TIER TECHNOLOGIES INC, 10-Q, 1999-08-16

TIER TECHNOLOGIES INC
10-Q, 1999-08-16
COMPUTER INTEGRATED SYSTEMS DESIGN

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------

FORM 10-Q

----------------

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1999

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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Commission file number 000-23195

TIER TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)

----------------

<TABLE>
<S> <C>
California 94-3145844
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>

1350 Treat Boulevard, Suite 250
Walnut Creek, California 94596
(Address of principal executive offices)
(Zip Code)

(925) 937-3950
(Registrant's telephone number, including area code)

----------------

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

As of August 4, 1999, the number of shares outstanding of the Registrant's
Class A Common Stock was 1,639,762 and the number of shares outstanding of the
Registrant's Class B Common Stock was 10,884,451.

This report contains a total of 27 pages of which this page is number 1.

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<PAGE>

TIER TECHNOLOGIES, INC.

FORM 10-Q

TABLE OF CONTENTS

Part I--FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Item 1. Condensed Consolidated Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 1999 and
September 30, 1998............................................ 3

Condensed Consolidated Statements of Operations for the three
and nine months ended June 30, 1999 and 1998.................. 4

Condensed Consolidated Statements of Cash Flows for the nine
months ended June 30, 1999 and 1998........................... 5

Notes to Condensed Consolidated Financial Statements........... 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 12

Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 24

Part II--OTHER INFORMATION

Item 1. Legal Proceedings.............................................. 25

Item 2 Changes in Securities and Use of Proceeds...................... 25

Item 6. Exhibits and Reports on Form 8-K............................... 26

Signatures.............................................................. 27
</TABLE>

Safe Harbor Statement

Certain statements contained in this report, including statements regarding
the development of the Company's services, markets and future demand for the
Company's services, and other statements regarding matters that are not
historical facts, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Certain such forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates" or "anticipates" or the negative
thereof, other variations thereof or comparable terminology, or by discussions
of strategy, plans or intentions. Such forward-looking statements include
risks and uncertainties; consequently, actual results may differ materially
from those expressed or implied thereby. Factors that could cause actual
results to differ materially include, but are not limited to, those factors
listed in "Factors that May Affect Future Results" section, as set forth
beginning on page 18 of this report. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this report. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements or factors to
reflect events or circumstances after the date of this report or to reflect
the occurrence of unanticipated events.

2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)

<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
-------- -------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........................... $ 9,252 $22,466
Restricted cash..................................... 794 712
Short-term investments.............................. 12,261 16,834
Accounts receivable, net............................ 20,731 18,335
Prepaid expenses and other current assets........... 5,988 1,399
------- -------
Total current assets.............................. 49,026 59,746
Equipment and improvements, net....................... 6,676 2,371
Notes and accrued interest receivable from related
parties.............................................. 1,569 1,871
Acquired intangibles, net............................. 24,442 9,794
Other assets.......................................... 604 721
------- -------
Total assets...................................... $82,317 $74,503
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable.................................... $ 3,517 $ 3,263
Accrued liabilities................................. 2,176 934
Accrued subcontractor expenses...................... 1,699 2,503
Accrued compensation and related liabilities........ 3,288 2,310
Other current liabilities........................... 1,864 1,041
------- -------
Total current liabilities......................... 12,544 10,051
Other liabilities..................................... 989 280
------- -------
Total liabilities................................. 13,533 10,331
------- -------

Commitments and contingencies

Shareholders' equity:
Common stock, no par value.......................... 65,831 62,656
Notes receivable from shareholders.................. (1,773) (2,159)
Deferred compensation............................... (441) (591)
Foreign currency translation adjustment............. (139) (1,210)
Retained earnings................................... 5,306 5,476
------- -------
Total shareholders' equity........................ 68,784 64,172
------- -------
Total liabilties and shareholders' equity......... $82,317 $74,503
======= =======
</TABLE>

See Notes to Condensed Consolidated Financial Statements

3
<PAGE>

TIER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- ------------------
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues.............................. $ 23,798 $ 14,890 $ 65,397 $ 36,713
Cost of revenues...................... 13,913 9,241 39,733 23,678
--------- --------- -------- --------
Gross profit.......................... 9,885 5,649 25,664 13,035
Costs and expenses:
Selling and marketing............... 1,716 800 4,473 2,217
General and administrative.......... 5,598 2,725 13,650 6,428
Compensation charge related to
business combinations.............. 355 94 477 646
Purchased in-process technology..... 4,000 -- 4,000 --
Reserve for contract dispute........ 1,856 -- 1,856 --
Depreciation and amortization....... 1,219 337 2,577 706
--------- --------- -------- --------
Income (loss) from operations......... (4,859) 1,693 (1,369) 3,038
Interest income (expense), net........ 266 219 1,091 544
--------- --------- -------- --------
Income (loss) before income taxes..... (4,593) 1,912 (278) 3,582
Provision (benefit) for income taxes.. (1,791) 713 (108) 1,390
--------- --------- -------- --------
Net income (loss)..................... $ (2,802) $ 1,199 $ (170) $ 2,192
========= ========= ======== ========
Basic net income (loss) per share..... $ (0.23) $ 0.12 $ (0.01) $ 0.26
========= ========= ======== ========
Shares used in computing basic net
income (loss) per share.............. 12,262 9,848 12,006 8,378
========= ========= ======== ========
Diluted net income (loss) per share... $ (0.23) $ 0.11 $ (0.01) $ 0.22
========= ========= ======== ========
Shares used in computing diluted net
income (loss) per share.............. 12,262 11,373 12,006 9,760
========= ========= ======== ========
</TABLE>

See Notes to Condensed Consolidated Financial Statements

4
<PAGE>

TIER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

<TABLE>
<CAPTION>
Nine Months Ended
June 30,
------------------
1999 1998
-------- --------
<S> <C> <C>
Operating activities:
Net income (loss).......................................... $ (170) $ 2,192
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization............................. 2,747 653
Amortization of deferred compensation..................... 150 --
Provision for doubtful accounts........................... 1,822 50
Deferred income taxes..................................... -- (399)
Tax benefit of stock options exercised.................... 565 314
Forgiveness of notes receivable from employees............ 511 --
Changes in operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable...................................... (2,707) (6,558)
Prepaid expenses and other current assets................ (897) (636)
Other assets............................................. 97 (850)
Accounts payable and accrued liabilities................. 207 1,728
Income taxes payable..................................... (3,925) 793
Deferred income.......................................... 905 301
-------- --------
Net cash used in operating activities...................... (695) (2,412)
-------- --------
Investing activities:
Purchases of equipment and improvements.................... (4,758) (948)
Notes and accrued interest receivable from related
parties................................................... (520) (192)
Repayment on notes and accrued interest receivable from
related parties........................................... 212 --
Business combinations, net of cash acquired................ (12,773) (5,465)
Purchases of available-for-sale securities................. (26,642) (13,283)
Sales of available-for-sale securities..................... 17,478 1,063
Maturities of available-for-sale securities................ 13,737 2,000
Other assets............................................... 20 --
-------- --------
Net cash used in investing activities...................... (13,246) (16,825)
-------- --------
Financing activities:
Borrowings under bank lines of credit...................... 909 6,912
Payments on borrowings..................................... (1,466) (9,671)
Net proceeds from issuance of common stock................. -- 54,772
Repurchases of common stock................................ (414) --
Repayment by shareholders on notes receivable.............. 386 95
Exercise of stock options.................................. 1,109 495
Employee stock purchase plan............................... 388 116
Increase in capital lease obligations...................... 46 --
Payments on capital lease obligations...................... (140) (28)
Deferred financing costs................................... -- 224
Payments on notes payable to shareholders.................. (19) (39)
-------- --------
Net cash provided by financing activities.................. 799 52,876
-------- --------
Effect of exchange rate changes on cash.................... (72) (609)
-------- --------
Net (decrease) increase in cash and cash equivalents....... (13,214) 33,030
Cash and cash equivalents at beginning of period........... 22,466 106
-------- --------
Cash and cash equivalents at end of period................. $ 9,252 $ 33,136
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid............................................. $ 243 $ 88
======== ========
Income taxes paid (refunded), net......................... $ 3,345 $ 683
======== ========
Equipment acquired under capital lease obligations......... $ 46 $ 207
======== ========
Accrued purchase price and assumed liabilities related to
business combinations..................................... $ 3,670 $ 175
======== ========
Conversion of preferred stock into common stock............ $ -- $ 1,892
======== ========
Common stock issued in business combinations............... $ 1,328 $ 666
======== ========
Restricted stock held in escrow for employees.............. $ -- $ 701
======== ========
</TABLE>

See Notes to Condensed Consolidated Financial Statements

5
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TIER TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1--BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of Tier
Technologies, Inc. ("Tier" or the "Company") include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. In the
opinion of management, the condensed consolidated financial statements reflect
all normal and recurring adjustments which are necessary for a fair
presentation of the Company's financial position, results of operations and
cash flows as of the dates and for the periods presented. The condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Consequently, these statements do not include all the disclosures normally
required by generally accepted accounting principles for annual financial
statements nor those normally made in the Company's Annual Report on Form 10-
K. Accordingly, reference should be made to the Company's Form 10-K filed on
December 21, 1998 and other reports the Company filed with the Securities and
Exchange Commission for additional disclosures, including a summary of the
Company's accounting policies, which have not materially changed. The
consolidated results of operations for the three months and nine months ended
June 30, 1999 are not necessarily indicative of results that may be expected
for the fiscal year ending September 30, 1999 or any future period, and the
Company makes no representations related thereto.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities and the results of operations
during the reporting period. Actual results could differ materially from those
estimates.

Certain reclassifications have been made to the prior period's financial
statements to conform to the current year's presentation.

NOTE 2--REVENUE RECOGNITION

The majority of the Company's revenues are derived from time and material
contracts and are recognized as services are performed. Revenues from fixed
price contracts are recognized using the percentage-of-completion method of
contract accounting based on the ratio of incurred costs to total estimated
costs. Revenues from performance-based contracts are recognized based on fees
charged on a per-transaction basis. Losses on contracts are recognized when
they become known and reasonably estimable. Actual results of contracts may
differ from management's estimates and such differences could be material to
the consolidated financial statements. Most of the Company's contracts are
terminable by the client following limited notice and without significant
penalty to the client. Cost incurred in anticipation of specific future
contracts are deferred if recoverability from the contract is probable. As of
June 30, 1999, deferred costs were $1,121,000. The completion, cancellation or
significant reduction in the scope of a large project would have a material
adverse effect on the Company's business, financial condition and results of
operations. Unbilled receivables were $5,262,000 and $3,444,000 at June 30,
1999 and September 30, 1998, respectively. Unbilled receivable for one client
accounted for 10.7% of total accounts receivable at June 30, 1999.

Revenues derived from governmental agencies were $9,054,000 and $5,951,000
for the three months ended June 30, 1999 and 1998, respectively, and
$20,699,000 and $15,781,000 for the nine months ended June 30, 1999 and 1998,
respectively.

NOTE 3--ACQUISITIONS

Technology Training Services

Effective May 1, 1999, the Company acquired certain assets and assumed
certain liabilities of the Technology Training Services division ("TTS") of
Automated Concepts, Inc., a leading provider of training

6
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TIER TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)

NOTE 3--ACQUISITIONS (continued)

services to the IT professionals of Fortune 500 companies and other major
corporations. The initial cost of the acquisition totaled approximately $1.7
million in cash including $213,000 in estimated acquisition costs. Additional
contingent payments of up to $1.5 million may be paid in shares of the
Company's Class B common stock and cash over a two-year period based on the
acquired business achieving certain levels of gross profit and revenues
measured annually over the two-year period. Shares of the Company's Class B
common stock equal to $1.5 million based on the average closing price of the
Company's Class B common stock for the five trading days preceding the
agreement date of April 6, 1999, are currently in an escrow account. If
contingent performance requirements are met, the number of shares released
will be determined utilizing the average closing price of the Company's Class
B common stock for the five trading days preceding each performance
anniversary. In the event the value of the shares in the escrow account is not
sufficient to satisfy the additional contingent payments, such shortfall shall
be paid in cash. Any shares not released at the end of the two-year
performance period will be returned to the Company. The TTS acquisition was
accounted for using the purchase method of accounting. Contingent payments
will be accrued when earned and recorded as additional purchase price. The
accompanying consolidated financial statements include the results of
operations of TTS for periods beginning on or subsequent to May 1, 1999.

The allocation of the initial purchase price was as follows:

<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash paid..................................................... $1,500
Estimated acquisition costs................................... 213
------
$1,713
======

Tangible assets............................................... $ 131
Intangible assets:
Goodwill.................................................... 1,653
Liabilities assumed........................................... (71)
------
$1,713
======
</TABLE>

Acquired tangible assets, which primarily consist of fixed assets, are
being depreciated over their useful lives of three to five years. Goodwill is
being amortized over an eight-year useful life.

Pro Forma Disclosure of Significant Acquisitions

The initial purchase price for significant acquisitions since September 30,
1997, was allocated to the assets acquired and liabilities assumed based on
their estimated fair values on the respective acquisition dates as follows:

<TABLE>
<CAPTION>
Sancha
Group Infact Midas
------ ------ -------
(in thousands)
<S> <C> <C> <C>
Tangible assets..................................... $ 17 $ 23 $ 1,812
Acquired workforce.................................. 302 304 --
Goodwill............................................ 4,901 2,813 3,787
------ ------ -------
5,220 3,140 5,599
Liabilities assumed................................. (66) (118) (1,692)
------ ------ -------
Net assets acquired................................. $5,154 $3,022 $ 3,907
====== ====== =======
</TABLE>

7
<PAGE>

TIER TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)

NOTE 3--ACQUISITIONS (continued)

The following summary, prepared on a pro forma basis, combines the
consolidated results of operations of the Company as if three prior
significant acquisitions, Sancha Computer Group Pty Limited, Infact Pty
Limited as Trustee of the Infact Unit Trust and Midas Computer Software
Limited, had been purchased by the Company as of October 1, 1997, after
including the impact of certain pro forma adjustments, such as the increased
amortization expense due to the recording of intangible assets.

<TABLE>
<CAPTION>
Nine Months
Ended June 30,
----------------
1999 1998
------- -------
(in thousands,
except per
share data)
<S> <C> <C>
Revenues................................................... $66,113 $48,814
Net income (loss).......................................... (346) 2,881
Basic net income (loss) per share.......................... (0.03) 0.34
Diluted net income (loss) per share........................ (0.03) 0.29
</TABLE>

The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been in effect for the entire period
presented and are not intended to be a projection of future results.

Purchased In-Process Technology

In June 1999, the Company purchased for $4 million the exclusive worldwide
licensing rights to components of a large scale, enterprise-wide commercial
billing system currently under development by the Company for a client. The
license includes all additions, enhancements, and improvements to the software
to the extent that the Company is employed by the licensor to make such
changes in the future. The completion of the software, which is currently not
executable, is expected to occur in the second quarter of fiscal year 2000. If
the development of the software is not completed, the Company's cash flows and
operations would not be materially adversely affected.

NOTE 4--BANK LINE OF CREDIT

On June 30, 1999, the Company had an $8 million revolving credit facility
which terminates on May 27, 2000. The total commitment amount is limited to
the lesser of 85% of eligible accounts receivable or $8 million. The loans are
secured by first priority liens and security interests in substantially all of
the Company's assets, including a pledge of all stock of its domestic
subsidiaries and a pledge of approximately 65% of the stock of the Company's
foreign subsidiaries. Interest is based on either the adjusted LIBOR rate plus
2.5% per annum or an alternate base rate plus 0.5% per annum, at the Company's
option. The alternate base rate is the greater of the bank's base rate or the
federal funds effective rate plus 0.5% per annum. Interest is charged monthly
on alternate base rate loans. Interest is payable on LIBOR loans on the last
day of the interest period applicable thereto and is also paid when a LIBOR
loan becomes due. Among other provisions, the credit facility requires the
Company to maintain certain minimum financial ratios. As of June 30, 1999, the
Company was in compliance with all covenants. As of June 30, 1999 and
September 30, 1998, the Company had no outstanding borrowings under its credit
facility; however, the availability of the total commitment amount to the
Company has been reduced by the $800,000 letter of credit issued in connection
with the SDA acquisition.

8
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TIER TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)

NOTE 5--NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net
income (loss) per share:

<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
June 30, June 30,
--------------- --------------
1999 1998 1999 1998
------- ------ ------ ------
(in thousands, except per
share data)
<S> <C> <C> <C> <C>
Numerator:
Net income (loss).......................... $(2,802) $1,199 $ (170) $2,192
======= ====== ====== ======
Denominator for basic net income (loss) per
share-weighted average common shares
outstanding................................. 12,262 9,848 12,006 8,378
Effects of dilutive securities:
Common stock options....................... -- 1,492 -- 1,251
Convertible preferred stock................ -- -- -- 120
Common stock contingently issuable......... -- 33 -- 11
------- ------ ------ ------
Dilutive common stock equivalents............ -- 1,525 -- 1,382
------- ------ ------ ------
Denominator for diluted net income (loss) per
share-adjusted weighted average common
shares and assumed conversions.............. 12,262 11,373 12,006 9,760
======= ====== ====== ======
Basic net income (loss) per share............ $ (0.23) $ 0.12 $(0.01) $ 0.26
======= ====== ====== ======
Diluted net income (loss) per share.......... $ (0.23) $ 0.11 $(0.01) $ 0.22
======= ====== ====== ======
</TABLE>

Options to purchase approximately 128,043 shares of Class B common stock at
a price ranging from $13.88 to $16.38 per share were not included in the
computation of diluted net income per share for the nine months ended June 30,
1998 because the options' exercise prices were greater than the average market
price of the shares. For the three months and nine months ended June 30, 1999,
common stock equivalents of 574,000 shares and 823,000 shares, respectively,
were excluded from the calculation of net loss per share since their effect
would have been anti-dilutive.

NOTE 6--COMPREHENSIVE INCOME (LOSS)

The Company's comprehensive income (loss) was as follows:

<TABLE>
<CAPTION>
Nine Months
Three Months Ended
Ended June 30, June 30,
--------------- --------------
1999 1998 1999 1998
------- ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C>
Net income (loss)........................... $(2,802) $1,199 $ (170) $2,192
Currency translation adjustment............. 647 (553) 1,069 (609)
------- ------ ------ ------
Comprehensive income (loss)................. $(2,155) $ 646 $ 899 $1,583
======= ====== ====== ======
</TABLE>

NOTE 7--CONTINGENCIES

Guaranty of Obligation

On December 22, 1998, the Company guaranteed a portion of an obligation of
James L. Bildner, the Company's Chief Executive Officer, with respect to his
California residence (the "Guaranty"). The Company's liability under the
Guaranty is capped at $1,000,000. In connection with the Guaranty, Mr. Bildner
had previously

9
<PAGE>

TIER TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)

NOTE 7--CONTINGENCIES (continued)

pledged to the Company shares of Tier Technologies, Inc. common stock owned by
him with a fair market value of at least 110% of the Guaranty amount and
agreed to indemnify the Company for any loss, liability or expense incurred in
connection with the Guaranty. Effective June 30, 1999, the Company amended the
pledge agreement with Mr. Bildner such that his pledge to the Company is set
at 126,619 shares of Tier Technologies, Inc. common stock, which as of June
30, 1999 had a market value of $886,333. Mr. Bildner continues to indemnify
the Company for any loss, liability or expense incurred in connection with the
Guaranty.

NOTE 8--NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosure about Segments of an Enterprise and Related Information"
("FAS 131"). The Company is required to adopt FAS 131 in the fiscal year 1999
annual financial statements. FAS 131 requires disclosure of certain
information regarding operating segments, products and services, geographic
areas of operation and major customers. Adoption of FAS 131 is expected to
have no material impact on the Company's consolidated financial position,
results of operations or cash flows.

In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS
133"). The new standard requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives will be
reported in the statement of operations or as a deferred item, depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the derivative must be highly
effective in achieving offsetting changes in fair value or cash flows of the
hedged items during the term of the hedge. In July 1999, the Financial
Accounting Standards Board issued Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activity--Deferral of Effective Date of
FASB Statement No. 133," which defers the effective date for the Company until
the quarter ended December 31, 2000. The Company will adopt FAS 133 in its
quarter ending December 31, 2000 and has not yet determined the impact, if
any, that the adoption of FAS 133 will have on the consolidated financial
statements.

NOTE 9--CONTRACT DISPUTE

10
<PAGE>

TIER TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)

NOTE 9--CONTRACT DISPUTE (continued)

On August 11, 1999, the Company received the prime contractor's answer and
counterclaim in response to the Company's complaint. The prime contractor
denied the Company's claim and counterclaimed alleging breach of contract and
seeking declaratory relief and damages in excess of $8 million. The Company
denies the allegations and intends to vigorously pursue its own claim against
the prime contractor. In the event the prime contractor prevails in its action,
the Company's financial condition and results of operations would be materially
and adversely affected.

11
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

Tier provides information technology ("IT") consulting, application
development and software engineering services that facilitate the migration of
clients' enterprise-wide systems and applications to leading edge
technologies. Through offices located in the United States, Australia and the
United Kingdom, the Company works closely with Fortune 1000, government and
other clients to determine, evaluate and implement an IT strategy that allows
it to rapidly adopt, deploy and transfer emerging technologies while
preserving viable elements of the client's legacy systems. The Company's
revenues increased to $65.4 million in the nine months ended June 30, 1999
from $36.7 million in the nine months ended June 30, 1998. The Company's
workforce, composed of employees, independent contractors and subcontractors,
has grown to 706 on June 30, 1999 from 436 on June 30, 1998.

The Company's revenues are derived primarily from professional fees billed
to clients on either a time and materials basis, a fixed price basis, or a
per-transaction basis. Time and materials revenues are recognized as services
are performed and expenses are incurred. Fixed price revenues are recognized
using the percentage-of-completion method, based upon the ratio of costs
incurred to total estimated project costs. Revenues from performance-based
contracts are recognized based on fees charged on a per-transaction basis. The
percentage of the Company's revenues generated on a fixed price basis was
21.0% and 27.9% for the three months ended June 30, 1999 and 1998,
respectively, and 13.2% and 23.3% for the nine months ended June 30, 1999 and
June 30, 1998, respectively. Revenues from the resale of products and software
licenses were $2.1 million and $178,000 for the three months ended June 30,
1999 and 1998, respectively, and $5.2 million and $2.6 million for the nine
months ended June 30, 1999 and June 30, 1998, respectively. Substantially all
of Tier's contracts are terminable by the client following limited notice and
without significant penalty to the client. From time to time, in the regular
course of its business, the Company negotiates the modification, termination,
renewal or transition of time and materials and fixed price contracts that may
involve an adjustment to the scope or nature of the project, billing rates or
outstanding receivables. To date, the Company has generally been able to
obtain an adjustment in its fees following a significant change in the
assumptions upon which the original estimate was made, but there can be no
assurance that the Company will be successful in obtaining adjustments in the
future.

The Company has derived a significant portion of its revenues from a small
number of large clients. For many of these clients, the Company performs a
number of different projects pursuant to multiple contracts or purchase
orders. For the nine months ended June 30, 1999, Humana Inc. and the State of
Missouri accounted for 33.9% and 13.9% of the Company's revenues,
respectively. The Company anticipates that a substantial portion of its
revenues will continue to be derived from a small number of large clients. The
completion, cancellation or significant reduction in the scope of a large
project would have a material adverse effect on the Company's business,
financial condition and results of operations. A significant portion of the
Company's revenues are derived from sales to government agencies. For the nine
months ended June 30, 1999, approximately 31.7% of the Company's revenues were
derived from sales to government agencies, as compared to 43% for the nine
months ended June 30, 1998.

Personnel and rent expenses represent a significant percentage of the
Company's operating expenses and are relatively fixed in advance of any
particular quarter. Senior executives manage the Company's personnel
utilization rates by carefully monitoring its needs and basing most personnel
increases on specific project requirements. To the extent revenues do not
increase at a rate commensurate with these additional expenses, the Company's
results of operations would be materially and adversely affected. In addition,
to the extent that the Company is unable to hire and retain salaried employees
to staff new or existing client engagements and retains hourly employees or
independent contractors in their place, the Company's business, financial
condition and results of operations would be materially and adversely
affected.

From December 1996 through June 30, 1999, the Company made twelve
acquisitions for a total cost of approximately $23.9 million, including the
issuance of shares of Class B common stock but excluding future contingent
payments, all of which were accounted for under the purchase method of
accounting. Generally,

12
<PAGE>

contingent payments are recorded as additional purchase price at the time the
payment can be determined beyond a reasonable doubt. If a contingent payment
is based, in part, on a seller's continuing employment with the Company, when
the amount is deemed probable to be made the payments are recorded as
compensation expense over the vesting period. These acquisitions helped the
Company to expand its operations in the United States, to establish its
operations in Australia and the United Kingdom, to broaden the Company's
client base, service offerings and technical expertise and to supplement its
human resources. International operations accounted for 33.9% and 22.0% of
revenues for the nine months ended June 30, 1999 and June 30, 1998,
respectively. The Company believes that the percentage of total revenues
attributable to international operations will continue to be significant and
may continue to grow. International operations may subject the Company to
foreign currency translation adjustments and transaction gains and losses for
amounts denominated in foreign currencies.

Results of Operations

The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of net revenues:

<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................. 100.0 % 100.0% 100.0 % 100.0%
Cost of revenues..................... 58.5 62.1 60.8 64.5
------- ------- ------- -------
Gross profit......................... 41.5 37.9 39.2 35.5
Costs and expenses:
Selling and marketing.............. 7.2 5.4 6.8 6.0
General and administrative......... 23.5 18.3 20.9 17.5
Compensation charge related to
business combinations............. 1.5 0.6 0.7 1.8
Purchased in-process technology.... 16.8 -- 6.1 --
Reserve for contract dispute....... 7.8 -- 2.9 --
Depreciation and amortization...... 5.1 2.3 3.9 1.9
------- ------- ------- -------
Income (loss) from operations........ (20.4) 11.3 (2.1) 8.3
Interest income (expense), net....... 1.1 1.5 1.7 1.5
------- ------- ------- -------
Income (loss) before income taxes.... (19.3) 12.8 (0.4) 9.8
Provision (benefit) for income
taxes............................... (7.5) 4.8 (0.1) 3.8
------- ------- ------- -------
Net income (loss).................... (11.8)% 8.0% (0.3)% 6.0%
======= ======= ======= =======
</TABLE>

Three Months Ended June 30, 1999 and June 30, 1998

Revenues. Revenues are generated primarily by providing professional
consulting services on client engagements. Revenues increased 59.8% to $23.8
million for the three months ended June 30, 1999 from $14.9 million in the
three months ended June 30, 1998. This increase resulted primarily from
internal growth, including an expanded client base and several significant new
contracts, and from acquisitions including two months of revenues from the TTS
acquisition completed during the quarter.

Gross Profit. Cost of revenues consists primarily of those costs directly
attributable to providing service to a client, including employee salaries,
independent contractor and subcontractor costs, employee benefits, payroll
taxes, travel expenses, and any equipment or software costs. For projects
performed on a per-transaction basis, cost of revenues would also include
facility and overhead costs. Gross profit increased 75.0% to $9.9 million for
the three months ended June 30, 1999 from $5.6 million in the three months
ended June 30, 1998. Gross margin increased to 41.5% for the three months
ended June 30, 1999 as compared to 37.9% in the three months ended June 30,
1998. This increase resulted primarily from higher margins on certain large
contracts.

13
<PAGE>

Selling and Marketing. Selling and marketing expenses consist primarily of
personnel costs, sales commissions, travel costs and product literature.
Selling and marketing expenses increased 114.5% to $1.7 million for the three
months ended June 30, 1999 from $800,000 in the three months ended June 30,
1998. As a percentage of revenues, selling and marketing expenses increased to
7.2% for the three months ended June 30, 1999 from 5.4% in the three months
ended June 30, 1998. The increase in selling and marketing expenses was
primarily attributable to the addition of sales and marketing personnel, both
internally and through acquisitions, to support the higher revenue base and
increased selling and marketing efforts.

General and Administrative. General and administrative expenses consist
primarily of personnel costs related to general management functions, human
resources, recruiting, finance, legal, accounting and information systems, as
well as professional fees related to legal, audit, tax, external financial
reporting and investor relations matters. General and administrative expenses
increased 105.4% to $5.6 million for the three months ended June 30, 1999 from
$2.7 million in the three months ended June 30, 1998. As a percentage of
revenues, general and administrative expenses increased to 23.5% for the three
months ended June 30, 1999 from 18.3% in the three months ended June 30, 1998.
The increase in general and administrative expenses, both in total dollars and
as a percentage of revenues, was attributable to building the infrastructure
to support, manage and control the Company's growth, as well as the costs of
integrating and operating acquired businesses.

Compensation Charge Related to Business Combinations. Compensation charge
related to business combinations consists primarily of certain contingent
performance payments made in connection with prior acquisitions. Compensation
charge related to business combinations increased 277.7% to $355,000 for the
three months ended June 30, 1999 from $94,000 in the three months ended June
30, 1998. As a percentage of revenues, compensation charges related to
business combinations increased to 1.5% for the three months ended
June 30, 1999 from 0.6% in the three months ended June 30, 1998. The increase
in total compensation charge related to business combinations was attributable
to an increase in contingent payments earned during the current period by
prior owners of the acquired businesses. For the three months ended June 30,
1999, the compensation charge related to business combinations resulted from
contingent payments earned in accordance with the acquisition agreements for
Simpson Fewster & Co. Pty Limited ("SFC") and Infact Pty Limited as trustee of
the Infact Unit Trust ("Infact"). For the three months ended June 30, 1998,
the compensation charge related to business combinations resulted from
contingent payments earned in accordance with the acquisition agreements for
Encore Consulting, Inc. ("Encore") and SFC. The Company expects compensation
charges related to business combinations to fluctuate significantly from
quarter to quarter depending upon whether performance payments are earned or
missed by acquired businesses and the timing of those determinations.

Purchased In-Process Technology. Purchased in-process technology charge of
$4 million was recorded for the three months ended June 30, 1999. There was no
comparable charge for the three months ended June 30, 1998. As a percentage of
revenues, the purchased in-process technology charge was 16.8% for the three
months ended June 30, 1999. This charge results from the purchase of exclusive
worldwide licensing rights to components of a large scale, enterprise-wide
commercial billing system currently under development by the Company for a
client.

Reserve for Contract Dispute. Reserve for contract dispute charge of $1.9
million was recorded for the three months ended June 30, 1999. There was no
comparable charge for the three months ended June 30, 1998. As a percentage of
revenues, the reserve for contract dispute was 7.8% for the three months ended
June 30, 1999. This reserve relates to a previously disclosed ongoing contract
dispute with a prime contractor to which the Company is a subcontractor. After
a series of discussions with the prime contractor, the Company determined that
collection of the outstanding accounts receivable balance was unlikely.

Depreciation and Amortization. Depreciation and amortization consist
primarily of expenses associated with the depreciation of equipment and
improvements and amortization of intangible assets resulting from acquisitions
and purchases of certain intellectual property. Depreciation and amortization
increased 261.7% to $1.2 million for the three months ended June 30, 1999 from
$337,000 in the three months ended June 30, 1998. As a percentage of revenues,
depreciation and amortization increased to 5.1% for the three months ended
June 30, 1999 from 2.3% in the three months ended June 30, 1998. The increase
in total depreciation and

14
<PAGE>

amortization expense was primarily attributable to the amortization of
increased intangible assets from business combinations, the amortization of
the costs associated with the purchase of a project management system, and the
depreciation associated with increased capital expenditures.

Interest Income and Interest Expense, Net. Net interest income increased
21.5% to $266,000 for the three months ended June 30, 1999 compared to net
interest income of $219,000 in the three months ended June 30, 1998. This
increase was primarily attributable to interest income generated from the
Company's investments. The three months ended June 30, 1998 does not reflect
the increased investment base from the secondary offering proceeds as these
were not invested until late June of 1998.

Provision (Benefit) for Income Taxes. The benefit for income taxes was
$(1.8) million for the three months ended June 30, 1999 as compared to a
provision for income taxes of $713,000 in the three months ended June 30,
1998. The effective tax rate for the three months ended June 30, 1999 was
39.0%, compared to 37.3% for the three months ended June 30, 1998. The
increase in the effective tax rate was due to the potential impact of the
Company's ability to utilize its foreign tax credits given the change in the
geographic mix of the Company. The Company anticipates that its effective tax
rate for the fiscal year ending September 30, 1999 will be 39.0%; however, the
actual rate may vary due to a change in the estimated amount or geographic mix
of the Company's earnings, changes in tax law, the effect of future
acquisitions or a change in the Company's investment in tax-advantaged
securities.

Nine Months Ended June 30, 1999 and June 30, 1998

Revenues. Revenues increased 78.1% to $65.4 million for the nine months
ended June 30, 1999 from $36.7 million in the nine months ended June 30, 1998.
This increase resulted primarily from internal growth, including an expanded
client base and several significant new contracts, and from multiple
acquisitions.

Gross Profit. Gross profit increased 96.9% to $25.7 million for the nine
months ended June 30, 1999 from $13.0 million in the nine months ended June
30, 1998. Gross margin increased to 39.2% for the nine months ended June 30,
1999 from 35.5% in the nine months ended June 30, 1998. The increase in gross
margin was primarily attributable to higher margins on certain large
contracts.

Selling and Marketing. Selling and marketing expenses increased 101.8% to
$4.5 million for the nine months ended June 30, 1999 from $2.2 million in the
nine months ended June 30, 1998. As a percentage of revenues, selling and
marketing expenses increased to 6.8% for the nine months ended June 30, 1999
from 6.0% in the nine months ended June 30, 1998. The increase in total
selling and marketing expenses was primarily attributable to the addition of
sales and marketing personnel, both internally and through acquisitions, to
support the higher revenue base and increased selling and marketing efforts.

General and Administrative. General and administrative expenses increased
112.4% to $13.7 million for the nine months ended June 30, 1999 from $6.4
million in the nine months ended June 30, 1998. As a percentage of revenues,
general and administrative expenses increased to 20.9% for the nine months
ended June 30, 1999 from 17.5% in the nine months ended June 30, 1998. The
increase in general and administrative expenses, both in total dollars and as
a percentage of revenues, was primarily attributable to building the
infrastructure to support, manage and control the Company's growth, as well as
the costs of integrating and operating acquired businesses.

Compensation Charge Related to Business Combinations. Business combination
compensation expenses were $477,000 or 0.7% of revenues, for the nine months
ended June 30, 1999 as compared to $646,000, or 1.8% of revenues, for the nine
months ended June 30, 1998. The decrease in total compensation charge related
to business combinations was attributable to a decrease in contingent payments
earned during the current period by prior owners of the acquired businesses.
For the nine months ended June 30, 1999, the compensation charge related to
business combinations resulted from contingent payments earned in accordance
with the acquisition agreements for SFC and Infact. For the nine months ended
June 30, 1998, the compensation charge related to business combinations
resulted from contingent payments earned in accordance with the acquisition
agreements for Encore, Albanycrest, Limited and SFC.

15
<PAGE>

Purchased In-Process Technology. Purchased in-process technology charge of
$4 million was recorded for the nine months ended June 30, 1999. There was no
comparable charge for the nine months ended June 30, 1998. As a percentage of
revenues, the purchased in-process technology charge was 6.1% for the nine
months ended June 30, 1999. This charge results from the purchase of exclusive
worldwide licensing rights to components of a large scale, enterprise-wide
commercial billing system currently under development by the Company for a
client.

Reserve for Contract Dispute. Reserve for contract dispute charge of $1.9
million was recorded for the nine months ended June 30, 1999. There was no
comparable charge for the nine months ended June 30, 1998. As a percentage of
revenues, the reserve for contract dispute was 2.9% for the nine months ended
June 30, 1999. This reserve relates to a previously disclosed ongoing contract
dispute with a prime contractor to which the Company is a subcontractor. After
a series of discussions with the prime contractor, the Company determined that
collection of the outstanding accounts receivable balance was unlikely.

Depreciation and Amortization. Depreciation and amortization increased
265.0% to $2.6 million for the nine months ended June 30, 1999 from $706,000
in the nine months ended June 30, 1998. As a percentage of revenues,
depreciation and amortization increased to 3.9% for the nine months ended June
30, 1999 from 1.9% in the nine months ended June 30, 1998. The increase in
total depreciation and amortization expenses was primarily attributable to the
amortization of increased intangible assets from business combinations, the
depreciation associated with increased capital expenditures, and the
amortization of the costs associated with the purchase of a project management
system.

Interest Income and Interest Expense, Net. The Company had net interest
income of $1.1 million for the nine months ended June 30, 1999 compared to net
interest income of $544,000 for the nine months ended June 30, 1998. This
change was primarily attributable to the interest income generated from its
investment of proceeds from the initial and secondary public offerings.

Provision (Benefit) for Income Taxes. The benefit for income taxes was
$(108,000) for the nine months ended June 30, 1999 as compared to a provision
for income taxes of $1.4 million in the nine months ended June 30, 1998. The
effective tax rate for the nine months ended June 30, 1999 and June 30, 1998
was 39%.

Liquidity and Capital Resources

The Company's principal capital requirement is to fund working capital to
support its growth, including potential future acquisitions. The Company
maintains an $8 million revolving credit facility (the "Credit Facility") that
allows the Company to borrow the lesser of an amount equal to 85% of eligible
accounts receivable or $8 million. The loans bear interest, at the Company's
option, either at the adjusted LIBOR rate plus 2.5% per annum or an alternate
base rate plus 0.5% per annum. The alternate base rate is the greater of the
bank's base rate or the federal funds effective rate plus 0.5% per annum at
the Company's option. The loans are secured by first priority liens and
security interests in substantially all of the Company's assets, including a
pledge of all stock of its domestic subsidiaries and a pledge of approximately
65% of the stock of the Company's foreign subsidiaries. The Credit Facility
contains certain restrictive covenants, including limitations on the amount of
loans the Company may extend to officers and employees, the incurrence of
additional debt and a prohibition against the payment of dividends (other than
dividends payable in its stock). The Credit Facility requires the maintenance
of certain financial ratios, including a minimum quarterly net income
requirement and a minimum ratio of total liabilities to earnings before
interest, taxes, depreciation and amortization. As of June 30, 1999, the
Company was in compliance with all covenants. As of June 30, 1999, there were
no borrowings outstanding under the Credit Facility; however, the availability
of the total commitment amount to the Company has been reduced by the $800,000
letter of credit issued in connection with the SDA acquisition.

Net cash used in operating activities was $695,000 in the nine months ended
June 30, 1999 as compared to net cash used in operating activities of $2.4
million in the nine months ended June 30, 1998. The decrease in net cash used
in operating activities is largely attributable to increased depreciation and
amortization and provision for doubtful accounts and a smaller increase in
accounts receivable, as partially offset by a decrease in net

16
<PAGE>

income, a larger decrease in accounts payable and accrued liabilities and
income taxes payable. During the three months ended June 30, 1999, the Company
acquired the exclusive worldwide licensing rights to components of a large
scale, enterprise-wide commercial billing system currently being developed by
the Company for a client. The license includes all additions, enhancements,
and improvements to the software to the extent that the Company is employed by
the licensor to make such changes in the future. Upon completion, the billing
system will be customizable for licensing to the Company's clients in both the
commercial and government sectors.

Net cash used in investing activities was $13.2 million and $16.8 million
in the nine months ended June 30, 1999 and June 30, 1998, respectively. The
decrease in cash used in investing activities is largely attributable to an
increase in sales and maturities of available-for-sale securities, as
partially offset by an increase in purchases of available-for-sale securities
and increased investments in the acquisition of Midas Computer Software
Limited, ADC Consultants Pty Limited, Service Design Associates, Inc. and
Technology Training Services, a division of Automated Concepts, Inc. Capital
expenditures, including equipment acquired under capital lease but excluding
assets acquired or leased through business combinations, were approximately
$4.8 million in the nine months ended June 30, 1999 and $1.2 million in the
nine months ended June 30, 1998. The increase in capital expenditures was
primarily attributable to an increased workforce, geographic expansion and
development of the Company's technology infrastructure. The Company
anticipates that it will continue to have significant capital expenditures in
the near-term related to, among other things, purchases of computer equipment
to enhance the Company's global operations and support its growth, as well as
potential expenditures related to new office leases and the establishment of
the Company's application development centers and global project management
office. During the three months ended June 30, 1999, the Company purchased
from a client the ownership rights to a project management system for $2
million. The system will be used by the Company as its standard project
management system.

Net cash provided by financing activities totaled $799,000 in the nine
months ended June 30, 1999 and $52.9 million in the nine months ended June 30,
1998. In the nine months ended June 30, 1998, the Company completed its
initial public offering, which raised net proceeds of $54.8 million, and
repaid $2.8 million under its line of credit.

The Company anticipates that its existing capital resources, including cash
provided by operating activities and available bank borrowings, will be
adequate to fund the Company's operations for at least the next 12 months.
There can be no assurance that changes will not occur that would consume
available capital resources before such time. The Company's capital
requirements depend on numerous factors, including potential acquisitions, new
contracts, the timing of the receipt of accounts receivable and employee
growth. The Company is involved in a contract dispute with the prime
contractor on one of the Company's Australian projects. See "Item 1. Legal
Proceedings." On June 28, 1999, the Company filed a federal civil action
against the prime contractor for the amounts the Company is due under the
contract. On August 11, 1999, the Company received the prime contractor's
answer and counterclaim, in which the prime contractor denies the Company's
claim, alleges breach of contract by the Company and seeks declaratory relief
and damages in excess of $8 million. The Company denies the allegations and
intends to vigorously pursue its own claim against the prime contractor. At
this time, there can be no assurance as to the course of this dispute or its
possible resolution. In the event the prime contractor prevails in its action,
the Company's financial condition and results of operations would be
materially and adversely affected. To the extent that the Company's existing
capital resources are insufficient to meet its capital requirements, the
Company will have to raise additional funds. There can be no assurance that
additional funding, if necessary, will be available on favorable terms, if at
all.

Year 2000

The "Year 2000 Issue" is typically the result of software being written
using two digits rather than four to define the applicable year. The Company
uses a significant number of computer software programs and operating systems
in its service offerings, financial business systems and administrative
functions. To the extent these software applications are unable to
appropriately interpret the upcoming calendar year "2000", remediation of such
applications will be necessary.

17
<PAGE>

The Company is continuing to assess the preparedness of its internal IT and
non-IT systems and has substantially completed the remediation, testing and
certification of its critical internal systems. To date, no significant Year
2000 related problems have been identified. The Company's internal systems are
largely PC-based and a majority were recently acquired or installed. As a
result, the Company believes that a high percentage of its hardware and non-IT
systems already address the Year 2000 Issue, as does a majority of its
software. Tier anticipates that the remediation, testing and certification
process of its remaining systems and software will be substantially completed
during the summer of 1999. The Company has not incurred material remediation
costs to date and does not anticipate that the cost of such process will have
a material adverse effect on the Company's business, result of operations or
financial condition.

In addition, the Company has made an initial evaluation of the Year 2000
readiness of its key suppliers and other key third parties. The Company
continues to work with these parties to address the Year 2000 Issue and to
obtain appropriate assurances. The Company's operations could be materially
adversely affected if these third parties or the products or services they
supply to Tier are disrupted or impaired by the Year 2000 Issue.

There can be no assurance that the remediation, testing and certification
of the Company's systems will be successful or that the Company's key
contractors will have successful conversion programs, and that such Year 2000
Issue compliance failures will not have a material adverse effect on the
Company's business, results of operations or financial condition.

As a result of the Company's assessment to date, the Company currently
believes that a formal contingency plan to address Year 2000 non-compliance is
unnecessary; however, the Company may develop such a plan if its on-going
assessment indicates areas of significant exposure.

Factors That May Affect Future Results

The following factors, among others could cause actual results to differ
materially from those contained in forward-looking statements in this Form 10-
Q. Tier is referred to in this section as "we" or "us".

Potential Adverse Effect on Operating Results from Dependence on Large
Projects, Limited Clients or Certain Market Sectors. The completion,
cancellation or significant reduction in the scope of a large project or a
project with certain clients would have a material adverse effect on our
business, financial condition and results of operations. Most of our contracts
are terminable by the client following limited notice and without significant
penalty to the client. We have derived, and believe that we will continue to
derive, a significant portion of our revenues from a limited number of
clients. For the nine months ended June 30, 1999, Humana Inc. and the State of
Missouri accounted for 33.9% and 13.9% of our revenues, respectively. The
volume of work performed for specific clients is likely to vary from period to
period, and a major client in one period may not use our services in a
subsequent period. In addition, as a result of our focus in specific vertical
markets, economic and other conditions that affect the companies in these
markets could have a material adverse effect on our business, financial
condition and results of operations.

Variability of Quarterly Operating Results. Our revenues and operating
results are subject to significant variation from quarter to quarter due to a
number of factors, including:

. the number, size and scope of projects in which we are engaged,

. the contractual terms and degree of completion of such projects,

. start-up costs including software sublicense fees incurred in connection
with the initiation of large projects,

. our ability to staff projects with salaried employees versus hourly
independent and sub-contractors,

. competitive pressures on the pricing of our services,

. any delays incurred in connection with, or early termination of, a
project,

. employee utilization rates,

18
<PAGE>

. the number of billable days in a particular quarter,

. the adequacy of provisions for losses,

. the accuracy of estimates of resources required to complete ongoing
projects,

. demand for our services generated by strategic partnerships and certain
prime contractors,

. our ability to increase both the number and size of engagements from
existing clients, and

. economic conditions in the vertical and geographic markets we serve.

Due to the relatively long sales cycles for our services in the government
services market, the timing of revenue is difficult to forecast. In addition,
the achievement of anticipated revenues is substantially dependent on our
ability to attract, on a timely basis, and retain skilled personnel. A high
percentage of our operating expenses, particularly personnel and rent, are
fixed in advance. In addition, we typically reach the annual limitation on
FICA contributions for many of our consultants before the end of the calendar
year. As a result, payroll taxes as a component of cost of sales will vary
from quarter to quarter during the fiscal year and will generally be higher at
the beginning of the calendar year. Because of the variability of our
quarterly operating results, we believe that period-to-period comparisons of
our operating results are not necessarily meaningful, should not be relied
upon as indications of future performance and may result in volatility in the
price of our common stock. In addition, our operating results will from time
to time be below the expectations of analysts and investors.

Potential Failure to Identify, Acquire or Integrate New Acquisitions. An
important component of our business strategy is to expand our presence in new
or existing markets by acquiring additional businesses. From December 1996
through June 30, 1999, we acquired twelve businesses. There can be no
assurance that we will be able to identify, acquire or profitably manage
additional businesses or to integrate successfully any acquired businesses
without substantial expense, delay or other operational or financial problems.
Acquisitions involve a number of special risks, including:

. diversion of management's attention,

. failure to retain key personnel,

. amortization of acquired intangible assets,

. client dissatisfaction or performance problems with an acquired firm,

. assumption of unknown liabilities, and

. other unanticipated events or circumstances.

Any of these risks could have a material adverse effect on our business,
financial condition and results of operations.

Inability to Manage Growth. If we are unable to manage our growth
effectively, such inability would have a material adverse effect on the
quality of our services, our ability to retain key personnel, and our
business, financial condition and results of operations. Our growth has
placed, and is expected to continue to place, significant demands on our
management, financial, staffing and other resources. We have expanded
geographically by opening new offices domestically and abroad, and intend to
open additional offices. Our ability to manage growth effectively will require
us to continue to develop and improve our operational, financial and other
internal systems, as well as our business development capabilities, and to
train, motivate and manage our employees. In addition, as the average size and
number of our projects continues to increase, we must be able to manage such
projects effectively. There can be no assurance that our rate of growth will
continue or that we will be successful in managing any such growth.

Inability to Attract and Retain Professional Staff Necessary to Existing
and Future Projects. Our inability to attract, retain and train skilled
employees could impair our ability to adequately manage and staff our existing
projects and to bid for or obtain new projects, which would have a material
adverse effect on our

19
<PAGE>

business, financial condition and results of operation. In addition, the
failure of our employees to achieve expected levels of performance could
adversely affect our business. Our success depends in large part upon our
ability to attract, retain, train, manage and motivate skilled employees,
particularly project managers and other senior technical personnel. There is
significant competition for employees with the skills required to perform the
services we offer. In particular, qualified project managers and senior
technical and professional staff are in great demand worldwide and competition
for such persons is likely to increase. In addition, we require that many of
our employees travel to client sites to perform services on our behalf, which
may make a position with us less attractive to potential employees. There can
be no assurance that a sufficient number of skilled employees will continue to
be available, or that we will be successful in training, retaining and
motivating current or future employees.

Dependence on Key Personnel. Our success depends in large part upon the
continued services of a number of key employees, including our Chief Executive
Officer and Chairman of the Board of Directors, James L. Bildner, and our
President and Chief Technology Officer, William G. Barton. Although we have
entered into employment agreements with each of Messrs. Bildner and Barton,
either of them may terminate their employment agreements at any time. The loss
of the services of either of Messrs. Bildner or Barton could have a material
adverse effect on our business. In addition, if one or more of our key
employees resigns to join a competitor or to form a competing company, the
loss of such personnel and any resulting loss of existing or potential clients
to any such competitor could have a material adverse effect on our business,
financial condition and results of operations.

Control of Company and Corporate Actions by Principal
Shareholders. Concentration of voting control could have the effect of
delaying or preventing a change in control of us and may affect the market
price of our stock.

. All of the holders of Class A Common Stock have entered into a Voting
Trust with respect to their shares of Class A Common Stock, which
represents 60.1% of the total common stock voting power at June 30,
1999. All power to vote shares held in the Voting Trust has been vested
in the Voting Trust's trustees, Messrs. Bildner and Barton. As a result,
Messrs. Bildner and Barton will be able to control the outcome of all
corporate actions requiring shareholder approval, including changes in
our equity incentive plan, the election of a majority of our directors,
proxy contests, mergers, tender offers, open-market purchase programs or
other purchases of common stock that could give holders of our Class B
Common Stock the opportunity to realize a premium over the then-
prevailing market price for their shares of Class B Common Stock.

. The California Corporations Code and our Bylaws currently permit
shareholders to require cumulative voting in connection with the
election of directors, subject to certain requirements. However, the
Articles and Bylaws also provide that cumulative voting will be
eliminated effective as of the first record date for an annual meeting
on which we have equity securities listed on Nasdaq and 800 or more
holders of our equity securities.

. Holders of an aggregate of 779,762 shares of Class A Common Stock have
entered into agreements with us that may restrict their ability to
transfer shares of Class A Common Stock following termination of their
employment with the Company. Such agreements would effectively delay the
conversion of such shares of Class A Common Stock and may perpetuate
control of the Company by the Voting Trust's trustees.

Dependence on Partnerships with Third Parties in Performing Certain Client
Engagements. We sometimes perform client engagements in partnership with third
parties. In the government services market, we often join with other
organizations to bid and perform an engagement. In these engagements, we may
engage subcontractors or we may act as a subcontractor to the prime contractor
of the engagement. In the commercial services market, we sometimes partner
with software or technology providers to jointly bid and perform engagements.
In both markets, we often depend on the software, resources and technology of
our partners in order to perform the engagement. There can be no assurance
that actions or failures attributable to our partners

20
<PAGE>

or to the prime contractor or subcontractor will not also negatively affect
our business, financial condition or results of operations. In addition, the
refusal or inability of a partner to permit continued use of its software,
resources or technology by us, or the discontinuance or termination by the
prime contractor of our services or the services of a key subcontractor, would
have a material adverse effect on our business, financial condition and
results of operations.

Dependence on Contracts with Government Agencies. For the nine months ended
June 30, 1999, approximately 31.7% of our revenues were derived from sales to
government agencies. Such government agencies may be subject to budget cuts or
budgetary constraints or a reduction or discontinuation of funding. A
significant reduction in funds available for government agencies to purchase
IT services would have a material adverse effect on our business, financial
condition and results of operations. In addition, the loss of a major
government client, or any significant reduction or delay in orders by such
client, would have a material adverse effect on our business, financial
condition and results of operations.

Failure to Estimate Accurately Fixed Price and Performance-Based
Contracts. Our failure to estimate accurately the resources or time required
for a fixed price project or the expected volume of transactions under a
performance-based contract could have a material adverse effect on our
business, financial condition and results of operations. Under fixed price
contracts, we receive our fee if we meet specified objectives such as
completing certain components of a system installation. For performance-based
contracts, we receive our fee on a per-transaction basis, such as the number
of child support payments processed. To earn a profit on these contracts, we
rely upon accurately estimating costs involved and assessing the probability
of meeting the specified objectives or realizing the expected number of
transactions within the contracted time period. If we fail to estimate
accurately the factors upon which we base our contract pricing, we may incur
losses on these contracts. During the nine months ended June 30, 1999, 13.2%
of our revenues were generated on a fixed price basis. During the nine months
ended June 30, 1999, performance-based contracts did not constitute a material
component of the Company's operations; however, such contracts are expected to
become a more significant portion of operations in the future.

Significant Start-Up Costs. When we are awarded a contract to manage a
government program, we can incur significant start-up costs before the
facility is fully operational and transactions are being processed. These
expenses include leasing office space, purchasing equipment and hiring
personnel. As a result, we may incur operating losses in the early stage of a
contract.

Potential Costs or Claims Resulting from Project Performance. Many of our
engagements involve projects that are critical to the operations of our
clients' businesses and provide benefits that may be difficult to quantify.
The failure by us, or of the prime contractor on an engagement in which we are
a subcontractor, to meet a client's expectations in the performance of the
engagement could damage our reputation and adversely affect our ability to
attract new business, and could have a material adverse effect upon our
business, financial condition and results of operations. We have undertaken,
and may in the future undertake, projects in which we guarantee performance
based upon defined operating specifications or guaranteed delivery dates.
Unsatisfactory performance or unanticipated difficulties or delays in
completing such projects may result in client dissatisfaction and a reduction
in payment to, or payment of damages (as a result of litigation or otherwise)
by us, which could have a material adverse effect upon our business, financial
condition and results of operations. In addition, unanticipated delays could
necessitate the use of more resources than we initially budgeted for a
particular project, which also could have a material adverse effect upon our
business, financial condition and results of operations.

Insufficient Insurance Coverage for Potential Claims. Any failure in a
client's system could result in a claim against us for substantial damages,
regardless of our responsibility for such failure. There can be no assurance
that the limitations of liability set forth in our service contracts will be
enforceable or will otherwise protect us from liability for damages. Although
we maintain general liability insurance coverage, including coverage for
errors or omissions, there can be no assurance that such coverage will
continue to be available on reasonable terms, will be available in sufficient
amounts to cover one or more claims or that the insurer will not

21
<PAGE>

disclaim coverage as to any future claim. The successful assertion for one or
more claims against us that exceed available insurance coverage or changes in
our insurance policies, including premium increases or the imposition of large
deductible or co-insurance requirements, would adversely affect our business,
financial condition and results of operations.

Delay or Failure to Develop New IT Solutions. Our success will depend in
part on our ability to develop IT solutions that keep pace with continuing
changes in technology, evolving industry standards and changing client
preferences. There can be no assurance that we will be successful in
developing such IT solutions in a timely manner or that if developed we will
be successful in the marketplace. Delay in developing or failure to develop
new IT solutions would have a material adverse effect on our business,
financial condition and results of operations.

Substantial Competition in the IT Services Market. The IT services market
is highly competitive and is served by numerous international, national and
local firms. There can be no assurance that we will be able to compete
effectively in the market. Market participants include systems consulting and
integration firms, including national accounting firms and related entities,
the internal information systems groups of our prospective clients,
professional services companies, hardware and application software vendors,
and divisions of large integrated technology companies and outsourcing
companies. Many of these competitors have significantly greater financial,
technical and marketing resources, generate greater revenues and have greater
name recognition than we do. In addition, there are relatively low barriers to
entry into the IT services market, and we have faced, and expect to continue
to face, additional competition from new entrants into the IT services market.

We believe that the principal competitive factors in the IT services market
include:

. reputation,

. project management expertise,

. industry expertise,

. speed of development and implementations,

. technical expertise,

. competitive pricing, and

. the ability to deliver results on a fixed price as well as a time and
materials basis.

We believe that our ability to compete also depends in part on a number of
competitive factors outside our control, including:

. the ability of our clients or competitors to hire, retain and motivate
project managers and other senior technical staff,

. the ownership by competitors of software used by potential clients,

. the price at which others offer comparable services,

. the ability of our clients to perform the services themselves, and

. the extent of our competitors' responsiveness to client needs.

Our inability to compete effectively on these competitive factors would
have a material adverse effect on our business, financial condition and
results of operations.

Inability to Protect Proprietary Intellectual Property. The steps we take
to protect our intellectual property rights may be inadequate to avoid the
loss or misappropriation of such information, or to detect unauthorized use of
such information. We rely on a combination of nondisclosure and other
contractual arrangements, and copyright, trade secret and trademark laws to
protect our intellectual property rights. We also

22
<PAGE>

(1) enter into confidentiality agreements with our employees, (2) generally
require that our consultants and clients enter into such agreements and (3)
limit access to our proprietary information.

Issues relating to the ownership of, and rights to use, software and
application frameworks can be complicated, and there can be no assurance that
disputes will not arise that affect our ability to resell or reuse such
software and application frameworks. A portion of our business involves the
development of software applications for specific client engagements.
Ownership of such software is the subject of negotiation with each particular
client and is typically assigned to the client. We also develop software
application frameworks, and may retain ownership or marketing rights to these
application frameworks, which may be adapted through further customization for
future client projects. Certain clients have prohibited us from marketing the
software and application frameworks developed for them entirely or for
specified periods of time or to specified third parties, and there can be no
assurance that clients will not demand similar or other restrictions in the
future.

Although we believe that our services and products do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against us in the future, or that if asserted, any
such claim will be successfully defended.

Failure to Manage and Expand International Operations. For the nine months
ended June 30, 1999, international operations accounted for 33.9% of our total
revenues. We believe that the percentage of total revenues attributable to
international operations will continue to be significant. In addition, a
significant portion of our sales are to large multinational companies. To meet
the needs of such companies, both domestically and internationally, we must
provide worldwide services, either directly or indirectly. As a result, we
intend to expand our existing international operations and may enter
additional international markets, which will require significant management
attention and financial resources and could adversely effect our operating
margins and earnings. In order to expand international operations, we will
need to hire additional personnel and develop relationships with potential
international clients through acquisition or otherwise. To the extent that we
are unable to do so on a timely basis, our growth in international markets
would be limited, and our business, financial condition and results of
operations would be materially and adversely affected.

Our international business operations are subject to a number of risks,
including, but not limited to, difficulties in building and managing foreign
operations, enforcing agreements and collecting receivables through foreign
legal systems, longer payment cycles, fluctuations in the value of foreign
currencies and unexpected regulatory, economic or political changes in foreign
markets. There can be no assurance that these factors will not have a material
adverse effect on our business, financial condition and results of operations.

Potential Year 2000 Non-Compliance. The "Year 2000 Issue" is typically the
result of software being written using two digits rather than four to define
the applicable year. The Company uses a significant number of computer
software programs and operating systems in its service offerings, financial
business systems and administrative functions. To the extent these software
applications are unable to appropriately interpret the upcoming calendar year
"2000", remediation of such applications will be necessary.

In addition, the Company has made an initial evaluation of the Year 2000
readiness of its key suppliers and other key third parties. The Company is
working with these parties to address the Year 2000 Issue and to obtain
appropriate assurances. The Company's operations could be materially adversely
affected if these third parties or the products or services they supply to
Tier are disrupted or impaired by the Year 2000 Issue.

23
<PAGE>

Potential Volatility of Stock Price. A public market for our Class B Common
Stock has existed only since the initial public offering of the Class B Common
Stock in December 1997. There can be no assurance that an active public market
will be sustained. The market for securities of early stage companies has been
highly volatile in recent years as a result of factors often unrelated to a
company's operations. Factors such as quarterly variations in operating
results, announcements of technological innovations or new products or
services by us or our competitors, general conditions in the IT industry or
the industries in which our clients compete, changes in earnings estimates by
securities analysts and general economic conditions such as recessions or high
interest rates could contribute to the volatility of the price of the Class B
Common Stock and could cause significant fluctuations. Further, in the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against the
issuing company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect on our business, financial condition and results of operations.
Any adverse determination in such litigation could also subject us to
significant liabilities. There can be no assurance that such litigation will
not be instituted in the future against us.

Issuance of Preferred Stock May Prevent Change in Control and Adversely
Affect Market Price for Class B Common Stock. The Board of Directors has the
authority to issue preferred stock and to determine the preferences,
limitations and relative rights of shares of preferred stock and to fix the
number of shares constituting any series and the designation of such series,
without any further vote or action by our shareholders. The preferred stock
could be issued with voting, liquidation, dividend and other rights superior
to the rights of our Class B Common Stock. The potential issuance of preferred
stock may delay or prevent a change in control of us, discourage bids for the
Class B Common Stock at a premium over the market price and adversely affect
the market price and the voting and other rights of the holders of our common
stock.

No Current Intention to Declare or Pay Dividends. We have never declared or
paid cash dividends on our capital stock and do not anticipate paying any cash
dividends in the foreseeable future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in market prices and rates. The Company is exposed to market risk
because of changes in foreign currency exchange rates as measured against the
U.S. dollar and currencies of the Company's subsidiaries and operations in
Australia and the United Kingdom.

Foreign Currency Exchange Rate Risk. The Company has wholly owned
subsidiaries in Australia and conducts operations in the United Kingdom
through a U.S.-incorporated subsidiary and a United Kingdom subsidiary.
Revenues from these operations are typically denominated in Australian Dollars
or British Pounds, respectively, thereby potentially affecting the Company's
financial position, results of operations and cash flows due to fluctuations
in exchange rates. The Company does not anticipate that near-term changes in
exchange rates will have a material impact on future earnings, fair values or
cash flows of the Company and has not engaged in foreign currency hedging
transactions for the nine months ended June 30, 1999. There can be no
assurance that a sudden and significant decline in the value of the Australian
Dollar or British Pound would not have a material adverse effect on the
Company's financial condition and results of operations.

24
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company received a notice dated December 17, 1998 that a prime
contractor was exercising its right to terminate one of the Company's
Australian projects alleging a breach of the sub-contract. The Company
believes that the termination was not valid under the terms of the sub-
contract and that it has not breached the agreement. In early January 1999,
the Company and the prime contractor reached an understanding to continue the
engagement on a time and materials basis with both parties retaining their
rights under the original agreement. In accordance with the January agreement,
the Company has continued to provide resources on a time and materials basis
on the engagement. The Company and the prime contractor met in early June to
discuss the project and resolution of outstanding issues. The parties were not
able to resolve the dispute at that time. On June 17, 1999, the Company
received a letter from the prime contractor requesting a plan to terminate the
Company's involvement in the project. After a series of further discussions
with the prime contractor concerning the future of the relationship between
the parties, the Company determined that it would establish a reserve for the
entire net receivable balance of $1,856,000. On June 28, 1999, the Company
also filed a civil action (Tier Technologies, Inc. v. Unisys Corporation) in
the U.S.D.C. for the Northern District of California seeking money damages in
excess of $2,000,000 and a declaration that the Company has performed its
duties and obligations under the agreement, that it has no further obligations
under the agreement, and that the prime contractor is obligated to pay the
Company all amounts outstanding under the agreement. On August 11, 1999, the
Company received the prime contractor's answer and counterclaim in response to
the Company's complaint. The prime contractor denied the Company's claim and
counterclaimed alleging breach of contract and seeking declaratory relief. The
prime contractor is also seeking damages in excess of $8 million and
indemnification for damages, claims, penalties, fines and/or other sanctions
which may be levied in the future by the client of the prime contractor. The
Company denies the prime contractor's allegations and intends to vigorously
pursue its own claim against the prime contractor.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

c. Effective as of April 30, 1999, in connection with the acquisition of
certain assets and the assumption of certain liabilities of the Technology
Training Services division ("TTS") of Automated Concepts, Inc., the Company
issued into escrow 172,406 shares of its Class B common stock registered in
the name of "Automated Concepts, Inc." At the time of issue the shares were
valued at $1.5 million. The shares are contingently issuable from escrow based
on the acquired business achieving certain levels of gross profit and revenues
measured annually over a two-year period. If contingent performance
requirements under the acquisition agreement are met, the number of shares to
be released from escrow will be determined utilizing the average closing price
of the Company's Class B common stock for the five trading days preceding each
performance anniversary. The offer and sale of these securities were made in
reliance on the exemption from registration under Section 4(2) and Regulation
D of the Securities Act of 1933.

25
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.49 Asset Purchase Agreement dated as of May 17, 1999 by and between the
Registrant and Humana, Inc.*

10.50 End User Agreement dated as of May 17, 1999 between the Registrant and
Humana, Inc.*

10.51 End User Agreement dated as of May 19, 1999 between the Registrant and
Humana, Inc.*

10.52 Amended and Restated Pledge Agreement, dated as of June 30, 1999, by
and between the Registrant and James L. Bildner

10.53 Second Amended and Restated Pledge Agreement, dated as of June 30,
1999, by and between the Registrant and James L. Bildner

10.54 Third Amended and Restated Pledge Agreement, dated as of June 30,
1999, by and between the Registrant and James L. Bildner

10.55 Third Amended and Restated Pledge Agreement, dated as of June 30,
1999, by and between the Registrant and William G. Barton

10.56 Amended and Restated Revolving Credit Agreement, dated as of May 28,
1999, by and between the Registrant, Tier Technologies (United
Kingdom) and BankBoston, N.A.

10.57 First Amendment to Amended and Restated Revolving Credit Agreement,
dated as of June 30, 1999, by and between the Registrant, Tier
Technologies (United Kingdom), Inc. and BankBoston, N.A.

10.58 Standard Services Contract Agreement, dated as of June 1, 1999, by and
between the Registrant and the Maryland Department of Human Resources

10.59 Contract, dated as of May 27, 1999, by and between the Registrant and
the State of Tennessee Department of Human Services

27.1 Financial Data Schedule
</TABLE>
- --------
* Filed as an exhibit to the Registrant's Current Report on Form 8-K, filed
on June 16, 1999.

(b) Reports on Form 8-K.

Current Report on Form 8-K, filed on April 6, 1999 pursuant to Item 5
regarding the acquisition of certain assets and liabilities of Service Design
Associates, Inc.

Current Report on Form 8-K, filed on May 14, 1999 pursuant to Item 5
regarding the acquisition of certain assets and liabilities of Automated
Concepts, Inc.

Current Report on Form 8-K, filed on June 16, 1999 pursuant to Item 5
regarding the acquisition of a project management system and intellectual
property rights.

26
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Tier Technologies, Inc.

Dated: August 13, 1999

By: /s/ James L. Bildner
-----------------------------------
James L. Bildner
Chairman of the Board and Chief
Executive Officer
(Duly Authorized Officer)

By: /s/ George K. Ross
-----------------------------------
George K. Ross
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)

27
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<C> <S> <C>
10.52 Amended and Restated Pledge Agreement, dated as of June 30,
1999, by and between the Registrant and James L. Bildner

10.53 Second Amended and Restated Pledge Agreement, dated as of June
30, 1999, by and between the Registrant and James L. Bildner

10.54 Third Amended and Restated Pledge Agreement, dated as of June
30, 1999, by and between the Registrant and James L. Bildner

10.55 Third Amended and Restated Pledge Agreement, dated as of June
30, 1999, by and between the Registrant and William G. Barton

10.56 Amended and Restated Revolving Credit Agreement, dated as of
May 28, 1999, by and between the Registrant, Tier Technologies
(United Kingdom) and BankBoston, N.A.

10.57 First Amendment to Amended and Restated Revolving Credit
Agreement, dated as of June 30, 1999, by and between the
Registrant, Tier Technologies (United Kingdom) and BankBoston,
N.A.

10.58 Standard Services Contract Agreement, dated as of June 1, 1999,
by and between the Registrant and the Maryland Department of
Human Resources

10.59 Contract, dated as of May 27, 1999, by and between the
Registrant and the State of Tennessee Department of Human
Services

27.1 Financial Data Schedule
</TABLE>

<PAGE>

EXHIBIT 10.52

AMENDED AND RESTATED PLEDGE AGREEMENT

This AMENDED AND RESTATED PLEDGE AGREEMENT (the "Agreement"), dated as of
June 30, 1999, is between TIER TECHNOLOGIES, INC. (the "Company") and JAMES L.
BILDNER ("Bildner").

WHEREAS, on December 22, 1998, Bildner entered into an indemnification
agreement with the Company (the "Indemnification Agreement") pursuant to which
Bildner and Nancy J. Bildner (each, an "Indemnitor" and together, the
"Indemnitors") agreed to indemnify the Company for any loss, claim, action,
cause of action, liability, cost or expense made under or incurred in connection
with that certain Guaranty dated December 22, 1998 (the "Guaranty"); and

WHEREAS, in an agreement dated December 22, 1998 (the "Pledge Agreement"),
Bildner agreed to pledge certain shares of Tier Technologies, Inc. common stock
owned by Bildner to secure the Indemnitors' obligations under the
Indemnification Agreement; and

WHEREAS, due to fluctuations in the Company's stock price, the amount of
shares pledged pursuant to this Agreement decreases or increases each quarter,
causing administrative burdens on Bildner, the Company and other parties who may
hold the shares on behalf of Bildner; and

WHEREAS, the Company feels that Bildner is a valued employee of the Company
and that it would be in the best interests of the Company to alleviate the
administrative burdens caused by such share fluctuations; and

WHEREAS, Bildner and the Company wish to amend the Pledge Agreement by
means of this "Amended and Restated Pledge Agreement";

NOW, THEREFORE, for good and valuable consideration and to secure the
payment of the Indemnitors' obligations to the Company, the parties agree as
follows:

1. Bildner's Obligations.
---------------------

(a) The Indemnitors have executed and delivered to NationsBank, N.A. (the
"Lender") a Promissory Note dated August 27, 1998 in the principal amount of
$2,310,000 (the "Note").

(b) The Company has executed and delivered the Guaranty guaranteeing the
Indemnitors' loan obligations to the Lender for an amount up to an aggregate of
$1,000,000.

(c) The Indemnitors have executed and delivered the Indemnification
Agreement indemnifying the Company for any loss, claim, action, cause of action,
liability, cost or expense made under or incurred in connection with the
Guaranty.

1
<PAGE>

(d) The number of shares of Class B Common Stock of the Company set forth
on Schedule A hereto, which are currently owned by Bildner, shall serve as
security for the Indemnitors' obligations under the Indemnification Agreement
(the "Shares").

2. Pledge. Bildner hereby pledges to the Company, and grants to the Company a
------
security interest in, the following (the "Pledged Collateral"): (i) the Shares
and the certificates representing the Shares; and (ii) securities of the Company
associated with the Shares issued in connection with any stock dividend or stock
split, or securities of the Company issued in connection with a
recapitalization, merger, reorganization or similar transaction.

3. Security for Obligations.
------------------------

(a) This Agreement secures the payment of all of Bildner's present and
future obligations, duties and liabilities under the Indemnification Agreement
and under this Agreement (all referred to as the "Obligations").

(b) This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until payment
in full of the Obligations; (ii) be binding upon Bildner and his successors and
assigns; and (iii) inure to the benefit of the Company and its successors,
transferees, and assigns.

4. Delivery of Pledged Shares. All certificates or instruments representing or
--------------------------
evidencing the Shares shall be held by or on behalf of the Company under this
Agreement and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Company. If Bildner fails to perform
any Obligation contained in this Agreement, the Company may itself perform, or
cause performance of, that Obligation, and the expenses of the Company incurred
in connection with that performance shall be payable by Bildner under Section 9
hereto.

5. Representations and Warranties. Bildner represents and warrants as follows:
------------------------------

(a) Bildner is the beneficial and record owner of the Pledged Collateral
free and clear of any lien on the Pledged Collateral except for the security
interest created by this Agreement.

(b) The pledge of the Pledged Collateral under this Agreement creates a
valid and perfected first priority interest in the Pledged Collateral, securing
the payment of the Obligations.

(c) No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by Bildner of the Pledged Collateral under this Agreement or
for the execution, delivery, or performance of this Agreement by Bildner; or
(ii) for the exercise by the Company of the voting or other rights provided for
in this Agreement or the remedies in respect of the Pledged Collateral under
this Agreement (other than restrictions under any federal or state securities
law applicable to the offer or sale of unregistered securities).

6. Rights in Absence of Default.
----------------------------
2
<PAGE>

(a) So long as there has been and is no Event of Default: (i) involving
failure by either or both Indemnitors to fill its or their obligations under the
Indemnification Agreement, or (ii) involving the voluntary placement by Bildner
of a lien upon all or a significant portion of the Pledged Collateral:

(i) Bildner shall be entitled to exercise any and all voting and other
consensual rights pertaining to any or all of the Shares, subject to any other
agreement to which the Shares may be subject.

(ii) Securities of the Company associated with the Shares issued in
connection with any stock dividend or stock split, or securities of the Company
issued in connection with a recapitalization, merger, reorganization or similar
transaction shall be immediately delivered to the Company as Pledged Collateral
in the same form as so received (with any necessary endorsement). Any other
dividends, distributions, or interest paid or payable in respect of, or
instruments and other property received, receivable, or otherwise distributed in
respect of, or in exchange for, any Pledged Collateral shall be paid to Bildner.

(iii) The Company shall execute and deliver (or cause to be executed
and delivered) to Bildner all such proxies and other instruments as Bildner may
reasonably request for the purpose of enabling him to exercise the voting and
other rights that he is entitled to exercise pursuant to paragraph (i) of this
Section 6(a).

(b) When and so long as there is an Event of Default (i) involving failure
by either or both Indemnitors to fulfill its or their obligations under the
Indemnification Agreement, or (ii) involving the voluntary placement by Bildner
of a lien upon all or a significant portion of the Pledged Collateral, all
rights of Bildner to exercise the voting and other rights that he would
otherwise be entitled to exercise pursuant to Section 6(a)(i) shall cease, and
all those rights shall become vested in the Company, which shall then have the
sole right to exercise those voting and other rights.

7. Transfers and Liens. Bildner agrees that he will not (i) sell or otherwise
-------------------
dispose of, or grant any option with respect to, any of the Pledged Collateral
without the prior written consent of the Company; or (ii) voluntarily create any
lien upon or with respect to any of the Pledged Collateral, except for the
security interest under this Agreement.

8. Events of Default; Remedies upon Default.
----------------------------------------

(a) The following shall constitute Events of Default ("Events of Default")
under this Agreement:

(i) If Bildner fails to perform or observe any term, covenant, or
Obligation under this Agreement or either Indemnitor fails to perform or observe
any term, covenant, or obligation under the Indemnification Agreement, or if any
representation or warranty made by Bildner or the Indemnitors in this Agreement
or the Indemnification Agreement is untrue or misleading in any material respect
as of the date with respect to which that representation or warranty was made;

3
<PAGE>

(ii) If a notice of lien, levy, or assessment is filed or recorded with
respect to all or a substantial part of the Pledged Collateral, except for a
lien that relates to current taxes not yet due and payable, and if the
applicable claim is not discharged or satisfied within ninety (90) days of
Bildner's actual knowledge of that filing or recordation (such effected Pledged
Collateral shall hereinafter be referred to as the "Effected Collateral");

(iii) If all or a substantial part of the Pledged Collateral is
attached, seized, or subjected to a writ or distress warrant, or is levied upon,
or comes within the possession of any receiver, trustee, custodian, or assignee
for the benefit of creditors, and that Pledged Collateral is not returned to
Bildner or the writ, distress warrant, or levy is not dismissed, stayed, or
lifted within ninety (90) days (such effected Pledged Collateral shall
hereinafter be referred to as the "Effected Collateral").

(iv) Provided; however, with respect to subparagraphs 8(a)(ii) and
(iii) hereto, if prior to the end of such ninety (90) day period, Bildner
provides the Company with additional collateral to secure the Obligations with a
fair market value equal to 110% of the fair market value of the Effected
Collateral, which collateral may be Shares or cash (or such other collateral,
subject to the consent of the Company, which consent shall not be unreasonably
withheld) at the discretion of Bildner and which collateral Bildner hereby
agrees shall be subject to the terms of this Agreement, no Event of Default
shall be deemed to have occurred.

(b) When and so long as there is any Event of Default, the Company may
exercise in respect of the Pledged Collateral, in addition to other rights and
remedies provided for in this Agreement or otherwise available to it, all the
rights and remedies of a secured party upon a default under the Uniform
Commercial Code in effect in the State of California at that time.

(c) Notwithstanding anything else contained herein to the contrary, so long
as there has been and is no Event of Default: (i) involving failure by either or
both Indemnitors to fulfill its or their obligations under the Indemnification
Agreement, or (ii) involving the voluntary placement by Bildner of a lien upon
all or a significant portion of the Pledged Collateral, Bildner shall be
entitled to exercise any and all voting and other consensual rights pertaining
to any or all of the Shares.

9. Expenses. On demand, Bildner will pay the Company all reasonable expenses,
--------
including attorneys' fees and costs, which the Company may incur in connection
with (i) the exercise or enforcement of any of the rights of the Company under
this Agreement; or (ii) Bildner's failure to perform or observe any of the
provisions of this Agreement.

10. Security Interest Absolute. All rights and security interests of the
--------------------------
Company, and all Obligations of Bildner, under this Agreement shall be absolute
and unconditional irrespective of: (i) any lack of validity or enforceability of
the Indemnification Agreement or any other agreement or instrument relating to
it; (ii) any change in the time, manner, or place of payment of, or in any other
term of, any of the Obligations, or any other amendment or waiver of or consent
to any departure from the Indemnification Agreement; (iii) any exchange,
release, or non-perfection of any other collateral, or any release, amendment,
or waiver of any of the

4
<PAGE>
Obligations; or (iv) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Bildner in respect of the Obligations
or of this Agreement.

11. Further Assurances. Bildner agrees that at any time and from time to time,
------------------
at his expense, Bildner will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Company may request, in order to perfect and protect any
security interest granted or purported to be granted by this Agreement or to
enable the Company to exercise and enforce its rights and remedies under this
Agreement with respect to any Pledged Collateral.

12. Entire Agreement; Amendment; Waiver. This Agreement and the Indemnification
-----------------------------------
Agreement embody the entire agreement of the parties hereto with respect to the
subject matter of this Agreement and supersede all prior agreements with respect
to that subject matter. This Agreement may not be amended or modified except in
a writing signed by both parties. No waiver of any provision of this Agreement
shall be deemed to, or shall, operate as a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
Except as expressly provided in this Agreement, no waiver shall be binding
unless executed in writing by the party making the waiver.

13. Notices. All notices and other communications provided for under this
-------
Agreement shall be given as follows:

If to the Company:

TIER TECHNOLOGIES, INC.
1350 Treat Boulevard, Suite 250
Walnut Creek, CA 94596
Attn: Chief Financial Officer

If to Bildner:

JAMES L. BILDNER
5 Boardman Avenue
Manchester, MA 01944

14. Captions. Captions are used for reference purposes only and should be
--------
ignored in the interpretation of the Agreement. Unless the context requires
otherwise, all references in this Agreement to Sections are to the sections of
this Agreement.

15. Governing Law; Terms. This Agreement shall be governed by and construed in
--------------------
accordance with the laws of the State of California applicable to contracts
wholly made and performed in the State of California. Unless otherwise defined
above, terms defined in Division 9 of the Uniform Commercial Code as adopted in
the State of California are used in this Agreement with their statutory
meanings.

5
<PAGE>

The parties have duly executed this Agreement as of the date first written
above.

TIER TECHNOLOGIES, INC.

By: /s/ George K. Ross
-------------------------------
George K. Ross
Its: Executive Vice President and
Chief Financial Officer

JAMES L. BILDNER

/s/ James L. Bildner
- -----------------------------------
James L. Bildner

6
<PAGE>

STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain AMENDED AND RESTATED PLEDGE
AGREEMENT dated as of June 30, 1999 (the "Agreement"), the undersigned hereby
sells, assigns, and transfers to TIER TECHNOLOGIES, INC. (the "Company"),
__________ (__________) shares of Class B Common Stock of the Company, standing
in the undersigned's name on the books of the Company represented by Certificate
No(s). ______ delivered herewith. The undersigned does hereby irrevocably
constitute and appoint the Secretary of the Company as the undersigned's
attorney-in-fact, with full power of substitution, to transfer this stock on the
books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE
AGREEMENT.

JAMES L. BILDNER

/s/ James L. Bildner
- ----------------------------
James L. Bildner

Instructions: Please sign this Stock Power above, but do not fill in any blanks
other than the signature lines.

The purpose of this Stock Power and Assignment Separate from Stock Certificate
is to enable the Company to acquire the Shares in accordance with the terms of
the Agreement.

7
<PAGE>

SCHEDULE A

PLEDGED SHARES AND
OTHER COLLATERAL

<TABLE>
<CAPTION>
FAIR MARKET OTHER
VALUE OF SHARES COLLATERAL
DATE SHARES PLEDGED PLEDGED /VALUE
------------- -------------- --------------- ----------
<S> <C> <C> <C>
June 30, 1999 126,619

</TABLE>

<PAGE>

EXHIBIT 10.53

SECOND AMENDED AND RESTATED PLEDGE AGREEMENT

This SECOND AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of June 30,
1999, is between TIER TECHNOLOGIES, INC. (the "Company") and JAMES L. BILDNER
("Bildner").

WHEREAS, on February 28, 1997, Bildner entered into a promissory note
payable to the Company in the amount of $283,600, due February 28, 2007 (the
"First Note"), secured by shares of Class A Common Stock of the Company owned by
Bildner pursuant to a pledge agreement dated as of February 28, 1997 (the
"Pledge Agreement"); and

WHEREAS, Bildner and the Company amended and restated the First Note and
replaced it with a revised note (the "April 1998 Note") and amended and restated
the Pledge Agreement in order to facilitate the operation of Section 11(b)
thereof with respect to adjustment for excess collateral ("Amended and Restated
Pledge Agreement"); and

WHEREAS, Bildner and the Company wish to amend the Pledge Agreement by
means of this "Second Amended and Restated Pledge Agreement";

NOW, THEREFORE, for good and valuable consideration and to secure the
payment of Bildner's indebtedness to the Company, the parties agree as follows:

1. Bildner's Indebtedness.
----------------------

(a) In connection herewith Bildner has delivered the April 1998 Note,
payable to the order of the Company in an aggregate principal amount two hundred
and eighty three thousand, six hundred dollars ($283,600.00).

(b) The number of shares of Class A Common Stock of the Company set forth
on Schedule A hereto, which are currently beneficially owned by Bildner, shall
serve as the security for the Note (the "Shares").

(c) Bildner has executed the Note and is required to secure the April 1998
Note by a pledge of the Shares and the delivery of this Agreement.

1
<PAGE>

3. Security for Obligations.
------------------------

(a) This Agreement secures the payment of all of Bildner's present and
future obligations, duties, and liabilities under the Note and under this
Agreement (all referred to as the "Obligations").

5. Representations and Warranties. Bildner represents and warrants as follows:
------------------------------

(a) Bildner is the beneficial owner of the Pledged Collateral free and
clear of any lien on the Pledged Collateral except for the security interest
created by this Agreement and the other terms and conditions set forth in the
Stock Option Agreements. The Pledged Collateral is held of record by the Tier
Technologies, Inc.
Voting Trust.

(b) The pledge of the Pledged Collateral under this Agreement creates a
valid and perfected first priority interest in the Pledged Collateral, securing
the payment of the Obligations.

2
<PAGE>

6. Rights in Absence of Default.
----------------------------

(a) So long as there has been and is no Event of Default: (i) involving
failure to make the payment described in Section 2 of the April 1998 Note, or
(ii) involving the voluntary placement by Bildner of a lien upon all or a
significant portion of the Pledged Collateral:

(i) Bildner shall be entitled to exercise any and all voting and other
consensual rights pertaining to any or all of the Shares.

(b) When and so long as there is an Event of Default (i) involving failure
to make the payment described in Section 2 of the April 1998 Note, or (ii)
involving the voluntary placement by Bildner of a lien upon all or a significant
portion of the Pledged Collateral, all rights of Bildner to exercise the voting
and other rights that he would otherwise be entitled to exercise pursuant to
Section 6(a)(i) shall cease, and all those rights shall become vested in the
Company, which shall then have the sole right to exercise those voting and other
rights.

8. Events of Default; Remedies upon Default.
----------------------------------------

(a) The following shall constitute Events of Default ("Events of Default")
under this Agreement:

(i) If Bildner fails to perform or observe any term, covenant, or
Obligation under this Agreement or the April 1998 Note, or if any representation
or warranty made by Bildner in this Agreement or the April 1998 Note is untrue
or misleading in any material respect as of the date with respect to which that
representation or warranty was made;

3
<PAGE>

(iv) Provided; however, with respect to subparagraphs 8(a)(ii) and
(iii) hereto, if prior to the end of such ninety (90) day period, Bildner
provides the Company with additional collateral to secure the April 1998 Note
with a fair market value equal to or exceeding the fair market value of the
Effected Collateral, which collateral may be Shares or cash (or such other
collateral, subject to the consent of the Company, which consent shall not be
unreasonably withheld) at the discretion of Bildner and which collateral Bildner
hereby agrees shall be subject to the terms of this Agreement, no Event of
Default shall be deemed to have occurred.

(c) Notwithstanding anything else contained herein to the contrary, so long
as there has been and is no Event of Default: (i) involving failure to make the
payment described in Section 2 of the April 1998 Note, or (ii) involving the
voluntary placement by Bildner of a lien upon all or a significant portion of
the Pledged Collateral, Bildner shall be entitled to exercise any and all voting
and other consensual rights pertaining to any or all of the Shares.

10. Security Interest Absolute. All rights and security interests of the
--------------------------
Company, and all Obligations of Bildner, under this Agreement shall be absolute
and unconditional irrespective of: (i) any lack of validity or enforceability of
the April 1998 Note or any other agreement or instrument relating to it; (ii)
any change in the time, manner, or place of payment of, or in any other term of,
any of the Obligations, or any other amendment or waiver of or consent to any
departure from the April 1998 Note; (iii) any exchange, release, or
non-perfection of any other collateral, or any release, amendment, or waiver of
any of the Obligations; or (iv) any other

4
<PAGE>

circumstance that might otherwise constitute a defense available to, or a
discharge of, Bildner in respect of the Obligations or of this Agreement.

12. Entire Agreement; Amendment; Waiver. This Agreement and the April 1998 Note
-----------------------------------
embody the entire agreement of the parties hereto with respect to the subject
matter of this Agreement and supersede all prior agreements with respect to that
subject matter. This Agreement may not be amended or modified except in a
writing signed by both parties. No waiver of any provision of this Agreement
shall be deemed to, or shall, operate as a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
Except as expressly provided in this Agreement, no waiver shall be binding
unless executed in writing by the party making the waiver.

13. Notices. All notices and other communications provided for under this
-------
Agreement shall be given as follows:

If to the Company:

TIER TECHNOLOGIES, INC.
1350 Treat Boulevard, Suite 250
Walnut Creek, CA 94596
Attn: Chief Financial Officer

If to Bildner:

JAMES L. BILDNER
5 Boardman Avenue
Manchester, MA 01944

5
<PAGE>

The parties have duly executed this Agreement as of the date first written
above.

TIER TECHNOLOGIES, INC.

By: /s/ George K. Ross
-----------------------------
George K. Ross
Its: Executive Vice President and
Chief Financial Officer

JAMES L. BILDNER

/s/ James L. Bildner
- ----------------------------------
James L. Bildner

6
<PAGE>

STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain SECOND AMENDED AND RESTATED
PLEDGE AGREEMENT dated as of June 30, 1999 (the "Agreement"), the undersigned
hereby sells, assigns, and transfers to TIER TECHNOLOGIES, INC. (the "Company"),
__________ (__________) shares of Class A Common Stock of the Company, standing
in the undersigned's name on the books of the Company represented by Certificate
No(s). ______ delivered herewith. The undersigned does hereby irrevocably
constitute and appoint the Secretary of the Company as the undersigned's
attorney-in-fact, with full power of substitution, to transfer this stock on the
books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE
AGREEMENT.

JAMES L. BILDNER

/s/ James L. Bildner
- ----------------------------
James L. Bildner

Instructions: Please sign this Stock Power above, but do not fill in any blanks
other than the signature lines.

The purpose of this Stock Power and Assignment Separate from Stock Certificate
is to enable the Company to acquire the Shares in accordance with the terms of
the Agreement.

7
<PAGE>

SCHEDULE A

PLEDGED SHARES AND
OTHER COLLATERAL

<TABLE>
<CAPTION>
FAIR MARKET VALUE OF SHARES OTHER COLLATERAL
DATE SHARES PLEDGED PLEDGED /VALUE
---- -------------- ------- ------
<S> <C> <C> <C>
June 30, 1999 37,436
</TABLE>

<PAGE>

EXHIBIT 10.54
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT

This THIRD AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of June 30,
1999, is between TIER TECHNOLOGIES, INC. (the "Company") and JAMES L. BILDNER
("Bildner").

WHEREAS, on February 28, 1997, Bildner entered into two promissory notes
payable to the Company totaling $1,218,800.00 due February 28, 2007 (the "First
Notes"), secured by a mortgage filed upon Bildner's residence in Manchester,
Massachusetts and a pledge agreement relating to certain shares of common stock
of the Company owned by Bildner dated as of February 28, 1997 (the "Pledge
Agreement"); and

WHEREAS, on August 1, 1997, the First Notes were combined into one note
(the "August Note") and the Pledge Agreement was amended and restated (the
"First Amended and Restated Pledge Agreement"); and

WHEREAS, on April 1, 1998 (the "April 1998 Note"), Bildner and the Company
amended and restated the note (and Pledge Agreement) in order to facilitate the
operation of Section 11(b) thereof with respect to adjustment for excess
collateral ("Second Amended and Restated Pledge Agreement"); and

WHEREAS, Bildner and the Company wish to amend the Second Amended and
Restated Pledge Agreement by means of this "Third Amended and Restated Pledge
Agreement";

NOW, THEREFORE, for good and valuable consideration and to secure the
payment of Bildner's indebtedness to the Company, the parties agree as follows:

1. Bildner's Indebtedness.
----------------------

(a) In connection herewith Bildner has delivered the April 1998 Note,
payable to the order of the Company in an aggregate principal amount of one
million, two hundred and eighteen thousand, eight hundred dollars
($1,218,800.00).

1
<PAGE>

(c) Bildner has executed the April 1998 Note and is required to secure the
April 1998 Note by a pledge of the Shares and the delivery of this Agreement.

3. Security for Obligations.
------------------------

(a) This Agreement secures the payment of all of Bildner's present and
future obligations, duties, and liabilities under the April 1998 Note and under
this Agreement (all referred to as the "Obligations").

5. Representations and Warranties. Bildner represents and warrants as follows:
------------------------------

(b) The pledge of the Pledged Collateral under this Agreement creates a
valid and perfected first priority interest in the Pledged Collateral, securing
the payment of the Obligations.

2
<PAGE>

6. Rights in Absence of Default.
----------------------------

(i) Bildner shall be entitled to exercise any and all voting and other
consensual rights pertaining to any or all of the Shares.

(iii) Company shall execute and deliver (or cause to be executed and
delivered) to Bildner all such proxies and other instruments as Bildner may
reasonably request for the purpose of enabling him to exercise the voting and
other rights that he is entitled to exercise pursuant to paragraph (i) of this
Section 6(a).

8. Events of Default; Remedies upon Default.
----------------------------------------

(a) The following shall constitute Events of Default ("Events of Default")
under this Agreement:

(ii) If a notice of lien, levy, or assessment is filed or recorded with
respect to all or a substantial part of the Pledged Collateral, except for a
lien that relates to current taxes not yet due

3
<PAGE>

and payable, and if the applicable claim is not discharged or satisfied within
ninety (90) days of Bildner's actual knowledge of that filing or recordation
(such effected Pledged Collateral shall hereinafter be referred to as the
"Effected Collateral");

(iv) Provided; however, with respect to subparagraphs 8(a)(ii) and
(iii) hereto, if prior to the end of such ninety (90) day period, Bildner
provides the Company with additional collateral to secure the April 1998 Note
with a fair market value equal to or exceeding the fair market value of the
Effected Collateral, which collateral may be Shares or cash (or such other
collateral, subject to the consent of the Company, which consent shall not be
unreasonably withheld) at the discretion of Bildner and which collateral Bildner
hereby agrees shall be subject to the terms of this Agreement, no Event of
Default shall be deemed to have occurred.

10. Security Interest Absolute. All rights and security interests of the
--------------------------
Company, and all Obligations of Bildner, under this Agreement shall be absolute
and unconditional irrespective of: (i) any lack of validity or enforceability of
the April 1998 Note or any other agreement or instrument relating to it; (ii)
any change in the time, manner, or place of payment of, or in any other term of,
any of the Obligations, or any other amendment or waiver of or consent to any
departure from the April 1998 Note; (iii) any exchange, release, or
non-perfection of any other collateral, or any release, amendment, or waiver of
any of the Obligations; or (iv) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Bildner in respect of the
Obligations or of this Agreement.

4
<PAGE>

13. Notices. All notices and other communications provided for under this
-------
Agreement shall be given as follows:

If to the Company:

TIER TECHNOLOGIES, INC.
1350 Treat Boulevard, Suite 250
Walnut Creek, CA 94596
Attn: Chief Financial Officer

If to Bildner:

JAMES L. BILDNER
5 Boardman Avenue
Manchester, MA 01944

5
<PAGE>

Division 9 of the Uniform Commercial Code as adopted in the State of California
are used in this Agreement with their statutory meanings.

The parties have duly executed this Agreement as of the date first written
above.

TIER TECHNOLOGIES, INC.

By: /s/ George K. Ross
-----------------------------
George K. Ross
Its: Executive Vice President and
Chief Financial Officer

JAMES L. BILDNER

/s/ James L. Bildner
- ---------------------------------
James L. Bildner

6
<PAGE>

STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain THIRD AMENDED AND RESTATED
PLEDGE AGREEMENT dated as of June 30, 1999 (the "Agreement"), the undersigned
hereby sells, assigns, and transfers to TIER TECHNOLOGIES, INC. (the "Company"),
( ) shares of Class A Common Stock of the Company,
- ------------ ----------
standing in the undersigned's name on the books of the Company represented by
Certificate No(s). delivered herewith. The undersigned does hereby
------
irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
this stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT.

JAMES L. BILDNER

/s/ James L. Bildner
- -----------------------------
James L. Bildner

Instructions: Please sign this Stock Power above, but do not fill in any blanks
other than the signature lines.

The purpose of this Stock Power and Assignment Separate from Stock Certificate
is to enable the Company to acquire the Shares in accordance with the terms of
the Agreement.

7
<PAGE>

SCHEDULE A

PLEDGED SHARES AND
OTHER COLLATERAL

<TABLE>
<CAPTION>
FAIR MARKET VALUE OF SHARES OTHER COLLATERAL
DATE SHARES PLEDGED PLEDGED /VALUE
- ---- -------------- ------- ------
<S> <C> <C> <C>
June 30, 1999 139,628
</TABLE>

<PAGE>

EXHIBIT 10.55
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT

This THIRD AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement"), dated
as of June 30, 1999, is between TIER TECHNOLOGIES, INC. (the "Company") and
WILLIAM G. BARTON ("Barton").

WHEREAS, on February 28, 1997, Barton entered into a promissory note
payable to the Company in the amount of $939,800, due February 28, 2007 (the
"Note"), secured by shares of Common Stock of the Company owned by Barton
pursuant to a pledge agreement dated as of February 28, 1997, as amended by the
Amended and Restated Pledge Agreement dated as of August 1, 1997 (the "Pledge
Agreement"); and

WHEREAS, Barton and the Company amended and restated the Note and replaced
it with a revised note (the "August 1998 Note") and amended and restated the
Pledge Agreement ("Second Amended and Restated Pledge Agreement") in order to
facilitate the operation of Section 11(b) thereof and to secure the August 1998
Note with Class A Common Stock beneficially owned by Barton;

WHEREAS, due to fluctuations in the Company's stock price, the amount of
shares pledged pursuant to this Agreement decreases or increases each quarter,
causing administrative burdens on Barton, the Company and other parties who may
hold the shares on behalf of Barton; and

WHEREAS, the Company feels that Barton is a valued employee of the Company
and that it would be in the best interests of the Company to alleviate the
administrative burdens caused by such share fluctuations; and

WHEREAS, Barton and the Company wish to amend the Pledge Agreement by means
of this "Third Amended and Restated Pledge Agreement";

NOW, THEREFORE, for good and valuable consideration and to secure the payment of
Barton's indebtedness to the Company, the parties agree as follows:

1. Barton's Indebtedness.
---------------------

(a) In connection herewith Barton has delivered the August 1998 Note,
payable to the order of the Company in an aggregate principal amount of nine
hundred and thirty-nine thousand, eight hundred dollars ($939,800.00).

(b) The number of shares of Class A Common Stock of the Company set forth
on Schedule A hereto, which are currently beneficially owned by Barton, shall
serve as the security for the August 1998 Note (the "Shares").

1
<PAGE>

(c) Barton has executed the August 1998 Note and is required to secure the
August 1998 Note by a pledge of the Shares and delivery of this Third Amended
and Restated Pledge Agreement.

2. Pledge. Barton hereby pledges to the Company, and grants to the Company a
------
security interest in, the following (the "Pledged Collateral"): (i) the Shares
and the certificates representing the Shares; and (ii) securities of the Company
associated with the Shares issued in connection with any stock dividend or stock
split, or securities of the Company issued in connection with a
recapitalization, merger, reorganization or similar transaction.

3. Security for Obligations.
------------------------

(a) This Agreement secures the payment of all of Barton's present and
future obligations, duties and liabilities under the August 1998 Note and under
this Agreement (all referred to as the "Obligations").

(b) This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until payment
in full of the Obligations; (ii) be binding upon Barton and his successors and
assigns; and (iii) inure to the benefit of the Company and its successors,
transferees, and assigns.

4. Delivery of Pledged Shares. All certificates or instruments representing or
--------------------------
evidencing the Shares shall be held by or on behalf of the Company under this
Agreement and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Company. If Barton fails to perform
any Obligation contained in this Agreement, the Company may itself perform, or
cause performance of, that Obligation, and the expenses of the Company incurred
in connection with that performance shall be payable by Barton under Section 9
hereto.

5. Representations and Warranties. Barton represents and warrants as follows:
------------------------------

(a) Barton is the beneficial owner of the Pledged Collateral free and clear
of any lien on the Pledged Collateral except for the security interest created
by this Agreement and the other terms and conditions set forth in the Stock
Option Agreements. The Pledged Collateral is held of record by the Tier
Technologies, Inc.
Voting Trust.

(b) The pledge of the Pledged Collateral under this Agreement creates a
valid and perfected first priority interest in the Pledged Collateral, securing
the payment of the Obligations.

(c) No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by Barton of the Pledged Collateral under this Agreement or
for the execution, delivery, or performance of this Agreement by Barton; or (ii)
for the exercise by the Company of the voting or other rights provided for in
this Agreement or the remedies in respect of the Pledged Collateral under this

2
<PAGE>

Agreement (other than restrictions under any federal or state securities law
applicable to the offer or sale of unregistered securities).

6. Rights in Absence of Default.
----------------------------

(a) So long as there has been and is no Event of Default: (i) involving
failure to make the payment described in Section 2 of the August 1998 Note, or
(ii) involving the voluntary placement by Barton of a lien upon all or a
significant portion of the Pledged Collateral:

(i) Barton shall be entitled to exercise any and all voting and other
consensual rights pertaining to any or all of the Shares, subject to any other
agreement to which the Shares may be subject.

(iii) The Company shall execute and deliver (or cause to be executed
and delivered) to Barton all such proxies and other instruments as Barton may
reasonably request for the purpose of enabling him to exercise the voting and
other rights that he is entitled to exercise pursuant to paragraph (i) of this
Section 6(a).

(b) When and so long as there is an Event of Default (i) involving failure
to make the payment described in Section 2 of the August 1998 Note, or (ii)
involving the voluntary placement by Barton of a lien upon all or a significant
portion of the Pledged Collateral, all rights of Barton to exercise the voting
and other rights that he would otherwise be entitled to exercise pursuant to
Section 6(a)(i) shall cease, and all those rights shall become vested in the
Company, which shall then have the sole right to exercise those voting and other
rights.

7. Transfers and Liens. Barton agrees that he will not (i) sell or otherwise
-------------------
dispose of, or grant any option with respect to, any of the Pledged Collateral
without the prior written consent of the Company; or (ii) voluntarily create any
lien upon or with respect to any of the Pledged Collateral, except for the
security interest under this Agreement.

8. Events of Default; Remedies upon Default.
----------------------------------------

(a) The following shall constitute Events of Default ("Events of Default")
under this Agreement:

(i) If Barton fails to perform or observe any term, covenant, or
Obligation under this Agreement or the August 1998 Note, or if any
representation or warranty made by Barton in

3
<PAGE>

this Agreement or the August 1998 Note is untrue or misleading in any material
respect as of the date with respect to which that representation or warranty was
made;

(ii) If a notice of lien, levy, or assessment is filed or recorded with
respect to all or a substantial part of the Pledged Collateral, except for a
lien that relates to current taxes not yet due and payable, and if the
applicable claim is not discharged or satisfied within ninety (90) days of
Barton's actual knowledge of that filing or recordation (such effected Pledged
Collateral shall hereinafter be referred to as the "Effected Collateral");

(iii) If all or a substantial part of the Pledged Collateral is
attached, seized, or subjected to a writ or distress warrant, or is levied upon,
or comes within the possession of any receiver, trustee, custodian, or assignee
for the benefit of creditors, and that Pledged Collateral is not returned to
Barton or the writ, distress warrant, or levy is not dismissed, stayed, or
lifted within ninety (90) days (such effected Pledged Collateral shall
hereinafter be referred to as the "Effected Collateral").

(iv) Provided; however, with respect to subparagraphs 8(a)(ii) and
(iii) hereto, if prior to the end of such ninety (90) day period, Barton
provides the Company with additional collateral to secure the August 1998 Note
with a fair market value equal to or exceeding the fair market value of the
Effected Collateral, which collateral may be Shares or cash (or such other
collateral, subject to the consent of the Company, which consent shall not be
unreasonably withheld) at the discretion of Barton and which collateral Barton
hereby agrees shall be subject to the terms of this Agreement, no Event of
Default shall be deemed to have occurred.

(c) Notwithstanding anything else contained herein to the contrary, so long
as there has been and is no Event of Default: (i) involving failure to make the
payment described in Section 2 of the August 1998 Note, or (ii) involving the
voluntary placement by Barton of a lien upon all or a significant portion of the
Pledged Collateral, Barton shall be entitled to exercise any and all voting and
other consensual rights pertaining to any or all of the Shares.

9. Expenses. On demand, Barton will pay the Company all reasonable expenses,
--------
including attorneys' fees and costs, which the Company may incur in connection
with (i) the exercise or enforcement of any of the rights of the Company under
this Agreement; or (ii) Barton's failure to perform or observe any of the
provisions of this Agreement.

10. Security Interest Absolute. All rights and security interests of the
--------------------------
Company, and all Obligations of Barton, under this Agreement shall be absolute
and unconditional irrespective of: (i) any lack of validity or enforceability of
the August 1998 Note or any other agreement or instrument relating to it; (ii)
any change in the time, manner, or place of payment of, or in

4
<PAGE>

any other term of, any of the Obligations, or any other amendment or waiver of
or consent to any departure from the August 1998 Note; (iii) any exchange,
release, or non-perfection of any other collateral, or any release, amendment,
or waiver of any of the Obligations; or (iv) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, Barton in
respect of the Obligations or of this Agreement.

5
<PAGE>

11. Further Assurances. Barton agrees that at any time and from time to time,
------------------
at his expense, Barton will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that the Company may request, in order to perfect and protect any security
interest granted or purported to be granted by this Agreement or to enable the
Company to exercise and enforce its rights and remedies under this Agreement
with respect to any Pledged Collateral.

12. Entire Agreement; Amendment; Waiver. This Agreement and the August 1998
-----------------------------------
Note embody the entire agreement of the parties hereto with respect to the
subject matter of this Agreement and supersede all prior agreements with respect
to that subject matter. This Agreement may not be amended or modified except in
a writing signed by both parties. No waiver of any provision of this Agreement
shall be deemed to, or shall, operate as a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
Except as expressly provided in this Agreement, no waiver shall be binding
unless executed in writing by the party making the waiver.

13. Notices. All notices and other communications provided for under this
-------
Agreement shall be given as follows:

If to the Company:

TIER TECHNOLOGIES, INC.
1350 Treat Boulevard, Suite 250
Walnut Creek, CA 94596
Attn: Chief Financial Officer

If to Barton:

WILLIAM G. BARTON
1028 Pebble Beach Drive
Clayton, CA 94517

6
<PAGE>

The parties have duly executed this Agreement as of the date first written
above.

TIER TECHNOLOGIES, INC.

By: /s/ George K. Ross
-----------------------------
George K. Ross
Its: Executive Vice President and
Chief Financial Officer

WILLIAM G. BARTON

/s/ William G. Barton
- ---------------------------------
William G. Barton

7
<PAGE>

STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain THIRD AMENDED AND RESTATED
PLEDGE AGREEMENT dated as of June 30, 1999 (the "Agreement"), the undersigned
hereby sells, assigns, and transfers to TIER TECHNOLOGIES, INC. (the "Company"),
( ) shares of Class A Common Stock of the Company, standing
- ---------- ----------
in the undersigned's name or in the name of Tier Technologies, Inc. Voting Trust
(of which the undersigned is beneficial owner) on the books of the Company
represented by Certificate No(s). delivered herewith. The undersigned
------
does hereby irrevocably constitute and appoint the Secretary of the Company as
the undersigned's attorney-in-fact, with full power of substitution, to transfer
this stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT.

WILLIAM G. BARTON

/s/ William G. Barton
- ----------------------------
William G. Barton

Instructions: Please sign this Stock Power above, but do not fill in any blanks
other than the signature lines.

The purpose of this Stock Power and Assignment Separate from Stock Certificate
is to enable the Company to acquire the Shares in accordance with the terms of
the Agreement.

8
<PAGE>

SCHEDULE A

PLEDGED SHARES AND
OTHER COLLATERAL

<TABLE>
<CAPTION>
FAIR MARKET OTHER
VALUE OF SHARES COLLATERAL
DATE SHARES PLEDGED PLEDGED /VALUE
---- -------------- ------- ------
<S> <C> <C> <C>
June 30, 1999 102,274
</TABLE>

<PAGE>

EXHIBIT 10.56

AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

Dated as of May 28, 1999

among

TIER TECHNOLOGIES, INC.,

TIER TECHNOLOGIES (UNITED KINGDOM), INC.

(collectively, the "Borrowers")

and

BANKBOSTON, N.A.

<PAGE>

TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION I............................................................................................ 1
- ---------

DEFINITIONS.......................................................................................... 1
- -----------
1.1. Definitions.......................................................................... 1
-----------
1.2. Accounting Terms..................................................................... 16
----------------

SECTION II........................................................................................... 16
- ----------

DESCRIPTION OF CREDIT................................................................................ 16
- ---------------------
2.1. The Loans............................................................................ 16
---------
2.2. Notice and Manner of Borrowing or Conversion of Loans................................ 16
-----------------------------------------------------
2.3. (a) Commitment Fee................................................................... 17
--------------
2.4. Reduction of Commitment Amount....................................................... 17
------------------------------
2.5. The Note............................................................................. 17
--------
2.6. Duration of Interest Periods......................................................... 18
----------------------------
2.7. Interest Rates and Payments of Interest.............................................. 18
---------------------------------------
2.8. Changed Circumstances................................................................ 18
---------------------
2.9. Overdraft Facility................................................................... 20
------------------
2.10. Capital Requirements................................................................. 22
--------------------
2.11. Prepayments of the Loans............................................................. 22
------------------------
2.12. Method of Payment.................................................................... 22
-----------------
2.13. Default Rate Interest. Etc........................................................... 23
--------------------------
2.14. Indemnity............................................................................ 23
---------
2.15. Computation of Interest and Fees..................................................... 23
--------------------------------
2.16. The Letters of Credit................................................................ 23
---------------------
2.17. Letter of Credit Fees................................................................ 24
---------------------

SECTION III.......................................................................................... 25
- -----------

CONDITIONS OF LOANS.................................................................................. 25
- -------------------
3.1. Conditions Precedent to Initial Revolving Loan. and Letter of Credit................. 25
--------------------------------------------------------------------
3.2. Conditions Precedent to all Loans and Letters of Credit.............................. 27
-------------------------------------------------------

SECTION IV........................................................................................... 28
- ----------

REPRESENTATIONS AND WARRANTIES....................................................................... 28
- ------------------------------
4.1. Organization and Qualification....................................................... 28
------------------------------
4.2. Corporate Authority.................................................................. 29
-------------------
4.3. Valid Obligations.................................................................... 29
-----------------
4.4. Consents or Approvals................................................................ 29
---------------------
4.5. Title to Properties; Absence of Encumbrances......................................... 29
--------------------------------------------
4.6. Financial Statements................................................................. 30
--------------------
4.7. Changes.............................................................................. 30
-------
4.8. Defaults............................................................................. 30
--------
4.9. Taxes................................................................................ 30
-----
4.10. Litigation........................................................................... 30
----------
</TABLE>

-i-
<PAGE>

<TABLE>
<S> <C>
4.11. Use of Proceeds...................................................................... 30
---------------
4.12. Subsidiaries......................................................................... 30
------------
4.13. Holding Company and Investment Company............................................... 31
--------------------------------------
4.14. Compliance with ERISA................................................................ 31
---------------------
4.15. Environmental Matters................................................................ 31
---------------------
4.16 Collateral........................................................................... 32
----------
4.17 Trademarks, Etc...................................................................... 32
---------------
4.18 Solvency............................................................................. 32
--------

SECTION V............................................................................................ 33
- ---------

AFFIRMATIVE COVENANTS................................................................................ 33
- ---------------------
5.1. Financial Statements and other Reporting Requirements................................ 33
-----------------------------------------------------
5.2. Conduct of Business.................................................................. 35
-------------------
5.3. Maintenance and Insurance............................................................ 35
-------------------------
5.4. Taxes................................................................................ 36
-----
5.5. Inspection by the Bank............................................................... 36
----------------------
5.6. Maintenance of Books and Records..................................................... 36
--------------------------------
5.7. Current Ratio........................................................................ 36
-------------
5.8. Minimum Quarterly Net Income......................................................... 36
----------------------------
5.9. Consolidated Total Liabilities to EBITDA Ratio....................................... 37
----------------------------------------------
5.10. EBIT/Interest Expense Ratio.......................................................... 37
---------------------------
5.11. Further Assurances................................................................... 37
------------------

SECTION VI........................................................................................... 37
- ----------

NEGATIVE COVENANTS................................................................................... 37
- ------------------
6.1. Restrictions on Indebtedness......................................................... 37
----------------------------
6.2. Restricted Payments.................................................................. 38
-------------------
6.3. Leases............................................................................... 39
------
6.4. Sale and Leaseback................................................................... 39
------------------
6.5. Encumbrances......................................................................... 39
------------
6.6. Merger; Consolidation; Sale or Lease of Assets; Other Acquisitions................... 40
------------------------------------------------------------------
6.7. Additional Stock Issuance............................................................ 41
-------------------------
6.8. Upstream Limitations................................................................. 41
--------------------
6.9. Capital Expenditures................................................................. 41
--------------------
6.10. Investments.......................................................................... 41
-----------
6.11. ERISA................................................................................ 42
-----
6.12. Transactions with Affiliates......................................................... 42
----------------------------
6.13. No Amendments to Certain Documents................................................... 42
----------------------------------

SECTION VII.......................................................................................... 43
- -----------

DEFAULTS............................................................................................. 43
- --------
7.1. Events of Default.................................................................... 43
-----------------
7.2. Remedies............................................................................. 45
--------

SECTION VIII......................................................................................... 46
- ------------
</TABLE>

-ii-
<PAGE>

<TABLE>
<S> <C>
SECURITY............................................................................................. 46
- --------
8.1. Security of Company.................................................................. 46
-------------------
8.2. Guaranties and Security of Subsidiaries.............................................. 46
---------------------------------------
8.3. Additional Guarantors................................................................ 46
---------------------

SECTION IX........................................................................................... 46
- ----------

MISCELLANEOUS........................................................................................ 46
- -------------
9.1. Notices.............................................................................. 46
-------
9.2. Expenses............................................................................. 47
--------
9.3. Set-Off.............................................................................. 47
-------
9.4. Term of Agreement.................................................................... 47
-----------------
9.5. No Waivers........................................................................... 48
----------
9.6. Governing Law........................................................................ 48
-------------
9.7. Amendments........................................................................... 48
----------
9.8. Binding Effect of Agreement.......................................................... 48
---------------------------
9.9. Successors and Assigns............................................................... 48
----------------------
9.10. Counterparts......................................................................... 50
------------

SECTION X............................................................................................ 50
- ---------

TRANSITIONAL ARRANGEMENTS............................................................................ 50
- -------------------------
10.1. Original Credit Agreement Superseded................................................. 50
------------------------------------
10.2. Return and Cancellation of Notes..................................................... 50
--------------------------------
10.3. Interest and Fees Under Superseded Agreement......................................... 50
--------------------------------------------
</TABLE>

-iii-
<PAGE>

EXHIBITS

EXHIBIT A - Form of Promissory Note

EXHIBIT B - Form of Notice of Borrowing or Conversion

EXHIBIT C - Indebtedness; Encumbrances

EXHIBIT D - Litigation

EXHIBIT E - Subsidiaries

EXHIBIT F - Form of Report of Borrowing Base Certificate

EXHIBIT G - Form of Report of Chief Financial Officer

EXHIBIT H - Form of Opinion of Counsel to the Company

EXHIBIT I - Trademarks

-iv-
<PAGE>

AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

Dated as of May 28, 1999

THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of May
28, 1999, by and among TIER TECHNOLOGIES, INC., a California corporation (the
"Company"), TIER TECHNOLOGIES (UNITED KINGDOM), INC., a Delaware corporation
("Tier UK" and, collectively with the Company, the "Borrowers" and each
individually a "Borrower"), and BANKBOSTON, N.A. (the "Bank"), a national
banking association.

WHEREAS, pursuant to a Revolving Credit Agreement dated as of March 31,
1998 (as amended and in effect from time to time, the "Original Credit
Agreement") by and among the Borrowers and the Bank, the Bank made loans and
other extensions of credit available to the Borrowers for, among other things,
general corporate and working capital purposes; and

WHEREAS, the Borrowers have requested, among other things, to amend and
restate the Original Credit Agreement, and the Bank is willing to amend and
restate the Original Credit Agreement on the terms and conditions set forth
herein;

NOW, THEREFORE, the Borrowers and the Bank agree that on the Closing
Date (as hereinafter defined) the Original Credit Agreement is hereby amended
and restated in its entirety and shall remain in full force and effect only as
expressly set forth herein.

SECTION I.
----------

DEFINITIONS
-----------

1.1. Definitions.
-----------

All capitalized terms used in this Agreement or in the Note or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:

Adjusted LIBOR Rate. Applicable to any Interest Period, shall mean, for
-------------------
any LIBOR Loan, a rate annum equal to (x) the rate quoted by the Bank at 11:00
-----
a.m. London time (or as soon thereafter as practical) at which deposits in
dollars are offered by prime commercial banks to prime commercial banks in the
London interbank Eurodollar market two Business Days before the first day of
such Interest Period for a period equal to such Interest Period and in an amount
equal to such LIBOR Loan, divided by (y) one (1) minus the Reserve Requirement,
if any, for each such LIBOR Loan for such Interest Period.
<PAGE>

-2-

Affected Loans. See Section 2.8(a).
--------------

Agreement. This Agreement, as the same may be supplemented or amended
---------
from time to time, including all schedules and exhibits hereto.

AIU Insurance Policy. The Insolvency Risk Insurance Policy issued to
--------------------
the Company by AIU North America Inc. with a policy limit of liability of
$4,000,000.

Alternate Base Rate. The greater of (i) the rate of interest announced
-------------------
from time to time by the Bank at its head office as its Base Rate, and (ii) the
Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if
necessary, to the next 1/8 of 1%).

Alternate Base Rate Loan. Any Revolving Loan bearing interest
------------------------
determined with reference to the Alternate Base Rate.

Availability. As of any date of determination, the Commitment Amount as
------------
in effect on such date less the aggregate amount of all intercompany loans made
by the Company to a Foreign Subsidiary pursuant to (S).6.10(ii) hereof and which
are outstanding on such date.

Bank. See Preamble.
----

Borrower(s). See Preamble.
-----------

Borrowing Base. At the relevant time of reference thereto, an amount
--------------
determined by the Bank by reference to the most recent Borrowing Base
Certificate delivered to the Bank pursuant to Section 5.1, as adjusted pursuant
to the provisions below, which is equal to eighty five percent (85%) of Eligible
Receivables for which invoices have been issued and are payable.

The Bank may, in its discretion, from time to time, upon five (5) days' prior
notice to the Company, reduce the lending formula with respect to Eligible
Receivables to the extent that the Bank determines that: (a) the dilution with
respect to the Receivable for any period has increased in any material respect
or may be reasonably anticipated to increase in any material respect above
historical levels, or (b) the general creditworthiness of account debtors or
other obligors of the Borrowers and their Subsidiaries have declined. In
determining whether to reduce the lending formula, the Bank may consider events,
conditions, contingencies or other risks which are also considered in
determining Eligible Receivables.

Borrowing Base Certificate. See Section 3. 1 (n).
--------------------------

Business Day. (i) For all purposes other than as covered by clause (ii)
------------
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts or New York, New York are open for the conduct of a
substantial part of their commercial banking business; and (ii) with respect to
<PAGE>

-3-

all notices and determinations in connection with, and payments of principal and
interest on, LIBOR Loans, any day that is a Business Day described in clause (i)
and that is also a day for trading by and between banks in U.S. Dollar deposits
in the London interbank market.

Capital Expenditures. To the extent capitalized in accordance with
--------------------
GAAP, any expenditure for fixed assets, including assets being constructed
(whether or not completed), leasehold improvements, Capitalized Leases under
GAAP, installment purchases of machinery and equipment, acquisitions of real
estate and other similar expenditures including (a) in the case of a purchase,
the entire purchase price, whether or not paid during the fiscal period in
question, (b) in the case of a Capitalized Lease, the capitalized amount thereof
(determined in accordance with GAAP), and (c) without duplication, expenditures
in or from any construction-in-progress account, but excluding expenditures made
with the proceeds of insurance to replace a damaged or destroyed asset and
expenditures made with the proceeds of the sale of an asset, up to an amount not
greater than the then-book value of such sold asset, to replace such asset.

Capitalized Leases. Leases under which the Company or any of its
------------------
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.

Closing Date. The first date on which all conditions set forth in (S)3
------------
have been satisfied and any Revolving Loans are to be made or any Letter of
Credit is to be issued hereunder.

Code. The Internal Revenue Code of 1986 and the rules and regulations
----
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.

Collateral. All real and personal property of any Borrower or Guarantor
----------
pledged as collateral under any Security Document or under any other instrument
or agreement now or hereafter in effect between or among the Bank, the
Borrowers, the Guarantors or any other Person, or any of them, which provides
collateral security for the payment and performance of all or any portion of the
Obligations.

Collateral Instruments. Letters of credit, guarantees, indemnities and
----------------------
performance bonds in form and substance satisfactory to the Overdraft Bank
issued or to be issued by the Overdraft Bank to or for the account of Tier UK
pursuant to Section 2.9.

Commitment Amount. $8,000,000 or any lesser amount, including zero,
-----------------
resulting from a termination or reduction of such amount in accordance with
Section 2.4 or Section 7.2.

Company. See Preamble.
-------
<PAGE>

-4-

Consolidated Current Assets. As at any date as of which the amount
---------------------------
thereof shall be determined, all amounts that should, in accordance with GAAP,
be included as current assets on the consolidated balance sheet of the Company
and its Subsidiaries as at such date.

Consolidated Current Liabilities. At any date as of which the amount
--------------------------------
thereof shall be determined, all amounts that should, in accordance with GAAP,
be included as current liabilities on the consolidated balance sheet of the
Company and its Subsidiaries as at such date, plus, to the extent not already
included therein, all Loans and all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of the Company or any Subsidiary to a
date more than one year from the date of determination.

Consolidated Net Income. The consolidated net income of the Company and
-----------------------
its Subsidiaries, after deduction of all expenses, taxes and other proper
charges, determined in accordance with GAAP.

Consolidated Total Liabilities. At any date as of which the amount
------------------------------
thereof shall be determined, all obligations that should, in accordance with
GAAP, be classified as liabilities on the consolidated balance sheet of the
Company and its Subsidiaries, including in any event all Indebtedness, provided,
however, notwithstanding the foregoing, Consolidated Total Liabilities shall not
include any Indebtedness constituting the Earn-Out until such time as such
Earn-Out is due and payable.

Controlled Group. All trades or businesses (whether or not
----------------
incorporated) under common control that, together with the Company, are treated
as a single employer under Section 414(b) or 414(c) of the Code or Section 4001
of ERISA.

Counter Indemnities. Any indemnity or counter indemnity from Tier UK,
-------------------
in favor of the Overdraft Bank with respect to any Collateral Instrument issued
to or for the account of Tier UK, in the standard form of indemnity or counter
indemnity used by the Overdraft Bank or in such other form and substance as may
be satisfactory to the Overdraft Bank and including (without limitation) any
letter of credit application incorporating indemnification language satisfactory
to the Overdraft Bank.

Default. An Event of Default or event or condition that, but for the
-------
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.

Distribution. The declaration or payment of any dividend on or in
------------
respect of any shares of any class of capital stock of any Borrower, other than
dividends payable solely in shares of common stock of such Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of any Borrower, directly or indirectly through a Subsidiary of such
Borrower or otherwise; the return of capital by any Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of
<PAGE>

-5-

capital stock of any Borrower, other than a dividend payable solely in shares of
common stock of such Borrower.

Domestic Subsidiary. Any Subsidiary which is not a Foreign Subsidiary.
-------------------

Earn-Out. Any deferred purchase price or other consideration to be paid
--------
to a seller (including, without limitation, a contingent earn-out arrangement
incurred) in connection with any acquisition permitted pursuant to Section 6.6 .

EBIT. In relation to the Company and its Subsidiaries for any period,
----
an amount equal to the Consolidated Net Income determined in accordance with
GAAP for such period, plus the following to the extent deducted in computing
----
such Consolidated Net Income for such period: (a) Interest Expense for such
period, (b) taxes on income for such period and (c) the one-time non-recurring
charge taken in the fiscal quarter ending June 30, 1999 in an amount of not more
than $4,000,000 relating to the commercial billing system acquired by the
Company, but minus (i) any income that is generated from any source other than
-----
the Company's ordinary operations and (ii) any capitalized software costs.

EBITDA. In relation to the Company and its Subsidiaries for any period,
------
an amount equal to the Consolidated Net Income determined in accordance with
GAAP for such period, plus the following to the extent deducted in computing
----
such Consolidated Net Income for such period: (a) Interest Expense for such
period, (b) taxes on income for such period, (c) depreciation for such period,
(d) amortization for such period, (e) the one-time non-recurring charge taken in
the fiscal quarter ending June 30, 1999 in an amount of not more than $4,000,000
relating to the commercial billing system acquired by the Company and (f)
one-time non-recurring charges which are related to acquisitions and actually
deducted in calculating EBITDA in such period, but minus (x) all gains (or plus
-----
all losses) attributable to the sale or other disposition of assets in such
period other than in the ordinary course of business, (y) any income that is
generated from any source other than the Company's ordinary operations and (z)
any capitalized software costs. It is understood and agreed that the EBITDA for
the period in question of any Person acquired (whether by merger, sale of
substantially all assets, or otherwise) by the Company during such period,
calculated in accordance with this definition, shall be included in the EBITDA
of the Company for such period.

Eligible Receivables. The aggregate of the unpaid portions of
--------------------
Receivables of the Borrowers, the Foreign Subsidiaries and any Guarantor (net of
any credits, rebates, offsets, holdbacks or other adjustments or commissions
payable to third parties that are adjustments to such Receivable) (a) that the
Company reasonably and in good faith determines to be collectible; (b) that are
with account debtors or other obligors that (i) are not Affiliates of the
Company and its Subsidiaries; (ii) purchased the goods or services giving rise
to the relevant Receivable in an arm's length transaction, (iii) are not
insolvent or involved in any case or proceeding, whether voluntary or
involuntary, under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt,
<PAGE>

-6-

dissolution, liquidation or similar law of any jurisdiction and (iv) are, in the
Bank's reasonable judgment, creditworthy; (c) that are in payment of obligations
that have been fully performed, do not consist of progress billings or bill and
hold invoices and are not subject to dispute or any other similar claims that
would reduce the cash amount payable therefor; (d) that are not subject to any
pledge, restriction, security interest or other lien or encumbrance other than
those created by the Loan Documents; (e) other than as to Foreign Subsidiaires,
in which the Bank has a valid and perfected first priority security interest;
(f) that are not outstanding for more than ninety (90) days past the earlier to
occur of (i) the date of the respective invoices therefor and (ii) the date of
shipment thereof in the case of goods or the end of the calendar month following
the provision thereof in the case of services; (g) that are not due from an
account debtor or other obligor located in Minnesota unless the Borrowers or
their relevant Subsidiaries, as the case may be, (i) has received a certificate
of authority to do business and is in good standing in such state or (ii) has
filed a notice of business activities report with the appropriate office or
agency of such state for the current year; (h) that, if due from any single
account debtor or obligor other than an Investment Grade Account Debtor, do not
exceed ten percent (10%) of the aggregate amount of all Eligible Receivables,
and, in the case of any Investment Grade Account Debtors, do not exceed twenty
five percent (25%) of Eligible Receivables; (i) that are payable in Dollars,
Pounds Sterling and Australian Dollars; (j) that are not payable from an office
outside of the United States or, so long as such Receivable is covered by the
AIU Insurance Policy or secured by a letter of credit acceptable to the Bank,
from Australia and the UK, provided that at no time shall more than thirty
--------
percent (30%) of all Eligible Receivables consist of either Foreign Receivables
and/or Receivables of a Foreign Subsidiary; and (k) that are not secured by a
letter of credit unless the Bank has a prior perfected security interest in such
letter of credit.

Encumbrances. See Section 6.5.
------------

ERISA. The Employee Retirement Income Security Act of 1974 and the
-----
rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.

Environmental Laws. Any and all applicable foreign, federal, state and
------------------
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Company or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment
<PAGE>

-7-

or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of such Hazardous Materials, chemical
substances, pollutants or contaminants.

Event of Default. Any event described in Section 7.1.
----------------

Federal Funds Effective Rate. For any day, a fluctuating interest rate
----------------------------
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the Bank
from three Federal funds brokers of recognized standing selected by the Bank.

First Amendment to Security Documents. That certain First Amendment to
-------------------------------------
Security Documents Agreement dated on or prior to the Closing Date among the
Borrowers, certain Guarantors and the Bank and in form and substance acceptable
to the Bank.

Foreign Receivables. A Receivable payable by an entity that is located
-------------------
in neither the United States nor Canada.

Foreign Subsidiary. Any Subsidiary which conducts substantially all of
------------------
its business in countries other than the United States of America and that is
organized under the laws of a jurisdiction other than the United States of
America and the States (or the District of Columbia) thereof.

GAAP. (a) When used in Sections 5.7 - 5.11, whether directly or
----
indirectly through reference to a capitalized term used therein, means (i)
principles that are consistent with the principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors, in effect for the
fiscal year ended on September 30, 1998, and (ii) to the extent consistent with
such principles, the accounting practice of the Company reflected in its
financial statements for the year ended on September 30, 1998, and (b) when used
in general, other than as provided above, means principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (ii) consistently applied with past financial statements of the Company
adopting the same principles, provided that in each case referred to in this
definition of "GAAP" a certified public accountant would, insofar as the use of
such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.
<PAGE>

-8-

Guarantors. Collectively, (a) all Domestic Subsidiaries of any Borrower
----------
and (b) each other Person required to become a Guarantor pursuant to Section
VIII hereof.

Guaranty and Guaranties. Collectively, (a) the Guaranty dated as of
-----------------------
March 31, 1998, as amended by the First Amendment to Security Documents, from
Tier UK to the Banks pursuant to which Tier UK guaranties to the Bank the
payment and performance of the Obligations, and (b) any other guaranty required
to be executed and delivered pursuant to Section VIII hereof, in each case to be
in form and substance satisfactory to the Bank.

Hazardous Material. Any substance (i) the presence of which requires or
------------------
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Company; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").

Indebtedness. As to any Person and whether recourse is secured by or is
------------
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:

(a) every obligation of such Person for money borrowed,

(b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,

(c) every reimbursement obligation of such Person with respect
to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person,

(d) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
<PAGE>

-9-

(e) every obligation of such Person under any Capitalized
Lease,

(f) every obligation of such Person under any lease (a
"Synthetic Lease") treated as an operating lease under generally
accepted accounting principles and as a loan or financing for U.S.
income tax purposes,

(g) all sales by such Person of (i) accounts or general
intangibles for money due or to become due, (ii) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (iii) other receivables (collectively "receivables"), whether
pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person relating
thereto or a disposition of defaulted receivables for collection and
not as a financing arrangement, and together with any obligation of
such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith,

(h) every obligation of such Person (an "equity related
purchase obligation") to purchase, redeem, retire or otherwise acquire
for value any shares of capital stock of any class issued by such
Person, any warrants, options or other rights to acquire any such
shares, or any rights measured by the value of such shares, warrants,
options or other rights,

(i) every obligation of such Person under any forward
contract, futures contract, swap, option or other financing agreement
or arrangement (including, without limitation, caps, floors, collars
and similar agreements), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices (a
"derivative contract"),

(j) every obligation in respect of Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent that such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such
entity, except to the extent that the terms of such Indebtedness
provide that such Person is not liable therefor and such terms are
enforceable under applicable law,

(k) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of
clauses (a) through (j) (the "primary obligation") of another Person
(the "primary obligor"), in any manner, whether directly or indirectly,
and including, without limitation, any
<PAGE>

-10-

obligation of such Person (1) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (ii) to purchase property, securities or services for the
purpose of assuring the payment of such primary obligation, or (iii) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such primary obligation.

The "amount" or "principal amount" of any Indebtedness at any
time of determination represented by (u) any Indebtedness, issued at a
price that is less than the principal amount at maturity thereof, shall
be the amount of the liability in respect thereof determined in
accordance with generally accepted accounting principles, (v) any
Capitalized Lease shall be the principal component of the aggregate of
the rentals obligation under such Capitalized Lease payable over the
term thereof that is not subject to termination by the lessee, (w) any
sale of receivables shall be the amount of unrecovered capital or
principal investment of the purchaser (other than the Borrower or any
of its wholly-owned Subsidiaries) thereof, excluding amounts
representative of yield or interest earned on such investment, (x) any
Synthetic Lease shall be the stipulated loss value, termination value
or other equivalent amount, (y) any derivative contract shall be the
maximum amount of any termination or loss payment required to be paid
by such Person if such derivative contract were, at the time of
determination, to be terminated by reason of any event of default or
early termination event thereunder, whether or not such event of
default or early termination event has in fact occurred and (z) any
equity related purchase obligation shall be the maximum fixed
redemption or purchase price thereof inclusive of any accrued and
unpaid dividends to be comprised in such redemption or purchase price.

Interest Expense. For any specified period, the aggregate interest and
----------------
other financing expenses that shall have become due and payable on Indebtedness
to any Person (including the Bank), including fees with respect to such
Indebtedness and interest under capitalized leases, all determined in accordance
with GAAP.

Interest Period. With respect to each LIBOR Loan, the period commencing
---------------
on the date of the making or continuation of or conversion to such LIBOR Loan
and ending one, two, three or six months thereafter, as the Company may elect in
the applicable Notice of Borrowing or Conversion;

provided that:
- --------

(i) any Interest Period (other than an Interest Period
determined pursuant to clause (iii) below) that would otherwise end on
a
<PAGE>

-11-

day that is not a Business Day shall be extended to the next succeeding
Business Day unless, in the case of LIBOR Loans, such Business Day
falls in the next calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;

(ii) any Interest Period applicable to a LIBOR Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (iii)
below, end on the last Business Day of a calendar month;

(iii) any Interest Period that would otherwise end after the
Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date; and

(iv) notwithstanding clauses (iii) and (iv) above, no Interest
Period applicable to a LIBOR Loan shall have a duration of less than
one month; and if any Interest Period applicable to such Loans would be
for a shorter period, such Interest Period shall not be available
hereunder.

International Standby Practices. With respect to any standby Letter of
-------------------------------
Credit, International Standby Practices (ISP98), International Chamber of
Commerce Publication No. 590, or any successor code of standby letter of credit
practices among banks adopted by the Bank in the ordinary course of its business
as a standby letter of credit issuer and in effect at the time of issuance of
such Letter of Credit.

Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.

Investment Grade Account Debtor. Any Person which either (a) maintains
-------------------------------
at least a BBB rating or its equivalent with respect to its debt obligations, as
rated by Standard & Poor's Rating Service, Moody's Investors
<PAGE>

-12-

Service, Inc. or Duff & Phelps Credit Rating Co. or (b) is expressly approved as
an Investment Grade Account Debtor by the Bank in its sole and absolute
discretion.

Letter of Credit. Letters of credit in the form customarily issued by
----------------
the Bank as standby, documentary or commercial letters of credit, issued by the
Bank, at the request and for the account of a Borrower.

Letter of Credit Obligations. At any time, the aggregate Stated Amount
----------------------------
of Letters of Credit outstanding at such time, plus the aggregate amount of any
unreimbursed draws under outstanding Letters of Credit.

LIBOR Loan. Any Revolving Loan bearing interest at a rate determined
----------
with reference to the Adjusted LIBOR Rate.

Loan. A loan made to a Borrower by the Bank pursuant to Section II of
----
this Agreement (including, without limitation, any advances made under the
Overdraft Facility), and "Loans" means all of such loans, collectively.

Loan Documents. This Agreement, the Notes, the Letter of Credit
--------------
Applications, the Letters of Credit, any Collateral Instrument and the Security
Documents.

Maximum Overdraft Amount. The Sterling equivalent of $500,000, as the
------------------------
same may be reduced from time to time in accordance with Section 2.9, or if the
Overdraft Facility is terminated pursuant to the provisions hereof, zero.

Net Worth. As of any date of determination, the Consolidated
---------
stockholders' equity of the Company and its Subsidiaries.

Note. An amended and restated promissory note of a Borrower,
----
substantially in the forms of Exhibit A-1 and A-2 a hereto, as applicable,
-------------------
evidencing the obligation of such Borrower to the Bank to repay the Loans.

Notice of Borrowing or Conversion. See Section 2.2.
---------------------------------

Obligations. All indebtedness, obligations and liabilities of any of
-----------
the Company and its Subsidiaries to the Bank and the Overdraft Bank,
individually or collectively, existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Agreement or any of the other Loan Documents or in respect of any of the Loans
made or Reimbursement Obligations incurred or any of the Notes, Letter of Credit
Applications, Letters of Credit, Collateral Instruments or arising or incurred
in connection with any interest rate protection arrangements provided by the
Bank, foreign exchange an/or currency risk protection arrangements entered into
with the Bank or other instruments at any time evidencing any thereof.
<PAGE>

-13-

Overdraft Bank. The Bank, acting through its London branch.
--------------

Overdraft Facility. See Section 2.9.
------------------

PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding
----
to any or all of its functions under ERISA.

Permitted Encumbrances. See Section 6.5.
----------------------

Person. An individual, partnership, corporation, limited liability
------
company or partnership, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.

Plan. At any time, an employee pension or other benefit plan that is
----
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (ii) if such Plan is established, maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.

Pledge Agreement. The Pledge Agreement dated as of March 31, 1998,
----------------
executed and delivered by the Company to the Bank, as amended by the First
Amendment to Security Documents.

Qualified Investments. As applied to the Company and its Subsidiaries,
---------------------
investments in (i) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America; (ii)
certificates of deposit or other deposit instruments or accounts of banks or
trust companies organized under the laws of the United States or any state
thereof that have capital and surplus of at least $100,000,000, (iii) commercial
paper that is rated not less than prime-one or A-1 or their equivalents by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors, and (iv) any repurchase agreement secured by any one or
more of the foregoing.

Receivables. All rights of the Company or any of its Subsidiaries to
-----------
payment for goods sold, leased or otherwise marketed in the ordinary course of
business and all rights of the Company or any of its Subsidiaries to payment for
services rendered in the ordinary course of business and all sums of money or
other proceeds due thereon pursuant to transactions with account debtors, except
for that portion of the sum of money or other proceeds due thereon that relate
to sales, use or property taxes in conjunction with such transactions, recorded
on books of account in accordance with GAAP.
<PAGE>

-14-

Regulatory Change. Any change after the date of this Agreement in
-----------------
United States federal, state or foreign laws or regulations (including
Regulation D) or the adoption or making after such date of any orders, rulings,
interpretations, directives, guidelines or requests applying to a class of banks
including the Bank, of or under any United States federal, state, or foreign
laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.

Reimbursement Obligations. The aggregate non-contingent reimbursement
--------------------------
or repayment obligations of the Company with respect to amounts drawn under the
Letter of Credit.

Reserve Requirement. For any LIBOR Loans for any Interest Period (or,
-------------------
as the case may be, shorter period), the average maximum rate at which reserves
(including marginal, supplemental or emergency reserves, if any) are required to
be maintained during such period under Regulation D by member banks of the
Federal Reserve System in Boston, Massachusetts with deposits exceeding one
billion dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks by reason of any Regulatory Change against: (i) any category of
liabilities which includes deposits by references to which the Adjusted LIBOR
Rate is to be determined as provided in the definition of "Adjusted LIBOR Rate",
as applicable, in this Section 1, or (ii) any category of extensions of credit
or other assets which include LIBOR Loans.

Restricted Payment. In relation to the Company and its Subsidiaries,
------------------
any (a) Distribution or (b) payment or prepayment by the Company or its
Subsidiaries to any shareholder or to any other Affiliate (other than a
Guarantor) of the Company or any Subsidiary.

Revolving Loans. The Loans made to the Company pursuant to Section
---------------
2.1(a) of this Agreement and advances made on the Overdraft Facility pursuant to
Section 2.9 of this Agreement.

Revolving Credit Termination Date. May 27, 2000.
---------------------------------

Security Agreement. Collectively, (a) the Security Agreement dated as
------------------
of March 31, 1998 between the Company and the Bank, as amended by the First
Amendment to Security Documents; (b) the Security Agreement dated as of March
31, 1998 between Tier UK and the Bank, as amended by the First Amendment to
Security Documents; (c) the Debenture dated as of June 10, 1998 between Tier UK
and the Bank; and (d) any other security agreement required to be executed and
delivered pursuant to Section VIII hereof, in each case in form and substance
satisfactory to the Bank.

Security Documents. The Guaranties, the Security Agreements, the
------------------
Trademark Assignments, the Pledge Agreement and all other instruments and
<PAGE>

-15-

documents, including without limitation Uniform Commercial Code financing
statements, required to be executed or delivered pursuant to any Security
Document.

Solvent. With respect to the Company and its Subsidiaries on a
-------
particular date, measured on a consolidated basis, that on such date (i) the
fair value of the property (tangible or intangible) of the Company and its
Subsidiaries is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of the Company and its Subsidiaries, (ii)
the amount that will be required to pay the probable liabilities of the Company
and its Subsidiaries on their debts as they become absolute and matured will not
be greater than the fair salable value of the assets of the Company and its
Subsidiaries at such time, (iii) the Company and its Subsidiaries are able to
realize upon their assets and pay their debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (iv) the Company and its Subsidiaries do not intend to, and do not
believe that they will, incur debts or liabilities beyond the Company's and its
Subsidiaries' ability to pay as such debts and liabilities mature, and (v) the
Company and its Subsidiaries are not engaged in business or a transaction, and
are not about to engage in business or a transaction, for which the Company's
and its Subsidiaries' properties would constitute unreasonably small capital
after giving due consideration to prevailing practices in the industry in which
the Company and its Subsidiaries are engaged. In computing the amount of any
contingent liability at any time, it is intended that such liability will be
compounded at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that might reasonably be expected
to become an actual or matured liability.

Stated Amount. With respect to each Letter of Credit outstanding at any
-------------
given time, the maximum amount then available to be drawn thereunder (without
regard to whether any conditions to drawing could then be met).

Sterling or (Pounds). Pounds Sterling in lawful currency of the United
--------------------
Kingdom.

Sterling Base Rate. The annual rate of interest announced from time to
------------------
time by the Bank's London branch as its "base rate" for loans denominated in
Sterling.

Subsidiary. Any corporation, association, joint stock company, business
----------
trust or other similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the members of the board of directors or
other governing body of such entity is held or controlled by the Company or a
Subsidiary of the Company; or any other such organization the management of
which is directly or indirectly controlled by the Company or a Subsidiary of the
Company through the exercise of voting power or otherwise; or any joint venture,
whether incorporated or not, in which the Company has a 50% ownership interest.

Synthetic Lease. As defined in the definition of "Indebtedness".
---------------
<PAGE>

-16-

Tier UK. See Preamble.
-------

Total Overdraft Usage. See Section 2.9.
---------------------

Trademark Assignment. The Trademark Assignment, dated or to be dated on
--------------------
or prior to March 31, 1999, made by the Company in favor of the Bank and in form
and substance satisfactory to the Bank.

1.2. Accounting Terms. All terms of an accounting character shall have
----------------
the meanings assigned thereto by GAAP, modified to the extent, but only to the
extent, that such meanings are specifically modified herein.

SECTION II.
-----------

DESCRIPTION OF CREDIT
---------------------

2.1. The Loans. (a) Subject to the terms and conditions hereof, the
---------
Bank agrees to make Revolving Loans to the Company, and the Company may borrow,
repay and reborrow from time to time between the Closing Date and the Revolving
Credit Termination Date, such amounts as the Company may request, provided that
--------
the aggregate principal amount of all Loans at any one time outstanding
hereunder (after giving effect to all amounts requested) plus the Letter of
Credit Obligations plus the Total Overdraft Usage shall not exceed the lesser of
----
(i) the Borrowing Base and (ii) the Availability and provided further that at
----------------
the time the Company requests a Revolving Loan and after giving effect to the
making thereof, no Default or Event of Default has occurred and is continuing.
Any Revolving Loan not repaid by the Revolving Credit Termination Date shall be
due and payable on the Revolving Credit Termination Date.

(b) Provided that no Default shall have occurred and be continuing, the
Company may convert all or any part (in integral multiples of $500,000) of any
outstanding Loan into a Loan of any other type provided for in this Agreement in
the same aggregate principal amount, on any Business Day (which, in the case of
a conversion of a LIBOR Loan, shall be the last day of the Interest Period
applicable to such LIBOR Loan). The Company shall give the Bank prior notice of
each such conversion (which notice shall be effective upon receipt) in
accordance with Section 2.2.

(c) The Company may, prior to the Revolving Credit Termination Date,
prepay the principal balance of the Revolving Loans in accordance with Section
2.11. Any amounts so prepaid may, subject to the terms and conditions of this
Agreement, be reborrowed by the Company prior to the Revolving Credit
Termination Date.

2.2. Notice and Manner of Borrowing or Conversion of Loans. (a)
-----------------------------------------------------
Whenever the Company desires to obtain or continue a Loan hereunder or convert
an outstanding Loan into a Loan of another type provided for in this Agreement,
the Company shall notify the Bank (which notice shall be
<PAGE>

-17-

irrevocable) by telephone or facsimile received no later than 10:00 a.m. Boston
time on the date one Business Day before the day on which the requested Loan is
to be made or continued as or converted to an Alternate Base Rate Loan, and
received no later than 10:00 a.m. Boston time on the date three Business Days
before the day on which the requested Loan is to be made or continued as or
converted to a LIBOR Loan. Such notice shall specify (i) the effective date and
amount of each Loan or portion thereof to be continued or converted, subject to
the limitations set forth in Section 2.1, (ii) the interest rate option to be
applicable thereto, and (iii) the duration of the applicable Interest Period, if
any (subject to the provisions of the definition of Interest Period and Section
2.6). Each such notification (a "Notice of Borrowing or Conversion") shall be
immediately followed by a written confirmation thereof by the Company in
substantially the form of Exhibit B hereto, provided that if such written
--------- --------
confirmation differs in any material respect from the action taken by the Bank,
the records of the Bank shall control absent manifest error.

(b) Subject to the terms and conditions hereof, the Bank shall make
each Loan on the effective date specified therefor by crediting the amount of
such Loan to the Company's demand deposit account with the Bank or if no such
account exists, by disbursing such funds as directed by the Company.

2.3. (a) Commitment Fee. The Company shall pay to the Bank a commitment
--------------
fee computed at the rate of three tenths of one percent (.30%) per annum on the
average daily amount of the unborrowed portion of the Commitment Amount during
each quarter or portion thereof. Commitment fees shall be payable quarterly in
arrears, on the last day of each calendar quarter of each year beginning on the
first such date following the date hereof, and on the Revolving Credit
Termination Date.

(b) Closing Fee. The Company shall pay to the Bank a closing fee
------------
of $20,000, payable on the Closing Date.

2.4. Reduction of Commitment Amount. The Company may from time to time
------------------------------
by written notice delivered to the Bank at least three Business Days prior to
the date of the requested reduction, reduce by $100,000 or integral multiples
thereof any unborrowed portion of the Commitment Amount. No reduction of the
Commitment Amount shall be subject to reinstatement.

2.5. The Note. (a) The Loans shall be evidenced by an amended and
--------
restated Note in the form of Exhibit A-1 attached hereto, payable to the order
-----------
of the Bank and having a final maturity of the Revolving Credit Termination
Date. The Note shall be dated on or before the date of the first Loan and shall
have the blanks therein appropriately completed.

(b) The Bank shall, and is hereby irrevocably authorized by the
Borrowers to, enter on the schedule forming a part of the Note or otherwise in
its records appropriate notations evidencing the date and the amount of each
Loan, the interest rate applicable thereto and the date and amount of each
<PAGE>

-18-

payment of principal made by the Borrower with respect thereto; and in the
absence of manifest error, such notations shall constitute conclusive evidence
thereof. The Bank is hereby irrevocably authorized by the Borrowers to attach to
and make a part of the Note a continuation of any such schedule as and when
required. No failure on the part of the Bank to make any notation as provided in
this subsection (b) shall in any way affect any Loan or the rights or
obligations of the Bank or the Borrowers with respect thereto.

2.6. Duration of Interest Periods. (a) Subject to the provisions of the
----------------------------
definition of Interest Period, the duration of each Interest Period applicable
to a Loan shall be as specified in the applicable Notice of Borrowing or
Conversion. The Company shall have the option to elect a subsequent Interest
Period to be applicable to such Loan by giving notice of such election to the
Bank received no later than 10:00 a.m. Boston time on the date one Business Day
before the end of the then applicable Interest Period if such Loan is to be
continued as or converted to an Alternate Base Rate Loan and three Business Days
before the end of the then applicable Interest Period is such Loan is to be
continued as or converted to a LIBOR Loan.

(b) If the Bank does not receive a notice of election of duration of an
Interest Period for a LIBOR Loan pursuant to subsection (a) above within the
applicable time limits specified therein, or if, when such notice must be given,
a Default exists, the Company shall be deemed to have elected to convert such
Loan in whole into an Alternate Base Rate Loan on the last day of the then
current Interest Period with respect thereto.

(c) Notwithstanding the foregoing, the Company may not select an
Interest Period that would end, but for the provisions of the definition of
Interest Period, after the Revolving Credit Termination Date.

2.7. Interest Rates and Payments of Interest. (a) Each Base Rate Loan
---------------------------------------
shall bear interest on the outstanding principal amount thereof at a rate per
annum equal to the Alternate Base Rate plus one half of one percent (.50%),
which rate shall change contemporaneously with any change in the Alternate Base
Rate. Such interest shall be payable in arrears on the last day of each month
commencing April 30, 1999, and when such Loan is due (whether at maturity, by
reason of acceleration, prepayment or otherwise).

(b) Each LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per annum
equal to the Adjusted LIBOR Rate plus two and one half percent (2.5 %). Such
interest shall be payable in arrears for such Interest Period on the last day
thereof and when such LIBOR Loan is due (whether at maturity, by reason of
acceleration, prepayment or otherwise) and, if such Interest Period is longer
than three months, at intervals of every three months after the first day
thereof.

2.8. Changed Circumstances.
---------------------
<PAGE>

-19-

(a) in the event that:

(i) on any date on which the Adjusted LIBOR Rate would
otherwise be set the Bank shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair
means do not exist for ascertaining the Adjusted LIBOR Rate, or

(ii) at any time the Bank shall have determined in good faith
(which determination shall be final and conclusive) that:

(A) the making or continuation of or conversion of any Loan to
a LIBOR Loan has been made impracticable or unlawful by (1) the
occurrence of a contingency that materially and adversely affects the
London interbank market or (2) compliance by the Bank in good faith
with any applicable law or governmental regulation, guideline or order
or interpretation or change thereof by any governmental authority
charged with the interpretation or administration thereof or with any
request or directive of any such governmental authority (whether or not
having the force of law); or

(B) the Adjusted LIBOR Rate shall no longer represent the
effective cost to the Bank for U.S. dollar deposits in the interbank
market for deposits in which it regularly participates;

then, and in any such event, the Bank shall forthwith so notify the Company
thereof. Until the Bank notifies the Company that the circumstances giving rise
to such notice no longer apply, the obligation of the Bank to allow selection by
the Company of the type of Loan affected by the contingencies described in this
Section 2.8(a) (herein called "Affected Loans") shall be suspended. If at the
--------------
time the Bank so notifies the Company, the Company has previously given the Bank
a Notice of Borrowing or Conversion with respect to one or more Affected Loans
but such Loans have not yet gone into effect, such notification shall be deemed
to be void and the Company may borrow Loans of a non-affected type by giving a
substitute Notice of Borrowing or Conversion pursuant to Section 2.2 hereof.

Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) the Company shall, with respect to
the outstanding Affected Loans, prepay the same, together with interest thereon
and any amounts required to be paid pursuant to Section 2.13, and may borrow a
Loan of another type in accordance with Section 2.1 hereof by giving a Notice of
Borrowing or Conversion pursuant to Section 2.2 hereof.

(b) in case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
<PAGE>

-20-

(i) subjects the Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the
Company or otherwise with respect to the transactions contemplated
hereby (except for taxes on the overall net income of the Bank imposed
by the United States of America or any political subdivision thereof,
or

(ii) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, the
Bank (other than such requirements as are already included in the
determination of the Adjusted LIBOR Rate), or

(iii) imposes upon the Bank any other condition with respect
to its performance under this Agreement,

and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by the Bank or impose any expense upon the Bank
with respect to any Loans, the Bank shall notify the Company thereof. The
Company agrees to pay to the Bank the amount of such increase in cost, reduction
in income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by the Bank of a statement in the
amount and setting forth the Bank's calculation thereof, which statement shall
be deemed true and correct absent manifest error.

2.9. Overdraft Facility.
------------------

(a) Subject to the terms and conditions of this Agreement, including,
without limitation, the conditions of this (S)2.9, Tier UK may from time to time
between the date hereof and the Revolving Credit Termination Date (i) utilize an
overdraft facility on a Sterling-denominated current account with the Overdraft
Bank in the name of Tier UK (the "Overdraft Facility") by causing checks or
other items denominated in Sterling to be presented for payment against such
current account in amounts greater than the then available balance in such
current account and (ii) request that the Overdraft Bank agree to issue
Collateral Instruments to or for the account of Tier UK upon receipt by it of a
duly-completed and executed Counter Indemnity from Tier UK in respect of each
such Collateral Instrument, in form and substance satisfactory to the Overdraft
Bank provided that the aggregate amount of all liabilities of Tier UK in respect
of the Overdraft Facility and all such Counter Indemnities (whether contingent
or otherwise) (the "Total Overdraft Usage") shall not exceed the Maximum
Overdraft Amount and, in addition, the Total Overdraft Usage shall not at any
time exceed the lesser of the Borrowing Base and the Availability. As to the
Overdraft Facility, each such presentation shall be deemed to be a request by
Tier UK for a utilization of the Overdraft Facility in an amount equal to the
excess of such check or other item over such available balance, and shall be
irrevocable. Notwithstanding the foregoing, at no time shall the Total Overdraft
Usage exceed the Maximum Overdraft Amount and, in addition, the Total Overdraft
Usage shall not at any time exceed the lesser of the Borrowing Base and the
Availability. After the occurrence of an Event of Default, the
<PAGE>

-21-

Overdraft Bank may terminate the Overdraft Facility in its entirety and reduce
the Maximum Overdraft Amount to zero with immediate effect at its sole
discretion by written notice to the Company and Tier UK, and the entire
principal amount of the debit balance in the Overdraft Facility, together with
all interest accrued thereon, shall become immediately due and payable. The
entire principal amount of the debit balance in the Overdraft Facility, together
with all interest accrued thereon, shall be due and payable on the Revolving
Credit Termination Date.

(b) If at any time the outstanding amount of the debit balance in the
Overdraft Facility plus the aggregate amount of all liabilities in respect of
all Counter Indemnities shall exceed the Maximum Overdraft Amount (due to
currency fluctuations or otherwise), the Borrowers hereby jointly and severally,
absolutely and unconditionally promise to immediately repay the amount of such
excess to the Bank for the account of the Overdraft Bank.

(c) Any amounts borrowed under the Overdraft Facility shall be deemed
to be Revolving Loans hereunder and shall be evidenced by the Note in the form
of Exhibit A-2 attached hereto.
-----------

(d) Interest on the Overdraft Facility shall be payable on the day to
day cleared debit balance in Tier UK's current account maintained with the
Overdraft Bank. Except as provided in Section 2.13 hereto, interest on the
Overdraft Facility shall be payable at the annual percentage rate of interest
determined by the Bank to be the sum of (i) the Sterling Base Rate, plus (ii)
two and one half percent (2.5%). The rate of interest on the Overdraft Facility
shall be adjusted from time to time to reflect changes in the Sterling Base
Rate. Any such change in such rate of interest shall become effective on the
date of the change in the Sterling Base Rate. The Borrowers jointly and
severally promise to pay interest on the Overdraft Facility (i) monthly in
arrears on the last day of each calendar month, commencing on the first such
date following the Closing Date and (ii) the date on which the Overdraft
Facility is repaid in full.

(e) Interest due with respect to the Overdraft Facility shall be paid
to the Bank for the account of the Overdraft Bank.

(f) Tier UK shall, on the date of issuance or any extension or renewal
of any Collateral Instrument and at such other time or times as such charges are
customarily made by the Overdraft Bank, pay a fee (in each case, a "Collateral
Instrument Fee") to the Overdraft Bank in respect of each Collateral Instrument
equal to the rate of two and one half percent (2.5%) plus the Overdraft Bank's
customary issuance fee, such fee to be for the account of the Overdraft Bank.

(g) The Company hereby absolutely and unconditionally promises to pay
to the Bank any amounts borrowed by Tier UK under the Overdraft Facility and
guarantees to the Bank that Tier UK will duly and punctually pay and perform all
of its Obligations to the Bank under the Overdraft Facility and otherwise under
this Agreement.
<PAGE>

-22-

2.10. Capital Requirements. If after the date hereof the Bank
--------------------
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (ii) compliance by the
Bank or its parent bank holding company with any guideline, request or directive
of any such entity regarding capital adequacy (whether or not having, the force
of law), has the effect of reducing the return on the Bank's or such holding
company s capital as a consequence of the Bank s commitment to make Loans
hereunder to a level below that which the Bank or such holding company could
have achieved but for such adoption, change or compliance (taking into
consideration the Bank's or such holding company's then existing policies with
respect to capital adequacy and assuming the full utilization of such entity's
capital) by any amount deemed by the Bank to be material, then the Bank shall
notify the Company thereof. The Company agrees to pay to the Bank the amount of
such reduction in the return on capital as and when such reduction is
determined, upon presentation by the Bank of a statement in the amount and
setting forth the Bank's calculation thereof, which statement shall be deemed
true and correct absent manifest error. In determining such amount, the Bank may
use any reasonable averaging and attribution methods.

2.11. Prepayments of the Loans. (a) Voluntary Prepayments. Revolving
------------------------
Loans that are LIBOR Loans may be prepaid at any time, without premium or
penalty, on the last day of any interest Period applicable thereto, upon three
Business Days' notice. Revolving Loans that are Alternate Base Rate Loans may be
prepaid at any time, without premium or penalty, upon one Business Day's notice.
Any interest accrued on the amounts so prepaid to the date of such payment must
be paid at the time of any such payment. No prepayment of the Revolving Loans
shall affect the Commitment Amount or impair the Company's right to borrow as
set forth in Section 2.1.

(b) Mandatory Prepayments. The Borrowers promise to pay on the
Revolving Credit Termination Date, and there shall become absolutely due and
payable on the Revolving Credit Termination Date, all of the outstanding
Revolving Loans on such date, together with any and all accrued and unpaid
interest thereon. In addition, if at any time the sum of the aggregate
outstanding amount of the Revolving Loans plus the Total Overdraft Usage plus
---- ----
the Letter of Credit Obligations exceeds the lesser of (i) the Borrowing Base,
as reflected in the Borrowing Base Certificate then most recently delivered to
the Bank pursuant to Section 5.1 and (ii) the Availability, the Borrowers
immediately shall make a prepayment of the Revolving Loans in an amount not less
than such excess.

2.12. Method of Payment. The Bank shall, and the Borrowers hereby
-----------------
authorize the Bank to, debit the amount of any payments and prepayments of
principal and all payments of interest, fees and other amounts payable hereunder
to the demand deposit account of the Borrowers with the Bank.
<PAGE>

-23-

2.13. Default Rate Interest. Etc. Each overdue amount under this
---------------------
Agreement or under any of the other Loan Documents (including, without
limitation, all principal, interest and fees outstanding) shall bear interest
from and including the due date thereof until paid, compounded daily and payable
on demand, at a rate per annum (the "Default Rate") equal to (x) if such due
date occurs prior to the end of an Interest Period, 2% above the interest rate
applicable to such Loan for such Interest Period until the expiration of such
Interest Period, and thereafter, 2% above the rate then applicable to Alternate
Base Rate Loans; and (y) in all other cases, 2% above the rate then applicable
to Alternate Base Rate Loans.

2.14. Indemnity. Each of the Borrowers agrees to indemnify the Bank and
---------
to hold the Bank harmless from and against any loss, cost or expense (including
loss of anticipated profits) that the Bank may sustain or incur as a consequence
of (a) a default by any Borrower in payment of the principal amount of or any
interest or any LIBOR Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by the Bank to lenders of funds
obtained by it in order to maintain its LIBOR Loans, (b) a default by any
Borrower in making a borrowing or conversion after such Borrower has given (or
is deemed to have given) a Notice of Borrowing or Conversion relating thereto in
accordance with Section 2.2 or (c) the making of any payment of a LIBOR Loan or
the making of any conversion of any such LIBOR Loan to an Alternate Base Rate
Loan on a day that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by the Bank to lenders of
funds obtained by it in order to make any such LIBOR Loans.

2.15. Computation of Interest and Fees. Interest and all fees payable
--------------------------------
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day (subject to clause (i) of the definition of Interest Period), and
such extension shall be included in computing interest in connection with such
payment.

2.16. The Letters of Credit (a) Upon the terms and subject to the
---------------------
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Company made herein, the Bank agrees to issue,
to the extent permitted by law, one or more Letters of Credit on the application
and for the account of the Company, during the period from the date hereof, to
the date which is fourteen (14) days prior to the Revolving Credit Termination
Date, provided, however, that, after giving effect to such request (i) the
-------- -------
Stated Amount of all outstanding Letters of Credit plus the aggregate amount of
----
all unreimbursed draws under such outstanding Letters of Credit shall not exceed
$5,000,000 at any one time and (ii) the Stated Amount of all outstanding Letters
of Credit plus the outstanding amount of all Loans shall not exceed the lesser
----
of the Borrowing Base and the Commitment Amount. In
<PAGE>

-24-

addition, each Letter of Credit so issued, extended or renewed shall be subject
to the Uniform Customs and Practice for Documentary Credits, International
Chamber of Commerce Publication No. 500 (or any successor thereto) or, in the
case of a standby Letter of Credit, either such Uniform Customs or the
International Standby Practices. It is understood and agreed by the parties
hereto that amounts drawn under such Letters of Credit shall become immediately
due and payable by the Company to the Bank, for the account of the Bank, and
shall bear interest at the rate then applicable to Revolving Loans that are
LIBOR Loans, and, if not paid forthwith shall, to the extent there is
availability under the Borrowing Base, be added to the Revolving Loans and shall
be immediately due and payable upon the maturity of the Revolving Loans. The
issuance of any such Letter of Credit shall result in a reduction of
availability under the Borrowing Base in accordance with Section 2.1. In
addition, all Letters of Credit shall have a stated expiration date not to
exceed 365 days. A Letter of Credit may, subject to the terms and conditions of
this Agreement, be renewed for an additional period not to exceed 365 days. Each
Letter of Credit shall, in any event, expire not later than five Business Days
prior to the Revolving Credit Termination Date.

(b) In order to evidence such Letters of Credit, the Borrower shall
enter into, with the Bank, such agreements and execute such instruments and
documents as the Bank requires, including, but not limited to, a letter of
credit application and agreement.

2.17. Letter of Credit Fees. A Letter of Credit fee shall be payable
---------------------
quarterly in arrears on the last Business Day of each calendar quarter and on
the Revolving Credit Termination Date to the Bank, on each Letter of Credit
issued at a rate per annum equal to two and one half percent (2.5%) multiplied
by the face amount of such Letter of Credit.

2.18. Payments. All payments of principal, interest, fees and any other
--------
amounts due hereunder or under any of the other Loan Documents shall be made on
the due date thereof to the Bank in Dollars at the Bank's head office or at such
other place that the Bank may from time to time designate, in each case at or
about 11:00 a.m. (Boston, Massachusetts, time or other local time at the place
of payment) and in immediately available funds.

2.19. No Offset. All payments by the Borrowers hereunder and under any
---------
of the other Loan Documents shall be made without recoupment, setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the applicable Borrower is compelled by law to make
such deduction or withholding. If any such obligation is imposed upon any
Borrower with respect to any amount payable by it hereunder or under any of the
other Loan Documents, such Borrower will pay to the Bank, on the date on which
such amount is due and payable hereunder or under such other Loan Document, such
additional amount in Dollars as shall be necessary to enable
<PAGE>

-25-

the Bank to receive the same net amount which the Bank would have received on
such due date had no such obligation been imposed upon such Borrower. The
applicable Borrower will deliver promptly to the Bank certificates or other
valid vouchers for all taxes or other charges deducted from or paid with respect
to payments made by such Borrower hereunder or under such other Loan Documents.

SECTION III.
------------

CONDITIONS OF LOANS
-------------------

3.1. Conditions Precedent to Initial Revolving Loan. and Letter of
----------------------------------------------
Credit. The obligation of the Bank to make the initial Revolving Loan and to
issue the initial Letter of Credit is subject to the fulfillment on the date
hereof of each of the following conditions precedent:

(a) Loan Documents, Etc.
-------------------

(i) Each of the Loan Documents shall have been duly and
properly authorized, executed and delivered by the respective parties thereto
and shall be in full force and effect on and as of the Closing Date.

(ii) Executed original counterparts of each of the Loan
Documents, as executed and delivered by the respective parties thereto, shall
have been delivered to the Bank.

(b) Legality of Transactions. No change in applicable law or regulation
------------------------
shall have occurred as a consequence of which it shall have become and continue
to be unlawful (a) for the Bank to perform any of its agreements or obligations
under any of the Loan Documents to which it is a party on the Closing Date, or
(b) for the Company or any of its Subsidiaries to perform any of their
respective agreements or obligations under any of the Loan Documents to which
they are a party on the Closing Date.

(c) Representations and Warranties. Each of the representations and
------------------------------
warranties made by or on behalf of the Company or any of its Subsidiaries to the
Bank in this Agreement or the other Loan Documents shall be true and correct in
all material respects when made, and shall, for all purposes of this Agreement,
be deemed to be repeated on and as of the Closing Date, and shall be true and
correct in all material respects on and as of such date.

(d) Performance, Etc. The Company and each of its Subsidiaries shall
----------------
have duly and properly performed, complied with and observed each of its
respective covenants, agreements and obligations contained in any of the Loan
Documents to which it is a party or by which it is bound which are required to
be performed on or prior to the Closing Date. No event shall have occurred on or
prior to the Closing Date and be continuing on such Closing Date, and no
condition shall exist on such Closing Date, which constitutes a Default or an
Event of Default.
<PAGE>

-26-

(e) Certified Copies of Charter Documents. The Bank shall have received
-------------------------------------
from the Company and each of its Subsidiaries party to the Loan Documents,
respectively, a copy, certified by a duly authorized officer of each such
entity, to be true and complete on the Closing Date, of (i) its respective
charter or other incorporation documents, as in effect on such date of
certification, certified by the Secretary of State of the jurisdiction of its
incorporation, and (ii) its by-laws as in effect on such date.

(f) Proof of Corporate Action. The Bank shall have received from the
-------------------------
Company and each of its Subsidiaries party to the Loan Documents, respectively,
a copy, certified by a duly authorized officer of each such entity, to be true
and complete on the Closing Date, of records of all corporate action taken by
the Company and each of its Subsidiaries to authorize (a) its execution and
delivery of the Loan Documents to which it is or is to become a party, (b) its
performance of all of its agreements and obligation under each of such
documents, and (c) with respect to the Borrowers, any borrowings and other
transactions contemplated by this Agreement.

(g) Incumbency Certificate. The Bank shall have received from the
----------------------
Company and each of its Subsidiaries party to the Loan Documents, respectively,
an incumbency certificate, dated the Closing Date and signed by a duly
authorized officer of each such entity, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (a) to sign, in
the name and on behalf of the Company and each of its Subsidiaries,
respectively, each of the Loan Documents and to which it is or is to become a
party; (b) with respect to the Borrowers, to make application for the Loans or
conversion thereof, and (c) to give notices to take other action on its behalf
under the Loan Documents.

(h) Proceedings and Documents. All corporate, governmental and other
-------------------------
proceedings in connection with the transactions contemplated by the Loan
Documents and all instruments and documents incidental thereto, shall be in form
and substance reasonably satisfactory to the Bank and the Bank shall have
received all such counterpart originals or certified or other copies of all such
installments and documents as the Bank shall have reasonably requested.

(i) Good Standing Etc. The Bank shall have received a certificate from
-----------------
the Secretary of State of their respective jurisdictions of incorporation as to
the Company's and each of its Subsidiaries' party to the Loan Documents legal
existence and good standing in such state and listing all documents on file for
each such entity in the office of said Secretary of State. The Bank shall also
have received certificates of qualification to do business from any
jurisdictions in which the Company and each of its Subsidiaries, respectively,
is required to be qualified.

(j) Facility Fee. The Company shall have complied with its obligation
------------
under Section 2.3 to pay the closing fee.
<PAGE>

-27-

(k) Legal Opinion. The Bank shall have received a written legal
-------------
opinion, addressed to the Bank, dated the Closing Date, from Paul, Hastings,
Janofsky & Walker LLP, counsel to the Company and its Subsidiaries, and in form
and substance satisfactory to the Bank.

(l) Financial Condition. The Bank shall be satisfied that the financial
-------------------
statements referred to in Section 4.6 fairly present the financial condition of
the Company and its Subsidiaries as at the close of business on the date thereof
and the results of operations for the periods then ended, and that there has
been no material adverse change in the assets, business, operations or financial
condition the Company and such Subsidiaries, taken as a whole, since the most
recent financial statements referred to therein.

(m) Security Documents: U.C.C. Search Reports. Insurance. The Security
----------------------------------------------------
Documents and the appropriate financing statements (in the name of the Company)
and other documents in respect thereto and necessary to enable the Bank to
perfect a legal, valid and enforceable first-priority security interest
thereunder shall have been duly executed by the Company and duly filed or
recorded, as applicable, in all appropriate filing offices or other locations
necessary for the perfection of such first-priority interests, and all other
actions necessary for the perfection of such interests shall have been
completed. The Bank shall have received satisfactory evidence that such
insurance as is required by the Security Documents to be in effect in respect of
all property and fixtures of the Company and each of its Subsidiaries is in
effect and the interest of the Bank as loss payee and additional insured has
been duly endorsed upon all instruments of insurance issued in respect of such
property. Without limitation of the foregoing sentence, the Bank shall also have
received satisfactory evidence that the Company maintains adequate liability
insurance (including insurance relating to product liability matters) and the
interest of the Bank as additional insured has been duly endorsed on all such
instruments of insurance. All such insurance shall provide for 30 days' advance
written notice to the Bank of any cancellation thereof.

(n) Borrowing Base Certificate. The Company shall have delivered to the
--------------------------
Bank a certificate in the form of Exhibit F (a "Borrowing Base Certificate"),
---------
dated as of the Closing Date.

3.2. Conditions Precedent to all Loans and Letters of Credit. The
-------------------------------------------------------
obligation of the Bank to make each Loan and issue each Letter of Credit,
including the initial Revolving Loan and initial Letter of Credit, or continue
or convert Loans to Loans of the other type, is further subject to the following
conditions:

(a) timely receipt by the Bank of the Notice of Borrowing or Conversion
as provided in Section 2.2;

(b) the representations and warranties contained in Section IV shall be
true and accurate in all material respects on and as of the date of such Notice
of Borrowing or Conversion and on the effective date of the making,
<PAGE>

-28-

continuation or conversion of each Loan or issuance of each Letter of Credit as
though made at and as of each such date (except to the extent that such
representations and warranties expressly relate to an earlier date), and no
Default or Event of Default shall have occurred and be continuing, or would
result from such Loan; further, the Bank may without waiving this condition
consider it fulfilled, and a representation by the Company to such effect made,
if no written notice to the contrary, dated the date of such Loan or Letter of
Credit is received from the Company, and in the event that the Company submits
such a written notice, the conditions set forth in this Section 3.2(b) will be
considered fulfilled if such notice specifies in detail the exceptions to the
representations and warranties as of the date of such Loan or Letter of Credit,
the exceptions as stated in such notice are satisfactory to the Bank in its sole
discretion, and the Bank so notifies the Company;

(d) the Bank shall have received a Borrowing Base Certificate that is
satisfactory to the Bank; and

(e) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Bank, would make
it illegal or against the policy of any governmental agency or authority for the
Bank to make Loans or issue Letters of Credit hereunder.

The making of each Loan and issuance of each Letter of Credit shall be
deemed to be a representation and warranty by the Company on the date of the
making, continuation or conversion of such Loan or issuance of such Letter of
Credit as to the accuracy of the facts referred to in subsection (b) of this
Section 3.2, except to the extent that such representation and warranty shall be
modified to reflect the effect of any action or inaction on the part of the
Borrower which is expressly permitted hereunder.

SECTION IV.
-----------

REPRESENTATIONS AND WARRANTIES
------------------------------

In order to induce the Bank to enter into this Agreement and to make
Loans hereunder, the Company represents and warrants to the Bank that:

4.1. Organization and Qualification. Each of the Company and its
------------------------------
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification. Since its inception, the Borrower has not transacted business
under any other name or trade name other than Tier Technologies, Inc., Tier
Corporation, TSource and
<PAGE>

-29-

The Information Engineering Resource Corporation. The Company maintains its
principal place of business at its offices located in Walnut Creek, California;
Tier UK maintains its principal place of business at its offices located in the
United Kingdom.

4.2. Corporate Authority. The execution, delivery and performance of
-------------------
this Agreement, the Note and the other Loan Documents and the transactions
contemplated hereby are within the corporate power and authority of such Person
and have been authorized by all necessary corporate proceedings, and do not and
will not (a) require any consent or approval of the stockholders of the Company
or such Subsidiary, (b) contravene any provision of the charter documents or
by-laws of the Company or any of its Subsidiaries or any law, rule or regulation
applicable to the Company or any of its Subsidiaries, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given, or both, would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on the Company or any of its Subsidiaries, or (d) result in or require
the imposition of any Encumbrance on any of the properties, assets or rights of
the Company or any of its Subsidiaries.

4.3. Valid Obligations. This Agreement, the Note and the other Loan
-----------------
Documents and all of their respective terms and provisions are the legal, valid
and binding obligations of the Company and its Subsidiaries, enforceable in
accordance with their respective terms except as limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally, and except as the remedy of specific performance
or of injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.

4.4. Consents or Approvals. The execution, delivery and performance of
---------------------
this Agreement, the Note and the other Loan Documents and the transactions
contemplated herein do not require any approval or consent of, or filing or
registration with, any governmental or other agency or authority, or any other
party.

4.5. Title to Properties; Absence of Encumbrances. Each of the Company
--------------------------------------------
and its Subsidiaries has good and marketable title to all of the properties,
assets and rights of every name and nature now purported to be owned by it,
including, without limitation, such properties, assets and rights as are
reflected in the financial statements referred to in Section 4.6 (except such
properties, assets or rights as have been disposed of in the ordinary course of
business since the date thereof), free from all Encumbrances except Permitted
Encumbrances or those Encumbrances disclosed in Exhibit C hereto, and, except as
---------
so disclosed, free from all defects of tide that might materially adversely
affect such properties, assets or rights, taken as a whole.

4.6. Financial Statements. The Company has furnished the Bank its
--------------------
consolidated balance sheet as of September 30, 1998 and its consolidated
<PAGE>

-30-

statements of income, changes in stockholders' equity and cash flow for the
fiscal year then ended, and related footnotes, audited and certified by
PricewaterhouseCoopers LLP. The Company has also furnished the Bank its
consolidated balance sheet as of March 31, 1999 and its consolidated statements
of income, changes in stockholders' equity and cash flow for the fiscal quarter
then ended, certified by the principal financial officer of the Company but
subject, however, to normal, recurring year-end adjustments that shall not in
the aggregate be material in amount. All such financial statements were prepared
in accordance with GAAP throughout the periods specified and present fairly the
financial position of the Company and its Subsidiaries as of such dates and the
results of the operations of the Company and its Subsidiaries for such periods.
There are no liabilities, contingent or otherwise, not disclosed in such
financial statements that involve a material amount.

4.7. Changes. Since the date of the most recent financial statements
-------
referred to in Section 4.6, there have been no changes in the assets,
liabilities, financial condition, business or prospects of the Company or any of
its Subsidiaries other than changes in the ordinary course of business, the
effect of which has not, in the aggregate, been materially adverse.

4.8. Defaults. As of the date of this Agreement, no Default exists.
--------

4.9. Taxes. The Company and each Subsidiary have filed all federal,
-----
state and other tax returns required to be filed, and all taxes, assessments and
other governmental charges due from the Company and each Subsidiary have been
fully paid. The Company and each Subsidiary have established on their books
reserves adequate for the payment of all federal, state and other tax
liabilities.

4.10. Litigation. Except as set forth on Exhibit D hereto, there is no
---------- ---------
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of the Company's or any Subsidiary's officers, threatened, against the
Company or any Subsidiary that, if adversely determined, could result in a
material judgment not fully covered by insurance, could result in a forfeiture
of all or any substantial part of the property of the Company or its
Subsidiaries, or could otherwise have a material adverse effect on the assets,
business or prospects of the Company or any Subsidiary.

4.11. Use of Proceeds. No portion of any Loan is to be used for the
---------------
"purpose of purchasing or carrying" any "margin stock" as such terms are used in
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System; and the Company is not engaged in the business of extending credit to
others for such purpose.

4.12. Subsidiaries. As of the date of this Agreement, all the
------------
Subsidiaries of the Company are listed on Exhibit E hereto. The Company or a
---------
Subsidiary of the Company is the owner, free and clear of all liens and
encumbrances, of all of the issued and outstanding stock of each Subsidiary. All
shares of such stock have been validly issued and are fully paid and
<PAGE>

-31-

nonassessable, and no rights to subscribe to any additional shares have been
granted, and no options, warrants or similar rights are outstanding.

4.13. Holding Company and Investment Company. Neither the Company nor
--------------------------------------
any of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935 or the Investment Company Act of 1940, as amended.

4.14. Compliance with ERISA. The Company and each member of the
---------------------
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any liability to the PBGC (other than liability for
premiums which have been paid when due) or a Plan under Title IV of ERISA; and
no "prohibited transaction" or "reportable event" (as such terms are defined in
ERISA) has occurred with respect to any Plan.

4.15. Environmental Matters.
---------------------

(a) The Company and each of its Subsidiaries have obtained all permits,
licenses and other authorizations which are required under all Environmental
Laws, except to the extent failure to have any such permit, license or
authorization would not have a material adverse effect on the business,
financial condition or operations of the Company and its Subsidiaries. The
Company and each of its Subsidiaries are in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a material adverse effect on the business, financial condition or
operations of the Company and its Subsidiaries.

(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the Company
or any of its Subsidiaries to have any permit, license or authorization required
in connection with the conduct of its business or with respect to any
Environmental Laws, including, without limitation, Environmental Laws relating
to the generation, treatment, storage, recycling, transportation, disposal or
release of any Hazardous Materials.

(c) To the best of the Company's knowledge no material, oral or written
notification of a release of a Hazardous Material has been filed by or on behalf
of the Company or any of its Subsidiaries and no property now or previously
owned, leased or used by the Company or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List under the
<PAGE>

-32-

Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any similar state list of sites requiring investigation or clean-
up.

(d) There are no liens or encumbrances arising under or pursuant to any
Environmental Laws on any of the real property or properties owned, leased or
used by the Company or any of its Subsidiaries and no governmental actions have
been taken or are in process which could subject any of such properties to such
liens or encumbrances or, as a result of which the Company or any of its
Subsidiaries would be required to place any notice or restriction relating to
the presence of Hazardous Materials at any property owned by it in any deed to
such property.

(e) Neither the Company nor any of its Subsidiaries nor, to the best
knowledge of the Company, any previous owner, tenant, occupant or user of any
property owned, leased or used by the Company or any of its Subsidiaries has (i)
engaged in or permitted any operations or activities upon or any use or
occupancy of such property, or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except to the extent commonly used in day-to-day operations of
such property and in such case only in compliance with all Environmental Laws,
or (ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws; nor to the best
knowledge of the Company have any Hazardous Materials migrated from other
properties upon, about or beneath such property, nor, to the best knowledge of
the Company, are any Hazardous Materials presently constructed, deposited,
stored or otherwise located on, under, in or about such property except to the
extent commonly used in day-to-day operations of such property and, in such
case, in compliance with, all Environmental Laws.

4.16 Collateral. All of the Obligations under or in respect of the Loan
----------
Documents will, at all times from and after the execution and delivery of each
of the Security Documents, be entitled to the benefits of and be secured by each
of such Security Documents to the extent provided therein.

4.17 Trademarks, Etc. Borrower is duly licensed or otherwise entitled
---------------
to use all trademarks, service marks and trade names which are used in the
operation of its business as presently conducted and as shown on Exhibit I
---------
hereto. No claim is pending or, as far as the Borrower can reasonably foresee,
threatened against Borrower contesting the use of any such trademarks, service
marks and trade names nor does the Borrower know of any valid basis for any such
claims.

4.18 Solvency. The Company and its Subsidiaries are, and after giving
--------
effect to the transactions contemplated hereby, will be, Solvent.
<PAGE>

-33-

SECTION V.
----------

AFFIRMATIVE COVENANTS
---------------------

So long as the Bank has any commitment to lend hereunder or any Loan or
other Obligation hereunder remains outstanding, the Company covenants as
follows:

5.1. Financial Statements and other Reporting Requirements. The Company
-----------------------------------------------------
shall furnish to the Bank:

(a) as soon as available to the Company, but in any event within 90
days after the end of each of its fiscal years, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and consolidating
statement of income, changes in stockholders' equity and cash flow for, such
year, audited and certified by PricewaterhouseCoopers LLP (or other independent
certified public accountants acceptable to the Bank) in the case of such
consolidated statements, and certified by the chief financial officer in the
case of such consolidating statements; and, concurrently with such financial
statements, a copy of said certified public accountants' management report and a
written statement by such accountants that, in the making of the audit necessary
for their report and opinion upon such financial statements they have obtained
no knowledge of any Default or, if in the opinion of such accountants any such
Default exists, they shall disclose in such written statement the nature and
status thereof;

(b) as soon as available to the Company, but in any event within 45
days after the end of each of its fiscal quarters (or, in the case of cash flow
statements, 90 days after the end of each fiscal year), a consolidated and
consolidating balance sheet as of the end of, and a related consolidated and
consolidating statement of income and cash flow for, the period then ended,
certified by the principal financial officer of the Company but subject,
however, to normal, recurring year-end adjustments that shall not in the
aggregate be material in amount, along with the original projections for such
period and the same financial statements for the same period of the prior year;

(c) concurrently with the delivery of each financial statement pursuant
to subsections (a) and (b) of this Section 5. 1, a report in substantially the
form of Exhibit G hereto signed on behalf of the Company by its chief financial
---------
officer;

(d) within 30 days after the end of (i) each month in which any Loan or
Letter of Credit is outstanding and (ii) each fiscal quarter in which no Loan or
Letter of Credit is outstanding, a Borrowing Base Certificate provided that the
--------
Company shall be required to furnish to the Bank a Borrowing Base Certificate
prior to requesting its first Loan or Letter of Credit hereunder;

(e) promptly after the receipt thereof by the Company, copies of any
reports submitted to the Company by independent public accountants in
<PAGE>

-34-

connection with any interim review of the accounts of the Company made by such
accountants;

(f) promptly after the same are available, copies of all proxy
statements, financial statements and reports as the Company shall send to its
stockholders or as the Company may file with the Securities and Exchange
Commission or any governmental authority at any time having jurisdiction over
the Company or its Subsidiaries;

(g) if and when the Company gives or is required to give notice to the
PBGC of any "Reportable Event" (as defined in Section 4043 of ERISA) with
respect to any Plan that might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that any member of the Controlled Group or the
plan administrator of any Plan has given or is required to give notice of any
such Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC;

(h) immediately upon becoming aware of the existence of any condition
or event that constitutes a Default, written notice thereof specifying the
nature and duration thereof and the action being or proposed to be taken with
respect thereto;

(i) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Company or any of its Subsidiaries of which it has
notice, the outcome of which would or might have a materially adverse effect on
the assets, business or prospects of the Company or the Company and its
Subsidiaries on a consolidated basis, written notice thereof and the action
being or proposed to be taken with respect thereto;

(j) promptly upon becoming aware of any investigative proceedings by a
governmental agency or authority commenced or threatened against the Company or
any of its Subsidiaries regarding any potential violation of Environmental Laws
or any spill, release, discharge or disposal of any Hazardous Material, written
notice thereof and the action being or proposed to be taken with respect
thereto;

(k) on each anniversary of the date hereof, for so long as Receivables
from such entities or their wholly-owned subsidiaries comprise part of the
Borrowing Base, the then current rating of the debt obligations of each
Investment Grade Account Debtor (or in the event any such customer does not have
a separate credit rating, the rating of such customer's parent corporation) and
any other customer, the Eligible Receivables from which comprise greater than
10% of the Borrowing Base, as rated by Standard & Poor's Rating Services,
Moody's Investors Service, Inc. or Duff & Phelps Credit Rating Co.;

(l) at the end of each six-month period after the date hereof, a
"pipeline" report describing the status of all outstanding and future projects
with customers;
<PAGE>

-35-

(m) on or before September 30 of each year, a projected consolidated
balance sheet and projected consolidated statements of income, changes in
stockholders' equity and cash flow for the next succeeding year, together with
supporting assumptions;

(n) within 30 days after the end of each fiscal quarter, a Receivables
aging report;

(o) within five (5) days after the end of each month in which any
Investment has been made under Section 6.10(ii) hereof, certification from the
Company that the Company's cash on its balance sheet as of the end of such
month, exceeds the amount of such Investment;

(p) from time to time, such other financial data and information about
the Company or its Subsidiaries as the Bank may reasonably request.

5.2. Conduct of Business. Each of the Company and its Subsidiaries
-------------------
shall:

(a) duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets (including without limitation all
Environmental Laws and ERISA), and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the proper
conduct of its business;

(b) maintain its corporate existence; and

5.3. Maintenance and Insurance. Each of the Company and its
-------------------------
Subsidiaries shall maintain its properties in good repair, working order and
condition as required for the normal conduct of its business. Each of the
Company and its Subsidiaries shall at all times maintain liability and casualty
insurance with financially sound and reputable insurers in such amounts as the
officers of the Company in the exercise of their reasonable judgment deem to be
adequate, and shall also maintain the AIU Insurance Policy or such replacement
policy as may be approved by the Bank, in such manner. The Bank shall be named
as loss payee and additional insured under, and shall be given 3 0 days' prior
written notice of any cancellation of, all such insurance. If the Company or any
of its Subsidiaries fails to provide such insurance, the Bank, in its sole and
complete discretion, may provide such insurance and charge the cost thereof to
the Company's deposit account with the Agent. Any payment not recovered from the
Company or its Subsidiaries shall bear interest at the Alternate Base Rate then
in effect. The Bank shall not, by the fact of approving, disapproving,
accepting, obtaining or failing to obtain any such insurance, incur liability
for the form or legal sufficiency of insurance contracts, solvency of insurance
companies or payment of lawsuits, and the Borrowers
<PAGE>

-36-

hereby expressly assumes full responsibility therefor and liability, if any,
thereunder. The Company shall furnish to the Bank certificates or other evidence
satisfactory to the Bank of compliance with the foregoing insurance provisions.

5.4. Taxes. The Company shall pay or cause to be paid all taxes,
-----
assessments or governmental charges on or against it or any of its Subsidiaries
or its or their properties on or prior to the time when they become due, except
for taxes, assessments or governmental charges which are being contested in good
faith by the Company and for which the Company has established and maintains
adequate reserves for payment.

5.5. Inspection by the Bank. The Company shall permit the Bank or its
----------------------
designees, at any reasonable time and at reasonable intervals of time, and upon
reasonable notice (or if a Default shall have occurred and is continuing, at any
time and without prior notice), to (i) visit and inspect the properties of the
Company and its Subsidiaries, (ii) examine and make copies of and take abstracts
from the books and records of the Company and its Subsidiaries, and (iii)
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with their appropriate officers, employees and accountants. In handling such
information the Bank shall exercise the same degree of care that it exercises
with respect to its own proprietary information of the same types to maintain
the confidentiality of any non-public information thereby received or received
pursuant to subsections 5. I(a), (b), or (c) except that disclosure of such
information may be made (i) to the subsidiaries or affiliates of the Bank in
connection with their present or prospective business relations with the
Company, (ii) to prospective transferees or purchasers of an interest in the
Loans, (iii) as required by law, regulation, rule or order, subpoena, judicial
order or similar order and (iv) as may be required in connection with the
examination, audit or similar investigation of the Bank.

5.6. Maintenance of Books and Records. Each of the Company and its
--------------------------------
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP and
applicable law.

5.7. Current Ratio. The Company shall at all times maintain a ratio of
-------------
Consolidated Current Assets to Consolidated Current Liabilities of at least 2.0
to 1.

5.8. Minimum EBITDA. The Company shall not permit its EBITDA as at the
--------------
end of any fiscal quarter to be less than (a) $1,900,000 for the fiscal quarter
ending June 30, 1999; (b) $3,200,000 for the fiscal quarter ending September 30,
1999; (c) $3,400,000 for the fiscal quarter ending December 31, 1999; and (d)
$3,700,000 for each fiscal quarter ending thereafter.
<PAGE>

-37-

5.9. Consolidated Total Liabilities to EBITDA Ratio. The Company shall
----------------------------------------------
at all times maintain a ratio of Consolidated Total Liabilities to EBITDA,
calculated on a rolling four quarter basis, as follows:

Quarter ending June 30, 1999: less than 2.0
Quarter ending September 30, 1999: less than 2.0
Quarter ending December 31, 1999 and
at the end of each quarter thereafter: less than 1.75

5.10. EBIT/Interest Expense Ratio. The Company shall at all times
---------------------------
maintain a ratio of EBIT to Interest Expense of not less than 3.0 to 1.

5.11. Further Assurances. At any time and from time to time the Company
------------------
shall, and shall cause each of its Subsidiaries to, execute and deliver such
further instruments and take such further action as may reasonably be requested
by the Bank to effect the purposes of this Agreement, the Note and the other
Loan Documents.

SECTION VI.
-----------

NEGATIVE COVENANTS
------------------

So long as the Bank has any commitment to lend hereunder or any Loan or
other Obligation hereunder remains outstanding, the Company covenants as
follows:

6.1. Restrictions on Indebtedness. The Company will not, and will not
----------------------------
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:

(a) Indebtedness to the Bank arising under any of the Loan Documents;

(b) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;

(d) Indebtedness of a Guarantor to the Company or another Guarantor so
long as such Person incurring the Indebtedness remains both a Guarantor
hereunder and a Subsidiary;

(e) In addition to Earn-Outs set forth on Schedule 6.1, Indebtedness of
------------
the Company consisting of Earn-Outs up to a maximum aggregate amount not to
exceed $5,000,000 at any one time outstanding;
<PAGE>

-38-

(f) Indebtedness of the Company and/or any of its Subsidiaries with
respect to performance, surety, statutory, appeal or similar bonds obtained in
the ordinary course of business, so long as the aggregate amount of such
Indebtedness does not exceed $5,000,000 outstanding at any time;

(g) In addition to the Indebtedness of a Foreign Subsidiary to the
Company set forth on Schedule 6.1 and permitted by Section 6.1(h), Indebtedness
------------
of a Foreign Subsidiary to the Company in the form of intercompany loans or
advances so long as (i) no Default or Event of Default has occurred and is
continuing; (ii) such Indebtedness is on a demand basis; (iii) such Indebtedness
is at all times evidenced by a proper secured demand promissory note or similar
debt instrument acceptable to the Bank, in each case pledged to the Bank; (iv)
the Foreign Subsidiary has granted to the Company a first priority perfected
security interest on all its assets other than real property leasehold interests
to secure such Indebtedness, such security interest has been assigned to the
Bank and the Bank has received a legal opinion from local counsel opining as to
the validity and enforceability of such note, security interest and assignment,
and the perfection of such security interest; and (v) the aggregate principal
amount of such Indebtedness does not exceed $3,000,000 outstanding at any one
time;

(h) Indebtedness of Tier Technologies (Australia) Pty. Ltd. ("Tier
Australia") to the Company in the form of an intercompany loan or advance so
long as (i) no Default or Event of Default has occurred and is continuing; (ii)
the aggregate principal amount of such loan, taken together with all other
equity Investments made by the Company in Tier Australia pursuant to Section
6.10(iii) hereof, does not exceed the lesser of (1) $3,500,000 and (2) the
aggregate purchase price for the assets of Simsion & Bowles Pty Ltd. to be
acquired by Tier Australia on or prior to September 28, 1999 (the "S&B
Acquisition"); (iii) such Indebtedness is incurred on or prior to September 28,
1999; (iv) Tier Australia uses the proceeds of such Indebtedness to purchase
certain of the assets of Simsion & Bowles Pty Ltd.; and (v) such Indebtedness is
incurred on the date of the consummation of the S&B Acquisition; and

(i) Unsecured Indebtedness not otherwise provided in this ss.6.1 which
does not exceed at any time, in the aggregate, $2,000,000.

6.2. Restricted Payments. The Company and its Subsidiaries shall not
-------------------
make any Restricted Payments, provided, however, so long as no Default or Event
-------- -------
of Default has occurred and is continuing or would exist as a result thereof,
(a) any Subsidiary shall be permitted to make Distributions to any Borrower or
Guarantor; and (b) the Company shall be permitted to make purchases of all or
any portion of its capital stock from the holders thereof so long as (i) the
total, cumulative amount of the consideration paid for all such purchases from
and after the date hereof does not exceed, in the aggregate, $1,000,000 for any
consecutive twelve month period, and (ii) the total cumulative amount of the
consideration paid for each share of capital stock does not exceed its fair
market value as determined as of the date of such purchase.
<PAGE>

-39-

6.3. Leases. Neither the Company nor any of its Subsidiaries shall
------
during any fiscal year enter into any leases of real or personal property as
lessee, except for Capitalized Leases or leases providing for payments (whether
or not such payments are termed rent) (a) from the Closing Date through
September 30, 1999 in the aggregate amount of less than $1,000,000 and (b) in
any one fiscal year thereafter in the aggregate of less than $1,000,000.

6.4. Sale and Leaseback.
------------------

Neither the Company nor any of its Subsidiaries shall enter into any
arrangement, directly or indirectly, whereby it shall sell or transfer any
property owned by it in order to lease such property or lease other property
that the Company or any such Subsidiary intends to use for substantially the
same purpose as the property being sold or transferred.

6.5. Encumbrances.
------------

Neither the Company nor any of its Subsidiaries shall create, incur,
assume or suffer to exist any mortgage, pledge, security interest, lien or other
charge or encumbrance, including the lien or retained security title of a
conditional vendor upon or with respect to any of its property or assets
("Encumbrances"), or assign or otherwise convey any right to receive income,
including the sale or discount of accounts receivable with or without recourse,
except the following ("Permitted Encumbrances"):
----------------------

(a) Encumbrances in favor of the Bank or any of its affiliates;

(b) liens for taxes, fees, assessments and other governmental charges
to the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 5.4;

(c) landlords' and lessors' liens in respect of rent not in default or
liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business;

(d) judgment liens that shall not have been in existence for a period
longer than 30 days after the creation thereof or, if a stay of execution shall
have been obtained, for a period longer than 30 days after the expiration of
such stay;

(e) liens in favor of lessors under Capitalized Leases on assets
subject to Capitalized Leases permitted by Sections 6.1 and 6.3 hereof; and
<PAGE>

-40-

(f) easements, rights of way, restrictions and other similar charges or
Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business.

6.6. Merger; Consolidation; Sale or Lease of Assets; Other
-----------------------------------------------------
Acquisitions. Neither the Company nor any of its Subsidiaries shall sell, lease
- ------------
or otherwise dispose of assets or properties in excess of $100,000 during any
fiscal year (valued at the lower of cost or market), other than sales of
inventory in the ordinary course of business in any fiscal year; or liquidate,
merge or consolidate into or with any other person or entity, or otherwise
acquire any other entity, provided that any Subsidiary of the Company may merge
--------
or consolidate into or with (i) the Company if no Default would result from such
merger and if the Company is the surviving company, or (ii) any other
wholly-owned Subsidiary of the Company and provided further, that the Company or
----------------
any Subsidiary of the Company may enter into a merger or acquire any other
entity or other assets so long as (a) in the case of a merger, the Company or
such Subsidiary, as the case may be, is the surviving entity of such merger; (b)
no Default or Event of Default has occurred and is continuing or would exist as
a result of the merger or acquisition, as the case may be; (c) the Company has
delivered to the Bank seven (7) Business Day's prior written notice of such
merger or acquisition, which notice shall provide the Bank with a reasonably
detailed description of the proposed merger or acquisition; (d) the business to
be acquired would not subject the Bank to regulatory or third party approvals in
connection with the exercise of any of their rights and remedies under this
Agreement or the other Loan Documents; (e) the business or assets so acquired
shall be acquired free and clear of all liens, encumbrances and Indebtedness;
(f) the Company or such other applicable Person involved in the acquisition or
merger has taken or caused to be taken all necessary action to grant to the Bank
a first priority perfected lien in all assets and capital stock or other equity
interests to be acquired in connection with such acquisition or merger, to the
extent provided in the applicable provisions of Section VIII; (g) any new
Domestic Subsidiary formed as a result of such acquisition or merger shall
become a Guarantor hereunder and shall execute and deliver to the Bank all
applicable Security Documents; (h) the Company has demonstrated to the
satisfaction of the Bank, based on a pro forma compliance certificate,
compliance with all the financial covenants contained herein on a pro forma
basis immediately prior to and after giving effect to such acquisition or merger
(provided, to the extent the Company is not able to calculate such pro forma
compliance due to the accounting methods used by the Person to be acquired or
merged, the Company shall deliver to the Bank a certification that, to the best
of the Company's knowledge, no Default or Event of Default will exist after
giving effect to the acquisition and, in addition, the Company shall be required
to deliver such pro forma compliance certificate within sixty (60) days from the
date of the consummation of the acquisition or merger); and (i) the aggregate
purchase price consisting of any consideration other than the capital stock of
the Company for any single acquisition or merger or series of related
acquisitions or mergers shall not exceed $5,000,000 and the aggregate purchase
price consisting of any consideration other than the capital stock of
<PAGE>

-41-

the Company for all mergers and acquisitions shall not exceed $8,000,000 over
the life of this Agreement.

6.7. Additional Stock Issuance. The Company shall not permit any of its
-------------------------
Subsidiaries to issue any additional shares of its capital stock or other equity
securities, any options therefor or any securities convertible thereto other
than to the Company; provided, however, so long as no Default or Event of
-------- -------
Default has occurred and is continuing or would exist as a result thereof, any
Foreign Subsidiary may issue, sell or otherwise dispose of additional shares of
its capital stock so long as the net cash proceeds received from such issuance,
sale or other disposition shall be used within thirty (30) days of receipt
thereof to fund all or any portion of the purchase price of an acquisition or
merger which is permitted pursuant to ss.6.6 hereof. Neither the Company nor any
of its Subsidiaries shall sell, transfer or otherwise dispose of any of the
capital stock or other equity securities of a Subsidiary, except (i) to the
Company or any of its wholly-owned Subsidiaries, or (ii) in connection with a
transaction permitted by Section 6.6.

6.8. Upstream Limitations. Neither the Company nor any of its
--------------------
Subsidiaries will enter into, or permit any of its Subsidiaries to enter into,
any agreement, contract or arrangement (other than the Agreement and the other
Loan Documents) restricting the ability of any Subsidiary to pay or make
dividends or distributions in cash or kind, to make loans, advances or other
payments of whatsoever nature or to make transfers or distributions of all or
any part of its assets to the Company or any Guarantor.

6.9. Capital Expenditures. Neither the Company nor any of its
--------------------
Subsidiaries shall make Capital Expenditures in excess of the following amounts
in each year specified below, exclusive of Capital Expenditures incurred in
connection with the acquisition of any Person:

Fiscal Year Maximum Capital Expenditure
----------- ---------------------------
1999 $6,500,000
The first day of the 2000 fiscal year $5,000,000
through and including May 27, 2000

6.10. Investments. Neither the Company nor any of its Subsidiaries
-----------
shall make or maintain any Investments other than (i) Investments in Guarantors
or any Borrower, (ii) Investments in Foreign Subsidiaries with respect to
Indebtedness permitted by Section 6.1(g) hereof so long as (1) such Person
remains a Subsidiary of the Company; (2) all conditions set forth in Section
6.1(g) have been satisfied; and (3) the Company maintains an amount of cash on
its balance sheet at all times in an amount of not less than the aggregate
amount of all such outstanding Investments under this Section 6.10(ii); (iii)
Investments by the Company in Tier Australia with respect to Indebtedness
permitted by Section 6.1(h) hereof or otherwise so long as (1) Tier Australia
remains a Subsidiary of the Company; (2) no Default or Event of Default has
occurred and is continuing; (3) the aggregate amount of the
<PAGE>

-42-

Investment, taken together with all other Indebtedness of Tier Australia to the
Company incurred under Section 6.1(h) does not exceed, in the aggregate, the
lesser of (1) $3,500,000 and (2) the aggregate purchase price for the S&B
Acquisition; (4) such Investment is made solely with the proceeds of a sale of
the Company's common stock from which the Company has received net cash proceeds
from such equity issuance of not less than $5,000,000; (5) such Investment is
made not later than September 28, 1999; (6) the proceeds of such Investment are
used by Tier Australia to consummate the S&B Acquisition; and (7) such
Investment is not made prior to the date of consummating the S&B Acquisition;
(iv) Qualified Investments, (v) loans outstanding to Messrs. James L. Bildner
and William G. Barton evidenced by those certain promissory notes dated in
February, 1997 and amended in August, 1997 payable by such individuals to the
Company, the aggregate outstanding principal balance of which was $1,772,861 as
of March 31, 1999 (vi) up to $2,000,000 aggregate amount of loans to employees
of the Company and any Subsidiaries who are shareholders of the Company; and
(vii) Investments by a Foreign Subsidiary with the proceeds of any equity
issuance received by such Foreign Subsidiary from any equity issuance permitted
by ss.6.7 hereof in a Person to be acquired pursuant to ss.6.6 hereof. It is
understood and agreed that as the loans described in clause (v) in the preceding
sentence are paid or otherwise reduced, the amount of the payments or reductions
shall not become available for new permitted Investments under this Section
6.10.

6.11. ERISA. Neither the Company nor any member of the Controlled Group
-----
shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Company or any of its
Subsidiaries pursuant to Section 4068 of ERISA.

6.12. Transactions with Affiliates. None of the Company nor any of its
----------------------------
Subsidiaries will enter into or participate in any agreements or transactions of
any kind with any affiliate, except: agreements or transactions (in each case)
in the ordinary course of business and on an arms-length basis which (i) do not
violate or otherwise conflict with any of the terms of any of the Security
Documents, (ii) require the payment of no fees, charges or commissions by the
Company or such Subsidiaries to any affiliate except those which are reasonable
and disclosed to the Bank, (iii) are disclosed on the books, accounts and
records of the Company or such Subsidiaries, and (iv) involve terms no less
favorable to the Company or such Subsidiaries than would be the terms of a
similar agreement or transaction with any person other than an affiliate.

6.13. No Amendments to Certain Documents. The Company will not at any
----------------------------------
time cause or permit any of the charter or other incorporation documents or
by-laws of the Company or any of its Subsidiaries to be modified, amended or
supplemented in any respect whatever, except for such modification or amendment
as would not effect any change adverse to the Bank, or have a material adverse
effect on the business, property, assets,
<PAGE>

-43-

operations or condition (financial or otherwise) of the Company or any of its
Subsidiaries, without the express prior written agreement, consent or approval
of the Bank.

SECTION VII.
------------

DEFAULTS
--------

7.1. Events of Default. There shall be an Event of Default hereunder if
-----------------
any of the following events occurs:

(a) the Company shall fail to pay when due (i) any amount of principal
of any Loans, or (ii) any amount of interest thereon or any fees or expenses
payable hereunder or under the Note within five days of the due date therefor;
or

(b) The Company shall fail to perform any term, covenant or agreement
contained in Sections 5. 1 (h), 5.5, 5.7 through 5. 10 or Section VI; or

(c) the Company shall fail to perform any covenant contained in
Sections 5. l(g), 5. 1 (i) or 5.2, and such failure shall continue for 30 days;
or

(d) the Company shall fail to perform any term, covenant or agreement
(other than in respect of subsections 7. 1 (a) through (c) hereof) contained in
this Agreement and such default shall continue for 30 days after notice thereof
has been sent to the Company by the Bank; or

(e) any representation or warranty of the Company made in this
Agreement or in the Note or any other Loan Document or any other documents or
agreements executed in connection with the transactions contemplated by this
Agreement or in any certificate delivered hereunder shall prove to have been
false in any material respect upon the date when made or deemed to have been
made; or

(f) there shall occur any material adverse change in the assets,
liabilities, financial condition, business or prospects of the Company or the
Company and its Subsidiaries, taken as a whole, as determined by the Bank acting
in good faith; or

(g) the Company or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligations for borrowed
monies or advances, or for the use of real or personal property, or fail to
observe or perform any term, covenant or agreement evidencing or securing such
obligations for borrowed monies or advances, or relating to such use of real or
personal property, the result of which failure is to permit the holder or
holders of such Indebtedness to cause such Indebtedness to become due prior to
its stated maturity upon delivery of required notice, if any; or
<PAGE>

-44-

(h) the Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar official of itself or of all or a
substantial part of its property, (ii) be generally not paying its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, or any other law providing for
the relief of debtors, (vi) fail to contest in a timely or appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
under the Federal Bankruptcy Code or other law, (vii) take any action under the
laws of its jurisdiction of incorporation or organization similar to any of the
foregoing, or (viii) take any corporate action for the purpose of effecting any
of the foregoing; or

(i) a proceeding or case shall be commenced, without the application or
consent of the Company or any of its Subsidiaries in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of 30 days; or an order for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against the Company or
such Subsidiary; or action under the laws of the jurisdiction of incorporation
or organization of the Company or any of its Subsidiaries similar to any of the
foregoing shall be taken with respect to the Company or such Subsidiary and
shall continue unstayed and in effect for any period of 30 days; or

(j) a judgment or order for the payment of money shall be entered
against the Company or any of its Subsidiaries by any court, or a warrant of
attachment or execution or similar process shall be issued or levied against
property of the Company or such Subsidiary, that in the aggregate exceeds
$500,000 in value and such judgment, order, warrant or process shall continue
undischarged or unstayed for 45 days, unless the same shall be covered by
insurance in a manner satisfactory to the Bank; or

(k) the Company or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $500,000 that it shall
have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under Title IV of
ERISA by the Company, any member of the Controlled Group, any plan administrator
or any combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Company and
<PAGE>

-45-

such proceedings shall not have been dismissed within 45 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated; or

(l) there shall occur a Default or Event of Default under any of the
Loan Documents or under any of the documents with respect to any equipment lease
line to be entered into between the Bank and the Company.

7.2. Remedies. Upon the occurrence of an Event of Default described in
--------
subsections 7. 1(h) and (i), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Bank's option and upon the Bank's
declaration:

(a) the Bank's commitment to make any further Loans hereunder shall
terminate;

(b) the unpaid principal amount of the Loans together with accrued
interest and all other Obligations hereunder shall become immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived;

(c) the Bank may exercise any and all rights it has under this
Agreement, the Note or any other documents or agreements executed in connection
herewith, or at law or in equity, and proceed to protect and enforce the Bank's
rights by any action at law, in equity or other appropriate proceeding; and

(d) upon termination of the commitment or acceleration of the Loans, as
provided for above, the Borrowers shall, as specified in written notice by the
Bank, either (i) immediately deliver to the Bank, in immediately available
funds, to be held pursuant to a cash collateral agreement in substantially the
form that at the time is customarily being used by the Bank in similar
situations, an amount equal to the Letter of Credit Obligations (the "Letter of
Credit Amount"), or (ii) with the consent of the beneficiary or beneficiaries
thereof, cause any Letter of Credit to be canceled in a manner satisfactory to
the Bank. In connection with the delivery of the Letter of Credit Amount, the
Borrowers shall provide the Bank with such documentation as the Bank may from
time to time request to perfect its rights in the Letter of Credit Amount,
including, without limitation, pledge agreements and financing statements in
form and substance satisfactory to the Bank. The Bank shall hold the Letter of
Credit Amount in its own name for the exclusive purpose of applying such Letter
of Credit Amount toward the immediate payment of amounts which are thereafter
drawn under any Letter of Credit, and, to the extent of such payment,
Reimbursement Obligations shall be deemed to be satisfied. Upon the expiry date
of all Letters of Credit, any Letter of Credit Amount remaining after
satisfaction of the Reimbursement Obligations shall be available to the Bank for
application to any Obligations that are then due and payable. The Borrowers
shall remain liable for any deficiency.
<PAGE>

-46-

SECTION VIII.
-------------

SECURITY
--------

8.1. Security of Company. The Obligations shall be secured by a
-------------------
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the
Borrowers, whether now owned or hereafter acquired, pursuant to the terms of the
Security Documents to which such Borrower is a party.

8.2. Guaranties and Security of Subsidiaries. The Obligations shall
---------------------------------------
also be guaranteed pursuant to the terms of the Guaranties. The obligations of
the Guarantors under each such Guaranty shall be in turn secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the assets of each such Guarantor,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents to which such Guarantor is a party.

8.3. Additional Guarantors. The Company will cause each Domestic
---------------------
Subsidiary created, acquired or existing on or after the date hereof, other than
TSource, Inc., to become a Guarantor immediately and shall cause such Domestic
Subsidiary to execute and deliver to the Bank (a) a Guaranty and (b) further
Security Documents or other instruments and documents as the Bank may require in
order to grant to the Bank a first priority perfected security interest in such
Subsidiary's assets, together with legal opinions in form and substance
satisfactory to the Bank to be delivered to the Bank opining as to the
authorization, validity and enforceability of such Guaranty and Security
Documents and, as to the applicable Security Documents, to the perfection of
such security interests. In addition, the Company may at any time elect to have
a Foreign Subsidiary become a Guarantor hereunder. To the extent the Company
makes such an election, such Foreign Subsidiary shall comply in all respects
with the requirements of this (S)8.3.

SECTION IX.
-----------

MISCELLANEOUS
-------------

9.1. Notices. Unless otherwise specified herein, all notices hereunder
-------
to any party hereto shall be in writing and shall be deemed to have been given
when delivered by hand, when properly deposited in the mails postage prepaid,
when sent by telex, answer back received, or electronic facsimile transmission,
or when delivered to the telegraph company or overnight courier, addressed to
such party at its address indicated below:

If to the Company or Tier UK, at

1350 Treat Boulevard
Suite 250
<PAGE>

-47-

Walnut Creek, CA 94596
Attention: Chief Financial Officer
Telephone: 925-937-3950
Fax: 925-937-3902

If to the Bank, at

100 Federal Street
High Technology Division
Boston, MA 02110
Attention: Larisa B. Chilton
Telephone: 617-434-8957
Fax: 617-434-0819

or at any other address specified by such party in writing.

9.2. Expenses. The Company will pay on demand all expenses of the Bank
--------
in connection with the preparation, waiver or amendment of this Agreement, the
Note, the other Loan Agreements and all other documents executed in connection
therewith, or the administration, default or collection of the Loans or other
Obligations or administration, default, collection in connection with the Bank's
exercise, preservation or enforcement of any of its rights, remedies or options
thereunder, including, without limitation, fees of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any fees or expenses associated
with any travel or other costs relating to any appraisals or examinations
conducted in connection with the Obligations or any collateral therefor, and the
amount of all such expenses shall, until paid, bear interest at the rate
applicable to principal hereunder (including any default rate).

9.3. Set-Off. Regardless of the adequacy of any collateral or other
-------
means of obtaining repayment of the Obligations, any deposits, balances or other
sums credited by or due from the head office of the Bank or any of its branch
offices to the Company may, at any time and from time to time after the
occurrence of an Event of Default hereunder, without notice to the Company or
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly waived) be
set off, appropriated, and applied by the Bank against any and all obligations
of the Company to the Bank or any of its affiliates in such manner as the bead
office of the Bank or any of its branch offices in their sole discretion may
determine, and the Company hereby grants the Bank a continuing security interest
in such deposits, balances or other sums for the payment and performance of all
such obligations.

9.4. Term of Agreement. This Agreement shall continue in full force and
-----------------
effect so long as the Bank has any commitment to make Loans hereunder or any
Loan or any Obligation hereunder shall be outstanding.
<PAGE>

-48-

9.5. No Waivers. No failure or delay by the Bank in exercising any
----------
right, power or privilege hereunder or under the Note or under any other
documents or agreements executed in connection herewith shall operate as a
waiver thereof; nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein and in the Note provided are
cumulative and not exclusive of any rights or remedies otherwise provided by
agreement or law.

9.6. Governing Law. This Agreement and the Note shall be deemed to be
-------------
contracts made under seal and shall be construed in accordance with and governed
by the laws of the Commonwealth of Massachusetts (without giving effect to any
conflicts of laws provisions contained therein).

9.7. Amendments. Neither this Agreement nor the Note nor any provision
----------
hereof or thereof may be amended, waived, discharged or terminated except by a
written instrument signed by the Bank and, in the case of amendments, by the
Company.

9.8. Binding Effect of Agreement. This Agreement shall be binding upon
---------------------------
and inure to the benefit of the Company and the Bank and their respective
successors and assigns; provided that the Company may not assign or transfer its
rights or obligations hereunder. The Bank may sell, transfer or grant
participation in the Note without the prior written consent of the Company, and
the Company agrees that `any transferee or participant shall be entitled to the
benefits of Sections 2.8, 2.10, 2.14, 5.5 and 9.3 to the same extent as if such
transferee or participant were the Bank hereunder; provided that notwithstanding
any such transfer or participation, the Company may, for all purposes of this
Agreement, treat the Bank as the person entitled to exercise all rights
hereunder and under the Note and to receive all payments with respect thereto.
The Bank shall provide to the Company not less than ten (10) days prior written
notice of any transfer of or participation in the Note.

9.9. Successors and Assigns.
----------------------

(a) The Bank may at any time grant to one or more banks or other
financial institutions (each, a "Participant") participating interests in its
commitment to make Loans hereunder or in any or all of its Loans on such terms
as the Bank may think fit. In the event of any such grant by the Bank of a
participating interest to a Participant, whether or not upon notice to the
Company, the Bank shall remain responsible for the performance of its
obligations hereunder, and the Company shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
under this Agreement. Any agreement pursuant to which the Bank may grant such a
participating interest shall provide that the Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement, provided that such participation
--------
agreement may provide that the Bank will not agree, without the consent of the
<PAGE>

-49-

Participant, to any modification, amendment or waiver of this Agreement
requiring the consent, agreement or approval of the Bank. The Borrowers agree
that each Participant shall be entitled to the benefits of Sections 2.8 (other
than benefits that otherwise would be available due to the foreign status of
such Participant) and 2.10 with respect to its participating interest, to the
extent such Bank would be entitled to such benefits if the participation had not
been entered into or sold. An assignment or other transfer which is not
permitted by paragraph (ii) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this paragraph (a).

(b) The Bank may at any time assign to one or more banks or other
financial institutions (each, an "Assignee") all, or a part of all, of its
rights, interests and obligations under this Agreement and the Notes (or any one
of its Notes) on such terms, as between the Bank and each of its Assignees, as
the Bank may think fit (it being understood that any such assignments do not
have to be made by pro rata among the facilities), and such Assignee shall
--------
assume such rights, interests and obligations, pursuant to an instrument
executed by such Assignee and the Bank, provided, that (i) prior to assigning
--------
any interest to any Assignee hereunder, the Bank will (A) notify the Company in
writing identifying the proposed Assignee and stating the aggregate principal
amount of the proposed interest to be assigned, and (B) prior to the occurrence
of an Event of Default, receive the prior written consent of the Company which
consent may not be unreasonably withheld or delayed, and (ii) the Bank will not
assign to any Assignee less than an aggregate amount equal to $2,000,000 of its
commitments to issue Loans hereunder and interest in the Notes (as such interest
may be reduced pursuant to the terms hereof) or the remaining amount of its
commitments to issue Loans hereunder. It is understood and agreed that the
proviso contained in the immediately preceding sentence shall not be applicable
in the case of, and this paragraph (b) shall not restrict, (i) an assignment or
other transfer by the Bank to an Affiliate or (ii) a collateral assignment or
other similar transfer to a Federal Reserve Bank. Upon execution and delivery of
such an instrument and payment by such Assignee to the Bank of an amount equal
to the purchase price agreed between the Bank and such Assignee, such Assignee
shall be a Bank party to this Agreement and shall have all the rights, interests
and obligations of a Bank with the commitment to issue Loans hereunder as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this paragraph (b), the transferor Bank and the
Company shall make appropriate arrangements so that, if required, new Notes are
issued to the Assignee.

(c) No Assignee or Participant shall be entitled to receive any greater
payment under Sections 2.8 and 2.10 than the Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made at
a time when the circumstances giving rise to such greater payment did not exist.
<PAGE>

-50-

9.10. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.

SECTION X.
----------

TRANSITIONAL ARRANGEMENTS
-------------------------

10.1. Original Credit Agreement Superseded. This Agreement shall on the
------------------------------------
Closing Date supersede the Original Credit Agreement in its entirety, except as
provided in this Section 10. On the Closing Date, the rights and obligations of
the parties evidenced by the Original Credit Agreement shall be evidenced by
this Agreement and the other Loan Documents, the "Revolving Credit Loans" as
defined in the Original Credit Agreement shall be converted to Revolving Credit
Loans as defined herein, and all outstanding letters of credit issued by the
Bank for the account of the any Borrower prior to the Closing Date shall, for
purposes of this Agreement, be Letters of Credit hereunder.

10.2. Return and Cancellation of Notes. As soon as reasonably
--------------------------------
practicable after its receipt of its Notes hereunder on the Closing Date, the
Bank will promptly return to the Company, marked "Substituted" or "Cancelled",
as the case may be, any promissory notes of any Borrower held by the Bank
pursuant to the Original Credit Agreement.

10.3. Interest and Fees Under Superseded Agreement. All interest and
--------------------------------------------
fees and expenses, if any, owing or accruing under or in respect of the Original
Credit Agreement through the Closing Date shall be calculated as of the Closing
Date (prorated in the case of any fractional periods), and shall be paid on the
Closing Date. Commencing on the Closing Date, the commitment fees shall be
payable by the Borrowers to the Bank, in accordance with (S)2.3(a).
<PAGE>

-51-

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.

TIER TECHNOLOGIES, INC.

By: /s/ George K. Ross
------------------------------------------
Name: George K. Ross
Title: CFO/Executive Vice President

TIER TECHNOLOGIES
(UNITED KINGDOM), INC.

By: /s/ George K. Ross
------------------------------------------
Name: George K. Ross
Title: CFO/Secretary/Treasurer

BANKBOSTON, N.A.

By: /s/ Debra E. Del Vecchio
------------------------------------------
Name: Debra E.Del Vecchio
Title: Vice President

<PAGE>

Exhibit 10.57

FIRST AMENDMENT
TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

First Amendment dated as of June 30, 1999 to Amended and Restated Revolving
Credit Agreement (the "First Amendment"), by and among TIER TECHNOLOGIES, INC.,
a California corporation (the "Company"), TIER TECHNOLOGIES (UNITED KINGDOM),
INC., a Delaware corporation ("Tier UK" and, collectively with the Company, the
"Borrowers" and each individually, a "Borrower") and BANKBOSTON, N.A. (the
"Bank"), amending certain provisions of the Amended and Restated Revolving
Credit Agreement dated as of May 28, 1999 (as amended and in effect from time to
time, the "Credit Agreement") by and among the Borrowers and the Bank. Terms
not otherwise defined herein which are defined in the Credit Agreement shall
have the same respective meanings herein as therein.

WHEREAS, the Borrowers and the Bank have agreed to modify certain terms and
conditions of the Credit Agreement as specifically set forth in this First
Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

(S)1. AMENDMENT TO (S)1 OF THE CREDIT AGREEMENT. Section 1.1 of the
--------- -- ---- -- --------------------
Credit Agreement is hereby amended as follows:

(a) The definition of "EBIT" is hereby amended by inserting
immediately after the words "commercial billing system acquired by the
Company" which appear in subparagraph (c) of such definition the words "and
the charge taken in the fiscal quarter ending June 30, 1999 in an amount of
not more than $1,856,000 relating to reserves taken for contracts in
dispute".

(b) The definition of "EBITDA" is hereby amended by inserting
immediately after the words "commercial billing system acquired by the
Company" which appear in subparagraph (e) of such definition the words "and
the charge taken in the fiscal quarter ending June 30, 1999 in an amount of
not more than $1,856,000 relating to reserves taken for contracts in
dispute".

(S)2. AMENDMENT TO (S)5 OF THE CREDIT AGREEMENT. Section 5.8 of the
--------- ---- -- --------------------
Credit Agreement is hereby amended (a) by deleting the amount "$3,200,000" which
appears in subparagraph (b) of Section 5.8 and substituting in place thereof the
amount "$3,400,000"; and (b) deleting the amount "$3,400,000" which appears in
subparagraph (c) of Section 5.8 and substituting in place thereof the amount
"$3,500,000".
<PAGE>

-2-

(S)3. Amendment to Section 6 of the Credit Agreement. Section 6.1 of the
----------------------------------------------
Credit Agreement is hereby amended as follows:

(a) Section 6.1(h) is hereby amended by deleting the word "and"
which appears at the end of Section 6.1(h);

(b) Section 6.1 is amended by inserting immediately after the text
of Section 6.1(h) the following:

(i) unsecured Indebtedness of the Company consisting of the
Guaranty dated as of December 22, 1998 from the Company to Bank of
America f/k/a NationsBank, N.A. in an aggregate amount of not more
than $1,000,000, guaranteeing certain Indebtedness of James L. Bildner
and Nancy J. Bildner to Bank of America, provided (i) the
--------
indemnification agreement among James L. Bildner, Nancy J. Bildner and
the Company dated as of December 22, 1998 remains in full force and
effect; and (ii) such indemnification obligations thereunder remain
secured by not less than 126,619 shares of common stock of the Company
(as adjusted by any stock split, reclassification or similar event)
pursuant to the terms of the Amended and Restated Pledge Agreement
dated as of June 30, 1999 between the Company and James L. Bildner;
and

(c) Section 6.1(i) of the Credit Agreement is hereby amended by (i)
relettering such section as 6.1(j) and (ii) inserting immediately after the
amount "$2,000,000" the words "less the amount by which the fair market
----
value as of the relevant date of determination of the capital stock pledged
by James L. Bildner to the Company under the Amended and Restated Pledge
Agreement dated as of June 30, 1999 is less than $1,000,000, provided,
---------
however, notwithstanding the foregoing, any failure of the Company to
-------
comply with this Section 6.1(j) solely as a result of the amount permitted
to be incurred changing due to market fluctuations in the value of such
stock after Indebtedness was incurred in compliance herewith shall not
constitute an Event of Default hereunder".

(S)4. Conditions to Effectiveness. This First Amendment shall not become
---------------------------
effective until the Bank receives the following:

(a) a counterpart of this First Amendment, executed by the Borrowers
and the Banks; and

(b) payment in cash of an amendment fee of $5,000 for the account of
the Bank.

(S)5. Representations and Warranties. The Borrowers hereby repeat, on and
------------------------------
as of the date hereof, each of the representations and warranties made by them
in (S)4 of the Credit Agreement, and such representations and warranties remain
true as of the date hereof (except to the extent of changes resulting from
transactions contemplated or permitted by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such
<PAGE>

-3-

representations and warranties relate expressly to an earlier date), provided,
--------
that all references therein to the Credit Agreement shall refer to such Credit
Agreement as amended hereby. In addition, each Borrower hereby represents and
warrants that the execution and delivery by each Borrower and its Subsidiaries
of this First Amendment and the performance by such Borrower and its
Subsidiaries of all of its agreements and obligations under the Credit Agreement
as amended hereby and the other Loan Documents are within the corporate
authority of each such Borrower and its Subsidiaries and has been duly
authorized by all necessary corporate action on the part of such Borrower and
its Subsidiaries.

(S)6. Ratification, Etc. Except as expressly amended hereby, the Credit
------------ ---
Agreement, the Security Documents and all documents, instruments and agreements
related thereto are hereby ratified and confirmed in all respects and shall
continue in full force and effect. The Credit Agreement and this First
Amendment shall be read and construed as a single agreement. All references in
the Credit Agreement or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.

(S)7. No Waiver. Nothing contained herein shall constitute a waiver of,
---------
impair or otherwise affect any Obligations, any other obligation of the
Borrowers or any rights of the Bank consequent thereon.

(S)8. Counterparts. This First Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

(S)9. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
<PAGE>

-4-

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as a document under seal as of the date first above written.

TIER TECHNOLOGIES, INC.

By: /s/ George K. Ross
------------------------------
Title: EVP & CFO

TIER TECHNOLOGIES
(UNITED KINGDOM), INC.

By: /s/ George K. Ross
------------------------------
Title: Director

BANKBOSTON, N.A.

By: /s/ Debra E. DelVecchio
------------------------------
Title: Vice President

<PAGE>

Exhibit 10.58

Option 2

CSEA/CC-99-001
--------------
Agency Control Number

STANDARD SERVICES CONTRACT
AGREEMENT

BETWEEN

MARYLAND STATE DEPARTMENT OF HUMAN RESOURCES

CHILD SUPPORT ENFORCEMENT ADMINISTRATION
------------------------------------------------------------------
311 WEST SARATOGA STREET
------------------------------------------------------------------
BALTIMORE, MARYLAND 21201
------------------------------------------------------------------

AND

Tier Technologies, Inc.
------------------------------------------------------------------
1350 Treat Blvd., Suite 250
------------------------------------------------------------------
Walnut Creek, CA 94549
------------------------------------------------------------------

FOR

CENTRAL DISBURSEMENT UNIT SERVICES
------------------------------------------------------------------

THIS AGREEMENT, effective as of the 1st day of June, 1999, by and between
the Maryland State Department of Human Resources, Child Support Enforcement
Administration, hereinafter referred to as the "DEPARTMENT" and Tier
Technologies, Inc., a ___________________, hereinafter referred to as
the "CONTRACTOR".

The DEPARTMENT and the CONTRACTOR do mutually agree as follows:

I.
PROGRAM AND SERVICES TO BE PROVIDED

Subject to the continuing availability of the State and/or Federal funds,
the DEPARTMENT shall purchase the CONTRACTOR'S services and the CONTRACTOR shall
develop, implement and operate the Maryland Child Support Enforcement state
disbursement unit's front-end payment processing functions.

These services shall be provided in accordance with the terms and conditions of
this Contract and the following exhibits, which hereby are incorporated as part
of this Contract:

1. Exhibit A: Request for Proposals/Invitation for bids for (name of unit)
Child Support Enforcement dated January 26, 1999;

2. Exhibit B: Contractor's Technical and/or Financial Proosal dated 3/4/99
and 4/9, 1999;

3. Exhibit C: State Contract Affidavit Addendum.

4. Exhibit D: Addendum To Standard Service Contract Agreement.

The DEPARTMENT shall have the unilateral right to order, in writing, changes in
the work to be performed by the CONTRACTOR, which are within the scope of the
above services.

II.
TERM OF AGREEMENT

Performance under this Contract shall commence on June 1, 1999, and shall
continue until agreed upon services are completed, but in any case no later than
August 30, 2004.

The PARTIES, however, may mutually agree in writing to an earlier
termination, or the DEPARTMENT, in its sole discretion, may serve upon the
CONTRACTOR a written notification of an intention to terminate the Contract
pursuant to either Section IV(l) or (m) of this Contract.
<PAGE>

III.
COSTS AND EFFICIENCY

(a) The cost to the DEPARTMENT for the services to be provided by the
CONTRACTOR under the Contract shall not exceed Eighteen Million One Hundred
Thirty-Two Thousand One Hundred Sixty-One Dollars ($ 18,132,161.00 ).
(b) Method of Payment: Payments by the DEPARTMENT shall be made within 30
days of receipt of an expenditure report or an approved invoice from the
CONTRACTOR.

Charges for late payment of invoices other than as prescribed by Title 15,
Subtitle 1, of the State Finance and Procurement Article, Annotated Code of
Maryland, as from time to time amended, are prohibited.

In addition to any other available remedies if, in the opinion of the
Procurement Officer, the CONTRACTOR fails to perform in a satisfactory and
timely manner, the Procurement Officer may refuse or limit approval of any
invoice for payment, and may cause payments to the CONTRACTOR to be reduced or
withheld until such time as the CONTRACTOR meets performance standards as
established by the Procurement Officer.

(c) Availability of Funding: Payment of these funds is conditional upon
the DEPARTMENT receiving funds as specified to pay for the total cost of the
services set forth in the Appendix from Department of Health and Human Services
and State General Funds.

If the General Assembly fails to appropriate funds or if funds are not
otherwise made available for continued performance for any fiscal period of this
contract succeeding the first fiscal period, this Contract shall be cancelled
automatically as of the beginning of the fiscal year for which funds were not
appropriated or otherwise made available; provided; however, that this will not
affect either the State's rights or the CONTRACTOR's rights under any
termination clause in the Contract. The effect of termination of the Contract
hereunder will be to discharge both the CONTRACTOR and the DEPARTMENT from
future performance of the Contract, if not from their rights and obligations
existing at the time of termination. The CONTRACTOR shall be reimbursed for the
reasonable value of any nonrecurring cost incurred but not amortized in the
price of the Contract. The State shall notify the CONTRACTOR as soon as it has
knowledge that funds may not be available for the continuation of this contract
for each succeeding fiscal period beyond the first.

If the General Assembly fails to appropriate sufficient funds or if
sufficient funds are not otherwise made available for performance of this
Contract, the DEPARTMENT reserves the right in its sole discretion to reduce the
total amount of funding under the Contract.

(d) The CONTRACTOR'S Federal Tax Identification Number is 94-3145844. The
CONTRACTOR agrees to include this number on all invoices billed to the
DEPARTMENT. The DEPARTMENT may withhold payment for failure to comply with this
provision.

The CONTRACTOR's Social Security Number is ________________________________
(individual contractor only).

IV.
GENERAL PROVISIONS AND CONDITIONS

(a) Maryland Law: The place of performance of this Contract shall be the
State of Maryland. This Contract shall be construed, interpreted, and enforced
according to the laws of the State of Maryland as required under applicable laws
and regulations, including approval of the Board of Public Works where
appropriate.

(b) Indemnification; Claims: (1) The CONTRACTOR shall indemnify the State
against liability for any suits, actions, or claims of any character arising
from or relating to the performances of the CONTRACTOR or its subcontractors
under this Contract.

(2) The State of Maryland has no obligation to provide legal counsel
or defense to the CONTRACTOR or its subcontractors in the event that a suit,
claim or action of any character is brought by any person not party to this
Contract against the CONTRACTOR or subcontractors as a result of or relating to
the CONTRACTOR's obligations under this Contract.

(3) The State has no obligation for the payment of any judgments or
the settlement of any claims against the CONTRACTOR or its subcontractors as a
result of or relating to the CONTRACTOR's obligations under this Contract.
<PAGE>

(4) The CONTRACTOR shall immediately notify the Procurement Officer
of any claim or suit made or filed against the CONTRACTOR or its subcontractors
regarding any matter resulting from or relating to the CONTRACTOR's obligations
under the Contract, and will cooperate, assist, and consult with the State in
the defense or investigation of any claim, suit, or action made or filed against
the State as a result of, or relating to the CONTRACTOR's performance under this
Contract.

(1) It is qualified to do business in the State of Maryland and that
it will take such action as, from time to time, may be necessary to remain so
qualified;

(2) It is not in arrears with respect to the payment of any monies
due and owing the State of Maryland, or any department or unit thereon
including, but not limited to, the payment of taxes and employee benefits, and
that it shall not become so in arrears during the term of this Contract;

(3) It shall comply with all Federal, State and local laws,
regulations, and ordinances applicable to its activities and obligations under
this Contract; and

(4) It shall procure, at its expense, all licenses, permits,
insurance, and governmental approval, if any, necessary to the performance of
its obligations under this Contract.

(d) Employees of CONTRACTOR: The persons performing these services, as set
forth in the Appendix, shall be employees of the CONTRACTOR. The CONTRACTOR is
responsible for complying with all Federal and State laws as to tax and Social
Security payments to be withheld from wages paid to said employees.

(e) Administration: The work to be accomplished under this Contract shall
be performed under the direction of the DEPARTMENT'S Procurement Officer,
Shirley Larson, Assistant Director, Administration and Compliance.

All matters relating to the administration and performance of this Contract
shall be referred to the Procurement Officer for determination.

(f) Technical Assistance and Consultation: The DEPARTMENT shall furnish
the CONTRACTOR with such technical assistance and consultation by the
DEPARTMENT's staff as is reasonably necessary to assure satisfactory performance
in providing the services required by this Contract and not readily available
elsewhere.

The use of funds under this Contract by the CONTRACTOR to hire consultants shall
require the prior approval by the DEPARTMENT's designated Procurement Officer,
of any such arrangement and the proposed work plan of the consultant(s)
involved.

(g) Non-hiring of Employees: No employee of the State of Maryland or any
unit thereof, whose duties as such employee include matters relating to or
affecting the subject matter of this Contract, shall, while so employed, become
or be an employee of the party or parties hereby contracting with the State of
Maryland or any unit thereof.

(h) Amendments: This Contract constitutes the entire agreement between the
parties and all other communications prior to its execution, whether written or
oral, with reference to the subject matter of this Contract are superseded by
this agreement. This Contract may be amended as the DEPARTMENT and the
CONTRACTOR mutually agree in writing. Any amendment to this Contract must first
be approved in writing by the Procurement Officer, subject to any additional
approvals required by State law. No amendment to this Contract shall be binding
unless so approved and unless it is in writing and signed by the party to be
charged. Except for the specific provision of the Contract which is thereby
amended, the Contract shall remain in full force and effect after such amendment
subject to the same laws, obligations, conditions, provisions, rules and
regulations, as it was prior to said amendment.

Adjustments of funds between categories approved in writing by the Project
Officer, so long as they do not affect the total authorized funding and are
consistent with the objectives of this Contract do not require an amendment to
the Contract.

(i) Nondiscrimination in Employment: The CONTRACTOR agrees: (1) not to
discriminate in any manner against an employee or applicant for employment
because of race, color, religion, creed, age, sex, marital status, national
origin, ancestry, or physical or mental disability unrelated in nature and
extent so as reasonably to preclude the performance of such employment; (2) to
include a provision similar to that contained in subsection (1), above, in any
subcontract except a subcontract standard commercial supplies or raw materials;
and (3) to post and cause subcontractors to post in conspicuous places available
to employees and applicants for employment, notices setting forth the substance
of this clause.

(j) Nondiscrimination in Programs: The CONTRACTOR agrees that, in
providing any aid, benefit, service, program, or activity, under this contract
on behalf of the Department of Human Resources. It will not: (1) deny any
individual the opportunity to participate in or benefit from the benefit or
service equal to that provided others; (2) provide a qualified individual with a
disability with any aid, benefit, or service that is not as effective in
affording equal opportunity to obtain the same result, to gain the same benefit,
or to reach the same level of achievement as that provided to others: (3)
provide different or separate aid, benefits, or services to individuals or
classes of individuals with disabilities than is provided to others unless such
action is necessary to provide qualified individuals with disabilities with
aids, benefits, or service that are as effective as those provided to others;
(4) deny a qualified individual with a disability the opportunity to participate
as a member of any planning or advisory boards; or (5) otherwise limit a
qualified individual with a disability in the enjoyment of any right, privilege,
advantage or opportunity enjoyed by others receiving the aid, benefit, or
service.
<PAGE>

The CONTRACTOR agrees further to not utilize criteria or methods of
administration that have the effect of subjecting anyone to discrimination on
the basis of disability, or have the purpose or effect of defeating or
substantially impairing accomplishment of the objectives of the Department of
Human Resources program with respect to individuals with disabilities.

(k) Subcontracting; Assignment: The CONTRACTOR may not subcontract any
portion of the services provided under the Contract without obtaining the prior
written approval of the DEPARTMENT and the CONTRACTOR may not assign this
Contract, or any of its rights or obligations hereunder, without the prior
written approval of the Department. Any such subcontract or assignment shall be
subject to any items and conditions that the Department deems necessary to
protect the interest of the State. The Department shall not be responsible for
the fulfillment of the CONTRACTOR's obligation to the subcontractors.

(l) Termination for Convenience: The performance of work under this
Contract may be terminated by the DEPARTMENT in accordance with this clause in
whole, or from time to time in part, whenever the DEPARTMENT shall determine
that such termination is in the best interest of the State. The DEPARTMENT will
pay all reasonable costs associated with this Contract that the CONTRACTOR has
incurred up to the date of termination and all reasonable costs associated with
termination of the Contract; provided, however, that the CONTRACTOR shall not be
reimbursed for any anticipatory profits which have not been earned up to the
date of termination. Termination hereunder, including the determination of the
rights and obligations of the parties, shall be governed by the provisions of
COMAR 21.07.01.12A(2).

(m) Termination for Cause: If the CONTRACTOR fails to fulfill its
obligations under this Contract properly and on time, or otherwise violates any
provision of the Contract, the Department may terminate the Contract. Prior to
terminating this contract, the DEPARTMENT shall give the CONTRACTOR thirty (30)
days prior written notice of such default and if the CONTRACTOR has not cured
such default within the thirty (30) day period, the DEPARTMENT may, by written
notice, not less than five (5) days after expiration of this period, terminate
the Contract. The notice shall specify the acts or omissions relied on as cause
for termination. All finished or unfinished supplies and services provided by
the CONTRACTOR shall, at the DEPARTMENT's option, become the State's property.
The DEPARTMENT shall pay the CONTRACTOR fair and equitable compensation for
satisfactory performance prior to receipt of notice of termination, less the
amount of damages caused by the CONTRACTOR's breach. If the damages are more
than the compensation payable to the CONTRACTOR, the CONTRACTOR will remain
liable after termination and the DEPARTMENT can affirmatively collect damages.
Termination hereunder, including the determination of the right and obligations
of the parties, shall be governed by the provisions of COMAR 21.07.01.11B.

(n) Disputes: This Contract shall be subject to the provisions of State
Finance and Procurement Article, title 15, Subtitle 2, Annotated Code of
Maryland, and COMAR 21.10 (Administrative and Civil Remedies). Pending
resolution of a claim, the CONTRACTOR shall proceed diligently with the
performance of the Contract in accordance with the Procurement Officer's
decision.

Unless a lesser period is provided by applicable statute, regulation, or
this Contract, the CONTRACTOR must file a written notice of claim with the
Procurement Officer within 30 days after the basis for the claim is known or
should have been known, whichever is earlier. Contemporaneously with or within
30 days of the filing of a notice of claim, but no later than the date of final
payment under the Contract, the CONTRACTOR must submit to the Procurement
Officer its written claim containing the information specified in COMAR
21.10.01.02.

(o) Saving Clause: Both PARTIES hereby expressly acknowledge the
possibility of substantial changes in Federal regulations applicable to this
Contract and expressly agree to renegotiate this Contract as necessary to comply
with such changes.

(p) Document Retention and Inspection: The CONTRACTOR shall retain and
maintain all books, records, and other documents relevant to this Contract for a
period of no less than three years after the date of final payment, a resolution
of audit findings, or disposition of non-expendable property, whichever is
later, and upon receipt of reasonable written notice thereof. Full access
thereto and the right to examine any of said materials shall be afforded Federal
and State auditors who shall have substantiated in writing a need therefor in
the performance of their official duties, and such other persons as are
authorized by the DEPARTMENT, including the Procurement Officer or his designee,
at all reasonable times.

(q) Contingent Fee Prohibition: The CONTRACTOR, Architect, or Engineer
warrants that it has not employed or retained any person, partnership,
corporation, or other entity, other than a bona fide employee, bona fide agent,
bona fide salesperson, or commercial selling agency working for the CONTRACTOR,
Architect, or Engineer, to solicit or secure this agreement, and that it has not
paid or agreed to pay any person, partnership, corporation, or other entity,
other than a bona fide employee, bona fide salesperson, or commercial selling
agency, any fee or other consideration contingent on the making of this
agreement.

(r) Delays and Extensions of Time: The CONTRACTOR agrees to perform this
Contract continuously and diligently. No charges or claims for damages shall be
made by the Contractor for any delays or hindrances, regardless of cause, in the
performance of services under the Contract. Time extensions may be granted only
for excusable delays that arise from unforeseeable causes beyond the control,
and without the fault or negligence of the Contractor, including but not
restricted to acts of God, acts of the public enemy, acts of the State in either
its sovereign or contractual capacity, acts of another contractor in the
performance of a state contract, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, or the delays of a subcontractor or
supplier arising from unforeseeable causes beyond the control and without the
fault or negligence of either the CONTRACTOR or the subcontractor of supplier.
<PAGE>

(s) Variations in Estimated Quantities: No equitable adjustments shall be
permitted in favor of either the State or the CONTRACTOR in the event that the
quantity of any pay item in this Contract is an estimated quantity and the
actual quantity of such pay item varies from the Estimated Quantity stated in
the Contract.

(t) Suspension of Work: The Procurement Officer unilaterally may order the
CONTRACTOR in writing to suspend, delay, or interrupt all or any part of its
performance for such period as the Procurement Officer may determine to be
appropriate for the convenience of the State.

(u) Pre-existing Regulations: In accordance with the provisions of Section
11-206 of the State Finance and Procurement Article, Annotated Code of Maryland,
the regulations set forth in Title 21 of the Code of Maryland Regulations (COMAR
Title 21) in effect on the date of execution of this Contract are applicable to
this Contract.

(v) Financial Disclosure: The CONTRACTOR shall comply with the provisions
of Section 13-221 of the State Finance and Procurement Article of the Annotated
Code of Maryland, which requires that every business that enters into contracts,
leases, or other agreements with the State of Maryland or its agencies during a
calendar year under which the business is to receive in the aggregate $100,000
or more, shall, within 30 days of the time when the aggregate value of these
contract, leases or other agreements reaches $100,000, file with the Secretary
of State of Maryland certain specified information to include disclosure of
beneficial ownership of the business.

(w) Political Contribution Disclosure: The CONTRACTOR shall comply with
Chapter 838, Laws of 1997 (Reporting of Contributions, HB 6) which requires a
statement be filed by a business with the State Administrative Board of Election
laws which discloses political contributions of $500 or more made to a candidate
for elective office during the reporting period. This is required when the
business receives from the State or its political subdivisions an aggregate of
$100,000 or more in a calendar year. The Statement must be filed before the
execution of a lease or contract by the State or its subdivisions and the
statement covers the preceding two calendar years. If the contribution is made
subsequent to the execution of a lease or contract, the statement must be filed
twice a year during the contract term.

(x) Cost and Price Certification: The CONTRACTOR by submitting costs or
price information certifies that, to the best of its knowledge, the information
submitted is accurate, complete, and current as of the closing date for receipt
of bids or proposals.

The price under this Contract and any change order or modification
hereunder, including profit or fee, shall be adjusted to exclude any significant
price increase occurring because the CONTRACTOR furnished cost or price
information which, as of the closing date for receipt of bids/proposals, was
inaccurate, incomplete, or not current.

(y) Liability for Loss of Data: In the event of loss of any data or
records necessary for the performance of this Contract where such loss is due to
the error or negligence of the CONTRACTOR, the CONTRACTOR shall be responsible,
irrespective of cost to the CONTRACTOR, for recreating such lost data or
records.

(z) Purchase and Treatment of Assets:

(1) CONTRACTOR shall obtain written approval of the DEPARTMENT for
any purchase of assets with funds paid under this Contract, excluding ordinary
office supplies, except that such is not required with regard to purchase of
assets described in the Appendix attached hereto.

(2) Title to all property furnished by the DEPARTMENT shall remain in
the DEPARTMENT. Title to all property acquired by the CONTRACTOR at a cost of
over FIFTY DOLLARS ($50.00) including purchase by lease-purchase agreement for
the cost of which the CONTRACTOR is to be reimbursed under this Contract, shall
immediately vest in the DEPARTMENT upon (i) issuance for use of such property in
the performance of this Contract, or (ii) reimbursement of the cost thereof by
the DEPARTMENT, whichever occurs first.

(3) The CONTRACTOR shall maintain and administer in accordance with
sound business practice a program for the maintenance, repair, protection, and
preservation of the DEPARTMENT'S property as to assure its full availability and
usefulness for the performance of this Contract.

(4) The DEPARTMENT'S property shall, unless otherwise provided
herein, or approved in writing by the DEPARTMENT, be used only for the
performance of this Contract.

(5) In the event that the CONTRACTOR is indemnified, reimbursed, or
otherwise compensated for any loss or destruction of or damage to the
DEPARTMENT's property, it shall use the proceeds to repair, renovate, or replace
the DEPARTMENT's property involved, or shall credit such proceeds against the
cost of the work covered by the Contract, or shall otherwise reimburse the
DEPARTMENT as directed by the DEPARTMENT.
<PAGE>

(6) At the conclusion of the term of this Contract, the CONTRACTOR shall
deliver to the DEPARTMENT a listing of all the DEPARTMENT's property purchased
thereunder, showing the following information as to each property item:

(i) a description of the property;
(ii) manufacturer's serial number or other identification number;
(iii) acquisition date and cost;
(iv) source of the property;
(v) percentage of Federal funds used in acquisition of the
property; and
(vi) location, use and condition of the property.

(7) Upon termination of the Contract, the DEPARTMENT may require the
CONTRACTOR to deliver to the DEPARTMENT any property specifically produced or
acquired for the performance of this Contract.

(8) As an alternative to the provisions of (1) - (7), the CONTRACTOR may
elect to furnish property for use in the performance of this Contract out of its
own funds, for which the DEPARTMENT will reimburse it to the extent of its
allocated share of the annual depreciation expense of such property allowed by
IRS depreciation schedules.

(aa) The CONTRACTOR, if providing direct services to the DEPARTMENT'S clients,
agrees to include an acknowledgment of funding received from the DEPARTMENT
under this contract in any and all related publications. "Related publications"
are not limited to publications funded under the contract.

Prohibition against shifting Maryland income to out-of-state affiliates.
Contractor may not, for any period during the Contract term, seek to reduce the
amount of Contractor's income subject to Maryland income tax by payments made to
an affiliated entity or an affiliate's agent for the right to use trademarks,
trade names, or other intangible property associated with Contractor.
Contractor agrees that during the course of this Contract it shall not make any
royalty or similar payments to any affiliated company; and if any such royalty
or similar payments are made, Contractor and the affiliated company shall file
separate Maryland income tax returns and pay their respective Maryland income
taxes in such a manner that Contractor does not claim a deduction against
Maryland income tax for such paymnts, and the affiliated company receiving the
royalty or similar payments files Maryland income tax returns and pays Maryland
tax, under a formula that reasonably apportions the income of the affiliated
company among the states, including Maryland, in which the Contractor does
business. Contractor agrees that it is authorized to bind its affiliated
entities to the terms hereof.

This Contract, together with the Appendix attached hereto and incorporated
herein by reference, represents the complete, total and final understanding of
the PARTIES and no other understanding or representation, oral or written,
regarding the subject matter of this Contract, shall be deeemed to exist or to
bind the Parties hereto at the time of execution.

IN WITNESS WHEREOF, the PARTIES have executed this Contract and have caused
their respective seals to be affixed hereto on or before the date first set
forth herein.

FOR THE CONTRACTOR: FOR THE DEPARTMENT:

/s/ James R. Weaver /s/ Brian D. Shea
- ------------------------------ -------------------------------
Signature Signature

James R. Weaver Brian D. Shea
- ------------------------------ -------------------------------
Name (typed) Name (typed)

Acting Executive Director
President, Government Services Child Support Enforcement Admin.
- ------------------------------ -------------------------------
Title Title

April 30, 1999
- ------------------------------ -------------------------------
Date Signed Date Signed
<PAGE>

ADDENDUM TO STANDARD SERVICES CONTRACT
AGREEMENT

BETWEEN

MARYLAND DEPARTMENT OF HUMAN RESOURCES

CHILD SUPPORT ENFORCEMENT ADMINISTRATION

AND

TIER TECHNOLOGIES, INC.

IV.

GENERAL PROVISIONS AND CONDITIONS

IV.(B) Indemnification Claims:

Paragraphs (2) and (3) are amended to state that these provisions are
mutually applicable to both the State and to Tier Technologies, Inc.

<PAGE>

Exhibit 10.59

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

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

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

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

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

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

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

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

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

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

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

b. The Compensation for Years 4 and 5 shall be determined as follows:

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

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

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

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

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

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

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

LOCKBOX/PAYMENT IDENTIFICATION TRANSACTION FEES:

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

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

2
<PAGE>

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

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

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

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

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

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

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

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

3
<PAGE>

D. STANDARD TERMS AND CONDITIONS.

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

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

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

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

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

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

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

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

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

4
<PAGE>

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

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

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

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

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

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

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

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

5
<PAGE>

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

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

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

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

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

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

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

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

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

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

6
<PAGE>

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

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

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

a. The Contract document and its attachments

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

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

d. The Contractor's Proposal

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

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

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

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

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

7
<PAGE>

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

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

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

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

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

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

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

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

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

8
<PAGE>

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

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

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

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

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

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

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

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

9
<PAGE>

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

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

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

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

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

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

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

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

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

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

10
<PAGE>

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

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

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

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

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

ii) liquidated damages;

iii) partial default; and/or

iv) termination of the Contract.

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

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

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

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

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

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

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

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

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

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

11
<PAGE>

in Appendix B from any amounts owed to the Contract.

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

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

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

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

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

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

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

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

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

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

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

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

12
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

13
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

14
<PAGE>

subject to reductions for any remedies invoked by the State.

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

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

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

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

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

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

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

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

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

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

15
<PAGE>

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

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

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

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

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

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

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

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

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

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

16
<PAGE>

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

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

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

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

IN WITNESS WHEREOF:

TIER TECHNOLOGIES, INCORPORATED

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

DEPARTMENT OF HUMAN SERVICES:

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

APPROVED:

DEPARTMENT OF FINANCE AND ADMINISTRATION

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

COMPTROLLER OF THE TREASURY

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

<PAGE>

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