Exhibit
10.40


 


SEPARATION AGREEMENT


 


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


 


WHEREAS, the Employee was
employed by the Company and served as Senior Vice President and General
Manager, Government Services Strategic Business Unit.


 


WHEREAS, the Employee
desired to resign as Senior Vice President and General Manager, Government
Services Strategic Business Unit of the Company and from any and all other
positions he may have held with the Company or any of its affiliates (the
“Additional Positions”) and to terminate his employment with the Company.


 


WHEREAS, the Employee and
the Company intend that the terms and conditions of this Agreement shall govern
all issues relating to the Employee's discontinuation of his employment with
the Company.


 


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


 


1.             Resignation.  The Employee has elected to resign as an
employee of the Company effective December 12, 2003 (the “Resignation
Date”).  The Employee resigned as Senior
Vice President and General Manager, Government Services Strategic Business Unit
of the Company and from all of his Additional Positions, as provided herein.


 


2.             Payments and
Benefits.  In
consideration of the release contained in Section 7 hereof, assuming this
Agreement has not been revoked under Section 13, below, the parties agree as
follows: The Company shall pay the Employee for consulting services as provided
in the Independent Contractor Agreement
attached hereto as Appendix A.


 


3.             Other Employment.  Except as otherwise expressly provided herein,
the Employee's entitlement to his payments and benefits hereunder shall not be
reduced or affected by his earnings from any other source.


 


4.             Taxes.  The Company shall have the right to deduct
from all payments under this Agreement, whether in cash, stock or other
property, an amount necessary to satisfy any federal, state or local
withholding tax requirements.


 


5.             Confidentiality.


 


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


 


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


 


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


 


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


 


(iv)          on termination of the Independent
Contractor Agreement, attached hereto as Appendix A, or at any other time the Company may in writing so
request, to promptly deliver to the Company all materials constituting
Confidential Information (including all copies thereof) that are in Employee's
possession or under Employee's control. 
Further, the Employee undertakes that, if requested by the Company, the
Employee shall return any Confidential Information pursuant to this subsection
and shall not make or retain any copy of or extract from such materials.


 


(b)           For purposes of this Section, “Confidential Information” means any and all information
developed by or for the Company of which the Employee gained knowledge by
reason of Employee's employment with the Company under this Agreement that is not
generally known in the industry in which the Company is or may be engaged.  Confidential Information includes, but is
not limited to, any and all information developed by or for the Company or
customers of the Company, concerning plans, marketing and sales methods,
materials, processes, business forms, procedures, devices used by the Company,
plans for development of new products, services and expansion into new areas or
markets, internal operations and any trade secrets and proprietary information
of any type owned by the Company together with all written, graphic and other
materials relating to all or any part of the same.  Confidential Information does not include any information which
becomes public through some means not controlled by the Employee.


 


6.             Additional
Covenants.


 


(a)           The Employee further agrees and covenants that:


 


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


 


(ii)           he shall immediately instruct his immediate family, tax
advisor and legal counsel not to disclose the terms and conditions of this
Agreement to anyone;


 


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


 


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disks, cassettes and other
physical representations of any information relating to the Company or its
Affiliates or to the business or clients of the Company, whether or not
constituting confidential information, and 
to promptly return to the Company any of the same that he discovers at
any future time and without retaining copies in any form, including electronic;
and


 


(iv)          Cooperation.         The
Employee covenants and agrees to cooperate with and make himself readily
available to the Company or its General Counsel, as the Company may reasonably
request, to assist it in any matter, including but not limited to, providing
information, giving truthful testimony in any litigation or potential
litigation over which the Employee may have knowledge, information or
expertise, and signing routine documents for administrative purposes.


 


(b)           The Company further agrees and covenants that:


 


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


 


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


 


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


 


7.             Mutual Waiver and
Release.  In
consideration of the Company's commitment to the various arrangements described
in the preceding paragraphs, the Employee hereby releases and discharges the
Company, its divisions, subsidiaries and affiliates and their current and
former directors, officers, shareholders, agents and employees, and each of
their predecessors, successors, and assigns (collectively “the Releasees”),
from any and all claims and causes of action (except for the benefits
specifically set forth in this Agreement) arising out of or related to any act
or omission prior to the date of this Agreement, including claims related to
the Employee's employment or the termination of the Employee's employment.  This release includes, but is not limited
to, any claims for salary, bonuses, severance pay, vacation pay or any benefits
under the Employee Retirement Income Security Act (except for vested benefits
which are not affected by this Agreement); claims for sexual harassment, or
discrimination based on race, color, national origin, ancestry, religion,
marital status, sex, sexual orientation, citizenship status, pregnancy, leave of
absence (including, but not limited to the Family and Medical Leave Act, or any
other federal, state, or local leave laws), medical condition or disability (as
defined by the Americans with Disabilities Act, or any other state or local
law), age (under the Age Discrimination in Employment Act, or any other
federal, state or local laws prohibiting age discrimination) or any other
unlawful discrimination claims under the Worker Adjustment and Retraining
Notification Act, whistleblower claims, and claims for breach of implied or
express contract, breach of promise, misrepresentation, negligence, fraud,
estoppel, defamation, infliction


 


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of emotional distress,
violation of public policy or wrongful or constructive discharge, and for
attorneys' fees, that the Employee or his heirs, executors, administrators,
successors, and assigns now have, ever had or may hereafter have, whether known
or unknown, suspected or unsuspected, up to and including the date of this Agreement.  The Employee further agrees, promises and
covenants that, to the maximum extent permitted by law, neither the Employee,
nor any person, organization or other entity acting on the Employee's behalf,
has or will file, charge, claim, sue, or cause or permit to be filed, charged
or claimed, any action for damages or other relief (including injunctive,
declaratory, monetary relief or other) against the Releasees involving any
matter occurring in the past up to the date of this Agreement, or involving or
based upon any claims, demands, causes of action, obligations, damages or
liabilities which are the subject of this Agreement.  This Agreement shall not affect the Employee's rights under the
Older Workers Benefit Protection Act to have a judicial determination of the
validity of this release and waiver.


 


In consideration of the
Employee's commitment to the various arrangements described in the preceding
paragraphs, the Company hereby releases and discharges the Employee, his heirs,
estate, executors, administrators, predecessors, successors, and assigns
(collectively “the Releasees”), from any and all claims and causes of action
arising out of or related to any act or omission prior to the date of this
Agreement, including claims related to the Employee's employment with the
Company or the termination of the Employee's employment.


 


8.             No Claims.  Each party hereby represents that it has not
filed or commenced any action, complaint, charge, grievance, arbitration or any
other proceedings, administrative or judicial (a “Claim”), against the other.


 


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


 


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


 


11.           Prevailing Party.  If any litigation is commenced between the
parties hereto concerning this Agreement or their respective rights, duties and
obligations hereunder, the party prevailing in that litigation shall be
entitled to reasonable attorneys' fees, to be fixed by the court as part of the
costs of the litigation or established in a separate action brought to recover
those fees, in addition to any other relief that may be granted.


 


12.           Miscellaneous.


 


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


 


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


 


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


 


(c)           No modification, amendment or waiver of any provision of,
or consent required by, this Agreement, nor any consent to any departure herefrom,
shall be effective unless it is in writing and signed by the parties
hereto.  Such modification, amendment,
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.


 


(d)           Descriptive headings are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement.


 


(e)           The Agreement and the rights and obligations of the
Company and the Employee hereunder shall be governed by and construed and
enforced under the laws of the Commonwealth of Virginia, without reference to
any principles of conflict of laws.


 


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


 


13.           Acknowledgments by
the Employee.  The
Employee acknowledges and agrees that, in deciding to execute this Agreement,
he has relied entirely upon his own judgment, that he has read this Agreement
and has had adequate time to consider its terms and effects and to ask any
questions that he may have of anyone, including legal counsel of his own
choosing, and that he has executed this Agreement voluntarily and with full
understanding of its terms and its effects on him, and that no fact, evidence,
event or transaction currently unknown to him but which may later become known
to him will affect in any way or manner the final and unconditional nature of
this Agreement.  The Employee further
acknowledges that (a) he was advised to consult with an attorney before he
executed this Agreement; (b) he was afforded sufficient opportunity to and did
consult with an attorney; (c) he had 21 days from his receipt of this Agreement
to consider this Agreement before executing and delivering this Agreement; and
(d) he may revoke this Agreement by delivering written notice to the Company
within a period of seven days following the day on which he executes this
Agreement (the “Revocation Period”), and this Agreement shall not become
effective or enforceable until after the Revocation Period has expired.  For this revocation to be effective, written
notice from the Employee must be received by the Company at its address set
forth on the signature page hereof no later than the close of business on the
seventh (7th) day after the Employee signs this Agreement.  If the Employee revokes this Agreement, the
Employee will not receive any of the payments or benefits described in this
Agreement.


 


BY SIGNING
THIS AGREEMENT, THE EMPLOYEE STATES THAT:


 


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


 


(b)           THE EMPLOYEE UNDERSTANDS ALL OF THE
TERMS AND CONDITIONS OF THIS AGREEMENT AND KNOWS THAT HE IS GIVING UP IMPORTANT
RIGHTS;


 


(c)           THE EMPLOYEE AGREES WITH EVERYTHING
IN THIS AGREEMENT;


 


(d)           THE EMPLOYEE IS AWARE OF HIS RIGHT TO
CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT AND HAS BEEN ADVISED OF
SUCH RIGHT;


 


(e)           THE EMPLOYEE HAS SIGNED THIS
AGREEMENT KNOWINGLY AND VOLUNTARILY; AND


 


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


 


IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the day and year first set
forth above.


 


	
   

  	
  TIER TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James R. Weaver

  	
   

  
	
   

  	
   

  	
  James R. Weaver

  
	
   

  	
   

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  Tier Technologies, Inc.

  
	
   

  	
   

  	
  10780 Parkridge Blvd., Suite 400

  
	
   

  	
   

  	
  Reston, VA  20191

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
    

  	
  By:

  	
  /s/ Harry Wiggins

  	
   

  
	
   

  	
   

  	
  Name:  Harry Wiggins

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  3525 Aviary Way

  
	
   

  	
   

  	
  Lake Ridge, VA 22192

  
							



 


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INDEPENDENT CONTRACTOR
AGREEMENT


 


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


 


WHEREAS, Wiggins was an
employee of Tier;


 


WHEREAS, Wiggins resigned
from Tier effective December 12, 2003;


 


WHEREAS, Tier has requested
and Wiggins has agreed to provide ongoing short-term transition services, as
set forth below;


 


NOW, THEREFORE, in
consideration of the promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Wiggins agrees to provide and Tier agrees to accept certain services from
Wiggins as set forth below:


 


1.                                       Services:  For a period of three (3)
months, commencing December 13, 2003 and concluding March 12, 2004 (the
“Term”), Wiggins shall assist Tier in effecting an orderly transition of the
business of the Government Services Strategic Business Unit (“SBU”).  These efforts shall include, but not be limited
to, completing existing projects, preparing summaries of ongoing business
matters and assisting Tier personnel in continuing to conduct the business of
the SBU (the “Services”).  Wiggins shall
work directly under James R. Weaver, President and CEO of Tier.   Wiggins agrees to use good faith efforts in
performing these Services.


 


2.             Fees and Payment.


 


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


 


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


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


iii.                                    The sum of $26,324.57 for the period February
13, 2004 through March 12, 2004.


 


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


 


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


 


Tier Technologies, Inc.


10780 Parkridge Blvd., Suite
400


Reston, VA  20191


 


Payment to Wiggins shall be
made by check to the address listed below:


 


Harry W. Wiggins


3525 Aviary Way


Lake Ridge, VA  22192


 


3.             Restrictions.  Wiggins agrees that the Services shall be provided
at the request, and under the direct supervision, of James R. Weaver only.  Wiggins shall not directly contact any of
Tier's clients or individuals within those entities unless directed to do so by
James R. Weaver.  Wiggins shall have no
authority to legally bind Tier in any manner, to sign for or represent Tier, to
negotiate or agree to any contract or payment terms or other legal terms and
conditions, unless otherwise expressly directed in writing by Tier.


 


4.             Independent
Contractor.  Wiggins acknowledges
that he will perform the Services as an independent contractor and that he will
not be an employee or agent of Tier.  At
no time shall Wiggins be eligible to participate in the benefits of any sort
which Tier offers to its employees. 
Wiggins agrees to maintain a place of business at a location other than
the premises of Tier and to use his own equipment and supplies in performing
the Services.  Wiggins shall be
responsible for paying all ordinary and necessary expenses incurred in
performing the Services, including, but not limited to, all local and long
distance phone charges, applicable taxes, insurances, workers' compensation
insurance, and state disability insurance necessary to provide the Services.


 


5.             Performance
Warranty.  Wiggins warrants, at all
times during the term of this Agreement and in performing the Services, that he
will act professionally, lawfully and in a business like manner.


 


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


 


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7.             Indemnification.  Each Party shall indemnify and hold the
other Party (including its affiliates, officers, agents, employees, and
volunteers) harmless from and against any and all liability, loss, cost,
expenses, including reasonable attorney's fees and cost, or damages howsoever
caused by reason of any injury or damages resulting from or in any way
connected with any negligent or willful misconduct in the performance of this
Agreement.


 


8.             Limitation of
Liability.  EXCEPT FOR THE
INDEMNIFICATION OBLIGATIONS IN SECTION 7 OF THIS AGREEMENT, NEITHER PARTY SHALL
HAVE ANY LIABILITY UNDER THIS AGREEMENT TO THE OTHER FOR DIRECT, INDIRECT,
CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, EVEN IF SUCH PARTY HAS BEEN
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF
AN ESSENTIAL PURPOSE OF THIS AGREEMENT.


 


9.             Notice.   Any notice or other communication hereunder
shall be in writing.  If to Tier:  James R. Weaver, Tier, 2001 N. Main Street,
Suite 500, Walnut Creek, CA  94596.  With a copy to: Legal Dept. (same
address).  All notices provided to
Wiggins shall be sent to the address listed in section 2(c) of this Agreement.


 


10.           Entire
Agreement/Modifications.  This
Agreement contains the complete agreement between the Parties and the terms
hereof are contractual and not a mere recital. 
No modification hereof shall be binding on either of the Parties unless
it has been agreed to in writing and signed by each of the Parties and
identified as an amendment to this Agreement.


 


11.           Assignment.  This Agreement and the rights hereunder are
not transferable or assignable by either Party without the prior written
consent of the other, non-assigning Party.


 


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


 


13.           Severability.  If any provision of this Agreement shall be
held or deemed to be invalid, inoperative or unenforceable, such circumstance
shall not render the remainder of it invalid, inoperative or unenforceable, and
this Agreement shall be reformed so that it is enforceable to the maximum
extent permitted by law.


 


14.           Governing Law.  This Agreement shall be governed and
interpreted in accordance with the laws of the State of Virginia, without regard
to its conflicts of law principles.


 


[signature
page follows]


 


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IN WITNESS WHEREOF, and
intending to be legally bound hereby, Tier and Wiggins have executed and signed
this Agreement on the date stated below.


 


	
   

  	
  AGREED AND ACCEPTED:

  	
   

  	
  AGREED AND ACCEPTED:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TIER TECHNOLOGIES, INC.

  	
   

  	
  HARRY W. WIGGINS

  
	
   

  	
  2001 N. Main St., Suite 500

  	
   

  	
  3525 Aviary Way

  
	
   

  	
  Walnut Creek, CA  94596

  	
   

  	
  Lake Ridge, VA  22192

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James R. Weaver

  	
   

  	
  By:

  	
  /s/ Harry W. Wiggins

  	
   

  
	
   

  	
  James R. Weaver

  	
   

  	
  Harry W. Wiggins

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its President and CEO

  	
   

  	
   

  
								



 


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