Document:

EXHIBIT 10.10

                            Payment Data Systems, Inc
                            PLACEMENT AGENT AGREEMENT

Dated  as  of:  June  4,  2004.

The  undersigned,  Payment  Data  Systems,  Inc.,  a  Nevada  corporation  (the
"COMPANY"),  hereby  agrees  with Charleston Capital Corporation (the "PLACEMENT
AGENT") and Dutchess Private Equities Fund, L.P., a Delaware Limited Partnership
(the  "INVESTOR")  as  follows:

1.  OFFERING.  The  Company  hereby  engages  the  Placement Agent to act as its
exclusive placement agent in connection with the Investment Agreement dated June
4,  2004  (the "INVESTMENT AGREEMENT") pursuant to which the Company shall issue
and  sell  to  the  Investor, from time to time, and the Investor shall purchase
from the Company (the "OFFERING") up to Ten Million Dollars ($10,000,000) of the
Company's  Class  A  Voting  Common  Stock  (the "COMMITMENT AMOUNT"), par value
$0.001  per share (the "COMMON STOCK"), at price per share equal to the Purchase
Price,  as  that  term  is  defined in the Investment Agreement. Pursuant to the
terms  hereof,  the  Placement  Agent  shall  render  consulting services to the
Company  with  respect  to  the  Investment Agreement and shall be available for
consultation  in  connection  with  the  advances to be requested by the Company
pursuant  to the Investment Agreement. All capitalized terms used herein and not
otherwise  defined herein shall have the same meaning ascribed to them as in the
Investment  Agreement.  The Investor will be granted certain registration rights
with  respect  to  the  Common  Stock  as more fully set forth in a Registration
Rights  Agreement  between  the Company and the Investor dated June 4, 2004 (the
"REGISTRATION  RIGHTS AGREEMENT"). The documents to be executed and delivered in
connection with the Offering, including, but not limited, to this Agreement, the
Investment  Agreement, and the Registration Rights Agreement, and any Prospectus
or  other  disclosure  document  (including  all  amendments  and  supplements )
utilized  in  connection with the Offering are referred to sometimes hereinafter
collectively  as  the  "OFFERING  MATERIALS."  The  Company's  Common  Stock  is
sometimes referred to hereinafter as the "SECURITIES." The Placement Agent shall
not be obligated to sell any Securities and this Offering by the Placement Agent
shall  be  solely  on  a  "best  efforts  basis."

2.  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  OF  THE  PLACEMENT  AGENT.

A.  The  Placement  Agent  represents,  warrants  and  covenants  as  follows:

(i) The Placement Agent has the necessary power to enter into this Agreement and
to  consummate  the  transactions  contemplated  hereby.

(ii) The execution and delivery by the Placement Agent of this Agreement and the
consummation  of  the  transactions  contemplated  herein will not result in any
violation  of,  or  be  in  conflict  with,  or  constitute a default under, any
agreement  or instrument to which the Placement Agent is a party or by which the
Placement  Agent or its properties are bound, or any judgment, decree, order or,
to  the  Placement Agent's knowledge, any statute, rule or regulation applicable
to  the  Placement  Agent.  This  Agreement  when  executed and delivered by the
Placement Agent, will constitute the legal, valid and binding obligations of the
Placement  Agent,  enforceable in accordance with their respective terms, except
to  the

extent  that  (a)  the  enforceability  hereof  or  thereof  may  be  limited by
bankruptcy,  insolvency, reorganization, moratorium or similar laws from time to
time  in  effect  and  affecting  the  rights  of  creditors  generally, (b) the
enforceability  hereof or thereof is subject to general principles of equity, or
(c)  the  indemnification  provisions  hereof  or  thereof  may be held to be in
violation  of  public  policy.

(iii)  Upon  receipt  and  execution  of this Agreement the Placement Agent will
promptly  forward copies of this Agreement to the Company or its counsel and the
Investor  or  its  counsel.

(iv)  The  Placement  Agent will not take any action that it reasonably believes
would  cause  the  Offering  to  violate the provisions of the Securities Act of
1933,  as  amended  (the  "1933  ACT"), the Securities Exchange Act of 1934 (the
"1934  ACT"),  the respective rules and regulations promulgated there under (the
"RULES  AND  REGULATIONS")  or  applicable  "Blue  Sky"  laws  of  any  state or
jurisdiction.

(v)  The  Placement  Agent  will  use  all  reasonable  efforts  to  determine
(a)  whether the Investor is an Accredited Investor and (b) that any information
furnished  by  the Investor is true and accurate. The Placement Agent shall have
no  obligation  to  insure  that  (x)  any  check, note, draft or other means of
payment  for  the  Common Stock will be honored, paid or enforceable against the
Investor  in accordance with its terms, or (y) subject to the performance of the
Placement  Agent's  obligations  and  the  accuracy  of  the  Placement  Agent's
representations  and  warranties  hereunder, (1) the Offering is exempt from the
registration requirements of the 1933 Act or any applicable state "Blue Sky" law
or  (2)  the  Investor  is  an  Accredited  Investor.

(vi)  The  Placement Agent is a member of the National Association of Securities
Dealers,  Inc., and is a broker-dealer registered as such under the 1934 Act and
under  the securities laws of the states in which the Securities will be offered
or  sold  by the Placement Agent unless an exemption for such state registration
is  available  to the Placement Agent. The Placement Agent is in compliance with
all  material  rules and regulations applicable to the Placement Agent generally
and  applicable  to  the  Placement  Agent's  participation  in  the  Offering.

3.  REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.

A.  The  Company  makes  to  the  Placement  Agent  all  the representations and
warranties  it  makes  to  the  Investor  in  the  Investment  Agreement and, in
addition,  represents  and  warrants  as  follows:

(i)  The  execution,  delivery  and  performance  of each of this Agreement, the
Investment  Agreement  and the Registration Rights Agreement has been or will be
duly  and  validly  authorized  by  the Company and is, and with respect to this
Agreement,  the  Investment Agreement and the Registration Rights Agreement will
each be, a valid and binding agreement of the Company, enforceable in accordance
with  its  respective  terms,  except  to the extent that (a) the enforceability
hereof  or  thereof  may  be  limited by bankruptcy, insolvency, reorganization,
moratorium  or similar laws from time to time in effect and affecting the rights
of  creditors  generally, (b) the enforceability hereof or thereof is subject to
general  principles  of  equity  or (c) the indemnification provisions hereof or
thereof  may  be  held to be in violation of public policy. The Securities to be
issued  pursuant  to  the  transactions  contemplated  by this Agreement and the
Investment  Agreement  have  been

duly  authorized  and,  when  issued  and  paid  for in accordance with (x) this
Agreement,  the  Investment  Agreement  and  the  certificates/instruments
representing  such  Securities, (y) will be valid and binding obligations of the
Company,  enforceable  in  accordance with their respective terms, except to the
extent  that  (1)  the  enforceability  thereof  may  be  limited by bankruptcy,
insolvency,  reorganization,  moratorium  or  similar  laws from time to time in
effect  and  affecting  the  rights  of  creditors  generally,  and  (2)  the
enforceability thereof is subject to general principles of equity. All corporate
action  required  to  be  taken  for the authorization, issuance and sale of the
Securities  has  been  duly  and  validly  taken  by  the  Company.

(ii) The Company has a duly authorized, issued and outstanding capitalization as
set  forth herein and in the Investment Agreement. The Company is not a party to
or  bound  by any instrument, agreement or other arrangement providing for it to
issue  any  capital stock, rights, warrants, options or other securities, except
for  this  Agreement,  the  agreements  described herein and as described in the
Investment  Agreement,  dated  the  date  hereof  and  the  agreements described
therein.  All  issued  and outstanding securities of the Company, have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof  have  no rights of rescission or preemptive rights with respect thereto
and  are  not  subject  to personal liability solely by reason of being security
holders;  and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company. As of the date hereof, the
authorized  capital  stock  of the Company consists of (i) 200,000,000 shares of
Common  Stock,  .001  par  value  per  share,  of  which  as of the date hereof,
20,722,656  shares  are  issued  and  outstanding.

(iii)  The  Common  Stock to be issued in accordance with this Agreement and the
Investment  Agreement  has  been duly authorized and when issued and paid for in
accordance  with  this  Agreement,  the  Investment  Agreement  and  the
certificates/instruments representing such Common Stock, will be validly issued,
fully-paid  and  non-assessable;  the  holders  thereof  will  not be subject to
personal  liability  solely by reason of being such holders; such Securities are
not  and  will  not  be  subject  to  the preemptive rights of any holder of any
security  of  the  Company.

4.  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  OF  THE  INVESTOR.

A.  The  Investor  makes  to  the  Placement  Agent  all the representations and
warranties  it makes to the Company in the Investment Agreement and, in addition
represents,  warrants  and  covenants  as  follows:

(i)  The  Investor  has  the necessary power to enter into this Agreement and to
consummate  the  transactions  contemplated  hereby.

(ii)  The  execution  and  delivery  by  the  Investor of this Agreement and the
consummation  of  the  transactions  contemplated  herein will not result in any
violation  of,  or  be  in  conflict

with,  or  constitute  a default under, any agreement or instrument to which the
Investor is a party or by which the Investor or its properties are bound, or any
judgment,  decree,  order  or, to the Investor's knowledge, any statute, rule or
regulation  applicable  to  the  Investor.  This  Agreement  when  executed  and
delivered  by  the  Investor,  will  constitute  the  legal,  valid  and binding
obligations  of  the  Investor,  enforceable in accordance with their respective
terms, except to the extent that (a) the enforceability hereof or thereof may be
limited  by  bankruptcy,  insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, (b)
the enforceability hereof or thereof is subject to general principles of equity,
or  (c)  the  indemnification  provisions hereof or thereof may be held to be in
violation  of  public  policy.

(iii)  the  Investor  is  not,  and will not be, as a result of the transactions
contemplated  by  the  Offering  Materials  a "dealer" within the meaning of the
Securities Exchange Act of 1934 and applicable federal and state securities laws
and  regulations.  The  Investor  covenants  that in this respect it is and will
remain  in compliance with the requirements of applicable "no action" rulings of
the  U.S.  Securities  Exchange  Commission.

(iv)  The  Investor  will  promptly  forward copies of any and all due diligence
questionnaires  compiled  by  the  Investor  to  the  Placement  Agent.

5.  CERTAIN  COVENANTS  AND  AGREEMENTS  OF  THE  COMPANY.

The  Company  covenants and agrees at its expense and without any expense to the
Placement  Agent  as  follows:

A. To advise the Placement Agent of any material adverse change in the Company's
financial  condition,  prospects  or  business  or of any development materially
affecting  the  Company or rendering untrue or misleading any material statement
in the Offering Materials occurring at any time as soon as the Company is either
informed  or  becomes  aware  thereof.

B. To use its commercially reasonable efforts to cause the Common Stock issuable
in  connection  with the Equity Line of Credit to be qualified or registered for
sale  on terms consistent with those stated in the Registration Rights Agreement
and  under  the securities laws of such jurisdictions as the Placement Agent and
the Investor shall reasonably request. Qualification, registration and exemption
charges  and  fees  shall  be  at  the  sole  cost  and  expense of the Company.

C.  Upon written request, to provide and continue to provide the Placement Agent
and the Investor copies of all quarterly financial statements and audited annual
financial  statements  prepared  by  or  on behalf of the Company, other reports
prepared  by or on behalf of the Company for public disclosure and all documents
delivered  to  the  Company's  stockholders.

D.  To  deliver,  during the registration period of the Investment Agreement, to
the  Placement  Agent  upon  the  Placement  Agent's  request,

(i)  within  forty  five  (45)  days,  a  statement  of its income for each such
quarterly  period,  and  its  balance  sheet  and  a  statement  of  changes  in
stockholders'  equity  as of the end of such quarterly period, all in reasonable
detail,  certified  by  its  principal  financial  or  accounting  officer;

(ii)  within  ninety  (90) days after the close of each fiscal year, its balance
sheet  as of the close of such fiscal year, together with a statement of income,
a  statement of changes in stockholders' equity and a statement of cash flow for
such  fiscal year, such balance sheet, statement of income, statement of changes
in  stockholders'  equity  and statement of cash flow to be in reasonable detail
and  accompanied  by  a copy of the certificate or report thereon of independent
auditors  if  audited  financial  statements  are  prepared;  and

(iii)  a  copy  of  all  documents,  reports  and  information  furnished to its
stockholders  at  the  time  that  such  documents,  reports and information are
furnished  to  its  stockholders.

(iv)  a copy of all documents, reports and information furnished to the Investor
at  the  time  that such documents, reports and information are furnished to the
Investor.

E.  To  comply  with  the  terms  of  the  Offering  Materials.

F.  To  ensure that any transactions between or among the Company, or any of its
officers,  directors  and affiliates be on terms and conditions that are no less
favorable  to the Company, than the terms and conditions that would be available
in  an  "arm's  length"  transaction  with  an  independent  third  party.

6.  INDEMNIFICATION.

A. The Company hereby agrees that it will indemnify and hold the Placement Agent
and  each  officer,  director,  shareholder,  employee  or representative of the
Placement  Agent  and  each  person  controlling,  controlled by or under common
control  with  the  Placement Agent within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act or the SEC's Rules and Regulations promulgated
there under (the "Rules and Regulations"), harmless from and against any and all
loss,  claim,  damage, liability, cost or expense whatsoever (including, but not
limited  to,  any  and  all  reasonable  legal  fees  and  other  expenses  and
disbursements  incurred in connection with investigating, preparing to defend or
defending  any  action,  suit  or  proceeding,  including  any  inquiry  or
investigation,  commenced or threatened, or any claim whatsoever or in appearing
or  preparing  for  appearance  as  a witness in any action, suit or proceeding,
including  any  inquiry,  investigation  or  pretrial  proceeding  such  as  a
deposition)  to  which  the  Placement  Agent  or such indemnified person of the
Placement  Agent  may become subject under the 1933 Act, the 1934 Act, the Rules
and  Regulations, or any other federal or state law or regulation, common law or
otherwise,  arising  out  of  or  based upon (i) any untrue statement or alleged
untrue  statement  of  a  material  fact  contained  in  (a)  Section  4 of this
Agreement,  (b) the Offering Materials (except those written statements relating
to  the  Placement  Agent given by an indemnified person for inclusion therein),
(c)  any  application or other document or written communication executed by the
Company  or based upon written information furnished by the Company filed in any
jurisdiction  in  order  to  qualify  the Common Stock under the securities laws
thereof,  or  any  state  securities  commission or agency; (ii) the omission or
alleged  omission from documents described in clauses (a), (b) or (c) above of a
material  fact required to be stated therein or necessary to make the statements
therein  not  misleading;  or  (iii) the breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees  that  upon  demand by an indemnified person, at any time or from time to
time,  it  will  promptly reimburse such indemnified person for any loss, claim,
damage,  liability,  cost  or  expense  actually  and

reasonably  paid  by  the  indemnified  person  as  to  which  the  Company  has
indemnified  such  person  pursuant  hereto.  Notwithstanding  the  foregoing
provisions  of  this  Paragraph  6(A),  any such payment or reimbursement by the
Company  of fees, expenses or disbursements incurred by an indemnified person in
any  proceeding  in  which a final judgment by a court of competent jurisdiction
(after  all  appeals or the expiration of time to appeal) is entered against the
Placement  Agent  or such indemnified person based upon specific finding of fact
as  to  the  Placement  Agent  or  such indemnified person's gross negligence or
willful  misfeasance  will  be  promptly  repaid  to  the  Company.

B. The Placement Agent hereby agrees that it will indemnify and hold the Company
and  each  officer,  director,  shareholder,  employee  or representative of the
Company, and each person controlling, controlled by or under common control with
the  Company  within  the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the Rules and Regulations, harmless from and against any and all
loss,  claim,  damage, liability, cost or expense whatsoever (including, but not
limited  to,  any  and  all  reasonable  legal  fees  and  other  expenses  and
disbursements  incurred in connection with investigating, preparing to defend or
defending  any  action,  suit  or  proceeding,  including  any  inquiry  or
investigation,  commenced or threatened, or any claim whatsoever or in appearing
or  preparing  for  appearance  as  a witness in any action, suit or proceeding,
including  any  inquiry,  investigation  or  pretrial  proceeding  such  as  a
deposition)  to  which the Company or such indemnified person of the Company may
become  subject  under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any  other  federal or state law or regulation, common law or otherwise, arising
out  of  or  based  upon (i) the conduct of the Placement Agent or its officers,
employees  or  representatives  in  willful  violation  of  any of such laws and
regulations  while  acting  as  Placement  Agent  for  the  Offering or (ii) the
material  breach  of any representation, warranty, covenant or agreement made by
the  Placement Agent in this Agreement (iii) any false or misleading information
provided  to  the  Company  by one of the Placement Agent's indemnified persons.

C.  The  Investor  hereby  agrees  that it will indemnify and hold the Placement
Agent and each officer, director, shareholder, employee or representative of the
Placement  Agent,  and  each  person  controlling, controlled by or under common
control  with  the  Placement Agent within the meaning of Section 15 of the 1933
Act  or  Section  20 of the 1934 Act or the Rules and Regulations, harmless from
and  against  any  and  all  loss,  claim,  damage,  liability,  cost or expense
whatsoever (including, but not limited to, any and all reasonable legal fees and
other  expenses  and  disbursements  incurred  in connection with investigating,
preparing  to  defend or defending any action, suit or proceeding, including any
inquiry or investigation, commenced or threatened, or any claim whatsoever or in
appearing  or  preparing  for  appearance  as  a  witness in any action, suit or
proceeding,  including any inquiry, investigation or pretrial proceeding such as
a  deposition)  to  which  the Placement Agent or such indemnified person of the
Placement  Agent  may become subject under the 1933 Act, the 1934 Act, the Rules
and  Regulations, or any other federal or state law or regulation, common law or
otherwise,  arising  out of or based upon (i) the conduct of the Investor or its
officers,  employees  or  representatives  in its acting as the Investor for the
Offering  or  (ii) the material breach of any representation, warranty, covenant
or  agreement  made by the Investor in the Offering Materials (iii) any false or
misleading information provided to the Placement Agent by the Investor or one of
the  Investor's  indemnified  persons.

D.  The  Placement  Agent  hereby  agrees  that  it  will indemnify and hold the
Investor  and each officer, director, shareholder, employee or representative of
the  Investor,  and  each  person

controlling,  controlled by or under common control with the Investor within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act or the Rules
and  Regulations,  harmless  from  and  against any and all loss, claim, damage,
liability,  cost  or  expense whatsoever (including, but not limited to, any and
all  reasonable  legal  fees  and  other  expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or  proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in  any  action,  suit  or  proceeding,  including any inquiry, investigation or
pretrial  proceeding  such  as  a  deposition)  to  which  the  Investor or such
indemnified  person  of  the Investor may become subject under the 1933 Act, the
1934  Act,  the  Rules  and  Regulations,  or  any other federal or state law or
regulation,  common  law  or  otherwise,  arising  out  of or based upon (i) the
conduct  of the Placement Agent or its officers, employees or representatives in
willful  violation  of  any  of  such  laws  and regulations while acting as the
Placement  Agent  for  the  Offering  or  (ii)  the  material  breach  of  any
representation,  warranty,  covenant or agreement made by the Placement Agent in
this  Agreement  (iii)  any  false  or  misleading  information  provided to the
Investor  by  one  of  the  Placement  Agent's  indemnified  persons.

E.  Promptly  after receipt by an indemnified party of notice of commencement of
any action covered by Section 6(A), (B), (C) or (D), the party to be indemnified
shall,  within  five  (5)  business  days,  notify the indemnifying party of the
commencement thereof; the omission by one (1) indemnified party to so notify the
indemnifying party shall not relieve the indemnifying party of its obligation to
indemnify  any  other indemnified party that has given such notice and shall not
relieve  the indemnifying party of any liability outside of this indemnification
if  not  materially  prejudiced thereby. In the event that any action is brought
against  the  indemnified  party,  the  indemnifying  party  will be entitled to
participate  therein and, to the extent it may desire, to assume and control the
defense  thereof with counsel chosen by it which is reasonably acceptable to the
indemnified  party. After notice from the indemnifying party to such indemnified
party  of  its election to so assume the defense thereof, the indemnifying party
will  not  be  liable  to  such  indemnified  party  under  such
Section  6(A),  (B),  (C),  or  (D) for any legal or other expenses subsequently
incurred  by  such indemnified party in connection with the defense thereof, but
the  indemnified  party  may, at its own expense, participate in such defense by
counsel  chosen  by  it,  without,  however,  impairing the indemnifying party's
control  of  the  defense.  Subject  to  the  proviso  of  this  sentence  and
notwithstanding  any  other  statement  to  the  contrary  contained herein, the
indemnified  party  or  parties  shall have the right to choose its or their own
counsel  and  control  the  defense  of  any  action,  all at the expense of the
indemnifying  party  if,  (i)  the  employment  of  such counsel shall have been
authorized  in  writing by the indemnifying party in connection with the defense
of  such  action  at  the  expense  of  the  indemnifying  party,  or  (ii)  the
indemnifying  party  shall  not have employed counsel reasonably satisfactory to
such  indemnified  party  to  have charge of the defense of such action within a
reasonable  time  after  notice  of  commencement  of  the action, or (iii) such
indemnified  party  or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available  to  one  or  all  of  the  indemnifying  parties  (in  which case the
indemnifying  parties  shall  not  have  the right to direct the defense of such
action  on  behalf  of the indemnified party or parties), in any of which events
such  fees  and  expenses  of  one  additional  counsel  shall  be  borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection  with any one action or separate but substantially similar or related
actions  in the same jurisdiction arising out of the same general allegations or
circumstance,  be  liable  for the reasonable fees and expenses of more than one
separate  firm  of  attorneys  at  any  time  for  all

such  indemnified  parties. No settlement of any action or proceeding against an
indemnified  party  shall be made without the consent of the indemnifying party.

F.  In  order to provide for just and equitable contribution in circumstances in
which  the  indemnification  provided for in Section 6 is due in accordance with
its  terms but is for any reason held by a court to be unavailable on grounds of
policy  or otherwise, the Company and the Placement Agent and the Investor shall
contribute  to  the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with the investigation
or  defense  of  same)  which the other may incur in such proportion so that the
Company,  the  Placement  Agent  and  the Investor shall be responsible for such
percent  of  the  aggregate  of  such losses, claims, damages and liabilities as
shall  equal  the  percentage  of  the  gross  proceeds  paid  to each of them.;
provided,  however, that no person guilty of fraudulent misrepresentation within
the  meaning  of Section 11(f) of the 1933 Act shall be entitled to contribution
from  any  person  who  was not guilty of such fraudulent misrepresentation. For
purposes  of  this  Section 6(F), any person controlling, controlled by or under
common  control  with  the  Placement  Agent, or any partner, director, officer,
employee, representative or any agent of any thereof, shall have the same rights
to  contribution  as the Placement Agent and each person controlling, controlled
by  or under common control with the Company within the meaning of Section 15 of
the  1933  Act or Section 20 of the 1934 Act and each officer of the Company and
each  director  of the Company shall have the same rights to contribution as the
Company  and each person controlling, controlled by or under common control with
the  Investor  within the meaning of Section 15 of the 1933 Act or Section 20 of
the  1934  Act and each member of the general partner of the Investor shall have
the  same  rights  to  contribution  as  the  Company.  Any  party  entitled  to
contribution  will,  promptly  after  receipt  of  notice of commencement of any
action,  suit  or  proceeding against such party in respect of which a claim for
contribution may be made against the other party under this Section 6(F), notify
such  party  from whom contribution may be sought, but the omission to so notify
such party shall not relieve the party from whom contribution may be sought from
any  obligation  they  may  have  hereunder  or otherwise if the party from whom
contribution  may  be sought is not materially prejudiced thereby. The indemnity
and  contribution  agreements contained in this Section 6 shall remain operative
and  in  full  force  and  effect  regardless of any investigation made by or on
behalf  of  any  indemnified  person  or  any  termination  of  this  Agreement.

7.  FEES.  The Company hereby agrees to pay the Placement Agent 1% for the gross
proceeds from each Put with a maximum of ten thousand dollars ($10,000) upon the
execution  of  this  Agreement.

8. PAYMENT OF EXPENSES. The Company hereby agrees to bear all of the expenses in
connection  with  the  Offering,  including,  but  not limited to the following:
filing fees, printing and duplicating costs, advertisements, postage and mailing
expenses  with  respect to the transmission of Offering Materials, registrar and
transfer  agent  fees,  and  expenses,  fees  of  the  Company's  counsel  and
accountants,  issue  and transfer taxes, which expenses, if any, will not exceed
One  Hundred  and  No/100  Dollars ($100.00) in aggregate. The Company agrees to
bear  all  the  reasonable  expenses  of  the  Placement Agent in performing its
services under this Agreement including but not limited to the fees and expenses
of  counsel,  which  expenses,  if  any,  will not exceed One Hundred and No/100
Dollars  ($100.00)  in  aggregate.

9.  CONDITIONS  OF  CLOSING.  The  Closing  shall  be held at the offices of the
Investor  or its counsel. The obligations of the Placement Agent hereunder shall
be  subject  to the continuing accuracy of the representations and warranties of
the  Company  herein  as  of  the date hereof and as of the Date of Closing (the
"Closing  Date") with respect to the Company as if it had been made on and as of
such  Closing Date; the accuracy on and as of the Closing Date of the statements
of  the  officers of the Company made pursuant to the provisions hereof; and the
performance  by  the  Company on and as of the Closing Date of its covenants and
obligations  hereunder  and  to  the  following  further  conditions:

A.  Upon  the  effectiveness  of a registration statement in accordance with the
Investment  Agreement, the Placement Agent shall receive the opinions of Counsel
to  the Company and of the Investor, dated as of the date thereof, which opinion
shall  be  in  form  and  substance reasonably satisfactory to the Investor, the
Company,  their  counsel  and  the  Placement  Agent.

B.  At  or  prior  to the Closing, the Placement Agent shall have been furnished
such  documents,  certificates and opinions as it may reasonably require for the
purpose  of enabling them to review or pass upon the matters referred to in this
Agreement  and  the  Offering  Materials,  or in order to evidence the accuracy,
completeness  or  satisfaction  of  any  of  the  representations, warranties or
conditions  herein  contained.

C.  At  and  prior  to  the  Closing,  and except as otherwise disclosed in that
certain  Investment  Agreement  by  and between the Company and Dutchess Private
Equities  Fund,  L.P.,  (i) there shall have been no material adverse change nor
development  involving a prospective change in the condition or prospects or the
business  activities,  financial  or  otherwise,  of the Company from the latest
dates  as  of  which such condition is set forth in the Offering Materials; (ii)
there  shall  have  been  no transaction, not in the ordinary course of business
except the transactions pursuant to the Investment Agreement entered into by the
Company  which  has  not  been  disclosed  in  the  Offering Materials or to the
Placement Agent in writing; (iii) except as set forth in the Offering Materials,
the  Company  shall  not  be  in  default  under any provision of any instrument
relating to any outstanding indebtedness for which a waiver or extension has not
been otherwise received; (iv) except as set forth in the Offering Materials, the
Company  shall  not have issued any securities (other than those to be issued as
provided in the Offering Materials) or declared or paid any dividend or made any
distribution of its capital stock of any class and there shall not have been any
change in the indebtedness (long or short term) or liabilities or obligations of
the  Company  (contingent  or otherwise) and trade payable debt; (v) no material
amount of the assets of the Company shall have been pledged or mortgaged, except
as  indicated  in the Offering Materials; and (v) no action, suit or proceeding,
at  law  or in equity, against the Company or affecting any of its properties or
businesses  shall  be pending or threatened before or by any court or federal or
state  commission,  board  or  other administrative agency, domestic or foreign,
wherein  an  unfavorable  decision, ruling or finding could materially adversely
affect  the  businesses,  prospects  or  financial  condition  or  income of the
Company,  except  as  set  forth  in  the  Offering  Materials.

D.  At  Closing,  the Placement Agent shall receive a certificate of the Company
signed  by  an  executive  officer  and chief financial officer, dated as of the
applicable  Closing, to the effect that the conditions set forth in subparagraph
(C)  above  have  been  satisfied  and  that,  as of the applicable closing, the
representations  and  warranties  of  the  Company set forth herein are true and
correct.

10.  TERMINATION.  This  Agreement shall be co-terminus with, and terminate upon
the  same  terms and conditions as those set forth in, the Investment Agreement.
The  rights  of  the  Investor  and  the  obligations  of  the Company under the
Registration  Rights  Agreement,  and  the rights of the Placement Agent and the
obligations  of  the  Company  shall  survive  the termination of this Agreement
unabridged  for  a  period  of  twenty-four  (24) months after the Closing Date.

11.  MISCELLANEOUS.  A.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each  of  which  shall be deemed to be an original, but all which
shall  be  deemed  to  be one and the same instrument. B. Any notice required or
permitted  to  be  given hereunder shall be given in writing and shall be deemed
effective  when  deposited  in  the United States mail, postage prepaid, or when
received if personally delivered or faxed (upon confirmation of receipt received
by  the  sending  party),  addressed  as  follows:

                           If to Placement Agent, to:

Charleston  Capital  Corporation
Attention:  Ara Proudian, President 216 East 45th Street, Suite 903 New York, NY
10017
(212)  244-1555
(212)  244-6955,  fax

                             If to the Company, to:

                            PAYMENT DATA SYSTEMS INC
                                 12500 San Pedro
Suite  120
San  Antonio  TX  78216
(210)249-4100
(210)249-4130  fax

                               If to the Investor:

Dutchess  Private  Equities  fund,  LP  312  Stuart  St.
Boston,  MA  02116
Tel:  (617)  960-3582
Fax:  (617)  960-3772

or  to  such  other  address  of  which  written  notice is given to the others.

C.  This  Agreement shall be governed by and construed in all respects under the
laws  of  the State of Delaware, without reference to its conflict of laws rules
or  principles.  Any  suit,  action,  proceeding or litigation arising out of or
relating  to  this  Agreement shall be brought and prosecuted in such federal or
state  court  or  courts  located  within  the  Commonwealth of Massachusetts as
provided  by  law. The parties hereby irrevocably and unconditionally consent to
the jurisdiction of each such court or courts located within the Commonwealth of
Massachusetts  and to service of process by registered or certified mail, return
receipt requested, or by any other manner provided by applicable law, and hereby
irrevocably  and unconditionally waive any right to claim that any suit, action,
proceeding  or  litigation  so  commenced  has been commenced in an inconvenient
forum.

D.  This Agreement and the other agreements referenced herein contain the entire
understanding  between  the  parties  hereto  and may not be modified or amended
except  by  a  writing  duly signed by the party against whom enforcement of the
modification  or  amendment  is  sought.

E.  If  any  provision  of  this  Agreement  shall  be  held  to  be  invalid or
unenforceable,  such  invalidity  or unenforceability shall not affect any other
provision  of  this  Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN  WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of the
date  first  written  above.

COMPANY:

By:   /s/  Michael  Long
Name:  Michael  Long
Title:  CEO

PLACEMENT  AGENT:

By:   /s/  Ara  Proudian
Name:  Ara  Proudian
Title:  President

INVESTOR:

DUTCHESS  PRIVATE  EQUITIES  FUND,  L.P.
BY  ITS  GENERAL  PARTNER  DUTCHESS
CAPITAL  MANAGEMENT,  LLC

   /s/  Douglas  Leighton
By:__________________________________
Name:  Douglas  H.  Leighton
Title:  A  Managing  MemberEXHIBIT  4.1.  Specimen  Stock  Certificate

              SPECIMEN CERTIFICATE OF COMMON STOCK PAR VALUE $.001

CERTIFICATE NUMBER  __________________        NUMBER OF SHARES  ____________

                              H-NET.NET, INC., INC.
              INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO

CUSIP NUMBER

     This  certifies  that  ____________________________  is  the  owner  of
___________________  Fully  Paid  and  Non-Assessable Shares of Common Stock Par
Value  $.001 Per Share, of H-Net.Net, Inc., Inc., Transferable only on the books
of the Corporation by the holder hereof in person or by duly authorized attorney
upon  surrender  of  this certificate properly endorsed. This Certificate is not
valid  unless  countersigned and registered by the Transfer Agent and Registrar.

Witness  the  facsimile  seal of the corporation and the facsimile Signatures of
its  duly  authorized  officers.

Date:

                                [CORPORATE SEAL]

-------------------------                           ----------------------------
       President                                         Secretary

                              COUNTERSIGNED:

                              -------------------------------

Transfer Agent and Registrar

Attest:  ___________________
Authorized Signature

                          [REVERSE SIDE OF CERTIFICATE]

                              H-NET.NET, INC., INC.

The Corporation will furnish to any shareholder upon request and Without charge,
a  full  statement  of  the designations, preferences, limitations, and relative
rights  of  the  shares  of  each  class  authorized  to  be  issued and, if the
Corporation is authorized to issue any preferred or special class in series, the
variations  in  the  relative  rights and preferences between the shares or each
such  series  so  far  as  the  same  have  been  fixed and  determined, and the
authority of the board of directors to fix and determine the relative rights and
preferences  of  other  series.

                            [STANDARD TRANSFER FORM]

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