<PAGE>

                                                                    Exhibit 10.2

                THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

          Third Amended And Restated Employment Agreement (the "Agreement")
effective as of October 1, 2000 by and between Tier Technologies, Inc., a
California corporation (the "Company") and James L. Bildner ("Bildner").

          In consideration of the mutual benefits derived from this Agreement
and of the agreements, covenants and provisions hereof, the parties hereto agree
as follows:

1.   Employment

     1.1  Position.  During the Term (as hereinafter defined) of this Agreement
and subject to the terms and conditions set forth herein, the Company agrees to
employ Bildner as its Chairman of the Board and Chief Executive Officer,
reporting only to the Board of Directors of the Company.

     1.2  Election to Office.  During the Term of this Agreement, the Company
shall use its best efforts to sustain and continue Bildner's position and
designation as Chairman of the Board and Chief Executive Officer.

     1.3  Fulfillment of Duties.  As long as the Company sustains and continues
Bildner's position and designation as Chairman and Chief Executive Officer of
the Company, Bildner shall (i) devote his full-time efforts during normal
business hours to the performance of his services hereunder, except during
vacation periods and periods of illness or incapacity and except that nothing in
this Agreement shall preclude Bildner from devoting reasonable periods required
for serving as a director, or member of a committee of, or holding other
positions, in any organization involving no conflict of interest with the
interests of the Company and (ii) perform his services hereunder faithfully,
diligently and to the best of his skill and ability.

     1.4  Location.  During the Term of this Agreement, Bildner will perform his
duties and services at such locations as he shall deem appropriate, except that
Bildner agrees to make such business trips to the Company's principal executive
offices and to other locations as may be reasonable and necessary in the
performance of his services hereunder.

2.   Compensation And Benefits

     2.1  Salary.  In consideration of and as compensation for the services
agreed to be performed by Bildner hereunder, the Company agrees to pay Bildner
during the Term of this Agreement a base salary (the "Base Salary") of not less
than $550,000 per year, less standard deductions and withholdings, payable bi-
monthly in accordance with the Company's regular payroll practices.  The Company
may review Bildner's Base Salary and other compensation (including bonuses and
incentive compensation) from time to time during the Term of this Agreement and,
at the recommendation of the Compensation Committee of the Board of Directors of
the Company (the "Committee"), may increase his Base Salary or other
compensation (including bonuses and incentive compensation) from time to time.
Any increase in Base Salary or other compensation (including bonuses or
incentive compensation) shall in no

                                       1.
<PAGE>

way limit or reduce any other obligation of the Company hereunder and, once
established at an increased rate, Bildner's Base Salary hereunder shall not be
reduced.

     2.2  Incentive Compensation.  During the Term of this Agreement, in
addition to the Base Salary provided in Section 2.1 above, Bildner shall be
eligible to receive additional incentive compensation (the "Bonus'), in an
amount not to exceed 110% of Bildner's then applicable Base Salary, pursuant to
the terms and conditions of the Company's Incentive Compensation Plan,  which is
subject to adoption and approval by the Committee.

     2.3  Benefits.  Bildner will be entitled to the Benefits listed on Exhibit
A.

3.   Term

     3.1  Term.  The "Term" of employment under this Agreement means the period
commencing on October 1, 2000, and expiring on the date that is three (3) years
from the date thereof or the earlier termination hereof pursuant to Section 4.1.
Prior to the expiration of the Term, the Company and Bildner will discuss the
terms on which Bildner's employment may continue with the Company.  In the event
Bildner and the Company agree not to extend or renew the Term of this Agreement
and therefore, this Agreement expires on the last day of the Term, the Company
and Bildner agree that Bildner will remain employed with the Company for a
period of six (6) months beyond the last day of the Term (the "Transition
Period") to provide transition services to the Company.  During the Transition
Period, Bildner will receive his Base Salary and benefits as provided herein and
Sections 4 and 5 herein will not apply.  Except as provided herein, either Party
may terminate Bildner's employment under this Agreement at any time, with or
without Cause, subject to the terms and conditions of Sections 4 and 5 herein.

4.   Termination Of Employment

     4.1  Termination By the Company.  Bildner's employment with the Company may
be terminated under the following conditions:

          4.1.1  Death or Disability.  Bildner's employment with the Company
shall terminate effective upon the date of Bildner's death or "Complete
Disability" (as defined in Section 4.5.1).

          4.1.2  For Cause.  The Company may terminate Bildner's employment
under this Agreement for "Cause" (as defined in Section 4.5.2) by delivery of
written notice to Bildner specifying the Cause or Causes relied upon for such
termination. Any notice of termination given pursuant to this Section 4.1.2
shall effect termination as of the date specified in such notice or, in the
event no such date is specified, on the last day of the month in which such
notice is delivered or deemed delivered as provided in Section 8.1 below.

          4.1.3  Without Cause.  The Company may terminate Bildner's employment
under this Agreement at any time and for any reason by delivery of written
notice of such termination to Bildner.  Any notice of termination given pursuant
to this Section 4.1.3 shall effect termination as of the date specified in such
notice or, in the event no such date is specified, on the last day of the month
in which such notice is delivered or deemed delivered as provided in Section 8.1
below.

                                       2.
<PAGE>

     4.2  Termination By Bildner.  Bildner may terminate Bildner's employment
with the Company upon sixty (60) days written notice to the Company.

     4.3  Termination by Mutual Agreement of the Parties.  Bildner's employment
pursuant to this Agreement may be terminated at any time upon a mutual agreement
in writing of the Parties.  Any such termination of employment shall have the
consequences specified in such agreement.

     4.4  Compensation Upon Termination.

          4.4.1  Death or Complete Disability.  If Bildner's employment shall be
terminated by death or Complete Disability, Bildner (or his heirs) shall be
entitled to Bildner's Base Salary and accrued and unused vacation earned through
the date of termination, subject to standard deductions and withholdings.  In
addition, upon Bildner's (or his heirs') furnishing to the Company an executed
waiver and release of claims (a form of which is attached hereto as Exhibit B,
which will be revised for signature by Bildner's heirs if applicable), Bildner
(or his heirs) shall be entitled to:

                 (a)  The equivalent of Bildner's annual base salary in effect
at the time of termination for a period of twenty-four (24) months, less
standard deductions and withholdings, and the equivalent of the average bonus
earned by Bildner over the twenty-four (24) months prior to the date of
termination, less standard deductions and withholdings, to be paid over a period
of twenty-four (24) months after the date of termination; and

                 (b)  any options to purchase stock (common or otherwise) in the
Company granted to Bildner pursuant to any plan, agreement or otherwise, or any
equivalent or similar rights which appreciate or tend to appreciate as the value
of the Company's stock appreciates, shall be governed by the terms of any
applicable plan or agreement; and

                 (c)  In the event Bildner (or his heirs) elects continued
coverage under COBRA, the Company will reimburse Bildner (or his heirs) for the
same portion of Bildner's COBRA health insurance premium that it paid during
Bildner's employment until the last day of Bildner's COBRA health insurance
benefits.

          4.4.2  Termination for Cause or Resignation by Bildner.  If Bildner's
employment shall be terminated by the Company for Cause or Bildner resigns his
employment, the Company shall pay Bildner's accrued Base Salary and accrued and
unused vacation benefits earned through the date of termination at the rate in
effect at the time of the notice of termination to Bildner or Bildner's notice
of resignation to the Company, and the Company shall thereafter have no further
obligations to Bildner under this Agreement.

          4.4.3  Termination Without Cause.  If the Company terminates Bildner's
employment without Cause (except under any circumstance in which Section 5.1 is
applicable to Bildner, in which case this Section 4.4.3 shall not apply) Bildner
shall be entitled to Bildner's Base Salary and accrued and unused vacation
earned through the date of termination, subject to standard deductions and
withholdings.  In addition, upon Bildner's furnishing to the Company an executed
waiver and release of claims (a form of which is attached hereto as Exhibit B),
Bildner shall be entitled to:

                                       3.
<PAGE>

                 (a)  The equivalent of Bildner's annual base salary in effect
at the time of termination for a period of thirty (30) months, less standard
deductions and withholdings, and the equivalent of the average bonus earned by
Bildner over the thirty (30) months prior to the date of termination, less
standard deductions and withholdings, to be paid over a period of thirty (30)
months after the date of termination; and

                 (b)  any options to purchase stock (common or otherwise) in the
Company granted to Bildner pursuant to any plan or otherwise, or any equivalent
or similar rights which appreciate or tend to appreciate as the value of the
Company's stock appreciates, shall become immediately accelerated and fully
vested and any restrictions on such options or equivalent or similar rights
shall, to the extent permissible under applicable securities laws, fully lapse;
and the Company shall endeavor to cause any restrictions on such options or
equivalent or similar rights not lapsed by operation of this clause to so lapse;
and

                 (c)  In the event Bildner elects continued coverage under
COBRA, the Company will reimburse Bildner for the same portion of Bildner's
COBRA health insurance premium that it paid during Bildner's employment up until
the earlier of either (i) the last day of Bildner's COBRA health insurance
benefits or, ii) the date on which Bildner becomes covered under any other group
health plan (as an employee or otherwise).

          4.4.4  Covenant not to Compete.  Notwithstanding any provisions in
this Agreement to the contrary, including any provisions contained in this
Section 4.4, the Company's obligations, and Bildner's rights, pursuant to
Section 4.4.3 shall cease and be rendered a nullity immediately should Bildner
violate the provision of Section 7 herein, or should Bildner violate the terms
and conditions of Bildner's Proprietary Information and Inventions Agreement.

          4.4.5  Termination of Obligations.  In the event of the termination of
Bildner's employment hereunder and pursuant to this Section 4, the Company shall
have no obligation to pay Bildner any Base Salary, bonus or other compensation
or benefits, except as provided in this Section 4 or for benefits due to Bildner
(and/or Bildner's dependents under the terms of the Company's benefit plans).
The Company may offset any amounts Bildner owes it or its subsidiaries against
any amount it owes Bildner pursuant to this Section 4.4.

          4.4.6  Material Breach.  The Company's failure to comply with the
terms of this Section 4.4 shall be a material breach of this Agreement.

     4.5  Definitions.  For purposes of this Agreement, the following terms
shall have the following meanings:

          4.5.1  Complete Disability.  "Complete Disability" shall mean the
inability of Bildner to perform Bildner's duties under this Agreement because
Bildner has become permanently disabled within the meaning of any policy of
disability income insurance covering employees of the Company then in force.  In
the event the Company has no policy of disability income insurance covering
employees of the Company in force when Bildner becomes disabled, the term
"Complete Disability" shall mean the inability of Bildner to perform Bildner's
duties under this Agreement by reason of any incapacity, physical or mental,
which the Board, based

                                       4.
<PAGE>

upon medical advice or an opinion provided by a licensed physician acceptable to
the Board, determines to have incapacitated Bildner from satisfactorily
performing all of Bildner's usual services for the Company for a period of at
least one hundred twenty (120) days during any twelve (12) month period (whether
or not consecutive). Based upon such medical advice or opinion, the
determination of the Board shall be final and binding and the date such
determination is made shall be the date of such Complete Disability for purposes
of this Agreement.

          4.5.2  For Cause. The Company shall be entitled to terminate Bildner's
employment for Cause.  For purposes of this Agreement, "Cause" shall mean:

                 (a)  the willful and continued failure by Bildner to
substantially perform his duties with the Company in good faith (other than any
such failure resulting from his incapacity due to physical or mental illness,
injury or disability), after a demand for substantial performance is delivered
to him by the Board of Directors of the Company which identifies, in reasonable
detail, the manner in which the Board of Directors believes that Bildner has not
substantially performed his duties in good faith;

                 (b)  the willful engaging by Bildner in conduct which causes
material harm to the Company, monetarily or otherwise; or

                 (c)  Bildner's conviction of a felony arising from conduct
during the Term of this Agreement.

For purposes of this Subsection 4.5.2, no act, or failure to act, on Bildner's
part shall be considered "willful" unless done, or omitted to be done, by him
not in good faith and without reasonable belief that his action or omission was
in the best interest of the Company or its shareholders.  Notwithstanding the
foregoing, Bildner shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of two-thirds (2/3) of the directors then
occupying a seat on the Board of Directors at a meeting of the Board of
Directors called and held for such purpose (after ten days notice to him and an
opportunity for him, together with his counsel, to appear before the Board of
Directors), finding that Bildner was guilty of conduct set forth above in
clauses (a), (b) or (c) of this Subsection 4.5.2 and setting forth, in
reasonable detail, the basis for such finding.

5.   Change of Control

     5.1  In the event that either: 1) a Change of Control (as defined below) of
the Company occurs prior to the expiration of the Term; provided that in the
event that the Company requests that Bildner provide transition services
following the Change of Control for a period not to exceed one year ("Transition
Services"), Bildner agrees to provide such Transition Services; or 2) the
Company terminates Bildner's employment without Cause pursuant to Section 4
herein, within three (3) months prior to the effective date of a Change of
Control of the Company, then: (i) Bildner will be entitled to a lump sum payment
equivalent to three (3) years of Bildner's Base Salary in effect at the time of
the Change of Control, less standard deductions and withholdings; (ii) any
options to purchase stock (common or otherwise) in the Company granted to
Bildner

                                       5.
<PAGE>

pursuant to any plan or otherwise, or any equivalent or similar rights which
appreciate or tend to appreciate as the value of the Company's stock
appreciates, shall become immediately accelerated and fully vested and any
restrictions on such options or equivalent or similar rights shall, to the
extent permissible under applicable securities laws, fully lapse; and the
Company shall endeavor to cause any restrictions on such options or equivalent
or similar rights not lapsed by operation of this clause to so lapse; and (iii)
in the event Bildner elects continued coverage under COBRA, the Company will
reimburse Bildner for the same portion of Bildner's COBRA health insurance
premium that it paid during Bildner's employment up until the earlier of either:
(i) the last day of Bildner's COBRA health insurance benefits, or ii) the date
on which Bildner becomes covered under any other group health plan (as an
employee or otherwise). (Sections 5.1 (i)-(iii) are collectively referred to
herein as the "Change of Control Benefit Package"). Subject to the terms herein,
Bildner will be entitled to the Change of Control Benefit Package upon the
effective date of the Change of Control, provided that, in the event the Company
requests that Bildner provide Transition Services, Bildner will be entitled to
the Change of Control Benefit Package on the earlier of: i) the date upon which
the Company terminates Bildner's employment with or without Cause; ii) the date
on which the Company informs Bildner that it does not need him to provide or no
longer needs him to provide the Transition Services; or iii) the date upon which
Bildner completes the Transition Services. Notwithstanding any other provision
of this Agreement to the contrary, this Section 5 and the benefits provided
herein, shall not have any force or effect unless Bildner beneficially owns or
otherwise controls the right to vote, directly or indirectly, shares
representing less than twenty percent (20%) of the voting power of the Company
on each of the following dates: (i) the record date for a vote of the
shareholders relating to the Change of Control; and (ii) the date on which the
Change of Control is approved by the shareholders of the Company.

     5.2  For purposes of this Agreement, Change of Control means: (i) a sale or
other disposition of all or substantially all of the assets of the Company; (ii)
a merger or consolidation in which the Company is not the surviving entity and
in which the shareholders of the Company immediately prior to such consolidation
or merger own less than fifty percent (50%) of the surviving entity's voting
power immediately after the transaction; (iii) a reverse merger in which the
Company is the surviving entity but the shares of the Company's Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, and in which the shareholders of the Company immediately prior to
such merger own less than fifty percent (50%) of the Company's voting power
immediately after the transaction; or (iv) any other capital reorganization in
which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged.

     5.3  In the event that the Change of Control Benefit Package or any part
thereof provided for in this Agreement or otherwise payable to Bildner
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and will be subject to
the excise tax imposed by Section 4999 of the Code, then Bildner shall receive
(i) a payment from the Company sufficient to pay such excise tax, and (ii) an
additional payment from the Company sufficient to pay the income, employment,
excise and any other taxes arising from the payments made by the Company to or
for the benefit of Bildner pursuant to Section 5.1 above and this Section 5.3 so
that Bildner shall be fully reimbursed for any excise tax and any taxes
associated with the payments to reimburse Bildner for such excise tax.  Unless
the Company and Bildner otherwise agree in writing, the determination of
Bildner's

                                       6.
<PAGE>

excise tax liability and the amount required to be paid under this Section 5.3
shall be made in writing by a nationally recognized accounting firm satisfactory
to both parties (the "Accountants"). In the event that the excise tax incurred
by Bildner is determined by the Internal Revenue Service to be greater or lesser
than the amount so determined by the Accountants, the Company and Bildner agree
to promptly make such additional payment, including interest and any tax
penalties, to the other party as the Accountants reasonably determine is
appropriate to ensure that the net economic effect to Bildner under this Section
5.3, on an after-tax basis, is as if the Code Section 4999 excise tax did not
apply to Bildner. For purposes of making the calculations required by this
Section 5.3, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on interpretations of the Code for
which there is a "substantial authority" tax reporting position. The Company and
Bildner shall furnish to the Accountants such information and documents the
Accountants may reasonably request in order to make a determination under this
Section 5.3. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 5.3.

6.   Non-Competition And Confidentiality

     6.1  Non-Competition.  During Bildner's employment by the Company hereunder
and during the period during which Bildner is receiving severance from the
Company pursuant to Section 4.4.3 herein:

          6.1.1  Bildner will not directly compete with the business of the
Company so as to cause the Company to lose material revenue from any client
account which is in existence on the date of termination of Bildner's
employment.

          6.1.2  Bildner will not directly or indirectly employ or solicit for
employment any person whom he knows to be an employee of the Company or any
subsidiary of the Company.

     6.2  Confidential Information.

     Bildner agrees that as a condition of employment, he will execute and abide
by the Company's Proprietary Information & Inventions Agreement, attached hereto
as Exhibit C.

7.   Remedies

     7.1  Injunctive Relief.  Bildner acknowledges and agrees that the covenants
and obligations contained in Sections 6.1 and 6.2 relate to special, unique and
extraordinary matters and that a violation of any of the terms of such sections
will cause the Company irreparable injury for which adequate remedy at law is
not available.  Therefore, Bildner agrees that the Company shall be entitled to
an injunction, restraining order, or other equitable relief from any court of
competent jurisdiction, restraining Bildner from committing any violation of the
covenants and obligations set forth in Sections 6.1 and 6.2 hereof.

     7.2  Remedies Cumulative.  The Company's rights and remedies under Section
7.1 hereof are cumulative and are in addition to any other rights and remedies
the Company may have at law or in equity.

                                       7.
<PAGE>

8.   Miscellaneous

     8.1  Notices.  Any written notice, required or permitted under this
Agreement, shall be deemed sufficiently given if either hand delivered or if
sent by fax or overnight courier.  Written notices must be delivered to the
receiving party at his or its address on the signature page of this Agreement.
The parties may change the address at which written notices are to be received
in accordance with this section.

     8.2  Assignment.  Bildner may not assign, transfer, or delegate his rights
or obligations hereunder and any attempt to do so shall be void.  This Agreement
shall be binding upon and shall inure to the benefit of the Company and its
successors and assigns and the term Company as used herein shall include such
successors and assigns to the extent applicable.

     8.3  Entire Agreement.  This Agreement, including Exhibits A, B & C,
contains the entire agreement of the parties with respect to the subject matter
hereof, and all other prior agreements, written or oral, are hereby merged
herein and are of no further force or effect.  This Agreement may be modified or
amended only by a written agreement that is signed by the Company and Bildner.
No waiver of any section or provision of this Agreement will be valid unless
such waiver is in writing and signed by the party against whom enforcement of
the waiver is sought.  The waiver by the Company of any section or provision of
this Agreement shall not apply to any subsequent breach of this Agreement.
Captions to the various sections in this Agreement are for the convenience of
the parties only and shall not affect the meaning or interpretation of this
Agreement.  This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but together they shall constitute one and
the same instrument.

     8.4  Severability.  The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held illegal, void, or invalid
under applicable law such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding.  If
any provision of this Agreement is held illegal, void, or invalid in its
entirety, the remaining provisions of this Agreement shall not in any way be
affected or impaired but shall remain binding in accordance with their terms.

     8.5  Continuing Obligations.  Sections 4.4, 5, 6, 7 and 8.6 of this
Agreement shall continue and survive the termination of this Agreement.

     8.6  Applicable Law.  This Agreement and the rights and obligations of the
Company and Bildner thereunder shall be governed by and construed and enforced
under the laws of the State of California applicable to agreements made and to
be performed entirely within such State.

                                       8.
<PAGE>

     In Witness Whereof, the parties have executed this Agreement effective as
of the date first above written.

                                   The "Company"

                                   Tier Technologies, Inc.

                                   By: /s/ Morgan Guenther
                                       -----------------------------------------
                                                 Morgan Guenther
                                   Title:        Chairman of the Compensation
                                                 Committee of the Board of
                                                 Directors

                                   Address:      1350 Treat Blvd., Ste. 250
                                                 Walnut Creek, CA 94596

                                   "Bildner"

                                   /s/ James L. Bildner
                                   ---------------------------------------------
                                   James L. Bildner

                                   Address:      1350 Treat Blvd., Ste. 250
                                                 Walnut Creek, CA 94596

                                       9.
<PAGE>

                                   EXHIBIT A

                  Benefits for Bildner's Employment Agreement


1.   Group Term and Key Man Life Insurance
2.   Standard medical plan.
3.   Four (4) weeks vacation.
4.   Standard 11 holidays.
5.   Standard long term disability insurance.
6.   Automobile (owned by company) or automobile allowance not to exceed one
     thousand dollars ($1,000), less applicable deductions and withholdings, per
     month.
7.   Pension supplement.
8.   Standard defined benefit pension plan.
9.   Incentive Compensation plan.
10.  D & O liability insurance.
11.  Annual physical examination.
12.  Thrift savings (401(k) Plan.)
13.  Personal liability insurance.
14.  Attorneys' Fee Allowance, not to exceed twenty-five thousand dollars
     ($25,000), less applicable deductions and withholdings, per year.
15.  Discretionary Bonus in the amount of fifty-five thousand dollars ($55,000),
     less applicable deductions and withholdings, which may be awarded by the
     Committee in its sole discretion.
<PAGE>

                                    EXHIBIT B

                          RELEASE AND WAIVER OF CLAIMS

         In consideration of the payments and other benefits set forth in
Section __ of the Employment Agreement dated ___________, to which this form is
attached, I, JAMES L. BILDNER, hereby furnish TIER TECHNOLOGIES, INC. (the
"Company"), with the following release and waiver ("Release and Waiver").

         I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns affiliates and
benefit plans, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising at any time prior
to and including my employment termination date with respect to any claims
relating to my employment and the termination of my employment, including but
not limited to, claims pursuant to any federal, state or local law relating to
employment, including, but not limited to, discrimination claims, claims under
the California Fair Employment and Housing Act, and the Federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), or claims for
wrongful termination, breach of the covenant of good faith, contract claims,
tort claims, and wage or benefit claims, including but not limited to, claims
for salary, bonuses, commissions, stock, stock options, vacation pay, fringe
benefits, severance pay or any form of compensation.

         I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.

         I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this Release and Waiver is knowing and
voluntary, and that the consideration given for this Release and Waiver is in
addition to anything of value to which I was already entitled as an Bildner of
the Company. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the Release and Waiver granted
herein does not relate to claims which may arise after this Release and Waiver
is executed; (b) I have the right to consult with an attorney prior to executing
this Release and Waiver (although I may choose voluntarily not to do so); and if
I am over 40 years of age upon execution of this Release and Waiver: (c) I have
twenty-one (21) days from the date of termination of my employment with the
Company in which to consider this Release and Waiver (although I may choose
voluntarily to execute this Release and Waiver earlier); (d) I have seven (7)
days following the execution of this Release and Waiver to revoke my consent to
this Release and Waiver; and (e) this Release and Waiver shall not be effective
until the seven (7) day revocation period has expired.

Date: __________________                        By: ____________________________
                                                    James L. Bildner
<PAGE>

                                   EXHIBIT C

                            Tier Technologies, Inc.

               PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

             In consideration of my employment or continued employment by Tier
Technologies, Inc. (the "Company"), the compensation and benefits provided to me
in the Employment Agreement to which this Proprietary Information and Inventions
Agreement is attached, and the compensation now and hereafter paid to me, I,
James L. Bildner, hereby agree as follows:

         1.  Nondisclosure

         1.1 Recognition of Company's Rights; Nondisclosure. At all times during
my employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

         1.2 Proprietary Information. The term "Proprietary Information" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.

         1.3 Third Party Information. I understand, in addition, that the
Company has received and in the future will receive from third parties
confidential or proprietary information ("Third Party Information") subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than Company personnel who
need to know such information in connection with their work for the Company) or
use, except in connection with my work for the Company, Third Party Information
unless expressly authorized by an officer of the Company in writing.

         1.4 No Improper Use of Information of Prior Employers and Others.
During my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.

         2.  Assignment of Inventions.

         2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

         2.2 Prior Inventions. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company

                                       1.
<PAGE>

are excluded from the scope of this Agreement. To preclude any possible
uncertainty, I have set forth on Exhibit C-2 (Previous Inventions) attached
hereto a complete list of all Inventions that I have, alone or jointly with
others, conceived, developed or reduced to practice or caused to be conceived,
developed or reduced to practice prior to the commencement of my employment with
the Company, that I consider to be my property or the property of third parties
and that I wish to have excluded from the scope of this Agreement (collectively
referred to as "Prior Inventions"). If disclosure of any such Prior Invention
would cause me to violate any prior confidentiality agreement, I understand that
I am not to list such Prior Inventions in Exhibit C-2 but am only to disclose a
cursory name for each such invention, a listing of the party(ies) to whom it
belongs and the fact that full disclosure as to such inventions has not been
made for that reason. A space is provided on Exhibit C-2 for such purpose. If no
such disclosure is attached, I represent that there are no Prior Inventions. If,
in the course of my employment with the Company, I incorporate a Prior Invention
into a Company product, process or machine, the Company is hereby granted and
shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide
license (with rights to sublicense through multiple tiers of sublicensees) to
make, have made, modify, use and sell such Prior Invention. Notwithstanding the
foregoing, I agree that I will not incorporate, or permit to be incorporated,
Prior Inventions in any Company Inventions without the Company's prior written
consent.

         2.3 Assignment of Inventions. Subject to Sections 2.4 and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "Company Inventions".

         2.4 Nonassignable Inventions. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Exhibit C-1 (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

         2.5 Obligation to Keep Company Informed. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

         2.6 Government or Third Party. I also agree to assign all my right,
title and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.

         2.7 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire",
pursuant to United States Copyright Act (17 U.S.C., Section 101).

         2.8 Enforcement of Proprietary Rights. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the

                                       2.
<PAGE>

termination of my employment, but the Company shall compensate me at a
reasonable rate after my termination for the time actually spent by me at the
Company's request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.

         3.   Records. I agree to keep and maintain adequate and current records
(in the form of notes, sketches, drawings and in any other form that may be
required by the Company) of all Proprietary Information developed by me and all
Inventions made by me during the period of my employment at the Company, which
records shall be available to and remain the sole property of the Company at all
times.

         4.   Additional Activities. I agree that during the period of my
employment by the Company I will not, without the Company's express written
consent, engage in any employment or business activity which is competitive
with, or would otherwise conflict with, my employment by the Company. I agree
further that for the period of my employment by the Company and for one (l) year
after the date of termination of my employment by the Company I will not induce
any employee of the Company to leave the employ of the Company.

         5.   No Conflicting Obligation. I represent that my performance of all
the terms of this Agreement and as an Bildner of the Company does not and will
not breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.

         6.   Return of Company Documents. When I leave the employ of the
Company, I will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.

         7.   Legal and Equitable Remedies. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.

         8.   Notices. Any notices required or permitted hereunder shall be
given to the appropriate party at the address specified below or at such other
address as the Party shall specify in writing. Such notice shall be deemed given
upon personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.

         9.   Notification of New Employer. In the event that I leave the employ
of the Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.

         10.  General Provisions.

         10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement
will be governed by and construed according to the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in San Diego County, California for any lawsuit filed there against me
by Company arising from or related to this Agreement.

         10.2 Severability. In case any one or more of the provisions contained
in this Agreement

                                       3.
<PAGE>

shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect the
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein. If moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.

         10.3 Successors and Assigns. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.

         10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

         10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without Cause.

         10.6 Waiver. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.

         10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the Parties
with respect to the subject matter hereof and supersedes and merges all prior
discussions between us and is the governing document to the extent this
Agreement conflicts with the Employment Agreement to which it is attached as
Exhibit C. No modification of or amendment to this Agreement, nor any waiver of
any rights under this Agreement, will be effective unless in writing and signed
by the Party to be charged. Any subsequent change or changes in my duties,
salary or compensation will not affect the validity or scope of this Agreement.

         This Agreement shall be effective as of the first day of my employment
with the Company, namely: _______________, 20__.

         I have read this Agreement carefully and understand its terms. I have
completely filled out Exhibit C-1 to this Agreement.

Dated: _____________________________________


____________________________________________
(Signature)


____________________________________________
James L. Bildner


Accepted and Agreed To:

Tier Technologies, Inc.

         ___________________________
         ___________________________

By:__________________________________________

Title:_______________________________________

Dated:_______________________________________

                                       4.
<PAGE>

                                  Exhibit C-1

                        LIMITED EXCLUSION NOTIFICATION


         This is to notify Bildner in accordance with Section 2872 of the
California Labor Code that the foregoing Agreement between Bildner and the
Company does not require Bildner to assign or offer to assign to the Company any
invention that Bildner developed entirely on your own time without using the
Company's equipment, supplies, facilities or trade secret information except for
those inventions that either:

         1.       Relate at the time of conception or reduction to practice of
                  the invention to the Company's business, or actual or
                  demonstrably anticipated research or development of the
                  Company;

         2.       Result from any work performed by Bildner for the Company.

         To the extent a provision in the foregoing Agreement purports to
require Bildner to assign an invention otherwise excluded from the preceding
paragraph, the provision is against the public policy of this state and is
unenforceable.

         This limited exclusion does not apply to any patent or invention
covered by a contract between the Company and the United States or any of its
agencies requiring full title to such patent or invention to be in the United
States.

         I acknowledge receipt of a copy of this notification.

                                                      __________________________
                                                      James L. Bildner

                                                      Date:_____________________

Witnessed by:


_______________________________________
(Printed Name of Representative)
<PAGE>

                                  Exhibit C-2

TO:      Tier Technologies, Inc.

FROM:    James L. Bildner

DATE:    October 1, 2000

SUBJECT: Previous Inventions

     1.      Except as listed in Section 2 below, the following is a complete
             list of all inventions or improvements relevant to the subject
             matter of my employment by Tier Technologies, Inc. (the "Company")
             that have been made or conceived or first reduced to practice by me
             alone or jointly with others prior to my engagement by the Company:

     [_] No inventions or improvements.

     [_] See below:

         _______________________________________________________________________

         _______________________________________________________________________

         _______________________________________________________________________

     [_] Additional sheets attached.

     2.      Due to a prior confidentiality agreement, I cannot complete the
             disclosure under Section 1 above with respect to inventions or
             improvements generally listed below, the proprietary rights and
             duty of confidentiality with respect to which I owe to the
             following party(ies):

     Invention or Improvement        Party(ies)           Relationship

1.   ___________________________     __________________   ______________________

2.   ___________________________     __________________   ______________________

3.   ___________________________     __________________   ______________________

     [_] Additional sheets attached.