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                                                                    EXHIBIT 10.7
                                    FORM OF
                             iPAYMENT HOLDINGS, INC.
                        INCENTIVE STOCK OPTION AGREEMENT

         THIS AGREEMENT is made and entered into as of ____________, 200__, by
and between iPayment Holdings, Inc. (the "Company") and _______________ (the
"Participant") in connection with the grant of an option under the iPayment
Holdings, Inc. Stock Incentive Plan (the "Plan").

         The Company has established the Plan by action of its board of
directors and such action was thereafter approved by the shareholders of the
Company. The Participant is an employee of the Company or an Affiliate, and the
Company desires to encourage the Participant to own Stock for the purposes
stated in Article 2 of the Plan. In consideration of the foregoing, the parties
have entered into this Agreement to govern the terms of the Option granted by
the Company pursuant to the authority specified under the Plan:

                  1. Grant of Option. Subject to the terms and conditions set
forth in the Plan and herein, the Company grants to the Participant an Option to
purchase from the Company ________ shares of Stock at a price of $______ per
share, subject to adjustment as provided in Article 8 of the Plan. This Option
will expire on ___________, 20__, unless it expires sooner pursuant to Paragraph
6. This option is exercisable with respect to the number of shares of Stock
determined as follows:

<Table>

<S>                                                          <C>
           On and After                                      Number of Shares Exercisable
           ___________, 20__                                 ________ Shares
           ___________, 20__                                 Additional ________ Shares
           ___________, 20__                                 Additional ________ Shares
</Table>

         2. Notice of Exercise. This Option may be exercised, in whole or in
part, with respect to the number of whole shares of Stock that can be purchased
at the times described in Paragraph 1, by written notice to the Company at the
address provided in Paragraph 12 on a form (which may be supplied by the
Company) which

              (a) specifies the number of whole shares of Stock to be purchased
and the exercise price;

              (b) contains evidence satisfactory to the Committee that the
person exercising this Option is the Participant or has the right to exercise;
and

              (c) is accompanied by payment of the exercise price in accordance
with the Plan.

         3. Transfer and Exercise of Option. Except for transfers pursuant to a
will or the laws of descent and distribution, this Option is not transferable
and the Participant may not make any disposition of this Option or any interest
herein during his or her lifetime. As used herein, "disposition" means any sale,
transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or
other disposition, whether similar or dissimilar to those previously enumerated,
whether voluntary or involuntary, and whether during the Participant's lifetime
or upon or after




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the Participant's death, including, but not limited to, any disposition by
operation of law, by court order, by judicial process, or by foreclosure, levy,
or attachment, except a transfer by will or by the laws of descent or
distribution. Any attempted disposition in violation of this Paragraph is void.

         4. Status of Participant. The Participant shall not be deemed a
shareholder of the Company with respect to any of the shares of Stock subject to
this Option, except to the extent that such shares shall have been purchased and
transferred to him or her. The Company is not required to issue shares of Stock
purchased upon exercise of this Option until all applicable requirements of law
have been complied with and such shares shall have been duly listed on any
securities exchange on which the Stock may then be listed.

         5. No Effect on Capital Structure. This Option shall not affect the
right of the Company or any Affiliate to reclassify, recapitalize or otherwise
change its capital or debt structure or to merge, consolidate, convey any or all
of its assets, dissolve, liquidate, windup, or otherwise reorganize.

         6. Expiration of Option. In general, the right to purchase Stock under
this Option shall expire on the date specified in Paragraph 1. However, this
Option shall expire sooner in the circumstances described in this Paragraph.

              (a) Termination of Employment. If the Participant ceases to be
employed by the Company or one of its Affiliates for any reason other than death
or disability (as described in this Paragraph 6), and the Participant does not
thereupon become an employee of the Company or another of its Affiliates, the
Participant shall have the right for three months after such termination of
employment to exercise this Option with respect to the shares that have become
exercisable pursuant to Paragraph 1 on the date of such termination. Thereafter,
this Option shall terminate and cease to be exercisable.

              (b) Disability. If the Participant ceases to be employed by the
Company or one of its Affiliates by reason of disability (as defined in section
22(e)(3) of the Code), the Participant shall have the right for 12 months after
the date of such termination of employment to exercise this Option with respect
to all shares available for purchase hereunder, including the portion of this
Option that has not yet become exercisable pursuant to Paragraph 1 on the date
of such termination. Thereafter, this Option shall terminate and cease to be
exercisable.

              (c) Death. If the Participant dies, this Option shall be
exercisable by the Participant's legal representatives, heirs, legatees, or
distributees for 12 months after the date of the Participant's death with
respect to all shares available for purchase hereunder, including that portion
of this Option that has not yet become exercisable pursuant to Paragraph 1 on
the date of the Participant's death. Thereafter, this Option shall terminate and
cease to be exercisable.

         7. Committee Authority. Any question concerning the interpretation of
this Agreement, any adjustments required to be made under the Plan, and any
controversy which may arise under the Plan or this Agreement shall be determined
by the Committee in its sole discretion. Such decision by the Committee shall be
final and binding.



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         8. Restrictions on Shares. Shares acquired pursuant to the exercise of
this Option shall be subject to certain restrictions, including but not limited
to repurchase rights in favor of the Company upon the Participant's termination
of employment as described in Section 4.4 of the Plan and the Company's right of
first refusal as described in Section 4.5 of the Plan.

         9. Incentive Stock Option Qualification. This Option is intended to
qualify as an "incentive stock option" within the meaning of section 422 of the
Code, and shall be so construed; provided, however, that nothing in this
Agreement shall be interpreted as a representation, guarantee or other
undertaking on the part of the Company that this Option is or will be determined
to be an Incentive Option. However, if any portion of this Option is deemed not
to be an Incentive Option because the $100,000 annual limit under section 422(d)
of the Code on Incentive Options is exceeded, or otherwise, the portion of this
Option which cannot be treated as an Incentive Option shall be deemed to be a
Nonqualified Option. In such an event, the Participant shall be subject to the
tax withholding provision of Section 7.3 of the Plan for the portion of this
Option which is not an Incentive Option, and all other Plan provisions that
apply to Nonqualified Options.

         10. Notice of Disqualifying Disposition. Except to the extent that a
portion of this Option is treated as a Nonqualified Option pursuant to Paragraph
9, the Participant shall notify the Company of his or her intent to dispose of
any of the shares of Stock purchased pursuant to this Option within two years
from the date of the grant of the Option and one year from the date of exercise
of the Option, and promptly after such disposition the Participant shall notify
the Company of the number of shares of Stock disposed of, the dates of
acquisition and disposition of such shares, and the consideration if any,
received on such disposition. If in connection with any such disposition, the
Company becomes liable for withholding taxes and has no amounts owing the
Participant with which to discharge its withholding obligation, the Participant
shall indemnify the Company against any penalties it may incur through its
inability to apply amounts owing the Participant in discharge of its withholding
obligation. Nothing in this Paragraph shall give the Participant any right to
dispose of shares of Stock in a manner that is inconsistent with any provision
of this Agreement, the Plan, or any stock transfer restriction agreement entered
into by the Participant.

         11. Plan Controls. The terms of this Agreement are governed by the
terms of the Plan, as it exists on the date of this Agreement and as the Plan is
amended from time to time. A copy of the Plan, and all amendments thereto, is
attached hereto as Exhibit A and made a part hereof as if fully set forth
herein. In the event of any conflict between the provisions of this Agreement
and the provisions of the Plan, the terms of the amended Plan shall control,
except as expressly stated otherwise. Capitalized terms used herein, if not
defined, shall have the meaning as set forth in the Plan, except where the
context otherwise requires. The terms "Article" or "Section" generally refer to
provisions within the Plan; provided, however, the term "Paragraph" shall refer
to a provision of this Agreement.

         12. Notice. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date which it is personally delivered, or, whether actually
received or not, on the third business day after it is deposited in the United


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States mail, certified or registered, postage prepaid, addressed to the person
who is to receive it at the address which such person has theretofore specified
by written notice delivered in accordance herewith. The Company or Participant
may change, by written notice to the other, the address previously specified for
receiving notices. Notices delivered to the Company shall be addressed as
follows:

                                    iPayment Holdings, Inc.
                                    Attn:   Afshin Yazdian
                                    30 Burton Hills, Suite 520
                                    Nashville, TN  37215
                                    Phone:  (615) 665-1858
                                    Fax:  (615) 665-8434

         Notices to the Participant shall be hand delivered to the Participant
on the premises of the Company or its Affiliates, or mailed to the last address
shown on the records of the Company.

         13. Information Confidential. As partial consideration for granting of
this Option, the Participant agrees that he or she will keep confidential all
information and knowledge that the Participant has relating to the manner and
amount of his or her participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Participant's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.

         14. Governing Law. Except as is otherwise provided in the Plan, where
applicable, the provisions of this Agreement shall be governed by the internal
laws of the State of Tennessee, without regard to the principles of conflicts of
laws thereof.



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         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and the Participant has set his hand hereto on the day and year first
above written.

                                          iPAYMENT HOLDINGS, INC.



                                          By:
                                             ----------------------------------

                                          Its:
                                              ---------------------------------



                                          PARTICIPANT


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