**Exhibit10.40**

 

SEPARATION AGREEMENT

 

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

 

WHEREAS, the Employee wasemployed by the Company and served as Senior Vice President and GeneralManager, Government Services Strategic Business Unit.

 

WHEREAS, the Employeedesired to resign as Senior Vice President and General Manager, GovernmentServices Strategic Business Unit of the Company and from any and all otherpositions 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 andthe Company intend that the terms and conditions of this Agreement shall governall issues relating to the Employee's discontinuation of his employment withthe Company.

 

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

 

1.             **Resignation**.  The Employee has elected to resign as anemployee of the Company effective December 12, 2003 (the “ResignationDate”).  The Employee resigned as SeniorVice President and General Manager, Government Services Strategic Business Unitof the Company and from all of his Additional Positions, as provided herein.

 

2.             **Payments andBenefits**.  Inconsideration of the release contained in Section 7 hereof, assuming thisAgreement has not been revoked under Section 13, below, the parties agree asfollows: The Company shall pay the Employee for consulting services as providedin the **Independent Contractor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 bereduced or affected by his earnings from any other source.

 

4.             **Taxes**.  The Company shall have the right to deductfrom all payments under this Agreement, whether in cash, stock or otherproperty, an amount necessary to satisfy any federal, state or localwithholding tax requirements.

 

5.             **Confidentiality**.

 

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

 

1

----

 

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

 

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

 

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

 

(iv)          on termination of the **IndependentContractor Agreement**, attached hereto as **Appendix A**, or at any other time the Company may in writing sorequest, to promptly deliver to the Company all materials constitutingConfidential Information (including all copies thereof) that are in Employee'spossession or under Employee's control. Further, the Employee undertakes that, if requested by the Company, theEmployee shall return any Confidential Information pursuant to this subsectionand 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 informationdeveloped by or for the Company of which the Employee gained knowledge byreason of Employee's employment with the Company under this Agreement that is notgenerally known in the industry in which the Company is or may be engaged.  Confidential Information includes, but isnot limited to, any and all information developed by or for the Company orcustomers 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 ormarkets, internal operations and any trade secrets and proprietary informationof any type owned by the Company together with all written, graphic and othermaterials relating to all or any part of the same.  Confidential Information does not include any information whichbecomes public through some means not controlled by the Employee.

 

6.             **AdditionalCovenants**.

 

(a)           The Employee further agrees and covenants that:

 

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

 

(ii)           he shall immediately instruct his immediate family, taxadvisor and legal counsel not to disclose the terms and conditions of thisAgreement to anyone;

 

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

 

2

----

 

disks, cassettes and otherphysical representations of any information relating to the Company or itsAffiliates or to the business or clients of the Company, whether or notconstituting confidential information, and to promptly return to the Company any of the same that he discovers atany future time and without retaining copies in any form, including electronic;and

 

(iv)          Cooperation.         TheEmployee covenants and agrees to cooperate with and make himself readilyavailable to the Company or its General Counsel, as the Company may reasonablyrequest, to assist it in any matter, including but not limited to, providinginformation, giving truthful testimony in any litigation or potentiallitigation over which the Employee may have knowledge, information orexpertise, and signing routine documents for administrative purposes.

 

(b)           The Company further agrees and covenants that:

 

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

 

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

 

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

 

7.             **Mutual Waiver andRelease**.  Inconsideration of the Company's commitment to the various arrangements describedin the preceding paragraphs, the Employee hereby releases and discharges theCompany, its divisions, subsidiaries and affiliates and their current andformer directors, officers, shareholders, agents and employees, and each oftheir predecessors, successors, and assigns (collectively “the Releasees”),from any and all claims and causes of action (except for the benefitsspecifically set forth in this Agreement) arising out of or related to any actor omission prior to the date of this Agreement, including claims related tothe Employee's employment or the termination of the Employee's employment.  This release includes, but is not limitedto, any claims for salary, bonuses, severance pay, vacation pay or any benefitsunder the Employee Retirement Income Security Act (except for vested benefitswhich are not affected by this Agreement); claims for sexual harassment, ordiscrimination based on race, color, national origin, ancestry, religion,marital status, sex, sexual orientation, citizenship status, pregnancy, leave ofabsence (including, but not limited to the Family and Medical Leave Act, or anyother federal, state, or local leave laws), medical condition or disability (asdefined by the Americans with Disabilities Act, or any other state or locallaw), age (under the Age Discrimination in Employment Act, or any otherfederal, state or local laws prohibiting age discrimination) or any otherunlawful discrimination claims under the Worker Adjustment and RetrainingNotification Act, whistleblower claims, and claims for breach of implied orexpress contract, breach of promise, misrepresentation, negligence, fraud,estoppel, defamation, infliction

 

3

----

 

of emotional distress,violation of public policy or wrongful or constructive discharge, and forattorneys' fees, that the Employee or his heirs, executors, administrators,successors, and assigns now have, ever had or may hereafter have, whether knownor unknown, suspected or unsuspected, up to and including the date of this Agreement.  The Employee further agrees, promises andcovenants 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, chargedor claimed, any action for damages or other relief (including injunctive,declaratory, monetary relief or other) against the Releasees involving anymatter occurring in the past up to the date of this Agreement, or involving orbased upon any claims, demands, causes of action, obligations, damages orliabilities which are the subject of this Agreement.  This Agreement shall not affect the Employee's rights under theOlder Workers Benefit Protection Act to have a judicial determination of thevalidity of this release and waiver.

 

In consideration of theEmployee's commitment to the various arrangements described in the precedingparagraphs, 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 actionarising out of or related to any act or omission prior to the date of thisAgreement, including claims related to the Employee's employment with theCompany or the termination of the Employee's employment.

 

8.             **No Claims**.  Each party hereby represents that it has notfiled or commenced any action, complaint, charge, grievance, arbitration or anyother proceedings, administrative or judicial (a “Claim”), against the other.

 

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

 

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

 

11.           **Prevailing Party**.  If any litigation is commenced between theparties hereto concerning this Agreement or their respective rights, duties andobligations hereunder, the party prevailing in that litigation shall beentitled to reasonable attorneys' fees, to be fixed by the court as part of thecosts of the litigation or established in a separate action brought to recoverthose fees, in addition to any other relief that may be granted.

 

12.           **Miscellaneous**.

 

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

 

4

----

 

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

 

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

 

(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 partieshereto.  Such modification, amendment,waiver or consent shall be effective only in the specific instance and for thepurpose for which given.

 

(d)           Descriptive headings are for convenience only and shallnot control or affect the meaning or construction of any provision of thisAgreement.

 

(e)           The Agreement and the rights and obligations of theCompany and the Employee hereunder shall be governed by and construed andenforced under the laws of the Commonwealth of Virginia, without reference toany principles of conflict of laws.

 

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

 

13.           **Acknowledgments bythe Employee**.  TheEmployee acknowledges and agrees that, in deciding to execute this Agreement,he has relied entirely upon his own judgment, that he has read this Agreementand has had adequate time to consider its terms and effects and to ask anyquestions that he may have of anyone, including legal counsel of his ownchoosing, and that he has executed this Agreement voluntarily and with fullunderstanding 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 knownto him will affect in any way or manner the final and unconditional nature ofthis Agreement.  The Employee furtheracknowledges that (a) he was advised to consult with an attorney before heexecuted this Agreement; (b) he was afforded sufficient opportunity to and didconsult with an attorney; (c) he had 21 days from his receipt of this Agreementto consider this Agreement before executing and delivering this Agreement; and(d) he may revoke this Agreement by delivering written notice to the Companywithin a period of seven days following the day on which he executes thisAgreement (the “Revocation Period”), and this Agreement shall not becomeeffective or enforceable until after the Revocation Period has expired.  For this revocation to be effective, writtennotice from the Employee must be received by the Company at its address setforth on the signature page hereof no later than the close of business on theseventh (7th) day after the Employee signs this Agreement.  If the Employee revokes this Agreement, theEmployee will not receive any of the payments or benefits described in thisAgreement.

 

**BY SIGNINGTHIS AGREEMENT, THE EMPLOYEE STATES THAT:**

 

5

----

 

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

 

**(b)           THE EMPLOYEE UNDERSTANDS ALL OF THETERMS AND CONDITIONS OF THIS AGREEMENT AND KNOWS THAT HE IS GIVING UP IMPORTANTRIGHTS;**

 

**(c)           THE EMPLOYEE AGREES WITH EVERYTHINGIN THIS AGREEMENT;**

 

**(d)           THE EMPLOYEE IS AWARE OF HIS RIGHT TOCONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT AND HAS BEEN ADVISED OFSUCH RIGHT;**

 

**(e)           THE EMPLOYEE HAS SIGNED THISAGREEMENT KNOWINGLY AND VOLUNTARILY; AND**

 

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

 

IN WITNESS WHEREOF, theparties hereto have executed this Agreement as of the day and year first setforth 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 |
|        |                         |  |  |  |  |  |

 

6

----

 

INDEPENDENT CONTRACTORAGREEMENT

 

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

 

WHEREAS, Wiggins was anemployee of Tier;

 

WHEREAS, Wiggins resignedfrom Tier effective December 12, 2003;

 

WHEREAS, Tier has requestedand Wiggins has agreed to provide ongoing short-term transition services, asset forth below;

 

NOW, THEREFORE, inconsideration of the promises contained herein and other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged,Wiggins agrees to provide and Tier agrees to accept certain services fromWiggins 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 thebusiness of the Government Services Strategic Business Unit (“SBU”).  These efforts shall include, but not be limitedto, completing existing projects, preparing summaries of ongoing businessmatters and assisting Tier personnel in continuing to conduct the business ofthe SBU (the “Services”).  Wiggins shallwork directly under James R. Weaver, President and CEO of Tier.   Wiggins agrees to use good faith efforts inperforming these Services.

 

2.             Fees and Payment.

 

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

 

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

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

iii.                                    The sum of $26,324.57 for the period February13, 2004 through March 12, 2004.

 

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

 

1

----

 

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

 

Tier Technologies, Inc.

10780 Parkridge Blvd., Suite400

Reston, VA  20191

 

Payment to Wiggins shall bemade 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 providedat the request, and under the direct supervision, of James R. Weaver only.  Wiggins shall not directly contact any ofTier's clients or individuals within those entities unless directed to do so byJames R. Weaver.  Wiggins shall have noauthority to legally bind Tier in any manner, to sign for or represent Tier, tonegotiate or agree to any contract or payment terms or other legal terms andconditions, unless otherwise expressly directed in writing by Tier.

 

4.             IndependentContractor.  Wiggins acknowledgesthat he will perform the Services as an independent contractor and that he willnot be an employee or agent of Tier.  Atno time shall Wiggins be eligible to participate in the benefits of any sortwhich Tier offers to its employees. Wiggins agrees to maintain a place of business at a location other thanthe premises of Tier and to use his own equipment and supplies in performingthe Services.  Wiggins shall beresponsible for paying all ordinary and necessary expenses incurred inperforming the Services, including, but not limited to, all local and longdistance phone charges, applicable taxes, insurances, workers' compensationinsurance, and state disability insurance necessary to provide the Services.

 

5.             PerformanceWarranty.  Wiggins warrants, at alltimes during the term of this Agreement and in performing the Services, that hewill act professionally, lawfully and in a business like manner.

 

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

 

2

----

 

7.             Indemnification.  Each Party shall indemnify and hold theother Party (including its affiliates, officers, agents, employees, andvolunteers) harmless from and against any and all liability, loss, cost,expenses, including reasonable attorney's fees and cost, or damages howsoevercaused by reason of any injury or damages resulting from or in any wayconnected with any negligent or willful misconduct in the performance of thisAgreement.

 

8.             Limitation ofLiability.  EXCEPT FOR THEINDEMNIFICATION OBLIGATIONS IN SECTION 7 OF THIS AGREEMENT, NEITHER PARTY SHALLHAVE ANY LIABILITY UNDER THIS AGREEMENT TO THE OTHER FOR DIRECT, INDIRECT,CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, EVEN IF SUCH PARTY HAS BEENNOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OFAN ESSENTIAL PURPOSE OF THIS AGREEMENT.

 

9.             Notice.   Any notice or other communication hereundershall 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. (sameaddress).  All notices provided toWiggins shall be sent to the address listed in section 2(c) of this Agreement.

 

10.           EntireAgreement/Modifications.  ThisAgreement contains the complete agreement between the Parties and the termshereof are contractual and not a mere recital. No modification hereof shall be binding on either of the Parties unlessit has been agreed to in writing and signed by each of the Parties andidentified as an amendment to this Agreement.

 

11.           Assignment.  This Agreement and the rights hereunder arenot transferable or assignable by either Party without the prior writtenconsent of the other, non-assigning Party.

 

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

 

13.           Severability.  If any provision of this Agreement shall beheld or deemed to be invalid, inoperative or unenforceable, such circumstanceshall not render the remainder of it invalid, inoperative or unenforceable, andthis Agreement shall be reformed so that it is enforceable to the maximumextent permitted by law.

 

14.           Governing Law.  This Agreement shall be governed andinterpreted in accordance with the laws of the State of Virginia, without regardto its conflicts of law principles.

 

**[signaturepage follows]**

 

3

----

 

IN WITNESS WHEREOF, andintending to be legally bound hereby, Tier and Wiggins have executed and signedthis 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 |                       |   |
|        |                              |                       |                            |  |  |  |  |

 

4

----