Exhibit 10.40

 

SEPARATION AGREEMENT

 

SEPARATION AGREEMENT, dated as of December 12, 2003 (the “Execution Date”),
between Tier Technologies, Inc., a California corporation (“the Company”), and
Harry Wiggins (the “Employee”).

 

WHEREAS, the Employee was employed by the Company and served as Senior Vice
President and General Manager, Government Services Strategic Business Unit.

 

WHEREAS, the Employee desired to resign as Senior Vice President and General
Manager, Government Services Strategic Business Unit of the Company and from any
and all other positions he may have held with the Company or any of its
affiliates (the “Additional Positions”) and to terminate his employment with the
Company.

 

WHEREAS, the Employee and the Company intend that the terms and conditions of
this Agreement shall govern all issues relating to the Employee's
discontinuation of his employment with the Company.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
below, including the releases given and received herein, the parties hereto
agree as follows:

 

1.             Resignation.  The Employee has elected to resign as an employee
of the Company effective December 12, 2003 (the “Resignation Date”).  The
Employee resigned as Senior Vice President and General Manager, Government
Services Strategic Business Unit of the Company and from all of his Additional
Positions, as provided herein.

 

2.             Payments and Benefits.  In consideration of the release contained
in Section 7 hereof, assuming this Agreement has not been revoked under Section
13, below, the parties agree as follows: The Company shall pay the Employee for
consulting services as provided in the Independent Contractor Agreement attached
hereto as Appendix A.

 

3.             Other Employment.  Except as otherwise expressly provided herein,
the Employee's entitlement to his payments and benefits hereunder shall not be
reduced or affected by his earnings from any other source.

 

4.             Taxes.  The Company shall have the right to deduct from all
payments under this Agreement, whether in cash, stock or other property, an
amount necessary to satisfy any federal, state or local withholding tax
requirements.

 

5.             Confidentiality.

 

(a)           The Employee acknowledges that the Confidential information (as
hereinafter defined) of the Company is valuable, special and unique to the
Company Business, and that such Company Business depends on such Confidential
Information; and that the Company wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of the Company. 
Based on the foregoing, the Employee undertakes:

 

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(i)            to keep any and all Confidential Information in trust for the use
and benefit of the Company;

 

(ii)           except as required by the Employee's duties hereunder or as may
be authorized in writing by the Company, not at any time during and for a period
of one (1) year after termination of the Employee's employment with the Company,
to disclose or use, directly or indirectly, any Confidential Information of the
Company;

 

(iii)          to take all reasonable steps necessary, or reasonably requested
by the Company, to ensure that all Confidential Information of the Company is
kept confidential for the use and benefit of the Company; and

 

(iv)          on termination of the Independent Contractor Agreement, attached
hereto as Appendix A, or at any other time the Company may in writing so
request, to promptly deliver to the Company all materials constituting
Confidential Information (including all copies thereof) that are in Employee's
possession or under Employee's control.  Further, the Employee undertakes that,
if requested by the Company, the Employee shall return any Confidential
Information pursuant to this subsection and shall not make or retain any copy of
or extract from such materials.

 

(b)           For purposes of this Section, “Confidential Information” means any
and all information developed by or for the Company of which the Employee gained
knowledge by reason of Employee's employment with the Company under this
Agreement that is not generally known in the industry in which the Company is or
may be engaged.  Confidential Information includes, but is not limited to, any
and all information developed by or for the Company or customers of the Company,
concerning plans, marketing and sales methods, materials, processes, business
forms, procedures, devices used by the Company, plans for development of new
products, services and expansion into new areas or markets, internal operations
and any trade secrets and proprietary information of any type owned by the
Company together with all written, graphic and other materials relating to all
or any part of the same.  Confidential Information does not include any
information which becomes public through some means not controlled by the
Employee.

 

6.             Additional Covenants.

 

(a)           The Employee further agrees and covenants that:

 

(i)            unless required by law, he shall not disclose the terms and
conditions of this Agreement to anyone other than his immediate family, tax
advisor and legal counsel;

 

(ii)           he shall immediately instruct his immediate family, tax advisor
and legal counsel not to disclose the terms and conditions of this Agreement to
anyone;

 

(iii)          he will return to the Company on or before March 31, 20004 any
and all property of the Company, records, files, notes, memoranda, reports, work
product and similar items and any manuals, drawings, sketches, plans, tape
recordings, computer programs,

 

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disks, cassettes and other physical representations of any information relating
to the Company or its Affiliates or to the business or clients of the Company,
whether or not constituting confidential information, and  to promptly return to
the Company any of the same that he discovers at any future time and without
retaining copies in any form, including electronic; and

 

(iv)          Cooperation.         The Employee covenants and agrees to
cooperate with and make himself readily available to the Company or its General
Counsel, as the Company may reasonably request, to assist it in any matter,
including but not limited to, providing information, giving truthful testimony
in any litigation or potential litigation over which the Employee may have
knowledge, information or expertise, and signing routine documents for
administrative purposes.

 

(b)           The Company further agrees and covenants that:

 

(i)            unless required by law, the Company shall not disclose the terms
and conditions of this Agreement to anyone other than its tax advisor, legal
counsel, or auditors; and

 

(ii)           the Company shall, consistent with provisions in the Employee's
Indemnity Agreement with the Company, continue to indemnify the Employee with
respect to attorneys' fees and related expenses incurred in connection with the
representation of the Employee in the ongoing Department of Justice criminal
antitrust investigation; and

 

(iii)          the Company agrees to waive the Non-Competition and
Non-Solicitation Provisions contained in Sections 5.1 and 5.2 of the Employment
Agreement memorialized on October 29, 2002, with the waiver becoming effective
March 12, 2004, upon the conclusion of the Independent Contractor Agreement,
attached hereto as Appendix A.

 

7.             Mutual Waiver and Release.  In consideration of the Company's
commitment to the various arrangements described in the preceding paragraphs,
the Employee hereby releases and discharges the Company, its divisions,
subsidiaries and affiliates and their current and former directors, officers,
shareholders, agents and employees, and each of their predecessors, successors,
and assigns (collectively “the Releasees”), from any and all claims and causes
of action (except for the benefits specifically set forth in this Agreement)
arising out of or related to any act or omission prior to the date of this
Agreement, including claims related to the Employee's employment or the
termination of the Employee's employment.  This release includes, but is not
limited to, any claims for salary, bonuses, severance pay, vacation pay or any
benefits under the Employee Retirement Income Security Act (except for vested
benefits which are not affected by this Agreement); claims for sexual
harassment, or discrimination based on race, color, national origin, ancestry,
religion, marital status, sex, sexual orientation, citizenship status,
pregnancy, leave of absence (including, but not limited to the Family and
Medical Leave Act, or any other federal, state, or local leave laws), medical
condition or disability (as defined by the Americans with Disabilities Act, or
any other state or local law), age (under the Age Discrimination in Employment
Act, or any other federal, state or local laws prohibiting age discrimination)
or any other unlawful discrimination claims under the Worker Adjustment and
Retraining Notification Act, whistleblower claims, and claims for breach of
implied or express contract, breach of promise, misrepresentation, negligence,
fraud, estoppel, defamation, infliction

 

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of emotional distress, violation of public policy or wrongful or constructive
discharge, and for attorneys' fees, that the Employee or his heirs, executors,
administrators, successors, and assigns now have, ever had or may hereafter
have, whether known or unknown, suspected or unsuspected, up to and including
the date of this Agreement.  The Employee further agrees, promises and covenants
that, to the maximum extent permitted by law, neither the Employee, nor any
person, organization or other entity acting on the Employee's behalf, has or
will file, charge, claim, sue, or cause or permit to be filed, charged or
claimed, any action for damages or other relief (including injunctive,
declaratory, monetary relief or other) against the Releasees involving any
matter occurring in the past up to the date of this Agreement, or involving or
based upon any claims, demands, causes of action, obligations, damages or
liabilities which are the subject of this Agreement.  This Agreement shall not
affect the Employee's rights under the Older Workers Benefit Protection Act to
have a judicial determination of the validity of this release and waiver.

 

In consideration of the Employee's commitment to the various arrangements
described in the preceding paragraphs, the Company hereby releases and
discharges the Employee, his heirs, estate, executors, administrators,
predecessors, successors, and assigns (collectively “the Releasees”), from any
and all claims and causes of action arising out of or related to any act or
omission prior to the date of this Agreement, including claims related to the
Employee's employment with the Company or the termination of the Employee's
employment.

 

8.             No Claims.  Each party hereby represents that it has not filed or
commenced any action, complaint, charge, grievance, arbitration or any other
proceedings, administrative or judicial (a “Claim”), against the other.

 

9.             Jurisdiction.  The Employee hereby submits his person to the
jurisdiction of all state courts of the State of Virginia, for the purposes of
the enforcement of this Agreement.  All disputes under this Agreement will be
determined in the Federal or State courts within the State of Virginia.

 

10.           No Liability.  By entering into this Agreement, the Company does
not admit, and specifically denies, any liability or wrongdoing, and it is
expressly understood and agreed that this Agreement is being entered into solely
for the purposes of avoiding and amicably resolving all disputes and potential
claims between the Employee and the Company and its Affiliates.

 

11.           Prevailing Party.  If any litigation is commenced between the
parties hereto concerning this Agreement or their respective rights, duties and
obligations hereunder, the party prevailing in that litigation shall be entitled
to reasonable attorneys' fees, to be fixed by the court as part of the costs of
the litigation or established in a separate action brought to recover those
fees, in addition to any other relief that may be granted.

 

12.           Miscellaneous.

 

(a)           This Agreement is personal in its nature and the parties shall
not, without the prior written consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided that the provisions
hereof shall inure to the benefit of, and be

 

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binding upon, the heirs, administrators or executors of the Employee and upon
each successor of the Company, whether by merger, consolidation or transfer of
all or substantially all of its assets.

 

(b)           This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements or understandings between the parties hereto with respect thereto.

 

(c)           No modification, amendment or waiver of any provision of, or
consent required by, this Agreement, nor any consent to any departure herefrom,
shall be effective unless it is in writing and signed by the parties hereto. 
Such modification, amendment, waiver or consent shall be effective only in the
specific instance and for the purpose for which given.

 

(d)           Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.

 

(e)           The Agreement and the rights and obligations of the Company and
the Employee hereunder shall be governed by and construed and enforced under the
laws of the Commonwealth of Virginia, without reference to any principles of
conflict of laws.

 

(f)            Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

 

13.           Acknowledgments by the Employee.  The Employee acknowledges and
agrees that, in deciding to execute this Agreement, he has relied entirely upon
his own judgment, that he has read this Agreement and has had adequate time to
consider its terms and effects and to ask any questions that he may have of
anyone, including legal counsel of his own choosing, and that he has executed
this Agreement voluntarily and with full understanding of its terms and its
effects on him, and that no fact, evidence, event or transaction currently
unknown to him but which may later become known to him will affect in any way or
manner the final and unconditional nature of this Agreement.  The Employee
further acknowledges that (a) he was advised to consult with an attorney before
he executed this Agreement; (b) he was afforded sufficient opportunity to and
did consult with an attorney; (c) he had 21 days from his receipt of this
Agreement to consider this Agreement before executing and delivering this
Agreement; and (d) he may revoke this Agreement by delivering written notice to
the Company within a period of seven days following the day on which he executes
this Agreement (the “Revocation Period”), and this Agreement shall not become
effective or enforceable until after the Revocation Period has expired.  For
this revocation to be effective, written notice from the Employee must be
received by the Company at its address set forth on the signature page hereof no
later than the close of business on the seventh (7th) day after the Employee
signs this Agreement.  If the Employee revokes this Agreement, the Employee will
not receive any of the payments or benefits described in this Agreement.

 

BY SIGNING THIS AGREEMENT, THE EMPLOYEE STATES THAT:

 

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(a)           THE EMPLOYEE HAS READ THIS AGREEMENT AND HAS HAD SUFFICIENT TIME
TO CONSIDER ITS TERMS;

 

(b)           THE EMPLOYEE UNDERSTANDS ALL OF THE TERMS AND CONDITIONS OF THIS
AGREEMENT AND KNOWS THAT HE IS GIVING UP IMPORTANT RIGHTS;

 

(c)           THE EMPLOYEE AGREES WITH EVERYTHING IN THIS AGREEMENT;

 

(d)           THE EMPLOYEE IS AWARE OF HIS RIGHT TO CONSULT WITH AN ATTORNEY
BEFORE SIGNING THIS AGREEMENT AND HAS BEEN ADVISED OF SUCH RIGHT;

 

(e)           THE EMPLOYEE HAS SIGNED THIS AGREEMENT KNOWINGLY AND VOLUNTARILY;
AND

 

(f)            THIS AGREEMENT INCLUDES A RELEASE BY THE EMPLOYEE OF ALL KNOWN
AND UNKNOWN CLAIMS.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.

 

 

TIER TECHNOLOGIES, INC.

 

 

 

 

 

By:

/s/ James R. Weaver

 

 

 

James R. Weaver

 

 

President and CEO

 

 

 

 

Address:

Tier Technologies, Inc.

 

 

10780 Parkridge Blvd., Suite 400

 

 

Reston, VA  20191

 

 

 

 

 

EMPLOYEE

 

 

 

 

 

By:

/s/ Harry Wiggins

 

 

 

Name:  Harry Wiggins

 

 

 

 

Address:

3525 Aviary Way

 

 

Lake Ridge, VA 22192

 

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INDEPENDENT CONTRACTOR AGREEMENT

 

This Independent Contractor Agreement (the “Agreement”) by and between Tier
Technologies, Inc., (“Tier”) and Harry W. Wiggins (“Wiggins”), shall be
effective December 13, 2003, upon both parties duly signing the Agreement as
provided below.  Tier and Wiggins may collectively be referred as the Parties
and individually as a Party.

 

WHEREAS, Wiggins was an employee of Tier;

 

WHEREAS, Wiggins resigned from Tier effective December 12, 2003;

 

WHEREAS, Tier has requested and Wiggins has agreed to provide ongoing short-term
transition services, as set forth below;

 

NOW, THEREFORE, in consideration of the promises contained herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Wiggins agrees to provide and Tier agrees to accept certain
services from Wiggins as set forth below:

 

1.                                       Services:  For a period of three (3)
months, commencing December 13, 2003 and concluding March 12, 2004 (the “Term”),
Wiggins shall assist Tier in effecting an orderly transition of the business of
the Government Services Strategic Business Unit (“SBU”).  These efforts shall
include, but not be limited to, completing existing projects, preparing
summaries of ongoing business matters and assisting Tier personnel in continuing
to conduct the business of the SBU (the “Services”).  Wiggins shall work
directly under James R. Weaver, President and CEO of Tier.   Wiggins agrees to
use good faith efforts in performing these Services.

 

2.             Fees and Payment.

 

a.               Fees:  Wiggins shall be compensated for his Services performed
pursuant to the terms of this Agreement as follows:

 

i.                                          The sum of $28,824.57 for the period
of December 13, 2003 through January 12, 2004;

ii.                                       The sum of $26,324.57 for the period
of January 13, 2004 through February 12, 2004; and

iii.                                    The sum of $26,324.57 for the period
February 13, 2004 through March 12, 2004.

 

b.              Expenses:  Provided Wiggins has received Tier's prior approval,
Tier will reimburse Wiggins for any reasonable travel, lodging and related
expenses.  Original receipts are required in the event any expenses are approved
as reimbursable.  James R. Weaver is authorized to approve any such expenses.

 

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c.               Payment:  Wiggins shall receive the fees set forth above within
ten (10) calendar days following Tier's receipt of an invoice from Wiggins. 
Invoices should be sent to James R. Weaver at the following address:

 

Tier Technologies, Inc.

10780 Parkridge Blvd., Suite 400

Reston, VA  20191

 

Payment to Wiggins shall be made by check to the address listed below:

 

Harry W. Wiggins

3525 Aviary Way

Lake Ridge, VA  22192

 

3.             Restrictions.  Wiggins agrees that the Services shall be provided
at the request, and under the direct supervision, of James R. Weaver only. 
Wiggins shall not directly contact any of Tier's clients or individuals within
those entities unless directed to do so by James R. Weaver.  Wiggins shall have
no authority to legally bind Tier in any manner, to sign for or represent Tier,
to negotiate or agree to any contract or payment terms or other legal terms and
conditions, unless otherwise expressly directed in writing by Tier.

 

4.             Independent Contractor.  Wiggins acknowledges that he will
perform the Services as an independent contractor and that he will not be an
employee or agent of Tier.  At no time shall Wiggins be eligible to participate
in the benefits of any sort which Tier offers to its employees.  Wiggins agrees
to maintain a place of business at a location other than the premises of Tier
and to use his own equipment and supplies in performing the Services.  Wiggins
shall be responsible for paying all ordinary and necessary expenses incurred in
performing the Services, including, but not limited to, all local and long
distance phone charges, applicable taxes, insurances, workers' compensation
insurance, and state disability insurance necessary to provide the Services.

 

5.             Performance Warranty.  Wiggins warrants, at all times during the
term of this Agreement and in performing the Services, that he will act
professionally, lawfully and in a business like manner.

 

6.             Confidentiality.  During the term of this Agreement, Wiggins
agrees that he will keep in confidence all nonpublic information relating to the
terms of this Agreement and Tier's products, trade secrets, business, customers
and personnel (collectively, “Proprietary Information”) that may be acquired
pursuant to, or in connection with, this Agreement.  During and for a period of
three (3) years after the term of this Agreement, Wiggins will not, without the
prior written consent of an officer of Tier, disclose any of such Proprietary
Information.  Notwithstanding the foregoing, it is agreed that Proprietary
Information shall not include any information which: (i) has become publicly
known through no wrongful act of Wiggins; (ii) has been rightfully received by
Wiggins from a third party without restriction on disclosure and without breach
of any agreement with Tier; or (iii) has been approved for release by written
authorization executed by an authorized officer of Tier.

 

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7.             Indemnification.  Each Party shall indemnify and hold the other
Party (including its affiliates, officers, agents, employees, and volunteers)
harmless from and against any and all liability, loss, cost, expenses, including
reasonable attorney's fees and cost, or damages howsoever caused by reason of
any injury or damages resulting from or in any way connected with any negligent
or willful misconduct in the performance of this Agreement.

 

8.             Limitation of Liability.  EXCEPT FOR THE INDEMNIFICATION
OBLIGATIONS IN SECTION 7 OF THIS AGREEMENT, NEITHER PARTY SHALL HAVE ANY
LIABILITY UNDER THIS AGREEMENT TO THE OTHER FOR DIRECT, INDIRECT, CONSEQUENTIAL,
PUNITIVE OR EXEMPLARY DAMAGES, EVEN IF SUCH PARTY HAS BEEN NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF AN ESSENTIAL
PURPOSE OF THIS AGREEMENT.

 

9.             Notice.   Any notice or other communication hereunder shall be in
writing.  If to Tier:  James R. Weaver, Tier, 2001 N. Main Street, Suite 500,
Walnut Creek, CA  94596.  With a copy to: Legal Dept. (same address).  All
notices provided to Wiggins shall be sent to the address listed in section 2(c)
of this Agreement.

 

10.           Entire Agreement/Modifications.  This Agreement contains the
complete agreement between the Parties and the terms hereof are contractual and
not a mere recital.  No modification hereof shall be binding on either of the
Parties unless it has been agreed to in writing and signed by each of the
Parties and identified as an amendment to this Agreement.

 

11.           Assignment.  This Agreement and the rights hereunder are not
transferable or assignable by either Party without the prior written consent of
the other, non-assigning Party.

 

12.           Acknowledgment.  The Parties acknowledge and agree that they have
read the terms of this document and that they have had sufficient opportunity to
discuss it with their respective attorneys and that they understand its terms
and effects.

 

13.           Severability.  If any provision of this Agreement shall be held or
deemed to be invalid, inoperative or unenforceable, such circumstance shall not
render the remainder of it invalid, inoperative or unenforceable, and this
Agreement shall be reformed so that it is enforceable to the maximum extent
permitted by law.

 

14.           Governing Law.  This Agreement shall be governed and interpreted
in accordance with the laws of the State of Virginia, without regard to its
conflicts of law principles.

 

[signature page follows]

 

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IN WITNESS WHEREOF, and intending to be legally bound hereby, Tier and Wiggins
have executed and signed this Agreement on the date stated below.

 

 

AGREED AND ACCEPTED:

 

AGREED AND ACCEPTED:

 

 

 

 

 

TIER TECHNOLOGIES, INC.

 

HARRY W. WIGGINS

 

2001 N. Main St., Suite 500

 

3525 Aviary Way

 

Walnut Creek, CA  94596

 

Lake Ridge, VA  22192

 

 

 

 

 

 

 

 

 

By:

/s/ James R. Weaver

 

By:

/s/ Harry W. Wiggins

 

 

James R. Weaver

 

Harry W. Wiggins

 

 

 

 

 

 

Its President and CEO

 

 

 

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