IPAYMENT, INC.
                    NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
                     AS AMENDED AND RESTATED ON MAY 2, 2003

                                    PREAMBLE

     WHEREAS, iPayment, Inc. (the "Company") previously established this Plan in
order to provide  for the award of Options to purchase  the common  stock of the
Company to its directors who are not employed by the Company or its Affiliates;

     WHEREAS,  the Company intends that this Plan and Options granted  hereunder
will conform to the  requirements  for exemption set forth under  Securities and
Exchange Commission Rule 16b-3;

     WHEREAS,  the  Board  and  the  Company's   shareholders  have  approved  a
0.4627-for-one reverse split of the Stock effective May 2, 2003; and

     WHEREAS, the Company desires to amend and restate the Plan.

     NOW, THEREFORE, the Company hereby amends and restates this Plan, effective
May 2, 2003 to read as follows:

                             ARTICLE I. DEFINITIONS

     1.1 Affiliate. A corporate parent, corporate subsidiary,  limited liability
company,  partnership or other business entity that is wholly-owned,  controlled
by, or controls the Company.

     1.2 Agreement.  A written agreement  (including any amendment or supplement
thereto) between the Company or Affiliate and a Participant specifying the terms
and conditions of an Option granted to such Participant.

     1.3 Board. The Board of Directors of the Company.

     1.4 Code. The Internal Revenue Code of 1986, as amended.

     1.5 Committee.  A committee that is designated by the Board to serve as the
administrator  of the Plan.  The  Committee  shall be  composed  of at least two
individuals who are members of the Board and are not employees of the Company or
an  Affiliate,  and  who  are  designated  by the  Board  as  the  "compensation
committee" or are otherwise designated to administer the Plan. In the absence of
a designation of a Committee by the Board, the Board shall be the Committee.

     1.6 Company. iPayment, Inc. and its successors.

     1.7 Date of  Exercise.  The date  that the  Company  accepts  tender of the
exercise price of an Option.
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     1.8 Exchange Act. The Securities Exchange Act of 1934, as amended.

     1.9 Fair  Market  Value.  On any given  date,  Fair  Market  Value shall be
determined by the applicable method described below:

          (a) If the Stock is traded on a trading  exchange (e.g.,  the New York
     Stock  Exchange)  or is reported on the NASDAQ  National  Market  System or
     another NASDAQ automated quotation system or the OTC Bulletin Board System,
     Fair Market Value shall be the closing  selling  price of the Stock on such
     exchange or system with  respect to the date for which Fair Market Value is
     being determined. If there is no closing selling price for the Stock on the
     date in question,  then the Fair Market Value shall be the closing  selling
     price on the last preceding date for which such quotation exists.

          (b) If the Stock is not traded on a  recognized  exchange or automated
     trading  system,  Fair Market Value shall be the value  determined  in good
     faith by the Committee.

     1.10 Grant Date. The date on which an Option is awarded pursuant to Section
4.1.

     1.11  Option.  The right  that is granted  hereunder  to a  Participant  to
purchase  from the  Company a stated  number of shares of Stock at the price set
forth in an Agreement.

     1.12 Participant.  A member of the Board who is not employed by the Company
or an Affiliate on a Grant Date.

     1.13 Plan. The iPayment, Inc. Non-Employee Directors Stock Option Plan.

     1.14 Stock. The common stock of the Company or any successor security.

     1.15  Underwriting  Agreement.  The  agreement  between the Company and the
underwriter or underwriters managing the initial public offering of the Stock.

     1.16  Underwriting  Date. The date on which the  Underwriting  Agreement is
executed and priced in connection with the initial public offering of the Common
Stock.

                           ARTICLE II. PURPOSE OF PLAN

     The purpose of the Plan is to provide an incentive to enable the Company to
attract and retain the services of experienced and highly-qualified  individuals
as directors of the Company,  and to encourage stock ownership by such directors
so that their  interests  are aligned with the  interests  of the  Company,  its
Affiliates and its shareholders. It is intended that Participants may acquire or
increase their proprietary  interests in the Company and be encouraged to remain
in the  directorship of the Company.  The proceeds  received by the Company from
the sale of Stock  pursuant  to this  Plan  may be used  for  general  corporate
purposes.

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<PAGE>

                           ARTICLE III. ADMINISTRATION

     3.1  Administration  of  Plan.  The  Plan  shall  be  administered  by  the
Committee.  The express grant in the Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee.  Any
decision made or action taken by the  Committee to administer  the Plan shall be
final and  conclusive.  No member of the  Committee  shall be liable for any act
done in good faith with  respect to this Plan or any  Agreement  or Option.  The
Company shall bear all expenses of Plan administration. In addition to all other
authority  vested with the Committee  under the Plan,  the Committee  shall have
complete authority to:

          (a) Interpret all provisions of this Plan;

          (b)  Prescribe  the form of any  Agreement  and  notice and manner for
     executing or giving the same;

          (c) Make amendments to all Agreements;

          (d) Adopt, amend and rescind rules for Plan administration;

          (e) Make all  determinations it deems advisable for the administration
     of this Plan; and

          (f) Effect, at any time and from time to time, with the consent of the
     affected Option holders, the cancellation of any or all outstanding Options
     under the Plan and to grant in  substitution  therefor new Awards  covering
     the same or  different  number of shares of Stock but with an  exercise  or
     purchase  price per share based on the Fair Market Value per share of Stock
     on the new Award grant date.

          (g)  Amend the  terms of  outstanding  Options  and  impose  terms and
     conditions on the shares  issued upon  exercise of such Options.  Either at
     the time the Option is granted,  or by  subsequent  action,  to impose such
     restrictions, conditions, or limitations as it determines appropriate as to
     the  timing  and  manner of any  resales,  including,  but not  limited  to
     restrictions  under an insider  trading  policy,  restrictions  designed to
     delay and/or coordinate the timing and manner of sales by Participants, and
     restrictions  as to the use of specific  brokerage  firm for any resales or
     transfers.   Notwithstanding  the  foregoing,  an  amendment,  restriction,
     condition or limitation  that would have a material  adverse  effect on the
     rights of a  Participant  under an  outstanding  Option  is not valid  with
     respect to such Option without the Participant's consent.

          (h) Waive  conditions to and/or  accelerate the  exercisability  of an
     Option,  either  automatically  upon the occurrence of specified  events or
     otherwise in its discretion.

     3.2 Section  16(b).  Notwithstanding  anything in the Plan to the contrary,
the Committee, in its absolute discretion,  may restrict, limit or condition the
use of any  provision  of the Plan in order to ensure  compliance  with  section
16(b) of the Exchange Act.

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<PAGE>

                ARTICLE IV. ELIGIBILITY AND LIMITATIONS ON GRANTS

     4.1 Participation. Options shall be granted automatically as follows:

          (a) Number. Each Participant who is a member of the Company's Board of
     Directors as of the  Underwriting  Date shall  automatically  be granted an
     Option to purchase 13,881 shares of Stock on the Underwriting Date and each
     such  individual  shall  automatically  be granted an additional  Option to
     purchase  4,627  shares  of  Stock  on (i)  the  date of the  third  Annual
     Stockholders  Meeting  following the Underwriting Date and (ii) each Annual
     Stockholders  Meeting thereafter,  provided he or she is reelected to serve
     as  a  non-employee   Board  member  on  each  such  date.   Following  the
     Underwriting  Date,  each  Participant  shall  automatically  be granted an
     Option to purchase  4,627  shares of Stock on the date the  Participant  is
     first elected by the  shareholders  of the Company to serve as a new member
     of the Board, and such individual shall  automatically be granted an option
     to purchase an additional 4,627 shares of Stock at each Annual Stockholders
     Meeting  following the date of such  Participant's  initial election to the
     Board provided that he or she is reelected to serve as a non-employee Board
     member on each such  date.  If, on any Grant  Date  during  the term of the
     Plan,  there are not  sufficient  shares  of Stock  that  remain  available
     pursuant to Section 5.2 to provide this automatic  grant on such date, then
     the number of shares that can be purchased under the Option that is granted
     on that date shall be  determined  on a  pro-rata  basis,  with  fractional
     shares rounded down to the nearest  number of whole shares.  All references
     to  numbers  of  shares  in this  Section  are  subject  to  adjustment  in
     accordance with Article VIII.

          (b) Price. The price at which each share of Stock covered by an Option
     may be acquired  shall be the Fair Market  Value of Stock on the Grant Date
     of such Option.

          (c) Option Period. The initial 13,881 Share Option granted to existing
     non-employee  Board  members  as  of  the  Underwriting  Date  will  become
     exerciseable  incrementally  over a  period  of three  years so that  4,627
     shares  of Stock  may be  acquired  one  year  after  the  Grant  Date,  an
     additional  4,627  shares  may be  acquired  on the day prior to the second
     anniversary of the Grant Date, and the Option will be fully exerciseable on
     the day prior to the third anniversary of the Grant Date, provided that the
     Participant  remains a director  on each such  date.  In the event that any
     Participant is not re-elected at the next Annual Stockholders  Meeting, and
     the one-year  vesting date has not yet passed,  such  Participant's  shares
     shall vest as of the date of such  Annual  Stockholders  Meeting for his or
     her  services  for the prior  year.  Each  4,627  Share  Option  granted to
     Participants  after the  Underwriting  Date to serve as a new member of the
     Board will become  exercisable  one year after the Grant Date. In the event
     that any  Participant  is not  re-elected  at the next Annual  Stockholders
     Meeting,   and  the  one-year  vesting  date  has  not  yet  passed,   such
     Participant's  shares shall vest as of the date of such Annual Stockholders
     Meeting for his or her services  for the prior year.  The right to exercise
     an Option shall  terminate ten years after the date it was granted,  unless
     terminated sooner pursuant to any of the following:

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<PAGE>

               (i) If the  directorship  of the  Participant  is  terminated  on
          account  of  fraud,  dishonesty  or  other  acts  detrimental  to  the
          interests  of the  Company  or any direct or  indirect  majority-owned
          subsidiary  of the Company,  the Option,  including any portion of the
          Option   which  has  vested  or  is  otherwise   exercisable   by  the
          Participant, shall terminate as of the date of such termination.

               (ii) Upon the death or disability (as defined in Section 22(e)(3)
          of the Code) of a Participant  prior to the  expiration of the Option,
          the Option may be fully exercised,  whether or not the Participant was
          entitled to exercise it on the date thereof, at any time within twelve
          (12) months  after such death or  disability.  Thereafter,  the Option
          shall terminate and no longer be exercisable.

               (iii) If the  directorship of a Participant is terminated for any
          reason other than the  circumstances  described in subparagraph (i) or
          (ii) above, the Option may be exercised, to the extent the Participant
          was  able to do so at the  date of  termination  of the  directorship,
          within three (3) months after such termination. Thereafter, the Option
          shall  terminate  and no longer be  exercisable.  Notwithstanding  the
          foregoing, if the Participant becomes an employee of the Company or an
          Affiliate upon the termination of his  directorship,  the Option shall
          expire  after  the  termination  of  employment  in a  manner  that is
          consistent with this subparagraph (iii).

     4.2  Grant of  Options.  An  Option  shall be  deemed  to be  granted  to a
Participant  on each  Grant  Date.  Accordingly,  an Option  may be deemed to be
granted prior to the time that an Agreement is executed by the  Participant  and
the Company.

                        ARTICLE V. STOCK SUBJECT TO PLAN

     5.1 Source of Shares.  Upon the  exercise of an Option,  the Company  shall
transfer to the  Participant  authorized  but  previously  unissued Stock or, if
determined by the Board, shares of Stock that are held in treasury.

     5.2 Maximum  Number of Shares.  The maximum  aggregate  number of shares of
Stock that may be issued  pursuant  to this Plan is 347,025  shares,  subject to
increases and adjustments as provided in Article VIII. Should the exercise price
of an option  under the Plan be paid  with  shares of Stock or should  shares of
Stock  otherwise  issuable  under  the  Plan  be  withheld  by  the  Company  in
satisfaction of the  withholding  taxes incurred in connection with the exercise
of an option,  then the number of shares of Stock  issuable under the Plan shall
be reduced by the gross number of shares for which the option is exercised,  and
not by the net number of shares of Stock issued to the holder of such option.

     5.3 Forfeitures.  If any Option granted hereunder is forfeited,  expires or
terminates for any reason, in part or whole, the shares of Stock subject thereto
which are not issued  pursuant  to that  Option  shall  again be  available  for
issuance of an Option under this Plan.

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<PAGE>

                         ARTICLE VI. EXERCISE OF OPTIONS

     6.1  Transferability.  Any  Option  granted  under  this Plan  shall not be
transferable  except by will or by the laws of  descent  and  distribution,  and
shall  be  exercisable  during  the  lifetime  of the  Participant  only  by the
Participant; provided, however, that an Option may be transferable to the extent
provided in an Agreement.  No right or interest of a  Participant  in any Option
shall be liable for, or subject to, any lien,  obligation  or  liability of such
Participant.

     6.2  Shareholder  Rights.  No  Participant  shall  have  any  rights  as  a
shareholder  with  respect to shares  subject  to  Options  prior to the Date of
Exercise of such Option.

     6.3  Interruption  of Service.  The Committee shall determine the extent to
which a leave of absence for military or government service, illness,  temporary
disability,  or other reasons shall be treated as a termination or  interruption
of service as a member of the Board for  purposes of  determining  questions  of
forfeiture and exercise of an Option after termination.

                         ARTICLE VII. METHOD OF EXERCISE

     7.1  Exercise.  An Option  granted  hereunder  shall be deemed to have been
exercised on the Date of Exercise.  Subject to the provisions of Articles VI and
IX, an Option may be exercised in whole or in compliance with such  requirements
as the Committee  shall  determine,  but in no event sooner than six months from
the date of grant.

     7.2 Payment. Except as otherwise provided by the Agreement,  payment of the
Option price shall be made (i) in cash,  (ii) where the Stock is publicly traded
on a recognized  exchange or automated trading system, in actual or constructive
delivery of Stock that was acquired at least six months prior to the exercise of
the  Option,  or such  shorter or longer  period,  if any, as is required by the
Company's  accountants to avoid a charge to the Company's earnings for financial
reporting  purposes,  (iii) where the Stock is publicly  traded on a  recognized
exchange or automated  trading  system,  through a special  sale and  remittance
procedure pursuant to which a Participant shall concurrently provide irrevocable
instructions to (a) a Company-designated  brokerage firm to effect the immediate
sale of the purchased shares and remit to the Company,  out of the sale proceeds
available  on the  settlement  date,  sufficient  funds to cover  the  aggregate
exercise price payable for the purchased  shares plus all applicable  income and
employment  taxes  required  to be  withheld  by the  Company  by reason of such
exercise  and (b) the  Company to deliver  the  certificates  for the  purchased
shares  directly to such brokerage  firm in order to complete the sale,  (iv) in
other  consideration  acceptable  to the  Committee,  or  (v)  in a  combination
thereof;  provided,  however,  that a form of  payment  other  than cash is only
acceptable to the extent that the same is approved by the Committee.  Payment of
the exercise  price must include  payment of tax  withholdings,  as described in
Section 7.3, in cash unless the Company consents to alternative arrangements for
withholdings.

     7.3  Withholding  Tax  Requirements.   Upon  exercise  of  an  Option,  the
Participant  shall,  upon  notification  of  the  amount  due  and  prior  to or
concurrently with the delivery of the certificates  representing the shares, pay
to the Company amounts necessary to satisfy applicable federal,  state and local
withholding tax requirements or shall otherwise make  arrangements

                                       6
<PAGE>

satisfactory to the Company for such  requirements,  but only to the extent that
the Company is required by law to withhold such amounts or that the  Participant
voluntarily elects for such withholding.

     7.4 Issuance and Delivery of Shares. Shares of Stock issued pursuant to the
exercise of Options  hereunder shall be delivered to Participants by the Company
(or its transfer agent) as soon as administratively feasible after a Participant
exercises an Option hereunder and executes any applicable  shareholder agreement
or agreement  described in Section 9.2 that the Company  requires at the time of
exercise.

                 ARTICLE VIII. ADJUSTMENT UPON CORPORATE CHANGES

     8.1  Adjustments  to  Shares.  The  maximum  number of shares of Stock with
respect to which  Options  hereunder may be granted and which are the subject of
outstanding Options,  and the exercise price thereof,  shall only be adjusted as
the Committee  determines  (in its sole  discretion) to be  appropriate,  in the
event that:

          (a) the Company or an Affiliate  effects one or more Stock  dividends,
     Stock splits, reverse Stock splits,  subdivisions,  consolidations or other
     similar events;

          (b) the  Company or an  Affiliate  engages in a  transaction  which is
     described in section 424(a) of the Code; or

          (c)  there  occurs  any  other  event  which  in the  judgment  of the
     Committee necessitates such action;

     provided,  however,  that if an event  described  in  paragraph  (a) or (b)
     occurs,  the  Committee  shall  make  adjustments  to the limit on  Options
     specified in Section 5.2 that are proportionate to the modifications of the
     Stock that are on account of such corporate  changes.  Notwithstanding  the
     foregoing,  the  Committee  may not  modify  the  Plan or the  terms of any
     Options  then  outstanding  or to be granted  hereunder  to provide for the
     issuance  under  the  Plan  of a  different  class  of  stock  or  kind  of
     securities.  If an event described in paragraph (a), (b) or (c) occurs, the
     number  of shares  of Stock  subject  to each  option  grant to be  granted
     following  such event  pursuant to Section  4.1(a) shall not be adjusted to
     reflect  such event  unless the Board (in its sole  discretion)  determines
     otherwise.

     8.2  Substitution  of Options on Merger or  Acquisition.  The Committee may
grant  Options  in  substitution   for  stock  awards,   stock  options,   stock
appreciation  rights or  similar  awards  held by an  individual  who  becomes a
director of the Company in connection with a transaction to which section 424(a)
of the Code applies.  The terms of such substituted  Options shall be determined
by the  Committee in its sole  discretion,  subject only to the  limitations  of
Article V.

     8.3 Effect of Certain  Transactions.  The  provisions  of this  Section 8.3
shall apply to the extent that an Agreement does not otherwise expressly address
the matters contained herein.

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<PAGE>

If the Company  experiences  an event which results in a "Change in Control," as
defined in Section 8.3(a),  then,  whether or not the vesting  requirements  set
forth in any Agreement have been satisfied,  all Options that are outstanding at
the time of the Change in Control  shall  become  fully  vested and  exercisable
immediately prior to the Change in Control event.

          (a) A Change in Control  will be deemed to have  occurred for purposes
     hereof if (1) any "person" as such term is used in Sections 13(d) and 14(d)
     of the Exchange Act,  other than an individual  who is a shareholder on the
     date of the  adoption  of the Plan by the Board,  becomes  the  "beneficial
     owner" (as defined in Rule 13d-3 under said Act),  directly or  indirectly,
     of securities of the Company representing more than 50% of the total voting
     power  represented by the Company's then outstanding  Voting Securities (as
     defined below),  or (2) the shareholders of the Company approve a merger or
     consolidation of the Company with any other entity,  other than a merger or
     consolidation  which would result in the Voting  Securities  of the Company
     outstanding  immediately  prior thereto  continuing to represent (either by
     remaining  outstanding or by being converted into Voting  Securities of the
     surviving  entity) more than 50% of the total voting power  represented  by
     the Voting  Securities of the Company or such surviving entity  outstanding
     immediately after such merger or consolidation,  or (3) the shareholders of
     the  Company  approve a plan of complete  liquidation  of the Company or an
     agreement  for  the  sale  or   disposition   by  the  Company  of  all  or
     substantially  all of its  assets.  For  purposes of this  Section  8.3(a),
     "Voting  Securities"  of an entity shall mean any  securities of the entity
     which vote generally in the election of its directors.

          (b) In the event of a Change in Control, the Committee may provide, in
     its discretion  and on such terms and  conditions as it deems  appropriate,
     either by the terms of the  Agreement or by a resolution  adopted  prior to
     the occurrence of the Change in Control, that:

               (i) any  outstanding  Option  shall be assumed  by the  surviving
          corporation or any successor  corporation to the Company,  or a parent
          or subsidiary  thereof,  or other  corporation  that is a party to the
          transaction  resulting in the Change in Control,  in which event,  (1)
          the shares of the Stock  subject to such Option  shall be  substituted
          with the number and class of securities of the successor, surviving or
          other  corporation  that would have been issued to the  Participant in
          exchange  for  shares of the Stock  pursuant  to the Change in Control
          transaction had the Option been exercised  prior to such  transaction,
          (2) notwithstanding  Section  8.3(b)(i)(1)  hereof, the number of such
          securities of the successor,  surviving or other  corporation  that is
          made subject to such Option shall be adjusted as necessary so that the
          aggregate  value of such  securities  shall be equal to the  aggregate
          value of the consideration  that would have been paid or issued to the
          Participant in exchange for the shares of Stock pursuant to the Change
          in Control transaction had the Option been exercised immediately prior
          to such  transaction,  and (3) the exercise price payable per share of
          Stock subject to such Option shall be appropriately adjusted provided,
          however,  that the  aggregate  exercise  price for such  Option  shall
          remain the same;

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<PAGE>

               (ii) any  outstanding  Option shall be converted  into a right to
          receive cash on or following  the closing date or  expiration  date of
          the Change in Control  transaction in an amount equal to the aggregate
          value of the consideration  that would have been paid or issued to the
          Participant in exchange for shares of the Stock pursuant to the Change
          in Control transaction had the Option been exercised immediately prior
          to such transaction less the aggregate exercise price of such Option;

               (iii) any  outstanding  Option  cannot be exercised  after such a
          Change in Control; or

               (iv) any outstanding Option may be dealt with in any other manner
          determined in the discretion of the Committee.

          (c)  Notwithstanding  the foregoing,  a portion of the acceleration of
     vesting described in this Section shall not occur with respect to an Option
     to the extent such  acceleration  of vesting would cause the Participant or
     holder of such Option to realize less income, net of taxes, after deducting
     the amount of excise  taxes that would be imposed  pursuant to section 4999
     of the Code, than if accelerated  vesting of that portion of the Option did
     not  occur.  This  limitation  shall not apply (i) to the  extent  that the
     Company,  an  Affiliate or the  acquirer  are  obligated  to indemnify  the
     Participant  or holder for such excise tax liability  under an  enforceable
     "golden  parachute"  indemnification  agreement,  or (ii)  the  shareholder
     approval  described in Q&A 7 of Prop. Treas. Reg. ss. 1.280G-1 issued under
     section 280G of the Code is obtained to permit the  acceleration of vesting
     described in this Section (applied as if the shareholder  approval date was
     the date of the Change in Control).

          (d)  Notwithstanding  anything to the  contrary  contained  herein,  a
     change in  ownership  that  occurs as a result of a public  offering of the
     Company's  equity  securities  that is  approved  by the  Board  shall  not
     constitute a Change in Control.

     8.4 No Adjustment upon Certain Transactions. The issuance by the Company of
shares of stock of any class, or securities  convertible into shares of stock of
any class, for cash or property, or for labor or services rendered,  either upon
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon  conversion of shares or obligations of the Company  convertible  into such
shares  or other  securities,  shall not  affect,  and no  adjustment  by reason
thereof shall be made with respect to, outstanding Options.

     8.5 Fractional  Shares.  Only whole shares of Stock may be acquired through
the  exercise of an Option.  Any amounts  tendered in the  exercise of an Option
remaining  after the maximum  number of whole shares have been purchased will be
returned to the Participant in the form of cash.

                                       9
<PAGE>

             ARTICLE IX. COMPLIANCE WITH LAW AND REGULATORY APPROVAL

     9.1 General.  No Option shall be exercisable,  no Stock shall be issued, no
certificates  for shares of Stock shall be  delivered,  and no payment  shall be
made under this Plan except in compliance with all federal, state and local laws
and regulations  including,  without  limitation,  withholding tax requirements,
federal and state  securities laws and regulations and the rules and regulations
of any government or regulatory  agency or body and in compliance with the rules
of all  securities  exchanges  or  self-regulatory  organizations  on which  the
Company's  shares may be listed,  which the Committee  shall, in its discretion,
determine to be necessary or applicable, in all respects. The Company shall have
the  right to rely on an  opinion  of its  counsel  as to such  compliance.  Any
certificate  issued to evidence shares of Stock for which an Option is exercised
may bear such legends and statements as the Committee upon advice of counsel may
deem advisable to assure compliance with federal or state laws and regulations.

     9.2  Representations by Participants.  As a condition to the exercise of an
Option,  the Company may require a  Participant  to represent and warrant at the
time of any  such  exercise  that  the  shares  are  being  purchased  only  for
investment and without any present  intention to sell or distribute such shares,
if, in the opinion of counsel for the Company,  such  representation is required
by any relevant  provision of the laws referred to in Section 9.1. At the option
of the Company,  a stop transfer order against any shares of Stock may be placed
on the official stock books and records of the Company,  and a legend indicating
that the Stock  may not be  pledged,  sold or  otherwise  transferred  unless an
opinion of counsel was  provided  (concurred  in by counsel for the Company) and
stating  that  such  transfer  is not in  violation  of  any  applicable  law or
regulation may be stamped on the stock  certificate in order to assure exemption
from registration. The Committee may also require such other action or agreement
by the Participants as may from time to time be necessary to comply with federal
or state  securities  laws. This provision shall not obligate the Company or any
Affiliate to undertake registration of options or Stock hereunder.

                          ARTICLE X. GENERAL PROVISIONS

     10.1 Unfunded Plan. The Plan,  insofar as it provides for grants,  shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be  represented  by grants  under this Plan.  Any  liability  of the
Company to any person  with  respect to any grant under this Plan shall be based
solely  upon  contractual  obligations  that may be created  hereunder.  No such
obligation  of the  Company  shall be deemed to be  secured by any pledge of, or
other encumbrance on, any property of the Company.

     10.2 Rules of Construction. Headings are given to the articles and sections
of this Plan solely as a  convenience  to  facilitate  reference.  The masculine
gender when used herein refers to both masculine and feminine.  The reference to
any statute, regulation or other provision of law shall be construed to refer to
any amendment to or successor of such provision of law.

     10.3  Governing  Law. The internal  laws of the State of Delaware  (without
regard to the choice of law  provisions of Delaware)  shall apply to all matters
arising under this Plan, to the extent that federal law does not apply.

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     10.4 Compliance with Section 16 of the Exchange Act Transactions under this
Plan are  intended to comply with all  applicable  conditions  of Rule 16b-3 (or
successor  provisions)  under the Exchange  Act. To the extent any  provision of
this Plan or action by Committee fails to so comply, it shall be deemed null and
void to the extent permitted by law and deemed advisable by the Committee.

     10.5  Amendment.  The Board may amend or  terminate  this Plan at any time;
provided, however, an amendment that would have a material adverse effect on the
rights of a Participant under an outstanding Option is not valid with respect to
such Option without the Participant's  consent; and provided,  further, that the
shareholders of the Company must approve, in general meeting, any amendment that
changes the number of shares in the  aggregate  which may be issued  pursuant to
Options granted under the Plan. Such amendment must be approved  coincident with
or prior to the date Options are granted with respect to such shares.

     10.6  Effective  Date of Plan.  This Plan shall be  effective  on August 6,
2002.

     10.7 Disputes and Dispute Resolution.

     (a) Any and all  claims  arising  out of or  relating  to the Plan,  or the
Committee's  administration  or  interpretation  of the Plan with respect to any
Participant,  shall be resolved by binding  arbitration  which shall be the sole
and exclusive  method of resolving  such disputes or claims and shall be in lieu
of any trial before a court of jury. The Committee,  in offering an option grant
under this Plan,  and a  Participant,  in  accepting  any option grant under the
Plan,  expressly  waive  any and all  rights  to a trial  before a court or jury
regarding  any disputes  and claims which arise from or relate to the Plan,  and
any option grant made under the Plan.

     (b) Arbitration shall be conducted within Davidson County, Tennessee before
a  single  neutral  arbitrator   selected  jointly  by  the  Committee  and  the
Participant in accordance with the rules of the American Arbitration Association
("AAA") rules and applicable law then in effect. However, the standard of review
to be applied by the Arbitrator  shall be whether the Committee's  disputed act,
omission or decision  with respect to the  Participant  was contrary to any Plan
provision or otherwise arbitrary and capricious.

     (c) To the extend that any of the  provisions  of this  Section 10.7 or the
AAA  Rules  conflicts  with  applicable  law for  the  arbitration  of  contract
disputes, the provisions or procedures required by applicable law shall govern.

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     IN WITNESS WHEREOF,  the undersigned officer has executed this Plan on this
the 6th day of August,  2002,  but to be effective  as of the date  specified in
Section 10.6.

                                       IPAYMENT, INC.

                                       By: /s/ Gregory S. Daily
                                          --------------------------------------
                                          Gregory S. Daily
                                          Chairman of the Board, Chief Executive
                                          Officer and Secretary

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