**Exhibit 10.39**

 

**[COMPANYLETTERHEAD]**

 

October 14, 2003

 

James L. Bildner

5 Boardman Avenue

Manchester, Massachusetts 01944

 

Dear Jim:

 

This letter sets forth the terms and conditions of our agreement (the“Agreement”) regarding your termination of employment with **TIER TECHNOLOGIES, INC.** (the “Company”)pursuant to Sections 3 and 4 of the Third Amended and Restated EmploymentAgreement effective as of October 1, 2000, by and between the Company and you(the “Employment Agreement”). Effective September 30,2003, you and the Companyhereby agree as follows:

 

**1.             Separation.**  Yourduties as Chief Executive Officer pursuant to the Employment Agreement ended onAugust 30, 2003.  In all other respects,except as provided herein, the Company and you agree that you will continue asan employee of the Company under the terms of the Employment Agreement duringthe period from August 30, 2003, to April 1, 2004 (such period is referred toherein as the “Transition Period”). During the Transition Period, (i) you will receive the Base Salary andbenefits provided in the Employment Agreement until September 30, 2003, andfrom October 1, 2003 through April 1, 2004, your annual Base Salary will be$100,000, and, except as provided herein, you will receive the other benefitsprovided in the Employment Agreement, and (ii) the Company will not terminateyour employment with the Company.  Youand the Company further agree that you will resign as an employee of theCompany effective as of April 1, 2004 (the “Separation Date”), by executing anddelivering to the Company the resignation letter attached hereto as ExhibitA.  During the period from October 1,2003, through April 1, 2004, you will continue to be an employee of the Companyfor all purposes and provide services on an “as needed” basis.

 

**2.             AccruedSalary and Vacation.**  As soon as practicable after September 30,2003, the Company will pay you all of your accrued but unused vacation throughsuch date, based on your salary in effect, prior to October 1, 2003, and youwill not accrue any vacation after such date. On the Separation Date, the Company will pay you all accrued but unpaidsalary as of that date, subject to standard payroll deductions andwithholdings.  You are entitled to thesepayments regardless of whether or not you sign this Agreement.

 

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**3.             SeveranceBenefits.**  Upon your furnishing the Company with aneffective Release and Waiver of Claims in the form attached to this Agreementas Exhibit B, and in addition to the amounts specified in Paragraph 2 hereof,the Company agrees to provide you with the following severance benefits:

 

**(a)          **Total payments of $675,000, subject tostandard payroll deductions and withholdings, of which $225,000 will be paid onNovember 1, 2003, $225,000 will be paid on the Separation Date and theremaining $225,000 will be paid on April 1, 2005.

 

**(b)          **All options to purchase Company stock(“Options”), granted to you pursuant to any plan or otherwise shall remainoutstanding and shall become immediately accelerated and fully vested as of theSeparation Date and any restrictions on such Options shall to the extentpermissible under applicable securities laws, fully lapse as of that date;

 

**(c)          **The exercise period of your Options shall beextended such that the Options may be exercised up to and until April 1, 2006;

 

**(d)          **In the event that you elect to continuecoverage under COBRA, the Company will reimburse you for the same portion ofyour COBRA health insurance premiums that it paid during your employment upuntil the last day of your COBRA health insurance benefit coverage;

 

**(e)          **The Company shall provide you, for a periodof eighteen months following the Separation Date, with:  (1) telecommunications service and fullaccess to all email services and all equipment currently in your possession orneeded in the future to access these services; (2) reasonable office space; and(3) secretarial assistance equivalent to the support you are currentlyreceiving, either as reimbursement for the cost of such assistance or as adirect cost, in your discretion.  Anysuch secretarial assistance will be provided by an individual who is classifiedas an employee of the Company; and

 

**(f)           **If the Company terminates your employmentwith the Company before April 1, 2004, for any reason, then notwithstandinganything in the Employment Agreement to the contrary, (i) the date of suchtermination shall be your “Separation Date” for purposes of Subparagraphs (a),(b), (c), and (e) of this Paragraph 3, (ii) your lump payment described inSubparagraph (a) above will be increased by the amount of the salary that youwould have been paid from the date of such termination of employment throughMarch 31, 2004, had you been continually employed during that time under theEmployment Agreement, and (iii) in addition to the continued benefits coveragedescribed in Subparagraph (d) above, the Company will provide you withcontinued coverage of all such benefits from the date of such termination ofemployment through March 31, 2004.

 

**4.             IndemnificationRights and Liability Insurance.**  The Company will indemnify youand take all steps necessary to provide indemnification for you, pursuant toCalifornia Labor Code § 2802 and/or California Corporations Code § 317, for anyand all expenditures or losses, damages, judgments, witness fees, fines,settlement payments, reasonable attorneys' fees and costs, incurred in thedefense or participation as a witness in any pending or threatened claims,demands, suits, proceedings or actions, whether civil or criminal,arbitrational, administrative, or investigative, arising from your employmentor service to the Company, to the maximum extent allowable by Californialaw.  Your indemnification, as describedin this Paragraph 4 will survive the later of the termination of youremployment or service relationship with the Company.  The

 

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Company further agrees that your indemnification provided under thisParagraph 4 includes the agreement and obligation to advance, on a monthlybasis, the full amount of all expenditures described in this Paragraph 4,including your reasonable monthly attorneys' fees and costs in connection withany claims, demands, and actions arising from or in connection with youremployment or service to the Company. For purposes of this agreement, reasonable attorneys' fees shall bedefined as the fees incurred by counsel of your own selection and shall notexceed the hourly rate for the Company's outside counsel in the same or similarmatters.  Costs shall be defined as anycosts incurred by your counsel deemed by your counsel to be necessary in itsrepresentation of you.  If the Companycontests your right to indemnification on the grounds that your actions did notarise out of or in connection with your employment or service to the Company,or for any other reason under this Paragraph 4, you shall still be entitled toindemnification as described in this Paragraph 4 unless and until the trier offact in the applicable proceeding determines that your actions did not arisefrom or in connection with your employment or service to the Company or thatyou are otherwise not entitled to indemnification.  In addition, you will continue to be covered under the Company'sdirectors' and officers' liability insurance policy, and the Company shallcontinue to maintain such an insurance policy with coverage for formeremployees, officers and directors on the same terms and conditions as foractive employees, officers and directors, after the later of the termination ofyour employment or service relationship with the Company.

 

**5.             ProprietaryInformation Obligations.**  You acknowledge your continuing obligationsunder your Proprietary Information and Inventions Agreement not to use ordisclose any confidential or proprietary information of the Company.  A copy of your Proprietary Information andInventions Agreement is attached hereto as Exhibit C.

 

**6.             Miscellaneous.** Except to the extent that provisions of the Employment Agreement andOption agreements continue to apply, this Agreement, including Exhibits A, Band C, (i) constitutes the complete, final and exclusive embodiment of theentire agreement between you and the Company with regard to this subject matterand supercedes any prior or inconsistent document, and (ii) is entered intowithout reliance on any promise or representation, written or oral, other thanthose expressly contained herein, and supersedes any other such promises,warranties or representations.  This Agreementmay not be modified or amended except in a writing signed by both you and aduly authorized officer of the Company. This Agreement shall bind the heirs, personal representatives,successors and assigns of both you and the Company, and inure to the benefit ofboth you and the Company, their heirs, successors and assigns.  If any provision of this Agreement isdetermined to be invalid or unenforceable, in whole or in part, thisdetermination will not affect any other provision of this Agreement and theprovision in question shall be modified by the court so as to be renderedenforceable.  This Agreement shall bedeemed to have been entered into and shall be construed and enforced inaccordance with the laws of the State of California as applied to contractsmade and to be performed entirely within California.

 

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Please confirm your agreement to the foregoing terms and conditions bysigning and returning a copy of this letter to me.

 

Sincerely,

 
| **TIER TECHNOLOGIES, INC.** |                      |
|-----------------------------|---------------------------|
|                        |                      |
|                        |                      |
| By:                         | /s/ Jeffrey A. McCandless |   |   |
|                        | Jeffrey A. McCandless     |   |
|                        | Chief Financial Officer   |   |
|                        |                      |
| Its:                        | SVP & CFO             |   |   |
|                             |                           |  |  |  |

 

Exhibit A – Resignation Letter

Exhibit B – Release and Waiver of Claims

Exhibit C – Proprietary Information and Inventions Agreement

 
| AGREED:                    |   |
|----------------------------|--------|
|                       |   |
| /s/  James L. Bildner |   | 10/14/03 |   |
| James L. Bildner           | Date   |
|                            |        |  |  |

 

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**EXHIBIT A**

 

**RESIGNATIONLETTER**

 

April 1, 2004

 

Tier Technologies, Inc.

2001 N. Main Street, Suite 500

Walnut Creek, CA 94596

 

To the Board of Directors of Tier Technologies, Inc.:

 

I, James L. Bildner, hereby tender my resignation as an officer of TierTechnologies, Inc., such resignation to be effective immediately.

 
|   | Sincerely,       |
|--------|------------------|
|   |             |
|   |             |
|   |             |   |
|   | James L. Bildner |

 

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**EXHIBIT B**

 

**RELEASE ANDWAIVER OF CLAIMS**

 

I, JAMES L. BILDNER, herebyfurnish TIER TECHNOLOGIES, INC. (the ”Company”), with the following release andwaiver (“Release and Waiver”) in consideration of the payments and otherbenefits set forth in Paragraph 3 of the letter Agreement dated                              ,2003, by and between the Company and me (the “Separation Agreement”):

 

I hereby release, andforever discharge the Company, its officers, directors, agents, employees,stockholders, successors, assigns, affiliates and benefit plans (the “Released Parties”),of and from any and all claims, liabilities, demands, causes of action, costs,expenses, attorneys' fees, damages, indemnities and obligations of every kindand nature, in law, equity, or otherwise, known and unknown, suspected andunsuspected, disclosed and undisclosed (referred to collectively as “Claims”),arising at any time prior to and including my employment termination date withrespect to any claims relating to my employment and the termination of myemployment, including but not limited to, claims pursuant to any federal, stateor local law relating to employment, including, but not limited to,discrimination claims, claims under the California Fair Employment and HousingAct, and the Federal Age Discrimination in Employment Act of 1967, as amended(“ADEA”), or claims for wrongful termination, breach of the covenant of goodfaith, contract claims, tort claims, and wage or benefit claims, including butnot limited to, claims for salary, bonuses, commissions, stock, stock options,vacation pay, fringe benefits, severance pay or any form of compensation;except that, the Released Parties shall not be so released with respect to anyClaims relating to or arising from rights granted to me pursuant to theSeparation Agreement between the Company and me, including, but not limited to,my rights with respect to indemnification, coverage under employee benefitplans of the Company and Company stock options granted to me.

 

I also acknowledge that Ihave read and understand Section 1542 of the California Civil Code which readsas follows: “A general release does not extend to claims which the creditordoes not know or suspect to exist in his favor at the time of executing therelease, which if known by him must have materially affected his settlement withthe debtor.”  I hereby expressly waiveand relinquish all rights and benefits under that section and any law of anyjurisdiction of similar effect with respect to any claims I may have againstthe Company.

 

I acknowledge that, amongother rights, I am waiving and releasing any rights I may have under ADEA, thatthis Release and Waiver is knowing and voluntary, and that the considerationgiven for this Release and Waiver is in addition to anything of value to whichI was already entitled as an employee of the Company. I further acknowledgethat I have been advised, as required by the Older Workers Benefit ProtectionAct, that: (a) the Release and Waiver granted herein does not relate to claimswhich may arise after this Release and Waiver is executed; (b) I have the rightto consult with an attorney prior to executing this Release and Waiver(although I may choose voluntarily not to do so); and if I am over 40 years ofage upon execution of this Release and Waiver: (c) I have twenty-one (21) daysfrom the date of termination of my employment with the Company in which toconsider this Release and Waiver (although I may choose voluntarily to executethis Release and Waiver earlier); (d) I have seven (7) days

 

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following the execution ofthis Release and Waiver to revoke my consent to this Release and Waiver; and(e) this Release and Waiver shall not be effective until the seven (7) dayrevocation period has expired.

 
| Date:  |   |             | By:    |   |   |
|--------|--------|------------------|--------|--------|--------|
|   |   | James L. Bildner |   |

 

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**EXHIBIT C**

 

**PROPRIETARYINFORMATION AND INVENTIONS AGREEMENT**

 

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