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| On May 11, 2022, we granted each of our non-employee directors 724 restricted stock units with a grant date fair value of $249,925,1.On May 11, 2023, we granted each of our non-employee directors 643 restricted stock units with a grant date fair value of $249,883, computed in accordance with FASB ASC Topic 718. These restricted stock units vest and will be settled in shares on the first anniversary of the grant date. No options to purchase shares of our common stock were granted to our non-employee directors in 2023. 2.The following table shows the aggregate shares underlying outstanding common stock options and restricted stock units, based upon grants made as director compensation, held by non-employee directors as of December 31, 2023. | | | | | | | | | | | | | Name | Number of Stock Options (#) | Number of Stock Awards (#) | | | | | | | Glenn A. Carter | 15,000 | | 643 | | | | Brenda A. Cline | 10,000 | | 643 | | | | Ronnie D. Hawkins | — | | 643 | | | | Mary L. Landrieu | — | | 643 | | | | Daniel M. Pope | — | | 643 | | | | Dustin R. Womble | — | | 643 | | |
| | | | | | | | | Operations of the grant date. No options to purchase sharesBoard | | Table of our common stock were granted to our non-employee directors in 2022.Contents |
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| The following table shows the aggregate shares underlying outstanding common stock options and restricted stock units, based upon grants made as director compensation, held by non-employee directors as of December 31, 2022. |
| | Glenn A. Carter | | | 17,000 | | | 724 | | | | Brenda A. Cline | | | 10,000 | | | 724 | | | | Ronnie D. Hawkins | | | — | | | 724 | | | | Mary L. Landrieu | | | — | | | 724 | | | | Daniel M. Pope | | | 3,334 | | | 724 | | | | Dustin R. Womble | | | 1,231 | | | 724 | |
Director & Officer Liability Insurance Directors are covered under our director and officer liability insurance for claims alleged in connection with their service as directors. We have entered into indemnification agreements with all of our directors, agreeing to indemnify them to the fullest extent permitted by law for claims alleged in connection with their service on the Board. Communications with Our Board of Directors Any shareholder or interested party who wishes to communicate with our Board of Directors or any specific director(s), including non-management director(s), may write to: Board of Directors
Tyler Technologies, Inc.
5101 Tennyson Parkway
Plano, Texas 75024 Depending on the subject matter, management will: • | •Forward the communication to the director or directors to whom it is addressed (for example, if the communication received relates to our “whistleblower policy” found on our website, www.tylertech.com, including questions, concerns, or complaints regarding accounting, internal accounting controls, and auditing matters, it will be forwarded by management to the Chair of the Audit Committee for review); •www.tylertech.com, including questions, concerns, or complaints regarding accounting, internal accounting controls, and auditing matters, it will be forwarded by management to the Chair of the Audit Committee for review); |
Attempt to handle the inquiry directly (for example, if the communication is a request for information about us or our operations or it is a stock-related matter that does not appear to require direct attention by our Board of Directors); and/or •Not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. At each meeting of our Board of Directors, our BoardExecutive Chair will present a summary of all communications received since the last meeting of the Board of Directors that were not forwarded and will make those communications available to any director on request. | | | | | | | | | | 41 | | | | | | | | 28
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSCertain Relationships and Related TransactionsOur directors and executive officers seek approval from the Board of Directors prior to entering into a business arrangement that may be deemed a conflict of interest as described in our Code of Business Conduct and Ethics. Examples of transactions that may be considered a conflict of interest include: •to receive from or give to anyone that has a business relationship with us something with more than a token value; •to lend to or borrow from individuals or concerns that do business with or compete with us, except banks and other financial institutions; •to serve as an officer, director, employee, or consultant of, or receive income from, any enterprise doing business with or competing with us; •to own an interest in or engage in the management of an organization providing services or products to us, or to which we sell or compete, except when such interest (a) comprises publicly traded securities listed on a national securities exchange or the OTC margin list and (b) is not in excess of 5% of the securities of such company; and •to knowingly cause, either directly or indirectly, us to enter into a business transaction with a close relative of the director or executive officer or a business enterprise of such relative. In addition, we review, on an annual basis, our financial records to ensure all related-party transactions are identified, quantified, and adequately disclosed. Also, each director and executive officer must disclose in writing any known related-party transactions during the completion of the annual director and officer questionnaire. Throughout 2022,2023, we employed Dane L. Womble, a brother of 2023-2024 director Dustin R. Womble. Dane L. Womble is the President of our Public Administration Group and received in excess of $120,000 in salary and bonus compensation in 20222023 in exchange for services rendered. He was also granted restricted stock optionsunits with respect to 4,600700 shares of our common stock, which vest over three years, and long-term PSUs with respect to 2,3005,700 shares that are subject to a three-year performance condition. In addition, Dane L. Womble received other employee benefits on the same basis as other, similarly situated employees. Dane L. Womble’s total compensation is consistent with that of similarly situated employees and his compensation terms are established directly with him, independent of any relationship he has with Dustin R. Womble. Throughout 2022,2023, we employed Jennifer M. LeBlanc, a daughter of Executive Chair John S. Marr, Jr. Ms. LeBlanc served as a Senior DirectorVice President of FinanceFinancial Planning and Analysis Management and received in excess of $120,000 in salary and bonus compensation in 20222023 in exchange for services rendered. Ms. LeBlanc was also granted restricted stock units with respect to 7001,100 shares of our common stock, which vest over four years. In addition, Ms. LeBlanc received other employee benefits on the same basis as similarly situated employees. Ms. LeBlanc’s total compensation is consistent with that of similarly situated employees, and her compensation terms are established directly with her, independent of any relationship she has with Mr. Marr. | | | | | | | | | | 42 | | | | | | | | 20232024 Proxy Statement 29
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REPORT OF THE AUDIT COMMITTEEReport of the Audit CommitteeThe Audit Committee assists the Board of Directors in fulfilling its responsibilities for general oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements (including but not limited to information security compliance), the independent auditor’s qualifications and independence, the performance of our independent auditors, the effectiveness of our disclosure controls and of our internal controls over financial reporting, and risk assessment and risk management. The Audit Committee manages the relationship with our independent auditors, who report directly to the Audit Committee. The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting, or other advisors as the Audit Committee deems necessary to carry out its duties and to receive appropriate funding from us for such advice and assistance, as determined by the Audit Committee. Management has the primary responsibility for our reporting process, including our systems of internal controls and for preparing our financial statements. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited financial statements contained in the Annual Report, including a detailed discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of the significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee meets with the independent auditors, with and without management present, to discuss the overall scope and plans for the audits and the results of their examinations. The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the accounting principles and such other matters as are required to be discussed under applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee also reviewed management’s report on internal control over financial reporting and the independent registered public accounting firm’s related opinions. In addition, the Audit Committee received from the independent auditors written disclosures regarding the auditors’ independence required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence, and has discussed with the independent auditors, the independent auditors’ independence. The Audit Committee met five times during 2022.2023. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board approved) that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, for filing with the SEC. This report is submitted by the 2023-2024 Audit Committee. Brenda A. Cline, Chair
Mary L. Landrieu
Daniel M. Pope | | | | | | | | | | 43 | | | | | | | | 30
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CORPORATE GOVERNANCE PRINCPLESCorporate Governance PrinciplesOur Board of Directors has adopted a number of corporate governance policies and practices that apply to the Board, our executive officers, and/or our Company and employee community. Representative highlights of those policies and practices are shared below. For more information, please visit our website, www.tylertech.com.www.tylertech.com. Corporate Governance Guidelines Our Corporate Governance Guidelines include the following: •Independence standards, under which director independence is evaluated on an annual basis under the requirements of applicable rules and standards. •Limitations on the number of additional public company boards on which a director may serve to a maximum of four, and on the number of additional public company audit committees that a member of our Audit Committee may serve to a maximum of two. •Expectations that directors should attend all Board meetings and all committee meetings on which they serve. •Complete and open access to the Company’s executives and senior leadership. •Authority of non-employee directors and each committee to retain independent legal, financial, or other advisors when such advice is necessary, appropriate, and in the best interests of the Company and its shareholders. •Executive sessions of independent directors at least twice annually, and otherwise as deemed necessary and appropriate. •Annual evaluations of directors, committees, and the Board as a whole. •Application of Stock Ownership Guidelines and Stock Anti-Hedging and Pledging Policy to directors and executives. •Annual evaluation of CEO performance against goals and objectives established by the Compensation Committee, in consultation with the Board Chair. •Periodic reports by the Nominating and Governance Committee regarding succession planning. •Prohibition of personal loans by the Company to any director or member of executive management. •Prohibition of stock option repricing. Code of Business Conduct and Ethics Tyler expects all directors, officers and employees to exercise the highest degree of professional business ethics in all actions they undertake on the Company’s behalf. Our Board of Directors has adopted a Code of Business Conduct and Ethics that applies to all of our directors, executive officers (including, without limitation, the chief executive officer, chief financial officer, principal accounting officer, and controller), and employees. The policies established under the Code include: •Steps for contacting the Chair of the Audit Committee to report any concerns about an accounting, auditing, internal control, or related matter, and prohibition of retaliation for reporting the same. •Expectations to conduct all Company business in accordance with applicable law. •Prohibition of the use of any Company asset for any unlawful or improper purpose. •Prohibition of any Company political contribution to any political party, committee, or candidate for public office, as well as on payments to government officials and personnel. •Prohibition of financial or other interests that might conflict with the best interests of the Company.
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•Requirement to use reasonable care to protect against the unauthorized use or disclosure of the Company’s confidential or proprietary information. •Prohibition of insider trading and imposition of trading limitations that apply to all directors, officers, and employees during applicable timeframes. •Encouraging employees to report any work-related accident or injuries, or unsafe or hazardous working conditions, and prohibition of retaliation for reporting the same. •Commitment to equal employment and non-discrimination, encouraging a diversity of backgrounds, cultures, experiences, insights and skills in the Company’s workforce. •Prohibition of all forms of harassment, with reporting instructions in the event of an incident and prohibition of retaliation for reporting the same. The Board periodically reviews the Code and any adopted updates are posted to our website. Company employees must review and acknowledge the Employee Handbook, which incorporates the Code, on an annual basis, and receive regular training on Code topics such as protecting confidential information and anti-harassment. We also publish regular reminders about Tyler’s insider trading policy, trading limitations, and whistleblower policy. | | | | | | | | | | 2023 Proxy Statement 31
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In 2021, our Board of Directors adopted a standalone anti-bribery policy, setting forth our expectations of integrity and anti-bribery specific to Tyler’s foreign activities and international presence, consistent with the applicable provisions of the U.S. Foreign Corrupt Practices Act and other international anti-bribery laws that prohibit unlawful payments to secure unfair business advantages. The policy applies to the Company and all of its subsidiaries and each of their directors, officers, employees, agents and representatives. Potential or suspected violations are to be reported to a member of the Audit Committee or to our Chief Legal Officer. Whistleblower Policy Tyler is committed to compliance with all applicable securities laws and regulations, accounting standards, accounting controls, and audit practices. The Board of Directors adopted a standalone Whistleblower Policy.Policy, which is posted on our website and referenced in other Company documentation. That policy sets forth detailed procedures for the reporting of concerns or complaints regarding accounting, internal accounting controls, or auditing matters, including concerns around questionable accounting or auditing matters. Tyler does not permit retaliation of any kind for reporting a concern or complaint under the policy. Stock Ownership Guidelines In 2018, our Board of Directors approved stock ownership guidelines, which were updated in 2022 to increase the ownership requirement applicable to directors. The guidelines are based on the Board’s belief that Tyler’s directors and executive officers should have a meaningful ownership stake in Tyler that will align their interests with Tyler’s shareholders and will promote sound corporate governance. The guidelines apply to non-employee members of the Board and designated executive officers of Tyler. The market value of shares each “covered person” is required to hold is equal to or greater than the ownership levels specified below, based on a multiple of executive officers’ base salary or non-employee directors’ annual cash retainer. | | | | | |
| Covered Person Position | | | Stock Ownership Guideline | | | | | Executive Chair, Chief Executive Officer, President | | | 6 times base salary | | | Other Named Executive Officers | | | 4 times base salary | | | Other Executive Officers as designated by the Compensation Committee of the Board | | | 1 times base salary | | | Non-employee Directors | | | 5 times annual cash retainer |
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Compliance is evaluated once a year, as of the last day of each fiscal year. We expect each covered person to meet these guidelines within three years from their commencement of service with Tyler as a covered person. In the event of a promotion or an increase in base salary, annual cash retainer, or ownership requirement, the covered person is expected to meet the higher ownership amount within three years from the effective date of the promotion, salary, retainer change, or ownership requirement. Each of our covered persons is in compliance with the stock ownership guidelines as of December 31, 2022.2023. A copy of the Stock Ownership Guidelines may be found on our website, www.tylertech.com.www.tylertech.com. Insider Trading Policy Our insider trading policy (most recently adopted by the Board in 2018)2023) prohibits our directors, officers, and employees (as well as family members and others living in a covered person’s household), from engaging in transactions in Tyler stock while in the possession of material non-public information, from disclosing material non-public information to unauthorized persons outside Tyler, and from “short selling” Tyler stock (or an interest in Tyler stock). The policy additionally includes a general blackout period for stock transactions beginning on the first business dateday after the end of each fiscal quarter through the close of trading on the second full business day after Tyler’s public earnings announcement. Directors, executive officers and executive management, and officers or key employees of any Tyler division (including accounting personnel) may not buy or sell Tyler stock without prior approval from our Chief Legal Officer. These persons are also subject to an extended blackout period that begins on the 16th day of the third month of each fiscal quarter through the close of trading on the second full business day after our public earnings announcement. A copy of the Insider Trading and Confidentiality Policy may be found on our website, www.tylertech.com. | | | | | | | | | | 32
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Rule 10b5-1 Plans No director or officer of Tyler has a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement in place as of April 6, 2023,March 29, 2024, or had one in place during 2022.2023. Stock Anti-Hedging and Pledging Policy Also inIn 2018, our Board approved an anti-hedging/pledging policy, which provides that the same non-employee directors and executive officers subject to the Stock Ownership Guidelines are prohibited from engaging in any hedging transaction that could reduce or limit that person’s holdings, ownership or interest in Company securities. Such transactions, while allowing the holder to own Tyler’s securities without the full risks and rewards of ownership, potentially separate the holder’s interests from those of our shareholders generally. In addition, those same covered persons are discouraged from pledging Company securities or from holding our securities in margin accounts and are prohibited from doing so to the extent of the Stock Ownership Guidelines. A copy of the Stock Anti-Hedging and Pledging Policy may be found on our website, www.tylertech.com.www.tylertech.com.
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Corporate Responsibility WhileWe recognize the importance of corporate responsibility and take a thoughtful approach to our sustainability and governance programs, practices, and policies to maximize the benefit to Tyler, our stakeholders and the communities we impact. The Board is regularly briefed on Tyler’s environmental, social, and governance (ESG) initiatives, and the Nominating and Governance Committee has beenis tasked with direct oversight responsibility for those activities. Tyler’s ESG disclosures are designed to align withinfluenced by recognized frameworks including the Sustainability Accounting Standards Board Standards and the Global Reporting Initiative Standards. We also support actions of theall 17 United Nations Sustainable Development Goals (UN SDGs) and believe our efforts best align withbusiness can generate the most impact on SDG 9 (Industry, Innovation and Infrastructure), SDG 11 (Sustainable Cities and Communities), and SDG 16 (Peace, Justice and Strong Institutions). In 2022,2023, Tyler placed in the 96th95th percentile of companies in the Software and Diversified IT Services industry in the S&P Global Corporate Sustainability Assessment,Assessment.
During 2023, Tyler transformed its corporate responsibility reporting by implementing a data management and we were included in the Dow Jones Sustainability Index for the second consecutive year. We also continuevalidation platform designed to be recognized in the top 20% of sustainability performers among the 600 largest U.S.further refine our processes and Canadian companies in the S&P Global Broad Market Index. controls. Tyler’s cross-functional management committee (including executive leaders from Tyler’s finance, human resources, and legal disciplines) met regularly throughout 20222023 to continue the coordination and communication of our ESG initiatives.initiatives, among other things. More information can be found in our Corporate Responsibility Reports, which we make available on our website, www.tylertech.com/about-us/who-we-are/corporate-responsibility.corporate-responsibility. Since 2021, those reports have also included EEO-1 data. While we encourage shareholders to review the Corporate Responsibility Reports we make available, we are pleased to share some ESGthe following corporate responsibility highlights from 2022.2023: •We launched “Green Teams,” which are self-organized, cross-functional groupsconducted a Double Materiality Assessment to identify and prioritize the relevance of sustainability matters to our financial materiality and impact materiality •We invested in energy efficiency and water diversion projects at various Tyler team members who voluntarily come togetheroffices and upgraded our solar generation monitoring software at our headquarters in Plano, Texas. •We expanded the breadth of Scope 3 emissions accounting for our GHG inventory. •We continued to educate co-workers on sustainability practices. Guided by our “Better Together, with Flexibility,” principles, we supported work arrangements that balance collaborative in-person work environments with remote-work options to accommodate team member needs.
We strengthenedstrengthen our Diversity, Equity, and Inclusion (DEI) initiativesefforts by establishing a Corporateenhancing our DEI Council, which brings togethergovernance structure and executive leadership from local DEI councils andsupport for Employee Resource Groups to collaboratefoster continued collaboration and leverage DEI bestinclusion practices across Tyler.
•We continuedhonored our annualTyler military veterans by presenting them with challenge coins that represent not only their sacrifice and commitment to our country, but also their dedication to Tyler’s mission of empowering the public sector to create smarter, safer, and stronger communities. •We redesigned our anti-harassment training on topics such as anti-harassment, dataand achieved a nearly 100% completion rate. We also achieved a 93.7% completion rate for our security and data privacy training, and grew our expectations for ethical team member conduct.Security Champions program. Our shareholders approved three shareholder rights amendments to our corporate charter, as discussed in detail in the 2022 Proxy Statement.
We promoted a Tyler leader to the role of Chief Information Security Officer, reporting directly to our Chief Operating Officer.
•We provided quarterly briefings to the Board and the Audit Committee on information security matters, with as-needed interim updates to the Audit Committee in its oversight capacity for information security matters. • | We continued to operationalize the privacy practices outlined in•We updated our Insider Trading Policy and our Privacy Statement, each of which is publicly available on our website, www.tylertech.com. |
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Tyler is committed to regular, proactive and responsive engagement with our shareholders and prospective investors, as we believe these are constructive conversations that build better understanding of stakeholder perspectives and support strong corporate governance. Over the course of 2022,2023, Tyler leadership and members of our Board of Directors regularly engaged with shareholders. Those engagementsshareholders on topics predominantly centered on our approach to enterprise risk management, board composition considerations, compensation practices, human capital development, talent recruitment, and overall progress on ESGour corporate responsibility matters. The Chairs of our Compensation Committee and Nominating and Governance Committee were typically joined by our Chief Financial Officer, Chief Legal Officer, andand/or Chief Human Resources Officer for those discussions. We also regularly welcomed investors and prospective investors at our corporate headquarters, where they typically met with our Chief Executive Officer, Chief Financial Officer, and/or Chief Operating Officer, along with other Company leaders. Specific to compensation practices, our discussions focused on current levels of compensation and performance metrics used in providing short-term and long-term incentive compensation to our Named Executive Officers. At our 20222023 Annual Meeting of Shareholders, our say-on-pay proposal received the support of 94%over 97% of the votes cast. Our Board views this support as affirmation that our shareholders support our approach to Named Executive Officer compensation, that our policies are in alignment with our shareholders, and that they appropriately reflect our “pay for performance” philosophy. Based on engagement with shareholders and the high level of approval, the Compensation Committee determined that current executive compensation practices and those being considered for the future remain appropriate. The governance practices we discussed with investors included our thoughtful approach to Board composition, including the skill sets each director brings to the Board and Board diversity,how those are intended to complement the Company’s strategic priorities. We also responded to shareholder inquiries regarding talent retention and development, allocation of risk management, and our effortsperformance against various sustainability metrics. We believe these conversations were fruitful, and reflected a shared understanding of the Company’s commitment to balance diversity “targets”sound governance practices that inherently align with the successful integration of two Board members whose onboarding was impacted by the COVID-19 pandemic. We also regularly discussed our climate strategies and the inherent climate-friendly naturebusiness philosophy. Another element of our software solutions that replace paper-based systems. We received positive feedbackopen dialogue with shareholders is their input on the perspectivesour long-term business strategy and our overall sustainability practices. For example, in June 2023, we shared,hosted an investor day where we welcomed 40 in-person attendees and were gratified that those conversations reflected an understandingnearly 215 participants who attended via livestream. The event featured presentations by our senior executives and members of our philosophies.division leadership who discussed Tyler’s plans for its cloud transition and its strategic growth roadmap, including our mid- to long-term financial targets and capital allocation framework, all supporting what we refer to as our 2030 vision. Later in 2023, we conducted a Double Materiality Assessment through a robust internal and external stakeholder engagement effort to assess and rank the relevance of 26 ESG topics that we identified based on our business priorities and industry research. Over 150 stakeholders participated in the process, including our executive leadership, members of our Board of Directors, team members, shareholders, clients, suppliers, and business partners. Through surveys and interviews, we solicited valuable feedback and unique perspectives on potential ESG risks and opportunities for our organization, helping us to holistically prioritize material topics for our Company and to refine our corporate responsibility strategy. | | | | | | | | | | 48 | | | | | | | | 34
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COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and AnalysisThis Compensation Discussion and Analysis describes the compensation program for certain of our executive officers (the “Named Executive Officers” or “NEOs”) and provides an overview of our executive compensation philosophy, objectives, policies and practices. It also describes how and why the Compensation Committee made specific decisions relative to Named Executive Officer compensation, including the objectives and key factors considered in determining 20222023 compensation, and summarizes 20232024 approved compensation. 2023 Business Highlights In 2022,2023, we experienced positive trends in public sector market activity, as proposalachieved our key objectives for the year and other sales activities reachedboth earnings and evencash flow surpassed pre-COVID levels. For the full year, bookings were up 9.5 percent. In addition, we completed three acquisitions andour expectations. We continued to accelerate our move towards becomingto a cloud-first organization.organization with increased cloud adoption from both new and existing clients. SaaS revenues grew 23.2% and comprised approximately 85% of the total new software contract value, compared to approximately 83% in 2022. In terms of financial performance,addition, we achievedcompleted four strategic acquisitions: Computing System Innovations (CSI), Safeground Analytics, ResourceX, and ARInspect. These new offerings and the following:team members who support them help us expand AI capabilities across our product portfolios, bring enhanced functionality to our clients, and incorporate deep domain expertise. For the year ended December 31, 2022:2023: •Total revenues were $1.952 billion, up 5.5% over 2022. On an organic basis (excluding COVID-related revenues in 2022), revenues grew 7.4%. •Recurring revenues were $1.63 billion, up 9.8%, and comprised 83.3% of 2023 revenues, up from 80.0%. On an organic basis, recurring revenues were $1.61 billion, up 9.5%. •We achieved annualnet income under Generally Accepted Accounting Principles (“GAAP”) revenue of $1.850 billion, a 16.2 percent increase over 2021; Recurring revenues increased 17.6 percent over 2021 to $1.481 billion, and comprised approximately 80 percent of our total revenues in 2022;
GAAP earnings$165.9 million, or $3.88 per diluted share, increased 1.7 percent to $3.87 in 2022, and non-GAAP earningsup 1.0%. Non-GAAP net income was $333.7 million, or $7.80 per diluted share, increased 7.3 percent to $7.50;up 4.9%.
•We generated $381.5$380.4 million in cash provided byfrom operations during the year and ended the year with total cash and investments of $229.4$182.9 million, and $995 million in debt;total outstanding debt, including convertible debt, of $650 million. •We continued to strengthenfurther strengthened our balance sheet repaying $360 million ofand reduced term debt and ending the year withby $345 million, bringing our net leverage at year-end to under one times pro forma EBITDA. We have repaid $1.1 billion of approximately 1.64 times proforma EBITDA;debt since the acquisition of NIC in April 2021. We generated Adjusted EBITDA of $475.0 million;Our mix of new business continued to shift to the cloud, with SaaS agreements comprising 83% of our new software contract value, up from 71% in 2021; and
We closed the year with backlog of $1.889 billion, up 5.2 percent from 2021.Our executive officers, along with our entire team, were focused on leading our business and clients to emerge from the impact of COVID-19 and deliver on strategic objectives and key operational initiatives in 2022. In addition to our financial performance, 20222023 achievements included:
• | Recognition for the 6th consecutive year by Government Technology (GovTech) on its “2022 GovTech Top 100” list and recognition for the 2nd consecutive year as a top sustainability performer in the Dow Jones Sustainability Index (DJSI) North America.
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•A successful Investor Day in June 2023, where we unveiled our Tyler 2030 plan for driving growth and margin expansion over the remainder of the decade. •Recognition for the 7th consecutive year by Government Technology Magazine on its “2023 GovTech 100” list. •The increased return of Tyler team members to our more than 60 office locations with enhanced flexible work options. •Celebration of an important milestone in Tyler’s history – 25 years of empowering the public sector market. •Our largest-ever Tyler Connect user conference in San Antonio, Texas. •The successful launchopening of our brand evolution initiative, which streamlined our brand architecturenewly renovated and application names.expanded office in Manila, Philippines The return•Implementation of in-person Connect user conferences — this year in Indianapolis, Indiana — after moving to a virtual format in 2020 due to the pandemic.
The rollout of myTyler, our new global HR platform, which brings all Tyler team members together within one systemenhanced financial and set of employee tools.
The completion of three strategic acquisitions: US eDirect, Quatred, and Rapid Financial Solutions.
The creation of a new chief information security officer role, to further safeguard Tyler’s data, applications,tools and systems.
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2022 Executive Compensation Summary Named Executive Officer compensation was reviewed by the Compensation Committee in multiple meetings givenleading into and during 2023. The Committee focused on aligning NEO compensation with Tyler’s 2030 vision and reflecting peer data, shareholder engagement, and the previously communicated planadjustments to endour NEO employment agreements we recently undertook. With these factors in mind, the historic practiceCommittee eliminated the use of options, replacing the majority of NEO equity compensation with performance-based restricted stock units (“PSUs”) and providing for the limited use of restricted stock units (“RSUs”). In so doing, the Committee achieved a material portionbalance of 80% performance-based and 20% service-based compensation to the Named Executive Officer compensation in the form of equity grants every five years. The Committee reviewed compensation provided to each Named Executive Officer, with and without the annual value of the equity compensation associated with the five-year grant, and relative to multiple factors including company and individual performance, executive retention, and multiple peer groups as described later in this discussion and analysis.Officers. As a result, of this review, 20222023 compensation to our Named Executive Officers was approved as follows: •Mr. Marr and Mr. Puckett received no increase to theirhis annual salariessalary in 2022.2023. The annual salaries of Mr. Moore, Mr. Miller, and Mr. MillerPuckett were increased by 14.3%12.5%, 2.4%, and 3.8%8.3%, respectively. The salaries for •As Executive Chair, Mr. Moore and Mr. Miller were last increased in February 2020. Marr does not receive a short-term incentive. No changes were made to short-term incentive target levels of Mr. Moore or Mr. Miller. As Executive Chair, Mr. Marr does not receive a short-term incentive.Miller for 2023. Mr. Puckett’s short-term incentive target was increased from 75%85% to 85% of annual salary consistent with100% to reflect the final stage in his expanded role as COO.transition to Chief Operations Officer. Mr. Moore, Mr. Miller, and Mr. Puckett earned 2,054; 1,421;1,930 ; 1,215; and 873929 short-term performance-based restricted stock units (“PSUs”),PSUs, respectively, reflecting 110%representing 125% of the target amounts based on achievement of short-term incentive performance goals in 2022.2023. •With the transition from options to PSUs in 2023, Mr. Marr received 7,500 stock options in 2022, which was unchanged from 2021. Mr. Marr did not receivegranted 2,810 PSUs in his role as Executive Chair in 2022. Stock options granted toChair. Mr. Marr did not receive RSUs. Mr. Moore, were increased from 18,000 in 2021 to 20,000 in 2022, and the number of PSUs granted to Mr. Moore increased from 5,000 to 6,500. Stock options granted to Mr. Miller, were reduced from 12,000 in 2021 to 10,000 in 2022 and the number of PSUs granted to Mr. Miller increased from 3,333 to 3,750. Stock options granted to Mr. Puckett were increased from 4,700granted 20,306; 9,542; and 5,934 PSUs, respectively, and 3,124; 1,390; and 781 RSUs, respectively, in 2021 to 6,500 in 2022 and the number of2023. The PSUs granted in 2023 will vest in 2026 based on achievement of three-year performance goals. The RSUs granted will vest one-third each year over three years from grant date. •In 2023, the Committee approved vesting of 6,000; 3,999; and 2,400 PSUs granted as part of the 2020 long-term incentive grant to Mr Moore, Mr. Miller and Mr. Puckett, increased from 2,350 to 2,500.respectively, reflecting 150% of the target amounts based on achievement of long-term incentive performance goals set in 2020.
The total direct compensation received by our Named Executive Officers in 20222023 was allocated as follows: Our executive compensation program emphasizes performance-based compensation tied to the creation of long-term shareholder value. We believe incentives that vest over multiple years motivate and retain our executives while aligning their interest in the long-term performance of the Company with that of our shareholders. As a result, in 20222023 a substantial portion of our executives’NEO compensation consisted of performance-based restricted stock units and stock options that provide no value to our executivesNEOs unless value is created for our shareholders through long-term performance of the Company. | | | | | | | | | | 51 | | | | | | | | 36
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COMPENSATION PHILOSOPHY AND OBJECTIVESCompensation Philosophy and Objectives Elements of Executive Compensation We believe that sustained achievement of measurable financial objectives leads to increased shareholder value. As such, a significant portion of our Named Executive Officers’ target total direct compensation is “at-risk” and based on the achievement of annual and long-term financial objectives. Linking our NEO compensation to challenging performance objectives creates a strong incentive to achieve both short-term growth and profitability objectives and to create sustainable long-term value for our shareholders. | | | | | | | | | | | | | | | | | | | | | | | | | Element | | Element
| | Form of
Compensation | | Purpose | | Purpose
| | | 20222023 Metric
| | | | | | | | | | | | | | | | | | Base salaryService-Based
Compensation Generally 20% of Total Target Compensation | Base Salary | | Cash | | Cash
| | ProvideProvides competitive, fixed compensation to attract and retain executive talent with the specific skills and experience needed to drive continued growth
| | | Base salary is a fixed component and changes to salary, when made, are dependent on individual performance, peer and market comparisons and retention goals | | | | | | | | | | Annual Stock Grant | | Restricted stock units (RSUs) | | Supports retention and provides competitive annual compensation level to attract and retain executive talent | | Provided as needed to maintain target ratio of service-based compensation (salary + RSUs) and approved by the Committee | | | | | | | | | Performance-Based Compensation Generally 80% of Total Target Compensation | Annual Incentive compensationCompensation | | | Performance-based restricted stock units (PSUs) | | | Provides reward for achieving or exceeding annual financial performance goals | | | Achievement of adjusted earnings per share goals (Non-GAAP), which are recommended by the CEO and approved by the Compensation Committee | | | | | | | | | | Long-term incentive compensation | Long-term equity-based compensation
| | | Performance- based restricted stock units (PSUs) and stock options | | | Create a strong financial incentive for shareholder value creation with significant Company equity stake linked to long-term, future Company performance | | | Achievement of 3-year Cumulative Recurring Revenue Growth, (PSUs); shareholder value created, inas recommended by the formCEO and approved by the Compensation Committee | | | | Performance- based restricted stock units (PSUs) | Achievement of increased value per share (options) | 2025 Operating Margin, as recommended by the CEO and approved by the Compensation Committee |
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Executive Compensation Related Policies and Practices We operate under the following compensation-related governance practices for responsible management of risk and expense in the reward of our Named Executive Officers: | | | | | | | | |
| Our Philosophy | | | Our Practice | | | | |
| | | | Our executive compensation program and practices are designed to reward for performance, not provide perquisites | | | Total Target Compensation for our Named Executive Officers is consistently set at or below levels within our peer group with the opportunity for increased compensation based on performance above planned growth goals. | | | | | | 88%80% or more of total target compensation to our Named Executive Officers is “at risk” compensation.
| performance-based compensation and between 85% and 90% of total target compensation is equity based and ‘at risk’. | | | | | Our Named Executive Officers receive no material non-cash benefits, deferred compensation benefits, or other executive perquisites. | | | | | | Our Named Executive Officers participate in the same health and welfare benefits available to all employees of the Company and on the same terms as are broadly available. | | | | |
| We deliver pay for performance that consistently meets or exceeds expectations | | | Performance-based incentives are provided upon the achievement of annual growth and operational goals and long-term growth goals that increase shareholder value. The potential for additional compensation is linked to performance levels that exceed Board of Directors and shareholder expectations for performance and growth. | | | | |
| We administer our executive compensation programs and practices responsibly on behalf of our shareholders | | | Our Compensation Committee is comprised solely of independent directors. | | | | | | We maintain an executive compensation recovery policy and incentive compensation recovery policy as described further in the “Other Important Elements of our Executive Compensation” section. | | | | | | We maintain stock ownership guidelines, referenced in more detail in the “Stock Ownership Guidelines” section, which require our executives to hold a meaningful ownership stake in the Company. | | | | | | We design and administer our executive compensation program with caps and appropriate controls to ensure excessive risk taking is not incentivized as described in the “Other Important Elements of our Executive Compensation” section. | | | | | | Our 2018 Stock Incentive Plan does not permit stock option exchanges or repricing without shareholder approval. | | | | | | We maintain a Stock Anti-Hedging and Pledging Policy, described in the “Stock Anti-Hedging and Pledging Policy” section, to prohibit our executives from engaging in transactions that could reduce or limit their holdings, ownership or interest in Company securities and to discourage our executives from pledging Company securities or from holding Company securities in margin accounts. | | | | | | Since 2017, we have conducted an annual shareholder advisory vote on Named Executive Officer compensation and maintain ongoing outreach to our investors to understand their perspectives on our executive compensation program. | | | | | | Our Compensation Committee conducts an annual self-assessment. | | | | | | We do not provide excise tax payments or “gross ups” on future post-employment compensation to our Named Executive Officers if they become eligible for severance payments under the terms of their employment agreements. | |
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PROCESS FOR SETTING EXECUTIVE COMPENSATIONProcess for Setting Executive CompensationThe Compensation Committee carries out the responsibilities of our Board relating to the compensation of our Named Executive Officers, with input from all of our independent directors including:directors. The Committee’s responsibilities include: •Reviewing and approving all compensation of our CEO and other Named Executive Officers; •Reviewing and approving performance goals used in the design of our annual and long-term incentive plans; •Reviewing and approving CEO and other Named Executive Officer post-employment compensation arrangements; and •Reviewing and approving this Compensation Discussion and Analysis. The Compensation Committee carries out these duties in the interests of our shareholders based on our compensation philosophy and objectives. The Committee’s focus is on developing and maintaining an executive compensation program that is competitive and balances the need to attract, motivate, and retain a talented, experienced executive team within a context of responsible cost and risk management. In the course of carrying out theirits duties, the Compensation Committee consults with our Human Resources, Finance,human resources, finance, and Legallegal departments to gather information regarding corporate and individual performance,performance; peer and market comparator data,data; regulatory changes; and relevant financial, legal, and legalESG best practices, and regulatory changes.among other things. The Compensation Committee reviews recommendations for performance measures and related target levels of pay for our Named Executive Officers, which are prepared by our Chief Human Resources Officer and presented in the context of our operational and long-term performance objectives, our compensation philosophy and objectives, and peer compensation data. Role of Our CEO and the Other Named Executive Officers Our Named Executive Officers do not make recommendations regarding their own compensation. The Compensation Committee does solicit the opinions of our Executive Board Chair and our Chief Executive Officer relative to the level of attainability and risk associated with performance objectives in the performance-based compensation elements and to the rationale for any individual changes to Named Executive Officer compensation (other than their own). The Compensation Committee reviews and discusses the recommendations presented and uses them as one factor in approving the compensation of our Named Executive Officers.
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Factors Considered in Setting Executive Compensation In determining the amount and form of the compensation elements, the Compensation Committee considers a number of factors, including: Our executive compensation program objectives;
Corporate•Operational and long-term growth goals and performance against these goals as reflected in the achievement of key strategic, financial and operational objectives;
Responsible•Our executive compensation program objectives, including responsible compensation pay practices and mix of pay elements which minimize excessive risk taking;
Base•Annual salaries, annual incentives, and long-term incentives provided in our peer group and for peer roles in the Radford Global Technology Survey;
•Performance and retention of the Named Executive Officers and the value of that retention to shareholders; and •Feedback and perspectives gained from engagement with shareholders. Each year, our Chief Human Resources Officer provides the Compensation Committee with data to support a review of the market competitiveness of our executive compensation relative to broad industry peers, which is described in detail below. In addition to a review of this information, the Compensation Committee considers the overall objectives of our executive compensation program and the elements of the program, including the mix of cash and stock-based compensation, and the mix of short-term and long-term compensation, and the mix of performance-based and service-based compensation, to determine whether they are appropriate relative to operational objectives and long-term performance of the Company. The Compensation Committee may retain the services of compensation advisors for the purposes of assisting in the determination of executive compensation. In 2022,2023, the Compensation Committee engageddid not engage a consultant, from Pearl Meyer to review and discuss with our Compensation Committee materials prepared by the Chief Human Resources Officer for Committee review.instead relying on guidance provided in previous engagements. Our Named Executive Officers’ compensation is primarily composed of base salary, bonus, PSU grants, and stock option and PSURSU grants, and does not include more complex elements such as deferred compensation plans. Beginning in 2023, our Named Executive Officers’ compensation currently does not include option grants. Peer Group In order to provide the Compensation Committee with more detailed and specific information about executive compensation levels and practices, we utilize a peer group (the “Peer Group”) each year to assist in determining appropriate compensation levels for the Named Executive Officers. The Peer Group used for competitive analysis consists of publicly traded companies of similar size to Tyler, most of which are in the enterprise software space. | | | | | | | | | | 2023 Proxy Statement 39
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The 1513 companies in the Peer Group used to assist in setting 20222023 compensation were: | | | | | |
| ACI Worldwide, Inc. | | | Pegasystems, Inc. | | | Ansys, Inc. | | | PTC, Inc. | | | Blackbaud, Inc. | | | RingCentral, Inc. | | | Envestnet, Inc.
| | | Splunk | | | Fair Isaac Corporation | | | Veeva Systems, Inc. | | | Fortinet, Inc.
| | | Zendesk, Inc.
| | | Hubspot, Inc. | | | Ziff Davis, Inc. | | | Jack Henry & Associates, Inc.
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We review the Peer Group annually to ensure that the companies in the Peer Group remain relevant and provide meaningful compensation comparisons. In January 2022,February 2023, the Compensation Committee reviewed the final Peer Group relative to Tyler considering multiple factors, including the following four key metrics: revenue; market capitalization; and one-year and three-year total shareholder return. The Compensation Committee determined the Peer Group was appropriate as proposed for 20222023 executive compensation comparativecomparison purposes. The table below shows a comparison of those key metrics for Tyler in 2022 to the peer group average:average for those key metrics: | | Tyler Technologies, Inc. | | | $1,117 | | | $17,604 | | | 45.5% | | | 35.1% | | | | Peer Group Average | | | $1,419 | | | $16,917 | | | 43.7% | | | 35.9% | |
| | | | | | | | | | | | | | | | | | | Revenue | Market Capitalization | TSR(1y)
(%) | TSR(3y)
(%) | | | (in millions) ($) | | | | | | | | | Tyler Technologies, Inc. | 1,592 | | 22,043 | | 23.2 | | 42.5 | | | | Peer Group Average | 1,587 | | 15,615 | | 1.0 | | 24.0 | | |
In addition to Peer Group data, and data from those peers identified by ISS and Glass Lewis, the Compensation Committee reviews compensation data for each of the Named Executive Officer’s roles from the Radford Global Technology Survey (the “Radford Survey”), which it has used since 2010. Over 2,000 technology and life science companies use the Radford Survey to benchmark their compensation practices for all levels within their organizations. This data is provided to the Compensation Committee by the Chief Human Resources Officer. The Compensation Committee uses Peer Group and survey data as a reasonableness check. This flexibility is important in designing compensation arrangements which attract and retain new executives in the highly competitive and rapidly changing environment in which we compete for growth and talent. Positioning of Pay The Compensation Committee determines target total compensation for our Named Executive Officers after considering analysis of the Peer Group and Radford Survey data. The Committee does not apply a formula that ties our total compensation levels to specific market percentiles. The Committee does apply a general practice of setting target compensation at a target pay mix of 20% service-based compensation and 80% performance-based compensation. For the purposes of these targets, service-based compensation includes annual salary and the value of any restricted stock units at grant. Performance-based compensation includes the target value of the short-term stock incentive award and the long-term stock incentive award at grant; all of which require achievement of financial goals to be earned by the Named Executive Officers. | | | | | | | | | | 56 | | | | | | | | 40
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ANALYSIS OF NAMED EXECUTIVE OFFICER COMPENSATION2022 Analysis of Named Executive Officer Compensation2023Named Executive Compensation Structure and Process In January 2022, the Committee conducted in-depth analysis of Named Executive Officer compensation as part of our multi-year business strategy and long-term growth goals, as well as the plan, previously communicated to shareholders in 2019, to eliminate the historic practice of granting equity associated with the legacy five-year employment agreements. With the final vesting of equity associated with the previous five-year grants set to occur in 2023, the Committee’s goal was to ensure that NEO compensation design and levels moving forward reward appropriately for the achievement of operational and long-term growth goals and align with governance best practices. The Committee conducted this work with the expectation that its decisions regarding 2023 NEO compensation would reflect our approach to NEO compensation moving forward, including: •Use of a total compensation target mix, generally 20% service-based and 80% performance-based, consistent with peer and governance best practices to avoid incentivizing excessive risk taking; •Introduction of RSUs, which vary by executive, to supplement annual salary in reaching the 20% service-based level of target total compensation; •Elimination of stock options as a form of equity compensation, at the present time, based on shareholder outreach, governance best practices, and peer group analysis; and •Increased PSUs to provide focus and reward for achievement of key long-term goals, and to supplement target annual incentives in reaching the 80% performance-based level of target total compensation. In February 2023, the Compensation Committee approvedreviewed the total 2022final proposed executive compensation packagesprogram and individual compensation elements for Mr. Marr, Mr. Moore, Mr. Miller, and Mr. Puckett, who was added aseach of the Named Executive Officers, including our Chief Executive Officer, in May 2021.as described below. The totalCommittee considered the overall objectives and the four elements of our executive compensation packages included annual salary, aprogram, including the mix of cash and stock-based compensation, mix of short-term (annual) stock incentive award, and a long-term stock incentive award.compensation, and mix of service-based and performance-based compensation to determine whether they are appropriate relative to operational objectives and long-term performance of the Company. Annual Salary Annual salary is intended to provide competitive, fixed compensation to attract and retain executive talent with the skills and specific expertise needed to support the achievement of annual and long-term business objectives. Each year, the Compensation Committee approves the annual salaries for each of the Named Executive Officers, who may or may not receive a salary increase in any given year. In considering the annual salaries for the Named Executive Officers, the Committee reviews the Peer Group and Radford Survey, internal annual and multi-year business plans and performance, and general economic conditions in the context of our objectives for executive compensation.
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Annual salary represents the single fixed component of the three principal elements of our executive compensation program and is intended to provide a baseline minimum amount of annual compensation for our executives. In January 2022,February 2023, the Compensation Committee approved maintaining Mr. Marr’s annual salaries for Mr. Marr and for Mr. Puckett, who received an increase in 2021 of 11.1% associated with his promotion to COO and confirmation by the Board of Directors as an executive officer in May 2021.salary. The Committee approved annual salary increases to Mr. Moore, Mr. Miller, and Mr. MillerPuckett of 14.3%12.5%, 2.4%, and 3.8%, respectively; the first salary increases for each Named Executive Officer since February 2020.8.3% respectively. | | John S. Marr, Jr. | | | 0.0% | | | $300,000 | | | $300,000 | | | | H. Lynn Moore, Jr. | | | 14.3% | | | $525,000 | | | $600,000 | | | | Brian K. Miller | | | 3.8% | | | $400,000 | | | $415,000 | | | | Jeffrey D. Puckett | | | 0.0% | | | $300,000 | | | $300,000 | |
| | | | | | | | | | | | | | | | Name | Increase
(%) | 2022
($) | 2023
($) | | | | | | | | John S. Marr, Jr. | — | | 300,000 | | 300,000 | | | | H. Lynn Moore, Jr. | 12.5 | | 600,000 | | 675,000 | | | | Brian K. Miller | 2.4 | | 415,000 | | 425,000 | | | | Jeffrey D. Puckett | 8.3 | | 300,000 | | 325,000 | | |
The review and approval of increases by our Compensation Committee for Mr. Moore and Mr. Miller was based on multiple factors. First, the Committee reviewed the Peer Group and Radford Survey data, which included comparisons for comparable roles in similar-sized companies with annual revenues between $900 million and $2.5$2.6 billion. The Compensation Committee also considered individual and Company performance in the previous fiscal year executive experience, retention, and against multi-year goals including Tyler’s growth in both revenue, operating margin, and earnings per share in independently assessing 2022 annual salary levels.share. In addition, the Compensation Committee applied its philosophies regarding “at risk” relative to fixedconsidered executive experience and retention as well as the balance between service-based and performance-based, compensation as part of an executive’s overall compensation mix in balancing the justification for a relative increase while maintaining the fixedtotal target compensation componentat or below Peer Group and Radford Survey benchmarks. This includes an evaluation of the impact of annual salary increases on annual incentive compensation and total compensation. The increased2023 annual salary approved by the Committee for 2022 is 19%Mr. Moore was 10% below both the Tyler Peer Group and 10%Radford survey median. The 2023 approved annual salary for Mr. Miller was 11% below the Tyler Peer Group median and is 20% and 13%15% below the Radford Survey medianmedian. There are no peers to our COO in the Tyler Peer Group; however, the 2023 approved annual salary for our CEO and CFO, respectively.Mr. Puckett was 23% below the Radford Survey benchmark for COOs. As noted above, the Compensation Committee does not adhere to strict formulas or rely, to any significant extent, on market survey data to determine total compensation or the mix of compensation elements.compensation. Market survey data is not used as a benchmark per se, but rather is referred to by the Compensation Committee as a reasonableness check. As noted above, the Committee’s long-standing philosophy remains positioning compensation toward performance-based over fixed pay for our Named Executive Officers. Short-term Incentives Short-term incentives are the second element of NEO compensation, intended to reward the achievement of short-term objectives which, when consistently achieved, drive long-term shareholder value. We believe that a meaningful portion of the executive’sexecutive compensation should be contingent upon the successful achievement of our annual corporate objectives, which represent annual components of our long-term growth strategy. While our short-term incentive compensation plan is based on a given year’s non-GAAP earnings per share, the initial establishment ofsetting the criteria for full achievement of the target bonus from year to year is based on a multi-year view of appropriate growth levels. In other words, performance that meets our internal plan in a given year may not necessarily correspond with our executives earning 100% of the target bonus if the internal plan does not meet the goal of overall year-over-year growth. The short-term incentive plan is based on our operating plan, which is driven by our multi-year plan and developed from the “bottom-up” and considers“bottom-up,” considering a wide range of factors that impact our results including the(the general economic environment,environment; our market, competitive landscape, initiatives and investments,investments; and various other risks and opportunities.opportunities). | | | | | | | | | | 58 | | | | | | | | 20232024 Proxy Statement 41
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In February 2020, the Compensation Committee approved the change from a cash-based to a stock-based short-term incentive plan in the form of PSUs, which vest only upon the attainment of short-term performance objectives established for the plan. The Committee believescontinues to believe equity-based short-term incentives align executives with shareholder interests and company performance which increases long-term value for our shareholders. Each year, the Compensation Committee approves the vesting of annualshort-term incentive compensation PSUs for the prior fiscal year based on the achievement of definedpre-defined and pre-approved incentive compensation performance objectives that were approved by the Compensation Committee at the beginning of the prior fiscal year.objectives. Short-term incentives for the prior fiscal year are reviewed by the Compensation Committee in the first quarter of the following fiscal year and generally vest as earned on March 1. While the vesting of short-term incentive PSUs is based solely on the achievement of pre-defined and pre-approved performance objectives, the Compensation Committee, using its judgment, may exercise discretion in granting additional bonus amounts and equity awards as it deems appropriate. These adjustments may be based on subjective factors, such as the Compensation Committee’s assessment of external factors, including general economic and market conditions,conditions; unforeseen “one-time” events affecting financial performance or driving shareholder value,value; the executive’s assumption of additional responsibilities,responsibilities; the degree of difficulty of a particular assignment,assignment; and the executive’s experience, tenure, and future prospects with Tyler. The 20222023 short-term incentive compensation plan was based on annual non-GAAP earnings per share and is structured with graduated benefits for over-achievement and consequences for underachievementunder-achievement of objectives, including no vesting below a minimum threshold of performance. | | | | | |
| Annual Incentive Metric | | | Rationale for Metric | | | | | | | Non-GAAP Earnings per Share* | | | We believe that non-GAAP earnings per share removes certain uncontrollable variables and provides a more accurate picture of our financial performance. | |
*
| Excludes write-downs of acquisition-related deferred revenue and acquired leases, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, acquisition-related costs, lease restructuring costs and other asset write-offs, and expenses associated with amortization of intangibles arising from business combinations. |
*Excludes write-downs of acquisition-related deferred revenue and acquired leases, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, acquisition-related costs, lease restructuring costs and other asset write-offs, and expenses associated with amortization of intangibles arising from business combinations. In January 2022,February 2023, the Compensation Committee approved the 20222023 Short-Term Incentive Compensation Plan recommended by the Chief Executive Officer, which was based on the achievement of fully diluted non-GAAP earnings per share goals established in connection with our annual operating plan and consistent with our long-term growth strategy, (which excludes write-downs of acquisition-related deferred revenue and acquired leases, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, acquisition-related costs, lease restructuring costs and other asset write-offs, and expenses associatedconsistent with the amortization of acquisition intangibles arising from business combinations and did not include any individual performance goals).chart above. The 20222023 Short-Term Incentive Compensation Plan performance objectives for the Named Executive Officers were similar to other corporate employees’ incentive compensation plans and tied to similar goals, the main difference being the size of the target incentive award in relation to base salary. We believe that the percentage of compensation that is based on our performance should increase with an employee’s level within the Company up to and including executive management. Target incentives are therefore determined based on experience, level of responsibility, and retention risk.
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The 20222023 Short-Term Incentive Compensation Plan provided the opportunity for the executive officers, as well as other corporate employees, to earn incentive compensation at the following levels: 175% of target based on achieving 108.1% of adjusted earnings per share goal
170% of target based on achieving 107.6% of adjusted earnings per share goal
165% of target based on achieving 107.0% of adjusted earnings per share goal
160% of target based on achieving 106.5% of adjusted earnings per share goal
155% of target based on achieving 105.9% of adjusted earnings per share goal
150% of target based on achieving 105.4% of adjusted earnings per share goal
145% of target based on achieving 104.9% of adjusted earnings per share goal
140% of target based on achieving 104.3% of adjusted earnings per share goal
135% of target based on achieving 103.8% of adjusted earnings per share goal
130% of target based on achieving 103.2% of adjusted earnings per share goal
125% of target based on achieving 102.7% of adjusted earnings per share goal
120% of target based on achieving 102.2% of adjusted earnings per share goal
115% of target based on achieving 101.6% of adjusted earnings per share goal
110% of target based on achieving 101.1% of adjusted earnings per share goal
105% of target based on achieving 100.5% of adjusted earnings per share goal
100% of target based on achieving 100.0% of adjusted earnings per share goal
| | | | | | | | | | | | | | | | Percentage of EPS Goal (%) | | | Percentage of Target Award Earned (%) | | | | | | | | | | | 107.9 and above | | 42
175 | | | 107.4 to 107.89 | | 170 | | | 106.9 to 107.39 | | 165 | | | 106.4 to 106.89 | | 2023 Proxy Statement
160 | | | 105.8 to 106.39 | | 155 | | | 105.3 to 105.79 | | 150 | | | 104.8 to 105.29 | | 145 | | | 104.2 to 104.79 | | 140 | | | 103.7 to 104.19 | | 135 | | | 103.2 to 103.69 | | 130 | | | 102.6 to 103.19 | | 125 | | | 102.1 to 102.59 | | 120 | | | 101.6 to 102.09 | | 115 | | | 101.1 to 101.59 | | 110 | | | 100.5 to 101.09 | | 105 | | | 100.0 to 100.49 | | 100 | | | 99.5 to 99.99 | | 95 | | | 98.9 to 99.49 | | 90 | | | 98.4 to 98.89 | | 85 | | | 97.9 to 98.39 | | 80 | | | 97.4 to 97.89 | | 75 | | | 96.8 to 97.39 | | 70 | | | 96.3 to 96.79 | | 65 | | | 95.8 to 96.29 | | 60 | | | 95.2 to 95.79 | | 55 | | | 94.7 to 95.19 | | 50 | | | 94.2 to 94.69 | | 45 | | | 93.6 to 94.19 | | 40 | | | Less than 93.6 | | 0 | |
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95% of target based on achieving 99.5% of adjusted earnings per share goal
90% of target based on achieving 98.9% of adjusted earnings per share goal
85% of target based on achieving 98.4% of adjusted earnings per share goal
80% of target based on achieving 97.8% of adjusted earnings per share goal
75% of target based on achieving 97.3% of adjusted earnings per share goal
70% of target based on achieving 96.8% of adjusted earnings per share goal
65% of target based on achieving 96.2% of adjusted earnings per share goal
60% of target based on achieving 95.7% of adjusted earnings per share goal
55% of target based on achieving 95.1% of adjusted earnings per share goal
50% of target based on achieving 94.6% of adjusted earnings per share goal
45% of target based on achieving 94.1% of adjusted earnings per share goal
40% of target based on achieving 93.5% of adjusted earnings per share goal
In January 2023,February 2024, the Compensation Committee approved vesting of the 20222023 short-term incentive awards at 110%125% of base salary for Mr. Moore, Mr. Miller, and Mr. Puckett. Equity awards under the 20222023 Short-Term Incentive Compensation Plan vested on March 1, 2023,2024, as approved. | | Non-GAAP EPS* | | | $6.93 | | | $7.41 to $7.449 | | | $8.01 | | | $7.50 | | | 110% | |
| | | | | | | | | | | | | | | | | | | | | | Metric | Threshold (40%)
($) | Target (100%)
($) | Max (175%)
($) | Actual Achievement ($) | % of Target Achieved (%)(1) | | | | | | | | | Non-GAAP EPS(2) | 7.07 | | 7.55 to 7.589 | 8.15 | | 7.80 | | 125 | |
1.Represents the highest award payable without exceeding the expense limit for the performance range. | *
| | | | | | | | | Included adjustments to 2022 GAAP pre-tax income for (i) $1.9 million of acquisition- related costs, (ii) $104.6 million of share-based compensation expense and employer portion of payroll taxes on employee stock transactions, (iii) $113.6 million of amortization of intangibles arising from business combinations, and (iv) $2.8 million of lease restructuring and other asset write-offs.60 | 2024 Proxy Statement |
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2.Included adjustments to 2023 GAAP pre-tax income for (i) $0.4 million of acquisition- related costs, (ii) $110.2 million of share-based compensation expense and employer portion of payroll taxes on employee stock transactions, (iii) $110.7 million of amortization of intangibles arising from business combinations, and (iv) $8.2 million of lease restructuring and other asset write-offs. Long-term Incentives The third componentand fourth components of our Named Executive Officers’ 20222023 compensation wasare provided as long-term stock incentives, including PSUs and stock options.incentives. We believe stock incentives provide a vital link between the long-term results achieved for our shareholders and the rewards provided to executive officers and other key employees for that achievement. Long-term equity incentives for 20222023 were comprised of stock optionsPSUs and PSUs andRSUs intended to reward sustained achievement of long-term objectives through achievement of performance goals and time-based vesting periods. Stock options granted to our executive officers have a ten-year life. Beginning in 2016, options vest ratably over a three-year period for employees (including Named Executive Officers) who are at least 50 years of age and have tenure with the Company of at least 15 years; otherwise, options vest ratably over a four-year period. Beginning in 2018,Long-term PSUs cliff-vest at the end of three years upon the achievement of defined performance measures as determined by the Compensation Committee. Our allocations reflect our philosophy that a significant portion of our executive officers’ compensation should be performance-based and therefore at risk depending on the Company’s performance.RSUs vest one-third each year over three years from grant date. Through the use of equity incentives, a significant portion of potential compensation is tied directly to achievement of performance goals or stock price appreciation, further aligning the interest of our executive officers with those of our shareholders. Stock options are granted in semi-annual tranches (on or about June 1In 2023, long-term PSUs represented approximately 70% of target total compensation to our Named Executive Officers. PSUs and December 1), and PSUsRSUs are granted on or about March 1 after performance metrics have been established. Stock option awards are granted with an exercise price equal to the market price at the time of the award. Our objectives in granting equity incentive awards are to: maintain•Maintain an overall number and value of equity incentive awards that is reasonable in terms of shareholder dilution;
focus•Focus equity incentive awards on a limited number of key employees who have a direct impact on our ability to achieve our long-term goals;
provide•Provide the largest equity incentive grants to our top performers and individuals with the greatest responsibilities and potential to drive long-term share price appreciation; and
utilize•Utilize a mix of options, restricted stock units and performance-based restricted stock units to align recipients with the long-term interests of our shareholders, without promoting excessingexcessive risk taking.
In setting the mix between the different elements of compensation, we do not target specific allocations, but generally weigh incentive compensation elements more heavily. For more information, see “Compensation Discussion and Analysis — 20222023 Named Executive Officer Compensation Structure and Process — Compensation Mix” below. For 2022,2023, the Compensation Committee approved grants of PSUs for 6,5002,810 shares for Mr. Marr; 20,306 shares for Mr. Moore; 3,7509,542 shares for Mr. Miller; and 2,5005,934 shares for Mr. Puckett. This represents an increase in PSUs granted in 2022 versus 2021 of 1,500; 417;2,810; 13,806; 5,792; and 1503,434 shares, respectively. This increase was due to the elimination, at the present time, of the previous practice of granting stock options in addition to PSUs. The Committee felt the increased number of shares and resulting target long-term incentive compensation provided an appropriate level of compensation for each Named Executive Officer in light of Company and individual performance as well as Peer Group analysis. | | | | | | | | | | 2023 Proxy Statement 43
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Mr. Marr received no PSUs in his role as Executive Chair in 2022.
These grants to the Named Executive Officers, and therefore the actual number of PSUs that vest, are subject to performance-based vesting with a performance period of three years. The performance measuremeasures used to determine the number of PSUs vested at the end of the three-year performance period for the 20222023 PSU grant isare recurring revenue growth over that period. period and 2025 operating margin. The three-year cliff vesting period reinforces the importance of sustained recurring revenue and operating margin growth to the Company’s long-term success. The Compensation Committee believes that this vesting schedule emphasizes the long-term nature of this compensation component, thereby further aligning the interests of the Named Executive Officers with those of the shareholders. Upon vesting, the vested PSUs will be “settled” by our issuance to the holder, without any charge, of one share of our common stock for each vested PSU.
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The following tabletables sets forth the performance criteria that must be met for annual PSU grants to be earned and eligible for vesting: | | | | | | | | | 3-Year Cumulative Recurring
Revenue Growth(1) | | | Percentage of PSUs
to be earned and
eligible for vesting (%) | | | | | | Under 28.9% | — | | | | 28.9% to 32.89% | 50 | | | | 32.9% to 36.89% | 80 | | | | 36.9% to 42.89% | 100 | | | | 42.9% to 46.89% | 120 | | | | 46.9% and above | 150 | | |
1.Includes non-GAAP recurring revenue from an acquisition when total acquired company recurring revenue is less than or equal to 3% of Tyler recurring revenue. For an acquisition with recurring revenue run rate at the time of acquisition that is greater than 3% of Tyler recurring revenue, includes recurring revenue from the acquisition that is equal to 3% of Tyler recurring revenue at the time of acquisition. | | | | | | | | | 2025 Operating Margin(1) | Under 25.6%Percentage of PSUs
to be earned and eligible for vesting (%) | | | —
| | | | 25.6%-29.59%
| | 50%
| | Under 23.5% | 29.6%-33.59%
— | | | 80%
| | 23.5% to 23.99% | 33.6%-39.59%
50 | | | 100%
| | 24.0% to 24.49% | 39.6%-45.59%
80 | | | 120%
| | 24.5% to 25.49% | 45.6%100
| | | | 25.5% to 25.99% | 120 | | | | 26.0% and above | 150 | | | 150%
|
(1)
| Includes non-GAAP recurring revenue from an acquisition when total acquired company recurring revenue is less than or equal to 3% of Tyler recurring revenue. For an acquisition with recurring revenue run rate at the time of acquisition that is greater than 3% of Tyler recurring revenue, includes recurring revenue from the acquisition that is equal to 3% of Tyler recurring revenue at the time of acquisition. |
1.Non-GAAP Operating Margin as calculated for our quarterly earnings releases. In addition, in January 2022,February 2023, the Compensation Committee preliminarily approved the size of option grants to our Named Executive Officers as set forth below, to be made in two equal tranches on June 1 and December 1, 2022, which was consistent with our semi-annual grant policy. The term and vesting period for stock option grants was consistent with stock option grants made to all our employees. | | John S. Marr, Jr. | | | n/a | | | 3,750 | | | 3,750 | | | | H. Lynn Moore, Jr. | | | 6,500 | | | 10,000 | | | 10,000 | | | | Brian K. Miller | | | 3,750 | | | 5,000 | | | 5,000 | | | | Jeffrey D. Puckett | | | 2,500 | | | 3,250 | | | 3,250 | |
The grant of options approved by the Committee in January 2022 represented no change from the number of options granted to Mr. Marr in 2021. Options were the only form of long-term incentive provided to Mr. Marr in his role as Executive Chair in 2022. The number of options grantedRSUs to Mr. Moore, Mr. Miller and Mr. Puckett were 20,000; 10,000;as shown in the summary below of total long-term PSUs and 6,500 in 2022 versus 18,000; 12,000; and 4,700 in 2021, respectively. RSUs approved for the Named Executive Officers.
| | | | | | | | | | | | | | | | PSUs
(Recurring Revenue) | PSUs
(Operating Margin) | RSUs | | | Name | March 1, 2023 | March 1, 2023 | March 1, 2023 | | | | | | | | John S. Marr, Jr. | 1,405 | | 1,405 | | — | | | | H. Lynn Moore, Jr. | 10,153 | | 10,153 | | 3,124 | | | | Brian K. Miller | 4,771 | | 4,771 | | 1,390 | | | | Jeffrey D. Puckett | 2,967 | | 2,967 | | 781 | | |
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In approving equity grants to the NEOs, the Compensation Committee considered many factors, including the position of our Named Executive Officers’ total compensation relative to the Peer Group and Radford Survey comparators, long-term growth goals and potential future financial performance, each Named Executive Officer’s experience and level of responsibility, and the retention of each Named Executive Officer. The Compensation Committee does not have a set formula to determine which of these factors is more or less important, and the specific factors used and their weighting may vary among individual executives. The Compensation Committee also periodically reviews ISS guidelines as to the appropriate level of share-based awards granted for companies of similar characteristics. | | | | | | | | | | 44
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Share-based awards were made in 20222023 to approximately 17%19% of all Company employees. The Named Executive Officers were awarded approximately 17%12% of the total annual recurring stock incentive awards granted to employees in 20222023 as part of our annual recurring stock incentive award program. In 2022,2023, the percentage of total share-based awards for our annually recurring grants to Named Executive Officers was as follows: | | | | | | | | |
| Name | | | Percentage of total
annually recurring stock
incentive awards (%) | | | | |
| John S. Marr, Jr. | 1 | | | 2.3%
| | H. Lynn Moore, Jr. | 6 | | | 8.0%
| | Brian K. Miller | 3 | | | 4.2%
| | Jeffrey D. Puckett | 2 | | | 2.7%
|
Compensation Mix The mix of the threefour key elements of 20222023 Named Executive Officer compensation is designed to align a substantial portion of executive pay with the achievement of performance goals and increased value to Tyler shareholders. While annual salaries are intended to be fixed and certain, the other two elements only have value if performance goals are achieved or adjusted earnings per share goals are met and if the value of our common stock increases. We believe that having a larger measure of key pay elements at riskbased on achievement of key financial goals responsibly motivates and challenges our Named Executive Officers to achieve positive returns for our shareholders. For 2022,2023, the proportion of pay at risk for our Named Executive Officers was as follows: | | John S. Marr, Jr. | | | 27% | | | 0% | | | 73% | | | | H. Lynn Moore, Jr. | | | 10% | | | 11% | | | 79% | | | | Brian K. Miller | | | 12% | | | 13% | | | 75% | | | | Jeffrey D. Puckett | | | 13% | | | 12% | | | 75% | |
| | | | | | | | | | | | | | | | | | | | Compensation at Risk | | | Name | Annual Salary
(%) | Long-Term Stock Incentive Target (RSUs) (%) | Short-term Stock Incentive Target (PSUs) (%) | Long-term Stock Incentive Target (PSUs) (%) | | | | | | | | | John S. Marr, Jr. | 25 | | — | | — | | 75 | | | | H. Lynn Moore, Jr. | 8 | | 11 | | 8 | | 73 | | | | Brian K. Miller | 10 | | 10 | | 10 | | 70 | | | | Jeffrey D. Puckett | 12 | | 8 | | 12 | | 68 | | |
The table above depicts the relative mix of pay elements for 2022,2023, consisting of annual salary earned, annual bonus incentive earned, and the aggregate grant date fair value of annual recurring share-based awards made to the Named Executive Officers. For more detail, see “Executive Compensation — Summary Compensation Table.”
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Additional Considerations In addition to the compensation objectives and the specific considerations discussed above, the Compensation Committee discussed in detail the following in determining total compensation for the Chief Executive Officer and other Named Executive Officers in 2022:2023: •Key operational and long-term objectives, including management’s goal of multi-year and year-over-year earnings per share growth, continued strengthening of the Company’s balance sheet, profitability, and growth of recurring revenues and operating margin; •Management’s objectives to deliver on the 2030 vision, shared with investors in 2023, including our focus to develop and deploy premier technology through continued investment and the transition to the cloud; •The continued retention of each of our Named Executive Officers who lead our long-term growth strategy; •Reference to levels of compensation of other named executive officers of similarly sized, publicly held companies in similar industries; •Analysis of granted and realizable Named Executive Officer compensation at Tyler and shareholder value created under multiple long-term growth scenarios; •Terms of employment agreements, including equity granted with the five-year employment agreements executed in 2018 and the final vesting of thisthe related grant in 2023. After considering all of the factors outlined in this Compensation Discussion and Analysis, the Compensation Committee considered the overall compensation paid to our Named Executive Officers for 20222023 to be appropriate and reasonable. | | | | | | | | | | 2023 Proxy Statement 45
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20232024 Named Executive Officer Compensation In 2022,February 2024, the Committee conducted in-depth analysis of Named Executive Officer compensation in the context of our multi-year business strategy and long-term growth goals, as well as the plan, previously communicated to shareholders in 2019, to eliminate the historic practice of granting equity associated with the five-year employment agreements. With the final vesting of equity associated with the previous five-year grants set to occur in 2023, the goal of the Committee was to ensure that NEO compensation design and levels moving forward reward appropriately for the achievement of operational and long-term growth goals and align with governance best practices. The Committee conducted this work with the expectation that its decisions regarding 2023 NEO compensation reflect our current approach to NEO compensation moving forward, including: use of a total compensation target mix, generally 20% service-based and 80% performance-based, consistent with peer and governance best practices to avoid incentivizing excessive risk taking;
introduction of RSUs, which vary by executive, to supplement annual salary in reaching the 20% service-based level of target total compensation;
elimination of stock options as a form of equity compensation, based on shareholder outreach, governance best practices, and peer group analysis; and
increased PSUs to provide focus and reward for achievement of key long-term goals, and to supplement target annual incentive in reaching the 80% performance-based level of target total compensation.
In February 2023, the Compensation Committee reviewed the final proposed executive compensation program and individual compensation elements for each of the Named Executive Officers, including our Chief Executive Officer. As in previous years, the Committee considered the overall objectives of our executive compensation program and the elements of the program, including the mix of cash and stock-based compensation and the mix of short-term and long-term compensation, to determine whether they are appropriate relative to operational objectives and long-term performance of the Company. The Committee reviewed and discussed changes proposed by the Chief Executive Officer to the performance measures used in the long-term incentive plan as well as information provided by the Chief Human Resources Officer, including peer and market data. Mr. Marr, Mr. Moore, and Mr. Miller attended the portions of the meeting focused on multi-year business strategy and long-term growth drivers, as well as those portions focused on 2022 Company performance and achievement of short and long-term incentives. They each left the meeting prior to any discussion regarding their compensation. Our Chief Human Resources Officer remained to answer the Committee’s questions regarding 2023 Named Executive Officer compensation information provided and to record the decisions of the Committee. The Committee approved the following changes to 20232024 total compensation for the Named Executive Officers:
Annual Salary The Compensation Committee increasedmade no changes to annual salaries to Mr. Moore, Mr. Miller, and Mr. Puckett to $675,000, $425,000, and $325,000, respectively. No change was made toof the annual salary of Mr. Marr.Named Executive Officers. These decisions were based on multiple factors, including the review of Peer Group and Radford Survey total compensation data relative to Named Executive Officer compensation, including and excluding the annual value of the discontinued five-year grant.compensation. Annual Incentive The Compensation Committee maintained the current target bonus levels of 100% of base salary for Mr. Moore, Mr. Miller, and Mr. Miller. Mr. Puckett’s target bonus level was increased from 85% to 100%.Puckett. Mr. Marr does not receive an annual incentive in his role as Executive Chair of the Board. The annual incentive continues to be delivered in the form of short-term performance-based restricted stock units. To earn 100% of the target bonus under the 20232024 Incentive Compensation Plan, the Company must achieve 20232024 non-GAAP earnings per share between $7.55$8.95 and $7.589,$9.099, as adjusted to exclude write-downs of acquisition-related deferred revenue and acquired leases, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, acquisition-related costs, lease restructuring and other asset write-offs, and expenses associated with amortization of intangibles arising from business combinations. The bonus is based on our operating plan, which was reviewed by the Compensation Committee. In order to achieve the threshold bonus of 40%50% of target, the Company must achieve non-GAAP earnings per share of $7.07.$8.61. The short-term PSUs have a grant date of grant of March 1, 2023,2024, and vesting will be determined on the first anniversary based on the level of performance achieved. Upon vesting, the vested PSUs will be “settled” by our issuance to the holder, without any charge, of one share of our common stock for each vested PSU. | | | | | | | | | | 64 | | | | | | | | 46
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Long-Term Incentive Stock Options. The Committee approved an end to the practice of granting stock options as a form of long-term incentive. This decision was made based on multiple factors, including benchmarking of Tyler versus peer equity practices and the perspectives gathered by the Chief Financial Officer, Chief Human Resources Officer, and Chief Legal Officer in discussions with investors and investor governance groups over multiple years. While we continue to believe that stock options can be a valuable compensation incentive in creating value for shareholders, it is clear that our investors prefer, and our peers consistently use, restricted stock units and/or restricted stock as opposed to stock options. The elimination of stock options from Named Executive Officer long-term compensation also provided the opportunity to more materially align Named Executive Officer compensation with two long-term Tyler priorities—recurring revenue growth PSUsand operating margin growth. As a result, in February 2023, the Committee approved 2023 long-term incentive compensation to our Named Executive Officers as described below.
PSUs. . For 2023,2024, the Compensation Committee approved grants of long-term PSUs to Mr. Marr, Mr. Moore, Mr. Miller, and Mr. Puckett with a target value at grant of $900,000; $6,500,000; $3,055,000;$3,000,000; and $1,900,000,$2,100,000, respectively. The PSUs granted to our Named Executive Officers in 20232024 reflects the Committee’s view of multiple factors, including the appropriate level of PSUs in total compensation value, and a review of peer and market data, the final step for Mr. Moore and Mr. Miller in the normalization of equity compensation with the elimination of the historic five-year grant associated with executive employment agreements, and a reflection of Mr. Puckett’s continuing expanded role.data.
Annual grants of long-term PSUs to the Named Executive Officers are subject to performance-based cliff vesting with a performance period of three years. In 2023,2024, the performance measures used to determine the number of PSUs vested at the end of the three-year performance period are three-year adjusted cumulative recurring revenue growth over the period for half of the PSUs, and three-year net non-GAAP operating margin growth over the period as calculated for our quarterly earnings releases for the other half of units granted. From 2018 through 2020, the performance measure used in the NEO PSU grants was three-year cumulative revenue growth. The Committee has historically discussed a move to metrics more closely aligned with the Company’s business strategy and feedback received during shareholder engagement. Recurring revenue growth over a three-year period was approved by the Committee in 2021 as a PSU metric given its alignment with our strategy to move to the cloud, feedback from shareholders, peer utilization review, and as a significant driver of continuing shareholder value. Operating margin growth over a three-year period was approved by the Committee in 2023 as an additional PSU metric given its importance to shareholders as we complete our transition to the cloud. The three-year cliff vesting period reinforces the importance of sustained revenue and operating margin growth to the Company’s long-term success. The Compensation Committee believes that this vesting schedule emphasizes the long-term nature of profitable growth, thereby further aligning the interests of the Named Executive Officers with those of the shareholders. Upon vesting, the vested PSUs will be “settled” by our issuance to the holder, without any charge, of one share of our common stock for each vested PSU. Performance levels for the long-term PSUs are reviewed by the Committee and approved each year based on multiple factors, including historic and expected performance against multi-year growth goals. In 2024, the performance goals exclude merchant fees associated with our payments business from the determination of adjusted non-GAAP revenue. Many of our payments clients prefer for us to assume responsibility for merchant fees, which are then passed through to the client as a part of our revenue, along with a margin (the “gross model”). In other cases, the client assumes responsibility for paying merchant fees, and only the applicable margin is included in our revenue (the “net model”). Because the revenue model applicable to each client and the associated impact on our revenue and net operating margin is based on the client’s choice of model and is outside of our control, we have determined that it is appropriate to exclude merchant fees for calculating performance goals for PSUs granted in 2024. At grant, the total target value of awards, as set forth above, is divided into two equal parts, with 50% of PSUs granted subject to 3-year cumulative adjusted recurring revenue growth performance and the other 50% subject to 2026 net operating margin performance. The following table sets forth the performance criteria that must be met for 20232024 PSUs granted under each performance measure to be earned and eligible for vesting:vesting, which are aligned with the near-term and mid-term targets set forth at our June 2023 Investor Day:
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| | | | | | | | | 3-Year Cumulative Recurring
Adjusted Recurring Revenue Growth(1) | | | Percentage of PSUs
to be earned and
eligible for vesting (%) | | | | Under 28.9%
| | —
| | Under 22.5% | 28.9%-32.89%
— | | | 50%
| | 22.5% to 27.72% | 32.9%-36.89%
50 | | | 80%
| | 27.73% to 33.09% | 36.9%-42.89%
80 | | | 100%
| | 33.10% to 40.49% | 42.9%-46.89%
100 | | | 120%
| | 40.50% to 48.14% | 46.9%120
| | | | 48.15% and above | 150 | | | 150%
|
(1)
| Includes non-GAAP recurring revenue from an acquisition when total acquired company recurring revenue is less than or equal to 3% of Tyler recurring revenue. For an acquisition with recurring revenue run rate at the time of acquisition that is greater than 3% of Tyler recurring revenue, includes recurring revenue from the acquisition that is equal to 3% of Tyler recurring revenue at the time of acquisition. |
1.Includes non-GAAP recurring revenue from an acquisition when total acquired company recurring revenue is less than or equal to 3% of Tyler recurring revenue. For an acquisition with recurring revenue run rate at the time of acquisition that is greater than 3% of Tyler recurring revenue, includes recurring revenue from the acquisition that is equal to 3% of Tyler recurring revenue at the time of acquisition. Adjusted recurring revenue determined as non-GAAP revenue from subscriptions and maintenance revenue categories, including transaction-based revenues, but excluding interchange, network association fees, third-party processing fees or other bank fees (collectively referred to as “merchant fees”). | | | | | | | | | | | | | 2023 Proxy Statement 47
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| | Under 23.5%
| | —
| | Under 26.0% | 23.5% to 23.99%
— | | | 50%
| | 26.0% to 26.49% | 24.0% to 24.49%
50 | | | 80%
| | 26.5% to 26.99% | 24.5% to 25.49%
80 | | | 100%
| | 27.0% to 27.99% | 25.5% to 25.99%
100 | | | 120%
| | 28.0% to 28.49% | 26.0%120
| | | | 28.5% and above | 150 | | | 150%
|
(1)
| Non-GAAP Operating Margin as calculated for our quarterly earnings releases. |
1.Net Operating Margin determined as non-GAAP operating profit (as calculated for our quarterly earnings releases) divided by total adjusted non-GAAP revenues, where merchant fees (i.e., interchange, network association fees, third-party processing fees or other bank fees) are excluded from total non-GAAP revenues. RSUs. For 2023,2024, the Compensation Committee approved grants of time-based restricted stock units (RSUs) with three-year, ratable vesting to Mr. Moore, Mr. Miller, and Mr. Puckett with a target value of $1,000,000; $445,000;$500,000; and $250,000, respectively. In making its decision to grant these RSU awards, the Committee considered, among other things, the role of RSUs as a retention tool, maintaining an appropriate balance of fixedservice-based and ‘at risk’ payperformance-based total compensation as part of our Named Executive Officers’ overall compensation package, and the prevalence of RSUs as an award vehicle within our Peer Group. The mix of long-term incentive awards shifted this year to a general targeted mix of 80% performance-based restricted stock (PSUs) and 20% time-based restricted stock (RSUs) awards, based on the planned value of awards at grant, versus the previous targeted mix of 50% PSUs and 50% stock options used in 2022. Benefits Our Named Executive Officers are eligible for the same benefits made available to other full-time employees generally, including our 401(k) Savings Plan, Employee Stock Purchase Plan, health and dental care plans, life insurance plans, disability plans, paid time off plan, parental leave plan and other welfare benefit programs.
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Employment Agreements We have historically executed five-year employment agreements with our Named Executive Officers based on our belief that these agreements were in the best interests of our shareholders. The employmentEmployment agreements with our Named Executive Officers support leadership team retention and operational stability. They also ensure continuation of the disciplined growth and operational execution we have relied upon to consistently deliver shareholder value and client satisfaction.
We had historically executed five-year employment agreements with our Named Executive Officers based on our belief that these agreements were in the best interests of our shareholders. These agreements have historicallyalso included equity grants that vestvested over the term of the employment agreements. In 2019, based on engagement with shareholders, we made the decision no longer to provide equity grants with the execution of employment agreements. In 2022, we also made the decision to move from five-year employment agreements to one-year employment agreements that automatically renew for an additional one-year term unless the Company or the NEO provides at least three months’ notice of non-renewal. The 2022 agreements replaced and superseded the 2018 employment agreements that had been entered into with Mr. Marr, Mr. Moore, and Mr. Miller, which would have expired in February 2023. We also entered into a one-year employment agreement, subject to renewal as described above, with Mr. Puckett. Each of those agreements renewed in May 2023, per their terms, for a one-year renewal term. Under the terms of the newthese employment agreements, Mr. Marr, Mr. Moore, Mr. Miller, and Mr. Puckett will receive minimum base salaries, annual performance bonuses, and equity grants determined by the Compensation Committee on an annual basis. These items were most recently set by the Compensation Committee in February 2023,2024, as discussed in above in “2023“2024 Named Executive Officer Compensation.” These executives will also receive all employee benefits and perquisites (if any) normally offered to our employees. Each agreement provides for payment of accrued compensation as well as a severance payment equal to each executive’s then-current base salary and target bonus upon (1) a termination of the executive’s employment without cause or (2) a termination of employment by the executive for defined, and customary, “good reason” or by the Company without cause within twelve months following the occurrence of a change in control transaction. A change in control under the new agreements has the same definition as set forth in our 2018 Stock Incentive Plan. The change in control severance payment reflects a “double trigger” mechanism, meaning that both a change in control transaction must have occurred and the NEO’s employment must be terminated for “good reason” or without cause within the limited period of time following the change in control transaction. This was a material change from the “single trigger” change in control severance provision in the now-superseded 2018 employment agreements. Each agreement also provides that we will continue to provide medical benefits for 12 months after a termination without cause, a termination due to disability, or a termination following a change in control. In the event of a termination without cause, a termination due to disability, a termination following a change in control, or the death of the executive, all unvested options, restricted stock units, or other equity awards outstanding as of the date of the executive’s termination would immediately become fully vested and, as applicable, exercisable. | | | | | | | | | | 48
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We developed a standard severance package for Mr. Marr, Mr. Moore, Mr. Miller, and Mr. Puckett because we believe it is necessary to attract and retain these qualified executive officers. We also believe these agreements are important to help minimize the distraction caused by a potential transaction and reduce the risk that any of these executive officers departs before an acquisition is consummated. We believe that a pre-existing plan allows these executive officers to focus on continuing normal business operations and the success of a potential business combination, rather than on seeking alternative employment. We further believe that our employment agreements ensure stability and will enable our executive officers to maintain a balanced perspective in making overall business decisions during a potentially uncertain period. The Compensation Committee applied its best judgment in developing the severance package after considering each executive’s overall compensation package, the rapidly changing environment for technology-based companies, the average time required to obtain employment for equivalent job duties, and the amount paid to executives in the event of termination without cause or upon a change in control.
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Other Important Elements of Our Executive Compensation Executive Compensation Recovery Policy; Incentive Compensation Recovery Policy; Clawbacks or Forfeitures Accountability is one of our fundamental Company values. To reinforce this value through our executive compensation program, the Board of Directors adopted an Executive Compensation Recovery Policy in February 2010. The policy applies to our Named Executive Officers, group and division presidents, senior financial management, and other key financial employees, and is included in the compensation plans for each such individual. Under this policy, if, in the opinion of the independent directors of the Board, an executive engages in fraud or intentional misconduct that causes a material restatement of our financial statements, then the independent directors shall have the discretion to use their best efforts to remedy the misconduct and prevent its recurrence. Based upon the facts and circumstances surrounding the restatement, the independent directors may direct the Company to recover all or a portion of any bonus or incentive compensation paid, adjust the future compensation of the executive, and dismiss, or take legal action against, the executive, in each case as the independent directors determine is in the Company’s best interests. The remedies that may be sought by the independent directors are subject to a number of conditions, including that: (1) the bonus or incentive compensation to be recouped was calculated based upon the financial results that were restated; (2) the executive in question engaged in fraud or intentional misconduct; and (3) the bonus or incentive compensation calculated under the restated financial results is less than the amount actually paid or awarded. Effective November 20, 2023, the Compensation Committee adopted an Incentive Compensation Recovery Policy. Under the policy, the Compensation Committee is responsible for taking reasonably prompt action after an accounting restatement to determine, and recover, any erroneously awarded incentive compensation. The Committee has broad discretion to determine the appropriate means of recovery. The policy applies to defined “Covered Executives,” who are expected to acknowledge, in writing, the applicability of the policy to them. The 2018 Stock Incentive Plan includes a “clawback/forfeiture” provision pursuant to which the Compensation Committee may provide in any equity incentive award agreement that (1) the Compensation Committee may in its discretion cancel the award if the holder of the award engages in certain defined detrimental activity, and/or (2) the holder of an award is required to repay any amount in excess of what the holder should have received, whether by reason of a financial restatement, mistake in calculations, administrative error, or otherwise. In addition, all awards would be subject to reduction, cancellation, forfeiture, or recoupment as required under applicable law. Stock Ownership Requirements Our Named Executive Officers and other senior Company executives are also subject to minimum stock ownership requirements. Please see “Stock Ownership Guidelines” above for more information. Anti-Hedging and Pledging We maintain a Stock Anti-Hedging and Pledging Policy, described in the “Corporate Governance Principles—Stock Anti-Hedging and Pledging Policy” section, to prohibit our executives from engaging in transactions that could reduce or limit their holdings, ownership or interest in Company securities and to discourage our executives from pledging Company securities or from holding Company securities in margin accounts. Frequency of Say-on-Pay Vote The Board of Directors has submitted an advisory vote on executive compensation to our shareholders since the 2017 annual meeting of shareholders. In 2023, shareholders voted in favor of continuing the annual advisory vote. The annual proposal gives our shareholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our Named Executive Officers. Please see Proposal Four for a discussion of our history and intent with respect to the frequency of the shareholder say-on-pay advisory vote.
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Annual Assessment of Risks Associated with our Compensation Policies and Programs Our compensation program is designed not to incentivize excessive risk taking by allocating an appropriate balance between the threefour compensation elements. The baseannual salary component of compensation is a fixed amount and is therefore not subject to or influenced by risk taking. Our annual incentive compensation is principally focused on short-term performance | | | | | | | | | | 2023 Proxy Statement 49
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goals established with consideration to building long-term shareholder value (non-GAAP earnings per share, which excludes write-downs of acquisition-related deferred revenue and acquired leases, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, acquisition-related costs, and expenses associated with the amortization of acquisition intangibles arising from business combinations). Our long-term incentive compensation is based on the achievement of three-year revenue growth and operating margin goals and long-term stock price growth through the grant of long-term PSUs and stock options. OurRSUs. Both our annual and long-term incentive compensation plans are graduated scale plans rather than based on “all or nothing” performance, and both include caps on maximum earned awards, which reduces the incentive for short-term excessive risk taking. Moreover, our stock option grants occur in fixed amounts on a semi-annual basis (on or about June 1 and December 1), which eliminates the ability of executive officers to time the grant of options around short-term, market events. Further, options granted to Named Executive Officers vest over a three-year or four-year period beginning on the first anniversary of the grant date (as described above), which further emphasizes the long-term nature of this compensation component and reduces the incentive for risk taking. Compensation Committee Report The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of the SEC's Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis be included in this proxy statement. This report is submitted by the Compensation Committee. Daniel M. Pope, Chair
Glenn A. Carter
Ronnie D. Hawkins, Jr. Compensation Committee Interlocks and Insider Participation In 2022,2023, the Compensation Committee consisted of Daniel M. Pope (Chair), Glenn A. Carter, and Ronnie D. Hawkins, Jr. No member of the Compensation Committee was an officer or employee of the Company. None of our executive officers served on the compensation committee or equivalent of any other entity. | | | | | | | | | | 69 | | | | | | | | 50
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Summary Compensation Table The following table sets forth certain information regarding the compensation paid to our Named Executive Officers for all of the services they rendered to us during 2023, 2022, 2021, and 2020:2021: | | John S. Marr, Jr.
Executive Chairperson
of the Board | | | 2022 | | | $300,000 | | | $— | | | $— | | | $817,425 | | | $— | | | $— | | | $7,500 | | | $1,124,925 | | | | 2021 | | | $300,000 | | | $— | | | $— | | | $848,886 | | | $— | | | $— | | | $8,302 | | | $1,157,188 | | | | 2020 | | | $300,000 | | | $— | | | $— | | | $740,171 | | | $— | | | $— | | | $8,389 | | | $1,048,560 | | | | H. Lynn Moore, Jr.
President and Chief
Executive Officer | | | 2022 | | | $600,000 | | | $— | | | $3,405,145 | | | $2,179,800 | | | $— | | | $— | | | $12,217 | | | $6,197,162 | | | | 2021 | | | $525,000 | | | $— | | | $3,015,250 | | | $2,037,325 | | | $— | | | $— | | | $12,430 | | | $5,590,005 | | | | 2020 | | | $525,000 | | | $— | | | $1,934,153 | | | $2,220,515 | | | $— | | | $— | | | $12,514 | | | $4,692,182 | | | | Brian K. Miller
Executive Vice
President, Chief
Financial Officer and
Treasurer | | | 2022 | | | $415,000 | | | $— | | | $2,040,238 | | | $1,089,900 | | | $— | | | $— | | | $12,249 | | | $3,557,387 | | | | 2021 | | | $400,000 | | | $— | | | $2,070,008 | | | $1,358,216 | | | $— | | | $— | | | $12,409 | | | $3,840,633 | | | | 2020 | | | $400,000 | | | $— | | | $1,324,499 | | | $1,480,343 | | | $— | | | $— | | | $12,461 | | | $3,217,303 | | | | Jeffrey D. Puckett,
Chief Operating
Officer(5) | | | 2022 | | | $300,000 | | | $— | | | $1,336,325 | | | $708,435 | | | $— | | | $— | | | $6,174 | | | $2,350,934 | | | | 2021 | | | $300,000 | | | $— | | | $1,391,068 | | | $531,969 | | | $— | | | $— | | | $6,497 | | | $2,229,534 | |
(1)
| The reported amounts represent the aggregate grant date fair value of awards of restricted stock units and performance-based restricted stock units, computed in accordance with FASB ASC Topic 718, and, for performance-based restricted stock units, assume performance at the target level for each such award. |
(2)
| Represents aggregate grant date fair value of awards granted and calculated in accordance with FASB ASC Topic 718. Such grants provide our executive officers the opportunity to purchase shares of Tyler common stock at some future date at the fair market value of the stock on the date of grant. For additional information on the valuation assumptions, refer to Note 12 of the Tyler Technologies’ financial statements in the Form 10-K for the year ended December 31, 2022, as filed with the SEC. This fair value does not represent cash received by the executive in the relevant year, but potential earnings contingent on Tyler’s future performance. Stock option grants are designed to provide long-term (up to ten years) incentives and rewards linked directly to the price of our common stock. Stock options add value to the recipient only when shareholders benefit from stock price appreciation and, as such, further align management’s interest with those of our shareholders. |
(3)
| These amounts consist of amounts earned under Tyler’s incentive compensation plan for each respective year and generally paid in the following year. |
(4)
| All other compensation includes amounts contributed or accrued by Tyler under our 401(k) Savings Plan and tickets to sporting events. |
(5)
| Mr. Puckett was added as a Named Executive Officer in May 2021. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(4) | Total
($) | | | | | | | | | | | | | John S. Marr, Jr. Executive Chairperson of the Board | 2023 | 300,000 | | — | | 899,482 | | — | | — | | — | | 7,500 | | 1,206,982 | | | | 2022 | 300,000 | | — | | — | | 817,425 | | — | | — | | 7,500 | | 1,124,925 | | | | 2021 | 300,000 | | — | | — | | 848,886 | | — | | — | | 8,302 | | 1,157,188 | | | H. Lynn Moore, Jr. President and Chief Executive Officer | 2023 | 675,000 | | — | | 8,343,692 | | — | | — | | — | | 9,900 | | 9,028,592 | | | | 2022 | 600,000 | | — | | 3,405,145 | | 2,179,800 | | — | | — | | 12,217 | | 6,197,162 | | | | 2021 | 525,000 | | — | | 3,015,250 | | 2,037,325 | | — | | — | | 12,430 | | 5,590,005 | | | Brian K. Miller Executive Vice President, Chief Financial Officer and Treasurer | 2023 | 425,000 | | — | | 4,030,583 | | — | | — | | — | | 12,885 | | 4,468,468 | | | | 2022 | 415,000 | | — | | 2,040,238 | | 1,089,900 | | — | | — | | 12,249 | | 3,557,387 | | | | 2021 | 400,000 | | — | | 2,070,008 | | 1,358,216 | | — | | — | | 12,409 | | 3,840,633 | | | Jeffrey D. Puckett, Chief Operating Officer | 2023 | 325,000 | | — | | 2,555,722 | | — | | — | | — | | 7,542 | | 2,888,264 | | | | 2022 | 300,000 | | — | | 1,336,325 | | 708,435 | | — | | — | | 6,174 | | 2,350,934 | | | | 2021 | 300,000 | | — | | 1,391,068 | | 531,969 | | — | | — | | 6,497 | | 2,229,534 | | |
1.The reported amounts represent the aggregate grant date fair value of awards of restricted stock units and performance-based restricted stock units, computed in accordance with FASB ASC Topic 718, and, for performance-based restricted stock units, assume performance at the target level for each such award. 2.Represents aggregate grant date fair value of awards granted and calculated in accordance with FASB ASC Topic 718. Such grants provide our executive officers the opportunity to purchase shares of Tyler common stock at some future date at the fair market value of the stock on the date of grant. For additional information on the valuation assumptions, refer to Note 12 of the Tyler Technologies’ financial statements in the Form 10-K for the year ended December 31, 2023, as filed with the SEC. This fair value does not represent cash received by the executive in the relevant year, but potential earnings contingent on Tyler’s future performance. Stock option grants are designed to provide long-term (up to ten years) incentives and rewards linked directly to the price of our common stock. Stock options add value to the recipient only when shareholders benefit from stock price appreciation and, as such, further align management’s interest with those of our shareholders. | | | | | | | | | | 70 | | | | | | | | 20232024 Proxy Statement 51
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3.These amounts consist of amounts earned under Tyler’s incentive compensation plan for each respective year and generally paid in the following year. TABLE OF CONTENTS
4.All other compensation includes amounts contributed or accrued by Tyler under our 401(k) Savings Plan and tickets to sporting events.Pay Versus Performance
Pay Versus Performance Table.As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, the following additional compensation information is provided for our Chief Executive Officer as our principal executive officer (PEO) and our other Named Executive Officers (Other NEOs), in addition to total shareholder return, net income, and non-GAAP recurring revenue performance results for fiscal years 2020,2023, 2022, 2021, and 2022.2020. | | 2022 | | | $6,197,162 | | | $(3,366,114) | | | $2,344,425 | | | $(1,734,306) | | | $107 | | | $134 | | | $164,240 | | | $1,470,759 | | | | 2021 | | | $5,590,005 | | | $14,936,995 | | | $2,409,118 | | | $6,675,726 | | | $179 | | | $172 | | | $161,458 | | | $1,261,400 | | | | 2020 | | | $4,692,182 | | | $13,125,021 | | | $2,132,932 | | | $7,665,325 | | | $146 | | | $153 | | | $194,820 | | | $818,638 | |
(1)
| For the years 2022, 2021, and 2020, this is the total compensation, as depicted in the Summary Compensation Table above, for Chief Executive Officer H. Lynn Moore, Jr., our Principal Executive Officer (PEO). |
(2)
| Represents the amount of “compensation actually paid” to Mr. Moore, as determined in accordance with Item 402(v) of Regulation S-K. The figures presented do not reflect the actual amount of compensation earned by or paid to Mr. Moore during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to Mr. Moore’s total compensation for each year to determine the “compensation actually paid”: |
| | Total reported in Summary Compensation Table (SCT) | | | $6,197,162 | | | $5,590,005 | | | $4,692,182 | | | | Less, value of stock & option awards reported in SCT | | | (5,584,945) | | | (5,052,575) | | | (4,154,668) | | | | Less, change in pension value and non-qualified deferred compensation earnings in SCT | | | — | | | — | | | — | | | | Plus, pension service cost and impact of pension plan amendments | | | — | | | — | | | — | | | | Plus, year-end value of awards granted in fiscal year that are unvested and outstanding | | | 4,894,336 | | | 7,141,556 | | | 4,946,903 | | | | Plus, change in fair value of prior year awards that are outstanding and unvested | | | (5,684,175) | | | 6,633,151 | | | 7,207,776 | | | | Plus, fair value of awards granted this year and that vested this year | | | — | | | — | | | — | | | | Plus, change in fair value (from prior year-end) of prior year awards that vested this year | | | (3,188,491) | | | 624,859 | | | 432,828 | | | | Less, prior year fair value of prior year awards that failed to vest this year | | | — | | | — | | | — | | | | “Compensation Actually Paid” | | | $(3,366,114) | | | $14,936,995 | | | $13,125,021 | |
(3)
| Represents the average of the amounts reported for the company’s named executive officers as a group (excluding Mr. Moore) in the “Total” column of the Summary Compensation Table in each applicable year: Mr. Marr, Mr. Miller, and Mr. Puckett in 2022 and 2021, and Mr. Marr and Mr. Miller in 2020. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | Summary Compensation Table Total for PEO(1) ($) | Compensation Actually Paid to PEO(2) ($) | Average Summary Compensation Table Total for Other NEOs(3) ($) | Average Compensation Actually Paid to Other NEOs(4) ($) | Value of $100 Initial Fixed Investment Based on TSR(5) ($) | Value of $100 Initial Fixed Investment Based on Peer Group TSR(6) ($) | Net Income | Non-GAAP Recurring Revenue(7) | | | (In thousands)($) | | | | | | | | | | | | | 2023 | 9,028,592 | | 14,199,773 | | 2,854,571 | | 4,639,845 | | 139 | | 176 | | 165,919 | | 1,626,173 | | | | 2022 | 6,197,162 | | (3,366,114) | | 2,344,425 | | (1,734,306) | | 107 | | 109 | | 164,240 | | 1,480,759 | | | | 2021 | 5,590,005 | | 14,936,995 | | 2,409,118 | | 6,675,726 | | 179 | | 157 | | 161,458 | | 1,261,400 | | | | 2020 | 4,692,182 | | 13,125,021 | | 2,132,932 | | 7,665,325 | | 146 | | 153 | | 194,820 | | 818,638 | | |
1.For the years 2023, 2022, 2021, and 2020, this is the total compensation, as depicted in the Summary Compensation Table above, for Chief Executive Officer H. Lynn Moore, Jr., our Principal Executive Officer (PEO). 2.Represents the amount of “compensation actually paid” to Mr. Moore, as determined in accordance with Item 402(v) of Regulation S-K. The figures presented do not reflect the actual amount of compensation earned by or paid to Mr. Moore during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to Mr. Moore’s total compensation for each year to determine the “compensation actually paid”: | | | | | | | | | | | | | | | | | | Adjustments to determine Compensation Actually Paid for PEO | 2023
($) | 2022
($) | 2021
($) | 2020
($) | | | | | | | | | Total reported in Summary Compensation Table (SCT) | 9,028,592 | | 6,197,162 | | 5,590,005 | | 4,692,182 | | | | Less, value of stock & option awards reported in SCT | (8,343,692) | | (5,584,945) | | (5,052,575) | | (4,154,668) | | | | Less, change in pension value and non-qualified deferred compensation earnings in SCT | — | | — | | — | | — | | | | Plus, pension service cost and impact of pension plan amendments | — | | — | | — | | — | | | | Plus, year-end value of awards granted in fiscal year that are unvested and outstanding | 10,639,900 | | 4,894,336 | | 7,141,556 | | 4,946,903 | | | | Plus, change in fair value of prior year awards that are outstanding and unvested | 2,038,950 | | (5,684,175) | | 6,633,151 | | 7,207,776 | | | | Plus, fair value of awards granted this year and that vested this year | — | | — | | — | | — | | | | Plus, change in fair value (from prior year-end) of prior year awards that vested this year | 836,023 | | (3,188,491) | | 624,859 | | 432,828 | | | | Less, prior year fair value of prior year awards that failed to vest this year | — | | — | | — | | — | | | | “Compensation Actually Paid” | 14,199,773 | | (3,366,114) | | 14,936,995 | | 13,125,021 | | |
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| (4)
| | | | | | | | | Executive Compensation | | Represents the amount |
| | Total reported in Summary Compensation Table (SCT) | | | $2,344,425 | | | $2,409,118 | | | $2,132,932 | | | | Less, value of stock & option awards reported in SCT | | | (1,997,451) | | | (2,066,716) | | | (1,772,507) | | | | Less, change in pension value and non-qualified deferred compensation earnings in SCT | | | — | | | — | | | — | | | | Plus, pension service cost and impact of pension plan amendments | | | — | | | — | | | — | | | | Plus, year-end value of awards granted in fiscal year that are unvested and outstanding | | | 1,773,552 | | | 2,888,432 | | | 2,065,960 | | | | Plus, change in fair value of prior year awards that are outstanding and unvested | | | (2,303,705) | | | 3,127,295 | | | 5,001,364 | | | | Plus, fair value of awards granted this year and that vested this year | | | — | | | — | | | — | | | | Plus, change in fair value (from prior year-end) of prior year awards that vested this year | | | (1,551,127) | | | 317,596 | | | 237,576 | | | | Less, prior year fair value of prior year awards that failed to vest this year | | | — | | | — | | | — | | | | “Compensation Actually Paid” | | | $(1,734,306) | | | $6,675,726 | | | $7,665,325 | |
(5)
| For the relevant fiscal year, represents an initial $100 investment, measured on a cumulative basis from the market close on December 31, 2019, through and including the end of the fiscal year for which TSR is being presented in the table. |
(6)
| The Company’s peer group, described above under “Peer Group,” was used for the purposes of calculating peer group total shareholder return. Peer Group TSR was calculated on a market-capitalization-weighted basis according to the respective issuers’ stock market capitalization at the beginning of each period for which a return was indicated. TSR represents an initial $100 investment, measured on a cumulative basis from the market close on December 31, 2019, through and including the end of the fiscal year for which TSR is being presented in the table. |
(7)
| Non-GAAP Recurring Revenue is the company-selected financial performance measure that, in our assessment, represents the most important performance measure used to link compensation actually paid to our named executive officers to company performance for the most recently completed fiscal year. |
3.Represents the average of the amounts reported for the company’s named executive officers as a group (excluding Mr. Moore) in the “Total” column of the Summary Compensation Table in each applicable year: Mr. Marr, Mr. Miller, and Mr. Puckett in 2023, 2022 and 2021, and Mr. Marr and Mr. Miller in 2020. 4.Represents the amount of “compensation actually paid” to the company's named executive officers as a group (excluding Mr. Moore), as determined in accordance with Item 402(v) of Regulation S-K. The figures presented do not reflect the actual amount of compensation earned by or paid to the named executive officers during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to average total compensation for the named executive officers as a group (excluding Mr. Moore) for each year to determine the “compensation actually paid”: | | | | | | | | | | | | | | | | | | Adjustments to determine Compensation Actually Paid for Other NEOs | 2023
($) | 2022
($) | 2021
($) | 2020
($) | | | | | | | | | Total reported in Summary Compensation Table (SCT) | 2,854,571 | | 2,344,425 | | 2,409,118 | | 2,132,932 | | | | Less, value of stock & option awards reported in SCT | (2,495,262) | | (1,997,451) | | (2,066,716) | | (1,772,507) | | | | Less, change in pension value and non-qualified deferred compensation earnings in SCT | — | | — | | — | | — | | | | Plus, pension service cost and impact of pension plan amendments | — | | — | | — | | — | | | | Plus, year-end value of awards granted in fiscal year that are unvested and outstanding | 3,163,496 | | 1,773,552 | | 2,888,432 | | 2,065,960 | | | | Plus, change in fair value of prior year awards that are outstanding and unvested | 761,435 | | (2,303,705) | | 3,127,295 | | 5,001,364 | | | | Plus, fair value of awards granted this year and that vested this year | — | | — | | — | | — | | | | Plus, change in fair value (from prior year-end) of prior year awards that vested this year | 355,605 | | (1,551,127) | | 317,596 | | 237,576 | | | | Less, prior year fair value of prior year awards that failed to vest this year | — | | — | | — | | — | | | | “Compensation Actually Paid” | 4,639,845 | | (1,734,306) | | 6,675,726 | | 7,665,325 | | |
5.For the relevant fiscal year, represents an initial $100 investment, measured on a cumulative basis from the market close on December 31, 2019, through and including the end of the fiscal year for which TSR is being presented in the table. 6.The Company’s peer group, described above under “Peer Group,” was used for the purposes of calculating peer group total shareholder return. Peer Group TSR was calculated on a market-capitalization-weighted basis according to the respective issuers’ stock market capitalization at the beginning of each period for which a return was indicated. TSR represents an initial $100 investment, measured on a cumulative basis from the market close on December 31, 2019, through and including the end of the fiscal year for which TSR is being presented in the table. 7.Non-GAAP Recurring Revenue is the company-selected financial performance measure that, in our assessment, represents the most important performance measure used to link compensation actually paid to our named executive officers to company performance for the most recently completed fiscal year. Relationship between Pay and Performance. The graphs below illustrate the relationship between “compensation actually paid” to our Chief Executive Officer and other named executive officers in 2020, 2021, 2022, and 20222023 and Company and Peer Group TSR, Company net income, and Company non-GAAP recurring revenue.
“Compensation actually paid” (CAP), as required under SEC rules, reflects adjusted values to unvested and vested equity awards during the years shown based on year-end stock prices, various accounting valuation assumptions, and projected performance modifiers, but does not reflect actual amounts paid under those awards. Fluctuations in CAP are generally due to stock price and varying levels of the projected and actual achievement of performance goals (as reflected in the significant decrease to 2022 CAP). For a discussion of how our Compensation Committee assessed our performance and our Named Executive Officers’ pay each year, refer to the “Compensation Discussion and Analysis” in this Proxy Statement and the Proxy Statements for 2020, 2021, and 2021.2022. | | | | | | | | | | 72 | | | | | | | | 20232024 Proxy Statement 53
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Important Financial Performance Measures. The table below provides an unranked list of the most important financial performance measures, including the Company-Selected Measure, used by the Company to link CAP for all NEOs to Company performance for 2022.2023. | | |
| Non-GAAP Recurring Revenue | | | Non-GAAP Operating Margin | | | Non-GAAP Earnings Per Share | |
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Our CEO-to-median-employee pay ratio is calculated in accordance with Item 402(u) of the SEC’s Regulation S-K. We identified the median employee by examining the annual total compensation for all our employees who were employed by us on December 31, 2022,2023, excluding our Chief Executive Officer and internationalcertain employees under the regulation’s de minimis exemption provision which allows us to exclude up to 5% of our total employees. We included all employees, whether employed on a full-time,Accordingly, in identifying the median employee, we used the de minimis exemption to exclude seasonal, temporary, and non-benefits-eligible part-time or seasonal basis.employees. To determine the median employee, we calculated the total annual compensation for each of our 6,965 domestic7,324 employees as the sum of the following amounts: •Annual base pay and commissions, if applicable •Tyler’s matching contributions to the employee's 401(k) Plan account •Calendar year cash bonus •Calendar year share-based awards (incentive or nonqualified stock options and restricted stock units)
We believe the use of these components for all employees is a consistently applied compensation measure that includes all the compensation elements that are widely distributed throughout our organization, including retirement benefits. We calculated annual total compensation for the median employee using the same methodology we use for our Named Executive Officers as set forth in the 20222023 Summary Compensation tableTable included in this Proxy Statement. The total annual compensation calculated for our CEO was $6,197,162$9,028,592 and for our median employee was $95,889.$98,551. The resulting ratio for our CEO’s pay compared with the pay of our median employee for 20222023 is 64.691.6 to 1. | | | | | | | | | | 2023 Proxy Statement 55
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Grants of Plan-Based Awards in 20222023The following table sets forth certain information relating to grants of plan-based awards to the Named Executive Officers during 2022:2023: | | John S. Marr, Jr. | | | 6/1/2022 | | | | | | | | | | | | | | | | | | 3,750 | | | $345.87 | | | $373,217 | | | | 12/1/2022 | | | | | | | | | | | | | | | | | | 3,750 | | | $352.23 | | | $444,208 | | | | H. Lynn Moore, Jr. | | | 3/1/2022 | | | | | | | | | 568 | | | 1,420 | | | 2,485 | | | | | | | | | | | | | 3/1/2022 | | | | | | | | | 3,250 | | | 6,500 | | | 9,750 | | | | | | | | | | | | | 6/1/2022 | | | | | | | | | | | | | | | | | | 10,000 | | | $345.87 | | | $995,246 | | | | 12/1/2022 | | | | | | | | | | | | | | | | | | 10,000 | | | $352.23 | | | $1,184,554 | | | | Brian K. Miller | | | 3/1/2022 | | | | | | | | | 393 | | | 982 | | | 1,719 | | | | | | | | | | | | | 3/1/2022 | | | | | | | | | 1,875 | | | 3,750 | | | 5,625 | | | | | | | | | | | | | 6/1/2022 | | | | | | | | | | | | | | | | | | 5,000 | | | $345.87 | | | $497,623 | | | | 12/1/2022 | | | | | | | | | | | | | | | | | | 5,000 | | | $352.23 | | | $592,277 | | | | Jeffrey D. Puckett | | | 3/1/2022 | | | | | | | | | 241 | | | 603 | | | 1,055 | | | | | | | | | | | | | 3/1/2022 | | | | | | | | | 1,250 | | | 2,500 | | | 3,750 | | | | | | | | | | | | | 6/1/2022 | | | | | | | | | | | | | | | | | | 3,250 | | | $345.87 | | | $323,455 | | | | 12/1/2022 | | | | | | | | | | | | | | | | | | 3,250 | | | $352.23 | | | $384,980 | |
(1)
| The target and maximum plan award amounts reported in these columns are derived from our 2022 Incentive Compensation Plan. The actual payout amounts for 2022 are set forth in the Non-Equity Incentive Plan Compensation column of our Summary Compensation Table. |
(2)
| The target and maximum plan performance-based restricted stock unit awards reported in these columns are derived from our 2022 Incentive Compensation Plan. The actual vested amounts for 2022 are set forth in the 2022 Equity Incentive Plan Compensation column of our Summary Compensation Table. |
(3)
| The options awarded on June 1, 2022, and December 1, 2022, for Mr. Marr, Mr. Moore, Mr. Miller, and Mr. Puckett were granted as part of Tyler’s broad-based annual stock option grants. These options will vest ratably over a three-year period beginning on the first anniversary of the grant date for each Named Executive Officer who is at least fifty years of age or older and has a tenure with the Company of at least fifteen years or more. All options have a contractual term of ten years. The option terms are the same for substantially all the options granted to employees on June 1, 2022, and December 1, 2022; certain key employees who are closer to retirement age may, in the discretion of our Chief Executive Officer, receive shorter vesting periods. |
(4)
| The aggregate grant date fair value is determined in accordance with Accounting Standards Codification Topic 718, Stock Compensation, and does not represent cash received by the Named Executive Officers in 2022. The grant date fair value represents potential earnings contingent on Tyler’s future performance. Stock option grants are designed to provide long-term (up to ten years) incentives and rewards linked directly to the price of our common stock. Stock options add value to the recipient only when shareholders benefit from stock price appreciation and, as such, further align management’s interest with those of our shareholders. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Grant Date | Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | | | | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | | | | | | | | | | | | | | | John S. Marr, Jr. | 3/1/2023 | | | | 703 | | 1,405 | | 2,108 | | | | | | | 3/1/2023 | | | | 703 | | 1,405 | | 2,108 | | | | | | | H. Lynn Moore, Jr. | 3/1/2023 | | | | — | | 3,124 | | — | | | | | | | 3/1/2023 | | | | 5,077 | | 10,153 | | 15,230 | | | | | | | 3/1/2023 | | | | 5,077 | | 10,153 | | 15,230 | | | | | | | 3/1/2023 | | | | 843 | | 2,108 | | 3,689 | | | | | | | Brian K. Miller | 3/1/2023 | | | | — | | 1,390 | | — | | | | | | | 3/1/2023 | | | | 2,386 | | 4,771 | | 7,157 | | | | | | | 3/1/2023 | | | | 2,386 | | 4,771 | | 7,157 | | | | | | | 3/1/2023 | | | | 531 | | 1,327 | | 2,322 | | | | | | | Jeffrey D. Puckett | 3/1/2023 | | | | — | | 781 | | — | | | | | | | 3/1/2023 | | | | 1,484 | | 2,967 | | 4,451 | | | | | | | 3/1/2023 | | | | 1,484 | | 2,967 | | 4,451 | | | | | | | 3/1/2023 | | | | 406 | | 1,015 | | 1,776 | | | | | |
1.The target and maximum plan award amounts reported in these columns are derived from our 2023 Incentive Compensation Plan. The actual payout amounts for 2023 are set forth in the Non-Equity Incentive Plan Compensation column of our Summary Compensation Table. 2.The target and maximum plan performance-based restricted stock unit awards reported in these columns are derived from our 2023 Incentive Compensation Plan. The actual vested amounts for 2023 are set forth in the 2023 Equity Incentive Plan Compensation column of our Summary Compensation Table. 3.No options were awarded in 2023. 4.The aggregate grant date fair value is determined in accordance with Accounting Standards Codification Topic 718, Stock Compensation, and does not represent cash received by the Named Executive Officers in 2023. The grant date fair value represents potential earnings contingent on Tyler’s future performance. Stock option grants are designed to provide long-term (up to ten years) incentives and rewards linked directly to the price of our common stock. Stock options add value to the recipient only when shareholders benefit from stock price appreciation and, as such, further align management’s interest with those of our shareholders. | | | | | | | | | | 75 | | | | | | | | 56
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Outstanding Equity Awards at Year-End The following table shows outstanding equity awards for each of the Named Executive Officers at December 31, 2022:2023: | | John S. Marr, Jr. | | | 5/9/2018 | | | | | | | | | | | | | | | 7,200 | | | $2,321,352 | | | | | | | | | | | | | 3/1/2019 | | | | | | | | | | | | | | | | | | | | | 7,500 | | | $2,418,075 | | | | | | | 6/1/2017 | | | 583 | | | — | | | 171.44 | | | 6/1/2027 | | | | | | | | | | | | | | | | | | | 12/1/2017 | | | 25,000 | | | — | | | 181.79 | | | 12/1/2027 | | | | | | | | | | | | | | | | | | | 2/26/2018 | | | 89,600 | | | 22,400 | | | 205.66 | | | 2/26/2028 | | | | | | | | | | | | | | | | | | | 6/1/2018 | | | 11,250 | | | — | | | 231.68 | | | 6/1/2028 | | | | | | | | | | | | | | | | | | | 12/1/2018 | | | 11,250 | | | — | | | 192.76 | | | 12/1/2028 | | | | | | | | | | | | | | | | | | | 6/1/2019 | | | 6,875 | | | — | | | 213.35 | | | 6/1/2029 | | | | | | | | | | | | | | | | | | | 12/1/2019 | | | 6,875 | | | — | | | 290.17 | | | 12/1/2029 | | | | | | | | | | | | | | | | | | | 6/1/2020 | | | 2,500 | | | 1,250 | | | 375.85 | | | 6/1/2030 | | | | | | | | | | | | | | | | | | | 12/1/2020 | | | 2,500 | | | 1,250 | | | 432.12 | | | 12/1/2030 | | | | | | | | | | | | | | | | | | | 6/1/2021 | | | 1,250 | | | 2,500 | | | 402.00 | | | 6/1/2031 | | | | | | | | | | | | | | | | | | | 12/1/2021 | | | 1,250 | | | 2,500 | | | 501.87 | | | 12/1/2031 | | | | | | | | | | | | | | | | | | | 6/1/2022 | | | — | | | 3,750 | | | 345.87 | | | 6/1/2032 | | | | | | | | | | | | | | | | | | | 12/1/2022 | | | — | | | 3,750 | | | 352.23 | | | 12/1/2032 | | | | | | | | | | | | | | | | H. Lynn Moore, Jr. | | | 5/9/2018 | | | | | | | | | | | | | | | 7,200 | | | $2,321,352 | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 5,000 | | | $1,612,050 | | | | | | | 3/1/2021 | | | | | | | | | | | | | | | | | | | | | 5,000 | | | $1,612,050 | | | | | | | 3/1/2022 | | | | | | | | | | | | | | | | | | | | | 6,500 | | | $2,095,665 | | | | | | | 3/1/2022 | | | | | | | | | | | | | | | | | | | | | 1,420 | | | $457,822 | | | | | | | 6/1/2017 | | | 4,417 | | | — | | | 171.44 | | | 6/1/2027 | | | | | | | | | | | | | | | | | | | 12/1/2017 | | | 25,000 | | | — | | | 181.79 | | | 12/1/2027 | | | | | | | | | | | | | | | | | | | 2/26/2018 | | | 89,600 | | | 22,400 | | | 205.66 | | | 2/26/2028 | | | | | | | | | | | | | | | | | | | 6/1/2018 | | | 11,250 | | | — | | | 231.68 | | | 6/1/2028 | | | | | | | | | | | | | | | | | | | 12/1/2018 | | | 11,250 | | | — | | | 192.76 | | | 12/1/2028 | | | | | | | | | | | | | | | | | | | 6/1/2019 | | | 11,250 | | | — | | | 213.35 | | | 6/1/2029 | | | | | | | | | | | | | | | | | | | 12/1/2019 | | | 11,250 | | | — | | | 290.17 | | | 12/1/2029 | | | | | | | | | | | | | | | | | | | 6/1/2020 | | | 7,500 | | | 3,750 | | | 375.85 | | | 6/1/2030 | | | | | | | | | | | | | | | | | | | 12/1/2020 | | | 7,500 | | | 3,750 | | | 432.12 | | | 12/1/2030 | | | | | | | | | | | | | | | | | | | 6/1/2021 | | | 3,000 | | | 6,000 | | | 402.00 | | | 6/1/2031 | | | | | | | | | | | | | | | | | | | 12/1/2021 | | | 3,000 | | | 6,000 | | | 501.87 | | | 12/1/2031 | | | | | | | | | | | | | | | | | | | 6/1/2022 | | | — | | | 10,000 | | | 345.87 | | | 6/1/2032 | | | | | | | | | | | | | | | | | | | 12/1/2022 | | | — | | | 10,000 | | | 352.23 | | | 12/1/2032 | | | | | | | | | | | | | | | | Brian K. Miller | | | 5/9/2018 | | | | | | | | | | | | | | | 2,400 | | | $773,784 | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 3,333 | | | $1,074,593 | | | | | | | 3/1/2021 | | | | | | | | | | | | | | | | | | | | | 3,333 | | | $1,074,593 | | | | | | | 3/1/2022 | | | | | | | | | | | | | | | | | | | | | 3,750 | | | $1,209,038 | | | | | | | 3/1/2022 | | | | | | | | | | | | | | | | | | | | | 982 | | | $316,607 | | | | | | | 2/26/2018 | | | 8,000 | | | 8,000 | | | 205.66 | | | 2/26/2028 | | | | | | | | | | | | | | | | | | | 6/1/2018 | | | 4,000 | | | — | | | 231.68 | | | 6/1/2028 | | | | | | | | | | | | | | | | | | | 12/1/2018 | | | 7,500 | | | — | | | 192.76 | | | 12/1/2028 | | | | | | | | | | | | | | | | | | | 6/1/2019 | | | 7,500 | | | — | | | 213.35 | | | 6/1/2029 | | | | | | | | | | | | | | | | | | | 12/1/2019 | | | 7,500 | | | — | | | 290.17 | | | 12/1/2029 | | | | | | | | | | | | | | | | | | | 6/1/2020 | | | 5,000 | | | 2,500 | | | 375.85 | | | 6/1/2030 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(#)(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not vested (#) | Market Value of Shares or Units of Stock that have not vested(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not vested(3) ($) | | | | | | | | | | | | | | | John S. Marr, Jr. | 3/1/2023 | | | | | | | 2,810 | | 1,174,917 | | | | 12/1/2022 | 1,250 | | 2,500 | | 352 | | 12/1/2032 | | | | | | | 6/1/2022 | 1,250 | | 2,500 | | 346 | | 6/1/2032 | | | | | | | 12/1/2021 | 2,500 | | 1,250 | | 502 | | 12/1/2031 | | | | | | | 6/1/2021 | 2,500 | | 1,250 | | 402 | | 6/1/2031 | | | | | | | 12/1/2020 | 3,750 | | — | | 432 | | 12/1/2030 | | | | | | | 6/1/2020 | 3,750 | | — | | 376 | | 6/1/2030 | | | | | | | 12/1/2019 | 6,875 | | — | | 290 | | 12/1/2029 | | | | | | | 6/1/2019 | 6,875 | | — | | 213 | | 6/1/2029 | | | | | | | 12/1/2018 | 1,250 | | — | | 193 | | 12/1/2028 | | | | | | | 6/1/2018 | 11,250 | | — | | 232 | | 6/1/2028 | | | | | | | 2/26/2018 | 105,000 | | — | | 206 | | 2/26/2028 | | | | | | | 6/1/2017 | 583 | | — | | 171 | | 6/1/2027 | | | | | | | H. Lynn Moore, Jr. | 3/1/2023 | | | | | 3,124 | | 1,306,207 | | | | | | 3/1/2023 | | | | | | | 2,108 | | 881,397 | | | | 3/1/2023 | | | | | | | 10,153 | | 4,245,172 | | | | 3/1/2023 | | | | | | | 10,153 | | 4,245,172 | | | | 3/1/2022 | | | | | | | 6,500 | | 2,717,780 | | | | 3/1/2021 | | | | | | | 5,000 | | 2,090,600 | | | | 12/1/2022 | 3,333 | | 6,667 | | 352 | | 12/1/2032 | | | | | | | 6/1/2022 | 3,333 | | 6,667 | | 346 | | 6/1/2032 | | | | | | | 12/1/2021 | 6,000 | | 3,000 | | 502 | | 12/1/2031 | | | | | | | 6/1/2021 | 6,000 | | 3,000 | | 402 | | 6/1/2031 | | | | | | | 12/1/2020 | 11,250 | | — | | 432 | | 12/1/2030 | | | | | |
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TABLE OF CONTENTS
| | | | | 12/1/2020 | | | 5,000 | | | 2,500 | | | 432.12 | | | 12/1/2030 | | | | | | | | | | | | | | | | | | | 6/1/2021 | | | 2,000 | | | 4,000 | | | 402.00 | | | 6/1/2031 | | | | | | | | | | | | | | | | | | | 12/1/2021 | | | 2,000 | | | 4,000 | | | 501.87 | | | 12/1/2031 | | | | | | | | | | | | | | | | | | | 6/1/2022 | | | — | | | 5,000 | | | 345.87 | | | 6/1/2032 | | | | | | | | | | | | | | | | | | | 12/1/2022 | | | — | | | 5,000 | | | 352.23 | | | 12/1/2032 | | | | | | | | | | | | | | | | Jeffery D. Puckett | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 2,000 | | | $644,820 | | | | | | | 3/1/2021 | | | | | | | | | | | | | | | | | | | | | 2,350 | | | $757,664 | | | | | | | 3/1/2022 | | | | | | | | | | | | | | | | | | | | | 2,500 | | | $806,025 | | | | | | | 3/1/2022 | | | | | | | | | | | | | | | | | | | | | 603 | | | $194,413 | | | | | | | 12/15/2014 | | | 2,250 | | | — | | | 108.81 | | | 12/15/2024 | | | | | | | | | | | | | | | | | | | 6/1/2015 | | | 2,250 | | | — | | | 121.05 | | | 6/1/2025 | | | | | | | | | | | | | | | | | | | 12/1/2015 | | | 6,250 | | | — | | | 176.80 | | | 12/1/2025 | | | | | | | | | | | | | | | | | | | 6/1/2016 | | | 8,500 | | | — | | | 154.85 | | | 6/1/2026 | | | | | | | | | | | | | | | | | | | 12/1/2016 | | | 8,500 | | | — | | | 143.42 | | | 12/1/2026 | | | | | | | | | | | | | | | | | | | 6/1/2017 | | | 5,000 | | | — | | | 171.44 | | | 6/1/2027 | | | | | | | | | | | | | | | | | | | 12/1/2017 | | | 5,000 | | | — | | | 181.79 | | | 12/1/2027 | | | | | | | | | | | | | | | | | | | 6/1/2018 | | | 2,500 | | | — | | | 231.68 | | | 6/1/2028 | | | | | | | | | | | | | | | | | | | 12/1/2018 | | | 2,500 | | | — | | | 192.76 | | | 12/1/2028 | | | | | | | | | | | | | | | | | | | 6/1/2019 | | | 2,500 | | | — | | | 213.35 | | | 6/1/2029 | | | | | | | | | | | | | | | | | | | 12/1/2019 | | | 2,500 | | | — | | | 290.17 | | | 12/1/2029 | | | | | | | | | | | | | | | | | | | 6/1/2020 | | | 1,666 | | | 834 | | | 375.85 | | | 6/1/2030 | | | | | | | | | | | | | | | | | | | 12/1/2020 | | | 1,666 | | | 834 | | | 432.12 | | | 12/1/2030 | | | | | | | | | | | | | | | | | | | 6/1/2021 | | | 783 | | | 1,567 | | | 402.00 | | | 6/1/2031 | | | | | | | | | | | | | | | | | | | 12/1/2021 | | | 783 | | | 1,567 | | | 501.87 | | | 12/1/2031 | | | | | | | | | | | | | | | | | | | 6/1/2022 | | | — | | | 3,250 | | | 345.87 | | | 6/1/2032 | | | | | | | | | | | | | | | | | | | 12/1/2022 | | | — | | | 3,250 | | | 352.23 | | | 12/1/2032 | | | | | | | | | | | | | |
(1)
| Stock options expire on the tenth anniversary of the date of grant. All stock options vest ratably over a five-year period beginning on the first anniversary of the grant date. Beginning in 2016, stock options granted to persons who are at least fifty years of age and have a tenure with the Company of at least 15 years vest ratably over a three-year period beginning on the first anniversary of the grant date, and stock options granted to others vest over a five-year period beginning on the first anniversary of the grant date. Stock options granted on February 26, 2018, vest and become exercisable ratably on the first, second, third, fourth, and fifth anniversaries of the date of grant date. |
(2)
| Value based on $322.41, which was the closings market price of our common stock on December 31, 2022. The restricted stock units vest in equal installments on the first, second, third, fourth, and fifth anniversary of the date of the employment agreement. Vesting of restricted stock awards is subject to continued status as an eligible person (as defined in the 2018 Stock Incentive Plan). |
(3)
| Value based on $322.41, which was the closings market price of our common stock on December 31, 2022. The performance-based restricted stock units cliff vest at the end of a three-year performance period. The performance measure used to determine the number of restricted stock units vested at the end of the three-year performance period is average three-year revenue growth over that period adjusted to exclude material acquisitions completed during the performance period. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(#)(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not vested (#) | Market Value of Shares or Units of Stock that have not vested(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not vested(3) ($) | | | | | | | | | | | | | | | H. Lynn Moore, Jr. | 6/1/2020 | 11,250 | | — | | 376 | | 6/1/2030 | | | | | | | 12/1/2019 | 11,250 | | — | | 290 | | 12/1/2029 | | | | | | | 6/1/2019 | 11,250 | | — | | 213 | | 6/1/2029 | | | | | | | 12/1/2018 | 11,250 | | — | | 193 | | 12/1/2028 | | | | | | | 6/1/2018 | 11,250 | | — | | 232 | | 6/1/2028 | | | | | | | 2/26/2018 | 112,000 | | — | | 206 | | 2/26/2028 | | | | | | | 12/1/2017 | 25,000 | | — | | 182 | | 12/1/2027 | | | | | | | Brian K. Miller | 3/1/2023 | | | | | 1,390 | | 581,187 | | | | | | 3/1/2023 | | | | | | | 1,327 | | 554,845 | | | | 3/1/2023 | | | | | | | 4,771 | | 1,994,851 | | | | 3/1/2023 | | | | | | | 4,771 | | 1,994,851 | | | | 3/1/2022 | | | | | | | 3,750 | | 1,567,950 | | | | 3/1/2021 | | | | | | | 3,333 | | 1,393,594 | | | | 12/1/2022 | 1,666 | | 3,334 | | 352 | | 12/1/2032 | | | | | | | 6/1/2022 | 1,666 | | 3,334 | | 346 | | 6/1/2032 | | | | | | | 12/1/2021 | 4,000 | | 2,000 | | 502 | | 12/1/2031 | | | | | | | 6/1/2021 | 4,000 | | 2,000 | | 402 | | 6/1/2031 | | | | | | | 12/1/2020 | 7,500 | | — | | 432 | | 12/1/2030 | | | | | | | 6/1/2020 | 7,500 | | — | | 376 | | 6/1/2030 | | | | | | | 12/1/2019 | 7,500 | | — | | 290 | | 12/1/2029 | | | | | | | 6/1/2019 | 7,500 | | — | | 213 | | 6/1/2029 | | | | | | | 6/1/2018 | 2,000 | | — | | 232 | | 6/1/2028 | | | | | | | Jeffery D. Puckett | 3/1/2023 | | | | | 781 | | 326,552 | | | | | | 3/1/2023 | | | | | | | 1,015 | | 424,392 | | | | 3/1/2023 | | | | | | | 2,967 | | 1,240,562 | | | | 3/1/2023 | | | | | | | 2,967 | | 1,240,562 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(#)(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not vested (#) | Market Value of Shares or Units of Stock that have not vested(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not vested(3) ($) | | | | | | | | | | | | | | | Jeffery D. Puckett | 3/1/2022 | | | | | | | 2,500 | | 1,045,300 | | | | 3/1/2021 | | | | | | | 2,350 | | 982,582 | | | | 12/1/2022 | 1,083 | | 2,167 | | 352 | | 12/1/2032 | | | | | | | 6/1/2022 | 1,083 | | 2,167 | | 346 | | 6/1/2032 | | | | | | | 12/1/2021 | 1,566 | | 784 | | 502 | | 12/1/2031 | | | | | | | 6/1/2021 | 1,566 | | 784 | | 402 | | 6/1/2031 | | | | | | | 12/1/2020 | 2,500 | | — | | 432 | | 12/1/2030 | | | | | | | 6/1/2020 | 2,500 | | — | | 376 | | 6/1/2030 | | | | | | | 12/1/2019 | 2,500 | | — | | 290 | | 12/1/2029 | | | | | | | 6/1/2019 | 2,500 | | — | | 213 | | 6/1/2029 | | | | | | | 12/1/2018 | 2,500 | | — | | 193 | | 12/1/2028 | | | | | | | 6/1/2018 | 2,500 | | — | | 232 | | 6/1/2028 | | | | | | | 12/1/2017 | 5,000 | | — | | 182 | | 12/1/2027 | | | | | | | 6/1/2017 | 5,000 | | — | | 171 | | 6/1/2027 | | | | | | | 12/1/2016 | 8,500 | | — | | 143 | | 12/1/2026 | | | | | | | 6/1/2016 | 8,500 | | — | | 155 | | 6/1/2026 | | | | | | | 12/1/2015 | 6,250 | | — | | 177 | | 12/1/2025 | | | | | | | 6/1/2015 | 2,250 | | — | | 121 | | 6/1/2025 | | | | | | | 12/15/2014 | 2,250 | | — | | 109 | | 12/15/2024 | | | | | |
1.Stock options expire on the tenth anniversary of the date of grant. All stock options vest ratably over a five-year period beginning on the first anniversary of the grant date. Beginning in 2016, stock options granted to persons who are at least fifty years of age and have a tenure with the Company of at least 15 years vest ratably over a three-year period beginning on the first anniversary of the grant date, and stock options granted to others vest over a five-year period beginning on the first anniversary of the grant date. Stock options granted on February 26, 2018, vest and become exercisable ratably on the first, second, third, fourth, and fifth anniversaries of the date of grant date. 2.Value based on $418.12, which was the closing market price of our common stock on December 31, 2023. The restricted stock units vest in equal installments on the first, second, third, fourth, and fifth anniversary of the date of the employment agreement. Vesting of restricted stock awards is subject to continued status as an eligible person (as defined in the 2018 Stock Incentive Plan). 3.Value based on $418.12, which was the closing market price of our common stock on December 31, 2023. The performance-based restricted stock units cliff vest at the end of a three-year performance period. The performance measure used to determine the number of restricted stock units vested at the end of the three-year performance period is average three-year revenue growth over that period adjusted to exclude material acquisitions completed during the performance period.
Option Exercises and Stock Vested The following table sets forth information regarding stock option exercises and the value realized upon exercise, as well as all stock awards vested and the value realized upon vesting by our NEOs during the year ended December 31, 2022:2023: | | John S. Marr, Jr. | | | — | | | $— | | | 16,200 | | | $6,949,764 | | | | H. Lynn Moore, Jr. | | | 583 | | | $107,103 | | | 17,671 | | | $7,579,734 | | | | Brian K. Miller | | | — | | | $— | | | 9,520 | | | $4,081,019 | | | | Jeffrey D. Puckett | | | 6,750 | | | $2,111,482 | | | 2,430 | | | $1,040,672 | |
| | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | | | | | | | | | John S. Marr, Jr. | 42,000 | | 9,281,878 | | | 7,200 | | 2,354,760 | | | | H. Lynn Moore, Jr. | 4,417 | | 685,514 | | | 15,254 | | 4,942,108 | | | | Brian K. Miller | 25,500 | | 5,309,662 | | | 7,820 | | 2,526,095 | | | | Jeffrey D. Puckett | — | | — | | | 3,273 | | 1,051,451 | | |
Potential Payments Under Employment Agreements Consistent with the terms of their respective employment agreements, as discussed above, Mr. Marr, Mr. Moore, Mr. Miller, and Mr. Puckett would have been eligible to receive the payments set forth in the table below had their employment been terminated on December 31, 2022,2023, including if a change in control had occurred during 2022.2023. | | John S. Marr, Jr. | | | $600,000 | | | $17,863 | | | $1,591,309 | | | $255,820 | | | $600,000 | | | $17,863 | | | $1,591,309 | | | $255,820 | | | | H. Lynn Moore, Jr. | | | $1,200,000 | | | $17,863 | | | $3,821,814 | | | $3,249,996 | | | $1,200,000 | | | $17,863 | | | $3,821,814 | | | $3,249,996 | | | | Brian K. Miller | | | $830,000 | | | $13,673 | | | $2,145,851 | | | $1,903,522 | | | $830,000 | | | $13,673 | | | $2,145,851 | | | $1,903,522 | | | | Jeffrey D. Puckett | | | $555,000 | | | $8,193 | | | $1,024,007 | | | $1,232,088 | | | $555,000 | | | $8,193 | | | $1,024,007 | | | $1,232,088 | |
(1)
| Payments would only be made upon the occurrence of a change in control if, additionally, the NEO’s employment was terminated for “good reason” or without cause within 12 months following the occurrence of a change in control transaction. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Termination Without Cause | | Upon a Change in Control(1) | | | Name | Lump Sum Severance and Non -Compete Payment ($) | Continuation of Health Care Benefit ($) | Accelerated Vesting of Stock Options ($) | Accelerated Vesting of Restricted Stock Units ($) | | Lump Sum Severance and Non- Compete Payment ($) | Continuation of Health Care Benefit ($) | Accelerated Vesting of Stock Options ($) | Accelerated Vesting of Restricted Stock Units ($) | | | | | | | | | | | | | | John S. Marr, Jr. | 600,000 | | 19,803 | | 636,608 | | 649,169 | | | 600,000 | | 19,803 | | 636,608 | | 649,169 | | | | H. Lynn Moore, Jr. | 1,350,000 | | 19,803 | | 1,681,494 | | 6,613,175 | | | 1,350,000 | | 19,803 | | 1,681,494 | | 6,613,175 | | | | Brian K. Miller | 850,000 | | 15,132 | | 909,103 | | 3,229,909 | | | 850,000 | | 15,132 | | 909,103 | | 3,229,909 | | | | Jeffrey D. Puckett | 650,000 | | 9,075 | | 501,437 | | 2,024,302 | | | 650,000 | | 9,075 | | 501,437 | | 2,024,302 | | |
1.Payments would only be made upon the occurrence of a change in control if, additionally, the NEO’s employment was terminated for “good reason” or without cause within 12 months following the occurrence of a change in control transaction. | | | | | | | | | | 79 | | | | | | | | 20232024 Proxy Statement 59
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OTHER HELPFUL INFORMATIONOther Helpful Information Reminder: Shareholders are being asked to vote on the following matters at the 20232024 Annual Meeting. | | | | | | | | | | | | | | | | | | | Proposal | Proposal
| | | Description | | | Vote
Requirement for
Approval | | | Board
Recommendation | | | Effect of
Abstentions | | | Effect of Broker
Non-Votes | | | | | | | |
| Proposal One | | | Election of Directors | | | Majority of votes cast | FOR | | FOR
| | | No effect | | | No effect | | | | | | | |
| Proposal Two | | | Advisory Approval of Our Executive Compensation | | | Majority of shares present in person or represented by proxy | FOR | | FOR
| | | Counted as “AGAINST” | | | No effect | | | | | | | |
| Proposal Three | | | Ratification of Our Independent Auditors for Fiscal Year 2023 2024 | | | Majority of shares present in person or represented by proxy | FOR | | FOR
| | | Counted as “AGAINST” | | | Discretionary vote | | | | | | | |
| Proposal Four | Approval of the Amended and Restated Tyler Technologies, Inc. 2018 Stock Incentive Plan | | Advisory Resolution on the Frequency of Shareholder Voting on Our Executive Compensation
| | | Majority of shares present in person or represented by proxy | FOR | | 1 YEAR
| | | Counted as “AGAINST” | | | No effect | | | | | | | | Proposal Five | Shareholder Proposal Regarding a Simple Majority Vote | 66.67% of shares present in person or represented by proxy | AGAINST | Counted as “AGAINST” | No effect |
Voting your shares. Your shares will be voted at the annual meeting as you direct using one of the methods provided. No proxy can vote for more than eight nominees for director. If you return a proxy but fail to indicate how you wish your shares to be voted, then your shares will be voted in favor of each of the nominees for director. Voting by internet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Voting by internet:Go to www.proxyvote.com to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. The availability of internet voting for beneficial owners will depend on the voting processes of your broker, bank or nominee. We recommend that you follow the voting instructions in the materials you receive. | | | | Voting by phone: Call 1-800-690-6903 using a touch-tone phone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. The availability of voting by phone for beneficial owners will depend on the voting processes of your broker, bank or nominee. We recommend that you follow the voting instructions in the materials you receive. | | | | Voting by mail: Complete, sign and date the proxy card and return it in the prepaid envelope. If you are a shareholder of record and you return your signed proxy card without indicating your voting preferences, the persons named in the proxy card will vote FOR Proposal One, FOR Proposal Two, FOR Proposal Three, FOR Proposal Four, and AGAINST Proposal Five. |
Voting by phone: Call 1-800-690-6903 using a touch-tone phone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. The availability of voting by phone for beneficial owners will depend on the voting processes of your broker, bank or nominee. We recommend that you follow the voting instructions in the materials you receive.Voting by mail: Complete, sign and date the proxy card and return it in the prepaid envelope. If you are a shareholder of record and you return your signed proxy card without indicating your voting preferences, the persons named in the proxy card will vote FOR Proposal One, FOR Proposal Two, FOR Proposal Three, and 1 YEAR for Proposal Four.
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You may also vote in person at the Annual Meeting by following the instructions provided below. Meeting Date and Time: Thursday, May 11, 2023, at 9:00 a.m., Central Time
Place:www.virtualshareholdermeeting.com/TYL2023
Record Date: March 17, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Meeting Date and Time: Thursday, May 9, 2024, at 9:00 a.m., Central Time | | | | Place: www.virtualshareholdermeeting.com/TYL2024 | | | | Record Date: March 15, 2024 |
On March 17, 2023,15, 2024, we had 41,895,33342,438,685 shares of common stock issued and outstanding. Each shareholder will be entitled to one vote, in person or by proxy, for each share of common stock held in their name. Meeting quorum. quorum. A majority of our shares of common stock must be present, either in person or by proxy, to constitute a quorum for action at the annual meeting. How to access the meeting:Visit www.virtualshareholdermeeting.com/TYL2023TYL2024 and enter the 16-digit control number found on the proxy card, voting instruction form, or notice of internet availability of proxy materials previously received. We encourage shareholders to log in to the website and access the webcast before the meeting’s start time. | | | | | | | | | | 60
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Voting and questions during the meetingmeeting:: Shareholders who enter their 16-digit control number may vote and ask questions during the Annual Meeting by following the instructions available on the meeting website. Those without a control number may attend as guests of the meeting, but they will not have the option to vote their shares or participate during the meeting. Abstentions and broker non-votes. Abstentions and broker non-votes are counted for purposes of determining a quorum and otherwise as shares present in person or represented by proxy. Abstentions and broker non-votes are not counted as votes cast for purposes of determining whether a proposal requiring a majority of votes cast has been approved. Withholding authority to vote with respect any director nominee for Proposal One will also not be counted as a vote cast for that director nominee. Shares held in “street name.”If your shares are held in “street name” (the name of a broker, bank, or other nominee), you have the right to direct your broker, bank, or nominee how to vote. If you do not provide voting instructions, under New York Stock Exchange rules, your broker, bank, or nominee may only vote your shares on “discretionary” items. Proposals One (election of directors), Two (advisory vote on executive compensation,compensation), Four (amended and Four (advisory vote on frequency of a shareholder vote on executive compensation)restated 2018 Stock Incentive Plan), and Five (shareholder proposal regarding simple majority vote) are “non-discretionary” items. Your broker, bank, or nominee may not vote your shares on these items in the absence of voting instructions, which will result in “broker non-votes” with respect to your shares. Proposal Three (ratification of independent auditors) is considered a discretionary item and may be voted in the absence of instructions. Revoking your proxy.After you sign and return your proxy, you may revoke it prior to the meeting either by (1) filing a written notice of revocation at our corporate headquarters, (2) attending the annual meeting and voting your shares in person, or (3) delivering to us another duly executed proxy that is dated after the initial proxy. Proxy expenses.We will bear the expense of preparing, printing, and mailing the proxy solicitation material and the proxy.proxy, as applicable. Proxy solicitation. In addition to use of the mail, we may solicit proxies by personal interview or telephone by our directors, officers, and employees. We may also engage the services of a proxy solicitation firm to assist us in the solicitation. Distribution of proxies for the Annual Meeting. We estimate that the fee ifof any such firm will not exceed $25,000, plus reimbursement of reasonable out-of-pocket expenses. Arrangements may also be made with brokerage houses and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to record shareholders, and we may reimburse them for their reasonable out-of-pocket expenses. Multiple shareholders sharing the same address.
If you and other residents at your mailing address own shares of common stock in street name, your broker or bank may have sent you a notice that your household will receive only one Annual Report and proxy statement. This practice is known as “householding,” and is designed to reduce our printing and postage costs. However,Shareholder ProposalsProxy Statement Proposals Under SEC rules, if any Tyler shareholder residing at such an address wishes to receive a separate Annual Reportsubmit proposals for the proxy statement for next year’s annual meeting of shareholders, such proposal must be received by Tyler on or Proxy Statement, they may telephonebefore November 29, 2024. Such proposal must be made in accordance with Rule 14a-8 promulgated by the Investor Relations DepartmentSEC and the interpretations thereof. Any such proposal should be sent to the Company at 972-713-3770 or write to it at Tyler Technologies, Inc., 5101 Tennyson Parkway, Plano, Texas 75024, Attention: Corporate Secretary. Other Proposals and Nominations Our bylaws govern the submission of nominations for director or other business proposals that a separate copy willshareholder wishes to have considered at a meeting of shareholders, but which are not included in Tyler’s proxy statement for that meeting. Under our bylaws, nominations for director or other business proposals to be promptly delivered.addressed at our next annual meeting may be made by a shareholder entitled to vote who has delivered a notice to the Corporate Secretary not less than 90 days (February 7, 2025) nor more than 120 days (January 9, 2025) prior to the anniversary date of the immediately preceding annual meeting. The notice must contain the information required by the bylaws. To comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than Tyler’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act and our bylaws not less than 120 days (January 9, 2025) nor more than 150 days (December 10, 2024) prior to the anniversary date of the immediately preceding annual meeting. By Order of the Board of Directors, Abigail Diaz Chief Legal Officer Corporate Secretary Plano, Texas March 29, 2024 | | | | | | | | | | 82 | | | | | | | | 20232024 Proxy Statement 61
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Amended and restated Tyler Technologies, Inc. 2018 STOCK Incentive Plan 1.Restatement of the Prior Plan. The purpose of the Amended and Restated Tyler Technologies, Inc. 2018 Stock Incentive Plan is to amend and restate the Tyler Technologies, Inc. 2018 Stock Incentive Plan which was originally effective as of May 9, 2018 (the “Prior Plan”). This Amended and Restated Plan will provide a means through which the Company and its Affiliates may attract and retain key personnel and provide a means whereby directors, officers, employees, consultants and advisors (and prospective directors, officers, employees, consultants and advisors) of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Company’s stockholders. 2.Definitions. The following definitions shall be applicable throughout the Plan. (a)“Absolute Share Limit” has the meaning given such term in Section 5(b) of the Plan. (b)“Act” as the meaning given such term in Section 1 of the Plan. (c)“Affiliate” means any Person that directly or indirectly controls, is controlled by or is under common control with the Company. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract or otherwise. (d)“Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, Restricted Stock Unit, and Other Stock-Based Award granted under the Plan. (e)“Board” means the Board of Directors of the Company. (f)“Cause” means, as to any Participant, unless the applicable Award agreement states otherwise, (i) “Cause”, as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein), the Participant’s (A) willful neglect in the performance of the Participant’s duties for the Service Recipient or willful or repeated failure or refusal to perform such duties; (B) engagement in conduct in connection with the Participant’s employment or service with the Service Recipient, which results, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any Affiliate; (C) conviction of, or plea of guilty or no contest to, (I) any felony; or (II) any other crime that results, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any Affiliate; (D) material violation of the written policies of the Service Recipient, including but not limited to those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient; (E) fraud or misappropriation, embezzlement or misuse of funds or property belonging to the Company or
any Affiliate; or (F) act of personal dishonesty that involves personal profit in connection with the Participant’s employment or service to the Service Recipient. (g)“Change in Control” means: (i)the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (1) any acquisition by the Company or any Affiliate, (2) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate, or (3) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant); (ii)during any period of 24 months, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or (iii)the sale, transfer or other disposition of all or substantially all of the assets of the Company to any Person that is not an Affiliate of the Company. (h)“Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance. (i)“Committee” means the Compensation Committee of the Board or subcommittee thereof. (j)“Common Stock” means the common stock, par value $0.01 per share, of the Company (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).
(k)“Company” means Tyler Technologies, Inc., a Delaware corporation, and any successor thereto. (l)“Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization. (m)“Designated Foreign Subsidiaries” means all Affiliates organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time. (n)“Detrimental Activity” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of the Company or its Affiliates; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Service Recipient for Cause; (iii) the breach of any noncompetition, nonsolicitation or other agreement containing restrictive covenants, with the Company or its Affiliates; or (iv) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. (o)“Disability” means, as to any Participant, unless the applicable Award agreement states otherwise, (i) “Disability”, as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Disability” contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Company or an Affiliate, or, in the absence of such a plan, the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or served when such disability commenced. Any proposaldetermination of whether Disability exists shall be made by the Company in its sole and absolute discretion. (p)“Effective Date” means May 9, 2024, the date of approval of the Plan by the Company’s stockholders. (q)“Eligible Director” means a person who is (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act; and (ii) an “independent director” under the rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation. (r)“Eligible Person” means any (i) individual employed by the Company or an Affiliate; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of the Company or an Affiliate; (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act; or (iv) any prospective employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy from the Company or one of its Affiliates (and would satisfy the provisions of clauses (i) through (iii) above once he or she begins employment with or providing services to the Company or one of its Affiliates), who, in the case of each of clauses (i) through (iv) above has entered into an Award agreement or who has received written notification from the Committee or its designee that they have been selected to
participate in the Plan. Solely for purposes of this Section 2(q), “Affiliate” shall be limited to (1) a Subsidiary; (2) any parent corporation of the Company within the meaning of Section 424(e) of the Code (“Parent”); (3) any corporation, trade or business of which 50% or more of the combined voting power of such entity’s outstanding securities is directly or indirectly controlled by the Company or any Subsidiary or Parent; or (4) any corporation, trade or business which, directly or indirectly, controls 50% or more of the combined voting power of the outstanding securities of the Company. (s)“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. (t)“Exercise Price” has the meaning given such term in Section 7(c) of the Plan. (u)“Fair Market Value” means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported; (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee (in a manner consistent with Section 409A of the Code) in good faith to be the fair market value of the Common Stock. (v)“FINRA Dealer” means a registered broker-dealer that is a member of the Financial Industry Regulatory Authority. (w)“Immediate Family Members” has the meaning given such term in Section 12(b) of the Plan. (x)“Incentive Stock Option” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan. (y)“Indemnifiable Person” has the meaning given such term in Section 4(e) of the Plan. (z)“Nonqualified Stock Option” means an Option which is not designated by the Committee as an Incentive Stock Option. (aa) “Non-Employee Director” means a member of the Board who is not an employee of the Company or any Affiliate. (bb) “NYSE” means the New York Stock Exchange. (cc) “Option” means an Award granted under Section 7 of the Plan. (dd) “Option Period” has the meaning given such term in Section 7(d) of the Plan.
(ee) “Other Stock-Based Award” means an Award granted under Section 9 of the Plan. (ff) “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan. (gg) “Permitted Transferee” has the meaning set forth in Section 12(b) of the Plan. (hh) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act). (ii) “Plan” means this Amended and Restated Tyler Technologies, Inc. 2018 Stock Incentive Plan, as it may be amended from time to time. (jj) “Prior Plan” as the meaning given such term in Section 1 of the Plan. (kk) “Qualifying Shares” means shares of Common Stock which either (i) have been owned by the Participant for more than six months and have been “paid for” within the meaning of Rule 144 promulgated under the Securities Act, or (ii) were obtained by the Participant in the public market. (ll) “Restricted Period” means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned. (mm) “Restricted Stock” means Common Stock, subject to certain specified restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 8 of the Plan. (nn) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 8 of the Plan. (oo) “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. (pp) “Service Recipient” means, with respect to a Participant holding a given Award, either the Company or an Affiliate of the Company by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable. (qq) “Subsidiary” means, with respect to any specified Person: (i)any corporation, association or other business entity of which more than 50% of the total voting power of shares of such entity’s voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (ii)any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). (rr) “Substitute Award” has the meaning given such term in Section 5(g) of the Plan. (ss) “Sub-Plans” means any sub-plan to this Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder. (tt) “Termination” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient. 3.Effective Date; Duration. The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards. 4.Administration. (a)The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) it is intended that each member of the Committee shall, at the time he or she takes any action with respect to an Award under the Plan, be an Eligible Director. However, the fact that a shareholder desiresCommittee member shall fail to presentqualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan. (b)Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) interpret, administer,
reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. (c)Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any Person or Persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of the Company or any Subsidiary the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to persons who are Non-Employee Directors or otherwise are subject to Section 16 of the Exchange Act. (d)Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any of its Affiliates, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company. (e)No member of the Board, the Committee or any employee or agent of the Company or any Subsidiary (each such person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made under the Plan or any Award agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined as provided below that the Indemnifiable Person is not entitled to be indemnified); provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding
upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Certificate of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless. (f)Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan. 5.Grant of Awards; Shares Subject to the Plan; Minimum Vesting Requirements. (a)The Committee may, from time to time, grant Awards to one or more Eligible Persons. (b)Awards granted under the Plan shall be subject to the limitations in this Section 5(b). Subject to Section 10 of the Plan, no more than 14,100,000 shares of Common Stock shall be available for Awards under the Plan (the “Absolute Share Limit”), which includes (i) 4,600,000 shares of Common Stock approved in connection with this amendment and restatement and (ii) 9,500,000 shares of Common Stock approved under the 2018 Stock Incentive Plan. No more than 14,100,000 shares of Common Stock may be issued in the aggregate pursuant to the exercise of Incentive Stock Options (the “ISO Limit”). Each share of Common Stock that is issued as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards shall reduce the Absolute Share Limit by two and one-half (2.5) shares. The payment of stock dividends and dividend equivalents settled in shares of Common Stock in conjunction with outstanding Awards shall not be counted against the total number of shares available for issuance or delivery under the Plan. (c)Other than with respect to Substitute Awards, any shares of Common Stock covered by an Award that are forfeited or canceled, or any shares covered by an Option that expires shall be deemed not to have been issued and shall again be available for grant. (d)All Awards under the Plan will vest over a minimum period of one (1) year after the date of grant. Notwithstanding the foregoing, this minimum vesting requirement may be accelerated as set forth in Section 7(d) and/or Section 8(d). (e)Shares of Common Stock issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing. (f)Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”).
Substitute Awards shall not be counted against the Absolute Share Limit; provided, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan. 6.Eligibility. Participation in the Plan shall be limited to Eligible Persons. 7.Options. (a)General. Each Option granted under the Plan shall be evidenced by an Award agreement, in written or electronic form, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan. (b)Limitations on Incentive Stock Options. The aggregate Fair Market Value (determined as of the date of grant of an Option) of Common Stock which any Employee is first eligible to purchase during any calendar year by exercise of Incentive Stock Options granted under the Plan and by exercise of incentive stock options (within the meaning of Section 422 of the Code) granted under any other incentive stock option plan of the Company or an Affiliate shall not exceed $100,000. If the Fair Market Value of stock with respect to which all incentive stock options described in the preceding sentence held by any one Participant are exercisable for the first time by such Participant during any calendar year exceeds $100,000, the Options (that are intended to be Incentive Stock Options on the date of grant thereof) for the first $100,000 worth of shares of Common Stock to become exercisable in such year shall be deemed to constitute incentive stock options within the meaning of Section 422 of the Code and the Options (that are intended to be
Incentive Stock Options on the date of grant thereof) for the shares of Common Stock in the amount in excess of $100,000 that become exercisable in that calendar year shall be treated as Nonqualified Stock Options. If the Code or the Treasury regulations promulgated thereunder are amended after the effective date of the Plan to provide for a different limit than the one described in this Section 7(b), such different limit shall be incorporated herein and shall apply to any Options granted after the effective date of such amendment. (c)Exercise Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“Exercise Price”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant. (d)Vesting and Expiration; Termination. (i)Options shall vest and become exercisable in such manner and on such date or dates as determined by the Committee; provided, however, that notwithstanding any such vesting dates, the Committee may in its sole discretion accelerate the vesting of any Options at any time and for any reason. Options shall expire upon a date determined by the Company, not to exceed ten years (the “Option Period”); provided, that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the Option Period shall be automatically extended until the 30th day following the expiration of such prohibition. Notwithstanding the foregoing, in no event shall the Option Period exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate. (ii)Unless otherwise provided by the Committee, whether in an Award agreement or otherwise, in the event of (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall become fully vested and all Options held by such Participant shall remain exercisable for one year thereafter (but in no event beyond the expiration of the Option Period); and (C) a Participant’s Termination for any other reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for 90 days thereafter (but in no event beyond the expiration of the Option Period). Notwithstanding the foregoing, the Committee may in its sole discretion extend the post-Termination exercise period for any vested Option, but in no event beyond the expiration of the Option Period. (e)Method of Exercise and Form of Payment. No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic
notice of exercise (or telephonic instructions to the extent provided by the Committee) to the Company (or to a Person designated to act on its behalf) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check, cash equivalent and/or by surrendering for cancellation Qualifying Shares valued at the Fair Market Value at the time the Option is exercised, (provided that such surrender does not result in an accounting charge for the Company), including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of Qualifying Shares in lieu of actual surrender of such shares to the Company; provided, that such shares of Common Stock are not subject to any pledge or other security interest; or (ii) by such other method as the Committee may permit in its sole discretion, including without limitation: (A) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; (B) if there is a public market for the shares of Common Stock at such time, through a “margin” commitment from the Participant and an FINRA Dealer whereby the Participant elects to exercise the Option and to pledge the shares of Common Stock so purchased to the FINRA Dealer in a margin account as security for a loan from the FINRA Dealer in the amount of the exercise price, and whereby the FINRA Dealer commits upon receipt of such shares of Common Stock to forward the exercise price directly to the Company; or (C) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price and all applicable withholding (at not greater than the maximum statutory withholding rate) and any other applicable taxes. Any fractional shares of Common Stock shall be settled in cash. (f)Notification upon Disqualifying Disposition of an Incentive Stock Option Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (i) two years after the Date of Grant of the Incentive Stock Option or (ii) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock. (g)Compliance With Laws, etc. Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.
8.Restricted Stock and Restricted Stock Units. (a)General. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award agreement. Each Restricted Stock and Restricted Stock Unit grant shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. (b)Formula Grants to Directors. Each Non-Employee Director shall receive an initial grant of Restricted Stock Units and thereafter an annual grant of Restricted Stock Units. The initial grant upon a Non-Employee Director’s initial election or appointment to the Board shall have a grant date value not to exceed $600,000. If the initial election or appointment to the Board occurs on a date other than the annual meeting mustof stockholders, the director may receive, in whole or in part, a prorated initial grant based on the partial year of Board service, any such proration to be determined by the Compensation Committee in its sole discretion. Each annual grant, upon re-election to the Board, shall be awarded on the date of each annual meeting of stockholders and shall have a grant date value not to exceed $300,000. Grants to all Non-Employee Directors vest on the first anniversary of the grant date. Notwithstanding the foregoing, the Committee in its discretion may determine not to make an initial or annual grant under the Plan to a Non-Employee Director. (c)Stock Certificates and Book Entry; Escrow or Similar Arrangement Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable; and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 12(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 8 and the applicable Award agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock; provided that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on satisfaction of performance conditions (other than or in addition to the passage of time), any dividends payable on such shares of Restricted Stock shall be held by the Company and issued (without interest) to the Participant within 15 days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.
(d)Vesting; Termination. (i)The Restricted Period with respect to Restricted Stock and Restricted Stock Units shall lapse in such manner and on such date or dates determined by the Committee; provided, however, that notwithstanding any such vesting dates, the Committee may in its sole discretion accelerate the vesting of any Restricted Stock or Restricted Stock Unit at any time and for any reason. (ii)Unless otherwise provided by the Committee, whether in an Award agreement or otherwise, in the event of (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding unvested Restricted Stock and unvested Restricted Stock Units granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination by reason of death or Disability, the Restricted Period with respect to all unvested shares of Restricted Stock and unvested Restricted Stock Units shall expire and such Awards shall fully vest; and (C) a Participant’s Termination for any other reason prior to the time that such Participant’s Restricted Stock or Restricted Stock Units, as applicable, have vested, (i) all vesting with respect to such Participant’s Restricted Stock Units shall cease; and (ii) unvested shares of Restricted Stock and unvested Restricted Stock Units, as applicable, shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination. (e)Issuance of Restricted Stock and Settlement of Restricted Stock Units. (i)Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award agreement. If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends. (ii)Unless otherwise provided by the Committee in an Award agreement or otherwise, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant, or his or her beneficiary, without charge, one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its sole discretion, elect to (i) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units; or (ii) defer the issuance of shares of Common Stock (or cash or part shares of Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award agreement, the holder of
outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled following the release of restrictions on such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments. (f)Legends on Restricted Stock. Each certificate, if any, representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock: TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE AMENDED AND RESTATED TYLER TECHNOLOGIES, INC. 2018 STOCK INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, BETWEEN TYLER TECHNOLOGIES, INC. AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF TYLER TECHNOLOGIES, INC. 9.Other Stock-Based Awards. The Committee may issue unrestricted Common Stock, rights to receive grants of Awards at a future date, or other Awards denominated in Common Stock (including, without limitation, performance shares or performance units), under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award agreement. Each Other Stock-Based Award so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. 10.Changes in Capital Structure and Similar Events. In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the shares of Common Stock; or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate, then the Committee shall make any such adjustments in such manner as it may deem equitable, including without limitation, any or all of the following:
(i)adjusting any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder; (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of the Plan); and (C) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate; (2) the Exercise Price with respect to any Award; or (3) any applicable performance measures; (ii)providing for a substitution or assumption of Awards (or awards of an acquiring company), accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time (which shall not be required to be more than ten days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and (iii)cancelling any one or more outstanding Awards and causing to be paid to the holders holding vested Awards (including any Awards that would vest as a result of the occurrence of such event but for such cancellation) the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by us at our corporate headquarters no earlierother stockholders of the Company in such event), including without limitation, in the case of an outstanding Option, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option over the aggregate Exercise Price of such Option (it being understood that, in such event, any Option having a per share Exercise Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor); provided, however, that without the approval of the stockholders of the Company, outstanding Options may not be cancelled in exchange for cash, Options or other stock awards with an exercise price that is less than January 12, 2024, and no later than February 12, 2024.the exercise price of the original Options; | | | | By Order of the Board of Directors,
| | | | | | | | | | | | ABIGAIL DIAZ
Chief Legal Officer
Corporate Secretary
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Plano, Texas
April 6, 2023
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| | | | | | 20232024 Proxy Statement
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provided, however, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 10 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 10 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Any such adjustment shall be conclusive and binding for all purposes. Payments to holders pursuant to clause (iii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price). In addition, prior to any payment or adjustment contemplated under this Section 10, the Committee may require a Participant to (A) represent and warrant as to the unencumbered title to his Awards; (B) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Stock; and (C) deliver customary transfer documentation as reasonably determined by the Committee. 11.Amendments and Termination. (a)Amendment and Termination of the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in generally accepted accounting principles (GAAP) to new accounting standards; (ii) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Section 5 or Section 10 of the Plan); or (iii) it would materially modify the requirements for participation in the Plan; provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 11(b) of the Plan without stockholder approval.
(b)Amendment of Award Agreements. The Committee may, to the extent consistent with the terms of any applicable Award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award agreement, prospectively or retroactively (including after a Participant’s Termination); provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant; provided, further, that without stockholder approval, except as otherwise permitted under Section 10 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option; (ii) the Committee may not cancel any outstanding Option and replace it with a new Option (with a lower Exercise Price) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option; and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted. 12.General. (a)Award Agreements. Each Award under the Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto. For purposes of the Plan, an Award agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award agreement to be signed by the Participant or a duly authorized representative of the Company. (b)Nontransferability. (i)Each Award shall be exercisable only by a Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant (including, without limitation, except as may be prohibited by applicable law, pursuant to a domestic relations order) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. (ii)Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated
as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan. (iii)The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of the Termination of the Participant under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award agreement. (c)Dividends and Dividend Equivalents. The Committee in its sole discretion may provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided, that no dividends, dividend equivalents or other similar payments shall be payable in respect of outstanding (i) Options; or (ii) unearned Awards subject to performance conditions (other than or in addition to the passage of time) (although dividends, dividend equivalents or other similar payments may be accumulated in respect of unearned Awards and paid within 15 days after such Awards are earned and become payable or distributable). (d)Tax Withholding. (i)A Participant shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property issuable or deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, shares of Common Stock, other securities or other property) of any required withholding or any other applicable taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding or any other applicable taxes.
(ii)Without limiting the generality of clause (i) above, the Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the issuance of shares of Common Stock (which are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability, provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the maximum statutory withholding liability. (e)No Claim to Awards; No Rights to Continued Employment; Waiver. No employee of the Company or any Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or any Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant. (f)International Participants. With respect to Participants who reside or work outside of the United States of America, the Committee may, in its sole discretion, amend the terms of the Plan or Sub-Plans or outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or its Affiliates. (g)Designation and Change of Beneficiary. Each Participant may file with the Committee a written designation of one or more persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate.
(h)Termination. Except as otherwise provided in an Award agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant’s undergoes a Termination of employment, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be an Affiliate of the Company (by reason of sale, divestiture, spin-off, or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction. (i)No Rights as a Stockholder. Except as otherwise specifically provided in the Plan or any Award agreement, no person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such person. (j)Government and Other Regulations. (i)The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate issued under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award agreement, the federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 8 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of the Company or any Affiliate issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to
add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject. (ii)The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable), over (B) the aggregate Exercise Price (in the case of an Option) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof. (k)No Section 83(b) Elections Without Consent of Company. No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision. (l)Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. (m)Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.
(n)No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law. (o)Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself. (p)Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan or as required by applicable law. (q)Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Texas applicable to contracts made and performed wholly within the State of Texas, without giving effect to the conflict of laws provisions thereof. (r)Severability. If any provision of the Plan or any Award or Award agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect. (s)Obligations Binding on Successors. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
(t)Section 409A of the Code. i.Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments. ii.Notwithstanding anything in the Plan to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code and which would otherwise be payable upon the Participant’s “separation from service” (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six months after the date of such Participant’s “separation from service” or, if earlier, the Participant’s date of death. Following any applicable six month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day. iii.Unless otherwise provided by the Committee in an Award agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder.
(u)Clawback/Forfeiture. Notwithstanding anything to the contrary contained herein, an Award agreement may provide that the Committee may in its sole discretion cancel such Award if the Participant has engaged in or engages in any Detrimental Activity. The Committee may also provide in an Award agreement that if the Participant otherwise has engaged in or engages in any Detrimental Activity, the Participant will forfeit any gain realized on the vesting or exercise of such Award, and must repay the gain to the Company. The Committee may also provide in an Award agreement that if the Participant receives any amount in excess of what the Participant should have received under the terms of the Award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law. (v)Expenses; Gender; Titles and Headings. The expenses of administering the Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.
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