-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wtae/a23JIrik+Ra24tEYeCMs0EsYPZT+TwqVM3XbLUDc1W3J8EgVMSKV1rTT96v o5P8H2GrQ6eKpmmbysOaFg== /in/edgar/work/20000816/0000950134-00-007182/0000950134-00-007182.txt : 20000922 0000950134-00-007182.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950134-00-007182 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYLER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000860731 STANDARD INDUSTRIAL CLASSIFICATION: [3310 ] IRS NUMBER: 752303920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10485 FILM NUMBER: 704268 BUSINESS ADDRESS: STREET 1: 2800 W MOCKINGBIRD LANE STREET 2: STE 3200 SAN JACINTO TOWER CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2147547800 MAIL ADDRESS: STREET 1: 2121 SAN JACINTO STREET STREET 2: SUITE 3200 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: TYLER CORP /NEW/ DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: TYLER THREE INC DATE OF NAME CHANGE: 19600201 10-Q 1 e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (x) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File Number 1-10485 TYLER TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-2303920 (State or other jurisdiction of ( I.R.S. employer incorporation or organization) identification no.) 2800 WEST MOCKINGBIRD LANE DALLAS, TEXAS 75235 (Address of principal executive offices) (Zip code) (214) 902-5086 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Number of shares of common stock of registrant outstanding at August 9, 2000: 46,679,447 2 TYLER TECHNOLOGIES, INC. INDEX
Page No. Part I - Financial Information (Unaudited) Item 1. Financial Statements Condensed Consolidated Balance Sheets ................................... 3 Condensed Consolidated Statements of Operations ......................... 4 Condensed Consolidated Statements of Cash Flows.......................... 5 Notes to Condensed Consolidated Financial Statements .................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................... 16 Part II - Other Information Item 1. Legal Proceedings ....................................................... 23 Item 4. Submission of Matters to a Vote of Security Holders...................... 23 Item 6. Exhibits and Reports on Form 8-K......................................... 23 Signatures ................................................................................ 24
Page 2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements TYLER TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value and number of shares)
(Unaudited) June 30, December 31, 2000 1999 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 1,873 $ 2,424 Accounts receivable (less allowance for losses of $1,387 in 2000 and $1,257 in 1999) 39,514 39,464 Income taxes receivable 3,326 3,392 Prepaid expenses and other current assets 3,583 3,301 Deferred income taxes 2,436 2,438 --------- --------- Total current assets 50,732 51,019 Property and equipment, net 21,141 21,789 Other assets: Investment securities available-for-sale 7,375 33,713 Goodwill and other intangibles, net 167,942 160,665 Other receivables 3,214 3,358 Sundry 3,028 1,991 --------- --------- $ 253,432 $ 272,535 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,651 $ 5,163 Accrued liabilities 10,376 13,786 Current portion of long-term obligations 31,961 3,747 Deferred revenue 24,052 24,303 --------- --------- Total current liabilities 70,040 46,999 Long-term obligations, less current portion 50,755 67,446 Deferred income taxes 13,112 13,869 Other liabilities 5,065 5,317 Commitments and contingencies Shareholders' equity: Preferred stock, $10.00 par value; 1,000,000 shares authorized, none issued -- -- Common stock, $.01 par value; 100,000,000 shares authorized; 48,042,969 and 44,709,169 shares issued at 6/30/00 and 12/31/99, respectively 481 447 Additional paid-in capital 160,595 151,298 Accumulated deficit (32,313) (24,615) Accumulated other comprehensive income - unrealized (loss) gain on securities available-for-sale (8,408) 17,931 Treasury stock, at cost: 1,363,522 and 1,418,482 shares at 6/30/00 and 12/31/99, respectively (5,895) (6,157) --------- --------- Total shareholders' equity 114,460 138,904 --------- --------- $ 253,432 $ 272,535 ========= =========
See accompanying notes. Page 3 4 TYLER TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three months ended Six months ended June 30, June 30, -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Software licenses $ 4,131 $ 6,419 $ 8,567 $ 10,034 Professional services 17,349 11,068 34,713 19,073 Maintenance 9,258 5,927 18,256 10,399 Hardware and other 1,401 3,513 3,094 6,234 -------- -------- -------- -------- Total revenues 32,139 26,927 64,630 45,740 Cost of revenues: Software licenses 735 835 1,437 1,466 Professional services and maintenance 17,363 9,503 34,926 16,800 Hardware and other 989 2,313 2,013 4,212 -------- -------- -------- -------- Total cost of revenues 19,087 12,651 38,376 22,478 -------- -------- -------- -------- Gross profit 13,052 14,276 26,254 23,262 Selling, general and administrative expenses 12,655 9,649 24,947 15,117 Litigation defense costs 90 -- 1,264 -- Amortization of intangibles 2,652 1,552 5,359 2,648 -------- -------- -------- -------- Operating income (loss) (2,345) 3,075 (5,316) 5,497 Interest expense 2,020 927 3,896 1,756 -------- -------- -------- -------- (Loss) income from continuing operations before income tax (benefit) provision (4,365) 2,148 (9,212) 3,741 Income tax (benefit) provision (454) 1,446 (2,001) 2,426 -------- -------- -------- -------- (Loss) income from continuing operations (3,911) 702 (7,211) 1,315 Loss from disposal of discontinued operations, net of income taxes (68) (780) (487) (1,345) -------- -------- -------- -------- Net loss $ (3,979) $ (78) $ (7,698) $ (30) ======== ======== ======== ======== Basic and diluted earnings (loss) per common share: Continuing operations $ (0.09) $ 0.02 $ (0.16) $ 0.04 Discontinued operations (0.00) (0.02) (0.01) (0.04) -------- -------- -------- -------- Net earnings (loss) per common share $ (0.09) $ (0.00) $ (0.17) $ (0.00) ======== ======== ======== ======== Weighted average common shares outstanding: Basic 44,894 38,539 44,092 36,648 Diluted 44,894 39,944 44,092 37,946
See accompanying notes. Page 4 5 TYLER TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six months ended June 30, ------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net loss $ (7,698) $ (30) Adjustments to reconcile net loss from operations to net cash (used) provided by operations: Depreciation and amortization 8,773 4,298 Deferred income taxes (848) (455) Discontinued operations - noncash charges and changes in operating assets and liabilities -- (665) Changes in operating assets and liabilities, exclusive of effects of acquired companies and discontinued operations (5,117) (2,663) -------- -------- Net cash (used) provided by operating activities (4,890) 485 -------- -------- Cash flows from investing activities: Additions to property and equipment (2,189) (2,123) Investment in database and other software development costs (5,769) (1,997) Cost of acquisitions, net of cash acquired (3,073) (22,412) Capital expenditures of discontinued operations -- (534) Proceeds from disposal of discontinued operations, net of transactions costs -- 11,291 Issuance of notes receivable -- (1,000) Other (524) (94) -------- -------- Net cash used by investing activities (11,555) (16,869) -------- -------- Cash flows from financing activities: Net borrowings on revolving credit facility 9,581 16,703 Payments on notes payable (1,461) (1,354) Payments of principal on capital lease obligations (665) (201) Proceeds from sale of common stock, net of issuance costs 9,270 -- Proceeds from notes receivable -- 643 Sale of treasury shares to employee benefit plan 19 20 Debt issuance cost (850) (100) -------- -------- Net cash provided by financing activities 15,894 15,711 -------- -------- Net decrease in cash and cash equivalents (551) (673) Cash and cash equivalents at beginning of period 2,424 1,558 -------- -------- Cash and cash equivalents at end of period $ 1,873 $ 885 ======== ========
See accompanying notes Page 5 6 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited information for Tyler Technologies, Inc. ("Tyler" or the "Company") includes all adjustments which are, in the opinion of the Company's management, of a normal or recurring nature and necessary for a fair summarized presentation of the condensed consolidated balance sheet at June 30, 2000, and the condensed consolidated results of operations and cash flows for the periods presented. Such financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. The consolidated results of operations for interim periods may not necessarily be indicative of the results of operations for any other interim period or for the full year and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (2) Acquisitions On January 3, 2000, the Company acquired all of the outstanding common stock of Capitol Commerce Reporter, Inc. ("CCR") of Austin, Texas for approximately $3.0 million in cash, $1.2 million in assumed debt and $2.8 million in five-year, 10% subordinated notes and financed the cash portion of the acquisition utilizing funds available under its bank credit agreement. The Company accounted for the acquisition of CCR using the purchase method of accounting and its results of operations are included in the Company's condensed consolidated financial statements since the date of acquisition. The purchase price has been preliminarily allocated to the assets and liabilities based on their estimated respective fair values. The purchase price exceeded the estimated fair value of CCR's identifiable net assets by approximately $6.8 million. Goodwill is being amortized over ten years. Since January 1, 1999, the Company has also acquired the entities described below in transactions which were accounted for by the purchase method of accounting and the cash portion of the consideration was financed utilizing funds available under its bank credit agreement. Results of operations of the acquired entities are included in the Company's condensed consolidated financial statements from their respective dates of acquisition.
Date Company Acquired Acquired ---------------- -------- Eagle Computer Systems, Inc. ("Eagle") March 1, 1999 Micro Arizala Systems, Inc. ("FundBalance") April 1, 1999 Process Incorporated ("MUNIS") April 21, 1999 Gemini Systems, Inc. ("Gemini") May 1, 1999 Pacific Data Technologies, Inc. ("Pacific Data") July 16, 1999 Cole-Layer-Trumble Company ("CLT") November 4, 1999
The following unaudited pro forma information (in thousands, except per share data) presents the consolidated results of operations as if all of the Company's acquisitions occurred on January 1, 1999, after giving effect to certain adjustments, including amortization of intangibles, interest and income tax effects. Because CCR was acquired January 3, 2000, historical results of operations for the six months ended June 30, 2000 are the same as pro forma results of operations and are not presented herein. The pro forma information does not purport to represent what the Company's results of operations actually would have been had such transactions or events occurred on the dates specified, or to project the Company's results of operations for any future period. Page 6 7 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited)
Six months ended June 30, 1999 ------------------ Revenues.............................................. $ 73,320 Income from continuing operations..................... $ 2,234 Net income............................................ $ 889 Net income per diluted share.......................... $ 0.02
(3) Commitments and Contingencies As discussed in Note 17 of the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, the Company, through certain of its subsidiaries, is involved in various environmental claims and claims for work-related injuries and physical conditions arising from a formerly-owned subsidiary that was sold in December 1995. See the Company's Annual Report on Form 10-K for the year ended December 31, 1999, for further information. Except as summarized herein and detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, there are no other material legal proceedings pending to which the Company or its subsidiaries are parties or to which any of its properties are subject. (4) Revenue Recognition The Company's software systems and services segment derives revenue from software licenses, postcontract customer support ("PCS"), and services. PCS includes telephone support, bug fixes, and rights to upgrade on a when-and-if available basis. Services range from installation, training, and basic consulting to software modification and customization to meet specific customer needs. In software arrangements that include rights to multiple software products, specified upgrades, PCS, and/or other services, the Company allocates the total arrangement fee among each deliverable based on the relative fair value of each of the deliverables as determined based on vendor specific objective evidence. The Company recognizes revenue from software transactions in accordance with Statement of Position 97-2, "Software Revenue Recognition", as amended as follows: Software Licenses - The Company recognizes the revenue allocable to software licenses and specified upgrades upon delivery and installation of the software product or upgrade to the end user, unless the fee is not fixed or determinable or collectibility is not probable. If the fee is not fixed or determinable, revenue is recognized as payments become due from the customer. If collectibility is not considered probable, revenue is recognized when the fee is collected. Arrangements that include software services, such as training or installation, are evaluated to determine whether those services are essential to the functionality of other elements of the arrangement. A majority of the Company's software arrangements involve off-the-shelf software, and the other elements are not considered essential to the functionality of the software. For those software arrangements in which services are not considered essential, the software license fee is recognized as revenue after delivery and installation have occurred, training has commenced, customer acceptance is reasonably assured, the fee is billable and the remaining services other than training are considered nominal. Page 7 8 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Software Services - When software services are considered essential, revenue under the entire arrangement is recognized as the services are performed using the percentage-of-completion contract accounting method. When software services are not considered essential, the fee allocable to the service element is recognized as revenue as the services are performed. Computer Hardware Equipment - Revenue allocable to equipment based on vendor specific evidence of fair value is recognized when the equipment is delivered and collection is probable. Postcontract Customer Support - PCS agreements are generally entered into in connection with initial license sales and subsequent renewals. Revenue allocated to PCS is recognized on a straight-line basis over the period the PCS is provided. All significant costs and expenses associated with PCS are expensed as incurred. Contract Accounting - For arrangements that include customization or modification of the software, or where software services are otherwise considered essential, or for real estate mass appraisal projects, revenue is recognized using contract accounting. Revenue from these arrangements is recognized on a percentage-of-completion method with progress-to-completion measured based primarily upon labor hours incurred or units completed. Deferred revenue consists primarily of payments received in advance of revenue being earned under software licensing, software and hardware installation, support and maintenance contracts. Through its information and property records services segment, the Company provides computerized indexing and imaging of real property records, records management and micrographic reproduction, as well as information management outsourcing and professional services required by county and local government units and agencies. The Company provides title plant update services to title companies and sales of copies of title plants. The Company recognizes service revenue when services are performed and equipment sales when the products are shipped. Title Plants - Sales of copies of title plants are usually made under long-term installment contracts. The contract with the customer is generally bundled with a long-term title plant update service arrangement. The bundled fees are payable on a monthly basis over the respective contract period and revenue is recognized on an as-billable basis over the terms of the arrangement. The Company also receives royalty revenue relating to the current activities of two former subsidiaries. Royalty revenue is recognized as earned upon receipt of royalty payments. (5) Litigation Defense Costs In December 1999, a competitor of one of the Company's operating subsidiaries filed a lawsuit against the subsidiary, an employee of the subsidiary, and the Company alleging that the employee, who had previously been an employee of the competitor, had taken confidential and proprietary trade secrets upon leaving the employ of the competitor. The lawsuit proceeded on an accelerated court schedule and was tried before a judge in March 2000. After a trial on the merits, the trial court issued a favorable ruling on behalf of the Company and its subsidiary and awarded no monetary damages to the competitor. Incremental direct legal costs relating to the defense of these matters were $1.3 million, which are included in litigation defense costs in the accompanying consolidated condensed financial statements for the six months ended June 30, 2000. Page 8 9 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (6) Discontinued Operations Two of the Company's non-operating subsidiaries are involved in various claims for work related injuries and physical conditions and for environmental claims relating to a formerly-owned subsidiary that was sold in 1995. For the three and six months ended June 30, 2000, the Company expensed $68,000 (net of taxes of $37,000) and $487,000 (net of taxes of $263,000), respectively, for trial and related costs. Also, as discussed in Note 17 to the Company's 1999 Form 10-K, the Company entered into a Standstill Agreement in March 2000 with the plaintiffs alleging claims for work related injuries and physical conditions. In December 1998, the Company entered into a letter of intent to sell its non-core automotive parts retailer, Forest City Auto Parts Company ("Forest City"). Accordingly, this segment has been accounted for as a discontinued operation. The measurement date for recording the estimated loss on disposition of the segment was in December 1998. The Company estimated the loss on the disposal of Forest City to be $8.9 million which was reported in its 1998 financial statements. The estimated loss included anticipated operating losses from the measurement date of December 31, 1998 to the date of disposal and associated transaction costs. The Company recorded an additional loss during the six months ended June 30, 1999 of $565,000 (net of taxes of $364,000) to reflect higher than expected transaction costs and operating losses. (7) Sale of Copies of Title Plants During the three months ended June 30, 1999, the Company reported and recognized $1.9 million of revenue and $86,000 of interest income in connection with sales of copies of title plants. For the six months ended June 30, 1999, the Company reported and recognized $3.6 million of revenue and $98,000 of interest income in connection with sales of copies of title plants. Each of the contracts included the sale of copies of title plants combined with five and ten year title plant update service agreements to provide monthly update services. The Company previously sold update services separately to these customers. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 entitled, "Revenue Recognition in Financial Statements" ("SAB 101"), in which the SEC staff clarified certain revenue recognition matters. The Company previously unbundled the incremental value ascribed to the delivery and sale of the ownership privilege, while SAB 101 requires transactions of this nature to remain bundled and the associated revenues to be recognized ratably over the service period. As disclosed in Note 16 to the Consolidated Financial Statements included in the Company's 1999 Form 10-K, the Company changed its accounting in the fourth quarter of 1999 effective to the beginning of the year. The effect of the accounting change was to reduce revenue by $1.7 million and to reduce net income by $1.2 million ($0.03 per diluted share) from amounts previously reported for the three months ended June 30, 1999. For the six months ended June 30, 1999, the effect of the accounting change on amounts previously reported was to reduce revenue by $3.4 million and to reduce net income by $2.3 million ($0.06 per diluted share). The accompanying consolidated condensed financial statements as of and for the three and six months ended June 30, 1999 have been restated to reflect the change. Page 9 10 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (8) Earnings Per Share Basic earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated in the same manner as basic earnings (loss) per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding assuming the exercise of all employee stock options and warrants that would have had a dilutive effect on earnings (loss) per share. The Company incurred losses from continuing operations for the three months and six months ended June 30, 2000. As a result, the denominator was not adjusted for dilutive securities in 2000 as the effect would be antidilutive. The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings (loss) per share for each of the periods presented (in thousands, except per share data):
Three months ended Six months ended June 30, June 30, -------------------- -------------------- 2000 1999 2000 1999 --------- -------- --------- -------- Numerators for basic and diluted earnings per share: Income (loss) from continuing operations ............ $ (3,911) $ 702 $ (7,211) $ 1,315 ======== ======= ======== ======= Denominator: Denominator for basic earnings per share- Weighted-average common shares outstanding .......... 44,894 38,539 44,092 36,648 Effect of dilutive securities: Employee stock options .............................. -- 313 -- 228 Warrants ............................................ -- 1,092 -- 1,070 -------- ------- -------- ------- Dilutive potential common shares ........................ -- 1,405 -- 1,298 -------- ------- -------- ------- Denominator for diluted earnings per share- Adjusted weighted-average shares and assumed conversion ...................... 44,894 39,944 44,092 37,946 ======== ======= ======== ======= Basic and diluted earnings (loss) per share from continuing operations ............................... $ (0.09) $ 0.02 $ (0.16) $ 0.04 ======== ======= ======== =======
(9) Income Tax Provision For the three and six months ended June 30, 2000, the Company had a loss from continuing operations before income taxes of $4.4 million and $9.2 million, respectively, and an income tax benefit of $454,000 and $2.0 million, respectively. The resulting effective tax rates for the three and six month periods were 10% and 22%, respectively. For the three and six months ended June 30, 1999, the Company had income from continuing operations of $2.1 million and $3.7 million, respectively, and an income tax provision of $1.4 million and $2.4 million, respectively. The effective tax rates for the three and six months were 67% and 65%, respectively. The effective tax rates are due to non-deductible items such as goodwill amortization as compared to the relative amount of pretax earnings or loss. Page 10 11 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (10) Investment Securities Available-for-Sale Pursuant to an agreement in August 1999 with two major shareholders of H.T.E., Inc. ("HTE"), the Company exchanged its common stock in a series of transactions which had a fair value of $15.8 million for 5.6 million shares of HTE common stock. This investment is classified as a non-current asset since it was made for a continuing business purpose. Although the Company owns approximately 32% of HTE's outstanding common stock, HTE management has taken the position that, under Florida law, all of the shares acquired by the Company constitute "control shares" and therefore do not have voting rights until such time as a majority of the shareholders of HTE, other than the Company, restore voting rights to those shares. Management of the Company believes that only the shares acquired in excess of 20% of the outstanding shares of HTE constitute "control shares" and therefore believes it currently has the right to vote all HTE shares it owns up to at least 20% of the outstanding shares of HTE. The Company accounts for its investment in HTE pursuant to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities". These securities are classified as available-for-sale and are recorded at fair value as determined by quoted market prices. Unrealized holding gains and losses, net of the related tax effect, on securities available-for-sale are excluded from earnings and are reported as a separate component of shareholders' equity until realized. At June 30, 2000, the cost, fair value and gross unrealized holding loss amounted to $15.8 million, $7.4 million and $8.4 million respectively, based on a quoted market price of $1.31 per share. At August 9, 2000, the fair value of the investment securities available-for-sale was $7.0 million based on a quoted market price of $1.25 per share. If the uncertainty regarding the voting shares is resolved in the Company's favor, the Company will retroactively adopt the equity method of accounting for this investment. Therefore, the Company's results of operations and retained earnings for periods beginning with the first 1999 acquisition will be retroactively restated to reflect the Company's investment in HTE for all periods in which it held an investment in the voting stock of HTE. Had the Company's investment in HTE been accounted for under the equity method, the Company's investment at June 30, 2000 would have been $12.6 million and the equity in loss of HTE for the three and six months ended June 30, 2000 would have been $576,000 and $1.8 million, respectively. At June 30, 2000, the Company has an unrealized loss on its investment in HTE of $8.4 million. A decline in the market value of any available for sale security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. At this time, management of the Company does not believe the decline in the market value is other than temporary. (11) Long-term Obligations The Company has a credit facility totaling $80.0 million, of which approximately $71.8 million remained outstanding at June 30, 2000. This credit facility is with a syndicated group of banks and had an original maturity date of October 1, 2002. The credit facility contains covenants that limit, among other items, the level of the Company's funded debt and require minimum coverage of fixed charges and earnings levels. As of June 30, 2000, and as a result of the operating performance for certain accounting periods then ended, the Company was not in compliance with certain covenants of the credit Page 11 12 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) facility. Prior to the issuance of these condensed financial statements, the Company and its lenders amended certain aspects of the credit facility such that the Company would be in compliance with all covenants for the one year period as of and subsequent to June 30, 2000. The amended credit facility provides for reduction in the aggregate credit line to $77.5 million, with further reductions to $65.0 million at September 30, 2000, to $55.0 million at November 30, 2000 and by an additional $1.5 million monthly beginning on December 31, 2000. The remaining credit facility will mature October 2, 2001. Accordingly, the Company classified $27.3 million of the outstanding debt as a current liability in the accompanying condensed consolidated balance sheet at June 30, 2000. In connection with amending the credit facility, the Company will pay additional bank fees of $300,000 in August 2000, $300,000 on January 1, 2001 and $400,000 on July 1, 2001. The amended credit facility provides for interest at the lead bank's prime rate plus a margin of 2% as of August 1, 2000, increasing to 3% as of January 1, 2001, 3 1/2% as of April 1, 2001 and 4% as of July 1, 2001. In light of the Company's current projected earnings and cash flow, management believes the Company will meet or exceed the restrictive covenants for the one year period as of and subsequent to June 30, 2000. Management plans to reduce the outstanding balance of the debt through a combination of cash generated from operations and sales of non-strategic assets. Management of the Company has identified certain non-core operating assets which are not strategic to its future operations for sale and have had a number of conversations with potentially interested buyers. In addition, the Company is exploring opportunities to raise additional capital through the sale of subordinated senior notes with warrants. Although management believes it will be successful in repaying the amounts payable under the revised credit facility when those amounts come due, there can be no assurance that the Company will be successful in its attempt to consummate any of the aforementioned strategic alternatives. (12) Comprehensive Income (Loss) SFAS No. 130, "Reporting Comprehensive Income" establishes standards for reporting and displaying comprehensive income and its components in an annual financial statement that is displayed with the same prominence as other annual financial statements. The statement also requires the accumulated balance of other comprehensive income to be displayed separately from retained earnings and additional paid-in capital in the equity section of the condensed consolidated balance sheet. For the three and six months ended June 30, 2000, the Company had comprehensive loss of $14.7 million and $34.0 million, respectively, including an unrealized loss of $10.7 million and $26.3 million, respectively, associated with unrealized loss on securities classified as available-for-sale. Total comprehensive loss for the three and six months ended June 30, 1999 was the same as the Company's reported net loss. (13) Segment and Related Information The Company has two reportable segments: software systems and services and information and property records services. The software systems and services segment provides municipal and county governments with software systems and related services to meet their information technology and automation needs, including real estate appraisal services. The largest component of the information and property records services business is the computerized indexing and imaging of real property records maintained by county clerks and recorders, in addition to the provision of other information management outsourcing services, records management, micrographic reproduction and title plant update services and sales of copies of title plants to title companies. Page 12 13 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) The Company evaluates performance based on several factors, of which the primary financial measure is business segment operating profit (loss). The Company defines segment operating profit (loss) as income before noncash amortization of intangible assets associated with their acquisition by Tyler, interest expense, non-recurring items and income taxes. The accounting policies of the reportable segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. There were no intersegment transactions, thus no eliminations are necessary. The Company's reportable segments are strategic business units that offer different products and services. They are separately managed as each business requires different marketing and distribution strategies. The Company derives a majority of its revenue from domestic customers. The information and property records services segment conducts minor operations in Germany, which are not significant and are not separately disclosed. Summarized financial information concerning the Company's reportable segments is set forth below based on the nature of the products and services offered (in thousands): Page 13 14 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) ================================================================================ 2000
Information Software & Property Systems Records Continuing & Services Services Other Operations ----------- ----------- -------- ---------- - ------------------------------------------------------------------------------------- Assets as of June 30 .... $121,741 $110,969 $ 20,722 $253,432 Revenues for the periods ended June 30: Three months............ $ 21,235 $ 10,904 $ -- $ 32,139 Six months............. $ 42,608 $ 22,022 $ -- $ 64,630 Segment operating profit (loss) for the periods ended June 30: Three months........... $ 1,069 $ 1,625 $ (2,297) $ 397 Six months............. $ 2,175 $ 3,392 $ (4,260) $ 1,307
================================================================================ 1999
Information Software & Property Systems Records Continuing & Services Services Other Operations ----------- ----------- -------- ---------- - ------------------------------------------------------------------------------------- Assets as of June 30..... $ 97,449 $ 93,517 $ 14,561 $205,527 Revenues for the periods ended June 30: Three months........... $ 17,400 $ 9,527 $ -- $ 26,927 Six months............. $ 27,691 $ 18,049 $ -- $ 45,740 Segment operating profit (loss) for the periods ended June 30: Three months........... $ 4,108 $ 2,547 $ (2,028) $ 4,627 Six months............. $ 6,605 $ 5,049 $ (3,509) $ 8,145
================================================================================ Page 14 15 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited)
For the periods ended June 30 Three months Six months Reconciliation of reportable segment operating ----------------------- ----------------------- profit to the Company's consolidated totals 2000 1999 2000 1999 - --------------------------------------------------- -------- -------- -------- -------- Total segment operating profit for reportable segments .......................... $ 397 $ 4,627 $ 1,307 $ 8,145 Interest expense .................................. (2,020) (927) (3,896) (1,756) Litigation defense costs .......................... (90) -- (1,264) -- Goodwill and intangibles amortization ............. (2,652) (1,552) (5,359) (2,648) ------- ------- ------- ------- (Loss) income from continuing operations before income tax (benefit) provision ............... $(4,365) $ 2,148 $(9,212) $ 3,741 ======= ======= ======= =======
(14) Equity Private Placement In May 2000, the Company sold 3.3 million shares of common stock and 333,380 warrants pursuant to a private placement agreement with Sanders Morris Harris Inc. for approximately $10.0 million in gross cash proceeds, before deducting commissions and offering expenses of approximately $730,000. Each warrant is convertible into one share of common stock at an exercise price of $3.60 per share. The warrants expire in May 2005. The common stock sold in this transaction is not registered and may only be sold pursuant to Rule 144 of the Securities Act of 1933, generally after being held for at least one year. The Company intends to use the proceeds from the offering for the development of its previously announced e-government initiatives and for the development of its national data repository and Internet portal for public information, NationsData.com. (15) New Accounting Pronouncements Not Yet Adopted In June 1999, SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133" was issued by the Financial Accounting Standards Board ("FASB"). The Statement defers for one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". The rule now will apply to all fiscal years beginning after June 15, 2000. FASB Statement No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of SFAS No. 133 is not expected to have a material impact on the Company's consolidated financial statements and related disclosures. Page 15 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than historical or current facts, including, without limitation, statements about the business, financial condition, business strategy, plans and objectives of management, and prospects of the Company are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. Such risks and uncertainties include, without limitation, the ability of the Company to successfully integrate the operations of acquired companies, technological risks associated with the development of new products and the enhancement of existing products, changes in the budgets and regulating environments of the Company's government customers, the ability to attract and retain qualified personnel, changes in product demand, the availability of products, changes in competition, economic conditions, changes in tax risks, availability of capital, and other risks indicated in the Company's filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and in many cases, the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this Quarterly Report, the words "believes," "plans," "estimates," "expects," "anticipates," "intends," "continue," "may," "will," "should", "projects", "forecast", "might", "could" or the negative of such terms and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. GENERAL The Company is a provider of technology, software, data warehousing, web hosting services, electronic document management systems, information management outsourcing services, title plant and property record database information, and real estate appraisal services for local governments. In mid 1997, the Company embarked on a multi-phase strategy and growth plan focused on the specialized information management needs of local government. Since that time, the Company has experienced growth both internally and as a result of a number of acquisitions. By the close of 1999, the Company considered itself an important provider of information management solutions in the local government marketplace, providing a broad array of products for city and county government operations from law enforcement, to courts, financial systems, appraisal and taxation, records management, and utility billing. From 1998 through January 2000, the Company has made a significant number of acquisitions. All of the Company's acquisitions have been accounted for using the purchase method of accounting for business combinations, and the results of operations of the acquired entities are included in the Company's historical consolidated financial statements from their respective dates of acquisition. Because of the significance of these acquisitions in the following analysis of results of operations, the Company has provided pro forma amounts in the following analysis of results of operations as if all of the Company's acquisitions had occurred as of the beginning of 1999. Page 16 17 ANALYSIS OF RESULTS OF OPERATIONS REVENUES For the three and six months ended June 30, 2000, the Company had revenues from continuing operations of $32.1 million and $64.6 million, respectively, compared to $26.9 million and $45.7 million for the three and six months ended June 30, 1999, respectively. On a pro forma basis, total revenues for the three and six months ended June 30, 1999 were $36.8 million, and $73.3 million, respectively, compared to $32.1 million and $64.6 million for the three and six months ended June 30, 2000. Management believes the decline in revenues on a pro forma basis was primarily because of Year 2000 ("Y2K") related factors. Local governments appear to have reduced spending for software applications and systems for a variety of reasons, including anticipation of Y2K problems and delaying new systems projects while they recover from their intensive efforts to become Y2K compliant in the prior year. Many customers and potential customers appeared to have instituted Y2K "lockdowns" and did not install new systems in the first six months of 2000. Additionally, the 1999 pro forma revenues benefited somewhat from accelerated Y2K compliance related sales. Pro forma software license revenue for the three months ended June 30, 2000 declined $3.1 million from $7.2 million in the prior year period. For the six months ended June 30, 2000, pro forma revenues from software licenses decreased $5.4 million from $13.9 million in the comparable prior year. Pro forma software license revenue comparisons were negatively impacted by the Y2K factors described above. For the three months ended June 30, 2000, professional services revenue on a pro forma basis was $17.4 million compared to $17.6 million in the prior year period. Pro forma professional services for the six months ended June 30, 2000 declined $1.3 million compared to the prior year period primarily due to lower real estate appraisal services revenue. Revenue from real estate appraisal services varies from period to period based on customers' re-appraisal cycles. Although professional services revenue in the first six months of 2000 included approximately $3.1 million from large contracts with Cook County, Recorder of Deeds in Chicago ("Cook County") and with the Department of the Illinois Secretary of State's office ("State of Illinois"), the effect of these increases was largely offset by several large contracts installed in 1999 for judicial information management and court systems and property appraisal and tax systems. Revenue related to both the Cook County and State of Illinois contracts included in the results of operations for the three and six months ended June 30, 2000 was approximately $1.6 million and $3.1 million, respectively. The Cook County contract, which was valued at approximately $4.5 million, was substantially complete as of June 30, 2000. The State of Illinois contract to install and manage a new digital imaging system and perform related services, including technology updates, back records conversion, digital microfilm productions and process workflow implementation, for all divisions of the Business Services Department is valued at approximately $5.3 million. Installation of the State of Illinois contract began in May 2000 and the majority of this revenue is expected to be earned by early 2001. For the three months ended June 30, 2000, $430,000 of revenue was earned relating to this contract. For the three months ended June 30, 2000, pro forma maintenance revenue increased 11%, or $922,000, compared to $8.3 million for the same period in 1999. Year-to-date pro forma maintenance has increased 10%, or $1.7 million, compared to $16.5 million for the six months ended June 30, 1999. Maintenance revenue increases are due to a larger customer base of installed software and services products. Maintenance services are provided for the Company's software products, including real estate appraisal products, and third party software and hardware. The renewal rate for real estate appraisal system maintenance agreements is not as high as other software and hardware maintenance agreements and will vary somewhat from period to period. Excluding real estate maintenance agreements, pro forma maintenance revenue increased approximately 19% and 21% for the three and six months ended June 30, 2000, respectively, compared to the comparable prior year periods. As a percent of revenue, total maintenance revenue on a pro forma basis was approximately 29% and 28% for the three and six months ended June 30, 2000, respectively, compared to approximately 23% for both the three and six months ended June 30, 1999. Page 17 18 For the three and six months ended June 30, 2000, pro forma hardware and other revenues declined $2.3 million and $3.7 million, respectively, from $3.7 million and $6.8 million for the three and six months ended June 30, 1999, respectively. Pro forma hardware revenue is down from prior year periods mainly due to the Y2K related factors described above and Company efforts to focus sales on higher margin products and services. For the remainder of 2000, the Company anticipates slower revenue growth compared to 1999 as a result of the Y2K-related slowdown in new orders and as the Company pursues long-term development of its e-commerce growth strategy. In 2000, the Company plans to emphasize its long-term growth opportunities in e-commerce by developing Internet accessible solutions for its current installed customer base, as well as the broader local government market. COST OF REVENUES For the three and six months ended June 30, 2000, cost of revenues from continuing operations were $19.1 million and $38.4 million, respectively, compared to $12.7 million and $22.5 million for the three and six months ended June 30, 1999, respectively. On a pro forma basis, total cost of revenues for the three months ended June 30, 1999 was $19.2 million compared to $19.1 million for the three months ended June 30, 2000. For the six months ended June 30, 1999, pro forma cost of revenues was $39.4 million compared to $38.4 million for the three months ended June 30, 2000. The cost of revenues decline is primarily due to lower revenues. In addition, cost of revenues in 2000 also includes subcontracting expenses for the Cook County contract, higher head count as a result of prior year sales volume increases and salary adjustments. Personnel cost, which in the short term is somewhat fixed in nature, is the largest component of cost of revenues, and contributed to a lower gross margin for the three and six months ended June 30, 2000. The gross margin was also negatively impacted by a product mix that included less software license revenue in 2000 compared to 1999. On a pro forma basis, the overall gross margin was 41% for both the three and six months ended June 30, 2000 compared to 48% and 46% for the three and six months ended June 30, 1999, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the three and six months ended June 30, 2000, were $12.7 million and $24.9 million, respectively, compared to $9.6 million and $15.1 million in the comparable prior year periods. On a pro forma basis, selling, general and administrative expenses as a percent of revenues was 40% compared to 32% for the three months ended June 30, 2000 and 1999, respectively. For the six months ended June 30, 2000, pro forma selling, general and administrative expense as a percent of revenue was 39% compared to 30% for the six months ended June 30, 1999. Lower sales volume combined with increased travel expense, costs associated with consolidating certain finance and administrative functions and higher personnel costs negatively impacted selling, general and administrative expense comparisons. For the three and six months ended June 30, 2000, selling, general and administrative expenses included approximately $1.2 million and $2.4 million, respectively, of additional expenses associated with the Company's national data repository ("Database") activities and its preliminary sales efforts. LITIGATION DEFENSE COSTS In December 1999, a competitor of one of the Company's operating subsidiaries filed a lawsuit against the subsidiary, an employee of the subsidiary, and the Company alleging that the employee, who had previously been an employee of the competitor, had taken confidential and proprietary trade secrets upon leaving the employ of the competitor. The lawsuit proceeded on an accelerated court schedule and was tried before a judge in March 2000. After a trial on the merits, the trial court issued a favorable ruling on Page 18 19 behalf of the Company and its subsidiary and awarded no monetary damages to the competitor. Incremental direct legal costs relating to the defense of these matters was approximately $90,000 and $1.3 million for the three and six months ended June 30, 2000, respectively, which is included in litigation defense costs in the accompanying consolidated condensed financial statements. In addition, the Company devoted significant internal resources to the litigation defense, the costs of which are included in selling, general and administrative expenses. AMORTIZATION OF INTANGIBLES The Company has accounted for all acquisitions using the purchase method of accounting for business combinations. Unallocated purchase price over the fair value of net identifiable assets of the acquired companies ("goodwill") and intangibles associated with acquisition is amortized using the straight-line method of amortization over their respective useful lives beginning when a company is first acquired. Amortization expense increased for the three and six months ended June 30, 2000 compared to the same periods of 1999 due to inclusion of goodwill and other intangible amortization for companies acquired after June 30, 1999. INTEREST EXPENSE Interest expense increased substantially for the three and six months ended June 30, 2000 compared to the same periods in 1999. The Company incurred debt to finance acquisitions and their related transaction costs and capital expenditures including construction of the Database. In connection with construction of the Database and certain internally developed software projects, the Company capitalized $228,000 and $328,000 of interest cost in the three and six months ended June 30, 2000. In addition to higher debt levels, the average effective interest rate for the three and six months ended June 30, 2000, was 9.5% and 9.2%, respectively, compared to 7.3% and 7.2% for the same periods in 1999. INCOME TAX PROVISION In the three months ended June 30, 2000, the Company had a loss from continuing operations before income taxes of $4.4 million and an income tax benefit of $454,000, resulting in an effective tax rate of 10%. For the six months ending June 30, 2000, the Company had a loss from continuing operations before income taxes of $9.2 million and an income tax benefit of $2.0 million, resulting in an effective tax rate of 22%. These effective tax rates are due to non-deductible items such as goodwill amortization as compared to the relative amount of pretax earnings or loss. DISCONTINUED OPERATIONS The Company recorded a net loss from disposal of discontinued operations of $68,000 and $487,000 for the three and six months ended June 30, 2000, respectively compared to net losses of $780,000 and $1.3 million for the three and six months ended June 30, 1999. Discontinued operations in 2000 consist of Swan Transportation ("Swan"), whose operations were discontinued in 1995, and TPI of Texas, Inc. ("TPI"), which sold substantially all of its assets and liabilities in 1995. The 1999 loss from discontinued operations includes Forest City, which was disposed of in March 1999. In the three months ended June 30, 2000, TPI and Swan together recorded a charge of $68,000 for trial and related costs, net of taxes of $37,000. For the six months ended June 30, 2000, these charges totaled $487,000, net of taxes of $263,000. The Company estimated the loss on the disposal of Forest City to be $8.9 million, which was reported in its 1998 Form 10-K. The estimated loss included anticipated operating losses from the measurement date of December 31, 1998 to the date of disposal and associated transaction costs. The Company recorded an additional loss during the six months ended June 30, 1999 of $565,000 (net of taxes of $364,000) to reflect higher than expected transaction costs and operating losses. Page 19 20 NET INCOME (LOSS) AND OTHER MEASURES Net loss was $4.0 million and $7.7 million for the three and six months ended June 30, 2000, respectively, compared to net loss of $78,000 and $30,000 for the three and six months ended June 30, 1999. Net loss from continuing operations was $3.9 million and $7.2 million for the three and six months ended June 30, 2000 compared to net income of $702,000 and $1.3 million for the three and six months ended June 30, 1999, respectively. For the three and six months ended June 30, 2000, diluted loss per share from continuing operations was $0.09 and $0.16, respectively, compared to diluted earnings per share from continuing operations of $0.02 and $0.04 for the three and six months ended June 30, 1999, respectively. Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations for the three and six months ended June 30, 2000, respectively, was $2.3 million and $4.7 million compared to $5.6 million and $9.8 million for the comparable prior year periods. EBITDA consists of income from continuing operations before interest, litigation defense costs, income taxes, depreciation and amortization. Although EBITDA is not calculated in accordance with generally accepted accounting principles, the Company believes that EBITDA is widely used as a measure of operating performance. Nevertheless, the measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. EBITDA is not necessarily indicative of amounts that may be available for reinvestment in the Company's business or other discretionary uses. In addition, since all companies do not calculate EBITDA in the same manner, this measure may not be comparable to similarly titled measures reported by other companies. Cash flows used by operating activities for the six months ended June 30, 2000 were $4.9 million, compared to cash flows provided by operating activities of $485,000 for the six months ended June 30, 1999. FINANCIAL CONDITION AND LIQUIDITY In October 1999, the Company entered into a three-year $80.0 million revolving credit agreement ("credit facility") with a group of banks. At June 30, 2000, approximately $71.8 million remained outstanding. This credit facility had an original maturity date of October 1, 2002. The credit facility contains covenants that limit, among other items, the level of the Company's funded debt and require minimum coverage of fixed charges and earnings levels. As of June 30, 2000, and as a result of the operating performance for certain accounting periods then ended, the Company was not in compliance with certain covenants of the credit facility. Prior to the issuance of these condensed financial statements, the Company and its lenders amended certain aspects of the credit facility such that the Company would be in compliance with all covenants for the one year period as of and subsequent to June 30, 2000. The amended credit facility provides for a reduction in the aggregate credit line to $77.5 million, with further reductions to $65.0 million at September 30, 2000, to $55.0 million at November 30, 2000 and by an additional $1.5 million monthly beginning on December 31, 2000. The remaining credit facility will mature October 2, 2001. Accordingly, the Company classified $27.3 million of the outstanding debt as a current liability in the accompanying condensed consolidated balance sheet at June 30, 2000. In connection with amending the credit facility, the Company will pay additional bank fees of $300,000 in August 2000, $300,000 on January 1, 2001 and $400,000 on July 1, 2001. The amended credit facility provides for interest at the lead bank's prime rate plus a margin of 2% as of August 1, 2000, increasing to 3% as of January 1, 2001, 3 1/2% as of April 1, 2001 and 4% as of July 1, 2001. For the three and six months ended June 30, 2000, the effective average interest rate for the borrowings was approximately 9.5% and 9.2%, respectively. The credit facility is secured by substantially all of the Company's real and personal property and by a pledge of the common stock of present and future significant operating subsidiaries. The credit facility is also guaranteed by such subsidiaries. In light of the Company's current projected earnings and cash flow, management believes the Company will meet or exceed the restrictive covenants for the one year period as of and subsequent to June 30, 2000. Management plans to reduce the outstanding balance of the debt through a combination of cash generated from operations and sales of non-strategic assets. Management of the Company has identified certain non-core operating assets which are not strategic to its future operations for sale and have had a number of conversations with potentially interested buyers. In addition, the Company is exploring opportunities to raise additional capital through the sale of subordinated senior notes with warrants. Although management believes it will be successful in repaying the amounts payable under the revised credit facility when those amounts come due, there can be no assurance that the Company will be successful in its attempt to consummate any of the aforementioned strategic alternatives. Page 20 21 For the six months ended June 30, 2000, the Company made capital expenditures of $8.0 million. These expenditures included $5.8 million relating to the construction of the Database and other software development. The remaining expenditures were primarily for computer equipment and building expansions required for internal growth. In connection with the construction of the Database and other software development, the Company capitalized interest costs of $228,000 and $328,000 for the three and six months ended June 30, 2000. During the six months ended June 30, 2000, the Company incurred expenditures of approximately $400,000 in conjunction with various business combination opportunities. In January 2000, the Company acquired all of the outstanding common stock of Capitol Commerce Reporter, Inc. ("CCR") for approximately $3.0 million cash, $1.2 million in assumed debt and $2.8 million in five-year, 10% subordinated notes in a business combination accounted for as a purchase. CCR is based in Austin, Texas and provides public records research, documents retrieval, filing and information services. These expenditures were primarily funded by borrowings of approximately $9.6 million under the Company's revolving credit facility. In May 2000, the Company sold 3.3 million shares of common stock and 333,380 warrants pursuant to a private placement agreement with Sanders Morris Harris Inc. for approximately $10.0 million in gross cash proceeds before deducting commissions and offering expenses of approximately $730,000. Each warrant is convertible into one share of common stock at an exercise price of $3.60 per share. The warrants expire in May 2005. The common stock sold in this transaction is not registered and may only be sold pursuant to Rule 144 of the Securities Act of 1933, generally after being held for at least one year. Tyler intends to use the proceeds from the offering for new product development, including the development of its previously announced e-government initiatives and for the development of its national data repository and Internet portal for public information, NationsData.com. Page 21 22 On November 4, 1999 the Company acquired selected assets and assumed selected liabilities of Cole-Layer-Trumble Company, a division of a privately held company. A portion of the consideration consisted of restricted shares of Tyler common stock and included a price protection on the sale of the Company's common stock which expires no later than November 4, 2001. The price protection is equal to the difference between the actual sale proceeds of the Tyler common stock and $6.25 on a per share basis, but is limited to $2.8 million. The subsequent payment, if any, of the contingent consideration will not change the recorded cost of the acquisition. Page 22 23 Part II. OTHER INFORMATION Item 1. Legal Proceedings For a discussion of legal proceedings see Part I, Item 1. "Financial Statements - Notes to Condensed Consolidated Financial Statements - Commitments and Contingencies" on page 7 of this document. Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of stockholders on June 28, 2000. The following are the results of certain matters voted upon at the meeting: (a) With respect to the election of new directors and directors whose terms expired on June 28, 2000 shares were voted as follows:
Nominee Number of Votes for Number of Votes Withheld ------- ------------------- ------------------------ Ernest H. Lorch 31,045,858 4,470,186 Frederick R. Meyer 31,005,050 4,510,994 William D. Oates 31,048,700 4,467,344 C.A. Rundell, Jr. 30,972,303 4,543,741 Louis A. Waters 30,073,504 5,442,540 John M. Yeaman 30,087,759 5,428,285
(b) With respect to the amendments to the Company's Stock Option Plan ("the Plan") to increase the number of shares of the Company's Stock which may be issued under the Plan from 4,300,000 shares to 5,500,000 shares. The votes were as follows: For 27,746,484 Against 4,496,971 Abstain 3,272,589
Item 6. Exhibits and Reports on Form 8-K (a) Exhibit
Number Exhibit ------ ------- 4.4 Purchase Agreement dated May 19, 2000, between Tyler Technologies, Inc., and Sanders Morris Harris Inc. 4.5 Warrant to purchase common stock of Tyler Technologies, Inc. 4.6 Amendment #3 to the Credit Agreement dated October 1, 1999 27 Financial Data Schedule
(b) There were no reports filed on Form 8-K during the second quarter of 2000. Item 3 of Part I and Items 2, 3, and 5 of Part II were not applicable and have been omitted. Page 23 24 Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TYLER TECHNOLOGIES, INC. By: /s/ Theodore L. Bathurst ------------------------ Theodore L. Bathurst Vice President and Chief Financial Officer (principal financial officer and an authorized signatory) By: /s/ Terri L. Alford ------------------------ Terri L. Alford Controller (principal accounting officer and an authorized signatory) Date: August 16, 2000 Page 24 25 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.4 Purchase Agreement dated May 19, 2000, between Tyler Technologies, Inc., and Sanders Morris Harris Inc. 4.5 Warrant to purchase common stock of Tyler Technologies, Inc. 4.6 Amendment #3 to the Credit Agreement dated October 1, 1999 27 Financial Data Schedule
EX-4.4 2 ex4-4.txt PURCHASE AGREEMENT DATED 5/19/00 1 EXHIBIT 4.4 Tyler Technologies, Inc. 2800 West Mockingbird Lane Dallas, Texas 75235 Purchase Agreement $10,001,400 in Shares of Common Stock (the "Shares") May l9, 2000 To the Purchasers of the above Shares listed in Schedule 1 hereto: Gentlemen: Tyler Technologies, Inc., a Delaware corporation (the "Company"), hereby agrees with you as follows: 1. AUTHORIZATION OF COMMON STOCK. The Company will authorize the issue and sale of up to $10,001,400 in shares (the "Shares") of Common Stock, $0.01 par value (the "Common Stock"), of the Company, at the Stock Purchase Price. Certain capitalized terms used in this Agreement are defined in Section 11. 2. PURCHASE AND SALE OF COMMON STOCK. The Company will issue and sell to you and, subject to the terms and conditions of this Agreement, you will purchase from the Company, at the Closing provided for in Section 3, the aggregate number of shares of Common Stock specified opposite your name in the Schedule of Purchasers, in each case at a purchase equal to the lesser of (i) $3.00 per share or (ii) 80% of the average closing price for shares of Common Stock on the New York Stock Exchange for the 20 Trading Days prior to Closing (the "Stock Purchase Price"). 3. CLOSING. The sale of the Common Stock to be purchased by you will take place at the offices of Sanders Morris Harris Inc., 3100 Chase Tower, Houston, Texas 77002, at 10:00 a.m., Houston Time, at a closing (the "Closing") on May 18, 2000, or on such other business day thereafter as may be agreed upon by the Company and you. Within five Business Days following the Closing, the Company will deliver to you the Shares purchased by you at such Closing in the form of one certificate (or such greater number of certificates as you may request), each dated the date of the Closing and registered in your name (or in the name of your nominee as indicated on the Schedule of Purchasers or otherwise made known in writing by you to the Company prior to the Closing), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor. 2 4. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to you that: 4.1. ORGANIZATION, QUALIFICATION, STANDING, CAPITAL STOCK, SUBSIDIARIES, ETC. The Company has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware, and each of its Subsidiaries is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or organization, with power and authority (corporate and other) to own or lease its properties and to conduct its business as described in the Memorandum; the Company and each Subsidiary is duly qualified to do business and in good standing as a foreign corporation in all other jurisdictions in which its ownership or leasing of properties, or the conduct of its business requires or may require such qualification where the failure to be so qualified would have a Material Adverse Effect; the Company and each Subsidiary is in possession of and operating in compliance in all material respects with all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, and orders required for the conduct of their business as described in the Memorandum, where the failure to possess or comply therewith would have a Material Adverse Effect. The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, $0.01 par value per share, of which 43,290,687 shares were issued and outstanding at March 31, 2000, and 1,000,000 shares of Preferred Stock, $10.00 par value per share, none of which shares of Preferred Stock were issued and outstanding at the Closing Date. All of such outstanding shares have been validly issued and are fully paid and nonassessable. The Company has reserved 6,300,000 shares of Common Stock for issuance pursuant to options and warrants outstanding at March 31, 2000. Except as set forth on Schedule 4.1, there are not outstanding, nor is the Company subject to any agreement, arrangement, or understanding under which there may become outstanding, any option, warrant, or other right to purchase or subscribe to, or security convertible into or exchangeable for, any shares of capital stock of any class of the Company. The Company's Subsidiaries are identified in Exhibit 21 of the Form 10-K and such Exhibit correctly states the jurisdiction of organization and the extent of the Company's ownership of outstanding voting securities of each such Subsidiary. All such voting securities are owned by the Company free and clear of any liens, claims or encumbrances of any nature, except for the lien of Bank of America, N.A. under the Company's Revolving Credit Agreement. 4.2 FINANCIAL STATEMENTS, SUBSEQUENT CHANGES, ETC. The Form 10-K, one or more copies of which have been furnished to you, contains consolidated balance sheets of the Company and its consolidated Subsidiaries, and the consolidated statements of income, stockholders' equity, and cash flows of the Company and its consolidated Subsidiaries for each of the three years ended December 31, 1998, including notes thereto, and the opinion of Ernst & Young LLP, independent certified public accountants with respect to such financial statements. All of the foregoing financial statements are complete and correct in all material respects and fairly present in all material respects the consolidated financial condition of the Company and its consolidated Subsidiaries at the respective dates of said balance sheets and the consolidated results of operations of the Company and its consolidated Subsidiaries for the respective periods covered thereby. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein). There were no material liabilities, direct or indirect, fixed or contingent, of the Company and its consolidated Subsidiaries as of the respective dates of such balance sheets that are not reflected therein or in the notes thereto. Except as disclosed in the Memorandum, there has been no material change in the consolidated condition, financial or otherwise, or operations of the Company and its consolidated Subsidiaries since December 31, 2 3 1999, nor has the Company or any Subsidiaries, except for the execution, delivery, and performance of this Agreement, incurred any Indebtedness for borrowed money, incurred any material liability, contingent or otherwise, except in the ordinary course of business (including acquisitions of business and assets), or entered into any material commitment or other transaction not in the ordinary course of business since such date. 4.3. OTHER INFORMATION AS TO COMPANY. The Confidential Private Placement Memorandum dated April 19, 2000, together with the Exhibits thereto and the documents incorporated by reference therein (the "Memorandum"), does not contain any misstatement of a material fact or omit to state any material fact necessary to be stated therein or necessary in order to make the statements therein not misleading; provided, however, that with respect to all projections and estimates furnished to you, the Company represents and warrants only that the same were prepared in good faith and based, to the best of its knowledge, upon reasonable assumptions and that nothing has occurred, which has caused or may cause any projection or estimate to be or to become inaccurate in any material adverse respect as of the date hereof. In the event the Company has furnished to you information which corrects information previously furnished, the information last furnished is deemed to govern for purposes of this Section 4.3. 4.4. LITIGATION. Except as disclosed in the Memorandum, there are no legal or governmental proceedings pending to which the Company or any Subsidiary is a party or of which any of their properties are the subject, which, if determined adversely to the Company or its Subsidiaries would individually or in the aggregate result in a Material Adverse Effect; and, to the best knowledge of the Company after due inquiry, no such proceedings are threatened, except as set forth in the Memorandum. 4.5. FRANCHISES, LICENSES, TRADEMARKS, ETC. The Company and the Subsidiaries have all material franchises, permits, licenses and other authority as are necessary to enable it to conduct its business as now conducted and as proposed to be conducted, and to the best of the Company's knowledge, neither the Company nor any Subsidiary is in material default under any such franchises, permits, licenses or other authority. To the best knowledge of the Company, the Company and its Subsidiaries own (or have made appropriate application for) or have the right to use all trademarks, trademark rights, trade names, trade name rights, copyrights, and similar intangible assets or rights that are material to their business (collectively "Intellectual Property"). The Company has no knowledge of any adverse claim or facts that could give rise to a claim, which creates a reasonable doubt as to the ownership or validity of the Intellectual Property. No Governmental Body has rendered any opinion, decision, or judgment that could limit, cancel, or question the validity of any of the Intellectual Property. To the Company's knowledge, no other intellectual property is necessary to enable the Company to conduct its business substantially as currently conducted or as proposed to be conducted. The Company is not obligated or under any liability whatsoever to make any material payments in the nature of royalties, license fees, or otherwise to any owner of, licensee of, or other claimant to, any Intellectual Property. The Company has no knowledge of intellectual property owned by others that is used by the Company in the conduct of its business as currently conducted or as proposed to be conducted without valid license or other form of arrangement. To the knowledge of the Company, the continued use of the Intellectual property by the Company will not constitute an infringement, misappropriation, or misuse of any patent, trademark, trade name, copyright, invention, trade secret, proprietary information, nondisclosure, or other rights of any third party. No person has filed, or to the knowledge of the Company, threatened any claim before a Governmental Body regarding the use of, or challenging the validity or effectiveness of the Intellectual Property or 3 4 any license, contract, or commitment relating thereto, and the Company knows of no valid basis for any such claim. To the Company's knowledge, all material trade secrets, know how, and other trademarked, or copyrighted material has at all times been kept confidential by the Company, its employees, and agents so as to protectable under common law principles. 4.6. DUE AUTHORIZATION AND COMPLIANCE WITH OTHER INSTRUMENTS. This Agreement is, and the Shares when issued and delivered will be, valid and legally binding obligations of the Company and the Shares will be entitled to the benefits of this Agreement. The Shares to be issued to you hereunder have been duly authorized and when issued will be validly issued, fully paid and nonassessable. The Shares are not subject to any preemptive or similar rights on the part of holders of shares of capital stock of the Company. 4.7. BURDENSOME AND CONFLICTING AGREEMENTS AND VIOLATIONS OF CHARTER Provisions. Neither the Company nor any Subsidiary is currently bound by any agreement or instrument or subject to any charter or other corporate restriction that materially and adversely affects its business, properties, operations, or condition, financial or otherwise. The Company is not in violation of its articles of incorporation or by-laws, or in material default, or with the giving of notice or lapse of time or both, would be in material default, in the performance of any material obligation, agreement, or condition contained in any lease license, material contract, indenture, or loan agreement or in any bond, debenture, note, or other evidence of indebtedness, except as set forth in the Memorandum and except for such defaults as would not have a Material Adverse Effect. Neither the authorization, execution, and delivery of this Agreement or the issuance of the Shares, the consummation of the transactions herein and therein contemplated, nor the fulfillment of or compliance with the terms hereof and thereof, will conflict with or result in a breach of any of the terms of the articles of incorporation or by-laws, or any material loan agreement, mortgage, deed of trust, indenture, or other agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound, except to the extent that the same have been, or prior to the Closing Date will be, waived or cured, or, to the best knowledge of the Company, any law, statute, order, rule, administrative regulation, or decree of any court, or governmental agency or body having jurisdiction over the Company, its Subsidiaries, or their properties, which conflict, default, or breach individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect. 4.8. CONSENTS AND APPROVALS. To the best knowledge of the Company, no consent, approval, authorization or order of any Governmental Body is required for the consummation by the Company of the transactions contemplated by this Agreement, except such as may be required by the National Association of Securities Dealers, Inc., the Securities Act, or the Rules and Regulations or state securities or Blue Sky laws. The Company has obtained or made all necessary consents, approvals, waivers and notifications of stockholders, creditors, lessors and other non-governmental persons, in each case, in connection with the execution of this Agreement and the issuance of the Shares except for securities law filings that will be made after the Closing. 4.9. TAX RETURNS AND PAYMENTS. The Company and its Subsidiaries have filed all United States federal, state, county, local and foreign national, provincial and local returns and reports which were required to be filed on or prior to the date herein in respect of all income, withholding, franchise, payroll, excise, property, sales, use, value-added or other taxes or levies, imposts, duties, license and registration fees, charges, assessments or withholdings of any nature whatsoever (together, "Taxes"), and has paid all Taxes (and any related penalties, fines and 4 5 interest) which have become due pursuant to such returns or reports or pursuant to any assessment which has become payable, or, to the extent its liability for any Taxes (and any related penalties, fines and interest) has not been fully discharged, adequate reserves therefor have been established, except where the failure to do so would not have a Material Adverse Effect. All such returns and reports filed on or prior to the date hereof have been properly prepared and are true, correct (and to the extent such returns reflect judgments made by the Company, such judgments were reasonable under the circumstances) and complete in all material respects, except where the failure to do so would not have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company with respect to taxes for all fiscal periods are adequate, in the opinion of the Company, and the Company does not know of any actual or proposed tax assessment for any fiscal period or of any basis therefor against which adequate reserves have not been set up. The Company has not been advised that any federal income tax return of the Company has been, or will be, examined or audited by the Internal Revenue Service. 4.10. OFFERING OF THE SHARES. Neither the Company nor anyone authorized to act on its behalf has or will directly or indirectly sell or offer the Shares or any part thereof or any similar securities to, or solicit any offer to buy any thereof from, any Person so as to cause a violation of the Securities Act. In connection with the offering of the Shares, the Company has agreed to pay the Placement Agent a fee equal to 7% of the gross proceeds to the Company from the sale of the Shares. 4.11. OUTSTANDING REGISTRATION Rights. Except as described in Schedule 4.11 hereto or in the Memorandum, the Company is not a party to any contract or agreement pursuant to which any other party or parties thereto have the right to require the Company (on a best efforts basis or otherwise) (a) to register securities of the Company under the Securities Act for sale by or on behalf of such party or parties or (b) to notify such party or parties of the Company's intention to file a registration statement under the Securities Act and at the request of such party or parties to include therein securities of the Company for sale by or on behalf of such party or parties. 4.12. EXCHANGE ACT DOCUMENTS. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on the New York Stock Exchange. All Exchange Act reports and statements required to be filed by the Company under the Exchange Act, and the rules and regulations thereunder, due at or prior to the date of this Agreement have been made. Each Exchange Act Document conformed in all material respects at the time of its filing to the requirements of the Exchange Act and the rules and regulations thereunder, and no Exchange Act document includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.13. OTHER ADVERSE FACTS, ETC. To the best of the Company's knowledge, there are no existing facts or circumstances which materially and adversely affect, or (insofar as the Company can now reasonably foresee) in the future may materially and adversely affect, the business, results of operations or condition, financial or otherwise, of the Company and the Subsidiaries, on a consolidated basis, which are not disclosed in the Form 10-K, other Exchange Act Documents filed with the SEC pursuant to the Exchange Act, or in this Agreement or any exhibit hereto, the Memorandum, or which are required to be disclosed by the Company in an Exchange Act Document. 5 6 5. CONDITIONS PRECEDENT. 5.1. CLOSING. Your obligation to purchase from the Company the number of Shares specified opposite your name in the Schedule of Purchasers at the Closing shall be subject to the following conditions precedent: (a) OPINIONS OF COMPANY COUNSEL. You shall have received from Gardere & Wynne, LLP, counsel for the Company, an opinion, dated the Closing Date, satisfactory in form and substance to the Placement Agent. (b) REPRESENTATIONS AND DEFAULTS. The representations and warranties made by the Company herein shall be true and correct in all material respects on and as of the Closing Date with the same effects as if they had been made on and as of the Closing Date (except as to any changes resulting from transactions expressly reflected herein or contemplated hereby) and no Event of Default as defined in Section 10 hereof, nor any condition or event which, after notice or lapse of time, or both, would constitute such an Event of Default, shall exist; and the Company shall deliver to you on the Closing Date a certificate of the President and the Treasurer of the Company to the foregoing effects. (c) DOCUMENTS. All proceedings to be taken in connection with the transactions contemplated by this Agreement to be consummated at or prior to the Closing Date, and all documents incident thereto, shall be satisfactory in form and substance to the Placement Agent shall have received original counterparts or certified or other copies of all documents which you may have reasonably requested in connection with said transactions and of all corporate proceedings in connection therewith, in form and substance satisfactory to the Placement Agent. (d) MINIMUM OFFERING. The Company shall have received commitments for the purchase of a minimum of $5,000,000 in Shares. (e) NO MATERIAL ADVERSE CHANGE. As of the date of the Closing, no Material Adverse Change has occurred. (f) REGISTRATION RIGHTS AGREEMENT. The Company shall have entered into the Registration Rights Agreement with the purchasers of the Shares in the form of Exhibit A hereto. 6. COVENANTS OF THE COMPANY. The Company covenants and agrees that, except otherwise agreed to by the Placement Agent in writing, as so long as any of the Shares are outstanding it will comply with the following provisions, subject to the provisions of Section 12 hereof; 6.1. USE OF PROCEEDS. The Company will apply all of the proceeds (net of costs directly related to the preparation and negotiation of this Agreement and the offering and sale of the Shares) derived from the sale of the Shares for general working capital purposes. 6.2. TAXES. The Company will promptly pay and discharge all lawful taxes, assessments, and governmental charges or levies imposed on it or upon its income or profits, or upon any of its properties, real or personal, before the same shall become in default, as well as all 6 7 lawful claims for labor, materials, and supplies or otherwise which, if unpaid, might become a lien or charge upon its properties or any part thereof, except where the failure to do so would not have a Material Adverse Effect; provided, however, that the Company shall not be required to pay or cause to be paid any such tax, assessment, charge, levy or claim prior to institution of foreclosure proceedings if the validity thereof shall be contested in good faith by appropriate proceedings and if the Company shall have established reserves deemed by the Company adequate with respect to such tax, assessment, charge, levy, or claim. 6.3. INSURANCE. The Company will maintain liability, property damage, and insurance on its insurable property against fire and other hazards with responsible insurance carriers in the relative proportionate amounts consistent with the Company's past practice and usually carried by reasonable and prudent companies conducting businesses similar to that of the Company except where the failure to do so would not have a Material Adverse Effect. 6.4. MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will keep its corporate existence, rights, and franchises in full force and effect. The Company will comply with all applicable laws and regulations, decrees, orders, judgments, licenses and permits ("Applicable Laws"), except where noncompliance with such Applicable Laws would not have a Material Adverse Effect on the Company. 6.5. FINANCIAL STATEMENTS AND COMPLIANCE CERTIFICATES. The Company will keep true books of record and account in which full, true and correct entries in accordance with generally accepted accounting principles will be made of all dealings or transactions in relation to its business and activities. For a period of three years after the Closing Date, the Company shall furnish: (a) to the Placement Agent, as soon as available and in any event within 47 days after the close of each fiscal quarter (except the last fiscal quarter of each fiscal year of the Company), commencing with the fiscal quarter ending March 31, 2000, a consolidated balance sheet of the Company as of the end of such quarter and consolidated statements of operations and cash flows of the Company for such quarter and for the expired portion of the then current fiscal year, setting forth comparable figures for the same quarter and expired portion of the previous fiscal year, and prepared and certified by the Chief Financial Officer of the Company, subject to year-end audit adjustment; (b) to each holder of the Shares and the Placement Agent, as soon as available and in any event within 107 days after the close of each fiscal year of the Company, a balance sheet of the Company as of the end of such fiscal year and consolidated statements of operations, stockholders' equity, and cash flows of the Company for such fiscal year, setting forth comparable figures for the previous fiscal year, all reported upon, and certified, by independent certified public accountants of nationally recognized standing; (c) with each financial statement required to be delivered pursuant to the provisions of paragraph (b) above, a certificate of the Chief Financial Officer of the Company stating that to the best of his knowledge there does not exist any Event of Default or any condition or event which after notice or lapse of time, or both, would constitute an Event of Default, or specifying the nature and period of existence of each such Event of Default, condition or event and the action the Company is taking or proposed to take with respect thereto; and 7 8 (d) to the Placement Agent, promptly upon transmission thereof, copies of all financial statements and reports sent by the Company to its shareholders and of all regular and periodic reports, if any, filed by it with the Commission pursuant to any statute administered by the Commission. Except as and to the extent required by law or by any regulatory authority having jurisdiction over you, and except for disclosures to prospective transferees of any of your Shares, you will not willfully disclose to others information obtained from any such inspection or discussion which the Company advises you is confidential in nature. 7. REGISTRATION AND TRANSFER OF SHARES. The Company agrees to maintain an office (or to appoint an agent having an office) in Dallas, Texas, or such other city as the Company may designate by notice in writing to you, at which Shares may be surrendered for transfer and reissuance, for exchange, replacement, conversion, or cancellation. The Company shall keep or cause to be kept, at the office or agency so maintained, a register or registers in which the Company or its agent shall register the names and addresses of the holders of the Shares and shall transfer registered Shares in accordance with this Agreement. Upon surrender for transfer of any registered Shares duly assigned by the registered holder (or its duly authorized attorney) to the transferee(s) thereof and subject to satisfaction of the requirements set forth in Section 9.4 hereof if such Shares are then Restricted Shares, the Company shall execute and deliver a new registered certificates for the Shares. No service charge shall be assessed for any transfer, registration, reissuance, exchange, conversion, or notation of payment hereunder. 8. SUBSTITUTION OF SHARE CERTIFICATE. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction, or mutilation of any certificate for Shares, and of indemnity satisfactory to it (which, in the case of any original purchaser of the Shares, shall be a contractual obligation of such purchaser) and upon surrender, at the office or agency maintained in accordance with Section 8 hereof, and cancellation of any Shares, if mutilated, the Company will execute and deliver a new certificate of like tenor, in lieu of such certificate. 9. SECURITIES ACT. 9.1. INVESTMENT INTENT, ETC. Each of you and each other Person who has been designated by you as a registered holder to whom Shares will be initially issued on the Closing Date, by acceptance of such Shares, represent and in making this sale it is specifically understood and agreed that you and each such other Person are (i) "accredited investors" as defined in Rule 502 of Regulation D under the Securities Act, and (ii) acquiring the Shares to be purchased for your, or such Person's, own account, and not with a view to or for sale in connection with any distribution thereof, provided that the disposition of your, or such Person's, property shall at all times be and remain within your, or such Person's, control. 9.2. RESTRICTIONS ON TRANSFERABILITY. The Shares shall not be transferable except upon the conditions specified in this Section 9, which conditions are intended to ensure compliance with the provisions of the Securities Act in respect of the transfer of any Security. 9.3. RESTRICTIVE LEGENDS. Each certificate for Common Stock and each certificate for Common Stock issued to a subsequent transferee shall (unless otherwise permitted by the 8 9 provisions of Section 9.4 hereof) be stamped or otherwise imprinted with a legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933 or any state securities act. The shares have been acquired for investment and may not be sold, transferred, pledged or hypothecated unless (i) they shall have been registered under the Securities Act of 1933 and any applicable state securities act, or (ii) the corporation shall have been furnished with an opinion of counsel, satisfactory to counsel for the corporation, that registration is not required under any such acts." 9.4. NOTICE OF PROPOSED TRANSFERS. Except as otherwise provided in paragraph (b) of this Section 9.4, prior to any transfer or attempted transfer of any Restricted Stock, the holder thereof shall give written notice to the Company of such holder's intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer and shall be accompanied by an opinion of counsel for such holder satisfactory to the Company, to the effect that such transfer may be effected without registration of such Restricted Stock, under the Securities Act. If such notice is accompanied by such an opinion, such holder shall be entitled to transfer such security in conformity with the terms of such notice, and, if the opinion of counsel so specifies, the securities issued upon any such transfer shall not bear the restrictive legend set forth in Section 9.3. 10. EVENTS OF DEFAULT. If any one or more of the following events (herein called "Events of Default") shall occur and be continuing: (a) default shall be made in the due performance or observance of any other material covenant, agreement, or provision herein to be performed or observed by the Company or a breach shall exist in any material representation or warranty herein contained, and such default or breach is material and shall have continued for a period of 90 days after written notice thereof to the Company from any holder or holders of Shares aggregating not less than 5% of the aggregate number of the Shares then outstanding; (b) the Company shall (i) apply for or consent to the appointment of a receiver, trustee, or liquidator of the Company or any of its assets, (ii) make a general assignment for the benefit of creditors, (iii) be adjudicated a bankrupt or insolvent or (iv) file a voluntary petition in bankruptcy, or a petition or answer seeking reorganization to take advantage of any bankruptcy, reorganization, insolvency, moratorium, dissolution, liquidation, or debtor relief law, or any chapter of any such law, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or chapter, or corporate action shall be taken by the Company for the purpose of effecting any of the foregoing; or an order, judgment, or decree shall be entered, without the application, approval, or consent of the Company, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or of all or a substantial part of the assets of the Company; (c) default shall occur with respect to any indebtedness for borrowed money of the Company or under any agreement under which such indebtedness may be issued by the Company and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of all such indebtedness for which such default 9 10 shall have occurred exceeds $1,000,000 and, if not already matured in accordance with its terms, such default shall result in the acceleration of such indebtedness, and such default shall have continued for a period of 90 days after written notice thereof to the Company from any holder or holders of Shares aggregating not less than 5% of the aggregate number of the Shares then outstanding; provided, however, that if such default shall be remedied or cured by the Company, or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured, or waived without further action upon the part of and holders of the Shares; or (d) final judgment for the payment of money in excess of $1,000,000 shall be rendered against the Company and the same shall remain undischarged for a period of 90 days during which execution shall not be effectively stayed by appeal, posting of a bond, or agreement of the parties thereto. 11. DEFINITIONS. "Affiliates" of any Person shall mean any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. Each director, executive officer, and holder of 5% or more of and class of the outstanding voting securities of the Company shall be deemed to be an "Affiliate" of the Company. "Business Day" shall mean any day that the New York Stock Exchange is open for trading. "Closing" shall have the meaning given such term in Section 3 hereof. "Commission" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "Common Stock" shall mean the Company's Common Stock, $0.01 par value per share. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Act Documents" shall mean all reports and statements required to be filed by the Company with the Securities and Exchange Commission under the Exchange Act, together with all documents incorporated by reference therein or attached as exhibits thereto. "Event of Default" shall have the meaning given such term in Section 10. "Form 10-K" shall mean the Company's Annual Report on Form 10-K for the year ended December 31, 1999. "Governmental Body" shall mean any Federal, state, municipal, or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. 10 11 "Material Adverse Change" shall mean any single circumstance or event (or series of circumstances or events) having a Material Adverse Effect. "Material Adverse Effect" shall mean any material adverse effect on the financial condition or business operations of the Company and its Subsidiaries, taken as a whole. "Memorandum" shall mean the Confidential Offering Memorandum dated April 19, 2000, with respect to the offering of the Shares. "Person" shall mean and include an individual, a partnership, a corporation, a trust, a joint venture, an unincorporated organization, a government or any department or agency thereof, and any other entity. "Placement Agent" shall mean Sanders Morris Harris, Inc., a Texas corporation. "Restricted Stock" shall mean shares of Common Stock issued or issuable pursuant to this Agreement and evidenced by a certificate bearing the restrictive legend set forth in Section 9.3 hereof. "SEC" shall mean the Securities and Exchange Commission. "Shares" shall mean the shares of Common Stock issued or issuable pursuant to this Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Stock Purchase Price" shall mean the lesser of (i) $5.00 per share or (ii) 80% of the average closing price for shares of the Common Stock on the New York Stock Exchange for the 20 Trading Days prior to Closing. "Subsidiary" shall mean any Person of which at the time of determination the Company and/or one or more Subsidiaries owns or controls directly or indirectly more than 50% of the shares of voting stock of such Person. "Trading Day" shall mean a day that the New York Stock Exchange is open for trading. 12. WAIVERS; MODIFICATIONS OF AGREEMENT. Any provision in this Agreement to the contrary notwithstanding, changes in or additions to this Agreement may be made, and compliance with any covenant or condition herein set forth may be omitted, if the Company (a) shall obtain from the holders of record of Shares aggregating not less than 66-2/3% of the number of the Shares at the time outstanding their consent thereto in writing and (b) shall deliver copies of such consent in writing to any such holders of record who did not execute the same; provided, however, that without the consent in writing of all holder of the Shares purchased pursuant to this Agreement, no such consent shall reduce the percentage of the number of the Shares the consent of the holders of which shall be required under this Section 12. 11 12 13. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations, and warranties made herein and in any certificate delivered pursuant hereto shall survive any investigation made by you and the execution and delivery to you of the Shares to be purchased by you and your payment therefor and continue for two years. 14. BROKERS; ISSUANCE TAXES. The Company will hold you free and harmless from any claim, demand, liability for, or expense in connection with, any brokers' or finders' fees or commissions claimed by any Person acting on behalf of the Company in connection with this Agreement or the transactions contemplated herein and taxes (excluding federal income taxes), if any, payable upon, or on account of, issuance of the Shares. 15. GOVERNING LAW. This Agreement and the Shares are being delivered in the State of Texas and shall be governed by and construed according to the laws of the State of Texas. 16. NOTICES. Any notice, consent, request, or other communication required or permitted hereunder shall be in writing and shall be deemed given when either (a) personally delivered to the intended recipient or (b) sent and delivered, by certified or registered mail, return-receipt requested, addressed to the intended recipient as follows: if to the Company, to Tyler Technologies, Inc. 2800 West Mockingbird Lane Dallas, Texas 75235 Attention: Theodore Bathurst; if to any of you, to Sanders Morris Harris 3100 Chase Tower Houston, Texas 77002 Attention: Charles L. Davis ; if to any other holder of Shares to the address of such holder set forth on Schedule 1 or given to the Company in accordance with Section 9; and if to any other holder of Restricted Stock, to the address of such holder as set forth in the stock transfer records of the Company. Any Person (other than the Company) may change the address to which notice is to be sent pursuant to the preceding sentence by giving written notice of such new address to the Company in accordance with this Section 16. The Company may change the address to which notice is to be sent hereunder by giving notice of such change, in accordance with this Section 16, to each Person against whom such change shall be effective. Any notice mailed as aforesaid shall, unless otherwise provided herein, be deemed given on the fifth day after deposited in the United States mail in accordance with the first sentence of this Section 16. Each of the Purchasers hereby appoints Sanders Morris Harris Inc. as his, her, or its representative and agent to whom all communications to such Shareholders may be directed. 17. PARTIES IN INTEREST. All of the terms and provisions of this Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its or your rights or obligations under this Agreement without your prior written consent and you may not assign or transfer any of 12 13 your rights or obligations under this Agreement without the prior written consent of the Company. 18. HEADINGS. The headings of the various sections and subsections hereof have been inserted for convenience of reference only and shall not be deemed to in any way modify any of the terms or provisions hereof. 19. COUNTERPARTS. This Agreement may be signed by each party hereto upon a separate copy, in which event all of said copies shall constitute a single counterpart of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. If the foregoing is in accordance with your understanding, please sign the form of confirmation and acceptance on the enclosed counterpart of this Agreement and return the same to the company, whereupon this Agreement shall be a binding agreement between you and the Company. Very truly yours, TYLER TECHNOLOGIES, INC. By -------------------------------------- Name: ----------------------------------- Title: ---------------------------------- The foregoing Agreement is confirmed and accepted as of the date first above written. SANDERS MORRIS HARRIS INC., as agent and attorney-in-fact for the Purchasers listed on Schedule 1 By ------------------------------------------- Charles L. Davis, Managing Director 13 14 SCHEDULE 1 Schedule of Purchasers
Registered Owner/Address Purchase Price Shares of Common Stock ------------------------ -------------- ----------------------
14 15 SCHEDULE 4.11 Outstanding Registration Rights 15 EX-4.5 3 ex4-5.txt WARRANT TO PURCHASE COMMON STOCK 1 EXHIBIT 4.5 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE "ACTS"). NEITHER THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT HERETO UNDER ALL OF THE APPLICABLE ACTS, OR AN OPINION OF COUNSEL SATISFACTORY TO TYLER TECHNOLOGIES, INC. TO THE EFFECT THAT SUCH REGISTRATIONS ARE NOT REQUIRED. WARRANT to Purchase Common Stock of TYLER TECHNOLOGIES, INC. Expiring on May 19, 2005 THIS IS TO CERTIFY THAT, for value received, SANDERS MORRIS HARRIS INC., a Texas corporation, or permitted assigns, is entitled to purchase from TYLER TECHNOLOGIES, INC., a Delaware corporation (the "Company"), at the place where the Warrant Office designated pursuant to Section 2.1 is located, at a purchase price per share of $3.60 (as adjusted pursuant to the terms of this Warrant, the "Exercise Price"), 333,380 shares of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, $.01 par value, of the Company (the "Common Stock"), and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter set forth. The number of shares of the Common Stock purchasable hereunder and the Exercise Price are subject to adjustment in accordance with Article III hereof. This Warrant shall expire at 5:00 p.m., C.S.T., on May 19, 2005. Certain Terms used in this Warrant are defined in Article IV. ARTICLE I Exercise of Warrant 1.1 Method of Exercise. This Warrant may be exercised as a whole or in part from time to time until May 19, 2005, at which time this Warrant shall expire and be of no further force or effect; provided, however, that the minimum number of Warrant Shares that may be purchased on a single exercise shall be 20,000. To exercise this Warrant, the holder hereof or permitted assignees of all rights of the registered owner hereof shall deliver to the Company, at the Warrant Office designated in Section 2.1, (a) a written notice in the form of the Subscription Notice attached as an exhibit hereto, stating 2 therein the election of such holder or such permitted assignees of the holder to exercise this Warrant in the manner provided in the Subscription Notice, (b) payment in full of the Exercise Price (in the manner described below) for all Warrant Shares purchased hereunder, and (c) this Warrant. Subject to compliance with Section 3.1(a)(vi), this Warrant shall be deemed to be exercised on the date of receipt by the Company of the Subscription Notice, accompanied by payment for the Warrant Shares and surrender of this Warrant, as aforesaid, and such date is referred to herein as the "Exercise Date." Upon such exercise (subject as aforesaid), the Company shall issue and deliver to such holder a certificate for the full number of the Warrant Shares purchasable by such holder hereunder, against the receipt by the Company of the total Exercise Price payable hereunder for all the Warrant Shares, (a) in cash or by certified or cashier's check or (b) if the Common Stock is registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by surrendering Warrant Shares having a Current Market Price equal to the Exercise Price for all the Warrant Shares, so purchased. The Person in whose name the certificate(s) for Common Stock is to be issued shall be deemed to have become a holder of record of such Common Stock on the Exercise Date. 1.2 Net Exercise. Notwithstanding any provisions herein to the contrary, if the Common Stock is registered under the Exchange Act, and the Current Market Value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the Warrant Office together with the properly endorsed Subscription Notice in which event the Company shall issue the holder a number of shares of Common Stock computed as follows: X = Y(A-B) ------ A Where: X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation) A = the Current Market Value of one share of Common Stock (at the date of such calculation) B = Exercise Price (as adjusted to the date of such calculation) 1.3 Fractional Shares. In lieu of any fractional shares of Common Stock which would otherwise be issuable upon exercise of this Warrant, the Company shall issue a certificate for the next lower number of whole shares of Common Stock for any fraction of a share which is one-half or greater. No shares will be issued for less than one-half a share. 2 3 ARTICLE II Warrant Office; Transfer 2.1 Warrant Office. The Company shall maintain an office for certain purposes specified herein (the "Warrant Office"), which office shall initially be the Company's office at 2800 West Mockingbird Lane, Dallas, Texas 75235, and may subsequently be such other office of the Company or of any transfer agent of the Common Stock in the continental United States as to which written notice has previously been given to the holder of this Warrant. The Company shall maintain, at the Warrant Office, a register for the Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each permitted assignee of the rights of the registered owner hereof. 2.2 Ownership of Warrant. The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in this Article II. 2.3 Transfer of Warrants. The Company agrees to maintain at the Warrant Office books for the registration and transfer of this Warrant. This Warrant may be transferred in whole or in part only in compliance with the applicable law and only to shareholders, officers, and employees of Sanders Morris Harris Inc. or to any person who succeeds to all of the assets of Sanders Morris Harris Inc. The Company, from time to time, shall register the transfer of this Warrant in such books upon surrender of this Warrant at the Warrant Office properly endorsed or accompanied by appropriate instruments of transfer and written instructions for transfer satisfactory to the Company. Upon any such transfer, a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. The registered holder of this Warrant shall pay all taxes and all other expenses and charges payable in connection with the transfer of Warrants pursuant to this Section 2.3. 2.4 Registration Rights. The registered holder of this Warrant shall be entitled to all of the rights and benefits of a Stockholder under the Registration Rights Agreement dated May 18, 2000 (the "Registration Rights Agreement"), between the Company and the certain holders of the Common Stock. The Warrant Shares shall be considered Registrable Securities under the Registration Rights Agreement. The terms of the Registration Rights Agreement are hereby incorporated by reference for all purposes and shall be considered a part of this Agreement as if they had been fully set forth herein. 2.5 Acknowledgment of Rights. The Company will, at the time of the exercise of this Warrant in accordance with the terms hereof, upon the request of the registered holder hereof, acknowledge in writing its continuing obligation to afford to such holder any rights (including without limitation, any right to registration of the Warrant Shares) to which such holder shall continue to be entitled after such exercise in 3 4 accordance with the provisions of this Warrant, provided that if the holder of this Warrant shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights. 2.6 Expenses of Delivery of Warrants. The Company shall pay all reasonable expenses, taxes (other than transfer taxes) and other charges payable in connection with the preparation, issuance and delivery of Warrants and related Warrant Shares hereunder. 2.7 Compliance with Securities Laws. The holder hereof understands and agrees that the following restrictions and limitations shall be applicable to all Warrant Shares and resales or other transfers of such Shares pursuant to the Securities Act: (a) The holder hereof agrees that the Warrant Shares shall not be sold or otherwise transferred unless the Warrant Shares are registered under the Securities Act and state securities laws or are exempt therefrom. (b) A legend in substantially the following form has been or will be placed on the certificate(s) evidencing the Warrant Shares: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state (collectively, the "Acts"). Neither the shares nor any interest therein may be offered, sold, transferred, pledged, or otherwise disposed of in the absence of an effective registration statement with respect to the shares under all of the applicable Acts, or an opinion of counsel satisfactory to Tyler Technologies, Inc. to the effect that such registrations are not required." (c) Stop transfer instructions have been or will be imposed with respect to the Warrant Shares so as to restrict resale or other transfer thereof, subject to this Section 2.7. ARTICLE III Anti-Dilution Provisions 3.1 Adjustment of Exercise Price and Number of Warrant Shares. The Exercise Price shall be subject to adjustment from time to time as hereinafter provided in this Article III. Upon each adjustment of the Exercise Price, except pursuant to 3.1(a)(iii), (iv), and (v) the registered holder of the Warrant shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of the Common Stock (calculated to the nearest whole share pursuant to Section 1.2) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of the Common Stock purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4 5 (a) Exercise Price Adjustments. The Exercise Price shall be subject to adjustment from time to time as follows: (i) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date hereof (the "Original Issue Date") effect a subdivision of the outstanding Common Stock, the Exercise Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 3.1(a)(i) shall become effective at the close of business on the date the subdivision or combination becomes effective. (ii) Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Exercise Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Exercise Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Exercise Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Exercise Price shall be adjusted pursuant to this Section 4f to reflect the actual payment of such dividend or distribution. (iii) Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Original Issue Date, the Common Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 3.1(a)), in any such event the holder hereof shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Common Stock could have been converted immediately prior to such recapitalization, reclassification or change, 5 6 all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. (iv) Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Original Issue Date, there is a capital reorganization of the Common Stock (other than an Acquisition or Asset Transfer or a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 3.1(a) , as a part of such capital reorganization, provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise hereof the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon exercise would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 3(a) with respect to the rights of the holder hereof after the capital reorganization to the end that the provisions of this Section 3.1(a) (including adjustment of the Exercise Price then in effect and the number of shares issuable upon exercise) shall be applicable after that event and be as nearly equivalent as practicable. (v) Sale of Shares Below Exercise Price. (A) If at any time or from time to time prior to January 1, 2001, the Company issues or sells, or is deemed by the express provisions of this subsection (v) to have issued or sold, Additional Shares of Common Stock, other than as a dividend or other distribution on any class of stock as provided in Section 3.1(a)(ii) above, and other than a subdivision or combination of shares of Common Stock as provided in Section 3.1(a)(i) above, for an Effective Price less than the then effective Exercise Price, then and in each such case the then existing Exercise Price shall be reduced, as of the opening of business on the date of such issue or sale, to the price at which such Additional Shares of Common Stock are issued. (B) If at any time or from time to time on or after January 1, 2001, the Company issues or sells, or is deemed by the express provisions of this subsection (v) to have issued or sold, Additional Shares of Common Stock, other than as a dividend or other distribution on any class of stock as provided in Section 3.1(a)(ii) above, and other than a subdivision or combination of shares of Common Stock as provided in Section 3.1(a)(i) above, for an Effective Price less than the then effective Exercise Price, then and in each such case the then existing Exercise Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Exercise Price by a fraction (i) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (B) the number of shares of Common Stock which the aggregate consideration received (as defined in subsection (v)(C)) by the Company for the total number of Additional Shares of 6 7 Common Stock so issued would purchase at such Exercise Price, and (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue or sale plus the total number of Additional Shares of Common Stock so issued. (C) For the purpose of making any adjustment required under this Section 3.1(a)(v), the consideration received by the Company for any issue or sale of securities shall (1) to the extent it consists of cash, be computed at the net amount of cash received by the Company after deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale but without deduction of any expenses payable by the Company, (2) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board of Directors, and (3) if Additional Shares of Common Stock, Convertible Securities, or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities, or rights or options. (D) For the purpose of the adjustment required under this Section 3(a)(v), if the Company issues or sells (i) stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being herein referred to as "Convertible Securities") or (ii) rights or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Exercise Price, in each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities, plus, in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion thereof; provided, however, that if in the case of Convertible Securities the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses; provided further that if the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or 7 8 non-occurrence of specified events other than by reason of antidilution adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided further that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities. No further adjustment of the Exercise Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Exercise Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Exercise Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities, provided that such readjustment shall not apply to prior exercises of this Warrant. (E) "Additional Shares of Common Stock" means all shares of Common Stock issued by the Company or deemed to be issued pursuant to Section 3.1(a)(v), whether or not subsequently reacquired or retired by the Company other than (1) shares of Common Stock issued upon exercise of this Warrant; (2) shares of Common Stock and/or options, warrants or other Common Stock purchase rights, and the Common Stock issued pursuant to such options, warrants or other rights (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like) after the Original Issue Date to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary pursuant to the Company's and its predecessor's stock incentive plans or other arrangements that are approved by the Board; (3) shares of Common Stock issued pursuant to the exercise of options, warrants or convertible securities outstanding as of the Original Issue Date; (4) shares of Common Stock issued pursuant to a stock split, combination, dividend or distribution pursuant to (3).1(a)(i) and 3.1(a)(ii); (5) shares of Common Stock issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination; (6) shares of Common Stock issued to equipment lessors or financial institutions 8 9 in connection with debt, equipment or lease financings, or other transactions approved by the Board of Directors; and (7) shares of Common Stock issued for any other corporate purpose; provided, however, that the aggregate number of shares of Common Stock issued pursuant to clauses (2) and (7) may not exceed 20% of the shares of Common Stock of the Company then outstanding. The "Effective Price" of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 3.1(a)(v), into the aggregate consideration received, or deemed to have been received by the Company for such issue under this Section 3.1(a)(v), for such Additional Shares of Common Stock. (vi) Rounding of Calculations; Minimum Adjustment. All calculations under this Section 3.1(a) and under Section 3.1(b) shall be made to the nearest cent or to the nearest whole share (as provided in Section 1.2) share, as the case may be. Any provision of this Section 3.1 to the contrary notwithstanding, no adjustment in the Exercise Price shall be made if the amount of such adjustment would be less than one percent, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate one percent or more. (vii) Timing of Issuance of Additional Common Stock Upon Certain Adjustments. In any case in which the provisions of this Section 3.1(a) shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event issuing to the holder of this Warrant after such record date and before the occurrence of such event the additional shares of Common Stock or other property issuable or deliverable upon exercise by reason of the adjustment required by such event over and above the shares of Common Stock or other property issuable or deliverable upon such exercise before giving effect to such adjustment; provided, however, that the Company upon request shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares or other property, and such cash, upon the occurrence of the event requiring such adjustment. (b) Current Market Price. The "Current Market Price" shall mean, as of any date, the average, of either: (i) the high and low sales prices of the Common Stock on such Trading Day as reported on the composite tape for the principal national securities exchange on which the Common Stock may then be listed, or (ii) if the Common Stock shall not be so listed on any such Trading Day, the high and low sales prices of Common Stock in the over-the-counter market as reported by the Nasdaq National Market, or (iii) if the Common Shares shall not be included in the Nasdaq National Market on any such Trading Day, the representative bid and asked prices at the end of such Trading Day in such market as reported by the Nasdaq Stock Market or (iv) if there be no such representative prices reported by the Nasdaq Stock Market, the lowest bid and highest 9 10 asked prices at the end of such Trading Day in the over-the-counter market as reported by the OTC Electronic Bulletin Board or National Quotation Bureau, Inc., or any successor organization. For purposes of determining Current Market Price, the term "Trading Day" shall mean a day on which an amount greater than zero can be calculated with respect to the Common Stock under any one or more of the foregoing categories (i), (ii), (iii) and (iv), and the "end" thereof, for the purposes of categories (iii) and (iv), shall mean the exact time at which trading shall end on the New York Stock Exchange. If the Current Market Price cannot be determined under any of the foregoing methods, Current Market Price shall mean the fair value per share of Common Stock on such date determined by the Board of Directors in good faith, irrespective of any accounting treatment. (c) Statement Regarding Adjustments. Whenever the Exercise Price shall be adjusted as provided in Section 3.1(a), and upon each change in the number of shares of the Common Stock issuable upon exercise of this Warrant, the Company shall forthwith file, at the office of any transfer agent for this Warrant and at the principal office of the Company, a statement showing in detail the facts requiring such adjustment and the Exercise Price and new number of shares issuable that shall be in effect after such adjustment, and the Company shall also cause a copy of such statement to be given to the holder of this Warrant. Each such statement shall be signed by the Company's chief financial or accounting officer. Where appropriate, such copy may be given in advance and may be included as part of a notice required to be mailed under the provisions of Section 3.1(d). (d) Notice to Holders. In the event the Company shall propose to take any action of the type described in clause (iii), (iv), or (v) of Section 3.1(a), the Company shall give notice to the holder of this Warrant, in the manner set forth in Section 6.6, which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place. Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Exercise Price and the number, kind or class of shares or other securities or property which shall be deliverable upon exercise of this Warrant. In the case of any action which would require the fixing of a record date, such notice shall be given at least 10 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 15 days prior to the taking of such proposed action. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action. (e) Treasury Stock. For the purposes of this Section 3.1, the sale or other disposition of any Common Stock of the Company theretofore held in its treasury shall be deemed to be an issuance thereof. 3.2 Costs. The registered holder of this Warrant shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery of shares of Common Stock of the Company upon exercise of this Warrant; provided further, and not in limitation of the foregoing, that the Company shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or 10 11 delivery of any certificate for such shares. The holder of this Warrant shall reimburse the Company for any such taxes assessed against the Company. 3.3 Reservations of Shares. The Company shall reserve at all times so long as this Warrant remains outstanding, free from preemptive rights, out of its treasury Common Stock or its authorized but unissued shares of Common Stock, or both, solely for the purpose of effecting the exercise of this Warrant, sufficient shares of Common Stock to provide for the exercise hereof. 3.4 Valid Issuance. All shares of Common Stock which may be issued upon exercise of this Warrant will upon issuance by the Company be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof attributable to any act or omission by the Company, and the Company shall take no action which will cause a contrary result (including without limitation, any action which would cause the Exercise Price to be less than the par value, if any, of the Common Stock). ARTICLE IV Terms Defined As used in this Warrant, unless the context otherwise requires, the following terms have the respective meanings set forth below or in the Section indicated: Additional Shares of Common Stock -- Section 3.1(a)(v)(E). Acquisition -- any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred. Asset Transfer -- a sale, lease or other disposition of all or substantially all of the assets of the Company. Board of Directors -- the Board of Directors of the Company. Common Stock -- the Company's authorized Common Stock, $0.01 par value per share. Company - Tyler Technologies, Inc., a Delaware corporation, and any other corporation assuming or required to assume the obligations undertaken in connection with this Warrant. 11 12 Current Market Price -- Section 3.1(b). Effective Price -- Section 3.1(a)(v)(E). Outstanding -- when used with reference to Common Stock at any date, all issued shares of Common Stock (including, but without duplication, shares deemed issued pursuant to Article III) at such date, except shares then held in the treasury of the Company. Person -- any individual, corporation, partnership, trust, organization, association or other entity or individual. Securities Act -- the Securities Act of 1933 and the rules and regulations thereunder, all as the same shall be in effect at the time. Trading Day -- Section 3.1(b). Warrant -- this Warrant and any successor or replacement Warrant delivered in accordance with Section 2.3 or 6.8. Warrant Office -- Section 2.1. Warrant Shares -- shall mean the shares of Common Stock purchased or purchasable by the registered holder of this Warrant or the permitted assignees of such holder upon exercise thereof pursuant to Article I hereof. ARTICLE V Covenant of the Company The Company covenants and agrees that this Warrant shall be binding upon any corporation succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. ARTICLE VI Miscellaneous 6.1 Entire Agreement. This Warrant contains the entire agreement between the holder hereof and the Company with respect to the shares which it can purchase upon exercise hereof and the related transactions and supersedes all prior arrangements or understanding with respect thereto. 6.2 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Texas. 12 13 6.3 Waiver and Amendment. Any term or provision of this Warrant may be waived at any time by the party which is entitled to the benefits thereof and any term or provision of this Warrant may be amended or supplemented at any time by agreement of the holder hereof and the Company, except that any waiver of any term or condition, or any amendment or supplementation, of this Warrant must be in writing. A waiver of any breach or failure to enforce any of the terms or conditions of this Warrant shall not in any way affect, limit or waive a party's rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Warrant. 6.4 Illegality. In the event that any one or more of the provisions contained in this Warrant shall be determined to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in any other respect and the remaining provisions of this Warrant shall not, at the election of the party for whom the benefit of the provision exists, be in any way impaired. 6.5 Copy of Warrant. A copy of this Warrant shall be filed among the records of the Company. 6.6 Notice. Any notice or other document required or permitted to be given or delivered to the holder hereof shall be delivered at, or sent by certified or registered mail to such holder at, the last address shown on the books of the Company maintained at the Warrant Office for the registration of this Warrant or at any more recent address of which the holder hereof shall have notified the Company in writing. Any notice or other document required or permitted to be given or delivered to the Company, other than such notice or documents required to be delivered to the Warrant Office, shall be delivered at, or sent by certified or registered mail to, the office of the Company at 2800 West Mockingbird Lane, Dallas, Texas 75235 or any other address within the continental United States of America as shall have been furnished by the Company to the holder of this Warrant. 6.7 Limitation of Liability; Not Stockholders. No provision of this Warrant shall be construed as conferring upon the holder hereof the right to vote, consent, receive dividends or receive notices other than as herein expressly provided in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the holder hereof to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the purchase price of any shares of Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 6.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of this Warrant, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of this Warrant, the Company 13 14 will make and deliver a new Warrant of like tenor, in lieu of such lost, stolen, destroyed or mutilated Warrant; provided, however, that the original recipient of this Warrant shall not be required to provide any such bond of indemnity and may in lieu thereof provide his agreement of indemnity. Any Warrant issued under the provisions of this Section 6.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or in lieu of any mutilated Warrant, shall constitute an original contractual obligation on the part of the Company. This Warrant shall be promptly canceled by the Company upon the surrender hereof in connection with any exchange or replacement. The registered holder of this Warrant shall pay all taxes (including securities transfer taxes) and all other expenses and charges payable in connection with the preparation, execution and delivery of Warrants pursuant to this Section 6.8. 6.9 Headings. The Article and Section and other headings herein are for convenience only and are not a part of this Warrant and shall not affect the interpretation thereof. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name. Dated: May __, 2000 TYLER TECHNOLOGIES, INC. By ------------------------------------- Name: ---------------------------------- Title: --------------------------------- 14 15 SUBSCRIPTION NOTICE The undersigned, the holder of the foregoing Warrant, hereby elects to exercise purchase rights represented by said Warrant for, and to purchase thereunder __________ shares of the Common Stock covered by said Warrant and herewith makes payment in full therefor pursuant to Section 1.1 of such Warrant, and requests (a) that certificates for such shares (and any securities or other property issuable upon such exercise) be issued in the name of, and delivered to, ___________ , ___________ and (b) if such shares shall not include all of the shares issuable as provided in said Warrant, that a new Warrant of like tenor and date for the balance of the shares issuable thereunder be delivered to the undersigned. The undersigned represents that (1) the aforesaid shares of Common Stock are being acquired for the account of the undersigned for investment not with view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (2) the undersigned is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (3) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned's own interests; (4) the undersigned understands that the shares of Common Stock issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the "Securities Act'), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (5) the undersigned is aware that the aforesaid shares of Common Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (6) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares Common Stock unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required. -------------------------------- Dated: , ---------------- ----- 15 16 ASSIGNMENT For value received, ______________________________, hereby sells, assigns and transfers unto_________________________ the within Warrant, together with all right, title and interest therein and does hereby irrevocably constitute and appoint ____________________________________attorney, to transfer said Warrant on the books of the Company, with full power of substitution. -------------------------------- Dated: , 19 ---------------- -- 16 EX-4.6 4 ex4-6.txt AMENDED CREDIT AGREEMENT 1 EXHIBIT 4.6 AMENDMENT NO. 3 This Amendment No. 3 to the Credit Agreement dated as of August 14, 2000 (this "Agreement"), is among Tyler Technologies, Inc., a Delaware corporation (the "Borrower"), the Banks signatory to the Credit Agreement described below (the "Banks"), and Bank of America, N.A., as agent (the "Agent") for the Banks. INTRODUCTION Reference is made to the Credit Agreement dated as of October 1, 1999 (as amended, the "Credit Agreement"), among the Borrower, the Banks, and the Agent, the defined terms of which are used herein unless otherwise defined herein. The Borrower, the Banks, and the Agent have agreed to modify the Credit Agreement as set forth herein in connection with the Borrower's proposed business activities. THEREFORE, in connection with the foregoing and for other good and valuable consideration, the Borrower, the Banks, and the Agent hereby agree as follows: Amendment. (a) Section 1.1 of the Credit Agreement is amended by replacing or inserting the following definitions, as appropriate: "Applicable Margin" means, with respect to interest rates, unused commitment fees, and letter of credit fees and as of any date of its determination, the percentage amount set forth in the table below:
Period Applicable Margin Applicable Margin Base Rate Tranches and Commitment Fee Letters of Credit 8/1/00 through 12/31/00 2.00% .50% 1/1/01 through 3/31/01 3.00% .50% 4/1/01 through 6/30/01 3.50% .50% thereafter 4.00% .50%
"Collateral" means (a) all real property, fixtures, and equipment comprising the Borrower's headquarters in Dallas, Texas, (b) all accounts, notes receivable, inventory, equipment, and general intangibles (including contractual rights to the payment of money and intellectual property rights) of the Borrower and its Subsidiaries, (c) all ownership interests in the Subsidiaries of the Borrower, and (d) all other real and personal property of the Borrower and its Subsidiaries requested by the Agent to be collateral for the Credit Obligations, in each case other than Excluded Collateral. 2 "Excluded Collateral" means (a) the stock of Government Records Services, Inc., and Title Records Corporation and the assets of TRC which are set forth as "Excluded Collateral" in Schedule II of the Security Agreement which is executed in connection with this Agreement and is dated as of October 1, 1999, each until such time as the BRC Note has been paid or the BRC Pledge Agreement and Guaranty has been terminated and (b) the stock of the Excluded Subsidiaries and the assets of the Excluded Subsidiaries. "Excluded Subsidiaries" means (a) TPI and Swan and (b) any other Subsidiaries of the Borrower determined by the Agent to be Excluded Subsidiaries. "Permitted Minor Asset Sales" means sales of assets, other than in the ordinary course of business, that have a sales price totaling not more than $100,000 in any fiscal year. "Net Cash Proceeds" means the cash proceeds from any sale of assets or capital stock after payment of the costs of the sale and repayment of any Permitted Debt secured by a Permitted Lien on any of the assets or capital stock which was sold. "Permitted Debt" means all of the following Debt: (a) Debt in the form of the Credit Obligations; (b) Debt between Credit Parties; (c) Debt of the Borrower outstanding on the date of this Agreement that is disclosed on Schedule II and unpaid interest which has accrued or shall accrue on such Debt; and (d) Debt of the Borrower other than that specified above which was outstanding on June 30, 2000, and is disclosed on the Borrower's June 30, 2000, financial statements. "Security Documents" means the Security Agreements, the Mortgages, the Pledge Agreements, and any other document creating or consenting to Liens in favor of the Agent securing Credit Obligations. "Revolving Loan Maturity Date" means October 2, 2001. (b) Sections 2.1(a)(iii) of the Credit Agreement is amended to read as follows: (iii) Reduction of Revolving Loan Commitments. 3 (A) In connection with any prepayment under Section 2.1(c)(i)(A), the Revolving Loan Commitments shall be reduced by an amount equal to the amount of such prepayment, with each Bank's Revolving Loan Commitment reduced pro rata. Any termination or reduction of the Revolving Loan Commitments pursuant to this paragraph shall be permanent, with no obligation of the Banks to reinstate such reduced Revolving Loan Commitments. (B) The Borrower shall have the right, upon at least 5 Business Days advance notice to the Agent, to reduce ratably in part or terminate in whole the Revolving Loan Commitments. Each such notice shall specify the amount of the termination or reduction and shall be irrevocable and binding on the Borrower. Partial reductions shall be in a minimum amount of $5,000,000 and be made in integral multiples of $5,000,000. In the event of any partial reduction, each Bank's Revolving Loan Commitment shall be reduced pro rata. The Revolving Loan Commitments cannot be reduced below the amount of the Revolving Loan plus the Letter of Credit Exposure. Any termination or reduction of the Revolving Loan Commitments pursuant to this paragraph shall be permanent, with no obligation of the Banks to reinstate such reduced or terminated Revolving Loan Commitments. (C) To the extent not reduced below the following amounts by reductions pursuant to paragraphs (A) and (B) above, the Revolving Loan Commitments shall be reduced in accordance with the following schedule:
Date Aggregate Revolving Loan Commitments 08/14/00 $ 77,500,000 09/30/00 $ 65,000,000 11/30/00 $ 55,000,000
In connection with each such reduction, each Bank's Revolving Loan Commitment shall be reduced pro rata and the Borrower shall to the extent required by Section 2.1(c)(i)(B) prepay the Revolving Loan. Any termination or reduction of the Revolving Loan Commitments pursuant to this paragraph shall be permanent, with no obligation of the Banks to reinstate such reduced Revolving Loan Commitments. (D) On December 30, 2000, the Revolving Loan Commitments shall be reduced to an amount equal to sum of (x) the Revolving Loan plus (y) the Swing Line Loan plus (z) the Letter of Credit Exposure on such date. The Revolving Loan Commitments shall thereafter be reduced by $1,500,000 on December 31, 2000, and the last day of each month thereafter until the Revolving Loan Maturity Date. In connection with each such reduction, each Bank's Revolving Loan Commitment shall be reduced pro rata and the Borrower shall to the extent required by Section 2.1(c)(i)(B) prepay the Revolving Loan. Any termination or reduction of the Revolving Loan Commitments pursuant to this paragraph shall be permanent, with no obligation of the Banks to reinstate such reduced Revolving Loan Commitments. 4 (c) Section 2.1(c)( i) of the Credit Agreement is amended to read as follows: (i) The Borrower shall make mandatory prepayments of principal: (A) upon receipt of any Net Cash Proceeds from any asset sale, including the sale of any capital stock of any Subsidiary of the Borrower, or upon any sale of any capital stock of the Borrower, in an amount equal to 100% of the Net Cash Proceeds of such asset sale or capital stock sale (provided that such requirement shall not apply to sales of assets in the ordinary course of business or Permitted Minor Asset Sales); and (B) when required and in the amount necessary to keep the amount of (x) the Revolving Loan plus (y) the Swing Line Loan plus (z) the Letter of Credit Exposure equal to or less than the amount of the Revolving Loan Commitments. In connection with any such mandatory prepayment, the Revolving Loan Commitments shall be reduced to the extent set forth in Section 2.1(a)(iii), and the Borrower shall provide notice to the Agent in writing or by telecopy not later than 11:00 a.m. (local time at the Applicable Lending Office of the Agent) on the 5th Business Day before the date of the required prepayment. Each such notice shall specify the principal amount and Tranches of the Revolving Loan which shall be prepaid, the date of the prepayment, and shall be irrevocable and binding on the Borrower. (d) Paragraphs (a) through (c) of Section 2.5 of the Credit Agreement are replaced with the following two paragraphs (with paragraph (d) being renumbered as paragraph (c) accordingly): (a) Interest Rate Basis. Effective on August 14, 2000, and subject to the provisions of Section 2.6, all LIBOR Tranches shall convert to Base Rate Tranches. Thereafter the Borrower may select only Base Rate Tranches for the Revolving Loan. The Borrower shall provide the Agent with written notice of the Base Rate Tranche in a Revolving Loan Borrowing Request not later than 11:00 a.m. (local time at the Applicable Lending Office of the Agent) on the date of the proposed Borrowing. (b) Base Rate Tranches. Each Base Rate Tranche shall bear interest at a per annum interest rate equal to the Adjusted Base Rate in effect from time to time plus the Applicable Margin for Base Rate Tranches in effect from time to time. Any change in the interest rate accruing on a Base Rate Tranche resulting from a change in the Prime Rate shall become effective as of the opening of business on the day on which such change in the Prime Rate shall occur. Interest for Base Rate Tranches shall be calculated on the basis of a 365/366 day year for the actual number of days elapsed. The Borrower shall pay to the Agent for the ratable benefit of the Banks all accrued but unpaid interest on outstanding Base Rate Tranches on the last day of each calendar month, on any date all Base Rate Tranches under this revolving facility are prepaid or repaid in full, and on the Revolving Loan Maturity Date. 5 (e) Section 5.2 of the Credit Agreement is amended by inserting the following new paragraph (c) after paragraph (b) and renumbering the prior paragraph (c) and the remainder of the Section accordingly: (b) Monthly Reports. Beginning with September 2000, as soon as available and in any event not later than 45 days after the end of each month, (i) a copy of the internally prepared consolidated financial statements of the Borrower for such month and for the fiscal year to date period ending on the last day of such month, including therein the consolidated balance sheets of the Borrower as of the end of such month and the consolidated statements of income, and cash flows for such month and for such fiscal year to date period, setting forth the consolidated financial position and results of the Borrower for such month and fiscal year to date period, all in reasonable detail and duly certified by a Responsible Officer of the Borrower as having been prepared in accordance with generally accepted accounting principles (subject to normal year-end audit adjustments), and (ii) a copy of the internally prepared consolidating financial schedules of the Borrower from which the consolidated financial statements of Borrower provided to the Agent pursuant to clause (i) were prepared. (f) Section 5.5 of the Credit Agreement is amended by replacing such section in its entirety with the following: 5.5 Financial Covenants. (a) Net Worth. The Borrower shall not permit the consolidated Net Worth of the Borrower at any time to be less than the sum of (i) $100,000,000 plus (ii) 75% of the quarterly consolidated net income of the Borrower for each fiscal quarter ending after June 30, 2000, during which the Borrower has positive consolidated net earnings; plus (iii) 100% of the net proceeds resulting from any sale or issuance of any capital stock of the Borrower or its Subsidiaries since June 30, 2000, plus (iv) to the extent that the required consolidated Net Worth under this Section 5.5(a) was not increased in clauses (i) through (iii) above as a result of any Acquisition, 100% of any increase in the consolidated Net Worth of the Borrower resulting from any Acquisition. (b) Debt Ratio. As of September 30, 2000, and the last day of each fiscal quarter thereafter, the Borrower shall not permit the consolidated Debt Ratio of the Borrower to be greater than the following ratio:
Dates Maximum Ratio ----- ------------- 09/30/00 5.10 to 1.00 12/31/00 4.25 to 1.00 03/31/01 2.95 to 1.00 06/30/01 2.15 to 1.00 thereafter 1.60 to 1.00
(c) EBITDA. As of September 30, 2000, and the last day of each fiscal quarter thereafter, the consolidated EBITDA of the Borrower for the fiscal quarter then ended shall not be less than the amount specified below.
Dates Minimum Amount ----- -------------- 09/30/00 $3,380,000 12/31/00 $6,230,000 03/31/01 $5,261,000 06/30/01 $8,073,000 09/30/00 $9,630,000 thereafter $9,800,000
6 (d) Capital Expenditures. The Borrower shall not permit the consolidated Capital Expenditures of the Borrower, less the amount of such Capital Expenditures reimbursed by the customers of the Borrower, during the Borrower's 2000 fiscal year to exceed $14,460,000, and shall not permit the consolidated Capital Expenditures of the Borrower, less the amount of such Capital Expenditures reimbursed by customers of the Borrower, during each fiscal quarter thereafter to exceed $1,000,000. (g) Section 5.9 of the Credit Agreement is amended to read as follows: 5.9 Corporate Transactions. The Borrower shall not, without the Agent's consent, permit any Restricted Entity to (a) merge, consolidate, or amalgamate with another Person, or liquidate, wind up, or dissolve itself (or take any action towards any of the foregoing), (b) convey, sell, lease, assign, transfer, or otherwise dispose of any of its property, businesses, or other assets outside of the ordinary course of business (except for Permitted Minor Asset Sales and equity offerings of common stock in the Borrower), or (c) make any Acquisition; provided that any Subsidiary of the Borrower that is not an Excluded Subsidiary may merge, consolidate, or amalgamate into any wholly owned Subsidiary of the Borrower that is also not an Excluded Subsidiary or convey, sell, lease, assign, transfer, or otherwise dispose of any of its assets to any wholly-owned Subsidiary of the Borrower that is not an Excluded Subsidiary (and if such disposition transfers all or substantially all of the assets of transferring Subsidiary, such Subsidiary may then liquidate, wind up, or dissolve itself), provided that a wholly-owned Subsidiary is the surviving or acquiring Subsidiary. In connection with any Permitted Minor Asset Sale, provided that no Default or Event of Default exists or would be caused thereby, upon reasonable advance written notice from the Borrower of the intent to so dispose of assets, the Agent at the Borrower's expense shall release the collateral to be sold from the liens and security interests created by the Credit Documents and shall execute and deliver in favor of such Subsidiary any releases reasonably requested by the Borrower to evidence such release. (f) Section 5.19 of the Credit Agreement is amended by replacing such section in its entirety with the following: 5.19 Collateral. The Borrower shall and shall cause its Subsidiaries to execute and deliver to the Agent such joinder agreements, guaranties, pledge agreements, security agreements, mortgages, amendment agreements and other documents and agreements as the Agent requests in form satisfactory to the Agent so that the Borrower and its Subsidiaries (other than the Excluded Subsidiaries) are obligated to pay the Credit Obligations and have secured the Credit Obligations with a first priority perfected Lien on the Collateral. In connection therewith, the Borrower shall provide corporate documentation and opinion letters to the extent requested by the Agent reasonably satisfactory to the Agent reflecting the corporate status of the Borrower and its Subsidiaries and the enforceability and effect of such agreements. 7 2. Certain Fees. The Borrower shall pay to the Agent for the ratable benefit of the Banks an amendment fee of $1,000,000 in installments, with $300,000 due and payable as a condition to the effectiveness of this Agreement, and subsequent payments of $300,000 due and payable on January 1, 2001, and $400,000 due and payable on July 1, 2001, unless before the due date there are no Credit Obligations outstanding and the Revolving Loan Commitments have been terminated. 3. Waivers. (a) The Agent and the Lenders hereby agree to a one time extension of the time period for delivery of the items required to be delivered pursuant to Section 5.2(b) of the Credit Agreement so that such items may be delivered on or before August 31, 2000. It shall be an Event of Default if the Borrower fails to deliver the documents and other items listed in Section 5.2(b), each in form and substance reasonably acceptable to the Agent on or before August 31, 2000. This waiver shall not extend to any violation of Section 5.2(b) which occurs after August 31, 2000. (b) The Agent and the Lenders hereby waive any Default or Event of Default under Sections 5.5(a), (b), and (c) of the Credit Agreement existing on the date of this Agreement resulting from the failure of the Borrower to comply with the financial covenants in such Sections on or before such date, and any failure to report any such Default or Event of Default under Section 5.2(e) before the date of this waiver. This waiver shall not extend to any violation of Section 5.5 which occurs after the date of this Agreement or any other failure to report under 5.2(e). 4. Representations and Warranties. The Borrower represents and warrants that (a) the execution, delivery, and performance of this Agreement are within the corporate power and authority of the Borrower and have been duly authorized by appropriate proceedings, (b) this Agreement constitutes legal, valid, and binding obligations of the Borrower enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and general principles of equity, and (c) upon the effectiveness of this Agreement and the amendment of the Credit Documents as provided for herein, no Event of Default shall exist under the Credit Documents and there shall have occurred no event which with notice or lapse of time would become an Event of Default under the Credit Documents, as amended. 5. Effect on Credit Documents. Except as amended herein, the Credit Agreement and all other Credit Documents remain in full force and effect as originally executed. Nothing herein shall act as a waiver of the Agent's or the Banks' rights under the Credit Documents as amended, including the waiver of any default or event of default, however denominated, except as specifically provided herein. The Borrower must continue to comply with the terms of the Credit Documents, as amended. This Agreement is a Credit Document for the purposes of the provisions of the other Credit Documents. Without limiting the foregoing, any breach of representations, warranties, and covenants under this Agreement shall be a default under the other Credit Documents. 6. Effectiveness. This Agreement shall become effective and the Credit Agreement shall be amended as provided in this Agreement effective on the date first set forth above when the Agent shall have received duly executed counterparts hereof signed by the Borrower, the Agent, and the Banks and the payments required to be made as conditions precedent to the effectiveness this Agreement under Section 2 above have been made. 7. Release. In consideration of this Agreement, Borrower on its behalf and on behalf of its Subsidiaries hereby fully releases, remises, and forever discharges the Agent and the Banks, their parents and all other affiliates and predecessors, and all past and present officers, directors, agents, employees, servants, partners, shareholders, attorneys, and managers thereof (the Agent, the Banks, and the other described parties being the "Bank-Related Parties"), for, from, and against any and all claims, liens, demands, causes of action, controversies, offsets, obligations, losses, damages, and liabilities of every kind and character whatsoever, including, without limitation, any action, omission, misrepresentation, or other basis of liability founded either in tort, contract, or equity and the duties arising thereunder, that the Borrower and its Subsidiaries, or any of them, has had in the past, or now has, whether known or unknown, whether asserted or unasserted, by reason of any matter, cause, or thing set forth in, relating to, or arising out of, or in any way connected with or resulting from, the Credit Agreement, the Credit Documents or any real or personal property now or at any time securing the same (collectively "Claims"). It is the express intent of the parties that the release and discharge set forth in this paragraph be construed as broadly as possible in favor of the Bank Related Parties so as to foreclose forever the assertion by the Borrower or its Subsidiaries of any Claims, as defined above, against Bank Related Parties or any of them. 8. Miscellaneous. The miscellaneous provisions of the Credit Agreement apply to this Agreement. This Agreement may be signed in any number of counterparts, each of which shall be an original. (signature pages follow) 8 THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED as of the date first above written. BORROWER: TYLER TECHNOLOGIES, INC. By: ---------------------------------------------- Brian K. Miller, Vice President and Treasurer AGENT: BANK OF AMERICA, N.A., as Agent By: ---------------------------------------------- Roger E. Chitwood, Senior Vice President BANKS: BANK OF AMERICA, N.A. By: ---------------------------------------------- Roger E. Chitwood, Senior Vice President CHASE BANK OF TEXAS, N.A. By: ---------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- 9 BANK ONE, TEXAS, N.A. By: ---------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- TEXAS CAPITAL BANK, NATIONAL ASSOCIATION By: ---------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- EX-27 5 ex27.txt FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1,873,000 0 40,901,000 1,387,000 804,000 50,732,000 30,018,000 8,877,000 253,432,000 70,040,000 0 0 0 481,000 113,979,000 253,432,000 64,630,000 64,630,000 38,376,000 38,376,000 0 0 3,896,000 (9,212,000) (2,001,000) (7,211,000) (487,000) 0 0 (7,698,000) (0.17) (0.17)
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