TYLER CORP /NEW/, 10-K405, 1999-03-31

TYLER CORP /NEW/
10-K405, 1999-03-31
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 1-10485

TYLER CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 75-2303920
(State or other jurisdiction (I.R.S. employer
of incorporation or identification no.)
organization)

2800 W. MOCKINGBIRD LANE 75235
DALLAS, TEXAS (Zip code)
(Address of principal
executive offices)

Registrant's telephone number, including area code: (214) 902-5086
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Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- -------------------

COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act:
NONE

---------

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THE FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. YES X NO
--- ---

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT ON MARCH 24, 1999 WAS $113,283,000.

THE NUMBER OF SHARES OF COMMON STOCK OF THE REGISTRANT OUTSTANDING ON
MARCH 24, 1999 WAS 35,542,464.

DOCUMENTS INCORPORATED BY REFERENCE

CERTAIN INFORMATION REQUIRED BY PART III OF THIS ANNUAL REPORT IS
INCORPORATED BY REFERENCE FROM THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR
ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1999.

===============================================================================

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TYLER CORPORATION
FORM 10-K
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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PART I
<S> <C> <C>
Item 1 Business......................................................................... 2
Item 2 Properties....................................................................... 12
Item 3 Legal Proceedings................................................................ 12
Item 4 Submission of Matters to a Vote of Security Holders.............................. 13

PART II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters.................................................... 14
Item 6 Selected Financial Data.......................................................... 15
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................... 16
Item 7A Quantitative and Qualitative Disclosures About Market Risk....................... 28
Item 8 Financial Statements and Supplementary Data (see Index to
Financial Statements below).................................................... 28
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................................... 28

PART III
Item 10 Directors and Executive Officers of the Registrant............................... 29
Item 11 Executive Compensation........................................................... 29
Item 12 Security Ownership of Certain Beneficial Owners
and Management................................................................. 29
Item 13 Certain Relationships and Related Transactions................................... 29

PART IV
Item 14 Exhibits, Financial Statement Schedule and Reports on Form 8-K................... 30

Signatures................................................................................ 32

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Auditors............................................................ 34
Consolidated Statements of Operations for the years ended December 31, 1998, 1997
and 1996............................................................................ 35
Consolidated Balance Sheets as of December 31, 1998 and 1997.............................. 36
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998,
1997 and 1996....................................................................... 37
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996....................................................................... 38
Notes to Consolidated Financial Statements................................................ 39
Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 1998, 1997 and 1996.................................................... 70
</TABLE>

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PART I

ITEM 1. BUSINESS.

GENERAL

Tyler Corporation ("Tyler" or the "Company") is a major provider of
technology, software, data warehousing, electronic document management systems,
information management outsourcing services, title plant and property records
database information and other professional services for local governments and
other enterprises. From 1966 (the year the Company was founded) until 1998,
Tyler provided products and services to customers in a variety of industries
through ownership of various diversified operating companies, which have since
been sold or discontinued.

Company Growth Strategy

In 1997, the Company adopted a strategy to build a nationally
integrated information management services, systems, database, and outsourcing
company initially serving county, local, and municipal governments. The Company
believes that the information management industry today is fragmented and that
small, private companies primarily serve the county and municipal governments
and related markets. Given these industry characteristics, the Company intends
to pursue a consolidation strategy that, if successful, could lead to
significant revenue growth for the Company. The initial phase of this strategy
was implemented on February 19, 1998 with the acquisition of three companies -
Business Resources Corporation ("Resources"), The Software Group, Inc. ("TSG"),
and Interactive Computer Designs, Inc. ("INCODE"), each of which is a major
provider of technology and services to county, local, and municipal governments.
Since February 19, 1998, the Company has continued its growth strategy through
the acquisition or formation of the following companies:

o Kofile, Inc. ("Kofile") - a provider of document management solutions
software and related maintenance and support to governmental and
commercial users; acquired June 5, 1998

o Ram Quest Software, Inc. ("Ram Quest") - a provider of software
applications that facilitate and automate much of the work performed
by title companies; acquired July 1, 1998

o CompactData Solutions, Inc. ("CompactData") - a provider of public
information on CD ROM utilizing its own powerful search engine to
obtain information for research and marketing purposes; acquired July
1, 1998

o Computer Management Services, Inc. ("CMS") - a provider of integrated
information management systems and services to county and municipal
governmental agencies; acquired August 1, 1998

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Recent Developments

On March 8, 1999, Tyler acquired Eagle Computer Systems, Inc.
("Eagle"), a provider of integrated information management systems and services
to over 120 counties in 14 states, primarily in the western United States. The
transaction will be accounted for using the purchase method of accounting and,
accordingly, the results of operations of Eagle will be included in the
Company's results of operations from the date of the acquisition.

On March 26, 1999, Tyler sold all of the common stock of its former
subsidiary, Forest City Auto Parts Company ("Forest City") to HalArt, L.L.C.
Accordingly, the historical operating results of Forest City are reported in
discontinued operations.

Market Overview

The state, local, and municipal government market is one of the
largest and most decentralized information technology markets in the United
States, consisting of all 50 states with approximately 19,000 municipalities
and 3,200 counties. This market is also comprised of hundreds of various
governmental agencies, each with specialized, delegated responsibilities and
unique information management requirements.

Traditionally, local governmental bodies and agencies performed
state-mandated duties, including property assessment, record keeping (i.e.,
property and vital statistics), road maintenance, administration of election
and judicial functions, and the provision of welfare assistance. Today, a host
of emerging and urgent issues are confronting counties, each of which demands a
service response. These areas include solid waste disposal, clean air and
water, transportation, criminal justice and corrections, administration and
finance, public safety, health and human services, and public works. Transfers
of responsibility from the federal and state governments to county and
municipal governments and agencies in these and other areas also place
additional service and financial requirements on these governmental units. As a
result, these governmental bodies and agencies recognize the increasing value
of information management services and systems to, for example, improve revenue
collection, provide increased access to information, and streamline delivery of
government services to their constituents. From integrated tax systems to
integrated criminal justice information systems, many counties and municipal
governments have benefited significantly from the implementation of
jurisdiction-wide systems that allow different agencies to share data and
provide a more comprehensive approach to information management. Many of the
county and municipal government agencies also have individual information
management requirements, which must be tailored to the specific services being
provided.

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In 1996, G2Research estimated the annual expenditures by state, local,
and municipal governmental bodies and agencies for information technology and
resources at approximately $34.5 billion. G2Research estimates such total
spending by these entities to increase by at least 5.5% annually with total
spending to exceed $45 billion by 2001. Included in the estimated 1996 annual
expenditures of $34.5 billion are expenditures on packaged software estimated at
$5 billion and spending for external services in which the government agencies
have turned to the vendor community to provide information technology solutions
estimated at $6.7 billion. In addition, G2Research estimates increases of at
least 10% annually on software expenditures to exceed $8 billion by 2001, and
increases of 13% annually for external services spending to exceed $12.3 billion
by 2001.

CORE SERVICES

Tyler classifies its businesses into two fundamental areas based on
the nature of the products and services offered:

o Information and Property Records Services

o Information Software Systems and Services

Comparative segment revenues, profits, and related financial information
for 1998, 1997 and 1996 are provided in Note 16 in Notes to Consolidated
Financial Statements.

INFORMATION AND PROPERTY RECORDS SERVICES SEGMENT

GENERAL

The information and property records services segment provides a wide
range of information management outsourcing services, primarily to county
governments as well as to some commercial users. These outsourcing services
currently include records management and micrographic reproduction,
computerized indexing, and imaging of real property records maintained by
county clerks and recorders, as well as information management outsourcing and
professional services required by other county government units and agencies.
This segment also provides title plant data and update services to title
companies.

The Company operates in the information and property records services
segment through Resources, a wholly-owned subsidiary that serves as a holding
company for acquired businesses that operate in this segment. In December 1994,
Resources acquired Government Records Services, Inc. ("GRS"), the leading
provider of property records management and other title related services to
county governments and other commercial enterprises in Texas. In August 1995,
Resources acquired the business and assets of Texas Dimensions, a provider of
government information services to tax appraisal districts in Texas. In
September 1995, Resources acquired the government information management
outsourcing services business in Texas, Oklahoma, Louisiana, and New Mexico of
BRC Holdings, Inc., a publicly traded company (together with its subsidiaries
"Holdings"), making the Company the largest provider of those services in Texas.
In July 1997, Resources acquired the assets and business of the title
information services division of Holdings, and began providing title plant data
and update services to title companies throughout Texas, principally in the
Dallas-Fort Worth metropolitan area. In July 1998, the Company acquired Ram
Quest,

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a provider of software applications that facilitate and automate much of the
work performed by title companies.

Historically, the information and property records services segment's
primary emphasis has been supplying records management, document workflow, and
imaging products and services to county clerk and district clerk offices in
Texas. In 1998, Resources expanded its property records management services
business to Cook County, Illinois as a result of an agreement with the Cook
County recorder's office. In June 1998, Resources acquired from Eastman Kodak
Company a line of document management software and related customer
installations and service contracts that provide document access and storage on
various computer platforms. These product lines provide indexing and retrieval
software for digitized documents and microfilm documents and serve over 1,000
commercial and governmental users. The Company intends to continue to
aggressively expand its business into other geographic regions throughout the
United States, either by acquisition or internal growth.

PRODUCTS AND SERVICES

The information and property records services segment offers the
following products and services:

o Property Records Software and Services. The Company's product
offerings record and index real property transactions, maintain
archival copies of the filed documents, and makes those records
available for public inspection and copying. The Company also provides
a wide range of software products that provide document access and
storage on various computer platforms to commercial users and
governmental agencies. These products provide indexing and retrieval
software for digitized documents and microfilm documents.

o Re-creation Services. The Company provides image-enhanced,
archival-quality reprints of old records, including photostatic
prints, with microfilm backup copies for improved security in case of
loss by fire, water damage, or other catastrophe.

o Information Management Outsourcing and Professional Services. The
Company offers direct and complete facilities management of a county
government's financial, judicial, law enforcement, personnel, tax,
clerical, and administrative information by, in effect, becoming its
information systems department.

o Title Plant Services. The Company provides title companies with a
variety of title plant data and update services (the information needed
to perform title searches in order to underwrite title insurance
policies), sells copies of these title plants and related data and
update services to title companies or other firms that need title
search capabilities, and provides software to facilitate and automate
much of the work performed by title companies, including storing all
information necessary for a closing, tracking the progress of a
closing, producing all necessary closing documents, and other closing
related services.

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o Document Management and Imaging Solutions Software Products. The
Company's products and services are used for image storage and
retrieval in a wide range of document-intensive applications that are
designed to deliver a total document management solution for many work
group and departmental applications, particularly where hybrid media
support is a requirement.

o Public Data Products. The Company distributes appraisal district and
motor vehicle data on CD ROM utilizing its own search engine to obtain
information for research and marketing purposes, including the
creation and manipulation of special reports, telemarketing lists, and
mailing labels.

SALES, MARKETING, AND CUSTOMERS

The information and property records services segment markets its
products and services through its direct sales and marketing personnel. This
segment targets long-term contracts with larger governmental units and title
companies. Although many of its customers are small and do not have long-term
contracts, they have long-term, continuing relationships with Resources and its
sales and marketing personnel. Many of the county government customers and
title plant customers have been served by the information and property records
services segment and its predecessors for more than 20 years, with some
customers dating back to 1962. Customer turnover is considered by management to
be extremely low.

Other than the contract with Cook County, Illinois, which accounted
for approximately 12% of this segment's total revenues, no other single
customer accounted for 10% or more of the segment's total revenues in 1998.
Although installation of the Cook County contract was completed in 1998,
maintenance and support activities will continue through 2003. The five largest
customers of this segment, including Cook County, accounted for approximately
25% of the segment's total revenues in 1998. These customers are currently
under long-term contracts expiring at various times from 1999 through 2002.
Three of these five contracts permit early termination by the customer in the
following respective circumstances: (i) upon 10 days' notice to Resources for
any reason; (ii) at the end of a budget year; and (iii) if required for the
"public good" or because of change in applicable laws.

In February 1999, Title Records Corporation ("TRC"), a subsidiary of
Resources, amended a contract with its largest customer group for the provision
of title plant information and update services to extend the expiration date of
the contract from April 30, 2000 to January 31, 2009. Beginning August 1, 2003,
the customer group may terminate the contract early by providing 180 days notice
and paying a termination fee equal to 50% of the then remaining obligation due
under the contract. With the same customer group, TRC entered into seven new
contracts for the provision of title plant data and update services for various
other counties. These contracts, which were effective February 1, 1999 and
terminate on January 31, 2009, constitute the sale of certain title plant copies
and 10-year update agreements. Beginning August 1, 2003, a customer may
terminate a contract early by providing TRC with 180 days' notice and paying a
termination fee equal to 50% of the then remaining obligation due under the
contract. It is TRC's belief that any exercise of the early termination
provision in any of the above-described contracts is highly improbable due to
the unfavorable economic impact on the customer.

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COMPETITION

The Company competes with numerous local and regional businesses that
provide or offer at least some of the products and services provided by the
information and property records services segment. The Company also
occasionally competes with internal, centralized information service
departments of county governments, which requires the Company to persuade the
end-user department to discontinue the service by its own personnel and
outsource the service to the Company and its subsidiaries. The Company competes
on a variety of factors, including price, service, name recognition,
technological capabilities, and the ability to modify existing products and
services to accommodate the individual requirements of the customer. County
governments often are required to put their contracts up for competitive bid.
Competition may be increased if a customer seeks bids on only one aspect of its
system (such as imaging or indexing) rather than bidding on all of the services
as an integrated whole as single function bidding generally results in more
bidders and more intense price competition.

In connection with the acquisition of the title information services
division of Holdings in July 1997, Resources acquired the Dallas, Texas data
processing center of Holdings and agreed to provide to Holdings certain data
entry services for customers of property records services provided by Holdings.
Resources also agreed not to solicit these customers, which are located
primarily in the northeastern and southeastern United States, prior to August
1999.

INFORMATION SOFTWARE SYSTEMS AND SERVICES SEGMENT

GENERAL

The information software systems and services segment provides county,
local, and municipal governments with software, systems, and services to serve
their diverse information technology and automation needs. This segment
currently operates through three companies - TSG, CMS, and INCODE. These
companies assist local and county governments with all aspects of software and
hardware selection, network design and management, installation and training,
and on-going support and related services. In connection with these services,
these companies integrate their own products with computer equipment from
hardware vendors, third-party database management applications, and office
automation software.

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PRODUCTS AND SERVICES

The information software systems and services segment offers the
following products and services:

o Judicial Information Management. The Company's offerings provide a
complete suite of information management products designed to meet the
needs of various aspects of the judicial system. While each of these
products may be installed on a stand-alone basis, most of the products
are generally installed in the different government offices located in
and around a county courthouse to take full advantage of the benefits
of an integrated system of products, which eliminates some of the
duplicate input and record keeping and helps increase the efficiency
of the offices.

o Court Systems. The Company provides several integrated products
designed to track and manage the information involved in criminal and
civil cases, including applications that are designed to track cases,
process fines and fees, generate judgment and sentencing paperwork in
conjunction with criminal cases, generate numerous citations, notices
and forms required in a civil case, and generally track the status of
each criminal and civil case in the court system. In addition, other
court system applications manage court calendars, coordinate judges'
schedules, generate court dockets, manage the justice of the peace
processes and automate the district attorney or prosecutors functions.

o Law Enforcement Systems. The Company's systems automate all aspects of
a law enforcement agency, including jail management, inmates' medical
processing applications, incident and offense applications to track
officers' activities, and report and warrant tracking applications. A
Computer Aided Dispatch/Emergency 911 system tracks calls and the
status of emergency response vehicles, interfaces with local and state
searches, and generally assists dispatchers in processing emergency
situations.

o Other Judicial Information Products. Other Company judicial
information products include a jury selection application, hot check
processing application, and adult and juvenile probation processing
application.

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o Property Appraisal and Tax. The Company provides systems that automate
the appraisal and assessment of real and personal property, including
record keeping, mass appraisal, inquiry and protest tracking,
appraisal and tax roll generation, tax statement processing, and
electronic state level reporting. These systems can also be image- and
video-enabled for the storage of the many property related documents
involved as well as for the on-line storage of electronic photographs
of properties for use in defending values in protest situations. Other
related applications are tax billing and collection agencies,
including counties and cities, school tax offices, as well as special
collection agencies. These systems support billing, collections, lock
box operations, mortgage company electronic payments, and provide
various reporting requirements.

o Fund Accounting. The Company offers a complete accounting package
system that includes modules for accounts payable, budgetary
accounting (general ledger), payroll/personnel, purchasing,
project/grant accounting, fixed assets, revenues, bank manager and
human resources, all of which conform to government auditing and
financial reporting requirements and generally accepted accounting
principles.

o Utility Customer Information System. These systems automate the
billing and collection of the various metered utilities and
non-metered services provided by municipal governments.

o Specialized Municipal Information Products. These systems automate the
functions of city hall, including municipal court, equipment and
project costing and inventory, special assessments, and tax billing
and collection. Other applications offered at the city level include
cemetery records, ambulance billing and fleet maintenance, tracking of
citizen complaints, permits and inspections, and business licenses.

o Specialized County Products. The Company offers specialized products
that allow government offices in and around a courthouse to further
integrate and automate their operations, including child support
tracking, voter registration and election result tabulations, motor
vehicle registration, and an indexing application for all official
public records such as deeds, birth and death certificates.

o Imaging and Voice Response Products. The Company provides a variety of
products that interface with and enhance its other products, including
electronic document imaging systems that integrate scanning,
retrieval, and display of document images into other applications
where needed. Other products add an electronic video imaging system,
which integrates the capture and display of pictures with other
applications.

o Internet Web Development. The Company offers specialized application
database interfaces that allow the public records portion of
information contained in various Company systems to be made available
to the public via the Internet.

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SALES, MARKETING, AND CUSTOMERS

The information software systems and services segment markets its
product and services through direct sales and marketing personnel located in
Texas, Georgia, Oregon, and the midwest United States. Other in-house staff
focus on add-on sales, forms, supplies, and professional services.

Sales of new systems are typically generated from referrals from
different governmental offices or departments within a county or municipality,
referrals from adjoining counties and local governments, relationships
established between sales representatives and county or local officials,
contacts at trade shows, direct mailings, and direct contact from a prospect
already familiar with the Company. The Company is active in virtually all
state, county, and local government associations, including annual meetings,
trade shows, and educational events. In addition, the Company often hosts
customer luncheons at larger, statewide meetings such as the Texas Association
of Appraisal Districts and the Texas County and District Clerks Association.

Customers consist primarily of county and local government offices and
other municipal agencies. In counties, customers include the auditor,
treasurer, tax assessor/collector, county clerk, district clerk, county and
district court judges, probation officers, sheriff's office, and county
appraiser. At municipal government sites, customers include directors from
various departments, including administration, finance, utilities, public
works, code enforcement, personnel, purchasing, taxes, municipal court, and
police. No single customer accounted for more than 10% of the segment's total
revenues for 1998. Contracts for products and services are generally
implemented over six months to one year with annually renewing service and
software update agreements thereafter. Although by the terms of these
agreements either the Company or the customer is entitled to terminate upon 90
days' notice after the first anniversary of the agreement, historically most
agreements are automatically renewed annually. Currently, approximately 25% of
this segment's revenue is attributable to ongoing support and maintenance
agreements.

COMPETITION

The Company competes with numerous local and regional firms that
provide or offer at least some or all of the products and services provided by
the information software systems and services segment. The Company also
occasionally competes with internal, centralized information service
departments of county or local governments, which requires the Company to
persuade the end-user department to discontinue service by its own personnel
and outsource the service to the Company. The Company competes on a variety of
factors, including price, service, name recognition, confidence in the
supplier, technological capabilities, and the ability to modify existing
products and services to accommodate the individual requirements of the
customer. The Company's ability to offer an integrated system of applications
for several offices/departments is often a factor in its favor. County and
local governmental units often are required to put their contracts up for
competitive bid. Competition may be

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increased if a customer seeks bids on only one aspect of its system (such as
only motor vehicle registration) rather than bidding all of the services as an
integrated whole as single function bidding generally results in more bidders
and more intense price competition. TSG and INCODE are Qualified Information
Systems Vendors for the Texas General Services Commission on state purchasing
contracts and, as a result, in some cases county government offices may
contract with TSG or INCODE directly without a bid process.

SUPPLIERS

All computers, peripherals, printers, scanners, operating system
software, office automation software, and other equipment necessary for the
implementation and provision of information software systems and services are
presently available from several third party sources. Hardware is purchased on
original equipment manufacturer or distributor terms at discounts from retail.
The Company has not experienced any significant supply problems.

BACKLOG

At December 31, 1998, the estimated sales backlog for the information
software systems and services segment was approximately $13.0 million compared
to $6.2 million at December 31, 1997, on a pro forma basis. Backlog increased
primarily due to a significant increase in new sales awards in 1998 compared to
1997, on a pro forma basis. In addition, constraints on the number of qualified
trainers available have slightly lengthened the installation process. The
backlog represents contracts that have been signed but not delivered as of
year-end. The majority of these contracts are expected to be installed within
the next six to twelve months.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS, AND LICENSES

The Company regards certain features of its internal operations,
software, and documentation as confidential and proprietary, and relies on a
combination of contractual restrictions, trade secret laws, and other measures
to protect its proprietary intellectual property. The Company does not rely on
patents. The Company believes that, due to the rapid rate of technological
change in the computer software industry, trade secret and copyright protection
are less significant than factors such as knowledge, ability and experience of
the Company's employees, frequent product enhancements, and timeliness and
quality of support services. The Company typically licenses its software
products under exclusive license agreements, which are generally
non-transferable and have a perpetual term. Although the Company rarely
provides source code to customers, it has escrowed its source code for the
benefit of several customers in the event of business failure.

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EMPLOYEES.

At December 31, 1998, excluding employees at Forest City, the Company
had 510 employees, of whom 287 were employed in the information and property
records segment and 212 were employed in the information software systems and
services segment. None of the Company's employees are represented by a labor
union or is subject to collective bargaining agreement. Management considers
its relations with its employees to be positive.

ITEM 2. PROPERTIES.

Excluding Forest City, at December 31, 1998, the Company occupied
approximately 174,000 square feet of office and warehouse space of which
approximately 74,000 square feet is owned. With its principle executive office
located in Dallas, Texas, the Company leases other offices and facilities for
its operating companies in Lubbock, Plano, Richardson, McKinney and Houston,
all located in Texas; Ames, Iowa; and Rochester, New York.

ITEM 3. LEGAL PROCEEDINGS.

The New Jersey Department of Environmental Protection and Energy
("NJDEPE") has alleged that a site where a former affiliate of Tyler Pipe
Industries, Inc. (a wholly-owned subsidiary of the Company known as TPI of
Texas, Inc. ("TPI")), Jersey-Tyler Foundry Company ("Jersey-Tyler"), once
operated a foundry contains lead and possible other priority pollutant metals
and may need on-site and off-site remediation. The site was used for foundry
operations from the early part of this century to 1969 when it was acquired by
Jersey-Tyler. Jersey-Tyler operated the foundry from 1969 to 1976, at which
time the foundry was closed. In 1976, Jersey-Tyler sold the property to other
persons who have operated a salvage yard on the site. NJDEPE agreed for TPI to
conduct a feasibility study to assess remediation options and propose a remedy
for the site and the impacted areas. This study will be completed and submitted
to the NJDEPE in the first quarter of 1999. TPI has not agreed to commit to
further action at this time. TPI never held title to the site and denies
liability.

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predecessor owners and operators of the site, as well as others, to bear their
share of the cost of the investigation and any other costs, including any
remediation costs incurred by TPI. Some costs may also be covered by insurance.
Although the insurance carriers have initially denied coverage, TPI is in
negotiations with the major carrier. Recoveries from predecessor companies and
insurance companies are shared by TPI and the Buyer.

Pursuant to the Acquisition Agreement, the Buyer agreed to manage and
direct the prosecution or defense of certain matters on behalf of TPI, and to
reimburse related costs and expenses. The Buyer agreed to reimburse TPI the
first $750,000 of all costs and expenses incurred in connection with each such
matter, and one-half of such expenses in excess of $750,000. The maximum amount
that the Buyer agreed to reimburse TPI in connection with all of these matters
excluding Jersey-Tyler is $8.0 million. The Buyer did not agree to reimburse
TPI for, among other things, (a) liabilities relating to the use, handling,
manufacture or sale of products containing asbestos or silica, (b) claims of
individuals for health problems such as (but not limited to) silicosis, or (c)
offsite environmental liabilities. Although it is impossible to predict the
outcome of legal or regulatory proceedings, the Company believes that
substantially all of the costs, expenses, and damages, if any, resulting from
the legal proceedings and environmental matters described above will be
reimbursed by the Buyer pursuant to the Acquisition Agreement or have been
adequately provided for in the financial statements.

Between 1968 and December 1995, TPI owned and operated foundries. TPI
is, and expects to continue to be, involved in different types of litigation
for which it will not be reimbursed by the Buyer. Since February 1997, over
three hundred former employees of TPI have filed a series of separate personal
injury lawsuits which allege that they were exposed to silica, asbestos, and/or
other industrial dusts during their employment at TPI. Named as defendants with
TPI and Swan Transportation Company ("Swan"), another wholly-owned subsidiary
of the Company, are major suppliers of asbestos, sand and industrial respirator
devices. These co-defendants have been sued under product liability theories of
recovery and various theories to try to avoid workers compensation bars to
recovery. The plaintiffs seek to recover money damages for the personal
injuries they allegedly suffered as a result of their occupational exposure to
silica, asbestos, and other industrial dusts. Little discovery has taken place,
and it is not possible to predict the outcome at this time. The Company plans
to defend this litigation vigorously, but the ultimate outcome is uncertain.

Other than ordinary course, routine litigation incidental to the
business of the Company and except as described herein, there are no material
legal proceedings pending to which the Company or its subsidiaries are parties
or to which any of its properties are subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Tyler common stock is traded on the New York Stock Exchange. At
December 31, 1998, Tyler had approximately 3,200 stockholders of record. A
number of the Company's stockholders hold their shares in street name;
therefore, there are substantially more than 3,200 beneficial owners of its
common stock.

The following table sets forth for the calendar periods indicated the
high and low sales price per share of Tyler common stock as reported on the New
York Stock Exchange.

<TABLE>
<CAPTION>
High Low
------- --------
<S> <C> <C> <C>
1997: First Quarter............................. $ 2 3/8 $ 1 1/2
Second Quarter............................ 2 1/4 1 3/8
Third Quarter............................. 3 3/4 2
Fourth Quarter............................ 5 7/8 3 3/8

1998: First Quarter ............................ $ 8 3/4 $ 5 5/16
Second Quarter............................ 11 3/8 7 1/2
Third Quarter............................. 10 1/2 6 1/2
Fourth Quarter............................ 8 7/16 5

1999: First Quarter (through March 24, 1999) ... $ 6 7/16 $ 4 5/16
</TABLE>

The Company made a rights redemption payment of $.01 per share in
1998. No cash dividends were paid in 1998 or 1997. The Company intends to retain
earnings for use in the operation and expansion of its business, and therefore
does not anticipate declaring a cash dividend in the foreseeable future.
Pursuant to the Company's existing senior credit facility, the Company is
restricted from paying cash dividends to stockholders. Any future determination
to pay dividends will be at the discretion of the Company's board of directors
and will be dependent upon the existing conditions, including the Company's
financial condition, results of operations, contractual restrictions, capital
requirements, business prospects, and such other factors as the board of
directors deems relevant.

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ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
(DOLLARS AND AVERAGE SHARES IN THOUSANDS, EXCEPT PER
SHARE DATA)

1998 1997 1996 1995 1994
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues ............................ $50,549 $ -- $ -- $ -- $ --
Costs and expenses:
Cost of revenues ................. 24,749 -- -- -- --
Selling, general and
administrative expense ......... 14,461 2,959 6,858(2) 4,126 5,018
Costs of a certain acquisition
opportunity ..................... 3,146 -- -- -- --
Amortization of intangibles ...... 3,173 -- -- -- --
Interest (income) expense, net ... 1,831 (822) (304) 1,003 678
------- -------- -------- -------- --------
Income (loss) from continuing
operations before taxes .......... 3,189 (2,137) (6,554) (5,129) (5,696)
Income tax provision (benefit) ...... 2,033 (918) (1,573) (1,753) (2,013)
------- -------- -------- -------- --------
Income (loss) from continuing
operations ....................... $ 1,156 $ (1,219) $ (4,981) $ (3,376) $ (3,683)
======= ======== ======== ======== ========
Per share data
Income (loss) from
continuing operations:
Basic ...................... $ .04 $ (.06) $ (.25) $ (.17) $ (.18)
Diluted .................... .03 (.06) (.25) (.17) (.18)
Average number of shares:
Basic ...................... 32,612 20,498 19,876 19,869 19,925
Diluted .................... 34,400 20,498 19,876 19,869 19,925
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (1)
Total assets ................. $150,094 $47,150 $52,484 $109,559 $189,012
Long-term debt, excluding
current portion ............ 37,189 -- -- -- 63,500
Shareholders' equity ......... 76,346 31,403 32,041 93,362 110,298
</TABLE>

(1) 1998 includes the results of operations from the information
management, services, systems and outsourcing businesses from their
respective dates of acquisition and excludes the results of operations
from the discontinued automotive parts and supplies business. Prior
years' selected financial data has been restated to reflect its
discontinuation of the automotive parts and supply business and only
includes data relating to the holding company (see Notes 2 and 3 in
Notes to Consolidated Financial Statements).

(2) 1996 selling, general and administrative expenses include pretax
restructuring and other charges of $3,616,000 (see Note 12 in Notes to
Consolidated Financial Statements).

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<PAGE> 17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

FORWARD - LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements other
than historical or current facts, including, without limitation, statements
about the business, financial condition, business strategy, plans and objectives
of management, and prospects of the Company are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, such forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from these expectations. Such risks and uncertainties include,
without limitation, changes in product demand, the availability of products,
changes in competition, economic conditions, various inventory risks due to
changes in market conditions, risks associated with Year 2000 issues, changes in
tax risks and other risks indicated in the Company's filings with the Securities
and Exchange Commission. These risks and uncertainties are beyond the ability of
the Company to control, and in many cases, the Company cannot predict the risks
and uncertainties that could cause its actual results to differ materially from
those indicated by the forward-looking statements.

When used in this Annual Report, the words "believes," "plans,"
"estimates," "expects," "anticipates," "intends," "continue," "may," "will,"
"should" or the negative of such terms and similar expressions as they relate
to the Company or its management are intended to identify forward-looking
statements.

GENERAL

During 1998 Tyler operated two distinct businesses, the integrated
information management services, systems and outsourcing business and the
automotive parts and supplies business. In 1997, the automotive parts and
supplies business accounted for all of Tyler's continuing revenues.
Discontinued operations previously reported in 1997 included the results of the
Company's products for fund raising business, which was sold in October 1997.
In March 1999, Tyler sold Forest City to HalArt, L.L.C. As a result of the sale
of Forest City, Tyler will no longer engage in the automotive parts and
supplies business, and its business will be solely focused on the integrated
information management services, systems, and outsourcing business. Therefore,
historical financial information attributable to the automotive parts and
supply business has been reported as discontinued operations in 1998, 1997 and
1996 together with the results of operations associated with the products for
fund raising business which was disposed of in 1997, and all prior year
financial information included herein has been restated to reflect these
dispositions. In 1997 and 1996, continuing operations includes only corporate
expense and

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<PAGE> 18

interest income mainly attributable to proceeds from disposals of prior
operating companies. Continuing operations in 1998 are comprised of the results
of operations of its newly acquired information management businesses from
their respective dates of acquisition as follows: Resources, TSG and INCODE -
February 19, 1998; Kofile operations - June 5, 1998; CompactData and Ram Quest
- - July 1, 1998; and CMS - August 1, 1998.

RESULTS OF OPERATIONS

1998 COMPARED TO 1997

In the latter part of 1997, Tyler adopted a strategy to build a
nationally integrated information management services, systems, and outsourcing
company initially serving county and local governments. Tyler believes that the
information management industry today is fragmented and that small, private
companies primarily serve the county and municipal governments and related
markets. Given these industry characteristics, the Company intends to pursue a
consolidation strategy that, if successful, could lead to significant revenue
growth for the Company. The initial phase of this strategy was implemented on
February 19, 1998, with the acquisition of three companies - Resources, TSG and
INCODE, each of which is a major provider of technology and services to county,
local and municipal governments. Following is a summary of acquisitions
consummated in 1998:

On February 19, 1998, the Company acquired Resources, a major provider
of a wide range of information management outsourcing services, primarily to
county as well as to some commercial users. These outsourcing services currently
include records management and micrographic reproduction, computerized indexing,
and imaging of real property records maintained by county clerks and recorders,
as well as information management outsourcing and professional services required
by other county government units and agencies. Resources also provides title
plant copies and title plant update services for title companies.

On February 19, 1998, the Company also acquired TSG and INCODE, which
provide county, local and municipal governments with software, systems and
services to serve their information technology and automation needs. Their
customer base is mainly located in Texas, Georgia and Oregon.

On June 5, 1998, the Company acquired a line of document management
software and related customer installations and service contracts from the
Business Imaging Systems division of Eastman Kodak Company. Kofile, a newly
formed subsidiary in the Company's Resources unit, provides development,
support and marketing of document management software and related customer
installations and service contracts throughout the United States. Kofile's
customer base includes both commercial and governmental users.

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<PAGE> 19

On July 1, 1998, the Company completed the purchases of CompactData
and Ram Quest. CompactData specializes in building and marketing large-scale
databases comprised of public record information, such as property appraisals
and motor vehicle registrations, primarily in Texas. Ram Quest is a producer of
advanced software for title companies that provides automated solutions for the
closing, title plant management and imaging needs of its customers. Ram Quest
has installed software systems primarily with customers throughout Texas. Ram
Quest currently operates as a subsidiary of the Company's Resources unit.

Effective August 1, 1998, the Company completed the purchase of CMS.
CMS provides integrated information management systems and services to county
and municipal governments throughout Iowa, Minnesota, Missouri, South Dakota,
Illinois, Wisconsin and other states, primarily in the upper Midwest.

During 1998, the Company also made other acquisitions, which are
immaterial.

REVENUES

For the year ended December 31, 1998, Tyler had revenues from
continuing operations of $50.5 million, $28.4 million of which were
attributable to the information and property records services segment and $22.1
million of which were derived from the information software systems and
services segment. On a pro forma basis total revenues were $62.7 million
compared to $48.1 million in 1997.

Information and Property Records Services Segment

On a pro forma basis, total revenues from the information and property
records services segment increased $6.2 million or 22%, for the twelve months
ended December 31, 1998 compared to $28.2 million in the comparable prior year
period. A large portion of this increase is the result of revenue earned from a
contract for the Cook County Recorder of Deeds in Chicago, Illinois to design
and install an electronic document management and imaging system.
Implementation of the system began in the second quarter and was completed in
the fourth quarter of 1998. Although the installation of the Cook County
contract was completed in 1998, maintenance and support activities will
continue through 2003. Other sources of revenue increases were optical imaging
services, title plant update services, title company software, customized
programming associated with document management software and royalty income.
Royalty income is derived from the sale of property tax information for real
estate transactions. These increases were somewhat offset by lower re-creation
revenue compared to last year. Re-creation services provide image-enhanced,
archival-quality reprints of old and deteriorating records, including
photostatic prints, with microfilm backup copies for improved security in case
of fire, theft, water damage, or other catastrophe. Re-creation revenue is
generally dependent on available county funds, which may result in uneven
revenue streams from year to year.

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<PAGE> 20

Information Software Systems and Services Segment

On a pro forma basis, total revenues from the information software
systems and services segment increased $8.5 million, or 43%, for the twelve
months ended December 31, 1998 compared to $19.9 million in the comparable
prior year period. Results benefited from an overall movement by county and
local governments to upgrade their current computer systems. The movement has
been driven in part by customers' need to solve their Year 2000 ("Y2K") issues.
The Y2K issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Thus, a date using "00" may be
recognized as the year 1900 rather than 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities. As with all new contracts, the
Company expects Y2K related sales to increase its customer base, which will
provide opportunities to increase future service and maintenance revenues and
to make "add-on" sales of additional products. Maintenance revenue in 1998 was
approximately 25% of total revenue for this segment. In 1998, TSG was awarded
significant contracts with the counties of El Paso and Gregg, both located in
Texas, and Multnomah County (Portland) in Oregon for combined expected revenues
of approximately $8.0 million. Installation of these contracts began in the
fall of 1998 and is expected to be significantly complete by the end of 1999.
Revenues in 1998 include approximately $2.5 million associated with these three
contracts. Additional revenue growth was derived from product upgrades and
expansion into new markets in Georgia, Washington, Minnesota, Wisconsin and
Illinois.

COST OF REVENUES

For the year ended December 31, 1998, Tyler had cost of revenues from
continuing operations of $24.7 million, $14.5 million of which were
attributable to the information and property records services segment and $10.2
million of which were derived from the information software systems and
services segment. On a pro forma basis, cost of revenues were $32.1 million
compared to $24.6 million in 1997.

Information and Property Records Services Segment

On a pro forma basis, total cost of revenues from the information and
property records services segment increased $3.6 million, or 25%, for the
twelve months ended December 31, 1998 compared to $14.5 million in the
comparable prior year period. The gross margin from information and property
records services was slightly lower at 47.3%, compared to the prior year period
amount of 48.6%, on a pro forma basis. This decline in margin is mainly
attributable to changes in product mix, primarily re-creation revenue, which
was unusually high in 1997 and has a higher gross margin than other services.

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Information Software Systems and Services Segment

On a pro forma basis, total cost of revenues from the information
software systems and services segment increased $3.9 million, or 38%, for the
twelve months ended December 31, 1998 compared to $10.1 million in the
comparable prior year period. The gross margin for information software systems
and services in 1998 of 50.8% was up slightly from 49.3% for same period in the
prior year, on a pro forma basis, primarily due to increased sales volume
related to several large contracts in the fourth quarter of 1998. The gross
margin increase was offset somewhat by a strong competitive market for computer
professionals which resulted in increased salaries and other costs associated
with attracting and retaining quality employees.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $14.5 million in
1998, compared to $3.0 million in 1997. The increase is due to acquisition of
the information management companies as the prior year consists only of
corporate expense relating to the holding company's activities. On a pro forma
basis, selling, general and administrative expenses as a percent of revenues
has declined from approximately 29% in 1997 to approximately 27% in 1998,
mainly due to increased sales volume. This decline was offset somewhat by
increased costs associated with present and planned future growth.

COSTS OF A CERTAIN ACQUISITION OPPORTUNITY

On July 31, 1998, the Company entered into a letter of intent with a
Fortune 500 company to acquire certain businesses of the company in a
transaction to be accounted for as a purchase business combination. These
businesses had estimated annual revenues in excess of $500 million and
represented a business opportunity which was aligned with the company's strategy
in the information management business. Direct and incremental costs totaling
$3.1 million associated with the combination, primarily consisting of fees paid
to outside legal and accounting advisors for due diligence, were incurred by the
Company and would have been considered as a cost of the acquisition upon the
successful closing of the transaction. Subsequent to September 30, 1998, the
potential seller elected not to sell any of the businesses. Accordingly, all
costs associated with this opportunity have been expensed in the 1998
consolidated financial statements.

AMORTIZATION OF INTANGIBLES

The Company accounted for all 1998 acquisitions using the purchase
method of accounting for business combinations. Unallocated purchase price over
the net identifiable assets of the acquired companies ("goodwill") is amortized
using the straight-line method of amortization over their respective useful
lives.

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NET INTEREST EXPENSE

As a result of the debt incurred to finance acquisitions and their
related transaction costs in 1998, the Company recorded net interest expense of
$1.8 million compared to net interest income of $0.8 million in 1997.

INCOME TAX PROVISION

The effective tax rate increased to 64% from a 43% benefit rate in the
prior year mainly due to the non-deductibility of goodwill amortization
relating to the 1998 acquisitions.

DISCONTINUED OPERATIONS

Forest City Divestiture

In December 1998, the Company entered into a letter of intent to sell
its non-core automotive parts and supplies business, Forest City. Accordingly,
this segment has been accounted for as a discontinued operation in compliance
with Accounting Principles Board No. 30.

On March 26, 1999, the Company sold all of the outstanding common stock
of Forest City, to HalArt, L.L.C. for approximately $24.5 million. Proceeds
consisted of $12.0 million in cash, $3.8 million in a short-term secured
promissory note, $3.2 million in senior secured subordinated notes and $5.5
million in preferred stock. The short-term secured promissory note bears
interest at 8 1/2%, becomes due in July 1999, is secured by a first lien on
certain real estate and is subject to mandatory prepayment in certain
conditions. In July 1999, the unpaid balance, if any, of the short-term secured
promissory note will be converted to a senior subordinated note due in March
2002. The senior secured subordinated notes will carry interest rates ranging
between 6% to 8%, become due in March 2002, and will be secured by a second lien
on Forest City inventory and real estate. The preferred stock will be
mandatorily redeemable March 2006. Both the subordinated notes and the preferred
stock will be subject to partial or whole redemption upon the occurrences of
specified events.

The estimated loss on the disposal of Forest City is $8.9 million (net
of taxes of $0.7 million), consisting of an estimated loss on disposal of the
business of $8.5 million and a provision of $0.4 million, after taxes, for
anticipated operating losses from the measurement date to the date of disposal.
The amounts the Company will ultimately realize could differ materially from the
amounts assumed in arriving at the loss on disposal of the discontinued
operations. In determining the loss on the disposal of the business, the
subordinated notes were valued using present value techniques. Also, because
redemption of the preferred stock is highly dependent upon future successful
operations of the buyer and due to the extended repayment terms, the Company is
unable to estimate the degree

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of recoverability. Accordingly, the Company will record the value of the
preferred stock as cash is received. Included in the costs and expenses directly
associated with the decision to dispose are among other items, amounts due the
chairman of the board of Forest City and former President of the Company in
connection with the acceleration of his compensation package directly associated
with completion of the sale.

IFS Divestiture

Effective October 15, 1997, the Company sold all of the capital stock
of its subsidiary, IFS, which provided products for fund-raising programs, to
I.F.S. Acquisition Corporation for approximately $8.4 million. This sale
resulted in a loss on disposal of approximately $2.5 million. The estimated
loss on disposal included estimates regarding the value of certain assets that
were subject to change. In 1998, the Company made final adjustments to these
assets, which resulted in a reduction of the previously estimated loss on
disposal by $0.8 million. Management does not expect any further adjustments to
the loss on disposal. Proceeds consisted of approximately $5.8 million in cash
received at closing and approximately $2.6 million received in January 1998.
The results of IFS are included in the Company's consolidated financial
statements as discontinued operations.

NET INCOME AND OTHER MEASURES

Net loss was $8.4 million in 1998 compared to $3.3 million in 1997.
Diluted loss per share was $.24 and $.16 for 1998 and 1997, respectively. Net
earnings from continuing operations was $1.2 million, or $.03 per diluted
share, in 1998 compared to a net loss of $1.2 million, or $.06 per diluted
share in 1997. Excluding the effect of the costs of a certain acquisition
opportunity, income from continuing operations and diluted earnings per share
in 1998 would have been $3.2 million or $.09, respectively.

Earnings before interest, taxes, depreciation, amortization and costs
of a certain acquisition opportunity ("EBITDA") for the year ended December 31,
1998, was $13.7 million. EBITDA consists of income from continuing operations
before interest, costs of a certain acquisition opportunity, income taxes,
depreciation and amortization. Although EBITDA is not calculated in accordance
with generally accepted accounting principles, the Company believes that EBITDA
is widely used as a measure of operating performance. Nevertheless, the measure
should not be considered in isolation or as a substitute for operating income,
cash flows from operating activities, or any other measure for determining the
Company's operating performance or liquidity that is calculated in accordance
with generally accepted accounting principles. EBITDA is not necessarily
indicative of amounts that may be available for reinvestment in the Company's
business or other discretionary uses. In addition, since all companies do not
calculate EBITDA in the same manner, this measure may not be comparable to
similarly titled measures reported by other companies.

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RESULTS OF OPERATIONS

1997 COMPARED TO 1996

Continuing operations in 1997 and 1996 include corporate expense
associated with activities of the holding company and interest income mainly
associated with proceeds from the disposal of prior operating companies.
Results of operations relating to the automotive parts and supply business sold
in March 1999 and the products for fund raising business sold in October 1997
are included in discontinued operations.

After excluding restructuring and other charges of $3.6 million
recorded in 1996, corporate expense in 1997 declined approximately 9% compared
to 1996, due to reduced employee costs. Restructuring and other charges in 1996
included a $1.9 million non-cash charge related to a terminated defined benefit
plan with the remaining charges primarily related to workforce reductions and
reducing corporate office space requirements.

The Company's income tax benefit of approximately $.9 million in 1997
was more than the amount computed by applying the statutory rate to its income
from continuing operations due to the utilization of capital losses.

ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In April, 1998, Statement of Position ("SOP") 98-5, Reporting on the
Costs of Start-up Activities was issued. This SOP provides guidance on the
financial reporting of start-up pre-contract costs and organization cost and
requires that these costs be expensed as incurred. The provisions of SOP 98-5
are effective for financial statements for fiscal years beginning after December
15, 1998. The adoption of SOP 98-5 is not expected to have a material impact on
the Company's consolidated financial statements and related disclosures.

In June 1998, Statement of Financial Accounting Standards ("SFAS") No.
133, Accounting for Derivative Instruments and Hedging Activities, was issued.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The provisions of SFAS No. 133 are
effective for financial statements beginning after June 15, 1999, although
early adoption is allowed. The Company has not determined if it will adopt the
provisions of this SFAS prior to its effective date. The adoption of SFAS No.
133 is not expected to have a material impact on the Company's consolidated
financial statements and related disclosures.

LIQUIDITY

In February 1998, the Company entered into a three-year bank credit
agreement in an amount not to exceed $50.0 million, including a $5.0 million
sublimit for the issuance of standby and commercial letters of credit ("Senior
Credit Facility"). At December 31, 1998, the Company had outstanding borrowings
of $30.8 million and available borrowing capacity of $19.2 million under the
bank credit agreement. The proceeds of the Senior Credit Facility are used to
fund acquisitions, capital expenditures and to meet short-term working capital
needs which may arise from time to time. Borrowings under the Senior Credit
Facility, as amended, bear interest at either the bank's prime rate plus a
margin of zero to .75% or the London Interbank Offered Rate plus a margin of
1.5% to 2.5% depending on the Company's ratio of indebtedness to earnings
before interest, taxes, depreciation and amortization. The effective

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<PAGE> 25

interest rate for borrowings under the bank credit agreement in 1998 was
approximately 7.5%. The Senior Credit Facility is secured by a pledge of the
common stock of all present and future operating subsidiaries and is guaranteed
by all such subsidiaries. Under the terms of the Senior Credit Facility, the
Company is required to maintain certain financial ratios and other financial
conditions. The Senior Credit Facility also prohibits the Company from
incurring certain additional indebtedness, limits certain investments, advances
or loans and restricts substantial asset sales, capital expenditures and cash
dividends.

The Company has engaged in preliminary discussions with its primary
lending bank regarding increasing its credit line. There can be no assurances
that the credit line can be increased on terms acceptable to the Company.

In addition, at December 31, 1998, the Company had several promissory
notes payable, capital lease obligations and other installments notes totaling
approximately $6.4 million (excluding current portion of approximately $1.9
million) with fixed rates of interest ranging from 6.1% to 12%. The Company made
payments of approximately $2.0 million on these notes in 1998.

In January 1998, the Company collected a $2.6 million note receivable
from I.F.S. Acquisition Corporation relating to the sale of IFS in October
1997.

In 1998, the Company incurred capital expenditures of $2.7 million for
continuing operations. Expenditures included cost of building expansion and
computer equipment required for internal growth.

Tyler entered into a tax-benefit transfer lease in 1983 pursuant to
which it is obligated to make income tax payments totaling $3.5 million over
the next three years beginning in 1999. This obligation is included in deferred
taxes at December 31, 1998.

The Company is from time to time engaged in discussions with respect
to selected acquisitions and expects to continue to assess these and other
acquisition opportunities as they arise. The Company may also require
additional financing if it decides to make additional acquisitions. There can
be no assurance, however, that any such opportunities will arise, any such
acquisitions will be consummated or that any needed additional financing will
be available when required on terms satisfactory to the Company. Absent any
acquisitions, the Company anticipates that cash flows from operations, working
capital and unused borrowing capacity under its existing bank credit agreement
will provide sufficient funds to meet its needs for at least the next year.

Effective March 1, 1999, the Company acquired Eagle Computer Systems,
Inc. ("Eagle") for approximately 1.1 million shares of Tyler common stock and
$5.0 million cash in a business combination accounted for as a purchase. Eagle
is based in Eagle, Colorado, and provides integrated information management
systems and services to counties and states located primarily in the western
United States. Eagle was founded in 1978 and employs approximately 50 people.

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CAPITALIZATION

Historically, Tyler's capital structure has varied depending on the
Company's strategies and actions. Acquisitions for cash generally have increased
debt, while cash-generating capabilities of Tyler's operating subsidiaries and
dispositions of companies or assets have provided funds to reduce debt. The
Company's capitalization at December 31, 1998, consisted of $39.1 million in
long-term debt and capital lease obligation (including current portion) and
$76.3 million in stockholders' equity. The total debt-to-capital ratio was 34%
at December 31, 1998.

Excluding acquisitions, Tyler anticipates that 1999 capital spending
will be approximately $7.7 million, which is expected to be funded from
internal operations and/or bank financing. Included in these expenditures is
approximately $3.4 million relating to construction of a national data
repository ("Database"). Such costs include certain payroll related programming
costs as well as the costs to purchase data from external sources to initially
populate the Database. Upon completion, the Database will include, among other
items, a wide range of public information such as real property tax and
assessment data, chain of title property records and images. The Company does
not anticipate Database revenues to be significant in 1999. Additionally,
further expenditures will be necessary subsequent to 1999 to update and expand
the database.

YEAR 2000 COMPLIANCE

Introduction

The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's hardware, software and embedded systems ("systems") that have
time/ date-sensitive software and hardware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculation. The Company presently believes that, with its
scheduled modification to and selective replacement of existing computer
systems, the Y2K issue will not pose material operational problems for the
Company's systems, as so modified and/or replaced.

The Company has established a Program Office to centralize and
coordinate its efforts and to further define, evaluate and conduct audits of
the Company and its progress toward Y2K compliance. The Program Office is
chaired by the Chief Financial Officer and reports periodically to the
Executive Committee of the Board of Directors. The Program Office has
established a Y2K Task Force, comprised of representatives from each of the
Company's principal operating units, which is charged with evaluating and
implementing the Company's Y2K effort and reporting the results thereof to the
Program Office. The Executive Committee of the Board of Directors is charged
with evaluating the progress reported by the Program Office and addressing any
issues as they arise.

Page 25
<PAGE> 27

Status of Progress

At the request of the Program Office, each of the Company's operating
units has independently developed a Y2K plan. Pursuant to these plans, each
operating unit has conducted an inventory and assessment of its internal and
external technology, all of its computer-based systems, imbedded microchips and
other processing capabilities to identify the computer systems that could be
affected by the Y2K issue. The operating units have also substantially
completed testing of their products for Y2K compliance, and some have completed
testing of their delivery systems. Certain customers currently have Y2K
compliant versions of the Company's products. The Company's Y2K plan calls for
a majority of customers to have compliant versions installed by July 1999 and
the remainder by December 1999. Each operating unit is at a different stage in
the implementation of their Y2K plan. Overall, however, as of December 31,
1998, the Company was approximately 55% complete.

The Company primarily uses third party software for its internal
computer systems. A majority of the installed systems are purported to be Y2K
compliant. The Company has purchased, and is now installing at one of its
principal operating units, an enhanced accounting application from Platinum
Technologies that is Y2K compliant to replace the current system. Installation
is expected to be completed by September 1999.

The Company cooperates with many third party vendors and suppliers to
provide products and services to its customers and to the Company itself. The
Company has circulated and has received written confirmation from a selected
number of such parties and is expecting responses from the remainder. All
responses will be evaluated as received to determine if additional action is
required.

Costs to Address

Given the nature of ongoing system development activities throughout
the businesses, it is difficult to quantify, with specificity, all of the costs
being incurred to address this issue. A significant portion of these costs will
represent the redeployment of existing information technology resources. The
Company's employees have conducted the majority of the work performed thus far
in executing the implementation plans.

The costs incurred to date are estimated to be approximately $2.6
million, and the estimated costs to complete will comprise an additional $1.4
million. A majority of the estimated costs to complete will be capitalized
because such costs represent hardware and software packages. Some of the prior
costs were incurred by the Company's operating units before they were acquired
by the Company. The new accounting application is being purchased primarily to
accommodate expansion and anticipated future acquisitions and secondarily to
obtain Y2K compliance. However, the total cost for the accounting application
is included in the aforementioned amount. The total cost estimate of the
implementation plan may be revised because the plan is constantly evaluated and
revised as a result of many factors. These factors include, but are not limited
to, the results of any phase of the implementation

Page 26
<PAGE> 28

plan, customer requirements, acquisitions, or recommendations by business
partners. The Company does not expect that the opportunity costs of executing
the implementation plan will have a material effect on the financial condition
of the Company or its results of operations.

Risks

The Y2K issue creates risk for the Company from unforeseen problems in
its own computer, telephone and security systems and from third parties upon
which the Company relies. Accordingly, the Company is requesting assurances
from certain software vendors from which it has acquired software, or from
which it may acquire software, that the software will correctly process all
date information at all times. The Company exerts no control over such third
party's efforts to become Y2K compliant. The services provided by these parties
are critical to the operations of the Company and the Company is heavily
reliant upon these parties to successfully address the Y2K issue. Therefore, if
any of these parties fail to provide the Company with services, the Company's
ability to conduct business could be materially impacted. The result of such
impact may have a material adverse effect on the financial condition and
results of operations of the Company.

In addition, the Company is in the process of confirming with certain
of its customers and suppliers their progress in identifying and addressing
problems that their computer systems will face in correctly processing date
information as the year 2000 approaches and is reached. Failure to
appropriately address the Y2K issue by a major customer or supplier or a
material percentage of the smaller customers could have a material adverse
effect on the financial condition and results of operations of the Company.

The Company does not expect any material product development
activities to be delayed due to the Y2K compliance efforts; however, if certain
initiatives are delayed, the result could have an adverse effect to the
Company.

Contingency

The Company's Y2K compliance activities are being monitored and
evaluated by the Program Office and ultimately by the Executive Committee.
Contingency plans are being established and implemented as the risks are
identified. Additional steps are being taken to further minimize the risks
associated with the Y2K issue. For example, all of the Company's operating
units are developing plans to allow for additional customer support after
January 1, 2000 in anticipation of questions they may receive from their
customers, even if the questions do not relate directly to their products or
services.

Page 27
<PAGE> 29
Summary

There can be no assurances that the Company will identify all
date-handling problems in its business systems or those of its customers and
suppliers in advance of their occurrence or that the Company will be able to
successfully remedy all Y2K compliance issues that are discovered. However, the
Company is working to identify all issues. To the extent that the Company is
unable to resolve its Y2K issues prior to January 1, 2000, operating results
could be materially and adversely affected. In addition, the Company could be
adversely affected if other entities (i.e., vendors or customers) not
affiliated with the Company do not appropriately address their own Y2K
compliance issues in advance of their occurrence.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to market risk from changes in interest rates
due to the variable borrowing rates on its revolving credit facility, but
because of the present nature of its operations, it is not exposed to changes in
equity prices and foreign currency exchange rates. Interest rate risk can be
estimated by measuring the impact of a near-term adverse movement of 2% in
short-term market interest rates. If short-term market interest rates average 2%
more in 1999 than in 1998, there would be no material adverse impact on the
Company's results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements of the Company, together with the
report of independent auditors and financial statement schedule, are included on
pages 34 through 70 of this report. Financial statement schedules other than the
schedule included have been omitted because the required information is
contained in the consolidated financial statements or related notes, or such
information is not applicable.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE.

Not applicable.

Page 28
<PAGE> 30

PART III

The information required by Items 10 through 13 of Part III is
incorporated herein by reference from the indicated sections of Tyler's
definitive proxy statement for its annual meeting of stockholders to be held on
May 19, 1999 (the "Proxy Statement"). Only those sections of the Proxy
Statement that specifically address the items set forth herein are incorporated
by reference. Such incorporation by reference does not include the Compensation
Committee Report or the Stock Performance Graphs, included in the Proxy
Statement.

<TABLE>
<CAPTION>
Headings in
Proxy Statement
----------------------------------------
<S> <C>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. "Directors and Executive Officers"

ITEM 11. EXECUTIVE COMPENSATION. "Executive Compensation"

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS "Security Ownership of Directors and
AND MANAGEMENT. Executive Officers"

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. "Certain Transactions"
</TABLE>

Page 29
<PAGE> 31

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.

(a) (1) The consolidated financial statements listed in the "Index to
Financial Statements" included in the Table of Contents on page 1
are filed as part of this report.

(2) The schedule listed in the Index to Financial Statements and
Schedule included in the Table of Contents on page 1 is filed
as part of this report.

(3) Exhibits

Certain of the exhibits to this report are hereby incorporated by
reference, as specified:

3.1 Restated Certificate of Incorporation of Tyler Three, as amended
through May 14, 1990, and Certificate of Designation of Series A
Junior Participating Preferred Stock (filed as Exhibit 3.1 to the
Company's Form 10-Q for the quarter ended June 30, 1990, and
incorporated herein).

3.2 Certificate of Amendment to the Restated Certificate of
Incorporation (filed as Exhibit 3.1 to the Company's Form 8-K, dated
February 19, 1998, and incorporated herein).

3.3 Amended and Restated By-Laws of Tyler Corporation, dated November 4,
1997 (filed as Exhibit 3.3 to the Company's Form 10-K for the year
ended December 31, 1997, and incorporated herein).

4.1 Rights Agreement, dated as of March 14, 1993, by and between Tyler
Corporation and The First National Bank of Boston, as Rights Agent,
which includes the form of Rights Certificate as Exhibit B thereto
(filed as Exhibit 4 to the Company's Form 8-K, dated January 29,
1993, and incorporated herein).

4.2 Specimen of Common Stock Certificate (filed as Exhibit 4.1 to the
Company's registration statement no. 33-33505 and incorporated
herein).

4.3 Credit agreement among Tyler Corporation and NationsBank of Texas,
N.A., dated February 13, 1998 (filed as Exhibit 4.3 to the Company's
Form 10-K for the year ended December 31, 1997, and incorporated
herein).

10.1 Form of Indemnification Agreement for directors and officers (filed
as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
March 31, 1992, and incorporated herein).

10.2 Stock Option Plan amended and restated as of February 7, 1997
(filed as Exhibit 4.1 to the Company's registration statement no.
33-34809 and incorporated herein).

10.5 Indemnification Agreement, dated December 20, 1989 (filed as Exhibit
2.3 to the Company's registration statement no. 33-33505 and
incorporated herein).

10.6 Agreement and Plan of Merger among Tyler Corporation, T1 Acquisition
Corporation, Business Resources Corporation and William D. Oates
dated October 8, 1997 (filed as Exhibit 10.25 to the Company's Form
8-K, dated October 16, 1997, and incorporated herein).

Page 30
<PAGE> 32

10.7 Agreement and Plan of Merger among Tyler Corporation, T2 Acquisition
Corporation, The Software Group, Inc., Brian B. Berry and Glenn A.
Smith dated October 8, 1997 (filed as Exhibit 10.26 to the Company's
Form 8-K, dated October 16, 1997, and incorporated herein).

10.8 Second Amended and Restated Agreement and Plan of Merger, dated as
of December 29, 1997, and effective as of October 8, 1997, among the
Company, T1 Acquisition Corporation, Business Resources Corporation,
and William D. Oates (filed as Exhibit 10.1 to the Company's Form
8-K, dated February 19, 1998, and incorporated herein).

10.9 Amended and Restated Agreement and Plan of Merger, dated as of
December 29, 1997, and effective as of October 8, 1997, among the
Company, T2 Acquisition Corporation, The Software Group, Inc., and
Brian B. Berry and Glenn A. Smith (filed as Exhibit 10.2 to the
Company's Form 8-K, dated February 19, 1998, and incorporated
herein).

10.10 Amendment Number One, dated February 19, 1998, and effective as of
October 8, 1997, to the Amended and Restated Agreement and Plan of
Merger among the Company, T2 Acquisition Corporation, The Software
Group, Inc. and Brian B. Berry and Glenn A. Smith (filed as Exhibit
10.3 to the Company's Form 8-K, dated February 19, 1998, and
incorporated herein).

10.11 Acquisition Agreement dated as of November 20, 1995, by and among
the Registrants, Tyler Pipe Industries, Inc. and Ransom Industries,
Inc., formerly known as Union Acquisition Corporation (filed as
Exhibit 2.1 to the Company's Form 8-K, dated December 14, 1995, and
incorporated herein).

10.12 Purchase Agreement between Tyler Corporation, Richmond Partners,
Ltd. and Louis A. Waters, dated August 20, 1997 (filed as Exhibit
10.24 to the Company's Form 8-K, dated September 2, 1997, and
incorporated herein).

10.16 Employment agreement between the Company and Brian K. Miller, dated
December 1, 1997. (filed as Exhibit 10.16 to the Company's Form 10-K
for the year ended December 31, 1997 and incorporated herein).

10.18 Employment agreement between the Company and Theodore L. Bathurst,
dated October 7, 1998, filed as Exhibit 10.18 to the Company's Form
10-Q for the quarter ended September 30, 1998, and incorporated
herein).

*10.19 Employment agreement between the Company and C.A. Rundell, Jr., dated
December 9, 1998.

*21 Subsidiaries of Tyler

*23 Consent of Ernst & Young LLP

*27 Financial Data Schedule

Tyler will furnish copies of these exhibits to shareholders upon
written request and payment for copying charges of $0.15 per page.

* Filed herewith.

(b) Reports on Form 8-K

Tyler did not file any Current Reports on Form 8-K during the fourth
quarter of 1998.

Page 31
<PAGE> 33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

TYLER CORPORATION

Date: March 26, 1999 By: /s/ John M. Yeaman
-----------------------------------------
John M. Yeaman
President and Chief Executive Officer
(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: March 26, 1999 By: /s/ Louis A. Waters
-----------------------------------------
Louis A. Waters
Chairman of the Board

Date: March 26, 1999 By: /s/ John M. Yeaman
-----------------------------------------
John M. Yeaman
President and Chief Executive Officer
(principal executive officer)

Date: March 26, 1999 By: /s/ Theodore L. Bathurst
-----------------------------------------
Theodore L. Bathurst
Vice President and Chief
Financial Officer
(principal financial officer)

Date: March 26, 1999 By: /s/ Brian K. Miller
-----------------------------------------
Brian K. Miller
Vice President and Chief Accounting
Officer and Treasurer
(principal accounting officer)

Page 32
<PAGE> 34

Date: March 26, 1999 By: /s/ Ernest H. Lorch
-----------------------------------------
Ernest H. Lorch
Director

Date: March 26, 1999 By: /s/ F. R. Meyer
-----------------------------------------
F. R. Meyer
Director

Date: March 26, 1999 By: /s/ William D. Oates
-----------------------------------------
William D. Oates
Director

Date: March 26, 1999 By: /s/ C.A. Rundell, Jr.
-----------------------------------------
C.A. Rundell, Jr.
Director

Page 33
<PAGE> 35

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Tyler Corporation

We have audited the accompanying consolidated balance sheets of Tyler
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These consolidated financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Tyler Corporation and subsidiaries at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

Ernst & Young LLP

Dallas, Texas
March 19, 1999, except for the second paragraph of Note 3, as to which the date
is March 26, 1999

Page 34
<PAGE> 36

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
In thousands, except per share amounts

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues ........................................................ $ 50,549 $ -- $ --
Cost of revenues ................................................ 24,749 -- --
-------- -------- --------

Gross profit ............................................... 25,800 -- --

Selling, general and administrative expense ..................... 14,461 2,959 6,858
Costs of a certain acquisition opportunity ...................... 3,146 -- --
Amortization of intangibles ..................................... 3,173 -- --
-------- -------- --------

Operating income (loss) .................................... 5,020 (2,959) (6,858)

Interest expense ................................................ 2,009 85 183
Interest income ................................................. (178) (907) (487)
-------- -------- --------

Income (loss) from continuing operations,
before income tax ........................................... 3,189 (2,137) (6,554)

Income tax provision (benefit)
Current ..................................................... 1,837 1,280 (83)
Deferred .................................................... 196 (2,198) (1,490)
-------- -------- --------
2,033 (918) (1,573)
-------- -------- --------

Income (loss) from continuing operations ........................ 1,156 (1,219) (4,981)

Discontinued operations:
Income (loss) from operations, after income tax (benefit) ... (1,378) 339 (56,349)
Loss on disposal, after income tax benefit .................. (8,138) (2,468) --
-------- -------- --------
Loss from discontinued operations ........................... (9,516) (2,129) (56,349)
-------- -------- --------

Net loss ........................................................ $ (8,360) $ (3,348) $(61,330)
======== ======== ========

Basic earnings (loss) per common share:
Continuing operations ........................................ $ .04 $ (.06) $ (.25)
Discontinued operations ...................................... (.30) (.10) (2.84)
-------- -------- --------
Net loss per common share .................................. $ (.26) $ (.16) $ (3.09)
======== ======== ========

Diluted earnings (loss) per common share:
Continuing operations ........................................ $ .03 $ (.06) $ (.25)
Discontinued operations ...................................... (.27) (.10) (2.84)
-------- -------- --------
Net loss per common share .................................. $ (.24) $ (.16) $ (3.09)
======== ======== ========

Weighted average outstanding common shares:
Basic ........................................................ 32,612 20,498 19,876
Diluted ...................................................... 34,400 20,498 19,876
</TABLE>

See accompanying notes.

Page 35
<PAGE> 37

CONSOLIDATED BALANCE SHEETS
December 31
In thousands, except par value and number of shares

<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 1,558 $ 8,364
Accounts receivable (less allowance for losses of $531 in 1998) ........ 14,429 17
Note receivable from I.F.S. Acquisition Corporation .................... -- 2,628
Income tax receivable .................................................. 1,308 516
Prepaid expenses and other current assets .............................. 1,445 346
Deferred income taxes .................................................. 1,061 814
Net assets of discontinued operations .................................. 12,752 16,272
--------- --------
Total current assets ................................................ 32,553 28,957

Net assets of discontinued operations ..................................... 2,848 6,524

Property and equipment, net ............................................... 14,147 110

Other assets:
Goodwill and other intangibles, net .................................... 95,996 --
Sundry ................................................................. 938 1,404
Note receivable from Business Resources Corporation .................... -- 5,700
Other receivables ...................................................... 3,612 4,455
--------- --------
$ 150,094 $ 47,150
========= ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 1,190 $ 11
Accrued wages and commissions .......................................... 1,903 236
Other accrued liabilities .............................................. 3,249 4,218
Current portion of long-term debt ...................................... 1,876 --
Deferred revenue ....................................................... 10,148 --
--------- --------
Total current liabilities ........................................... 18,366 4,465

Long-term debt, less current portion ...................................... 37,189 --
Deferred income taxes ..................................................... 10,920 2,745
Other liabilities ......................................................... 7,273 8,537

Commitments and contingencies

Shareholders' equity:
Preferred stock, $10.00 par value; 1,000,000 shares authorized,
none issued .......................................................... -- --
Common stock, $.01 par value, 100,000,000 and 50,000,000 shares
authorized in 1998 and 1997, respectively; 35,913,313 shares issued in
1998; 23,309,277 shares issued in 1997 ................................ 359 233
Capital surplus ........................................................ 103,985 51,216
Accumulated deficit .................................................... (21,791) (13,431)
--------- --------
82,553 38,018
Less 1,423,482 treasury shares in 1998 and 1,552,965 treasury
shares in 1997, at cost ............................................. 6,207 6,615
--------- --------
Total shareholders' equity ....................................... 76,346 31,403
--------- --------
$ 150,094 $ 47,150
========= ========
</TABLE>

See accompanying notes.

Page 36
<PAGE> 38

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1998, 1997 and 1996
In thousands, except number of shares

<TABLE>
<CAPTION>
Common Stock Retained Treasury Stock
------------------- Earnings ----------------------
Capital (Accumulated
Shares Amount Surplus Deficit) Shares Amount
---------- ------ --------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ............. 21,309,277 $213 $ 48,538 $ 51,247 (1,433,783) $(6,636)
Net sale of treasury shares to
employee benefit plan .............. -- -- (18) -- 4,955 27
Net loss/Aggregate comprehensive
loss ............................... -- -- -- (61,330) -- --
---------- ---- --------- -------- ---------- -------
Balance at December 31, 1996 ............. 21,309,277 213 48,520 (10,083) (1,428,828) (6,609)

Issuance of treasury shares upon
exercise of stock options .......... -- -- (309) -- 198,472 682

Issuance of treasury shares for
employee stock grants .............. -- -- (442) -- 150,000 942
Sale of common stock and warrant ...... 2,000,000 20 3,480 -- -- --
Redemption of rights .................. -- -- (220) -- -- --
Purchase of treasury shares ........... -- -- -- -- (472,609) (1,630)
Federal income tax benefit related
to exercise of stock options ....... -- -- 187 -- -- --
Net loss/Aggregate comprehensive
loss ............................... -- -- -- (3,348) -- --
---------- ---- --------- -------- ---------- -------
Balance at December 31, 1997 ............. 23,309,277 233 51,216 (13,431) (1,552,965) (6,615)

Issuance of treasury shares upon
exercise of stock options .......... -- -- (259) -- 135,483 468
Shares issued for acquisitions ........ 12,604,036 126 52,880 -- (6,000) (60)
Federal income tax benefit related
to exercise of stock options ....... -- -- 148 -- -- --
Net loss/Aggregate comprehensive
loss ............................... -- -- -- (8,360) -- --
---------- ---- --------- -------- ---------- -------
Balance at December 31, 1998 ............. 35,913,313 $359 $ 103,985 $(21,791) (1,423,482) $(6,207)
========== ==== ========= ======== ========== =======
</TABLE>

See accompanying notes.

Page 37
<PAGE> 39

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
In thousands

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss ........................................................ $ (8,360) $ (3,348) $(61,330)

Adjustments to reconcile net loss from operations
to net cash provided (used) by operations:
Depreciation and amortization ................................ 5,503 116 101
Other noncash charges ........................................ -- -- 7,748
Deferred income tax (benefit) ................................ 242 (2,477) (2,071)
Discontinued operations - noncash charges and changes
in operating assets and liabilities ........................ 9,266 2,794 62,217
Changes in operating assets and liabilities,
exclusive of effects of acquired companies
and discontinued operations:
Accounts receivable ...................................... (7,504) (15) 197
Prepaid expenses and other current assets ................ (189) (150) (489)
Income tax receivable .................................... 231 510 3,272
Other receivables ........................................ 882 -- --
Accounts payable ......................................... (533) (135) 4
Accrued liabilities ...................................... (463) (3,071) (3,004)
Deferred revenue ......................................... 4,316 -- --
Other liabilities ........................................ (1,303) (53) (161)
-------- -------- --------
Net cash provided (used) by operating activities ..... 2,088 (5,829) 6,484
-------- -------- --------

Cash flows from investing activities
Additions to property and equipment ............................. (2,658) (139) --
Cost of acquisitions, net of cash acquired ...................... (34,741) -- --
Proceeds from disposal of property and equipment ............... 21 -- --
Capital expenditures of discontinued operations ................. (2,070) (1,290) (3,567)
Note receivable from Business Resources Corporation ............. -- (5,700) --
Proceeds from disposal of discontinued operations ............... 2,628 5,847 7,599
Other ........................................................ 33 (738) 2,107
-------- -------- --------
Net cash provided (used) by investing activities .......... (36,787) (2,020) 6,139
-------- -------- --------
Cash flows from financing activities
Net borrowings on revolving credit facility ..................... 30,810 -- --
Payments on notes payable ....................................... (2,042) -- --
Issuance of common stock ........................................ -- 3,500 --
Net sale of treasury shares to employee benefit plans .......... 209 645 9
Purchase of treasury shares .................................... -- (1,630) --
Payments of principal on capital lease obligations .............. (551) -- --
Redemption of rights ............................................ (220) -- --
Debt issuance costs ............................................. (313) -- --
-------- -------- --------
Net cash provided by financing activities ................. 27,893 2,515 9
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ............... (6,806) (5,334) 12,632
Cash and cash equivalents at beginning of year ..................... 8,364 13,698 1,066
-------- -------- --------
Cash and cash equivalents at end of year ........................... $ 1,558 $ 8,364 $ 13,698
======== ======== ========
</TABLE>

See accompanying notes.

Page 38
<PAGE> 40
Notes to Consolidated Financial Statements
(Tables in thousands, except per share data)

December 31, 1998 and 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Tyler Corporation (the "Company") currently provides information
management services and products through four major operating subsidiaries,
Business Resources Corporation ("Resources"), The Software Group, Inc. ("TSG"),
Interactive Computer Designs, Inc. ("INCODE") and Computer Management Services,
Inc. ("CMS").

The Company operates in two business segments: the information and
property records services segment and the information software systems and
services segment.

Resources, which represents the information services and property
records segment, provides a wide range of information management outsourcing
services, primarily to county governments as well as some commercial users.
These outsourcing services currently include records management and micrographic
reproduction, computerized indexing, and imaging of real property records
maintained by county clerks and recorders, as well as information management
outsourcing and professional services required by other county government units
and agencies. This segment also provides title plant copies and title plant
update services to title companies.

TSG, INCODE and CMS comprise the information software systems and
services segment. These companies provide county, local and municipal
governments with software, systems and services to serve their information
technology and automation needs. These companies integrate their own products
with computer equipment from hardware vendors, third-party database management
applications and office automation software. They assist local and county
governments with all aspects of software and hardware selection, network design
and management, installation and training and on-going support and related
services.

The Company discontinued operations of Institutional Financing Services
Inc. ("IFS") in 1997 and Forest City Auto Parts Company ("Forest City") in 1998.
See Note 3 for further discussion.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company and all of its wholly-owned subsidiaries. Prior year's financial
statements have been restated to reflect the dispositions of IFS and Forest
City as discontinued operations.

Page 39
<PAGE> 41

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased
with original maturities of three months or less, which includes overnight
repurchase agreements, to be cash equivalents.

MERCHANDISE INVENTORIES

Merchandise inventories of Forest City, a discontinued operation, are
valued at the lower of cost or market, cost being determined utilizing the
first-in, first-out method. Cost of sales includes product cost, net of earned
vendor rebates, discounts and allowances based on the terms of the underlying
agreements. All operating and administrative costs are expensed as incurred and
are not capitalized in inventories.

REVENUE RECOGNITION

The Company's information software systems and services segment
derives revenue from software licenses, postcontract customer support ("PCS"),
and services. PCS includes telephone support, bug fixes, and rights to upgrade
on a when-and-if available basis. Services range from installation, training,
and basic consulting to software modification and customization to meet
specific customer needs. In software arrangements that include rights to
multiple software products, specified upgrades, PCS, and/or other services, the
Company allocates the total arrangement fee among each deliverable based on the
relative fair value of each of the deliverables, determined based on
vendor-specific objective evidence.

In October 1997, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position ("SOP") 97-2, Software
Revenue Recognition which supersedes SOP 91-1. The Company was required to
adopt SOP 97-2 for software transactions entered into beginning January 1,
1998.

The Company recognizes revenue in accordance with SOP 97-2 as follows:

Software Licenses - The Company recognizes the revenue allocable to
software licenses and specified upgrades upon delivery and installation of the
software product or upgrade to the end user, unless the fee is not fixed or
determinable or collectibility is not probable. If the fee is not fixed or
determinable, revenue is recognized as payments become due from the customer.

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<PAGE> 42
If collectibility is not considered probable, revenue is recognized when the
fee is collected. Arrangements that include software services, such as training
or installation, are evaluated to determine whether those services are essential
to the functionality of other elements of the arrangement.

A majority of the Company's software arrangements involve
off-the-shelf software and the other elements are not considered essential to
the functionality of the software. For those software arrangements in which
services are not considered essential, the software license fee is recognized
as revenue after delivery and installation have occurred, training has
commenced, customer acceptance is reasonably assured, the license fee is
substantially billable and remaining services other than training are
considered nominal.

Software Services - When software services are considered essential,
revenue under the entire arrangement is recognized as the services are
performed using the percentage-of-completion contract accounting method. When
software services are not considered essential, the fee allocable to the
service element is recognized as revenue as the services are performed.

Computer Hardware Equipment - Revenue allocable to equipment based on
vendor specific evidence of fair value is recognized when the equipment is
delivered and collection is probable.

Postcontract Customer Support - PCS agreements are generally entered
into in connection with initial license sales and subsequent renewals. Revenue
allocated to PCS is recognized on a straight-line basis over the period the PCS
is provided. All significant costs and expenses associated with PCS are
expensed as incurred.

Contract Accounting - For arrangements that include customization or
modification of the software, or where software services are otherwise
considered essential, revenue is recognized using contract accounting. Revenue
from these software arrangements is recognized on a percentage-of-completion
method with progress-to-completion measured based primarily upon labor hours
incurred.

Deferred revenue consists primarily of payments received in advance of
revenue being earned under software licensing, software and hardware
installation, support and maintenance contracts.

Through its information and property records services segment, the
Company provides computerized indexing and imaging of real property records,
records management and micrographic reproduction, as well as information
management outsourcing and professional services required by county and local
government units and agencies and provides title plant update services to title
companies. The Company recognizes service revenue when services are performed
and equipment sales when the products are shipped.

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The Company also receives royalty revenue relating to the current
activities of two former subsidiaries of Resources. Royalty revenue is
recognized as earned upon receipt of royalty payments.

Substantially all revenue from the discontinued operations is
recognized when products are delivered to customers. Estimated sales returns
and allowances are recorded as of the date of sale.

USE OF ESTIMATES

The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PROPERTY AND EQUIPMENT

Property, equipment and purchased software are recorded at cost.
Depreciation and amortization are computed for financial reporting purposes
utilizing primarily the straight-line method over the estimated useful lives of
the related assets, or for leasehold improvements and capital leases, the base
lease term or estimated useful life, if shorter. For income tax purposes
accelerated depreciation methods are primarily used with the establishment of
deferred income tax liabilities for the resulting temporary differences.

Maintenance and repairs are charged to expense as incurred. Costs of
renewals and betterments are capitalized. The cost and accumulated depreciation
and amortization applicable to assets sold or otherwise disposed of are removed
from the asset accounts, and any net gain or loss is included in the statement
of operations.

INTERNAL SOFTWARE DEVELOPMENT COSTS

In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed for or Obtained for Internal Use. The SOP, which was
adopted by the Company on January 1, 1998, requires capitalization of certain
external direct costs of materials and services, internal payroll and payroll
related costs and other qualifying costs incurred in connection with developing
or obtaining internal use software.

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IMPAIRMENT OF LONG-LIVED ASSETS

The Company accounts for its long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets, including goodwill, to be held and used
is measured by a comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the assets.

Assets to be disposed of are reported at the lower of carrying amount
or fair value less costs to sell.

RESEARCH AND DEVELOPMENT COSTS

The Company expenses all research and development costs as incurred
and such amounts were not material in any of the periods presented.

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INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

STOCK COMPENSATION

Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
Accounting for Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards as of
the date of grant. Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method defined in SFAS
No. 123 had been applied.

The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
See Note 15 for additional information.

COMPREHENSIVE INCOME (LOSS)

On January 1, 1998, the Company adopted the provisions of SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting
and displaying comprehensive income and its components. Reclassification of
financial statements for earlier periods, provided for comparative purposes, is
required. The statement also requires the accumulated balance of other
comprehensive income to be displayed separately from retained earnings and
additional paid-in capital in the equity section of the statement of financial
position.

Comprehensive income (loss) for each year in the three year period
ended December 31, 1998 is the same as the Company's reported net income (loss)
for this period and there is no accumulated balance of other comprehensive
income as of December 31, 1998, 1997 or 1996.

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EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share is calculated in accordance with SFAS
No. 128, Earnings Per Share, which was adopted by the Company in the fourth
quarter of 1997. Amounts previously reported have been restated.
See Note 7.

SOFTWARE DEVELOPMENT COSTS

SFAS No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed, requires capitalization of software development
costs incurred subsequent to establishment of technological feasibility and
prior to the availability of the product for general release to customers. The
Company capitalized approximately $267,000 of software development costs, which
primarily includes personnel costs, in 1998 only.

Systematic amortization of capitalized costs begins when a product is
available for general release to customers and is computed on a
product-by-product basis at a rate not less than straight-line basis over the
product's remaining estimated economic life. Amortization of software
development costs in 1998 was not significant.

GOODWILL AND OTHER INTANGIBLE ASSETS

The cost of acquired companies is allocated first to identifiable
assets based on estimated fair values. Costs allocated to identifiable
intangible assets are amortized on a straight-line basis over the remaining
estimated useful lives of the assets, as determined principally by underlying
contract terms or independent appraisals. The excess of the purchase price over
the fair value of identifiable assets acquired, net of liabilities assumed, is
recorded as goodwill and amortized on a straight-line basis over the useful
life. The useful life is determined based on the individual characteristics of
the acquired entity and ranges from ten to forty years.

The Company periodically evaluates the carrying amounts of goodwill, as
well as the related amortization periods, to determine whether adjustments to
these amounts or useful lives are required based on current events and
circumstances. The evaluation is based on the Company's projection of the
undiscounted future operating cash flows of the acquired operation over the
remaining useful lives of the related goodwill. To the extent such projections
indicate that future undiscounted cash flows are not sufficient to recover the
carrying amounts of related goodwill, the underlying assets are written down by
charges to expense so that the carrying amount is equal to fair value, primarily
determined based on future discounted cash flows. The assessment of
recoverability of goodwill will be affected if estimated future operating cash
flows are not achieved.

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Title plants consist of title records relating to a particular region and are
generally stated at cost. Expenses associated with current maintenance, such as
salaries and supplies, are charged to expense in the year incurred. The costs of
acquired title plants and costs of building new title plants, prior to the time
that a plant is put into operation, are capitalized. Properly maintained title
plants are not amortized as permitted by SFAS No. 61, Accounting for Title
Plant, because there is no indication of diminution in their value.

Costs incurred after a title plant is operational to convert the
information from one storage and retrieval system to another have not been
capitalized as title plant. Those costs have been capitalized separately and
will be amortized over an estimated useful life of ten years.

The Company capitalizes qualifying costs to internally construct a
national data repository ("Database"). Such capitalized costs include certain
payroll-related programming costs as well as the costs to purchase data from
external sources to initially populate the Database. Costs to subsequently
update the Database will be expensed as incurred. Upon its completion, the
Database will include among other items, a wide range of public information
such as real property tax and assessment data, chain of title property records
and images.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:

Cash and cash equivalents, trade accounts receivables, other current
assets, other assets, notes payable to banks, trade accounts payables, and
accrued expenses (nonderivatives): The carrying amounts approximate fair value
because of the short maturity of these instruments.

Long-term debt: The fair value of the Company's long-term debt is
estimated by discounting the future cash flows of each instrument at rates
currently offered to the Company for similar debt instruments of comparable
maturities by the Company's banks.

Based upon the borrowing rates available to the Company for bank loans
with similar terms and average maturities, the estimated fair value of the notes
payable is approximately $39,176,000 at December 31, 1998. The corresponding
carrying value is approximately $39,065,000 at December 31, 1998. The Company
had no such indebtedness at December 31, 1997.

The Company has no involvement with derivative financial instruments,
including those for speculative or trading purposes.

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CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk with respect to receivables are limited
due to the wide variety of customers and markets into which the Company's
products and services are provided, as well as their dispersion across many
different geographic areas. As a result, as of December 31, 1998, the Company
does not consider itself to have any significant concentrations of credit risk.

COMMITMENTS AND CONTINGENCIES

In October 1996, the AICPA issued SOP 96-1, Environment Remediation
Liabilities. SOP 96-1 was adopted by the Company on January 1, 1997 and
required, among other things, environmental remediation liabilities to be
accrued when the criteria of SFAS No. 5, Accounting for Contingencies, have
been met. The guidance provided by the SOP is consistent with the Company's
current method of accounting for environmental remediation costs and,
therefore, adoption of this SOP did not have a material impact on the Company's
consolidated financial statements.

The Company accrues for losses associated with environmental
remediation obligations when such losses are probable and reasonably
estimatable. Accruals for estimated losses from environmental remediation
obligations generally are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further information develops
or circumstances change. Such costs include the incremental direct costs of the
remediation effort, including fees estimated to be paid to outside law firms
and certain internal employee compensation and benefits directly related to the
remediation effort. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable and have been included in noncurrent other
receivables at December 31, 1998 and 1997.

Legal costs to defend nonenvironmental litigation matters are expensed
as incurred.

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RECLASSIFICATIONS

Certain amounts for previous years have been reclassified to conform
to the 1998 presentation.

(2) ACQUISITIONS

On February 19, 1998, the Company completed the purchases of
Resources, TSG and INCODE. These acquisitions represent the implementation of
Tyler's previously announced strategy to build a nationally integrated
information management services, system and outsourcing company servicing
county, local and municipal governments and other entities. Resources provides
a wide range of information management outsourcing services, primarily to
county governments as well as to some commercial users. TSG and INCODE provide
county, local and municipal governments with software, systems and services to
serve their information technology and automation needs.

On June 5, 1998, the Company acquired a line of document management
software and related customer installations and service contracts from the
Business Imaging Systems division of Eastman Kodak Company. Kofile, Inc.
("Kofile"), a newly formed subsidiary in the Company's Resources unit, is based
in Rochester, New York and its business consists of the development, support
and marketing of the document management software and related maintenance and
support to governmental and commercial users.

On July 1, 1998, the Company completed the purchases of CompactData
Solutions, Inc. ("CompactData") and Ram Quest Software, Inc. ("Ram Quest").
CompactData specializes in building and marketing large-scale databases
comprised of public record information, such as property appraisals and motor
vehicle registrations. Ram Quest is a producer of advanced software for title
companies, which provides automated solutions for the closing, title plant
management and imaging needs of its customers. Ram Quest currently operates as
a subsidiary of the Company's Resources unit.

Effective August 1, 1998, the Company completed the purchase of CMS.
CMS provides integrated information management systems and services to county
and municipal governmental agencies throughout Iowa, Minnesota, Missouri, South
Dakota, Illinois, Wisconsin and other states, primarily in the upper Midwest.

During 1998, the Company also made other acquisitions which are
immaterial.

The Company accounted for all of the aforementioned acquisitions using
the purchase method of accounting for business combinations. Results of
operations of the acquired entities are included in the Company's consolidated
financial statements from their respective dates of acquisition. The excess
purchase price over the fair value of the net identifiable assets of the
acquired companies (goodwill) is amortized using the straight-line method of
amortization over their respective useful life.

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Following is a summary of the Company's 1998 acquisitions:

SHARES OF ASSUMED GOODWILL
COMMON VALUE OF NON-CURRENT USEFUL LIFE
COMPANY CASH STOCK COMMON STOCK DEBT GOODWILL (YEARS)
------- --------- ------------ ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Resources $15,250 10,000 $40,125 $12,790 $45,921 40
TSG 12,000 2,000 8,025 -- 14,066 20
INCODE 1,250 225 1,220 -- 2,509 20
Kofile 3,600 -- -- 1,900 5,550 20
Ram Quest 625 61 625 -- 1,314 10
CompactData 101 84 852 240 815 10
CMS 1,205 228 2,099 -- 1,059 20
Other 800 -- -- -- 714 10-20
------- ------ ------- ------- ------- -----
TOTAL $34,831 12,598 $52,946 $14,930 $71,948 --
======= ====== ======= ======= ======= =====
</TABLE>

Cash paid for acquisitions does not reflect cash paid for transaction
costs related to the execution of the acquisitions, such as legal, accounting
and consulting fees, of approximately $2,488,000 and acquired cash balances of
approximately $2,578,000.

The purchase price for Resources does not include certain potential
additional consideration up to an aggregate amount of $4,500,000 in cash if
certain contingencies relating to the acquisition of certain businesses are
achieved on or before December 31, 1999. The contingencies regarding such
additional consideration are not presently determinable beyond a reasonable
doubt.

The following unaudited pro forma information presents the consolidated
results of operations as if all of the Company's acquisitions and dispositions
of Forest City and IFS (Note 3) occurred as of the beginning of 1998 and 1997,
after giving effect to certain adjustments, including amortization of
intangibles, interest and income tax effects and reflecting only the loss on the
respective disposals of the discontinued operations in the year reflected in the
historical consolidated financial statements. The pro forma information does not
purport to represent what the Company's results of operations actually would
have been had such transactions or events occurred on the dates specified, or to
project the Company's results of operations for any future period.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues .................................... $ 62,708 $ 48,074

Income from continuing operations ........... 2,395 1,870

Net loss .................................... (7,121) (259)

Net loss per diluted share .................. $ (.20) $ (.01)
</TABLE>

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The Company has an active acquisition program. In accordance with
generally accepted accounting principles for business combinations, costs
incurred by the Company for acquisitions to be accounted for under the
pooling-of-interest method are charged to expense as incurred. For acquisitions
to be accounted for by the purchase method of accounting, direct out-of-pocket
or incremental costs incurred are initially deferred. Such direct costs in
connection with unsuccessful attempts to acquire an enterprise are charged to
expense in the period in which the plans to acquire are abandoned.

On July 31, 1998, the Company entered into a letter of intent with a
Fortune 500 company to acquire certain businesses of the company in a
transaction to be accounted for as a purchase business combination. These
businesses had estimated annual revenues of over $500 million and represented a
business opportunity which was aligned with the Company's strategy in the
information management business. Direct and incremental costs associated with
the proposed combination, primarily consisting of fees paid to outside legal and
accounting advisors for due diligence, were incurred by the Company and would
have been considered as a cost of the acquisition upon the successful closing of
the transaction. Subsequent to September 30, 1998, the potential seller elected
not to sell any of the businesses. Accordingly, all costs associated with this
opportunity have been expensed in the accompanying 1998 consolidated financial
statements and included in "costs of a certain acquisition opportunity."

In connection with the 1991 acquisition of Forest City, the Company
was obligated to make payments up to a specified amount on or before March 31,
1996, if certain profit objectives were met, some of which were to be paid as
bonuses to certain executives of Forest City. As a result, the Company made a
final payment of $1,320,000 in the first quarter of 1996 to former shareholders
and certain other executives of Forest City. The total amount paid since the
acquisition was $3,300,000. Of the total amount paid, $2,160,000 was paid to
former shareholders and considered additional purchase price with additional
goodwill recorded. The remaining $1,140,000 was considered special incentive
bonuses to certain executives of Forest City as designated by the former
shareholders and provided for in the sales agreement. These bonus amounts were
expensed as earned.

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(3) DISCONTINUED OPERATIONS

In December 1998, the Company entered into a letter of intent to sell
its non-core automotive parts retailer, Forest City. Accordingly, this segment
has been accounted for as a discontinued operation in compliance with APB
Opinion No. 30.

On March 26, 1999, the Company sold all of the outstanding common stock
of Forest City to, HalArt L.L.C. for approximately $24,500,000. Proceeds
consisted of $12,020,000 in cash, $3,825,000 in a short-term secured promissory
note, $3,155,000 in senior secured subordinated notes and $5,500,000 in
preferred stock. The short-term secured promissory note bears interest at 8
1/2%, becomes due in July 1999, is secured by a first lien on certain real
estate and is subject to mandatory prepayment in certain conditions. In July
1999, the unpaid balance, if any, of the short-term secured promissory note will
be converted to a senior subordinated note due in March 2002. The senior secured
subordinated notes will carry interest rates ranging between 6% to 8%, become
due in March 2002, and will be secured by a second lien on Forest City inventory
and real estate. The preferred stock will be mandatorily redeemable March 2006.
Both the subordinated notes and the preferred stock will be subject to partial
or whole redemption upon the occurrences of specified events.

The estimated loss on the disposal of Forest City is $8,939,000 (net of taxes of
$695,000), consisting of an estimated loss on disposal of the business of
$8,517,000 and a provision of $422,000, after taxes, for anticipated operating
losses from the measurement date to the date of disposal. The amounts the
Company will ultimately realize could differ materially from the amounts assumed
in arriving at the loss on disposal of the discontinued operations. In
determining the loss on the disposal of the business, the subordinated notes
were valued using present value techniques. Also, because the redemption of the
preferred stock is highly dependent upon future successful operations of the
buyer and due to its extended repayment terms, the Company is unable to estimate
the degree of recoverability. Accordingly, the Company will record the value of
the preferred stock as cash is received. Included in the costs and expenses
directly associated with the decision to dispose are, among other items, amounts
due to the chairman of the board of Forest City and the former President of the
Company in connection with the acceleration of his compensation package directly
associated with completion of the sale.

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The condensed components of net assets of discontinued Forest City
operations included in the consolidated balance sheets as of December 31 are as
follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash and cash equivalents .......................... $ 789 $ 513
Merchandise inventory .............................. 24,289 22,901
Property and equipment, net ........................ 6,375 --
Other current assets ............................... 493 232
Accounts payable and other accrued liabilities ..... (7,521) (7,322)
Deferred taxes ..................................... (345) (52)
-------- --------
24,080 16,272
Less reserve for estimated loss on disposition,
including post balance sheet operating losses
and transaction costs, net of income taxes ....... (8,480) --
Reclassification of long-term assets on
disposition ...................................... (2,848) --
-------- --------
Net current assets ............................... 12,752 16,272
-------- --------

Property and equipment, net ........................ -- 5,470
Sundry assets ...................................... -- 1,477
Deferred taxes ..................................... -- (423)
Reclassification of net long-term assets on
disposition ...................................... 2,848 --
-------- --------
Net noncurrent assets ............................ 2,848 6,524
-------- --------
Net assets .................................... $ 15,600 $ 22,796
======== ========
</TABLE>

The condensed statements of operations relating to the discontinued
Forest City operations for the years ended December 31 are presented below:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Revenues .......................... $ 76,484 $76,429 $ 85,074
Costs and expenses ................ 78,715 72,924 86,075
Goodwill impairment charge ........ -- -- 14,789
-------- ------- --------
Income (loss) before income
tax (benefit) ................... (2,231) 3,505 (15,790)
Income tax provision (benefit) .... (853) 1,115 (1,464)
-------- ------- --------
Net income (loss) ................. $ (1,378) $ 2,390 $(14,326)
======== ======= ========
</TABLE>

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Included in Forest City's results of operations in 1996 are $1,345,000
of restructuring and other charges in connection with a restructuring plan to
reduce costs and increase future operating efficiency by reducing the work
force, closing and relocating its stores and reducing its corporate office
space requirements. Also in 1996, Forest City recorded charges of $2,289,000
which included obligations relating to the termination of former employees,
vendor restocking charges for on-hand inventory items and the noncash write-off
of certain fixed assets and software which Forest City decided it would no
longer utilize in its business. The total restructuring and other charges
recorded in 1996 were $3,634,000. In 1996 Forest City also recognized a goodwill
and other intangibles impairment charge of $14,789,000 related to the Company's
1991 acquisition of Forest City.

The Company has estimated a $4,596,000 capital loss for tax purposes
on the sale of Forest City. No tax benefit has been recorded for this capital
loss since realization of the capital loss is not assured.

Effective October 15, 1997, the Company sold all of the capital stock
of its subsidiary IFS, which provided products for fund-raising programs, to
I.F.S. Acquisition Corporation for approximately $8,400,000, resulting in a
loss on disposal of approximately $2,500,000. Proceeds consisted of
approximately $5,800,000 in cash received at closing and $2,628,000 received in
January 1998. This estimated loss on disposal included estimates regarding the
value of certain assets that were subject to change. In 1998, the Company made
final adjustments to those assets, which resulted in a reduction of the
previously estimated loss on disposal of $801,000. Management does not expect
any further adjustments to the loss on disposal.

Included in IFS's results of operations in 1996 is a goodwill
impairment charge of $37,316,000 related to the 1994 acquisition of IFS by the
Company. In addition, IFS also recorded $198,000 of restructuring and other
charges in 1996, in connection with a restructuring plan to discontinue a small
product line and $2,449,000 provision for uncollectible accounts receivable and
the write-down of excess inventory remaining after a fourth-quarter sales
decline.

In 1996 results of discontinued operations include a pretax charge of
$2,000,000 for litigation claims involving Tyler Pipe Industries, Inc., a
previously owned subsidiary. See Note 13 for further discussion.

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<PAGE> 55

Operating results of all discontinued operations are as follows for
the years ended December 31:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- ---------
<S> <C> <C> <C>
Revenues ............................... $ 76,484 $98,342 $ 128,373

Income (loss) before income
tax (benefit) ....................... (2,231) 374 (59,783)
Income tax (benefit) provision ......... (853) 35 (3,434)
-------- ------- ---------
Net income (loss) from discontinued
operations .......................... $ (1,378) $ 339 $ (56,349)
======== ======= =========
</TABLE>

Interest has been charged to discontinued operations based on the net
assets of Forest City. External interest expense, which totaled $374,000, was
allocated to discontinued operations in 1998 only. Income tax (benefit) has
been charged (credited) to discontinued operations based on the income tax
(benefit) resulting from inclusion of the discontinued segments in the
Company's consolidated federal income tax return.

The income tax (benefit) differs from the amount which would be
provided by applying the statutory income tax rate to income (loss) before
income tax (benefit) due to permanent difference items consisting primarily
of non-deductible goodwill and state income taxes.

(4) RELATED PARTY TRANSACTIONS

During 1998, Resources executed four promissory notes totaling
$335,000, all of which remained outstanding at December 31, 1998, to three of
its employees. Three of the notes are non-interest bearing. There is no
significant difference between the face value and the present value of the
notes. The four notes mature in 2003.

On October 8, 1997, the Company entered into an agreement to acquire
Resources and received shareholder approval for the transaction on February 19,
1998 (see Note 2). In connection with this transaction, the Company loaned
Resources $5,700,000 on December 29, 1997 for working capital purposes. The
unsecured loan bore interest at a rate of 8.5% and had an original maturity date
of September 30, 1999. Subsequent to the acquisition, the loan eliminates in
consolidation.

In connection with two of the 1998 acquisitions, the Company entered
into two office building lease agreements with shareholders of the Company.
Total rental expense for the year ended December 31, 1998 was $83,000. Both
lease agreements provide for monthly payments of $12,000 and expire in fiscal
2003.

Page 54
<PAGE> 56

(5) LONG-TERM DEBT

Long-term debt consists of the following as of December 31, 1998. The
Company had no long-term debt as of December 31, 1997:

<TABLE>
<CAPTION>
<S> <C>
Revolving senior credit facility ......................................... $ 30,810
8% promissory note payable, payable in quarterly installments
through September 2000, collateralized by certain assets ............ 160
8% promissory note payable, payable in quarterly installments
through September 2005, collateralized by certain assets ............ 1,002
Installment notes, interest at the prime rate plus .5% (8.25% at
December 31, 1998) due 1996-2000, collateralized by certain
assets .............................................................. 133
6.1% unsecured installment notes payable, payable in annual
installments through August 2002 .................................... 173
10% unsecured installment notes payable, payable in monthly
installments through May 2004 ....................................... 250
9% promissory note payable, payable in monthly installments through February
2001, collateralized by certain assets and the capital stock of Title
Records Corporation and Government
Records Services, Inc., wholly-owned subsidiaries of Resources ...... 4,632
Long-term obligations under various capital leases ....................... 1,826
Other .................................................................... 79
--------
Total debt .......................................................... 39,065
Less current portion ..................................................... (1,876)
--------
Total long-term debt ................................................ $ 37,189
========
</TABLE>

The aggregate maturities of long-term debt for each of the years
subsequent to December 31, 1998, assuming the revolving credit facility is not
renewed, are as follows: 1999 - $1,876,000; 2000 - $2,170,000; 2001-
$33,732,000; 2002 - $723,000; 2003 - $226,000; thereafter - $338,000.

Interest paid in 1998, 1997 and 1996 was $1,818,000, $5,000 and
$65,000, respectively.

In February 1998, the Company entered into a three-year bank credit
agreement in an amount not to exceed $50,000,000, including a $5,000,000
sublimit for the issuance of standby and commercial letters of credit (the
"Senior Credit Facility"). At December 31, 1998, the Company had $19,210,000
available borrowing capacity under the Senior Credit Facility. The proceeds of
the Senior Credit Facility are used to fund acquisitions, capital expenditures
and to meet short-term working capital needs which may arise from time to time.
Borrowings under the Senior Credit Facility, as amended, bear interest at either
the bank's prime rate plus a margin of zero to .75% or the London Interbank
Offered Rate plus a margin of 1.5% to 2.5% depending on the Company's ratio of
indebtedness to earnings before interest, taxes, depreciation and amortization.
The interest rate at December 31, 1998 was 7.6%. The Senior Credit Facility is
secured by a pledge of the common stock of all present and future operating

Page 55
<PAGE> 57

subsidiaries and is guaranteed by all such subsidiaries. Under the terms of the
Senior Credit Facility, the Company is required to maintain certain financial
ratios and other financial conditions. The Senior Credit Facility also
prohibits the Company from incurring certain additional indebtedness, limits
certain investments, advances or loans and restricts substantial asset sales,
capital expenditures and cash dividends. During 1998 borrowings under the
credit agreement were at an average rate of approximately 7.5%. The Company
pays commitment fees of 0.5% on the unused portion of the Senior Credit
Facility.

All interest costs incurred in conjunction with the aforementioned
indebtedness has been expensed in the accompanying consolidated financial
statements.

(6) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
USEFUL
LIVES (YEARS) 1998 1997
------------- ------- ------
<S> <C> <C> <C>
Land ............................................ -- $ 2,450 $ --
Transportation equipment ........................ 4-10 334 --
Computer equipment and purchased software ....... 3-10 5,650 65
Furniture and fixtures .......................... 3-10 2,842 431
Building and leasehold improvements ............. 7-30 3,529 510
Computer equipment under capital lease .......... 5 1,874 --
------- ------
16,679 1,006
Accumulated depreciation and amortization ....... 2,532 896
------- ------
Property and equipment, net ................... $14,147 $ 110
======= ======
</TABLE>

Depreciation expense totaled $2,146,000, $29,000 and $101,000 during
the years ended December 31, 1998, 1997 and 1996, respectively.

Page 56
<PAGE> 58

(7) EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED

In February 1997, the Financial Accounting Standards Board issued SFAS
No.128, Earnings per Share. SFAS No. 128 revised the previous calculation
methods and presentations of earnings per share under APB Opinion No. 15 and
requires that all prior-period earnings (loss) per share data be restated. The
Company adopted SFAS No. 128 in the fourth quarter of 1997 as required. In
accordance with SFAS No. 128, the Company has presented basic income (loss) per
share, computed on the basis of the weighted average number of common shares
outstanding during the year, and diluted income (loss) per share, computed on
the basis of the weighted average number of common shares and all dilutive
potential common shares outstanding during the year. All prior period income
(loss) per share amounts have been restated in accordance with SFAS No. 128.

The Company incurred losses from continuing operations in 1997 and
1996. As a result, the denominator was not adjusted for dilutive securities in
1997 or 1996 as the effect would have been antidilutive.

Options to purchase 110,000 shares of common stock at prices ranging
from $9.63 to $10.94 were outstanding at December 1998, but were not included
in the computation of diluted earnings per share because the options exercise
prices were greater than the average market price of the common shares and,
therefore, the effect would have been antidilutive.

The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Income (loss) from continuing operations ............ $ 1,156 $ (1,219) $ (4,981)
========= ========= =========

Denominator:
Denominator for basic earnings per share -
Weighted average shares ............................. 32,612 20,498 19,876

Effect of dilutive securities:
Employee stock options .............................. 340 -- --
Employee stock grant ................................ 67 -- --
Warrant ............................................. 1,381 -- --
--------- --------- ---------

Dilutive potential common shares ...................... 1,788 -- --
--------- --------- ---------
Denominator for diluted earnings per share-
Adjusted weighted-average shares and
assumed conversion ............................. 34,400 20,498 19,876
========= ========= =========

Basic earnings (loss) per share from
continuing operations .......................... $ .04 $ (.06) $ (.25)
========= ========= =========

Diluted earnings (loss) per share from
continuing operations .......................... $ .03 $ (.06) $ (.25)
========= ========= =========
</TABLE>

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<PAGE> 59

The Company issued approximately 12,600,000 shares of common stock in
1998 in connection with acquisitions (see Note 2).

(8) GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, other intangible assets and related accumulated amortization
as of December 31, 1998 are as follows. There was no goodwill and other
intangible assets as of December 31, 1997:

<TABLE>
<CAPTION>
USEFUL
LIVES (YEARS)
--------------------------

<S> <C> <C>
Goodwill .................................... 10-40 $ 71,948

Title plants ................................ -- 13,100
Customer lists .............................. 20 5,035

Software .................................... 5 5,519
Workforce ................................... 5-10 3,301
Database .................................... 10 266
----------
99,169

Accumulated amortization 3,173
----------

Goodwill and other intangibles, net ..... $ 95,996
==========
</TABLE>

Amortization expense totaled $3,173,000 for the year ended December 31,
1998. For 1997 and 1996, there was no goodwill amortization expense.

(9) INCOME TAX

The provision (benefit) included in continuing operations for income
tax consists of the following:

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal ................... $ 1,483 $ 1,280 $ (83)
State ..................... 354 -- --
--------- --------- ---------
1,837 1,280 (83)

Deferred ..................... 196 (2,198) (1,490)
========= ========= =========
$ 2,033 $ (918) $ (1,573)
========= ========= =========
</TABLE>

Page 58
<PAGE> 60

The income tax provision (benefit) differs from amounts computed by
applying the statutory tax rate to income (loss) from continuing operations as
follows:

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------

<S> <C> <C> <C>
Income tax (benefit) at statutory rate ...... $ 1,116 $ (748) $ (2,294)
State income tax, net of federal
income tax benefit ....................... 230 -- --
Life insurance .............................. -- -- 534
Non-deductible amortization ................. 652 13 15
Utilization of capital loss ................. -- (188) --
Other, net .................................. 35 5 172
--------- --------- ---------
$ 2,033 $ (918) $ (1,573)
========= ========= =========
</TABLE>

Significant components of deferred tax assets and liabilities as of
December 31 are as follows:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Insurance reserves ...................................... $ 98 $ 98
Operating expenses not currently deductible ............. 1,611 652
Employee benefit plans .................................. 149 74
Net operating loss ...................................... -- 1,763
Capital loss ............................................ 12,514 11,723
Other ................................................... 408 155
--------- ---------
Total deferred income tax assets ..................... $ 14,780 $ 14,465
--------- ---------

Deferred income tax liabilities:
Tax-benefit transfer lease .............................. (3,475) (4,512)
Property and equipment .................................. (3,782) --
Intangible assets ....................................... (4,738) --

Other .................................................. (130) (161)
--------- ---------
Total deferred income tax liabilities ................ (12,125) (4,673)
--------- ---------
Net deferred income tax assets before valuation
allowance ............................................. 2,655 9,792
Less valuation allowance ................................ 12,514 11,723
--------- ---------
Net deferred income tax liabilities ........................ $ (9,859) $ (1,931)
========= =========
</TABLE>

The Company paid income taxes, net of refunds received, of $1,478,000
in 1998. In 1997 and 1996, the Company received refunds of prior years' income
taxes of $95,000 and $4,693,000, respectively.

Page 59
<PAGE> 61

Although realization is not assured, management believes it is more
likely than not that all the deferred tax assets will be realized except for
those relating to capital loss carryforwards. Accordingly, the Company believes
that no valuation allowance is required for the remaining deferred tax assets.

The Company's capital loss carryforwards expire beginning in 2003.

(10) LEASES

The Company leases certain offices, transportation, computer and other
equipment used in its operations under noncancellable operating lease
agreements expiring at various dates through 2008. Most leases contain renewal
options and some contain purchase options. The leases generally provide that
the Company pay taxes, maintenance, insurance and certain other operating
expenses.

Rent expense was approximately $903,000 in 1998, $191,000 in 1997 and
$351,000 in 1996.

The Company has capital leases for certain equipment, which is included
in "Property and equipment, net." The present value of future minimum lease
payments relating to these assets are capitalized based on contract provisions.
Capitalized amounts are depreciated over the lesser of the term of the lease or
the normal depreciable lives of the assets.

Future minimum lease payments at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
Operating Capital
Fiscal Year Leases Leases
- -----------------------------------------------------------------------------------------
<S> <C> <C>
1999 ....................................................... $ 652 $ 607
2000 ....................................................... 323 558
2001 ....................................................... 282 501
2002 ....................................................... 204 482
2003 ....................................................... 78 --
2004 and thereafter ........................................ 38 --
--------- ---------
Total future minimum lease payments ...................... $ 1,577 2,148
=========
Less interest .......................................... (322)
---------
Present value of future minimum lease
payments ............................................... 1,826
Current portion of obligations under capital
leases ................................................. (463)
---------
Long-term obligations under capital leases ............... $ 1,363
=========
</TABLE>

Page 60
<PAGE> 62

(11) EMPLOYEE BENEFIT PLANS

The Company maintains various defined contribution profit sharing
plans, primarily 401(k) retirement plans (the "Plans"), at each of its operating
subsidiaries. The Plans cover substantially all eligible employees of the
Company that meet age and length of service requirements. Employee contributions
are by salary reduction and are at the employees' discretion within the limits
imposed by the Plans' provisions and the Internal Revenue Code. Employer
contributions are at the discretion of each operating company's board of
directors and can be up to 4% of the total employee compensation. In 1998, total
employer contributions to the Plans were approximately $106,000. Excluding
discontinued operations, the Company did not make any contributions to employee
benefit plans for the years 1997 and 1996.

In 1996, the Company terminated a defined benefit pension plan (the
"Plan") in connection with the sale of substantially all the assets and
liabilities of Tyler Pipe Industries Inc., ("TPI") in 1995. The terms of the
sale required the Company to transfer the asset and obligation relating to the
employees of TPI to the buyers' pension plan. Subsequent to the asset and
obligation transfer to the buyers' plan, the Company terminated the Plan on June
30, 1996 and determined that the remaining Plan assets exceeded the obligation
relating to the remaining participants. As a result, the Plan was amended to
provide a "pro rata benefit increase" as described in section 4980(d)(3) of the
Internal Revenue Code of 1986. This amendment allows the excise tax associated
with the excess asset reversion to be 20% rather than 50%. The Company received
a favorable determination letter from the IRS in November 1996 relating to the
termination of the Plan including the terms of the pro rata benefit increase. As
a result of the amendment and termination of the Plan, the Company received cash
and recorded income from reversion of excess assets from a defined benefit
pension plan of approximately $2,300,000 and accrued an excise tax liability of
approximately $465,000 in December 1996. In addition, the Company also recorded
a non-cash settlement loss of approximately $3,700,000 and reduced the related
prepaid pension asset in accordance with SFAS No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination of Benefits. These two events, the income reversion and the
settlement of the Plan, resulted in a net charge of $1,865,000. Final
distributions were paid to all remaining participants in the form of lump-sum
settlements. No assets or liabilities of the Plan remained at December 31, 1996.
In addition, no pension cost was recorded in 1996.

Page 61
<PAGE> 63

The Company maintained several other benefit plans for certain key
employees of the Company and TPI. These plans were also terminated in 1996.
Approximately 55% of these benefits were funded by insurance policies which
were redeemed in 1996. The Company made final settlement payments of
approximately $2,400,000 in 1996 and an additional $1,300,000 remained accrued
at December 31, 1996, which was paid in January 1997.

(12) RESTRUCTURING AND OTHER CHARGES

In 1996, the Company recorded $1,751,000 of restructuring and other
charges in connection with a restructuring plan to reduce costs and increase
future operating efficiency by reducing the work force and reducing corporate
office space requirements. In addition, the Company terminated its defined
benefit pension plan in December 1996 resulting in a net charge of approximately
$1,865,000 (see Note 11). The total restructuring and other charges recorded in
1996 were $3,616,000 which is included in selling, general and administrative
expenses. Substantially all reserves were paid as of December 31, 1998.

(13) COMMITMENTS AND CONTINGENCIES

The New Jersey Department of Environmental Protection and Energy
("NJDEPE") has alleged that a site where a former affiliate of Tyler Pipe
Industries, Inc. (a wholly-owned subsidiary of the Company known as TPI of
Texas, Inc. ("TPI")), Jersey-Tyler Foundry Company ("Jersey-Tyler"), once
operated a foundry contains lead and possible other priority pollutant metals
and may need on-site and off-site remediation. The site was used for foundry
operations from the early part of this century to 1969 when it was acquired by
Jersey-Tyler. Jersey-Tyler operated the foundry from 1969 to 1976, at which time
the foundry was closed. In 1976, Jersey-Tyler sold the property to other persons
who have operated a salvage yard on the site. NJDEPE agreed for TPI to conduct a
feasibility study to assess remediation options and propose a remedy for the
site and the impacted areas. This study will be completed and submitted to the
NJDEPE in early 1999. TPI has not agreed to commit to further
action at this time. TPI never held title to the site and denies liability.

Page 62
<PAGE> 64

In connection with the sale of the assets of TPI to Ransom Industries,
Inc. (formerly known as Union Acquisition Corporation) (the "Buyer"), an
affiliate of McWane, Inc., on December 1, 1995, pursuant to an acquisition
agreement among the Company, TPI and the Buyer (the "Acquisition Agreement"),
the Buyer agreed to manage and direct the prosecution or defense of these
matters on behalf of TPI. In addition, the Buyer agreed to reimburse TPI the
first $3,000,000 of certain costs and expenses incurred in connection with the
investigation or remediation of the site, and one-half of such expenses in
excess of $3,000,000. Under any circumstances, however, the maximum amount that
the Buyer agreed to reimburse TPI in connection with this matter is $6,500,000.
As of December 31, 1996, management estimated total cost to investigate or
remediate the New Jersey site to be $7,000,000. In accordance with the
above-mentioned provisions of the Acquisition Agreement, the Company recorded a
$5,000,000 receivable due from the Buyer for its portion of the estimated costs
as of December 31, 1996. As of December 31, 1998, approximately $1,700,000 of
expenses in connection with the investigation of the New Jersey site, have been
paid by TPI and as provided for in the Acquisition Agreement, the Buyer has
reimbursed this amount to TPI. Accordingly, management currently estimates the
total cost remaining in connection with the investigation or remediation of the
New Jersey site to be approximately $5,300,000 and the related receivable from
the Buyer to be approximately $3,300,000 which is included as other receivables
in the accompanying consolidated balance sheets. The Buyer, on behalf of TPI, is
proceeding against predecessor owners and operators of the site, as well as
others, to bear their share of the cost of the investigation and any other
costs, including any remediation costs incurred by TPI. Some costs may also be
covered by insurance. Although the insurance carriers have initially denied
coverage, TPI is in negotiations with the major carrier. Recoveries from
predecessor companies and insurance companies are shared by TPI and the Buyer.

Pursuant to the Acquisition Agreement, the Buyer agreed to manage and
direct the prosecution or defense of certain other matters on behalf of TPI and
to reimburse related costs and expenses. The Buyer agreed to reimburse TPI the
first $750,000 of all costs and expenses incurred in connection with each such
matter and one-half of such expenses in excess of $750,000. The maximum amount
that the Buyer agreed to reimburse TPI in connection with all of these matters,
excluding Jersey-Tyler, is $8,000,000. The Buyer did not agree to reimburse TPI
for, among other things, (a) liabilities relating to the use, handling,
manufacture or sale of products containing asbestos or silica, (b) claims of
individuals for health problems such as (but not limited to) silicosis, or (c)
offsite environmental liabilities. Although it is impossible to predict the
outcome of legal or regulatory proceedings, the Company believes that
substantially all of the costs, expenses and damages, if any, resulting from the
legal proceedings and environmental matters described above will be reimbursed
by the Buyer pursuant to the Acquisition Agreement or have been adequately
provided for in the consolidated financial statements.

Page 63
<PAGE> 65

theories of recovery and various theories to try to avoid workers compensation
bars to recovery. The plaintiffs seek to recover money damages for the personal
injuries they allegedly suffered as a result of their occupational exposure to
silica, asbestos and other industrial dusts. Little discovery has taken place,
and it is not possible to predict the outcome at this time. The Company plans to
defend this litigation vigorously, but the ultimate outcome is uncertain. In
light of the current litigation, and based on a preliminary assessment of claims
and contingent claims that may result in future litigation involving TPI, a
pretax charge from discontinued operations of $2,000,000 was recorded in 1996
for such matters. This amount is included in other liabilities in the
accompanying consolidated balance sheets at December 31, 1998 and 1997. It is
reasonably possible that the amounts recorded as liabilities for TPI related
matters could change in the near term by amounts that would be material to the
consolidated financial statements.

Other than ordinary course, routine litigation incidental to the
business of the Company and except as described herein, there are no other
material legal proceedings pending to which the Company or its subsidiaries are
parties or to which any of its properties are subject. In the opinion of
management, the ultimate liability, if any, resulting from these ordinary
course, routine contingencies will not have a material adverse effect on the
Company's consolidated results of operations or financial condition.

(14) SHAREHOLDERS' EQUITY

The Company has authorized 1,000,000 shares of $10 par value voting
preferred stock. The board of directors had designated 250,000 shares as Series
A Junior Participating Preferred Stock which were reserved for issuance upon
exercise of the Company's stock purchase rights. In December 1997, the board of
directors authorized the redemption of the preferred stock purchase rights in
connection with the contemplated acquisitions of Resources, TSG and INCODE. The
rights were redeemed in January 1998 at $.01 per share. Prior to this
redemption, each share of the Company's common stock included a stock purchase
right. These rights, which did not have voting rights, could be exercised only
after public announcement that a person or group had acquired 20% or more of the
Company's common stock or public announcement of an offer for 30% or more of the
Company's common stock. The Company had the right to redeem the rights at a
price of $.01 per right at any time prior to 15 days (or such longer period as
the board of directors may have determined) after the acquisition of 20% of the
Company's common stock. Upon exercise each right could have been used to
purchase 1/100 of a share of Series A Junior Participating Preferred Stock for
$21. Each share of Series A Junior Participating Preferred Stock would have had
a minimum preferential quarterly dividend of 100 times the dividend declared on

Page 64
<PAGE> 66

common stock, minimum liquidation preference of $100 per share and other
preferential common stock conversion features in connection with mergers or
other business combinations.

As of December 31, 1998, the Company had a warrant outstanding to
purchase 2,000,000 shares of the Company's common stock at $2.50 per share. The
warrant expires in September 2007.

(15) STOCK OPTION PLAN

The Tyler Corporation Stock Option Plan provides for the granting of
non-qualified and incentive stock options, as defined by the Internal Revenue
Code, to key employees of the Company and its subsidiaries for up to 3,300,000
shares of the Company's common stock at prices which represent fair market value
at dates of grant. All options granted have ten year terms and generally vest
over, and become fully exercisable at the end of, four to five years of
continued employment.

The following table summarizes the transactions of the Company's stock
option plan for the three-year period ended December 31, 1998:

<TABLE>
<CAPTION>
Number of Weighted-Average
Shares Exercise Prices
--------- ----------------

<S> <C> <C>
Options outstanding at January 1, 1996 ................ 120 $ 2.10

Granted .......................................... 225 1.85
Canceled ......................................... (15) 3.23
---------

Options outstanding at December 31, 1996 .............. 330 1.88

Granted .......................................... 1,517 2.36
Canceled ......................................... (953) 1.80
Exercised ........................................ (198) 1.87
---------

Options outstanding at December 31, 1997 .............. 696 3.04

Granted .......................................... 1,371 7.10
Canceled ......................................... (14) 5.92
Exercised ........................................ (135) 1.53
---------
Options outstanding at December 31, 1998 .............. 1,918 $ 6.03
=========

Reserved for future options at December 31, 1998 ...... 848
---------

Exercisable options
December 31, 1996 ................................ 151 $ 1.98
December 31, 1997 ................................ 145 $ 2.71
December 31, 1998 ................................ 239 $ 3.03
</TABLE>

Page 65
<PAGE> 67

The following table summarizes information concerning outstanding and
exercisable options at December 31, 1998:

WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE PRICE
REMAINING NUMBER OF PRICE OF NUMBER OF OF
RANGE OF EXERCISE CONTRACTUAL OUTSTANDING OUTSTANDING EXERCISABLE EXERCISABLE
PRICES LIFE OPTIONS OPTIONS OPTIONS OPTIONS
------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 2.125 - $ 3.6875 8.5 years 502 $ 3.22 225 $ 2.90
$ 4.875 - $ 7.875 9.4 years 1,306 $ 6.74 14 $ 5.15
$ 9.625 - $ 10.938 9.4 years 110 $10.42 -- --

</TABLE>

SFAS No. 123, Accounting for Stock-Based Compensation, became effective
for the Company in 1996. As allowed by SFAS No. 123, the Company has elected to
continue to follow APB Opinion No. 25, Accounting for Stock Issued to Employees,
which does not recognize compensation expense on the issuance of its stock
options because the option terms are fixed and the exercise price equals the
market price of the underlying stock on the grant date.

As required by SFAS No. 123, the Company has determined the pro forma
information as if the Company had accounted for stock options granted since
January 1, 1995, under the fair value method of SFAS No. 123. The Black-Scholes
option pricing model was used with the following weighted-average assumptions
for 1998, 1997 and 1996, respectively: risk-free interest rates of 5.16%, 6.49%
and 6.32%; dividend yield of 0%; expected common stock market price volatility
factor of .68, .39 and .37; and a weighted-average expected life of the options
of seven years. The weighted-average fair value of options granted in 1998, 1997
and 1996 was $4.93, $1.24 and $.94 per share, respectively.

Had compensation expense been recorded based on the fair values of the
stock option grants, the Company's 1998 and 1997 pro forma income (loss) from
continuing operations would have been $162,000 and ($1,639,000), or $.00 and
($.08) per diluted share, respectively. The pro forma effect of these options on
net earnings and earnings per diluted share in 1996 was not material. These pro
forma calculations only include the effects of grants since 1995. Accordingly,
the impacts are not necessarily indicative of the effects on reported net income
of future years.

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<PAGE> 68

(16) SEGMENT AND RELATED INFORMATION

As of January 1, 1998, the Company has adopted SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information which
requires segment information to be reported using a management approach. This
management approach is based on reporting segment information the way management
organizes segments within the enterprise for making operating decisions and
assessing performance.

The Company has two reportable segments: information and property
records services and information software systems and services. The largest
component of the information and property records services business is the
computerized indexing and imaging of real property records maintained by county
clerks and recorders, in addition to providing other information management
outsourcing services, records management, micrographic reproduction and title
plant update services and sales of copies of title plants to title companies.
The information software systems and services segment provides municipal and
county governments with software systems and services to meet their information
technology and automation needs.

Divested activities include the historical operating results and assets
of the automotive parts and supplies segment, which was discontinued in 1998 and
the products for fund raising segment, which was discontinued in 1997. See Note
3 for further discussion. In addition, corporate activities are included as
"Other".

The Company evaluates performance based on several factors, of which
the primary financial measure is business segment operating income. The Company
defines segment operating income as income before noncash amortization of
intangible assets associated with their acquisition by Tyler, interest expense,
non-recurring items and income taxes. The accounting policies of the reportable
segments are the same as those described in Note 1.

There were no intersegment transactions, thus no eliminations are
necessary.

The Company's reportable segments are strategic business units that
offer different products and services. They are separately managed as each
business requires different marketing and distribution strategies.

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<PAGE> 69

The Company derives a majority of its revenue from external domestic
customers. The information and property records services segment conducts minor
operations in Germany, which are not significant and are not subsequently
disclosed.

Summarized financial information concerning the Company's reportable
segments is set forth below based on the nature of the products and services
offered:

<TABLE>
<CAPTION>
As of and year ended December 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Information
& Property Information
Records Software Continuing Divested
Services Systems Other Operations Activities Totals
- -------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Revenues................. $ 28,441 $ 22,108 $ -- $ 50,549 $ 76,484 $ 127,033

Other amortization
expense................ -- -- 184 184 822 1,006

Depreciation expense..... 1,880 217 49 2,146 1,066 3,212

Segment profit (loss).... 9,249 4,863 (2,773) 11,339 (845) 10,494

Capital expenditures..... 2,076 432 150 2,658 2,070 4,728

Segment assets........... 93,698 33,432 7,364 134,494 15,600 150,094

- -------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
As of and year ended December 31, 1997
- -------------------------------------------------------------------------------------------------------------------
Information
& Property Information
Records Software Continuing Divested
Services Systems Other Operations Activities Totals
- -------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Revenues................. $ -- $ -- $ -- $ -- $ 98,342 $ 98,342

Other amortization
expense................ -- -- 87 87 749 836

Depreciation expense..... -- -- 29 29 1,817 1,846

Segment profit (loss).... -- -- (2,959) (2,959) 1,106 (1,853)

Capital expenditures..... -- -- 139 139 1,290 1,429

Segment assets........... -- -- 24,354 24,354 22,796 47,150

- -------------------------------------------------------------------------------------------------------------------
</TABLE>

Page 68

<PAGE> 70

<TABLE>
<CAPTION>
As of and year ended December 31, 1996
- -------------------------------------------------------------------------------------------------------------------
Information
& Property Information
Records Software Continuing Divested
Services Systems Other Operations Activities Totals
- -------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Revenues................. $ -- $ -- $ -- $ -- $ 128,373 $ 128,373

Depreciation expense..... -- -- 101 101 2,205 2,306

Segment profit (loss).... -- -- (3,242) (3,242) 777 (2,465)

Capital expenditures..... -- -- -- -- 3,567 3,567

Segment assets........... -- -- 20,890 20,890 31,594 52,484

- -------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
Reconciliation of reportable segment operating
profit (loss) to the Company's consolidated totals .... 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Total profit or loss for continuing reportable
segments ........................................... $ 11,339 $ (2,959) $ (3,242)

Interest expense ...................................... (2,009) (85) (183)

Interest income ....................................... 178 907 487

Costs of a certain acquisition opportunity ............ (3,146) -- --

Goodwill and intangibles associated with
acquisition amortization ........................... (3,173) -- --

Restructuring and other charges (Note 12).............. -- -- (3,616)
--------- --------- ---------

Income (loss) from
continuing operations before income tax ............ $ 3,189 $ (2,137) $ (6,554)
========= ========= =========
</TABLE>

(17) SUBSEQUENT EVENTS

Effective March 1, 1999, the Company acquired Eagle Computer Systems,
Inc. ("Eagle") for approximately 1,100,000 shares of Tyler Corporation common
stock and $5,000,000 cash. Eagle is based in Eagle, Colorado, and provides
integrated information management systems and services to counties and states
located primarily in the western United States. Eagle was founded in 1978 and
employs approximately 50 people.

Page 69
<PAGE> 71

TYLER CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<S> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
- -------------------------------
Year ended December 31, 1996:
Balance at beginning of year ..................... $ --
Additions charged to costs and expenses .......... --
Deductions for accounts charged off .............. --
Other changes (A) ................................ --
---------

Balance at end of year ....................... $ --
=========

Year ended December 31, 1997:
Balance at beginning of year ..................... $ --
Additions charged to costs and expenses .......... --
Deductions for accounts charged off .............. --
Other changes (A) ................................ --
---------

Balance at end of year ....................... $ --
=========

Year ended December 31, 1998:
Balance at beginning of year ..................... $ --
Additions charged to costs and expenses .......... 179
Deductions for accounts charged off .............. (56)
Other changes (A) ................................ 408
---------

Balance at end of year ....................... $ 531
=========
</TABLE>

(A) Purchase of subsidiaries

Page 70

<PAGE> 72
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Tyler Three, as amended
through May 14, 1990, and Certificate of Designation of Series A
Junior Participating Preferred Stock (filed as Exhibit 3.1 to the
Company's Form 10-Q for the quarter ended June 30, 1990, and
incorporated herein).

3.2 Certificate of Amendment to the Restated Certificate of
Incorporation (filed as Exhibit 3.1 to the Company's Form 8-K, dated
February 19, 1998, and incorporated herein).

3.3 Amended and Restated By-Laws of Tyler Corporation, dated November 4,
1997 (filed as Exhibit 3.3 to the Company's Form 10-K for the year
ended December 31, 1997, and incorporated herein).

4.2 Specimen of Common Stock Certificate (filed as Exhibit 4.1 to the
Company's registration statement no. 33-33505 and incorporated
herein).

10.1 Form of Indemnification Agreement for directors and officers (filed
as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
March 31, 1992, and incorporated herein).

10.2 Stock Option Plan amended and restated as of February 7, 1997
(filed as Exhibit 4.1 to the Company's registration statement no.
33-34809 and incorporated herein).

10.5 Indemnification Agreement, dated December 20, 1989 (filed as Exhibit
2.3 to the Company's registration statement no. 33-33505 and
incorporated herein).

Page 30
<PAGE> 73
<TABLE>
<S> <C>
10.7 Agreement and Plan of Merger among Tyler Corporation, T2 Acquisition
Corporation, The Software Group, Inc., Brian B. Berry and Glenn A.
Smith dated October 8, 1997 (filed as Exhibit 10.26 to the Company's
Form 8-K, dated October 16, 1997, and incorporated herein).

*10.19 Employment agreement between the Company and C.A. Rundell, Jr., dated
December 9, 1998.

*21 Subsidiaries of Tyler

*23 Consent of Ernst & Young LLP

*27 Financial Data Schedule
Tyler will furnish copies of these exhibits to shareholders upon
written request and payment for copying charges of $0.15 per page.
</TABLE>

* Filed herewith.

(b) Reports on Form 8-K

Tyler did not file any Current Reports on Form 8-K during the fourth
quarter of 1998.

Page 31

<PAGE> 1
EXHIBIT 10.19

TYLER CORPORATION
2800 W. MOCKINGBIRD LANE
DALLAS, TEXAS 75235

December 9, 1998

Mr. C.A. Rundell, Jr.
4400 Belfort Place
Dallas, Texas 75205

Dear C.A.:

This letter amends and supersedes that letter agreement dated October 8, 1997
between Tyler Corporation ("Tyler") and you.

You will resign as President and Chief Executive Officer of Tyler as of
December 9, 1998. You will serve as an employee director and member of the
Executive Committee until June 30, 2000.

Primary Duties and Compensation

1. Primary Duties. Your primary duties will consist of serving as
Chairman and as an employee of FCAP and will consist of the development and
implementation of a strategy to maximize the shareholder value of Forest City
Auto Parts ("FCAP") through the sale or liquidation of all or substantially all
of FCAP (or such other means as the Tyler Board of Directors may pursue), upon
terms to be approved by the Tyler Board of Directors.

2. Salary. In consideration for your service and efforts in the sale of
FCAP, your total cash compensation will be $315,000, which will be payable at a
rate of $17,500 per month beginning January 1, 1999. Any remaining portion of
the $315,000 due to be paid to you for your service described above will be
paid to you in full upon the closing of a sale of all or substantially all of
FCAP. You will continue to be paid at your current rate through December 31,
1998.

3. Non-Accountable Expense Allowance. In addition to the salary
described above, you will be entitled to a non-accountable expense allowance of
$36,000, which will be payable at a rate of $2,000 per month. Any remaining
portion of the $36,000 due to be paid to you for your service described above
will be paid to you in full upon the closing of a sale of all or substantially
all of FCAP.

4. Stock Grant. As additional compensation for your service and efforts
in the sale of FCAP, the unvested 75,000 shares of restricted Tyler common
stock originally granted to you under the October 8, 1997 letter agreement will
vest on the following schedule:

<TABLE>
<S> <C>
April 8, 1999 25,000
October 8, 1999 25,000
April 8, 2000 25,000
</TABLE>

except that all of such shares will vest immediately upon the closing of a sale
of all or substantially all of FCAP.

5. Office Location and Support. To assist you in your efforts to
maximize shareholder value of FCAP, you will use such assistants and support as
mutually agreed. You and your assistants will work out of the office located at
2121 San Jacinto Street, Suite 2900, Dallas, Texas 75201. Tyler will continue
to pay your office assistant, Pat Dugan, at her current rate through December
31, 1998.

6. Miscellaneous. Your perks will consist of a transfer to you of the
Tyler computer equipment currently used by yourself and your secretary. In
addition, Tyler will transfer the Petroleum Club Membership to you.

Additional Tyler Duties and Compensation

1. Additional Tyler Duties. In addition to your primary duties as
Chairman and an employee of FCAP, you will be available at Tyler's request on
a mutually satisfactory schedule for up to forty (40) hours per month until
January 1, 2002 at no additional compensation while being compensated by FCAP.
Any time requested by Tyler resulting in hours worked in excess of forty (40)
hours per month shall be paid at a rate of $200 per hour. Any such service will
be performed at 2800 W. Mockingbird Lane, Dallas, Texas 75235 or at such other
location as mutually agreed.

2. Additional Compensation. Should your salary be prepaid as described
upon the sale of FCAP, you will remain an employee of Tyler at a salary equal
to $1,250 per month until January 1, 2002.

Stock Options

For this additional service, your current outstanding and unvested stock
options will vest according to the original schedule modified as follows:

1. Incentive Stock Options. Of the original 132,199 Incentive Stock
Options previously granted to you, 23,727 are vested and exercisable. Of the
remaining 108,472, 27,118 will vest and be exercisable on each of January 1,
1999, January 1, 2000, January 1, 2001, and January 1, 2002.

2. Non-Qualified Stock Options. Of the original 217,801 Non-Qualified
Stock Options previously granted to you, 87,121 are vested and exercisable. Of
the remaining 130,680, 43,560 will vest and be exercisable on October 8, 1999
and 87,120 will vest and be exercisable on June 30, 2002.

If the foregoing reflects your understanding of the agreement, please sign
below where indicated.

Yours very truly,

/s/ LOUIS A. WATERS
-------------------------------
Louis A. Waters
Chairman of the Board

Mr. C.A. Rundell, Jr.
December 9, 1998

Agreed and Accepted:
-------------------------------

/s/ C. A. RUNDELL, JR.
-------------------------------
C. A. Rundell, Jr.

cc: Tyler Board of Directors

<PAGE> 1
Exhibit 21

SUBSIDIARIES OF TYLER CORPORATION

<TABLE>
<CAPTION>
Place of
Name Incorporation
---- -------------
<S> <C>

Tyler Corporation Delaware

Business Resources Corporation Texas

The Software Group, Inc. Texas

Interactive Computer Designs, Inc. Texas

CMS Holdings, Inc. Texas

CompactData Solutions, Inc. Texas
</TABLE>

<PAGE> 1
EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-34809) pertaining to the Tyler Corporation Stock Option Plan of our
report dated March 19, 1999, except for the second paragraph of Note 3, as to
which the date is March 26, 1999, with respect to the consolidated financial
statements and schedule of Tyler Corporation and subsidiaries included in the
Annual Report (Form 10-K) for the year ended December 31, 1998.

ERNST & YOUNG LLP

Dallas, Texas
March 26, 1999

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,558,000
<SECURITIES> 0
<RECEIVABLES> 14,960,000
<ALLOWANCES> 531,000
<INVENTORY> 0
<CURRENT-ASSETS> 32,553,000
<PP&E> 16,679,000
<DEPRECIATION> 2,532,000
<TOTAL-ASSETS> 150,094,000
<CURRENT-LIABILITIES> 18,366,000
<BONDS> 0
0
0
<COMMON> 359,000
<OTHER-SE> 75,987,000
<TOTAL-LIABILITY-AND-EQUITY> 150,094,000
<SALES> 50,549,000
<TOTAL-REVENUES> 0
<CGS> 24,749,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 179,000
<INTEREST-EXPENSE> 2,009,000
<INCOME-PRETAX> 3,189,000
<INCOME-TAX> 2,033,000
<INCOME-CONTINUING> 1,156,000
<DISCONTINUED> (9,516,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,360,000)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.24)

</TABLE>