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                                                                    EXHIBIT 10.4


                      SUBORDINATED SECURED PROMISSORY NOTE


 $4,000,000                                                       April 12, 2001

         FOR VALUE RECEIVED, the undersigned, iPAYMENT HOLDINGS, INC., a
Tennessee corporation, iPAYMENT TECHNOLOGIES, INC., a California corporation,
and FIRST ACQUISITION COMPANY, a Nevada corporation (individually and
collectively, "Maker"), jointly and severally promise to pay to the order of
HARBINGER MEZZANINE PARTNERS, L.P., a Delaware limited partnership ("Payee";
Payee and any subsequent holder[s] hereof are hereinafter referred to
collectively as "Holder"), at the office of Payee at Harbinger Mezzanine
Partners, L.P., One Riverchase Parkway South, Birmingham, Alabama 35244 or at
such other place as Holder may designate to Maker in writing from time to time,
the principal sum of FOUR MILLION AND NO/100THS DOLLARS ($4,000,000), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of 14% per annum (computed on the basis of a 360-day year).

         Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of June, 2001, and subsequent installments being payable on the
first (1st) day of each succeeding month thereafter until April ___, 2006 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.

         The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without premium or penalty. Any such
prepayments shall be credited first to any accrued and unpaid interest and then
to the outstanding principal balance hereof.

         Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any Event of Default shall occur under and as defined in that
certain Loan and Security Agreement of even date herewith, between Maker and
Payee (together with any amendments thereto, the "Loan Agreement"), which Event
of Default is not cured following the giving of any applicable notice and within
any applicable cure period set forth in the Loan Agreement, then, and in such
event, the entire outstanding principal balance of the indebtedness evidenced
hereby, together with any other sums advanced hereunder, under the Loan
Agreement and/or under any other instrument or document now or hereafter
evidencing, securing or in any way relating to the indebtedness evidenced
hereby, together with all unpaid interest accrued thereon, shall, at the option
of Holder and without notice to Maker, at once become due and payable and may be
collected forthwith, regardless of the stipulated date of maturity. Upon the
occurrence of any Event of Default as set forth herein, at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the maximum rate of interest allowed to be charged under applicable law
(the "Maximum Rate"), regardless of whether or not there has been an
acceleration of the payment of principal as set forth herein. All



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such interest shall be paid at the time of and as a condition precedent to the
curing of any such Event of Default.

         In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any endorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
reasonable attorneys' fees and all court costs.

         Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of an Event of
Default hereunder, acceptance of a past-due installment or other indulgences
granted from time to time, shall be construed as a novation of this Note or as a
waiver of such right of acceleration or of the right of Holder thereafter to
insist upon strict compliance with the terms of this Note or to prevent the
exercise of such right of acceleration or any other right granted hereunder or
by applicable law. No extension of the time for payment of the indebtedness
evidenced hereby or any installment due hereunder, made by agreement with any
person now or hereafter liable for payment of the indebtedness evidenced hereby,
shall operate to release, discharge, modify, change or affect the original
liability of Maker hereunder or that of any other person now or hereafter liable
for payment of the indebtedness evidenced hereby, either in whole or in part,
unless Holder agrees otherwise in writing. This Note may not be changed orally,
but only by an agreement in writing signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought.

         The indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee, as more specifically described in the Loan Agreement. This Note is
subject to certain transfer restrictions set forth in the Loan Agreement.

         All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.

         This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.



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         Maker hereby irrevocably consents to the jurisdiction of the United
States District Court for the Middle District of Tennessee and of all Tennessee
state courts sitting in Davidson County, Tennessee, for the purpose of any
litigation to which Holder may be a party and which concerns this Note. It is
further agreed that venue for any such action shall lie exclusively with courts
sitting in Davidson County, Tennessee, unless Holder agrees to the contrary in
writing.

         HOLDER AND MAKER HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY,
ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

         As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.

                                   MAKERS:

                                   iPAYMENT HOLDINGS, INC., a Tennessee
                                   corporation


                                   By:    /s/ Carl Grimstad
                                      -----------------------------------------
                                   Title: President
                                         --------------------------------------


                                   iPAYMENT TECHNOLOGIES, INC., a
                                   California corporation


                                   By:    /s/ Carl Grimstad
                                      -----------------------------------------
                                   Title: President
                                         --------------------------------------


                                   FIRST ACQUISITION COMPANY, a Nevada
                                   corporation


                                   By:    /s/ Carl Grimstad
                                      -----------------------------------------
                                   Title: President
                                         --------------------------------------




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