Execution Copy





                            ASSET PURCHASE AGREEMENT



                          Dated as of December 19, 2003

                                      Among




                                 iPAYMENT, INC.,




                          iPAYMENT ACQUISITION SUB LLC




                                       and





                    FIRST DATA MERCHANT SERVICES CORPORATION




<PAGE>
                                TABLE OF CONTENTS

                                                              Page No.

ARTICLE I  DEFINITIONS...........................................1

     1.1.     Definitions........................................1

ARTICLE II  PURCHASE AND SALE....................................6

     2.1.     Purchased Assets...................................6
     2.2.     Excluded Assets....................................7
     2.3.     Assumed Liabilities................................7
     2.4.     Excluded Liabilities...............................8

ARTICLE III  PURCHASE PRICE......................................8

     3.1.     Purchase Price.....................................9
     3.2.     Allocation of Purchase Price.......................9

ARTICLE IV  CLOSING..............................................9

     4.1.     Closing Date.......................................9
     4.2.     Payment at Closing.................................9
     4.3.     Buyer and Parent's Additional Deliveries...........9
     4.4.     Seller's Closing Date Deliveries..................10

ARTICLE V  REPRESENTATIONS AND WARRANTIES OF SELLER.............10

     5.1.     Organization of Seller............................10
     5.2.     Authority of Seller...............................10
     5.3.     Absence of Encumbrances...........................11
     5.4.     Status of Seller Contracts........................11
     5.5.     No Violation, Litigation or Regulatory Action.....12
     5.6.     Net Revenues......................................12
     5.7.     Operations Since October 31, 2003.................12
     5.8.     Customers.........................................12
     5.9.     Compliance with Laws..............................13
     5.10.    Chargeback........................................13
     5.11.    Merchant Reserve Accounts.........................13
     5.12.    Taxes.............................................13
     5.13.    No Finder.........................................13
     5.14.    No Untrue Statements..............................13

ARTICLE VI  REPRESENTATIONS AND WARRANTIES OF BUYER.............13

     6.1.     Organization......................................13
     6.2.     Authority.........................................14
     6.3.     Buyer Determination...............................15
     6.4.     No Violation, Litigation or Regulatory Action.....15
     6.5.     No Finder.........................................15
     6.6.     Financial Ability.................................15

ARTICLE VII  ADDITIONAL AGREEMENTS..............................15

     7.1.     Use of Names......................................15
     7.2.     Tax Matters.......................................16
     7.3.     Non-Solicitation and Related Obligations..........17
     7.4.     Merchant Reserve Accounts; Guarantees.............17
     7.5.     Solicitation of Employees.........................18
     7.6.     Performance by Buyer..............................18
     7.7.     Post-Closing Merchant Contracts...................18

ARTICLE VIII  [Intentionally Omitted.]..........................18


ARTICLE IX  INDEMNIFICATION.....................................18

     9.1.     Indemnification by Seller.........................18
     9.2.     Indemnification by Buyer and Parent...............20
     9.3.     Notice of Claims..................................20
     9.4.     Third Person Claims...............................21
     9.5.     Limitations.......................................22

ARTICLE X  GENERAL PROVISIONS...................................23

     10.1.    Survival of Obligations...........................23
     10.2.    Confidential Nature of Information................23
     10.3.    No Public Announcement............................24
     10.4.    Notices...........................................24
     10.5.    Successors and Assigns............................25
     10.6.    Access to Records after Closing...................25
     10.7.    Entire Agreement; Amendments......................26
     10.8.    Interpretation....................................26
     10.9.    Waivers...........................................26
     10.10.   Expenses..........................................27
     10.11.   Partial Invalidity................................27
     10.12.   Execution in Counterparts.........................27
     10.13.   Further Assurances................................27
     10.14.   Cooperation.......................................27
     10.15.   Governing Law.....................................28
     10.16.   Disclaimer of Warranties..........................28




<PAGE>

                            ASSET PURCHASE AGREEMENT


          ASSET PURCHASE AGREEMENT dated as of December 19, 2003 among iPayment,
Inc., a Delaware corporation ("Parent"), iPayment Acquisition Sub LLC, a
Delaware limited liability company ("Buyer"), and First Data Merchant Services
Corporation, a Florida corporation ("Seller").

                                    RECITALS


          WHEREAS, Seller is, among other things, engaged in Merchant acquiring
activities and in the provision of Merchant Processing Services; and

          WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, a specific portfolio of Agent Bank and Merchant contracts
and related assets, all on the terms and subject to the conditions set forth
herein;

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed between Seller and Buyer
as follows:

                                    ARTICLE I

                                   DEFINITIONS

          1.1. Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.

          "Acquirer's Processing Date" has the meaning specified in Section
2.1(a)(i).

          "Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person; provided, that in no event shall any Alliance be deemed to be
an Affiliate of Seller. As used herein, "control" means the power to direct the
management or affairs of a Person and "ownership" means the beneficial ownership
of more than 50% of the equity securities of the Person.

          "Agent Bank" means a financial institution (as such term is defined in
the Rules) sponsored by a Card Association member for which services related to
Cards and payment system processing are provided by Seller prior to the
Effective Time.

          "Alliance" means any venture (in any form, including in corporate,
partnership or limited liability company form) or contractual alliance now or
hereafter entered into between Seller or its Affiliates and one or more third
parties for the provision of any Merchant Processing Services pursuant to an
arrangement whereby Seller or its Affiliates shares the economic benefits of
ownership of Merchant contracts through profit sharing, revenue sharing, a
royalty interest or

<PAGE>


otherwise. Employees, agents and independent contractors of Seller or its
Affiliates, insofar as such persons act on behalf of any Alliance, shall not be
deemed to be employees, agents or independent contractors of Seller or its
Affiliates for purposes of this Agreement.

          "Allocation Schedule" has the meaning specified in Section 3.2.

          "Assumed Liabilities" has the meaning specified in Section 2.3.

          "Assumption Agreement" means the Assumption Agreement in the form of
Exhibit A.

          "Bank Card" means a credit or debit card issued by a licensee of Visa
or MasterCard.

          "Buyer" has the meaning specified in the first paragraph of this
Agreement.

          "Buyer Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Buyer or Parent under this
Agreement or in connection herewith.

          "Buyer Group Member" means (i) Buyer and its Affiliates, (ii)
directors, officers, employees, agents, attorneys and consultants of Buyer and
its Affiliates and (iii) the successors and assigns of the foregoing.

          "Card" means any credit or debit card, including Visa, MasterCard,
American Express, Discover, Maestro, Interlink, JCB and Diners Club (but
excluding, for the avoidance of doubt, private label cards, "smart cards" and
stored value cards).

          "Card Associations" means Visa, MasterCard and any other association
or card issuer having proprietary rights to, and clearing and oversight
responsibilities with respect to, any credit or debit card used to effect
Transactions and shall include any debit card network utilized to authorize and
settle any debit card used to effect Transactions.

          "Card Association Fines" means all Card Association fines, penalties
and fees related to or arising from Transactions.

          "Cardholder" means the Person in whose name a Card has been issued.

          "Chargeback" means a disputed charge by a Cardholder or rejected
charge form or other evidence of a purchase by a Cardholder of goods and/or
services from a Merchant by use of a Card that is returned unpaid by the issuing
financial institution, in accordance with the Rules.

          "Claim Notice" has the meaning specified in Section 9.3(a).

          "Closing" means the closing of the transfer of the Closing Purchased
Assets from Seller to Buyer.

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<PAGE>

          "Closing Date" has the meaning specified in Section 4.1.

          "Closing Purchased Assets" has the meaning specified in Section
2.1(a).

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Confidentiality Agreement" means that certain Confidentiality
Agreement dated August 1, 2003 between Buyer and First Annapolis Capital Inc..

          "Court Order" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.

          "Effective Time" means 11:59 p.m. Eastern Time on December 31, 2003.

          "Encumbrance" means any lien, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect in
title or other similar restrictions of any kind.

          "Excluded Assets" has the meaning specified in Section 2.2.

          "Excluded Liabilities" has the meaning specified in Section 2.4.

          "Expenses" means any and all reasonable expenses incurred in
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including court
filing fees, court costs, arbitration fees or costs, witness fees, and
reasonable fees and disbursements of legal counsel, investigators, expert
witnesses, accountants and other professionals).

          "FDC" means First Data Corporation, a Delaware corporation.

          "Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body.

          "Indemnified Party" has the meaning specified in Section 9.3(a).

          "Indemnitor" has the meaning specified in Section 9.3(a).

          "Instrument of Assignment" means the Instrument of Assignment in the
form of Exhibit B.

          "IRS" means the Internal Revenue Service.

          "ISO Agreements" means the ISO agreements identified in Schedule 1.1.

          "knowledge of Seller" means the actual knowledge of Ingrid Baken,
Tracy Etheridge, Linda Foss, Deanna Kosse, Anthony Lucatuorto, Alvina Mickel,
Joe Resendez and Patti Wren.

                                       3
<PAGE>

          "Losses" means any and all out-of-pocket losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges.

          "MasterCard" means MasterCard International, Inc. and its successor
and assigns.

          "Material Adverse Effect" means a material adverse effect on the
results of operations or financial condition of the Purchased Assets.

          "Merchant" means any provider of goods and/or services that accepts
Cards as a payment vehicle.

          "Merchant Processing Services" means any of the following services
offered to Merchants in respect of Cards: the authorization and capture of
Transactions, the submission of such Transactions for interchange settlement,
the clearing and settlement of such Transactions, the preparation of statements
or reports based on such Transactions, processing Chargebacks and other
exception items, the provision of customer service in respect of any of such
Transactions or the rental of POS Hardware relating to any of the foregoing.
"Merchant Processing Services" shall not include services relating to (i) any
card issuing or related activities or services, (ii) private label cards, "smart
cards" or stored value cards, (iii) check authorization and guarantee services
or (iv) the leasing of POS Hardware.

          "Net Revenues" means an amount equal to the merchant discount
generated by the Seller Contracts, less (i) interchange, (ii) assessments and
(iii) payments required by the ISO Agreements and Seller Contracts with Agent
Banks plus other recurring revenues generated from Bank Card acquiring services
generated by the Purchased Assets.

          "Permitted Encumbrances" means liens or imperfections on property
which are not material in amount or do not materially detract from the value of
or materially impair the existing use of the property affected by such lien or
imperfection.

          "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.

          "POS Hardware" means point of sale Transaction processing devices,
including terminals, printers, pinpads and imprinter hardware.

          "Post-Closing Merchant Contracts" has the meaning specified in Section
7.7.

          "Pre-Effective Period" means any taxable year or period ending on or
before the Effective Time, and with respect to any Straddle Period, the portion
of such Straddle Period ending on and including the Effective Time.

          "Processing Agreement" means the Service Agreement in the form of
Exhibit C.

          "Purchase Price" has the meaning specified in Section 3.1.

                                       4
<PAGE>

          "Purchased Assets" means the assets and properties being transferred
from Seller to Buyer pursuant to Section 2.1.

          "Requirements of Law" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body.

          "Reserve Accounts" has the meaning specified in Section 2.1(a)(ii).

          "Rules" means the applicable bylaws, rules, regulations, documentation
and manuals promulgated or adopted by MasterCard, Visa or other Card
Associations, as such rules, manuals and other items may be amended or
supplemented from time to time.

          "Seller" has the meaning specified in the first paragraph of this
Agreement.

          "Seller Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Seller under this Agreement
or in connection herewith.

          "Seller Contracts" has the meaning specified in Section 2.1(a)(i).

          "Seller Group Member" means (i) Seller and its Affiliates, (ii)
directors, officers, employees, agents, attorneys and consultants of Seller and
its Affiliates and (iii) the successors and assigns of the foregoing.

          "Seller Merchant" means a Merchant that is a party to a Seller
Contract.

          "Seller's Group" means any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes Seller.

          "Significant Agent Banks" has the meaning specified in Section 5.8.

          "Significant Merchants" has the meaning specified in Section 5.8.

          "Straddle Period" means any taxable year or period beginning before
and ending after the Effective Time.

          "Tax" (and, with correlative meaning, "Taxes") means (i) any federal,
state, local or foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, estimated, payroll, withholding, alternative or
add-on minimum, ad valorem, value added, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty, imposed by any
Governmental Body and (ii) any liability for the payment of such amounts with
respect to payments of a type described in clause (i) as a result of being a
member of a consolidated, combined, unitary or affiliated group or as a result
of a contractual obligation to indemnify any Person or other entity.

                                       5
<PAGE>

          "Tax Return" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.

          "Transaction" means the purchase by a Cardholder of goods and/or
services from a Merchant by use of a Card or a Cardholder obtaining a cash
advance from an Agent Bank.

          "Transition Completion Date" means the date on which Seller ceases to
provide the services described in Section 2.1(c) of the Processing Agreement.

          "Visa" means, individually or collectively, as appropriate, VISA
U.S.A., Inc. and/or VISA International, Inc. and ---- either of their successors
or assigns.

                                   ARTICLE II

                                PURCHASE AND SALE

     2.1. Purchased Assets. (a) Upon the terms and subject to the conditions of
this Agreement, on the Closing Date, Seller shall sell, transfer, assign, convey
and deliver to Buyer, and Buyer shall purchase from Seller, free and clear of
all Encumbrances (except for Permitted Encumbrances), all right, title and
interest of Seller in, to and under the following assets and properties (subject
to Section 2.2) (herein collectively called the "Closing Purchased Assets"):

          (i) all right, title and interest of Seller in, to and under the agent
     bank agreements and merchant agreements identified in Schedule 2.1(a)(i)
     hereto or provided on a diskette, tape or other machine readable form (the
     "Seller Contracts") with respect to the period after the Effective Time,
     including all revenues attributable to Transactions having an acquirer's
     processing date as specified in the Visa rules, or a comparable date with
     respect to other Card Associations (each, an "Acquirer's Processing Date"),
     after the Effective Time;

          (ii) subject to Section 7.4, all rights to the Seller Merchants' funds
     in reserve, escrow or similar accounts (collectively, the "Reserve
     Accounts") and all guarantees from other Persons to satisfy obligations of
     the Seller Merchants to Seller arising in connection with Merchant
     Processing Services;

          (iii) all POS Hardware which Seller has furnished to Seller Merchants,
     including rented POS Hardware but excluding POS Hardware leased or sold to
     Seller Merchants;

          (iv) all revenues relating to the period after the Effective Time
     generated by agreements or arrangements between Seller and Seller Merchants
     pursuant to which Seller rents POS Hardware;

                                       6
<PAGE>

          (v) all rights to receive reverse interchange fees after the Effective
     Time for cash advances initiated by Agent Banks that are parties to the
     Seller Contracts at their branch offices or ATMs; and

          (vi) all books and records of Seller to the extent relating
     exclusively to the Purchased Assets or as otherwise reasonably necessary
     for Buyer to be able to continue to operate the Purchased Assets.

          (b) On the Transition Completion Date, Buyer shall direct Seller to
transfer the sponsorship of the Seller Contracts (and to take any required
action incidental thereto) to Buyer (or the clearing bank designated by Buyer).

     2.2. Excluded Assets. Notwithstanding the provisions of Section 2.1, the
Purchased Assets shall not include the following (herein referred to as the
"Excluded Assets"):

          (a) any portion of any agreement or arrangement described in Section
2.1(a) pursuant to which a Seller Merchant obtains services performed by
TeleCheck Services, Inc. or pursuant to which a Merchant leases POS Hardware
from Seller or any Affiliate or assignee of Seller;

          (b) all rights of Seller or its Affiliates as a lessor under all
leases of POS Hardware to the Seller Merchants (including all agreements or
arrangements relating thereto);

          (c) all rights of Seller or its Affiliates to receive payments from
third-party lessors with respect to leases of POS Hardware sold to Seller
Merchants (including all agreements or arrangements relating thereto);

          (d) all revenues attributable to Transactions under the Seller
Contracts having an Acquirer's Processing Date at or prior to the Effective
Time;

          (e) all revenues relating to the period at or prior to the Effective
Time generated by agreements or arrangements between Seller and Seller Merchants
pursuant to which Seller rents POS Hardware;

          (f) Seller's rights, claims or causes of action against third parties
relating to the Purchased Assets at or prior to the Effective Time with respect
to the period prior to the Effective Time;

          (g) the names "First Data Corporation," "FDC," "FDMS" or any related
or similar trade names, trademarks, service marks or logos to the extent the
same incorporate the name "First Data Corporation," "FDC," "FDMS" or any
variation thereof; and

          (h) all refunds (or credits) of any Tax for which Seller is liable
pursuant to Section 7.2.

     2.3. Assumed Liabilities. On the Closing Date, Buyer shall deliver to
Seller the Assumption Agreement, pursuant to which Buyer shall assume and be
obligated to pay, perform

                                       7
<PAGE>

or otherwise discharge, in accordance with their respective terms and subject to
the respective conditions thereof, all of the following:

          (a) all liabilities and obligations of Seller to be paid or performed
after the Effective Time under the Seller Contracts, including liability for
Chargebacks, Card Association Fines and other credit-related losses relating to
Transactions having an Acquirer's Processing Date after the Effective Time, and
any expenses relating to Transactions having an Acquirer's Processing Date after
the Effective Time;

          (b) all liabilities and obligations to be paid or performed after the
Effective Time under the ISO Agreements;

          (c) all liabilities and obligations under the Post-Closing Merchant
Contracts; and

          (d) all liabilities in respect of Taxes for which Buyer is liable
pursuant to Section 7.2.

All of the foregoing liabilities and obligations to be assumed by Buyer
hereunder (excluding any Excluded Liabilities) are referred to herein as the
"Assumed Liabilities."

     2.4. Excluded Liabilities. Buyer shall not assume or be obligated to pay,
perform or otherwise discharge the following liabilities (all such liabilities
and obligations not being assumed being herein called the "Excluded
Liabilities") and, notwithstanding anything to the contrary in Section 2.3, none
of the following shall be "Assumed Liabilities" for purposes of this Agreement:

          (a) any liabilities or obligations with respect to Chargebacks, Card
Association Fines and other credit-related losses for Transactions having an
Acquirer's Processing Date at or prior to the Effective Time, and any expenses
relating to Transactions having an Acquirer's Processing Date at or prior to the
Effective Time;

          (b) any liabilities in respect of Taxes for which Seller is liable
pursuant to Section 7.2;

          (c) any liabilities or obligations in respect of any Excluded Assets;
or

          (d) any liability to pay residuals due for Transactions having an
Acquirer's Processing Date at or prior to the Effective Time.


                                  ARTICLE III

                                 PURCHASE PRICE

                                       8
<PAGE>

     3.1. Purchase Price. The purchase price for the Purchased Assets (the
"Purchase Price") shall be equal to $55 million in cash. Such amount shall be
paid by Buyer pursuant to Section 4.2 hereof.

     3.2. Allocation of Purchase Price. Within 60 days following the Closing
Date, Buyer and Seller shall agree upon a schedule (the "Allocation Schedule")
allocating the Purchase Price (including, for the purpose of this Section 3.2,
any other consideration paid to Seller, including the Assumed Liabilities) among
the Purchased Assets. The Allocation Schedule shall be reasonable and shall be
prepared in accordance with Section 1060 of the Code, the regulations thereunder
and the preceding sentence. Promptly after agreeing to the Allocation Schedule,
Seller shall sign the Allocation Schedule and return an executed copy thereof to
Buyer. Buyer and Seller each agrees to file IRS Form 8594, and all federal,
state, local and foreign Tax Returns, in accordance with the Allocation
Schedule, and neither Buyer nor Seller shall take any other position
inconsistent therewith. Buyer and Seller each agrees to provide the other
promptly with any other information required to complete IRS Form 8594.

                                   ARTICLE IV

                                     CLOSING

     4.1. Closing Date. The Closing is being held on the date hereof at the
offices of Sidley Austin Brown & Wood LLP, Bank One Plaza, Chicago, Illinois or
at such other place as shall be agreed upon by Buyer and Seller. The Closing
shall be deemed to occur for all purposes hereunder at 10:00 a.m. Eastern Time
on the date hereof. The time and date of the Closing is referred to herein as
the "Closing Date."

     4.2. Payment at Closing. At Closing Parent shall cause Buyer to pay Seller
an amount equal to the Purchase Price by wire transfer of immediately available
funds to the account specified in Schedule 4.2.

     4.3. Buyer and Parent's Additional Deliveries. On the Closing Date, Buyer
or Parent, as applicable, will deliver to Seller all the following:

          (a) Certificate of the secretary or an assistant secretary of Buyer,
dated the Closing Date, in form and substance reasonably satisfactory to Seller,
as to (i) the resolutions of the Board of Directors of Buyer authorizing the
execution and performance of this Agreement and the contemplated transactions
and (ii) incumbency and signatures of the officers of Buyer executing this
Agreement and any Buyer Ancillary Agreement to which Buyer is a party;

          (b) Certificate of the secretary or an assistant secretary of Parent,
dated the Closing Date, in form and substance reasonably satisfactory to Seller,
as to (i) the resolutions of the Board of Directors of Parent authorizing the
execution and performance of this Agreement and the contemplated transactions
and (ii) incumbency and signatures of the officers of Parent executing this
Agreement and any Buyer Ancillary Agreement to which Parent is a party;

          (c) The Processing Agreement duly executed by Parent; and

                                       9
<PAGE>

          (d) The Assumption Agreement duly executed by Buyer.

     4.4. Seller's Closing Date Deliveries. On the Closing Date, Seller will
deliver to Buyer all the following:

          (a) Certificate of the secretary or an assistant secretary of Seller,
dated the Closing Date, in form and substance reasonably satisfactory to Buyer,
as to incumbency and signatures of the officers of Seller executing this
Agreement and any Seller Ancillary Agreement;

          (b) The Instrument of Assignment duly executed by Seller;

          (c) The Processing Agreement duly executed by Seller; and

          (d) Such other bills of sale, assignments and other instruments of
transfer or conveyance as Buyer may reasonably request or as may be otherwise
necessary to evidence and effect the sale, assignment, transfer, conveyance and
delivery of the Closing Purchased Assets to Buyer.

                                   ARTICLE V

                    REPRESENTATIONS AND WARRANTIES OF SELLER

          As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, as of the date hereof, Seller
represents and warrants to Buyer as follows:

     5.1. Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
Seller is duly qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions in which Seller is required to be so
licensed or qualified with respect to the operation of the Purchased Assets,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect. Seller has the corporate power and authority to own or
lease and to operate and use the Purchased Assets and to carry on the Merchant
acquiring and processing business as now conducted.

     5.2. Authority of Seller. (a) Seller has the corporate power and authority
to execute, deliver and perform this Agreement and all of the Seller Ancillary
Agreements. The execution, delivery and performance of this Agreement and the
Seller Ancillary Agreements by Seller have been duly authorized and approved and
do not require any further authorization or consent of Seller or its
stockholder. This Agreement has been duly authorized, executed and delivered by
Seller and (assuming the valid authorization, execution and delivery of this
Agreement by Buyer) is the legal, valid and binding obligation of Seller
enforceable in accordance with its terms, and each of the Seller Ancillary
Agreements has been duly authorized by Seller and (assuming the valid
authorization, execution and delivery thereof by Buyer) upon execution and
delivery by Seller will be a legal, valid and binding obligation of Seller
enforceable in accordance with its terms, in each case subject to bankruptcy,
insolvency, reorganization, moratorium and similar

                                       10
<PAGE>

laws of general application relating to or affecting creditors' rights and to
general equity principles.

          (b) Except as set forth in Schedule 5.2, neither the execution and
delivery of this Agreement or any of the Seller Ancillary Agreements by Seller
or the consummation of any of the transactions contemplated hereby or thereby by
Seller nor compliance with or fulfillment of the terms, conditions and
provisions hereof or thereof by Seller will:

          (i) result in a breach of the terms, conditions or provisions of, or
     constitute a default, an event of default or an event creating rights of
     acceleration, termination or cancellation or a loss of rights under, or
     result in the creation or imposition of any Encumbrance upon any of the
     Purchased Assets, under (1) the charter or by-laws of Seller, (2) any
     Seller Contract, (3) any other material note, instrument, agreement,
     mortgage, lease, license, franchise, permit or other authorization, right,
     restriction or obligation to which Seller is a party or any of the
     Purchased Assets is subject or by which Seller is bound, (4) any Court
     Order to which Seller is a party or any of the Purchased Assets is subject
     or by which Seller is bound or (5) any Requirements of Laws affecting
     Seller or the Purchased Assets, other than, in the case of clauses (2) and
     (3), any such breaches, defaults, rights, loss of rights or Encumbrances
     that, individually or in the aggregate, would not reasonably be expected to
     have a Material Adverse Effect or would not prevent the consummation of the
     transactions contemplated hereby; or

          (ii) require the approval, consent, authorization or act of, or the
     making by Seller of any declaration, filing or registration with, any
     Governmental Body, except for such approvals, consents, authorizations,
     declarations, filings or registrations the failure of which to be obtained
     or made would not reasonably be expected to have a Material Adverse Effect
     or would not prevent the consummation of the transactions contemplated
     hereby.

     5.3. Absence of Encumbrances. Except as set forth in Schedule 5.3, Seller's
right, title and interest in the Purchased Assets (other than the POS Hardware)
are free and clear of all Encumbrances, except for Permitted Encumbrances.

     5.4. Status of Seller Contracts. Except as set forth in Schedule 5.4 or as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, each of the Seller Contracts (i) constitutes a valid
and binding obligation of the parties thereto and is in full force and effect
and (ii) may be assigned as contemplated by this Agreement and will continue in
full force and effect thereafter, in each case without breaching any material
term thereof or resulting in the forfeiture or impairment of any material right
thereunder and without the consent, approval or act of, or the making of any
filing with, any other Person. Seller has fulfilled and performed its
obligations under each of the Seller Contracts except for any failures to
perform which would not, individually or in the aggregate, reasonably be
expected to have Material Adverse Effect and Seller is not in, or alleged to be
in, any breach or default under, nor is there or is there alleged to be any
reasonable basis for termination for cause of, any of the Seller Contracts and
no other party to any of the Seller Contracts has breached or defaulted
thereunder which has remained uncured except for any breaches or defaults which
would not,

                                       11
<PAGE>

individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as set forth in Schedule 5.4, Seller has complete and
correct copies of substantially all of the Seller Contracts with Agent Banks and
has afforded Buyer, to the extent requested by Buyer, reasonable access to the
agent bank agreements for Buyer to review and inspect.

     5.5. No Violation, Litigation or Regulatory Action. Except as set forth in
Schedule 5.5, there are no material claims, suits, proceedings or investigations
pending or, to the knowledge of Seller, threatened in respect of the Purchased
Assets.

     5.6. Net Revenues. Schedule 5.6 contains information relating to the pro
forma Net Revenues with respect to the Purchased Assets for the twelve months
ended December 31, 2002 and the ten months ended October 31, 2003. Such
information has been prepared in accordance with the assumptions stated therein
and in a manner consistent with Seller's past practice of determining Net
Revenues associated with the Purchased Assets. Such information presents fairly
(and has been prepared in good faith and on a reasonable basis with respect to)
the Net Revenues associated with the Purchased Assets for the periods covered
thereby. The Seller Contracts with Agent Banks listed in Schedule 5.4 do not
contain any terms which would result in a material increase in the payment
obligations to the Agent Banks party thereto from the historical payment
obligations reflected in the calculation of Net Revenues as set forth in
Schedule 5.6.

     5.7. Operations Since October 31, 2003. (i) Since October 31, 2003, there
has been no Material Adverse Effect and there has been no change in Seller's
operations of the Purchased Assets that would reasonably be expected to result
in a Material Adverse Effect.

          (ii) Since October 31, 2003, Seller has conducted its affairs with
     respect to Agent Banks and Merchants which are parties to the Seller
     Contracts only in the ordinary course and in conformity with past practice.
     Without limiting the generality of the foregoing, since October 31, 2003,
     Seller has not in respect of the Seller Contracts:

               (A) materially delayed or accelerated payment of any account
     payable or other liability of any party under any of the Seller Contracts
     beyond or in advance of its due date or the date when such liability would
     have been paid in the ordinary course of business consistent with past
     practice; or

               (B) created, modified or continued any arrangements with any
     Merchant (either directly or through its Affiliates or Agent Banks)
     pursuant to which selected Merchants received either subsidized fees or
     discount support (except for Merchants who received such subsidized fees or
     discount support that are listed in Schedule 5.7).

     5.8. Customers. Schedule 5.8 sets forth a complete and accurate list of the
top 25 Agent Banks that are party to Seller Contracts based on net Bank Card
sales volume for the ten months ended October 31, 2003 (the "Significant Agent
Banks") and the top 25 Merchants that are party to Seller Contracts based on net
Bank Card sales volume for the ten months ended October 31, 2003 (the
"Significant Merchants"). Except as set forth in Schedule 5.8, since

                                       12
<PAGE>

November 1, 2003 Seller has not lost or been notified in writing that it will
lose any Significant Agent Bank and, to the knowledge of Seller, Seller has not
lost or been notified in writing that it will lose any Significant Merchant.

     5.9. Compliance with Laws. Seller is in compliance with all Requirements of
Law and all Rules which, in each case, are applicable to the Purchased Assets,
except for such instances of non-compliance as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

     5.10. Chargeback. To the knowledge of Seller, there are no factors (other
than any factors which are generally known, or with respect to which information
is generally available, in the Merchant Processing Services industry) relating
to an increase in the Chargeback rates with respect to the Purchased Assets
which, individually or in the aggregate, Seller reasonably expects will cause a
Material Adverse Effect.

     5.11. Merchant Reserve Accounts. Schedule 5.11 sets forth a complete
listing of Reserve Accounts with respect to the Seller Merchants as of October
31, 2003.

     5.12. Taxes. Except as set forth on Schedule 5.12, Seller has, in respect
of the Purchased Assets, filed all material Tax Returns which are required to be
filed and has paid all Taxes shown to be due on such Tax Returns; provided,
however, that nothing in this Section 5.12 shall cause Seller to be liable for
any Taxes for which Seller is not expressly liable pursuant to Section 7.2
(relating to liability for Taxes).

     5.13. No Finder. Except for First Annapolis Capital, Inc., the fees of
which will be paid by Seller, neither Seller nor any Person acting on its behalf
has paid or become obligated to pay any fee or commission to any broker, finder
or intermediary for or on account of the transactions contemplated by this
Agreement.

     5.14. No Untrue Statements. To the knowledge of Seller, none of this
Agreement, any Schedule to this Agreement or any Exhibit to this Agreement
contains any untrue statement of a material fact.

                                   ARTICLE VI

                     REPRESENTATIONS AND WARRANTIES OF BUYER

          As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, as of the date hereof, Buyer
and Parent hereby jointly and severally represent and warrant to Seller as
follows:

     6.1. Organization. Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted. Buyer is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full limited liability company
power

                                       13
<PAGE>

and authority to own or lease and to operate and use its properties and assets
and to carry on its business as now conducted.

     6.2. Authority. (a) Each of Buyer and Parent has the corporate or other
power and authority to execute, deliver and perform this Agreement and all of
the Buyer Ancillary Agreements to which it is party. The execution, delivery and
performance of this Agreement and the Buyer Ancillary Agreements to which it is
party by Buyer have been duly authorized and approved by Buyer's board of
directors and stockholders. The execution delivery and performance of this
Agreement and the Buyer Ancillary Agreements to which it is party by Parent have
been duly authorized and approved by Parent's board of directors and do not
require any further authorization or consent of Parent or its stockholders. This
Agreement has been duly authorized, executed and delivered by Buyer and Parent
and (assuming the valid authorization, execution and delivery of this Agreement
by Seller) is the legal, valid and binding agreement of each of Buyer and Parent
enforceable in accordance with its terms, and each of the Buyer Ancillary
Agreements has been duly authorized by Buyer or Parent, as applicable, and
(assuming the valid authorization, execution and delivery thereof by Seller)
upon execution and delivery by Buyer or Parent, as applicable, will be a legal,
valid and binding obligation of Buyer or Parent, as applicable, enforceable in
accordance with its terms, in each case subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.

          (b) Neither the execution and delivery of this Agreement or any of the
Buyer Ancillary Agreements to which it is a party by Buyer or Parent or the
consummation of any of the transactions contemplated hereby or thereby by Buyer
or Parent nor compliance with or fulfillment of the terms, conditions and
provisions hereof or thereof by Buyer or Parent will:

          (i) result in a breach of the terms, conditions or provisions of, or
     constitute a default, an event of default or an event creating rights of
     acceleration, termination or cancellation or a loss of rights under (1) the
     Certificate of Incorporation or by-laws of Buyer or Parent, (2) any
     material note, instrument, agreement, mortgage, lease, license, franchise,
     permit or other authorization, right, restriction or obligation to which
     Buyer or Parent is a party or any of its properties is subject or by which
     Buyer or Parent is bound, (3) any Court Order to which Buyer or Parent is a
     party or by which it is bound or (4) any Requirements of Laws affecting
     Buyer or Parent, other than, in the case of clause (2), any such breaches,
     defaults, rights or loss of rights that, individually or in the aggregate,
     would not materially impair the ability of Buyer or Parent to perform its
     obligations hereunder or prevent the consummation of the transactions
     contemplated hereby; or

          (ii) require the approval, consent, authorization or act of, or the
     making by Buyer or Parent of any declaration, filing or registration with,
     any Governmental Body, except for such approvals, consents, authorizations,
     declarations, filings or registrations the failure of which to be obtained
     or made would not materially impair the ability of Buyer or Parent to
     perform its obligations hereunder or prevent the consummation of the
     transactions contemplated hereby.

                                       14
<PAGE>

     6.3. Buyer Determination. Buyer has independently determined that the
consummation of the transactions set forth in this Agreement is not subject to
the reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

     6.4. No Violation, Litigation or Regulatory Action. As of the date hereof,
there are no claims, suits, proceedings or investigations pending or, to the
knowledge of Buyer or Parent, threatened against Buyer or Parent or and of their
respective subsidiaries which are reasonably expected to materially impair the
ability of Buyer or Parent to perform its obligations hereunder or prevent the
consummation of the transactions contemplated hereby. As of the date hereof,
there is no action, suit or proceeding pending or, to the knowledge of Buyer or
Parent, threatened that questions the legality or propriety of the transactions
contemplated by this Agreement or any of the Buyer Ancillary Agreements.

     6.5. No Finder. Except for Merrill Lynch, Pierce, Fenner & Smith
Incorporated, the fees of which will be paid by Parent, neither Buyer or Parent
nor any Person acting on either such party's behalf has paid or become obligated
to pay any fee or commission to any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement.

     6.6. Financial Ability. Parent has the financial ability to consummate the
transactions contemplated by this Agreement.

                                  ARTICLE VII

                              ADDITIONAL AGREEMENTS

     7.1. Use of Names. (a) Except to the extent expressly provided in Section
7.1(b), Seller is not conveying ownership rights or granting Buyer a license to
use any of the tradenames or trademarks of FDC or any Affiliate of FDC and,
after the Closing, Buyer shall not use in any manner the names or marks of FDC
or any Affiliate of FDC or any word that is similar in sound or appearance to
such names or marks.

          (b) Until the Transition Completion Date, Seller hereby grants to
Buyer a non-exclusive, non-transferable, fully-paid and royalty-free license
(without right to sublicense) to use the tradenames or trademarks of Seller on
Seller's existing marketing and sales materials (including applications) in use
as of the Closing Date for use by Buyer solely in connection with the Purchased
Assets. Buyer's use of the tradenames or trademarks of Seller shall be subject
to standards of quality and specifications that conform to or exceed those
quality standards and operational specifications specified by Seller from time
to time and shall otherwise comply with all Requirements of Law. Notwithstanding
the foregoing, Buyer shall use reasonable best efforts to change all references
to any such tradenames or trademarks as soon as practicable following the
Effective Time, and Buyer will not make any statements in any correspondence or
communications made by Buyer that would imply that the Purchased Assets are
owned by Seller.

          (c) If Buyer or any Affiliate of Buyer violates any of its obligations
under this Section 7.1, Seller and its Affiliates may proceed against it in law
or in equity for such damages or other relief as a court may deem appropriate.
Buyer acknowledges that a violation of this Section 7.1 would cause Seller and
its Affiliates irreparable harm that would not be adequately

                                       15
<PAGE>

compensated for by money damages. Buyer therefore agrees that in the event of
any actual or threatened violation of this Section 7.1, Seller and its
Affiliates shall be entitled, in addition to other remedies that they may have,
to a temporary restraining order and to preliminary and final injunctive relief
against Buyer or such Affiliate of Buyer to prevent any breaches or violations
of this Section 7.1 and to enforce specifically the terms and provisions hereof,
without the necessity of posting a bond.

     7.2. Tax Matters.

          7.2.1. Liability for Taxes. (a) Seller shall be liable for and pay,
and pursuant to Article IX (and subject to the limitations thereof) shall
indemnify and hold harmless each Buyer Group Member against all Taxes (whether
assessed or unassessed) applicable to the Purchased Assets or the Assumed
Liabilities, in each case attributable to Pre-Effective Periods. Seller shall be
entitled to any refund of (or credit for) Taxes described in the preceding
sentence allocable to any Pre-Effective Periods.

          Buyer shall be liable for and pay, and pursuant to Article IX (and
subject to the limitations thereof) shall indemnify and hold harmless each
Seller Group Member against all Taxes (whether assessed or unassessed)
applicable to the Purchased Assets or the Assumed Liabilities, in each case
attributable to taxable years or periods beginning after the Effective Time and
with respect to any Straddle Period, the portion of such Straddle Period
beginning after the Effective Time.

          (b) Notwithstanding paragraphs (a) of this Section 7.2.1, any sales
Tax, use Tax, real property transfer or gains Tax, documentary stamp Tax or
similar Tax attributable to the sale or transfer of the Purchased Assets shall
be paid by Buyer.

          7.2.2. Assistance and Cooperation. After the Closing Date, each of
Seller and Buyer shall (and cause their respective Affiliates to):

          (i) assist the other party in preparing any Tax Returns relating to
     the Purchased Assets for Pre-Effective Periods;

          (ii) cooperate fully in preparing for any audits of, or disputes with
     taxing authorities regarding, any Tax Returns relating to the Purchased
     Assets for Pre-Effective Periods;

          (iii) make available to the other and to any taxing authority as
     reasonably requested all information, records, and documents relating to
     Taxes for Pre-Effective Periods;

          (iv) provide timely notice to the other in writing of any pending or
     threatened Tax audits or assessments relating to the Business, Purchased
     Assets or Assumed Liabilities for taxable periods for which the other may
     have a liability under Section 7.2.1;

                                       16
<PAGE>

          (v) furnish the other with copies of all correspondence received from
     any taxing authority in connection with any Tax audit or information
     request with respect to any Pre-Effective Period;

          (vi) timely sign and deliver such certificates or forms as may be
     necessary or appropriate to establish an exemption from (or otherwise
     reduce), or file Tax Returns or other reports with respect to, Taxes
     described in paragraph (b) of Section 7.2.1 (relating to sales, transfer
     and similar Taxes); and

          (vii) timely provide to the other powers of attorney or similar
     authorizations necessary to carry out the purposes of this Section 7.2.

          7.2.3. Non-Foreign Person Affidavit. Seller shall furnish to Buyer on
or before the Closing Date a non-foreign person affidavit as required by Section
1445 of the Code.

     7.3. Non-Solicitation and Related Obligations. For a four (4)-year period
after the Effective Time, Seller shall refrain from, and shall use its
reasonable best efforts so that its Affiliates, shall not, directly or
indirectly, target for solicitation for the purpose of providing Merchant
Processing Services thereto in the United States, any Agent Bank or Merchant
which is a party to a Seller Contract as of the Effective Time, it being
understood that the provision of services by Seller or its Affiliates to Agent
Banks or Merchants who initiate contacts with Seller or its Affiliates without
being solicited by Seller or its Affiliates shall not violate Seller's
obligations hereunder. Notwithstanding the foregoing, the provisions of this
Section 7.3 are not intended and shall not be interpreted to create any remedy
or breach as a result of incidental solicitations of customers in the ordinary
course of FDMS' or its Affiliates' business, including any general
advertisements not targeted at the customers included in the Purchased Assets.

     7.4. Merchant Reserve Accounts; Guarantees.

          (a) Merchant Reserve Accounts. Seller shall continue to maintain and
control any Reserve Accounts established to secure payment of amounts due to
Seller pursuant to Seller Contracts, and may continue to debit such accounts for
amounts which Seller is responsible for pursuant to Section 2.4(a). Within 180
days after the Effective Time, Seller shall transfer any amounts remaining in
each Reserve Account to Buyer, and Buyer shall credit a similar account
established for the same Merchant by Buyer in an amount equal to the amount
transferred by Seller or return the balance to the applicable Merchant.

          (b) Guarantees. Upon Seller no longer having any potential liability
pursuant to Section 2.4(a) as a result of the expiration of all applicable Card
Association periods, Seller shall cease to have any right to have any guarantees
provided by Merchants enforced on its behalf.

          (c) Collections. In addition to the foregoing, Seller may collect
amounts due to Seller resulting from Transactions with an Acquirer's Processing
Date prior to the Effective Time from Merchants through offsets against
Merchant's settlement monies or through any other means. Buyer shall provide any
reasonable assistance requested by Seller in connection with Seller's efforts to
collect any amounts pursuant to the preceding sentence.

                                       17
<PAGE>

     7.5. Solicitation of Employees. For a period beginning at the Effective
Time and ending on the first anniversary thereof, Buyer shall be permitted, at
its sole option, to make offers of employment to the employees of Seller listed
on Schedule 7.5 (the "Identified Employees"); it being understood that Seller
shall have no obligation to assist Buyer in its solicitation of any Identified
Employee and shall have the right to continue to employ any Identified Employee
who does not accept any employment offer of Buyer.

     7.6. Performance by Buyer. Immediately after the Effective Time, Buyer
shall have full responsibility for the proper performance of the Merchant
Processing Services under each Seller Contract (other than the services which
are subject to the terms contained in the Processing Agreement). Buyer shall
also determine all pricing charged to Seller Merchants or Agent Banks that are
party to Seller Contracts for Merchant Processing Services after the Effective
Time.

     7.7. Post-Closing Merchant Contracts. Subject to Buyer's compliance with
Section 2.7 of the Processing Agreement, from the Effective Time until the
Transition Completion Date, Buyer may request that Seller enter into agreements,
utilizing the form applications and agreement currently in use by Seller with
respect to the Purchased Assets, with new Merchants sourced through Seller
Contracts with Agent Banks (each, a "Post-Closing Merchant Contract"). Upon
execution thereof, Seller shall provide Buyer with an assignment of the rights
under such Post-Closing Merchant Contract consistent in form and scope with the
assignments provided in this Agreement with respect to Seller Contracts with
Merchants.

     7.8. Operation of the Purchased Assets. From the date hereof through the
Effective Time, Seller shall continue to conduct its affairs with respect to
Agent Banks and Merchants which are parties to the Seller Contracts only in the
ordinary course and in conformity with past practice.

                                  ARTICLE VIII

                            [Intentionally Omitted.]

                                   ARTICLE IX

                                 INDEMNIFICATION

     9.1. Indemnification by Seller. (a) Seller agrees to indemnify and hold
harmless each Buyer Group Member from and against any and all Losses and Expense
incurred by such Buyer Group Member in connection with or arising from:

          (i) any breach by Seller of any of its covenants in this Agreement;

          (ii) any breach of any warranty or the inaccuracy of any
     representation of Seller contained or referred to in this Agreement or any
     certificate delivered by or on behalf of Seller pursuant hereto; or

                                       18
<PAGE>

          (iii) any Excluded Liability.

          (b) Notwithstanding anything contained in Section 9.1(a) to the
contrary, Seller shall be required to indemnify and hold harmless under clauses
(i) and (ii) of Section 9.1(a) with respect to Loss and Expense incurred by
Buyer Group Members only to the extent that the aggregate amount of such Loss
and Expense exceeds $400,000 (it being intended that such amount shall
constitute a "deductible" for which Seller bears no indemnification
responsibility); provided, however, that the limitation on indemnification
contained in this Section 9.1(a) shall not apply to Losses or Expenses which
arise from a breach of representations and warranties contained in Sections 5.1,
5.2(a) and 5.13. In addition, in no event shall the aggregate amount required to
be paid by Seller pursuant to Section 9.1(a) (other than with respect to clause
(iii) thereof) exceed 25% of the Purchase Price.

          (c) The indemnification provided for in this Section 9.1 shall
terminate 18 months after the Effective Time (and no claims shall be made by any
Buyer Group Member under this Section 9.1 thereafter), except that the
indemnification by Seller shall continue as to:

          (i) the obligations and representations of Seller under the Instrument
     of Assignment, as to which no time limitation shall apply;

          (ii) the covenants of Seller set forth in Section 7.2, which shall
     survive for the applicable statute of limitations;

          (iii) the representations and warranties of Seller set forth in
     Section 5.12, which shall survive for a period of sixty (60) days following
     the expiration of the applicable statute of limitations;

          (iv) the covenants of Seller set forth in Sections 7.1 and 7.3, which
     shall survive for a period of six (6) months following the expiration of
     the time periods set forth in such covenants;

          (v) the representations and warranties of Seller set forth in Sections
     5.1, 5.2(a) and 5.13, the covenants of Seller set forth in Sections 7.7,
     10.2, 10.6 and 10.13 and the matter set forth in Section 9.1(a)(iii), as to
     all of which no time limitation shall apply; and

          (vi) any Loss or Expense of which any Buyer Group Member has notified
     Seller in accordance with the requirements of Section 9.3 on or prior to
     the date such indemnification would otherwise terminate in accordance with
     this Section 9.1, as to which the obligation of Seller shall continue until
     the liability of Seller shall have been determined pursuant to this Article
     IX, and Seller shall have reimbursed all Buyer Group Members for the full
     amount of such Loss and Expense in accordance with this Article IX.

                                       19
<PAGE>

     9.2. Indemnification by Buyer and Parent. (a) Buyer and Parent jointly and
severally agree to indemnify and hold harmless each Seller Group Member from and
against any and all Loss and Expense incurred by such Seller Group Member in
connection with or arising from:

          (i) any breach by Buyer or Parent of any of its respective covenants
     in this Agreement;

          (ii) any breach of any warranty or the inaccuracy of any
     representation of Buyer or Parent contained or referred to in this
     Agreement or in any certificate delivered by or on behalf of Buyer or
     Parent pursuant hereto; or

          (iii) (A) any Assumed Liability, (B) any other liability or obligation
     relating to the operation of the Purchased Assets by Buyer after the
     Effective Time, or (C) any act or omission by Buyer with respect to the
     Post-Closing Merchant Contracts;

          (b) The indemnification provided for in this Section 9.2 shall
terminate 18 months after the Effective Time (and no claims shall be made by any
Seller Group Member under this Section 9.2 thereafter), except that the
indemnification by Buyer shall continue as to:

          (i) the obligations and representations of Buyer under the Assumption
     Agreement, as to which no time limitation shall apply;

          (ii) the covenants of Buyer set forth in Section 7.2, which shall
     survive for the applicable statute of limitations;

          (iii) the representations and warranties of Buyer set forth in
     Sections 6.1, 6.2(a), 6.3 and 6.5, the covenants of Buyer set forth in
     Sections 7.1, 10.2, 10.6 and 10.13 and the matters set forth in Section
     9.2(a)(iii), as to all of which no time limitation shall apply; and

          (iv) any Loss or Expense of which any Seller Group Member has notified
     Buyer in accordance with the requirements of Section 9.3 on or prior to the
     date such indemnification would otherwise terminate in accordance with this
     Section 9.2, as to which the obligation of Buyer shall continue until the
     liability of Buyer shall have been determined pursuant to this Article IX,
     and Buyer shall have reimbursed all Seller Group Members for the full
     amount of such Loss and Expense in accordance with this Article IX.

     9.3. Notice of Claims. (a) Any Buyer Group Member or Seller Group Member
(the "Indemnified Party") seeking indemnification hereunder shall give to the
party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or

                                       20
<PAGE>

any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, that a Claim Notice in
respect of any action at law or suit in equity by or against a third Person as
to which indemnification will be sought shall be given promptly after the action
or suit is commenced.

          (b) In calculating any Loss or Expense there shall be deducted any
insurance recovery in respect thereof (and no right of subrogation shall accrue
hereunder to any insurer).

          (c) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article IX shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Loss and Expense suffered by it.

          (d) If Seller is required to indemnify Buyer pursuant to the
provisions of Article IX, and the Loss or Expense for which the indemnification
is sought under Article IX has provided, or will provide, any Buyer Group Member
with a Tax refund or credit, Buyer shall use its reasonable efforts to obtain
(or cause such Buyer Group Member to obtain) such Tax refund or credit
(including, if necessary, the filing of amended Tax Returns) and the amount of
such Tax refund or credit actually received by Buyer shall reduce Seller's
liability to indemnify Buyer under Article IX.

          (e) Buyer and Seller agree that, for purposes of computing the amount
of any indemnification payment under this Section 9.3, any such indemnification
payment shall be treated as an adjustment to the Purchase Price for all Tax
purposes.

     9.4. Third Person Claims. (a) In order for a party to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of
or involving a claim or demand made by any third Person against the Indemnified
Party, such Indemnified Party must notify the Indemnitor in writing, and in
reasonable detail, of the third Person claim within 15 days after receipt by
such Indemnified Party of written notice of the third Person claim. Thereafter,
the Indemnified Party shall deliver to the Indemnitor, within 10 business days
after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnitor relating to the
third Person claim. Notwithstanding the foregoing, should a party be physically
served with a complaint with regard to a third Person claim, the Indemnified
Party must notify the Indemnitor with a copy of the complaint within ten
business days after receipt thereof and shall deliver to the Indemnitor within
10 business days after the receipt of such complaint copies of notices and
documents (including court papers) received by the Indemnified Party relating to
the third Person claim. Notwithstanding anything contained herein to the
contrary, the failure to give such notice shall not relieve the Indemnitor of
its obligations hereunder except to the extent it shall have been prejudiced by
such failure.

                                       21
<PAGE>

     (b) Any notice given pursuant to Section 9.4(a) of a claim based upon or
relating to any of the representations, warranties or covenants contained in
this Agreement shall contain a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based, the facts giving rise to an alleged
basis for the claim and the amount of the liability asserted against the
Indemnitor by reason of the claim. In the event of the initiation of any legal
proceeding against the Indemnified Party by a third Person, the Indemnitor shall
have the sole and absolute right, within 45 days after the receipt of notice, at
its option and at its own expense, to be represented by counsel of its choice
and to control, defend against, negotiate, settle or otherwise deal with any
proceeding, claim, or demand which relates to any loss, liability or damage
indemnified against hereunder; provided, however, that the Indemnitor shall not
be entitled to assume control of such defense (but shall be entitled to
participate therein with counsel of its choice) if (i) Indemnitor and
Indemnified Party agree, reasonably and in good faith, that such third party
claim would give rise to Losses which are more than twice the amount
indemnifiable by such Indemnitor pursuant to this Article IX or (ii) the claim
seeks only an injunction or equitable relief against the Indemnified Party and
provided, further that Indemnified Party may participate in any such proceeding
with counsel of its choice and at its expense. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such legal proceeding, claim or demand. To the extent the
Indemnitor elects not to defend such proceeding, claim or demand, and the
Indemnified Party defends against or otherwise deals with any such proceeding,
claim or demand, the Indemnified Party may retain counsel, at the expense of the
Indemnitor, and control the defense of such proceeding. Neither the Indemnitor
nor the Indemnified Party may settle any such proceeding which settlement
obligates the other party to pay money, to perform obligations or to admit
liability without the consent of the other party, such consent not to be
unreasonably withheld. In the event the Indemnified Party shall refuse to
consent to the settlement of any legal proceeding, claim or demand, the
Indemnified Party may elect to take over the defense of such legal proceeding,
claim or demand, and in any such case the liability of the Indemnitor for
indemnification in respect of such legal proceeding, claim or demand shall not
exceed the amount for which the legal proceeding, claim or demand could have
been settled plus the amount of Expense incurred by the Indemnified Party prior
to the time of the proposed settlement to which it is entitled to
indemnification. After any final judgment or award shall have been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the time in which to appeal therefrom has expired, or a settlement shall have
been consummated, or the Indemnified Party and the Indemnitor shall arrive at a
mutually binding agreement with respect to each separate matter alleged to be
indemnified by the Indemnitor hereunder, the Indemnified Party shall forward to
the Indemnitor notice of any sums due and owing by it with respect to such
matter and the Indemnitor shall pay all of the sums so owning to the Indemnified
Party by wire transfer, certified or bank cashier's check within 30 days after
the date of such notice.

     (c) If there shall be any conflict between the provisions of this Section
9.4 relating to contests of third-party claims, and Section 7.2.2 relating to
Tax contests, the provisions of Section 7.2.2 shall control with respect to Tax
contests.

     9.5. Limitations. (a) In any case where an Indemnified Party recovers from
third Persons any amount in respect of a matter with respect to which an
Indemnitor has indemnified it

                                       22
<PAGE>

pursuant to this Agreement, such Indemnified Party shall promptly pay over to
the Indemnitor the amount so recovered (after deducting therefrom the full
amount of the expenses incurred by it in procuring such recovery), but not in
excess of the sum of (i) any amount previously so paid by the Indemnitor to or
on behalf of the Indemnified Party in respect of such matter and (ii) any amount
expended by the Indemnitor in pursuing or defending any claim arising out of
such matter.

          (b) IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL (INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUES OR PROFITS),
EXEMPLARY OR PUNITIVE DAMAGES, ARISING UNDER ANY LEGAL OR EQUITABLE THEORY,
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, ALL OF WHICH ARE HEREBY
EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER OR NOT ANY PARTY TO
THIS AGREEMENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

          (c) Each of the parties agrees to take all reasonable steps to
mitigate their respective Losses and Expenses upon and after becoming aware of
any event or condition which could reasonably be expected to give rise to any
Losses and Expenses that are indemnifiable hereunder.

          (d) Except for fraud, for remedies that cannot be waived as a matter
of law and for injunctive and provisional relief, this Article IX shall be the
exclusive remedy for breaches of this Agreement (including any covenant,
obligation, representation or warranty contained in this Agreement or in any
certificate delivered pursuant to this Agreement) or otherwise in respect of the
sale of the Purchased Assets contemplated hereby.

                                   ARTICLE X

                               GENERAL PROVISIONS

     10.1. Survival of Obligations. Each representation and warranty contained
in this Agreement shall survive the consummation of the transactions
contemplated by this Agreement through the period during which claims for
indemnification may be made pursuant to Article IX (at which time such
representation and warranty shall terminate).

     10.2. Confidential Nature of Information. Each party hereto agrees that all
documents, materials and other information which it shall have obtained
regarding the other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether obtained before or
after the date of this Agreement), the investigation provided for herein and the
preparation of this Agreement and other related documents shall be held in
confidence pursuant to the Confidentiality Agreement. The obligations of the
parties set forth in the Confidentiality Agreement shall survive the termination
of this Agreement. Notwithstanding anything to the contrary set forth herein,
except as reasonably necessary to comply with applicable securities laws, any
party to the transactions contemplated by this Agreement (referred to in this
paragraph as the "Transaction") (and each employee, representative, or other
agent of such party) may disclose to any and all persons, without limitation of
any kind, the Tax

                                       23
<PAGE>

Treatment and Tax Structure of the Transaction and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such Tax Treatment and Tax Structure. For purposes of this provision, "Tax
Treatment" is strictly limited to the purported or claimed U.S. federal income
tax treatment of the Transaction contemplated by this Agreement and "Tax
Structure" is strictly limited to any fact that may be relevant to understanding
the purported or claimed U.S. federal income tax treatment of the Transaction,
and neither term includes information relating to the identity of any party to
the Transaction or any of such party's representatives, the existence and status
of negotiations between the parties, or financial, business, legal or other
information regarding a party (or any of its Representatives), to the extent not
related to the Tax Treatment or Tax Structure of the Transaction. This
authorization of tax disclosure is retroactively effective to the commencement
of the first discussions between the parties regarding the Transaction
contemplated herein. These provisions are meant to be interpreted so as to
prevent the Transaction from being treated as offered under "conditions of
confidentiality" within the meaning of the Code and the Treasury Regulations
thereunder.

     10.3. No Public Announcement. Neither Buyer or Parent, on the one hand, nor
Seller on the other hand shall, without the approval of the other, make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any such party
shall be so obligated by law, in which case the other party shall be advised and
the parties shall use their reasonable efforts to cause a mutually agreeable
release or announcement to be issued; provided, however, that the foregoing
shall not preclude communications or disclosures necessary to implement the
provisions of this Agreement or to comply with the accounting and Securities and
Exchange Commission disclosure obligations.

     10.4. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally or when sent by registered or certified mail or by private
courier addressed as follows:

     If to Buyer or Parent, to:

          iPayment, Inc.
          40 Burton Hills
          Suite 415
          Nashville, TN  37215
          Attention:  Chief Executive Officer
          Facsimile:  (615)


     with a copy to:

          iPayment, Inc.
          40 Burton Hills
          Suite 415
          Nashville, TN  37215
          Attention:  General Counsel
          Facsimile:  (615)

                                       24
<PAGE>

     and:

          White & Case LLP
          1155 Avenue of the Americas
          New York, NY  10036
          Attention:  Mark L. Mandel
          Facsimile:  (212) 354-8113

     If to Seller, to:

          First Data Merchant Services Corporation
          265 Broadhollow Road
          Melville, New York 11747
          Attention:  General Manager
          Facsimile:  (631) 577-7015

     with a copy to:

          First Data Merchant Services Corporation
          12500 E. Mt. Belford Avenue, Suite M5-C
          Englewood, Colorado 80112
          Attention:  General Counsel
          Facsimile:  (720) 332-0033

or to such other address as such party may indicate by a notice delivered to the
other party hereto.

     10.5. Successors and Assigns. (a) The rights of any party under this
Agreement shall not be assignable by such party hereto prior to the Closing
without the written consent of each other party.

          (b) Following the Closing, neither Buyer or Parent, on the one hand,
nor Seller on the other hand, may assign any of its rights hereunder to any
third Person without the written consent of the other party, except that any
party may assign its rights hereunder to an Affiliate or to a third party in
connection with a merger, or the sale of all or substantially all of the capital
stock or assets of such party. Any assignment hereunder (whether before or after
the Closing) shall not relieve the assigning party of its obligations hereunder.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon any
Person other than the parties and successors and assigns permitted by this
Section 10.5 any right, remedy or claim under or by reason of this Agreement.

     10.6. Access to Records after Effective Time. For a period of three years
after the Effective Time, Seller and its representatives shall have reasonable
access to all of the books and records transferred to Buyer hereunder to the
extent that such access may reasonably be required by Seller in connection with
matters relating to or affected by the operation of the Purchased Assets prior
to the Effective Time. Such access shall be afforded by Buyer upon receipt of

                                       25
<PAGE>

reasonable advance notice and during normal business hours. Seller shall be
solely responsible for any costs or expenses incurred by it pursuant to this
Section 10.6. If Buyer shall desire to dispose of any of such books and records
prior to the expiration of such three-year period, Buyer shall, prior to such
disposition, give Seller a reasonable opportunity, at Seller's expense, to
segregate and remove such books and records as Seller may select.

          For a period of three years after the Effective Time, Buyer and its
representatives shall have reasonable access to all of the books and records
relating to the Purchased Assets which Seller may retain after the Effective
Time (but only to the extent relating to the Purchased Assets). Such access
shall be afforded by Seller upon receipt of reasonable advance notice and during
normal business hours. Buyer shall be solely responsible for any costs and
expenses incurred by it pursuant to this Section 10.6. If Seller shall desire to
dispose of any of such books and records prior to the expiration of such
six-year period, Seller shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such books
and records as Buyer may select.

     10.7. Entire Agreement; Amendments. This Agreement and the Exhibits and
Schedules referred to herein and the documents delivered pursuant hereto and the
Confidentiality Agreement contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and supersede all
prior agreements, understandings or letters of intent between or among any of
the parties hereto. This Agreement shall not be amended, modified or
supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.

     10.8. Interpretation. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. The Schedules and
Exhibits referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim herein.
Disclosure of any fact or item in any Schedule hereto referenced by a particular
section in this Agreement shall be deemed to have been disclosed with respect to
every other section in this Agreement. The specification of any dollar amount in
the representations or warranties contained in this Agreement or the inclusion
of any specific item in any Schedules hereto is not intended to imply that such
amounts, or higher or lower amounts, or the items so included or other items,
are or are not material, and neither party shall use the fact of the setting of
such amounts or the inclusion of any such item in any dispute or controversy
between the parties as to whether any obligation, item or matter not described
herein or included in a Schedule is or is not material for purposes of this
Agreement.

     10.9. Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The failure
of any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.

                                       26
<PAGE>

     10.10. Expenses. Each party hereto will pay all costs and expenses incident
to its negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel and accountants.

     10.11. Partial Invalidity. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.

     10.12. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
hereto and delivered to each of Seller and Buyer.

     10.13. Further Assurances. From time to time after the Effective Time,
Seller shall execute and deliver, or cause to be executed and delivered, to
Buyer such other instruments of conveyance and transfer as Buyer may reasonably
request or as may be otherwise necessary to more effectively convey and transfer
to, and vest in, Buyer and put Buyer in possession of, any part of the Purchased
Assets, and, in the case of Seller Contracts included in the Purchased Assets
which cannot be transferred or assigned effectively without the consent of third
parties which consent has not been obtained prior to the Effective Time, to
cooperate with Buyer at its request in endeavoring to obtain such consent
promptly. From time to time after the Effective Time, Buyer shall execute and
deliver, or cause to be executed and delivered, to Seller such other instruments
of assumption as Seller may reasonably request or as may be otherwise necessary
to more effectively evidence or effect the assumption by Buyer of the Assumed
Liabilities. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any Seller Contract
included in the Purchased Assets if an attempted assignment thereof without the
consent of a third party thereto would constitute a breach thereof; provided,
that Seller shall assign the revenues from any such Seller Contract included in
the Purchased Assets to Buyer, shall hold any such Seller Contract for the use
and benefit of Buyer (and at the sole expense of Buyer) and shall retain any
Assumed Liability related to such Seller Contract for the account and at the
sole expense of Buyer and shall take such other action as may be reasonably
requested by Buyer in order to place Buyer, insofar as reasonably permitted by
such Seller Contract and applicable law, in the same position as would have
existed had such Seller Contract been transferred and such related Assumed
Liability been assumed hereunder. As and when such Seller Contracts become
transferable, such transfer, including the assumption of the related Assumed
Liability, shall be deemed to occur immediately without any other action being
taken by Seller, Buyer or any other Person.

     10.14. Cooperation. Seller shall cooperate with Buyer and its outside
accountants in Buyer's audit of the Purchased Assets after the Effective Time
(which audit will be with respect to the three years ended on December 31,
2003), including without limitation, by affording

                                       27
<PAGE>

Buyer and its outside accountants (at Buyer's sole expense) access to such
records (including financial and operating data) and personnel of Seller and its
outside accountants as may be necessary for the conduct of Buyer's audit by its
outside accountants (including trial balances and similar materials, in each
case to the extent, and only to the extent, they relate solely to the Purchased
Assets), it being understood that Buyer shall provide Seller reasonable advance
notice of any request for access or information and Seller shall provide such
access or make available such information during normal business hours.

     10.15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of New York.

     10.16. Disclaimer of Warranties. Seller makes no representations or
warranties with respect to any projections, forecasts or forward-looking
information provided to Buyer. There is no assurance that any projected or
forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS EXPRESSLY
COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT, SELLER IS
SELLING THE PURCHASED ASSETS ON AN "AS IS, WHERE IS" BASIS AND SELLER DISCLAIMS
ALL OTHER WARRANTIES, REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR IMPLIED.
SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER. Buyer acknowledges
that neither Seller nor any of its representatives nor any other Person has made
any representation or warranty, express or implied, as to the accuracy or
completeness of any memoranda, charts, summaries or schedules heretofore made
available by Seller or its representatives to Buyer or any other information
which is not included in this Agreement or the Schedules hereto, and neither
Seller nor any of its representatives nor any other Person will have or be
subject to any liability to Buyer, any Affiliate of Buyer or any other Person
resulting from the distribution of any such information to, or use of any such
information by, Buyer, any Affiliate of Buyer or any of their agents,
consultants, accountants, counsel or other representatives.

                                       28
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.



                                 iPAYMENT, INC.


                                 By:   /s/ Greg Daily
                                    ----------------------------------------
                                    Name:  Greg Daily
                                    Title: CEO


                                 iPAYMENT ACQUISITION SUB LLC


                                 By:   /s/ Greg Daily
                                    ----------------------------------------
                                    Name:  Greg Daily
                                    Title: CEO


                                 FIRST DATA MERCHANT SERVICES CORPORATION


                                 By:   /s/ Brian J. McCutcheon
                                    ----------------------------------------
                                    Name:  Brian J. McCutcheon
                                    Title: Senior Vice President