Exhibit 4.1
TYLER TECHNOLOGIES, INC.
2010 STOCK OPTION PLAN
1.
ESTABLISHMENT OF PLAN
. Tyler Technologies, Inc. establishes the Tyler
Technologies, Inc. 2010 Stock Option Plan, effective as of May 13, 2010 (the Effective Date).
Options granted under the Plan shall be subject to the terms and of the Plan as set forth herein,
as it may be amended from time to time.
2.
PURPOSE
. The purposes of the Plan are to (i) offer selected Employees, Directors
and Consultants an equity ownership interest and opportunity to participate in the growth and
financial success of the Company, (ii) provide the Company an opportunity to attract and retain the
best available personnel for positions of substantial responsibility, (iii) create long-term value
and to provide incentives to such Employees, Directors and Consultants by means of market-driven
and performance-related stock-based Options to achieve long-term performance goals, and (iv) to
promote the growth and success of the Companys business by aligning the financial interests of
selected Employees, Directors and Consultants with that of the other shareholders of the Company.
Toward these objectives, the Plan provides for the grant of Options.
3.
DEFINITIONS
. As used herein, unless the context requires otherwise, the following
terms shall have the meanings indicated below:
(a)
Affiliate
means (i) any corporation, partnership or other entity which owns,
directly or indirectly, a majority of the voting equity securities of the Company, (ii) any
corporation, partnership or other entity of which a majority of the voting equity securities or
equity interest is owned, directly or indirectly, by the Company, and (iii) with respect to an
Option that is intended to be an Incentive Stock Option, (A) any parent corporation of the
Company, as defined in Section 424(e) of the Code or (B) any subsidiary corporation of the
Company as defined in Section 424(f) of the Code; provided, that in each case, an Affiliate must be
a recipient corporation as described in Treasury Regulations issued under Section 409A of the
Code.
(b)
Board
means the Board of Directors of the Company.
(c)
Change in Control
of the Company means the occurrence of any of the following
events: (i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50 percent or more of the combined voting
power of the Companys then outstanding securities; (ii) as a result of, or in connection with, any
tender offer or exchange offer, merger, or other business combination (a
Transaction
),
the persons who were directors of the Company immediately before the Transaction shall cease to
constitute a majority of the Board of Directors of the Company or any successor to the Company;
(iii) the Company is merged or consolidated with another corporation and as a result of the merger
or consolidation less than 50 percent of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the former stockholders of the
Company; (iv) a tender offer or exchange offer is
made and consummated for the ownership of securities of the Company representing 50 percent or
more of the combined voting power of the Companys then outstanding voting securities; or (v) the
Company transfers substantially all of its assets to another corporation which is not controlled by
the Company.
(d)
Code
means the Internal Revenue Code of 1986, as amended, and any successor
statute. Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any Treasury regulations promulgated under
such section.
(e)
Committee
means the committee, as constituted from time to time, of the Board
that is appointed by the Board to administer the Plan; provided, however, that while the Common
Stock is publicly traded, the Committee shall be a committee of the Board consisting solely of two
or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or
more Non-Employee Directors, in accordance with Rule 16b-3, as necessary in each case to satisfy
such requirements with respect to Options granted under the Plan. Within the scope of such
authority, the Committee may (i) delegate to a committee of one or more members of the Board who
are not Outside Directors the authority to grant Options to eligible persons who are either (A) not
then Covered Employees and are not expected to be Covered Employees at the time of recognition of
income resulting from such Options or (B) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code and/or (ii) delegate to a committee of one or more members
of the Board who are not Non-Employee Directors the authority to grant Options to eligible persons
who are not then subject to Section 16 of the Exchange Act.
(f)
Common Stock
means the Common Stock, $0.01 par value per share, of the Company
or the common stock that the Company may in the future be authorized to issue (as long as the
common stock varies from that currently authorized, if at all, only in amount of par value).
(g)
Company
means Tyler Technologies, Inc., a Delaware corporation.
(h)
Consultant
means any person (other than an Employee or a Director, solely with
respect to rendering services in such persons capacity as a Director) who is engaged by the
Company or any Affiliate to render consulting or advisory services to the Company or such Affiliate
and who is a consultant or advisor within the meaning of Rule 701 promulgated under the
Securities Act or Form S-8 promulgated under the Securities Act.
(i)
Continuous Service
means that the provision of services to the Company or an
Affiliate in any capacity of Employee, Director or Consultant is not interrupted or terminated.
Except as otherwise provided in a particular Option Agreement, service shall not be considered
interrupted or terminated for this purpose in the case of (i) any approved leave of absence, (ii)
transfers among the Company, any Affiliate, or any successor, in any capacity of Employee, Director
or Consultant, or (iii) any change in status as long as the individual remains in the service of
the Company or an Affiliate in any capacity of Employee, Director or Consultant. An approved leave
of absence shall include sick leave, military leave, or any other authorized personal leave. For
purposes of each Incentive Stock Option, if such leave exceeds ninety (90)
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days, and re-employment upon expiration of such leave is not guaranteed by statute or
contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the
day that is three (3) months and one (1) day following the expiration of such ninety (90)-day
period.
(j)
Covered Employee
means the Chief Executive Officer and the four other most
highly compensated officers of the Company for whom total compensation is required to be reported
to shareholders under Regulation S-K, as determined for purposes of Section 162(m) of the Code.
(k)
Director
means a member of the Board.
(l)
Disability
means the disability of a person as defined in a then effective
long-term disability plan maintained by the Company that covers such person, or if such a plan does
not exist at any relevant time, Disability means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code. For purposes of determining the time during
which an Incentive Stock Option may be exercised under the terms of an Option Agreement,
Disability means the permanent and total disability of a person within the meaning of Section
22(e)(3) of the Code. Section 22(e)(3) of the Code provides that an individual is totally and
permanently disabled if he is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not less than twelve (12)
months.
(m)
Employee
means any person, including an Officer or Director, who is employed
within the meaning of Section 3401 of the Code by the Company or an Affiliate. The provision of
compensation by the Company or an Affiliate to a Director solely with respect to such individual
rendering services in the capacity of a Director, however, shall not be sufficient to constitute
employment by the Company or that Affiliate.
(n)
Exchange Act
means the Securities Exchange Act of 1934, as amended, and any
successor statute. Reference in the Plan to any section of the Exchange Act shall be deemed to
include any amendments or successor provisions to such section and any rules and regulations
relating to such section.
(o)
Fair Market Value
means, as of any date, the value of the Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of
Common Stock shall be the closing sales price for such a share of Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in the Common Stock) on the day of
determination (or if no such price or bid is reported on that day, on
last market trading day prior to the day of determination), as reported in
The Wall
Street Journal
or such other source as the Committee deems reliable.
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(ii) In the absence of any such established markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Committee in a manner consistent with
Section 409A of the Code.
(p)
Incentive Stock Option
means an Option granted to an Employee under the Plan
that meets the requirements of Section 422 of the Code.
(q)
Non-Employee Director
means a Director of the Company who either (i) is not an
Employee or Officer, does not receive compensation (directly or indirectly) from the Company or an
Affiliate in any capacity other than as a Director (except for an amount as to which disclosure
would not be required under Item 404(a) of Regulation S-K), does not possess an interest in any
other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and
is not engaged in a business relationship as to which disclosure would be required under Item
404(b) of Regulation S-K or (ii) is otherwise considered a non-employee director for purposes of
Rule 16b-3.
(r)
Non-Qualified Stock Option
means an Option granted under the Plan that is not
intended to be an Incentive Stock Option.
(s)
Officer
means a person who is an officer of the Company or any Affiliate
within the meaning of Section 16 of the Exchange Act (whether or not the Company is subject to the
requirements of the Exchange Act).
(t)
Option
means a stock option granted pursuant to the Plan to purchase a specified
number of shares of Common Stock, whether granted as an Incentive Stock Option or as a
Non-Qualified Stock Option.
(u)
Option Agreement
means the written agreement evidencing the grant of an Option
executed by the Company and the Optionee, including any amendments thereto.
(v)
Optionee
means an individual to whom an Option has been granted under the Plan.
(w)
Outside Director
means a Director of the Company who either (i) is not a current
employee of the Company or an affiliated corporation (within the meaning of the Treasury
regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company
or an affiliated corporation receiving compensation for prior services (other than benefits under
a tax qualified pension plan), has not been an officer of the Company or an affiliated
corporation at any time and is not currently receiving (within the meaning of the Treasury
regulations promulgated under Section 162(m) of the Code) direct or indirect remuneration from the
Company or an affiliated corporation for services in any capacity other than as a Director, or
(ii) is otherwise considered an outside director for purposes of Section 162(m) of the Code.
(x)
Plan
means this Tyler Technologies, Inc. 2010 Stock Option Plan, as set forth
herein and as it may be amended from time to time.
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(y)
Qualifying Shares
means shares of Common Stock which either (i) have been owned
by the Optionee for more than six (6) months and have been paid for within the meaning of Rule
144 promulgated under the Securities Act, or (ii) were obtained by the Optionee in the public
market.
(z)
Regulation S-K
means Regulation S-K promulgated under the Securities Act, as it
may be amended from time to time, and successor to Regulation S-K. Reference in the Plan to any
item of Regulation S-K shall be deemed to include any amendments or successor provisions to such
item.
(aa)
Rule 16b-3
means Rule 16b-3 promulgated under the Exchange Act, as it may be
amended from time to time, and any successor to Rule 16b-3.
(bb)
Section
means a section of the Plan unless otherwise stated or the context
otherwise requires.
(cc)
Securities Act
means the Securities Act of 1933, as amended, and any successor
statute. Reference in the Plan to any section of the Securities Act shall be deemed to include any
amendments or successor provisions to such section and any rules and regulations relating to such
section.
(dd)
Ten Percent Shareholder
means a person who owns (or is deemed to own pursuant
to Section 424(d) of the Code) at the time an Option is granted stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the Company or of any
of its Affiliates.
4.
STOCK OPTION GRANTS AVAILABLE UNDER THE PLAN
. Options granted under this Plan may
be (a) Incentive Stock Options and (b) Non-Qualified Stock Options.
5.
SHARES SUBJECT TO PLAN
. Subject to adjustment pursuant to Section 10(a) hereof,
the total amount of Common Stock with respect to which Options may be granted under the Plan shall
not exceed 5,000,000 shares of Common Stock. Any shares of Common Stock covered by an Option (or a
portion of an Option) that is forfeited or canceled, or that expires shall be deemed not to have
been issued for purposes of determining the maximum aggregate number of shares of Common Stock
which may be issued under the Plan and shall again be available for Options under the Plan. At all
times during the term of the Plan, the Company shall reserve and keep available such number of
shares of Common Stock as will be required to satisfy the requirements of outstanding Options under
the Plan. Nothing in this Section 5 shall impair the right of the Company to reduce the number of
outstanding shares of Common Stock pursuant to repurchases, redemptions, or otherwise; provided,
however, that no reduction in the number of outstanding shares of Common Stock shall (i) impair the
validity of any outstanding Option, whether or not that Option is fully exercisable, or (ii) impair
the status of any shares of Common Stock previously issued pursuant to an Option as duly
authorized, validly issued, fully paid, and nonassessable. The shares to be delivered under the
Plan shall be
made available from (i) authorized but unissued shares of Common Stock or (ii) Common Stock
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held in the treasury of the Company, in each case as the Committee may determine from time to time
in its sole discretion.
6.
ELIGIBILITY
. Options other than Incentive Stock Options may be granted to
Employees, Officers, Directors, and Consultants. Incentive Stock Options may be granted only to
Employees (including Officers and Directors who are also Employees), as limited by clause (iii) of
Section 3(a). The Committee in its sole discretion shall select the recipients of Options. An
Optionee may be granted more than one Option under the Plan, and Options may be granted at any time
or times during the term of the Plan. The grant of an Option to an Employee, Officer, Director or
Consultant shall not be deemed either to entitle that individual to, or to disqualify that
individual from, participation in any other grant of Options under the Plan.
7.
LIMITATION ON INDIVIDUAL OPTIONS
. Subject to the provisions of Section 10(a), the
maximum number of shares of Common Stock that may be subject to Options granted to any one person
under the Plan shall not exceed 1,000,000 shares of Common Stock. The limitation set forth in the
preceding sentence shall be applied in a manner which will permit compensation generated under the
Plan to constitute performance-based compensation for purposes of Section 162(m) of the Code,
including counting against such maximum number of shares, to the extent required under Section
162(m) of the Code and applicable interpretive authority thereunder, any shares of Common Stock
subject to Options that are canceled or repriced.
8.
TERMS AND CONDITIONS OF OPTIONS
. The Committee shall determine (a) whether each
Option shall be granted as an Incentive Stock Option or a Non-Qualified Stock Option and (b) the
provisions, terms and conditions of each Option including, but not limited to, the vesting
schedule, the number of shares of Common Stock subject to the Option, the exercise price of the
Option, the period during which the Option may be exercised, repurchase provisions, forfeiture
provisions, methods of payment, and all other terms and conditions of the Option, subject to the
following:
(a)
Form of Option Grant
. Each Option granted under the Plan shall be evidenced by a
written Option Agreement in such form (which need not be the same for each Optionee) as the
Committee, or if applicable the Chief Executive Officer, from time to time approves, but which is
not inconsistent with the Plan, including any provisions that may be necessary to assure that any
Option that is intended to be an Incentive Stock Option will comply with Section 422 of the Code.
(b)
Date of Grant
. The date of grant of an Option will be the date on which the
Committee makes the determination to grant such Option unless otherwise specified by the Committee.
The Option Agreement evidencing the Option will be delivered to the Optionee with a copy of the
Plan and other relevant Option documents, within a reasonable time after the date of grant.
(c)
Exercise Price
. The exercise price of an Option shall be not less than 100% of
the Fair Market Value of the shares of Common Stock on the date of grant of the Option. The
exercise price of any Incentive Stock Option granted to a Ten Percent Shareholder shall not be
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less than 110% of the Fair Market Value of the shares of Common Stock on the date of grant of
the Option.
(d)
Exercise Period
. Options shall be exercisable within the time or times or upon
the event or events determined by the Committee and set forth in the Option Agreement; provided,
however, that no Option shall be exercisable later than the expiration of ten (10) years from the
date of grant of the Option, and provided further, that no Incentive Stock Option granted to a Ten
Percent Shareholder shall be exercisable after the expiration of five (5) years from the date of
grant of the Option.
(e)
Limitations on Incentive Stock Options
. The aggregate Fair Market Value
(determined as of the date of grant of an Option) of Common Stock which any Employee is first
eligible to purchase during any calendar year by exercise of Incentive Stock Options granted under
the Plan and by exercise of incentive stock options (within the meaning of Section 422 of the Code)
granted under any other incentive stock option plan of the Company or an Affiliate shall not exceed
$100,000. If the Fair Market Value of stock with respect to which all incentive stock options
described in the preceding sentence held by any one Optionee are exercisable for the first time by
such Optionee during any calendar year exceeds $100,000, the Options (that are intended to be
Incentive Stock Options on the date of grant thereof) for the first $100,000 worth of shares of
Common Stock to become exercisable in such year shall be deemed to constitute incentive stock
options within the meaning of Section 422 of the Code and the Options (that are intended to be
Incentive Stock Options on the date of grant thereof) for the shares of Common Stock in the amount
in excess of $100,000 that become exercisable in that calendar year shall be treated as
Non-Qualified Stock Options. If the Code or the Treasury regulations promulgated thereunder are
amended after the effective date of the Plan to provide for a different limit than the one
described in this 8(e), such different limit shall be incorporated herein and shall apply to any
Options granted after the effective date of such amendment.
(f)
Transferability of Options
. Options granted under the Plan, and any interest
therein, shall not be transferable or assignable by the Optionee, and may not be made subject to
execution, attachment or similar process, otherwise than by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee;
provided, that the Optionee may, however, designate persons who or which may exercise his Options
following his death.
(g)
Acquisitions and Other Transactions
. The Committee may, from time to time, assume
outstanding options granted by another entity, whether in connection with an acquisition of such
other entity or otherwise, by either (i) granting an Option under the Plan in replacement of or in
substitution for the option assumed by the Company, or (ii) treating the assumed option as if it
had been granted under the Plan if the terms of such assumed option could be applied to an Option
granted under the Plan. Such assumption shall be permissible if the holder of the assumed option
would have been eligible to be granted an Option hereunder if the other entity had applied the
rules of this Plan to such grant. The Committee also may grant Options under the Plan in
settlement of or substitution for, outstanding options or obligations to grant future options in
connection with the Company or an Affiliate acquiring another entity, an interest in another entity
or an additional interest in an Affiliate whether by merger, stock purchase, asset purchase or
other form of transaction. Notwithstanding the foregoing provisions of this
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Section 8, in the case of an Option issued or assumed pursuant to this Section 8(g), the exercise
price for the Option shall be determined in accordance with the principles of Section 424(a) of the
Code and the Treasury regulations promulgated thereunder.
9.
EXERCISE OF OPTIONS
.
(a)
Notice
. Options may be exercised only by delivery to the Company of a written
exercise notice approved by the Committee (which need not be the same for each Optionee), stating
the number of shares of Common Stock being purchased, the method of payment, and such other matters
as may be deemed appropriate by the Company in connection with the issuance of shares of Common
Stock upon exercise of the Option, together with payment in full of the exercise price for the
number of shares of Common Stock being purchased. Such exercise notice may be part of an
Optionees Option Agreement.
(b)
Payment
. Payment for the shares of Common Stock to be purchased upon exercise of
an Option may be made in cash (by check) or, if elected by the Optionee and in one or more of the
following methods stated in the Option Agreement (at the date of grant with respect to any Option
granted as an Incentive Stock Option) and where permitted by law: (i) if a public market for the
Common Stock exists, through a same day sale arrangement between the Optionee and a broker-dealer
that is a member of the National Association of Securities Dealers, Inc. (an
NASD Dealer
)
whereby the Optionee elects to exercise the Option and to sell a portion of the shares of Common
Stock so purchased to pay for the exercise price and whereby the NASD Dealer commits upon receipt
of such shares of Common Stock to forward the exercise price directly to the Company; (ii) if a
public market for the Common Stock exists, through a margin commitment from the Optionee and an
NASD Dealer whereby the Optionee elects to exercise the Option and to pledge the shares of Common
Stock so purchased to the NASD Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the exercise price, and whereby the NASD Dealer commits upon receipt of
such shares of Common Stock to forward the exercise price directly to the Company; or (iii) by
surrender for cancellation of Qualifying Shares at the Fair Market Value per share at the time of
exercise (provided that such surrender does not result in an accounting charge for the Company).
No shares of Common Stock may be issued until full payment of the purchase price therefor has been
made.
(c)
Withholding Taxes
. The Committee may establish such rules and procedures as it
considers desirable in order to satisfy any obligation of the Company to withhold the statutory
prescribed minimum amount of federal or state income taxes or other taxes with respect to the
exercise of any Option granted under the Plan. Prior to issuance of the shares of Common Stock
upon exercise of an Option, the Optionee shall pay or make adequate provision acceptable to the
Committee for the satisfaction of the statutory minimum prescribed amount of any federal or state
income or other tax withholding obligations of the Company, if applicable. Upon exercise of an
Option, the Company shall withhold or collect from the Optionee an amount sufficient to satisfy
such tax withholding obligations.
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(d)
Exercise of Option Following Termination of Continuous Service
.
(i) An Option may not be exercised after the expiration date of such Option set forth
in the Option Agreement and may be exercised following the termination of an Optionees
Continuous Service only to the extent provided in the Option Agreement.
(ii) Where the Option Agreement permits an Optionee to exercise an Option following the
termination of the Optionees Continuous Service for a specified period, the Option shall
terminate to the extent not exercised on the last day of the specified period or the last
day of the original term of the Option, whichever occurs first.
(iii) Any Option designated as an Incentive Stock Option, to the extent not exercised
within the time permitted by law for the exercise of Incentive Stock Options following the
termination of an Optionees Continuous Service, shall convert automatically to a
Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent
exercisable by its terms for the period specified in the Option Agreement.
(iv) The Committee shall have discretion to determine whether the Continuous Service of
an Optionee has terminated and the effective date on which such Continuous Service
terminates and whether the Optionees Continuous Service terminated as a result of the
Disability of the Optionee.
(e)
Limitations on Exercise
.
(i) The Committee may specify a reasonable minimum number of shares of Common Stock or
a percentage of the shares subject to an Option that may be purchased on any exercise of an
Option; provided, that such minimum number will not prevent Optionee from exercising the
full number of shares of Common Stock as to which the Option is then exercisable.
(ii) The obligation of the Company to issue any shares of Common Stock pursuant to the
exercise of any Option shall be subject to the condition that such exercise and the issuance
and delivery of such shares pursuant thereto comply with the Securities Act, all applicable
state securities laws and the requirements of any stock exchange or national market system
upon which the shares of Common Stock may then be listed or quoted, as in effect on the date
of exercise. The Company shall be under no obligation to register the shares of Common
Stock with the Securities and Exchange Commission or to effect compliance with the
registration, qualification or listing requirements of any state securities laws or stock
exchange or national market system, and the Company shall have no liability for any
inability or failure to do so.
(iii) As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise that the
shares of Common Stock are being purchased only for investment and without any present
intention to sell or distribute such shares of Common Stock if, in the opinion of counsel
for the Company, such a representation is required by any securities or other applicable
laws.
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(f)
Modification, Extension And Renewal of Options
. The Committee shall have the
power to modify, cancel, extend or renew outstanding Options and to authorize the grant of new
Options in substitution therefor (regardless of whether any such action would be treated as a
repricing for financial accounting or other purposes), provided that (except as permitted by
Section 10 of this Plan) any such action may not, without the written consent of any Optionee, (i)
impair any rights under any Option previously granted to such Optionee or (ii) cause the Otpion to
become subject to Section 409A of the Code. Any outstanding Incentive Stock Option that is
modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code.
(g)
Privileges of Stock Ownership
. No Optionee will have any of the rights of a
shareholder with respect to any shares of Common Stock subject to an Option until such Option is
properly exercised and the purchased shares are issued and delivered to the Optionee, as evidenced
by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company. No adjustment shall be made for dividends or distributions or other rights for which the
record date is prior to such date of issuance and delivery, except as provided in the Plan.
10.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION AND CORPORATE EVENTS
.
(a)
Capital Adjustments
. The number of shares of Common Stock (i) covered by each
outstanding Option granted under the Plan, the exercise or purchase price of such outstanding
Option, and any other terms of the Option that the Committee determines requires adjustment and
(ii) available for issuance under Sections 5 and 7 shall be adjusted to reflect, as deemed
appropriate by the Committee, any increase or decrease in the number of shares of Common Stock
resulting from a stock dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without receipt of consideration, subject to
any required action by the Board or the shareholders of the Company and compliance with applicable
securities laws; provided, however, that a fractional share will not be issued upon exercise of any
Option, and either (i) any fraction of a share of Common Stock that would have resulted will be
cashed out at Fair Market Value or (ii) the number of shares of Common Stock issuable under the
Option will be rounded down to the nearest whole number, as determined by the Committee. Except as
the Committee determines, no issuance by the Company of shares of capital stock of any class, or
securities convertible into shares of capital stock of any class, shall affect, and no adjustment
by reason hereof shall be made with respect to, the number or price of shares of Common Stock
subject to an Option.
(b)
Dissolution or Liquidation
. The Committee shall notify the Optionee at least
twenty (20) days prior to any proposed dissolution or liquidation of the Company. Unless provided
otherwise in an individual Option Agreement or in a then-effective written employment agreement
between the Optionee and the Company or an Affiliate, to the extent that an Option has not been
previously exercised, any such Option shall expire immediately prior to consummation of such
dissolution or liquidation.
(c)
Change in Control
. Unless specifically provided otherwise with respect to Change
in Control events in an individual Option Agreement or in a then-effective written
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employment agreement between the Optionee and the Company or an Affiliate, if, during the
effectiveness of the Plan, a Change in Control occurs, then the Options outstanding immediately
before the Change of Control will be assumed by the surviving corporation or the acquiring
corporation or will be converted into options or rights of at least equal value; except that if the
surviving corporation or the acquiring corporation refuses to so assume or to so convert the
outstanding Options, then the Options shall become fully vested and exercisable, and the Company
shall notify each Participant, not later than 20 days prior to the effective date of such Change of
Control (except that in the case of a Change of Control described in clause (iii) above in this
paragraph, notice shall be given as soon as practicable after that Change of Control), that all his
Options have become fully vested and exercisable, whether or not such Options would otherwise then
be exercisable under the terms of his Option Agreement. Any such arrangement relating to Incentive
Options shall comply with the requirements of Section 422 of the Code and the regulations
thereunder. To the extent that the Participants exercise the Options before or on the effective
date of the Change of Control, the Company shall issue all Common Stock purchased by exercise of
those Options (subject to Optionees satisfaction of the requirements of Section 9(c)), and those
shares of Common Stock shall be treated as issued and outstanding for purposes of the Change of
Control. Upon a Change of Control, where the outstanding Options are not assumed by the surviving
corporation or the acquiring corporation, the Plan shall terminate, and any unexercised Options
outstanding under the Plan at that date shall terminate.
11.
STOCKHOLDER APPROVAL
. The Company shall obtain the approval of the Plan by the
Companys stockholders to the extent required to satisfy Section 162(m) of the Code or to satisfy
or comply with any applicable laws or the rules of any stock exchange or national market system on
which the Common Stock may be listed or quoted. No Option that is issued as a result of any
increase in the number of shares of Common Stock authorized to be issued under the Plan may be
exercised prior to the time such increase has been approved by the stockholders of the Company, and
all such Options granted pursuant to such increase will similarly terminate if such shareholder
approval is not obtained.
12.
ADMINISTRATION
. This Plan shall be administered by the Committee. The Committee
shall interpret the Plan and any Options granted pursuant to the Plan and shall prescribe such
rules and regulations in connection with the operation of the Plan as it determines to be advisable
for the administration of the Plan. The Committee may rescind and amend its rules and regulations
from time to time. The interpretation by the Committee of any of the provisions of this Plan or
any Option granted under this Plan shall be final and binding upon the Company and all persons
having an interest in any Option or any shares of Common Stock acquired pursuant to an Option.
13.
EFFECT OF PLAN
. Neither the adoption of the Plan nor any action of the Board or
the Committee shall be deemed to give any Employee, Director or Consultant any right to be granted
an Option or any other rights except as may be evidenced by the Option Agreement, or any amendment
thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to
the extent and on the terms and conditions expressly set forth therein. The existence of the Plan
and the Options granted hereunder shall not affect in any way the right of the Board, the Committee
or the stockholders of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Companys capital structure or its business, any merger or
consolidation or other transaction involving the
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Company, any issue of bonds, debentures, or shares of preferred stock ahead of or affecting
the Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale
or transfer of all or any part of the Companys assets or business, or any other corporate act or
proceeding by or for the Company. Nothing contained in the Plan or in any Option Agreement or in
other related documents shall confer upon any Employee, Director or Consultant any right with
respect to such persons Continuous Service or interfere or affect in any way with the right of the
Company or an Affiliate to terminate such persons Continuous Service at any time, with or without
cause.
14.
NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS
. Except as specifically provided
in a retirement or other benefit plan of the Company or an Affiliate, Options shall not be deemed
compensation for purposes of computing benefits or contributions under any retirement plan of the
Company or an Affiliate, and shall not affect any benefits under any other benefit plan of any kind
or any benefit plan subsequently instituted under which the availability or amount of benefits is
related to level of compensation. The Plan is not a Retirement Plan or Welfare Plan under the
Employee Retirement Income Security Act of 1974, as amended.
15.
AMENDMENT OR TERMINATION OF PLAN
. The Board in its discretion may, at any time or
from time to time after the date of adoption of the Plan, terminate or amend the Plan in any
respect, including amendment of any form of Option Agreement, exercise agreement or instrument to
be executed pursuant to the Plan; provided, however, to the extent necessary to comply with the
Code, including Sections 162(m) and 422 of the Code, other applicable laws, or the applicable
requirements of any stock exchange or national market system, the Company shall obtain stockholder
approval of any Plan amendment in such manner and to such a degree as required. No Option may be
granted after termination of the Plan. Any amendment or termination of the Plan shall not affect
Options previously granted, and such Options shall remain in full force and effect as if the Plan
had not been amended or terminated, unless mutually agreed otherwise in a writing (including an
Option Agreement) signed by the Optionee and the Company.
16.
TERM OF PLAN
. Unless sooner terminated by action of the Board, the Plan shall
terminate on the earlier of (i) the tenth (10
th
) anniversary of the Effective Date or
(ii) the date on which no shares of Common Stock subject to the Plan remain available to be granted
as Options under the Plan according to its provisions.
17.
SEVERABILITY AND REFORMATION
. The Company intends all provisions of the Plan to
be enforced to the fullest extent permitted by law. Accordingly, should a court of competent
jurisdiction determine that the scope of any provision of the Plan is too broad to be enforced as
written, the court should reform the provision to such narrower scope as it determines to be
enforceable. If, however, any provision of the Plan is held to be wholly illegal, invalid, or
unenforceable under present or future law, such provision shall be fully severable and severed, and
the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision
were never a part hereof, and the remaining provisions of the Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its
severance.
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18.
GOVERNING LAW
. The Plan shall be construed and interpreted in accordance with the
laws of the State of Texas.
19.
INTERPRETIVE MATTERS
.
Whenever required by the context, pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular
shall include the plural, and vice versa. The term include or including does not denote or
imply any limitation. The captions and headings used in the Plan are inserted for convenience and
shall not be deemed a part of the Plan for construction or interpretation.
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