IPAYMENT, INC.
                              STOCK INCENTIVE PLAN
                     AS AMENDED AND RESTATED ON MAY 2, 2003

                                    PREAMBLE

     WHEREAS,  iPayment,  Inc. (the "Company") previously  established the Stock
Incentive  Plan (the  "Plan")  through  which the Company  may award  options to
purchase  the Common  Stock of the Company to  directors,  officers,  employees,
consultants,  advisors,  and eligible  individuals  associated with  independent
sales or service  organizations  that  provide  services  to the Company and its
affiliates;

     WHEREAS,  the Plan  provides  for the  granting of options  that qualify as
"incentive stock options" within the meaning of section 422 of the Code, as well
as options that are not so qualified;

     WHEREAS,  the Plan  provides  for the  granting of Stock that is subject to
certain restrictions on transfer and/or a risk of forfeiture;

     WHEREAS,  the Company  intends  that,  in the event that a common  class of
equity  securities of the Company becomes subject to registration  under section
12 of the  Exchange  Act,  the  Awards  granted  hereunder  will (i)  qualify as
"performance-based  compensation" described in section 162(m)(4)(C) of the Code,
and (ii) 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 the iPayment,  Inc.
Stock Incentive Plan, effective May 2, 2003, to read as follows:

                             ARTICLE I. DEFINITIONS

     1.1 Affiliate.  A "parent corporation," as defined in section 424(e) of the
Code, or "subsidiary  corporation," as defined in section 424(f) of the Code, of
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 Award granted to such Participant.

     1.3 Award.  A right that is granted under the Plan to a Participant  by the
Company, which may be in the form of Options or Restricted Stock.

     1.4 Board. The Board of Directors of the Company.
<PAGE>

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

     1.6  Committee.  The  Board  or any  committee  of  Board  members  that is
designated  by the Board to serve as the  administrator  of the Plan;  provided,
however,  that in the event that any common  class of equity  securities  of the
Company becomes  subject to  registration  under section 12 of the Exchange Act,
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.

     1.7 Company. iPayment, Inc. and its successors which adopt the Plan.

     1.8 Date of  Exercise.  The date  that the  Company  accepts  tender of the
exercise price of an Option.

     1.9  Disability.  The inability of a Participant  to engage in  substantial
gainful  activity  by reason of any  medically  determinable  physical or mental
impairment  that is expected to result in death or has lasted or can be expected
to last for a continuous  period of twelve (12) months or more. A  determination
that a person is disabled  shall be made by the  Committee  on the basis of such
medical evidence as the Committee deems warranted under the circumstances.

     1.10 Exchange Act. The Securities Exchange Act of 1934, as amended.

     1.11 Fair  Market  Value.  On any given date,  Fair  Market  Value shall be
determined as follows:

     (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, 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 or the Board.

     1.12  Incentive  Option.  An  Option  that is  intended  to  qualify  as an
"incentive  stock  option"  within the  meaning of section  422 of the Code.  An
Incentive  Option,  or a portion  thereof,  shall not be invalid  for failure to
qualify  under section 422 of the Code,  but shall be treated as a  Nonqualified
Option.

     1.13 Misconduct shall mean any act of embezzlement,  fraud or dishonesty by
a Participant, nonpayment by a Participant of any obligation owed to the Company
or any  Affiliate,  breach of a  Participant's  fiduciary  duty to the  Company,
deliberate  disregard  by a
<PAGE>

Participant  of Company rules or the rules of any  Affiliate  resulting in loss,
damage or injury to the Company or any Affiliate,  unauthorized  disclosure by a
Participant  of any  Company  or any  Affiliate  trade  secret  or  confidential
information,  a  Participant's  engagement  in any unfair  competition  with the
Company or any Affiliate, the breach of Participant's non-competition agreement,
inducement  by a  Participant  of any Company or Affiliate  customer to breach a
contract with the Company or any  Affiliate,  inducement by a Participant of any
principal for whom the Company or any Affiliate  acts as agent to terminate such
agency  relationship,  or  any  other  intentional  misconduct  by  such  person
adversely affecting the business or affairs of the Company or any Affiliate in a
material manner.

     1.14. Nonqualified Option. An Option that is not an Incentive Option.

     1.15  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. As used herein, an Option includes both Incentive Options
and Nonqualified Options.

     1.16 Participant. A director, officer, employee, consultant, advisor, or an
eligible individual associated with an independent sales or service organization
that  provides   services  to  the  Company  or  an  Affiliate,   satisfies  the
requirements of Article IV and is selected by the Committee to receive an Award.

     1.17 Plan. The iPayment, Inc. Stock Incentive Plan.

     1.18 Restricted  Stock. A grant of Stock that is subject to restrictions on
transfer and/or a risk of forfeiture by and to the Participant,  as described in
Section  4.6.  Restricted  Stock is awarded to a  Participant  shall cease to be
Restricted  Stock at the time that  such  restrictions  and risks of  forfeiture
lapse in accordance with the terms of the Agreement or Plan.

     1.19 Stock. The common stock of the Company.

     1.20 Ten Percent  Shareholder.  An individual who owns more than 10% of the
total  combined  voting  power of all  classes  of stock  of the  Company  or an
Affiliate  at the time he is granted an  Incentive  Option.  For the  purpose of
determining if an individual is a Ten Percent Shareholder, he shall be deemed to
own any voting stock owned  (directly or  indirectly) by or for his brothers and
sisters  (whether  by  whole  or  half  blood),  spouse,   ancestors  or  lineal
descendants  and shall be  considered  to own  proportionately  any voting stock
owned (directly or indirectly) by or for a corporation,  partnership,  estate or
trust of which such individual is a shareholder, partner or beneficiary.

                               ARTICLE II. PURPOSE

     The purpose of this Plan is to encourage  ownership of Stock of the Company
by  directors,   officers,  employees,   consultants,   advisors,  and  eligible
individuals  associated with  independent  sales or service  organizations  that
provide  services to the Company  and to any current or future  Affiliate.  This
Plan is intended  to provide an  incentive  and bonus for maximum  effort in the
successful  operation of the Company and is expected to benefit the shareholders
by associating the interests of the directors, officers, employees, consultants,
advisors,  and eligible
<PAGE>

individuals  associated with  independent  sales or service  organizations  that
provide  services to the  Company or an  Affiliate  with those of the  Company's
shareholders  and by enabling the Company and  Affiliates  to attract and retain
personnel of the best available  talent through the opportunity to share, by the
proprietary  interests  created  by this  Plan,  in the  increased  value of the
Company's shares to which such personnel have contributed.  The benefits of this
Plan are not a  substitute  for  compensation  otherwise  payable  to  employees
pursuant to the terms of their  employment.  Proceeds from the purchase of Stock
pursuant  to this Plan shall be used for the  general  business  purposes of the
Company.

                           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 Award.  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  Awards and impose terms and conditions
          on the shares issued  pursuant to such Awards.  Either at the time the
          Award  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
<PAGE>

          outstanding  Award is not valid with respect to such Award without the
          Participant's consent.

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

     3.2 Authority to Grant Awards.  The Committee shall have authority to grant
Awards  upon  such  terms  the  Committee  deems  appropriate  and  that are not
inconsistent with the provisions of this Plan. Such terms may include conditions
on the exercise of all or any part of an Option.

     3.3 Persons Subject to Section 16(b).  Notwithstanding anything in the Plan
to the contrary,  the Committee,  in its absolute discretion,  may bifurcate the
Plan so as to restrict,  limit or condition the use of any provision of the Plan
to participants  who are officers and directors  subject to section 16(b) of the
Exchange Act,  without so restricting,  limiting or  conditioning  the Plan with
respect to other Participants.

                  ARTICLE IV. AWARD ELIGIBILITY AND LIMITATIONS

     4.1 Participation. The Committee may from time to time designate directors,
officers, employees, consultants,  advisors, and eligible individuals associated
with independent sales or service organizations to whom Awards are to be granted
and who are eligible to become Participants.  Such designation shall specify the
number of shares of Stock,  if any,  subject to each Award.  All Awards  granted
under  this Plan  shall be  evidenced  by  Agreements  that  shall be subject to
applicable provisions of this Plan or such other provisions as the Committee may
adopt that are not inconsistent with the Plan.

     4.2  Grant  of  Awards.  An  Award  shall  be  deemed  to be  granted  to a
Participant  at the time that the  Committee  designates  in a  writing  that is
adopted by the Committee as the grant of an Award,  and that makes  reference to
the name of the  Participant  and the number of shares of Stock that are subject
to the Award.  Accordingly,  an Award may be deemed to be  granted  prior to the
approval of this Plan by the  shareholders  of the Company and prior to the time
that  an   Agreement   is  executed  by  the   Participant   and  the   Company.
Notwithstanding  any language in an Agreement or other document to the contrary,
if this Plan is not approved by the shareholders of the Company in a manner that
satisfies  Treasury  Regulation section 1.422-5 within twelve (12) months of the
adoption  of this Plan by the Board,  all  Options  granted  hereunder  shall be
treated as Nonqualified Options.

     4.3  Limitations on Incentive  Options.  A person who is not an employee of
the Company or an Affiliate is not eligible to receive an Incentive  Option.  To
the extent that the  aggregate  Fair Market Value of Stock with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar  year  (under  all  stock  incentive  plans  of  the  Company  and  its
Affiliates)  exceeds  $100,000  (or the amount  specified  in section 422 of the
Code),  determined as of the date an Incentive  Option is granted,  such Options
shall be treated as
<PAGE>

Nonqualified  Options.  This  provision  shall be  applied  by taking  Incentive
Options into account in the order in which they were granted.

     4.4 Repurchase Rights upon Termination.  If a Participant  ceases providing
services to the Company or an  Affiliate  in his or her  capacity as a director,
officer, employee,  consultant,  advisor, or eligible individual associated with
an  independent  sales or service  organization  for  reasons  other than death,
Disability or retirement  after age sixty (60),  then the Company shall have the
right to purchase  shares of Stock  issued to the  Participant  pursuant to this
Plan for the Fair Market Value of the Stock on the date of such  termination  of
services.  The Company may exercise the rights  described in this Section 4.4 by
giving notice of exercise to the  Participant in person or by mail within ninety
(90) days of the  later of (i) the date of  exercise  of any  Option or (ii) the
date of termination of service. A legend may be placed on all stock certificates
to  reference  this right.  The Company may also  require  each  Participant  to
execute a separate  agreement that contains these and additional  terms that are
consistent  with this Section 4.4. This provision  shall not limit the Company's
right to repurchase  any shares of Restricted  Stock  pursuant to the terms of a
Restricted Stock Agreement.

     Notwithstanding the foregoing, the Company's repurchase rights described in
this Section 4.4 shall not apply if the Participant's services terminate after a
common class of equity  securities of the Company  becomes  publicly traded on a
recognized exchange or automated trading system.

     4.5 Right of First Refusal.  A Participant may not sell the shares of Stock
acquired  pursuant to an Award to any person other than the Company  without the
prior written consent of the Company, unless the Participant has received a bona
fide offer from a person who is a shareholder of the Company prior to making the
offer and, prior to the completion of the sale, the Participant gives reasonable
notice to the Company of the terms thereof and provides the Company a reasonable
opportunity  to purchase the Stock under terms that are no less favorable to the
Participant.  If the Company does not purchase the Stock within thirty (30) days
after  receiving  notice of such intended sale, the Participant may complete the
sale  to the  Company  shareholder,  validly  identified  in the  notice  to the
Company,  without  further  restriction  hereunder.  Any  transfer  of  Stock in
violation of this provision may be voided by the Company within thirty (30) days
after the transfer.  Notwithstanding  the foregoing,  the Company's  consent and
first  refusal  rights  described  in this  Section  4.5  shall not apply if the
Participant sells the Stock acquired hereunder (i) in connection with or after a
public offering of the Company's common equity securities, or (ii) pursuant to a
merger,  acquisition  or other  transaction  in which  the  shareholders  of the
Company receive cash or equity proceeds in exchange for Stock.

     4.6 Restricted  Stock.  An award of Restricted  Stock to a Participant is a
grant of Stock that is subject to  forfeiture  and/or  restrictions  on transfer
that are identified in an Agreement. The Committee may grant Restricted Stock to
a Participant  as part of a "deposit  share,"  "performance  award" or any other
arrangement  established  by the  Committee  and  specified in an  Agreement.  A
Participant who receives  Restricted  Stock shall be treated as a shareholder of
the Company for all purposes,  except that the rights of the  Participant may be
limited  under the terms of the  Agreement.  Unless  otherwise  specified  in an
Agreement,  Participants  shall be
<PAGE>

entitled to receive  dividends  on and  exercise  voting  rights with respect to
shares of Restricted Stock.

     4.7  Additional  Limitations on Grants.  No person may receive  Options and
shares  of  Restricted  Stock  for  more  than  462,700  shares  of Stock in the
aggregate  (subject to increases  and  adjustments  as provided in Article VIII)
during any calendar year.

                        ARTICLE V. STOCK SUBJECT TO PLAN

     5.1  Source  of  Shares.  Upon the  exercise  of an  Option or the grant of
Restricted  Stock,  the Company shall deliver to the Participant  authorized but
previously  unissued  Stock or Stock  that is held by the  Company  as  treasury
stock.

     5.2 Stock Subject to the Plan..  The maximum  aggregate number of shares of
Stock that may be issued pursuant to the Plan is 1,966,475. The number of shares
of Stock that may be issued pursuant to the Plan shall automatically increase on
the first trading day of January each calendar year during the term of the Plan,
beginning with calendar year 2004, by (i) a number of shares of Stock that, when
added to the then maximum aggregate number of shares of Stock that may be issued
pursuant  to the Plan,  is equal to 12.5%  the  total  number of shares of Stock
outstanding  (as further  defined  below),  on an as converted and fully diluted
basis, on the last trading day in December of the immediately preceding calendar
year or (ii) such  lesser  number as  determined  by the Board,  but in no event
shall such annual increase  exceed  3,470,250  shares of Stock.  For purposes of
this Section,  in order to determine the actual  increase each year, the Company
shall take the total number of basic shares (common and preferred)  outstanding,
plus all  securities  or debt  convertible  into  shares of common or  preferred
stock,  plus all  warrants and any other  securities,  and divide such number by
0.875. The product shall then be multiplied by 12.5%, and then subtracted by the
total  un-issued and outstanding  shares reserved in the Company's  Non-Employee
Directors  Stock  Option  Plan.  This final number shall then be approved by the
Board as the automatic increase to the stock subject to the Plan.

     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 or the  vesting of  Restricted  Stock,  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  or which  vest  under the
Restricted  Stock grant,  and not by the net number of shares of Stock issued to
the holder of such Option or Restricted Stock.

     If any  Option  granted  hereunder  expires  or  terminates  for any reason
without  having been  exercised in full, or Restricted  Stock is forfeited,  the
shares of Stock  subject  thereto  shall again be  available  for issuance of an
Award under this Plan.

               ARTICLE VI. OPTION EXERCISE AND SHAREHOLDER RIGHTS

     6.1 Exercise  Price.  The exercise  price per share of an Incentive  Option
shall not be less than 100% of the Fair Market  Value of a share of Stock on the
date the Incentive Option is
<PAGE>

granted. In the case of a Ten Percent  Shareholder,  however, the exercise price
of an Incentive Option shall not be less than 110% of the Fair Market Value of a
share of Stock on the date the Incentive  Option is granted.  The exercise price
per  share  of a  Nonqualified  Option  shall  be the  price  determined  by the
Committee at the time that such Award is granted,  and  provided  such price per
share shall not be less than the par value of the Stock subject to the Award.

     6.2 Right to Exercise. An Option may be exercisable on the date of grant or
on such  other  date(s)  established  by the  Committee  or  provided  for in an
Agreement.

     6.3 Maximum Exercise  Period.  The maximum period in which an Option may be
exercised  shall be determined by the Committee on the date of grant except that
no Incentive Option shall be exercisable after the expiration of ten (10) years,
or after  the  expiration  of five (5)  years in the case of  Incentive  Options
granted to a Ten  Percent  Shareholder,  from the date an  Incentive  Option was
granted.  An  Option  shall  terminate  and  cease  to be  outstanding  upon the
termination,  for any reason, of the Participant's services to the Company or an
Affiliate as a director,  officer,  employee,  consultant,  advisor, or eligible
individual  associated with an independent sales or service  organization except
as follows:

     (a)  where a  Participant's  services  to the Company or an  Affiliate  are
          terminated  due to the  death  of a  Participant,  the  Option  may be
          exercised  after a Participant's  death by a Participant's  designated
          beneficiary,  a  Participant's  heir,  the legal  representative  of a
          Participant's estate or by the legatee of a Participant under his last
          will  for  a  period  of  twelve  (12)  months  from  the  date  of  a
          Participant's death but only to the extent an Option is exercisable as
          of the date of the  Participant's  death and has not otherwise expired
          or been terminated;

     (b)  where a  Participant's  services  to the Company or an  Affiliate  are
          terminated  due to a  Disability  of a  Participant,  an Option may be
          exercised  after such  termination  of services for a period of twelve
          (12) months from the date of such  termination of services but only to
          the extent an Option is exercisable as of the date of such termination
          of services and has not otherwise expired or been terminated; and

     (c)  where a  Participant's  services  to the Company or an  Affiliate  are
          terminated for any reason other than by reason of death, Disability or
          Misconduct,  an Option may  thereafter  be  exercised  for a period of
          three (3) months from the date of such  termination  of  services  but
          only to the  extent an Option  is  exercisable  as of the date of such
          termination  of  services  and  has  not  otherwise  expired  or  been
          terminated.

     6.4  Transferability.  Any  Award  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 a Nonqualified Option or Restricted Stock
may be transferable to the extent provided in an Agreement. No right or interest
of a  Participant  in any Award  shall be liable  for,  or subject to, any lien,
obligation or liability of such Participant.
<PAGE>

     6.5  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. A Participant's rights as a shareholder with respect to
Restricted Stock shall be determined as provided in Section 4.6.

     6.6 Employee  Status.  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 employment for purposes of  determining  questions of forfeiture and exercise
of an Award  after  termination  of  employment.  With  respect to an  Incentive
Option,  such period of unemployment  that is longer than three months following
termination  may be treated as employment if consistent  with section 422 of the
Code pursuant to a federal statute,  Treasury Regulation,  or a published ruling
of the Internal Revenue Service that has general application.

     6.7  Suspension and  Termination  of Options.  If at any time the Committee
reasonably believes a Participant may have committed an act of Misconduct,  such
Participant's rights to exercise his or her Option(s) may be suspended pending a
determination by the Committee that an act of Misconduct has been committed.  If
the  Committee  in its  sole  discretion  determines  that the  Participant  has
committed  an act of  Misconduct,  then  all  outstanding  Options  held by such
Participant shall terminate immediately and cease to remain outstanding.

                         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 part at such  times  and in
compliance with such requirements as the Committee shall determine.

     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 Stock that was acquired
at least six months  prior to the  exercise  of the Option,  or such  shorter or
longer period, if any,  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 the optionee
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.

     7.3  Withholding  Tax  Requirements.  Upon the exercise of an Option or the
lapse of  restrictions  on  Restricted  Stock  (or,  if a  Participant  files an
election  under  Section  83(b) of the  Code,  upon the  issuance  of  shares of
Restricted  Stock),  the Participant shall, upon notification of
<PAGE>

the amount  due,  pay to the Company  amounts  necessary  to satisfy  applicable
federal,  state and local  withholding tax  requirements or shall otherwise make
arrangements  satisfactory  to the Company  for the payment of such  withholding
taxes.

     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,  or is granted Restricted Stock, and executes any
applicable  shareholder agreement or agreement described in Section 9.2 that the
Company  requires at the time of exercise.  The Company's  obligation to deliver
shares  of  Stock  upon the  exercise  of an  Option  or upon  the  issuance  of
Restricted Stock shall be subject to the satisfaction of all applicable federal,
state and local withholding tax requirements.

                 ARTICLE VIII. ADJUSTMENT UPON CORPORATE CHANGES

     8.1  Adjustments  to  Shares.  The  maximum  number of shares of Stock with
respect to which Awards  hereunder may be granted,  the maximum number of shares
of Stock by which the share reserve is to increase  automatically  each calendar
year,  the maximum  number of Option shares and shares of Restricted  Stock that
may be granted to an individual  during any calendar  year, the number of shares
of Stock  which are the  subject of  outstanding  Awards,  and the  exercise  or
purchase  price  of  outstanding  Awards  shall  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 to which section
          424 of the Code applies; or

     (c)  there  occurs any other event that 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  limits on Awards
     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 Awards
     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.

     8.2  Substitution  of Awards on Merger or  Acquisition.  The  Committee may
grant Awards in substitution for stock awards, stock options, stock appreciation
rights or similar  awards held by an  individual  who becomes an employee of the
Company or an Affiliate 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.
<PAGE>

     8.3 Effect of Certain  Transactions.  The  provisions of this Section shall
apply to the extent that an Agreement does not otherwise  expressly  address the
matters contained herein. 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,  (i) all
shares of  Restricted  Stock that are  outstanding  at the time of the Change in
Control  shall  become fully  vested and all  restrictions  shall lapse upon the
Change in Control event,  and (ii) 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:

          (1)  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, (i) the shares of 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
<PAGE>

               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, (ii) notwithstanding Section
               8.3(b)(1)(i)  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 (iii) 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;

          (2)  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;

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

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

     (c)  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 Awards.

     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.

                     ARTICLE IX. LEGAL COMPLIANCE CONDITIONS

     9.1 General.  No Award shall be exercisable,  no Stock or Restricted  Stock
shall be issued, no certificates for shares of Stock shall be delivered,  and no
payment  shall be made under
<PAGE>

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 issued  pursuant to this Plan 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.  No Award shall be
exercisable,  no Stock or Restricted  Stock shall be issued,  no certificate for
shares shall be delivered and no payment shall be made under this Plan until the
Company  has  obtained  such  consent  or  approval  as the  Committee  may deem
advisable from any regulatory bodies having jurisdiction over such matters.

     9.2  Representations by Participants.  As a condition to the exercise of an
Award,  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.
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  Effect  on  Employment.  Neither  the  adoption  of  this  Plan,  its
operation,  nor any documents  describing or referring to this Plan (or any part
thereof)  shall  confer upon any employee any right to continue in the employ of
the  Company  or an  Affiliate  or in any way  affect any right and power of the
Company or an Affiliate to terminate the  employment of any employee at any time
with or without assigning a reason therefor.

     10.2 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.

     10.3 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.
<PAGE>

     10.4  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.

     10.5  Compliance with Section 16 of the Exchange Act. In the event that any
common class of equity securities of the Company becomes subject to registration
under section 12 of the Exchange Act,  transactions under this Plan are intended
to comply with all applicable  conditions of Rule 16b-3 or its successors  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.

     10.6  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 Award is not valid with respect to
such Award without the Participant's consent,  except as necessary for Incentive
Options to maintain  qualification under the Code; and provided,  further,  that
the shareholders of the Company must approve the following:

     (a)  twelve (12) months before or after the date of adoption, any amendment
          that  increases  the  aggregate  number of shares of Stock that may be
          issued under  Incentive  Options or changes the employees (or class of
          employees) eligible to receive Incentive Options.

     (b)  before the effective  date thereof,  any amendment  that increases the
          period during which Incentive Options may be granted or exercised; and

     (c)  in the event that a common class of equity  securities  of the Company
          becomes traded on an exchange or through a NASDAQ market system before
          the effective  date thereof,  any amendment that changes the number of
          shares in the aggregate which may be issued pursuant to Awards granted
          under the Plan except pursuant to Article VIII.

     10.7 Duration of Incentive  Options.  Incentive  Option awards shall not be
made with respect to the shares of Stock  specified in Section 5.2 more than ten
(10) years  after the  earlier of the date that the Plan is adopted by the Board
or the date that the Plan is approved by  shareholders.  If the number of shares
specified in Section 5.2 is  increased  by an amendment to this Plan,  Incentive
Options may be awarded with respect to such increased shares for a period of ten
(10)  years  after the  earlier  of the date that the  amendment  to the Plan is
adopted by the Board or the date that the amendment is approved by  shareholders
in a manner  that  satisfies  Treasury  Regulation  section  1.422-5.  Incentive
Options  granted  before such dates shall remain valid in accordance  with their
terms.

     10.8  Effective  Date of Plan.  This Plan shall be effective on the date of
its adoption by the Board, and Awards may be granted hereunder at any time after
such adoption.

     10.9 Disputes and Dispute Resolution.


<PAGE>

     (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 Award under
this Plan, and the Participant, in accepting any Award 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 Award made
under the Plan.

     (b) Arbitration shall be conducted within Davidson County, Tennessee or, if
required by state law, in the State and County where the Participant is employed
by or provides  services to the Company or an  Affiliate at the time the dispute
or claim arises,  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 extent 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.

                                    EXECUTION

     IN WITNESS WHEREOF,  the undersigned officer has executed this Plan on this
the 22nd day of May 2001.

                                       IPAYMENT, INC.

                                       By: /s/ Gregory S. Daily
                                          --------------------------------------

                                       Its:  CEO
                                           -------------------------------------