DEF 14A 1 nc10009785x1_def14a.htm DEF 14A

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

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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☐			Soliciting Material under § 240.14a-12

TYLER TECHNOLOGIES INC
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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April 8, 2020

Dear Shareholder:

You are cordially invited to attend the annual meeting of shareholders of Tyler Technologies, Inc. to be held on Tuesday, May 12, 2020, at the Renaissance Dallas at Plano Legacy West Hotel, 6007 Legacy Drive, Plano, Texas 75024, commencing at 9:30 a.m., local time. Details of the business to be conducted are given in the attached Notice of Annual Meeting and Proxy Statement.

Whether or not you attend the annual meeting, it is important that your shares be represented and voted. Therefore, I urge you to sign, date, and return the enclosed proxy or vote through the Internet at your earliest convenience. If you decide to attend, you will be able to vote in person, even if you have previously submitted your proxy.

On behalf of the Board of Directors, I would like to express our appreciation for your continued interest in Tyler Technologies.

				Yours very truly,


				JOHN S. MARR, JR.
				Executive Chairman of the Board

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TYLER TECHNOLOGIES, INC.
5101 Tennyson Parkway
Plano, Texas 75024

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 2020

To the Shareholders of

TYLER TECHNOLOGIES, INC.:

The annual meeting of shareholders will be held at the Renaissance Dallas at Plano Legacy West Hotel, 6007 Legacy Drive, Plano, Texas 75024, on Tuesday, May 12, 2020, at 9:30 a.m., local time. At the meeting, you will be asked to:

(1)	elect nine directors to serve until the next annual meeting or until their respective successors are duly elected and qualified;

(2)	ratify the selection of our independent auditors for fiscal year 2020; and

(3)	approve an advisory resolution on executive compensation.

Only shareholders of record on March 20, 2020 may vote at the annual meeting. A list of those shareholders will be available for examination at our corporate headquarters, 5101 Tennyson Parkway, Plano, Texas 75024, from May 1 through May 12, 2020.

We intend to hold our annual meeting in person. However, we are monitoring the situation regarding COVID-19 (coronavirus), taking into account guidance from public health officials. The health and well-being of our employees and shareholders is our top priority. Accordingly, we are planning for the possibility that the annual meeting may be held in a different location or solely by means of remote communication (i.e., a virtual-only meeting). We will announce any such updates as promptly as practicable, including details on how to participate, by press release, through a filing with the SEC and on our website. We encourage you to check our website prior to the meeting if you plan to attend. As always, we encourage you to vote your shares prior to the annual meeting.

Please sign and date the enclosed proxy card and return it promptly in the enclosed envelope or vote through the Internet as described on the enclosed proxy card. No postage is required if the proxy card is mailed in the United States. Your prompt response will reduce the time and expense of solicitation.

The enclosed 2019 Annual Report does not form any part of the proxy solicitation material.

				By Order of the Board of Directors


				ABIGAIL DIAZ
				Chief Legal Officer Corporate Secretary

Plano, Texas
April 8, 2020

VOTING METHODS

BY INTERNET	BY TELEPHONE	BY MAIL	AT THE MEETING

Go to www.proxyvote.com and follow the instructions	Call 1-800-690-6903	Sign, date and return your proxy card or voting instruction form	Attend the annual meeting in Plano, Texas


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			Page
THE ANNUAL MEETING			5
General Information			5
Proxy Solicitation, Revocation, and Expense			5
PROPOSALS FOR CONSIDERATION			6
Proposal One – Election of Directors			6
Proposal Two – Ratification of Our Independent Auditors for Fiscal Year 2020			7
Proposal Three – Approval of an Advisory Resolution on Our Executive Compensation			8
TYLER MANAGEMENT			9
Director Nominees and Executive Officers			9
Director Nominee Qualifications and Board Diversity			14
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE PRINCIPLES			15
General Information			15
Corporate Governance Guidelines			15
Code of Business Conduct and Ethics			15
Stock Ownership Guidelines and Stock Anti-Hedging and Pledging Policy			16
Board Independence			16
Committees and Meetings of the Board of Directors			16
Board Leadership Structure			18
The Board’s Role in Risk Oversight			18
Audit Committee Financial Expert			18
Pre-Approval Policies and Procedures for Audit and Non-Audit Services			19
Director Nominating Process			19
Communications with our Board of Directors			20
Director Attendance at Annual Meetings			20
Environment and Social Responsibility			20
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			22
Security Ownership of Directors and Management			22
Delinquent Section 16(a) Reports			23
COMPENSATION DISCUSSION AND ANALYSIS			24
Executive Summary			24
2019 Business Highlights			24
2019 Executive Compensation Summary			24
Shareholder Engagement			26
Compensation Philosophy and Objectives			30
Elements of Executive Compensation			30
Executive Compensation Related Policies and Practices			31
Process for Setting Executive Compensation			32
Role of the Compensation Committee			32
Role of our CEO and the other Named Executive Officers			32
Factors Considered in Setting Executive Compensation			32
Analysis of Named Executive Officer Compensation			34
2019 Named Executive Compensation Structure and Process			34
2020 Named Executive Officer Compensation			38
Employment Agreements			40
Other Important Elements of Our Executive Compensation			41
Compensation Committee Report			42
Compensation Committee Interlocks and Insider Participation			42


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THE ANNUAL MEETING

General Information

The annual meeting will be held at the Renaissance Dallas at Plano Legacy West Hotel on Tuesday, May 12, 2020, at 9:30 a.m., local time. At the annual meeting, you will be asked to consider and vote upon the following proposals:

•	Proposal One – Election of nine directors;

•	Proposal Two – Ratification of our independent auditors for fiscal year 2020; and

•	Proposal Three – Approval of an advisory resolution on our executive compensation.

At the 2017 annual meeting, our shareholders voted, on an advisory basis, in favor of holding future shareholder voting on executive compensation on an annual basis. Our Board of Directors decided to follow our shareholders’ recommendation.

Only shareholders of record on March 20, 2020, are entitled to vote at the annual meeting. On March 20, 2020, we had 39,751,343 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 his or her name. 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.

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. Proposal Two (ratification of independent auditors) is considered a discretionary item and may be voted in the absence of instructions. Proposals One (election of directors) and Three (advisory vote on executive compensation) 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.

Abstentions and broker non-votes are counted for purposes of determining a quorum. Abstentions are counted in tabulating the votes cast on any proposal but are not counted as votes either for or against a proposal. Broker non-votes are not counted as votes cast for purposes of determining whether a proposal has been approved.

This proxy statement and accompanying form of proxy are first being sent to shareholders on or about April 8, 2020.

Proxy Solicitation, Revocation, and Expense

The accompanying proxy is being solicited on behalf of the Board of Directors. Your shares will be voted at the annual meeting as you direct in the enclosed proxy or through the Internet, provided that the proxy is completed, signed, and returned to us prior to the annual meeting. No proxy can vote for more than nine 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.

After you sign and return your proxy, you may revoke it prior to the meeting either by (i) filing a written notice of revocation at our corporate headquarters, (ii) attending the annual meeting and voting your shares in person, or (iii) delivering to us another duly executed proxy that is dated after the initial proxy.

We will bear the expense of preparing, printing, and mailing the proxy solicitation material and the proxy. In addition to use of the mail, we may solicit proxies by personal interview or telephone by our directors, officers, and employees. We have retained Okapi Partners LLC to assist us in the solicitation and distribution of proxies for the Annual Meeting. The estimated cost of such services is $10,000, plus 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.


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PROPOSALS FOR CONSIDERATION

Proposal One – Election of Directors

At the annual meeting, you will be asked to elect a board of nine directors. The nominees for director are: Donald R. Brattain; Glenn A. Carter; Brenda A. Cline; J. Luther King, Jr.; Mary L. Landrieu; John S. Marr, Jr.; H. Lynn Moore, Jr.; Daniel M. Pope; and Dustin R. Womble. For more information regarding these nominees and their qualifications, see “Tyler Management.” Each nominee has indicated that he or she is able and willing to serve as a director. If any of the nominees becomes unable to serve prior to the meeting, the persons named in the enclosed proxy will vote the shares covered by your executed proxy for a substitute nominee as selected by the Board of Directors.

Under our bylaws, directors must be elected by a majority of the votes cast in uncontested elections. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee. Abstentions and broker non-votes are not counted as votes “for” or “against” a director nominee. Any nominee who does not receive a majority of votes cast “for” his or her election would be required to tender his or her resignation promptly following the failure to receive the required vote. Within 90 days of the certification of the shareholder vote, the Nominating and Governance Committee would then be required to make a recommendation to the Board as to whether the Board should accept the resignation, and the Board would be required to decide whether to accept the resignation and to disclose its decision-making process. In a contested election, the required vote would be a plurality of votes cast.

Our Board of Directors unanimously recommends that the shareholders vote FOR each of the nominees for director.


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Proposal Two – Ratification of Our Independent Auditors for Fiscal Year 2020

The Audit Committee has selected Ernst & Young LLP, independent registered public accounting firm, as our independent auditors for fiscal year 2020, subject to ratification by the shareholders. The affirmative vote of a majority of the shares present or represented by proxy and voting at the annual meeting is required to ratify Ernst & Young LLP as our independent auditors for fiscal year 2020.

Ernst & Young LLP served as our independent auditors for fiscal years 2019 and 2018. A representative of Ernst & Young LLP is expected to be present at the annual meeting. That representative will have an opportunity to make a statement, if desired, and will be available to respond to appropriate questions.

Ernst & Young’s fees for all professional services during each of the last two fiscal years were as follows:

	2019	2018
Audit Fees	$2,575,250	$2,146,300
Audit-Related Fees	—	8,000
Other Fees	—	—
Tax Fees	—	77,500
Total	$2,575,250	$2,231,800

Audit Fees. Fees for audit services include fees associated with the annual audit, the review of our interim financial statements, and the auditor’s opinions related to internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act.

Audit-Related Fees. Fees for audit-related services generally include fees for accounting consultations and Securities and Exchange Commission (“SEC”) filings.

Other Fees. Other fees include accounting consultation and due diligence services necessary to complete an acquisition.

Tax Fees. Fees for tax services include fees for tax consulting and tax compliance.

The Audit Committee approved all of the independent auditor engagements and fees presented above. Our Audit Committee Charter requires that the Audit Committee pre-approve all audit and non-audit services provided to us by our independent auditors. All such services performed in 2019 were pre-approved by the Audit Committee. For more information on these policies and procedures, see “Board of Directors and Corporate Governance Principles—Pre-Approval Policies and Procedures for Audit and Non-Audit Services.”

Our Board of Directors unanimously recommends that the shareholders vote FOR the ratification of Ernst & Young LLP as our independent auditors for fiscal year 2020.


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Proposal Three – Approval of an Advisory Resolution on Our Executive Compensation

At the 2017 annual meeting, our shareholders voted, on an advisory basis, in favor of holding future shareholder voting on executive compensation on an annual basis.

As described in detail under the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement, our executive compensation program is designed to attract, retain and motivate our named executive officers. The design and administration of our executive compensation program balances responsible assessment of risk and compensation expense with a pay-for-performance design under which more than 85% of our named executive officer compensation is dependent on the achievement on annual and long-term objectives which increase shareholder value.

The following proposal gives our shareholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our Named Executive Officers identified in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and our compensation philosophy, policies, and practices, as disclosed under the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. We are providing this vote as required by Section 14A of the Securities Exchange Act of 1934, as amended. Accordingly, for the reasons discussed in the “Compensation Discussion & Analysis” section of this proxy statement, we are asking our shareholders to vote “FOR” the adoption of the following resolution:

“RESOLVED, that the shareholders of Tyler Technologies, Inc. approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement for the 2020 Annual Meeting of Shareholders.”

The advisory resolution on our executive compensation will be approved if holders of a majority of the voting power of the shares actually voted at the annual meeting vote in favor of the proposal.

Because your vote is advisory, it will not be binding on either the Board of Directors or Tyler. However, our Compensation Committee, which is composed solely of independent directors, will take into account the outcome of the shareholder vote on this proposal when considering future executive compensation arrangements. In addition, your non-binding advisory vote described in this Proposal Three will not be construed (1) as overruling any decision by the Board of Directors, any Board committee, or Tyler relating to the compensation of the Named Executive Officers or (2) as creating or changing any fiduciary duties or other duties on the part of the Board of Directors, any Board committee, or Tyler.

Our Board of Directors unanimously recommends that the shareholders vote FOR the advisory resolution on our executive compensation.


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TYLER MANAGEMENT

Director Nominees and Executive Officers

Below is a brief description of our director nominees and executive officers. Each director holds office until our next annual meeting or until his or her successor is elected and qualified. Executive officers are elected annually by the Board of Directors and hold office until the next annual Board meeting or until their successors are elected and qualified.


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		Brenda A. Cline, age 59 Director Director since: 2014 Other Current Reporting Company Directorships: Range Resource Corporation; The Cushing Asset Management Closed-End Funds
Ms. Cline has served as a director since 2014. Ms. Cline also serves as Chair of the Audit Committee and is a member of the Nominating and Governance Committee. Since 1993, Ms. Cline has served as Executive Vice President, Chief Financial Officer, Treasurer, and Secretary of the Kimbell Art Foundation, a private foundation that owns and operates the Kimbell Art Museum in Fort Worth, Texas. In such capacities, Ms. Cline oversees the foundation’s investment portfolio of over $300 million, including asset allocation, risk management, and investment performance; manages all treasury functions; and supervises all foundation and museum business operations, including budgeting, cash management, employee benefit plans, insurance, debt issuance and compliance, financial reporting, and contractual and legal matters. Ms. Cline has also served as an Independent Trustee of American Beacon Funds since 2004 and currently serves as the Chair of the Board of Trustees, formerly served as the Chair of the Audit and Compliance Committee, and formerly served as the Vice Chair of the Investment Committee. From 1993 until 2013, Ms. Cline served as a contract author for Thomson Reuters (formerly “Practitioners Publishing Company”), writing and editing published financial accounting and reporting books. Since 1998, Ms. Cline has also served as a Trustee of Texas Christian University (“TCU”), Fort Worth, Texas. Ms. Cline's services for TCU include serving as the former Chair of the Investment Committee, member of the Audit Committee and Executive Committee, and former member of the Student Relations Committee. Ms. Cline also serves as a director of Range Resources Corporation (NYSE: RRC), where she also currently serves as Chair of the Audit Committee. She is a board trustee of The Cushing Asset Management Closed-End Funds, which oversees various investment funds including The Cushing MLP Total Return Fund (NYSE: SRV), The Cushing Energy Income Fund (NYSE: SRF) and The Cushing Renaissance Fund (NYSE: SZC) and currently serves as Chair of the Audit Committee and member of the Nominating and Governance Committee of Cushing Asset Management Closed-End Funds. Ms. Cline is a certified public accountant.
Key Attributes, Experience and Skills:
•	Executive operational and investment management experience for the Kimbell Art Foundation
•	Outside board experience as a director of Range Resources Corporation and a board trustee of The Cushing Asset Management Closed-End Funds and American Beacon Funds
•	Fiduciary and executive experience as a university trustee and on other senior university committees
•	Audit experience with a large public accounting firm


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Director Nominee Qualifications and Board Diversity

Our Corporate Governance Guidelines include the criteria our Board of Directors believes are important in the selection of director nominees, which includes the following qualifications:

•	Sound personal and professional integrity

•	An inquiring and independent mind

•	Practical wisdom and mature judgment

•	Broad training and experience at the policy-making level of business, finance and accounting, government, education, or technology

•	Expertise that is useful to the company and complementary to the background and experience of other Board members, so that an optimal balance of Board members can be achieved and maintained

•	Willingness to devote the required time to carrying out the duties and responsibilities of board membership

•	Commitment to serve on the Board for several years to develop knowledge about our business

•	Willingness to represent the best interests of all shareholders and objectively appraise management performance

•	Involvement only in activities or interests that do not conflict with the director’s responsibilities to the company or our shareholders

In identifying nominees for director, the Board of Directors focuses on ensuring that it reflects a diversity of experiences and backgrounds that will complement our business and enhance the function of the Board. The Board prefers a mix of backgrounds and experience among its members. The Board has not adopted a formal policy with respect to its consideration of diversity and does not follow any ratio or formula to determine the appropriate mix; rather, it uses its judgment to identify nominees whose backgrounds, attributes, and experiences, taken as a whole, will contribute to the high standards of board service. Following the 2020 annual meeting, our Board of Directors will be composed of nine individuals, including two employee directors. We believe the mix of outside experience from our independent directors coupled with the specific industry experience of our employee directors provides an appropriate diversity of experience to effectively manage our business. In addition, each independent director has extensive chief executive officer or other executive leadership position experience with businesses of varying size in various industries, and/or with local, state or federal government. A substantial majority of our directors have valuable experience in building and sustaining a successful business enterprise.

The Nominating and Governance Committee believes that the above-mentioned attributes and business experience provide us with the perspectives and judgment necessary to guide our strategies and monitor their execution.


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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE PRINCIPLES

General Information

Our Board of Directors is responsible for supervision of the Company’s overall affairs. To assist it in carrying out its duties, the Board has delegated certain authority to several committees. See “Board of Directors and Corporate Governance Principles –– Committees and Meetings of the Board of Directors.” Following the 2020 annual meeting, the Board will consist of nine directors, including six independent directors, as defined by Rule 303A.02 of the New York Stock Exchange Listed Company Manual (“NYSE Rule 303A.02”), two employee directors, and one non-employee director who does not meet the standards for independence as defined by NYSE Rule 303A.02.

Corporate Governance Guidelines

Our Board of Directors has adopted a number of corporate governance guidelines, including the following:

•	Independence Standards, which determine the independence of our non-employee directors. These standards are consistent with the independence standards set forth in NYSE Rule 303A.02.

•	Corporate Governance Guidelines, which include, among other things

•	Annual submission of independent auditors to shareholders for approval

•	Formation of a Nominating and Governance Committee comprised solely of independent directors

•	Prohibition of stock option repricing

•	Formalization of the ability of independent directors to retain outside advisors

•	Performance of periodic formal Board evaluation

•	Limitation on the number of additional public company boards on which a director may serve to a maximum of four

A copy of our Corporate Governance Guidelines may be found on our website, www.tylertech.com.

•

An Audit Committee Charter, which requires, among other things, that the committee be comprised solely of independent directors (as defined by the New York Stock Exchange), at least one of whom will qualify as an “audit committee financial expert” as set forth in Item 401(h) of the SEC’s Regulation S-K. A copy of our Audit Committee Charter may be found on our website, www.tylertech.com.

•	A Compensation Committee Charter, which requires, among other things, that the committee be comprised solely of independent directors and sets forth the guidelines for determining executive compensation. A copy of our Compensation Committee Charter may be found on our website, www.tylertech.com.

•

A Nominating and Governance Committee Charter, which requires, among other things, that the committee be comprised of at least three independent directors who are responsible for recommending candidates for election to the Board of Directors. A copy of our Nominating and Governance Committee Charter may be found on our website, www.tylertech.com.

Code of Business Conduct and Ethics

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 purpose of the Code of Business Conduct and Ethics is to promote

•	Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships

•	Full, fair, accurate, timely, and understandable disclosure in our public communications and reports filed with the SEC

•	Compliance with applicable governmental laws, rules, and regulations

•	Prompt internal reporting of violations of the policy to the appropriate persons designated therein, including anonymous “whistleblower” provisions

•	Accountability for adherence to the policy

A copy of our Code of Business Conduct and Ethics may be found on our website, www.tylertech.com, or will be furnished, without charge, upon written request at our principal executive offices. We will promptly post on our website any future amendments or waivers related to our Code of Business Conduct and Ethics.


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Stock Ownership Guidelines and Stock Anti-Hedging and Pledging Policy

In 2018, our Board of Directors approved two additional corporate governance initiatives. The first is a set of stock ownership guidelines, which 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 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			Share Ownership Guideline
	Executive Chairman, 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			4 times annual cash retainer

Compliance will be 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 the later of (1) his or her commencement of service with Tyler as a covered person or (2) the adoption of these guidelines. In the event of a promotion or an increase in base salary or annual cash retainer, the covered person is expected to meet the higher ownership amount within three years from the effective date of the promotion, salary or retainer change. Each of our covered persons is in compliance with the Stock Ownership Guidelines as of December 31, 2019.

A copy of the Stock Ownership Guidelines may be found on our website, www.tylertech.com.

The second initiative is a 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 the Company’s securities without the full risks and rewards of ownership, potentially separate the holder’s interests from those of the Company’s shareholders generally. In addition, those same covered persons are also discouraged from pledging Company securities or from holding Company 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

Board Independence

Our Board of Directors has determined, after considering all of the relevant facts and circumstances, that (1) each of the non-employee directors standing for election (Mr. Brattain, Mr. Carter, Ms. Cline, Mr. King, Ms. Landrieu, Mr. Pope and Mr. Womble) has no material relationship with us (either directly or as a partner, shareholder, or officer of an organization that has a relationship with us) and (2) each of the non-employee directors, except for Mr. Womble, is “independent” within the meaning of the New York Stock Exchange director independence standards currently in effect. Although more than three years have passed since Mr. Womble’s retirement from Tyler, Mr. Womble is not considered independent under New York Stock Exchange Rules because an immediate family member is an employee of the Company and receives more than $120,000 in direct compensation from the Company. See “Certain Relationships and Related Transactions.” As a result, if each of the nominees for director is elected at the annual meeting, our Board of Directors will be comprised of a majority of “independent” directors as required by the New York Stock Exchange. Furthermore, our Board of Directors has determined that each of the members of the Audit Committee, Compensation Committee, and Nominating and Governance Committee has no material relationship with Tyler (either directly or as a partner, shareholder, or officer of an organization that has a relationship with Tyler).

Committees and Meetings of the Board of Directors

Our Board of Directors has the following four standing committees: Audit Committee; Compensation Committee; Nominating and Governance Committee; and Executive Committee. Each committee (other than the Executive Committee) has a written charter, which may be found at our website, www.tylertech.com. Each Board member participated in at least 75% of all Board and committee meetings held during the portion of 2019 that he or she served as a director and/or committee member.


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During 2019, our Board of Directors held five meetings. In addition, our Board of Directors has established a policy under which our non-management members will meet at regularly scheduled (and in any event at least twice per fiscal year) executive sessions without management present and with Mr. Brattain presiding over such meetings.

The table below provides the current membership and 2019 meeting information for each of the committees:

Donald R. Brattain

Glenn A. Carter

Chair

Brenda A Cline

Chair

J. Luther King, Jr.

Chair

John S. Marr, Jr.

Chair

Daniel M. Pope

Dustin R. Womble

H. Lynn Moore, Jr.

Total Meetings in 2019

Five

Two

Periodically

Below is a description of each committee. Each committee has authority to engage legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities.

Audit Committee. The Audit Committee assists the Board of Directors in its oversight of the quality and integrity of our accounting, auditing, and reporting practices. The Audit Committee’s role includes:

•	Considering the independence of our independent auditors before we engage them

•	Reviewing with the independent auditors the fee, scope, and timing of the audit

•

Reviewing the completed audit with the independent auditors regarding any significant accounting adjustments, recommendations for improving internal controls, appropriateness of accounting policies, appropriateness of accounting and disclosure decisions with respect to significant unusual transactions or material obligations, and significant findings during the audit

•	Performing periodic formal committee evaluations

•	Reviewing our financial statements and related regulatory filings with management and the independent auditors

•	Meeting periodically with management and internal audit to discuss internal accounting and financial controls

The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the independent auditor engaged to prepare or issue audit reports on our financial statements and internal control over financial reporting. The Audit Committee relies on the expertise and knowledge of management, internal audit and the independent auditor in carrying out its oversight responsibilities. The Board of Directors has determined that each Audit Committee member is a non-management director who satisfies the New York Stock Exchange director independence standards and has sufficient knowledge in financial and auditing matters to serve on the Audit Committee. In addition, the Board of Directors has determined that Mr. Brattain, Ms. Cline, and Mr. King are “audit committee financial experts” as defined by SEC rules.

Compensation Committee. The Compensation Committee has responsibility for defining and articulating our overall compensation philosophy and administering and approving all elements of compensation for elected corporate officers, including base salary, annual cash incentive compensation, and long-term equity incentive compensation. The Compensation Committee reports to shareholders as required by the SEC. See “Compensation Discussion and Analysis—Compensation Committee Report.” Members of the Compensation Committee are non-management directors who, in the opinion of the Board of Directors, satisfy our Independence Standards. For more information about the work of the Compensation Committee, see “Compensation Discussion and Analysis.”

Nominating and Governance Committee. The Nominating and Governance Committee’s duties include:

•	Identifying and recommending candidates for election to our Board of Directors

•	Identifying and recommending candidates to fill vacancies occurring between annual shareholder meetings

•	Reviewing the composition of Board committees

•	Periodically reviewing the appropriate skills and characteristics required of Board members in the context of the current make-up of our Board of Directors

•	Monitoring adherence to our “Corporate Governance Guidelines”


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Executive Committee. The Executive Committee has the authority to act for the entire Board of Directors, but may not commit to an expenditure in excess of $5,000,000 without full Board approval.

Board Leadership Structure

Tyler’s governing documents allow the roles of Chairman of the Board and Chief Executive Officer to be filled by the same or different individuals. This approach allows the Board flexibility to determine whether the two roles should be separate or combined based upon the Company’s needs and the Board’s assessment of the Company’s leadership from time to time. The Board believes that having Mr. Marr serve as Executive Chairman and having Mr. Moore serve as Chief Executive Officer is in the best interests of Tyler and its shareholders. As Mr. Moore’s transition to Chief Executive Officer (in addition to his duties as President) continued over the course of 2019, Mr. Moore assumed full responsibility for the day-to-day leadership of Tyler’s operations, with input from Mr. Marr as needed, as intended by Mr. Marr and the Board. Mr. Marr and Mr. Moore continue to communicate frequently with each other and with the Board and management. This arrangement allows Mr. Moore to concentrate on and take leadership over executing the Company’s strategic initiatives and business plans and confront its challenges, with Mr. Marr providing executive oversight and facilitating communication between management and the Board.

Should the roles of Chief Executive Officer and Chairman of the Board again be assumed by the same person in the future, the Board should and will designate an independent director to serve as the Lead Director. In such event, the duties of Lead Director will be consistent with the responsibilities generally held by “lead directors” at public companies, including:

•	Presiding at all meetings of the Board at which the Executive Chairman of the Board is not present, as well as executive sessions of the independent directors

•	Serving as liaison between the Executive Chairman of the Board and the independent directors

•	Having the authority to call meetings of the independent directors and preparing the agenda for such meetings

•	Coordinating the activities of the independent directors when acting as a group

•	Approving meeting schedules to ensure there is sufficient time for discussion of all agenda items

•	Advising the Executive Chairman and Chief Executive Officer as to the quality, quantity, and timeliness of the flow of information from management, including the materials provided to directors at Board meetings

The Board believes there is no single organizational model that is the best and most effective in all circumstances. As a result, the Board will periodically reexamine its corporate governance policies and leadership structures on an ongoing basis to ensure that they continue to meet the Company’s needs.

The Board’s Role in Risk Oversight

Senior management is responsible for assessing and managing Tyler's various exposures to risk on a day-to-day basis, including the creation of appropriate risk management policies and programs. The Board of Directors is responsible for overseeing management in the execution of its responsibilities and for assessing Tyler's overall approach to risk management. The Board of Directors exercises these responsibilities periodically as part of its meetings and also through its committees, each of which examines various components of enterprise risk as part of its responsibilities. The Audit Committee oversees management of financial risks, as well as Tyler's policies with respect to risk assessment and risk management. The Compensation Committee is responsible for overseeing the management of risks relating to Tyler's executive compensation plans and arrangements. The Nominating and Governance Committee manages risks associated with Board independence and potential conflicts of interest. In addition, an overall review of risk is inherent in the Board’s consideration of our long-term strategies and in the transactions and other matters presented to the Board, including capital expenditures, acquisitions and divestitures, and financial matters. The Board of Directors' role in risk oversight is consistent with our leadership structure, with the Chief Executive Officer and other members of senior management having responsibility for assessing and managing our risk exposure, and the Board and its committees providing oversight in connection with these efforts.

Audit Committee Financial Expert

Our Board of Directors determined that each member of the Audit Committee (Mr. Brattain, Ms. Cline, and Mr. King) possesses the attributes necessary to qualify as an “audit committee financial expert” as set forth in Item 401(h) of the SEC’s Regulation S-K.


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Pre-Approval Policies and Procedures for Audit and Non-Audit Services

The Audit Committee Charter requires that the Audit Committee pre-approve all of the audit and non-audit services performed by Tyler's independent auditors. The purpose of these pre-approval procedures is to ensure that the provision of services by Tyler's independent auditors does not impair their independence. Each year, the Audit Committee receives fee estimates from Tyler's independent auditors for each category of services to be performed by the independent auditors during the upcoming fiscal reporting year. These categories of services include Audit Services, Audit-Related Services, Tax Services, and All Other Services. Upon review of the types of services to be performed and the estimated fees related thereto, the Audit Committee will determine which services and fees should be pre-approved for a period of twelve months. The Audit Committee may periodically review the list of pre-approved services based on subsequent determinations. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee (or delegated member of the Audit Committee) prior to the performance of such service. Any proposed services exceeding the pre-approved cost levels will also require specific pre-approval by the Audit Committee (or delegated member of the Audit Committee).

Director Nominating Process

The Nominating and Governance Committee is responsible for reviewing and interviewing qualified candidates to serve on our Board of Directors and to select both “independent” as well as management nominees for director to be elected by Tyler's shareholders at each annual meeting. The Nominating and Governance Committee is comprised solely of independent directors and operates under a Charter for the Nominating and Governance Committee. Our Corporate Governance Guidelines include the criteria our Board of Directors believes are important in the selection of director nominees. For more information about director nominee criteria and qualifications, see “Tyler Management –– Board Diversity and Director Nominee Qualifications.”

The Nominating and Governance Committee may, in the exercise of its discretion, actively solicit nominee candidates, including through the retention of a professional search firm to assist in identifying appropriate nominee candidates. Nominee recommendations may also be submitted by other directors, and nomination recommendations submitted by shareholders will also be considered as described below.

The Nominating and Governance Committee will consider qualified nominees recommended by shareholders who may submit recommendations to the committee in care of our Corporate Secretary at our corporate headquarters, 5101 Tennyson Parkway, Plano, Texas 75024. To be considered by the Nominating and Governance Committee, shareholder nominations must be submitted in accordance with our bylaws and must be accompanied by a description of the qualifications of the proposed candidate and a written statement from the proposed candidate that he or she is willing to be nominated and desires to serve, if elected. Nominees for director who are recommended by our shareholders will be evaluated in the same manner as any other nominee for director.

Nominations by shareholders may also be made at an annual meeting of shareholders in the manner provided in Tyler's bylaws. Our bylaws require that a shareholder entitled to vote for the election of directors may make nominations of persons for election to our Board at a meeting of shareholders by complying with required notice procedures. Nominations must be received at Tyler's corporate headquarters not less than 75 days or more than 85 days before any annual meeting of shareholders. If, however, notice or prior public disclosure of an annual meeting is given or made less than 75 days before the date of the annual meeting, the notice must be received no later than the 10^th day following the date of mailing of the notice of annual meeting or the date of public disclosure of the date of the annual meeting, whichever is earlier. The notice must specify the following:

•	As to each person the shareholder proposes to nominate for election or re-election as a director

•	The name, age, business address, and residence address of the person

•	The principal occupation or employment of the person

•	The class and number of shares of our capital stock that are beneficially owned by the person

•	A description of all direct and indirect compensation and other material monetary agreements, arrangements, or understandings during the previous three years, and any other material relationships, between the shareholder and the proposed nominee

•	Any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors under Regulation 14A of the Exchange Act

•	As to the shareholder giving notice

•	The name and record address of the shareholder and any other shareholder known to be supporting the nominee

•	The class and number of shares of our capital stock that are beneficially owned by the shareholder making the nomination and by any other supporting shareholders


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•	Any proxy, contract, arrangement, understanding, or relationship pursuant to which the shareholder has a right to vote any company shares

Tyler may require that the proposed nominee furnish us with other information as we may reasonably request to assist us in determining the eligibility of the proposed nominee to serve as a director. At any meeting of shareholders, the presiding officer may disregard the purported nomination of any person not made in compliance with these procedures.

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 Chairman 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 Chairman 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.

Director Attendance at Annual Meetings

Directors are not required to attend our annual meetings of shareholders. However, our Board of Directors typically holds a meeting immediately following the annual meeting of shareholders. Therefore, in most cases, all of our director nominees will be present at the annual meeting. All of our director nominees were present at the 2019 annual meeting of shareholders.

Environment and Social Responsibility

Tyler has built its brand by delivering value for clients, creating a strong workplace culture, ensuring transparency in our operations, and empowering strong, vibrant communities. Tyler experienced tremendous growth and change in 2019, and still we remain committed to making a positive impact on the people, places, and experiences we touch every day.

Environment

In 2019, we continued to make meaningful changes to our operations, infrastructure, and product offerings to better conserve natural resources and address environmental concerns. Some of these efforts include occupancy sensors, solar panels, and building automation sensors to manage power usage, and use of document management workflow tools to reduce paper usage. Our products are increasing efficiencies at more than 10,000 sites across the public sector, with many of our solutions providing a dramatic reduction in fuel use and paper waste.

Social Responsibility

Tyler is committed to employee wellness and fulfillment, and to a wide range of causes they care about. We give generously through the Tyler Foundation, our endowment for charitable giving. For our clients and shareholders, we provide peace of mind by investing in security, compliance, and privacy initiatives that meet or exceed software industry standards. We embrace a culture of mutual respect and inclusion where diverse people with different perspectives and backgrounds serve the community. In 2019, Tyler was included in Forbes’ “Best Employers for Diversity” list for the first time, as well as Forbes’ list of “America’s Best Midsize Employers” for the second time. Numerous Tyler offices have also been recognized in “Best Place to Work” listings.


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Governance

In adhering to corporate governance standards, integrity is our guiding principle and our number one requirement for success - with our team members, our clients, our shareholders, and even with our competitors. We invest in technical and operational solutions and training to evolve the security of our applications, architecture, and processes. In 2019, we consolidated information security efforts under a newly organized Information Security Office to monitor internal security infrastructure, improve processes, and provide consultation to product security teams.

To learn more about these efforts, please view our 2019 Corporate Social Responsibility Report under the Corporate Social Responsibility section of our website at www.tylertech.com.


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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table sets forth certain information concerning the beneficial ownership of our Common Stock as of March 20, 2020, by (i) each beneficial owner of more than 5% of our Common Stock, (ii) each director and nominee, (iii) each “Named Executive Officer” (as defined in the SEC’s Regulation S-K), and (iv) all of our executive officers and directors as a group.

Security Ownership of Directors and Management

Name and Address of Beneficial Owner⁽¹⁾	Direct⁽²⁾	Options Exercisable Within 60 Days⁽³⁾	Stock Awards Vested Within 60 Days⁽⁴⁾	Other⁽⁵⁾	Total	Percent of Class⁽⁶⁾
BlackRock, Inc. 55 East 52nd Street New York, NY 10055	4,941,717⁽⁷⁾	—		—	4,941,717	12.4%
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355	3,673,176⁽⁸⁾	—		—	3,673,176	9.2%
Brown Capital Management, LLC 1201 N. Calvert Street Baltimore, MD 21202	1,854,286⁽⁹⁾	—		—	1,854,286	4.7%
Janus Henderson Group PLC 201 Bishopsgate EC2M 3AE United Kingdom	1,480,959⁽¹⁰⁾	—		—	1,480,959	3.7%
Directors and Nominees
Donald R. Brattain	8,169	5,000	1,150	3,000⁽¹¹⁾	17,319	*
Glenn A. Carter	774	20,775	1,150	—	22,699	*
Brenda A. Cline	2,099	15,000	1,150	—	18,249	*
J. Luther King, Jr.	82,996	30,000	1,150	61,179⁽¹²⁾	175,325	*
Mary L. Landrieu	—⁽¹³⁾	—	—	—	—
Daniel M. Pope	—	10,000	1,150	—	11,150	*
Dustin R. Womble	165,622⁽¹⁴⁾	93,118	1,150	—	259,890	*
Named Executive Officers
John S. Marr, Jr.	196,317	331,924		75,150⁽¹⁵⁾	603,391	1.5%
H. Lynn Moore, Jr.	68,038	208,835		—	276,873	*
Brian K. Miller	48,096	32,000		—	80,096	*
Directors and executive officers as a group (9 persons)	572,111	746,652	6,900	139,329	1,464,992	3.6%

*	Less than one percent of our outstanding common stock

(1)	Unless otherwise noted, the address of each beneficial owner is our corporate headquarters: 5101 Tennyson Parkway, Plano, Texas 75024.

(2)	“Direct” represents shares as to which each named individual has sole voting or dispositive power.

(3)	“Options Exercisable within 60 Days” reflects the number of shares that could be purchased by exercise of options at March 20, 2020, or within 60 days thereafter.

(4)	“Stock Awards Vested within 60 Days” reflects the number of restricted stock units that will vest and be settled in shares at March 20, 2020, or within 60 days thereafter.

(5)	“Other” represents the number of shares of common stock as to which the named entity or individual share voting and dispositive power with another entity or individual(s).

(6)

Based on 39,751,343 shares of our common stock issued and outstanding at March 20, 2020. Each shareholder’s percentage is calculated by dividing (a) the number of shares beneficially owned by (b) the sum of (i) 39,751,343 plus (ii) the number of shares such owner has the right to acquire within 60 days.

(7)

Based on information reported by BlackRock, Inc. on Amendment No. 11 to Schedule 13G that was filed with the SEC on February 3, 2020. BlackRock, Inc. is deemed to have beneficial ownership of all of these shares, which includes sole voting power for 4,724,172 shares, sole investment power for all 4,941,717 shares.


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(8)

Based on information reported by The Vanguard Group on Amendment No. 7 to Schedule 13G that was filed with the SEC on February 10, 2020. The Vanguard Group is deemed to have beneficial ownership of these shares, which includes sole voting power of 31,466 shares, sole investment power of 3,636,965 shares, shared voting power of 9,918 shares, and shared investment power of 36,211 shares.

(9)

Based on information reported by Brown Capital Management, LLC on Amendment No. 13 to Schedule 13G that was filed with the SEC on February 14, 2020. Brown Capital Management, LLC is deemed to have beneficial ownership of these shares, which includes sole voting power of 1,084,616 shares and sole investment power for all 1,854,286 shares.

(10)

Based on information reported by Janus Henderson Group PLC on Amendment No.1 to Schedule 13G that was filed with the SEC on February 11, 2019. Janus Henderson Group PLC is deemed to have beneficial ownership of these shares, which includes shared voting power of all 1,480,959 shares and shared investment power for all 1,480,959 shares.

(11)	Includes (a) 7,070 shares held by Deephaven Enterprises, Inc., of which Mr. Brattain is the sole shareholder, and (b) 3,000 shares held in an investment retirement account for the benefit of Mr. Brattain's spouse.

(12)

Represents shares of common stock held by clients of Luther King Capital Management, an investment advisory firm controlled by Mr. King in which he is deemed to have voting and investment power. Mr. King expressly disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(13)	2020 Board nominee

(14)	Includes: 41,182 shares of our common stock pledged and held in a margin account.

(15)

Includes: (a) 59,500 shares of common stock held in a partnership in which Mr. Marr is the general partner and has sole voting and investment power (the partnership is owned 99% by a trust in which Mr. Marr’s disclaims beneficial ownership and 1% by the general partner); and (b) 15,650 shares held in two trusts for which Mr. Marr is a co-trustee and is deemed to have shared voting and dispositive power. Mr. Marr disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act requires that our directors, executive officers, and 10% or more shareholders file with the SEC and New York Stock Exchange initial reports of ownership and reports of changes in ownership of our common stock. These persons are required to furnish us with copies of all Section 16(a) reports they file with the SEC. To our knowledge, based solely upon (i) our review of the copies of the forms we received during 2019 and (ii) written representations from our directors and executive officers, we believe that all of our directors, officers, and 10% or more shareholders complied with all Section 16(a) filing requirements during 2019, with two exceptions. On February 28, 2019, filings were made for restricted stock unit grants authorized under the February 2018 employment agreements of Messrs. Marr, Moore and Miller (in the amounts of 36,000, 36,000 and 12,000 units, respectively) but granted on May 9, 2018, after shareholder approval of the 2018 Stock Incentive Plan. These incentive grants were duly disclosed in the Current Report on Form 8-K the Company filed with the aforementioned employment agreements and were discussed in the Company’s 2018 Proxy Statement. Messrs. Brattain, Carter and Womble conducted transactions on September 6, 2019, that were reported on a Form 4 filed with the SEC on September 11, 2019.


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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the compensation program for our executive officers (the “Named Executive Officers”) 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 2019 compensation and summarizes 2020 approved compensation.

EXECUTIVE SUMMARY

2019 Business Highlights

Tyler continues to strengthen its position as a leading provider of software and related services for the public sector. In 2019, we continued to produce strong financial results and steady growth, particularly with respect to recurring revenues, while improving our competitive position and investing in product development. In terms of financial results, we achieved record highs in revenues and cash flows from operations.

For the year ended December 31, 2019:

•	Tyler achieved record annual Generally Accepted Accounting Principles (“GAAP”) revenue of $1.086 billion, a 16 percent increase over 2018;

•	Recurring revenues increased 20 percent over 2018 to $727 million, and comprised approximately 67 percent of our total revenues in 2019;

•	GAAP earnings per diluted share decreased 0.6 percent to $3.65 in 2019, and non-GAAP earnings per diluted share increased 10 percent to $5.30;

•	We generated a record $255 million in cash provided by operations during the year, and ended the year with total cash and investments of $314 million and no debt;

•	We generated a record Adjusted EBITDA of $303 million;

•	In 2019 we signed over 1,100 new software arrangements, a 44% increase over 2018: and

•	We closed the year with record backlog of $1.46 billion, up nearly 17 percent from 2018.

Our executive officers, with our entire team, also delivered on strategic objectives and key initiatives during 2019. In addition to strong financial results, 2019 achievements included:

•	Continued progress in achieving our Connected Communities vision and the signing of a strategic collaboration agreement with Amazon Web Services;

•	Completed three acquisitions, increasing our footprint in the federal space and strengthening our local government and courts and justice offerings;

•	Recognized as a “Best Place to Work” for several Tyler offices;

•	Ranked by Forbes on its “Best Employers for Diversity” list for the first time as well as Forbes’ list of “America’s Best Midsize Employers” for the second time.

2019 Executive Compensation Summary

The leadership transition of Mr. Marr to Executive Chairman of the Board and Mr. Moore to Chief Executive Officer began in May 2018 and continued through 2019. Key compensation highlights for our Named Executive Officers are as follows:

•	Each Named Executive Officer received a base salary increase of 3%. Mr. Marr’s 3% increase followed a 30% decrease in his pay in 2018 to reflect his transition to the role of Executive Chairman;

•	No changes were made to short-term incentive target levels for 2019; and

•	The number of stock options granted to Mr. Marr was reduced 39%, from 22,500 stock options in 2018 to 13,750 in 2019. Option grants to Mr. Moore and Mr. Miller remained unchanged from 2018 grant levels.


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The total direct compensation received by our Named Executive Officers in 2019 was allocated as follows:

Our executive compensation program emphasizes performance-based compensation tied to the creation of long-term shareholder value. We believe that 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, a substantial portion of our executives’ compensation consists of performance-based restricted stock units and stock options that provide no value to our executives unless value is created for our shareholders through long-term performance of the Company.


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SHAREHOLDER ENGAGEMENT

At our 2019 Annual Meeting of Shareholders, our say-on-pay proposal received the support of 47% of the votes cast, which was significantly lower than the 98% received in 2017 and 76% received in 2018. Our Board viewed the decrease in support as an indication that expanded engagement was needed to ensure we have a clear understanding of, and opportunity to respond to, our shareholders’ views on our compensation program.

In response to the 2019 vote, we engaged an outside consultant and proactively reached out to investors and requested an opportunity to discuss our executive compensation program and practices. The purpose of these meetings was to understand their perspectives on our approach to executive compensation and governance as well as any other items of interest.

Since the 2019 Annual Meeting of Shareholders, at the Board’s discretion, we have reached out to investors representing more than 54% of outstanding shares. While not all our investors felt a need to engage, we had productive and valuable discussions with investors holding more than 35% of outstanding shares. For those that did not respond or agree to engage with us, we reached out to them again to request meetings. We also consulted the publicly-available policies of our major shareholders to better understand their views on executive compensation. This effort supplemented discussions and meetings that management and our investor relations team held between the 2019 Annual Meeting and the end of 2019 through various engagement channels, including direct meetings, analyst conferences and road shows.

The meetings were telephonic and included multiple members of our Compensation Committee, as well as some combination of our Chief Financial Officer, Chief Legal Officer and Chief Human Resources Officer. Our Executive Chairman and Chief Executive Officer purposefully did not participate in the calls to ensure investors were candid in their feedback. We provided an open forum to each shareholder to discuss and comment on any aspects of the Company’s executive compensation program. Overall, we received positive and constructive feedback from the shareholders who engaged with us regarding the Company’s executive compensation program. After this engagement with shareholders, we agreed to keep in contact with them, as well as the other shareholders who chose not to engage with us, in order to continue to receive feedback on our executive compensation program.

During these discussions, investors expressed to us the following:

•	Confidence in the strength of our executive team and appreciation for the consistency and strength of our performance over time;

•	Support for our decision in 2018 to include performance-based restricted stock units as part of our long-term equity grant;

•	Understanding of our objectives in the use of stock options, including our view of options as a form of compensation having no value at the time of grant, unless additional value is created for our shareholders;

•	Appreciation for our history of investor outreach and support for continued outreach in the future;

•	Questions to further understand the rationale for the use of equity grants associated with our five-year employment agreements versus including that value in the annual equity grant;

•	Perspectives regarding additional performance metrics for consideration in long-term incentive programs;


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•	Questions regarding the duties and responsibilities and corresponding level of compensation of the Executive Chairman role, in total and relative to the Chief Executive Officer role, as well as the expected duration of the transition;

•	Support for ongoing assessment of board composition, tenure, and board diversity, including varied experiences in alignment with our strategic objectives as board composition changes over time; and

•	Requests for enhanced communication of the Company’s current environmental, social and governance practices.

These meetings provided the Compensation Committee and the Board with valuable insights into our shareholders’ perspectives on our compensation program and potential improvements to the program, as described below. The results of these discussions were reviewed by the Compensation Committee with the full Board of Directors at a Board meeting on October 19, 2019, and were reviewed again on February 4, 2020, when the Compensation Committee presented recommendations regarding 2020 Executive Compensation to the Board.


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Based on these discussions, we believe our shareholders generally 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. As a result of our discussions with investors, we have incorporated their feedback in our approach to shareholder communications going forward, and have taken the following actions in the area of executive compensation:

	Point of Discussion with Shareholders			Tyler Actions
	Equity grant associated with the five-year employment agreements			The Company provides an annual grant that includes a combination of stock options and long-term performance-based restricted stock units (PSUs) to our Named Executive Officers. The annual grant has generally been set at or below the level of our peer comparators and the PSUs are based on the achievement of average three-year revenue growth. In addition, corresponding with the renewal of five-year employment agreements, the Company has provided an additional grant in time-based restricted stock units that vest over the five-year term of the employment agreements. Target total compensation to our Named Executive Officers, including the value of the annual grants plus the annual value of the five-year grant associated with the employment agreements, has consistently remained at or below the levels within our peer group.

				As a result of feedback from investors, and to ensure we continue to provide and disclose compensation that represents our executive compensation philosophy and objectives, we do not plan to issue an equity grant to our Named Executive Officers with any future employment agreements after the current agreements expire in 2023.
	Roles, responsibilities and compensation of the Executive Chairman and CEO during the CEO leadership transition			In May 2018, Mr. Marr became Executive Chairman of the Board after more than 12 years in the role of President and Chief Executive Officer of the Company. At that time, Mr. Moore became President and Chief Executive Officer. Early in the transition, Mr. Marr continued to participate in daily operational matters, in addition to strategic and Board-related matters. As the transition has evolved, Mr. Moore has taken over full responsibility for daily operations, with Mr. Marr as a resource for advice and other guidance. Mr. Marr's focus has turned to participating in strategic and Board-related matters.

				In anticipation of Mr. Marr moving to the role of Executive Chairman of the Board, in February 2018, the Compensation Committee approved a decrease in Mr. Marr’s annual salary of 30% from $425,000 to $300,000.

				In February 2019, the Compensation Committee approved a 3% increase in base salary for Mr. Marr with no change to his short-term incentive target or the number of stock options and performance-based restricted stock units for 2019. The Compensation Committee considered multiple factors including the continued leadership transition at the Company and Mr. Marr’s continuing involvement in strategic initiatives as his first full year as Executive Chairman continued.


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Point of Discussion with Shareholders	Tyler Actions
	On May 28, 2019, following the 2019 Annual Meeting of Shareholders, after reviewing a request from Mr. Marr to reduce his 2019 long-term compensation, the Compensation Committee recommended, and the Board of Directors approved, a 39% reduction in options to be granted to Mr. Marr in 2019 from 22,500 to 13,750 stock options.

	In February 2020, the Compensation Committee requested, and the Board of Directors approved, a further reduction in Mr. Marr’s compensation to reflect continued success in the transition of Mr. Marr to the Executive Chairman role as follows:
	•	3% reduction in annual salary to $300,000
	•	Elimination of short-term incentive for 2020
	•	Adjustment to total long-term incentive with reduction in stock options from 13,750 to 7,500 and elimination of performance-based restricted stock units

	The Compensation Committee believes the changes to Mr. Marr’s compensation, beginning in 2018 continuing through 2020, are consistent with the multi-year leadership transition at Tyler and with feedback received in our discussions with investors.
Communication of Environmental, Social and Governance Practices	The Company has consistently invested in those social and governance practices most important to our clients, employees and shareholders. In our say-on-pay outreach discussions, investors agreed and recommended more robust communications about our corporate social responsibility and sustainability efforts and accomplishments.

	We have enhanced our ESG reporting in the “Environmental and Social Responsibility” section of the Proxy and on our website and will continue to provide enhanced disclosure of our continuing efforts and accomplishments in each of the areas noted. The Company is proud to share these examples of our commitment to environmental, social and governance practices that are important to our shareholders, employees and clients.
Board Composition	We have a consistent record of selecting director nominees according to the qualifications and philosophies set forth in “Tyler Management—Board Diversity and Director Nominee Qualifications.” As noted therein, we do not apply a strict formula for measuring diversity on our Board, but instead take a holistic view towards achieving a mix of backgrounds, perspectives, and experiences. In our say-on-pay outreach discussions, investors commented favorably on Tyler leadership, including Board leadership. While no single element of diversity was specifically called out for improvement, some investors did comment on the tenure of certain directors. We appreciate the long-term perspective and wisdom our longer-serving directors bring to our Board and believe we have balanced that perspective with directors of more medium- and short-term tenure. This year, we are also nominating a new director. We will continue to evaluate the overall composition of not just our Board but also each Committee on our Board to ensure that fresh and new perspectives are represented.


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COMPENSATION PHILOSOPHY AND OBJECTIVES

Our executive compensation program is designed and administered to reward for performance which drives shareholder value based on the following objectives:

•	Provide compensation that attracts, motivates, retains and rewards a talented executive team with deep experience in the public sector and the technology industry;

•	Design compensation to prevent excessive risk taking and responsible cost management with a mix of compensation elements balanced between fixed pay, annual incentives, and long-term incentives; and

•	Deliver compensation based on the achievement of key operational results and long-term strategic objectives which drive company performance and align executive compensation with increased shareholder value.

Elements of Executive Compensation

To achieve these objectives, we use a mix of fixed compensation, short-term incentives and long-term incentives to provide total compensation that is designed to reward sustained strong performance while providing cash compensation that remains competitive for our industry.

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 executive officer 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	Form of Compensation	Purpose	Metric
Base salary	Cash	Provide competitive, fixed compensation to attract and retain exceptional executive talent	Base salary is a fixed component and changes to salary are dependent on individual performance, peer and market comparisons and retention goals
Annual Incentive compensation	Cash*	Create a strong financial incentive for achieving or exceeding annual financial performance goals	Achievement of adjusted earnings per share goals, which are recommended by the CEO and approved by the Compensation Committee
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	3-year Average Revenue Growth (PSUs) Stock price; shareholder value created, in the form of increased value per share (Options)

Delivered as cash upon achievement of performance goals in 2019. In February 2020, the Compensation Committee recommended, and the Board of Directors approved, future annual incentives to executive management to be delivered in the form of short-term PSUs based on the achievement of annual performance goals.


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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 for performance, not perquisites			Total Target Compensation for our Named Executive Officers is consistently set at or below levels within our peer group.

				78% of total target compensation to our Named Executive Officers is “at risk” compensation.

				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 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 with responsibility on behalf of our shareholders			Our Compensation Committee is comprised solely of independent directors

				We maintain an executive compensation recovery policy 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 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 transaction that could reduce or limit their holdings, ownership or interest in Company securities.

				We conduct 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 Compensation-Related Risk Assessment.

				We do not provide excise tax payments or “gross ups” on future post-employment on 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 COMPENSATION

Role of the Compensation Committee

The 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:

•	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 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. Their 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 their duties, the Compensation Committee consults with our Human Resources, Finance and Legal departments to gather information regarding corporate and individual performance, peer and market comparator data, and financial and legal best practices and regulatory changes. The Compensation Committee reviews recommendations for performance measures and related target levels of pay for our Named Executive Officers, which is 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 Chairman of the Board and our Chief Executive Officer relative to the level of attainability and risk associated with performance objectives in the performance-based compensation elements and 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.

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 performance, as reflected in the achievement of key strategic, financial and operational objectives;

•	Responsible compensation pay practices and mix of pay elements which minimize excessive risk taking;

•	Base salaries, annual incentives and long-term incentives provided in our peer group and for peer roles in the Radford Global Technology Survey; and

•	Performance and retention of the named executive officers and the value of that retention to 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, 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 2019, the Compensation Committee did not engage its own outside consultant for advice. The Compensation Committee was comfortable with the benchmarking data and other supporting information provided by the Chief Human Resources Officer in 2019 and believed that outside consultants were unnecessary for 2019 review of compensation. Our Named Executive Officers’ compensation is primarily composed of base salary, bonus, and stock option and PSU grants, and does not include more complex elements such as deferred compensation plans at this time.


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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, most of which are in the enterprise software space.

The 20 companies in the Peer Group used to assist in setting 2019 compensation were:

	ACI Worldwide, Inc.			MicroStrategy, Incorporated
	Ansys, Inc.			NetScout Systems, Inc.
	Aspen Technology, Inc.			Pegasystems, Inc.
	athenahealth, Inc.			RealPage, Inc.
	Blackbaud, Inc.			ServiceNow, Inc.
	Guidewire Software, Inc.			Splunk, Inc.
	Jack Henry & Associates, Inc.			SS&C Technologies Holdings, Inc.
	j2 Global, Inc.			Tableau Software, Inc.
	Manhattan Associates, Inc.			The Ultimate Software Group, Inc.
	Medidata Solutions, Inc.			Veeva Systems Inc.

We review the Peer Group annually to ensure that the companies in the peer group remain relevant and provide meaningful compensation comparisons. In February 2019, the Compensation Committee reviewed the Peer Group utilized in 2018, comparing them to Tyler considering the following four key metrics: revenues; net income; market capitalization; and total assets. The Compensation Committee determined the same Peer Group was appropriate for 2019 executive compensation comparative purposes.

The table below shows a comparison of those key metrics for Tyler to the peer group average:

	Revenues	Net Income	Market Capitalization	Total Assets
	(in millions)		(in billions)
Tyler Technologies, Inc.	$841	$164	$7.4	$1.6
Peer Group Average	$973	$191^(a)	$8.5	$1.9

(a)	Excludes peer companies with net losses

Compensation Survey Data

In addition to peer company data, 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. Nearly 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.


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ANALYSIS OF NAMED EXECUTIVE OFFICER COMPENSATION

2019 Named Executive Compensation Structure and Process

In February 2019, the Compensation Committee approved the total 2019 compensation packages for each of the Named Executive Officers, including the Chief Executive Officer. The total compensation packages included base salary, an annual cash incentive compensation plan, and proposed stock incentive awards. The Compensation Committee reaffirmed the appropriateness and amount of share-based awards prior to the June 1 and December 1 awards.

Annual Salary

Annual salary is intended to provide competitive, fixed compensation to attract and retain exceptional executive talent. Each year, the Compensation Committee approves the base salaries for each of the Named Executive Officers who may or may not receive a salary increase in any given year. Prior to making a decision regarding any change in annual salaries for the Named Executive Officers, the Committee reviews the Peer Group and Radford Survey, internal business plans and performance, and general economic conditions in the context of our objectives for executive compensation.

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 February 2019, the Compensation Committee approved annual salary adjustments for each of the Named Executive Officer’s annual base salary as set forth below:

Name	Increase (Decrease)	2018	2019
John S. Marr, Jr.	3%	$300,000	$309,000
H. Lynn Moore, Jr.	3%	$500,000	$515,000
Brian K. Miller	3%	$383,000	$394,490

The 3% increase for Mr. Marr followed a 29% reduction in annual salary approved by the Compensation Committee in 2018 to reflect his new role as Executive Chairman. The review and approval of increases by our Compensation Committee to our Named Executive Officers 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 $500 million and $1 billion. The annual salary approved by the Committee for 2019 is below the peer group median by 15%, 75% and 14% for our CEO, Executive Chairman and CFO, respectively. It is 22% lower, 11% higher and 38% higher than the Radford Survey median annual salary for our CEO, Executive Chairman and CFO, respectively.

The Compensation Committee considered multiple factors including individual and company performance in the previous fiscal year, executive experience, retention and the company’s growth in both revenue and earnings per share in independently determining the 2019 salary adjustments. 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. Market survey data is not used as a benchmark per se, but rather is referred to by the Compensation Committee as a reasonableness check.

Annual Incentives

Annual incentives are intended to reward the achievement of short-term objectives, which, when consistently achieved, drive long-term shareholder value. Our 2019 incentive compensation plan is based on annual non-GAAP earnings per share and is structured with graduated benefits for overachievement and consequences for underachievement of objectives. While our annual incentive compensation plan is based on a given year’s non-GAAP earnings per share, the initial establishment of 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.

	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, and expenses associated with amortization of intangibles arising from business combinations.


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Each year, the Compensation Committee approves the incentive compensation for the prior fiscal year based on the achievement of defined incentive compensation plans that were approved by the Compensation Committee at the beginning of the prior fiscal year. Annual incentives for the previous fiscal year are reviewed by the Compensation Committee in the first quarter of the following fiscal year and generally paid shortly thereafter. While the payment of annual incentive compensation is based solely on the achievement of pre-defined and pre-approved metrics, 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, unforeseen “one-time” events affecting financial performance or driving shareholder value, the executive’s assumption of additional responsibilities, the degree of difficulty of a particular assignment, and the executive’s experience, tenure, and future prospects with Tyler.

A significant portion of each executive’s annual compensation is in the form of an annual incentive. We believe that some meaningful portion of the executive’s compensation should be contingent upon the successful achievement of our annual corporate objectives.

In February 2019, the Compensation Committee approved the 2019 Incentive Compensation Plan recommended by the Chief Executive Officer, which was a 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, and expenses associated with the amortization of acquisition intangibles arising from business combinations, and did not include any individual performance goals). The 2019 Incentive Compensation Plan for the Named Executive Officers was 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 determined based on experience, level of responsibility, and retention risk.

The 2019 Incentive Compensation Plan provided the opportunity for the executive officers, as well as our corporate employees, to earn incentive compensation at the following levels:

•	175% of target based on achieving 112.9% of adjusted earnings per share goal

•	170% of target based on achieving 112.1% of adjusted earnings per share goal

•	165% of target based on achieving 111.4% of adjusted earnings per share goal

•	160% of target based on achieving 110.6% of adjusted earnings per share goal

•	155% of target based on achieving 109.9% of adjusted earnings per share goal

•	150% of target based on achieving 109.1% of adjusted earnings per share goal

•	145% of target based on achieving 108.3% of adjusted earnings per share goal

•	140% of target based on achieving 107.6% of adjusted earnings per share goal

•	135% of target based on achieving 106.8% of adjusted earnings per share goal

•	130% of target based on achieving 106.1% of adjusted earnings per share goal

•	125% of target based on achieving 105.3% of adjusted earnings per share goal

•	120% of target based on achieving 104.6% of adjusted earnings per share goal

•	115% of target based on achieving 103.8% of adjusted earnings per share goal

•	110% of target based on achieving 103.0% of adjusted earnings per share goal

•	100% of target based on achieving 102.3% of adjusted earnings per share goal

•	95% of target based on achieving 101.5% of adjusted earnings per share goal

•	90% of target based on achieving 100.8% of adjusted earnings per share goal

•	85% of target based on achieving 100.0% of adjusted earnings per share goal

•	80% of target based on achieving 99.2% of adjusted earnings per share goal

•	75% of target based on achieving 98.5% of adjusted earnings per share goal

•	70% of target based on achieving 97.7% of adjusted earnings per share goal

•	65% of target based on achieving 97.0% of adjusted earnings per share goal

•	60% of target based on achieving 96.2% of adjusted earnings per share goal

•	55% of target based on achieving 95.4% of adjusted earnings per share goal

•	50% of target based on achieving 94.7% of adjusted earnings per share goal

•	45% of target based on achieving 93.9% of adjusted earnings per share goal

•	40% of target based on achieving 93.2% of adjusted earnings per share goal

•	0% of target based on achieving less than 93% of adjusted earnings per share goal


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The operating plan is developed from the “bottom-up” and considers a wide range of factors that impact our results, including the general economic environment, our market, competitive landscape, initiatives and investments, and various other risks and opportunities. As of the beginning of the plan year, achievement of the plan was generally considered to be challenging but reasonably possible when all such factors were considered.

In February 2020, the Compensation Committee approved 2019 incentive awards at 85% of base salary for Messrs. Marr, Miller, and Moore. Awards under the 2019 Incentive Compensation Plan were paid in cash upon approval in February 2020.

Non-GAAP EPS*

$4.91

$5.39 to $5.429

$5.95

$5.30

85%

Included adjustments to 2019 GAAP pre-tax income for (i) $4.9 million of write-downs of acquisition-related deferred revenue and acquired leases, (ii) $61.1 million of share-based compensation expense and employer portion of payroll taxes on employee stock transactions, (iii) $52.1 million of amortization of intangibles arising from business combinations and (iv) $1.4 million of acquisition-related costs.

Long-term Incentives

The third component of our Named Executive Officers’ 2019 compensation is long-term stock incentives, including PSUs and stock options. 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.

Equity incentives, comprised of stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), are 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 fifteen years; otherwise, options vest ratably over a five-year period. Beginning in 2018, RSUs also vest ratably over three-year or five-year periods, and PSUs vest 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. 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 and RSUs are granted in semi-annual tranches (on or about June 1 and December 1), and PSUs 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 an overall number and value of equity incentive awards that is reasonable in terms of shareholder dilution; and

•	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; and

•	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 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 excessing 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—2019 Named Executive Officer Compensation Structure and Process—Compensation Mix” below.

For 2019, the Compensation Committee approved grants of PSUs for 7,500 shares for each of Messrs. Marr and Moore and 5,000 shares for Mr. Miller. These grants to the Named Executive Officers, and therefore the actual number of PSUs, are subject to performance-based vesting with a performance period of three years. The performance measure used to determine the number of PSUs vested at the end of the three-year performance period is the average annual revenue growth over that period. The three-year cliff vesting period reinforces the importance of sustained revenue 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 table sets forth the performance criteria that must be met for annual PSU grants to be earned and eligible for vesting:

	Average Annual Revenue Growth⁽¹⁾			Percentage of PSUs to be earned and eligible for vesting
	Under 6%			—
	6.0% -7.49%			50%
	7.5%-8.99%			80%
	9.0%-10.99%			100%
	11.0% and above			120%

(1)	Adjusted to exclude acquisitions with revenue 3% or greater of Tyler consolidated revenue.

In addition, in February 2019, the Compensation Committee preliminarily approved the size of option grants to our Named Executive Officers to be made in two equal tranches on June 1 and December 1, 2019, 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.

In so doing, the Compensation Committee considered many factors, including the fact that our Named Executive Officers’ total cash compensation was below the average as reflected in the Peer Group, our 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. Prior to June 1, 2019, the Compensation Committee initially approved the annual grants of share-based awards to each Named Executive Officer as set forth below:

	PSUs	Stock Options	Stock Options
Name	March 1, 2019	June 1, 2019	December 1, 2019
John S. Marr, Jr.	7,500	11,250	11,250
H. Lynn Moore, Jr.	7,500	11,250	11,250
Brian K. Miller	5,000	7,500	7,500

On May 28, 2019, after reviewing a request from Mr. Marr to reduce his 2019 long-term compensation, the Compensation Committee recommended, and the Board of Directors approved, a 39% reduction in options to be granted to Mr. Marr in 2019 from 22,500 to 13,750 stock options.

As a result of this change, the following PSUs and stock options were granted to the Named Executive Officers in 2019:

	PSUs	Stock Options	Stock Options
Name	March 1, 2019	June 1, 2019	December 1, 2019
John S. Marr, Jr.	7,500	6,875	6,875
H. Lynn Moore, Jr.	7,500	11,250	11,250
Brian K. Miller	5,000	7,500	7,500

Share-based awards were made in 2019 to approximately 12% of all employees. The Named Executive Officers were awarded approximately 17% of the total annual recurring stock incentive awards granted to employees in 2019 as part of our annual recurring stock incentive award program. In 2019, 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.			5.1%
	H. Lynn Moore, Jr.			7.2%
	Brian K. Miller			4.8%


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Compensation Mix

The mix of the three key elements of 2019 Named Executive Officer compensation is designed with the objective of aligning a substantial portion of executive pay with the achievement of performance goals and increased value to Tyler shareholders. While base 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 risk motivates and challenges our Named Executive Officers to achieve positive returns for our shareholders. For 2019, the proportion of pay at risk for our Named Executive Officers was as follows:

Name	Base Salary	Compensation at Risk
Name	Base Salary	Bonus	Stock Incentive Awards
John S. Marr, Jr.	10%	8%	82%
H. Lynn Moore, Jr.	12%	11%	77%
Brian K. Miller	14%	12%	74%

The table above depicts the relative mix of pay elements for 2019, consisting of base salary earned, annual bonus cash 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.”

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 2019:

•	Key operational and long-term objectives including management’s goal of year-over-year earnings per share growth, continued strengthening of our balance sheet, profitability and growth of recurring revenues;

•	Management’s objectives to develop and deploy premier technology through continued investment;

•	Mr. Moore’s increased responsibilities in driving the achievement of each of these strategic initiatives and Mr. Marr's role and level of involvement;

•	The continued retention of each of our Named Executive Officers through the leadership transition;

•	Reference to levels of compensation of other chief executive officers of similarly sized, publicly-held companies in similar industries;

•	Terms of employment agreements, including equity granted with the five-year employment agreements executed in 2018

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 2019 to be appropriate and reasonable.

2020 Named Executive Officer Compensation

In February 2020, the Compensation Committee reviewed the 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 information provided by the Chief Human Resources Officer, including peer and market data. The Chief Human Resources Officer and Chief Legal Officer were present to answer questions and record the decisions of the Committee. The Named Executive Officers did not attend the Compensation Committee meeting. At the end of the review, the Compensation Committee approved the following 2020 total compensation for the Named Executive Officers:

Annual Salary

The Compensation Committee decreased Mr. Marr's annual salary 2.9% and increased the annual salaries of Mr. Moore and Mr. Miller 1.9% and 1.4%, respectively. This decision was based on multiple factors including the Company’s strong performance in 2019 and review of Peer Group and the Radford Survey data.


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Annual Incentive

The Compensation Committee removed the annual incentive from Mr. Marr's compensation program, to reflect the continued leadership transition and Mr. Marr's role as Executive Chairman of the Board.

The Committee approved current target bonus levels of 100% of base salary for Mr. Moore and Mr. Miller and approved a change to the 2020 Incentive Compensation Plan for Mr. Moore and Mr. Miller to deliver the incentive in the form of short-term performance-based restricted stock units which must be achieved using the graduated scale levels similar to those in the 2018 Incentive Compensation Plan as updated to reflect 2019 performance expectations. To earn 100% of the target bonus under the 2020 Incentive Compensation Plan, the Company must achieve 2020 non-GAAP earnings per share between $5.76 and $5.799, 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, 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% of target, the Company must achieve non-GAAP earnings per share of $5.28. The short-term PSUs have a date of grant of March 1, 2020, 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.

Long-term Incentive

Stock Options. For 2020, the Compensation Committee preliminarily approved stock option grants of 22,500 options to Mr. Moore and 15,000 options to Mr. Miller, which reflects no change from their annual grant of stock options in 2019. The Committee approved a stock option grant of 7,500 options to Mr. Marr, which reflects multiple factors including Mr. Marr's role as Executive Chairman, his continued vesting of restricted stock from the five-year grant associated with his 2018 employment agreement, and the incorporation of feedback from our outreach to shareholders in 2019.

The options will be issued in two equal tranches on or about June 1 and December 1, 2020, subject to final approval by the Compensation Committee. Options will vest ratably over a three-year period beginning on the first anniversary of the grant date for the Named Executive Officers, each of whom is at least fifty years of age and has a tenure with the Company of at least fifteen years. The Compensation Committee believes these vesting schedules emphasize the long-term nature of this compensation component, and the changes approved in 2020 long-term incentive compensation further align the interests of our Named Executive Officers with those of the shareholders.

PSUs. For 2020, the Compensation Committee conditionally approved grants of long-term PSUs of 5,000 shares to Mr. Moore and 3,333 shares to Mr. Miller. The PSUs were granted on March 1, 2020. In 2019, Mr. Moore was granted 7,500 PSUs, and Mr. Miller was granted 5,000 PSUs. The Compensation Committee did not grant PSUs in 2020 to Mr. Marr, who received 7,500 PSUs in 2019. The reduction in the number of PSUs granted to our Named Executive Officers in 2020 reflects the increased value that has been created for our shareholders on a per share basis, a review of peer and market data on the value of equity compensation granted, and a reflection of Mr. Marr's continued transition to the Executive Chairman role.

Annual grants of long-term PSUs to the Named Executive Officers are subject to performance-based vesting with a performance period of three years. The performance measure used to determine the number of PSUs vested at the end of the three-year performance period is the average annual revenue growth over that period. The three-year cliff vesting period reinforces the importance of sustained revenue 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.

The following table sets forth the performance criteria that must be met for annual PSU grants to be earned and eligible for vesting:

	Average Annual Revenue Growth⁽¹⁾			Percentage of PSUs to be earned and eligible for vesting
	Under 6%			—
	6.0%-7.49%			50%
	7.5%-8.99%			80%
	9.0%-10.99%			100%
	11.0% and above			120%

(1)	Adjusted to exclude acquisitions with revenue 3% or greater of Tyler consolidated revenue.


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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, and other welfare benefit programs.

Employment Agreements

We have historically executed five-year employment agreements with our Named Executive Officers based on our belief that these agreements are in the best interests of our shareholders. These agreements have historically included five-year equity grants. The employment 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.

In February 2018, we entered into new five-year employment agreements with John S. Marr, Jr., H. Lynn Moore, Jr., and Brian K. Miller. Under the terms of the employment agreements, Messrs. Marr, Moore and Miller receive minimum base salaries of $300,000, $500,000 and $383,000, respectively. These executives also participate in performance bonus or incentive compensation plans as approved by the Compensation Committee and receive all employee benefits and perquisites normally offered to our executive employees. The 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 the executive’s termination of employment without cause, or upon the executive’s termination of employment within thirty days of a change in control. A change in control is defined as our merger or consolidation into an unaffiliated entity, our dissolution or liquidation, the sale of all or substantially all of our assets, the acquisition by any person, entity or group of more than 30% of our voting stock, or a change in the majority of our Board of Directors that was not approved by the then existing directors. In addition to the payment of accrued compensation and the severance payment, each agreement also provides that we will continue to provide medical benefits for 12 months after the date of termination without cause or upon a change in control. In the event of a termination without cause, a termination due to disability or death, or a termination because of a change in control, 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.

We developed a standard severance package for our Named Executive Officers because we believe it is necessary to attract and retain qualified executive officers and to minimize the distraction caused by a potential transaction and reduce the risk that an executive officer departs before an acquisition is consummated. We believe that a pre-existing plan allows our executive officers to focus on continuing normal business operations and on 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.

In addition, the employment agreements provide that Messrs. Marr, Moore and Miller were to be granted options to purchase 112,000, 112,000, and 40,000 shares of our Common Stock, respectively. The options were granted at an exercise price equal to the closing market price of our common stock as reported by the New York Stock Exchange as of the February 26, 2018, date of grant. The options vest in equal installments on the first, second, third, fourth, and fifth anniversary of the grant date and are subject to terms and conditions of the 2018 Stock Incentive Plan and our standard option agreement.

The employment agreements also provide that Messrs. Marr, Moore and Miller were to be granted 36,000, 36,000 and 12,000 restricted stock units under the 2018 Stock Incentive Plan. The granted restricted stock units vest in equal installments on the first, second, third, fourth, and fifth anniversary of the date of the employment agreements.

In contrast to our general vesting schedules, the vesting schedules of the stock option and restricted stock unit grants associated with the 2018 employment agreements were structured to coincide with the full five-year term of the contracts.


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The equity compensation associated with our five-year employment agreements is viewed by the Compensation Committee as one component of total equity compensation to the Named Executive Officers as shown in the table below:

Equity Type	Grant Frequency	Vesting	Purpose
Performance - based restricted stock units	Annual	Three - year cliff, only if performance metric achieved	Performance - Average three-year revenue growth
Options	Annual	Vesting over three years	Performance - Growth in stock price/shareholder value
Options	Every five years	Vesting over five years	Retention of Named Executive Officers
Restricted stock units	Every five years	Vesting over five years	Retention of Named Executive Officers

Equity granted to the Named Executive Officers is intended to retain and reward for performance that meets or exceeds growth goals over time. Equity type, grant frequency and vesting period as well as the performance criteria selected for use with PSUs has been chosen purposefully to drive consistent growth and increased shareholder value over time. In determining the value of equity compensation provided in association with the five-year employment agreements, the Compensation Committee considered Named Executive Officer experience, total compensation for each Named Executive Officer, including base, bonus, and the value of proposed annual equity grants as well as multi-year growth performance targets, and Peer Group and market compensation data. Total compensation, including the annual value of the grant associated with the five-year employment agreements, is reviewed each year by the Compensation Committee. As noted in previous years, annual executive equity compensation, excluding the value of the grants associated with our five-year employment agreements, is well below Peer Group equity compensation in the years between our five-year employment agreement grants. However, as discussed above, based on Tyler’s engagement with shareholders in 2019, we do not plan to issue an equity grant to our Named Executive Officers with any future employment agreements after the current agreements expire in 2023.

Other Important Elements of Our Executive Compensation

Executive Compensation Recovery Policy

Accountability is one of the fundamental Company's 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 us 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.

Stock Ownership Requirements and Guidelines

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.

Anti - Hedging and Pledging

We maintain a Stock Anti-Hedging and Pledging Policy, described at the “Stock Anti-Hedging and Pledging Policy” section, to prohibit our executives from engaging in transaction that could reduce or limit their holdings, ownership or interest in Company securities.


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Frequency of Say-on-Pay Vote

In October 2016, our Board of Directors decided to submit an advisory vote on executive compensation to our shareholders on annual basis beginning with the 2017 annual meeting. The proposal gives our shareholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our Named Executive Officers. Shareholder feedback regarding our executive compensation program and governance practices is important to us. As described in the “Shareholder Engagement” section of this Compensation Discussion and Analysis, we have incorporated feedback from our shareholders in the review of our executive compensation program and plan to continue the practice of the annual advisory vote and our ongoing outreach to shareholders.

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 three compensation elements. The base 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 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 goals and long-term stock price growth through the grant of long-term PSUs and stock options. Our annual incentive compensation plans are graduated scale plans rather than based on “all or nothing” performance, 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 five-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.

J. Luther King, Jr., Chair
Donald R. Brattain
Glenn A. Carter

Compensation Committee Interlocks and Insider Participation

In 2019, the Compensation Committee consisted of J. Luther King, Jr. (Chair), Donald R. Brattain, and Glenn A. Carter. 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.


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EXECUTIVE COMPENSATION

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 2019, 2018, and 2017:

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 Chairman of the Board	2019	$309,000	$—	$1,547,100	$1,025,611	$262,650		$8,590	$3,152,951
	2018	$300,000	$—	$9,928,320	$8,869,480	$315,000	$—	$8,435	$19,421,235
	2017	$425,000	$—	$—	$2,780,462	$510,000	$—	$9,630	$3,725,092
H. Lynn Moore, Jr. President and Chief Executive Officer	2019	$515,000	$—	$1,547,100	$1,678,272	$437,750		$13,008	$4,191,130
	2018	$500,000	$—	$9,928,320	$8,869,480	$525,000	$—	$12,452	$19,835,252
	2017	$425,000	$—	$—	$2,780,462	$510,000	$—	$12,961	$3,728,423
Brian K. Miller Executive Vice President, Chief Financial Officer and Treasurer	2019	$394,490	$—	$1,031,400	$1,118,848	$335,317	$—	$12,920	$2,892,975
	2018	$383,000	$—	$3,888,640	$3,641,914	$402,150	$—	$13,890	$8,329,594
	2017	$370,000	$—	$—	$1,835,105	$444,000	$—	$12,232	$2,661,337

(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 9 of the Tyler Technologies’ financial statements in the Form 10-K for the year ended December 31, 2019, 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.

CEO Pay Ratio

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 of our employees, excluding our CEO, who were employed by us on December 31, 2019. We included all employees, whether employed on a full-time, part-time or seasonal basis. To determine the median employee, we calculated the total annual compensation for each of our 5,219 employees as the sum of the following amounts:

•	Annual base pay

•	The company's matching contributions to the employee's 401(k) 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 of 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 2019 Summary Compensation table included in this proxy statement. The total annual compensation calculated for our CEO was $4,191,130 and for our median employee was $87,564. The resulting ratio for our CEO’s pay compared with the pay of our median employee for 2019 is 47.86 to 1.


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Grants of Plan-Based Awards in 2019

The following table sets forth certain information relating to grants of plan-based awards to the Named Executive Officers during 2019:

		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⁾
Name	Grant Date	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)		Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)⁽⁴⁾
John S. Marr, Jr.	2/5/2019	$309,000	$540,750
	3/1/2019			3,750	7,500	9,000
	6/1/2019						6,875	$213.35	$443,308
	12/1/2019						6,875	$290.17	$582,303
H. Lynn Moore, Jr.	2/5/2019	$515,000	$901,250
	3/1/2019			3,750	7,500	9,000
	6/1/2019						11,250	$213.35	$725,412
	12/1/2019						11,250	$290.17	$952,860
Brian K. Miller	2/5/2019	$394,490	$690,358
	3/1/2019			2,500	5,000	6,000
	6/1/2019						7,500	$213.35	$483,608
	12/1/2019						7,500	$290.17	$635,240

(1)	The target and maximum plan award amounts reported in these columns are derived from our 2019 Incentive Compensation Plan. The actual payout amounts for 2019 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 2019 Incentive Compensation Plan. The actual vested amounts for 2019 are set forth in the 2019 Equity Incentive Plan Compensation column of our Summary Compensation Table.

(3)

The options awarded on June 1, 2019, and December 1, 2019, for Messrs. Marr, Moore and Miller 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, 2019, and December 1, 2019; 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 2019. 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.


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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, 2019:

		Option Awards				Stock Awards
		Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)⁽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⁾ ($)
Name	Grant Date	Exercisable	Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock that have not vested (#)
John S. Marr, Jr.	5/9/2018					28,800	$8,640,576
	3/1/2019							7,500	$2,250,150
	6/1/2018							7,500	$2,250,150
	6/15/2011	4,152	—	$24.08	6/15/2021
	6/15/2012	2,540	—	$39.36	6/15/2022
	2/11/2013	80,000	—	$54.45	2/11/2023
	6/14/2013	28,800	—	$68.17	6/14/2023
	12/13/2013	28,800	—	$100.43	12/13/2023
	6/13/2014	26,000	—	$81.21	6/13/2024
	12/15/2014	26,000	—	$108.81	12/15/2024
	6/1/2015	25,000	—	$121.05	6/1/2025
	12/1/2015	25,000	—	$176.80	12/1/2025
	6/1/2016	25,000	—	$154.85	6/1/2026
	12/1/2016	25,000	—	$143.42	12/1/2026
	6/1/2017	16,666	8,334	$171.44	6/1/2027
	12/1/2017	16,666	8,334	$181.79	12/1/2027
	2/26/2018	22,400	89,600	$205.66	2/26/2028
	6/1/2018	3,750	7,500	$231.68	6/1/2028
	12/1/2018	3,750	7,500	$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
H. Lynn Moore, Jr.	5/9/2018					28,800	$8,640,576
	3/1/2019							7,500	$2,250,150
	6/1/2018							7,500	$2,250,150
	2/11/2013	50,000	—	$54.45	2/11/2023
	12/13/2013	19,200	—	$100.43	12/13/2023
	6/13/2014	16,269	—	$81.21	6/13/2024
	12/15/2014	17,500	—	$108.81	12/15/2024
	6/1/2015	13,400	3,350	$121.05	6/1/2025
	12/1/2015	13,400	3,350	$176.80	12/1/2025
	6/1/2016	10,050	6,700	$154.85	6/1/2026
	12/1/2016	10,050	6,700	$143.42	12/1/2026
	6/1/2017	10,000	15,000	$171.44	6/1/2027
	12/1/2017	16,666	8,334	$181.79	12/1/2027
	2/26/2018	22,400	89,600	$205.66	2/26/2028
	6/1/2018	3,750	7,500	$231.68	6/1/2028
	12/1/2018	3,750	7,500	$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


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		Option Awards				Stock Awards
		Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)⁽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⁾ ($)
Name	Grant Date	Exercisable	Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock that have not vested (#)
Brian K. Miller	5/9/2018					9,600	$2,880,192
	3/1/2019							5,000	$1,500,100
	6/1/2018							5,000	$1,500,100
	12/15/2014	3,500	—	$108.81	12/15/2024
	12/1/2016	4,250	—	$143.42	12/1/2026
	6/1/2017	11,000	5,500	$171.44	6/1/2027
	12/1/2017	11,000	5,500	$181.79	12/1/2027
	2/26/2018	8,000	32,000	$205.66	2/26/2028
	6/1/2018	2,500	5,000	$231.68	6/1/2028
	12/1/2018	2,500	5,000	$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

(1)

Stock options expire on the tenth anniversary of the date of grant. Stock options granted in 2011 and 2012 vest and become exercisable ratably on the third, fourth, fifth, and sixth anniversaries of the date of grant. All other 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 fifteen 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 $300.02, which was the closings market price of our common stock on December 31, 2019. 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 continue status an eligible person (as defined in the 2018 Stock Incentive Plan).

(3)

Value based on $300.02, which was the closings market price of our common stock on December 31, 2019. 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, 2019:

	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.	105,000	$19,993,336	7,200	$1,479,600
H. Lynn Moore, Jr.	57,231	$11,605,932	7,200	$1,479,600
Brian K. Miller	90,090	$12,076,047	2,400	$493,200


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Potential Payments under Employment Contracts

The Named Executive Officers would have been eligible to receive the payments set forth in the table below had their employment been terminated on December 31, 2019, including if a change in control had occurred during 2019:

	Termination Without Cause				Upon a Change in Control
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.	$1,236,000	$16,233	$6,974,427	$7,024,086	$1,236,000	$16,233	$6,974,427	$7,024,086
H. Lynn Moore, Jr.	$2,060,000	$23,344	$8,768,079	$7,024,086	$2,060,000	$23,344	$8,768,079	$7,024,086
Brian K. Miller	$1,577,960	$18,146	$3,589,016	$2,959,307	$1,577,960	$18,146	$3,589,016	$2,959,307

Director Compensation

The following table sets forth a summary of the compensation paid to our non-employee directors in 2019:

Name	Fees Earned or Paid in Cash ($)⁽¹⁾	Stock Awards ($)⁽²⁾	Total ($)
Donald R. Brattain	$74,250	$249,872⁽³⁾	$324,122
Glenn A. Carter	$72,250	$249,872⁽³⁾	$322,122
Brenda A. Cline	$89,250	$249,872⁽³⁾	$339,122
J. Luther King, Jr.	$87,750	$249,872⁽³⁾	$337,622
Daniel M. Pope	$55,750	$249,872⁽³⁾	$305,622
Dustin R. Womble	$40,500	$249,872⁽³⁾	$290,372

(1)	Non-employee directors receive the following compensation:

•	An annual retainer of $60,000 for the chair of the Audit Committee, $55,000 for the chair of the Compensation Committee, $50,000 for the chair of the Nominating Committee and $40,000 for the other non-employee directors

•	A fee of $3,500 for each Board meeting attended in person and $1,750 for each Board meeting attended via telephone

•	A fee of $3,000 for each Audit Committee meeting attended in person and $1,500 for each Audit Committee meeting attended via telephone

•	A fee of $2,500 for each Compensation Committee meeting attended in person and $1,250 for each Compensation Committee meeting attended via telephone

•	A fee of $1,500 for each Nominating and Governance Committee meeting attended in person and $750 for each Nominating and Governance Committee meeting attended via telephone

•	Reimbursement for reasonable out-of-pocket expenses incurred in connection with travel to and from, and attendance at, meetings of the Board of Directors or its committees and related activities

(2)

On May 7, 2019, we granted each of our non-employee directors 1,150 restricted stock units with a grant date fair value of $249,872, 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 2019.

(3)	The following table shows the aggregate shares underlying outstanding stock options and restricted stock units, based upon grants made as part of director compensation, held by our non-employee directors as of December 31, 2019:

Name	Number of Stock Options (#)	Number of Stock Awards (#)
Donald R. Brattain	10,000	1,150
Glenn A. Carter	20,775	1,150
Brenda A. Cline	15,000	1,150
J. Luther King, Jr.	30,000	1,150
Daniel M. Pope	10,000	1,150
Dustin R. Womble	148,118	1,150


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REPORT OF THE AUDIT COMMITTEE

The 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, the independent auditors’ qualifications and independence, the performance of our independent auditors, the effectiveness of our disclosure controls and of our internal control 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 four times during 2019.

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, 2019, for filing with the SEC.

This report is submitted by the Audit Committee.

Brenda A. Cline, Chair
Donald R. Brattain
J. Luther King, Jr.


	48						2020 Proxy Statement

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our 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 or give more than a token value to anyone that has a business relationship with us;

•	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 associated with completion of the annual director and officer questionnaire.

In 2019, we employed Dane L. Womble, a brother of Dustin R. Womble. Dane L. Womble is the President of our Local Government division and received $497,554 in salary and bonus compensation in 2019 in exchange for services rendered.

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, if any shareholder residing at such an address wishes to receive a separate Annual Report or proxy statement, he or she may telephone the Investor Relations Department at 972-713-3714 or write to it at Tyler Technologies, Inc., 5101 Tennyson Parkway, Plano, Texas 75024, and a separate copy will be promptly delivered.

SHAREHOLDER PROPOSALS

Any proposal that a shareholder desires to present at the 2021 annual meeting must be received by us at our corporate headquarters no later than December 6, 2020.

				By Order of the Board of Directors,


				ABIGAIL DIAZ
				Chief Legal Officer Corporate Secretary

Plano, Texas
April 8, 2020


				2020 Proxy Statement 49

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John S. Marr, Jr., age 60

Executive Chairman of the Board

Director since: 2002

Mr. Marr has served as a director since May 2002. Mr. Marr has served as Executive Chairman of the Board of Tyler since May 2018. Mr. Marr served as Chairman of the Board and Chief Executive Officer from January 2017 until May 2018, when he assumed his current title and Lynn Moore, Jr. was appointed to the additional position of Chief Executive Officer. Mr. Marr also serves as Chairman of the Executive Committee. From July 2004 through December 2016, Mr. Marr served as President and Chief Executive Officer. From July 2003 until July 2004, Mr. Marr served as Chief Operating Officer. Mr. Marr also served as President of MUNIS, Inc. (“MUNIS”) from 1994 until July 2004. Mr. Marr began his career in 1983 with MUNIS, a provider of a wide range of software products and related services for county and city governments, schools, and not-for-profit organizations, with a focus on integrated financial systems. Tyler acquired MUNIS in 1999.

Key Attributes, Experience and Skills:

Executive Chairman of the Board since May 2018; Chairman of the Board since January 2017; Chief Executive Officer of Tyler from 2004 to 2018

Over 35 years of specific industry experience, including chief executive experience with MUNIS prior to acquisition by Tyler

Outside board experience as a former director of Mercy Hospital in Portland, Maine