<PAGE>

                                                                   EXHIBIT 10.42

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

                             STOCK OPTION AGREEMENT

                  This Stock Option Agreement (this "Agreement"), dated [INSERT
DATE OF GRANT] (the "Date of Grant"), is made between iPayment, Inc. (the
"Company") and [INSERT NAME] (the "Participant"). All capitalized terms used
herein that are not defined herein shall have the respective meanings given to
such terms in the Non-Employee Directors Stock Option Plan, as amended and
restated on [INSERT DATE] (the "Plan").

                              W I T N E S S E T H :

         1.       Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Participant, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase (the "Option") from the Company all or any part of
an aggregate of [INSERT NUMBER OF SHARES] shares of the Stock of the Company at
a per share purchase price equal to $[INSERT EXERCISE PRICE] (the "Exercise
Price"), such Option to be exercisable as hereinafter provided. The Option shall
not be treated as an "incentive stock option," as defined in Section 422 of the
Code.

         2.       Option Period.

                  (a)      Subject to the other terms of this Agreement and the
Plan, the Option shall vest and may be exercised on or after the dates indicated
below as to that percentage of the total shares of Stock subject to the Option
as set forth below opposite each such date, plus any shares of Stock as to which
the Option could have been exercised previously, but was not so exercised:

<TABLE>
<CAPTION>
     Date                      Percentage
     ----                      ----------
<S>                       <C>
[INSERT DATE]             [INSERT PERCENTAGE]
[INSERT DATE]             [INSERT PERCENTAGE]
[INSERT DATE]             [INSERT PERCENTAGE]
[INSERT DATE]             [INSERT PERCENTAGE]
</TABLE>

                  (b)      Notwithstanding Section 2(a) of this Agreement, in
he event of a Change in Control, 100% of the Stock subject to the Option shall
become fully exercisable immediately prior to a Change in Control event.

         3.       Method of Exercise.

                  (a)      Any exercise of all or any part of the Option shall
be made by submitting to the Company the exercise notice attached hereto as
Exhibit A, along with the aggregate Exercise Price.

<PAGE>

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

         4.       Expiration and Termination of Option. The Option shall expire
and, thus, no longer be exercisable on the tenth (10th) anniversary of the Grant
Date, unless terminated earlier pursuant to any of the following:

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

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

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

                                      -2-

<PAGE>

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

         6.       Tax Consequences. Upon exercise of the Option, the Participant
shall, upon notification of the amount due and prior to or concurrently with the
delivery of the certificates representing the shares, pay to the Company amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements or shall otherwise make arrangements satisfactory to the Company
for such requirements, but only to the extent that the Company is required by
law to withhold such amounts or that the Participant voluntarily elects for such
withholding.

         7.       Lock-Up Period. The Participant hereby agrees that, if so
requested by the Company or any representative of the underwriters (the
"Managing Underwriter") in connection with any registration of the offering of
any securities of the Company under the Securities Act, the Participant shall
not offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any Stock or other securities of the Company or enter into any swap,
hedging or other arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership of any Stock or other securities of
the Company (each such action, a "Transfer") during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. The Company may impose stop-transfer instructions with respect
to securities subject to the foregoing restrictions until the end of such Market
Standoff Period.

         8.       Provisions of the Plan. The Option is granted pursuant to the
Plan, and such Option and this Agreement are in all respects governed by the
Plan and subject to all of the terms and provisions whether such terms and
provisions are incorporated in this Agreement solely by reference or are
expressly cited herein. Any interpretation of this Agreement will be made in
accordance with the Plan. In the event there is any contradiction between the
provisions of this Agreement and the Plan, the provisions of this Agreement will
prevail.

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

                                      -3-

<PAGE>

         10.      Certain Other Representations and Covenants of the
Participant. The Participant hereby acknowledges receipt of a copy of the Plan
and represents that he is familiar with the terms and provisions thereof. The
Participant hereby represents and acknowledges that the Participant has reviewed
the Plan and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Agreement and fully understands
all provisions of the Plan and this Agreement. The Participant hereby agrees to
be bound by all of the terms and provisions of the Plan and this Agreement,
including the terms and provisions adopted after the granting of the Option but
prior to the complete exercise hereof, subject to the last paragraph of Section
10.5 of the Plan as in effect on the date hereof. The Participant hereby agrees
to accept as binding, conclusive and final all decisions and interpretations of
the Committee or the Board upon any questions arising under the Plan, this
Agreement or otherwise relating to the Option.

         11.      Notices. Any notice or other communication required or
permitted hereunder shall be in accordance with the Plan, and, if to the
Company, may be delivered in person to the Company's [__________] or sent to the
Company, attention: [__________], by facsimile at [__________], or sent by
certified or registered mail or overnight courier, prepaid, addressed to the
Company at [_______________], and, if to the Participant, shall be addressed to
him at the address set forth below his signature hereon, subject to the right of
either party to designate at any time hereafter in writing some other address.

         12.      Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware applicable to contracts executed and to be performed entirely within
such state, without regard to the conflict of law provisions thereof.

         13.      Severability. If any of the provisions of this Agreement
should be deemed unenforceable, the remaining provisions shall remain in full
force and effect.

         14.      Modification. Except as otherwise permitted by the Plan, this
Agreement may not be modified or amended, nor may any provision hereof be
waived, in any way except in writing signed by the parties hereto.

         15.      Counterparts. This Agreement has been executed in two
counterparts, each of which shall constitute one and the same instrument.

                                      -4-

<PAGE>

                  IN WITNESS WHEREOF, iPayment, Inc. has caused this Agreement
to be executed by a duly authorized officer, and the Participant has executed
this Agreement, both as of the day and year first written above.

                  IPAYMENT, INC.

                  By__________________________________
                  Name:
                  Title:

                  PARTICIPANT

                  _____________________________________
                  [INSERT NAME OF PARTICIPANT]
                  [INSERT ADDRESS]

                  Date:_________________________________

                                      -5-

<PAGE>

EXHIBIT A:

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

                                 EXERCISE NOTICE

iPayment, Inc.
[INSERT ADDRESS OF STOCK ADMINISTRATOR]

         This Exercise Notice is given pursuant to the terms of the Stock Option
Agreement dated _________________ between iPayment, Inc. (the "Company") and the
undersigned Participant (the "Agreement"), which is made a part hereof and
incorporated herein by reference. (All capitalized terms not defined herein
shall have the meanings given to such terms in the iPayment, Inc. Non-Employee
Directors Stock Option Plan and the Agreement.)

         EXERCISE OF OPTION. The Participant hereby exercises the Option to
purchase _________________ shares of Stock of the Company. The Participant
hereby delivers, together with this written statement of exercise, the aggregate
Exercise Price with respect to the number of shares of Stock purchased:

                  Cash in the total amount of $_________________.

                  ______________ shares of Stock of the Company.

                  Cashless Exercise.

         ACKNOWLEDGMENT. The Participant understands and acknowledges that the
exercise of any rights to purchase any shares of Stock is expressly conditioned
upon compliance with the Securities Act of 1933, the Exchange Act of 1934, the
requirements of any stock exchange or national market system on which the
Company's stock may be listed, and all applicable state securities laws. The
Participant agrees to cooperate with the Company to ensure compliance with such
laws. The Participant has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.

         Executed this ________ day of ________________, ________.

         PARTICIPANT

         ____________________________     _________________________________
         Signature                        Print or Type Name

         iPayment, Inc. hereby acknowledges receipt of this Exercise Notice and
receipt of payment in the form and amount indicated above, all on this
_________day of ________________, __________.

         IPAYMENT, INC.

         ___________________________________________
         By:
         Title: