Exhibit 10.7
THIRD AMENDMENT TO SERVICE AGREEMENT
     This Third Amendment to Service Agreement (this “Amendment”) is made and
entered into as of this 8th day of January, 2004 between First Data Merchant
Services Corporation (“FDMS”) and iPayment, Inc., formerly known as iPayment
Holdings, Inc. (“Customer”).
RECITALS
     A. Customer and FDMS have previously entered into a Service Agreement dated
as of July 1, 2002, as amended by amendments dated October 25, 2002,
November 27, 2002 and                                          (the “Service
Agreement”).
     B. Customer and FDMS now desire to amend the Service Agreement as set forth
herein.
AGREEMENT
     In consideration of the foregoing, Customer and FDMS hereby agree as
follows:
     1. The terms of this Amendment will be effective as of January 8, 2004.
     2. Article 2 of the Service Agreement is hereby amended by the addition of
the following:
     “2.7 Portfolio Conversion;
          (a) Customer has Acquired a Non-FDMS Portfolio from Nobell (the
“Existing Nobell Portfolio”). Customer has elected to and will convert the
Existing Nobell Portfolio to the FDMS System for processing pursuant to the
terms of and under this Agreement. The parties will expeditiously and in good
faith agree to and document a conversion plan with respect to the Existing
Nobell Portfolio, including allocation of all related fees and costs. For the
avoidance of doubt, the parties acknowledge and agree that (i) in conjunction
with its acquisition of the Existing Nobell Portfolio, Customer acquired ongoing
relationships with two independent sales organizations/member service providers
known as “On-Line Data Corp” and “CardSync,” and (ii) any new Merchant Accounts
sourced and established after the initial conversion of the Existing Nobell
Portfolio solely by On-Line Data Corp and CardSync shall be known as the “New
Nobell Portfolio.”
          (b)  At Customer’s sole expense, all Merchant Accounts in the Existing
Nobell Portfolio will be set up and reside under principal bank numbers * or *
of Customer’s system number * on the FDMS system, and no other Merchant Accounts
of Customer will reside under such principal bank/system numbers. At Customer’s
sole expense, all
 

*   Omitted pursuant to a confidential treatment request. The confidential
portion has been filed separately with the SEC.

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Merchant Accounts in the New Nobell Portfolio will be set up and reside under
principal bank numbers * or * of Customer’s system number * on the FDMS system,
and no other Merchant Accounts of Customer will reside under such principal
bank/system numbers.
          (c) The prices charged to Customer for the services performed by FDMS
with respect to Customer’s Existing Nobell Portfolio and New Nobell Portfolio
operations shall be the same as for Customer’s other Merchant Transaction Card
operations with the exception of those prices labeled as “Existing Nobell
Portfolio” or “New Nobell Portfolio” in Exhibit “B.”
          (d) Upon the conclusion of each month during the Term of this
Agreement, FDMS shall calculate the total monthly Processing Fees paid to FDMS
by Customer hereunder during such month solely with respect to the Existing
Nobell Portfolio and the New Nobell Portfolio (“Total Monthly Nobell Portfolio
Processing Fees”). *
          (e) The parties acknowledge and agree that the provisions of
Section 3.2(a) will not be applicable to the Existing Nobell Portfolio or the
New Nobell Portfolio.”
     3. Section II of Exhibit “B” to the Service Agreement, Item 3514-External
Authorization Processing, is hereby amended to read as follows:

              3514   External Authorization Processing   The fee associated with
the point-of-sale authorization of a transaction to an account of Customer by a
third party where notice of such authorization is delivered to FDMS via a
transmission medium from the third party.   -Existing Nobell Portfolio and New
Nobell Portfolio @ $ * / authorization

 
          -All Others @ $ * / authorization

 

*   Omitted pursuant to a confidential treatment request. The confidential
portion has been filed separately with the SEC.

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     4. Section II of Exhibit “B” to the Service Agreement is hereby amended by
the addition of the following:

              5550   Enhanced Recover Reduced   Enhanced Recover Reduced allows
Customer the flexibility to assess a surcharge in the form of a percentage
applied to the dollar amount of downgraded sales transactions for selected
merchants. Customer understands that Enhanced Recover Reduced can only be used
on merchants that are set up on the FDMS System using Recover Reduced
(Interchange Fee Flag setting of “3”) with a Statement Print Option of “0”. The
surcharge amount is added to the actual Recover Reduced amount and displayed on
the merchant’s statement under the heading of “Non-Qualified Fees.” FDMS’s fees
for Enhanced Recover Reduced are calculated by applying a fixed percentage to
the dollar amount of the downgraded sales transaction volume for merchants
enrolled by Customer in this program.   -Existing Nobell Portfolio @ * basis
points ( *%) on the downgraded sales transaction dollar volume

-All Others @ * basis points ( *%) on the downgraded sales transaction dollar
volume

     5. Capitalized terms used but not otherwise defined in this Amendment will
have the meanings set forth in the Service Agreement.
     6. In the event of a conflict between this Amendment and the Service
Agreement as it relates to the subject matter hereof, the terms of this
Amendment will control. Otherwise, all terms and conditions of the Service
Agreement will remain in full force and effect and likewise apply to this
Amendment.
     The parties have executed this Amendment as of the date first above
written.

          FIRST DATA MERCHANT SERVICES CORPORATION    
 
       
By:
  /s/ Rick Learch    
 
       
Name:
  Rick Learch    
Title:
  VP    
 
        iPAYMENT, INC.    
 
       
By:
  /s/ Joseph Jorling    
 
       
Name:
  Joseph Jorling    
Title:
  C.O.O.    

 

*   Omitted pursuant to a confidential treatment request. The confidential
portion has been filed separately with the SEC.

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