Document:

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                                                                    EXHIBIT 10.3

                                 PROMISSORY NOTE

$900,000.00                                                 Nashville, Tennessee
                                                                  August 9, 2001

         FOR VALUE RECEIVED, 1st National Processing, Inc., a Nevada corporation
("1st National"), T.A. Gillis and Leon D. Ladd (collectively, the "Obligor"),
hereby jointly and severally promise to pay to iPayment Holdings, Inc., a
Tennessee corporation (the "Holder"), the principal sum of Nine Hundred Thousand
and No/100 Dollars ($900,000.00). The principal sum of Nine Hundred Thousand and
No/100 Dollars ($900,000.00), together with interest accrued thereon at six
percent (6%) per annum, shall be due and payable on the earlier of (i) an
initial public offering by iPayment Holdings, Inc.; (ii) a sale of iPayment
Holdings, Inc., including without limitation the sale of a significant portion
of the assets or business of iPayment Holdings, Inc.; (iii) a Transfer or series
of Transfers of 169,500 or more shares of iPayment Holdings, Inc. owned by 1st
National; or (iv) August 1, 2005; provided that no payment shall be due under
this Note (as hereinafter defined) unless the value of 678,000 shares, as
adjusted for any stock splits, of iPayment Holdings, Inc., equals or exceeds the
outstanding principal plus accrued but unpaid interest on the Note (as
hereinafter defined) at the time of the applicable event referenced above.
Payment of principal shall be made to Holder at 30 Burton Hills, Suite 520,
Nashville, Tennessee 37215 or such other address as Holder may designate from
time to time. Principal and interest accrued thereon shall be payable in lawful
money of the United States of America, which shall be legal tender in payment of
all debts and dues, public and private, at the time of payment.

         1. Definitions. The following words and terms when used in this Note
shall have the meanings set forth below, unless the context or use indicates
another or different meaning or intent, and such definitions and the other words
and terms in this Note shall be equally applicable to the singular and plural as
well as the masculine, feminine, and neuter, as the context requires.

                  "Business Day" means each Monday, Tuesday, Wednesday, Thursday
         and Friday which is not a day on which banking institutions in the city
         of Nashville, Tennessee are authorized or obligated by law or executive
         order to close.

                  "Event of Default" means the occurrence of any of the
         following events:

                  (a) the failure of Obligor to make any scheduled payment of
         principal and interest due in connection with this Note within ten (10)
         days of the date on which such payment is due;

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                  (b) Obligor's assignment for the benefit of its creditors or
         Obligor's admission in writing of its inability to pay its debts
         generally as they become due or Obligor's consent to the appointment of
         a receiver, conservator, custodian, liquidator, or trustee of Obligor
         or of all or any part of its property;

                  (c) Obligor's filing of a petition in voluntary bankruptcy or
         Obligor's seeking relief under any provision of any bankruptcy,
         reorganization, arrangement, insolvency, readjustment of debt,
         dissolution, or liquidation law of any jurisdiction, whether now or
         hereafter in effect or Obligor's consent to the filing of any petition
         against it under any such law;

                  (d) the appointment of a receiver, conservator, custodian,
         liquidator, or trustee of Obligor's or of all or any of the property of
         Obligor, and such appointment remains in effect for more than sixty
         (60) days;

                  (e) an order for relief is entered under the federal
         bankruptcy laws with respect to Obligor or any of the material property
         of Obligor is sequestered by court order and such order remains in
         effect for more than sixty (60) days; or

                  (f) a petition is filed against Obligor under the bankruptcy,
         reorganization, arrangement, insolvency, readjustment of debt,
         dissolution, or liquidation law of any jurisdiction, whether now or
         hereafter in effect, and is not dismissed within sixty (60) days after
         such filing.

                  "Note" means this Promissory Note.

                  "Person" means, whether or not capitalized, a natural person,
         a partnership, a corporation, an association, a limited liability
         company, a trust, a joint venture, a joint stock company, an
         unincorporated organization, or a governmental entity, or any
         department, agency, or political subdivision thereof.

                  "Permitted Transferee" shall have the meaning set forth in the
         Price Protection Agreement.

                  "Pledge Agreement" means that certain Pledge and Security
         Agreement, dated August 9, 2001, among iPayment Holdings, Inc., a
         Tennessee corporation, and Leon D. Ladd.

                  "Price Protection Agreement" means that certain Price
         Protection and Purchase Agreement, dated August 9, 2001, by and among
         iPayment Holdings, Inc., a Tennessee corporation, First Nevada
         Holdings, Inc., a Nevada corporation formerly known as 1st National
         Processing, Inc., T.A. Gillis, Leon D. Ladd and James L. Miller.

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                  "Shares" shall have the meaning set forth in the Price
         Protection Agreement.

                  "Transfer" shall have the meaning set forth in the Price
         Protection Agreement.

         2. Prepayment. Obligor, at its option, may prepay this Note, in whole
or in part, at any time and without prior notice, by paying Holder the principal
amount to be repaid, without penalty or premium, together with any interest
accrued thereon.

         3. Remedies for Event of Default.

              (a) If any Event of Default shall occur and be continuing, Holder
may, by notice to Obligor, declare this Note and all liabilities of Obligor
hereunder, to be immediately due and payable, and the same shall become and be
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, or other notice of any kind to Obligor, all of which are
hereby waived.

              (b) In the event this Note is placed in the hands of an attorney
for collection or enforcement, or in the event that Holder incurs any costs
incident to the collection of any indebtedness evidenced hereby, Obligor agrees
to pay all reasonable costs, including without limitation reasonable attorneys'
fees, court costs and collection efforts, actually incurred by Obligor.
Forbearance to exercise the remedies set forth herein with respect to any
failure or breach of the Obligor shall not constitute a waiver by the Holder of
any such remedies.

         4. Miscellaneous.

              4.1 Interest Rate. Regardless of any other provision of this Note
or in any documents relating hereto, Holder shall not ever be entitled to
receive, collect, reserve, or apply as interest on the principal of this Note
any amount in excess of the maximum rate of interest allowable under applicable
law or regulations, as amended or enacted from time to time, and if any Holder
of this Note ever receives, collects, or applies as interest hereon any such
excess, such amount that would be excessive interest shall be deemed a partial
prepayment of principal and shall be treated as such, and if the principal is
paid in full, any remaining excess shall forthwith be paid to the Obligor. In
determining whether any interest paid or payable on the principal outstanding
under this Note exceeds the maximum rate of interest allowable under applicable
law, the Obligor and the Holder shall, to the maximum extent permitted by
applicable law, (a) characterize any non-principal payment as an expense, fee,
or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) spread the total amount of interest through the entire
contemplated term hereof; provided, however, that if the indebtedness evidenced
hereby is paid and performed in full prior to the end of the full actual period
of existence thereof, and if the interest received for the actual period of
existence thereof exceeds the maximum rate of interest allowable

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under the applicable law, the Holder shall either apply or refund to the Obligor
the amount of such excess as herein provided, and in such event the Holder shall
not be subject to any penalties provided by any laws for contracting for,
charging, reserving, collecting or receiving interest in excess of the maximum
rate of interest allowable under law.

         4.2 Notice. Any notice required by the provisions of this Note to be
given to Holder or Obligor shall be (i) delivered personally, or mailed,
certified mail, return receipt requested, postage prepaid, or delivered by
nationally recognized overnight courier service to Holder at its address set
forth above or to Obligor at the address set forth in the Pledge Agreement, or
(ii) transmitted by telex or facsimile transmission to the respective numbers of
Holder or Obligor furnished in writing to the other party, and confirmed by
certified mail, return receipt requested. Any such notice shall be deemed to
have been given upon delivery, if delivered personally; three (3) days after
mailing, if mailed; and one Business Day after delivery to the courier or after
transmission, if delivered by overnight courier or transmitted by telex or
facsimile transmission.

         4.3 Descriptive Headings. The descriptive headings of this Note are
inserted for convenience only and do not constitute a part of and shall not be
utilized in interpreting this Note.

         4.4 Choice of Laws. This Note will be governed by and construed in
accordance with the local laws of the State of Tennessee, in which state such
indebtedness is incurred and in which this Note is made a delivered. Obligor and
Holder hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Tennessee and of the United States of
America located in the State of Tennessee (the "Tennessee Courts") for any
litigation arising out of or relating to this Note (and agrees not to commence
any litigation relating thereto except in such courts), waive any objection to
the laying of venue of any such litigation in the Tennessee Courts and agree not
to plead or claim in any Tennessee Court that such litigation brought therein
has been brought in an inconvenient forum.

         4.5 Amendment. All amendments to this Note, and any waiver or consent
by the Holder, must be in writing and signed by the Holder and the Maker.
Obligor and any endorser hereof hereby severally waive presentment, demand,
notice of dishonor, protests and all other notices whatever, and agree that
Holder may, without releasing the liability of Obligor, grant extensions or
renewals of this Note, in whole or in part, without limit as to the number of
such extensions, or the period or periods thereof, and without notice to them
and without affecting their liability thereon.

         4.6 Extension. Obligor and any endorser hereof hereby severally waive
presentment, demand, notice of dishonor, protests and all other notices
whatever, and agree that Holder may, without releasing the liability of Obligor,

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grant extensions or renewals of this Note, in whole or in part, without limit as
to the number of such extensions, or the period or periods thereof, and without
notice to them and without affecting their liability thereon.

         4.7 Pledge. The obligations of Obligor pursuant to this Note are
secured by collateral set forth in Pledge Agreement and may now or hereafter be
secured by other pledges, assignments, security agreements, or other instruments
of pledge. Neither this reference to the Pledge Agreement nor any provisions
thereof shall affect or impair the absolute and unconditional obligation of the
Obligor to pay the interest and unpaid principal amount of this Note when due
hereunder.

         IN WITNESS WHEREOF, the undersigned has executed this Note this 9th day
of August, 2001.

                                                 1ST NATIONAL PROCESSING, INC.

                                                 By:   /s/ T.A. Gillis
                                                    ----------------------------
                                                 Title:
                                                       -------------------------

                                                 /s/ Leon D. Ladd
                                                 -------------------------------
                                                 Leon D. Ladd

                                                 /s/ T.A. Gillis
                                                 -------------------------------
                                                 T.A. Gillis

ATTEST:

   /s/ Christa Shook
-----------------------------
Secretary

                                       5<PAGE>
                                                                    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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