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Exhibit 10.40

SECOND MODIFICATION TO CREDIT AGREEMENT

    This Second Modification to Credit Agreement (this "Modification") is
entered into by and between TIER TECHNOLOGIES,  INC.("Borrower") and IMPERIAL
BANK ("Bank") as of this 19th day of September, 2001, at Inglewood, California.

RECITALS

    This Modification is entered into upon the basis of the following facts and
understandings of the parties, which facts and understandings are acknowledged
by the parties to be true and accurate:

    Bank and Borrower previously entered into a Credit Agreement dated
August 25, 2000, which was subsequently amended pursuant to that certain
modification agreement dated June 18, 2001. The Credit Agreement and the
modification shall collectively be referred to herein as the "Agreement."

    NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
below.

AGREEMENT

    1.  Incorporation by Reference.  The Recitals and the documents referred to
therein are incorporated herein by this reference. Except as otherwise noted,
the terms not defined herein shall have the meaning set forth in the Agreement.

    2.  Modification to the Agreement.  Subject to the satisfaction of the
conditions precedent as set forth in Section 3 hereof, the Agreement is hereby
modified as set forth below.

A.Subsection 1.01A(b) of the Agreement is hereby deleted in its entirety and
replaced with the following:

"(b) Letter of Credit Usage and Sublimit. Subject to availability under the
Revolving Line of Credit, at any time and from time to time from the date hereof
through the banking day immediately prior to the Revolving Line of Credit
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which requests shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed Four Million Dollars ($4,000,000) ("Letters of Credit
Sublimit") and (ii) shall be deemed to constitute Revolving Loans for the
purpose of calculating availability under the Revolving Line of Credit. Unless
agreed to in writing by Bank, no Letter of Credit shall have an expiration date
that is later than the Revolving Line of Credit Maturity Date. All Letters of
Credit shall be in form and substance acceptable to Bank in its sole discretion
and shall be subject to the terms and conditions of Bank's form application and
letter of credit agreement and other agreements required by Bank. Borrower will
pay all usual issuance and other fees that Bank notifies Borrower it will be
charged for issuing and processing Letters of Credit for Borrower"

    3.  Legal Effect.  The effectiveness of this Modification is conditioned
upon receipt by Bank of this Modification, and any other documents which Bank
may require to carry out the terms hereof. Except as specifically set forth in
this Modification, all of the terms and conditions of the Agreement remain in
full force and effect.

    4.  Integration.  This is an integrated Modification and supersedes all
prior negotiations and agreements regarding the subject matter hereof. All
amendments hereto must be in writing and signed by the parties.

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    IN WITNESS WHEREOF, the parties have agreed as of the date first set forth
above.

TIER TECHNOLOGIES, INC.   IMPERIAL BANK
By:
 
/s/ Laura B. DePole

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By:
 
/s/ Mike Hazlewood

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Michael Hazlewood
Senior Vice President Title:   CFO/Secretary

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By:
 
  

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  Title:     

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Exhibit 10.40

SECOND MODIFICATION TO CREDIT AGREEMENT
RECITALS
AGREEMENT