Exhibit
10.42


 


PLEDGE
AGREEMENT


 


This PLEDGE AGREEMENT,
dated as of April 1, 2004, is between TIER TECHNOLOGIES, INC. (the
“Company”) and JAMES L. BILDNER (“Bildner”).


 


WHEREAS, on July 26,
2000, Bildner entered a Full Recourse Promissory Note payable to the Company in
the amount of $300,000.00 due July 26, 2005 (the “Note”); and


 


WHEREAS, Bildner’s
employment with Company terminated on April 1, 2004; and


 


WHEREAS, under the terms
of the Note, Bildner is obligated to repay the principal sum and all accrued but
unpaid interest within three days of termination of employment, or secure the
Note by pledging marketable securities in an amount that exceeds all amounts
due under the Note; and


 


WHEREAS, Bildner has
elected to pledge securities in lieu of acceleration of the Note;


 


NOW, THEREFORE, for good
and valuable consideration and to secure the payment of Bildner’s indebtedness
to the Company, the parties agree as follows:


 


1.               Bildner’s
Indebtedness.


 


(a)       In
connection herewith Bildner is indebted to the Company in an aggregate
principal amount of three hundred thousand dollars ($300,000.00), plus all
accrued but unpaid interest through the term of the Note.


 


(b)      The
number of shares of Class A Common Stock of the Company set forth on
Schedule A hereto, which are currently beneficially owned by Bildner,
shall serve as the security for the Note (the “Shares”).


 


2.               Pledge.  Bildner hereby pledges to the Company, and
grants to the Company a security interest in, the following (the “Pledged
Collateral”):  (i) the Shares and the
certificates representing the Shares; and (ii) securities of the Company
associated with the Shares issued in connection with any stock dividend or
stock split, or securities of the Company issued in connection with a
recapitalization, merger, reorganization or similar transaction.


 


3.               Security for
Obligations.


 


(a)  This Agreement secures the payment of all of
Bildner’s present and future obligations, duties, and liabilities under the
Note and under this Agreement (all referred to as the “Obligations”).


 


(b)  This Agreement shall create a continuing
security interest in the Pledged Collateral and shall (i) remain in full force
and effect until payment in full of the Obligations; (ii) be binding upon
Bildner and his successors and assigns; and (iii) inure to the benefit of the
Company and its successors, transferees, and assigns.


 


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4.               Delivery of
Pledged Shares.  All certificates or
instruments representing or evidencing the Shares shall be held by or on behalf
of the Company under this Agreement and shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to the Company.  If Bildner fails to perform any Obligation
contained in this Agreement, the Company may itself perform, or cause
performance of, that Obligation, and the expenses of the Company incurred in
connection with that performance shall be payable by Bildner under Section 9
hereto.


 


5.               Representations
and Warranties.  Bildner represents
and warrants as follows:


 


(a)  Bildner is the beneficial owner of the
Pledged Collateral free and clear of any lien on the Pledged Collateral except
for the security interest created by this Agreement and the other terms and
conditions set forth in the Stock Option Agreements.  The Pledged Collateral is held by the law firm of Cooley Godward.


 


(b)  The pledge of the Pledged Collateral under
this Agreement creates a valid and perfected first priority interest in the
Pledged Collateral, securing the payment of the Obligations.


 


(c)  No authorization, approval, or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required either (i) for the pledge by Bildner of the Pledged Collateral
under this Agreement or for the execution, delivery, or performance of this
Agreement by Bildner; or (ii) for the exercise by the Company of the voting or
other rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral under this Agreement (other than restrictions under any
federal or state securities law applicable to the offer or sale of unregistered
securities).


 


6.               Rights in
Absence of Default.


 


(a)  So long as there has been and is no Event of
Default: (i) involving failure to make the payment described in Section 2
of the Note, or (ii) involving the voluntary placement by Bildner of a lien
upon all or a significant portion of the Pledged Collateral:


 


(i)  Bildner shall be entitled to exercise any
and all voting and other consensual rights pertaining to any or all of the
Shares.


 


(ii)  Securities of the Company associated with
the Shares issued in connection with any stock dividend or stock split, or
securities of the Company issued in connection with a recapitalization, merger,
reorganization or similar transaction shall be immediately delivered to the
Company as Pledged Collateral in the same form as so received (with any
necessary endorsement).  Any other
dividends, distributions, or interest paid or payable in respect of, or
instruments and other property received, receivable, or otherwise distributed
in respect of, or in exchange for, any Pledged Collateral shall be paid to
Bildner.


 


(iii)  Company shall execute and deliver (or cause
to be executed and delivered) to Bildner all such proxies and other instruments
as Bildner may reasonably request for the purpose of enabling him 


 


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to exercise the voting
and other rights that he is entitled to exercise pursuant to paragraph (i) of
this Section 6(a).


 


(b)  When and so long as there is an Event of
Default (i) involving failure to make the payment described in Section 2
of the Note, or (ii) involving the voluntary placement by Bildner of a lien
upon all or a significant portion of the Pledged Collateral, all rights of
Bildner to exercise the voting and other rights that he would otherwise be
entitled to exercise pursuant to Section 6(a)(i) shall cease, and all
those rights shall become vested in the Company, which shall then have the sole
right to exercise those voting and other rights.


 


7.               Transfers and
Liens.  Bildner agrees that he will
not (i) sell or otherwise dispose of, or grant any option with respect to, any
of the Pledged Collateral without the prior written consent of the Company; or
(ii) voluntarily create any lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement.


 


8.               Events of
Default; Remedies upon Default.


 


(a)  The following shall constitute Events of
Default (“Events of Default”) under this Agreement:


 


(i)  If Bildner fails to perform or observe any
term, covenant, or Obligation under this Agreement or the Note, or if any
representation or warranty made by Bildner in this Agreement or the Note is
untrue or misleading in any material respect as of the date with respect to
which that representation or warranty was made;


 


(ii)  If a notice of lien, levy, or assessment is
filed or recorded with respect to all or a substantial part of the Pledged
Collateral, except for a lien that relates to current taxes not yet due and
payable, and if the applicable claim is not discharged or satisfied within
ninety (90) days of Bildner’s actual knowledge of that filing or recordation
(such effected Pledged Collateral shall hereinafter be referred to as the
“Effected Collateral”);


 


(iii)  If all or a substantial part of the Pledged
Collateral is attached, seized, or subjected to a writ or distress warrant, or
is levied upon, or comes within the possession of any receiver, trustee,
custodian, or assignee for the benefit of creditors, and that Pledged
Collateral is not returned to Bildner or the writ, distress warrant, or levy is
not dismissed, stayed, or lifted within ninety (90) days (such effected Pledged
Collateral shall hereinafter be referred to as the “Effected Collateral”).


 


(iv)  Provided; however, with respect to
subparagraphs 8(a)(ii) and (iii) hereto, if prior to the end of such ninety
(90) day period, Bildner provides the Company with additional collateral to
secure the Note with a fair market value equal to or exceeding the fair market
value of the Effected Collateral, which collateral may be Shares or cash (or
such other collateral, subject to the consent of the Company, which consent
shall not be unreasonably withheld) at the discretion of Bildner and which
collateral Bildner hereby agrees shall be subject to the terms of this
Agreement, no Event of Default shall be deemed to have occurred.


 


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(b)  When and so long as there is any Event of
Default, the Company may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for in this Agreement or
otherwise available to it, all the rights and remedies of a secured party upon
a default under the Uniform Commercial Code in effect in the State of
California at that time.


 


(c)  Notwithstanding anything else contained
herein to the contrary, so long as there has been and is no Event of Default: (i)
involving failure to make the payment described in Section 2 of the Note,
or (ii) involving the voluntary placement by Bildner of a lien upon all or a
significant portion of the Pledged Collateral, Bildner shall be entitled to
exercise any and all voting and other consensual rights pertaining to any or
all of the Shares.


 


9.               Expenses.  On demand, Bildner will pay the Company all
reasonable expenses, including attorneys’ fees and costs, which the Company may
incur in connection with (i) the exercise or enforcement of any of the rights
of the Company under this Agreement; or (ii) Bildner’s failure to perform or
observe any of the provisions of this Agreement.


 


10.         Security Interest
Absolute.  All rights and security
interests of the Company, and all Obligations of Bildner, under this Agreement
shall be absolute and unconditional irrespective of:  (i) any lack of validity or enforceability of the Note or any
other agreement or instrument relating to it; (ii) any change in the time,
manner, or place of payment of, or in any other term of, any of the
Obligations, or any other amendment or waiver of or consent to any departure
from the Note; (iii) any exchange, release, or non-perfection of any other
collateral, or any release, amendment, or waiver of any of the Obligations; or
(iv) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, Bildner in respect of the Obligations or of this
Agreement.


 


11.         Further Assurances.  Bildner agrees that at any time and from
time to time, at his expense, Bildner will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Company may request, in order to perfect
and protect any security interest granted or purported to be granted by this
Agreement or to enable the Company to exercise and enforce its rights and
remedies under this Agreement with respect to any Pledged Collateral.


 


12.         Entire Agreement;
Amendment; Waiver.  This Agreement
and the Note embody the entire agreement of the parties hereto with respect to
the subject matter of this Agreement and supersede all prior agreements with
respect to that subject matter.  This
Agreement may not be amended or modified except in a writing signed by both
parties.  No waiver of any provision of
this Agreement shall be deemed to, or shall, operate as a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver.  Except as expressly provided in
this Agreement, no waiver shall be binding unless executed in writing by the
party making the waiver.


 


13.         Notices.  All notices and other communications
provided for under this Agreement shall be given as follows:


 


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If to the Company:


 


TIER TECHNOLOGIES,
INC.


2001 North Main
Street, Suite 500


Walnut Creek, CA
94596


Attn:  Chief Financial Officer


 


If to Bildner:


JAMES L. BILDNER


5 Boardman Avenue


Manchester, MA
01944


 


14.         Captions.  Captions are used for reference purposes
only and should be ignored in the interpretation of the Agreement.  Unless the context requires otherwise, all
references in this Agreement to Sections are to the sections of this Agreement.


 


15.         Governing Law; Terms.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts wholly made and performed in the State of California.  Unless otherwise defined above, terms
defined in Division 9 of the Uniform Commercial Code as adopted in the State of
California are used in this Agreement with their statutory meanings.


 


Notwithstanding anything
to the contrary and pursuant to the Terms of the Note, Bildner shall have the
right to prepay this Note without penalty of any kind and the Company shall
promptly release the pledged security “Pledged Collateral” to Bildner upon
receipt of such payment.


 


The parties have duly
executed this Agreement as of the date first written above.


 


	
  TIER TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:  

  	
   

  	
   

  
	
  Jeffrey
  McCandless

  	
   

  
	
  Its:  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  JAMES L. BILDNER

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  James L. Bildner

  	
   

  
				



 


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STOCK POWER AND
ASSIGNMENT


SEPARATE FROM
STOCK CERTIFICATE


 


 


FOR VALUE RECEIVED and
pursuant to that certain PLEDGE AGREEMENT dated as of April 1, 2004  (the “Agreement”), the undersigned hereby
sells, assigns, and transfers to TIER TECHNOLOGIES, INC. (the “Company”),
                                     
(      ) shares of Class A Common Stock of the
Company, standing in the undersigned’s name on the books of the Company
represented by Certificate No(s).
          delivered herewith.  The undersigned does hereby irrevocably
constitute and appoint the Secretary of the Company as the undersigned’s
attorney-in-fact, with full power of substitution, to transfer this stock on
the books of the Company.  THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.


 


 


	
  JAMES L. BILDNER

  
	
   

  
	
   

  
	
  James L. Bildner

  	
   

  



 


 


Instructions:  Please sign this Stock Power above, but do
not fill in any blanks other than the signature lines.


 


The purpose of this Stock
Power and Assignment Separate from Stock Certificate is to enable the Company
to acquire the Shares in accordance with the terms of the Agreement.


 


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SCHEDULE A


 


PLEDGED SHARES AND


OTHER COLLATERAL


 


	
  DATE

  	
   

  	
  SHARES
  PLEDGED

  	
   

  	
  FAIR
  MARKET

  VALUE OF SHARES

  PLEDGED

  	
   

  	
  OTHER

  COLLATERAL

  /VALUE

  	
   

  
	
  April 1,
  2004

  	
   

  	
  49,284

  	
   

  	
  $

  	
  514,024

  	
   

  	
   

  	
   

  
									



 


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