March 31, 2010

Dear Stockholder:

     You are cordially invited to attend the annual meeting of stockholders of Tyler Technologies, Inc. to be held on Thursday, May 13, 2010, in Dallas, Texas at the Park City Club, 5956 Sherry Lane, Suite 1700, commencing at 9:30 a.m., local time. Details of the business to be conducted at the meeting are given in the attached Notice of Annual Meeting and Proxy Statement.

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

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

Yours very truly,

JOHN M. YEAMAN
Chairman of the Board

TYLER TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 2010

To the Stockholders of

          TYLER TECHNOLOGIES, INC.:

     The annual meeting of stockholders will be held in Dallas, Texas at the Park City Club, 5956 Sherry Lane, Suite 1700, at 9:30 a.m., local time. At the meeting, you will be asked to:

	(1)		elect seven directors to serve until the next annual meeting or until their respective successors are duly elected and qualified;
	(2)		consider and vote upon a proposal to adopt the Tyler Technologies, Inc. 2010 Stock Option Plan;
	(3)		ratify the selection of Ernst & Young LLP as our independent auditors for fiscal year 2010; and
	(4)		transact such other business as may properly come before the meeting.

     Only stockholders of record on March 19, 2010 may vote at the annual meeting. A list of those stockholders will be available for examination at our corporate headquarters, 5949 Sherry Lane, Suite 1400, Dallas, Texas 75225, from May 3 through May 13, 2010.

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

     The enclosed 2009 Annual Report does not form any part of the proxy solicitation material.

		By Order of the Board of Directors
		H. Lynn Moore, Jr.
		Executive Vice President,
		General Counsel, and Secretary

Dallas, Texas
March 31, 2010

TABLE OF CONTENTS

		Page
THE ANNUAL MEETING		4
General Information		4
Proxy Solicitation, Revocation, and Expense		4
PROPOSALS FOR CONSIDERATION		4
Proposal One — Election of Directors		4
Proposal Two — Adoption of the Tyler Technologies, Inc. 2010 Stock Option Plan		5
Proposal Three — Ratification of Ernst & Young LLP as Our Independent Auditors for Fiscal Year 2010		8
TYLER MANAGEMENT		9
Directors, Nominees for Director, and Executive Officers		9
Business Experience of Directors, Nominees for Director, and Executive Officers		9
Board Diversity and Nominee Qualifications		11
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE PRINCIPLES		12
General Information		12
Corporate Governance Guidelines		12
Code of Business Conduct and Ethics		13
Board Independence		13
Committees and Meetings of the Board of Directors		13
Board Leadership Structure		15
The Board’s Role in Risk Oversight		15
Audit Committee Financial Expert		15
Pre-Approval Policies and Procedures for Audit and Non-Audit Services		15
Director Nominating Process		16
Communications with our Board of Directors		17
Director Attendance at Annual Meetings		17
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		18
Security Ownership of Directors and Management		18
Section 16(a) Beneficial Ownership Reporting Compliance		19
COMPENSATION DISCUSSION AND ANALYSIS		20
Compensation Philosophy and Objectives		20
2009 Executive Summary Overview		20
Compensation Program Actions		21
Compensation Program Design		21
Company Performance Review Process for Prior Fiscal Year		23
Setting Compensation for the Current Fiscal Year		23
2009 Named Executive Officer Compensation		24
Role of the Chief Executive Officer		24
Analysis of Compensation Elements		24
Compensation Mix		26
Additional Considerations		27
2010 Named Executive Officer Compensation		27
Role of the Chief Executive Officer		27
2010 Compensation Committee/Board of Director Actions		28
Other Compensation Topics		28
Benefits		28
Severance and Change in Control Agreements		28
Tax Consequences of Certain Forms of Compensation		29
Employment Contracts		29
Compensation Committee Report		30
Compensation Committee Interlocks and Insider Participation		30

		Page
EXECUTIVE COMPENSATION		31
Summary Compensation Table		31
Grants of Plan-Based Awards in 2009		32
Outstanding Equity Awards at Year-End		33
Option Exercises and Stock Vested		34
Potential Payments under Employment Contracts		34
Director Compensation		35
REPORT OF THE AUDIT COMMITTEE		36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		37
MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS		37
STOCKHOLDER PROPOSALS		37
APPENDIX A — Tyler Technologies, Inc. 2010 Stock Option Plan		38

THE ANNUAL MEETING

General Information

     The annual meeting will be held in Dallas, Texas at the Park City Club, 5956 Sherry Lane, Suite 1700, on Thursday, May 13, 2010, at 9:30 a.m., local time. At the annual meeting, you will be asked to consider and vote upon the following proposals:

	•		Proposal One — Election of seven directors to serve until the next annual meeting or until their respective successors are duly elected and qualified;
	•		Proposal Two — Adoption of the Tyler Technologies, Inc. 2010 Stock Option Plan; and
	•		Proposal Three — Ratification of the selection of Ernst & Young LLP as our independent auditors for fiscal year 2010.

Only stockholders of record on March 19, 2010 are entitled to vote at the annual meeting. On March 19, 2010, we had 35,049,570 shares of common stock issued and outstanding. Each stockholder will be entitled to one vote, in person or by proxy, for each share of common stock held in his or her name. A majority of our shares of common stock must be present, either in person or by proxy, to constitute a quorum for action at the annual meeting. Abstentions and broker non-votes are counted for purposes of determining a quorum. Abstentions are counted in tabulating the votes cast on any proposal, but are not counted as votes either for or against a proposal. Broker non-votes are not counted as votes cast for purposes of determining whether a proposal has been approved.

Proxy Solicitation, Revocation, and Expense

     The accompanying proxy is being solicited on behalf of the Board of Directors. Your shares will be voted at the annual meeting as you direct in the enclosed proxy or through the Internet, provided that the proxy is completed, signed, and returned to us prior to the annual meeting. No proxy can vote for more than seven nominees for director. If you return a proxy but fail to indicate how you wish your shares to be voted, then your shares will be voted in favor of each of the nominees for director.

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

     We will bear the expense of preparing, printing, and mailing the proxy solicitation material and the proxy. In addition to use of the mail, we may solicit proxies by personal interview or telephone by our directors, officers, and employees. We may also engage the services of a proxy solicitation firm to assist us in the solicitation of proxies. We estimate that the fee of any such firm will not exceed $10,000 plus reimbursement of reasonable out-of-pocket expenses. Arrangements may also be made with brokerage houses and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to record stockholders, and we may reimburse them for their reasonable out-of-pocket expenses.

PROPOSALS FOR CONSIDERATION

Proposal One — Election of Directors

     At the annual meeting, you will be asked to elect a board of seven directors. The election of directors shall be determined by plurality vote.

     The nominees for director are: Donald R. Brattain; J. Luther King, Jr.; John S. Marr, Jr.; G. Stuart Reeves; Michael D. Richards; Dustin R. Womble; and John M. Yeaman. Each of the nominees currently serves on our Board of Directors. For more information regarding these nominees and their qualifications, see “Tyler Management.” Each nominee has indicated that he is able and willing to serve as a director. If any of the nominees becomes unable to serve prior to the meeting, the persons named in the enclosed proxy will vote the shares covered by your executed proxy for a substitute nominee as selected by the Board of Directors. You may withhold authority to vote for any nominee by entering his name in the space provided on the proxy card.

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

Proposal Two — Adoption of the Tyler Technologies, Inc. 2010 Stock Option Plan

     At the annual meeting, you will also be asked to consider and vote upon a proposal to adopt the Tyler Technologies, Inc. 2010 Stock Option Plan. The affirmative vote of holders of a majority of the voting power of the shares actually voted at the annual meeting is required to adopt the 2010 Stock Option Plan.

     The number of shares of our common stock that are subject to the Stock Option Plan is 5,000,000. The 2010 Stock Option Plan is intended to replace our 2000 Amended and Restated Stock Option Plan, which expires on May 12, 2010. The 2000 Stock Option Plan, as amended, authorized the issuance of a total of 11,000,000 shares of our common stock. The number of our shares subject to outstanding options under the 2000 Stock Option Plan is disclosed below.

     The purpose of the 2010 Stock Option Plan is to enable us to provide additional incentives to selected employees whose substantial contributions are important to our continued growth and profitability. The following summary does not contain all of the information in the 2010 Stock Option Plan. A copy of the 2010 Stock Option Plan is attached as Appendix A.

     Purpose of the 2010 Stock Option Plan. Stock options are designed to strengthen the commitment of selected employees, directors, and consultants, to motivate those individuals to perform their assigned responsibilities diligently and skillfully, and to attract and retain competent entrepreneurial-type management dedicated to our long-term growth and profitability. We believe this can best be accomplished by tying a portion of compensation to appreciation in the market value of our common stock so that the management and selected employees, non-employee directors, and consultants are rewarded only if the value of your investment in our common stock has appreciated.

     Description of the 2010 Stock Option Plan. The 2010 Stock Option Plan is designed to permit the applicable administering committee to grant options to selected employees, directors, and consultants to purchase shares of our common stock. The plan requires that the purchase price under each stock option will not be less than 100% of the fair market value of our common stock at the time of the grant of the option. (Under the 2000 Stock Option Plan, the administering committee had discretion in setting the exercise price for nonqualified options.) The fair market value per share is the reported closing price of our common stock on the New York Stock Exchange on the date of the grant of the option, or if no sale has been reported on such date, on the next preceding day or the last day prior to the date of grant when the sale was reported. The option period may not be more than ten years from the date the option is granted. Except with respect to options granted to officers and directors, the Executive Committee grants options to eligible individuals, determines the purchase price and option period at the time the option is granted, and administers and interprets the plan. The Compensation Committee grants options and administers the plan with respect to officers, and our Board of Directors, as a whole, grants options and administers the plan with respect to directors. Options may be exercised in annual installments as specified by the administering committee or, if applicable, our Board of Directors. All installments that become exercisable are cumulative and may be exercised at any time after they become exercisable until expiration of the option. The Stock Option Plan contains provisions governing any “Change in Control,” as defined therein, including accelerated vesting of options under certain circumstances.

     The exercise price of options is paid in cash or by check at the time of exercise or, if provided for in the option agreement and elected by the option holder, through one or more of the following methods: (1) a same-day sale arrangement between the option holder and a broker-dealer whereby the option holder authorizes the broker-dealer to sell a specified number of the shares of common stock to be acquired on the exercise of the option, having a then fair market value equal to the sum of the exercise price of the option, plus any transaction costs, with the remainder of the shares being delivered to the option holder; (2) a margin commitment from the option holder and a broker-dealer where the exercised shares are pledged as security for a loan from the broker-dealer in the amount of the exercise price, or (3) the tender of shares of our common stock, provided that such shares either (a) have been owned by the option holder for more than six months and have been “paid for” within the meaning of Rule 144

promulgated under the Securities Act of 1933 or (b) were obtained by the option holder in the public market (“Qualifying Shares”). If the option is exercised by tendering Qualifying Shares, the number of shares tendered shall be determined by the fair market value per share on the date of the exercise, as determined by us. Shares of common stock deliverable upon exercise of the options may be transferred from treasury or issued from authorized but unissued shares.

     The 2010 Stock Option Plan will terminate on May 13, 2020, and no options may thereafter be granted under the plan. Our Board of Directors may amend, alter, or discontinue the plan, or any part thereof, at any time and for any reason. However, we will obtain stockholder approval for any amendment to the plan to the extent necessary and desirable to comply with applicable law. The administering committee may also make appropriate adjustments in the number of shares covered by the plan, the number of shares subject to outstanding options, and the option prices to reflect any stock dividend, stock split, share combination, or other recapitalization and, with respect to outstanding options and option prices, to reflect any merger, consolidation, reorganization, liquidation, or similar transaction.

     Incentive stock options and nonqualified stock options may be granted under the plan to our employees. Non-employee directors, as well as consultants, are eligible for the grant of nonqualified stock options. The maximum number of shares that may be subject to options granted to any one person under the plan during any calendar year may not exceed 1,000,000. The 2000 Stock Option Plan did not have any similar restrictions, except for limitations on grants of incentive stock options, which are also included in the 2010 Stock Option Plan as discussed below.

     Incentive stock options are options that meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), and nonqualified stock options are options that do not meet the requirements of Section 422 of the Code. No incentive stock option, however, may be granted under the Stock Option Plan to an employee who owns more than 10% of the voting power of all classes of securities unless the option price is at least 110% of the fair market value of our common stock at the date of grant and the option is not exercisable more than five years after it is granted. There is no limit on the fair market value of incentive stock options that may be granted to an employee in any calendar year, but no employee may be granted incentive stock options that first become exercisable during a calendar year for the purchase of stock with an aggregate fair market value (determined as of the date of grant of each option) in excess of $100,000. An incentive stock option (or an installment thereof) counts against the annual limitation only in the year it first becomes exercisable.

     The applicable administering committee may provide for the termination of options in case of termination of employment, directorship, consultant relationship, dishonesty, or any other reason the administering committee determines. If an option expires or terminates before it has been exercised in full, then the shares of common stock allocable to the unexercised portion of that option may become subject to future grants of options. Upon termination of the employment, directorship, or consultant relationship of an option holder, his or her option is exercisable after termination to the extent provided in the option agreement. The option then terminates. Under the 2000 Stock Option Plan, this exercisability period was set at 30 days after termination. If an option holder dies or becomes disabled before the termination of his right to exercise his or her option, the legal representatives of the estate, or the option holder in the event of his disability, may also exercise his or her option to the extent provided in the option agreement. Under the 2000 Stock Option Plan, this exercisability period was set at the first to occur of the date of expiration of the option period or one year from the date of the option holder’s death or disability. The option may be exercised only as to those shares the option holder could have purchased under the option on the date of death, disability, or other termination. Options may not be transferred other than by will or the laws of descent and distribution and, during the lifetime of the option holder, may be exercised only by him.

     Tax Status of Options. An option holder has no taxable income, and we are not entitled to a deduction, at the time of the grant of an option. All stock options that qualify under the rules of Section 422 of the Code will be entitled to “incentive stock option” treatment. To receive incentive stock option treatment, an option holder must not dispose of the acquired stock within two years after the option is granted and within one year after the exercise. In addition, the individual must have been an employee for the entire time from the date of granting the option until three months (one year if the employee is disabled) before the date of the exercise. The requirements that the individual be an employee and the two-year and one-year holding periods are waived in the case of death of the employee. If all such requirements are met, then any gain upon sale of the stock will be entitled to capital gain treatment. The employee’s gain on exercise (the excess of the fair market value at the time of exercise over the exercise price) of an incentive stock option is a tax preference item and, accordingly, is included in the computation

of alternative minimum taxable income, even though it is not included in taxable income for purposes of determining regular tax liability of an employee. Consequently, an option holder may be obligated to pay alternative minimum tax in the year he or she exercises an incentive stock option.

     If an employee does not meet the two-year and one-year holding requirements (a “disqualifying disposition”), then tax will be imposed at the time of sale of the stock. In such event, the employee’s gain on exercise of the incentive stock option will be compensation to him taxed as ordinary income rather than capital gain to the extent the fair market value of the acquired common stock on the date of exercise of the incentive stock option exceeds the aggregate exercise price paid for that common stock, and we will be entitled to a corresponding deduction at the time of sale. If the amount realized on the disqualifying disposition is less than the fair market value of the common stock on the date of exercise of the incentive stock option, the total amount includable in the option holder’s gross income, and the amount deductible by us, will equal the excess of the amount realized on the disqualifying disposition over the exercise price.

     An option holder, upon exercise of a nonqualified stock option that does not qualify as an incentive stock option, recognizes ordinary income in an amount equal to the gain on exercise. The exercise of a nonqualified stock option entitles us to a tax deduction in the same amount as is includable in the income of the option holder for the year in which the exercise occurred. Any gain or loss realized by an option holder on subsequent disposition of shares generally is a capital gain or loss and does not result in any tax deduction to us.

     Different tax consequences may result from stock-for-stock exercises of options.

     THE FOREGOING SUMMARY OF THE EFFECT OF THE FEDERAL INCOME TAX UPON PARTICIPANTS IN THE 2010 STOCK OPTION PLAN DOES NOT PURPORT TO BE COMPLETE, AND IT IS RECOMMENDED THAT THE PARTICIPANTS CONSULT THEIR OWN TAX ADVISORS FOR COUNSELING. MOREOVER, THE FOREGOING SUMMARY IS BASED UPON PRESENT FEDERAL INCOME TAX LAWS AND IS SUBJECT TO CHANGE. THE TAX TREATMENT UNDER FOREIGN, STATE, OR LOCAL LAW IS NOT COVERED IN THIS SUMMARY.

     Other Equity Compensation Plans. The following table summarizes certain information related to our 2000 Stock Option Plan and our Employee Stock Purchase Plan (“ESPP”). There are no warrants or rights related to our equity compensation plans as of December 31, 2009.

										Number of securities remaining
		Number of securities to be				Weighted average				available for future issuance
		issued upon exercise of				exercise price of				under equity compensation
		outstanding options,				outstanding				plans (excluding securities
		warrants and rights as of				options, warrants				reflected in initial column as of
Plan Category		December 31, 2009				and rights				December 31, 2009)
Equity compensation plans approved by security shareholders:
Stock options			5,703,430			$	11.12				176,378
ESPP			25,072				16.92				341,306
Equity compensation plans not approved by security shareholders			—				—				—
			5,728,502			$	11.15				517,684

Our Board of Directors unanimously recommends that the stockholders vote FOR the amendment to the 2010 Stock Option Plan.

Proposal Three — Ratification of Ernst & Young LLP as Our Independent Auditors for Fiscal Year 2010

     The Audit Committee has selected Ernst & Young LLP, independent registered public accounting firm, as our independent auditors for fiscal year 2010, subject to ratification by the stockholders. The affirmative vote of holders of a majority of the voting power of the shares actually voted at the annual meeting is required to ratify Ernst & Young LLP as our independent auditors for fiscal year 2010.

     Ernst & Young LLP served as our independent auditors for fiscal years 2009 and 2008. A representative of Ernst & Young LLP is expected to be present at the annual meeting. That representative will have an opportunity to make a statement, if desired, and will be available to respond to appropriate questions.

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

		2009				2008
Audit Fees		$	1,129,000			$	1,095,000
Audit Related Fees			18,000				63,000
Tax Fees			29,000				19,000
Total		$	1,176,000			$	1,177,000

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

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

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

     All Other Fees. We did not engage Ernst & Young LLP for any other services in 2009 or 2008.

     The Audit Committee approved all of the independent auditor engagements and fees presented above. Our Audit Committee Charter requires that the Audit Committee pre-approve all audit and non-audit services provided to us by our independent auditors. All such services performed in 2009 were pre-approved by the Audit Committee. For more information on these policies and procedures, see “Board of Directors and Corporate Governance Principles — Pre-Approval Policies and Procedures for Audit and Non-Audit Services.”

Our Board of Directors unanimously recommends that the stockholders vote FOR the ratification of Ernst & Young LLP as our independent auditors for fiscal year 2010.

TYLER MANAGEMENT

Directors, Nominees for Director, and Executive Officers

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

Name / Age		Present Position		Served Since
John M. Yeaman, 69		Chairman of the Board			2004
		Director			1999
John S. Marr, Jr., 50		President and Chief Executive Officer			2004
		Director			2002
Donald R. Brattain, 69		Director			2004
Luther King, Jr., 70		Director			2004
G. Stuart Reeves, 70		Director			2001
Michael D. Richards, 59		Director			2002
Dustin R. Womble, 50		Executive Vice President			2003
		Director			2005
Brian K. Miller, 51		Executive Vice President			2008
		Chief Financial Officer			2005
		Treasurer			1997
H. Lynn Moore, Jr., 42		Executive Vice President			2008
		Secretary			2000
		General Counsel			1998

Business Experience of Directors, Nominees for Director, and Executive Officers

     John M. Yeaman has served as Chairman of the Board since July 2004. From April 2002 until July 2004, Mr. Yeaman served as President and Chief Executive Officer; from March 2000 until April 2002, he served as President and Co-Chief Executive Officer; and from December 1998 until March 2000, he was President and Chief Executive Officer. Mr. Yeaman was elected to our Board of Directors in February 1999. Mr. Yeaman also serves as Chairman of the Executive Committee. From 1980 until 1998, Mr. Yeaman was associated with Electronic Data Systems Corporation (“EDS”). Mr. Yeaman began his career with Eastman Kodak Company. Mr. Yeaman also serves on the Board of Directors of Park Cities Bank in Dallas, Texas.

     John S. Marr, Jr. has served as President and Chief Executive Officer since July 2004. From July 2003 until July 2004, Mr. Marr served as Chief Operating Officer. Mr. Marr has served on our Board of Directors since May 2002 and is currently a member of the Executive Committee. Mr. Marr also served as President of MUNIS, Inc. (“MUNIS”) from 1994 until July 2004. Mr. Marr began his career in 1983 with MUNIS, a provider of a wide range of software products and related services for county and city governments, schools, and not-for-profit organizations, with a focus on integrated financial systems. We acquired MUNIS in 1999. Mr. Marr also serves on the Board of Directors of Mercy Hospital in Portland, Maine.

     Donald R. Brattain has served as a director since 2004. Mr. Brattain also serves as Chairman of the Audit Committee and is a member of the Nominating and Governance Committee. Since 1985, Mr. Brattain has served as President of Brattain & Associates, LLC, a private investment company founded by Mr. Brattain in 1985 and located in Minneapolis, Minnesota. From 1981 until 1988, Mr. Brattain purchased and operated Barefoot Grass Lawn Service Company, a company that grew from $3.2 million in sales to over $100 million in sales and was sold to ServiceMaster, Ltd. in 1998.

     J. Luther King, Jr. has served as a director since 2004. Mr. King also serves on the Audit Committee and the Compensation Committee. Mr. King is the Chief Executive Officer and President of Luther King Capital Management (“LKCM”), a registered investment advisory firm that he founded in 1979. Mr. King also serves as a director and a member of the Audit Committee of Encore Energy Partners GP, LLC. In addition, Mr. King serves as

a director on various private and non-profit entities and foundations, including Chairman of the Board of Trustees of Texas Christian University, Advisory Committee of the Employees Retirement System of Texas, Trustee of LKCM Funds and director of Hunt Forest Products, Inc. Mr. King has a Bachelor of Science degree and a Masters of Business Administration from Texas Christian University, and he is also a Chartered Financial Analyst.

     G. Stuart Reeves has served on our Board of Directors since June 2001. Mr. Reeves also serves as Chairman of the Nominating and Governance Committee and is a member of the Audit Committee and the Compensation Committee. From 1967 to 1999, Mr. Reeves worked for EDS, a professional services company that offers its clients a portfolio of related systems worldwide within the broad categories of systems and technology services, business process management, management consulting, and electronic business. During his 32 years of service with EDS, Mr. Reeves held a variety of positions, including Executive Vice President, North and South America, from 1996 to 1999; Senior Vice President, Europe, Middle East, and Africa, from 1990 to 1996; Senior Vice President, Government Services Group, from 1988 to 1990; Corporate Vice President, Human Resources, from 1984 to 1988; Corporate Vice President, Financial Services Division, from 1979 to 1984; Project Sales Team Manager, from 1974 to 1979; and Systems Engineer and Sales Executive, from 1967 to 1974. Mr. Reeves also served on the EDS Board of Directors from 1988 until 1996. Mr. Reeves retired from EDS in 1999. Mr. Reeves serves on the Board of Directors of Park Cities Bank in Dallas, Texas. Mr. Reeves has Bachelor of Science and Master of Science degrees in Mathematics from Oklahoma State University.

     Michael D. Richards has served on our Board of Directors since May 2002. Mr. Richards also serves as Chairman of the Compensation Committee and is a member of the Nominating and Governance Committee. Mr. Richards is Executive Vice President of Republic Title of Texas, Inc. From September 2000 until September 2005, Mr. Richards served as Chairman and Chief Executive Officer of Suburban Title, LLC d/b/a Reunion Title, an independent title insurance agency founded by Mr. Richards in September 2000 and which he sold to Republic Title in September 2005. From 1989 until September 2000, Mr. Richards served as President and Chief Executive Officer of American Title Company, Dallas, Texas, an affiliate of American Title Group, Inc., one of the largest title insurance underwriters in Texas during that time. From 1982 until 1989, Mr. Richards held various management positions with Hexter-Fair Title Company, Dallas, Texas, including President from 1988 until 1989. From 1974 until 1982, Mr. Richards worked for Stewart Title Guaranty Company, Dallas, Texas, during which time he held several key management positions including serving on its Board of Directors. Mr. Richards holds several positions with various associations, some of which include: Greater Dallas Chamber of Commerce, member of the Economic Development Advisory Council; Leukemia Society of America, Advisory Board Member; Greater Dallas Association of Realtors, Board Member; Home Builders Association, Board Member; and member of the executive committee of the Texas Stampede.

     Dustin R. Womble has been Executive Vice President in charge of corporate-wide product strategy, Chief Executive Officer of both our Courts and Justice division and our Local Government division since July 2006 and is currently a member of the Executive Committee. From July 2003 to June 2006, Mr. Womble was Executive Vice President in charge of corporate-wide product strategy and President of our Local Government division. Mr. Womble previously served as President of our Local Government (formerly INCODE) division from 1998, when we acquired the Local Government division, to July 2003.

     Brian K. Miller has been Executive Vice President — Chief Financial Officer and Treasurer since February 2008. From May 2005 until February 2008, Mr. Miller served as Senior Vice President — Chief Financial Officer and Treasurer. He previously served as Vice President — Finance and Treasurer from May 1999 to April 2005 and was Vice President — Chief Accounting Officer and Treasurer from December 1997 to April 1999. From June 1986 through December 1997, Mr. Miller held various senior financial management positions at Metro Airlines, Inc. (“Metro”), a publicly-held regional airline holding company operating as American Eagle. Mr. Miller was Chief Financial Officer of Metro from May 1991 to December 1997 and also held the office of President of Metro from January 1993 to December 1997. Mr. Miller is a certified public accountant.

     H. Lynn Moore, Jr. has been General Counsel since September 1998 and has been Secretary since October 2000 and Executive Vice President since February 2008. He previously served as Vice President from October 2000 until February 2008. From August 1992 to August 1998, Mr. Moore was associated with the law firm of Hughes & Luce, L.L.P. in Dallas, Texas where he represented numerous publicly-held and privately-owned entities in various corporate and securities, finance, litigation, and other legal related matters. Mr. Moore is a member of the State Bar of Texas.

Board Diversity and Nominee Qualifications

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

	•		sound personal and professional integrity;
	•		an inquiring and independent mind;
	•		practical wisdom and mature judgment;
	•		broad training and experience at the policy-making level of business, finance and accounting, government, education, or technology;
	•		expertise that is useful to Tyler and complementary to the background and experience of other board members, so that an optimal balance of board members can be achieved and maintained;
	•		willingness to devote the required time to carrying out the duties and responsibilities of board membership;
	•		commitment to serve on the board for several years to develop knowledge about our business;
	•		willingness to represent the best interests of all stockholders and objectively appraise management performance; and
	•		involvement only in activities or interests that do not conflict with the director’s responsibilities to Tyler or our stockholders.

     In identifying nominees for director, the Board focuses on ensuring that it reflects a diversity of experiences and backgrounds that will complement our business and enhance the function of the Board. The Board prefers a mix of background and experience among its members. The Board has not adopted a formal policy with respect to its consideration of diversity and does not follow any ratio or formula to determine the appropriate mix; rather, it uses its judgment to identify nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standards of board service. Our Board of Directors is composed of seven individuals, consisting of four independent directors and three employee directors. We believe the mix of outside experience from our independent directors coupled with the specific industry experience of our employee directors provides an appropriate diversity of experience to effectively manage our business. In addition, each independent director has extensive chief executive officer experience with businesses of varying size in various industries. Some independent directors have direct public company experience, while others have smaller, private company experience. Each director has valuable experience in building and sustaining a successful business enterprise.

     The Nominating and Governance Committee believes that the above-mentioned attributes, along with the leadership skills and other experiences of its board members described below, provide us with the perspectives and judgment necessary to guide our strategies and monitor their execution:

Donald R. Brattain:		—		Private investment management experience as President of Brattain & Associates, LLC
		—		Executive and entrepreneurial experience in growth of a small business enterprise from $3.2 million in sales to over $100 million in sales
J. Luther King, Jr.:		—		Executive equity management experience as founder of Luther King Capital Management, a registered investment advisory firm
		—		Outside board experience as a director of Encore Energy Partners GP, LLC and other institutions
		—		Experience as a university trustee
G. Stuart Reeves		—		Extensive public company leadership experience with 32 years of service at EDS in various senior level capacities
		—		Outside board experience as a former director of EDS and current director of Park Cities Bank
Michael D. Richards		—		Executive and entrepreneurial experience as founder of Suburban Title LLC
		—		Outside board and advisory council service with various entities, including the Greater Dallas Chamber of Commerce

John S. Marr, Jr.		—		Chief Executive Officer of Tyler since 2004
		—		Over 27 years of specific industry experience, including chief executive experience, with MUNIS, Inc., which Tyler acquired in 1999
		—		Outside board experience as a director of Mercy Hospital in Portland, Maine
Dustin R. Womble		—		Senior-level executive experience at Tyler since 2003
		—		Over 29 years of specific industry experience as founder of INCODE, Inc., which Tyler acquired in 1998
John M. Yeaman		—		President of Tyler from 1998 through 2004
		—		Over 18 years of public company executive experience at EDS

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE PRINCIPLES

General Information

     Our Board of Directors is responsible for supervision of the overall affairs of Tyler. To assist it in carrying out its duties, the Board has delegated certain authority to several committees. See “Board of Directors and Corporate Governance Principles — Committees and Meetings of the Board of Directors.” Following the Annual Meeting in 2010, the Board will consist of seven directors, including four independent directors.

Corporate Governance Guidelines

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

	•		Independence Standards, which determine the independence of our non-employee directors. These standards are consistent with the independence standards set forth in Rule 303A.02(b) of the New York Stock Exchange Listed Company Manual. The Independence Standards are included as an exhibit to our Audit Committee Charter.
	•		Corporate Governance Guidelines, which include, among other things:

	•		annual submission of independent auditors to stockholders for approval;
	•		formation of a Nominating and Governance Committee to be comprised solely of independent directors;
	•		prohibition of stock option re-pricing;
	•		formalization of the ability of independent directors to retain outside advisors;
	•		performance of periodic formal board evaluation; and
	•		limitation on the number of additional public company boards on which a director may serve to a maximum of four.

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

	•		An Audit Committee Charter, which requires, among other things, that the committee be comprised solely of independent directors (as set forth in the Independence Standards), at least one of whom will qualify as an “audit committee financial expert” as set forth in Item 401(h) of the SEC’s Regulation S-K. A copy of our Audit Committee Charter may be found on our Website, www.tylertech.com.
	•		A Compensation Committee Charter, which requires, among other things, that the committee be comprised solely of independent directors and sets forth the guidelines for determining executive compensation. A copy of our Compensation Committee Charter may be found on our Website, www.tylertech.com.

•

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

Code of Business Conduct and Ethics

     Our Board of Directors has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, executive officers (including, without limitation, the chief executive officer, chief financial officer, principal accounting officer, and controller), and employees. The purpose of the Code of Business Conduct and Ethics is to promote:

	•		honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
	•		full, fair, accurate, timely, and understandable disclosure in our public communications and reports filed with the SEC;
	•		compliance with applicable governmental laws, rules, and regulations;
	•		prompt internal reporting of violations of the policy to the appropriate persons designated therein, including anonymous “whistleblower” provisions; and
	•		accountability for adherence to the policy.

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

Board Independence

     Our Board of Directors has determined, after considering all of the relevant facts and circumstances, that each of the non-employee directors standing for re-election as director (Messrs. Brattain, King, Reeves, and Richards) has no material relationship with us (either directly or as a partner, shareholder, or officer of an organization that has a relationship with us) and is “independent” within the meaning of our Independence Standards described above and the New York Stock Exchange director independence standards, as currently in effect and as may be changed from time to time. As a result, if each of the nominees for director is elected at the annual meeting, our Board of Directors will be comprised of a majority of “independent” directors as required by the New York Stock Exchange. Furthermore, our Board of Directors has determined that each of the members of the Audit Committee, Compensation Committee, and Nominating and Governance Committee has no material relationship with us (either directly or as a partner, shareholder, or officer of an organization that has a relationship with us) and is “independent” within the meaning of our Independence Standards.

Committees and Meetings of the Board of Directors

     Our Board of Directors has the following four standing committees: Audit Committee; Compensation Committee; Nominating and Governance Committee; and Executive Committee. Each committee (other than the Executive Committee) has a written charter, which can be found at our Website, www.tylertech.com. Each board member participated in at least 75% of all board and committee meetings held during the portion of 2009 that he served as a director and/or committee member.

     During 2009, our Board of Directors held four meetings. In addition, our Board of Directors has established a policy under which our non-management members will meet at regularly scheduled (and in any event at least twice per fiscal year) executive sessions without management present and with Mr. Reeves presiding over such meetings.

The table below provides current membership and 2009 meeting information for each of the committees:

Nominating and

Name

Audit

Compensation

Governance

Executive

Mr. Brattain

Chair

X

Mr. King, Jr.

X

X

Mr. Reeves

X

X

Chairman

Mr. Richards

Chairman

X

Mr. Marr, Jr.

X

Mr. Womble

X

Mr. Yeaman

Chairman

Total Meetings in 2009

five

two

one

Periodically

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

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

	•		considering the independence of our independent auditors before we engage them;
	•		reviewing with the independent auditors the fee, scope, and timing of the audit;
	•		reviewing the completed audit with the independent auditors regarding any significant accounting adjustments, recommendations for improving internal controls, appropriateness of accounting policies, appropriateness of accounting and disclosure decisions with respect to significant unusual transactions or material obligations, and significant findings during the audit;
	•		performing of periodic formal committee evaluations;
	•		reviewing our financial statements and related regulatory filings with management and the independent auditors; and
	•		meeting periodically with management and/or internal audit to discuss internal accounting and financial controls.

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

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

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

	•		identifying and recommending candidates for election to our Board of Directors;
	•		identifying and recommending candidates to fill vacancies occurring between annual stockholder meetings;
	•		reviewing the composition of board committees;
	•		periodically reviewing the appropriate skills and characteristics required of board members in the context of the current make-up of our Board of Directors; and
	•		monitoring adherence to our “Corporate Governance Guidelines.”

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

Board Leadership Structure

     The roles of Chairman of the Board and Chief Executive Officer are separate with Mr. Yeaman serving as Chairman of the Board and Mr. Marr serving as President and Chief Executive Officer. We believe it is beneficial to separate the roles of Chief Executive Officer and Chairman of the Board to facilitate their differing roles in the leadership of Tyler. The role of the Chairman is to set the agenda for, and preside over, board meetings, as well as providing advice and assistance to the Chief Executive Officer. In contrast, the Chief Executive Officer is responsible for handling the day-to-day management direction of Tyler, serving as a leader to the management team, and formulating overall corporate strategy. Mr. Yeaman, as our Chairman and former Chief Executive Officer, brings over 10 years of experience within our industry as well as extensive expertise from outside Tyler, while Mr. Marr, as a director and our Chief Executive Officer, brings over 27 years of company-specific experience and expertise. We believe that this structure allows for a balanced corporate vision and an ability to effectively execute our strategy. The Board of Directors has concluded at this time that it is not necessary to establish a lead director.

The Board’s Role in Risk Oversight

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

Audit Committee Financial Expert

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

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

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

Director Nominating Process

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

     The Nominating and Governance Committee may, in the exercise of its discretion, actively solicit nominee candidates; however, nominee recommendations submitted by other directors or stockholders will also be considered as described below.

     The Nominating and Governance Committee will consider qualified nominees recommended by stockholders who may submit recommendations to the committee in care of our Corporate Secretary at our corporate headquarters, 5949 Sherry Lane, Suite 1400, Dallas, Texas 75225. To be considered by the Nominating and Governance Committee, stockholder nominations must be submitted in accordance with our bylaws and must be accompanied by a description of the qualifications of the proposed candidate and a written statement from the proposed candidate that he or she is willing to be nominated and desires to serve, if elected. Nominees for director who are recommended by our stockholders will be evaluated in the same manner as any other nominee for director.

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

•

as to each person the stockholder proposes to nominate for election or re-election as a director:

	•		the name, age, business address, and residence address of the person;
	•		the principal occupation or employment of the person;
	•		the class and number of shares of our capital stock that are beneficially owned by the person; and
	•		any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors under Regulation 14A of the Exchange Act; and

•

as to the stockholder giving notice:

	•		the name and record address of the stockholder and any other stockholder known to be supporting the nominee; and
	•		the class and number of shares of our capital stock that are beneficially owned by the stockholder making the nomination and by any other supporting stockholders.

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

Communications with Our Board of Directors

     Any stockholder or interested party who wishes to communicate with our Board of Directors or any specific directors, including non-management directors may write to:

Board of Directors
Tyler Technologies, Inc.
5949 Sherry Lane, Suite 1400
Dallas, Texas 75225

     Depending on the subject matter, management will:

	•		forward the communication to the director or directors to whom it is addressed (for example, if the communication received deals with our “whistleblower policy” found on our Website, www.tylertech.com, including questions, concerns, or complaints regarding accounting, internal accounting controls, and auditing matters, it will be forwarded by management to the Chairman of the Audit Committee for review);
	•		attempt to handle the inquiry directly (for example, if the communication is a request for information about us or our operations or it is a stock-related matter that does not appear to require direct attention by our Board of Directors); or
	•		not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.

     At each meeting of our Board of Directors, our Chairman will present a summary of all communications received since the last meeting of the Board of Directors that were not forwarded and will make those communications available to any director on request.

Director Attendance at Annual Meetings

     Directors are not required to attend our annual meetings of stockholders. However, our Board of Directors typically holds a meeting immediately following the annual meeting of stockholders. Therefore, in most cases, all of our directors will be present at the annual meeting. All of our directors were present at the 2009 annual meeting of stockholders.

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information concerning the beneficial ownership of our common stock as of March 19, 2010 by (i) each beneficial owner of more than 5% of our common stock, (ii) each director and nominee, (iii) each “Named Executive Officer” (as defined in the SEC’s Regulation S-K), and (iv) all of our executive officers and directors as a group.

Security Ownership of Directors and Management

						Options
						Exercisable
						Within 60												Percent
Name and Address of Beneficial Owner (1)		Direct (2)				Days (3)				Other (4)				Total				of Class (5)
MSD Capital, L.P.
645 Fifth Avenue, 21st Floor New York, NY 10022			—				—				4,049,923	(6)			4,049,923				11.6	%
Brown Brothers Harriman and Company			—				—				3,535,013	(7)			3,535,013				10.1	%
140 Broadway New York City, NY 10005
Brown Capital Management, Inc.			2,384,562	(8)			—				—				2,384,562				6.8	%
1201 N. Calvert Street Baltimore, MD 21202
BlackRock, Inc.			2,266,565	(9)			—				—				2,266,565				6.5	%
40 East 52nd Street New York, NY 10022
Directors and Nominees
Donald R. Brattain			28,500				40,000				—				68,500				*
J. Luther King, Jr.			32,000				40,000				187,300	(10)			259,300				*
G. Stuart Reeves			65,000				110,000				—				175,000				*
Michael D. Richards			40,000				50,000				—				90,000				*
John M. Yeaman			270,800				443,000				7,300	(11)			721,100				2.0	%
Named Executive Officers
John S. Marr, Jr.			772,092				794,000				192,277	(12)			1,758,369				4.9	%
Dustin R. Womble			186,092				428,628				—				614,720				1.7	%
Brian K. Miller			27,865				142,188				7,300	(13)			177,353				*
H. Lynn Moore, Jr.			70,000				153,000				—				223,000				*
All directors, nominees and executive officers as a group (9 persons)			1,492,349				2,200,816				394,177				4,087,342				11.0	%

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act requires that our directors, executive officers, and 10% or more stockholders file with the SEC and New York Stock Exchange initial reports of ownership and reports of changes in ownership of our common stock. These persons are required to furnish us with copies of all Section 16(a) reports they file with the SEC. To our knowledge, based solely upon (i) our review of the copies of the forms we received during 2009 and (ii) written representations from our directors and executive officers we believe that all of our directors, officers, and 10% or more stockholders complied with all Section 16(a) filing requirements during 2009, except for one transaction subsequently reported on an amended Form 4. Mr. Yeaman inadvertently did not file a Form 4 in a timely manner with respect to a stock option grant of 5,000 shares of our common stock.

COMPENSATION DISCUSSION AND ANALYSIS

     In this Compensation Discussion and Analysis, we describe our compensation objectives, policies, and practices generally and the specific fiscal year 2009 total compensation for our Chief Executive Officer, Chief Financial Officer, and the two other executive officers who were the most highly compensated in fiscal year 2009 (collectively, the “Named Executive Officers”), and we summarize the approved compensation of the Named Executive Officers for fiscal year 2010.

Compensation Philosophy and Objectives

     Our Compensation Committee is responsible for reviewing and approving the design and administration of the executive compensation program. Our Compensation Committee believes that an effective compensation program should reward achievement of specific corporate goals and align our executives’ interests with those of our stockholders by rewarding performance that meets or exceeds established goals. Our compensation philosophy is designed to attract, motivate, and retain the key executives who drive our success and industry leadership and to motivate those executives to deliver stockholder value by achieving the following overall objectives:

	•		Compensation Should Align the Interests of our Executives with our Stockholders – compensation should link the interests of management with those of stockholders by making a substantial portion of executive compensation depend upon our long-term financial and stock performance;
	•		Compensation Should be Competitive – compensation levels should be sufficiently competitive to attract and retain superior executives by providing them with the opportunity to earn total compensation packages that are competitive in the industry;
	•		Compensation Should Be Based on Company Performance – compensation should reward corporate performance through annual cash incentives;
	•		Compensation Should Reflect Responsibility and Accountability – compensation should be based on the level of skill, knowledge, effort, and responsibility needed to perform the job successfully; and
	•		Compensation Should Not Incentivize Excessive Risk Taking – the mix of compensation elements should be appropriately balanced between fixed pay, short-term annual incentive cash compensation, and long-term incentive equity compensation to minimize incentive for excessive risk taking.

     To achieve these objectives, the Compensation Committee, has designed a compensation program for our Named Executive Officers that balances the three primary elements of our executive compensation: annual base pay; annual incentive cash compensation; and long-term incentive equity compensation (stock options). The Compensation Committee believes that this structure encourages our executives to think and act in both the near-term and long-term interests of our stockholders without promoting excessive risk taking.

     Regarding base pay and annual cash incentive compensation, the same compensation philosophy applied by the Compensation Committee to our Named Executive Officers is also utilized by management and applied throughout the entire employee base so that all employees’ incentive compensation is tied to similar goals, the difference being the amount of base pay compensation and percentage incentive compensation award in relation to base pay. Regarding long-term incentive compensation in the form of stock options, management also applies the same compensation philosophy as applied by the Compensation Committee to our Named Executive Officers to senior divisional employees. We believe that the application of this consistent philosophy regarding compensation further strengthens the alignment of employees’ interests with those of the stockholders.

2009 Executive Summary Overview

     2009 was a year of strong financial performance, particularly in light of the overall challenging economic environment. Total revenues grew from $265 million to $290 million. Earnings per share grew from $0.38 in 2008 to $0.74 in 2009. In 2008 we settled outstanding litigation related to stock purchase warrants owned by Bank of America, N. A. and recorded a non-cash legal settlement related to warrants charge of $9.0 million, which was not tax deductible. This non-cash legal settlement reduced earnings per share by $0.23 in 2008. Free cash flow (excluding $9.4 million of office facility investments) remained strong at $40 million.

Compensation Program Actions

     Our compensation program for our Named Executive Officers falls into three categories:

	•		Compensation Program Design – actions related to the overall design and governance of our executive compensation program;
	•		Company Performance Review Process for Prior Fiscal Year – actions approving actual incentive cash compensation awards for the just completed fiscal year; and
	•		Setting Compensation for Current Fiscal Year – actions that set future base pay and incentive compensation targets for the upcoming fiscal year.

     Compensation Program Design. Each year, our Chief Executive Officer, in conjunction with the Human Resources Department, reviews the market competitiveness of our executive compensation relative to technology and broad industry peers, which is described in detail below. If the review shows that our executive compensation is not competitive, our Chief Executive Officer will recommend changes to the Compensation Committee. He may also recommend changes to the executive compensation program based on changes in the business environment in which we operate. The Compensation Committee periodically reviews the overall objectives of our executive compensation program and the elements of the program, including the mix of cash and stock-based compensation and the mix of short-term and long-term compensation, to determine whether they are appropriate, properly coordinated, and achieve their intended purposes.

          Peer Group and Surveys. Prior to February 2010, the Compensation Committee considered comparative market data from a broad set of companies in the Culpepper Executive Compensation Surveys (the “Culpepper Surveys”). Over 1,500 technology and biomedical companies use Culpepper Surveys to benchmark their compensation practices for all levels within their organizations and management has historically utilized the Culpepper Surveys in determining the reasonableness of compensation for various levels of employees, including executives.

     In order to provide the Compensation Committee with more detailed and specific information about executive compensation levels and practices, we established a peer group of 20 companies of similar size in the software industry (the “Peer Group”) in February 2010 to assist in determining 2010 compensation. The Peer Group companies provide perspective and reflect the external market’s valuation of key executive compensation. External information is considered with internal factors such as an executive’s position, experience, and responsibilities. The Peer Group will be reviewed annually and adjusted as required by changes in the market. The companies in the Peer Group used to assist in setting 2010 compensation were:

Ariba, Inc.		Jack Henry & Associates, Inc.
Aspen Technology, Inc.		JDA Software Group, Inc.
Blackbaud, Inc.		Kenexa Corp.
Blackboard, Inc.		Lawson Software, Inc.
Concur Technologies, Inc.		Manhattan Associates, Inc.
DealerTrack Holdings, Inc.		Netscout Systems, Inc.
Deltek, Inc.		Quest Software, Inc.
Eclipsys Corp.		Radiant Systems, Inc.
Epicor Software Corp.		S1 Corp.
Epiq Systems, Inc.		Taleo Corp.

     In determining the appropriateness of the Peer Group, the Compensation Committee compared our performance against six key metrics of the Peer Group, including revenues, market capitalization, net income, total assets, one-year stockholder return, and three-year stockholder return. The Compensation Committee determined that based on these metrics the Peer Group was appropriate for comparative purposes. The Compensation Committee continues to utilize the Culpepper Surveys in addition to the Peer Group. The Compensation Committee uses market survey data like the Peer Group and Culpepper Surveys not as a benchmark per se, but rather as a reasonableness check. This flexibility is important in designing compensation arrangements to attract new executives in the highly-competitive, rapidly changing market in which we compete.

          Positioning of Pay. The Compensation Committee determines target total compensation for our Named Executive Officers after considering the Chief Executive Officer’s recommendations and a variety of data sources, including analysis of the Peer Group (beginning in 2010) and Culpepper Surveys. We do not apply a formula that ties our total compensation levels to specific market percentiles.

          Mix of Pay Elements. As described above, our philosophy is to provide a significant portion of total compensation linked to performance that we believe will create long-term stockholder value. To achieve these objectives, the executive compensation program relies on the following three elements of total compensation:

		Form of
Element		Compensation		Purpose		Metric
Base salary		Cash		Provide competitive, fixed compensation to attract and retain exceptional executive talent		Salaries are set each year based on the executive’s position, responsibilities, experience, and retention risk. Base salary is a fixed component and is not dependent on achieving goals
Incentive cash compensation under the annual bonus plan		Cash		Create a strong financial incentive for achieving or exceeding annual financial goals		Achieving earnings per share goals which are recommended by the CEO and approved by the Compensation Committee
Equity-based compensation		Stock options		Create a strong financial incentive for creating stockholder value, encourage a significant equity stake in Tyler, and provide a direct incentive for future performance		Discretionary, but set each year based on the executive’s position, experience, responsibilities, and retention risk

     Our executive compensation program is designed to provide an incentive and reward for the achievement of both short-term and long-term objectives. We believe that sustained achievement of measurable financial objectives leads to increased stockholder value. To achieve these objectives we use a mix of short-term compensation (base salaries and annual cash bonuses) and long-term incentives (stock options) to provide a total compensation structure that is designed to reward sustained strong performance while providing cash compensation that remains competitive for our industry. In setting the mix between the different elements of compensation, we do not target specific allocations, but generally weigh the incentive compensation elements (cash and equity) more heavily. For more information, see “Compensation Discussion and Analysis – 2009 Named Executive Officer Compensation – Compensation Mix.”

     Base salary and annual incentives are intended to reward the achievement of short-term objectives. Our incentive compensation plan is based on annual earnings per share performance metrics, with graduated benefits for overachievement and consequences for underachievement of objectives. We believe that growth in earnings per share most aligns management and stockholder interests and is a more meaningful short-term measure than growth in stock price because of the effect of outside factors (e.g., general economic conditions) on the price of our stock. While our annual incentive compensation plan is based on the earnings per share performance in a given year, the initial establishment of the criteria for full achievement of the target bonus from year to year is based on a longer term view of appropriate growth. In other words, performance that meets our internal plan in a given year will not necessarily correspond with our executives earning 100% of the target bonus if the internal plan does not meet the goal of overall year-over-year growth.

     Equity incentives, comprised of stock options, are intended to reward sustained achievement of long-term objectives through time-based vesting periods. Stock options to our executive officers have a ten-year life and have historically vested over a period of five years, thereby providing a long-term incentive. Our allocations reflect our philosophy that a significant portion of our executive officers’ compensation should be performance-based and therefore at risk depending on Tyler’s performance. Through the use of stock options, a significant portion of potential compensation is tied directly to stock price appreciation, further aligning the interest of our executive officers with those of our stockholders. We have considered other forms of equity compensation, such as restricted

stock, but believe that stock options are the best form of equity based compensation as stock options only reward executives if the value of the stock increases. Restricted stock can provide additional compensation even if the stock value is stagnant.

     All stock option awards are granted in two semi-annual tranches (on or about June 15 and December 15). Stock option awards are made at the market price at the time of the award and are subject to time-based vesting as determined by the Compensation Committee. Beginning in 2010, the Compensation Committee has changed the vesting schedule of options granted to the Named Executive Officers, which further emphasizes the long-term nature of this compensation component. See “Compensation Discussion and Analysis – 2010 Named Executive Officer Compensation.”

     Our philosophy with regard to granting stock options is to:

	•		Strive to ensure that the overall number and value of stock option awards is reasonable;
	•		focus stock option awards on a relatively small number of key employees determined to have a direct impact on our ability to achieve our long-term goals with the largest stock option grants awarded to our top performers and individuals with the greatest responsibilities and the potential to drive long-term share price appreciation; and
	•		manage the overall net stock dilution (i.e., manage the total number of shares outstanding by balancing the dilutive effect of granting stock options with repurchases of our common stock which reduce our shares outstanding).

     Assessment of Risk. Our compensation program is designed not to incentivize excessive risk taking by allocating an appropriate balance between the three compensation elements. The base salary component of compensation is a fixed amount and is therefore not subject to or influenced by risk taking. Our incentive compensation is balanced between short-term earnings per share growth through the payment of annual cash incentives and long-term stock price growth through the grant of stock options. Our annual cash incentive compensation plans are graduated scale plans rather than based on “all or nothing” performance, which reduces the incentive for short-term excessive risk taking. Moreover, our stock option grants occur in fixed amounts on a semi-annual basis (on or about June 15 and December 15), which reduces or eliminates the ability of executive officers to time the grant of options around short-term, market events. Further, beginning in 2010, the Compensation Committee has changed the vesting schedule of options to be awarded to the Named Executive Officers. Prior to 2010, option grants vested at 20% per year on the first through fifth anniversary of the date of grant. Effective in 2010, option grants will vest at 25% per year on the third through sixth anniversary of the date of grant, which further emphasizes the long-term nature of this compensation component and reduces the incentive for risk taking. Finally, the Board of Directors adopted the Executive Compensation Recovery Policy effective January 1, 2010, which provides that the independent directors can direct Tyler to recover all or a portion of any bonus or incentive compensation paid to an executive if, in the opinion of the independent directors, an executive engages in fraud or intentional misconduct that causes a material restatement of our financial statements. See “Compensation Discussion and Analysis – 2010 Named Executive Officer Compensation.”

     Company Performance Review Process for Prior Fiscal Year. Each year, the Compensation Committee approves the size of incentive compensation for the prior fiscal year based on the achievement of defined incentive compensation plans that were approved by the Compensation Committee at the beginning of the year. Annual bonuses are reviewed by the Compensation Committee and paid shortly after the fiscal year’s financial results are approved by the Audit Committee.

     While the payment of annual incentive compensation is based solely on the achievement of pre-defined and pre-approved earnings per share metrics, the Compensation Committee, using its judgment, may exercise discretion in granting additional bonus amounts and stock option awards as it deems appropriate. These adjustments may be based on subjective factors such as the Compensation Committee’s assessment of external factors, including general economic and market conditions, the executive’s assumption of additional responsibilities, the degree of difficulty of a particular assignment, and the executive’s experience, tenure, and future prospects with Tyler.

     Setting Compensation for Current Fiscal Year. Each year, the Compensation Committee approves base salary, annual incentive compensation earnings per share plans and the amount of stock options to be granted to the Named Executive Officers as part of our semi-annual option grants. In so doing, the Committee reviews recommendations

by the Chief Executive Officer and analyzes the Peer Group (beginning in 2010) and Culpepper Surveys, internal business plans and general economic conditions. For more information on the establishment of 2009 Named Executive Officer Compensation, see “Compensation Discussion and Analysis – 2009 Named Executive Officer Compensation.”

2009 Named Executive Officer Compensation

     In February 2009, the Compensation Committee approved the total compensation packages for each of the Named Executive Officers, including the Chief Executive Officer. The total compensation packages included base salary, an annual cash incentive compensation plan, and proposed stock option grants. The Compensation Committee re-affirmed the appropriateness and amount of stock option grants prior to the June 15 and December 15 awards. In February 2010, the Compensation Committee conducted a company performance review to determine the attainment of earnings per share targets, relating to the payment of cash incentive bonus under the incentive compensation plan.

     Role of the Chief Executive Officer. In February 2009, our Chief Executive Officer, John S. Marr, Jr., provided the Compensation Committee with recommendations for 2009 base salary increases, annual bonus performance targets with related minimum and maximum bonus payout potentials, and long-term incentives (stock option awards) for each Named Executive Officer, including himself. His recommendations were based on his review of internal pay relationships and consistency, the executive’s performance and experience, level of responsibility, changes in responsibilities, retention risk, and market compensation survey data consisting of the Culpepper Surveys provided by our Human Resources Department. Cash bonus payout potentials were based on the level of earnings per share achieved compared to earnings per share goals developed in connection with our annual operating plan at the beginning of 2009. Payouts were graduated for above and below target performance levels. The Chairman of the Board attended the Compensation Committee meeting in February 2009 and presented Mr. Marr’s recommendations for 2009 compensation packages to the Compensation Committee and participated in the Committee’s discussion of executive compensation. Mr. Marr did not attend any Compensation Committee meetings in 2009.

     Analysis of Compensation Elements. The principal elements of our executive compensation program in 2009 were (1) base salary, (2) annual cash bonus, and (3) stock options, each of which is described in more detail below:

          Base Salary. Base salary represents the single, fixed component of the three principal elements of our executive compensation program and is intended to provide a baseline minimum amount of annual compensation for our executives. In February 2009, the Compensation Committee approved a 3% increase for each of the Named Executive Officer’s annual base salary as set forth below:

Name		Increase				2008 Salary				2009 Salary
John S. Marr, Jr.			3	%		$	395,000			$	407,000
Dustin R. Womble			3	%		$	333,000			$	343,000
Brian K. Miller			3	%		$	250,000			$	257,500
H. Lynn Moore, Jr.			3	%		$	250,000			$	257,500

     The 3% increase in base salary was recommended to the Compensation Committee by the Chief Executive Officer. His recommendations were based on two things. First, he referenced nationwide market survey information consisting of the Culpepper Surveys. This information included comparisons to similar sized companies that were public companies in the technology and biomedical industries with annual revenues between $250 million and $500 million. These surveys indicated that the base salary for our Named Executive Officers was slightly under the median and total targeted cash compensation (base salary and bonus) was slightly above the median. Second, and most important, he believed that it was appropriate to treat executive management on a consistent basis with the overall employee base, which received an average 3% merit increase in 2009.

     The Compensation Committee reviewed the nationwide market survey information in a summary report and considered current economic conditions and the Chief Executive Officer’s recommendations in independently determining the 2009 salary adjustments. As noted above, the Compensation Committee does not adhere to strict formulas or rely to any significant extent on market survey data to determine total compensation or the mix of

compensation elements. Market survey data is not used as a benchmark per se, but rather is referred to by the Compensation Committee as a reasonableness check.

          Annual Cash Bonus. A significant portion of each executive’s annual compensation is in the form of a cash bonus. We believe that some meaningful portion of the executive’s compensation should be contingent upon the successful achievement of our corporate objectives. Our 2009 annual cash bonuses for executives were based on the level of attainment of earnings per share objectives and did not include any individual performance goals. In February 2009, the Compensation Committee approved the 2009 Incentive Compensation Plan recommended by the Chief Executive Officer, which was based on the achievement of fully diluted earnings per share goals established in connection with our annual operating plan and consistent with our long-term growth strategy. The Board of Directors also reviews the annual operating plan. The 2009 Incentive Compensation Plan for the Named Executive Officers was similar to other corporate employees’ incentive compensation plans and tied to similar goals, the main difference being the size of the target incentive award in relation to base salary. We believe that the percentage of compensation that is based on our performance should increase with an employee’s level within Tyler up to and including executive management. Target incentives are determined based on experience, level of responsibility, and retention risk. The 2009 Incentive Compensation Plan provided the opportunity for the executive officers as well as our corporate employees to earn incentive compensation at the following levels:

	•		180% of target based on achieving 134% of earnings per share goal
	•		170% of target based on achieving 130% of earnings per share goal
	•		160% of target based on achieving 126% of earnings per share goal
	•		150% of target based on achieving 121% of earnings per share goal
	•		140% of target based on achieving 117% of earnings per share goal
	•		130% of target based on achieving 113% of earnings per share goal
	•		120% of target based on achieving 109% of earnings per share goal
	•		110% of target based on achieving 104% of earnings per share goal
	•		100% of target based on achieving 100% of earnings per share goal
	•		90% of target based on achieving 96% of earnings per share goal
	•		80% of target based on achieving 91% of earnings per share goal
	•		70% of target based on achieving 87% of earnings per share goal
	•		60% of target based on achieving 83% of earnings per share goal
	•		50% of target based on achieving 79% of earnings per share goal
	•		40% of target based on achieving 74% of earnings per share goal
	•		0% of target based on achieving less than 74% of earnings per share goal

     In order to earn 100% of the target bonus for 2009, we had to achieve the earnings per share goal of $0.70 to $0.729, which was based on our operating plan that formed the basis of our published earnings guidance and was generally in a range consistent with our long-term growth strategy. In order to achieve the threshold bonus of 40% of target, we had to achieve 74% of the earnings per share goal, a range of $0.52 to $0.549. The operating plan is developed from the “bottom-up” and considers a wide range of factors that impact our results including the general economic environment, our market, competitive landscape, initiatives and investments, and various other risks and opportunities. As of the beginning of the plan year we believe achievement of the plan is generally considered to be challenging but reasonably possible when all such factors are considered.

     The Compensation Committee approved target incentive awards for 2009 at 100% of base salary for Mr. Marr and Mr. Womble, and 75% of base salary for Mr. Miller and Mr. Moore. The difference is primarily based on the executives’ level of responsibility and retention risk. For 2009, we achieved earnings per share of $.74. Accordingly, in February 2010, the Compensation Committee approved an annual cash bonus of 110% of the target incentive award, which was consistent with the 2009 Incentive Compensation Plan approved by the Compensation Committee in February 2009. The Compensation Committee did not grant any additional bonus compensation to any of the Named Executive Officers for 2009.

          Stock Options. A third component to our Named Executive Officers’ 2009 compensation is stock options. As discussed above, stock options promote long-term performance and serve as a means of attracting, motivating, and retaining executive officers. Stock options also provide a vital link between the long-term results achieved for our stockholders and the rewards provided to executive officers and other key employees. Option holders only

realize value on stock options if our stock price increases and only if they remain employed with us beyond the date their options vest. When our stock price does not grow, our executives realize little value from this component of their compensation. We believe this is appropriate because our stockholders also would not have benefited significantly from owning our stock.

     In February 2009, our Chief Executive Officer recommended stock option grants for our Named Executive Officers. He recommended these grants be made in two equal tranches on June 15 and December 15, which was consistent with our semi-annual grant policy. The 2009 option grants vest at 20% on the first through fifth anniversary of the date of grant and have an exercise price equal to fair market value of our common stock on the grant date. The ten-year option term and five-year vesting period for stock option grants was consistent with stock option grants made to all our employees.

     In February 2009, the Compensation Committee preliminarily approved the size of option grants to our Named Executive Officers. In so doing, the Compensation Committee considered many factors, including the recommendation of our Chief Executive Officer, our potential future financial performance, each Named Executive Officer’s experience and level of responsibility, and our retention risk for each Named Executive Officer. The Compensation Committee does not have a set formula by which it determines which of these factors is more or less important, and the specific factors used and their weighting may vary among individual executives. The Compensation Committee also periodically reviews Risk Metrics Group guidelines as to the appropriate level of stock option awards granted for companies of similar characteristics. Prior to June 15 and December 15, 2009, the Compensation Committee approved the actual grants of stock options to each Named Executive Officer as set forth below, the size of which (in number of shares) remained the same as the option grants made to these executives in 2008 (excluding stock options granted in connection with employment agreement renewals in 2008).

Name		2008				2009
John S. Marr, Jr.			60,000				60,000
Dustin R. Womble			50,000				50,000
Brian K. Miller			40,000				40,000
H. Lynn Moore, Jr.			40,000				40,000

     Stock option awards are made annually to approximately 2–4% of all employees. The Named Executive Officers were awarded approximately 29% of the total stock options granted to employees in 2009 as part of our annual recurring stock option grant program. In 2009, the percentage of total stock option awards for our annually recurring grants to Named Executive Officers was as follows:

		Percentage of total
		annually recurring
Name		stock option awards
John S. Marr, Jr.			9	%
Dustin R. Womble			8	%
Brian K. Miller			6	%
H. Lynn Moore, Jr.			6	%

     Compensation Mix. The mix of the three key elements of 2009 Named Executive Officer compensation is designed with the objective of putting a substantial portion of executive pay at risk. While salaries are intended to be assured, the other two elements only have value if earnings per share goals are met and if the value of our common stock increases. We believe that having a larger measure of key pay elements at risk motivates and challenges our Named Executive Officers to achieve positive returns for our stockholders. For 2009, the proportion of pay at risk for our Named Executive Officers was as follows:

						Compensation at risk
Name		Base Salary				Bonus				Stock Options
John S. Marr, Jr.			31	%			34	%			35	%
Dustin R. Womble			31	%			34	%			35	%
Brian K. Miller			33	%			28	%			39	%
H. Lynn Moore, Jr.			33	%			28	%			39	%

     The table above depicts the relative mix of pay elements for 2009, made up of base salary earned, annual bonus cash incentive earned in 2009 (paid in 2010), and the aggregate grant date fair value of stock option grants made to the executive officers. See “Executive Compensation – Summary Compensation Table” for more detail.

     Additional Considerations. In addition to the general philosophies and specific considerations discussed above, the Compensation Committee discussed in detail the following in determining total compensation for the Named Executive Officers:

	•		our 2009 financial performance;
	•		terms of employment agreements; and
	•		each Named Executive Officer’s annual incentive compensation plan that had been previously approved.

     With respect to our Chief Executive Officer’s 2009 total compensation package, the Compensation Committee also considered the following:

	•		management’s goal of year-over-year improved earnings per share growth;
	•		management’s focus on strengthening our balance sheet;
	•		management’s strategic mission to increase profitability through sustained internal growth, including software-related revenues;
	•		management’s directive to develop and deploy premier technology through continued investment;
	•		Mr. Marr’s contribution to the achievement of each of these strategic initiatives; and
	•		reference to levels of compensation of other chief executive officers of similar sized, publicly held companies and in similar industries.

     After considering all of the factors outlined in this Compensation Discussion and Analysis, the Compensation Committee considered the overall compensation paid to our Named Executive Officers for 2009 to be appropriate and reasonable.

2010 Named Executive Officer Compensation

     In February 2010, the Compensation Committee approved the total compensation packages for each of the Named Executive Officers for 2010, including our Chief Executive Officer. The 2010 total compensation packages will include the same components as 2009 with the adjustments as set forth below.

     Role of the Chief Executive Officer. In February 2010, our Chief Executive Officer, at the request of the Chairman of the Compensation Committee, attended the Compensation Committee meeting. Mr. Marr was asked to provide senior management’s philosophy regarding executive compensation and short- and long-term objectives for the purpose of assisting the Compensation Committee in establishing 2010 total compensation for the Named Executive Officers. In addition, Mr. Marr was asked to present the results of the analysis of the Peer Group and Culpepper Surveys as well as the financial outlook for 2010. Mr. Marr noted that the Named Executive Officers’ 2009 total compensation was below the median and mean as represented by the Peer Group. Mr. Marr made recommendations regarding 2010 base salary increases, annual bonus performance targets and related minimum and maximum bonus payout potentials, and long-term incentives (stock option awards) for each Named Executive Officer, including himself. Mr. Marr also recommended increasing annual stock option grants to the Named Executive Officers by 15-20% per year to compensate for the fact that total annual cash compensation was below the median and mean of the Peer Group, and also recommended changing the vesting schedule for future stock option grants to extend the total vesting period from five years to six years and delay initial vesting by two years, the purpose of which is to more reflect the long-term nature of this component of executive compensation and to further align the interests of the Named Executive Officers with those of the stockholders. Mr. Marr also recommended the adoption of an Executive Compensation Recovery Policy to promote further accountability among senior management as well as to discourage any excessive risk taking. Mr. Marr was excused from the meeting after his presentation and did not participate in the Compensation Committee’s discussion of executive compensation for 2010. The Compensation Committee has the authority to accept, reject or modify the Chief Executive Officer’s recommendations.

     2010 Compensation Committee / Board of Director Actions. In February 2010, the Compensation Committee approved the following 2010 total compensation for the Named Executive Officers and other measures:

          Base Salary. For 2010, the Compensation Committee approved a 3% increase for each of the Named Executive Officer’s annual base salary.

          Annual Cash Bonus. For 2010, the Compensation Committee elected to leave target bonus awards unchanged at 100% of base salary for Mr. Marr and Mr. Womble, and 75% of base salary for Mr. Miller and Mr. Moore. The Compensation Committee further approved the 2010 Incentive Compensation Plan for the Named Executive Officers as well as all employees at graduated scale levels similar to the 2009 Incentive Compensation Plan. Under the 2010 Incentive Compensation Plan to earn 100% of the target bonus for 2010, the Company must achieve the earnings per share goal of $0.84 to $0.869, which was based on our operating plan that formed the basis of our published 2010 earnings guidance and was reviewed by our Board of Directors. In order to achieve the threshold bonus of 40% of target, the Company must achieve 79% of the earnings per share goal, a range of $0.66 to $0.689.

          Stock Options. For 2010, the Compensation Committee preliminarily approved a 20% increase in the stock option grants to the Named Executive Officers from the 2009 stock option grants, which will be issued on or about June 15 and December 15, 2010, subject to final approval by the Compensation Committee. In addition, the Compensation Committee approved a change in the vesting of options granted in 2010 and thereafter. Prior to 2010, all stock options granted to the Named Executive Officers vested at 20% per year on the first through the fifth anniversary of the date of grant. Options granted to the Named Executive Officers beginning in 2010 shall vest at 25% per year on the third through the sixth anniversary of the date of grant. The Compensation Committee believes that the delayed and extended vesting schedule emphasizes the long-term nature of this compensation component, thereby further aligning the interests of the Named Executive Officers with those of the stockholders.

          Executive Compensation Recovery Policy. Accountability is a fundamental value to Tyler Technologies. To reinforce this value through our executive compensation program, the Board of Directors adopted an Executive Compensation Recovery Policy in February 2010. The policy applies to our Named Executive Officers, division presidents, senior financial management and division controllers and is included in the executive compensation plans for each such individual beginning January 1, 2010.

     Under this policy, if, in the opinion of the independent directors of the Board, an executive engages in fraud or intentional misconduct that causes a material restatement of our financial statements, then the independent directors shall have the discretion to use their best efforts to remedy the misconduct and prevent its recurrence. Based upon the facts and circumstances surrounding the restatement, the independent directors may direct us to recover all or a portion of any bonus or incentive compensation paid, adjust the future compensation of the executive, and dismiss, or take legal action against, the executive, in each case as the independent directors determines is in our best interests. The remedies that may be sought by the independent directors are subject to a number of conditions, including, that: (1) the bonus or incentive compensation to be recouped was calculated based upon the financial results that were restated; (2) the executive in question engaged in fraud or intentional misconduct; and (3) the bonus or incentive compensation calculated under the restated financial results is less than the amount actually paid or awarded.

Other Compensation Topics

     Benefits. Our Named Executive Officers are eligible for the same benefits made available to other full-time employees generally, including our 401(k) Savings Plan, Employee Stock Purchase Plan, health and dental care plans, life insurance plans, disability plans, and other welfare benefit programs.

     Severance and Change in Control Agreements. Our Named Executive Officers have employment contracts that provide for a severance payment equal to each executive’s base salary and target bonus and a non-compete payment equal to his base salary and target bonus upon the executive’s termination of employment without cause, or upon the executives’ termination of employment upon a change in control. In addition, upon a change in control all unvested options previously granted to each Named Executive Officer would immediately become vested and exercisable. For more information, see “Compensation Discussion and Analysis – Employment Contracts.”

     Tax Consequences of Certain Forms of Compensation. The following is a summary of principal federal income tax consequences of certain transactions under our compensation plan. It does not describe all federal tax consequences of our compensation plan, nor does it describe state and local tax consequences.

          Incentive Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If shares issued to an optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then upon sale of such shares, any amount realized in excess of the incentive option price will be taxed to the optionee as a long-term capital gain, any loss sustained will be a long-term capital loss, and we will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.

     If shares acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally the optionee will realize ordinary income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the shares at exercise over the option price and we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the stock option is paid by tendering shares.

          Non-Qualified Options. We also grant to executives non-qualified stock options that do not qualify for the tax treatment described above. No income is realized by the optionee at the time the option is granted. Generally, at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares on the date of exercise, and we receive a tax deduction for the same amount. At disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares have been held. Special rules apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.

Employment Contracts

     In February 2008, we entered into five-year employment agreements with John S. Marr, Jr., Dustin R. Womble, Brian K. Miller, and H. Lynn Moore, Jr. Under the terms of the agreements, Messrs. Marr, Womble, Miller and Moore will receive minimum base salaries of $395,000, $333,000, $250,000, and $250,000, respectively. They also participate in performance bonus or incentive compensation plans made available to our comparable-level employees and receive all employee benefits and perquisites normally offered to our executive employees. Each agreement provides for a severance payment equal to each executive’s base salary and target bonus and a non-compete payment equal to his base salary and target bonus upon the executive’s termination of employment without cause, or upon the executives’ termination of employment upon a change in control. A change in control is defined as our merger or consolidation into an unaffiliated entity, our dissolution or liquidation, the sale of all or substantially all of our assets, the acquisition by any person, entity or group of more than 50% of our voting stock, or a change in the majority of our Board of Directors that was not approved by the then existing directors. In addition to the severance payment and the non-compete payment, each agreement also provides that we will continue to provide medical benefits for twelve months after the date of termination. In the event of a change in control, all unvested options previously granted to Messrs. Marr, Womble, Miller, and Moore would immediately become vested and exercisable.

     In addition, the employment agreements provided that Messrs. Marr, Womble, Miller, and Moore be granted options to purchase respectively 400,000, 250,000, 150,000, and 150,000 shares of Tyler’s common stock. The options were granted at an exercise price equal to the closing market price of Tyler’s common stock as reported by the New York Stock Exchange as of the effective date of the grant (May 15, 2008). The options vest in equal installments on the first, second, third, fourth, and fifth anniversary of the date of grant and are subject to terms and conditions of the 2000 Stock Option Plan and our standard option agreement under that plan.

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

believe that our employment agreements ensure stability and will enable our executive officers to maintain a balanced perspective in making overall business decisions during a potentially uncertain period. The Compensation Committee applied its best judgment in developing the severance package after considering each executive’s overall compensation package, the rapidly changing environment for technology-based companies, the average time required to obtain employment for equivalent job duties, and the amount of payment made to executives in the event of termination without cause or upon a change in control.

Compensation Committee Report

     The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis be included in this proxy statement.

          This report is submitted by the Compensation Committee.

Michael D. Richards, Chairman
J. Luther King, Jr.
G. Stuart Reeves

Compensation Committee Interlocks and Insider Participation

     In 2009, the Compensation Committee consisted of Michael D. Richards (Chairman), J. Luther King, Jr., and G. Stuart Reeves. No member of the Compensation Committee was an officer or employee of Tyler. None of our executive officers served on the Compensation Committee of any other entity.

EXECUTIVE COMPENSATION

Summary Compensation Table

     The following table sets forth certain information regarding the compensation paid to our Named Executive Officers for all of the services they rendered to us during 2009, 2008, and 2007.

																										Change in
																										Pension Value
																										and
																										Nonqualified
																						Non-Equity				Deferred
														Stock				Option				Incentive Plan				Compensation				All Other
						Salary				Bonus				Awards				Awards				Compensation				Earnings				Compensation
Name and Principal Position		Year				($)				($)				($)				($) (1)				($) (2)				($)				($) (3)				Total ($)
John S. Marr, Jr.			2009			$	407,000											$	457,551			$	447,700							$	9,901			$	1,322,152
Chief Executive Officer			2008			$	395,000											$	3,208,500			$	671,500							$	8,301			$	4,283,301
and President			2007			$	380,000											$	605,652			$	430,000							$	8,176			$	1,423,828
Dustin R. Womble			2009			$	343,000											$	381,293			$	377,300							$	16,471	(3)		$	1,118,064
Executive Vice			2008			$	333,000											$	2,083,750			$	566,100							$	14,131	(3)		$	2,996,981
President; Chief			2007			$	320,000											$	504,710			$	320,000							$	19,170	(3)		$	1,163,880
Executive Officer of both the Courts and Justice division and Local Government division
Brian K. Miller			2009			$	257,500											$	305,034			$	212,438							$	2,776			$	777,748
Executive Vice President,			2008			$	250,000											$	1,313,000			$	318,750							$	5,940			$	1,887,690
Chief Financial			2007			$	235,000											$	302,826			$	117,500							$	4,668			$	659,994
Officer and Treasurer
H. Lynn Moore, Jr.			2009			$	257,500											$	305,034			$	212,438							$	3,856			$	778,828
Executive Vice President,			2008			$	250,000											$	1,313,000			$	318,750							$	2,376			$	1,884,126
General Counsel and			2007			$	235,000											$	302,826			$	117,500							$	2,224			$	657,550
Secretary

Grants of Plan-Based Awards in 2009

     The following table sets forth certain information relating to grants of plan-based awards to the Named Executive Officers during 2009.

																														All Other
																														Stock				All Other
																														Awards:				Option Awards:
																														Number of				Number of				Exercise or
						Estimated Future Payouts Under Non-Equity												Estimated Future Payouts Under Equity												Shares of				Securities				Base Price of
						Incentive Plan Awards (1)												Incentive Plan Awards												Stock or				Underlying				Option				Grant Date Fair Value
		Grant				Threshold				Target				Maximum				Threshold				Target				Maximum				Units				Options				Awards				of Stock and Option
Name		Date				($)				($)				($)				(#)				(#)				(#)				(#)				(#) (2)				($/Sh)				Awards (3) ($)
John S. Marr, Jr.			2/25/2009			$	—			$	407,000			$	732,600
			6/15/2009																																30,000			$	16.33			$	216,204
			12/15/2009																																30,000			$	19.20			$	241,347
Dustin R. Womble			2/25/2009			$	—			$	343,000			$	617,400
			6/15/2009																																25,000			$	16.33			$	180,170
			12/15/2009																																25,000			$	19.20			$	201,123
Brian K. Miller			2/25/2009			$	—			$	193,125			$	347,625
			6/15/2009																																20,000			$	16.33			$	144,136
			12/15/2009																																20,000			$	19.20			$	160,898
H. Lynn Moore, Jr.			2/25/2009			$	—			$	193,125			$	347,625
			6/15/2009																																20,000			$	16.33			$	144,136
			12/15/2009																																20,000			$	19.20			$	160,898

Outstanding Equity Awards at Year-End

     The following table shows outstanding equity awards for each of the Named Executive Officers at December 31, 2009:

		Option Awards																				Stock Awards
										Equity Incentive																Market
										Plan Awards:												Number				Value of				Equity Incentive				Equity Incentive
		Number of				Number of				Number of												of Shares				Shares or				Plan Awards:				Plan Awards:
		Securities				Securities				Securities												or Units				Units of				Number of				Market or Payout
		Underlying				Underlying				Underlying												of Stock				Stock				Unearned Shares,				Value of Unearned
		Unexercised				Unexercised				Unexercised				Option								That Have				That Have				Units or Other				Shares, Units or
		Options				Options				Unearned				Exercise				Option				Not				Not				Rights That Have				Other Rights That
		(#)				(#)				Options				Price				Expiration				Vested				Vested				Not Vested				Have Not Vested
Name		Exercisable				Unexercisable				(#)				($)				Date				(#)				($)				(#)				($)
John S. Marr, Jr.			500,000				—				—			$	4.58				7/1/2013
			80,000				20,000				—			$	7.52				7/26/2015
			12,000				18,000				—			$	13.29				3/2/2017
			12,000				18,000				—			$	12.26				6/15/2017
			12,000				18,000				—			$	14.93				12/14/2017
			80,000				320,000				—			$	15.00				5/15/2018
			6,000				24,000				—			$	14.98				6/13/2018
			6,000				24,000				—			$	12.14				12/15/2018
			—				30,000				—			$	16.33				6/15/2019
			—				30,000				—			$	19.20				12/15/2019
Dustin R. Womble			22,014				—				—			$	3.60				3/4/2013
			121,614				—				—			$	4.58				7/1/2013
			80,000				20,000				—			$	7.52				7/26/2015
			60,000				40,000				—			$	11.02				7/26/2016
			10,000				15,000				—			$	13.29				3/2/2017
			10,000				15,000				—			$	12.26				6/15/2017
			10,000				15,000				—			$	14.93				12/14/2017
			50,000				200,000				—			$	15.00				5/15/2018
			5,000				20,000				—			$	14.98				6/13/2018
			5,000				20,000				—			$	12.14				12/15/2018
			—				25,000				—			$	16.33				6/15/2019
			—				25,000				—			$	19.20				12/15/2019
Brian K. Miller			53,188				16,000				—			$	7.52				7/26/2015
			6,000				9,000				—			$	13.29				3/2/2017
			6,000				9,000				—			$	12.26				6/15/2017
			6,000				9,000				—			$	14.93				12/14/2017
			30,000				120,000				—			$	15.00				5/15/2018
			4,000				16,000				—			$	14.98				6/13/2018
			4,000				16,000				—			$	12.14				12/15/2018
			—				20,000				—			$	16.33				6/15/2019
			—				20,000				—			$	19.20				12/15/2019
H. Lynn Moore, Jr.			64,000				16,000				—			$	7.52				7/26/2015
			6,000				9,000				—			$	13.29				3/2/2017
			6,000				9,000				—			$	12.26				6/15/2017
			6,000				9,000				—			$	14.93				12/14/2017
			30,000				120,000				—			$	15.00				5/15/2018
			4,000				16,000				—			$	14.98				6/13/2018
			4,000				16,000				—			$	12.14				12/15/2018
			—				20,000				—			$	16.33				6/15/2019
			—				20,000				—			$	19.20				12/15/2019