<PAGE>

                                                                   Exhibit 10.59

                                   CONTRACT
                        BETWEEN THE STATE OF TENNESSEE
                         DEPARTEMENT OF HUMAN SERVICES
                                      AND
                        TIER TECHNOLOGIES INCORPORATED

This Contract, by and between the State of Tennessee, Department of Human
Services, hereinafter referred to as the "State", and Tier Technologies
Incorporated, hereinafter referred to as the "Contractor", is for the provision
of the implementation and operation of the Tennessee Child Support Centralized
Collection Lockbox/Payment Identification Unit as further defined in the "SCOPE
OF SERVICES".

The Contractor is a for-profit corporation. The Contractor's address is:

1350 Treat Blvd.; Suite 250
Walnut Creek, CA  94596

The Contractor's place of incorporation or organization is California.

A.   SCOPE OF SERVICES:
     -----------------

A.1. Pursuant to this Contract, the Contractor will implement and operate the
     Tennessee Child Support Centralized Collection Lockbox/Payment
     Identification Unit. This service will include, but not be limited to,
     implementation, operation, management, reporting, and training related to
     the implementation and operation of the Centralized Collection Unit as
     mandated by the requirements of the Personal Responsibility and Work
     Opportunity Reconciliation Act of 1996 (PRWORA). The detail of the scope of
     these services is provided in Appendix A, RFP Number ###-##-####, RFP
     Attachments, and all documents referenced in Section E.3 below.

B.   CONTRACT TERM.
     -------------

B.1. Contract Term. This Contract shall be effective for the period commencing
     -------------
     May 27, 1999 and ending on September 30, 2002. The State shall have no
     obligation for services by the Contractor which are not performed within
     the specified period.

B.2. Term Extension.
     --------------

     a.   The State reserves the unilateral right to extend this Contract, in
          increments of one (1) year each, for an additional two (2) years,
          provided that the State notifies the Contractor in writing of its
          intention to do so at least ninety (90) days prior to the contract
          expiration date. An extension of the term of this Contract will be
          effected through an amendment to the Contract. If the extension of the
          Contract necessitates additional funding beyond that which was
          included in the original contract, the increase in the State's maximum
          liability will also be effected through an amendment to the Contract
          and shall be based upon rates provided for in the original contract
          and proposal.
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     b.   The Compensation for Years 4 and 5 shall be determined as follows:

          i)   The percent increases between Years 1 and 2 and Years 2 and 3
               shall be averaged to arrive at a Percentage Adjustment.

          ii)  This Percentage Adjustment shall be applied to Year 3 to arrive
               at the Year 4 rate of compensation; and to Year 4 to arrive at
               the Year 5 rate of compensation. Contractor is obligated to
               perform services in Year 4 and 5 at this rate, but the State may
               extend the Contract based upon a lower rate.

B.3. Services Begin Date. The Contractor's obligations regarding preparation to
     -------------------
     provide the services requested herein begin on the effective date stated in
     paragraph B.1 above. However, the Contractor will not begin providing the
     services until October 1,m 1999, or later, at the State's discretion.
     Compensation to the Contractor for all preparatory work is included in the
     Fixed and Transaction Fees as proposed in the Contractor's Cost Proposal,
     with such compensation to begin no earlier than October 1, 1999, in
     accordance with the terms and provisions of Section C of this Contract.

C.   PAYMENT TERMS AND CONDITIONS:
     ----------------------------

C.1. Maximum Liability. In no event shall the maximum liability of the State
     -----------------
     under this Contract exceed THIRTEEN MILLION, ONE HUNDRED FORTY-FOUR
     THOUSAND, SIX HUNDRED EIGHT DOLLARS ($13,144,608.00) The Unit Rates in
     Section C.3. shall constitute the entire compensation due the Contractor
     for the Service and all of the Contractor's obligations hereunder
     regardless of the difficulty, materials or equipment required. The Unit
     Rates include, but are not limited to, all applicable taxes, fees
     overheads, travel expenses, profit, and all other direct and indirect costs
     incurred or to be incurred by the Contractor.

C.2  Compensation Firm. The Unit Rates in Section C.3. are the maximum
     -----------------
     liability of the State under this Contract are firm for the duration of the
     Contract and are not subject to increase for any reason unless amended.

C.3. Lockbox/Payment Identification Transaction Fee Payment Methodology. The
     ------------------------------------------------------------------
     Contractor shall be compensated based on the Unit Rates in a total amount
     not to exceed the Contract Maximum Liability established in section C.1.
     The Contractor shall be compensated based upon the following Unit Rates:

     LOCKBOX/PAYMENT IDENTIFICATION TRANSACTION FEES:

<TABLE>
<CAPTION>
     VOLUME LEVEL                  YEAR 1         YEAR 2         YEAR 3
     ------------                  ------         ------         ------
     <S>                           <C>            <C>            <C>
     Regular (0-3,400,000)         1.302          1.359          1.425
                ---------
     High (More than 3,400,000)    1.272          1.329          1.395
                     ---------
</TABLE>

     Contract Year 1 shall run from the Services Begin Date, described in
     paragraph B.3, above, through the day preceding the anniversary date of the
     Services Begin Date. Each

                                       2
<PAGE>

     subsequent year shall begin on the anniversary date of the Services Begin
     Date. In any given year the Contractor shall be compensated at the Regular
     Transaction Fee until such time as the Contractor has processed more than
     3,400,000 transactions, at which point the High fee will apply for all
     ---------
     transactions above this threshold that are processed during the remainder
     of that year. At the beginning of each year of the Contract, on the
     anniversary of the Services Begin Date, the transaction count will be reset
     to zero, and the Contractor will once again be compensated at the Regular
     Transaction Fee.

     The Contractor will submit invoices for transactions processed, in form and
     substance acceptable to the State with all of the necessary supporting
     documentation, prior to any payment. Such invoices shall, at a minimum,
     include the numbers and types of transactions processed and the total
     amount due the Contractor for the period invoiced. Transaction invoices
     shall be submitted no more other than monthly.

C.4. Travel Compensation. The Contractor shall not be compensated or reimbursed
     -------------------
     for travel, meals, or lodging. All travel expenses or costs incurred by the
     Contractor shall be borne by the Contractor since all such costs are
     included in compensation.

C.5. Payment of Invoice. The payment of the invoice by the State shall not
     ------------------
     prejudice the State's right to object to or question any invoice or matter
     in relation thereto. Such payment by the State shall neither be construed
     as acceptance or any part of the work or service provided nor as an
     approval of any of the amounts invoiced therein.

C.6. Invoice Reductions. The Contractor's invoice shall be subject to reduction
     ------------------
     for amounts included in any invoice or payment theretofore made which are
     determined by the State, on the basis of audits conducted in accordance
     with the terms of this Contract, not to constitute proper remuneration for
     compensable services.

C.7. Deductions. The State reserves the right to deduct from amounts which are
     ----------
     or shall become due and payable to the Contractor under this or any
     Contract between the Contractor and the State of Tennessee any amounts
     which are or shall become due and payable to the State of Tennessee by the
     Contractor.

C.8. Automatic Deposits. The Contractor shall complete and sign an
     ------------------
     "Authorization Agreement for Automatic Deposits (ACH Credits) Form." This
     form shall be provided to the Contractor by the State. Once this form has
     been completed and submitted to the State by the Contractor, all payments
     to the Contractor, under this or any other contract the Contractor has with
     the State of Tennessee shall be made by Automatic Clearing House (ACH). The
     Contractor shall not invoice the State for services until the Contractor
     has completed this form and submitted it to the State.

C.9. Federal Access. The United States Department of Health and Human
     --------------
     Services, the Office of Child Support Enforcement, the Comptroller General
     of the United States, or any of their duly authorized representatives,
     shall have access to any of the Contractor's documents, papers, and records
     which are directly pertinent to the TCSES Centralized Collection project
     for the purpose of making audit, examination, excerpts, and transcriptions.
     The Contractor must cooperate with all reviews and supply copies of any
     requested materials.

                                       3
<PAGE>

D.   STANDARD TERMS AND CONDITIONS.

D.1. Required Approvals. The State is not bound by this Contract until it is
     ------------------
     approved by the appropriate State officials in accordance with applicable
     State laws and regulations and by the appropriate Federal officials in
                                ---
     order to obtain enhanced Federal Financial Participation for PRWORA Reform
     initiative work performed pursuant to this Contract.

D.2. Modification and Amendment. This Contract may be modified only by a
     --------------------------
     written amendment executed by all parties hereto and approved by the
     appropriate State officials in accordance with applicable State laws and
     regulations.

D.3. Subcontracting. The Contractor shall not assign this Contract or enter
     --------------
     into a subcontract for any of the services performed under this Contract,
     without obtaining the prior written approval of the State. If such
     subcontracts are approved by the State, they shall contain, at a minimum,
     sections of this Contract pertaining to Conflicts of Interest and
     Nondiscrimination (Sections D.4 and D.5).

D.4. Conflicts of Interest. The Contractor warrants that no part of the total
     ---------------------
     Contract Amount shall be paid directly or indirectly to an employee or
     official of the State of Tennessee as wages, compensation, or gifts in
     exchange for acting as an officer, agent, employee, subcontractor, or
     consultant to the Contractor in connection with any work contemplated or
     performed relative to this Contract.

D.5. Nondiscrimination. The Contractor hereby agrees, warrants, and assures
     -----------------
     that no person shall be excluded from participation in, be denied benefits
     of, or be otherwise subjected to discrimination in the performance of this
     Contract or in the employment practices of the Contractor on the grounds of
     handicap and/or disability, age, race, color, religion, sex, national
     origin, or any other classification protected by Federal, Tennessee State
     constitutional, or statutory law. The Contractor shall, upon request show
     proof of such nondiscrimination and shall post in conspicuous places,
     available to all employees and applicants, notices of nondiscrimination.

D.6. Records. The Contractor shall maintain documentation for all charges
     -------
     against the State under this Contract. The books, records, and documents of
     the Contractor, insofar as they relate to work performed or money received
     under this Contract, shall be maintained for a period of three (3) full
     years from the date of the final payment and shall be subject to audit at
     any reasonable time and upon reasonable notice by the State, the
     Comptroller of the Treasury, or their duly appointed representatives. The
     financial statements shall be prepared in accordance with generally
     accepted accounting principles.

D.7. Monitoring. The Contractor's activities conducted and records maintained
     ----------
     pursuant to this Contract shall be subject to monitoring and evaluation by
     the State, the Comptroller of the Treasury, or their appointed
     representatives.

D.8. Progress Reports. The Contractor shall submit brief, periodic, progress
     ----------------
     reports to the State as requested.

D.9. Strict Performance. Failure by any party to this Contract to insist in
     ------------------
     any one or more

                                       4
<PAGE>

      cases upon the strict performance of any of the terms, covenants,
      conditions, or provision of this Contract shall not be construed as a
      waiver or relinquishment of any such term, covenant, condition, or
      provision. No term or condition of this Contract shall be held to be
      waived, modified, or deleted except by a written amendment signed by the
      parties hereto.

D.10. Independent Contractor. The parties hereto, in the performances of this
      ----------------------
      Contract, shall not act as employees, partners, joint venturers, or
      associates of one another. It is expressly acknowledged by the parties
      hereto that such parties are independent contracting entities and that
      nothing in this Contract shall be construed to create an employer/employee
      relationship or to allow either to exercise control or direction over the
      manner or method by which the other transacts its business affairs or
      provides its usual services. The employees or agents of one party shall
      not be deemed or construed to be the employees or agents of the other
      party for any purpose whatsoever.

      The Contractor, being an independent contractor and not an employee of the
      State, agrees to carry adequate public liability and other appropriate
      forms of insurance, including adequate public liability and other
      appropriate forms of insurance on the Contractor's employees, and to pay
      all applicable taxes incident to this Contract.

D.11. State Liability. The State shall have no liability except as specifically
      ---------------
      provided in this Contract.

D.12. Hold Harmless. The Contractor agrees to indemnify and hold harmless the
      -------------
      State of Tennessee as well as its officers, agents, and employees from and
      against any and all claims, liabilities, losses, and causes of action
      which may arise, accrue, or result to any person, firm, corporation, or
      other entity which may be injured or damaged as a result of acts,
      omissions, bad faith, negligence, or willful misconduct on the part of the
      Contractor, its employees, or any person acting for or on its or their
      behalf relating to this Contract. The Contractor further agrees it shall
      be liable for the reasonable cost of attorneys for the State in the event
      such service is necessitated to enforce the terms of this Contract or
      otherwise enforce the obligations of the Contractor to the State.

      In the event any such suit or claim, the Contractor shall give the State
      immediate notice thereof and shall provide all assistance required the
      State in the State's defense. The State shall give the Contractor written
      notice of any such claim or suit, and the Contractor shall have full right
      and obligation to conduct the Contractor's own defense thereof. Nothing
      contained herein shall be deemed to accord to the Contractor, through its
      attorney(s), the right to represent the State of Tennessee in any legal
      matter, such rights being governed by TENNESSEE CODE ANNOTATED, Section 8-
      6-106.

D.13. State and Federal Compliance. The Contractor shall comply with all
      ----------------------------
      applicable State and Federal laws and regulations in the performance of
      this Contract.

D.14. Governing Law. This Contract shall be governed by and construed in
      -------------
      accordance with the laws of the State of Tennessee. The Contractor agrees
      that it will be subject to the exclusive jurisdiction of the courts of the
      State of Tennessee and the courts of the United States which are located
      within the State of Tennessee in actions that might arise under this
      Contract. The Contractor acknowledges and agrees that any rights or claims
      against

                                       5
<PAGE>

      the State of Tennessee or its employees hereunder, and any remedies
      arising therefrom, shall be subject to and limited to those rights and
      remedies, if any, available under TENNESSEE CODE ANNOTATED, Sections 9-8-
      101 through 9-8-407.

D.15. Completeness. This Contract is complete and contains the entire
      ------------
      understanding between the parties relating to the subject matter contained
      herein, including all the terms and conditions of the parties' agreement.
      This Contract supersedes any and all prior understandings,
      representations, negotiations, and agreements between the parties relating
      hereto, whether written or oral.

D.16. Severability. If any terms or conditions of this Contract are held to be
      ------------
      invalid or unenforceable as a matter law, the other terms and conditions
      hereof shall not be affected thereby and shall remain in full force and
      effect. To this end, the terms and conditions of this Contract are
      declared severable.

D.17. Headings. Section headings of this Contract are for reference purposes
      --------
      only and shall not be construed as a part of this Contract.

E.    SPECIAL TERMS AND CONDITIONS.
      ----------------------------

E.1.  Conflicting Terms and Conditions. Should any of these special terms and
      --------------------------------
      conditions conflict with any other terms and conditions of this Contract,
      these special terms and conditions shall control.

E.2.  Communications and Contacts. All instructions, notices, consents,
      ---------------------------
      demands, or other communications required or contemplated by this Contract
      shall be in writing and shall be made by facsimile transmission, by
      overnight courier service, or by first class mail, postage prepaid,
      addressed to respective party at the appropriate facsimile number or
      address as set forth below or to such other party, facsimile number, or
                                 --
      address as may be hereafter specified by written notice.

      The State Project Director:
           Richard L. Paige
           Department of Human Services
           Citizens Plaza Building, 6/th/ Floor
           400 Deaderick Street
           Nashville, TN 37248-3400
           Phone: (615) 313-5348
           Fax: (615) 532-2713

      The Contractor:
           Catherine S. Bayse, State and Local Government Project Executive
           Tier Technologies, Inc./Service Design Associates
           342 Massachusetts Ave., Ste. 100
           Indianapolis, IN 46204
           Phone: (317) 955-1620
           Fax: (317) 955-8584

      Copy to: James R. Weaver, President, Government Services Unit

                                       6
<PAGE>

          Tier Technologies, Inc.
          1350 Treat Blvd., Suite 250
          Walnut Creek, CA 94596
          Phone: (925) 937-3950 ext. 772
          Fax: (925) 937-3752

     All instructions, notices, consents, demands, or other communications shall
     be considered effectively given as of the day of delivery; as of the date
     specified for overnight courier service delivery; as of three (3) business
     days after the date of mailing; or on the day the facsimile transmission is
     received mechanically by the telefax machine at the receiving location and
     receipt is verbally confirmed by the sender if prior to 4:30 p.m. CST. Any
     communication by facsimile transmission shall also be sent by United States
     mail on the same date of the facsimile transmission.

E.3. Incorporation of Additional Documents. Included in this Contract by
     -------------------------------------
     reference are the following documents:

     a.   The Contract document and its attachments

     b.   The Request for Proposals, associated amendments, and Attachments

     c.   All Clarifications and addenda made to the Contractor's proposal

     d.   The Contractor's Proposal

     In the event of a discrepancy or ambiguity regarding the Contractor's
     duties, responsibilities, and performance under this Contract, these
     documents shall govern in order of precedence detailed above.

E.4. Ownership.
     ---------

     a.   The State shall have all ownership right, title, and interest,
          including ownership of copyright, in all materials, including
          application software and modifications thereof and associated
          documentation, created, designed, and/or developed for the State under
          this Contract, and running on State-owned hardware (known collectively
          as "Work Products"). The State shall have royalty-free, non-exclusive,
          and unlimited rights to use, disclose, reproduce, and/or publish for
          any purpose whatsoever, all said Work Products. The Contractor shall
          furnish the Work Products upon request of the State, in accordance
          with the Contract and applicable State law. Work Products shall become
          property of the State upon termination or expiration of the Contract.

     b.   As referenced in 45 CFR 307.30(c), the Department of Health and Human
          Services reserves a royalty-free, non-exclusive and irrevocable
          license to reproduce, publish or otherwise use, and to authorize
          others for use for Federal government purposes software, software
          modifications, and documentation developed pursuant to this Contract.
          This license would permit the Department of Health and Human Services
          to authorize the use of software, software modifications, and
          documentation developed pursuant to this Contract in another project
          or activity funded by the Federal government.

     c.   The Contractor will be responsible for purchasing, obtaining,
          installing, and programming necessary automation hardware (personal
          computers, printers, modems and other peripherals) and software to
          inquire upon and update

                                       7
<PAGE>

          information in the current State computer system (TCSES) as required
          by the State. This hardware and software is known collectively as
          "Inquiry/Update Products". The software defined as Inquiry/Update
          Products is understood to run on Contractor-owned and maintained
          hardware, and is not to be confused with the Work Products mentioned
          above, which run on State-owned hardware. The Contractor shall have
          and retain all ownership of the Inquiry/Update Products; such
          ownership shall survive the termination or expiration of the Contract.

     d.   Telecommunication lines will be provided and paid for by the State.

     e.   The parties agree that the Contractor will use its proprietary payment
          processing software known as VIPRS in the performance of this
          Contract. Since the Contractor has licensed, created, designed and/or
          developed the VIPRS software, the State shall have no ownership
          rights, title, or interest in this software.

E.5. Confidentiality of Records. Strict standards of confidentiality of
     --------------------------
     records shall be maintained in accordance with the law. All material and
     information provided to the Contractor by the State or acquired by the
     Contractor on behalf of the State whether verbal, written, magnetic tape,
     cards or otherwise shall be regarded as confidential information in
     accordance with the provisions of State law and ethical standards and shall
     not be disclosed, and all necessary steps shall be taken by the Contractor
     to safeguard the confidentiality of such material or information in
     conformance with State law and ethical standards.

     The Contractor will be deemed to have satisfied its obligations under this
     section by exercising the same level of care to preserve the
     confidentiality of the State's information as the Contractor exercises to
     protect its own confidential information so long as such standard of care
     does not violate the applicable provisions of the first paragraph of this
     section.

     The Contractor's obligations under this section do not apply to information
     in the public domain; entering the public domain but not from a breach by
     the Contractor of this Contract; previously possessed by the Contractor
     without written obligations to the State to protect it; acquired by the
     Contractor without written restrictions against disclosure from a third
     party which, to the Contractor's knowledge, is free to disclose the
     information independently developed by the Contractor without the use of
     the State's information; or, disclosed by the State to others without
     restrictions against disclosure.

     It is expressly understood and agreed that the obligations set forth in
     this section shall survive the expiration or termination of this Contract.

E.6. Commercial Advertisement. The Contractor shall not refer to this Contract
     ------------------------
     or the Contractor's relationship with the State hereunder in commercial
     advertising in such a manner as to state or imply that the firm or its
     services are endorsed or preferred by the State of Tennessee.

E.7. Copyrights and Patents. The Contractor agrees to indemnify and hold
     ----------------------
     harmless the

                                       8
<PAGE>

      State of Tennessee as well as its officers, agents, and employees from and
      against any and all claims or suits which may be brought against the State
      for infringement of any laws regarding patents or copyrights which may
      arise from the Contractor's or the State's performance of this Contract.
      In any such action brought against the State, the Contractor shall satisfy
      and indemnify the State for the amount of any final judgment for
      infringement. The Contractor further agrees it shall be liable for the
      reasonable fees of attorneys for the State in the event such service is
      necessitated to enforce the terms of this Contract or otherwise enforce
      the obligations of the Contractor to the State. The State shall give the
      Contractor written notice of any such claim or suit and full right and
      opportunity to conduct the Contractor's own defense thereof.

E.8.  Subject to Funds Availability. This Contract is subject to the
      -----------------------------
      appropriation and availability of State and/or Federal funds. In the event
      that the funds are not appropriate or are otherwise unavailable, the State
      reserves the right to terminate the Contract upon written notice to the
      Contractor. Upon receipt of the written notice, the Contractor shall cease
      all work associated with the Contract on or before the effective
      termination date specified. Should an event occur, the Contractor shall be
      entitled to compensation for all satisfactory and authorized services
      completed as of the effective termination date.

E.9.  State Furnished Equipment. The Contractor shall be responsible for the
      -------------------------
      correct use, maintenance, and protection of all equipment furnished by the
      State for the Contractor's temporary use under this Contract. Upon
      expiration or termination of this Contract, all equipment furnished shall
      be returned to the State in good order and condition as when received,
      reasonable use and wear thereof excepted. Should the equipment be
      destroyed, lost or stolen, the Contractor shall be responsible to the
      State for the residual value of the equipment at the time of the loss.

E.10. Additional Conflict of Interest Provision. The Contractor covenants that
      -----------------------------------------
      it presently has no interest and shall not acquire any interest, direct or
      indirect, which would conflict in any manner or degree with the
      performance of its services hereunder. The Contractor further covenants
      that in the performance of the Contract no person having any such known
      interests shall be employed.

E.11. Workpapers Subject to Review. The Contractor shall make all audit,
      ----------------------------
      accounting, or financial analysis workpapers, notes, and other
      documentation available for review by the Comptroller of the Treasury or
      his representatives, upon request, during normal working hours either
      while the analysis is in progress or subsequent to the completion of this
      Contract.

E.12. Personnel-Related Provisions.
      ----------------------------

      a.  The State reserves the right to evaluate all personnel proposed to
          perform services under this Contract. The Contractor shall provide, at
          the State's request and in a timely fashion, resumes, contact
          references, and/or any other supporting documentation necessary to
          allow the State to evaluate the individuals' questions.

      b.  The Contractor agrees to remove and replace at the Contractor's
          expense, personnel reasonably judged by the State as not making
          substantial

                                       9
<PAGE>

          contributions to the tasks to which the Contractor personnel are
          assigned. The Contractor agrees not to charge the State for service
          performed which the State designates as being unacceptable.

      c.  No redeployment of any of the Core Team personnel (Lockbox Manager,
          key staff and/or supervisory staff) may be made by the Contractor
          without prior written consent of the State. Replacement of such
          personnel, if approved, shall be with personnel of equal ability and
          qualifications. If approval of replacement is given, no amendment of
          the Contract will be required to effect this change.

      d.  The Contractor shall not solicit State employees in State facilities
          or during State work hours for the purpose of employment.

      e.  No official or employee of the State and no other public official of
          the State of Tennessee who exercises any functions or responsibilities
          in the review or approval of the undertaking or carrying out of this
          Contract shall, prior to the completion of this Contract, voluntarily
          acquire any personal interest, direct or indirect, in this Contract.

      f.  The Contractor may not use individuals for the project who are
          employees of any State agency.

E.13. Disclaimer Regarding Accuracy of Historical Data and Estimated Volume
      ---------------------------------------------------------------------
      Information. All historical data and estimated future volume information
      -----------
      (collectively "data") contained herein and in all documents referenced
      herein, including amendments hereto, are provided solely for information
      purposes and, if Contractor intends to rely on said data, the Contractor
      must satisfy for themselves the accuracy of the data. The State makes no
      representations regarding the accuracy of said data. The State will not be
      held liable for any direct, indirect, or any other damages whatsoever, of
      any description or amount, including reduced revenues or lost profits,
      sustained by the Contractor that may result from inaccuracies in, or the
      Contractor's reliance upon, said data.

E.14. Year 2000 Compliance. All software created, modified, and/or delivered
      pursuant to this Contract shall be fully "Year 2000 Compliant" in
      accordance with the Department of Finance and Administration's Standards
      and Guidelines memo, Subject: "Year 2000 Compliance Standard For Dates and
      Applications", as referenced in RFP Number ###-##-####. With regards to
      modifications, if any, to existing State software, the Contractor will
      only have to guarantee Year 2000 compliance pursuant to this section to
      the actual modifications made by the Contractor.

E.15. Remedies. The State may seek remedies for breach and/or at its sole
      --------
      option, terminate the contract in accordance with the following
      provisions:

      a.  The Contractor shall be deemed to have breached the Contract if any of
          the following occur:

          i)   failure to perform in accordance with any material term or
               provision of the Contract;

                                       10
<PAGE>

          ii)  partial performance of any material term or provision of the
               Contract;

          iii) any material act prohibited or restricted by the Contract.

          For the purpose of this Contract, items i. through iii. shall
          hereinafter be referred to as "Breach".

     b.   In the event of a Breach by the Contractor, the State shall have
          available the following remedies as described further herein:

          i)   actual damages and any other remedy available at law or equity;

          ii)  liquidated damages;

          iii) partial default; and/or

          iv)  termination of the Contract.

     c.   Notwithstanding any provision herein to the contrary, in the event the
          Breach in any way, whether directly or indirectly, either

          i)   interferes with the custodial parent's ability to receive his or
               her payments in a timely manner; or

          ii)  impairs the ability of a caseworker to provide timely service to
               his or her clients. then the following shall be applicable:

               a)   the Contractor shall commit all resources needed to effect
                    the cure in the shortest possible amount of time, which
                    resources include, but are not limited to, personnel,
                    overtime, services, materials, equipment, software, and
                    hardware;

               b)   failure to cure as described in E.15.c.ii.a above may be
                    cause for termination as described herein.

     d.   Actual Damages. In the event that the State sustains any claims,
          --------------
          damages, system performance-related costs, losses, suits, or costs,
          including attorneys' fees (collectively, "Damages") as a result of the
          Breach, the State may, as its sole option:

          i)   permanently withhold payments to recover such Damages; and/or

          ii)  pursue, in the courts of Tennessee, just compensation from the
               Contractor for such Damages

     e.   Liquidated Damages.
          ------------------

          i)   In the event of a Breach by the Contractor described in Appendix
               B, the State may withhold as liquidated damages the amounts
               designated

                                       11
<PAGE>

               in Appendix B from any amounts owed to the Contract.

          ii)  The State shall notify the Contractor in writing of the Breach
               and the amounts to be withheld as liquidated damages.

          iii) The parties agree that due to the complicated nature of the
               Contractor's obligations under this Contract it would be
               difficult to specifically designate a monetary amount for a
               Breach by the contractor designated in Appendix B, as said
               amounts are likely to be uncertain and not easily proven. The
               Contractor hereby represents and covenants that it has carefully
               reviewed the liquidated damages contained in Appendix B and
               agrees that said amounts are the liquidated damages resulting
               from negotiation between the parties.

          iv)  It is hereby agreed between the parties that the liquidated
               damages represent solely the damages and injuries sustained by
               the State in losing the benefit of the bargain with the
               Contractor and do not include:

               a)   any injury or damage sustained by a third party, and the
                    Contractor agrees that the liquidated damage amount is in
                    addition to any amount the Contractor may owe the State
                    pursuant to the indemnity provision contained herein or
                    otherwise; and

               b)   the State shall permanently retain all liquidated damages
                    before availing itself of any other remedy.

          v)   The State is not obligated to assess liquidated damages before
               availing itself of any other remedy.

          vi)  The State may choose to discontinue liquidated damages and avail
               itself of any other remedy available under this contract or at
               law or equity; provided, however, the Contractor shall receive a
               credit for said liquidated damages previously withheld except in
               the event of a Partial Default.

     f.   Partial Default.
          ---------------

          i)   In the event of a Breach by the Contractor, the State may declare
               a Partial Default. A Partial Default may be declared only after
               failure by Contractor to cure a Breach within twenty (20)
               calendar days after written notice by the State.

          ii)  If the Contractor fails to cure the Breach within the time period
               described herein, then the State may declare a Partial Default
               and provide written notice to the contractor of the following:

               a)   the date upon which the Contractor shall terminate providing
                    the service(s) associated with the Breach; and

               b)   the date the State will begin to provide the service
                    associated with the Breach.

                                       12
<PAGE>

                    The State may revise the time periods contained in the
                    notice upon written notice to the Contractor.

          iii) In the event the State declares a Partial Default, the State may
               withhold from the amounts due the Contractor the greater of:

               a)   amounts which would be paid the Contractor to provide the
                    defaulted services required herein; or

               b)   the cost to the State of providing the defaulted service,
                    whether said service is provided by the State or a third
                    party, together with any other damages associated with the
                    Breach.

          iv)  To determine the amount the Contractor is being paid for any
               particular service, the State shall review all documentation
               required of the Contractor. The Contractor of the Department of
               Human Services (DHS) or her designee shall make the final and
               binding determination of said amount.

          v)   The State may assess liquidated damages against the Contractor
               for any failure to perform which ultimately results in a Partial
               Default, with said liquidated damages to cease when said Partial
               Default is effective.

          vi)  Upon Partial Default, the Contractor shall have no right to
               recover from the State any actual, general, special, incidental,
               consequential, or any other damages whatsoever of any description
               or amount.

          vii) The Contractor agrees to cooperate fully with the State in the
               event a Partial Default is taken.

     g.   Partial Takeover in Case of Partial Default.
          -------------------------------------------

          i)   The State may exercise a partial takeover of any service which
               the Contractor is found to be in Partial Default.

          ii)  The Contractor shall be given at least thirty (30) calendar days
               prior written notice of said Partial Takeover, with said notice
               to specify the areas of service the State will assume and the
               date of assumption.

          iii) Any Partial Takeover by the State shall not alter in any way the
               Contractor's other obligations under this Contract.

          iv)  The State may withhold from amounts due the Contractor the amount
               the Contractor would have been paid to deliver the services as
               determined by the State. The amount due the Contractor shall be
               so reduced as of the date the State assumes the service.

          v)   Upon Partial Takeover, the Contractor shall have no right to
               recover from the State any actual, general, special, incidental,
               consequential, or any other damages whatsoever of any description
               or amount.

                                       13
<PAGE>

          vi)  In the event of a termination, the Contractor shall be liable to
               the State for any and all Damages incurred by the State including
               but not limited to all expenses incurred by the State to
               implement the Centralized Collection Unit project which exceed
               the amount the State would have paid the Contractor under this
               Contract.

          vi)  In the event the State sustains Damages upon termination, the
               State may withhold any amounts which may be due the Contractor,
               for any claims, damages, system performance-related costs,
               losses, suits, or costs (including attorney's fees) without
               waiver of any other remedy or damages available to the State at
               law or at equity.

     h.   General Termination Provision.
          -----------------------------

          i)   Prior to Termination, Contractor shall be given written notice
               and twenty (20) calendar days to cure.

          ii)  If Breach is not cured, the Contractor shall be notified of the
               termination in writing signed by the Commissioner of DHS. Said
               notice shall hereinafter be referred to as Termination Notice.

          iii) As reasonably necessary to permit an orderly transition of
               services to another provider, the Termination Notice may specify
               either that the termination is to be effective immediately, on a
               date certain in the future, or that the Contractor shall cease
               operations under this Contract in stages.

          iv)  The Contractor agrees to cooperate with the State in the event of
               a termination, Partial Default or Partial Takeover.

          v)   If the State terminates the Contract for Breach, the State
               reserves the right to obtain the equipment, software, supplies,
               and/or services to be provided pursuant to the contract from
               other sources and upon such terms and in such manner as the State
               deems appropriate and charge the Contractor for any additional
               costs incurred thereby.

     i.   Termination for Convenience.
          ---------------------------

          i)   The State may terminate this Contract without cause for any
               reason. Said termination shall not be deemed a Breach of Contract
               by the State. The State shall give the Contractor thirty (30)
               calendar days written notice prior to termination of this
               Contract.

          ii)  Upon such termination, the Contractor shall have no right to any
               actual, general, special, incidental, consequential, or any other
               damages whatsoever of any description or amount, except that the
               State shall pay for all services rendered and deemed acceptable
               by the State and not yet invoiced to the State as of the date of
               termination,

                                       14
<PAGE>

               subject to reductions for any remedies invoked by the State.

      j.  Termination for Bankruptcy or Insolvency. Upon filing of any
          ----------------------------------------
          bankruptcy or insolvency proceeding by or against the Contractor,
          whether voluntary or involuntary, or upon the appointment of a
          receiver, trustee, or assignee for the benefit of creditors, the
          Contractor must notify the State CCU Project Director immediately.
          Upon learning of actions herein identified, the State reserves the
          right to terminate the contract or to affirm the contact and hold the
          Contractor liable for Damages, if any. The state shall not be liable
          for any penalties or costs resulting from such a termination.

      k.  Deliverable Incorporation. Upon State acceptance of any deliverable,
          -------------------------
          the deliverable becomes part of the contract, and a failure to carry
          out activities described in the deliverable, shall, at the State's
          discretion, be considered Breach of Contract.

E.16. Alternate Sources of Similar Services Allowed. In the event of Contract
      ---------------------------------------------
      termination, the Contractor shall not limit the State's ability to procure
      the same or similar services from sources that were formerly
      subcontractors to the Contractor pursuant to this agreement.

E.17. Termination and Transfer of Title. Upon termination, the Contractor
      ---------------------------------
      shall transfer title to the State (to the extent that title has not
      already been transferred) and deliver in the manner, at the times, and to
      the extent directed by the State all software developed or modified,
      files, data, manuals, or other documentation, in any form, that are
      complete or under development pursuant to the terms of the Contract at the
      time of the Contractor's receipt of the Notice of Termination, regardless
      of the status of completion.

E.18. Performance/Management Reports.
      ------------------------------

      a.  The Contractor shall deliver the reports described in Attachment 9.15
          to the RFP.

      b.  The State retains the flexibility, until detail design final sign-off,
          to define Performance or Management report formats, develop additional
          reports, and identify or modify the frequency of all reports issued by
          the Contractor, at no additional cost to the State. At the State's
          discretion, any report shall be delivered in either data file or
          formatted-for-printing format.

E.19. Contract Services Transitions. Upon expiration or termination of this
      -----------------------------
      Contract for whatever reason, the Contractor shall assist the State to
      insure an orderly transfer of responsibility and/or continuity of those
      services required under the terms of the Contract to an organization
      designated by the State, if requested in writing.

      a.  The Contractor shall deliver, FOB destination, all records,
          documentation, reports, data, hard copy and electronic files,
          recommendations, etc., which were required to be produced under the
          terms of the Contract to the State and/or to the State's designee
          promptly and with due diligence after receipt of the written request.

      b.  The Contractor shall agree to continue providing any part or all of
          the services

                                       15
<PAGE>

          in accordance with the terms and conditions of the Contract for a
          period not to exceed ninety (90) calendar days after the expiration or
          termination of the Contract for a price not to exceed those prices set
          forth in the Contract.

      c.  The Contractor shall discontinue providing the service or accepting
          new assignments under the terms of this Contract, on the date
          specified by the State, in order to insure the completion of such
          service prior to the expiration or termination of the Contract.

E.20. Minimum Notice of Periodic Maintenance. The Contractor shall provide a
      --------------------------------------
      minimum of two business days prior notice to the State in the event of
      periodic scheduled maintenance by the Contractor.

E.21. Title IV-D and Non IV-D Confidentiality. The Contractor shall ensure
      ---------------------------------------
      that all Title IV-D and non IV-D payment information and documentation
      will be maintained and used solely for child support enforcement purposes
      and safeguarded as provided in 45 CFR 303.21, and all other Federal and
      State laws and regulations pertaining to confidentiality. Such information
      will be provided to the Tennessee Department of Human Services upon
      request.

E.22. Client Information Confidentiality. The Contractor shall assure that any
      ----------------------------------
      information provided by the State relative to clients is used only for the
      administration of this contract, or in any investigation, prosecution, or
      criminal or civil proceeding, conducted pursuant to this contract.

E.23. Data Base and System Access Restricted. The Contractor agrees not to
      --------------------------------------
      access any data base or system maintained by the State, or which is
      accessible to the Contractor pursuant to this contract due to arrangements
      made by the State with other agencies, or entities, for any purpose not
      directly related to the performance under this Contract.

E.24. Contractor's Full Responsibility for Its Personnel. The Contractor shall
      --------------------------------------------------
      ensure that all personnel necessary to carry out the terms, conditions,
      and obligations of this contract shall be the responsibility of the
      Contractor. The Contractor shall hire, fire, train, and supervise such
      professional, paraprofessional and support personnel necessary to carry
      out the terms of this contract. Neither the Contractor nor any of its
      staff shall be considered employees of the State of Tennessee.

E.25. Contractor Data Collection Cooperation. The Contractor shall cooperate
      --------------------------------------
      fully with the data collection and evaluation activities carried out by
      the State in connection with the services performed under this contract.

E.26. Monthly Problem Reports. The Contractor shall provide a report, to be
      -----------------------
      defined by the State, of significant events, problems, progress and
      statistics relative to payments and services.

E.27. Operations Turnover Plan. The Contractor shall submit to the State, for
      ------------------------
      its approval, six months prior to contract termination, a turnover plan
      that provides for an orderly and controller transition to either the State
      or a successor Contractor. This plan shall include, at a minimum, the
      following:

                                       16
<PAGE>

     a.   List of all job titles and responsibilities and the number of
          individuals in each title;

     b.   A detailed plan for the turnover of payment information including the
          sequence of events, time frames, and, if necessary, a reasonable
          transport plan for case files and all documentation related thereto;

     c.   A commitment to maintain performance measures that are consistent with
          the requirements of the contract;

     d.   All other information requested by the State that the State, in its
          sole discretion, believes is necessary to effectuate a smooth turnover
          to the successor Contractor.

IN WITNESS WHEREOF:

TIER TECHNOLOGIES, INCORPORATED

                 /s/ James R. Weaver                         DATE  6/9/99
------------------------------------------------------            -------
JAMES R. WEAVER, PRESIDENT; GOVERNMENT SERVICES UNIT


DEPARTMENT OF HUMAN SERVICES:

                 /s/ Natasha K. Metcalf                      DATE  6-15-99
------------------------------------------------------            --------
NATASHA K. METCALF, COMMISSIONER


APPROVED:


DEPARTMENT OF FINANCE AND ADMINISTRATION

                 /s/ John D. Ferguson                        DATE  6-25-99
------------------------------------------------------            --------
JOHN D. FERGUSON, COMMISSIONER


COMPTROLLER OF THE TREASURY

                 /s/ John G. Morgan                          DATE  6/28/99
------------------------------------------------------            --------
JOHN G. MORGAN, COMPTROLLER OF THE TREASURY

                                       17