**Exhibit10.41**

 

**EMPLOYMENTAGREEMENT**

 

This agreement (the ***“Agreement”***) between**TIER TECHNOLOGIES INC.,**a California corporation (the ***“Company”***) and Mr.Jeff McCandless (the ***“Employee”***),is entered into as of July 2, 2003 (the ***“Effective Date”***).  Those capitalized terms used in thisAgreement and not otherwise defined herein shall have the meanings given tosuch terms in the Agreement

 

**AGREEMENT**

 

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

 

**A.****                                    AT-WILLEMPLOYMENT.**  The Company employsEmployee as of July 2, 2003 in the capacity of Senior Vice President andChief Financial Officer, reporting to Mr. James L. Bildner, Chairman and ChiefExecutive Officer or his designee. Employee will be based at Company’s offices in Walnut Creek,California.  Employee agrees toundertake such business travel as is customary to such position, and as shallfrom time to time be requested of him by the Company. The parties agree thatemployment at the Company is at will and may be terminated by either theCompany or Employee at any time with or without cause and with or withoutnotice.  Employee acknowledges thatEmployee has no right to be employed for a specific term and no right to insiston specific grounds for termination. Employee acknowledges and agrees that the at will nature of thisAgreement extends to all employment decisions and that any change in the termsand conditions of employment, including without limitation work assignments,production standards, job responsibilities, compensation and promotions, shallbe at the Company’s sole discretion.

 

**1.****                                      COMPENSATIONAND BENEFITS**

 

**1.1****                               BaseSalary.**  In consideration of and ascompensation for the services to be performed by the Employee hereunder, theCompany shall pay the Employee a base salary (the ***“Base Salary”***) of not less than $240,000per year, payable semi-monthly in arrears in accordance with the Company’sregular payroll practices.  Followingcompletion of six (6) consecutive months of employment, Employee’s base salaryshall be increased to $250,000 per annum. In addition, Employee will beentitled to compensation review on an annual basis consistent with theEffective Date of this Agreement, and any mutually adjusted compensation changewill be based upon individual and Company performance and applicable Tierpolicy.

 

**1.2****                               Bonus.**  At the Company’s sole discretion, Employeemay be eligible to participate in Company’s Executive Incentive CompensationPlan commencing as and from the fiscal year October 1, 2003, foradditional discretionary incentive compensation of up to 50% of base salary orsubject to a higher maximum based upon the then in effect approved incentivecompensation program. Incentive compensation will be defined by Tier’sExecutive Compensation Plan (Exhibit A) as determined by the CompensationCommittee of Tier’s Board of Directors and may be payable in cash and/or stockoptions as determined annually by the Compensation Committee.

 

**1.3****                               Options.**  In addition, subject to approval by theCompensation Committee of the Tier Board of Directors, the Employee will begranted stock options for 75,000 shares, which are subject to the provisions ofthe Tier Equity Incentive Plan.  Optionsare typically granted during the first week of the calendar quarter followingthe Effective Date of your employment and are priced by the Board of Directorsaccording to the market price at the time of grant.  Options vest over five years with 20% of the total grant vestingafter completion of each 12-month period from the original date of grant.  Option grant

 

| Initials: |   |     |
|-----------|--------|----------|
|      |   |     |
| Company   |   | Employee |

 

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and relateddocuments are sent to each new employee within 30 days following the date ofthe grant.  In the event of a merger,consolidation or other reorganization of the Company (collectively a “Merger”)in which the Company is not the surviving entity (other than a Merger involvinga majority-owned subsidiary of the Company) at the election of the Board ofDirectors either: (i) this option shall become fully vested and exercisableinto shares of the surviving corporation, subject to the applicable Mergerratio, without any change in the total purchase price; or (ii) the Optioneeshall receive a cash distribution equal to the difference between the exerciseprice of the option and the fair market value of the Common Stock on theeffective date of Merger.  Similarly if,in a single transaction or series of related transactions with a record datesubsequent to the date of the Agreement, there is (i) a transfer of more thanfifty percent (50%) of the voting power of the Company’s then outstandingCommon Stock, or (ii) the issuance of new shares of the Company’s Common Stockpossessing equal or greater voting power than the Company’s outstanding CommonStock prior to the issuance, this option shall become fully vested andexercisable.

 

In addition, subject to the approval of Tier’s Compensation Committee,Employee shall be eligible to receive an additional stock option grant of25,000 shares to be granted in the first week of the quarter following one yearof consecutive employment with Company as defined by the Effective Date of thisAgreement. Options vest over five years with 20% of the total grant vestingafter completion of each 12-month period from the original date of grant.  Option grant and related documents are sentto each new employee within 30 days following the date of the grant.    In the event of a merger, consolidation orother reorganization of the Company (collectively a “Merger”) in which theCompany is not the surviving entity (other than a Merger involving amajority-owned subsidiary of the Company) at the election of the Board ofDirectors either: (i) this option shall become fully vested and exercisableinto shares of the surviving corporation, subject to the applicable Mergerratio, without any change in the total purchase price; or (ii) the Optioneeshall receive a cash distribution equal to the difference between the exerciseprice of the option and the fair market value of the Common Stock on theeffective date of Merger.  Similarly if,in a single transaction or series of related transactions with a record datesubsequent to the date of the Agreement, there is (i) a transfer of more thanfifty percent (50%) of the voting power of the Company’s then outstandingCommon Stock, or (ii) the issuance of new shares of the Company’s Common Stockpossessing equal or greater voting power than the Company’s outstanding CommonStock prior to the issuance, this option shall become fully vested andexercisable.  .

 

**1.4****                               Participationin Benefit Plans.**  The Employeeshall be entitled to participate in any pension plans, profit-sharing plans andgroup insurance, medical, hospitalization, disability and other benefit plansmaintained by the Company from time to time, as such are generally applicableto employees of the Company and to the extent Employee is eligible under thegeneral provisions thereof.

 

**1.5****                               Reimbursementof Expenses.**  The Company shallreimburse the Employee for all business expenses, including, withoutlimitation, travel, entertainment and similar expenses, incurred by theEmployee on behalf of the Company if such expenses are ordinary and necessarybusiness expenses incurred on behalf of the Company pursuant to standardexpense reimbursement policy.  TheEmployee shall provide the Company with such itemized accounts, receipts ordocumentation for such expenses as are required under the Company’s policyregarding the reimbursement of such expenses.

 

In addition, theEmployee will be entitled to either the reimbursement of parking expenses atthe Walnut Creek office location or provided with Company paid parkingfacilities, as appropriate.

 

**1.6****                               Vacationand Personal Leave.**  The Employeeshall be entitled to three (3) weeks of vacation per annum, pro-rated in theyear of hire and terminated and accrued on a semi-monthly basis. The Employeeshall also be entitled to other paid personal leave in accordance with TheCompany’s

 

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policy.  Company is aware and agrees to Employee’svacation request from August 4-8, 2003, such time to be recorded againstannual vacation allowances and accrued benefits at that time.

 

**1.7****                               RelocationAllowance.**  The Employee shall bereimbursed for reasonable and customary expenses associated with Employee’srelocation to Walnut Creek, California in an amount not to exceed $15,000(fifteen thousand dollars). Reimbursement of incurred relocation expenses willbe made in accordance with Tier’s standard relocation practices and procedures,and the submission of original documentation in evidence of relocation expensesclaimed. Employee may request at the discretion of Tier’s Chairman and ChiefExecutive Officer reimbursement of relocation expenses incurred in excess of$15,000, and approval for additional expenses will not be unreasonablywithheld, provided that such expenses are reasonable and customary and directlyrelate to the relocation process.

 

**2.****                                      TERMINATION**

 

**2.1****                               Termination.**

 

**(a)****                                  Termination****for Cause**.  The Company may terminate Employee’semployment under this Agreement, in its sole discretion, “for cause.”  Grounds for the Company to terminate thisAgreement “for cause” shall be limited to the occurrence of any of thefollowing events:

 

**(i)****                                   **theEmployee’s commission of any act which detrimentally affects the Company,including, without limitation, an act of dishonesty, fraud, willfuldisobedience, gross misconduct ,breach of duty, intentional destruction ortheft of Tier property, material violation of Tier policies or falsification ofTier documents;

 

**(ii)****                               **theEmployee’s commission of any act in contravention of Employee’s undertakingscontained in Section 3 hereof; or

 

**(iii)****                           **theEmployee’s conviction of a felony or a misdemeanor involving dishonesty ormoral turpitude.

 

**(b)****                                  TerminationWithout Cause.**  The Company mayterminate Employee’s employment under this Agreement without cause or notice atany time.

 

**(c)****                                  Noticeof Termination.**  Any purportedtermination of employment by the Company or by the Employee shall becommunicated by written notice of termination to the other party hereto inaccordance with Section 4.1 hereof. Any notice of termination of employment given hereunder shall effect terminationas of the date specified in such notice, or, in the event no such date isspecified, on the last day of the month in which such notice is delivered ordeemed delivered as provided in Section 4.1 hereof.

 

**(d)****                                  Effectof Termination.**

 

**(i)****                                   **Uponthe termination of the Employee’s employment as a result of Employee’sdisability, the Employee shall be entitled to receive for an additional thirty(30) days after the date of such termination, Employee’s Base Salary in effectat the time of termination and any and all benefits to which Employee isentitled on the date of such termination under the Company’s pension, life,disability, accident and health and other benefit plans in accordance with theprovisions of such plans.

 

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**(ii)****                               **Upontermination of the Employee’s employment as a result of Employee’s death, theEmployee’s heirs, devisees, executors or other legal representatives shallreceive for an additional thirty (30) days from the date of death, Employee’sBase Salary in effect at the time of death.

 

**(iii)****                           **Ifthe Employee’s employment hereunder shall be terminated by the Company withoutcause, or if the Employee terminates his employment, then, and only then, shallthe Employee shall be entitled to the Employee’s Base Salary and accrued andunused vacation earned through the date of termination, subject to standarddeductions and withholdings, and upon the Employee’s furnishing to the Companyan executed waiver and release of claims, in the form of which is attachedhereto as **Exhibit B**, the Employeeshall also be entitled to continuation of the Employee’s Base Salary in effectat the time of termination for a period of nine (9) months (the “SeverancePeriod”), subject to Company standard payroll schedule, deductions andwithholdings.   In addition, Employeewill be entitled to continue group and elective benefits in which Employeeparticipated on the date of such termination under the Company’s benefitprograms, including life, disability and accident, in accordance with theprovisions of such plans and applicable legislation.

 

**(iv)****                              **Ifthe Employee’s employment hereunder shall be terminated by the Company forcause or by the Employee by resignation, the Company shall have no furtherobligation to the Employee under this Agreement other than accrued Base Salaryand other accrued benefits required by law, prorated to the date oftermination.

 

**3.****                                      NON-COMPETITION,NON-SOLICITATION AND CONFIDENTIALITY**

 

**3.1****                               Non-Competition.**  For the period of one year (1) from the dateof termination of Employee’s employment, the Employee shall not, directly orindirectly:

 

**(a)****                                 **carryon or engage in with any Person engaged in, in any territory in which theContinuing Business is carried on during Employee’s employment, any activity thatis in competition with the Continuing Business; or

 

**(b)****                                 **door say anything which is harmful to the reputation of the Continuing Businessor which may lead any person to cease to deal with the Continuing Business onsubstantially equivalent terms to those previously offered or at all; or

 

**(c)****                                 **seekto contract with or engage any person who has been contracted with or engagedto manufacture, assemble, supply or deliver products, goods, materials orservices which will be competitive with the Continuing Business.

 

**3.2****                               Non-solicitation. **For the period of one (1) year from thedate of termination of Employee’s employment, the Employee shall not, directlyor indirectly:

 

**(a)****                                 **employor solicit for employment any person whom Employee knows to be an employee of theCompany or any subsidiary of the Company or induce or attempt to induce anysuch person to terminate his or her employment with the Company or suchsubsidiary; or

 

**(b)****                                 **seekin competition with the Company to procure orders from or do business with or procuredirectly or indirectly any other person to procure orders from or do businesswith any person who has been a customer of the Company at any time.

 

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**3.3****                               ConfidentialInformation.**

 

**(a)****                                 **TheEmployee acknowledges that the Confidential Information (as hereinafterdefined) of the Company is valuable, special and unique to the ContinuingBusiness, and that such Continuing Business depends on such ConfidentialInformation; and that the Company wishes to protect such ConfidentialInformation by keeping it confidential for the use and benefit of theCompany.  Based on the foregoing, theEmployee undertakes:

 

**(i)****                                   **tokeep any and all Confidential Information in trust for the use and benefit ofthe Company;

 

**(ii)****                               **exceptas required by the Employee’s duties hereunder or as may be authorized inwriting by the Company, not at any time during and for a period of one (1) yearafter termination of Employee’s employment with the Company, to disclose oruse, directly or indirectly, any Confidential Information of the Company;

 

**(iii)****                           **totake all reasonable steps necessary, or reasonably requested by the Company, toensure that all Confidential Information of the Company is kept confidentialfor the use and benefit of the Company; and

 

**(iv)****                              **upontermination of Employee’s employment with the Company or at any other time theCompany may in writing so request, to promptly deliver to the Company allmaterials constituting Confidential Information (including all copies thereof)that are in Employee’s possession or under Employee’s control.  Further, the Employee undertakes that, ifrequested by the Company, Employee shall return any Confidential Informationpursuant to this subsection and shall not make or retain any copy of orextract from such materials.

 

**(b)****                                 **Forpurposes of this Section, ***“ConfidentialInformation”*** means any and all information developed by or forthe Company of which the Employee gained knowledge by reason of Employee’semployment with the Company under this Agreement that is not generally known inthe industry in which the Company is or may become engaged.  Confidential Information includes, but isnot limited to, any and all information developed by or for the Company or customersof the Company, concerning plans, marketing and sales methods, materials,processes, business forms, procedures, devices used by the Company orcontractors or customers with which the Company has dealt, plans fordevelopment of new products, services and expansion into new areas or markets,internal operations and any trade secrets and proprietary information of anytype owned by the Company together with all written, graphic and othermaterials relating to all or any part of the same.

 

**(c)****                                 **Employeeagrees that as a condition of employment Employee will execute and abide by theCompany’s Nondisclosure and Proprietary/Confidential Information Agreement (the***“Confidentiality Agreement”***),attached hereto as **Exhibit C**. Tothe extent the Confidentiality Agreement conflicts with or is inconsistent withthis Agreement, this Agreement shall control.

 

**3.4****                               Remedies.**

 

**(a)****                                  InjunctiveRelief.**  Employee acknowledges andagrees that the covenants and obligations contained in Sections 3.1, 3.2 and3.3 hereof relate to special, unique and extraordinary matters and that aviolation of any of the terms of said Sections will cause the Companyirreparable injury for which adequate remedy at law is not available.  Therefore, Employee agrees that the Companyshall

 

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be entitled to aninjunction, restraining order, or other equitable relief from any court ofcompetent jurisdiction, restraining the Employee from committing any violationof such covenants and obligations.

 

**(b)****                                  RemediesCumulative. **The Company’s rightsand remedies in respect of this Section are cumulative and are in additionto any other rights and remedies the Company may have at law or in equity.

 

**4.****                                      MISCELLANEOUS**

 

**4.1****                               Notices.**  Any written notice, required or permittedunder this Agreement, shall be deemed sufficiently given if either handdelivered or by fax (with written confirmation of receipt) or nationallyrecognized overnight courier.  Writtennotices must be delivered to the receiving party at its address or facsimilenumber on the signature page of this Agreement.  The parties may change the address or facsimile number at whichwritten notices are to be received in accordance with this Section.

 

**4.2****                               PrevailingParty.**  If any litigation iscommenced between the parties hereto concerning this Agreement or theirrespective rights, duties and obligations hereunder, the party prevailing inthat litigation shall be entitled to reasonable attorney’s fees, to be fixed bythe court as part of the costs of the litigation or established in a separate actionbrought to recover those fees, in addition to any other relief that may begranted.

 

**4.3****                               Assignment.**The Employee may not assign, transfer or delegate his rights or obligationshereunder, and any attempt to do so shall be void.  This Agreement shall be binding upon and shall inure to thebenefit of the Company and its successors and assigns.

 

**4.4****                               EntireAgreement.**  This Agreement containsthe entire agreement of the parties hereto with respect to the subject matterhereof, and all other prior agreements, written or oral, are hereby mergedherein and are of no further force or effect. This Agreement may be modified or amended only by a written agreementthat is signed by the Company and the Employee.  No waiver of any section or provision of this Agreementshall be valid unless such waiver is in writing and signed by the party againstwhom enforcement of the waiver is sought. The waiver by the Company of any section or provision of thisAgreement shall not apply to any subsequent breach of this Agreement.  Captions to the various Sections of thisAgreement are for the convenience of the parties only and shall not affect themeaning or interpretation of this agreement. This Agreement may be executed in several counterparts, each of whichshall be deemed an original, but together they shall constitute one and thesame instrument.

 

**4.5****                               Severability.**  The provisions of this Agreement shall bedeemed severable, and if any part of any provision is held illegal, void orinvalid under applicable law, such provision may be changed to the extentreasonably necessary to make the provision, as so changed, legal valid andbinding.  If any provision of thisAgreement is held illegal, void or invalid in its entirety, the remainingprovisions of this Agreement shall not in any way be affected or impaired butshall remain binding in accordance with their terms.

 

**4.6****                               ContinuingObligations.**  The provisionscontained in Sections 2.1(d), 3, 4.2, 4.6 and 4.7 of this Agreement shallcontinue and survive the termination of this Agreement.

 

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**4.7****                               ApplicableLaw.**  This Agreement and the rightsand obligations of the Company and the Employee hereunder shall be governed byand construed and enforced under the laws of the State of California, withoutreference to any principles of conflict of laws.

 

**IN WITNESS WHEREOF,**the parties hereto have executed this Agreement as of the date first abovewritten.

 

 
|   | **TIER  TECHNOLOGIES, INC.** |
|--------|------------------------------|
|   |                         |   |
|   | By:                          | /s/ James R.  Weaver |
|   |                         |   |
|   |                         | Print Name: |  James R. Weaver |
|   |                         | Title: |  President  & CEO |
|   |                         |   |
|   |                         |   |
|   |                         | /s/ Jeffrey A.  McCandless |
|   | **[EMPLOYEE]**               |
|   |                         |   |
|   | Address:                     |
|   | Facsimile:                   |   |
|        |                              |  |  |  |  |

 

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**ExhibitA**

**TIERTECHNOLOGIES, INC.**

**INCENTIVECOMPENSATION PLAN**

 

**ADOPTEDJANUARY 22, 2001**

**EFFECTIVEOCTOBER 1, 2000**

 

**1.****                                      Purpose.**  The Tier Technologies, Inc. IncentiveCompensation Plan (the “Plan”) is intended to provide incentive compensationopportunities for key Employees to receive Awards in the form of cash, fullyvested stock options to purchase shares of the Company’s common stock, otherstock grants, or any combination of these, based on (i) the performance of theCompany and/or one or more of its Affiliates and (ii) the individualParticipant’s performance as quantified in the Performance Objectives andPerformance Levels as described herein.

 

**2.****                                      Definitions.**

 

**(a)****                                  *“Affiliate”*** shall mean any member ofan affiliated group of corporations with the Company under CodeSection 1504.

 

**(b)****                                  *“Award”*** shall mean the incentiveamount earned under the Plan by a Participant which shall be payable in theform of cash, fully vested stock options to purchase shares of common stock ofthe Company, other stock grants, or any combination of these.

 

**(c)****                                  *“Base Salary”*** shall mean the actualbase earnings of a Participant for the Plan Year exclusive of any bonuspayments under this Plan or any other prior or present commitment, includingcontractual arrangements, any salary advance, any allowance or reimbursement,and the value of any basic or supplemental employee benefits orperquisites.  Base Salary refers only toamounts earned while a Participant during the Plan Year.

 

**(d)****                                  *“Board”*** shall mean the Board ofDirectors of the Company.

 

**(e)****                                  “*Cause*”**means, with respect to aparticular Participant:  (i) fraud,misappropriation, embezzlement or other act of misconduct against the Companyor an Affiliate; (ii) conviction of any felony which has a material adverseeffect on the Company or an Affiliate; (iii)

 

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violation of anyrules or regulations of any governmental or regulatory body which has amaterial adverse effect on the Company or an Affiliate; (iv) any breach of theParticipant’s duty not to engage in any transaction that represents, directlyor indirectly, self-dealing with the Company or any of its Affiliates, whichhas not been approved by the Company or an Affiliate; (v) a breach of anymaterial term of the Participant’s employment obligations to the Company or anAffiliate and/or unsatisfactory job performance where such breach and/orunsatisfactory performance is not cured within fifteen days of receipt ofwritten notice of such deficiencies (unless such deficiencies are caused by theParticipant’s Permanent Disability); (vi) violation of state or federal law inconnection with the Eligible Employee’s performance of his/her job which has amaterial adverse effect on the Company or an Affiliate; or (vii) a leave ofabsence exceeding the period allowed by contract, policy or applicable law.  Notwithstanding the foregoing, aParticipant’s Termination due to death or Permanent Disability shall not beconsidered termination for Cause.

 

**(f)****                                    *“CEO”***shall mean the Chief ExecutiveOfficer of the Company.

 

**(g)****                                 *“Code”*** shall mean the Internal RevenueCode of 1986, as amended.

 

**(h)****                                 *“Committee”***shall mean theCompensation Committee of the Board. The Committee shall consist solely of outside directors, as defined inSection 162(m) of the Code.

 

**(i)****                                    *“Company”*** shall mean TierTechnologies, Inc., a California corporation.

 

**(j)****                                    *“Covered Employees”*** shall mean the CEOand the four (4) highest compensated officers, as defined inSection 162(m) of the Code, of TIER.

 

**(k)****                                *“Employee”*** shall mean an employee ofthe Company or an Affiliate.

 

**(l)****                                    *“Fiscal Year”*** shall mean the twelve(12) consecutive months beginning October 1 and ending September 30.

 

**(m)****                              *“Maximum Award Percentage”*** shall meanthe maximum percentage of a Participant’s Base Salary (as in effect on thefirst day of the Plan Year) as established by the Committee for each Plan Yearthat a Participant may receive pursuant to the Plan provided that allPerformance Objectives are met at the Maximum Performance Level (as describedherein) for such Plan Year.

 

**(n)****                                 *“Participant”***shall mean an Employeedesignated by either the CEO or Committee as eligible to receive an Award underthis Plan for any Plan Year if the applicable Performance Objectives are met atany of the applicable Performance Levels specified for such Plan Year.

 

**(o)****                                  *“Performance Levels”*** shall mean aParticipant’s achievement of a Performance Objective at one of the followinglevels necessary for an Award:  (1)Threshold, (2) Target, or (3) Maximum, the specifics of each shall beestablished by the Committee for each Plan Year.

 

**(p)****                                  *“Performance Objectives”***shall meanthe pre-established goals established by the Committee for each Plan Year uponwhich a Participant’s performance will be assessed for each Plan Year.

 

**(q)****                                  *“Permanent Disability”***shall mean thepermanent and total disability of a person within the meaning of Section 22(e)(3)of the Code.

 

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**(r)****                                  *“Plan”*** shall mean this TierTechnologies, Inc. Incentive Compensation Plan, as amended from time to time.

 

**(s)****                                  *“Plan Year”*** shall mean the twelve (12)consecutive months beginning October 1 and ending September 30 overwhich performance is measured under this Plan.

 

**(t)****                                    *“Pro Forma EPS”***or ***“EPS”***shall mean thediluted net income per share of the Company’s common stock as determined on apro forma basis consistent with past practice as of Year-end for each PlanYear.

 

**(u)****                                 *“Retirement”***shall mean theParticipant’s voluntary Termination (as defined herein) for reasons other thanCause (as defined herein) if such Participant satisfies both of the followingas of the date of Termination:  (i) theParticipant has five (5) or more years of service as an Employee and (ii) thesum of the Participant’s age and years of service as an Employee is equal to orgreater than sixty (60) years.

 

**(v)****                                   *“Revenue”***shall mean the consolidatedrevenues of the Company for the Plan Year excluding any revenues realized as aresult of contracts assumed by the Company or an Affiliate as a result ofacquisitions consummated by the Company or an Affiliate during the Plan Year.

 

**(w)****                                *“Share Price”***shall mean average dailyclosing price of the Company’s common stock on the Nasdaq National Market, orother principal trading market of such common stock for the Plan Year.

 

**(x)****                                  *“Termination”*** shall mean theParticipant’s ceasing his or her service with the Company or any of itsAffiliates for any reason whatsoever.

 

**(y)****                                  *“TIER”*** shall mean the Company and allof its Affiliates.

 

**(z)****                                  *“Year-end”*** shall mean the end of theCompany’s Fiscal Year.

 

**3.****                                      Participationand Awards under the Plan.**

 

**(a)****                                  *Participation. ***Plan participation is extended to selected key Employeeswho, in the sole and exclusive opinion of the CEO and/or the Committee, havethe opportunity to significantly impact the annual operating success of theCompany and/or its Affiliates. Participants will be selected to participate in the Plan at thebeginning of or during the Plan Year as set forth herein.  Participants will be notified in writing oftheir selection to participate in the Plan each Plan Year.  This written notification for allParticipants, except Covered Employees, will be signed by the CEO.  The Committee will determine the Planparticipation of all Covered Employees and the written notification to aCovered Employee will be signed by the Chairman of the Committee.

 

**(b)****                                  *Performance Objectives and Levels.***  The Performance Objectives shall bedetermined by the Committee for each Plan Year and with respect to eachParticipant.  Performance Objectivesshall consist of one, all or a combination of the following:  Pro Forma EPS, Revenue, and Share Price;provided, however, the Performance Objectives for Participants who are notCovered Employees (or Participants who are Covered Employees but whoseremuneration, within the meaning of Section 162(m) of the Code, for theFiscal Year, in the determination of the Committee, is not expected to exceedone million dollars ($1,000,000)) may include additional Performance Objectivesin the discretion of the Committee.  Theweight to be given and Performance Levels for each of the applicable

 

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PerformanceObjectives shall be determined by the Committee with respect to eachParticipant.  The Committee mayestablish different Performance Objectives and/or Levels for the Company, andfor one or more Affiliates and may establish different Performance Objectivesand/or Levels for each Participant or group of Participants.

 

**(c)****                                  *Participant Awards.***

 

**(i)****                                    *Participant Award Criteria*. **Each Participant will be assigned aMaximum Award Percentage by the Committee. The Committee, in its sole and absolute discretion, may considerrecommendations made by the CEO as to individual Maximum Award Percentages forParticipants (other than the CEO).  TheParticipant’s Maximum Award Percentage, when multiplied by the Participant’sBase Salary earned during the Plan Year, represents the maximum Award payableto such Participant during such Plan Year if all of the applicable PerformanceObjectives are met at the Maximum Performance Level for each.  For each Plan Year, each Participant will benotified of the Maximum Award Percentage applicable to him or her, theapplicable Performance Objectives, the weight to be given each PerformanceObjective, the Performance Levels upon which each Performance Objective will beassessed, and each of these items will be included in the written notificationdescribed in subsection 3(a) above.

 

**(ii)****                                *Form of Awards. ***Awards may be paid and/or granted, as applicable, in anycombination of cash or, in lieu of cash, fully vested stock options to purchaseshares of the Company’s common stock (pursuant to the Company’s Amended andRestated 1996 Equity Incentive Plan, any subsequently adopted equity incentiveplan, or as otherwise determined by the Committee) with an exercise price equalto the fair market value of the Company’s common stock on the date of grant ofthe option (unless a higher exercise price is required by applicable law), orother stock grants as determined by the Committee.  The Committee, in its sole and absolute discretion, may determinethe form of any Award at any time prior to the payment and/or grant of suchAward for any Plan Year.  The value ofany stock options granted in lieu of cash (and any other form of Award thatrequires application of a valuation model) shall be determined in accordancewith the Black-Scholes valuation model. The Committee may (but need not)establish different forms of Awards for each Participant or group ofParticipants.  The written notificationdescribed in subsection 3(a) above may (but need not) include the form ofany Award that the Participant may earn upon achievement of the ApplicablePerformance Objective(s) for such Plan Year (to the extent that the form ofsuch Award for such Plan Year has been determined by the Committee as of thedate of such written notification).

 

**(d)****                                  *Special Rules for Covered Employees. ***Notwithstanding any provisionof the Plan to the contrary, the Committee shall establish Maximum AwardPercentages, Performance Objectives, the weight to be given each PerformanceObjective and the Performance Levels applicable to each Performance Objective,and any other term necessary under the Plan to determine the Awards for CoveredEmployees not later than ninety (90) days after the beginning of each FiscalYear, provided that at the time such Performance Objectives are established,the satisfaction of such Performance Objectives is not substantially certain tobe satisfied.  Notwithstanding theforegoing, the ninety (90) day requirement set forth in the preceding sentenceshall not apply in the case of a Covered Employee whose remuneration, withinthe meaning of Section 162(m) of the Code, for the Fiscal Year, in thedetermination of the Committee, is not expected to exceed one million dollars($1,000,000).

 

**(e)****                                  *Maximum Award Per Plan Year.***  Notwithstanding any provision of the Plan tothe contrary, the maximum Award payable under the Plan for any Plan Year to anyParticipant shall not exceed one million dollars ($1,000,000).

 

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**4.****                                      OtherPlan Provisions.**

 

**(a)****                                  *Performance Assessment. ***Assessment of actual performance and payout ofAwards with respect to Revenue and Pro Forma EPS will be subject to completionof the Year-end independent audit and certification by the Committee that aParticipant has met the applicable Performance Objectives and other materialterms of the Plan, and specifying the Performance Level at which suchPerformance Objectives have been met. The certification by the Committee with respect to these PerformanceObjectives will occur no later than December 15of eachyear.  Assessment of actual performanceand payout of any Award with respect to Share Price will be subject tocertification by the Committee that a Participant has met the applicablePerformance Objective and any other material terms of the Plan, and specifyingthe Performance Level at which such Performance Objective has been met.  The certification by the Committee withrespect to this Performance Objective shall occur no later than five (5)business days after the end of the Plan Year.

 

**(b)****                                  *Award Payment. ***The Award earned, if any, shall be paid and/or granted,as applicable, in the form of Award as determined by the Committee and shall bepaid and/or granted to the Participant (or the Participant’s heirs in the caseof death) within ten (10) business days following the certification by theCommittee.  Payroll and other taxes willbe withheld and/or reported as required by law.

 

**(c)****                                  *Stockholder Approval. ***Notwithstanding the foregoing, for any Plan Yearin which the Company desires a deduction pursuant to Section 162(m) of theCode with respect to any portion of any Award earned by any Covered Employeeunder the Plan during such Plan Year, no Award will be paid to any CoveredEmployee under the Plan during such Plan Year until the shareholders of theCompany have approved the material terms of the Plan in accordance withSection 162(m) of the Code and the requirements set forth insubsection 3(d) have been fulfilled. In addition, the material terms of the Plan must again be approved bythe shareholders of the Company no later than the first shareholders’ meetingin the fifth year following the year in which the shareholders previouslyapproved the material terms of the Plan.

 

**(d)****                                  *Employment.***  In order to receive an Award under the Plan, a Participant mustbe employed by the Company or an Affiliate on the last day of the Plan Year,except as otherwise provided herein. Selection for participation in the Plan does not convey any employmentrights on behalf of any Participant. Terms and conditions of Participants’ employment agreements with theCompany or its Affiliates addressing issues other than payment of bonus orincentive compensation, if any, supersede the terms and conditions of the Plan.

 

**(e)****                                  *Termination.***

 

**(i)****                                    *Death, Permanent Disability, or Retirement. ***If Termination of aParticipant occurs prior to the end of the Plan Year by reason of theParticipant’s death, Permanent Disability or Retirement (excluding theRetirement of a Covered Employee), the Participant (or the Participant’s heirsin the case of death) will be eligible to receive a pro-rata Award based on thetime employed as a Participant up to the date of such Termination if thePerformance Objectives and Performance Levels are achieved for the entire PlanYear.  Participants who earn an Award onthis basis will receive payment on the same schedule as otherParticipants.  The formula used topro-rate the Awards shall be to adjust the applicable Award by a fraction, thenumerator of which is the number of days (or whole months) for the which theParticipant was employed as a Participant during the Plan Year and thedenominator of which is 365 (or 12).

 

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**(ii)****                                *Other than Death, Permanent Disability, orRetirement. ***If Terminationof a Participant occurs prior to the end of the Plan Year for any reason otherthan the Participant’s death, Permanent Disability or Retirement (whethervoluntarily or involuntarily), the Participant will forfeit the opportunity toearn an Award under the Plan, except as otherwise provided for by theCommittee; provided, however, that if Termination of a Covered Employee occursprior to the end of the Plan Year, such Covered Employee shall not receive anAward at the discretion of the Committee or otherwise, except as provided inthe preceding paragraph.

 

**(f)****                                    *Other Pro-Rata Awards.***  Individuals who have been hired and selectedduring the Plan Year for Plan participation and who have served a minimum ofnine (9) months as a Participant will be eligible to receive a pro-rata Awardbased on the time employed as a Participant and the Performance Objectives andPerformance Levels achieved by such Participant for the entire Plan Year,provided that the Participant is employed by the Company or an Affiliate on thelast day of the Plan Year and, in the case of a Covered Employee, is selectedfor Plan participation on his or her date of hire.  The Committee will establish the Maximum Award Percentage forindividuals selected for Plan participation during the Plan Year as soon aspracticable after the individuals are selected, but not later than fifteen (15)days after the selection date.  Theformula used to pro-rate the applicable Award by a fraction, the numerator ofwhich is the number of days (or whole months) for which the individual was aParticipant during the Plan Year and the denominator of which is 365 (or 12).

 

***PlanAdministration.***

 

**(i)****                                    *Committee Discretion*. **Responsibility for decisions and/orrecommendations regarding Plan administration are divided between the CEO andthe Committee.  Notwithstanding theforegoing, the Committee retains final authority regarding all aspects of Planadministration, the resolution of any disputes, and application of the Plan inany respect to a Covered Employee including, but not limited to, thedetermination as to whether a Participant’s Termination was for Cause.  The Committee may, without notice, amend,suspend or terminate the Plan.

 

**(ii)****                                *Discretionary Participation and Awards.***  No Employee has a claim or right to be aParticipant in the Plan, to continue as a Participant, or to be granted anAward under the Plan.  The Company andits Affiliates are not obligated to give uniform treatment (e.g., Maximum AwardPercentages) to Employees or Participants under the Plan.

 

**(g)****                                 *No Employment Rights. ***Participation in the Plan does not give anEmployee the right to be retained in the employment of the Company or itsAffiliates, nor does it imply or confer any other employment rights.  Nothing contained in the Plan will be construedto create a contract of employment with any Participant.  The Company and its Affiliates reserve theright to elect any person to its offices and remove Employees in any manner andupon any basis permitted by law.

 

**(h)****                                 *No Ownership Rights. ***Nothing contained in the Plan will be deemed to requirethe Company or its Affiliates to deposit, invest or set aside amounts for thepayment of any Awards.  Participation inthe Plan does not give a Participant any ownership, security, or other rightsin any assets of the Company or any of its Affiliates.

 

**(i)****                                    *Withholding Tax.***  The Company or an Affiliate will deduct fromall Awards paid under the Plan any taxes required by law to be withheld.

 

**(j)****                                    *Effective Date. ***The Plan is effective as of October 1, 2000, and willremain in effect until suspended or terminated by the Committee.

 

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**(k)****                                *Validity.***  In the event any provision of the Plan is held invalid, void, orunenforceable, the same will not affect, in any respect whatsoever, thevalidity of any other provision of the Plan.

 

**(l)****                                    *Applicable Law.***  The Plan will be governed by and construedin accordance with the laws of the State of California.

 

**EXHIBITB**

 

**RELEASEAND WAIVER OF CLAIMS**

 

In consideration of the payments and other benefits set forth inSection 2.1(d)(iii) of the Employment Agreement dated (Month)      2002, to which this form is attached, I,           , herebyfurnish Tier Technologies, Inc (“the Company”),****with the following release and waiver (the ***“Release and Waiver”***).

 

I hereby release, and forever discharge the Companies, its officers,directors, agents, employees, stockholders, successors, assigns, affiliates,parent, subsidiaries, and benefit plans, of and from any and all claims,liabilities, demands, causes of action, costs, expenses, attorneys’ fees,damages, indemnities and obligations of every kind and nature, in law, equity,or otherwise, known and unknown, suspected and unsuspected, disclosed andundisclosed, arising at any time prior to and including my employmenttermination date with respect to any claims, including but not limited to thoseclaims relating to my employment and the termination of my employment;including but not limited to, claims pursuant to any federal, state or local lawrelating to employment, including, but not limited to, discrimination claims,claims under any local statute governing discrimination, and the Federal AgeDiscrimination in Employment Act of 1967, as amended (***“ADEA”***), or claimsfor wrongful termination, breach of the covenant of good faith, contractclaims, tort claims, and wage or benefit claims, including but not limited to,claims for salary, bonuses, commissions, stock, stock options, vacation pay,fringe benefits, severance pay or any form of compensation.

 

I also acknowledge that I have read and understand Section 1542 ofthe California Civil Code or any comparable statute under any other state,which reads as follows:  “**A general release does not extend to claims which thecreditor does not know or suspect to exist in his favor at the time ofexecuting the release, which if known by him must have materially affected hissettlement with the debtor.**”****Ihereby expressly waive and relinquish all rights and benefits under thatsection and any law of any jurisdiction of similar effect with respect toany claims I may have against the Companies.

 

I acknowledge that, among other rights, I am waiving and releasing anyrights I may have under ADEA, that this Release and Waiver is knowing andvoluntary, and that the consideration given for this Release and Waiver is inaddition to anything of value to which I was already entitled as an employee ofthe Companies.  I further acknowledgethat I have been advised, as required by the Older Workers Benefit ProtectionAct, that:  (a) the Release and Waivergranted herein does not relate to claims which may arise after this Release andWaiver is executed; (b) I have the right to consult with an attorney prior to

 

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executing thisRelease and Waiver (although I may choose voluntarily not to do so); and if Iam over 40 years of age upon execution of this Release and Waiver: (c) I havetwenty-one (21) days from the date of termination of my employment with theCompany in which to consider this Release and Waiver (although I may choosevoluntarily to execute this Release and Waiver earlier); (d) I have seven (7)days following the execution of this Release and Waiver to revoke my consent tothis Release and Waiver; and (e) this Release and Waiver shall not be effectiveuntil the seven (7) day revocation period has expired.

 

 
| Date:  |        |   | By:    |   |
|--------|-------------|--------|--------|--------|
|   | Print Name: |   |   |
|        |             |        |        |        |  |  |

 

 
|  | **EXHIBIT  C** |   |
|--|----------------|--------|

 

***NONDISCLOSURE and PROPRIETARY/CONFIDENTIAL INFORMATION/***

***NON-COMPETITION AGREEMENT***

 

**1.****                                      Introduction:**

 

This is anagreement between the employee named below, hereafter referred to as Employee,in which the Employee agrees not to disclose trade secrets or otherConfidential Information belonging to TIER, hereafter referred to as TIER, andin which Employee further agrees not to compete with TIER, as described below.

 

**2.****                                      Agreement:**

 

In considerationof Employee’s association with TIER, Employee agrees to keep all ConfidentialInformation, as described below, including but not limited to all trade secretsand/or confidential or proprietary information of TIER (and of its customers,suppliers, and other third parties who entrust confidential information toTIER) in strict confidence and to take all reasonable precautions againstaccidental disclosure of the same.  Thisagreement encompasses all Confidential Information and TIER trade secrets knownto Employee as well as Confidential Information and/or trade secrets known toEmployee during his/her tenure with TIER. In addition, Employee agrees that he/she will not use the ConfidentialInformation or trade secrets of TIER, either directly or indirectly, for anypurposes except for the performance of the Employee responsibilities infurtherance of TIER’s business, unless otherwise expressly authorized inwriting in advance.

 

**3.****                                      ConfidentialInformation and Proprietary Rights:**

 

“ConfidentialInformation” is any information, process, idea, or know-how that is notgenerally known in the industry; that TIER considers confidential; that givesTIER a competitive advantage; or that affects or relates to TIER, its business,or its methods of operation, or which is confidential information ofthird-party customers, contractors, or other parties and which is in thepossession of TIER.  Examples ofConfidential Information include, but are not limited to, the following:

 

•                                          Computerprogram listing, source code, and object code.

•                                          Customerlists, marketing information, financial information, business strategies,project information, price lists, cost information, business forms, and financialrecords.

•                                          Productdesign, contents, formulas, packaging, marketing, or anything related to theunique character or products or TIER’s business.

 

Employeeunderstands that the above list is intended to be illustrative rather thancomprehensive, and that other Confidential Information covered by the Agreementmay currently exist or arise in the future. In the event that Employee is not sure whether certain information isConfidential Information within the scope of this Agreement, Employee willtreat that information as confidential unless informed in writing by TIER tothe contrary.  In the event of anydispute relating to use or disclosure of Confidential Information, Employeeagrees that he/she shall have the burden of proof in establishing that theinformation was not confidential or that its disclosure was authorized.  Employee understands and hereby agrees thatany misappropriation, disclosure, or misuse of Confidential Information asprovided in this Agreement would cause irreparable harm to TIER and to TIER’sbusiness.  Employee agrees to surrenderto TIER all notes, records, and documentation in any form that was supplied toEmployee by TIER or was used, created, or controlled by Employee during his/herassociation with TIER upon request by TIER, and in any event upon terminationof

 

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Employee’sassociation with TIER.  The materials tobe surrendered include all materials whether in written or machine-readableform.  Employee agrees that he/she shallnot, by virtue of his/her association with TIER, acquire any rights in anyConfidential Information, good will, or other asset or property of TIER,whether tangible or intangible, and whether or not created by Employee.  If any such rights become vested in Employeeby operation of laws or otherwise, Employee agrees to assign the same to TIERwithout further consideration immediately upon TIER’s request.

 

Employeeunderstands and agrees a) that any and all of his/her work product created, orin the process of being created, during hours Employee is performing servicesfor TIER and/or any and all of his/her work product created or in the processof being created outside hours Employee is performing services for TIER, butwhich are related to Confidential Information of TIER, defined above, is andshall remain the property of TIER, b) that all proprietary rights therein shallbe held by TIER, and c) that Employee shall assist in all reasonable efforts toprotect such rights for TIER, to transfer such rights to TIER, and to verifythat such rights are owned by TIER.

 

ConfidentialInformation shall not be deemed to include the following:  (i) information that becomes available tothe public other than through breach of this Agreement; or (ii) information thatis lawfully received by Employee from a third party without misappropriation orbreach of this Agreement.

 

**4.****                                      Non-CompetitionAgreement:**

 

Because it wouldbe extremely difficult for Employee, in light of the special, unusual, andunique services he/she performed for TIER (“Special Services”) and his/heraccess to TIER’s Confidential Information, to compete fairly against TIER, andbecause it would be impossible for TIER to determine whether any suchprospective competition was in fact unfairly based on said Special Servicesand/or Confidential Information, and because TIER has a legitimate andcompelling business need against such unfair competition,****Employee agrees that, without the priorwritten permission of TIER’s President or CEO, for a period of six (6) monthsafter Employee’s date of termination from TIER he shall not be employed as anindependent consultant, employee of another firm, or employee of the clientwith respect to any account(s) that the Employee worked or sold on behalf ofTIER, provided however, that such limitation shall apply only to accounts thatthe employee worked or sold within the six (6) months immediately preceding thedate of Employee’s termination from TIER. In addition, Employee agrees TIER hasinvested substantial time and effort in assembling its present staff ofpersonnel.  For the same reasonsexpressed above, Employee further agrees that, for a period of six (6) monthsfollowing the termination of his/her employment, Employee shall not solicit orotherwise induce employees of TIER to become employed by Employee or by abusiness with which Employee is affiliated; nor will Employee solicit or inducemembers of TIER to leave TIER.

 

**5.****                                      Remedies:**

 

TIER shall haveall rights and remedies under the Uniform Trade Secret Act (California CivilCode Section 3426 *et seq.)*and Business & Professions Code Section 17200 *et seq.,* in addition to all other rights,damages, and remedies that the law and/or equity may provide.  TIER’s customers, clients, and other thirdparties who have entrusted TIER with Confidential Information are intendedthird-party beneficiaries of this Agreement, and may enforce it for theirbenefit.

 

**6.****                                      Attorneys’Fees:**

 

If any arbitrationor other action arises relating to this Agreement, the prevailing party shallbe entitled to recover all costs, expenses, and reasonable attorneys’ feesincurred, specifically including expert witness fees.

 

**7.****                                      Durationand Effect:**

 

This Agreement isconsidered by both parties to be a binding contract, and shall remain in effectthroughout the period of association between Employee and TIER and for one (1)year following the termination of association, except that the obligations setforth in Paragraph 2 shall survive termination of this Agreement.  Should any provision of this Agreement beheld to be invalid, void, or unenforceable, the remaining provisions of thisAgreement shall be unaffected and shall continue in full force and effect, andsuch invalid, void, or unenforceable provisions shall be deemed not to be apart of this Agreement.  If any court orother decision-making body determines that the term or area of any covenantherein is too long or too broad to be enforceable, the term and/or area shallbe automatically amended to come within a reasonable and enforceable term and/orarea.

 

**8.****                                      ApplicableLaw and Agreement to Arbitrate:**

 

This Agreementshall be construed under the law of the State of California, without giving anyeffect to conflict of law principles. The parties hereto agree that any controversy or claim arising out of orrelating to this contract, or the breach thereof, shall be settled by bindingarbitration by one (1) arbitrator, administered by the American ArbitrationAssociation under its then applicable rules, and that judgment upon the awardrendered by the arbitrator may be entered in any court having jurisdictionthereof.  Employee hereby knowinglywaives his/her right to a jury trial.

 

Execution:

 

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This Agreement isexecuted this          day of                              .

                                                                                month/year

 
|                        |   |     |   |
|-----------------------------|--------|----------|--------|
| **Employee  Signature**     |   | **Date** |
|                        |   |     |
|                        |   |     |
| **Please  PRINT name here** |   |     |

 

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