-----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, K8DbU7z7px2Ut966RCGFZvz/JaM52e+3xVIAsfpKJX3cQnPBSLQCWG/VzhrUEkf+ aM5MzmSSgkaMW7Fxg/UF2Q== 0000950134-03-007051.txt : 20030502 0000950134-03-007051.hdr.sgml : 20030502 20030502152040 ACCESSION NUMBER: 0000950134-03-007051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYLER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000860731 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 752303920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10485 FILM NUMBER: 03679588 BUSINESS ADDRESS: STREET 1: 2800 W MOCKINGBIRD LANE 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 THREE INC DATE OF NAME CHANGE: 19600201 FORMER COMPANY: FORMER CONFORMED NAME: TYLER CORP /NEW/ DATE OF NAME CHANGE: 19930328 10-Q 1 d05253e10vq.txt FORM 10-Q 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 March 31, 2003 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.) 5949 SHERRY LANE, SUITE 1400 DALLAS, TEXAS 75225 (Address of principal executive offices) (Zip code) (972) 713-3700 (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 April 29, 2003: 45,373,933 PART I. FINANCIAL INFORMATION Item 1. Financial Statements TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (In thousands, except per share amounts) (Unaudited)
Three months ended March, 31 ------------------------ 2003 2002 -------- -------- Revenues: Software licenses $ 5,460 $ 5,314 Software services 7,706 4,992 Maintenance 10,935 9,315 Appraisal services 6,751 7,783 Hardware and other 1,473 1,518 -------- -------- Total revenues 32,325 28,922 Cost of revenues: Software licenses 1,544 1,069 Software services and maintenance 13,282 11,510 Appraisal services 4,748 5,405 Hardware and other 1,107 1,204 -------- -------- Total cost of revenues 20,681 19,188 -------- -------- Gross profit 11,644 9,734 Selling, general and administrative expenses 9,101 7,895 Amortization of acquisition intangibles 785 834 -------- -------- Operating income 1,758 1,005 Realized gain on sale of investment in H.T.E., Inc. 23,233 - Legal fees associated with investment in H.T.E., Inc. - (125) Interest income 9 37 -------- -------- Income before income taxes 25,000 917 Income tax provision 7,704 355 -------- -------- Net income $ 17,296 $ 562 ======== ======== Earnings per common share: Basic $ 0.38 $ 0.01 ======== ======== Diluted $ 0.36 $ 0.01 ======== ======== Weighted average common shares outstanding: Basic 45,951 47,386 ======== ======== Diluted 47,738 49,725 ======== ========
See accompanying notes. 1 TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share amounts)
March 31, 2003 December 31, (Unaudited) 2002 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 30,044 $ 13,744 Short-term investments 15,001 - Accounts receivable (less allowance for losses of $782 in 2003 and $690 in 2002) 33,522 33,510 Prepaid expenses and other current assets 3,829 4,009 Deferred income taxes 1,197 1,197 --------- --------- Total current assets 83,593 52,460 Property and equipment, net 6,595 6,819 Other assets: Investment in H.T.E., Inc. - 27,196 Goodwill 46,298 46,298 Software, net 22,375 21,933 Customer base and other acquisition intangibles, net 14,431 14,655 Sundry 297 484 --------- --------- $ 173,589 $ 169,845 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,851 $ 2,390 Accrued liabilities and other current liabilities 8,617 11,186 Net current liabilities of discontinued operations 405 442 Income taxes payable 7,531 - Deferred revenue 25,482 26,208 --------- --------- Total current liabilities 43,886 40,226 Long-term obligations, less current portion - 2,550 Deferred income taxes 4,418 8,413 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; 48,147,969 shares issued 481 481 Additional paid-in capital 156,828 156,898 Accumulated deficit (23,658) (40,954) Accumulated other comprehensive income - unrealized gain on security available-for-sale, net of income taxes - 7,418 Treasury stock, at cost: 2,774,036 shares in 2003 and 1,928,636 shares in 2002 (8,366) (5,187) --------- --------- Total shareholders' equity 125,285 118,656 --------- --------- $ 173,589 $ 169,845 ========= =========
See accompanying notes. 2 TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three months ended March 31, ---------------------------- 2003 2002 -------- -------- Cash flows from operating activities: Net income $ 17,296 $ 562 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 2,154 2,092 Realized gain on sale of investment in H.T.E., Inc. (23,233) - Discontinued operations - non-cash charges and changes in operating assets and liabilities (37) (48) Changes in operating assets and liabilities, exclusive of effects of discontinued operations 3,925 (413) -------- -------- Net cash provided by operating activities 105 2,193 -------- -------- Cash flows from investing activities: Proceeds from sale of investment in H.T.E., Inc. 39,333 - Purchase of short-term investments (15,001) - Software development costs (1,782) (1,539) Additions to property and equipment (319) (665) Proceeds from sale of assets of discontinued operations - 800 Other (126) 1 -------- -------- Net cash provided (used) by investing activities 22,105 (1,403) -------- -------- Cash flows from financing activities: Purchase of treasury shares (3,298) - Payments on notes payable (2,662) (36) Payments on discontinued operations debt - (74) Proceeds from exercise of stock options 50 1,365 Other - (127) -------- -------- Net cash (used) provided by financing activities (5,910) 1,128 -------- -------- Net increase in cash and cash equivalents 16,300 1,918 Cash and cash equivalents at beginning of period 13,744 5,271 -------- -------- Cash and cash equivalents at end of period $ 30,044 $ 7,189 ======== ========
See accompanying notes. 3 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (Tables in thousands, except per share data) (1) Basis of Presentation We prepared the accompanying condensed consolidated financial statements following the requirements of the Securities and Exchange Commission and accounting principles generally accepted in the United States, or GAAP, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted for interim periods. Balance sheet amounts are as of March 31, 2003 and December 31, 2002 and operating result amounts are for the three months ended March 31, 2003 and 2002 and include all normal and recurring adjustments that we considered necessary for the fair summarized presentation of our financial position and operating results. As these are condensed financial statements, one should also read the financial statements and notes included in our latest Form 10-K for the year ended December 31, 2002. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. Although we have a number of operating subsidiaries, separate segment data has not been presented as they meet the criteria set forth in SFAS (Statement of Financial Accounting Standards) No. 131, "Disclosures About Segments of an Enterprise and Related Information" to be presented as one segment. In addition, certain other amounts for the previous year have been reclassified to conform to the current year presentation. (2) Discontinued Operations Discontinued operations includes our former information and property records services segment for which our Board of Directors approved a formal plan of disposal in December 2000 and two non-operating subsidiaries related to a formerly owned subsidiary that we sold in December 1995. The business units within the information and property records services segment were sold in 2000 and 2001. In March 2002, we renegotiated the proceeds from a May 2001 sale transaction and received cash of approximately $800,000 and a subordinated note receivable amounting to $200,000 to fully settle a promissory note and other contingent consideration in connection with the original sale transaction. In our opinion and based upon information available at this time, we believe that our remaining net liabilities related to discontinued operations are adequate. One of our non-operating subsidiaries is involved in various claims for work-related injuries and physical conditions relating to a formerly-owned subsidiary that we sold in 1995. See Note 10 -- Commitments and Contingencies. (3) Cash, Cash Equivalents and Short-term Investments Cash equivalents include items almost as liquid as cash, such as money market investments and certificates of deposits with insignificant interest rate risk and original maturities of three months or less at the time of purchase. For purposes of the statements of cash flows, we consider all investments with original maturities of three months or less to be cash equivalents. Short-term investments include investments in short-term mutual corporate and municipal bond funds. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", we determine the appropriate classification of debt and equity securities at the time of purchase and re-evaluate the classification as of each balance sheet date. At March 31, 2003, we classified these investments in bond funds as available-for-sale securities pursuant to SFAS No. 115. Investments which are classified as available-for-sale are recorded at fair value and unrealized holding gains and losses, net of the related tax effect, if any, are not reflected in earnings but are reported as a separate component of other comprehensive income (loss) until realized. We made the initial mutual fund investments of $15.0 million on March 28, 2003 and there were no unrealized holding gains and losses as of March 31, 2003. Realized gains and losses are determined on the specific identification method and are reflected in income. Other than the gain on the sale of our investment in H.T.E., Inc. (see Note 4 -- Investment in H.T.E., Inc.) there were no other realized gains or losses for the three months ended March 31, 2003. 4 (4) Investment in H.T.E., Inc. On March 25, 2003, we received cash proceeds of $39.3 million in connection with a transaction to sell all of our 5.6 million shares of H.T.E., Inc. ("HTE") common stock to SunGard Data Systems Inc. for $7.00 cash per share, pursuant to a Tender and Voting Agreement dated February 4, 2003. Our original cost basis in the HTE shares was $15.8 million. After transaction and other costs, we recorded a realized gross gain of $23.2 million ($16.2 million after income taxes of $7.0 million, including the utilization for tax purposes and reduction in valuation allowance for accounting purposes related to a capital loss carryforward amounting to $1.1 million on a tax effected basis). Our 5.6 million shares of HTE represented an ownership interest of approximately 35%. Under GAAP a 20% investment in the voting stock of another company creates the presumption that the investor has significant influence over the operating and financial policies of that company, unless there is evidence to the contrary. As disclosed in our previous filings, Tyler's management concluded that no such influence existed. Thus, we accounted for our investment in HTE pursuant to the provisions of SFAS No. 115. Accordingly, our investment in HTE was previously classified as an available-for-sale security. As of December 31, 2002, we had an unrealized holding gain of $11.4 million ($7.4 million after income tax of $4.0 million), which was included in other comprehensive income. (5) Shareholders' Equity In August 2002, our Board of Directors approved a plan to repurchase up to 1.0 million shares of our common stock. During the three months ended March 31, 2003, we repurchased 875,200 shares for an aggregate purchase price of $3.3 million. On April 14, 2003, we commenced a modified "Dutch Auction" tender offer to purchase up to 4.2 million shares of our common stock at a price per share of $3.60 to $4.00. The aggregate costs of the transaction will be approximately $17.0 million, including all estimated fees and expenses, if we purchase 4.2 million shares at the maximum price. We will pay for shares tendered in the offer with existing cash balances. The tender offer expires on May 12, 2003 unless we choose to extend the offer. (6) Income Tax Provision For the three months ended March 31, 2003, we had an income tax provision of $7.7 million, which included $7.0 million (after utilization of a capital loss carryforward amounting to $1.1 million on a tax effected basis) related to the realized gain from the sale of our investment in HTE. See Note 4 -- Investment in H.T.E., Inc. We had an effective income tax rate of 30.8% for the three months ended March 31, 2003 compared to an effective income tax rate of 38.7% for the three months ended March 31, 2002. The effective income tax rates are estimated based on projected pre-tax income for the entire fiscal year and the resulting amount of income taxes. The effective income tax rates for the periods presented were different from the statutory United States federal income tax rate of 35% primarily due to the utilization of the capital loss carryforward in 2003, state income taxes and non-deductible meals and entertainment costs. 5 (7) Earnings Per Share The following table details the reconciliation from basic earnings per share to diluted earnings per share:
Three months ended March 31, ------------------- 2003 2002 ------- ------- Numerator for basic and diluted earnings per share: Net income ...................................... $17,296 $ 562 ======= ======= Denominator: Weighted-average basic common shares outstanding .... 45,951 47,386 Assumed conversion of dilutive securities: Employee stock options ........................ 1,089 1,413 Warrants ...................................... 698 926 ------- ------- Potentially dilutive common shares .................. 1,787 2,339 ------- ------- Weighted-average common shares outstanding, assuming full dilution .............................. 47,738 49,725 ======= ======= Basic earnings per share ............................ $ 0.38 $ 0.01 ======= ======= Diluted earnings per share .......................... $ 0.36 $ 0.01 ======= =======
We did not include certain options to purchase shares of common stock in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive as follows: March 31, 2003............................... 1,927 March 31, 2002............................... 1,480
(8) Stock Compensation In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," we elected to account for our stock-based compensation under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," as amended and related interpretations including FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation," an interpretation of APB Opinion No. 25, issued in March 2000. In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure" was issued to amend SFAS No. 123. This statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Accordingly, under APB No. 25's intrinsic value method, compensation expense is determined on the measurement date; that is, the first date on which both the number of shares the option holder is entitled to receive, and the exercise price, if any, are known. Compensation expense, if any, is measured based on the award's intrinsic value -- the excess of the market price of the stock over the exercise price on the measurement date. The exercise price of all of our stock options granted equals the market price on the measurement date. Therefore we have not recorded any compensation expense related to grants of stock options. 6 Pro forma information regarding net income and earnings per share is required by SFAS No. 123 for awards granted after December 31, 1994, as if we had accounted for our stock-based awards to employees under the fair value method of SFAS No. 123, and is as follows:
Three months ended March 31, ----------------------------- 2003 2002 ------- ------- Net income ......................................................... $17,296 $ 562 Add stock-based employee compensation cost included in net income, net of related tax benefit ..................................... -- -- Deduct total stock-based employee compensation expense determined under fair-value-based method for all rewards, net of related tax benefit ............................................. 456 459 ------- ------- Pro forma net income ............................................... $16,840 $ 103 ======= ======= Pro forma net income per basic share ............................... $ 0.37 $ 0.00 ======= ======= Pro forma net income per diluted share ............................. $ 0.35 $ 0.00 ======= =======
(9) Comprehensive Income The components of comprehensive income are as follows:
Three months ended March 31, ---------------------------- 2003 2002 -------- -------- Net income ......................................................... $ 17,296 $ 562 Other comprehensive income: Reclassification adjustment for unrealized gain related to investment in H.T.E., Inc. (net of deferred tax expense of $3,995) ...................................................... (7,418) -- Change in fair value of investment in H.T.E., Inc. (net of deferred tax expense of $3,818) ................................ -- 11,634 -------- -------- Total comprehensive income ......................................... $ 9,878 $ 12,196 ======== ========
(10)Commitments and Contingencies One of our non-operating subsidiaries, Swan Transportation Company ("Swan"), has been and is currently involved in various claims raised by hundreds of former employees of a foundry that was once owned by an affiliate of Swan and Tyler. These claims are for alleged work related injuries and physical conditions resulting from alleged exposure to silica, asbestos, and/or related industrial dusts during the plaintiff's employment at the foundry. We sold the operating assets of the foundry on December 1, 1995. As a non-operating subsidiary of Tyler, the assets of Swan consist primarily of various insurance policies issued to Swan during the relevant time periods and restricted cash of $894,000 at March 31, 2003. Swan tendered the defense and indemnity obligations arising from these claims to its insurance carriers, who, prior to December 20, 2001, entered into settlement agreements with approximately 275 of the plaintiffs, each of whom agreed to release Swan, Tyler, and its subsidiaries and affiliates from all such claims in exchange for payments made by the insurance carriers. On December 20, 2001, Swan filed a petition under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The bankruptcy filing by Swan was the result of extensive negotiations between Tyler, Swan, their respective insurance carriers, and an ad hoc committee of plaintiff attorneys representing substantially all of the then known plaintiffs. Swan filed its plan of reorganization in February 2002. The principal features of the plan of reorganization include: (a) the creation of a trust, which is to be funded principally by fifteen insurance carriers pursuant to certain settlement agreements executed pre-petition between Swan, Tyler, and such carriers; (b) the implementation of a claims resolution procedure pursuant to which all present and future claimants may assert claims against such trust for alleged injuries; (c) the issuance of certain injunctions under the federal bankruptcy laws requiring any such claims to be asserted against the trust and barring such claims from being asserted, either now or in the future, against Swan, Tyler, all of Tyler's affected affiliates, and the insurers participating in the funding of the trust; and (d) the full and final release of each of Swan, Tyler, all of Tyler's affected affiliates, and the insurers participating in the funding of the trust from any and all claims associated with the once-owned foundry by all claimants that assert a claim against, and receive compensation from, the trust. 7 The confirmation hearings on Swan's plan of reorganization were held on December 9, 2002. The plan of reorganization received the affirmative vote of approximately 99% of the total votes cast. All objections to the plan were resolved prior to the confirmation hearing, and the final confirmation order will therefore not be subject to appeal. The confirmation order will discharge, release, and extinguish all of the foundry-related obligations and liabilities of Tyler, Swan, their affected affiliates, and the insurers participating in the funding of the trust. Further, the confirmation order will include the issuance of injunctions that channel all present and future foundry-related claims into the trust and forever bar any such claims from being asserted, either now or in the future, against Swan, Tyler, their affected affiliates, and the participating insurers. In order to receive the benefits described above, we have agreed, among other things, to transfer all of the capital stock of Swan to the trust (net assets of Swan at March 31, 2003 were $309,000) so that the trust can directly pursue claims against insurers who have not participated in the funding of the trust. In addition, we have agreed to contribute $1.5 million in cash to the trust, which is due as follows: $750,000 within ten days of the confirmation order becoming a final order; $500,000 on the first anniversary of the date the confirmation order becomes a final order; and $250,000 on the second anniversary of the date the confirmation order becomes a final order. The confirmation order for the plan of reorganization was filed with the United States Bankruptcy Court for the District of Delaware on April 30, 2003. The confirmation order will become a final order thirty days after execution by both the bankruptcy and district court judges, which is expected to occur by the end of the second quarter of 2003. Other than ordinary course, routine litigation incidental to our business and except as described herein, there are no material legal proceedings pending to which we or our subsidiaries are parties or to which any of our properties are subject. 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS The statements in this discussion that are not historical statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our business, financial condition, business strategy, plans and the objectives of our management, and future prospects. In addition, we have made in the past and may make in the future other written or oral forward-looking statements, including statements regarding future operating performance, short- and long-term revenue and earnings growth, the timing of the revenue and earnings impact for new contracts, backlog, the value of new contract signings, business pipeline, and industry growth rates and our performance relative thereto. Any forward-looking statements may rely on a number of assumptions concerning future events and be subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual results to differ materially from such statements. These include, but are not limited to: our ability to improve productivity and achieve synergies from acquired businesses; technological risks associated with the development of new products and the enhancement of existing products; changes in the budgets and regulating environments of our government customers; competition in the industry in which we conduct business and the impact of competition on pricing, revenues and margins; with respect to customer contracts accounted for under the percentage-of-completion method of accounting, the performance of such contracts in accordance with our cost and revenue estimates; our ability to maintain health and other insurance coverage and capacity due to changes in the insurance market and the impact of increasing insurance costs on the results of operations; the costs to attract and retain qualified personnel, changes in product demand, the availability of products, economic conditions, changes in tax risks and other risks indicated in our filings with the Securities and Exchange Commission. The factors described in this paragraph and other factors that may affect Tyler, its management or future financial results, as and when applicable, are discussed in Tyler's filings with the Securities and Exchange Commission, on its Form 10-K for the year ended December 31, 2002. Except to the extent required by law, we are not obligated to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. 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 Tyler or our management are intended to identify forward-looking statements. GENERAL Tyler provides integrated software systems and related services for local governments. We develop and market a broad line of software products and services to address the information technology (IT) needs of cities, counties, schools and other local government entities. We provide professional IT services to our customers, including software and hardware installation, data conversion, training and product modifications, along with continuing maintenance and support for customers using our systems. We also provide property appraisal outsourcing services for taxing jurisdictions. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements. These condensed consolidated financial statements have been prepared following the requirements of accounting principles generally accepted in the United States (GAAP) for interim periods and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition and intangible assets and goodwill. As these are condensed financial statements, one should also read our Form 10-K for the year ended December 31, 2002 regarding expanded information about our critical accounting policies and estimates. 9 ANALYSIS OF RESULTS OF OPERATIONS The following table sets forth items from our unaudited condensed consolidated financial statements and the percentage change in the amounts between the periods presented. The amounts shown in the table are in thousands, except per share data. Revenues and expenses can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year.
Three months ended March 31, ---------------------------------------------- 2003 2002 % Change -------------- -------------- -------------- Revenues: Software licenses $ 5,460 $ 5,314 3% Software services 7,706 4,992 54 Maintenance 10,935 9,315 17 Appraisal services 6,751 7,783 (13) Hardware and other 1,473 1,518 (3) -------- -------- Total revenues 32,325 28,922 12 Cost of revenues: Software licenses 1,544 1,069 44 Software services and maintenance 13,282 11,510 15 Appraisal services 4,748 5,405 (12) Hardware and other 1,107 1,204 (8) -------- -------- Total cost of revenues 20,681 19,188 8 % of revenues 64.0% 66.3% Gross profit 11,644 9,734 20 % of revenues 36.0% 33.7% Selling, general and administrative expenses 9,101 7,895 15 % of revenues 28.2% 27.3% Amortization of acquisition intangibles 785 834 (6) -------- -------- Operating income 1,758 1,005 75 Realized gain on sale of investment in H.T.E., Inc. 23,233 - Legal fees associated with investment in H.T.E., Inc. - (125) Interest income 9 37 -------- -------- Income before income taxes 25,000 917 Income tax provision 7,704 355 -------- -------- Effective income tax rate 30.8% 38.7% Net income $ 17,296 $ 562 ======== ======== Diluted earnings per share $ 0.36 $ 0.01 ======== ======== Cash flows provided by operating activities $ 105 $ 2,193 Cash, cash equivalents and short-term investments at March 31 45,045 7,189 Capital expenditures: Software development costs 1,782 1,539 Property and equipment 369 665
10 REVENUES The following table compares the components of revenue as a percent of total revenues for the periods presented:
Three months ended March 31, -------------------------------- 2003 2002 ------------ ------------ Software licenses 16.9 % 18.4 % Software services 23.8 17.3 Maintenance 33.8 32.2 Appraisal services 20.9 26.9 Hardware and other 4.6 5.2 ------------ ------------ 100.0 % 100.0 %
Software license revenues. For the three months ended March 31, 2003, software license revenues increased $146,000, or 3%, compared to the same period in 2002. In addition, the first quarter of 2003 was the sixth consecutive quarter in which our software license revenues increased compared to the same period in the prior year. Sales of our financial and city solutions software products increased approximately $500,000 compared to the prior year period mainly due to geographical expansion into the Midwest and Western United States. The majority of this increase was offset by a corresponding decline in real estate appraisal software products compared to the prior year. Our real estate appraisal software license volume varies from period to period dependent upon the special needs and timing of our customers. Local government taxing entities normally reappraise real properties from time to time to update values for tax assessment purposes and to maintain equity in the taxing process. While certain of these taxing jurisdictions contract with our real estate appraisal division to perform these reappraisals, it is not always necessary for the customer to purchase new software in order to process the appraisals. In some cases, a customer may simply add smaller appraisal software modules to enhance the functionality of its existing software. Software services revenues. Software services revenues increased $2.7 million, or 54%, during the three months ended March 31, 2003, compared to the same period in the prior year. The increase in software services revenues was attributable to the following factors: [ ] We recognized approximately $1.1 million for services performed in the first quarter of 2003 under our $11.0 million contract with the State of Minnesota to implement and install our Odyssey Case Management system. We signed the contract in July 2002 and it includes both software license and software services. To date, no software license revenues have been recognized. Under this contract we have recorded approximately $3.0 million of service revenue from inception to March 2003. We expect to perform approximately 70% of the implementation by late 2003. The remainder of the implementation is expected to be performed after this year; and [ ] During the three months ended March 31, 2003, software services related to the implementation of our financial and city solutions software products increased by approximately $900,000. Software services related to the implementation of our real estate appraisal software also increased over the prior year period due to services performed on several large software transactions which occurred late in 2002. Typically, contracts for software licenses include services such as installation of the software, converting the customers' data to be compatible with the software and training customer personnel to use the software. Maintenance revenues. Maintenance revenues for the three months ended March 31, 2003 increased $1.6 million, or 17%, compared to the same prior year period. We provide maintenance and support services for our software products, third party software and hardware. The maintenance revenue increase was due to growth in our installed customer base and slightly higher rates on certain product lines. Appraisal services revenues. For the three months ended March 31, 2003, appraisal services revenues decreased $1.0 million, or 13%, compared to the same period of 2002. The decrease is the result of the completion of our contract with the Nassau County, New York Board of Assessors ("Nassau County"). In the three months ended March 31, 2002, we recognized approximately $2.5 million of appraisal services revenues related to Nassau County. Because of the completion of the contract, we had no comparable revenues during the three months ended March 31, 2003. That decrease was offset somewhat by the recognition of approximately 11 $2.6 million for services performed during the first quarter of 2003 under our appraisal contract with Lake County, Indiana, which was awarded in December 2001. The Lake County contract to provide professional services and technology to reassess real property in Lake County is valued at approximately $15.9 million, of which $15.2 million relates to appraisal services, and we expect to complete the contract by late 2003. We recognized appraisal services revenues of approximately $855,000 related to the Lake County contract during the first quarter of 2002 and $11.5 million since the inception of the contract. In March 2003 we signed a new six-year, $28.0 million contract to provide Nassau County with updated property assessments and additional real estate appraisal software. COST OF REVENUES Cost of software license revenues. For the three months ended March 31, 2003, cost of software license revenues increased $475,000, or 44%, compared to the prior year period. During 2002, we had several products in the development stage, which were released throughout the year. Once a product is released, we begin to expense the costs associated with the development over the estimated useful life of the product. Development costs consist mainly of personnel costs, such as salary and benefits paid to our developers, rent for related office space and capitalized interest costs. Cost of software service and maintenance revenues. For three months ended March 31, 2003, cost of software services and maintenance revenues increased $1.8 million, or 15%, compared to the same period of 2002. These increases are consistent with the higher professional services and maintenance revenues for the same period, although software services and maintenance revenues grew at a higher rate than the cost of those revenues, which is reflective of more efficient utilization of our support and maintenance staff and economies of scale. As a percentage of related revenues, cost of software services and maintenance was 71% for the first quarter of 2003 compared to 80% for the first quarter of 2002. Cost of appraisal services revenues. Costs of appraisal services revenues decreased $657,000, or 12%, for the three months ended March 31, 2003, compared to the same prior year period. The decrease is consistent with the decrease in appraisal services revenues, which declined 13%. We often hire temporary employees to assist in appraisal projects whose term of employment generally ends with the projects' completion. As a percentage of related revenues, cost of appraisal services was 70% for the first quarter of 2003 compared to 69% for the first quarter of 2002. GROSS MARGIN For the three months ended March 31, 2003 and 2002, our overall gross margin was 36% and 34%, respectively. The improvement in our gross margin was mainly due to higher software services and maintenance revenues without a corresponding increase in personnel costs reflecting a more efficient utilization of our support and maintenance staff and economies of scale. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses, or SG&A, increased $1.2 million, or 15%, for the three months ended March 31, 2003, compared to the same period in the prior year, primarily as a result of increased revenue. For the first quarter of 2003, SG&A as a percent of revenue increased to 28% from 27% for the same prior year period. The increase in SG&A as a percentage of revenue is related primarily to higher health and other insurance expenses, annual salary increases, and slightly higher research and development costs. AMORTIZATION OF ACQUISITION INTANGIBLES For the three months ended March 31, 2003, amortization of acquisition intangibles was approximately $785,000, compared to $834,000 for the same period in 2002. The decrease in amortization from the prior year is related to certain of our acquisition intangibles becoming fully amortized during the first quarter of 2003. Acquisition intangibles are composed of the excess of the purchase price over the fair value of net tangible assets acquired that is allocated to acquired and amortizable software and customer base with the remainder allocated to goodwill which is not subject to amortization. The extended useful lives of these amortizable intangibles are 5 years and 20 to 25 years, respectively. 12 REALIZED GAIN ON SALE OF INVESTMENT IN H.T.E., INC. On March 25, 2003, we received cash proceeds of $39.3 million in connection with a transaction to sell all of our 5.6 million shares of H.T.E., Inc. ("HTE") common stock to SunGard Data Systems Inc. for $7.00 cash per share. Our original cost basis in the HTE shares was $15.8 million. After transaction and other costs, we recorded a gross realized gain of $23.2 million ($16.2 million or $0.34 per diluted share after income taxes of $7.0 million). See Note 4 in the Notes to the Condensed Consolidated Financial Statements. LEGAL FEES ASSOCIATED WITH INVESTMENT IN H.T.E., INC. During the three months ended March 31, 2002, we incurred approximately $125,000 of legal and other costs associated with legal matters concerning various tort claims HTE alleged against us and HTE's attempted redemption of our 5.6 million shares for $1.30 per share. In September 2002, HTE released us from all tort claims and a court declared HTE's reported redemption of our shares was invalid. In March 2003, we sold for cash our entire investment in HTE for $7.00 per share. INCOME TAX PROVISION For the three months ended March 31, 2003, we had an income tax provision of $7.7 million, which included $7.0 million (after reduction in valuation allowance related to the utilization of a capital loss carryforward amounting to $1.1 million on a tax effected basis) relating to the realized gain from the sale of our investment in HTE, Inc. We had an effective income tax rate of 30.8% for the three months ended March 31, 2003 compared to an effective income tax rate of 38.7% for the three months ended March 31, 2002. The effective income tax rates are estimated based on projected pre-tax income for the entire fiscal year and the resulting amount of income taxes. The effective income tax rates for the periods presented were different from the statutory United States federal income tax rate of 35% primarily due to the utilization of the capital loss carryforward in 2003, state income taxes and non-deductible meals and entertainment costs. NET INCOME Net income was $17.3 million in the three months ended March 31, 2003, including a $16.2 million realized gain after income taxes relating to the sale of our investment in HTE. This compares to net income of $562,000 in the three months ended March 31, 2002. For the quarter ended March 31, 2003 and 2002, diluted earnings per share was $0.36 and $0.01, respectively. Diluted earnings per share for the three months ended March 31, 2003 included $0.34 per share related to our net realized gain on the sale of our investment in HTE. FINANCIAL CONDITION AND LIQUIDITY On March 5, 2002, we entered into a new $10.0 million revolving credit agreement with a bank, which matures January 1, 2005. Our borrowings are limited to 80% of eligible accounts receivable and interest is charged at either the prime rate or at the London Interbank Offered Rate plus a margin of 3%. The credit agreement is secured by our personal property and the common stock of our operating subsidiaries. The credit agreement is also guaranteed by our operating subsidiaries. In addition, the credit agreement requires us to maintain certain financial ratios and other financial conditions and prohibits us from making certain investments, advances, cash dividends or loans. As of March 31, 2003, our bank has issued outstanding letters of credit totaling $5.0 million under our credit agreement to secure performance bonds required by some of our customer contracts. Our borrowing base under the credit agreement is limited by the amount of eligible receivables and was reduced by the letters of credit at March 31, 2003. At March 31, 2003, we had no outstanding bank borrowings under the credit agreement and had an available borrowing base of $5.0 million. As of March 31, 2003, our balance in cash and cash equivalents was $30.0 million and we had short-term investments of $15.0 million, compared to a cash balance of $13.7 million at December 31, 2002. Cash and short-term investments increased primarily due to the $39.3 million cash received as consideration in connection with the transaction to sell our 5.6 million shares of HTE common stock to SunGard Data Systems Inc. Another factor affecting our cash balance for the three months ended March 31, 2003 was improved cash collections. At March 31, 2003, our day's sales outstanding ("DSO's") (accounts receivable divided by the quotient of annualized quarterly revenues divided by 360 days) were 93 compared to DSO's of 99 at March 31, 2002. 13 On March 28, 2003, we purchased $15.0 million of short-term investments. The investments are principally low-risk funds that consist primarily of short-term mutual corporate and municipal bond funds. The interest and capital gains generated from these investments were re-invested in the funds. For the first three months of 2003, the interest and capital gains were immaterial. On March 28, 2003, we retired an outstanding $2.5 million promissory note payable. The note was due in January 2005 and paid interest quarterly at an annual rate of 10%. At March 31, 2003, our capitalization consisted entirely of $125.3 million of shareholders' equity since we have no long-term debt outstanding at March 31, 2003. During the first three months of 2003, we made capital expenditures of $2.1 million, including $1.8 million for software development costs. The other expenditures related to computer equipment and expansions related to internal growth. Capital expenditures were funded from cash generated from operations. During the three months ended March 31, 2003, we repurchased 875,200 shares for an aggregate purchase price of $3.3 million in accordance with a plan approved by our Board of Directors to repurchase up to 1.0 million of our common stock. On April 14, 2003, we commenced a modified "Dutch Auction" tender offer to purchase up to 4.2 million shares of our common stock at a price per share of $3.60 to $4.00. The aggregate costs of the transaction will be approximately $17.0 million, including all estimated fees and expenses, if we purchase 4.2 million shares at the maximum price. We will pay for shares tendered in the offer with existing cash balances. The tender offer expires on May 12, 2003 unless we chose to extend the offer. As part of the plan of reorganization of Swan Transportation Company, one of our non-operating subsidiaries, we have agreed to contribute approximately $1.5 million over the next three years to a trust that was set up as a part of the reorganization. See Note 10 in the Notes to the Condensed Consolidated Financial Statements. We expect to pay $750,000 of the $1.5 million by the end of the second quarter of 2003. The remaining amounts will be paid over the two subsequent years. Absent acquisitions, we believe our current cash balances and expected future cash flows from operations will be sufficient to meet our anticipated cash needs for working capital, capital expenditures and other activities through the next twelve months. If operating cash flows are not sufficient to meet our needs, we may borrow under our credit agreement. Item 4. Evaluation of Disclosure Controls and Procedures (a) Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date (the "Evaluation Date") within 90 days before the filing date of this quarterly report, have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities. (b) Changes in internal controls. There were no significant changes in our internal controls or to our knowledge, in other factors that could significantly affect our disclosure controls and procedures subsequent to the Evaluation Date. 14 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 6. Exhibits and Reports on Form 8-K (a) Exhibit 4.9 Third Amendment to Credit Agreement, Second Amendment to Pledge and Security Agreement, Lender's Consent and Waiver, and Borrower's Acknowledgement, by and between Tyler Technologies, Inc. and Bank of Texas, N.A. dated effective January 10, 2003. (b) Exhibit 4.10 Fourth Amendment to Credit Agreement, and Lender's Consent, by and between Tyler Technologies, Inc. and Bank of Texas, N.A. dated effective March 27, 2003. (c) Exhibit 4.11 Fifth Amendment to Credit Agreement and Lender's Consent and Waiver, by and between Tyler Technologies, Inc. and Bank of Texas, N.A. dated effective March 31, 2003. (d) Exhibit 99 Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (e) Reports on Form 8-K filed during the three months ended March 31, 2003:
Form 8-K Item Reported Date Reported Exhibits Filed ------------- -------- -------------------------------------------- 2/5/03 5 We entered into a Tender and Voting agreement with SunGard Data Systems, Inc. ("SunGard"), under which we agreed to sell our investment in H.T.E., Inc. to SunGard 3/3/03 5 News release issued by Tyler Technologies, Inc. dated August 19, 2002 announcing our operating results for the year ended December 31, 2002 3/26/03 2 We received the proceeds to complete the sale of our investment in H.T.E., Inc. to SunGard on March 25, 2003
Item 3 of Part I and Items 2, 3, 4 and 5 of Part II were not applicable and have been omitted. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 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: May 2, 2003 16 CERTIFICATIONS I, John M. Yeaman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tyler Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: May 2, 2003 By: /s/ John M. Yeaman ------------------ John M. Yeaman President and Chief Executive Officer 17 I, Theodore L. Bathurst, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tyler Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: May 2, 2003 By: /s/ Theodore L. Bathurst ------------------------ Theodore L. Bathurst Vice President and Chief Financial Officer 18 EXHIBIT INDEX Exhibit 4.9 Third Amendment to Credit Agreement, Second Amendment to Pledge and Security Agreement, Lender's Consent and Waiver, and Borrower's Acknowledgement, by and between Tyler Technologies, Inc. and Bank of Texas, N.A. dated effective January 10, 2003. Exhibit 4.10 Fourth Amendment to Credit Agreement, and Lender's Consent, by and between Tyler Technologies, Inc. and Bank of Texas, N.A. dated effective March 27, 2003. Exhibit 4.11 Fifth Amendment to Credit Agreement and Lender's Consent and Waiver, by and between Tyler Technologies, Inc. and Bank of Texas, N.A. dated effective March 31, 2003. Exhibit 99.1 Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code Exhibit 99.2 Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code EX-4.9 3 d05253exv4w9.txt THIRD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.9 THIRD AMENDMENT TO CREDIT AGREEMENT, SECOND AMENDMENT TO PLEDGE AND SECURITY AGREEMENT, LENDER'S CONSENT AND WAIVER, AND BORROWER'S ACKNOWLEDGMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT, SECOND AMENDMENT TO PLEDGE AND SECURITY AGREEMENT, LENDER'S CONSENT AND WAIVER, AND BORROWER'S ACKNOWLEDGEMENT (this "Amendment") is dated effective January 10, 2003, by and between TYLER TECHNOLOGIES, INC., a Delaware corporation ("Borrower") and BANK OF TEXAS, N.A., a national banking association ("Lender"). WITNESSETH: WHEREAS, Borrower and Lender entered into that certain Credit Agreement, dated February 27, 2002, pursuant to which Lender agreed to make the Loan (as therein defined) available to Borrower (as heretofore or hereafter amended, the "Credit Agreement")(each capitalized term used herein, but not otherwise defined shall have the same meaning given to it in the Credit Agreement); and WHEREAS, to secure the Loan, Borrower and Lender entered into that certain Pledge and Security Agreement dated February 27, 2002 (the "Pledge Agreement") whereby Borrower pledged as security, among other things, all of its shares of stock in H.T.E., Inc. ("HTE"); and WHEREAS, Borrower has requested that Lender (i) allow Borrower to sell all or any part of its shares of the common stock of HTE; (ii) authorize the release of up to all of the shares of the common stock of HTE (5,619,000 shares) from the Pledge Agreement; and (iii) allow Borrower to repurchase outstanding Borrower stock in an aggregate amount not to exceed $2,000,000; and WHEREAS, subject to the terms and conditions herein contained, Lender is willing to agree to such requests. NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, Borrower and Lender hereby covenant and agree as follows: ARTICLE I - AMENDMENT TO CREDIT AGREEMENT SECTION 1.1 SALE OF HTE STOCK. Section 9.13 of the Credit Agreement is hereby deleted in its entirety. ARTICLE II - CONSENT AND AGREEMENT SECTION 2.1 CONSENT TO REPURCHASE OF OUTSTANDING STOCK. The Credit Agreement provides, among other things, that, without the prior written consent of Lender, Borrower shall declare no Distribution nor make any Investment, prior to payment in full of the Obligations owed to Lender, and the termination of Lender's Commitment, under the Credit Agreement. Borrower has requested Lender's consent to Borrower's repurchase of outstanding Borrower stock in an aggregate amount not to exceed $2,000,000 (the "Targeted Repurchase"). Lender hereby consents to the Targeted Repurchase; provided, however, that such Targeted Repurchase occurs prior to the occurrence of a Default or an Event of Default. THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) 1 SECTION 2.2 AGREEMENT REGARDING SALE OF HTE STOCK. Lender hereby agrees that, in furtherance of the deletion of Section 9.13 of the Credit Agreement effected pursuant to Section 1.1 hereof, but subject to Borrower's compliance with the provisions of Section 3.1 hereof and the provisions of Section 9.9 of the Credit Agreement and Section 4.1.5 of the Pledge Agreement, the Borrower may, at any time and from time to time, in a single transaction or in a series of transactions, sell all or any part of the shares of the common stock of HTE owned by Borrower; provided, that, at the time of any such sale there does not then currently exist a Default or an Event of Default. In connection with any such sale, Lender will, promptly upon request by Borrower, (a) deliver to Borrower any certificate or certificates evidencing the common stock of HTE owned by Borrower that are in Lender's possession pursuant to the Borrower's Pledge Agreement and that are required to be delivered by Borrower in connection with any such sale (Borrower hereby agreeing that in the event that less than all of the shares evidenced by any such certificate are sold, Borrower will promptly redeposit a certificate or certificate evidencing such shares not sold with Lender pursuant to the Borrower's Pledge Agreement), and (b) file, or authorize Borrower to file, such UCC Financing Statement Amendments with the Secretary of State of the State of Delaware as are required to evidence the release of the shares so sold from the security interest granted pursuant to Borrower's Pledge Agreement. SECTION 2.3 LIMITATION ON CONSENT. The consent granted in this Amendment is limited to the foregoing action and does not constitute a waiver of any required consent with respect to any other action. ARTICLE III - ACKNOWLEDGEMENT SECTION 3.1 BORROWER'S ACKNOWLEDGEMENT REGARDING THE SALE OF HTE STOCK. Borrower hereby acknowledges that, pursuant to the terms of Section 9.9 of the Credit Agreement and Section 4.1.5 of the Pledge Agreement, up to the full amount of the net cash proceeds from the sale of the HTE stock shall be applied to prepay any Advances outstanding on the date Borrower receives any such net cash proceeds. ARTICLE IV - AMENDMENT TO PLEDGE AND SECURITY AGREEMENT SECTION 4.1 EXHIBIT "E". Borrower and Lender hereby agree that upon the filing of that certain UCC Financing Statement Amendment filed pursuant to Section 2.2(b) hereof, Exhibit "E" of the Pledge Agreement shall be amended to exclude all shares of the common stock of HTE described in such UCC Financing Statement Amendment. ARTICLE V - MISCELLANEOUS SECTION 5.1 CONDITION TO CLOSING; FURTHER ASSURANCES. As a condition to the closing of this Amendment, Borrower shall execute and deliver this Amendment and such other documents as may be necessary or as may be required, in the opinion of counsel to Lender, to effect the transactions contemplated hereby and continue the liens and/or security interests of all other collateral instruments, as modified by this Amendment. Borrower also agrees to provide to Lenders such other documents and instruments as Lenders reasonably may request in connection with the modification of the Loans effected hereby. SECTION 5.2 CONTINUING EFFECT. Except as modified and amended hereby, the Credit Agreement and other Loan Documents are and shall remain in full force and effect in accordance with their terms. SECTION 5.3 PAYMENT OF EXPENSES. Borrower agrees to pay to Lender the reasonable attorneys' fees and expenses of Lender's counsel and other expenses incurred by Lender in connection with this Amendment. THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) PAGE 2 SECTION 5.4 BINDING AGREEMENT. This Amendment shall be binding upon, and shall inure to the benefit of, the parties' respective representatives, successors and assigns. SECTION 5.5 NO DEFENSES. Borrower by its execution of this Amendment, hereby declares that it has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the Loan, this Amendment or otherwise; and, to the extent any such setoffs, counterclaims, defenses or other causes of action may exist, whether known or unknown, such items are hereby waived by Borrower. SECTION 5.6 USURY SAVINGS CLAUSE. Notwithstanding anything to the contrary in this Amendment, the Note or any other Loan Document, or in any other agreement entered into in connection with the Note or securing the indebtedness evidenced by the Note, whether now existing or hereafter arising and whether written or oral, it is agreed that the aggregate of all interest and other charges constituting interest, or adjudicated as constituting interest, and contracted for, chargeable or receivable under the Note or otherwise in connection with the Note shall under no circumstances exceed the maximum rate of interest permitted by applicable law. In the event the maturity of the Note is accelerated by reason of an election by the holder thereof resulting from a default thereunder or under any other document executed as security therefor or in connection therewith, or by voluntary prepayment by the maker, or otherwise, then earned interest may never include more than the maximum rate of interest permitted by applicable law. If from any circumstance any holder of any of the Note shall ever receive interest or any other charges constituting interest, or adjudicated as constituting interest, the amount, if any, which would exceed the maximum rate of interest permitted by applicable law shall be applied to the reduction of the principal amount owing on such Note or on account of any other principal indebtedness of the maker to the holders of such Note, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal thereof and such other indebtedness, the amount of such excessive interest that exceeds the unpaid balance of principal thereof and such other indebtedness shall be refunded to the maker. All sums paid or agreed to be paid to the holder of the Note for the use, forbearance or detention of the indebtedness of the maker to the holder of such Note shall be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full for the purpose of determining the actual rate on such indebtedness is uniform throughout the term thereof. The terms "maximum amount" or "maximum rate" as used in this Amendment or the Note, or in any other agreement entered into in connection with the Note or securing the indebtedness evidenced by the Note, whether now existing or hereafter arising and whether written or oral, include, as to Chapter 303 of the Texas Finance Code (and as same may be incorporated by reference in other statutes of the State of Texas), but otherwise without limitation, that rate based upon the "weekly ceiling"; provided, however, that this designation shall not preclude the rate of interest contracted for, charged or received in connection with the Loan from being governed by, or construed in accordance with, any other state or federal law. SECTION 5.7 COUNTERPARTS. This Amendment may be executed in several counterparts, all of which are identical, each of which shall be deemed an original, and all of which counterparts together shall constitute one and the same instrument, it being understood and agreed that the signature pages may be detached from one or more of such counterparts and combined with the signature pages from any other counterpart in order that one or more fully executed originals may be assembled. SECTION 5.8 CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS PREEMPT THE LAWS OF THE STATE OF TEXAS. SECTION 5.9 ENTIRE AGREEMENT. This Amendment, together with the other Loan Documents, contain the entire agreements between the parties relating to the subject matter hereof and thereof. This THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) PAGE 3 Amendment and the other Loan Documents may be amended, revised, waived, discharged, released or terminated only by a written instrument or instruments, executed by the party against which enforcement of the amendment, revision, waiver, discharge, release or termination is asserted. Any alleged amendment, revision, waiver, discharge, release or termination which is not so documented shall not be effective as to any party. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATED TO THE SUBJECT MATTER HEREIN CONTAINED 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. THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) PAGE 4 IN WITNESS WHEREOF, this Amendment is executed effective as of the date first written above. LENDER: BANK OF TEXAS, N.A., a national banking association By: ------------------------------------ Mark Wade Senior Vice President BORROWER: TYLER TECHNOLOGIES, INC. a Delaware corporation By: ------------------------------------ Brian K. Miller, Vice President-Finance THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) 5 CONSENT OF GUARANTORS Each of the undersigned Guarantors hereby acknowledges and consents to the foregoing amendment and expressly acknowledges and agrees that (a) its Guaranty shall guaranty, and the Security Agreement executed by it shall secure, the Loan as amended hereby, and (b) except as may be modified to incorporate the terms of this Amendment, the Guaranty of the other Loan Documents to which it is a part, are and shall continue in full force and effect. IN WITNESS WHEREOF, each of the Guarantors has caused this Consent to be duly executed by its authorized officer. GUARANTORS: COLE LAYER TRUMBLE COMPANY, a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 EAGLE COMPUTER SYSTEMS, INC., a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) 6 FUNDBALANCE, INC., a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 INTERACTIVE COMPUTER DESIGNS, a Texas corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 MUNIS, INC., a Maine corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) 7 NATIONSDATA.COM, INC., a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 THE SOFTWARE GROUP, INC., a Texas corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 THIRD AMENDMENT TO CREDIT AGREEMENT (TYLER) 8 EX-4.10 4 d05253exv4w10.txt FOURTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.10 FOURTH AMENDMENT TO CREDIT AGREEMENT AND LENDER'S CONSENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT AND LENDER'S CONSENT (this "Amendment") is dated effective March 27, 2003, by and among TYLER TECHNOLOGIES, INC., a Delaware corporation ("Borrower") and BANK OF TEXAS, N.A., a national banking association ("Lender"). WITNESSETH: WHEREAS, Borrower and Lender entered into that certain Credit Agreement, dated February 27, 2002, pursuant to which Lender agreed to make the Loan (as therein defined) available to Borrower (as heretofore or hereafter amended, the "Credit Agreement")(each capitalized term used herein, but not otherwise defined shall have the same meaning given to it in the Credit Agreement); and WHEREAS, Borrower is currently indebted to Robert S. Rickard pursuant to that certain Promissory Note dated January 3, 2000 in the stated principal amount of $2,520,000 (the "Seller Note"); and WHEREAS, Borrower has requested that Lender allow Borrower to pay the Seller Note in full; and WHEREAS, subject to the terms and conditions herein contained, Lender is willing to agree to such requests. NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, Borrower and Lender hereby covenant and agree as follows: ARTICLE I - CONSENT SECTION 1.1 CONSENT TO SATISFACTION OF SELLER NOTE. The Credit Agreement provides, among other things, that, without the prior written consent of Lender, Borrower shall not make any principal payment on the Seller Note prior to payment in full of the Obligations and the termination of the Commitment. Borrower has requested Lender's consent to the payment in full of the Seller Note. Lender hereby consents to the payment in full of the Seller Note prior to payment in full of the Obligations and the termination of the Commitment. SECTION 1.2 LIMITATION ON CONSENT. The consent granted in this Amendment is limited to the foregoing action and does not constitute a waiver of any required consent with respect to any other action. ARTICLE II - AMENDMENT SECTION 2.1 SUBORDINATED DEBT. Section 9.11 of the Credit Agreement is hereby deleted and restated in its entirety as follows: SECTION 9.11. SUBORDINATED DEBT; SELLER NOTE. Permit any amendment or modification to the documents evidencing or governing any Subordinated Debt permitted by Section 9.1(d), or, directly or indirectly, voluntarily prepay, defease or in substance defease, purchase, redeem, FOURTH AMENDMENT TO CREDIT AGREEMENT AND LENDER'S CONSENT (TYLER) 1 retire, or otherwise acquire any such Subordinated Debt, or make any principal payment on the Subordinate Debt prior to payment in full of the Obligations and the termination of the Commitment. ARTICLE III - MISCELLANEOUS SECTION 3.1 CONDITION TO CLOSING; FURTHER ASSURANCES. As a condition to the closing of this Amendment, Borrower shall execute and deliver this Amendment and such other documents as may be necessary or as may be required, in the opinion of counsel to Lender, to effect the transactions contemplated hereby and continue the liens and/or security interests of all other collateral instruments, as modified by this Amendment. Borrower also agrees to provide to Lender such other documents and instruments as Lender reasonably may request in connection with the modification of the Loans effected hereby. SECTION 3.2 CONTINUING EFFECT. Except as modified and amended hereby, the Credit Agreement and other Loan Documents are and shall remain in full force and effect in accordance with their terms. SECTION 3.3 PAYMENT OF EXPENSES. Borrower agrees to pay to Lender the reasonable attorneys' fees and expenses of Lender's counsel and other expenses incurred by Lender in connection with this Amendment. SECTION 3.4 BINDING AGREEMENT. This Amendment shall be binding upon, and shall inure to the benefit of, the parties' respective representatives, successors and assigns. SECTION 3.5 NO DEFENSES. Borrower by its execution of this Amendment, hereby declares that it has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the Loan, this Amendment or otherwise; and, to the extent any such setoffs, counterclaims, defenses or other causes of action may exist, whether known or unknown, such items are hereby waived by Borrower. SECTION 3.6 USURY SAVINGS CLAUSE. Notwithstanding anything to the contrary in this Amendment, the Note or any other Loan Document, or in any other agreement entered into in connection with the Note or securing the indebtedness evidenced by the Note, whether now existing or hereafter arising and whether written or oral, it is agreed that the aggregate of all interest and other charges constituting interest, or adjudicated as constituting interest, and contracted for, chargeable or receivable under the Note or otherwise in connection with the Note shall under no circumstances exceed the maximum rate of interest permitted by applicable law. In the event the maturity of the Note is accelerated by reason of an election by the holder thereof resulting from a default thereunder or under any other document executed as security therefor or in connection therewith, or by voluntary prepayment by the maker, or otherwise, then earned interest may never include more than the maximum rate of interest permitted by applicable law. If from any circumstance any holder of any of the Note shall ever receive interest or any other charges constituting interest, or adjudicated as constituting interest, the amount, if any, which would exceed the maximum rate of interest permitted by applicable law shall be applied to the reduction of the principal amount owing on such Note or on account of any other principal indebtedness of the maker to the holders of such Note, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal thereof and such other indebtedness, the amount of such excessive interest that exceeds the unpaid balance of principal thereof and such other indebtedness shall be refunded to the maker. All sums paid or agreed to be paid to the holder of the Note for the use, forbearance or detention of the indebtedness of the maker to the holder of such Note shall be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full for the purpose of determining the actual rate on such indebtedness is uniform throughout the term thereof. SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT AND LENDER'S CONSENT (TYLER) 2 The terms "maximum amount" or "maximum rate" as used in this Amendment or the Note, or in any other agreement entered into in connection with the Note or securing the indebtedness evidenced by the Note, whether now existing or hereafter arising and whether written or oral, include, as to Chapter 303 of the Texas Finance Code (and as same may be incorporated by reference in other statutes of the State of Texas), but otherwise without limitation, that rate based upon the "weekly ceiling"; provided, however, that this designation shall not preclude the rate of interest contracted for, charged or received in connection with the Loan from being governed by, or construed in accordance with, any other state or federal law. SECTION 3.7 COUNTERPARTS. This Amendment may be executed in several counterparts, all of which are identical, each of which shall be deemed an original, and all of which counterparts together shall constitute one and the same instrument, it being understood and agreed that the signature pages may be detached from one or more of such counterparts and combined with the signature pages from any other counterpart in order that one or more fully executed originals may be assembled. SECTION 3.8 CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS PREEMPT THE LAWS OF THE STATE OF TEXAS. SECTION 3.9 ENTIRE AGREEMENT. This Amendment, together with the other Loan Documents, contain the entire agreements between the parties relating to the subject matter hereof and thereof. This Amendment and the other Loan Documents may be amended, revised, waived, discharged, released or terminated only by a written instrument or instruments, executed by the party against which enforcement of the amendment, revision, waiver, discharge, release or termination is asserted. Any alleged amendment, revision, waiver, discharge, release or termination which is not so documented shall not be effective as to any party. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATED TO THE SUBJECT MATTER HEREIN CONTAINED 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. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT AND LENDER'S CONSENT (TYLER) 3 IN WITNESS WHEREOF, this Amendment is executed effective as of the date first written above. LENDER: BANK OF TEXAS, N.A., a national banking association By: -------------------------------------- Mark Wade Senior Vice President BORROWER: TYLER TECHNOLOGIES, INC. a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance FOURTH AMENDMENT TO CREDIT AGREEMENT AND LENDER'S CONSENT (TYLER) 4 CONSENT OF GUARANTORS Each of the undersigned Guarantors hereby acknowledges and consents to the foregoing amendment and expressly acknowledges and agrees that (a) its Guaranty shall guaranty, and the Security Agreement executed by it shall secure, the Loan as amended hereby, and (b) except as may be modified to incorporate the terms of this Amendment, the Guaranty of the other Loan Documents to which it is a part, are and shall continue in full force and effect. IN WITNESS WHEREOF, each of the Guarantors has caused this Consent to be duly executed by its authorized officer. GUARANTORS: COLE LAYER TRUMBLE COMPANY, a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 EAGLE COMPUTER SYSTEMS, INC., a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT AND LENDER'S CONSENT (TYLER) 5 FUNDBALANCE, INC., a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 INTERACTIVE COMPUTER DESIGNS, a Texas corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 MUNIS, INC., a Maine corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT AND LENDER'S CONSENT (TYLER) 6 NATIONSDATA.COM, INC., a Delaware corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 THE SOFTWARE GROUP, INC., a Texas corporation By: -------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT AND LENDER'S CONSENT (TYLER) 7 EX-4.11 5 d05253exv4w11.txt FIFTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.11 FIFTH AMENDMENT TO CREDIT AGREEMENT AND LENDER'S CONSENT AND WAIVER THIS FIFTH AMENDMENT TO CREDIT AGREEMENT AND LENDER'S CONSENT AND WAIVER (this "Amendment") is dated effective March 31, 2003, by and between TYLER TECHNOLOGIES, INC., a Delaware corporation ("Borrower") and BANK OF TEXAS, N.A., a national banking association ("Lender"). WITNESSETH: WHEREAS, Borrower and Lender entered into that certain Credit Agreement, dated February 27, 2002, pursuant to which Lender agreed to make the Loan (as therein defined) available to Borrower (as heretofore or hereafter amended, the "Credit Agreement")(each capitalized term used herein, but not otherwise defined shall have the same meaning given to it in the Credit Agreement); and WHEREAS, the Credit Agreement currently limits Letter of Credit Exposure to an amount not to exceed $5,000,000; and WHEREAS, Borrower has requested that Lender (i) increase the amount available for the issuance of Letters of Credit, (ii) consent to Borrower's repurchase of outstanding Borrower stock in excess of the $2,000,000 limit to which Lender previously consented pursuant to the Third Amendment to Credit Agreement, Second Amendment to Pledge and Security Agreement, and Lender's Consent and Waiver and Borrower's Acknowledgement dated effective January 10, 2003 by and among Borrower and Lender (the "Third Amendment") and (iii) allow Borrower to repurchase outstanding Borrower stock in an aggregate amount not to exceed $25,000,000; and WHEREAS, subject to the terms and conditions herein contained, Lender is willing to agree to such requests. NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, Borrower and Lender hereby covenant and agree as follows: ARTICLE I - CONSENT AND WAIVER SECTION 1.1 CONSENT TO REPURCHASE OF OUTSTANDING STOCK IN EXCESS OF AMOUNT PREVIOUSLY CONSENTED TO BY LENDER. The Credit Agreement provides, among other things, that, without the prior written consent of Lender, Borrower shall declare no Distribution nor make any Investment, prior to payment in full of the Obligations owed to Lender, and the termination of Lender's Commitment, under the Credit Agreement. Pursuant to the Third Amendment, Lender consented to Borrower's repurchase of outstanding Borrower stock in an aggregate amount not to exceed $2,000,000 (the "Second Targeted Repurchase"). The actual cost of the Second Targeted Repurchase equaled $3,270,663.49 (the "Actual Repurchase Cost"). Lender hereby consents to the Second Targeted Repurchase and waives any Default or Event of Default that may have occurred as a result of the amount of the Actual Repurchase Cost exceeding the amount previously consented to by Lender for the Second Targeted Repurchase. SECTION 1.2 CONSENT TO REPURCHASE OF OUTSTANDING STOCK. The Credit Agreement provides, among other things, that, without the prior written consent of Lender, Borrower shall declare no Distribution nor make any Investment, prior to payment in full of the Obligations owed to Lender, and the termination of Lender's Commitment, under the Credit Agreement. Pursuant to the Second Amendment to Credit 1 FIFTH AMENDMENT (TYLER) Agreement, first Amendment to Pledge and Security Agreement, and Lender's Consent and Waiver dated effective September 30, 2002, by and among Borrower and Lender, Lender consented to Borrower's repurchase of up to 1,500,000 shares of the outstanding stock in Borrower during the period from August 15, 2002 to November 30, 2002 (the "First Targeted Repurchase"). As noted above, pursuant to the Third Amendment, Lender consented to the Second Targeted Repurchase. Borrower has requested Lender's consent to Borrower's repurchases of additional outstanding Borrower stock (i.e., Borrower stock in addition to and exclusive of the Borrower stock repurchased by Borrower in connection with the First Targeted Repurchase and the Second Targeted Repurchase) (the "Third Targeted Repurchases"), with the aggregate purchase price for all such Third Targeted Repurchases not to exceed $25,000,000. Lender hereby consents to the Third Targeted Repurchases; provided, however, that all such Second Targeted Repurchases occur prior to the occurrence of a Default or an Event of Default. SECTION 1.3 LIMITATION ON CONSENT. The consents granted in this Amendment are limited to the foregoing actions and do not constitute a waiver of any required consent with respect to any other action. ARTICLE II - AMENDMENT SECTION 2.1 LETTERS OF CREDIT SUBLIMIT. Section 2.1(c) of the Credit Agreement is hereby deleted and restated in its entirety as follows: (c) LETTERS OF CREDIT. During the Credit Period, Lender agrees, subject to the terms and conditions set forth in this Agreement, to issue, upon request by Borrower, Letters of Credit for the account of Borrower (or a Guarantor designated by Borrower), provided, that, immediately after each such Letter of Credit is issued, the aggregate amount of the Letter of Credit Exposure plus Outstanding Advances shall not exceed the lesser of (a) the Borrowing Base and (b) $10,000,000. All amounts Lender is required to advance under any Letter of Credit shall be deemed an Advance hereunder and shall bear interest as provided herein, and Borrower shall be liable for all costs and expenses, including, but not limited to, attorney's fees and court costs, relating to such Letter of Credit, or any action related to such Letter of Credit, incurred by Lender in connection with such Letter of Credit. SECTION 2.2 FINANCIAL STATEMENT REPORTING DATE. Section 8.1(a) of the Credit Agreement is hereby amended by changing the reporting period from "ninety (90) days" to "one hundred twenty (120) days". SECTION 2.3 COLLATERAL AUDIT. Article VIII is hereby amended by adding the following new section after Section 8.12: SECTION 8.13. COLLATERAL AUDIT. Assist Lender with Lender's audit of the Collateral, which audit or audits shall occur at Lender's discretion. SECTION 2.4 FINANCIAL COVENANTS: TANGIBLE NET WORTH. Section 9.9(a) of the Credit Agreement is hereby deleted and restated in its entirety as follows: (a) Tangible Net Worth on the last day of any fiscal quarter to be less than the sum of (i) $17,181,000.00, plus (ii) as of the end of each fiscal quarter beginning with the fiscal quarter ending June 30, 2003, the product of (A) ninety percent (90%) times (B) the consolidated net income of Borrower for such fiscal quarter, provided, that in no case 2 FIFTH AMENDMENT (TYLER) shall such sum be less than the minimum Tangible Net Worth calculated hereunder for the previous quarter. SECTION 2.5 CONTRIBUTIONS TO SWAN TRANSPORTATION COMPANY AND TPI OF TEXAS, INC.. Article IX is hereby amended by adding the following new section after Section 9.12: SECTION 9.13. CONTRIBUTIONS TO EXCLUDED SUBSIDIARIES. Make any Investment in, including, but not limited to, cash contributions to, prior to the earlier of (a) the Termination Date, or (b) April 1, 2006, the Excluded Subsidiaries that exceeds an aggregate amount of $1,500,000.00. ARTICLE III - MISCELLANEOUS SECTION 3.1 CONDITION TO CLOSING; FURTHER ASSURANCES. As a condition to the closing of this Amendment, Borrower shall execute and deliver this Amendment and such other documents as may be necessary or as may be required, in the opinion of counsel to Lender, to effect the transactions contemplated hereby and continue the liens and/or security interests of all other collateral instruments, as modified by this Amendment. Borrower also agrees to provide to Lender such other documents and instruments as Lender reasonably may request in connection with the modification of the Loans effected hereby. SECTION 3.2 CONTINUING EFFECT. Except as modified and amended hereby, the Credit Agreement and other Loan Documents are and shall remain in full force and effect in accordance with their terms. SECTION 3.3 PAYMENT OF EXPENSES. Borrower agrees to pay to Lender the reasonable attorneys' fees and expenses of Lender's counsel and other expenses incurred by Lender in connection with this Amendment. SECTION 3.4 BINDING AGREEMENT. This Amendment shall be binding upon, and shall inure to the benefit of, the parties' respective representatives, successors and assigns. SECTION 3.5 NO DEFENSES. Borrower by its execution of this Amendment, hereby declares that it has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the Loan, this Amendment or otherwise; and, to the extent any such setoffs, counterclaims, defenses or other causes of action may exist, whether known or unknown, such items are hereby waived by Borrower. SECTION 3.6 USURY SAVINGS CLAUSE. Notwithstanding anything to the contrary in this Amendment, the Note or any other Loan Document, or in any other agreement entered into in connection with the Note or securing the indebtedness evidenced by the Note, whether now existing or hereafter arising and whether written or oral, it is agreed that the aggregate of all interest and other charges constituting interest, or adjudicated as constituting interest, and contracted for, chargeable or receivable under the Note or otherwise in connection with the Note shall under no circumstances exceed the maximum rate of interest permitted by applicable law. In the event the maturity of the Note is accelerated by reason of an election by the holder thereof resulting from a default thereunder or under any other document executed as security therefor or in connection therewith, or by voluntary prepayment by the maker, or otherwise, then earned interest may never include more than the maximum rate of interest permitted by applicable law. If from any circumstance any holder of any of the Note shall ever receive interest or any other charges constituting interest, or adjudicated as constituting interest, the amount, if any, which would exceed the maximum rate of interest permitted by applicable law shall be applied to the reduction of the principal amount owing on such Note or on account of any other principal indebtedness of the maker to 3 FIFTH AMENDMENT (TYLER) the holders of such Note, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal thereof and such other indebtedness, the amount of such excessive interest that exceeds the unpaid balance of principal thereof and such other indebtedness shall be refunded to the maker. All sums paid or agreed to be paid to the holder of the Note for the use, forbearance or detention of the indebtedness of the maker to the holder of such Note shall be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full for the purpose of determining the actual rate on such indebtedness is uniform throughout the term thereof. The terms "maximum amount" or "maximum rate" as used in this Amendment or the Note, or in any other agreement entered into in connection with the Note or securing the indebtedness evidenced by the Note, whether now existing or hereafter arising and whether written or oral, include, as to Chapter 303 of the Texas Finance Code (and as same may be incorporated by reference in other statutes of the State of Texas), but otherwise without limitation, that rate based upon the "weekly ceiling"; provided, however, that this designation shall not preclude the rate of interest contracted for, charged or received in connection with the Loan from being governed by, or construed in accordance with, any other state or federal law. SECTION 3.7 COUNTERPARTS. This Amendment may be executed in several counterparts, all of which are identical, each of which shall be deemed an original, and all of which counterparts together shall constitute one and the same instrument, it being understood and agreed that the signature pages may be detached from one or more of such counterparts and combined with the signature pages from any other counterpart in order that one or more fully executed originals may be assembled. SECTION 3.8 CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS PREEMPT THE LAWS OF THE STATE OF TEXAS. SECTION 3.9 ENTIRE AGREEMENT. This Amendment, together with the other Loan Documents, contain the entire agreements between the parties relating to the subject matter hereof and thereof. This Amendment and the other Loan Documents may be amended, revised, waived, discharged, released or terminated only by a written instrument or instruments, executed by the party against which enforcement of the amendment, revision, waiver, discharge, release or termination is asserted. Any alleged amendment, revision, waiver, discharge, release or termination which is not so documented shall not be effective as to any party. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATED TO THE SUBJECT MATTER HEREIN CONTAINED 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. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 4 FIFTH AMENDMENT (TYLER) IN WITNESS WHEREOF, this Amendment is executed effective as of the date first written above. LENDER: BANK OF TEXAS, N.A., a national banking association By: ---------------------------------------------- Mark Wade Senior Vice President BORROWER: TYLER TECHNOLOGIES, INC. a Delaware corporation By: ---------------------------------------------- Brian K. Miller, Vice President-Finance 5 FIFTH AMENDMENT (TYLER) CONSENT OF GUARANTORS Each of the undersigned Guarantors hereby acknowledges and consents to the foregoing amendment and expressly acknowledges and agrees that (a) its Guaranty shall guaranty, and the Security Agreement executed by it shall secure, the Loan as amended hereby, and (b) except as may be modified to incorporate the terms of this Amendment, the Guaranty of the other Loan Documents to which it is a part, are and shall continue in full force and effect. IN WITNESS WHEREOF, each of the Guarantors has caused this Consent to be duly executed by its authorized officer. GUARANTORS: COLE LAYER TRUMBLE COMPANY, a Delaware corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 EAGLE COMPUTER SYSTEMS, INC., a Delaware corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 6 FIFTH AMENDMENT (TYLER) FUNDBALANCE, INC., a Delaware corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 INTERACTIVE COMPUTER DESIGNS, a Texas corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 MUNIS, INC., a Maine corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 7 FIFTH AMENDMENT (TYLER) NATIONSDATA.COM, INC., a Delaware corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 THE SOFTWARE GROUP, INC., a Texas corporation By: ---------------------------------------- Brian K. Miller, Vice President-Finance Address: c/o Tyler Technologies, Inc. 5949 Sherry Lane, Suite 1400 Dallas, Texas 75225 Attention: Treasurer Fax: (214) 547-4041 8 FIFTH AMENDMENT (TYLER) EX-99.1 6 d05253exv99w1.txt CERTIFICATION PURSUANT TO SECTION 1350 EXHIBIT 99.1 Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code I, John M. Yeaman, the chief executive officer of Tyler Technologies, Inc., certify that (i) the Form 10-Q Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q Quarterly fairly presents, in all material respects, the financial condition and results of operations of Tyler Technologies, Inc. By: /s/ John M. Yeaman ------------------ John M. Yeaman President and Chief Executive Officer EX-99.2 7 d05253exv99w2.txt CERTIFICATION PURSUANT TO SECTION 1350 EXHIBIT 99.2 Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code I, Theodore L. Bathurst, the chief financial officer of Tyler Technologies, Inc., certify that (i) the Form 10-Q Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q Quarterly fairly presents, in all material respects, the financial condition and results of operations of Tyler Technologies, Inc. By: /s/ Theodore L. Bathurst ------------------------ Theodore L. Bathurst Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----