SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1996         Commission File Number 1-155

                              THE LEHIGH GROUP INC.

             (Exact name of Registrant as specified in its charter)

DELAWARE                                        13-1920670
---------------------------------------         -------------------------------
(State or other jurisdiction of                 (I.R.S. Employer
Incorporation or organization)                  Identification No.)

810 Seventh Avenue, New York, N.Y.              10019
----------------------------------------        -------------------------------
(Address of principal executive offices)        (Zip Code)

Registrant's telephone number including area code (212) 333-2620

Securities registered pursuant to Section 12(b) of the Act:

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

Common Stock $.001 par value        New York Stock Exchange


           Securities registered pursuant to Section 12(g) of the Act:
--------------------------------------------------------------------------------
                                (Title of Class)

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 this Form 10-K or any amendment to this
Form 10-K. YES / /  NO / X /

Approximate  aggregate market value of the voting stock held by  "nonaffiliates"
of the Registrant on March 12, 1997: $1,637,578.*

Number of shares of Common Stock  outstanding  of the Registrant as of March 12,
1997: 11,276,750

----------------
*  Registrant's  sole class of voting stock is its Common Stock $.001 par value,
which is listed on the New York  Stock  Exchange.  The  determination  of market
value of such Common Stock has been based solely on the closing  price per share
of such stock on the New York Stock  Exchange on the date  indicated.  In making
this  computation,  all  shares  known to be owned by  directors  and  executive
officers of the Registrant  and all shares known to be owned by persons  holding
in excess of 5% of the  Registrant's  Common  Stock  have  been  deemed  held by
"affiliates"  of the  Registrant.  Nothing  herein shall affect the right of the
Registrant to deny that any such directors,  executive  officers or more than 5%
stockholder is an "affiliate."

<PAGE>
                                     PART I

ITEM 1.  BUSINESS

GENERAL

         The Lehigh Group Inc., a Delaware  corporation  (formerly The LVI Group
Inc.) (the "Company"), through its wholly owned subsidiary,  HallMark Electrical
Supplies  Corp.  ("HallMark"),  is engaged  in the  distribution  of  electrical
supplies for the construction  industry both domestically  (primarily in the New
York Metropolitan area) and for export.

         Prior to 1994, the Company, through its wholly owned subsidiaries,  had
been  engaged in the  following  other  businesses:  (i) through  certain of its
operating  subsidiaries  ("NICO  Construction"),   interior  construction;  (ii)
through its wholly owned subsidiary, LVI Environmental Services Group Inc. ("LVI
Environmental")  and subsidiaries  thereof,  asbestos  abatement;  (iii) through
Riverside  Mfg.,  Inc.  ("Riverside"),   the  design,  production  and  sale  of
electrical products; (iv) through Mobile Pulley and Machine Works, Inc. ("Mobile
Pulley"),  the manufacture and sale of dredging equipment and precision machined
castings; and (v) through LVI Energy Recovery Corporation ("LVI Energy"), energy
recovery and power generation and landfill closure  services.  All of such other
businesses were transferred or sold prior to 1994.

         Riverside and Mobile Pulley were transferred to a liquidating  trust in
connection with the Company's  financial  restructuring  of its outstanding debt
and  preferred  stock on March 15, 1991 (the "1991  Restructuring").  During the
third  quarter of 1991,  the  Company  discontinued  its  interior  construction
business operated through its NICO Construction  subsidiaries due to the general
economic slowdown,  particularly as it related to the real estate market. In the
third quarter of 1990, the Company  discontinued  its LVI Energy  business which
was prompted by technical problems at the LVI Energy power plant facility.  Both
the NICO  Construction  and LVI Energy  subsidiaries  were sold on December  31,
1991.

         The  Company  consummated  a  restructuring  on May 5, 1993 (the  "1993
Restructuring").  Pursuant to the 1993 Restructuring,  the Company, through NICO
Inc., a wholly owned subsidiary ("NICO"),  sold LVI Environmental to LVI Holding
Corporation ("LVI Holding"),  a newly formed company organized by the management
of LVI Environmental,  which had a minority interest in LVI Holding.  The owners
of LVI  Holding  were  certain  holders  of the  9.5%  Class  A  Senior  Secured
Redeemable Notes due March 15, 1997 and the 8% Class B Senior Secured Redeemable
Notes due March 15,  1999  issued by NICO and  guaranteed  by the  Company  (the
"Class A Notes" and "Class B Notes," respectively) and members of the management
of LVI Environmental. As a result of the 1993 Restructuring, 100% of the Class A
Notes and over 97% of the Class B Notes  (together,  the "Notes"),  of NICO were
surrendered to the Company,  together with 3,000,000 shares of its Common Stock,
par  value  $.001 per share  ("Common  Stock")  (27% of all  Common  Stock  then
outstanding),  and, in  exchange  therefor,  participating  holders of the Notes
acquired,  through  LVI  Holding,  all of the  stock of LVI  Environmental.  The
Company's consolidated indebtedness was thereby reduced from approximately $45.9
million to  approximately  $3.6  million  (excluding  approximately  $431,217 of
indebtedness  under Class B Notes that LVI Holding  agreed to pay in  connection
with the 1993  Restructuring,  but for which the Company  remains  liable).  LVI
Holding paid $1.5 million to the Company during 1993 and 1994 in connection with
the  1993   Restructuring  to  fund  operating   expenses  and  working  capital
requirements.

         On October 29, 1996, the Company and First Medical  Corporation ("FMC")
entered into a Merger Agreement.  Under the terms of the Merger Agreement,  each
share of the FMC Common Stock would be  exchanged  for (i)  1,033.925  shares of
Lehigh  Common Stock and (ii) 95.1211  shares of Lehigh  Preferred  Stock.  Each
share of Lehigh  Preferred  Stock will be convertible  into 250 shares of Lehigh
Common  Stock and will have a like  number of votes per share,  voting  together
with the Lehigh Common Stock. Currently,  there are outstanding 10,000 shares of
FMC  Common  Stock.  As a result of these  actions,  immediately  following  the
Merger,  current Lehigh  stockholders and FMC stockholders  will each own 50% of
the issued and outstanding  shares of Lehigh Common Stock. In the event that all
of the  shares of Lehigh  Preferred  Stock  issued to the FMC  stockholders  are
converted  into  Lehigh  Common  Stock,  current  Lehigh  stockholders  will own
approximately 4% and FMC stockholders will own approximately 96% of the issued

                                       -2-

<PAGE>

and outstanding  shares of Lehigh Common Stock. In addition,  under the terms of
the  Merger  Agreement  Lehigh  will be renamed  "First  Medical  Group,  Inc.".
Following the Merger,  Mr. Sokol,  Chief  Executive  Officer of FMC, will become
Chairman and Chief  Executive  Officer of the combined  company,  Mr. Zizza will
become  Executive  Vice  President  and Treasurer and Mr. Bruno will continue as
Vice  President and Secretary.  However,  there can be no assurance at this time
that the Company will be able to consummate this transaction.

         The Company was incorporated under the laws of the State of Delaware in
1928.  The  Company's  principal  executive  offices  are located at 810 Seventh
Avenue,  New York,  NY 10019 and its  telephone  number at that address is (212)
333-2620.

ELECTRICAL SUPPLIES

         HallMark was acquired by the Company in December 1988. HallMark's sales
include electrical conduit, armored cable, switches,  outlets,  fittings, panels
and wire which are purchased by HallMark from electrical equipment manufacturers
in the United States. Approximately 70% of HallMark's sales are domestic and 30%
are export.

         Domestic sales are made by HallMark employees. Nine customers accounted
for  approximately  74%, 61% and 72% (including one customer which accounted for
approximately 21%, 25% and 18%) of HallMark's total domestic sales in 1996, 1995
and 1994, respectively. The loss of any of these customers could have a material
adverse effect on its business.  Export sales are made by sales agents  retained
by HallMark. Distribution is made in approximately 26 countries.

         Management   believes  that  many  companies   (certain  of  which  are
substantially  larger and have greater financial resources than HallMark) are in
competition  with  HallMark.  Management  believes that the primary  factors for
effective  competition between HallMark with its competitors are price, in-stock
merchandise and a reliable delivery service. As a result, orders for merchandise
are received daily and shipped daily; hence, backlog is insignificant.

         Management  believes  that  HallMark is  generally in  compliance  with
applicable governmental  regulations and that these regulations have not had and
will not have a material adverse effect on its business or financial condition.

EMPLOYEES

         As of March 1, 1997,  the Company had 3 employees  and HallMark had 35.
Approximately 85% of such employees are compensated on an hourly basis.

         The Company and HallMark comply with prevailing  local contracts in the
respective geographic locations of particular jobs with respect to wages, fringe
benefits and working conditions.  Most employees of HallMark are unionized.  The
current  collective  bargaining  agreement  for  HallMark,  which  is  with  the
International  Brotherhood  of Electrical  Workers,  Local Union #3,  expires on
April 30, 1999.

ITEM 2.  PROPERTIES

         The  Company  subleases  approximately  300 square feet of space on the
27th floor of 810 Seventh Ave., New York, NY 10019 pursuant to a  month-to-month
lease at a monthly  rental of $2,500 per month.  HallMark  leases  28,250 square
feet of office and  warehouse  facilities in Brooklyn,  New York,  pursuant to a
lease  expiring on June 30, 2004, at an annual rental of  approximately  $78,000
(which progressively  escalates to $106,000 in 2003). In December 1994, HallMark
leased 4,500 square feet of additional warehouse facilities

                                       -3-
<PAGE>

in Brooklyn,  New York,  pursuant to a lease  expiring on June 30,  2004,  at an
annual rental of $18,000 (which progressively escalates to $21,600).

         The Company  believes that all of its  facilities  are adequate for the
business in which it is engaged.

ITEM 3.  LEGAL PROCEEDINGS

         The State of Maine and Bureau of Labor Standards commenced an action in
Maine  Superior Court on or about November 29, 1990 against the Company and Dori
Shoe Company (an indirect  former  subsidiary)  to recover  severance  pay under
Maine's plant  closing law. The case was tried without a jury in December  1994.
Under that law, an  "employer"  who shuts down a large  factory is liable to the
employees  for  severance  pay at the rate of one  week's  pay for each  year of
employment.  Although  the law did not apply to the  Company  when the Dori Shoe
plant  was  closed  it was  amended  so as to  arguably  apply  to  the  Company
retroactively. In a prior case brought against the Company (then known as Lehigh
Valley  Industries)  and its former  subsidiary  under the Maine  severance  pay
statute prior to its amendment,  the Company was successful against the State of
Maine (see CURTIS V. LOREE FOOTWEAR AND LEHIGH VALLEY INDUSTRIES,  516 A. 2d 558
(Me. 1986).

         The  Superior  Court  by  decision  docketed  April  10,  1995  entered
judgement in favor of the former  employees  of Dori Shoe  Company  against Dori
Shoe and the Company in the amount of $260,969.11 plus prejudgment  interest and
reasonable  attorneys'  fees and costs to the Plaintiff  upon their  application
pursuant to Maine Rules of Civil  Procedure  54(b) (3) (d). The Company  filed a
timely appeal appealing that decision and the matter was argued before the Maine
Supreme Judicial Court on December 7, 1995.  Prejudgment interest will accrue at
an annual rate of approximately $20,800 from November 29, 1990.

         On February 18, 1997, the Supreme  Judicial Court of Maine affirmed the
Superior Court's decision. The Company is currently considering an appeal to the
United  States  Supreme  Court.  Approximately  $350,000 has been accrued by the
Company relating to this judgment.

         The Company is involved  in other  minor  litigation,  none of which is
considered  by  management  to be  material  to its  business  or, if  adversely
determined,  would have a material  adverse  effect on the  Company's  financial
condition.

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

         N/A.

                                       -4-

<PAGE>
                                     PART II

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

         The Common Stock is listed on the New York Stock Exchange.  The Company
did not pay cash dividends on the Common Stock during 1996, 1995 or 1994 and has
no  intention of paying cash  dividends  on the Common Stock in the  foreseeable
future.  On March 3, 1997, there were  approximately  7,791 holders of record of
the Common Stock (excluding shares held in "nominee" or "street" name).

         The following  table sets forth the reported high and low closing sales
prices of the Common Stock on the Composite Tape for the quarters indicated.

                                      High                Low
                                      ----                ---

1995:

First Quarter                       $   3/4              $    5/8
Second Quarter                          5/8                   3/8
Third Quarter                           1/2                   3/8
Fourth Quarter                        33/64                 13/64

1996:

First Quarter                       $ 11/16              $   7/16
Second Quarter                         9/16                   3/8
Third Quarter                         11/16                   1/4
Fourth Quarter                        15/32                   1/8


1997:

First Quarter (through
 March 3, 1997)                     $   3/8              $    1/4


                                       -5-
<PAGE>
ITEM 6.                     SELECTED FINANCIAL DATA

                      THE LEHIGH GROUP INC. & SUBSIDIARIES
                         Selected Financial Information
                    (in Thousands, Except For Per Share Data)
<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA

Years ended
December 31,                       1996          1995              1994               1993               1992
------------                       ----          ----              ----               ----               ----

<S>                              <C>            <C>               <C>                <C>                <C>
Revenues earned                  $10,446        $12,105           $12,247            $12,890            $10,729

Loss from continuing
  operations                     $  (920)       $  (558)          $  (410)           $  (250)           $(2,048)

Loss per common share from
  continuing operations           $(0.09)       $ (0.05)           $(0.04)            $(0.03)            $(0.19)

Cash dividends declared per
 common share                         --             --                --                 --                 --
</TABLE>

<TABLE>
<CAPTION>

BALANCE SHEET DATA

DECEMBER 31,                        1996       1995        1994        1993        1992
------------                        ----       ----        ----        ----        ----

<S>                                <C>        <C>         <C>        <C>        <C>      
Working capital                    $2,560     $2,437      $3,233     $ 2,800    ($28,700)

Total assets                       $5,625     $6,622      $7,441      $7,050     $13,753

Long-term debt                     $2,725     $2,080      $2,361      $2,524     $12,787

Total debt (A)                     $3,115     $2,950      $3,240      $3,615     $45,882

Shareholders' equity (deficit)       $(86)      $202        $510     $(5,099)   ($45,041)
</TABLE>


(A)  Includes  long term  debt,  current  maturities  of long term debt and Note
     payable - bank.

                                       -6-
<PAGE>

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

RESULTS OF OPERATIONS

         1996 IN COMPARISON WITH 1995

         Revenues earned for 1996 were $10.4 million, a decrease of $1.7 million
or 14%  compared  with  1995.  Most of the  decrease  in sales  occurred  in the
HallMark  export  operation due in part to the  departure of certain  clients of
HallMark  that  resulted  when certain  clients of HallMark  decided to purchase
supplies  directly from the  manufacturers  instead of through HallMark and also
the departure of a member of HallMark's sales force in the export sector and the
departure of certain  clients that have been  obtained by such person.  In June,
1996, the person in charge of HallMark's  export  operation in Miami and another
employee  were  terminated.  On  October  31,  1996,  HallMark  sold its  export
operation in Miami.  Management does not believe the closure of the Miami export
operation  will have a material  adverse  effect on the  Company.  HallMark  may
continue its export operation from its home office in New York.

         Gross profit as a percentage of revenues  increased from 29% in 1995 to
32% in 1996.  The  increase was  attributable  to higher  profit  margins in the
domestic  operations.  Selling,  general and  administrative  expenses  for 1996
decreased by approximately $121,000, or 3%, compared with 1995. The decrease was
primarily a result of the closing of HallMark's export operation in Miami.

         The net result of the factors  discussed above resulted in an operating
loss of $562,000 in 1996 compared to $517,000 in 1995.

         Interest expense increased by $38,000 to $471,000 in 1996 from $433,000
in 1995.  The increase in interest  expense was due  primarily to an increase in
outstanding borrowings during 1996.

         There  was no  federal  income  tax  for  1996,  due  to the  Company's
operating loss.

         On December 31, 1991, the Company sold its right, title and interest in
the stock of the various  subsidiaries  which made up its discontinued  interior
construction and energy recovery  business segments subject to existing security
interests.  The excess of liabilities over assets of subsidiaries  sold amounted
to approximately $9.6 million. Since 1991, the Company has reduced this deferred
credit (the reduction is shown as income from  discontinued  operations)  due to
the  successful  resolution  of the  majority  of the  liabilities  for  amounts
significantly  less than was  originally  recorded.  The  deferred  credits were
reduced as follows: 1996 - $250,000, 1995 - $250,000, 1994 - $5,000,000,  1993 -
$1,760,000, 1992 - $2,376,000.

         1995 IN COMPARISON WITH 1994

         Revenues earned for 1995 were $12.1 million,  a decrease of $.1 million
or 1% compared with 1994. A slight increase in the Company's  domestic sales was
more than offset by a decrease in export sales. As to the export  business,  the
Company has been unable to fully  replace  those sales lost due to the departure
of one of its key sales people  approximately three years ago. Gross profit as a
percentage  of revenues  decreased  from 30% in 1994 to 29% in 1995.  The slight
decrease was again attributable to weakened margins in export. Selling,  general
and administrative expenses for 1995 decreased by approximately $200,000, or 5%,
compared with 1994. The reduction was primarily a result of decreased  sales and
certain cost cutting initiatives instituted by the Company during 1995.

         The net result of the factors  discussed above resulted in no change in
operating loss in 1995 compared to 1994.

                                       -7-
<PAGE>

         Interest expense increased by $35,000 to $433,000 in 1995 from $398,000
in 1994. A decrease in interest expense due to the continued  reductions of long
term debt was more than offset by an increase in interest rates.

         There  was no  federal  income  tax  for  1995,  due  to the  Company's
operating loss.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's principal capital  requirements have been to fund working
capital  needs,  capital  expenditures  and the  payment of long term debt.  The
Company has recently relied  primarily on internally  generated  funds,  private
placement proceeds and loans to finance its operation.

         Net cash used in  operating  activities  was  $139,000,  $267,000,  and
$160,000 in 1996, 1995 and 1994, respectively. The change from 1994 and 1995 was
primarily  due to the net loss after the addback of the deferred  credit  income
only being  partially  offset by a decrease  in  receivables  and an increase in
accrued expenses. The change from 1995 to 1996 was primarily due to the net loss
after the add back of the deferred credit income and the gain on  extinguishment
of debt  being  partially  offset  by a  decrease  in  accounts  receivable  and
inventory and an increase in accrued expenses.

         Net cash used in investing activities was $13,000, $21,000, and $39,000
in  1996,  1995  and  1994,  respectively.  Due to the  amount  of cash  used in
operating  activities,  the Company  has  expended  very little with  respect to
property and equipment.

         Net cash  provided  by (used in)  financing  activities  was  $276,000,
$(290,000),  and $656,000 in 1996, 1995 and 1994, respectively.  The change from
1994 to 1995 was  primarily  due to the fact  that in 1995 the  Company  did not
receive  any  outside  funds  whereas in 1994 it did.  The Company was unable to
borrow from its bank under a previous credit agreement.  The change from 1995 to
1996 was primarily due to the loan from First Medical Corporation and a decrease
in the amount of capital  lease  payments and decrease in loan payments to Banca
Nazionale del Lavoro, SPA.

         On August 22, 1994,  pursuant to a private placement,  the Company sold
2,575,000  shares of Common Stock at an aggregate  purchase  price of $1,030,000
($.40 per share).  On November 18, 1994, the Company sold an additional  106,250
shares  of Common  Stock at an  aggregate  price of  $42,500  ($.40  per  share)
pursuant to such private placement.

         On June 11,  1996,  the  Company  and DHB  Capital  Group Inc.  ("DHB")
executed a letter of intent providing for the merger of DHB with a subsidiary of
the Company (which resulted in the execution of a definitive merger agreement on
July 8, 1996). Concurrent with the execution of the letter of intent, DHB made a
loan to the  Company  in the  amount  of  $300,000  pursuant  to the  terms of a
Debenture.  The Debenture  includes interest at the rate of two percent (2%) per
annum over the prime lending rate of Chase Manhattan Bank, N.A. payable monthly,
commencing  on the 1st day of each  subsequent  month next  ensuing  through and
including  June 1, 1998  when the  entire  principal  balance  plus all  accrued
interest is due and payable.

         The  proceeds  of the loan from DHB were used to  satisfy  the loan the
Company previously obtained from Macrocom Investors, LLC on March 28, 1996.

         On October 29, 1996 in  connection  with the  execution of a definitive
merger agreement between the Company and First Medical Corporation,  the Company
issued a  convertible  debenture in the amount of $300,000  plus interest at two
(2%) percent per annum over the prime lending rate of Chase Manhattan Bank, N.A.
payable  on the  1st day of each  subsequent  month  next  ensuing  through  and
including 24 months

                                       -8-
<PAGE>
thereafter. On the 24th month, the outstanding principal balance and all accrued
interest shall become due and payable.

         The proceeds of the loan from First  Medical  Corporation  were used to
satisfy the loan the Company  previously  obtained from DHB on June 11, 1996. On
February 7, 1997, First Medical  Corporation elected to convert the debenture in
937,500 shares of the Company's common stock.

         The  Company  continues  to be in  default in the  payment of  interest
(approximately  $628,000  interest  was past due as of December 31, 1996) on the
$390,000 aggregate principal amount of its 13-1/2% Senior Subordinated Notes due
May 15,1998  ("13-1/2% Notes") and 14-7/8%  Subordinated  Debentures due October
15, 1995 ("14-7/8% Debentures") that remain outstanding and were not surrendered
to the Company in connection  with its financial  restructuring  consummated  in
1991. The Company has been unable to locate the holders of the 13-1/2% Notes and
14-7/8%  Debentures  (with the  execption of certain of the 14-7/8  Subordinated
Debentures  which were retired during 1996). The Company does not presently have
sufficient funds to repay its outstanding  indebtedness  under the 13-1/2% Notes
and 14-7/8% Debentures.

         On November 6, 1996,  HallMark  paid off its loan with Banca  Nazionale
del  Lavoro,  SPA and  entered  into a three  year  revolving  loan with The CIT
Group/Credit  Finance,  Inc., with maximum borrowings of $5,000,000 subject to a
borrowing base formula.

IMPACT OF INFLATION

         Inflation has not had a significant impact on the Company's  operations
over the past three years.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See pages F-1  through  F-19 and page S-1 of this Form 10-K,  which are
incorporated herein by reference.

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

         NOT APPLICABLE

                                       -9-

<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following are the directors and executive officers of the Company:

         Name            Age      Position
         ----            ---      --------

Salvatore J. Zizza       51       Chairman  of  the  Board,   President,   Chief
                                  Executive Officer and Director of the Company

Robert A. Bruno          40       Vice President, General Counsel, Secretary and
                                  Director of the Company

Richard L. Bready        52       Director of the Company

Charles A. Gargano       61       Director of the Company

Anthony F. L. Amhurst    54       Director of the Company

Salvatore M. Salibello   51       Director of the Company

Joseph Delowery          62       President of HallMark

         Mr. Zizza has been a director of the Company since 1985 (except that he
did not serve as a director  during the period from March 15, 1991 through April
16, 1991) and Chairman of the Board of the Company since April 16, 1991, and was
Chief  Executive  Officer of the Company from April 16, 1991 through  August 22,
1991 and President of NICO from 1983 through  August 22, 1991. He also served as
President of the Company  from  October 1985 until April 16, 1991.  He is also a
director of the Gabelli Equity Trust,  Inc.; The Gabelli Asset Fund; The Gabelli
Growth Fund;  The Gabelli  Convertible  Securities  Funds,  Inc. and The Gabelli
Global  MultiMedia Trust Inc. On December 12, 1995, Mr. Zizza became Chairman of
the Board of The Bethlehem  Corporation (an American Stock Exchange Company). On
November 18, 1992,  Mr. Zizza also became  Chairman of the Board,  President and
Treasurer of Initial Acquisition Corp. (a Nasdaq listed Company).

         Mr. Bruno has served as Vice President and General Counsel since May 5,
1993 and as Secretary  since August 22, 1994.  He was  appointed to the Board on
March  31,  1994.  He also  has  served  as  General  Counsel  to  NICO  and its
subsidiaries since June 1983 (except he did not serve as General Counsel to NICO
during the period of January 1, 1992 through May 31, 1993).

         Mr.  Bready has been a director of the Company  since May 18, 1994.  He
has served since 1991 as the Chairman of the Board and Chief  Executive  Officer
of Nortek, Inc. (an NYSE-listed company engaged in the manufacture and marketing
of residential,  commercial and industrial  building products) and since 1979 as
its President.

                                      -10-
<PAGE>

         Mr.  Charles A.  Gargano  was  elected as a director  of the Company on
December 20,  1994.  He has been an  entrepreneur  since August 1991 and was the
Finance chairman of the New York State  Republican  Committee in 1994. He served
as the United  States  Ambassador  to the  Republic of Trinidad  and Tobago from
August 1988 through August 1991.  Currently,  Mr. Gargano is Commissioner of the
New York State Office of Economic  Development and President and Chief Executive
Officer of the New York State Urban Development Corporation. Mr. Gargano is also
on the board of  directors  of Alpha  Hospitality  Corporation  and  Winners All
International, Inc., both Nasdaq-listed companies.

         Mr.  Anthony F. L.  Amhurst was elected as a director of the Company on
December 20, 1994.  He has been a Senior and Managing  Partner of Amhurst  Brown
Colombotti  ( a law firm the  principal  office  of  which is in  London)  and a
Solicitor of the Supreme  Court of  Judicature of England for more than the past
five years.

         Mr.  Salibello was elected as a director of the Company on December 20,
1994.  He is the  founder  and for more  than the past  five  years has been the
managing partner of Salibello & Broder,  a certified public  accounting firm. He
is also a director of Nine West Group Inc. (an NYSE-listed company that designs,
develops and markets women's footwear).

         Mr.  Delowery has been the  President of HallMark  since July 1990.  He
served as Vice  President in charge of sales of HallMark  from June 1988 through
July 1990.

         No  family  relationship  exists  between  any  of  the  directors  and
executive officers of the Company.

         All directors  will serve until the annual meeting of  stockholders  of
the Company to be held in 1997 and until their  respective  successors  are duly
elected and  qualified or until their  earlier  death,  resignation  or removal.
Officers are elected annually by the Board and serve at the discretion thereof.

ITEM 11.  EXECUTIVE COMPENSATION

         The following  table sets forth a summary of  compensation  awarded to,
earned  by or paid to the  Chief  Executive  Officer  and  the  other  executive
officers of the Company  whose total annual salary and bonus  exceeded  $100,000
for services  rendered in all capacities to the Company during each of the years
ended December 31, 1996, December 31, 1995 and December 31, 1994:

                                      -11-
<PAGE>
                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                             Long Term
                                                                   Annual Compensation       Compensa-
                                                                                             tion
                                                                                       ----------------------
                                                                                               Awards

                                         ------------------------------------------------------------------------------

                                                                                                 Securities
                                                                                                 Underlying
                                                                                  Other          Underlying         All Other
Name and Principal                                                                Annual          Options           Compensation
------------------                                                                Compen-        (number of         ------------
Position                     Year            Salary               Bonds           sation(2)       Shares)           (3)
--------                     ----            ------               -----           ---------      ---------          ---

<S>                          <C>             <C>                 <C>                   <C>        <C>               <C>
Salvatore J. Zizza (1)       1996            $200,000               0                  0              0             $1,272
 Chairman of the Board
                             1995            $200,000               0                  0              0             $1,272

                             1994            $200,000               0                  0          10,250,000(1)     $  800



Robert A. Bruno (4)          1996            $150,000               0                  0             250,000(5)     $1,272
 Vice President and
 General Counsel             1995            $150,000               0                  0              0             $  822

                             1994                   *               0                  0              0             $  318


Joseph Delowery (5)
 President of Hallmark

                             1996            $110,784            $ 1,500               0              0             $1,272

                             1995            $110,784            $13,469               0              0             $1,272

                             1994            $110,613               0                  0              0             $1,272

</TABLE>



         * Mr.  Bruno's  compensation  for  1994  did not  exceed  $100,000  and
         therefore no disclosure was required to be provided for that year.


                                      -12-


<PAGE>

(1)      On  August  22,  1994,  the  Company  and  Mr.  Zizza  entered  into an
         employment  agreement providing for his employment through December 31,
         1999 as President, Chairman of the Board and Chief Executive Officer of
         the Company at an annual  salary of $200,000  (subject to increase,  in
         the  discretion of the Board,  if the Company  acquires one or more new
         businesses,  to a level  commensurate with the compensation paid to the
         top executives of comparable  businesses).  Pursuant to such agreement,
         if the Company  acquires any business with annual  revenues in the year
         immediately  prior to such  acquisition  of at least  $25  million  (an
         "Acquired  Business"),  Mr.  Zizza will be entitled to a bonus for each
         year  of his  employment  following  such  acquisition  (including  the
         portion of the year  immediately  following  such  acquisition),  in an
         amount  equal to  one-half  of (i) 10% of the first  $1,000,000  of all
         Acquired Business Pre-Tax Income (as hereinafter defined) for such year
         (or portion  thereof),  PLUS (ii) 9% of all Acquired  Business  Pre-Tax
         Income for such year (or portion  thereof)  above  $1,000,000 up to but
         not  exceeding  $2,000,000,  PLUS  (iii)  8% of all  Acquired  Business
         Pre-Tax Income for such year (or portion  thereof) above  $2,000,000 up
         to but not exceeding $3,000,000,  PLUS (iv) 7% of all Acquired Business
         Pre-Tax Income for such year (or portion  thereof) above  $3,000,000 up
         to but not exceeding  $4,000,000,  plus (v) 6% of all Acquired Business
         Pre-Tax  Income for such year above  $4,000,000 up to but not exceeding
         $5,000,000,  PLUS (vi) 5% of all Acquired  Business  Pre-Tax Income for
         such year above $5,000,000. For the purposes hereof, "Acquired Business
         Pre-Tax  Income"  for any year (or  portion  thereof)  means  the total
         pre-tax  income of all  Acquired  Businesses  for such year (or portion
         thereof),  excluding any income earned by Acquired  Businesses prior to
         their  acquisition  by the Company,  any earnings  attributable  to any
         minority interest in Acquired Businesses, and any extraordinary items.

         Mr. Zizza and Lehigh have amended the terms of Mr.  Zizza's  employment
         agreement effective as of the Effective Time of the Merger. In general,
         the amendment provides that (i) Mr. Zizza may be entitled to a bonus at
         the discretion of Lehigh,  in lieu of the current bonus  formula,  (ii)
         Mr. Zizza's options and warrants  exercisable at $.75 per share into an
         aggregate  of 6,000,000  shares of Lehigh  Common Stock and options and
         warrants  exercisable at $1.00 per share into an aggregate of 6,000,000
         shares of Lehigh  Common Stock shall be converted  into 3% of the total
         issued  and  outstanding  shares of  Lehigh  Common  Stock,  on a fully
         diluted basis (after giving effect to a conversion of all of the shares
         of Lehigh  Preferred  Stock issued in connection  with the Merger) at a
         blended  exercise  price of $.875  per  share and (iii) the term of Mr.
         Zizza's employment agreement be extended for an additional year through
         December 31, 2000.

(2)      As to each individual named, the aggregate amounts of personal benefits
         not included in the Summary Compensation Table do not exceed the lesser
         of either  $50,000 or 10% of the total annual salary and bonus reported
         for the named executive officer.

(3)      Represents  premiums  paid by the  Company  with  respect  to term life
         insurance for the benefit of the named executive officer.

(4)      On  January  1,  1995,  the  Company  and  Mr.  Bruno  entered  into an
         employment  agreement providing for his employment through December 31,
         1999 as Vice President and General Counsel for the Company at an annual
         salary of $150,000.  Pursuant to such agreement, Mr. Bruno has deferred
         one-third of his annual salary until such time as the Company's  annual
         revenues  exceed $25  million.  In April 1995 the  Company  granted Mr.
         Bruno an  option to  purchase  250,000  shares  of  common  stock at an
         exercise  price  of $.50  per  share.  The  option  is (i)  immediately
         exercisable  as  to  100,000  shares  subject  to  such  option,   (ii)
         exercisable December 31, 1995 as to an additional 75,000 shares subject
         to such  option,  and (iii)  exercisable  December  31,  1996 as to the
         remaining 75,000 shares subject to such option.  The option will expire
         December 31, 1999.

                                      -13-
<PAGE>

         Mr. Bruno and Lehigh have amended the terms of Mr.  Bruno's  employment
         agreement effective as of the Effective Time of the Merger. In general,
         the  amendment  provides  that (i) Mr.  Bruno's  salary be reduced from
         $150,000 to $120,000 per year, (ii) no part of Mr. Bruno's salary shall
         be deferred and (iii) the term of the employment  shall be extended for
         an additional year through December 31, 2000.

(5)      Mr. Delowery may be deemed to be an executive officer of the Company by
         virtue of his position  with  HallMark.  HallMark  became the Company's
         principal operating subsidiary following the 1993 Restructuring.

COMPENSATION OF DIRECTORS

         Directors  receive no compensation  for serving on the Board other than
the  reimbursement of reasonable  expenses  incurred in attending  meetings.  In
April 1995, the Company issued options to purchase 15,000 shares of common stock
at an  exercise  price of $.50 per share to Mr.  Bready and  options to purchase
10,000 shares of common stock at an exercise  price of $.50 per share to each of
Messrs. Gargano, Amhurst and Salibello. On December 13, 1996, the Company issued
options to purchase  10,000 shares of common stock at an exercise  price of $.50
per share to each of Messrs. Bready,  Gargano,  Amhurst and Salibello in lieu of
cash compensation for serving on the Board for 1996.

                                      -14-


<PAGE>

         The following table sets forth the number of options  exercised and the
dollar value realized thereon by the executive  officers of the Company named in
the Summary  Compensation  Table,  along with the number and dollar value of any
options remaining unexercised on December 31, 1996.

                         AGGREGATED OPTION EXERCISES IN
                         1996 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

                                                        Number of Unexercised                   Value of Unexercised
                                                             Options at                       In-the-Money Options at
                                                              Year-End                              Year-End(1)
                                                 -------------------------------      ------------------------------------

                        Shares
                       Acquired        Value
          Name       on Exercise    Realized(2)   Exercisable         Unexercisable    Exercisable(2)          Unexercisable(2)
          ----       -----------    -----------   -----------         -------------    -----------             -------------

<S>                       <C>            <C>       <C>                 <C>                   <C>                      <C>
Salvatore Zizza           $ 0            $ 0       6,000,000           12,000,000            $ 0                      $ 0

Robert Bruno              $ 0            $ 0         250,000                                 $ 0                      $ 0
</TABLE>



(1)      On December 31, 1996,  the average of the high and low prices per share
         of the Common Stock on the New York Stock Exchange was $.25.

(2)      Represents the difference  between the market value of the Common Stock
         underlying  the  option  and the  exercise  price of such  option  upon
         exercise or year-end, as the case may be.

                                      -15-

<PAGE>
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Section  16(a)  of  the  Securities   Exchange  Act  of  1934  and  the
regulations  of the Securities and Exchange  Commission  (the "SEC")  thereunder
require the Company's executive officers and directors, and persons who own more
than ten percent of a registered  class of the Company's equity  securities,  to
file reports of initial  ownership and changes in ownership with the SEC and the
National  Association of Securities Dealers,  Inc. Such officers,  directors and
ten-percent  stockholders  are also required by SEC rules to furnish the Company
with copies of all Section 16(a) forms they file.  Based solely on its review of
the copies of such forms received by it, or written representations from certain
reporting  persons that no other  reports were  required for such  persons,  the
Company believes that, during or with respect to the period from January 1, 1996
to December 31, 1996,  all Section 16(a) filing  requirements  applicable to its
executive officers, directors and ten-percent stockholders were complied with.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Both Anthony  Amhurst and Charles  Gargano are members of the Company's
Compensation  Committee and are directors.  There are no compensation  committee
interlock relationships to be disclosed pursuant to Item 402 of Regulation S-K.

BOARD REPORT ON EXECUTIVE COMPENSATION

         The Compensation  Committee is responsible for developing the Company's
executive  compensation  policies and determining the  compensation  paid to the
Company's Chief Executive Officer and its other executive officers.

         The Compensation Committee considers the current executive compensation
(other than for Mr. Delowery) to be below the standard for executives performing
comparable services (such as, debt restructurings,  work-outs, negotiations with
bondholders  and various  creditors,  restructuring  bank credit  lines for more
favorable terms, pursuing opportunities to raise working capital, etc.).

         The Company  entered  into an  employment  agreement  with Mr. Zizza in
August 1994 providing for his employment through December 31, 1999 as President,
Chairman  of the Board and Chief  Executive  Officer of the Company at an annual
salary of  $200,000  (the same  salary  previously  paid to him).  His salary is
subject to increase,  in the Board's discretion,  if the Company acquires one or
more new businesses,  to a level  commensurate with the compensation paid to the
top executives of comparable  businesses.  If the Company  acquires any business
with annual  revenues in the year  immediately  prior to such  acquisition of at
least $25  million,  Mr.  Zizza will be entitled to a bonus for each year of his
employment  following  such  acquisition  (including  the  portion  of the  year
immediately  following such acquisition),  based on specified percentages of the
total pre-tax  income of all such acquired  businesses  for such year or portion
thereof. See "Certain Transactions." Pursuant to such employment agreement,  the
Company  also  granted to Mr.  Zizza  options to purchase  10,250,000  shares of
Common  Stock at  exercise  prices  ranging  from $.50 to $1.00 per  share.  For
information  as to the terms and conditions of  exercisability  of such options,
see "Certain Transactions."

                  CHARLES A. GARGANO
                  ANTHONY F.L. AMHURST

                                      -16-

<PAGE>

PERFORMANCE GRAPH

         The graph below compares the cumulative total shareholder return on the
Common Stock of the Company with the cumulative  total return on the NYSE Market
Index and MG Group  Index  (assuming  the  investment  of $100 in the  Company's
Common Stock,  the NYSE Market Index and MG Group Index on January 1, 1992,  and
reinvestment of all dividends).

                     COMPARISON OF CUMULATIVE TOTAL RETURN
                  OF COMPANY, INDUSTRY INDEX AND BROAD MARKET


COMPANY                  1991     1992      1993      1994      1995      1996

LEHIGH GROUP INC         100     180.00     130.00    110.00     45.01    45.01
INDUSTRY INDEX           100     122.34     138.32    131.68    151.52   175.21
BROAD MARKET             100     104.70     118.88    116.57    151.15   182.08



                                      -17-

<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The following table sets forth information on March 12, 1997 (except as
otherwise  noted below) with respect to each person  (including any "group",  as
that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) known to the Company to be the beneficial  owner of more than 5% of the
Common Stock.
<TABLE>
<CAPTION>

            Name and Address                Amount and Nature of                    Percent
           of Beneficial Owner            Beneficial Ownership (1)                 of Class
           -------------------            ------------------------                ---------

<S>                                             <C>                                <C>
First Medical Corporation                       2,858,257 (2)                      25.4% (2)
5200 Blue Lagoon Drive
Miami, FL 33126 (2)

Fidelity Bankers Life Insurance                   799,921 (2)                       7.1% (2)
Company Trust (a subsidiary of
First Dominion Mutual Life
Insurance Company) ("FBL")
1011 Boulder Springs Drive
Richmond, Virginia 23225 (2)

Teachers Insurance and Annuity                   533,280 (2)                        4.7% (2)
Association ("Teachers")
730 Third Ave.
New York, NY 10017 (2)

Kenneth Godt as Trustee for The                  750,000                             6.7%
Orion Trust (The "Godt Trust")
c/o Siegel & Godt
666 Old Country Road
Garden City, NY 11530

Salvatore J. Zizza                              6,255,502 (3)                       36.2% (3)
c/o The Lehigh Group Inc.
810 Seventh Ave.
New York, NY 10019

The Equitable Life Assurance                     524,901 (2)                         4.6% (2)
Society of the United States
("Equitable")
787 Seventh Ave.
New York, NY 10019 (2)
</TABLE>

(1)      Except as otherwise indicated each of the persons listed above has sole
         voting and investment  power with respect to all of the shares shown in
         the table as beneficially owned by such person.

                                      -18-
<PAGE>

(2)      Based on information  set forth on Schedule 13G's filed with the SEC by
         Equitable on February 9, 1996, The Godt Trust on September 27, 1994 and
         Teachers  on April  23,  1992  (assuming,  in each  case,  no change in
         beneficial ownership since such date except in connection with the 1993
         Restructuring.  Information  as to FBL was obtained  from an investment
         specialist at T. Rowe Price on March 5, 1997.

(3)      Includes (i) 4,250,000 shares issuable upon the exercise of immediately
         exercisable options at a price of $.50 per share, (ii) 382 shares owned
         by trust accounts for the benefit of Mr. Zizza's minor children,  as to
         which he disclaims  beneficial  ownership  and (iii)  1,750,000  shares
         issuable  upon the exercise of  immediately  exercisable  warrants at a
         price of $.50 per share.  Excludes  12,000,000  shares of Common  Stock
         issuable  upon the  exercise of options  held by Mr.  Zizza at exercise
         prices of $.75 per share,  in the case of 3,000,000  shares,  $1.00 per
         share, in the case of 3,000,000 shares,  3,000,000 shares issuable upon
         the  exercise of  warrants  at a price of $.75 per share and  3,000,000
         shares  issuable  upon the exercise of warrants at a price of $1.00 per
         share.  These  options  are not  currently  exercisable  or expected to
         become exercisable within the next 60 days, and will not be exercisable
         until such time as (i) the Company receives aggregate net cash proceeds
         of at least $10 million  from the sale  (whether  public or private) of
         its equity securities, (ii) the Company consummates an acquisition of a
         business with annual  revenues  during the year  immediately  preceding
         such  acquisition  of at least $25  million,  and (iii) the fair market
         value  (determined over a 30-day period) of the Common Stock shall have
         equalled or exceeded $1.00 per share. All of the options granted to Mr.
         Zizza will  terminate  on the fifth  anniversary  of the date of grant,
         subject to earlier termination under certain circumstances in the event
         of his death or the  termination  of his  employment.  The Company also
         granted to him one demand  registration  right (exercisable only if the
         Company is eligible to file a  registration  statement on Form S-3 or a
         form  substantially   equivalent   thereto)  and  certain   "piggyback"
         registration  rights  with  respect to the  shares of the Common  Stock
         purchasable upon exercise of such options.

SECURITY OWNERSHIP OF MANAGEMENT

         The  following  table  indicates  the number of shares of Common  Stock
beneficially  owned on March 1, 1997 by (i) each  director of the Company,  (ii)
each of the executive officers named in the Summary Compensation Table set forth
above and (iii) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>

                                          Amount and Nature of
    Name of Beneficial Owner            Beneficial Ownership(1)                Percent of Class
------------------------------      ------------------------------     ---------------------------

<S>                                           <C>                                  <C>
Salvatore J. Zizza                            6,255,502(2)                         36.2%(2)

Richard L. Bready                                25,000(5)                           *

Robert A. Bruno                                 312,760(3)                           *

Charles A. Gargano                               20,000(5)                          --

Salvatore M. Salibello                           20,000(5)                          --

Anthony F. L. Amhurst                            20,000(5)                          --

Joseph Delowery                                       0                             --

All executive officers
and directors as a group
(7 persons)                                   6,653,262(4)                         38.5(4)
</TABLE>

---------------------
*        Less than 1%.

                                      -19-
<PAGE>

(1)      Each of the persons listed above has sole voting and  investment  power
         with respect to all shares shown in the table as beneficially  owned by
         such person.

(2)      See note 3 of the  table  under  the  caption  "Security  Ownership  of
         Certain Beneficial Owners" above.

(3)      Includes 250,000 options to purchase common stock at $.50 per share.

(4)      Includes and excludes shares as indicated in notes (2) and (3) above.

(5)      Represents options to purchase common stock at $.50 per share.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On August 22, 1994, the Company sold  2,575,000  shares of Common Stock
pursuant  to the  Private  Placement  at a  purchase  price of $.40  per  share,
including  250,000 shares sold to Salvatore J. Zizza (the  Company's  President,
Chairman of the board and Chief Executive Officer), 62,500 shares sold to Robert
A. Bruno (the  Company's  Vice  President,  General  Counsel and  Secretary) and
750,000  shares sold to Kenneth  Godt as Trustee of the Orion Trust  (which,  by
virtue of such sale, became the owner of more than 5% of the outstanding  Common
Stock).  Pursuant to a registration rights agreement dated as of August 22, 1994
among the Company and the investors that purchased  Common Stock pursuant to the
Private  Placement  (including Mr. Zizza,  Mr. Bruno and Kenneth Godt as Trustee
for the  Orion  Trust),  such  investors  have  one  demand  registration  right
(exercisable  at any time  after  the first  anniversary  and prior to the fifth
anniversary  of such date) and  certain  "piggyback"  registration  rights  with
respect to such Common Stock.  The Company is attempting to register such shares
under the Securities Act pursuant to the  registration  statement that was filed
on December 12, 1995 which has not yet been  declared  effective.  On August 22,
1994, the Company also (i) issued to Goldis  Financial Group,  Inc.  warrants to
purchase  386,250  shares  of  Common  Stock  at  $.50  per  share,  as  partial
consideration  for its services as selling agent in connection  with the Private
Placement,  and (ii) granted to it certain piggyback  registration  rights as to
such  shares.  The shares of Common  Stock  issuable  upon the  exercise of such
warrants are  attempting to be registered  under the  Securities Act pursuant to
the above mentioned registration statement.

         On August 22, 1994 (immediately  prior to the closing under the Private
Placement),  (i) the Company and Mr. Zizza entered into an employment  agreement
providing  for  the  employment  of Mr.  Zizza  through  December  31,  1999  as
President,  Chairman of the Board and Chief Executive  Officer of the Company at
an annual  salary of $200,000  (subject to increase,  in the  discretion  of the
Board,  if  the  Company  acquires  one  or  more  new  businesses,  to a  level
commensurate  with the  compensation  paid to the top  executives  of comparable
businesses),  and (ii) the Company and Dominic Bassani entered into a consulting
agreement  providing for Mr. Bassani to serve as a consultant to the Company for
a five year period and to provide  during such  period such  financial  advisory
services and assistance as the Company may request in connection  with arranging
for financing for the Company (including  pursuant to the Private Placement) and
in connection with the selection and evaluation of potential  acquisitions.  The
consulting  agreement with Mr. Bassani was mutually  terminated in July 1995. If
the Company  acquires any business with annual revenues in the year  immediately
prior to such acquisition of at least $25 million (an "Acquired Business"),  Mr.
Zizza will be entitled to a bonus for each year of his employment following such
acquisition  (including  the  portion  of the year  immediately  following  such
acquisition),  based on specified percentages of the total pre-tax income of all
Acquired Businesses for such year or portion thereof ("Acquired Business Pre-Tax
Income"). For this purpose, Acquired Business Pre-Tax Income excludes any income
earned by Acquired  Businesses  prior to their  acquisition by the Company,  any
earnings  attributable to any minority interest in Acquired Businesses,  and any
extraordinary  items.  The  bonus for Mr.  Zizza for each such year (or  portion
thereof) will be an amount equal to one-half of (i) 10% of the first  $1,000,000
of all Acquired Business Pre-Tax Income for such year (or portion thereof), (ii)
9% of all Acquired  Business  Pre-Tax Income for such year (or portion  thereof)
above $1,000,000 up to but not exceeding $2,000,000,

                                      -20-

<PAGE>

PLUS (iii) 8% of all Acquired  Business Pre-Tax Income for such year (or portion
thereof) above  $2,000,000 up to but not exceeding  $3,000,000,  PLUS (iv) 7% of
all Acquired  Business  Pre-Tax Income for such year (or portion  thereof) above
$3,000,000  up to but not  exceeding  $4,000,000,  plus  (v) 6% of all  Acquired
Business  Pre-Tax Income for such year above  $4,000,000 up to but not exceeding
$5,000,000, (vi) 5% of all Acquired Business Pre- Tax Income for such year above
$5,000,000.

         The Company also  granted (i) to Mr. Zizza  options to purchase a total
of 10,250,000 shares of Common Stock:  4,250,000  exercisable at $.50 per share,
3,000,000  exercisable at $.75 per share, and 3,000,000 exercisable at $1.00 per
share;  and (ii) to Mr. Bassani warrants to purchase a total of 7,750,000 shares
of Common Stock:  1,750,000 exercisable at $.50 per share, 3,000,000 at $.75 per
share,  and 3,000,000 at $1.00 per share.  In July 1995, Mr. Zizza purchased all
the  warrants  held by Mr.  Bassani.  At the time of such  purchase,  the  Board
consented  to the  transaction  and amended  the Bassani  warrants to make their
expiration date co-terminus with the other warrants which had been issued to Mr.
Zizza.  The $.50 per share  options are  exercisable  immediately;  the $.75 and
$1.00 per  share  options  will not be  exercisable  until  such time as (i) the
Company  has  raised  at least $10  million  of  equity,  (ii) the  Company  has
consummated  an  acquisition  of a business  with  annual  revenues  in the year
immediately  prior to such  acquisition  of at least $25 million,  and (iii) the
fair  market  value  of the  Common  Stock  (as  measured  over a  period  of 30
consecutive  days) has  equalled  or exceeded  $1.00 per share.  The options and
warrants held by Mr. Zizza will  terminate on the fifth  anniversary of the date
of grant,  subject to earlier  termination  under certain  circumstances  in the
event of his  death or the  termination  of his  employment.  The  Company  also
granted to Mr.  Zizza one demand  registration  right  (exercisable  only if the
Company  is  eligible  to file a  registration  statement  on Form S-3 or a form
substantially  equivalent thereto) and certain  "piggyback"  registration rights
with  respect to the shares of Common  Stock  purchasable  upon  exercise of the
options or warrants granted to him.

         The Company will require that any future transactions (other than those
described  above)  between the Company and its  officers,  directors,  principal
stockholders  and the  affiliates of the  foregoing  persons be on terms no less
favorable  to the Company  than could  reasonably  be  obtained in arm's  length
transactions with independent third parties.

         In connection with the issuance by the Company of Common Stock pursuant
to the 1991 Restructuring to the former holders of the 13-1/2% Notes and 14-7/8%
Debentures  and NICO's Senior  Secured Notes (which  holders  included BAT, FBL,
Allstate and Teachers or their predecessors in interest), the Company granted to
such  holders two demand and  unlimited  piggyback  registration  rights  (which
remain  in  effect to the  extent  such  Common  Stock is not  otherwise  freely
transferable). For information as to the Common Stock held by BAT, FBL, Allstate
and  Teachers  (which is covered  by such  registration  rights),  see "Item 12.
Security Ownership of Certain Beneficial Owners and Management."

                                      -21-

<PAGE>

                                     PART IV

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

                                                                            Page
                                                                    ----

     a.    (1)       Financial Statements
                     --------------------
                     The following financial statements are
                     included in Part II, Item 8 of this Annual
                     Report on Form 10-K:

                     Report of Independent Public
                     Accountants as of December 31, 1996,
                     1995 and 1994.                                    F-2

                     Consolidated Balance Sheets, December

                     31, 1996 and 1995.                                F-3 - F-4

                     Consolidated Statements of Operations,
                     Years Ended December 31, 1996, 1995
                     and 1994.                                         F-5

                     Consolidated Statements of Changes in
                     Shareholders' Equity (Deficit), Years
                     Ended December 31, 1996, 1995 and 1994.           F-6

                     Consolidated Statements of Cash Flows,
                     Years Ended December 31, 1996, 1995
                     and 1994.                                         F-7

                     Notes to Consolidated Financial                  F-8 - F-19
                     Statements.

     a.    (2)       SCHEDULE

                     The following schedule for the Years
                     Ended December 31, 1996, 1995 and 1994
                     are submitted herewith:

                     Schedule II - Valuation and Qualifying
                     Accounts                                          S-1

                     All other  schedules  are omitted  because
                     they are not applicable or the required
                     information is shown in the financial
                     statements or notes thereto.

     a.    (3)       EXHIBITS

                     The Exhibits to this Annual Report on
                     Form 10-K are listed in the Exhibit Index
                     annexed hereto and incorporated by
                     reference.

           (b)       REPORTS  ON FORM 8-K

                     There  was one  report on Form 8-K filed
                     during the last quarter covered by this
                     report, dated November, 1996.

                                      -22-
<PAGE>

                                   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.

                                             THE LEHIGH GROUP INC.

                                             By: /s/ Salvatore J. Zizza
                                                 ----------------------
                                                 Salvatore J. Zizza
                                                 President

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.

/s/ Salvatore J. Zizza
----------------------------  Chairman of the Board Director      March 25, 1997
Salvatore J. Zizza            and President Chief Executive
                              Officer (Chief Financial Officer)

/S/ Robert A. Bruno
----------------------------  Vice President, General             March 25, 1997
Robert A. Bruno               Counsel, Secretary and Director

/s/ Richard L. Bready
----------------------------   Director                           March 25, 1997
Richard L. Bready

----------------------------   Director                           March   , 1997
Charles A. Gargano

----------------------------   Director                           March , 1997
Anthony F.L. Amhurst

/s/ Salvatore M. Salibello     Director                           March 25, 1997
----------------------------
Salvatore M. Salibello

                                 -23-

<PAGE>
              INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                        Page
                                                                        ----

Report of Independent Certified Public Accountants as of
 December 31, 1996, 1995 and 1994                                       F-2

Consolidated Balance Sheets, December 31, 1996 and 1995             F-3 and F-4

Consolidated Statements of Operations, Years Ended
 December 31, 1996, 1995 and 1994                                       F-5

Consolidated Statements of Changes in Shareholders' Equity,
 (Deficit) Years Ended December 31, 1996, 1995 and 1994                 F-6

Consolidated Statements of Cash Flows, Years Ended
 December 31, 1996, 1995 and 1994                                       F-7

Notes to Consolidated Financial Statements                          F-8 to F-19

Schedule, Years Ended December 31, 1996, 1995 and 1994

  II - Valuation and Qualifying Accounts                                 S-1

All other  schedules  are omitted  because the  required
information  is either or is included in the  consolidated
financial  statements  or the notes thereto.

                                       F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To The Board of Directors and Shareholders of
The Lehigh Group Inc.:

We have audited the accompanying consolidated balance sheets of The Lehigh Group
Inc.  and  subsidiaries  as of  December  31,  1996 and  1995,  and the  related
consolidated  statements of operations,  shareholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996. We have
also audited the schedule  listed in the  accompanying  index.  These  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 audits to obtain
reasonable  assurance  about whether the financial  statements  and schedule are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial  statements and
schedule.  An audit also includes  assessing the accounting  principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
presentation  of the  financial  statements  and  schedule.  We believe that our
audits provides 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 The Lehigh Group
Inc.  and  subsidiaries  at December  31, 1996 and 1995,  and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996, in conformity with generally accepted accounting principles.

Also in our opinion, the schedule presents fairly, in all material respects, the
information set forth therein.

                                                  /S/ BDO SEIDMAN, LLP
                                                  --------------------
                                                      BDO Seidman, LLP

New York, New York
February 18, 1997

                                       F-2

<PAGE>
THE LEHIGH GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                          December 31,
                                                     1996             1995
--------------------------------------------------------------------------------
                                       (in thousands except for per share data)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents                            $  471          $  347
Accounts receivable, net of allowance for             3,581           4,335
  doubtful accounts of $342 and $174 (notes 6
  and 10)

Inventories (Note 6)                                  1,215           1,823
Prepaid expenses and other current assets               279              22
                                                     ------          ------

  Total current assets                                5,546           6,527

Property, plant and equipment, net of                    50              61
  accumulated depreciation and amortization
  (Notes 5 and 6)

Other assets                                             29              34
                                                     ------          ------

  TOTAL ASSETS                                       $5,625          $6,622
                                                     ======          ======



The accompanying notes to consolidated financial statements are an integral part
of these financial statements.

                                       F-3
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                        December 31,
                                                                                1996                      1995

-------------------------------------------------------------------------------------------------------------------

                                                                           (in thousands except for per share data)

<S>                                                                            <C>                       <C>      
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:

Current maturities of long-term debt (Note 6)                                       390                  $     510
Note payable-bank (Note 6)                                                           -                         360
Accounts payable                                                                    954                      1,839
Accrued expenses and other current liabilities (Notes 5, 6 and 8)                 1,642                      1,381
                                                                               --------                  ---------

Total current liabilities                                                         2,986                      4,090
                                                                               --------                  ---------

Long-term debt, net of current maturities (Note 6)                                2,725                      2,080
                                                                               --------                  ---------

Deferred credit applicable to the sale of

   discontinued operations (Note 4)                                                  -                         250
                                                                               --------                  ---------

Commitments and Contingencies (Notes 6 and 8)

SHAREHOLDERS' EQUITY (DEFICIT):

Preferred stock, par value $.001; authorized

  5,000,000 shares, none issued                                                      --                         --

Common stock, par value $.001 authorized
  shares  100,000,000,  in 1996 and 1995; shares
  issued  10,339,250 in 1996 and 1995 which
  excludes 3,016,249 and 3,016,249 shares held
  as treasury stock in 1996 and 1995, respectively                                   11                         11
Additional paid-in capital (Note 6)                                             106,594                    106,594
Accumulated deficit from January 1, 1986                                       (105,037)                  (104,749)
Treasury stock - at cost                                                         (1,654)                    (1,654)
                                                                               ---------                 ----------

Total shareholders' equity (deficit)                                                (86)                       202
                                                                               ---------                 ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                           $  5,625                  $   6,622
                                                                               =========                 =========
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.

                                       F-4
<PAGE>
THE LEHIGH GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

Years ended December 31,                                                    1996             1995              1994
-------------------------------------------------------------------------------------------------------------------

                                                                       (in thousands except for per share data)

<S>                                                                  <C>              <C>               <C>       
Revenues earned (Note 10)                                               $10,446          $12,105           $12,247

Costs of revenues earned                                                  7,134            8,628             8,577
                                                                        --------         --------          -------
Gross Profit                                                              3,312            3,477             3,670

Selling, general and administrative expenses                              3,874            3,994             4,187
                                                                        --------         --------          -------

Operating loss                                                             (562)            (517)             (517)
                                                                        --------         --------          --------

Other income (expense):

   Interest expense                                                        (471)            (433)             (398)
   Interest and other income (Note 6)                                       113              392               505
                                                                        --------         --------          -------
                                                                           (358)             (41)              107



Loss before discontinued operations and extraordinary item                 (920)            (558)             (410)
Income from discontinued operations (Note 4)                                250              250             5,000
                                                                        --------         --------          -------
Income (loss) before extraordinary item                                    (670)            (308)            4,590
Extraordinary item:

   Gain on early extinguishment of debt (Note 6)                            382              -                  -
                                                                        --------       ----------          -------

Net income (loss)                                                       $  (288)         $  (308)          $ 4,590
                                                                        ========         ========          =======

EARNINGS PER SHARE - PRIMARY AND FULLY DILUTED

   Loss before discontinued operations and extraordinary item           $ (0.09)         $ (0.05)          $ (0.04)
   Income from discontinued operations                                     0.02             0.02              0.49
   Income (loss) before extraordinary item                                (0.07)           (0.03)             0.45
   Net Income (loss)                                                      (0.03)           (0.03)             0.45

Weighted average Common Shares

AND SHARE EQUIVALENTS OUTSTANDING

   Primary and Fully diluted                                         10,339,250       10,339,250        10,169,000
                                                                     ===========      ===========       ==========
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       F-5
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>

Years Ended December 31, 1996, 1995 and 1994
----------------------------------------------------------------------------------------------------------------------------------
                           (in thousands)
                               Preferred
                                  Stock                Common Stock
                                  -----                ------------

                                                                               Additional                  Treasury
                                   Number of                 Number of         Paid-In      Deficit From    Stock
                                     Shares    Amount     Shares     Amount    Capital      Jan. 1, 1986     At Cost     Total
                                    --------   ------     -------    ------   ---------     ------------    ---------    ------

<S>                                 <C>      <C>         <C>            <C>    <C>           <C>            <C>        <C>    
Balance January 1, 1994              --      $  --        7,658         $11    $105,575      $(109,031)     $(1,654)   $(5,099)


Issuance of common
   stock in connection

   with private placement                                 2,681                   1,019                                  1,109

Net Income                           --      $  --          --          --                       4,590          --       4,590
                                  ------     ------     -------      ------    --------      ---------      -------    ------

Balance December 31, 1994                       --       10,339         $11    $106,594      $(104,441)     $(1,654)   $   510
                                  ======     ======      ======         ===    ========      ==========     ========   =======


Net Loss                             --         --          --          --                    $   (308)         --     $  (308)
                                  ------     ------     -------      ------    --------       ---------     -------    --------

Balance December 31, 1995                    $  --       10,339         $11    $106,594      $(104,749)     $(1,654)   $   202
                                  ======     ======      ======         ===    ========      ==========     ========   =======


Net Loss                             --         --          --         $                     $    (288)         --     $   288
                                 =======     ======     =======        ====    ========      ==========     =======    =======


Balance December 31, 1996           --       $  --       10,339         $11    $106,594      $(105,037)     $(1,654)   $    86
                                 =======     ======      ======         ===    ========      ==========     ========   =======
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       F-6


<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 11)
<TABLE>
<CAPTION>

Years Ended December 31,                                            1996             1995              1994
-----------------------------------------------------------------------------------------------------------
                                                                                (in thousands)

Cash flows from operating activities:

<S>                                                               <C>               <C>              <C>
   Net income (loss)                                              $ (288)           $(308)           $4,590
   Adjustments to reconcile net income (loss) to net
      cash used in operating activities:

      Gain on early extinguishment of debt                          (382)              --               --
      Depreciation and amortization                                   29               65                69

Deferred credit applicable to sale of discontinued
   operations                                                       (250)            (250)           (5,000)

Changes in assets and liabilities:
   Accounts receivable                                               754              276                93
   Inventories                                                       608              (78)             (108)
   Prepaid expenses and other current assets                        (257)                                55
   Other assets                                                        5               (1)                6


   Accounts payable                                                 (885)             (72)               64
   Accrued expenses and other current liabilities                    442              101                81
                                                                   ------           ------            -----
   Net cash used in operating activities                            (224)            (267)             (160)
                                                                   ------           ------            ------

Cash flows from investing activities:
   Capital expenditures                                              (18)             (21)              (39)

Cash flows from financing activities:
   Repayment of capital leases                                       (10)             (20)               (3)
   Net payments under bank debt                                   (2,340)            (270)             (360)
   Payment on subordinated debenture                                    (9)            --                --
   Net proceeds from sale of stock                                    --               --             1,019
   Issuance of convertible debenture                                 300               --                --
   Net borrowings from C.I.T. revolver                             2,425

   Net cash provided by (used in) financing activities               366             (290)              656
                                                                   ------           ------            -----

Net change in cash and cash equivalents                              124             (578)              457
Cash and cash equivalents at beginning of period                     347              925               468
                                                                   ------           ------            -----

Cash and cash equivalents at end of period                        $  471            $ 347             $ 925
                                                                   ======           ======            =====
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       F-7
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

1 - GENERAL

         The Lehigh  Group  Inc.  (the  "Company"),  through  its  wholly  owned
subsidiary,  HallMark Electrical Supplies Corp. ("HallMark"),  is engaged in the
distribution  of  electrical   supplies  for  the  construction   industry  both
domestically  (primarily  in the New York  Metropolitan  area)  and for  export.
HallMark was acquired by the Company in December 1988.  HallMark's sales include
electrical conduit, armored cable, switches,  outlets, fittings, panels and wire
which are purchased by HallMark from electrical  equipment  manufacturers in the
United States.  Approximately  70% of HallMark's  sales are domestic and 30% are
export. Export sales are made by sales agents retained by HallMark. Distribution
is made in approximately 26 countries.

         Export sales as a percentage of total sales are summarized as follows:

                           1996             1995              1994
                           ----             ----              ----

   Central America         10%              16%               14%
   South America            8%              18%               16%
   Caribbean                6%               6%                -
   West Indies              2%               -                 6%
   Other                    4%               -                 2%
                           ---              ---               ---
          Total            30%              40%               38%
                           ===              ===               ===

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The consolidated  financial statements include all
of  the  accounts  of  the  Company  and  its  wholly  owned  subsidiaries.  All
intercompany accounts and transactions have been eliminated in consolidation.

INVENTORIES  -  Inventories  are  stated at the lower of cost or market  using a
first-in,  first-out basis to determine cost.  Inventories consist of electrical
supplies held for resale.

PROPERTY,  PLANT AND  EQUIPMENT - Property,  plant and  equipment are carried at
cost.  Depreciation is provided on the  straight-line  method over the estimated
useful lives of the related assets.  Amortization  of leasehold  improvements is
provided over the life of each respective lease.

INCOME TAXES - The Company uses the liability  method of accounting for deferred
income taxes. The provision for income taxes typically  includes Federal,  state
and local income taxes currently payable and those deferred because of temporary
timing differences  between the financial  statement and tax bases of assets and
liabilities.  The  financial  statements  do not include a provision  for income
taxes due to the Company's net operating losses.

EARNINGS  PER SHARE - Earnings per common  share is  calculated  by dividing net
income  (loss)  applicable to common  shares by the weighted  average  number of
common shares and share  equivalents  outstanding  during each period.  Excluded
from fully diluted  computations  are certain stock options granted  (12,000,000
options which are  contingently  exercisable  pending the  occurrence of certain
future events).

                                       F-8
<PAGE>
THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

TREASURY STOCK - Treasury stock is recorded at net acquisition  cost.  Gains and
losses on  disposition  are  recorded as  increases or decreases to capital with
losses in excess of  previously  recorded  gains  charged  directly  to retained
earnings.

STOCK  OPTIONS - The Company uses the intrinsic  value method of accounting  for
employee  stock  options as  permitted  by  Statement  of  Financial  Accounting
Standards  No.  123  "According  for  Stock-Based  Compensation".   Accordingly,
compensation  cost for stock  options is measured as the excess,  if any, of the
quoted  market  price of the  Company's  stock at the date of the grant over the
amount the  employee  must pay to acquire the stock.  The  compensation  cost is
recognized over the vesting period of the options.

ESTIMATES - The preparation of 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 these estimates.

LONG-LIVED  ASSETS - The  Company  adopted  Statement  of  Financial  Accounting
Standards No. 121  "Accounting  for the Impairment of Long-Lived  Assets and for
Long  Lived-Assets  to be  Disposed  Of" in 1996.  The Company  reviews  certain
long-lived assets and identifible  intangibles for impairment whenever events or
changes  in  circumstances   indicate  that  the  carrying  amount  may  not  be
recoverable.  In that regard,  the Company assesses the  recoverability  of such
assets based upon estimated  non-discounted cash flow forecasts. The Company has
determined that no impairment loss needs to be recognized for long lived assets.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  -  The  carrying  values  of  financial
instruments  including  cash  and  cash  equivalents,  accounts  receivable  and
accounts  payable  approximate  fair value at December 31, 1996,  because of the
relative short maturities of these instruments.  It is not possible to presently
determine  the market  value of the long term debt and notes  payable  given the
Company's current financial condition.

STATEMENTS OF CASH FLOWS - Cash equivalents  include time deposits with original
maturities of three months or less.

REVENUE  RECOGNITION - Revenue is  recognized  when products are shipped or when
services are rendered.

                                       F-9
<PAGE>
THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

3 - MERGER

         On October 29, 1996, the Company and First Medical  Corporation ("FMC")
entered into a Merger Agreement.  Under the terms of the Merger Agreement,  each
share of the FMC Common Stock would be  exchanged  for (i)  1,033.925  shares of
Lehigh  Common Stock and (ii) 95.1211  shares of Lehigh  Preferred  Stock.  Each
share of Lehigh  Preferred  Stock will be convertible  into 250 shares of Lehigh
Common  Stock and will have a like  number of votes per share,  voting  together
with the Lehigh Common Stock. Currently,  there are outstanding 10,000 shares of
FMC  Common  Stock.  As a result of these  actions,  immediately  following  the
Merger,  current Lehigh  stockholders and FMC stockholders  will each own 50% of
the issued and outstanding  shares of Lehigh Common Stock. In the event that all
of the  shares of Lehigh  Preferred  Stock  issued to the FMC  stockholders  are
converted  into  Lehigh  Common  Stock,  current  Lehigh  stockholders  will own
approximately 4% and FMC stockholders  will own  approximately 96% of the issued
and outstanding  shares of Lehigh Common Stock. In addition,  under the terms of
the  Merger  Agreement  Lehigh  will be renamed  "First  Medical  Group,  Inc.".
Although  the Company has entered  into this merger  agreement,  there can be no
assurance  at this  time  that  the  Company  will be  able to  consummate  this
transaction.

4 - DISCONTINUED OPERATIONS

         On December 31, 1991, the Company sold its right, title and interest in
the stock of the various  subsidiaries  which made up its discontinued  interior
construction and energy recovery  business segments subject to existing security
interests.  The excess of liabilities over assets of subsidiaries  sold amounted
to approximately $9.6 million. Since 1991, the Company has reduced this deferred
credit (the reduction is shown as income from  discontinued  operations)  due to
the  successful  resolution  of the  majority  of the  liabilities  for  amounts
significantly  less than was  originally  recorded.  The  deferred  credits were
reduced as follows:

                       1992                     $ 2,376
                       1993                     $ 1,760
                       1994                     $ 5,000
                       1995                     $   250
                       1996                     $   250


                                      F-10
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

5 - PROPERTY, PLANT AND EQUIPMENT

                                         December 31
                                    ----------------------        Estimated
                                                                  Useful Lives
                                                              ---------------

                                    1996           1995
                                    ----------    --------

Machinery and equipment             $ 483          $  475       3 to 5 years
Leasehold improvements                295             285     Term of leases
                                    -----          -----
                                      778             760

Less accumulated depreciation and

   amortization                     (728)           (699)
                                    -----         ------
                                    $  50           $  61
                                    =====         ======




6 - LONG-TERM DEBT

                                                           December 31,
                                                    ----------------------------

                                  Interest Rate          1996           1995
                                  -------------

Subordinated Debentures           14-7/8%             $    290      $    400
Senior Subordinated Notes         13-1/2%                  100           100

Convertible Debenture              10.25%                  300            --
Note Payable-BNL                   10.56%                   --         2,440

Revolving Credit Facility-CIT      10.56%                2,425            --
Other Long-Term Debt               10.25%                  --             10
                                                      --------      --------
                                                         3,115         2,950

Less Current Portion                                     (390)         (870)
                                                      --------      --------
   Total Long-Term Debt                               $  2,725      $  2,080
                                                      ========      ========



         SUBORDINATED DEBENTURES AND SENIOR SUBORDINATED NOTES

         On March 15, 1991, pursuant to a restructuring done by the Company (the
"1991 Restructuring"), the holders of $8,760,000 principal amount of the 14-7/8%
Debentures  exchanged  such  securities,  together  with the  accrued but unpaid
interest  thereon,  for  $2,156,624  principal  amount  of  Class  B  Notes  and
53,646,240  shares of Common  Stock.  Additionally,  the holders of  $33,840,000
principal amount of the 13- 1/2% Notes exchanged such securities,  together with
the accrued but unpaid  interest  thereon,  for $8,642,736  principal  amount of
Class B Notes and 212,650,560 shares of Common Stock.

                                      F-11
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

         The Company was in default of certain covenants to the holders of Class
A Notes and Class B Notes (the  "Notes") at December 31, 1992 and 1991 and, as a
consequence, the Notes were classified as current in the 1992 and 1991 Financial
Statements.  The Company  continues  to be in default in the payment of interest
(approximately  628,000 and  $653,000 of interest is past due as of December 31,
1996 and 1995) on the  $500,000  principal  amount of 13-1/2%  Notes and 14-7/8%
Debentures  that were not tendered in the Company's 1991  Restructuring.  In May
1993 the  Company  reached  an  agreement  (the  "1993  Restructuring")  whereby
participating  holders of the Notes  ("Noteholders")  surrendered  their  Notes,
together  with a  substantial  portion of their Common  Stock,  and, in exchange
therefore,  the Noteholders  acquired,  through a newly formed corporation ("LVI
Holding"),  all of the stock of LVI  Environmental  Services  Group  Inc.  ("LVI
Environmental"),  a  subsidiary  of the  Company  that  conducted  its  asbestos
abatement  operations.  Management of LVI  Environmental  have a minority equity
interest  in  LVI  Holding.   As  a  consequence,   the  Company's   outstanding
consolidated  indebtedness  was  reduced  from  approximately  $45.9  million to
approximately  $3.6 million  (excluding  approximately  $120,944 of indebtedness
under Class B Notes that LVI Holding  agreed to pay in connection  with the 1993
Restructuring  but for which the Company remains liable).  Since the Noteholders
were also principal stockholders of the Company, the gain from this transaction,
net of the  carrying  value  of LVI  Environmental,  was  credited  directly  to
additional paid-in capital.

         In accordance with Statement of Financial  Accounting Standards No. 15,
the Class A Notes and the Class B Notes were carried on the consolidated balance
sheet at the  total  expected  future  cash  payments  (including  interest  and
principal)  specified by the terms of the Notes. A gain on early  extinguishment
of debt  occurred  as a result of the  carrying  amounts of the  13-1/2%  Notes,
14-7/8%  Debentures  and Senior  Secured  Notes  (including  accrued  but unpaid
interest and unamortized  deferred  financing costs) being greater than the fair
market  value of the  common  stock  issued,  the net  assets  transferred  to a
liquidating  trust, and total expected future cash payments of the Class A Notes
and Class B Notes, net of direct restructuring costs.

         Included in interest and other income in 1996 and 1995 is approximately
$106,000  and  $380,000   respectively  of  other  income  which  represents  an
adjustment  to the value of certain  items which  relate to the  Company's  1991
Restructuring.

         During 1996,  the Company  retired  $110,000 of the 14-7/8%  debentures
plus accrued and unpaid interest of $181,000 for approximately  $9,000. The gain
on extinguishment of debt of approximately $282,000 is included in extraordinary
item of $382,000.

         The  Company  continues  to be in  default in the  payment of  interest
(approximately   $628,000   and   $653,000  at  December   31,  1996  and  1995,
respectively) and principal  approximately $390,000 and $500,000 at December 31,
1996 and 1995  respectively  on the  13-1/2  Notes  and  14-7/8  Debentures  not
tendered in the  Company's  1991  Restructuring.  The  principal of $390,000 and
$500,000  is  included  as current  maturities  of long term debt and the unpaid
interest is included in accrued expenses and other current liabilities.

                                      F-12
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

REVOLVING CREDIT FACILITY

         In November 1996,  HallMark  entered into a three year revolving credit
facility with a financial  institution,  which provides a maximum line of credit
equal to the lesser of eligible accounts receivable and inventory or $5 million.
The  credit  facility  bears  interest  at  the  prime  rate  plus  2%,  and  is
collaterized by the Company's  accounts  receivable,  inventory and property and
equipment.

         The Company used  proceeds from the  revolving  credit  facility to pay
down its  outstanding  note  payable  with a bank.  The  extinguishment  of debt
resulted  in a gain of  approximately  $100,000.  This gain is  included  in the
extraordinary item of $382,000.

CONVERTIBLE DEBENTURE

         On October 29, 1996 in connection  with the execution of the definitive
merger  agreement  described  in Note 3 between the Company and FMC, the Company
issued a  convertible  debenture in the amount of $300,000  plus interest at two
(2%) percent per annum over the prime lending rate of Chase Manhattan Bank, N.A.
payable on the first day of each  subsequent  month  next  ensuing  through  and
including  twenty  four  months  thereafter.  On the twenty  fourth  month,  the
outstanding  principal  balance and all accrued  interest  shall  become due and
payable.

         The  proceeds  of the loan from FMC were used to  satisfy  the loan the
Company  previously  obtained  from DHB Capital  Group Inc. on June 11, 1996. On
February 7, 1997, First Medical  Corporation elected to convert the debenture in
937,500 shares of the Company's common stock.

                                      F-13
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

7 - INCOME TAXES

         At December 31, 1996 and 1995, the Company had a net deferred tax asset
amounting to approximately $2.2 and $1.6 million respectively.  The net deferred
tax asset consists  primarily of net operating loss ("NOL")  carryforwards,  and
temporary differences resulting from inventory and accounts receivable reserves,
and it is fully  offset  by a  valuation  allowance  of the same  amount  due to
uncertainty  regarding its ultimate  utilization.  The following is a summary of
the significant components of the Company's deferred tax assets and liabilities.

   December 31,                            1996               1995
   ------------

   Deferred tax assets:

    Nondeductible accruals and allowances $  206            $   65
    Net operating loss carryforward        2,008             1,575
                                          ------            ------
                                           2,214             1,640
   Deferred tax liabilities:

    Depreciation and amortization             30                30
                                          ------            ------

   Net deferred tax asset                 $2,184            $1,610
   Less:  Valuation Allowance              2,184             1,610
                                          ------            ------

   Deferred Income Taxes                      -                 -
                                          ------             ------
                                              -                 -
                                          ======             ======


         The Company did not have Federal  taxable income in 1996, 1995 and 1994
and,  accordingly,  no Federal  taxes  have been  provided  in the  accompanying
consolidated statements of operations.  As of December 31, 1996, the Company had
NOL carryforwards of approximately $5 million expiring through 2011.

8 - COMMITMENTS AND CONTINGENCIES

         LEASES

         The Company and its subsidiaries lease machinery,  office and warehouse
space,  as well as certain  data  processing  equipment  and  automobiles  under
operating leases. Rent expense aggregated $165,000,  $177,000,  and $148,000 for
the years ended December 31, 1996, 1995, and 1994, respectively.

                                      F-14
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

         Future  minimum  annual  lease  commitments,  primarily  for office and
warehouse space, with respect to non-cancelable leases are as follows:

                        1997                                104
                        1998                                105
                        1999                                114
                        2000                                118
                        2001                                121
                  Thereafter                                313
                                                         ------
                                                         $  875
                                                         ======

         In addition to the above,  certain  office and  warehouse  space leases
require the payment of real estate taxes and operating expense increases.

         EMPLOYMENT AGREEMENTS

         On August 22, 1994 the Company and Mr.  Salvatore Zizza entered into an
employment agreement providing employment to Mr. Zizza through December 31, 1999
as President,  Chairman of the Board and Chief Executive  Officer of the Company
at an annual  salary of $200,000.  On December 20, 1996,  the Company  agreed to
extend Mr. Zizza's employment contract through December 31, 2000.

         On January 1, 1995 the Company and Mr.  Robert  Bruno  entered  into an
employment agreement providing employment to Mr. Bruno through December 31, 1999
as Vice  President  and General  Counsel of the  Company at an annual  salary of
$150,000. The agreement calls for deferral of $50,000 of Mr. Bruno's salary each
year until the  Company's  annual  revenues  exceed  $25  million.  The  $50,000
deferral has not been accrued due to uncertainty regarding the Company achieving
$25 million in sales.  On December  20, 1996,  the Company  agreed to extend Mr.
Bruno's  employment  agreement  through December 31, 2000. Mr. Bruno reduced his
annual  salary  to  $120,000  no  part  of  which  shall  be  deferred   pending
consummation of the proposed merger with First Medical Corporation.

                                      F-15
<PAGE>
THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

         LITIGATION

         The State of Maine and Bureau of Labor  Standards  commenced  an action
against the Company and Dori Shoe Company (an  indirect  former  subsidiary)  to
recover  severance  pay under  Maine's  plant  closing  law.  The case was tried
without a jury on December 12 and 13, 1994 in Maine Superior  Court.  Under that
law, an "employer" who shuts down a large factory is liable to the employees for
severance  pay at the  rate of one  week's  pay  for  each  year of  employment.
Although  the law did not  apply to the  Company  at the time that the Dori Shoe
plant  was  closed  it was  amended  so as to  arguably  apply  to  the  Company
retroactively.

         In a prior case  brought  against  the  Company  (then  known as Lehigh
Valley  Industries)  and its former  subsidiary  under the Maine  severance  pay
statute prior to its amendment the Company was  successful  against the State of
Maine (see CURTIS V. LOREE FOOTWEAR AND LEHIGH VALLEY INDUSTRIES,  516 A. 2d 558
(Me. 1986).

         The  Superior  Court  by  decision  docketed  April  10,  1995  entered
judgement in favor of the former  employees  of Dori Shoe  Company  against Dori
Shoe and the Company in the amount of $260,969.  plus  prejudgment  interest and
reasonable  attorneys'  fees and costs to the Plaintiff  upon their  application
pursuant to Maine Rules of Civil  Procedure  54(b) (3) (d).  Interest  and other
fees are approximately $100,000 at December 31, 1996. The Company filed a timely
appeal appealing the decision and the matter was argued before the Maine Supreme
Judicial  Court on December 7, 1995.  On February 18, 1997 the Supreme  Judicial
Court of Maine affirmed the Superior Court's decision.  The Company is currently
considering an appeal to the United States Supreme Court. Approximately $350,000
has been accrued by the Company relating to this judgment.

                                      F-16
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

9 - STOCK OPTIONS

         The following table contains information on stock options for the three
year period ended December 31, 1996:
<TABLE>
<CAPTION>

                                                         Exercise price   Weighted
                                    Option shares        range per share  average price
-----------------------------------------------------------------------------------------


<S>                                   <C>           <C>      <C>              <C>  
Outstanding January 1, 1994              0                 0                      0

Granted                               18,402,187    $0.50 to $1.00            $0.75
Exercised                                0                 0                      0
Forfeited                                0                 0                      0
-----------------------------------------------------------------------------------------


Outstanding December 31, 1994         18,402,187    $0.50 to $1.00            $0.75

Granted                                  295,000         $0.50                $0.50
Exercised                                0                 0                      0
Forfeited                                0                 0                      0
-----------------------------------------------------------------------------------------


Outstanding December 31, 1995         18,697,187    $0.50 to $1.00            $0.75

Granted                                   55,000         $0.50                $0.50
Exercised                                0                 0                      0
Forfeited                                0                 0                      0
-----------------------------------------------------------------------------------------


Outstanding December 31, 1996         18,752,187    $0.50 to $1.00            $0.75
</TABLE>


         The Company issues stock options from time to time to certain employees
and outside directors. The Company applies APB Opinion 25, "Accounting for Stock
Issued to  Employees",  and  related  Interpretations  in  accounting  for stock
options  issued.  Under  APB  Opinion  25,  because  the  exercise  price of the
Company's  stock options equals the market price of the underlying  stock on the
date of grant, no compensation cost is recognized.

         FASB Statement 123, "Accounting for Stock-Based Compensation", requires
the Company provide pro forma information  regarding net income and earnings per
share as if  compensation  cost for the  Company's  stock  option plans had been
determined  in  accordance  with the fair value based method  prescribed in FASB
Statement 123. The Company  estimates the fair value of each stock option at the
grant date by using the  Black-Scholes  option-pricing  model with the following
weighted-average assumptions used for grants in 1995 and 1996, respectively:  no
dividends  paid for  both  years;  expected  volatility  of 30% for both  years;
risk-free  interest  rates of 6.78% and  6.42%;  and  expected  lives of 4 and 5
years.

         Under the  accounting  provisions of FASB  Statement 123, the Company's
net loss and loss per share would have been  adjusted  to the pro forma  amounts
indicated below:

                                      F-17
<PAGE>

THE LEHIGH GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)

                                                     1996              1995
                                                     ----              ----

   Net loss

     As reported                                     (288)             (308)
     Pro forma                                       (304)             (310)

   Primary earnings per share

     As reported                                    (0.03)            (0.03)
     Pro forma                                      (0.03)            (0.03)

   Fully diluted earnings per share

     As reported                                    (0.03)            (0.03)
     Pro forma                                      (0.03)            (0.03)


The following table summarizes  information  about stock options  outstanding at
December 31, 1996.

                        OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                        -------------------               -------------------

                                Weighted-
                                Average       Weighted-               Weighted-
Range of          Number        Remaining     Average    Number       Average
Exercise          Outstanding   Contractual   Exercise   Exercisable  Exercise
 Peixwa           at 12/31/96       Life       Price     at 12/31/96   Prices
 ------           -----------       ----       -----     -----------   ------

$0.50 to $1.00    18,752,187     3 years       $0.75     6,752,187        $0.50

Twelve million of the eighteen  million options and warrants granted in 1994 are
contingently  exercisable pending the occurrence of certain future events. These
events  include the Company  acquiring any business with annual  revenues in the
year immediately prior to such acquisition of at least $25 million dollars.  The
occurrence  of this event as well as certain  other events will  constitute  the
measurement   date  for  those  options  and  the  Company  will   recognize  as
compensation  the  difference  between  measurement  date price and the  granted
price.

                                      F-18
<PAGE>

10 - SIGNIFICANT CUSTOMER

Sales to a customer  accounted  for  approximately  21%,  25%, and 22% for years
ended December 31, 1996, 1995 and 1994,  respectively.  This customer  accounted
for approximately 14%, 21% and 15 % of accounts receivable on December 31, 1996,
1995, and 1994, respectively.

11 - SUPPLEMENTARY INFORMATION

STATEMENTS OF CASH FLOWS

                            YEARS ENDED DECEMBER 31,
                                 1996 1995 1994

Cash paid during the year for:

  Interest                   $252              $278             $264
  Income taxes                  1                12               78


Supplemental disclosure of non-cash financing activities:

DECEMBER 31, 1996 AND 1995

Accounts payable and operating loss were both reduced by approximately  $106,000
and  $380,000  for  December  31,  1996 and 1995,  respectively  relating  to an
adjustment  to the value of certain  items which  relate to the  Company's  1991
Restructuring.

                                      F-19
<PAGE>

                     THE LEHIGH GROUP INC. AND SUBSIDIARIES
                                   SCHEDULE II

                        Valuation and Qualifying Accounts
                  Years Ended December 31, 1996, 1995 and 1994

                          (Dollar Amounts in Thousands)
<TABLE>
<CAPTION>

                                                    Balance at      Charged to
                                                    Beginning       Costs and   Charged to        Other Charges       Balance at
December 31,          Description                   of Year         Expenses    Other Accounts    Add (Deduct)        End of Year
------------------------------------------------------------------------------------------------------------------------------------


<S>                                                <C>               <C>           <C>             <C>                 <C>
  1996        Allowance for doubtful
               accounts                            $   174           38            --                206               $    342

              Inventory obsolescence reserve       $   158           --            33                 50               $    175


  1995        Allowance for doubtful
               accounts                            $   275           --            --               (101)              $    174

              Inventory obsolescence reserve       $   158           --            --                                  $    158


  1994        Allowance for doubtful
               accounts                            $   300                         --                (25)              $    275

              Inventory obsolescence reserve       $   158           --            --                                  $    158
</TABLE>


                                       S-1


<PAGE>

                                  EXHIBIT INDEX

EXHIBIT

2                      Agreement  and Plan of Merger,  dated as of  October  29,
                       1996,  between the  Company,  the  Company's  Acquisition
                       Corp., and First Medical  Corporation,  as amended (filed
                       as  Appendix  A to the Joint  Proxy  Statement/Prospectus
                       (incorporated   by   reference  to  Exhibit  2.1  to  the
                       Company's  Form S-4  Amendment  No. 1 dated  December 27,
                       1996).

3(a)                   Restated   Certificate  of  Incorporation,   By-Laws  and
                       Amendments  to  By-Laws  (incorporated  by  reference  to
                       Exhibits A and B to Company's  Annual Report on Form 10-K
                       for the year ended  December 31, 1970.  Exhibits 3 and 1,
                       respectively,  to Company's  Current  Reports on Form 8-K
                       dated  September 8, 1972 and May 9, 1973,  and Exhibit to
                       Company's  Current  Report on Form 8-K dated  October 10,
                       1973,  and Exhibit 3 to Company's  Annual  Report on Form
                       10-K for the year ended December 31, 1980).

3(b)                   Certificate  of  Amendment  to  Restated  Certificate  of
                       Incorporation  dated September 30, 1983  (incorporated by
                       reference to Exhibit 4(a) to Company's  Quarterly  Report
                       on Form 10-Q for the quarter ended June 29, 1985).

3(c)                   Certificate  of  Amendment  to  Restated  Certificate  of
                       Incorporation  of  Company  filed with the  Secretary  of
                       State of the  State  of  Delaware  on  October  31,  1985
                       (incorporated  by  reference to Exhibit 4(c) to Company's
                       Current Report on Form 8-K dated November 7, 1985).

3(d)                   Certificate  of  Amendment  to  Restated  Certificate  of
                       Incorporation  of  Company  filed with the  Secretary  of
                       State  of the  State  of  Delaware  on  January  2,  1986
                       (incorporated  by  reference to Exhibit 3(d) to Company's
                       Annual  Report on Form 10-K for the year  ended  December
                       31, 1985).

3(e)                   Certificate  of  Amendment  to  Restated  Certificate  of
                       Incorporation  of  Company  filed with the  Secretary  of
                       State  of  the  State  of   Delaware   on  June  4,  1986
                       (incorporated  by  reference to Exhibit 4(a) to Company's
                       Quarterly  Report on Form 10-Q for the quarter ended June
                       30, 1986).

3(f)                   By-Laws of Company,  as amended to date  (incorporated by
                       reference to Exhibit 3(f) to Company's  Annual  Report on
                       Form 10-K for the year ended December 31, 1990).

3(g)                   Certificate  of  Amendment  to  Restated  Certificate  of
                       Incorporation  of  Company  filed with the  Secretary  of
                       State  of  the  State  of  Delaware  on  March  15,  1991
                       (incorporated  by  reference to Exhibit 3(g) to Company's
                       Annual  Report on Form 10-K for the year  ended  December
                       31, 1990).

3(h)                   Certificate of Amendment to Certificate of  Incorporation
                       of Company filed with the Secretary of State of the State
                       of  Delaware  on  December  27,  1991   (incorporated  by
                       reference to Exhibit 3(h) to Company's  Annual  Report on
                       Form 10-K for the year ended December 31, 1991).

3(i)                   Certificate of Amendment to Certificate of  Incorporation
                       of Company filed with the Secretary of State of the State
                       of Delaware on January 27, 1995 (incorporated by

                                       E-1


<PAGE>

                       reference to Exhibit 3(i) to Company's  Annual  Report on
                       Form 10-K for the year ended December 31, 1994).

3(j)                   Amended and Restated  By-laws of the Company,  as amended
                       to date  (incorporated  by reference to Exhibit  3(ii) to
                       the  Registrant's  Current  Report of Form 8-K dated July
                       17, 1996).

4(a)                   Form of  Indenture,  dated as of October 15, 1985,  among
                       Registrant, NICO, Inc. and J. Henry Schroder Bank & Trust
                       Company,  as Trustee,  including  therein the form of the
                       subordinated  debentures to which such Indenture  relates
                       (incorporated   by  reference  to  Exhibit  4(a)  to  the
                       Company's  Current  Report on Form 8-K dated  November 7,
                       1985).

4(b)                   Amendment  to  Indenture  dated  as  of  March  14,  1991
                       referenced to in Item 4(b)(1)  (incorporated by reference
                       to Exhibit 4(b)(2) to Registrant's  Annual Report on Form
                       10- K for the year ended December 31, 1990).

4(c)                   Indenture  dated as of March 15,  1991 (the "Class B Note
                       Indenture")  among  the  Company,  NICO,  the  guarantors
                       signatory  thereto,  and  Continental  Stock Transfer and
                       Trust Company, as Trustee, pursuant to which the 8% Class
                       B Senior Secured  Redeemable  Notes due March 15, 1999 of
                       NICO were  issued  together  with the form of such  Notes
                       (incorporated  by  reference to Exhibit 4(i) to Company's
                       Annual  Report on Form 10-K for the year  ended  December
                       31, 1990).

4(d)                   First  Supplemental  Indenture  dated  as of May 5,  1993
                       between  NICO  and  Continental  Stock  Transfer  & Trust
                       Company,  as  trustee  under the  Class B Note  Indenture
                       (incorporated  by  reference to Exhibit 4(h) to Company's
                       Annual  Report on Form 10-K for the year  ended  December
                       31, 1993).

4(e)                   Form of indenture  between the Company,  NICO and Shawmut
                       Bank,  N.A.,  as  Trustee,  included  therein the form of
                       Senior Subordinated Note due April 15, 1998 (incorporated
                       by  reference  to  Exhibit  4(b) to  Amendment  No.  2 to
                       Company's  Registration  Statement  on Form S-2 dated May
                       13, 1988).

10(a)                  Guaranty  of LVI  Environmental  dated as of May 5,  1993
                       (incorporated  by  reference  to  Exhibit  10(f)  to  the
                       Company's  Annual  Report on Form 10-K for the year ended
                       December 31, 1993).

10(b)                  Indemnification  Agreement  dated as of May 5, 1993 among
                       LVI  Environmental,  Company  and certain  directors  and
                       officers of Company (incorporated by reference to Exhibit
                       10(h) to the Company's Annual Report on Form 10-K for the
                       year ended December 31, 1993).

10(c)                  Assumption  Agreement  dated  as of  May  5,  1993  among
                       Company,  NICO and LVI Holding for the benefit of holders
                       of  certain  securities  of  Hold-Out  Notes (as  defined
                       therein)  (incorporated  by reference to Exhibit 10(i) to
                       the  Company's  Annual  Report  on Form 10-K for the year
                       ended December 31, 1993).

10(d)                  Exchange Offer and Registration Rights Agreement dated as
                       of March 15,  1991 made by the  Company in favor of those
                       persons  participating  in the Company's  exchange offers
                       (incorporated  by  reference  to  Exhibit  10(j)  to  the
                       Company's  Annual Report on Form 10-K/A  Amendment #2 for
                       the year ended December 31, 1993).

                                       E-2

<PAGE>

10(e)                  Employment  Agreement  between  Company and  Salvatore J.
                       Zizza dated August 22, 1994 (incorporated by reference to
                       Exhibit 10.1 to the Company's  Current Report on Form 8-K
                       filed with the  Securities  and  Exchange  Commission  in
                       September 1994).

10(f)                  Options  of  Mr.   Zizza  to  purchase  an  aggregate  of
                       10,250,000   shares  of  Common   Stock  of  the  Company
                       (incorporated   by  reference  to  Exhibit  10.2  to  the
                       Company's  Current  Report  on Form  8-K  filed  with the
                       Securities and Exchange Commission in September 1994).

10(g)                  Registration Rights Agreement dated as of August 22, 1994
                       between  Mr.  Zizza  and  the  Company  (incorporated  by
                       reference to Exhibit 10.3 to the Company's Current Report
                       on Form  8-K  filed  with  the  Securities  and  Exchange
                       Commission in September 1994).

10(h)                  Consulting  Agreement dated as of August 22, 1994 between
                       Dominic   Bassani  and  the  Company   (incorporated   by
                       reference to Exhibit 10.4 to the Company's Current Report
                       on Form  8-K  filed  with  the  Securities  and  Exchange
                       Commission in September 1994).

10(i)                  Warrants  of Mr.  Bassani to  purchase  an  aggregate  of
                       7,750,000   shares  of  Common   Stock  of  the   Company
                       (incorporated   by  reference  to  Exhibit  10.5  to  the
                       Company's  Current  Report  on Form  8-K  filed  with the
                       Securities and Exchange Commission in September 1994).

10(j)                  Registration Rights Agreement dated as of August 22, 1994
                       between  Mr.  Bassani and the  Company  (incorporated  by
                       reference to Exhibit 10.6 to the Company's Current Report
                       on Form  8-K  filed  with  the  Securities  and  Exchange
                       Commission in September 1994).

10(k)                  Form of Registration  Rights Agreement dated as of August
                       22,  1994  among the  Company  and the  investors  in the
                       Private  Placement  (incorporated by reference to Exhibit
                       10.7 to the  Company's  Current  Report on Form 8-K filed
                       with the Securities and Exchange  Commission in September
                       1994).

10(l)                  Warrant of Goldis  Financial  Group,  Inc. to purchase an
                       aggregate  of  386,250  shares  of  Common  Stock  of the
                       Company (incorporated by reference to Exhibit 10.8 to the
                       Company's  Current  Report  on Form  8-K  filed  with the
                       Securities and Exchange Commission in September 1994).

10(m)                  Employment  Agreement  between  the Company and Robert A.
                       Bruno dated January 1, 1995 (incorporated by reference to
                       Exhibit 10(m) to the Company's Annual Report on Form 10-K
                       for the year ended December 31, 1995).

21                     Subsidiaries of the Company (incorporated by reference to
                       Exhibit 21 of the  Company's  Annual  Report on Form 10-K
                       for the year ended December 31, 1995).

27*                    Financial  Data  Schedule to the  Company's  10-K for the
                       year ended December 31, 1995. *Filed herewith.

The Company will  provide a copy of any of the exhibits  included in this Annual
Report on Form 10-K  upon  written  request  and  payment  of a fee to cover the
reasonable  expense of furnishing  such  exhibits to The Lehigh Group Inc.,  810
Seventh Avenue,  New York, New York,  10019,  Attention:  Secretary  (Telephone:
(212) 333-2620).

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