the event of a breach or threatened breach of Sections 13 or 14, the
      Executive agrees that the Company shall be entitled to injunctive relief
      in a court of appropriate jurisdiction to remedy any such breach or
      threatened breach, the Executive acknowledging that damages would be
      inadequate and insufficient.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              16.

            	
              INDEMNIFICATION

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      Company agrees that if the Executive is made a party or is threatened to
      be made a party to any action, suit or proceeding, whether civil,
      criminal, administrative or investigative (a “Proceeding”), by reason of
      the fact that the Executive is or was a trustee, director or officer of
      the Company or any predecessor of the Company or any of its affiliates or
      is or was serving at the request of the Company, any predecessor of the
      Company, or any of its affiliates as a trustee, director, officer, member,
      employee or agent including, without limitation, service with respect to
      employee benefit plans, whether or not the basis of such proceeding is
      alleged action in an official capacity as a trustee, director, officer,
      member, employee or agent while serving as a trustee, director, officer,
      member, employee or agent, the Executive shall be indemnified and held
      harmless by the Company to the fullest extent authorized by law as the
      same exists or may hereafter be amended against all expenses incurred or
      suffered by the Executive in connection therewith, and such
      indemnification shall continue as to the Executive even if the Executive
      has ceased to be an officer, director, trustee or agent or is no longer
      employed by the Company and shall enure to the benefit of his heirs,
      executors and administrators.

            

    

    

    
      	
               
      

            	
              (b)

            	
              If
      a claim or request under this Section 16 is not paid by the Company or on
      its behalf, within 30 days after a written claim or request has been
      received by the Company, the Executive may at any time thereafter bring
      suit against the Company to recover the unpaid amount of the claim or
      request and if successful in whole or in part, the Executive shall be
      entitled to be paid also the expenses of prosecuting such suit. All
      obligations for indemnification hereunder shall be subject to and paid in
      accordance with the law of British
Columbia.

            

    

    

    
      	
               
      

            	
              (c)

            	
              If
      the Executive is entitled under any provision of this Agreement to
      indemnification by the Company for some or a portion of any claim in this
      Section 16 but not, however, for the total amount thereof, the Company
      shall nevertheless indemnify the Executive for the portion of such claim
      to which the Executive is entitled.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Expenses
      incurred by the Executive in connection with any Proceeding shall be paid
      by the Company in advance upon request of the Executive that the Company
      pay such expenses, but only in the event that the Executive shall have
      delivered in writing to the
Company,

            

    

     

    
      	 	 (i)
      	 an
      undertaking to reimburse the Company for expenses with respect to which
      the Executive is not entitled to indemnification, and
	 	 	 
	
               
      

            	
              (ii)

            	
              a
      statement of his good faith belief that the standard of conduct necessary
      for indemnification by the Company has been
met.

            

    

    

    
      	
               
      

            	
              (e)

            	
              The
      Executive shall give to the Company notice of any claim made against him
      for which indemnification will or could be sought under this Agreement. In
      addition, the Executive shall give the Company such information and
      cooperation as it may reasonably require and as shall be within the
      Executive’s power and at such time and places as are convenient for the
      Executive.

            

    

    

    
      	
               
      

            	
              (f)

            	
              With
      respect to any Proceeding as to which the Executive notifies the Company
      of the commencement thereof:

            

    

    

    
      	
               
      

            	
              (i)

            	
              The
      Company will be entitled to participate therein at its own
      expense;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Except
      as otherwise provided below, to the extent that it may wish, the Company
      will be entitled to assume the defence thereof, with counsel, reasonably
      satisfactory to the Executive, which in the Company’s sole discretion may
      be regular counsel to the Company and may be counsel to other officers and
      directors of the Company or any subsidiary. The Executive also shall have
      the right to employ his own counsel in such action, suit or proceedings if
      he reasonably concludes that failure to do so would involve a conflict of
      interest between the Company and the Executive, and under such
      circumstances the fees and expenses of such counsel shall be at the
      expense of the Company;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              The
      Company shall not be liable to indemnify the Executive under this
      Agreement for any amounts paid in settlement of any action or claim
      affected without its written consent. The Company shall not settle any
      action or claim in any manner which would impose any penalty that would
      not be paid directly or indirectly by the Company or limitation on the
      Executive without the Executive’s written consent. Neither the Company nor
      the Executive will unreasonably withhold or delay their consent to any
      proposed settlement.

            

    

    

    
      	
               
      

            	
              (g)

            	
              The
      right to indemnification and the payment of expenses incurred in defending
      a Proceeding in advance of its final disposition conferred in this Section
      16 shall not be exclusive of any other right which the Executive may have
      or hereafter may acquire under any statute or certificate of incorporation
      or by-laws of the Company or any subsidiary, agreement, vote of
      shareholders or disinterested directors or trustees or
      otherwise.

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              17.

            	
              COMPANY’S
      SUCCESSORS

            

    

    

    
      	
              17.1

            	
              No
      rights or obligations of the Company under this Agreement may be assigned
      or transferred, except that the Company shall require any successor
      (whether direct or indirect, by purchase, merger, consolidation or
      otherwise) to all or substantially all of the business and/or assets of
      the Company to expressly assume and agree to perform this Agreement in the
      same manner and to the same extent that the Company would be required to
      perform it if no such succession had taken place. As used in this
      Agreement, “Company” shall include any successor to its business and/or
      assets (by merger, purchase or otherwise) which executes and delivers the
      agreement provided for in this Section 17, or which otherwise becomes
      bound by all the terms and provisions of this Agreement by operation of
      law.

            

    

    

    
      	
              18.

            	
              EXECUTIVE’S
      SUCCESSORS

            

    

    

    
      	
              18.1

            	
              No
      rights or obligations of the Executive under this Agreement may be
      assigned or transferred by the Executive other than his rights to payments
      or benefits hereunder, which may be transferred by the Executive other
      than his rights to payments or benefits hereunder, which may be
      transferred only by will or the laws of descent and distribution. Upon the
      Executive’s death, this Agreement and all rights of the Executive
      hereunder shall inure to the benefit of and be enforceable by the
      Executive’s beneficiary or beneficiaries, personal or legal
      representatives, or estate, to the extent any such person succeeds to the
      Executive’s interests under this Agreement. If the Executive should die
      following his Date of Termination while any amounts would still be payable
      to him hereunder if he had continued to live, all such amounts unless
      otherwise provided herein shall be paid in accordance with the terms of
      this Agreement to such person or persons so appointed in writing by the
      Executive, or otherwise to his legal representatives or
      estate.

            

    

    

    
      	
              19.

            	
              NOTICE

            

    

    

    
      	
              19.1

            	
              For
      the purposes of this Agreement, notices, demands and all other
      communications provided for in this Agreement shall be in writing and
      shall be deemed to have been duly given when delivered either personally
      or by certified or registered mail, return receipt requested, postage
      prepaid, addressed as follows:

            

    

    

    If to the
Executive:

    

    At his
address most recently filed with the Company.

    

    If to the
Company:

    

    LML
Payment Systems Inc.

    Suite
1680 — 1140 West Pender Street

    Vancouver
BC Canada V6E 4G1

    

    or to
such other address as any party may have furnished to the others in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      	
              20.

            	
              MISCELLANEOUS

            

    

    

    
      	
              20.1

            	
              No
      provisions of this Agreement may be amended, modified, or waived unless
      such amendment or modification is agreed to in writing signed by the
      Executive and by a duly authorized officer of the Company, and such waiver
      is set forth in writing and signed by the party to be charged. No waiver
      by either party hereto at any time of any breach by the other party hereto
      of any condition or provision of this Agreement to be performed by such
      other party shall be deemed a waiver of similar or dissimilar provisions
      or conditions at the same or at any prior or subsequent time. No
      agreements or representations, oral or otherwise, express or implied, with
      respect to the subject matter hereof have been made by either party that
      are not set forth expressly in this agreement. The respective rights and
      obligations of the parties hereunder of this Agreement shall survive the
      Executive’s termination of employment and the termination of this
      Agreement to the extent necessary for the intended preservation of such
      rights and obligations. The validity, interpretation, construction and
      performance of this Agreement shall be governed by the laws of the
      Province of British Columbia.

            

    

    

    
      	
              20.2

            	
              The
      invalidity or unenforceability of any provision or provisions of
      this

            

    

    
      	
               
      

            	
              Agreement
      shall not affect the validity or enforceability of any other provision of
      this Agreement, which shall remain in full force and
    effect.

            

    

    

    
      	
              20.3

            	
              This
      Agreement may be executed in one or more counterparts, each of which shall
      be deemed to be an original but all of which together will constitute one
      and the same instrument.

            

    

    

    
      	
              20.4

            	
              This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of the subject matter contained herein and supersedes all prior
      agreements, promises, covenants, arrangements, communications,
      representations or warranties, whether oral or written, by any officer,
      employee or representative of any party hereto in respect of such subject
      matter including, without limitation. Any prior agreement of the parties
      hereto in respect of the subject matter contained herein is hereby
      terminated and cancelled.

            

    

    

    
      	
              20.5

            	
              All
      payments hereunder shall be subject to any required withholding of taxes
      pursuant to any applicable law or
regulation.

            

    

    

    
      	
              20.6

            	
              The
      section headings in this Agreement are for convenience of reference only,
      and they form no part of this Agreement and shall not affect its
      interpretation.

            

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    IN
WITNESS WHEREOF the parties hereunto have executed this Agreement as of the
31st  day
of March, 2008, to be effective September 24, 2007.

    

    

    

    LML
PAYMENT SYSTEMS INC.

    

    Per:
___________________

    Authorized
Signatory

     

    
       

      
        
          	
                  /s/
      Richard R. Schulz

                
	
                  RICHARD R.
      SCHULZexh10_3.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
               Exhibit
      10.3

            

    

     

    THIS
AGREEMENT is entered into this 31st day of
March, 2008, to be effective as at the 24th day of
September, 2007 (the “Effective Date”)

    

    BETWEEN:

    

    LML
Payment Systems Inc., a company incorporated pursuant to the laws of British
Columbia and carrying on business at 1680 - 1140 West Pender Street, Vancouver,
BC V6E 4G1 (the “Company”)

    

    AND:

    

    CAROLYN
GAINES, of  21018, 11- 200 Burrard Street, Vancouver, BC V6C
3L0

    (the
“Executive”)

    

    WHEREAS:

    

    
      	
              A.

            	
              The
      Executive is the Corporate Secretary of the
  Company;

            

    

    

    
      	
              B.

            	
              The
      Company recognizes that the Executive’s talents and abilities are unique
      and have been integral to the success of the Company and thus wishes to
      secure the ongoing services of the Executive on the terms and conditions
      set forth herein;

            

    

    

    NOW
THEREFORE, in consideration of the premises and the mutual covenants set forth
below, the parties agree as follows:

    

    
      	
              1.

            	
              EMPLOYMENT
      TERM

            

    

    

    
      	
              1.1

            	
              The
      employment of the Executive shall commence on the Effective Date and shall
      continue until terminated as hereinafter provided (the
      “Term”).

            

    

    

    
      	
              1.2

            	
              Despite
      the provisions of paragraphs 1.1 hereof, either the Executive or the
      Company may terminate the Executive’s employment at any time without
      notice for cause. Cause shall mean any serious, culpable conduct, deemed
      cause under the common law of the Province of British Columbia.
      (“Cause”)

            

    

    

    
      	
              2.

            	
              SERVICES

            

    

    

    
      	
              2.1

            	
              The
      Executive agrees to perform the duties and responsibilities of Corporate
      Secretary of the Company. The Executive’s duties will include the
      day-to-day management of the Company, attendance at all Board meetings and
      Board committee meetings, and such other incidental duties and
      responsibilities as may be reasonably required by the Company and assigned
      to the Executive by the Board from time to time (hereinafter collectively
      referred to as the “Services”).

            

    

    

    
      	
              2.2

            	
              The
      Executive shall devote substantially all of her working time, attention
      and energies during normal business hours (other than absences due to
      illness or vacation) to the performance of her duties for the Company.
      Notwithstanding the above, the Executive shall be permitted, to the extent
      that such activities do not substantially interfere with the performance
      of her duties and responsibilities hereunder or violate Sections 12, 13 or
      14 of this Agreement, to

            

    

    

    
      	
               
      

            	
              (a)

            	
              manage
      her personal, financial and legal
affairs,

            

    

    

    
      	
               
      

            	
              (b)

            	
              serve
      on civic or charitable boards or committees (it being expressly understood
      and agreed that the Executive’s continuing to serve on any such board
      and/or committees on which she is serving, or with which she is otherwise
      associated, as of the Effective Date, shall be deemed not to interfere
      with the performance of her duties and responsibilities under this
      Agreement),

            

    

    

    
      	
               
      

            	
              (c)

            	
              serve
      on boards of other companies; and

            

    

    

    
      	
               
      

            	
              (d)

            	
              make
      personal appearances and lectures, and the Executive shall be entitled to
      receive and retain all remuneration received by her from the items listed
      in clauses 2.2(a) through (d) of this
Section.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              3.

            	
              PLACE
      OF PERFORMANCE

            

    

    

    
      	
              3.1

            	
              During
      the Term, the Company shall maintain executive offices for the Executive
      in Vancouver, British Columbia, Canada and the Executive shall not be
      required to relocate to any other location. During the Term, the Company
      shall provide the Executive with an office and staff in the above offices
      consistent with the practices of the Company immediately prior to the
      Effective Date.

            

    

    

    
      	
              4.

            	
              COMPENSATION

            

    

    

    
      	
              4.1

            	
              The
      Company agrees to pay to the Executive a base salary of not less than CDN
      $71,000.00 per year (“Base Salary”). The Base Salary shall be paid in
      approximately equal installments in accordance with the Company’s
      customary payroll practices. If the Company increases the Base Salary,
      such increased Base Salary shall then constitute the Base Salary for all
      purposes of this Agreement.

            

    

    

    
      	
              5.

            	
              BENEFITS

            

    

    

    
      	
              5.1

            	
              During
      the Term, the Executive (and her eligible spouse and dependants) shall be
      entitled to participate in all the welfare benefit plans and programs
      maintained by the Company from time to time for the benefit of its senior
      executives, including, without limitation, all medical, hospitalization,
      dental, disability, accidental death and dismemberment and travel accident
      insurance plans and programs. In addition, during the Term, the Executive
      shall be eligible to participate in all pensions, retirement, savings and
      other employee benefit plans and programs maintained from time to time by
      the Company for the benefit of its senior executives, other than any
      annual cash incentive plan. The policy documents of such benefit plans
      shall determine benefit
entitlement.

            

    

    

    
      	
              6.

            	
              EXPENSES

            

    

    

    
      	
              6.1

            	
              In
      accordance with the policies formulated by the Company from time to time,
      the Executive shall be reimbursed for all reasonable traveling, business
      and entertainment expenses actually and properly incurred by the Executive
      in connection with the performance of her duties and functions, including,
      without limitation, first class transportation. For all such expenses the
      Executive shall keep proper accounts and shall furnish statements and
      receipts to the Company in a timely
manner.

            

    

    

    
      	
              7.

            	
              AUTOMOBILES

            

    

    

    
      	
              7.1

            	
              The
      Company shall provide the Executive with automobiles consistent with the
      practices of the Company immediately prior to the commencement of the
      Term.

            

    

    

    
      	
              8.

            	
              VACATION

            

    

    

    
      	
              8.1

            	
              The
      Executive shall be entitled to six weeks’ vacation.  Vacation
      not taken during the applicable fiscal year may be carried over to the
      next following fiscal year.

            

    

    

    
      	
              9.

            	
              STOCK
      OPTIONS

            

    

    

    
      	
              9.1

            	
              The
      Executive shall be entitled to maintain her current stock options and
      shall be entitled to participate in the Company’s stock option plans as
      determined by the Compensation Committee from time to time, and shall be
      entitled to immediately receive 210,000 stock options, pursuant to the
      terms of the Company’s stock option plan, which will provide for the
      vesting of 70,000 stock options per year, with a ten (10) year exercise
      term, and immediate vesting of all stock options upon a Control Change (as
      defined in paragraph 11.1
below)

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              10.

            	
              ILLNESS,
      DISABILITY, OR DEATH

            

    

    

    
      	
              10.1

            	
              The
      Executive’s employment hereunder shall terminate upon her
      death.

            

    

    

    
      	
              10.2

            	
              If
      the Executive’s employment is terminated by her death, the Company shall
      provide to the Executive’s beneficiary, legal representatives or estate,
      as the case may be, a lump sum as set out in Section 11.7
      below.

            

    

    

    
      	
              11.

            	
              TERMINATION
      OF EMPLOYMENT

            

    

    

    
      	
              11.1

            	
              In
      this section:

            

    

    

    
      	
               
      

            	
              (a)

            	
              "Control
      Change" means the occurrence of any of the following
    events:

            

    

    

    
      	
              (i)  

            	
              any
      Person acquiring twenty percent (20%) or more of the issued and
      outstanding shares of the Company;
or

            

    

    

    
      	
              (ii)  

            	
              any
      Person making an offer to purchase all or substantially all of the assets
      of the Company,

            

    

    

    provided
that for the purpose of the foregoing definition, "Person" means a third party
that is operating at arm's length from the Executive.  For greater
certainty, "Person" shall not include any person, partnership, corporation or
other entity with which the Executive is involved directly or indirectly as
principal, agent, shareholder, officer, employee or in any other manner
whatsoever.

    

    
      	
              11.2

            	
              The
      Executive may terminate her employment for good reason (“Good Reason”)
      after giving the Company detailed written notice thereof, if the Company
      shall have failed to cure the event or circumstance constituting Good
      Reason within 10 business days after receiving such notice. Good Reason
      shall mean the occurrence of any of the following without the written
      consent of the Executive:

            

    

    

    
      	
               
      

            	
              (a)

            	
              a
      Control Change;

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      assignment to the Executive of duties inconsistent with this Agreement or
      a change in her titles or
authority;

            

    

    

    
      	
               
      

            	
              (c)

            	
              any
      failure by the Company to comply with Sections 4, 5, or 9 in a material
      way;

            

    

    

    
      	
               
      

            	
              (d)

            	
              a
      material decrease in the Executive’s Base Salary, Annual Bonus, benefits
      or incentives;

            

    

    

    
      	
               
      

            	
              (e)

            	
              the
      requirement of the Executive to relocate to a location other than that
      provided in Section 3 hereof;

            

    

    

    
      	
               
      

            	
              (f)

            	
              the
      failure of the Company to comply with and satisfy Section 16 of
      this  Agreement; or

            

    

    

    
      	
               
      

            	
              (g)

            	
              any
      material fundamental breach of this Agreement by the
    Company.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              11.3

            	
              The
      Executive’s right to terminate her employment for Good Reason shall expire
      if the Executive has not tendered her resignation from the Company for
      Good Reason within 30 business days of her providing written notice
      thereof to the Company.

            

    

    

    
      	
              11.4

            	
              The
      Company may terminate the Executive’s employment at any time for Cause
      without notice or payment in lieu of notice, save and except that Cause
      shall not exist unless and until the Company has delivered to the
      Executive a copy of a resolution duly adopted by a majority of the Board
      (excluding the Executive for purposes of determining such majority) at a
      meeting of the Board called and held for such purpose after reasonable
      notice to the Executive and an opportunity for the Executive, together
      with her counsel, to be heard before the Board, finding that in the good
      faith opinion of the Board that Cause exists, and specifying the
      particulars thereof in detail. This Section 11.4 shall not prevent the
      Executive from challenging in any court of competent jurisdiction the
      Board’s determination that Cause exists or that the Executive has failed
      to cure any act (or failure to act) that purportedly formed the basis for
      the Board’s determination.

            

    

    

    
      	
              11.5

            	
              The
      Company shall have the right to terminate the Executive’s employment
      hereunder without Cause by providing to the Executive notice of
      termination as set out in Section
11.7.

            

    

    

    
      	
              11.6

            	
              Any
      termination of the Executive’s employment by the Company shall be
      communicated by written notice of termination to the
      Executive.

            

    

    

    
      	
              11.7

            	
              In
      the event that the Executive’s employment terminates during the Term, the
      Company shall provide the Executive with the payments and benefits set
      forth below. The Executive acknowledges and agrees that the payments set
      forth in this Section 11.7 constitute liquidated damages for termination
      of her employment during the Term.

            

    

    

    
      	
               
      

            	
              (a)

            	
              If
      the Executive’s employment is terminated by the Company without Cause, or
      the Executive terminates her employment for Good
  Reason,

            

    

    

    
      	
               
      

            	
              (i)

            	
              the
      Company shall pay to the Executive on or before the date of termination
      (the “Date of Termination”) a lump sum equal
to

            

    

    

    
      	
               
      

            	
              A.

            	
              Base
      Salary and accrued vacation pay through to the Date of Termination;
      plus

            

    

    

    
      	
               
      

            	
              B.

            	
              Two
      (2) years’ current Base Salary;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      Company shall, consistent with past practice, reimburse the Executive
      pursuant to Section 6 for business expenses incurred but not paid prior to
      such termination of her employment;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              upon
      the Date of Termination all of the Executive’s granted but unexpired stock
      options shall vest forthwith; and

            

    

    

    
      	
               
      

            	
              (iv)

            	
              the
      Company shall continue the welfare benefit plan and programs described in
      Section 5 above for two (2) years’ following the Date of Termination, or
      until the Executive replaces such plans and programs, whichever is
      earlier.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              11.8

            	
              If
      the Executive’s employment is terminated by the Company for Cause or by
      the Executive other than for Good Reason, then the Company shall provide
      the Executive with any compensation earned by the Executive to the Date of
      Termination including any accrued obligations owing to the Executive
      pursuant to the provisions of Sections 4, 5, 6, 8 and 9 hereof and shall
      have no further obligation to the Executive
  hereunder.

            

    

    

    
      	
              12.

            	
              CONFIDENTIAL
      INFORMATION AND COMPANY PROPERTY

            

    

    

    
      	
              12.1

            	
              For
      purposes of this Agreement, the term “Confidential Information” means all
      of the following materials and information (whether or not reduced to
      writing and whether or not patentable or protectible by copyright) which
      the Executive receives, received access to, conceived or developed, in
      whole or part, directly or indirectly, in connection with her employment
      with the Company or in the course of her employment with the Company (in
      any capacity, whether executive, managerial, planning, technical, sales,
      research, development, manufacturing, engineering or otherwise) or through
      the use of any of the Company’s facilities or
  resources:

            

    

    

    
      	
               
      

            	
              (a)

            	
              business
      plans, strategies, tactics, policies, resolutions, patent applications,
      trademark applications, trade name applications and industrial design
      applications;

            

    

    

    
      	
               
      

            	
              (b)

            	
              litigation,
      negotiations or contractual
arrangements;

            

    

    

    
      	
               
      

            	
              (c)

            	
              financial
      information, including, but not limited to, cost, pricing, performance
      data, debt arrangements, equity structure, interests and
      holdings;

            

    

    

    
      	
               
      

            	
              (d)

            	
              operational
      and scientific information, including, but not limited to, marketing
      research techniques, trade secrets, product specifications, data, data
      base information, know-how, methodologies, formulae, models, compositions,
      processes, improvements, devices, inventions, discoveries, concepts,
      ideas, designs, sketches, photographs, graphs, drawings, notes, samples,
      past, current and planned research and development, systems, structures
      and architectures and related processes (collectively the
      “Works”);

            

    

    

    
      	
               
      

            	
              (e)

            	
              marketing
      information, including, but not limited to, current and planned marketing
      activities, methods and processes, marketing strategies, advertising
      strategies, customer or client lists, current and anticipated customer or
      client requirements, price lists and methodologies, marketing research
      methodologies, market studies, sales and marketing plans and information
      concerning customers, clients or suppliers, and strategies for attracting
      and dealing with customers or clients, including information relevant to
      the design and implementation of marketing plans and advertising
      campaigns;

            

    

    

    
      	
               
      

            	
              (f)

            	
              personnel
      information, including, but not limited to, the names and backgrounds of
      key personnel, personnel lists, résumés, personnel data, including
      information about compensation and benefits, organization structure,
      performance evaluations of personnel of the Company and personnel training
      techniques and materials;

            

    

    

    
      	
               
      

            	
              (g)

            	
              any
      and all information concerning the business and affairs of the Company
      which the Company treats as proprietary and confidential and which is not
      in the public domain;

            

    

    

    
      	
               
      

            	
              (h)

            	
              any
      other information, however documented, of the Employer that is a trade
      secret under any applicable legislation or at common law;
    and

            

    

    

    
      	
               
      

            	
              (i)

            	
              all
      ideas which are derived from or related to the Executive’s access to or
      knowledge of any of the above enumerated materials and
      information.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              12.2

            	
              Failure
      to make any of the Confidential Information as confidential, proprietary
      or protected information does not affect its status as part of the
      Confidential Information under the terms of this
  Agreement.

            

    

    

    
      	
              12.3

            	
              For
      purposes of this Agreement, the information that would otherwise be
      Confidential Information which is or becomes publicly available without
      breach of:

            

    

    

    
      	
               
      

            	
              (a)

            	
              this
      Agreement;

            

    

    

    
      	
               
      

            	
              (b)

            	
              any
      other agreement or instrument to which the Company is a part or a
      beneficiary; or

            

    

    

    
      	
               
      

            	
              (c)

            	
              any
      duty owed to the Company by the Executive or any third
    party;

            

    

    

    
      	
               
      

            	
              (“Available
      Information”)

            

    

    

    
      	
               
      

            	
              is
      not Confidential Information, provided, however, that the Executive
      acknowledges and agrees that if the Executive seeks to disclose, divulge,
      reveal, report, publish, transfer or use, for any purpose, any Available
      Information, the Executive bears the burden of proving that such
      information is Available
Information.

            

    

    

    
      	
              12.4

            	
              For
      purposes of this Agreement, the term “Intellectual Property” means all
      works, trademarks, trademark applications, patents, patent applications,
      copyright materials, trade names, trade name applications, industrial
      designs, and applications to register
designs.

            

    

    

    
      	
              12.5

            	
              The
      Executive acknowledges that as a result of her employment by the Company,
      the Executive may use, acquire or add to Confidential Information or
      Intellectual Property.

            

    

    

    
      	
              12.6

            	
              The
      Executive shall not at any time during or following the Term of the
      Executive’s employment by the Company, directly or indirectly, disclose,
      divulge, reveal, report, publish, transfer or use for any purpose any of
      the Confidential Information, except with the prior written consent of the
      Company, or except if the Executive is acting as an employee of the
      Company solely for the benefit of the Company in connection with the
      Company’s business and in accordance with the Company’s business practices
      and employment policies.

            

    

    

    
      	
              12.7

            	
              Disclosure
      of any Confidential Information is not prohibited if the disclosure is
      directly pursuant to a valid and existing order of a court or other
      governmental body or agency within Canada; provided, however,
      that:

            

    

    

    
      	
               
      

            	
              (a)

            	
              the
      Executive shall first have given prompt notice to the Company of any
      possible or prospective order (or proceedings pursuant to which any order
      may result); and

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      Company shall have been afforded a reasonable opportunity to prevent or
      limit any disclosure.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              12.8

            	
              The
      Executive acknowledges and agrees that all rights, title and interest in
      any Confidential Information or Intellectual Property remains the
      exclusive property of the Company. Accordingly, the Executive specifically
      agrees and acknowledges that he has no interest in the Confidential
      Information or Intellectual Property, notwithstanding the fact that the
      Executive may have created or contributed to the creation of or her name
      is used in association with such Confidential Information or Intellectual
      Property.

            

    

    

    
      	
              13.

            	
              NON-COMPETITION

            

    

    

    
      	
              13.1

            	
              During
      the Term and until the 12 month anniversary of the Date of Termination, if
      the Executive’s employment is terminated by the Company for Cause or the
      Executive terminates employment without Good Reason, the Executive shall
      not engage in or become associated with any business or other endeavour
      that engages in any country in which the Company has significant business
      operations as of the Date of Termination to a significant degree in a
      business that directly competes with all or any substantial part of the
      Company’s business of:

            

    

    

    
      	
               
      

            	
              (a)

            	
              financial
      payment processing specializing in providing end to end cheque processing
      solutions including,

            

    

    

    
      	
               
      

            	
              (b)

            	
              electronic
      cheque conversation (whereby paper cheques are converted into electronic
      transactions at the point of
purchase),

            

    

    

    
      	
               
      

            	
              (c)

            	
              electronic
      cheque re-presentment (whereby returned paper cheques are represented for
      payment electronically),

            

    

    

    
      	
               
      

            	
              (d)

            	
              electronic
      cheque verification, and

            

    

    

    
      	
               
      

            	
              (e)

            	
              cheque
      collection. (collectively “Competitive
  Activity”)

            

    

    

    
      	
              13.2

            	
              A
      Competitive Activity shall not
include:

            

    

    

    
      	
               
      

            	
              (a)

            	
              any
      speaking engagement to the extent that such speaking engagement does not
      promote or endorse a product or service of the
  Business,

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      writing of any book or articles relating to subjects other than Business,
      or

            

    

    

    
      	
               
      

            	
              (c)

            	
              the
      television, video or movie business so long as such business does not
      relate to the Business.

            

    

    

    
      	
              13.3

            	
              The
      Executive shall be considered to have become “associated with a
      Competitive Activity” if she becomes involved as an owner, employee,
      officer, director, independent contractor, agent, partner, advisor or in
      any other capacity calling for the rendition of the Executive’s personal
      services, with any individual, partnership, corporation or other
      organization that is engaged in a Competitive Activity and her involvement
      relates to a significant extent to the Competitive Activity of such
      entity; provided, however, that the Executive shall not be prohibited
      from:

            

    

    

    
      	
               
      

            	
              (a)

            	
              owning
      less than five percent of any publicly traded corporation, whether or not
      such corporation is in competition with the Company,
  or

            

    

    

    
      	
               
      

            	
              (b)

            	
              serving
      as a director of a corporation or other entity the primary business of
      which is not a Competitive
Activity.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              14.

            	
              NON-SOLICITATION

            

    

    

    
      	
              14.1

            	
              During
      the Term, and for 12 months after the Date of Termination if the
      Executive’s employment is terminated by the Company for Cause or the
      Executive terminates employment without good reason, the Executive will
      not, directly or indirectly, solicit for employment by other than the
      Company any person (other than any personal secretary or assistant hired
      to work directly for the Executive) employed by the Company or its
      affiliated companies, nor will the Executive, directly or indirectly,
      solicit for employment by other than the Company any person known by the
      Executive (after reasonable inquiry) to be employed at the time by the
      Company or its affiliated
companies.

            

    

    

    
      	
              14.2

            	
              If,
      at any time, the provisions of Sections 13 or 14 shall be determined to be
      invalid or unenforceable by reason of being vague or unreasonable as to
      area, duration or scope of activity, Sections 13 or 14 shall be considered
      divisible and shall become and be immediately amended to only such area,
      duration and scope of activity as shall be determined to be reasonable and
      enforceable by the court or other body having jurisdiction over the
      matter; and the Executive agrees that Sections 13 and 14 as so amended
      shall be valid and binding as though any invalid or unenforceable
      provision had not been included
herein.

            

    

    

    
      	
              15.

            	
              INJUNCTIVE
      RELIEF

            

    

    

    
      	
              15.1

            	
              In
      the event of a breach or threatened breach of Sections 13 or 14, the
      Executive agrees that the Company shall be entitled to injunctive relief
      in a court of appropriate jurisdiction to remedy any such breach or
      threatened breach, the Executive acknowledging that damages would be
      inadequate and insufficient.

            

    

    

    
      	
              16.

            	
              INDEMNIFICATION

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      Company agrees that if the Executive is made a party or is threatened to
      be made a party to any action, suit or proceeding, whether civil,
      criminal, administrative or investigative (a “Proceeding”), by reason of
      the fact that the Executive is or was a trustee, director or officer of
      the Company or any predecessor of the Company or any of its affiliates or
      is or was serving at the request of the Company, any predecessor of the
      Company, or any of its affiliates as a trustee, director, officer, member,
      employee or agent including, without limitation, service with respect to
      employee benefit plans, whether or not the basis of such proceeding is
      alleged action in an official capacity as a trustee, director, officer,
      member, employee or agent while serving as a trustee, director, officer,
      member, employee or agent, the Executive shall be indemnified and held
      harmless by the Company to the fullest extent authorized by law as the
      same exists or may hereafter be amended against all expenses incurred or
      suffered by the Executive in connection therewith, and such
      indemnification shall continue as to the Executive even if the Executive
      has ceased to be an officer, director, trustee or agent or is no longer
      employed by the Company and shall enure to the benefit of her hefts,
      executors and administrators.

            

    

    

    
      	
               
      

            	
              (b)

            	
              If
      a claim or request under this Section 16 is not paid by the Company or on
      its behalf, within 30 days after a written claim or request has been
      received by the Company, the Executive may at any time thereafter bring
      suit against the Company to recover the unpaid amount of the claim or
      request and if successful in whole or in part, the Executive shall be
      entitled to be paid also the expenses of prosecuting such suit. All
      obligations for indemnification hereunder shall be subject to and paid in
      accordance with the law of British
Columbia.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (c)

            	
              If
      the Executive is entitled under any provision of this Agreement to
      indemnification by the Company for some or a portion of any claim in this
      Section 16 but not, however, for the total amount thereof, the Company
      shall nevertheless indemnify the Executive for the portion of such claim
      to which the Executive is entitled.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Expenses
      incurred by the Executive in connection with any Proceeding shall be paid
      by the Company in advance upon request of the Executive that the Company
      pay such expenses, but only in the event that the Executive shall have
      delivered in writing to the
Company,

            

    

    

    
      	
               
      

            	
              (i)

            	
              an
      undertaking to reimburse the Company for expenses with respect to which
      the Executive is not entitled to indemnification,
  and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              a
      statement of her good faith belief that the standard of conduct necessary
      for indemnification by the Company has been
met.

            

    

    

    
      	
               
      

            	
              (e)

            	
              The
      Executive shall give to the Company notice of any claim made against him
      for which indemnification will or could be sought under this Agreement. In
      addition, the Executive shall give the Company such information and
      cooperation as it may reasonably require and as shall be within the
      Executive’s power and at such time and places as are convenient for the
      Executive.

            

    

    

    
      	
               
      

            	
              (f)

            	
              With
      respect to any Proceeding as to which the Executive notifies the Company
      of the commencement thereof:

            

    

    

    
      	
               
      

            	
              (i)

            	
              The
      Company will be entitled to participate therein at its own
      expense;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Except
      as otherwise provided below, to the extent that it may wish, the Company
      will be entitled to assume the defence thereof, with counsel, reasonably
      satisfactory to the Executive, which in the Company’s sole discretion may
      be regular counsel to the Company and may be counsel to other officers and
      directors of the Company or any subsidiary. The Executive also shall have
      the right to employ her own counsel in such action, suit or proceedings if
      he reasonably concludes that failure to do so would involve a conflict of
      interest between the Company and the Executive, and under such
      circumstances the fees and expenses of such counsel shall be at the
      expense of the Company;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              The
      Company shall not be liable to indemnify the Executive under this
      Agreement for any amounts paid in settlement of any action or claim
      affected without its written consent. The Company shall not settle any
      action or claim in any manner which would impose any penalty that would
      not be paid directly or indirectly by the Company or limitation on the
      Executive without the Executive’s written consent. Neither the Company nor
      the Executive will unreasonably withhold or delay their consent to any
      proposed settlement.

            

    

    

    
      	
               
      

            	
              (g)

            	
              The
      right to indemnification and the payment of expenses incurred in defending
      a Proceeding in advance of its final disposition conferred in this Section
      16 shall not be exclusive of any other right which the Executive may have
      or hereafter may acquire under any statute or certificate of incorporation
      or by-laws of the Company or any subsidiary, agreement, vote of
      shareholders or disinterested directors or trustees or
      otherwise.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              17.

            	
              COMPANY’S
      SUCCESSORS

            

    

    

    
      	
              17.1

            	
              No
      rights or obligations of the Company under this Agreement may be assigned
      or transferred, except that the Company shall require any successor
      (whether direct or indirect, by purchase, merger, consolidation or
      otherwise) to all or substantially all of the business and/or assets of
      the Company to expressly assume and agree to perform this Agreement in the
      same manner and to the same extent that the Company would be required to
      perform it if no such succession had taken place. As used in this
      Agreement, “Company” shall include any successor to its business and/or
      assets (by merger, purchase or otherwise) which executes and delivers the
      agreement provided for in this Section 17, or which otherwise becomes
      bound by all the terms and provisions of this Agreement by operation of
      law.

            

    

    

    
      	
              18.

            	
              EXECUTIVE’S
      SUCCESSORS

            

    

    

    
      	
              18.1

            	
              No
      rights or obligations of the Executive under this Agreement may be
      assigned or transferred by the Executive other than her rights to payments
      or benefits hereunder, which may be transferred by the Executive other
      than her rights to payments or benefits hereunder, which may be
      transferred only by will or the laws of descent and distribution. Upon the
      Executive’s death, this Agreement and all rights of the Executive
      hereunder shall inure to the benefit of and be enforceable by the
      Executive’s beneficiary or beneficiaries, personal or legal
      representatives, or estate, to the extent any such person succeeds to the
      Executive’s interests under this Agreement. If the Executive should die
      following her Date of Termination while any amounts would still be payable
      to her hereunder if she had continued to live, all such amounts unless
      otherwise provided herein shall be paid in accordance with the terms of
      this Agreement to such person or persons so appointed in writing by the
      Executive, or otherwise to her legal representatives or
      estate.

            

    

    

    
      	
              19.

            	
              NOTICE

            

    

    

    
      	
              19.1

            	
              For
      the purposes of this Agreement, notices, demands and all other
      communications provided for in this Agreement shall be in writing and
      shall be deemed to have been duly given when delivered either personally
      or by certified or registered mail, return receipt requested, postage
      prepaid, addressed as follows:

            

    

    

    If to the
Executive:

    

    At her
address most recently filed with the Company.

    

    If to the
Company:

    

    LML
Payment Systems Inc.

    Suite
1680 — 1140 West Pender Street

    Vancouver
BC Canada V6E 4G1

    

    or to
such other address as any party may have furnished to the others in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              20.

            	
              MISCELLANEOUS

            

    

    

    
      	
              20.1

            	
              No
      provisions of this Agreement may be amended, modified, or waived unless
      such amendment or modification is agreed to in writing signed by the
      Executive and by a duly authorized officer of the Company, and such waiver
      is set forth in writing and signed by the party to be charged. No waiver
      by either party hereto at any time of any breach by the other party hereto
      of any condition or provision of this Agreement to be performed by such
      other party shall be deemed a waiver of similar or dissimilar provisions
      or conditions at the same or at any prior or subsequent time. No
      agreements or representations, oral or otherwise, express or implied, with
      respect to the subject matter hereof have been made by either party that
      are not set forth expressly in this agreement. The respective rights and
      obligations of the parties hereunder of this Agreement shall survive the
      Executive’s termination of employment and the termination of this
      Agreement to the extent necessary for the intended preservation of such
      rights and obligations. The validity, interpretation, construction and
      performance of this Agreement shall be governed by the laws of the
      Province of British Columbia.

            

    

    

    
      	
              20.2

            	
              The
      invalidity or unenforceability of any provision or provisions of this
      Agreement shall not affect the validity or enforceability of any other
      provision of this Agreement, which shall remain in full force and
      effect.

            

    

    

    
      	
              20.3

            	
              This
      Agreement may be executed in one or more counterparts, each of which shall
      be deemed to be an original but all of which together will constitute one
      and the same instrument.

            

    

    

    
      	
              20.4

            	
              This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of the subject matter contained herein and supersedes all prior
      agreements, promises, covenants, arrangements, communications,
      representations or warranties, whether oral or written, by any officer,
      employee or representative of any party hereto in respect of such subject
      matter including, without limitation. Any prior agreement of the parties
      hereto in respect of the subject matter contained herein is hereby
      terminated and cancelled.

            

    

    

    
      	
              20.5

            	
              All
      payments hereunder shall be subject to any required withholding of taxes
      pursuant to any applicable law or
regulation.

            

    

    

    
      	
              20.6

            	
              The
      section headings in this Agreement are for convenience of reference only,
      and they form no part of this Agreement and shall not affect its
      interpretation.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    IN
WITNESS WHEREOF the parties hereunto have entered into this Agreement
as

    of the
31st
day of March, 2008, to be effective September 24, 2007.

    

    

    LML
PAYMENT SYSTEMS INC.

    

    Per:
___________________

    

    Authorized
Signatory

    

    
       

      
        
          	
                  /s/
      Carolyn L. Gaines

                
	
                  CAROLYN L.
      GAINES

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