Exhibit 10.41

 

 

 

 

 

WARRANT AGREEMENT

 

 

among

 

 

UNIVERSITY FANCARDS LLC

 

AND

 

 

PAYMENT DATA SYSTEMS, INC.

 

 

 

 

 

Dated as of August 21, 2018

 

 

 

 

 

 

 

 

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WARRANT AGREEMENT

 

 

THIS WARRANT AGREEMENT (this “Warrant Agreement”) is made and entered into as of
July 31, 2018 (the “Effective Date”) by and among Payment Data Systems, Inc., a
Nevada corporation (“Payment Data”), and University Fancards, LLC, a Delaware
limited liability company (“Fancards”). Payment Data and Fancards are referred
to in this Warrant Agreement collectively as the “Parties” and singularly as a
"Party."

 

Preamble

Payment Data and Fancards have entered into a Prepaid Card Marketing and
Processing Agreement, dated as of August 21, 2018 (the “Prepaid Agreement”). As
consideration between the Parties for entering into the Prepaid Agreement, the
Parties hereby enter into this Warrant Agreement, providing, among other things,
that Fancards shall be entitled to receive warrants to acquire shares ("Shares")
of common stock of Payment Data, $0.001 par value (the “Common Stock”), pursuant
to the terms and conditions provided herein (all such warrants being referred to
herein as the “Warrants”).

 

This Warrant Agreement sets forth the agreement of the Parties with respect to
the Warrants.

 

NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:

 

ARTICLE 1

 

WARRANTS

 

1.1.     Issuance of Warrants.

 

(a)     Warrant. In consideration of Fancards entering into the Prepaid
Agreement and issuing cards under this Prepaid Agreement, on the date that the
first financial transaction is processed on a card account issued under the
Prepaid Agreement (the “Issue Date”), Payment Data will issue to Fancards a
Warrant representing the right to acquire 150,000 Shares at a strike price
("Strike Price") as determined in Section 1.3 below, subject to the vesting
provision in Section 1.2 below, and will deliver to Fancards a Warrant
Certificate representing such Warrant. The form of certificate representing the
Warrant (the “Warrant Certificate”) is attached hereto as Exhibit A.

 

(b) The Warrants will vest as described below in Section 1.2 and will be
exercisable once vested and ending five (5) years after the Issue Date;
provided, however, that Payment Data shall have the right to cause Fancards to
purchase the Shares underlying the Warrants (the "Call") on the terms and
conditions specified in Section 3.3 of this Warrant Agreement.

 

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1.2.     Vesting.

 

(a)      The Warrants will vest as follows:

 

(i)      Warrants to purchase 30,000 Shares vest immediately on the Issue Date.

 

(ii)     If the Prepaid Agreement is still active, and has not been terminated
by either party pursuant to the terms of the Prepaid Agreement as of the Vesting
Date, and all undisputed invoices prior to the Vesting Date shall have been paid
by Fancards, pursuant to Section 12.2 of the Prepaid Agreement, as of the
Vesting Date, Warrants to purchase the number of Shares listed on Schedule A
will vest as follows:

 

Schedule A

 

Vesting Date

Shares

7/31/2019

30,000

7/31/2020

30,000

7/31/2021

30,000

7/31/2022

30,000

 

1.3      Exercise Price. The Strike Price for the Shares issuable pursuant to
Warrant is $1.80 per Share (the “Strike price”) for the Warrants vesting on the
Issue Date. The Strike Price for the Warrants vesting pursuant to Schedule A
will be the lesser of $2.00 per Share or one hundred and twenty percent (120%)
of the Market Price of the Common Stock on the Vesting Date of the Warrant.

 

1.4     Execution of Warrant Certificates.      Warrant Certificates may be
signed on behalf of Payment Data by any person authorized by Payment Data.

 

1.5     Registration.      Payment Data shall maintain, or cause to be
maintained, a registry setting forth the name and address of the record holder
of the Warrants, and absent evidence of sale or transfer reasonably acceptable
to it, may treat the record holder of the Warrants as reflected on the registry
as the owner of the Warrants for all purposes.

 

1.6     Mutilated or Missing Warrant Certificates. If any Warrant Certificates
are mutilated, lost, stolen, or destroyed, Payment Data shall issue, in exchange
and substitution for and upon cancellation of such Warrant Certificate, a new
Warrant Certificate representing an equivalent number of Warrants, but only upon
receipt of evidence of such loss, theft, or destruction reasonably satisfactory
to Payment Data or, if requested by Payment Data, upon receipt of a duly
executed indemnification agreement reasonably satisfactory to Payment Data.

 

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1.7     Manner of Exercise of Warrants. Subject to the provisions of this
Warrant Agreement, Fancards shall have the right to purchase from Payment Data
at the applicable Strike Price, and Payment Data shall issue and sell to
Fancards, the number of Shares of Common Stock represented by each Warrant
exercised, upon surrender to Payment Data at its principal office of the Warrant
Certificate representing such Warrant, together with a Form of Warrant
Subscription in substantially the form of Exhibit B attached hereto, completed
and signed, and upon payment to Payment Data of the Strike Price in lawful money
of the United States of America. Any exercise of a Warrant shall be irrevocable.

 

1.8      Cashless Exercise. In lieu of exercising this Warrant by payment of
cash pursuant to Section 1.7 above, and only in the event that the Shares are
not registered, Fancards may elect to receive the number of Shares equal to the
value of this Warrant (or the portion thereof being exercised), by surrender of
this Warrant (or the portion thereof being exercised) to the Company, together
with the exercise form attached hereto, in which event Payment Data will issue
to Fancards Shares in accordance with the following formula:

 

X     = Y(A-B)          

Where,

       

X

=

The number of Shares to be issued to Fancards;

 

Y

=

The number of Shares for which the Warrant is being exercised;

 

A

=

The fair market value of one Share; and

 

B

=

The Strike Price.

 

For purposes of this Section 1.8, the fair market value of a Share is defined as
follows:

 

(i)     if Payment Data’s common stock is traded on a national securities
exchange, the OTCQB or OTCQX, the value shall be deemed to be the closing price
on such exchange, the OTCQB or OTCQX, as the case may be, on the trading day
immediately prior to the exercise form being submitted in connection with the
exercise of the Warrant; or

 

(ii)     if Payment Data’s common stock is not then traded on a securities
exchange, the OTCQB or OTCQX and if prices for Payment Data’s common stock are
then reported on the “Pink Sheets” published by OTC Markets Group, Inc., the
value shall be deemed to be the closing bid prior to the exercise form being
submitted in connection with the exercise of the Warrant so reported; or

 

(iii) if there is no active public market, the value shall be the fair market
value thereof, as determined in good faith by Payment Data’s Board of Directors;
provided that such value shall be communicated in writing to Fancards within ten
(10) days of submission and Fancards shall have the right to revoke the election
within three (3) days thereafter.

 

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1.9     Issuance of Shares Upon Exercise.    Upon exercise of a Warrant, Payment
Data shall issue and cause to be delivered to Fancards, registered in the name
of Fancards or an affiliate thereof as directed by Fancards, a certificate
representing the Shares issuable upon the exercise of such Warrant. Such
certificate shall be deemed to have been issued and Fancards shall be deemed to
have become a holder of record of such Common Stock as of the date of surrender
of the Warrant Certificate and payment of the Strike Price. The Warrants shall
be exercisable, at the election of Fancards, either as an entirety or for part
of the number of Shares specified in the Warrant Certificate representing such
Warrants. If less than all of the Shares evidenced by a Warrant Certificate are
exercised at any time prior to the Expiration Date, a new Warrant Certificate or
Certificates shall be issued by Payment Data, registered in the name of
Fancards, representing the remaining unexercised number of Shares evidenced by
the Warrant Certificate so surrendered. All Warrant Certificates surrendered
upon the exercise of Warrants shall be canceled by Payment Data.

 

1.10     Payment of Expenses and Taxes.     Payment Data shall pay all expenses
and taxes imposed by law or any governmental agency, including any documentary
stamp taxes, attributable to the issuance of Shares upon the exercise of
Warrants; provided, however that Fancards shall be solely responsible for any
income taxes attributable to it in connection with the issuance or exercise of
the Warrants or ownership of any Shares issued upon the exercise of the
Warrants.

 

1.11     Reservation of Shares. Payment Data covenants and agrees that, so long
as any Warrants remain outstanding, Payment Data shall (i) at all times have
authorized and reserved a number of Shares sufficient to provide for the
exercise of the Warrants and (ii) assure that the Shares, when issued, will be
fully paid and non-assessable.

 

1.12     Legend. The Warrants, and the Shares issued pursuant to the Warrants,
if applicable, shall bear such restrictive legends as Payment Data, with the
advice of counsel, shall deem reasonable to reflect the restrictions on transfer
of the Warrants and Shares applicable to this Warrant Agreement.

 

1.13     Expiration.     If the Expiration Date is a day on which banking
institutions are authorized by law to close, then the Warrants may be exercised
on the next succeeding day which is not such a day in accordance with the terms
herein.

 

ARTICLE 2

 

ADJUSTMENT PROVISIONS

 

2.1     Stock Dividends, Splits; Combinations. If Payment Data declares or pays
a stock dividend on the Common Stock, or if Payment Data’s outstanding shares of
Common Stock are subdivided into a greater number of shares of Common Stock, the
Strike Price shall, simultaneously with the effectiveness of such subdivision or
stock dividend, be proportionately reduced, and conversely, if Payment Data’s
outstanding shares of Common Stock are combined into a smaller number of shares
of Common Stock, the Strike Price shall, simultaneously with the effectiveness
of such combination, be proportionately increased.

 

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2.2     Adjustment of Shares Issuable Upon Exercise of Warrants. Upon each
adjustment of the Strike Price as a result of the calculations made pursuant to
this Article 2, each Warrant outstanding prior to the making of the adjustment
in the Strike Price shall thereafter be treated as that number of Warrants, and
shall evidence the right to purchase, at the adjusted Strike Price, that number
of Shares (calculated to the nearest hundredths), obtained by (i) multiplying
the number of Shares purchasable upon exercise of a Warrant prior to adjustment
by the Strike Price in effect prior to adjustment and (ii) dividing the product
so obtained by the Strike Price in effect after such adjustment of the Strike
Price.

 

 2.4     Notice of Adjustment to Holders.   Upon the occurrence of each
adjustment or readjustment of the Strike Price, Payment Data, at its expense,
shall compute such adjustment or readjustment in accordance with the terms
hereof. Promptly, and in no case more than twenty (20) Business Days after the
occurrence of such adjustment or readjustment, Payment Data shall furnish
Fancards with a certificate signed by Payment Data's chief financial officer, or
other authorized officer, setting forth in reasonable detail (i) the Strike
Price after such adjustment or readjustment; (ii) the method of calculation and
the facts upon which such calculation was based; and (iii) the number of Shares
purchasable upon exercise of a Warrant after such adjustment or readjustment.

 

2.6     Certain Other Actions Prohibited.  Payment Data shall not by amendment
of its charter documents or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the provisions of this Warrant Agreement, but shall at all times in good faith
assist in the carrying out of all of the provisions of this Warrant Agreement.

 

ARTICLE 3

 

TRANSFER OF WARRANTS; TERMINATION OF WARRANTS; CALL OF WARRANTS

 

3.1     Restriction on Transfer. Notwithstanding any other provision of this
Warrant Agreement, Shares of Common Stock held by Fancards pursuant to an
exercise of a Warrant must be held by Fancards for the lesser of (i) two (2)
years and (ii) such shorter period as may be required by applicable securities
law, in each case following such exercise before such Shares may be pledged,
loaned, sold, encumbered, or otherwise transferred.

 

3.2     Termination of Warrants. Upon the termination of the Prepaid Agreement,
this Warrant Agreement and all rights and responsibilities of either party
hereunder shall terminate immediately and Fancards will automatically forfeit
any unvested Warrants under this Warrant Agreement; provided, however, that (1)
all Warrants vested before the termination of the Prepaid Agreement may be
exercised by Fancards under this Warrant Agreement until the respective
Expiration Dates of such Warrants; and (2) if the Prepaid Agreement is
terminated by Payment Data for a reason other than a breach of the Prepaid
Agreement by Fancards, then this Warrant Agreement shall terminate upon the
first anniversary of the date of the termination of the Prepaid Agreement.

 

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3.3      Call Provision. Payment Data has the right to Call the exercise of the
Warrants upon twenty (20) calendar days’ notice and (i) upon a Change of Control
of Payment Data (as defined below) or (ii) at any time after the date of the
issuance of the Warrants; provided, however, that Payment Data is not permitted
to Call the exercise of any Warrant unless the Market Price exceeds the Strike
Price by 300 percent on the day of the Call. If Fancards does not exercise the
Warrants that are subject to a Call in accordance with Section 1.7 or 1.8
hereof, such Warrants will be forfeited by Fancards immediately. Notwithstanding
the foregoing, Payment Data shall not be entitled to call Warrants which require
payment of subscription funds by Fancards of more than $100,000 in any 12-month
period.

 

For purposes of Section 1.3 and this Section 3.3, Market Price on a given date
shall be determined by the closing bid price of the Common Stock on the Nasdaq,
or the exchange on which the Common Stock is then trading, on the day preceding
such Call date. When a Call is made, Shares will be issued upon exercise of the
Warrants pursuant to the terms and conditions of this Warrant Agreement. “Change
in Control” shall mean the occurrence of any of the following after the
Effective Date:

 

(i)  one person (or more than one person acting as a group) acquires ownership
of stock of Payment Data that, together with the stock held by such person or
group, constitutes more than 50% of the total fair market value or total voting
power of the stock of such corporation; provided that, a Change in Control shall
not occur if any person (or more than one person acting as a group) owns more
than 50% of the total fair market value or total voting power of Payment Data’s
stock and acquires additional stock;

 

(ii)  a majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is not endorsed
by a majority of the Board before the date of appointment or election; or

 

(iii)  the sale of all or substantially all of Payment Data’s assets.

 

Notwithstanding the foregoing, a Change in Control shall not occur unless such
transaction constitutes a change in the ownership of Payment Data, a change in
effective control of Payment Data, or a change in the ownership of a substantial
portion of the Company’s assets under Section 409A.

 

For purposes of the definition of “Change of Control”, the following definitions
shall be applicable:

 

(i) The term “person” shall mean any individual, corporation or other entity and
any group as such term is used in Section 13(d) (3) or 14(d) (2) of the Exchange
Act.

 

(ii)  Any person shall be deemed to be the beneficial owner of any shares of
capital stock of the Corporation:

 

a. which that person owns directly whether or not of record, or

 

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b. which that person has the right to acquire pursuant to any agreement or
understanding or upon exercise of conversion rights, warrants, or options, or
otherwise, or

 

c. which are beneficially owned, directly or indirectly (including shares deemed
owned through application of clause (b) above, by an “affiliate” or “associate”
(as defined in the rules of the Securities and Exchange Commission under the
Securities Act of 1933, as amended) of that person, or

 

d. which are beneficially owned, directly or indirectly (including shares deemed
owned through application of clause (b) above), by any other person with which
that person or his “affiliate” or “associate” (defined as aforesaid) has any
agreement, arrangement, or understanding for the purpose of acquiring, holding,
voting or disposing of capital stock of the Corporation.

  

(iii)  The outstanding shares of capital stock of the Corporation shall include
shares deemed owned through application of clause (ii) (b), (c), and (d) above,
but shall not include any other shares which may be issuable pursuant to any
agreement or upon exercise of conversion rights, warrants or options, or
otherwise, but which are not actually outstanding.

 

3.4     Registration Rights. At Payment Data’s sole discretion, Payment Data may
piggyback the registration of the Common Stock underlying the Warrants issued
under this Warrant Agreement for resale and distribution under the Securities
Act of 1933, as amended, and applicable state securities laws to a later
registration of Payment Data’s $0.001 par value common stock at such time as is
convenient to Payment Data, in its sole discretion.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES

 

4.1     Securities Representations of Fancards.

 

(a)     Fancards acknowledges that, based on its representations in this Warrant
Agreement, the Warrants and Shares have not been registered under the Securities
Act, in reliance on the non-public offering exemptions contained therein, as
well as under applicable state securities laws.

 

(b)     Fancards is an Accredited Investor. Fancards hereby represents that it
has the capacity to protect its interests in connection with the transactions
contemplated hereby.

 

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(c)     Fancards is acquiring the Warrants and Shares for its own account, not
as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof in violation of the Securities Act. The Shares
and Warrants are being and will be acquired by Fancards for investment purposes
(meaning with a current intention to hold for an indefinite period).

 

(d)     Fancards has been given full access to all material information
concerning the condition, proposed operations, and prospects of Payment Data.
Fancards and its advisors, if any, have had an opportunity to ask questions of,
and to receive information from Payment Data concerning the terms and conditions
of Fancards’s investment in Payment Data, and to obtain any additional
information necessary to verify the accuracy of the information and data
received by Fancards.

 

(e)     Fancards has made either alone or together with its advisors, if any,
such independent investigation of Payment Data and related matters as Fancards
deems to be, or Fancards’s advisors, if any, have advised to be, necessary or
advisable in connection with the acquisition of the Warrants, and Fancards and
its advisors, if any, believe to be necessary in order to reach an informed
decision as to the advisability of acquiring of the Warrants.

 

ARTICLE 5

 

FUTHER REPRESENTATIONS AND WARRANTIES OF THE PARTIES

 

5.1.     Organization. Each Party is a business entity duly organized, validly
existing, and in good standing under the laws of its state of organization. Each
Party has all requisite corporate power and authority to enter into and perform
this Warrant Agreement and to consummate the transactions contemplated hereby.
Each Party is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction in which the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on this Warrant Agreement or the other Party.

 

5.2.     Authority. Each Party has full power and authority to execute, deliver,
and perform this Warrant Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance by each Party of
this Warrant Agreement and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all necessary actions by such
Party, and no other proceedings other than actions previously taken on the part
of the Parties is necessary to authorize this Warrant Agreement and the
consummation of the transactions contemplated hereby. This Warrant Agreement has
been duly authorized, executed, and delivered by each of the Parties and
constitutes the legal, valid, and binding obligations of the Parties enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the enforcement of creditors’ rights generally and by the effect of
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).

 

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ARTICLE 6

 

MISCELLANEOUS

 

6.1     Certain Definitions.

 

(a)     Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:

 

"Accredited Investor" has the same meaning as in Section 501(a)(3) of Regulation
D promulgated under the Securities Act.

 

"Securities Act" means the Securities Act of 1933, as amended from time to time,
or any successor statute.

 

"Person" means and includes natural persons, corporations, limited partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, and
other organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.

 

(b)     Unless the context of this Warrant Agreement clearly requires otherwise,
references to the plural include the singular, to the singular include the
plural, and to the part include the whole. The term "including" is not limiting
and the term "or" has the inclusive meaning represented by the term "and/or."
The words "hereof," "herein," "hereunder," and similar terms in this Warrant
Agreement refer to this Warrant Agreement as a whole and not to any particular
provision of this Warrant Agreement. References to "Articles," "Sections,"
"Subsections," "Exhibits," and "Schedules" are to Articles, Sections,
Subsections, Exhibits, and Schedules, respectively, of this Warrant Agreement,
unless otherwise specifically provided.

 

6.2.     Survival of Representations and Warranties. Unless otherwise specified
in this Warrant Agreement, the representations and warranties of the Parties
contained herein shall survive the Effective Date for a period expiring at the
close of business on the first anniversary of the Expiration Date of the last
Warrant.

 

6.3.     Reliance by Payment Data. Notwithstanding the right of each Party to
investigate the business and company assets and financial condition of the other
Party, and notwithstanding any knowledge determined or determinable by such
Party as a result of such investigation, each Party has the unqualified right to
rely upon, and has relied upon, each of the representations and warranties made
by the other Party in this Warrant Agreement.

 

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6.4.     Notice. All notices, consents, or other communications required or
permitted to be given under this Warrant Agreement shall be in writing and shall
be deemed to have been duly given (i) when delivered personally; (ii) three
Business Days, with a “Business Day” being any day other than a Saturday, a
Sunday, or a U.S. federal holiday, after being mailed by first class certified
mail, return receipt requested, postage prepaid; or (iii) one Business Day after
being sent by a reputable overnight delivery service, postage or delivery
charges prepaid, to the other Party at its address stated below. Notices may
also be given by facsimile and shall be effective on the date transmitted if
confirmed within 24 hours thereafter by a signed original sent in the manner
provided in the preceding sentence. Notices shall be directed as follows:

 

If to Fancards:

 

University Fancards, LLC

450 Century Park South, Suite 100-B

Birmingham, AL 35226

Attn: Lynn Boggs

 

If to Payment Data:

 

3611 Paesanos Parkway, Suite 300

San Antonio, Texas 78231

Facsimile: (210) 249-4130

Attn: Louis Hoch

 

Any Party may change its address for notice and the address to which copies must
be sent by giving notice of the new addresses to the other Parties in accordance
with this Section 6.4, except that any such change of address notice shall not
be effective unless and until received.

 

6.5.     Expenses. Except as expressly set forth herein, each of the Parties
will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Warrant Agreement and the transactions
contemplated hereby.

 

6.6.     Applicable Law. This Warrant Agreement shall be governed by and
construed in accordance with the law of the State of Texas without giving effect
to any choice or conflict of law provision or rule. Venue will be in San
Antonio, Texas for all purposes.

 

6.7.     Headings. The article and section headings contained in this Warrant
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Warrant Agreement.

 

6.8.     Successors and Assigns. This Warrant Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors. No Party may assign this Warrant Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other Party. Any such attempted assignment will be void.

 

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6.9.     Amendments and Waivers. No amendment or waiver of any provision of this
Warrant Agreement shall be valid unless the same shall be in writing and signed
by both Parties. No waiver by any party of any default, misrepresentation, or
breach of a warranty or a covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of a warranty or a covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.

 

6.10.     Parties in Interest. Nothing in this Warrant Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Warrant Agreement on any persons other than the Parties, nor is
anything in this Warrant Agreement intended to relieve or discharge the
obligation or liability of any third persons to any Party to this Warrant
Agreement, nor shall any provision give any third party any right of subrogation
over or action against any Party to this Warrant Agreement.     

 

6.11.     Interpretation. The Parties have participated jointly in the
negotiation and drafting of this Warrant Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Warrant Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Warrant Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has breached
any representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.

 

6.12.     Severability. Any term or provision of this Warrant Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

 

6.13.     Counterparts. This Warrant Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the Parties to this Warrant Agreement. Any signature of a Party in this Warrant
Agreement that is by facsimile shall be deemed an original signature.

 

6.14.     Incorporation of Exhibits. The Schedules and Exhibits identified in
this Warrant Agreement are incorporated herein by reference and made a part
hereof.

 

6.15.     Entire Agreement. This Warrant Agreement and the other documents,
agreements, and instruments executed and delivered pursuant to or in connection
with this Warrant Agreement or referred to herein, contain the entire agreement
among the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior arrangements or understandings with respect thereto.

 

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6.16.     Time is of the Essence. With respect to all time periods and dates set
forth in this Warrant Agreement, time is of the essence.

 

[Signature Page to Follow]

 

 

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IN WITNESS WHEREOF, the Parties have executed this Warrant Agreement as of the
day and year first above written.

 

PAYMENT DATA SYSTEMS, INC.,

a Nevada corporation

 

By: /s/ Louis A. Hoch     Name: Louis A. Hoch     Title:  President & CEO      
 

University Fancards LLC,

a Delaware limited liability company

    By: /s/ Lynn Boggs     Name:  Lynn Boggs     Title: CEO

 

 

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Exhibit A

Form of Warrant Certificate

 

THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES PURCHASABLE
UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER, AND
ANY APPLICABLE STATE SECURITIES LAWS.

 

THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED PURSUANT TO AND ARE
SUBJECT TO A WARRANT AGREEMENT THAT FIXES THE RIGHTS AND OBLIGATIONS OF THE
COMPANY AND THE HOLDER OF THESE WARRANTS AND PLACES CERTAIN RESTRICTIONS ON THE
TRANSFERABILITY OF THE WARRANTS. A COPY OF THE WARRANT AGREEMENT IS ON FILE AT
THE COMPANY’S PRINCIPAL OFFICE.

 

COMMON STOCK WARRANT CERTIFICATE

 

VOID AFTER _________________ 

For the Purchase of __________ Shares

of Common Stock

 

Payment Data Systems, Inc., a Nevada corporation (the “Company”), hereby
certifies that, for value received University Fancards LLC., a Delaware limited
liability company (the "Holder"), is the registered holder of                   
                    (           ) Warrants (the “Warrants”) to purchase        
                           (           ) shares (the “Shares”) of the $0.001 par
value common stock of the Company (“Common Stock”). Each Warrant entitles the
Holder to purchase from the Company that number of fully paid and non-assessable
Shares of Common Stock specified herein at an initial strike price of
$_____________ per Share (“Strike Price”), subject to adjustment of such number
of Shares and such Strike Price as provided in the Warrant Agreement by and
between the Company and the Holder.

 

The Holder’s right to purchase Shares hereunder shall be exercised by surrender
to the Company of this Warrant Certificate, together with an executed Form of
Warrant Subscription (attached hereto) and payment of the aggregate Strike Price
of the Shares exercised that underlie the Warrants, at the principal executive
office of the Company, upon the terms and subject to the conditions set forth in
this Warrant Certificate and in the Warrant Agreement referred to herein.

 

The Warrants represented by this Warrant Certificate are part of a duly
authorized issue of warrants to purchase (subject to the satisfaction of certain
conditions as set forth in the Warrant Agreement) up to an aggregate of        
                          (           ) shares of Common Stock and have been
issued pursuant to the Warrant Agreement. The Warrant Agreement is incorporated
in this Warrant Certificate by this reference and must be referred to for a
description of the rights, obligations, and duties of the Company and the Holder
of the Warrants issued pursuant to the Warrant Agreement.

 

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If, upon any exercise of Warrants represented by this Warrant Certificate, the
number of Shares exercised is less than the total number of Shares represented
by this Warrant Certificate, there shall be issued to the Holder a new Warrant
Certificate representing the number of Shares not exercised.

 

This Warrant Certificate, when surrendered to the Company in accordance with the
terms of the Warrant Agreement, may be exchanged without payment of any service
charge for another Warrant Certificate or Warrant Certificates representing in
the aggregate a like number of Warrants.

 

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed
by the person named below thereunto duly authorized.

 

DATED: ____________ ___, _________          

 

Payment Data Systems, Inc.,

a Nevada corporation

 

By:       ____________________________

 

Name:  ____________________________

 

Title:    ____________________________

 

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Exhibit B

Form of Warrant Subscription

(To be signed only upon exercise of Warrant)

 

TO:     Payment Data Systems, Inc.

 

The undersigned, the holder of the Warrants represented by the attached Warrant
Certificate (the “Holder”), hereby irrevocably elects to exercise the purchase
right represented by such Warrants for, and to purchase thereunder,
____________* shares of the $0.001 par value common stock (the “Shares”) of
Payment Data Systems, Inc. (the “Company”) and herewith makes payment, as
provided in the Warrant Agreement and the Warrant Certificate, of US
$______________ therefor. The Holder hereby requests that the Company issue
____________ Shares and requests that the certificate(s) for such Shares be
issued in the name of, and delivered to, University Fancards LLC

Or

 

The undersigned hereby elects irrevocably to convert its right to purchase ___
Shares of the Company under the Warrant for ______ Shares, as determined in
accordance with the following formula:

 

 

X

=

Y(A-B)

       

A

 

Where,

       

X

=

The number of Shares to be issued to Holder;

 

Y

=

The number of Shares for which the Warrant is being exercised;

 

A

=

The fair market value of one Share which is equal to $_____; and

 

B

=

The Strike Price which is equal to $______ per share

 

The undersigned agrees and acknowledges that the calculation set forth above is
subject to confirmation by the Company and any disagreement with respect to the
calculation shall be resolved by the Company in its sole discretion.

 

Please issue the Shares as to which this Warrant is exercised in accordance with
the instructions given below and, if applicable, a new Purchase Warrant
representing the number of Shares for which this Warrant has not been converted.

 

FROM: University Fancards LLC

 

By:      ______________________________

 

Name: ______________________________

 

Title:   ______________________________

 

Date:  ______________________________

 

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(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant Certificate)

 

*     Insert here the number of Shares called for on the face of the Warrant
Certificate. (Or, in the case of a partial exercise, the portion thereof as to
which the Warrants are being exercised, in either case, without making any
adjustment for additional Shares that, pursuant to the adjustment provisions of
the Warrant Agreement, may be deliverable upon exercise.)

 

 

 

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