Exhibit 10.28

AMENDMENT NO. 2

DATED AS OF DECEMBER 19, 2003

TO

IPAYMENT CREDIT AGREEMENT

DATED AS OF AUGUST 1, 2003

 

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TABLE OF CONTENTS

             
1.
  Capitalized Terms     1  
2.
  Definitions     1  
3.
  Representations and Warranties     4  
 
  3.1 Incorporation     4  
 
  3.2 Due Authorization, No Conflicts, Etc.     4  
 
  3.3 Due Execution, Etc.     5  
4.
  Conditions Precedent     5  
 
  4.1 Conditions Precedent to Effectiveness of Amendment No. 2     5  
5.
  Effectiveness of Amendment No. 2     6  
6.
  Closing     6  
7.
  Governing Law, Etc.     6  
8.
  Section Titles and Table of Contents     6  
9.
  Arbitration     6  
10.
  Counterparts     7  
11.
  Agreement to Remain in Effect     7  

 

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     This Amendment No. 2 to Credit Agreement, dated as of this 19th day of
December, 2003, by and among iPayment, Inc., a Delaware corporation (hereinafter
referred to as the “Borrower”), Bank of America, N.A. and AmSouth Bank
(hereinafter referred to individually as the “Lender” and collectively as the
“Lenders”), Bank of America, N.A. as the Swingline Lender (the “Swingline
Lender”), and Bank of America, N.A., in its capacity as the Administrative Agent
(hereinafter referred to as the “Agent”).

W I T N E S S E T H:

     WHEREAS, Borrower, Lenders, Swingline Lender and Agent entered into a
certain Credit Agreement dated as of August 1, 2003 as amended by Amendment No.
1 thereto dated September 30, 2003 (collectively, the “Credit Agreement”); and

     WHEREAS, Borrower and its newly formed subsidiary, iPayment Acquisition Sub
LLC, have entered into an Asset Purchase Agreement with First Data Merchant
Services Corporation (“FDMS”), as the Seller therein, pursuant to which Borrower
and iPayment Acquisition Sub LLC have agreed to purchase from FDMS certain agent
bank and merchant portfolio assets described therein for a purchase price equal
to $55,000,000 in cash; and

     WHEREAS, to assist in financing the asset purchase, the Borrower has
requested that the Lenders amend and increase the Total Revolving Credit
Commitment under the Credit Agreement from Thirty Million Dollars ($30,000,000)
to Sixty-Five Million Dollars ($65,000,000); and

     WHEREAS, the Lenders and the Agent are willing to agree to said increase,
subject to the Credit Agreement being modified as hereinafter set forth;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:

     1. Capitalized terms used herein shall, except as hereinafter expressly set
forth, have the same meaning given them in the Credit Agreement.

     2. Article I of the Credit Agreement, DEFINITIONS, is hereby amended by
deleting the definition of “EBITDA” contained therein, and by adding thereto the
following new definitions in the appropriate alphabetical sequence, as follows:

    “EBITDA” shall mean, for any period of determination, Consolidated Earnings
Before Interest and Taxes of the Borrower and its Subsidiaries for the
immediately prior four (4) fiscal quarters, plus depreciation and amortization
deducted from the determination of Consolidated Earnings Before Interest and
Taxes for such period; provided, for the period ending September 30, 2003, there
shall be added thereto an amount equal to the FDMS Portfolio EBITDA for the
period July 1, 2003 to September 30, 2003 multiplied by the number four (4); and
provided further, for

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    the period ending December 31, 2003, there shall be added thereto an amount
equal to the FDMS Portfolio EBITDA for the period July 1, 2003 through December
31, 2003 multiplied by the number two (2); and provided further, that for the
fiscal quarter ending March 31, 2004, there shall be added thereto an amount
equal to the FDMS Portfolio EBITDA for the period July 1, 2003 through
December 31, 2003 multiplied by the number 1.50; and provided further, that for
the fiscal quarter ending June 30, 2004 there shall be added thereto an amount
equal to the FDMS portfolio EBITDA for the period July 1, 2003 through
December 31, 2003; and provided further, that for the fiscal quarter ending
September 30, 2004 there shall be added thereto an amount equal to the FDMS
portfolio EBITDA for the period October 1, 2003 through December 31, 2003.      
“FDMS Portfolio” shall mean the agent bank and merchant portfolio assets
acquired by Borrower and iPayment Acquisition Sub LLC from First Data Merchant
Services Corporation on December 19, 2003, as more specifically described in
that Asset Purchase Agreement and the schedules thereto executed among iPayment,
Inc., iPayment Acquisition Sub LLC and First Data Merchant Services Corporation
as of December 19, 2003.       “FDMS Portfolio EBITDA” shall mean, for any
period of determination, the Net Revenues generated by the FDMS Portfolio less
merchant losses and processing expenses but without deduction for interest
expense, taxes, depreciation and/or amortization, all as calculated in a manner
satisfactory to the Lenders. For the purposes hereof, “Net Revenues” means an
amount equal to the merchant’s discount generated by the FDMS Portfolio less
(i) interchange, (ii) assessments, and (iii) payment required by the ISO
agreements and contracts with agent banks plus other recurring revenues
generated from bank card acquiring services, all as generally defined and set
forth in the FDMS Asset Purchase Agreement and the schedules attached thereto,
including without limitation, Schedule 5.6 thereof.       “Net Cash Proceeds”
shall mean the cash proceeds (including, without limitation, all deferred cash
proceeds) received by the Borrower or any Subsidiary, net of (i) brokerage and
underwriting commissions and other fees and expenses related thereto, (ii)
provision for all taxes payable as a result of such sale or other disposition of
assets, (iii) deduction of appropriate amounts to be provided by the Borrower or
any Subsidiary, as the case may be, as a reserve against any liabilities
associated with such assets and retained by the Borrower or any Subsidiary, and
(iv) the amount of any Debt (other than debt under the Loan Documents or an

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    accompanying Debt) required to be repaid or prepaid in connection with such
sale or other disposition of assets.

     In addition to the foregoing new definitions, the following definitions are
hereby amended:

          (i) “Fee Letter” is hereby amended to add at the end thereof before
the period the clause “including without limitation any letters now or hereafter
executed among Bank of America, Bank of America Securities LLC (“BAS”), and
Borrower relating to other fees payable to Bank of America and BAS”.

          (ii) “Revolving Credit Facility Maturity Date” is hereby amended to
replace the date of August 1, 2006 with the date of December 31, 2006.

     2.1 Section 6.11 is hereby amended to replace the ratio of 1.00 to 1.00
with 1.50 to 1.00.

     2.2 Section 6.12 is hereby amended to replace the number of Twenty-Two
Million Five Hundred Thousand Dollars ($22,500,000) where it appears therein
with the number of Forty Million Dollars ($40,000,000).

     2.3 Unless and until the Revolving Credit Commitment of Bank of America,
which is $50,000,000 as of the date hereof, has been syndicated to other lenders
(who become Lenders hereunder) such that its Revolving Credit Commitment has
been reduced to $25,000,000, the Borrower covenants with the Lenders that,
notwithstanding the provisions of Section 5.13 (including 5.13(c)(ii)) or the
definition of “Permitted Acquisition”, it will not undertake, nor allow any
Subsidiary of Borrower to undertake, any Acquisition in excess of One Million
Dollars ($1,000,000.00) without the prior written consent of the Lenders, which
may be granted or withheld in their sole discretion.

     2.4 To the extent that the terms of this Credit Agreement conflict with the
terms of any Fee Letter executed in December of 2003, the terms of the Fee
Letter shall govern.

     2.5 A new Section 6.22 is hereby added to the Credit Agreement as follows:

    “6.22 Capital Expenditures. Make any Capital Expenditures in excess of Three
Million Dollars ($3,000,000) in any fiscal year.

     2.6 In connection with completing the FDMS asset acquisition, the Borrower
covenants that it shall comply and cause all its Subsidiaries to comply with
Section 5.13 of the Credit Agreement, including without limitation, executing or
causing to be executed all documents and accession agreements required
thereunder.

     2.7 If the Borrower has not completed a sale of its capital stock after
January 1, 2004 but prior to June 30, 2004, which results in the Borrower (as
opposed to any selling shareholders) receiving Net Cash Proceeds of $100,000,000
or more, then as of the close of business on June 30, 2004, all amounts
outstanding under the Revolving Credit Facility in excess of $20,000,000 shall
be converted to a new term loan (the “New Term Loan”), and the Total Revolving
Credit Commitments of the Lenders shall henceforth be that amount determined by
subtracting the balance of the New Term Loan as of July 1, 2004 from the figure
of $65,000,000. The New Term Loan shall be evidenced by new term loan notes to
be dated as of July 1, 2004 payable to the order of each Lender (the “Term Loan
Notes”), pro rata in amount in accordance with their respective Revolving Credit

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Commitment Percentages, which notes shall be in form and substance satisfactory
to the Lenders and shall provide for repayment of principal in equal
quarter-annual installments commencing October 1, 2004, based on dividing the
respective amount of each note as of July 1, 2004 by the figure of twenty (20).
The maturity date of each Term Loan Note shall be the same as the Revolving
Credit Facility Maturity Date, at which time each Term Loan Note shall be due
and payable in full together with all accrued interest. Interest on the Term
Loan Notes shall be computed at the same rate as interest on the Revolving
Credit Notes from time to time in effect, and shall be payable at the same time
as interest on the Revolving Credit Notes.

     2.8 The Revolving Credit Notes attached to the Credit Agreement for Bank of
America and AmSouth as Exhibit A-1 are hereby deleted and replaced with the
Revolving Credit Notes payable to the order of Bank of America and AmSouth
attached hereto as Exhibit A-1.

     2.9 The Applicable Margin Grid attached as Exhibit B-4 to the Credit
Agreement is hereby revised with respect to the annual unused fees to replace
the percentages of “0.20% per annum, 0.15% per annum, and 0.125% per annum”
with, respectively, the percentages of “0.50% per annum, 0.50% per annum, and
0.375% per annum”.

     2.10 The Compliance Certificate attached as Exhibit C to the Credit
Agreement is hereby deleted in its entirety and replaced with the revised
Compliance Certificate attached hereto as Exhibit C.

     2.11 On the signature page, under the signature of Bank of America as a
Lender, the Revolving Credit Commitment amount is hereby deleted and replaced
with the figure of $50,000,000. Likewise, on the signature page, under the
signature of AmSouth as a Lender, AmSouth’s Revolving Credit Commitment in the
amount of $10,000,000 is hereby deleted and replaced with the figure of
$15,000,000.00.

     3. Representations and Warranties. To induce the Lenders and the Agent to
enter into this Amendment No. 2, the Borrower represents and warrants to the
Lenders and the Agent as follows:

          3.1 Incorporation. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; has the
corporate power to own its properties and to engage in the business it conducts,
and is duly qualified and in good standing as a foreign corporation in the
jurisdictions wherein the nature of its business or the ownership of its
properties requires it to be so qualified and where the failure to be so
qualified would have a Material Adverse Effect.

          3.2 Due Authorization, No Conflicts, Etc. The execution, delivery and
performance by the Borrower of this Amendment No. 2 and any and all other
agreements, instruments and documents to be executed and/or delivered by the
Borrower pursuant hereto or in connection herewith, and the consummation by the
Borrower of the transactions contemplated hereby or thereby: (a) are within its
corporate powers; (b) has been duly authorized by all necessary corporate
action, including without limitation, the consent of stockholders where
required; (c) do not and will not conflict with or result in any breach of, or
constitute with the passage of time or the giving of notice or both, a default
under (i) any Requirement of Law or (ii) any agreement to which Borrower is a
party or by which it, or any of its property, is bound; and (d) do not require
the consent, authorization by, or approval of, or notice to, or filing or

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registration with, any governmental authority or any other Person other than
those which have been obtained and copies of which have been delivered to the
Agent pursuant to Subsection 4.1(a)(ii) hereof, each of which is in full force
and effect.

          3.3 Due Execution, Etc. This Amendment No. 2 and each of the other
agreements, instruments and documents to be executed and/or delivered by the
Borrower pursuant hereto or in connection herewith (a) has been duly executed
and delivered, and (b) constitutes the legal, valid and binding obligation of
the Borrower, enforceable against it in accordance with its terms, subject
however to state and federal bankruptcy, insolvency, reorganization and other
laws and general principles of equity affecting enforcement of the rights of
creditors generally.

     4. Conditions Precedent. The effectiveness of this Amendment No. 2 is
subject to the fulfillment of the following conditions precedent on or prior to
the Amendment No. 2 Effective Date (as hereinafter defined in Section 5 hereof):

          4.1 Conditions Precedent to Effectiveness of Amendment No. 2. The
Administrative Agent shall have received, on or prior to the Amendment No. 2
Effective Date, the following, each dated on or prior to the Amendment No. 2
Effective Date unless otherwise indicated, in form and substance satisfactory to
the Administrative Agent and in sufficient copies for each Lender:

          (a) Certified copies of (i) the resolutions of the Board of Directors
of the Borrower approving this Amendment No. 2 and each other agreement,
instrument or document to be executed by it pursuant hereto or as contemplated
hereby, and (ii) all documents evidencing other necessary corporate action and
required governmental and third party approvals, licenses and consents with
respect to this Amendment No. 2 and the transactions contemplated hereby.

          (b) A certificate of the Secretary or an Assistant Secretary of
Borrower certifying the names and true signatures of the officers of Borrower
who have been authorized to execute on behalf of Borrower this Amendment No. 2
and any other agreement, instrument or document executed or to be executed by
Borrower in connection herewith.

     (c) A certificate dated the Amendment No. 2 Effective Date signed by the
Chief Executive Officer, President or any Vice-President of Borrower, to the
following effect to their best knowledge after diligent inquiry:

               (i) The representations and warranties of the Borrower contained
in Sections 3.1, 3.2, and 3.3 of this Amendment No. 2 are true and correct on
and as of such date as though made on and as of such date;

               (ii) No Default or Event of Default has occurred and is
continuing, and no Default or Event of Default would result from the execution
and delivery of this Amendment No. 2 or the other agreements, instruments and
documents contemplated hereby; and

               (iii) The Borrower has paid or agreed to pay all amounts payable
by it pursuant to the Credit Agreement as amended hereby (including, without
limitation, all legal fees

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and expenses of Lenders’ counsel incurred in connection herewith) and any Fee
Letter, to the extent then due and payable.

          (d) Executed $50,000,000 Revolving Credit Note payable to the order of
Bank of America and the $15,000,000 Revolving Credit Note payable to the order
of AmSouth in the form attached hereto as Replacement Exhibit A-1.

          (e) Executed Accession documents from iPayment Acquisition Sub LLC in
the form attached hereto as collective Exhibit 1.

          (f) A favorable opinion of Messrs. Waller Lansden Dortch & Davis,
counsel to the Borrower, in substantially the form of Exhibit 2 hereto, and as
to such other matters as any Lender, through the Administrative Agent, may
reasonably request.

          (g) An executed copy, together with all schedules, of the Asset
Purchase Agreement by and among Borrower, iPayment Acquisition Sub LLC, and
First Data Merchant Services Corporation.

     5. Effectiveness of Amendment No. 2. This Amendment No. 2 shall become
effective at such time as (a) each of the conditions precedent set forth in
Section 4.1 hereof shall have been satisfied, and (b) counterparts of this
Amendment No. 2, executed and delivered by the Borrowers, the Lenders, the
Swingline Lender, and the Agent shall have been received by the Agent (or,
alternatively, confirmation of the execution hereof by such parties shall have
been received by the Agent). The date upon which the conditions described in
clauses (a) and (b) of the foregoing sentence shall have been fulfilled is
referred to herein as the “Amendment No. 2 Effective Date”.

     6. Closing. The Closing under this Amendment No. 2 shall occur on the
Amendment Effective Date at the offices of Boult, Cummings, Conners & Berry,
PLC, 414 Union Street, Suite 1600, Nashville, Tennessee 37219, or such other
location as the parties may agree.

     7. Governing Law, Etc. This Amendment No. 2 shall be governed by, and
construed in accordance with, the laws of the State of Tennessee as provided in
Section 10.2 of the Agreement, which Section is incorporated herein by reference
and made a part hereof as though set forth in full herein.

     8. Section Titles and Table of Contents. The Section Titles and Table of
Contents contained in this Amendment No. 2 are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
among the parties hereto.

     9. Arbitration. Any controversy or claim between or among the parties
hereto including but not limited to those arising out of or relating to this
Instrument, Agreement or document or any related instruments, agreements or
documents, including any claim based on or arising from an alleged tort, shall
be determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law), the Rules of Practice and
Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and
Mediation Services, Inc. (J.A.M.S.), and the “Special Rules” set forth below. In
the event of any

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inconsistency, the Special Rules shall control. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Any party to this
Agreement may bring an action, including a summary or expedited proceeding, to
compel arbitration of any controversy or claim to which this agreement applies
in any court having jurisdiction over such action.

          (a) Special Rules. The arbitration shall be conducted in the city of
the Borrower’s domicile at the time of the execution of this instrument,
agreement or document and administered by J.A.M.S. who will appoint an
arbitrator; if J.A.M.S. is unable or legally precluded from administering the
arbitration, then the American Arbitration Association will serve. All
arbitration hearings will be commenced within 90 days of the demand for
arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional
60 days. In any such arbitration, the prevailing party will be awarded
attorney’s fees, costs of arbitration and all out-of-pocket expenses against the
defaulting party.

          (b) Reservation of Rights. Nothing in this instrument, agreement or
document shall be deemed to (i) limit the applicability of any otherwise
applicable statutes of limitation or repose or any waivers contained in this
Agreement; or (ii) be a waiver by the Administrative Agent or Lenders of the
protection afforded to them by 12 U.S.C. § 91 or any substantially equivalent
state law; or (iii) limit the right of the Administrative Agent or Lenders
hereto (A) to exercise self help remedies such as (but not limited to) setoff,
or (B) to foreclose against any real or personal property collateral, or (C) to
obtain from a court provisional or ancillary remedies such as (but not limited
to) injunctive relief, writ of possession or the appointment of a receiver. The
Administrative Agent or Lenders may exercise such self help rights, foreclose
upon such property, or obtain such provisional or ancillary remedies before,
during or after the pendency of any arbitration proceeding brought pursuant to
this instrument, agreement or document. Neither this exercise of self help
remedies nor the institution or maintenance of an action for foreclosure or
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.

     10. Counterparts. This Amendment No. 2 may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.

     11. Agreement to Remain in Effect. Except as expressly provided herein, the
Agreement and each other Collateral Document shall be and shall continue in full
force and effect in accordance with its respective terms.

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

              AGENT   BORROWER BANK OF AMERICA, N.A., as
Administrative Agent   IPAYMENT, INC., a Delaware
corporation
 
           
By:
      By:    

 

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Its:
  SVP   Its:   EVP
 
            LENDERS:        
 
            BANK OF AMERICA, N.A.   AMSOUTH BANK
 
           
By:
      By:    

 

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Its:
  SVP   Its:   Vice President

                     
Revolving Credit
          Revolving Credit        
Commitment:
  $ 50,000,000     Commitment:   $ 15,000,000                        
Letter of Credit
                   
Sublimit:
  $ 3,000,000                                    
Swingline Commitment
                   
Sublimit:
  $ 500,000              

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EXHIBIT A-l

REVOLVING CREDIT NOTE

     
$50,000,000.00
  December 19, 2003
Davidson County, Tennessee

     FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to
pay to the order of

     Bank of America, N.A. (the “Lender”), at the offices of Bank of America,
N.A. (the “Administrative Agent”) located at 414 Union Street, Nashville,
Tennessee 37219 (or at such other place or places as the Administrative Agent
may designate), the principal sum of up to

     FIFTY MILLION AND NO/DOLLARS ($50,000,000.00), or such lesser amount as may
constitute the unpaid principal amount of the Revolving Credit Loans payable to
the Lender, under the terms and conditions of this Revolving Credit Note (this
“Revolving Credit Note”) and that certain Credit Agreement, dated as of
August 1, 2003, by and between the Borrower, the Administrative Agent, and the
Lenders set forth therein (as amended by Amendment No. 1 dated September 30,
2003 and Amendment No. 2 dated as of December 19, 2003, and as the same may be
further amended, modified, renewed, restated, extended or supplemented from time
to time, collectively the “Credit Agreement”).

     The Borrower also unconditionally promises to pay interest on the aggregate
unpaid principal amount of this Revolving Credit Note at the rates provided in
the Credit Agreement.

     This Revolving Credit Note is one of a series of Revolving Credit Notes (as
defined in the Credit Agreement) issued to evidence the Revolving Credit
Facility made pursuant to Article II of the Credit Agreement, and is a renewal
and modification of as well as an increase in that certain Revolving Credit Note
of undersigned to Lender dated as of August 1, 2003. The defined terms in the
Credit Agreement are used herein with the same meanings. All of the terms,
conditions and covenants of the Credit Agreement are expressly made a part of
this Revolving Credit Note by reference in the same manner and with the same
effect as if set forth herein at length, and any holder of this Revolving Credit
Note is entitled to the benefits of and remedies provided in the Credit
Agreement and the other Loan Documents. Reference is made to the Credit
Agreement for provisions relating to the interest rate, maturity, payment,
prepayment, acceleration and other terms affecting this Revolving Credit Note.

     The Borrower may borrow, repay and reborrow under this Revolving Credit
Note in accordance with the terms and conditions of the Credit Agreement. The
Borrower shall repay the Revolving Credit Notes in full on the Revolving Credit
Facility Termination Date.

     In the event of an acceleration of the maturity of this Revolving Credit
Note, this Revolving Credit Note, and all other indebtedness of the Borrower to
the Lender, shall become immediately due and payable, without presentation,
demand, protest or notice of any kind, all of which are hereby waived by the
Borrower.

     In the event this Revolving Credit Note is not paid when due at any stated
or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys’
fees.

     This Revolving Credit Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of Tennessee.

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     Any controversy or claim between or among the parties hereto including but
not limited to those arising out of or relating to this Note or any related
instruments, agreements or documents, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in accordance
with the Federal Arbitration Act (or if not applicable, the applicable state
law), the Rules of Practice and Procedure for the Arbitration of Commercial
Disputes of J.A.M.S/Endispute or any successor thereof (“J.A.M.S.”), and the
“Special Rules” set forth below. In the event of any inconsistency, the Special
Rules shall control. Judgment upon any arbitration award may be entered in any
court having jurisdiction. Any party to this Note may bring an action, including
a summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Note applies in any court having jurisdiction over such
action.

     (a) Special Rules. The arbitration shall be conducted in the city of the
undersigned’s domicile at the tune of the execution of this instrument,
agreement or document and administered by J.A.M.S who will appoint an
arbitrator; if J.A.M.S. is unable or legally precluded from administering the
arbitration, then the American Arbitration Association will serve. All
arbitration hearings will be commenced within 90 days of the demand for
arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional 60
days.

     (b) Reservation of Rights. Nothing in this arbitration provision shall be
deemed to (i) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this arbitration provision; or
(ii) be a waiver by the Agent or any Lender of the protection afforded to it by
12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the
right of the Agent or any Lender hereto (a) to exercise self help remedies such
as (but not limited to) setoff, or (b) to foreclose against any real or personal
property collateral, or (c) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, writ of possession or
the appointment of a receiver. The Agent or any Lender may exercise such self
help rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this instrument, agreement or document Neither
this exercise of self help remedies nor the institution or maintenance of an
action for foreclosure or provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in such action, to
arbitrate the merits of the controversy or claim occasioning resort to such
remedies.

     IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to
be executed under seal by its duly authorized corporate officers as of the day
and year first above written.

              iPAYMENT, INC.
 
       

  BY:    

     

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  ITS:   EVP

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REVOLVING CREDIT NOTE

     
$15,000,000.00
  December 19, 2003
Davidson County, Tennessee

     FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to
pay to the order of

     AmSouth Bank, an Alabama state chartered bank (the “Lender”), at the
offices of Bank of America, N.A. (the “Administrative Agent”) located at 414
Union Street, Nashville, Tennessee 37219 (or at such other place or places as
the Administrative Agent may designate), the principal sum of up to

     FIFTEEN MILLION AND NO/DOLLARS ($15,000,000.00), or such lesser amount as
may constitute the unpaid principal amount of the Revolving Credit Loans payable
to the Lender, under the terms and conditions of this Revolving Credit Note
(this “Revolving Credit Note”) and that certain Credit Agreement, dated as of
August 1, 2003, by and between the Borrower, the Administrative Agent, and the
Lenders set forth therein (as amended by Amendment No. 1 dated September 30,
2003 and Amendment No. 2 dated as of December 19, 2003 and as the same may be
amended, modified, renewed, restated, extended or supplemented from time to
time, collectively, the “Credit Agreement”).

     The Borrower also unconditionally promises to pay interest on the aggregate
unpaid principal amount of this Revolving Credit Note at the rates provided in
the Credit Agreement.

     This Revolving Credit Note is one of a series of Revolving Credit Notes (as
defined in the Credit Agreement) issued to evidence the Revolving Credit
Facility made pursuant to Article II of the Credit Agreement, and is a renewal
and modification of as well as an increase in that certain Revolving Credit Note
of undersigned to Lender dated as of October 31, 2003. The defined terms in the
Credit Agreement are used herein with the same meanings. All of the terms,
conditions and covenants of the Credit Agreement are expressly made a part of
this Revolving Credit Note by reference in the same manner and with the same
effect as if set forth herein at length, and any holder of this Revolving Credit
Note is entitled to the benefits of and remedies provided in the Credit
Agreement and the other Loan Documents. Reference is made to the Credit
Agreement for provisions relating to the interest rate, maturity, payment,
prepayment, acceleration and other terms affecting this Revolving Credit Note.

     The Borrower may borrow, repay and reborrow under this Revolving Credit
Note in accordance with the terms and conditions of the Credit Agreement. The
Borrower shall repay the Revolving Credit Notes in full on the Revolving Credit
Facility Termination Date.

     In the event of an acceleration of the maturity of this Revolving Credit
Note, this Revolving Credit Note, and all other indebtedness of the Borrower to
the Lender, shall become immediately due and payable, without presentation,
demand, protest or notice of any kind, all of which are hereby waived by the
Borrower.

     In the event this Revolving Credit Note is not paid when due at any stated
or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys’
fees.

     This Revolving Credit Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of Tennessee.

- 1 -

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

 

     Any controversy or claim between or among the parties hereto including but
not limited to those arising out of or relating to this Note or any related
instruments, agreements or documents, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in accordance
with the Federal Arbitration Act (or if not applicable, the applicable state
law), the Rules of Practice and Procedure for the Arbitration of Commercial
Disputes of J.A.M.S./Endispute or any successor thereof (“J.A.M.S.”), and the
“Special Rules” set forth below. In the event of any inconsistency, the Special
Rules shall control. Judgment upon any arbitration award may be entered in any
court having jurisdiction. Any party to this Note may bring an action, including
a summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Note applies in any court having jurisdiction over such
action.

     (a) Special Rules. The arbitration shall be conducted in the city of the
undersigned’s domicile at the time of the execution of this instrument,
agreement or document and administered by J.A.M.S who will appoint an
arbitrator; if J.A.M.S. is unable or legally precluded from administering the
arbitration, then the American Arbitration Association will serve. All
arbitration hearings will be commenced within 90 days of the demand for
arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional 60
days.

     (b) Reservation of Rights. Nothing in this arbitration provision shall be
deemed to (i) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this arbitration provision; or
(ii) be a waiver by the Agent or any Lender of the protection afforded to it by
12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the
right of the Agent or any Lender hereto (a) to exercise self help remedies such
as (but not limited to) setoff, or (b) to foreclose against any real or personal
property collateral, or (c) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, writ of possession or
the appointment of a receiver. The Agent or any Lender may exercise such self
help rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this instrument, agreement or document. Neither
this exercise of self help remedies nor the institution or maintenance of an
action for foreclosure or provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in such action, to
arbitrate the merits of the controversy or claim occasioning resort to such
remedies.

     IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to
be executed under seal by its duly authorized corporate officers as of the day
and year first above written.

              iPAYMENT, INC.
 
       

  BY:    

      /s/ Afshin Yazdian

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

 
       

  ITS:   EVP

- 2 -

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

 

EXHIBIT C
COMPLIANCE CERTIFICATE

     THIS CERTIFICATE is given pursuant to Section 5.1(d) of the Credit
Agreement, dated as of              , 2004, among iPayment, Inc. (the
“Company”), certain banks and other financial institutions from time to time
parties thereto (the “Lenders”), and Bank of America, N.A., as Administrative
Agent for the Lenders (as amended, modified, supplemented or restated from time
to time, the “Credit Agreement,” the terms defined therein being used herein as
therein defined).

     The undersigned hereby certifies that:

     i. He is the duly elected [President] [Chief Financial Officer] of the
Company.

     ii. Enclosed with this Certificate are copies of the financial statements
of the Company and its Subsidiaries as of               and for the [
         -quarter period] [year] then ended, required to be delivered under
Section [5.1(a)] [5.1(b)] of the Credit Agreement. Such financial statements
fairly present the financial condition of the Company and its Subsidiaries on a
consolidated basis as of the date indicated and the results of operation of the
Company and its Subsidiaries on a consolidated basis for the period covered
thereby.

     iii. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Company and its
Subsidiaries during the accounting period covered by such financial statements.

     iv. The examination described in paragraph iii above did not disclose, and
the undersigned has no knowledge of the existence of, any Default or Event of
Default during or at the end of the accounting period covered by such financial
statements or as of the date of this Certificate.

     v. Attached to this Certificate as Attachment A is a Covenant Compliance
Worksheet reflecting the computation of the financial covenants set forth in
Article VI of the Credit Agreement as of the last day of the period covered by
the financial statements enclosed herewith.

     IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the day of            , 2004.

              [signature of President or
CFO or VP-Finance of Company]
 
       

  Name:    

     

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

 
       

  Title:    

     

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

- 1 -

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

 

Covenant Compliance Worksheet
For
iPayment, Inc.

                            1.    
(a) Base Stockholders Equity per section 6.9
  $ 93,000,000                  
 
   

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

                   
 
                       
(b) 75% of the cumulative Consolidated Net Income (to the extent positive) for
each quarter ending from and after June 30, 2003.
  $                    
 
   

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

                   
 
                       
 
  $                    
 
   

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

                   
(c) 100% of the net proceeds from any equity issuances of the Borrower after
June 30, 2003.
          $               
 
           

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

           
 
                       
(d) Add lines l(a), l(b) and l(c).
          $                        
 
           

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

           
 
                  2.    
Stockholders Equity as of measurement date
          $            
 
           

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

           
 
                       
Line 2 must exceed line l(d)
               

 

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

 

                            1.    
(a) Consolidated Debt1 of Borrower and any Subsidiaries as of measurement date
  $                                
 
   

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

                   
 
                       
(b) Cash Investments then on hand
  $                    
 
   

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

                   
 
                       
(c) Subtract Line l(b) from Line l(a):
          $                        
 
           

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

           
 
                  2.    
EBITDA as of measurement date
                       
(a) Consolidated Net Income for immediately preceding four quarters
          $            
 
           

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

           
 
                       
(b) The Sum of the following for such period of
                       
Interest Expense
  $                    
 
   

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

                   
Taxes
  $                    
 
   

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

                   
Depreciation and Amortization
  $                    
 
   

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

                   
 
                       
Total
          $            
 
           

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

           
 
                       
(c) FDMS Portfolio EBITDA for applicable pre-acquisition periods
          $            
 
           

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

           
 
                       
(d) EBITDA: Add lines (2)(a), (2)(b) and 2(c)
          $            
 
           

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

           
 
                  3.    
Consolidated Debt to EBITDA Ratio: Divide line (l)(c) by line (2)(d)
               

     Consolidated debt at                   

         
 
  $                
 
   

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

   
 
  $    
 
   

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

   

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

1   Attach calculation of Consolidated Debt of Borrower and Subsidiaries on a
consolidated basis.

 

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

 

                            1.    
Consolidated Senior Debt of Borrower and any Subsidiaries as of measurement date
          $                        
 
           

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

           
 
                  2.    
EBITDA as of measurement date
                         
(a) Consolidated Net Income for immediately preceding four quarters
          $            
 
           

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

           
 
                       
(b) The Sum of the following for such period of
                       
Interest Expense
  $                                
 
   

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

                   
Taxes
  $                    
 
   

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

                   
Depreciation and Amortization
  $                    
 
   

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

                   
 
                       
Total
          $            
 
           

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

           
 
                       
(c) FDMS Portfolio EBITDA for applicable pre-acquisition periods
          $            
 
           

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

           
 
                       
(d) EBITDA: Add lines (2)(a), (2)(b) and 2(c)
          $            
 
           

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

           
 
                  3.    
Consolidated Senior Debt to EBITDA Ratio: Divide line 1 by line 2(d)
                                   
 
           

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

   

 

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

 

                            1.    
EBITDA as of measurement date
                                   
 
                       
 
                       
(a) Consolidated Net Income for immediately preceding four quarters
          $            
 
           

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

           
 
                       
(b) The Sum of the following for such period of
                       
Interest Expense
  $                                
 
   

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

                   
Taxes
  $                    
 
   

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

                   
Depreciation and Amortization
  $                    
 
   

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

                   
 
                       
Total
          $            
 
           

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

           
 
                       
(c) FDMS Portfolio EBITDA for applicable pre-acquisition periods
          $            
 
           

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

           
 
                       
(d) EBITDA: Add lines (2)(a), (2)(b) and 2(c)
          $            
 
           

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

   

- 4 -

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

 

ATTACHMENT B

Interest Rate and Unused Fee Calculation Worksheet

                                    1.    
Consolidated Debt of Borrower and any Subsidiaries as of measurement date
          $                                
 
           

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

                   
 
                          2.    
EBITDA as of measurement date
                               
 
                               
(a) Consolidated Net Income for immediately preceding four quarters
          $                    
 
           

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

                   
 
                               
(b) The Sum of the following for such period of
                               
Interest Expense
  $                                        
 
   

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

                           
Taxes
  $                            
 
   

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

                           
Depreciation and Amortization
  $                            
 
   

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

                           
 
                               
Total
          $                    
 
           

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

                   
 
                               
(c) FDMS Portfolio EBITDA for applicable pre-acquisition periods
          $                    
 
           

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

                   
 
                               
(d) EBITDA: Add lines (2)(a), (2)(b) and 2(c)
          $                    
 
           

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

                   
 
          $               3.    
Consolidated Debt to EBITDA Ratio: Divide line (1) by line (2)(d)
           

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

                   
 
                          4.    
Applicable Margins1 effective as of the third (3rd) Business Day after delivery
hereof and delivery of such other items required by Credit Agreement (based on
the matrix set forth in Exhibit B-4 as referenced in the definition of
Applicable Margin in the Credit Agreement):
                               
 
                               
Applicable Margin (LIBOR Loans)
              %                
 
           

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

                   
 
                          5.    
Applicable unused fee percentage rate2 effective as of the third (3rd) Business
Day after delivery hereof and delivery of such other items required by Credit
Agreement (based on matrix set forth in Section 2.7 (a) and Exhibit B-4 of the
Credit Agreement) applied to the average daily Unutilized Revolving Credit
Commitment.
              %                
 
           

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

           

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

1   Change in Applicable Margin is subject to satisfaction of the additional
terms and conditions set forth in the Credit Agreement, including without
limitation, the terms and conditions set forth in the definition of Applicable
Margin therein.   2   Change in applicable unused fee percentage rate is subject
to satisfaction of the additional terms and conditions set forth in the Credit
Agreement, including without limitation, the terms and conditions set forth in
Section 2.8(a) and Exhibit B-4 therein.

 

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

 

EXHIBIT 1

GUARANTOR ACCESSION

     THIS GUARANTOR ACCESSION, dated as of December 19, 2003, is delivered by
iPayment Acquisition Sub LLC, a Delaware limited liability company (the
“Guarantor”) pursuant to the Guaranty and Suretyship Agreement referred to
hereinbelow.

     Reference is hereby made to the Guaranty and Suretyship Agreement,
initially dated as of August 1, 2003, made by the Guarantors (as defined
therein) named therein (as amended, modified, supplemented or restated from time
to time, the “Guaranty,” capitalized terms defined therein being used herein as
therein defined) in favor of Bank of America, N.A., as Agent for the benefit of
the Guaranteed Parties, its successors and assigns.

     The undersigned is a direct or indirect Subsidiary of IPAYMENT, INC. (the
“Borrower”) and is required to guarantee the Obligations. The undersigned hereby
adopts and makes for itself all of the representations and warranties set forth
in Article V of the Guaranty and Suretyship Agreement as if such representations
and warranties were set forth herein at length.

     The undersigned hereby acknowledges that, upon the execution and delivery
of this Guarantor Accession, it will become a party to the Guaranty and
Suretyship Agreement as a Guarantor thereunder. The undersigned hereby adopts
the terms and provisions of the Guaranty and Suretyship Agreement and agrees to
be bound by all of the duties, liabilities and obligations of the Guarantors set
forth in the Guaranty and Suretyship Agreement. This Guarantor Accession and its
attachments are hereby incorporated into the Guaranty and Suretyship Agreement
and made a part thereof.

              IPAYMENT ACQUISITION SUB LLC :
 
       

  By:   /s/ Afshin Yazdian

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

  Name:   Afshin Yazdian

  Title:   Manager

- 1 -

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

 

ACCESSION TO
GUARANTOR SECURITY AGREEMENT

     THIS ACCESSION TO GUARANTOR SECURITY AGREEMENT, dated as of December 19,
2003, is delivered by iPayment Acquisition Sub LLC, a Delaware limited liability
company (the “Guarantor”), to Bank of America, N.A., as Administrative Agent
(the “Administrative Agent”) under the Credit Agreement referred to below,
pursuant to Section 7.9 of the Guarantor Security Agreement referred to below.

     Reference is made to the Credit Agreement initially dated as of August 1,
2003, among the Borrower, the Administrative Agent and the Lenders identified
therein (as amended, modified, supplemented or restated from time to time, the
“Credit Agreement”). Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Credit Agreement.

     Pursuant to the Credit Agreement, certain Affiliates of the Borrower have
executed and delivered the Guaranty Agreement, dated as of August 1, 2003, and
the Guarantor Security Agreement, dated as of August 1, 2003, and any and all
future Subsidiaries of the Borrower are also required to become parties to such
agreements, subject to the provisions of the Credit Agreement.

     The undersigned Guarantor is a Subsidiary of the Borrower, and as required
by the Credit Agreement, has acceded as of the date hereof to the Guaranty
Agreement, thereby guaranteeing the Obligations. To secure its obligations under
the Guaranty Agreement, the undersigned Guarantor hereby adopts and hereby
grants a security interest in its Collateral as set forth in Article II of the
Guarantor Security Agreement as if such grant was set forth herein at length.
The locations for the filing of financing statements to perfect the security
interest granted hereby and the location of each of the Guarantor’s Collateral
and records are listed on the revised Exhibits A and B to the Guarantor Security
Agreement attached hereto.

     The undersigned hereby acknowledges that, upon the execution and delivery
of this Accession, it will become a party to the Guarantor Security Agreement.
The undersigned hereby adopts the terms, provisions, representations and
warranties of the Guarantor Security Agreement and agrees to be bound thereby.
This Accession and its attachments are hereby incorporated into the Guarantor
Security Agreement and made a part thereof.

              IPAYMENT ACQUISITION SUB LLC
 
       

  By:   /s/ Afshin Yazdian

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

  Title:   Secretary

- 1 -

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

 

EXHIBIT A TO SECURITY AGREEMENT

SCHEDULE OF LOCATIONS FOR FILING UCC-1 FINANCING STATEMENTS

A.   iPayment, Inc. (Delaware & Tennessee Secretary of State)   B.   E-Commerce
Exchange, Inc. (Delaware Secretary of State)   C.   Online Data Corp. (Delaware
& Illinois Secretary of State)   D.   iPayment of Maine, Inc. (Delaware & Maine
Secretary of State)   E.   iPayment of Eureka, Inc. (Delaware Secretary of
State)   F.   Quad City Acquisition Sub, Inc. (Delaware Secretary of State)   G.
  CardPayment Solutions, L.L.C. (Delaware Secretary of State)   H.   Cardsync
Processing, Inc. (California Secretary of State)   I.   iPayment Technologies,
Inc. (California Secretary of State)   J.   iPayment of California, LLC
(Tennessee & California Secretary of State)   K.   1st National Processing, Inc.
(Nevada & California Secretary of State)   L.   iPayment Acquisition Sub LLC
(Delaware Secretary of State)

- 2 -

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

 

EXHIBIT B TO SECURITY AGREEMENT

LOCATIONS OF RECORDS AND COLLATERAL

     The chief executive office and principal place of business of the Guarantor
is 40 Burton Hills Boulevard, Suite 415, Nashville, Tennessee 37215. This is
also the location where the Borrower maintains billing and related records
relating to Accounts Receivable.

     Set forth below is a list of all locations where personal property valued
at $50,000.00 or more in the aggregate of Guarantor is presently maintained.

List of Inventory, Machinery and Equipment Locations

              Address

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

  City

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

  State

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

  Owner of Premises

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

40 Burton Hills, Suite 415
  Nashville   TN   iPayment, Inc.
 
           
9121 Oakdale Avenue, Suite 201
  Chatsworth   CA   iPayment of California, LLC, 1st National Processing, Inc.,
iPayment Technologies, Inc., E-Commerce Exchange, Inc.
 
           
25322 Rye Canyon
Road
  Santa Clarita   CA   Cardsync, Inc.
 
           
Two Westbrook
  Westchester   IL   Online Data Corp., Quad City
Corporate Center, Suite 200
      Acquisition Sub, Inc., iPayment of Maine, Inc.
 
           
4213 State Street Suite 303
  Santa Barbara   CA   CardPayment Solutions, L.L.C.

- 3 -

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

 

ACCESSION TO PLEDGE AMENDMENT

     THIS PLEDGE AMENDMENT dated as of December 19, 2003, is delivered by
iPayment, Inc. (the “Pledgor”) pursuant to Section 3 of the Pledge Agreement
referred to hereinbelow. The Pledgor hereby agrees that this Pledge Amendment
may be attached to the Pledge Agreement, dated as of August 1, 2003, made by the
Pledgor to Bank of America, N.A., as Agent (as amended, modified, supplemented
or restated from time to time, the “Pledge Agreement,” capitalized terms defined
therein being used herein as therein defined), and that the Pledged Securities
listed on Annex A to this Pledge Amendment shall be deemed to be part of the
Pledged Securities within the meaning of the Pledge Agreement and shall become
part of the Collateral and shall secure all of the Pledge Obligations as
provided in the Pledge Agreement. This Pledge Amendment and its attachments are
hereby incorporated into the Pledge Agreement and made a part thereof.

              IPAYMENT, INC.
 
       

  By:   /s/ Afshin Yazdian

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

- 1 -

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

 

ANNEX A
PLEDGED SECURITIES

Part I. Pledged Stock

                                                                             
Percentage of                                     Outstanding Name of Issuing  
        Type of   Number   Certificate   Shares of Corporation

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

  Name of Pledger

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

  Shares

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

  of Shares

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

  Number

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

  Capital Stock

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

iPayment Technologies, Inc.
  iPayment, Inc.   Common     1,000       1       100 %
1st National Processing, Inc. (formerly First Acquisition Company)
  iPayment, Inc.   Common     100       2       100 %
OnLine Data Corp.
  iPayment, Inc.   Common     1,000       1       100 %
iPayment of Maine, Inc.
  iPayment, Inc.   Common     1,000       1       100 %
Cardsync Processing, Inc.
  iPayment, Inc.   Common     1,000       1       100 %
iPayment of Eureka, Inc.
  iPayment, Inc.   Common     1,000       1       100 %
Quad City Acquisition Sub, Inc.
  iPayment, Inc.   Common     1,000       1       100 %
E-Commerce Exchange, Inc.
  iPayment, Inc.   Common     1,000       2       100 %

- 2 -

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

 

Part II. Pledged Interests

                  Name of Limited             Liability Company,            
Partnership or   Name of   Name of   Ownership Other Entity

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

  Pledger

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

  Interest

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

  Percentage

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

Card Payment Solutions, L.L.C.
  iPayment, Inc.   Membership Interest     100 %
 
               
iPayment of California, LLC
  iPayment, Inc.   Membership Interest     100 %
 
               
iPayment
Acquisition Sub LLC
  iPayment, Inc.   Membership Interest     100 %

Part III. Pledged Notes

                                    Original                       Principal    
Date

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    Lender

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    Borrower

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    Amount

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  Part IV. Rights and/or Restrictions in Favor of Third Parties in respect of
Pledged Stock, Pledged Interests and Pledged Notes.

- 3 -

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EXHIBIT 2

         

  WALLER LANSDEN DORTCH & DAVIS    

  A PROFESSIONAL LIMITED LIABILITY COMPANY    

  NASHVILLE CITY CENTER    

  511 UNION STREET, SUITE 2100    

  POST OFFICE BOX 198966    

  NASHVILLE, TENNESSEE 37219-8966    
WALLER LANSDEN DORTCH & DAVIS, LLP
  (615) 244-6380   WALLER LANSDEN DORTCH & DAVIS
AFFILIATED WITH THE PROFESSIONAL LIMITED LIABILITY COMPANY
  FAX: (615) 244-6804   A PROFESSIONAL LIMITED LIABILITY COMPANY
520 SOUTH GRAND AVENUE, SUITE 800
  www.wallerlaw.com   809 SOUTH MAIN STREET
LOS ANGELES, CALIFORNIA 90071
      POST OFFICE BOX 1035
(213) 362-3680
      COLUMBIA, TENNESSEE 38402-1035

      (931) 388-6031

December 19, 2003

Bank of America, N.A. as Administrative Agent and Lender
    under the Credit Agreement, dated August 7, 2003 414 Union Street
    Nashville, Tennessee 37219

  Re: Amendment No. 2 to Credit Agreement, dated as of December 19, 2003 (the
“Amendment”) between Bank of America, N.A., as Administrative Agent (the
“Agent”), the Lenders on Schedule I hereto (the “Lenders”), and iPayment, Inc. a
Delaware corporation, as the borrower (the “Borrower”).

Ladies and Gentlemen:

     We have acted as special counsel to the Borrower and iPayment Acquisition
Sub LLC, a Delaware limited liability company (“AcqSub” and together with the
Borrower, the “Loan Parties”) in connection with the negotiation, execution, and
delivery of the Amendment and certain related documents and instruments. This
opinion is being delivered to you at the request of the Borrower as required in
connection with the Amendment.

     In our capacity as such counsel we have examined originals, or copies
identified to our satisfaction as being true copies, of the following documents,
each dated as of the date hereof (unless otherwise noted):

1.   the Amendment;   2.   the $15,000,000 Revolving Credit Note;   3.   the
$50,000,000 Revolving Credit Note;   4.   the Guarantor Accession, between
AcqSub and the Agent;   5.   the Accession to Guarantor Security Agreement,
between AcqSub and the Agent;

1

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WALLER LANSDEN DORTCH & DAVIS
   
A PROFESSIONAL LIMITED LIABILITY COMPANY
   

6.   the Accession to Pledge Amendment, between the Borrower and the Agent;   7.
  the charter or articles or certificate of incorporation and bylaws of the
Borrower, and the articles of organization and operating agreement of AcqSub
(with respect to each Loan Party, its “Governing Documents”): and   8.  
resolutions adopted by or on behalf of each Loan Party.

               The documents in 1-6 above are sometimes referred to collectively
as the “Loan Documents.” In addition, we have examined such other documents,
agreements and certificates as we have deemed necessary or appropriate as a
basis for the opinion set forth below.

               As used in this opinion, the term “Governmental Authorities”
shall mean any executive, legislative, judicial, administrative, or regulatory
body of the State of Tennessee or the United States of America having
jurisdiction over the Loan Parties. The term “Applicable Law” means statutes,
rules, regulations, and judicial decisions of the State of Tennessee and the
United States of America that, in our experience, are normally applicable to
transactions of the type contemplated by the Loan Documents, and the Delaware
General Corporation Law and Delaware Limited Liability Company Act. The term
“Applicable Order” means any order, ruling, decree, judgment, or similar action
of a Governmental Authority or mediator or arbitrator known to us or identified
to us by the Loan Parties as being applicable to them. The term “Applicable
Contracts” shall mean any agreement or instrument to which the Loan Parties are
subject and which have been specifically identified to us by the Borrower in
Exhibit 1 hereto. The abbreviation “TCA” means the Tennessee Code Annotated as
in effect in the State of Tennessee on the date hereof.

               In addition to the foregoing, we have examined originals, or
copies identified to our satisfaction as being true copies, of such records,
documents or other instruments as in our judgment are necessary or appropriate
to enable us to render the opinions expressed below. We have obtained and relied
upon such certificates and assurances from public officials as we have deemed
necessary. In all such examinations, we have assumed the genuineness of all
signatures on original and certified documents (other than the signatures of the
Loan Parties to the Loan Documents), and the conformity to original or certified
documents of all documents submitted to us as conformed or photostatic copies.

               We are admitted to the bar in the State of Tennessee. We express
no opinion herein as to any laws other than (i) the laws of the State of
Tennessee, (ii) the Delaware General Corporation Law and the Delaware Limited
Liability Company Act, and (iii) the federal laws of the United States to the
extent specifically referred to herein.

2

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WALLER LANSDEN DORTCH & DAVIS

A PROFESSIONAL LIMITED LIABILITY COMPANY

Assumptions

     In rendering this opinion we have assumed without having made any
independent investigation of the facts and without expressing any opinion with
respect to (except, in each case, with respect to matters on which we have
specifically opined below), the following:

(i)   that all factual matters, including without limitation representations and
warranties contained in the Loan Documents or in certificates provided to us by
or on behalf of the Loan Parties or others (including the certificate attached
as Exhibit 1 hereto), are true and correct as set forth therein;   (ii)   the
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party do not and will not conflict with, contravene, violate or
constitute a default under (i) any lease, indenture, instrument or other
agreement to which such Loan Party or its property is subject (other than the
Applicable Contracts as to which we express our opinion in paragraph 4 herein)
or (ii) any rule, law or regulation to which such Loan Party is subject (other
than Applicable Laws as to which we express our opinion in paragraph 4 herein);
  (iii)   no authorization, consent or other approval of, notice to or filing
with any court, governmental authority or regulatory body (other than
Governmental Approvals as to which we express our opinion in paragraph 4 herein)
is required to authorize or is required in connection with the execution,
delivery or performance by any Loan Party of any Loan Document to which it is a
party or the transactions contemplated thereby; and   (iv)   each Loan Document
is the legal, valid, and binding obligation of each party thereto (other than
the Loan Parties), enforceable against such party in accordance with its terms.

     On the basis of the foregoing, and in reliance thereon, and subject to the
limitations, qualifications and exceptions set forth herein, we are of the
opinion that:

     1.     Based solely on the good standing certificates identified on
Schedule II hereto, each Loan Party is a corporation or limited liability
company existing and in good standing under the laws of its state of
organization listed on Schedule II hereto.

3

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WALLER LANSDEN DORTCH & DAVIS

A PROFESSIONAL LIMITED LIABILITY COMPANY

     2.     Each Loan Party has the corporate or limited liability power and
authority, as the case may be, to execute, deliver, and perform the Loan
Documents to which it is a party.

     3.     Each Loan Party has taken all necessary corporate or limited
liability company action, as the case may be, to authorize its execution,
delivery, and performance of the Loan Documents to which it is a party.

     4.      The execution, delivery and performance of each Loan Document by
each Loan Party do not (i) violate any provision of its Governing Documents,
(ii) violate any provision of Applicable Law, (iii) violate or contravene any
Applicable Order, (iv) conflict with or constitute a breach or result in the
imposition of any lien under any Applicable Contract, Applicable Law or
Applicable Order, or (v) require any registration with, consent or approval of,
or notice to, or filing with or other action to, with or by, any Governmental
Authority.

     5.      Each Loan Party has executed and delivered each Loan Document to
which it is a party, and each such Loan Document constitutes the valid and
binding obligation of the executing Loan Party, enforceable in accordance with
its terms against such Loan Party.

Qualifications

     The opinions set forth above are qualified as follows:

     a.     The opinions expressed above are subject to (i) the effect of all
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors’ rights generally, and (ii) the
effect of general principles of equity including, without limitation, concepts
of materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law.

     b.      We express no opinion as to the effect of compliance by the Agent
or any Lender with any laws, rules or regulations applicable to the Loan
Documents or the transactions contemplated thereby because of the status of the
Agent or any Lender as a regulated entity or the nature of the Agent or any
Lender’s businesses. We express no opinion regarding compliance by the Agent or
any Lender with any law regulating rates of interest, loan charges, or
commitment fees.

     c.     Where we render an opinion on facts “known to us” or “to our
knowledge,” we have based such opinion not upon our own independent verification
but solely upon (i) receipt of certificates executed by the Loan Parties and
other persons covering such matters, and (ii) the conscious awareness of any
attorney actively involved in the negotiation and preparation of the Loan
Documents. Where

4

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WALLER LANSDEN DORTCH & DAVIS

A PROFESSIONAL LIMITED LIABILITY COMPANY

we render an opinion “to our knowledge,” we have therefore conducted no
independent investigation of such matters.

     d.      We express no opinion regarding provisions of the Loan Documents
that purport to confer jurisdiction upon any court, which lay venue in a
specific court or courts or which require or pertain to arbitration.

     e.      We express no opinion with respect to the enforceability of (i)
provisions stating that the failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of such right or remedy, (ii) rights to
attorneys’ fees to the extent limited by applicable laws that provide that any
recovery of attorneys’ fees is limited to reasonable attorneys’ fees,
(iii) purported waivers of the benefits of statutory provisions or common law
rights that may be unenforceable where held to be contrary to public policy; or
(iv) the enforceability of self-help provisions and provisions which purport to
establish evidentiary standards.

     This opinion is given as of the date hereof, and we disclaim any obligation
to update this opinion letter after the date hereof. This opinion is rendered
only to the Agent and the Lenders (and their respective successors and assigns)
and is solely for their benefit in connection with the above transactions. This
opinion may not be relied upon by the Agent or the Lenders for any other
purpose, or quoted to or relied upon by any other person, firm, corporation, or
other entity for any purpose without our prior written consent, other than
regulatory authorities having jurisdiction over the Agent or any Lender. The
rendering of this opinion does not affect our opinion to you dated
August 7,2003, and you may continue to rely on such opinion as to the subject
matter addressed therein, subject to the assumptions, qualifications, and
limitations expressed therein.

     
 
  Very truly yours,

  /s/ Waller Lansden Dortch & Davis PLLC

5

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Exhibit 1 to Opinion of
Waller Lansden Dortch & Davis

iPayment, Inc. and Subsidiaries

     I, Afshin M. Yazdian, as Executive Vice President and General Counsel of
iPayment, Inc., a Delaware corporation (the “Company”), do hereby make this
certificate in such capacity to Waller Lansden Dortch & Davis, A Professional
Limited Liability Company (“WLD&D”). This certificate is made in connection with
the rendering of an opinion by WLD&D to Bank of America, N.A. (“BoA”) as
required by the terms of certain amended credit facilities being extended to the
Company and its subsidiaries by BoA and any other Lenders on the date hereof
(the “Credit Facilities”), Capitalized terms used in this certificate are used
as defined in the opinion unless otherwise noted.

     1.      There are no orders or decrees of Governmental Authorities
applicable to or binding upon the Company or its subsidiaries that in any manner
affect the execution, delivery, or performance of the Loan Documents or the
transactions contemplated thereby.

     2.      There is no agreement or instrument to which the Company or its
subsidiaries are subject which affects, restricts, or is affected by the
execution, delivery and performance of the documentation relating to the Credit
Facilities in accordance with the terms of such documents. The Applicable
Contracts as to which we have requested your review consist of the “material
contracts” listed on Exhibit 10 to the S-l Registration Statement of the Company
filed on December 6, 2002, as amended to the date hereof.

     3.      There is no action, suit or proceeding pending or threatened
against or affecting the Company or its subsidiaries before any court,
governmental department, or other authority which is required to be disclosed in
the Loan Documents and is not so disclosed, or which purports to affect the
legality, validity or enforceability of any Loan Document or the transactions
contemplated thereby. There is no order, ruling, decree, judgment or similar
action of any Governmental Authority or mediator or arbitrator affecting the
Company or its subsidiaries.

     4.      The representations and warranties in all Loan Documents and any
certificates or other instruments delivered in connection therewith, are true,
complete and accurate in all respects relevant to this opinion.

     IN WITNESS WHEREOF, the undersigned has set his hand this 19th day of
December, 2003.

     
 
  Afshin M. Yazdian

 

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  Afshin M. Yazdian

 

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SCHEDULE I

Lenders

Bank of America, N.A.
AmSouth Bank

 

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SCHEDULE II

GOOD STANDINGS

                  State of         Incorporation/ Subsidiary

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  Organization

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1.
  iPayment, Inc.   DE
2.
  IPayment Acquisition Sub LLC   DE