September 2, 2004                                                   Exhibit 10.1



Bruce R. Spector
Pinnacle Care International
111 South Calvert St.
Suite 2850
Baltimore, MD 21202


     Re: Indemnification Agreement

Dear Bruce:

     We are aware that you previously signed a Non-Competition Agreement dated
January 28, 2003 for the benefit of e.Magination Networks, LLC ("e.Magination")
and Roche Capital, LLC ("Roche," and, together with e.Magination, the
"Counter-parties") (the "Non- Compete Agreement"). The Non-Compete Agreement
purports to limit your right to control a business that engages in the ownership
and/or operation of a network integration sales and consulting business, and a
graphic design and computer software programming business, along with the
performance of related advertising services, within Maryland, Virginia or the
District of Columbia. We do not believe that your becoming one of Tier
Technologies, Inc.'s (the "Company") directors and fulfilling your obligations
as such in the ordinary course will cause you to breach the Non-Compete
Agreement. However, given the existence of the Non-Compete, there is a risk that
either or both of the Counter-parties may sue you or take other actions in an
attempt to have the Non-Compete Agreement restrict you from serving on the
Company's Board of Directors (the "Board"). Given this possibility, and the fact
that you are investing significant time and energy to become one of the
Company's directors, the Company has agreed to the terms stated in this
indemnification agreement (this "Letter Agreement"), which is intended to
supplement the Indemnification Agreement to be entered into between you and the
Company (the "Indemnification Agreement").

     The Company agrees to (i) assume the defense, with counsel mutually
agreeable to both parties, of any action, suit, claim or proceeding (each, a
"Non-Compete Action") by any Counter-party against you based upon your alleged
violation of the Non-Compete Agreement arising out of your service as a director
of the Company and (ii) indemnify you against, and advance, without requiring a
preliminary determination of entitlement to indemnification, any and all
expenses (including attorneys' fees, if applicable), witness fees, damages,
judgments, fines and amounts paid in settlement, and any other amounts actually
incurred by you in connection with the Non-Compete Action. To the extent that
the provisions of the Indemnification Agreement do not conflict with any
undertaking of the Company set forth in this Letter Agreement, such provisions,
including Section 6 of the Indemnification Agreement (relating to notification
and defense of claims), shall apply with respect to the defense against any
Non-Compete Action.

<PAGE>


     You acknowledge and agree that you will promptly resign from the Board in
the event that the Non-Compete Agreement is deemed by a court of appropriate
jurisdiction to bar you from serving on the Board (whether in conjunction with a
court-imposed injunction or otherwise), and that the Company will have no
obligation to nominate you for a position on the Board or to make any further
payment or option or other equity grant to you that would otherwise have been
made had you not been prohibited by a court of appropriate jurisdiction from
serving on the Board because of the Non-Compete Agreement; provided, however,
that any options granted to you under the Company's Amended and Restated 1996
Equity Incentive Plan (the "Plan") shall remain outstanding and exercisable by
you in accordance with the terms of the Plan and any applicable Option
Agreement(s).

     This agreement contains the complete, final and exclusive agreement between
you and the Company regarding the Company's agreement or obligation to indemnify
you in connection with any Non-Compete Action and amends any conflicting
provision in the Indemnification Agreement with respect to such Non-Compete
Actions. This agreement shall be interpreted and enforced in accordance with the
laws of the State of California.

     You and the Company agree to the terms contained herein.

                                                      THE COMPANY:
                                                      Tier Technologies, Inc.,
                                                      a California corporation


/s/ Bruce R. Spector                                  By: /s/ James R. Weaver
--------------------                                      ----------------------
Bruce R. Spector                                          Name:  James R. Weaver
                                                          Title: CEO & Chairman