<PAGE>

<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                 F O R M  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 0-19737
                                       OR

                  [ ] TRANSITION REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO           .

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

                                NOEL GROUP, INC.
             (Exact name of registrant as specified in its charter)

                DELAWARE                                 13-2649262
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)

     incorporation or organization)

 667 MADISON AVENUE, NEW YORK, NEW YORK                    10021
(Address of principal executive offices)                (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 371-1400

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     TITLE OF EACH CLASS              NAME OF EXCHANGE ON WHICH REGISTERED
     -------------------              ------------------------------------
            NONE                                 NOT APPLICABLE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                     COMMON STOCK, PAR VALUE $.10 PER SHARE

                                (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. [ ]

         The aggregate  market value of voting stock held by  non-affiliates  of
the registrant on March 25, 1997, was approximately $130,541,626.  On such date,
the last sale price of registrant's common stock was $6.50 per share. Solely for
the purposes of this  calculation,  shares  beneficially  owned by directors and
officers  of the  registrant  and  beneficial  owners of in excess of 10% of the
registrant's  common  stock have been  excluded,  except  shares with respect to
which such persons or entities  disclaim  beneficial  ownership.  Such exclusion
should  not be deemed a  determination  or  admission  by  registrant  that such
individuals or entities are, in fact, affiliates of registrant.

         Indicate  number  of  shares  outstanding  of each of the  registrant's
classes of common stock, as of March 25, 1997.

                 CLASS                             OUTSTANDING ON MARCH 25, 1997
                 -----                             -----------------------------
Common Stock, par value $.10 per share                     20,421,039

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                               PART OF THE FORM 10-K INTO WHICH
                Document                       THE DOCUMENT IS INCORPORATED
                --------                       ----------------------------
Definitive Proxy Statement to Shareholders     Part III, Items 10, 11, 12 and 13
 for 1997 Annual Meeting






<PAGE>

<PAGE>




         This Annual  Report on Form 10-K  contains,  in addition to  historical
information,  certain  forward-looking  statements  regarding  future  financial
condition  and  results  of   operations.   The  words   "expect,"   "estimate,"
"anticipate,"  "predict,"  "believe,"  and similar  expressions  are intended to
identify forward-looking  statements.  Such statements involve certain risks and
uncertainties.  Should one or more of these risks or uncertainties  materialize,
actual outcomes may vary materially from those indicated.

                                     PART I

ITEM 1.  BUSINESS.

(a)  General development of business.

         On May 21, 1996, the Board of Directors of Noel Group,  Inc. ("Noel" or
the  "Company")  adopted a Plan of Complete  Liquidation  and  Dissolution  (the
"Plan")  which  was  approved  by  the  shareholders  at a  Special  Meeting  of
Shareholders held on March 19, 1997.

PRINCIPAL PROVISIONS OF THE PLAN

Pursuant to the Plan:

         (a) The Company will distribute pro rata to its  shareholders,  in-kind
or sell or otherwise dispose of all its property and assets.  The liquidation is
expected  to be  concluded  prior to the  third  anniversary  of the date of the
approval of the Plan by the  shareholders  by a final  liquidating  distribution
either directly to the  shareholders or to one or more liquidating  trusts.  Any
sales of the Company's  assets will be made, in private or public  transactions,
on such terms as are approved by the Board of Directors.  It is not  anticipated
that any  further  shareholder  votes  will be  solicited  with  respect  to the
approval of the specific terms of any particular sales of assets approved by the
Board of  Directors  as the  Company has been  advised by its counsel  that such
further votes are not required by the Delaware  General  Corporate Law ("DGCL").
See  "Sales  of the  Company's  Assets."  Reference  is made to  "Factors  to be
Considered with Respect to  Distribution or Sale of the Company's  Assets" for a
discussion  of  the  factors  to be  considered  by  the  Board  in  making  its
determination  of  which  assets  will be sold  and  which  will be  distributed
in-kind.

         (b)  Subject  to  the  payment  or the  provision  for  payment  of the
Company's  indebtedness  and other  obligations,  the cash proceeds of any asset
sales together with other  available cash will be distributed  from time to time
pro rata to the  holders of the Common  Stock on record  dates  selected  by the
Board of Directors with respect to each such distribution.  Only shareholders of
record  on the  record  date  set for a  particular  distribution  will  receive
distributions  with  respect to such record  date.  The Company may  establish a
reasonable  reserve (a  "Contingency  Reserve") in an amount  determined  by the
Board of Directors to be  sufficient  to satisfy the  liabilities,  expenses and
obligations of the Company not otherwise paid,  provided for or discharged.  The
net balance,  if any, of any such Contingency  Reserve  remaining after payment,
provision or discharge of all such  liabilities,  expenses and obligations  will
also be distributed to the Company's  shareholders  pro rata. The Company itself
has no current or long-term  indebtedness.  Bank  indebtedness  reflected in the
Company's consolidated financial statements consists of the bank indebtedness of
the Company's consolidated  subsidiaries.  Lenders generally have no recourse to
the Company for the ultimate collection of loans to the Company's  subsidiaries.
The Company's accrued  obligations at December 31, 1996 were  approximately $8.2
million,  including $4.8 million  accrued with respect to  outstanding  options,
with the balance  accrued with  respect to Federal  income  taxes  payable,  the
Company's  obligations  under its  Supplemental  Executive  Retirement Plan (the
"Supplemental Plan") and other accrued expenses. No assurances can be given that
available  cash and  amounts  received on the sale of assets will be adequate to
provide for the Company's obligations,  liabilities,  expenses and claims and to
make cash  distributions to shareholders.  The Company currently has no plans to
repurchase shares


                                       -1-






<PAGE>

<PAGE>



of  Common  Stock  from  its  shareholders.  However,  if the  Company  were  to
repurchase  its  shares  of Common  Stock,  par  value  $.10 per share  ("Common
Stock"), from its shareholders,  such repurchases would be open market purchases
and would decrease amounts  distributable to other  shareholders if Noel were to
pay amounts in excess of the per share  values  distributable  in respect of the
shares purchased and would increase amounts  distributable to other shareholders
if Noel were to pay  amounts  less than the per share  values  distributable  in
respect of such shares. See "Liquidating Distributions;  Nature; Amount; Timing"
and "Contingent Liabilities; Contingency Reserve; Liquidating Trust" below.

         (c) Any  distribution  in-kind of the Company's  holdings of securities
will be made pro rata to the holders of Common Stock on record dates selected by
the Board of Directors with respect to each such distribution. Only shareholders
of record on the record  date set for a  particular  distribution  will  receive
distributions  with respect to such record date. A distribution of the Company's
holdings  in a  security  may  also  be  effected  by the  distribution  to Noel
shareholders  of interests in a trust holding such security.  If securities held
by the Company are to be  distributed  directly to  shareholders  (other than in
trust),  applicable  rules  and  regulations  of  the  Securities  and  Exchange
Commission  (the  "Commission")  will be complied with so that all  shareholders
(with the possible  exception of  affiliates  of the Company or of the issuer of
the  securities  which are  distributed)  will  receive  securities  which  will
thereafter be freely  transferable by them under applicable  Federal  securities
laws.  The  securities  to be  distributed  to the  shareholders  will have been
registered under the Securities  Exchange Act of 1934, as amended (the "Exchange
Act") and, if required by applicable law and  regulation,  the Securities Act of
1933, as amended (the "Securities Act").  Accordingly,  the corporation  issuing
such  securities will be subject to  substantially  the same reporting and proxy
rules as currently apply to the Company. As described under "Principal Assets of
the Company" only certain of Noel's  holdings  constitute  securities  which are
currently  registered under the Exchange Act. Securities which under current law
and  regulation  may not be distributed  without such  registration  will not be
distributed unless and until the required registration has been effectuated.  In
addition,  assuming satisfaction of required eligibility standards,  the Company
may seek to cause any of its holdings of securities  not currently  listed on an
securities  exchange or authorized for quotation on Nasdaq,  to be so authorized
for  quotation or listed,  although  there can be no assurance  that the Company
will do so. If any  distributed  securities  are not  authorized  for  quotation
through  Nasdaq or listed  on an  exchange,  the  effect  may be to render  such
securities  illiquid  and/or to diminish the price  realizable upon sale. In any
event,  the sale or distribution of the Company's  holdings and the anticipation
of such sale or distribution resulting from the approval of the Plan may reduce,
at least  temporarily,  the market price of such  securities  and  therefore the
values realized by the shareholders.  See "Factors to be Considered with Respect
to Distribution or Sale of the Company's Assets."

         (d) If deemed  necessary by the Board of Directors for any reason,  the
Company may, from time to time, transfer any of its unsold assets to one or more
trusts established for the benefit of the then shareholders which property would
thereafter be sold or distributed  on terms approved by its trustees.  If all of
the  Company's  assets  (other  than the  Contingency  Reserve)  are not sold or
distributed  prior to the third  anniversary  of the approval of the Plan by the
Company's  shareholders,  the Company must transfer in final  distribution  such
remaining  assets  to a trust.  The  Board of  Directors  may also  elect in its
discretion to transfer the Contingency  Reserve, if any, to such a trust. Any of
such trusts are referred to herein as "liquidating trusts."  Notwithstanding the
foregoing,  to the extent that a distribution or transfer of any asset cannot be
effected without the consent of a governmental  authority,  no such distribution
or transfer shall be effected  without such consent.  In the event of a transfer
of assets to a liquidating trust, the Company would distribute,  pro rata to the
holders of its Common Stock,  beneficial interests in any such liquidating trust
or trusts.  It is anticipated  that the interests in any such trusts will not be
transferable;  hence,  although the recipients of the interests would be treated
for tax purposes as having received their pro rata share of property transferred
to the liquidating trust or trusts and will thereafter take into account for tax
purposes their  allocable  portion of any income,  gain or loss realized by such
liquidating  trust or trusts,  the  recipients of the interests will not realize
the value thereof unless and until such liquidating trust or trusts  distributes
cash or other  assets to them.  The Plan  authorizes  the Board of  Directors to
appoint one or more individuals or entities to act as trustee or trustees of the
liquidating trust or trusts and to cause the Company to enter into a liquidating
trust agreement or agreements with such trustee or trustees on such terms


                                       -2-






<PAGE>

<PAGE>



and  conditions  as may be approved by the Board of  Directors.  Approval of the
Plan by the  shareholders  constituted the approval by such  shareholders of any
such appointment and any liquidating trust agreement or agreements.  For further
information  relating to liquidating trusts, the appointment of trustees and the
liquidating  trust  agreements,  reference is made to  "Contingent  Liabilities;
Contingent Reserve; Liquidating Trusts."

         (e) The Company  will close its stock  transfer  books and  discontinue
recording transfers of shares of Common Stock on the earlier to occur of (i) the
close of  business on the record  date fixed by the Board of  Directors  for the
final  liquidating  distribution,  or (ii)  the date on  which  the  dissolution
becomes  effective  under the DGCL (the "Final  Record  Date"),  and  thereafter
certificates  representing  shares  Common  Stock  will  not  be  assignable  or
transferable on the books of the Company except by will, intestate succession or
operation of law. After the Final Record Date the Company will not issue any new
stock  certificates,  other than  replacement  certificates.  See  "Listing  and
Trading of the Common Stock and  interests in the  Liquidating  Trust or Trusts"
and "Final Record Date" below.

         (f)  Following  completion  of the foregoing  steps,  a Certificate  of
Dissolution will be filed with the State of Delaware dissolving the Company. The
dissolution of the Company will become  effective,  in accordance  with the DGCL
upon proper filing of the Certificate of Dissolution with the Secretary of State
or upon such later date as may be specified in the  Certificate of  Dissolution.
Pursuant to the DGCL,  the Company will  continue to exist for three years after
the  dissolution  becomes  effective  or for such longer  period as the Delaware
Court of Chancery  shall direct,  for the purpose of  prosecuting  and defending
suits, whether civil, criminal or administrative, by or against it, and enabling
the Company gradually to settle and close its business, to dispose of and convey
its property, to discharge its liabilities and to distribute to its shareholders
any remaining  assets,  but not for the purpose of  continuing  the business for
which the Company was organized.

ABANDONMENT; AMENDMENT

         Under the Plan, the Board of Directors may modify, amend or abandon the
Plan, notwithstanding shareholder approval, to the extent permitted by the DGCL.
The  Company  will not amend or modify the Plan under  circumstances  that would
require  additional  shareholder  solicitations  under  the DGCL or the  federal
securities laws without complying with the DGCL and the federal securities laws.

         The  Executive  Committee of the Board of Directors may exercise all of
the powers of the Board of  Directors  in  implementing  the Plan.  Accordingly,
references  to the Board of Directors  herein  should be deemed also to refer to
such committee.

LIQUIDATING DISTRIBUTIONS; NATURE; AMOUNT; TIMING

         Although the Board of Directors has not  established  a firm  timetable
for  distributions  to  shareholders,  the Board of Directors  will,  subject to
exigencies   inherent  in  winding  up  the   Company's   business,   make  such
distributions  as promptly as  practicable.  The  liquidation  is expected to be
concluded  prior to the third  anniversary  of the  approval  of the Plan by the
shareholders  by  a  final  liquidating  distribution  either  directly  to  the
shareholders  or to a liquidating  trust.  The Board of Directors  is,  however,
currently  unable  to  predict  the  precise  nature,  amount  or  timing of any
distributions pursuant to the Plan. The actual nature, amount and timing of, and
record date for all distributions  will be determined by the Board of Directors,
in its sole  discretion,  and will  depend in part upon the Board of  Directors'
determination as to whether  particular assets are to be distributed  in-kind or
otherwise disposed of through sale or other means. Reference is made to "Factors
to be Considered with Respect to  Distribution or Sale of the Company's  Assets"
for a  discussion  of the  factors to be  considered  by the Board in making its
determination  of  which  assets  will be sold  and  which  will be  distributed
in-kind.

         The  Company  does  not  plan to  satisfy  all of its  liabilities  and
obligations prior to making distributions to its shareholders,  but instead will
reserve assets deemed by management and the Board of Directors to be


                                       -3-






<PAGE>

<PAGE>



adequate  to provide  for such  liabilities  and  obligations.  See  "Contingent
Liabilities;  Contingency Reserve;  Liquidating Trust." Management and the Board
of Directors believe that the Company has sufficient cash to pay its current and
accrued  obligations,  without the sale of any of its assets. It is anticipated,
however,  that the sale or  distribution  of all of the Company's  holdings will
result in the net realization of substantial net gain and the recognition of tax
obligations.  The Company  believes that it has sufficient  cash to enable it to
pay its estimated tax obligations. In the event this is not the case the Company
may need to raise additional cash through the sale of a portion of its holdings.
See  "Factors  to be  Considered  with  Respect to  Distribution  or Sale of the
Company's Assets."

         Uncertainties  as to the  precise  net value of Noel's  assets  and the
ultimate  amount  of its  liabilities  make  it  impracticable  to  predict  the
aggregate  net  values   ultimately   distributable  to  shareholders.   Claims,
liabilities and expenses from operations  (including operating costs,  salaries,
income  taxes,  payroll  and local  taxes and  miscellaneous  office  expenses),
although  currently  declining,  will continue to occur during  execution of the
Plan, and the Company  anticipates that expenses for professional fees and other
expenses of  liquidation  will be  significant.  These  expenses will reduce the
amount of assets available for ultimate distribution to shareholders, and, while
the Company  does not believe  that a precise  estimate  of those  expenses  can
currently be made,  management and the Board of Directors believe that available
cash and amounts  received on the sale of assets will be adequate to provide for
the  Company's   obligations,   liabilities,   expenses  and  claims  (including
contingent liabilities) and to make cash distributions to shareholders. However,
no assurances can be given that available cash and amounts  received on the sale
of  assets  will  be  adequate  to  provide  for  the   Company's   obligations,
liabilities, expenses and claims and to make cash distributions to shareholders.
If such  available  cash and  amounts  received  on the sale of  assets  are not
adequate to provide for the  Company's  obligations,  liabilities,  expenses and
claims,  distributions  of cash and other assets to the  Company's  shareholders
will be reduced.

PRINCIPAL ASSETS OF THE COMPANY

         Set forth below is a table setting forth Noel's  principal  holdings as
of March 10, 1997.

<TABLE>
<CAPTION>
                                                    Approximate                                                     Approximate
                                                    % of                                                            % of
                                                    Outstanding                                                     Outstanding
                                 No. of             Shares of                                    No. of             Shares of
                                 Shares of          Common Stock                                 Shares of          Preferred Stock
                                 Common             as of                 Common Stock           Preferred          as of
Name of Company                  Stock Held         March 10, 1997        Traded on              Stock              March 10, 1997
---------------                  ----------         --------------        ------------           ----------         --------------
<S>                              <C>                        <C>           <C>                      <C>                     <C> 
HealthPlan Services              4,275,846(1)               29%           New York                      --                   --
 Corporation                                                              Stock Exchange

Staffing Resources, Inc.         2,026,104(2)               16%                --(3)                    --                   --

Carlyle Industries, Inc.         2,205,814(1)               30%           New York                 19,312,837.5             93%
                                                                            Stock Exchange             Series B

Lincoln Snacks                   3,769,755(1)               60%           Nasdaq Small                  --                   --
 Company                                                                    Cap Market

Curtis Industries, Inc.            163,449(2)               62%                --                    141,000                67%
                                                                                                       Series B

                                                                                                         1,619
                                                                                                       Series A            100%
</TABLE>

                                       -4-






<PAGE>

<PAGE>




<TABLE>
<CAPTION>
                                                    Approximate                                                     Approximate
                                                    % of                                                            % of
                                                    Outstanding                                                     Outstanding
                                 No. of             Shares of                                    No. of             Shares of
                                 Shares of          Common Stock                                 Shares of          Preferred Stock
                                 Common             as of                 Common Stock           Preferred          as of
Name of Company                  Stock Held         March 10, 1997        Traded on              Stock              March 10, 1997
---------------                  ----------         --------------        ------------           ----------         --------------
<S>                              <C>                        <C>           <C>                      <C>                     <C> 
Ferrovia Novoeste,               1,200,000(2)               20%                --                   5,657,142               42%
 S.A.
</TABLE>

(1)  These securities are registered under the Exchange Act.
(2)  These securities are not registered under the Exchange Act.
(3)  A limited  number of shares of common  stock of  Staffing  Resources,  Inc.
     ("Staffing Resources") are traded in the over the counter market and prices
     are quoted in the "pink sheets."

FACTORS TO BE CONSIDERED WITH RESPECT TO DISTRIBUTION OR SALE OF THE COMPANY'S
ASSETS

         The sale by the  Company  or the  distribution  by the  Company  to its
shareholders  of an appreciated  asset will result in the recognition of taxable
gain by the  Company to the extent the fair market  value of such asset  exceeds
the Company's tax basis in such asset.  Accordingly,  it is anticipated that the
sale or  distribution  by the  Company of certain of its assets,  including  its
holdings in  HealthPlan  Services  and  Staffing  Resources,  will result in the
recognition by the Company of  significant  taxable gain. The greater the amount
of assets that are required to be sold in order to pay the taxes, the lesser the
amount of such assets  available for  distribution  to Noel's  shareholders.  On
February 7, 1997,  pursuant to a Stock Purchase  Agreement  dated as of December
18,  1996 by and  among  Noel.  Automatic  Data  Processing,  Inc.  ("ADP")  and
HealthPlan Services (the "ADP Agreement"),  Noel sold to ADP 1,320,000 shares of
its common stock of HealthPlan Services for an aggregate purchase price of $26.4
million.  Noel anticipates that the proceeds of such sale will be made available
to pay (i) the  taxes  payable  as a result  of the sale or  disposition  of the
Company's  assets  pursuant  to the Plan and (ii)  other  expenses  incurred  in
connection  with the  consummation  of the Plan.  Any proceeds  remaining  after
payment of such taxes and expenses will be made available for cash distributions
to the shareholders.  The Company  currently  believes that the proceeds of such
sale will be sufficient to pay such taxes and expenses, although there can be no
assurance  that this will be the case. In the event that sale proceeds and other
available cash are  insufficient  to pay such taxes and expenses the Company may
be  required  to sell  additional  assets.  The  determination  by the  Board of
Directors  as to which  additional  assets  would be sold to pay any  additional
taxes and expenses will depend on a variety of factors,  including,  the Board's
opinion as to the future  prospects of the issuer of the securities,  the amount
of additional cash required to be raised, the liquidity of the Company's assets,
the  prices  obtainable  for such  assets  in  public  or  privately  negotiated
transactions,  and a review of the Company's  public holdings to ascertain which
holdings  could be sold with the  least  disruption  to the  public  market  and
possible  resultant  depression in the values  realizable by the Company and its
shareholders and, with respect to assets to be sold in private transactions, the
availability  of  purchasers  for such assets.  Currently,  all of the Company's
public  holdings are thinly  traded.  Accordingly,  a public sale thereof  might
result in a disruption in the public  market.  See  "Liquidating  Distributions;
Nature; Amount; Timing."

         Set forth below is a brief  description of the status of Noel's current
plans to sell or distribute its principal  holdings.  Except as set forth below,
the Board of Directors and management have not yet determined whether or when to
sell or distribute any of its holdings. The determination of which holdings will
be sold and which will be distributed in-kind to the Company's shareholders will
be based on the judgment of the Board of Directors and  management as to whether
the sale or distribution  of a particular  holding will result in realization of
the


                                       -5-






<PAGE>

<PAGE>



highest  possible  value to  Noel's  shareholders  and will be based on  several
factors,  including,  in addition to the  factors  referred to in the  preceding
paragraph and not necessarily in order of priority (i) the Board's opinion as to
the future prospects of the issuer of the securities;  (ii) whether the security
in question is publicly traded; (iii) the anticipated effect on the market price
of a distribution  as opposed to a sale;  (iv) whether a distribution  or a sale
would require  registration  under the  Securities Act and the Exchange Act; (v)
the need to raise  cash  through  sales of  securities  to pay  corporate  taxes
payable upon the distribution and sale of the Company's assets;  (vi) whether an
orderly public market exists and would continue to exist after distribution; and
(vii) the  availability  of one or more  purchasers of the security in a private
sale.  With respect to  securities  held by the Company which are expected to be
distributed  to  shareholders  (other  than  in  trust),   applicable  laws  and
regulations  of the  Commission  will be complied with so that all  shareholders
(with the possible  exception of  affiliates of the Company or of the issuer the
securities  of  which  are  distributed)  will  receive  securities  which  will
thereafter be freely  transferable by them under applicable  Federal  securities
laws.  The  securities  to be  distributed  to the  shareholders  will have been
registered  under the  Exchange  Act and,  if  required  by  applicable  law and
regulation,  the  Securities  Act.  Accordingly,  the  corporation  issuing such
securities will be subject to  substantially  the same reporting and proxy rules
as  currently  apply to the  Company.  Securities  which  under  current law and
regulation  may  not  be  distributed  without  such  registration  will  not be
distributed unless and until the required registration has been effectuated.  In
addition,  assuming satisfaction of required eligibility standards,  the Company
may seek to cause any of its holdings of securities  not currently  listed on an
securities  exchange  or  authorized  for  quotation  through  Nasdaq  to  be so
authorized for quotation or listed,  although there can be no assurance that the
Company  will  do so.  If any  distributed  securities  are not  authorized  for
quotation  through Nasdaq or listed on an exchange,  the effect may be to render
such securities illiquid and/or to diminish the price realizable upon sale.

         The sale or distribution of the Company's holdings and the anticipation
of such sale or  distribution  resulting  from the  approval of the Plan may, at
least temporarily,  reduce the market price of such securities and therefore the
values realized by the shareholders.

HealthPlan Services Corporation

         Noel holds  4,275,846  shares of common stock of  HealthPlan  Services,
representing  approximately  29%  of  the  outstanding  common  stock,  with  an
estimated value as of March 10, 1997 of approximately $77.5 million. The Company
currently intends to distribute most of its shares of common stock of HealthPlan
Services to its  shareholders  and such  distributed  shares in the hands of the
distributees may be subject to temporary  restrictions on transferability.  Noel
may,  however,  engage in one or more private or  registered  public  sales,  as
market conditions permit, of shares of HealthPlan  Services to raise cash to pay
the estimated taxes payable upon  distribution  or sale of Noel's assets,  which
cash is not available  from existing cash  resources or defrayed by the proceeds
from the  sale of  other  assets.  On  February  7,  1997,  pursuant  to the ADP
Agreement,  ADP purchased from Noel 1,320,000 shares  (approximately  9%) of the
shares of common  stock of  HealthPlan  Services  at a price of $20 per share in
cash or $26.4 million in the aggregate. Other than pursuant to a distribution to
Noel's  shareholders,  pursuant  to the ADP  Agreement,  Noel has  agreed not to
transfer its remaining  shares of common stock of HealthPlan  Services  prior to
September 30, 1997.

Staffing Resources, Inc.

         Noel  currently  holds  2,026,104  shares of common  stock of  Staffing
Resources,  representing  approximately  16% of the  outstanding  shares of such
common  stock,  with an  estimated  value as of March 10, 1997 of  approximately
$32.4 million. Noel has not determined the method of disposition of its interest
in Staffing Resources or whether this asset or a portion thereof will be sold or
distributed  in-kind or the timing of any such decision.  Staffing  Resources is
contemplating  filing a registration  statement with the Commission prior to the
end of the third quarter of 1997 with respect to a public offering of its common
stock.  There can be no assurance that such public offering will be consummated.
In the event a public offering is consummated, it is anticipated that the shares
would be listed for trading on Nasdaq's  National Market,  although there can be
no assurance that


                                       -6-






<PAGE>

<PAGE>



this will be the case.  Although it is not  anticipated  that  Noel's  shares of
common stock of Staffing Resources will be included in the proposed registration
statement,  Noel's  determination  as to the disposition of its shares of common
stock of Staffing  Resources may depend on the  consummation  and timing of such
offering.

Carlyle Industries, Inc.

         Noel  currently  holds  2,205,814  shares  of common  stock of  Carlyle
Industries,  Inc.,  (which prior to March 26, 1997 was known as Belding Heminway
Company,  Inc.) ("Carlyle"),  representing  approximately 30% of the outstanding
shares of such common stock,  with an estimated value,  based upon market price,
as of March 10, 1997 of approximately $4.7 million. In addition,  Noel currently
holds 19,312,837.5  shares of Series B preferred stock of Carlyle,  representing
approximately  93% of the outstanding  shares of such Series B preferred  stock,
with an estimated value as of March 10, 1997 of approximately  $22.0 million. In
January  1997,  the Pension  Benefit  Guarantee  Corporation  ("PBGC")  notified
Carlyle that it was  considering  whether the sale of its Thread  Division would
create an  obligation  under  ERISA to  immediately  fund,  in whole or in part,
Carlyle's  unfunded  liability to its defined benefit plan. In February 1997, at
the  request of the PBGC,  Carlyle  agreed to provide  the PBGC with at least 30
days advance  notice of any proposed  dividend,  stock  redemption,  stockholder
buyback or other  distribution  to  shareholders of any class of equity prior to
March 31, 2002. In consideration of such agreement,  the PBGC agreed not to take
action solely with respect to the proposed sale  transaction.  If the PBGC takes
the  position  that  Carlyle  should  fund,  in whole or in part,  the  unfunded
liability to the defined  benefit  plan,  after  receiving  notice of a proposed
dividend,  stock  redemption,  stockholder  buyback  or  other  distribution  to
shareholders, and if such position is upheld, the ability of Carlyle to take any
such proposed action would be adversely  affected.  Carlyle's unfunded liability
to its deferred benefit plan is estimated to be approximately $1.5 million as of
December  31,  1996,  when  measured in  accordance  with  financial  accounting
standards.  Were the plan to be  terminated or were the PBGC to require that the
plan be  funded  according  to  different  standards,  Carlyle's  obligation  to
transfer cash to the plan could be $3.5 million to $4.5 million higher than this
amount. Any actual amounts transferred in the event of a plan termination, would
depend on PBGC action and market  conditions  at the time of transfer  and could
differ  significantly from this estimate.  Noel currently has not determined the
method or timing of the disposition of its interest in Carlyle.

Lincoln Snacks Company

         Noel  holds  3,769,755  shares  of  common  stock  of  Lincoln  Snacks,
representing  approximately  62% of the  outstanding  shares of Lincoln  Snacks'
common stock, with an estimated value as of March 10, 1997 of approximately $4.7
million.  Noel has not  determined  the method of disposition of its interest in
Lincoln  Snacks  or  whether  this  asset or a portion  thereof  will be sold or
distributed in-kind or the timing of any such decision.

Curtis Industries, Inc.

         Noel holds 163,449  shares of common stock of Curtis  Industries,  Inc.
("Curtis")  representing  approximately 62% of the outstanding shares of Curtis'
common  stock.  In  addition,  Noel holds  141,000  shares of  Curtis'  Series B
convertible  preferred stock  (representing 67% of such outstanding  shares) and
1,619 shares of Curtis' Series A convertible  preferred stock (representing 100%
of such outstanding  shares). The estimated value as of March 10, 1997 of Noel's
holdings in Curtis is approximately $18.4 million. Noel has not yet decided upon
the method of  disposition  of its interest in Curtis or whether this asset or a
portion  thereof will be sold or  distributed  in-kind or the timing of any such
decision.  Noel is currently  considering (i) the sale of its interest in Curtis
in one or more private transactions;  and (ii) the registration of its shares of
common stock of Curtis under the Securities Act and the Exchange Act followed by
the sale or distribution in-kind of such shares.

Ferrovia Novoeste, S.A.

         Noel holds 1,200,000  shares of common stock of Novoeste,  representing
20% of the outstanding  shares of common stock and 5,657,142 shares of preferred
stock of Novoeste, representing approximately 42% of such



                                       -7-






<PAGE>

<PAGE>



outstanding shares. It is anticipated that such ownership will be reduced to 18%
of the common  stock and 42.3% of the  preferred  stock  following  the proposed
issuance of  additional  shares to certain  employees.  The  estimated  value of
Noel's  interest in Novoeste as of March 10, 1997 is $8.0 million.  The transfer
of Noel's  interest  in  Novoeste  is  subject  to  certain  restrictions,  both
regulatory and  contractual.  Noel does not anticipate a public  distribution to
its  shareholders  of its  interest  in  Novoeste  and expects to dispose of its
interest  therein  through private sales or sales on the public market in Brazil
as permitted by Brazilian law and the terms of its investment therein.

Other Holdings

         Noel  holds  interests  in various  other  entities  with an  aggregate
estimated  liquidation  value of $2.7 million as of March 10, 1997 none of which
is material to the  Company.  It is  anticipated  that Noel will  dispose of its
interests in such entities for cash.

SALES OF THE COMPANY'S ASSETS

         The Plan gives the Board of Directors  the authority to sell all of the
assets of the Company.  As of March 31, 1997, no sale has been effected pursuant
to the Plan and no  agreement  to sell any of the assets of the Company has been
reached.  Sales  of the  Company's  assets  will be made  on such  terms  as are
approved by the Board of Directors and may be conducted by competitive  bidding,
public sales on  applicable  stock  exchanges or  over-the-counter  or privately
negotiated  sales.  Any sales will only be made after the Board of Directors has
determined that any such sale is in the best interests of the  shareholders.  It
is not  anticipated  that any further  shareholder  votes will be solicited with
respect to the approval of the specific terms of any particular  sales of assets
approved  by the Board of  Directors,  as the  Company  has been  advised by its
counsel  that such  further  votes are not  required by the DGCL.  The prices at
which the Company will be able to sell its various assets will depend largely on
factors beyond the Company's control, including, without limitation, the rate of
inflation,  changes in interest rates, the condition of financial  markets,  the
availability  of financing to  prospective  purchasers  of the assets and United
States and foreign regulatory approvals. In addition, the Company may not obtain
as high a price for a particular property as it might secure if the Company were
not in liquidation.

         The  Board  of  Directors   will  not  engage  in  a  sale  of  all  or
substantially all of its assets to an affiliate or group of affiliates.  At this
stage,  the Company cannot exclude the  possibility,  however,  that some of the
Company's assets may be sold to one or more of the Company's officers, directors
or  affiliates,  but  such a  transaction  will  be  effectuated  only  if  such
transaction is approved by a  disinterested  majority of the Board of Directors.
There have been no negotiations regarding any such sale.

CONDUCT OF THE COMPANY FOLLOWING ADOPTION OF THE PLAN

         Since the adoption of the Plan by the Board of Directors, the Board and
management  have   effectively   terminated  the  Company's   participation   in
acquisitions.  Consequently,  since  the  adoption  of the Plan by the  Board of
Directors,  Louis Marx,  Jr.,  has resigned as a director and as Chairman of the
Executive Committee, and John A. MacDonald and Thomas C. Israel have resigned as
directors. It is anticipated that certain of the present directors and principal
executive officers of the Company will continue to serve in such capacities. The
continuing officers and directors will receive  compensation for the duties then
being  performed as  determined  by the  Compensation  Committee of the Board of
Directors.  Neither the Board of Directors nor the  Compensation  Committee have
established specific guidelines for determination of the compensation to be paid
to directors and officers of the Company.  Such  compensation will be determined
by  evaluation  of all relevant  factors,  including,  without  limitation,  the
efforts  of  such   individuals  in  successfully   implementing  the  Plan  and
compensation  payable  in the  financial  community  to  individuals  exercising
similar authority and bearing similar responsibilities.



                                       -8-






<PAGE>

<PAGE>



         As a  consequence  of the approval of the Plan by Noel's  shareholders,
Noel's  activities are limited to winding up its affairs,  taking such action as
may be necessary to preserve the value of its assets and distributing its assets
in  accordance  with the Plan.  The Company will seek to distribute or liquidate
all of its assets in such  manner and upon such terms as the Board of  Directors
determines to be in the best interests of the Company's shareholders.

         The  Company  shall  continue to  indemnify  its  officers,  directors,
employees and agents in accordance  with its  certificate of  incorporation,  as
amended,  and by-laws and any  contractual  arrangements,  for actions  taken in
connection  with the Plan and the winding up of the affairs of the Company.  The
Company's  obligation  to indemnify  such  persons may be  satisfied  out of the
assets of any liquidating  trust. The Board of Directors and the trustees of any
liquidating  trust, in their absolute  discretion,  are authorized to obtain and
maintain  insurance as may be necessary to cover the  Company's  indemnification
obligations under the Plan.

CONTINGENT LIABILITIES; CONTINGENCY RESERVE; LIQUIDATING TRUST

         Under  the  DGCL  the  Company  is  required,  in  connection  with its
dissolution,  to pay or  provide  for  payment  of  all of its  liabilities  and
obligations.  The  Company  will pay all  expenses  and fixed  and  other  known
liabilities,  or set aside as a Contingency  Reserve assets which it believes to
be adequate for payment  thereof.  The Company is  currently  unable to estimate
with precision the amount of any Contingency Reserve, which may be required, but
any such amount (in addition to any cash contributed to a liquidating  trust, if
one is utilized) will be deducted before the  determination of amounts available
for distribution to shareholders.

         The  actual  amount  of the  Contingency  Reserve  will be  based  upon
estimates and opinions of management and the Board of Directors and derived from
consultations  with  outside  experts  and  review  of the  Company's  estimated
operating  expenses,  including,  without limitation,  anticipated  compensation
payments, estimated investment banking, legal and accounting fees, rent, payroll
and other taxes payable,  miscellaneous  office expenses and expenses accrued in
the  Company's  financial  statements.  There  can  be  no  assurance  that  the
Contingency Reserve in fact will be sufficient.  Subsequent to the establishment
of the Contingency  Reserve, the Company will distribute to its shareholders any
portions of the  Contingency  Reserve  which it deems no longer to be  required.
After the  liabilities,  expenses  and  obligations  for  which the  Contingency
Reserve had been  established  have been  satisfied  in full,  the Company  will
distribute to its shareholders any remaining portion of the Contingency Reserve.

         If deemed necessary, appropriate or desirable by the Board of Directors
for any reason,  the Company may, from time to time,  transfer any of its unsold
assets to one or more liquidating trusts established for the benefit of the then
shareholders  which  property  would  thereafter be sold or distributed on terms
approved by its trustees. The Board of Directors and management may determine to
transfer assets to a liquidating  trust in circumstances  where the nature of an
asset is not susceptible to distribution (for example, interests in intangibles)
or  where,  in view of the  limited  trading  market  for  the  publicly  traded
securities  in question,  it would not be in the best  interests of Noel and its
shareholders for such securities to be distributed  directly to the shareholders
at such  time.  If all of the  Company's  assets  (other  than  the  Contingency
Reserve)  are not sold or  distributed  prior to the  third  anniversary  of the
approval of the Plan by the Company's shareholders, the Company must transfer in
final  distribution  such remaining assets to a liquidating  trust. The Board of
Directors may also elect in its discretion to transfer the Contingency  Reserve,
if any, to such a  liquidating  trust.  Notwithstanding  the  foregoing,  to the
extent that the distribution or transfer of any asset cannot be effected without
the consent of a governmental  authority, no such distribution or transfer shall
be effected without such consent. The purpose of a liquidating trust would be to
distribute  such property or to sell such property on terms  satisfactory to the
liquidating  trustees,  and  distribute  the  proceeds of such sale after paying
those liabilities of the Company, if any, assumed by the trust, to the Company's
shareholders.  Any  liquidating  trust  acquiring  all the unsold  assets of the
Company will assume all of the  liabilities  and  obligations of the Company and
will be  obligated  to pay any expenses  and  liabilities  of the Company  which
remain unsatisfied. If the Contingency Reserve transferred to the



                                       -9-






<PAGE>

<PAGE>



liquidating trust is exhausted,  such expenses and liabilities will be satisfied
out of the liquidating trust's other unsold assets.

         The Plan  authorizes  the Board of  Directors  to  appoint  one or more
individuals or entities to act as trustee or trustees of the  liquidating  trust
or trusts and to cause the Company to enter into a liquidating  trust  agreement
or agreements  with such trustee or trustees on such terms and conditions as may
be  approved  by the Board of  Directors.  It is  anticipated  that the Board of
Directors will select such trustee or trustees on the basis of the experience of
such  individual  or  entity  in  administering  and  disposing  of  assets  and
discharging  liabilities  of the  kind to be held by the  liquidating  trust  or
trusts and the ability of such  individual or entity to serve the best interests
of the Company's shareholders. It is anticipated that a majority of the trustees
would be required to be independent of Noel's  management.  Approval of the Plan
by the  shareholders  constituted the approval by the Company's  shareholders of
any such appointment and any liquidating trust agreement or agreements.

         The Company has no present plans to use a liquidating  trust or trusts,
but the Board of Directors  believes the  flexibility  provided by the Plan with
respect to the liquidating trusts to be advisable.  The trust would be evidenced
by a trust  agreement  between the Company and the trustees.  The purpose of the
trust would be to serve as a temporary  repository  for the trust property prior
to its disposition or distribution to Noel's  shareholders.  The transfer to the
trust and distribution of interests therein to Noel's  shareholders would enable
Noel to divest itself of the trust  property and permit Noel's  shareholders  to
enjoy  the  economic  benefits  of  ownership  thereof.  Pursuant  to the  trust
agreement,  the trust property would be transferred to the trustees  immediately
prior to the distribution of interests in the trust to Noel's  shareholders,  to
be held in trust for the benefit of the shareholder beneficiaries subject to the
terms of the trust  agreement.  It is  anticipated  that the interests  would be
evidenced only by the records of the trust and there would be no certificates or
other  tangible  evidence of such  interests  and that no holder of Common Stock
would be required to pay any cash or other consideration for the interests to be
received in the  distribution or to surrender or exchange shares of Common Stock
in order to receive the interests.  It is further  anticipated  that pursuant to
the trust  agreements  (i) a majority  of the  trustees  would be required to be
independent  of Noel's  management;  (ii) approval of a majority of the trustees
would be required to take any action;  (iii) the trust would be irrevocable  and
would terminate  after,  the earlier of (x) the trust property having been fully
distributed, or (y) a majority in interest of the beneficiaries of the trust, or
a majority  of the  trustees,  having  approved  of such  termination,  or (z) a
specified number of years having elapsed after the creation of the trust.

         UNDER THE DGCL,  IN THE EVENT THE  COMPANY  FAILS TO CREATE AN ADEQUATE
CONTINGENCY RESERVE FOR PAYMENT OF ITS EXPENSES AND LIABILITIES,  OR SHOULD SUCH
CONTINGENCY  RESERVE AND THE ASSETS HELD BY THE  LIQUIDATING  TRUST OR TRUSTS BE
EXCEEDED  BY THE AMOUNT  ULTIMATELY  FOUND  PAYABLE IN RESPECT OF  EXPENSES  AND
LIABILITIES,  EACH SHAREHOLDER COULD BE HELD LIABLE FOR THE PAYMENT TO CREDITORS
OF SUCH  SHAREHOLDER'S  PRO RATA SHARE OF SUCH  EXCESS,  LIMITED TO THE  AMOUNTS
THERETOFORE   RECEIVED  BY  SUCH  SHAREHOLDER  FROM  THE  COMPANY  OR  FROM  THE
LIQUIDATING TRUST OR TRUSTS.

         If the  Company  were held by a court to have  failed to make  adequate
provision for its expenses and liabilities or if the amount ultimately  required
to be paid in respect of such liabilities exceeded the amount available from the
Contingency  Reserve  and the  assets  of the  liquidating  trust or  trusts,  a
creditor  of the  Company  could  seek  an  injunction  against  the  making  of
distributions  under the Plan on the ground that the  amounts to be  distributed
were  needed  to  provide  for  the  payment  of  the  Company's   expenses  and
liabilities.  Any such action  could delay or  substantially  diminish  the cash
distributions to be made to shareholders and/or interest holders under the Plan.



                                      -10-






<PAGE>

<PAGE>



FINAL RECORD DATE

         The  Company  will  close its  stock  transfer  books  and  discontinue
recording  transfers of shares of Common  Stock on the Final  Record  Date,  and
thereafter  certificates  representing  shares  of  Common  Stock  will  not  be
assignable or transferable on the books of the Company except by will, intestate
succession or operation of law. After the Final Record Date the Company will not
issue any new stock  certificates,  other than replacement  certificates.  It is
anticipated  that no further  trading of the  Company's  shares will occur on or
after the Final Record Date. All liquidating distributions from the Company or a
liquidating trust on or after the Final Record Date will be made to shareholders
according  to their  holdings  of  Common  Stock as of the  Final  Record  Date.
Subsequent  to the Final  Record Date,  the Company may at its election  require
shareholders to surrender  certificates  representing their shares of the Common
Stock in order to  receive  subsequent  distributions.  Shareholders  should not
forward their stock  certificates  before  receiving  instructions  to do so. If
surrender of stock certificates should be required, all distributions  otherwise
payable by the Company or the liquidating  trust,  if any, to  shareholders  who
have not  surrendered  their  stock  certificates  may be held in trust for such
shareholders,  without  interest,  until  the  surrender  of their  certificates
(subject to escheat pursuant to the laws relating to unclaimed  property).  If a
stockholder's  certificate  evidencing the Common Stock has been lost, stolen or
destroyed,  the  stockholder  may  be  required  to  furnish  the  Company  with
satisfactory evidence of the loss, theft or destruction thereof, together with a
surety  bond  or  other  indemnity,  as  a  condition  to  the  receipt  of  any
distribution.

LISTING AND TRADING OF THE COMMON STOCK AND INTERESTS IN THE LIQUIDATING TRUST
OR TRUSTS

         The Common  Stock is  currently  listed for trading on the Nasdaq Stock
Market's National Market. For continued listing, a company,  among other things,
must have $1  million  in net  tangible  assets (or $4 million if the issuer has
sustained  losses from continuing  operations  and/or net losses in three of its
four most recent fiscal years),  $1 million in market value of securities in the
public float and a minimum bid price of $1.00 per share (or, in the alternative,
$3 million in market value of  securities  in the public float and $4 million of
net  tangible  assets).  If the  Company is unable to satisfy  the Nasdaq  Stock
Market's National Market  maintenance  criteria in the future,  its Common Stock
may be delisted  therefrom  prior to the Final Record Date.  In such event,  the
Company may seek to list its  securities on the Nasdaq Stock  Market's Small Cap
Market.  However,  if it was unsuccessful,  trading, if any, in the Common Stock
would  thereafter be conducted in the  over-the-counter  market in the so-called
"pink sheets" or the NASD's  "Electronic  Bulletin  Board".  As a consequence of
such  delisting,  an investor would likely find it more difficult to dispose of,
or to obtain  quotations as to, the price of the Common Stock.  Delisting of the
Common  Stock  may  result in lower  prices  for the  Common  Stock  than  would
otherwise prevail.

         It is anticipated  that the interests in a liquidating  trust or trusts
will not be  transferable,  although no  determination  has yet been made.  Such
determination will be made by the Board of Directors and management prior to the
transfer of unsold assets to the  liquidating  trust and will be based on, among
other things,  the Board of Directors and managements'  estimate of the value of
the assets being transferred to the liquidating trust or trusts, tax matters and
the impact of compliance with applicable  securities laws.  Should the interests
be transferable,  the Company plans to distribute an information  statement with
respect to the liquidating trust or trusts at the time of the transfer of assets
and the liquidating  trust or trusts may be required to comply with the periodic
reporting  and proxy  requirements  of the Exchange Act. The costs of compliance
with  such  requirements  would  reduce  the  amount  which  otherwise  could be
distributed to interest  holders.  Even if  transferable,  the interests are not
expected to be listed on a national securities exchange or quoted through Nasdaq
and the extent of any trading market therein cannot be predicted.  Moreover, the
interests  may not be accepted by  commercial  lenders as security  for loans as
readily as more conventional securities with established trading markets.

         As  shareholders   will  be  deemed  to  have  received  a  liquidating
distribution  equal to  their  pro rata  share  of the  value of the net  assets
distributed  to an  entity  which is  treated  as a  liquidating  trust  for tax
purposes, the



                                      -11-






<PAGE>

<PAGE>



distribution of non-transferable  interests could result in tax liability to the
interest  holders  without their being readily able to realize the value of such
interests to pay such taxes or otherwise.

BUSINESS OF NOEL PRIOR TO ADOPTION OF PLAN

         Prior to the approval of the Plan by Noel's  shareholders  on March 19,
1997,  Noel conducted its principal  operations  through small and  medium-sized
operating  companies in which Noel holds controlling or other significant equity
interests.  Noel's holdings in operating companies currently include holdings in
(i)  HealthPlan  Services,  a provider  of  marketing,  administration  and rush
management  services and solutions for health and other benefit  programs;  (ii)
Staffing Resources, a provider of diversified staffing services to a broad range
of businesses in various industries  throughout the Mid-Atlantic,  Southeastern,
Southwestern and Rocky Mountain regions of the United States;  (iii) Carlyle,  a
distributor of a line of home sewing and craft  products,  principally  buttons;
(iv) Curtis, a national distributor of fasteners,  security products, chemicals,
automotive  replacement parts, fittings and connectors,  tools and hardware; (v)
Lincoln Snacks, a manufacturer and marketer of caramelized pre-popped popcorn in
the United States and Canada; and (vi) Novoeste,  a Brazilian  corporation which
operates the  concession for the western  network of the Brazilian  federal rail
system which was privatized by the Brazilian government.

         Noel was  incorporated in New York in December 1969 and  reincorporated
in Delaware in December 1986. Noel was originally a closely-held special purpose
investment  vehicle  until March 1988,  when under new  management  organized by
Louis Marx,  Jr., the former Chairman of the Executive  Committee,  Noel adopted
its  strategy  of   concentrating  on  the  acquisition  of  control  and  other
significant equity interests in established operating entities. Noel's principal
office is located at 667 Madison  Avenue,  New York, New York 10021-8029 and its
telephone number is (212) 371-1400.

         Prior to the  approval of the Plan,  Noel's  business  strategy  was to
acquire  controlling  and other  significant  equity  interests  in  established
privately  and  publicly-held  operating  companies  with  superior  risk/return
characteristics.  Noel sought to forge  strong  working  relationships  with the
management  of its  operating  companies  and to apply Noel's  experience to key
strategic,  operating  and  financial  decisions.  Generally,  Noel  worked with
operating  management to identify  opportunities to enhance  revenue,  operating
income and cash flow.  In other cases,  Noel had  identified  and  attracted new
management to its operating  companies.  In order to participate actively in the
management of Noel's operating companies,  Noel was generally represented on the
boards of directors of such  companies,  and members of Noel's  management  from
time to time, acted as executive officers of such companies.

(b)  Financial information about industry segments.

         The  information  required  is set forth in Note 17 under  the  caption
"Notes to Consolidated Financial Statements" on page F-30 hereof.

(c)  Narrative description of business.

         The  following   information  relates  to  Noel's  principal  operating
companies.  The percentage  appearing next to the name of each company indicates
the common equity ownership currently held by Noel.

                      HEALTHPLAN SERVICES CORPORATION (29%)

         HealthPlan  Services,  including its newly  acquired  operating  units,
Consolidated  Group,  Inc.   ("Consolidated   Group")  and  Harrington  Services
Corporation ("Harrington"), is a provider of marketing, administration, and risk
management  services  and  solutions  for  health  and other  benefit  programs.
HealthPlan  Services  provides these services for over 125,000 small businesses,
plan holders and large, self-funded



                                      -12-






<PAGE>

<PAGE>



organizations,  covering approximately 2.6 million members in the United States.
HealthPlan  Services'  clients  include  managed care  organizations,  insurance
companies,  integrated health care delivery systems,  self-funded benefit plans,
and health care  purchasing  alliances.  HealthPlan  Services and its  operating
units function solely as service  providers  generating  fee-based income and do
not assume any underwriting risk.

          HealthPlan  Services'  principal executive offices are located at 3501
Frontage Road, Tampa, Florida 33607; its telephone number is (813) 289-1000. Two
Noel  executive  officers,  Joseph S. DiMartino (who is also a director of Noel)
and  Samuel F.  Pryor,  IV,  and three  additional  Noel  directors,  William L.
Bennett,  James K. Murray, Jr. and James G. Niven, currently serve on HealthPlan
Services' Board of Directors.

STRATEGY

         HealthPlan  Services' strategy is to grow revenue and increase earnings
through new product  development,  broader distribution of existing managed care
products,   and  the  addition  of  new  payors,   such  as  health  maintenance
organizations  ("HMO's"),  integrated  health care delivery  systems,  and other
managed care providers.  HealthPlan Services desires to build economies of scale
by  adding   administrative   services  contracts  with  larger  groups  and  by
opportunistic expansion of its small employer business. HealthPlan Services also
intends to further support the development of information-based products for its
payors and other customers.

RECENT TRANSACTIONS AND COMPANY REORGANIZATION

Health Risk Management, Inc.

         On September  12,  1996,  HealthPlan  Services  entered into a Plan and
Agreement of Merger (the "Merger  Agreement")  with  HealthPlan  Services  Alpha
Corporation,  a Delaware  corporation and wholly owned  subsidiary of HealthPlan
Services,  and Health Risk Management,  Inc., a Minnesota  corporation  ("HRM"),
which  provides for the  acquisition  of HRM by HealthPlan  Services in a merger
transaction  (the "HRM  Merger").  In March 1997,  HealthPlan  Services  and HRM
mutually agreed to terminate the Merger  Agreement due to unexpected  delays and
the parties'  unwillingness  to consummate a  transaction  that might be of less
value  and  dilutive  to their  respective  shareholders  in the near  term.  In
connection with the termination, HealthPlan Services purchased 200,000 shares of
HRM common stock, representing approximately 4.5% of HRM shares outstanding,  at
a price of $12.50 per share.  These shares are not registered  under the federal
or state securities laws and are subject to restrictions on transfer. HealthPlan
Services  and HRM also have  committed  to  continue  to  jointly  market  their
respective  products  and  services  under  the terms of a  marketing  agreement
established in September 1996. HRM provides comprehensive, integrated healthcare
management,   information,   and  health  benefit  administration   services  to
employers,  insurance companies,  unions, HMOs, preferred provider organizations
("PPOs"), physician hospital organizations ("PHOs"), hospitals, and governmental
units in the United States and Canada.

Consolidated Group, Inc. and Harrington Services Corporation Acquisitions;
Company Reorganization

         On July 1, 1996,  HealthPlan  Services  acquired  all of the issued and
outstanding  stock of  Consolidated  Group and  three  affiliated  entities  for
approximately  $61.9  million  in cash.  Consolidated  Group,  headquartered  in
Framingham,   Massachusetts,   specializes   in   providing   medical   benefits
administration  and other related services for health care plans. As of December
31,  1996,  Consolidated  Group  provided  these  services for over 23,000 small
businesses  covering  approximately  250,000  members.  Consolidated  Group  was
founded in 1971,  and was a principal  competitor of HealthPlan  Services in the
small  employer  market  prior  to the  acquisition.  Between  July 1,  1996 and
December 31, 1996, Consolidated Group had revenues of $32.1 million.

         On July 1, 1996,  HealthPlan  Services  acquired  all of the issued and
outstanding  stock of Harrington for $32.5 million cash and 1,400,110  shares of
HealthPlan   Services'  common  stock  valued  at  $30.1  million.   Harrington,
headquartered  in  Columbus,  Ohio,  provides  administrative  services to large
self-funded benefit plans



                                      -13-






<PAGE>

<PAGE>



covering  approximately  960,000  members as of December 31, 1996.  Its revenues
between July 1, 1996 and December 31, 1996 were $42 million.

         In  the  third  quarter  of  1996,   after  the   consummation  of  the
Consolidated Group and Harrington acquisitions,  HealthPlan Services implemented
a  reorganization  of  its  management   structure.   In  connection  with  this
reorganization,  a chief operating  officer was appointed for each of HealthPlan
Services' four business  units:  Health Care  Alliances,  Small Group  Business,
Large Group Business,  and The New England.  Timothy T. Clifford,  the President
and Chief  Executive  Officer of  Consolidated  Group,  became  Chief  Operating
Officer  Small Group  Business,  and Robert R.  Parker,  the  Chairman and Chief
Executive  Officer of Harrington,  became Chief Operating  Officer - Large Group
Business.  Richard  M.  Bresee  became  Chief  Operating  Officer - Health  Care
Alliances,  and  Gary L.  Raeckers  became  Chief  Operating  Officer  - The New
England.

Medirisk, Inc. Transaction

         On January 8, 1996,  HealthPlan Services entered into an agreement with
Medirisk, Inc. ("Medirisk"), a provider of proprietary information products that
track the price and utilization of medical procedures,  to purchase $2.0 million
of Medirisk preferred stock. HealthPlan Services also agreed to lend up to $10.0
million over four years in the form of debt, for which HealthPlan Services would
receive  detachable  warrants to purchase  Medirisk  common  stock at $0.015 per
share. As of December 31, 1996,  HealthPlan  Services had purchased $2.0 million
of preferred stock of Medirisk,  and loaned Medirisk $6.9 million to finance the
acquisition  of two  health  care  data  companies.  Medirisk  used the funds to
finance its expansion  through the  development  of additional  products and the
acquisition of additional  health care  information  businesses.  On January 29,
1997, Medirisk completed an initial public offering of 2.3 million shares of its
common stock at a purchase price of $11.00 per share, and Medirisk  subsequently
fully satisfied its debt obligation to HealthPlan  Services.  In connection with
the offering,  HealthPlan  Services' Medirisk preferred stock was converted into
Medirisk common stock. As of January 29, 1997,  HealthPlan Services beneficially
owned 480,442 shares (representing approximately 11.1%) of Medirisk common stock
on a fully diluted basis, assuming exercise of all outstanding warrants.

Third Party Claims Management, Inc. and Diversified Brokerage Corporation
Acquisitions

         During 1995,  HealthPlan  Services  also acquired all of the stock of a
small,  self  funded  benefits   administrator   known  as  Third  Party  Claims
Management,  Inc.  ("TPCM"),  and  substantially  all of the  assets of  another
administrator known as Diversified Group Brokerage  Corporation  ("DGB").  After
performing a review for  impairment of goodwill  related to TPCM and DGB, in the
third quarter of 1996 HealthPlan  Services recorded a charge against earnings of
$7.1 million  relating to the TPCM  transaction and $6.6 million relating to the
DGB transaction. The $6.6 million of goodwill written off in connection with the
DGB acquisition,  is due to, among other things, higher than originally expected
attrition  rates  resulting in ongoing  decreases in net revenues on a quarterly
basis, due in part to increased pricing  resulting from a reinsurance  carrier's
departure from DGB's market, and an inadequate distribution system, as evidenced
by an underperforming  sales force and greater than anticipated operating costs.
The  $7.1  million  of  goodwill   written  off  in  connection  with  the  TPCM
acquisition,  due to,  among  other  things,  higher  than  originally  expected
attrition rates,  significantly  higher than expected claims experience  (claims
filed per enrollee),  and greater than  anticipated  operating  costs due to the
limited capability of TPCM's  infrastructure.  HealthPlan Services has worked to
consolidate  the  operations of TPCM and DGB,  resulting in the  termination  of
substantially all of the operations at the Memphis,  Tennessee and Irving, Texas
offices of TPCM in 1996 and 1997.

PRODUCTS AND SERVICES

         HealthPlan  Services  provides  marketing,   administration,  and  risk
management  outsourcing  services and solutions for managed care  organizations,
insurance  companies,  integrated  health  care  delivery  systems,  self-funded
benefit plans, and health care purchasing alliances.



                                      -14-






<PAGE>

<PAGE>



Marketing

         HealthPlan  Services,  through its Small Group Operating Unit, provides
managed care companies, insurance companies, and integrated health care delivery
systems with  marketing  services  targeting the  individual  and small business
market.  HealthPlan  Services'  marketing  activity  includes  sales support for
insurance  agents  through  a direct  field  sales  force  and  telephone  sales
representatives, and master brokers. HealthPlan Services maintains relationships
with over 100,000 insurance agents,  including  independent  brokers and captive
insurance agents who work exclusively for underwriters that have contracted with
HealthPlan  Services to provide  individual and small group health plans through
their agent force. This agent relationship  provides  HealthPlan Services with a
significant  distribution  conduit  to the small  business  market in the United
States.  HealthPlan  Services also helps design  managed care products  based on
market research,  actuarial analysis of claims adjudicated, and interaction with
payor  organizations.  These  products  often include  features that address the
particular needs of the small business  employer,  including  specialized dental
and disability  coverage.  On behalf of its payors,  HealthPlan Services designs
and  implements  communications  programs that are aimed at educating  insurance
agents about the relative merits of particular product  offerings.  In addition,
HealthPlan Services develops consumer awareness programs,  including advertising
and media planning, for state-sponsored health care purchasing alliances.

Administration

         HealthPlan   Services   provides   enrollment,   premium   billing  and
collection,  and claims administration  services for all types of benefit plans.
HealthPlan  Services'  enrollment  services  include  underwriting,  issuance of
enrollment  cards,  and case  renewal.  As a provider of billing and  collection
services, HealthPlan Services sends monthly bills on behalf of payors to insured
parties,  receives premium payments from the insureds,  and pays service fees to
agents. HealthPlan Services also implements premium changes due to rate changes,
employee hiring or termination,  and other group changes.  HealthPlan  Services'
claims  administration  services  include  eligibility  verification,  copayment
calculation,  repricing, claims adjudication,  and preparation of explanation of
benefits  forms.   HealthPlan  Services  also  processes  claims  on  behalf  of
self-funded  companies  and other  payors  by  issuing  checks  to  health  care
providers on payor accounts.

Risk Management

         HealthPlan  Services'  risk  management  products  include  traditional
utilization  review  services  as well as  information  and  analysis  services.
HealthPlan  Services  provides  utilization  review through its Care  Management
units.  These units are staffed by qualified nurses and other qualified  medical
personnel to provide precertification approval (a review mechanism for screening
costs in advance of medical care); medical case management (to contain the costs
of prolonged  and  catastrophic  cases);  and special  claims  review  services.
HealthPlan  Services has broad reporting and analytic  capabilities  relating to
all aspects of its services.  HealthPlan Services'  information services include
preparation of reports regarding agent production, enrollment, and frequency and
type  of  claims.  HealthPlan  Services  intends  to  continue  to  enhance  its
information-based  products. In particular,  HealthPlan Services plans to pursue
opportunities with its strategic partner, Medirisk, to develop information-based
products from HealthPlan Services' database of administered  claims.  HealthPlan
Services also expects to expand its risk management  business unit significantly
through the consummation of the HRM Merger.

CUSTOMERS

         HealthPlan  Services  provides  services  on behalf of a wide  range of
health care payors,  including managed care organizations,  insurance companies,
integrated  health-care delivery systems,  self-funded benefit plans, and health
care purchasing alliances.



                                      -15-






<PAGE>

<PAGE>



Small Group Customers

         Through its Small Business Operating Unit, HealthPlan Services has over
25 years of  experience in helping  insurance  companies and other payors access
the small employer market. Since October 1994,  HealthPlan Services has expanded
its customer base from traditional indemnity carriers to include HMOs, PPOs, and
other  managed  care  entities,  and has worked with its  traditional  indemnity
carriers  to  develop  managed  care  products.   HealthPlan  Services  provides
marketing  and  administrative  services for several major managed care products
through relationships with The New England Mutual Life Insurance Company and New
England Life Insurance Company (together, "The New England"),  United HealthCare
Corporation ("United HealthCare"), Kaiser Permanente Insurance Company, and U.S.
Healthcare,   Inc.  Effective  January  1,  1997,  HealthPlan  Services  assumed
marketing and administrative services for TMG Life Insurance Company's ("TMG's")
medical,  dental, and group life benefit business. Based on TMG's 1996 revenues,
HealthPlan  Services expects that TMG's employee benefits business will generate
over $20 million in revenue in 1997. This figure is, however,  a forward looking
estimate and is not  necessarily  indicative of actual  results,  which could be
different upon the occurrence of any one of several factors,  including  greater
than expected attrition.

         HealthPlan Services continues to pursue  relationships with several new
managed care clients. In July 1995, HealthPlan Services began providing services
in Florida for an affiliate of Physicians Corporation of America ("PCA"). In the
first  quarter of 1996,  HealthPlan  Services  expanded  its services to include
PCA's Alabama  affiliate.  In the fourth  quarter of 1996, PCA  transferred  its
Alabama operations to Health Partners of Alabama,  Inc.  HealthPlan Services and
Health Partners of Alabama, Inc. are currently negotiating a continuation of the
Alabama  relationship.  In April 1996,  HealthPlan  Services and an affiliate of
Foundation Health Corporation,  a national managed care company, entered into an
agreement whereby  HealthPlan  Services will be Foundation's  exclusive marketer
and  administrator  in the State of  Florida  for  individual  and  small  group
products  (for  groups  with 15 or fewer  employees).  In  addition,  HealthPlan
Services will market and  administer  Foundation's  individual  program and will
offer a dual option  PPO/HMO for small groups with between 15 and 50  employees.
In July 1996,  HealthPlan  Services  entered  into an agreement  with  Provident
Indemnity Life Insurance  Company to market and administer its managed indemnity
product to individuals in several states.

         HealthPlan  Services also  established  relationships  with  integrated
delivery systems. In May 1996,  HealthPlan Services entered into an agreement to
provide  administrative  services for an  affiliate  of the Florida  Independent
Physicians   Association   ("FIPA"),   a  network  of   independent   physicians
associations representing physicians in the State of Florida.

         In 1996 HealthPlan Services explored new distribution  channels for its
indemnity and managed care  products.  In the third quarter of 1996,  HealthPlan
Services  established  a computer  "home page" on the  Internet.  In addition to
providing  information  about  HealthPlan  Services,  the home page offers price
quotations  for  a  Celtic  Life  Insurance  Company  product  marketed  through
HealthPlan Services.

         To date,  HealthPlan Services has not generated any significant revenue
from any of its new managed care,  integrated  delivery system,  or distribution
relationships,  and it is  unclear  when,  if  ever,  significant  revenue  will
materialize from these ventures.

         In the first quarter of 1996,  HealthPlan  Services and Employers  Life
Insurance  Company of Wausau ("ELOW")  entered into an agreement to offer health
care products to small  businesses in several  states.  In the fourth quarter of
1996,  HealthPlan  Services and ELOW agreed to discontinue this product offering
due to unexpected market conditions. In 1995, HealthPlan Services entered into a
memorandum of understanding  with Coastal  Healthcare  Group,  Inc.  ("Coastal")
regarding   possible  marketing  and   administrative   services   arrangements.
HealthPlan  Services has not entered into a  definitive  agreement  with Coastal
regarding such  arrangements and is not currently  engaged in negotiations  with
Coastal.  In 1995 HealthPlan Services and Mutual of Omaha agreed to expand their
existing marketing relationship to include Mutual of Omaha's HMOs. The



                                      -16-






<PAGE>

<PAGE>



pricing  and other  terms of this  relationship  have not been  negotiated,  and
HealthPlan  Services is not currently  providing  services for Mutual of Omaha's
HMO product.

         Typically,  HealthPlan Services' insurance and managed care payors sign
contracts with  HealthPlan  Services that are cancelable by either party without
penalty upon  advance  written  notice of between 90 days and one year,  and are
also cancelable upon a significant  change of ownership of HealthPlan  Services.
The New England,  Celtic Life  Insurance  Company,  and Ameritas Life  Insurance
Corporation  accounted for approximately 31.0%, 23.0%, and 10.7%,  respectively,
of HealthPlan  Services'  consolidated  revenue in 1995 and approximately 16.2%,
12.5%, and 6.5%, respectively,  of HealthPlan Services' consolidated revenue for
the year ended  December 31,  1996.  Although  this decline is due  primarily to
HealthPlan  Services'  expansion  through  acquisitions,  which has  diluted its
concentration of revenues from these sources. It should be noted that HealthPlan
Services continues to experience higher lapses than originations in the business
written with these payors,  and it is not certain when, if ever, this trend will
be reversed.

         The  difficulty  experienced  by  HealthPlan  Services  in  originating
business  for  HealthPlan   Services'  indemnity  payors  during  the  1990s  is
representative  of the  problems  facing the  industry  in  general.  Escalating
medical  costs have  rendered  fee-for-service  products  less  competitive,  as
evidenced by the  explosive  growth  during this decade of HMO  products,  which
utilize  a  higher  degree  of  demand  and  disease  management   applications.
HealthPlan  Services cannot predict the success with which indemnity payors will
be able to manage their medical loss ratios in the future, which ability affects
the  competitive  nature of the  pricing  they can offer  with  respect to their
products.  Such  pricing  could  have a direct  effect on  HealthPlan  Services'
ability to originate, maintain, and grow indemnity business in the future.

         In the third  quarter  of 1996,  Metropolitan  Life  Insurance  Company
completed  a merger  with The New  England.  HealthPlan  Services  is  unable to
predict what effect,  if any,  such merger will  ultimately  have on  HealthPlan
Services' relationship with The New England.

         Historically, the majority of Consolidated Group's business was written
with  Travelers  Insurance  Company,  which  recently  combined  with the health
insurance  business of Metropolitan  Life Insurance Company to form MetraHealth.
Subsequently, MetraHealth was acquired by United HealthCare, one of the nation's
leading HMO companies. Between July 1, 1996 and December 31, 1996, this business
represented  approximately 75% of Consolidated Group's revenue, or approximately
13%  of  HealthPlan  Services'  consolidated  revenue.  HealthPlan  Services  is
dependent  on United  HealthCare's  commitment  to the small group market and on
Healthcare  Services' ultimate success in converting the MetraHealth business to
United  HealthCare's new products.  Should Healthcare Services have to move this
business to another payor,  it could  experience  higher than normal lapse rates
and lower than normal margins.

         The  abandonment  of the small group  market by either The New England,
Celtic Life Insurance Company, or Ameritas Life Insurance Corporation, indemnity
payor's to manage medical costs and the degree to which  HealthPlan  Services is
successful  with respect to the  MetraHealth  conversion,  could have a material
adverse effect on HealthPlan Services.  With respect to the business serviced by
HealthPlan  Services,  a decision by any one of these payors to  administer  and
distribute a significant  portion of its products  directly to small  businesses
could also have a material adverse effect on HealthPlan Services.

Large Group Customers

         HealthPlan  Services  has  been  in the  administrative  services  only
("ASO")  business since 1987, when HealthPlan  Services  assumed  administrative
responsibility  for the  employee  health  insurance  plan  of D&B.  Harrington,
HealthPlan  Services' newly acquired  subsidiary,  was founded in 1953 and is an
administrator  of  self-  funded  health  care  plans  for  large  corporations,
government sector employers,  Taft-Hartley plans, and associations.  In addition
to providing claims administration services, the Large Group Operating Unit also
offers its clients workers' compensation and unemployment cost control programs.
As a result of the TPCM, DGB,



                                      -17-






<PAGE>

<PAGE>



and  Harrington  acquisitions,  HealthPlan  Services  added  multiple  operating
facilities   throughout  the  country  for  its  ASO  business.   Through  these
acquisitions, as well as new business sales and case acquisition, as of December
31, 1996 this business unit provided  administrative  services to  approximately
3,500  clients  with over  850,000  employees,  representing  approximately  1.6
million members.

Health Care Purchasing Alliances

         During the 1990's,  many small  businesses were unable to obtain health
care  coverage  at  affordable  prices.  In  response,  some  states have formed
state-sponsored  health care  purchasing  alliances.  Several  privately  funded
groups also have formed  health care  purchasing  alliances,  in some cases with
state support. HealthPlan Services is the administrator for four state-sponsored
health care purchasing alliances (in Florida,  Kentucky, North Carolina, and the
State of Washington) and three private alliances.

         In  1996,  the  alliance  unit was  still  not  profitable.  HealthPlan
Services'  1996  alliance  revenues were $6.5 million,  or  approximately  3% of
HealthPlan  Services'  consolidated  revenues.  Management  continues  to review
operating  procedures to improve  profitability and has entered into discussions
with its Florida alliance customers to renegotiate the existing contracts, which
are  scheduled to expire in 1997.  Unless  HealthPlan  Services is successful in
renegotiating  its  alliance  contracts,  it may  elect  to  exit  the  alliance
business.

         HealthPlan  Services is  currently  the  administrator  for each of the
regional Florida Community Health Purchasing Alliances ("CHPAs"), established by
the State of Florida. In the fourth quarter of 1994, and in the third quarter of
1996, HealthPlan Services took significant charges to reflect the estimated loss
HealthPlan Services would incur over the life of the Florida CHPA contracts.  In
February 1995,  HealthPlan Services was selected as the statewide  administrator
for North Carolina's State Health Plan Purchasing  Alliance  program,  which was
launched in the fourth  quarter of 1995.  Insurance  carriers in North  Carolina
have not yet  shown  significant  support  for  this  alliance.  In April  1995,
HealthPlan  Services was selected as the statewide  administrator for Kentucky's
health care purchasing  alliance  program,  which commenced in July 1995. In the
third  quarter  of 1995,  HealthPlan  Services  opened an  office in  Lexington,
Kentucky  to  administer  the  Kentucky  program.  The  Kentucky  plan is  fully
operational  and was profitable in 1996, with over 270,000 members covered as of
December 31, 1996. In February 1997, the Kentucky alliance announced that at the
expiration  of the current  term of  HealthPlan  Services'  contract on June 30,
1997, the alliance will break out various  services  currently  being  performed
under  the  contract  and seek  separate  bids for  those  services.  HealthPlan
Services chose not to submit a formal bid to provide such services.  In December
1995,  HealthPlan  Services  was  selected  to develop and  implement  statewide
marketing and selected  administrative services for the "Basic Health Plan," the
State of Washington's health care purchasing alliance program,  beginning in the
second quarter of 1996. The  Washington  contract is still in the  developmental
stage,  and its ultimate success and acceptance by the residents of the State of
Washington cannot be predicted at this time.

         HealthPlan  Services has incurred  substantial  expenses in  connection
with the start-up of its  Florida,  Kentucky,  North  Carolina,  and  Washington
alliance  administration  contracts and will incur similar start-up  expenses in
connection with other state health care purchasing alliance business obtained by
HealthPlan  Services  in the future.  HealthPlan  Services  does not  anticipate
recovering all of its start-up expenses incurred in connection with the alliance
administration  contracts  during  their  initial  terms,  and  there  can be no
assurance that the health care purchasing  alliance contracts will be profitable
for  HealthPlan  Services.  In  addition,  each of the  health  care  purchasing
alliance  contracts  currently  held by  HealthPlan  Services  contains  a broad
cancellation  provision  that  enables the  alliance  to cancel the  contract on
relatively  short notice  without  penalty.  HealthPlan  Services has  developed
marketing expertise and proprietary software to handle the enrollment,  billing,
disbursement,  and reporting  services  required  under the Alliance  contracts,
including  client-server  technology.  HealthPlan  Services  believes  that  its
marketing  expertise and proprietary  software may provide it with a competitive
advantage in pursuing alliance contracts.



                                      -18-






<PAGE>

<PAGE>



         Prior  to  bidding  for a health  care  purchasing  alliance  contract,
HealthPlan  Services  estimates  the revenues to be derived over the life of the
contract,  along with the costs to perform  the  services  connected  therewith.
HealthPlan Services reviews for adverse commitments at each reporting date. This
review  includes an  evaluation  of actual  results  during the period and other
factors,  such as anticipated  rates,  volume,  and costs.  HealthPlan  Services
management then updates its estimates of expected revenues and expenses over the
remaining  life of the contract.  If the revised  estimates show a net loss over
the remaining  life of the contract,  HealthPlan  Services  recognizes  the loss
immediately.

         The primary material risks associated with alliance contracts are:

         1.       Private   enterprises   will   not   accept   the   use  of  a
                  government-sponsored   program  and  will  therefore  fail  to
                  provide an adequate  number of  enrollees to support a revenue
                  base (over which fixed costs may be spread).

         2.       The number of enrollees  per group will be so low that margins
                  are  insufficient  to  cover the fixed costs of set up for the
                  group.

         3.       The  level of  marketing,  enrollment,  and  customer  service
                  required  will be  materially  higher than  expected,  thereby
                  increasing the variable costs required under the contract.

         4.       The independent  agents on whom HealthPlan  Services relies to
                  distribute the product are not enthusiastic about the alliance
                  programs,  as a  result,  program  enrollment  fails  to  meet
                  expectations.

         Since 1985, Consolidated Group has worked with Associated Industries of
Massachusetts  ("A.I.M") to offer specially designed health care plans to A.I.M.
member companies.  In September 1995, Small Business United of Texas ("SBUT"), a
non-profit  business  association,   selected  HealthPlan  Services  to  provide
administrative  services for its  affiliated  health care  purchasing  alliance.
HealthPlan  Services has not entered into a definitive  agreement  with the SBUT
alliance.  In November 1995, HealthPlan Services began administering health care
benefits for the South Broward Hospital District  self-funded benefits plans. In
January 1996, HealthPlan Services began providing claims administration services
for some of the member  employers of Healthcare  Sarasota,  Inc., a coalition of
employers in Sarasota, Florida.

         In 1996, the alliance unit, in the aggregate, was still not profitable.
Management  continues to review operating  procedures to improve  profitability,
and has entered into  discussions  with several  Florida CHPA Boards in order to
renegotiate  the  existing  contracts,  which are  scheduled  to expire in 1997.
Unless HealthPlan Services is successful in renegotiating its contracts,  it may
elect to exit the alliance business.

INFORMATION TECHNOLOGY

         HealthPlan Services' central data processing  facilities are located in
its Tampa,  Florida,  Framingham,  Massachusetts,  Columbus,  Ohio and  Elmonte,
California.  HealthPlan  Services  operates  in  a  three  tiered  architectural
environment.  A large IBM mainframe and a DEC platform supports the large volume
of data and  transactions  processed by HealthPlan  Services on an annual basis.
Since 1990,  HealthPlan  Services has invested in  client-server  technology  to
support the front-end sales and marketing function. HealthPlan Services utilizes
personal computer  workstations in a local-area and wide area network to deliver
information  and images to the  desktop.  HealthPlan  Services  also  utilizes a
variety  of  other  technologies  to meet  specific  business  needs,  including
interactive voice response for sales and services,  point-of-service devices for
claims  processing,  and optical  character  recognition  for entry of data from
forms.



                                      -19-






<PAGE>

<PAGE>



         HealthPlan  Services  completed four acquisitions  during 1995 and 1996
and  intends  to create a common  technology  platform  for all of its  business
operations.  In addition,  HealthPlan  Services  expects to eliminate  redundant
facilities  and  personnel  as  part  of its  ongoing  integration  of  acquired
businesses.  These  efforts  could  take  several  years and the  costs,  though
significant, cannot be determined at this time.

COMPETITION

         HealthPlan  Services faces  competition and potential  competition from
traditional indemnity insurance carriers,  Blue Cross/Blue Shield organizations,
managed care  organizations,  third party  administrators and utilization review
companies,  risk  management  companies and  healthcare  informatics  companies.
HealthPlan  Services competes  principally on the basis of the price and quality
of services.  Many large insurers have actively sought the claims administration
business of self-funded  programs and have begun to offer utilization review and
other managed health care services similar to the services offered by HealthPlan
Services. Many of HealthPlan Services' competitors and potential competitors are
considerably  larger and have  significantly  greater  resources than HealthPlan
Services.

GOVERNMENT REGULATION

         HealthPlan  Services is subject to regulation under the health care and
insurance laws and other statutes and regulations of all 50 states, the District
of Columbia and Puerto Rico. Many states in which HealthPlan  Services  provides
claims  administration  services require HealthPlan Services or its employees to
receive  regulatory  approval or licensure to conduct  such  business.  Provider
networks  are also  regulated  in many  states and  certain  states  require the
licensure of companies,  such as HealthPlan Services,  which provide utilization
review  services.   HealthPlan  Services'  operations  are  dependent  upon  its
continued good standing under applicable  licensing laws and  regulations.  Such
laws and  regulations are subject to amendment or  interpretation  by regulatory
authorities in each  jurisdiction.  Generally,  such authorities have relatively
broad  discretion  when  granting,  renewing,  or revoking  licenses or granting
approvals.  These laws and  regulations  are intended to protect insured parties
rather than stockholders, and differ in content,  interpretation and enforcement
practices from state to state.  Moreover,  with respect to many issues affecting
HealthPlan  Services,  there is a lack of guiding  judicial  and  administrative
precedent.  Certain of these  laws could be  construed  by state  regulators  to
prohibit or restrict practices which have been significant factors in HealthPlan
Services'  operating  procedure for many years.  HealthPlan  services could risk
major  erosion and even  "rebate"  exposure in these states if state  regulators
were to deem HealthPlan Services' practices to be impermissible.

         The  Employment  Retirement  Income  Security  Act of 1974,  as amended
("ERISA"),  governs the  relationships  between certain health benefit plans and
the  fiduciaries  of those plans.  In general,  ERISA is designed to protect the
ultimate  beneficiaries of the plans from wrongdoing by the  fiduciaries.  ERISA
provides  that a person is a fiduciary  of a plan to the extent that such person
has discretionary authority in the administration of the plan or with respect to
the plan's  assets.  Each  employer is a fiduciary of the plan it sponsors,  but
there can also be other  fiduciaries of a plan.  ERISA imposes  various  express
obligations on fiduciaries.  These obligations  include barring a fiduciary from
permitting a plan to engage in certain  prohibited  transactions with parties in
interest or from acting under an impermissible conflict of interest with a plan.
Generally,  a party in interest  with respect to a plan  includes a fiduciary of
the plan and persons that provide services to the plan. The application of ERISA
to the  operations of HealthPlan  Services and its customers is an evolving area
of law and is subject to ongoing  regulatory  and  judicial  interpretations  of
ERISA.  Although  HealthPlan  Services strives to minimize the  applicability of
ERISA to its business and to ensure that HealthPlan  Services' practices are not
inconsistent with ERISA, there can be no assurance that courts or the Department
of Labor (the  "DOL")  will not in the future  take  positions  contrary  to the
current or future practices of HealthPlan Services.  Any such contrary positions
could require  changes to  HealthPlan  Services  business  practices (as well as
industry  practices  generally) or result in liabilities of the type referred to
above.  Similarly,  there can be no assurance that future  statutory  changes to
ERISA will not significantly affect HealthPlan Services and its industry.



                                      -20-






<PAGE>

<PAGE>





         HealthPlan Services'  Consolidated Group subsidiary is undergoing a DOL
audit in which the DOL has raised  various  questions  about the  application of
ERISA to the way that subsidiary does business. This audit is ongoing, and there
can be no assurance  that the DOL will not take  positions  which could  require
changes to the way this  subsidiary  operates,  or result in the  imposition  of
administrative fines and penalties.

EMPLOYEES

         With the  acquisitions  of  Consolidated  Group and  Harrington and the
assumption  of the  employee  benefits  business  of  TMG,  HealthPlan  Services
employed 3,364 employees as of March 20, 1997.  HealthPlan Services' labor force
is not unionized with the exception of Harrington's subsidiary, American Benefit
Plan  Administrators,  Inc., which administers  Taft-Hartley  plans.  HealthPlan
Services believes its relationship with its employees is good.

TRADEMARKS

         HealthPlan  Services  utilizes  various  service marks,  trademarks and
trade names in connection with its products and services,  most of which are the
property of HealthPlan Services' payors.  Although HealthPlan Services considers
its service marks,  trademarks and trade names important in the operation of its
business, the business of HealthPlan Services is not dependent on any individual
service mark, trademark or trade name.

                          STAFFING RESOURCES, INC. (16%)

         Staffing Resources,  which was formed in August 1993 in connection with
the acquisition of a group of five staffing  businesses located in the Southwest
region of the United States, is a provider of diversified staffing services to a
broad range of businesses in various  industries  throughout  the  Mid-Atlantic,
Southeastern, Southwestern and Rocky Mountain regions of the United States.

         Staffing Resources' principal executive offices are located at 222 West
Las Colinas Boulevard,  Suite 1250, Irving, Texas 75039 and its telephone number
is (214) 432-3000. Stanley R. Rawn, Jr., the Chief Executive Officer of Noel, is
Chairman of the Executive Committee of Staffing  Resources.  Mr. Rawn and Joseph
S.  DiMartino,  Chairman  of the  Board of  Noel,  currently  serve on  Staffing
Resources' seven member Board of Directors.

         Staffing Resources currently operates approximately 148 branches  under
a variety of brand names in 16 states,  and is organized into two core groups --
support services and strategic services.

           SUPPORT SERVICES.  Staffing  Resources' support services group offers
traditional  secretarial,  clerical  and  light  industrial  support,  including
numerous light duty manufacturing applications.

           STRATEGIC  SERVICES.  Staffing  Resources'  strategic  services group
provides clients with industry specialists in financial information, information
technology, skilled manufacturing and transportation services.

         Financial and Accounting.  Staffing Resources' financial and accounting
personnel  provide its client  base with a means of handling  the uneven or peak
workloads  that arise from periodic  financial  and tax reporting  requirements,
accounting system conversions,  acquisitions and special projects.  As a result,
assignments  for  these  employees  tend to be for a longer  term than a typical
support  services  assignment.  Clients are  provided  with  staffing  employees
qualified  to  work  as  auditors,  tax  accountants,   controllers,   financial
executives, bookkeepers and data entry clerks.



                                      -21-






<PAGE>

<PAGE>



         Information  Technology.  The  strategic  services  group also provides
clients  requiring  information  technology  expertise  with staffing  employees
qualified to work as software developers,  business analysts,  network engineers
and network and program analysts.

         Skilled   Manufacturing   Support.   The  strategic   services  group's
manufacturing  support  personnel act in a variety of  capacities  requiring (i)
electronics  manufacturing  skills,  including  PCB  solderers,  electronic  and
mechanical assemblers,  engineering technicians and quality control specialists;
(ii) machine tool and manufacturing skills,  including machinists,  tool and die
makers,  welders  and  machine  operators;  and  (iii)  engineering  assistance,
including  software  engineers,  circuit  designers,  industrial  engineers  and
production control specialists.

         Transportation  Specialists.  Staffing  Resources'  truck  drivers  and
machine operators offer clients a means of handling the uneven or peak workloads
for short and  long-haul  over the road truck  driving.  Staffing  Resources has
Class "A", "B" and "C"  Certified  Drivers,  short and  long-haul  over the road
drivers and heavy equipment operators.

SALES AND MARKETING

         The  needs  for each of the  staffing  services  provided  by  Staffing
Resources  differ  significantly  by  locale  and by type of  service.  Staffing
Resources obtains clients through its sales force and by referrals from existing
clients.  Staffing  Resources'  sales  force  consists  primarily  of  full-time
employees  whose duties  include  calling on potential  clients and  maintaining
relationships with existing clients.

OPERATIONS

         Field Offices.  Staffing Resources operates approximately  148 branches
throughout the Mid-Atlantic,  Southwest, Rocky Mountain and Southeast regions of
the United States. Staffing Resources typically commences operations in a market
by offering support services followed by the introduction of strategic  services
as dictated by each market.  Because all services  are not  appropriate  for all
markets, Staffing Resources evaluates each market individually as it expands.

         Corporate Services. Staffing Resources is in the process of integrating
the  operational,  financial and  administrative  functions of its field offices
into its  corporate  headquarters  in  Irving,  Texas.  The  corporate  services
provided  by  corporate  headquarters  include  centralized  payroll,   billing,
finance,  accounting, risk management,  systems, marketing support, training and
human resources services for the field offices.

         Management  Information  Systems.  Staffing  Resources has undertaken a
program to integrate the  management  information  systems of its various branch
offices into a national information network.  This network will allow the branch
offices to connect with the corporate systems of E-mail, accounting, payroll and
administration. Following its implementation, this system will also permit local
access to jobs and employee databases.

FACILITIES

         Staffing Resources currently operates in 16 states through a network of
approximately  148 branches,  including  its corporate  headquarters  in Irving,
Texas. All of these offices are leased.  A full-service  branch office typically
occupies  approximately  1,500 to 2,500 square feet, with lease terms that range
from three to five years.



                                      -22-






<PAGE>

<PAGE>



REGULATION

         Certain states in which Staffing Resources operates,  or may operate in
the future,  have  licensing  requirements  and other  regulations  specifically
governing the  provision of staffing  services.  There can be no assurance  that
states in which Staffing Resources operates,  or may in the future operate, will
not adopt more strict  licensing  requirements or other  regulations  that would
affect or limit Staffing Resources' operations.

         In May 1994,  Staffing Resources  established a partially  self-insured
workers'  compensation program with CNA Insurance.  Staffing Resources maintains
workers'  compensation  insurance  for all  claims  in excess  of  $250,000  per
occurrence.  Staffing  Resources  and its insurer have  established  appropriate
reserves  for the  uninsured  portion  of  claims,  but such  reserves  are only
estimates of future claims  payments and there can be no assurance that Staffing
Resources' future workers'  compensation  obligations will not exceed the amount
of its reserves.  Staffing  Resources has limited  experience  with its workers'
compensation program and workers' compensation costs may increase as a result of
changes in Staffing  Resources'  experience rating or applicable laws.  Staffing
Resources  may also incur  costs  related to claims made at a higher rate in the
future due to such causes as higher than  anticipated  losses from known claims,
an increase in the number and severity of new claims or a catastrophic accident.
An increase in the number of overall cost of workers'  compensation claims could
significantly  increase Staffing  Resources'  premiums and might have a material
adverse effect on its results.

EMPLOYEES

         As of January 1, 1997, Staffing Resources employed  approximately 1,100
full-time  employees.  None of  Staffing  Resources'  employees,  including  its
staffing employees, are represented by a collective bargaining agreement.

         In order to recruit its staffing  employees,  Staffing  Resources  uses
classified newspaper advertising, supported by its recruiting offices, and makes
direct contact  through  trained  recruiters  with public and private  agencies,
trade schools and colleges who can refer personnel seeking employment.  Staffing
Resources also compensates its workforce for referring other applicants.

         Training of staffing  employees,  when  required,  is  accomplished  by
computerized   tutorials,   videos,   on-the-job  training  by  clients  and  by
specialized skill training. Reference checking is performed on a selective basis
according to the judgment of recruiting  personnel and the  requirements of each
assignment.

                         CARLYLE INDUSTRIES, INC. (30%)

         Carlyle  (which  prior to March 26, 1997 was known as Belding  Heminway
Company,  Inc.) and its subsidiaries  currently distribute a line of home sewing
and craft products, principally buttons. Carlyle and its subsidiaries operate in
one industry  segment:  Consumer  Products.  Consumer  products are  principally
buttons used in consumer product applications.

         Carlyle was the surviving  corporation  in a merger (the "Merger") with
BH Acquisition  Corporation,  a Delaware  corporation  wholly-owned by Noel. The
Merger,  completed  on October 29,  1993,  was the second step of a  transaction
pursuant to which Noel acquired the entire equity interest in Carlyle.

         On July 31, 1996,  Carlyle  completed the sale of its Home Furnishing's
Division.  Proceeds  received on the sale adjusted for closing costs and changes
in net asset value of the division  subsequent to the contract date totaled $8.2
million,  which  proceeds  were  used to pay  down  Carlyle's  revolving  credit
facility. The Home Furnishing's Division operated under the name Belding Hausman
and produced low to medium priced fabrics for use in decorative  home furnishing
products such as draperies, upholstery, slip covers and pillows.



                                      -23-






<PAGE>

<PAGE>



         On March 26, 1997,  pursuant to an Asset Purchase Agreement dated as of
December  12,  1996  (the  "Sale  Agreement"),  among  Carlyle,  certain  of its
subsidiaries and Hicking  Pentecost PLC and its subsidiary,  HP Belt Acquisition
Corporation,  Carlyle sold its Thread  Division to Hicking  Pentecost PLC for an
aggregate cash  consideration  of $54,924,200,  subject to adjustment,  plus the
assumption  of certain  liabilities.  The  Thread  Division  was  engaged in the
manufacturing  and marketing of industrial  thread and special  engineered  yarn
used in non-sewing  products.  As part of the sale of the Thread  Division,  the
corporate name "Belding Heminway" was transferred to Hicking Pentecost PLC.

         Carlyle's principal executive offices are located at 1430 Broadway, New
York,  New York;  its  telephone  number is (212)  556-4700.  Karen  Brenner,  a
Managing Director of Noel, is currently Chairman,  President and Chief Executive
Officer of Carlyle  and Ms.  Brenner,  Joseph S.  DiMartino,  Chairman  of Noel,
Samuel F. Pryor, IV, a Managing Director of Noel and William L. Bennett,  a Noel
director, currently serve on Carlyle's eight member Board of Directors.

         As a result of the sale of the Thread Division and the Home Furnishings
Division,  Carlyle is currently  principally engaged in the distribution of home
sewing  and  craft  products,  mainly  buttons.  Carlyle's  button  business  is
conducted  through  the  Blumenthal/Lansing  Company,  which was formed from the
merger of B. Blumenthal & Co., Inc., a wholly-owned  subsidiary of Carlyle,  and
Lansing Company,  Blumenthal's  wholly-owned subsidiary.  The corporate name was
changed to Blumenthal/Lansing Company on January 1, 1995.

         Set forth  below is a  description  of  Carlyle's  Button  Division  as
described  in  Carlyle's  Annual  Report on Form 10-K for the Fiscal  Year Ended
December 31, 1996 filed with the Commission on March 14, 1997.

         PRODUCTS.  The Button  Division  packages and  distributes an extensive
variety of buttons for home sewing and crafts to mass  merchandisers,  specialty
chains, and independent retailers and wholesalers  throughout the United States.
Buttons  and  buckles,  sold  under the La  Mode'r'  and Le  Chic'r'  registered
trademarks and the Le Bouton, La Petites, Classic and Boutique brands names, are
available  in  thousands of styles,  colors,  materials  and sizes to meet every
consumer need. The Button Division also produces and  distributes  private-label
lines for some of the nation's  best-known  retailers.  The Button Division also
markets  complementary  product  lines,  including  appliques,  craft kits,  and
fashion and jewelry accessories to its home sewing and craft customers.

         MARKETS.  The Button Division's  products are sold primarily for use in
the  home  sewing  market  where  buttons  are used  for  garment  construction,
replacement,  and the upgrading and/or restyling of ready-to-wear clothing. More
modest button usage is found in craft  projects,  home  decorating,  and garment
manufacturing  on a small  scale  and  done by  dressmakers  and  other  cottage
industry consumers.  The market is served by large fabric specialty chains, mass
merchandisers (such as Wal-Mart),  local and regional fabric specialty chains of
4 to 25 stores, independent fabric stores, notions wholesalers, and craft stores
and chains.

         PRODUCT SOURCING,  DISTRIBUTION AND SALES. The button lines are sourced
from more than 75 button  manufacturers  around  the  world,  with most  buttons
coming from the traditional  markets of Holland,  Italy, and the Orient.  Button
manufacturers  specialize in different materials (plastic, wood, glass, leather,
metal, jewel,  pearl, etc.) and have varying approaches to fashion,  coloration,
finishing, and other factors.

         All  imported  and  domestically  purchased  buttons are shipped to the
Lansing,  Iowa facility for carding and distribution to customers.  As thousands
of button styles are received in bulk, computerized card printing systems enable
Blumenthal/Lansing  to economically  imprint  millions of button cards with such
necessary data as style number,  price, number of buttons,  bar code, country of
origin, and care  instructions.  The Button Division also  blister-packages  and
shrink-wraps  some products.  Shipments are made primarily to individual  stores
with a small percentage to warehouse locations.

         The Button  Division's  accounts include major fabric specialty chains,
most mass merchandisers  carrying buttons, most regional fabric specialty chains
and many independent stores. Mass merchandisers and specialty



                                      -24-






<PAGE>

<PAGE>



chain  customers  are  characterized  by the need for  sophisticated  electronic
support,  rapid  turn-around  of  merchandise  and  direct-to-store  service for
hundreds to  thousands  of  locations  nationwide.  The Button  Division  enjoys
long-standing ties to all of its key accounts and the average  relationship with
its ten largest  customers  extends over 20 years.  Although the Button Division
has more than 1,000 accounts,  its sales are highly concentrated and the loss of
one or more of its large customers  would have a material  adverse effect on the
Button  Division.  Due to the large account  nature of its customer  base,  most
customer  contact is  coordinated by  management;  additional  sales coverage is
provided  by  regional  sales  managers.   Certain  retailers  are  serviced  by
independent representatives and representative organizations.

         COMPETITIVE  FACTORS.  The  retail  button  market is served by several
competitors.  Carlyle competes  primarily with JHB  International and Streamline
Industries,  Inc.,  which are full-line button packagers and distributors in the
general button market and several smaller  competitors in the promotional button
market. Carlyle management believes that the principal bases for competition are
product innovation,  range of selection,  brand names, price, display techniques
and speed of distribution.

         Carlyle management believes that retail button distribution  depends on
trends in the home-sewing  market,  which Carlyle management believes is mature.
The retail customer base for buttons has changed substantially over the past two
decades as  department  stores and small  independent  fabric  stores  have been
replaced by mass  merchandisers and specialty retail chains which have continued
to consolidate recently through mergers and store closings.

         The bulk of the Button  Division's  revenues  are derived in the United
States.  In 1996,  less than 1% of revenues  related to export sales.  Inventory
levels remain  relatively  constant  throughout the year. The Button  Division's
policies related to merchandise  return and payment terms are in accordance with
industry standards.

         EMPLOYEES;  LABOR RELATIONS.  The Button Division has approximately 165
employees, two of whom are covered by a collective bargaining agreement with the
United Auto Workers which expires on May 31, 1997. Carlyle  management  believes
relations with both the non-union and unionized employees are satisfactory.

         PROPERTIES.  The Button  Division  operates from a 104,000  square foot
packaging and distribution  facility located in Lansing,  Iowa which is owned by
Carlyle.  Divisional  management,  sales  and  marketing,  product  development,
fashion and purchasing are  headquartered in a 6,300 square foot office facility
in Carlstadt, New Jersey which is leased by Carlyle. Carlyle management believes
that the Button Division's facilities are in good condition and adequate for the
Division's present and reasonably foreseeable future needs.

         In addition to these  properties,  Carlyle  owns a 214,000  square foot
former dye facility  located in Emporia,  Virginia,  which facility is leased to
the purchaser of the Home  Furnishings'  Division  under a triple net fifty-year
lease with a nominal base rent.

LEGAL PROCEEDINGS

          General.   Carlyle  is  not  currently  a  party  to  any  significant
litigation except as indicated below.

         Environmental Matters. Carlyle is subject to a number of federal, state
and local  environmental  laws and  regulations,  including those concerning the
treatment,  storage and  disposal of waste,  the  discharge  of  effluents  into
waterways,  the  emissions  of  substances  into the air and various  health and
safety  matters.  In  addition,   the  Comprehensive   Environmental   Response,
Compensation  and Liability Act of 1980, as amended  ("CERCLA")  and  comparable
state  statutes  generally  impose  joint and several  liability  on present and
former owners and operators,  transporters  and  generators  for  remediation of
contaminated  properties  regardless  of  fault.  These  parties  are  typically
identified as "potentially responsible parties" or PRPs.



                                      -25-






<PAGE>

<PAGE>



         Several  years  ago a  property,  owned  by the  Carlyle  Manufacturing
Company,  Inc.  (which  prior to March 26, 1997 was known as Heminway & Bartlett
Manufacturing  Company,  Inc.),  a subsidiary  wholly-owned  by Carlyle prior to
consummating  the sale of the Thread Division  ("H&B"),  located at 30 Echo Lake
Road in  Watertown,  Connecticut  was being  investigated  by the United  States
Environmental  Protection Agency ("EPA") for possible  inclusion on the National
Priorities  List  promulgated  pursuant  to CERCLA but no such  listing  has yet
occurred.  A Site Inspection conducted at this location detected certain on-site
soil and groundwater  contamination,  as well as  contamination of nearby water.
This site is listed on the Connecticut State Hazardous Waste Disposal Site list,
but remediation activity has not been required by the Connecticut  Department of
Environmental Protection ("CTDEP").

         Carlyle  Chemicals,  Inc.  (which  prior to March 26, 1997 was known as
Belding Chemical  Industries,  Inc.), a subsidiary of Carlyle,  owns an inactive
facility located in North Grosvenordale, Connecticut at which soil contamination
has been found.  Carlyle reported this contamination to the CTDEP in 1989 and is
presently  working with the CTDEP to define remedial options for the site, which
it expects  will  focus  primarily  on removal  and  possible  stabilization  of
contaminated soil onsite. Carlyle estimates the cost of remediation at this site
to be  approximately  $100,000  based upon  information on the costs incurred by
others in remediating  similar  contamination at other locations.  As the actual
cost of  remediation  at this  site  will  depend  on the  areal  extent of soil
contamination  and the remediation  options approved for this site in the future
by the CTDEP, no assurances can be given that the actual cost will not be higher
than Carlyle's current estimate.

         In or  about  June  1992,  Carlyle  received  notice  from the EPA that
Carlyle,  Belding  Corticelli Thread Company, a division of Carlyle prior to the
sale of the Thread Division, and H&B had been identified, along with 1,300 other
parties,  as  potentially  responsible  parties in  connection  with the alleged
release of hazardous  substances  from the Solvents  Recovery  Superfund site in
Southington, Connecticut. Carlyle has settled its alleged liability with the EPA
by paying $1,626 in connection with the de minimis settlement approved by EPA in
June 1994.  Carlyle's  subsidiaries,  along with other  potentially  responsible
parties have  committed to perform the Remedial  Investigation  and  Feasibility
Study  (RIFS)  and two  Non-Time  Critical  Removal  Actions  at the  site.  The
aggregate  cost to  complete  the  first  Non-Time  Critical  Removal  Action is
approximately $6 million. Carlyle is not obligated to pay the entire cost of the
first Non-Time Critical Removal Action at the Solvents Recovery  Superfund site.
It is obligated to pay a portion of the cost of that  removal  action,  which is
based upon the pro rata share of the waste its subsidiaries  allegedly  disposed
of at the site. H&B's alleged  contribution of waste disposed of at this site is
approximately  1%.  Belding  Corticelli's  alleged  contribution  of waste is de
micromis.  Carlyle is unable, at this time, to estimate the ultimate cost of the
remedy for this site,  remedial  investigation  for the site is underway and EPA
does not expect to be able to determine a remedy for the site until some time in
late 1998.

         By letter dated  January 21,  1994,  the EPA notified H&B that it was a
potentially  responsible party, along with approximately 335 other parties, with
respect to the Old  Southington  Landfill  in  Southington,  Connecticut.  H&B's
alleged contribution of waste disposed of at this site is 0.0637%. H&B's alleged
contribution  of waste at the Old  Southington  Landfill,  along  with the waste
contributions  of other  PRP's whose waste was  transshipped  from the  Solvents
Recovery Superfund site to the Old Southington Landfill,  was determined by EPA,
using  information  that EPA had compiled for the  Solvents  Recovery  Superfund
site,  and  factoring  in  shipments  of waste  that were made  directly  to Old
Southington Landfill.  The ultimate cost of the remedy for this site has not yet
been  determined  and EPA has  not yet  offered  to  settle  with  parties  that
allegedly sent less than 1% of total waste to the site,  like H&B.  Accordingly,
Carlyle's  liability  with respect to this site cannot  accurately be estimated.
However, given the de minimis nature of H&B's alleged contribution, and assuming
EPA offers a settlement to de minimis parties,  Carlyle currently  believes that
its liability for this site should not exceed $50,000, although no assurance can
be given that the ultimate cost will not exceed such amount.

         Carlyle  received notice in April 1995 that the State of New Jersey has
made a $34  million  demand for payment for  expenses  incurred  for cleanup and
claims at the Chemical Control Superfund Site. H&B,  identified as a PRP at this
site,  was one of the 167 parties that settled its  liability  with the EPA. The
State's demand,



                                      -26-






<PAGE>

<PAGE>



however, is separate from the federal settlement.  H&B's alleged contribution of
waste  disposed  at  the  site  was   identified  as  0.89342%.   H&B's  alleged
contribution of waste at the Chemical  Control  Superfund  site,  along with the
waste  contributions of other potentially  responsible  parties,  was determined
initially by EPA based upon a list it developed.  EPA then established a process
whereby PRPs were allowed to supply additional  information,  including defenses
to liability and challenges to EPA's information, and, in addition, were given a
credit if the PRPs could prove that they either  removed  waste from the site or
paid for the same waste  disposal at another  site.  There is a larger number of
PRPs in the state proceeding involving the site than in the EPA proceeding,  and
it is possible that H&B's  percentage  share of waste allegedly sent to the site
may be  adjusted  in  connection  with  the  state  proceeding  to  reflect  the
contribution of additional  PRPs.  However,  based on the $34 million demand and
the current  percentage  for H&B's alleged waste  contribution  (0.89342%),  the
amount  that H&B would  likely be  required  to pay to settle its  liability  is
approximately $322,000.

         By third-party  summons and complaint  dated November 27, 1991, H&B has
been named as a third-party  defendant in an action pending in the United States
District  Court for the  District of Rhode  Island  entitled  United  States vs.
Williams M. Davis et al vs. American Cyanamid Company et al. In addition to H&B,
approximately 60 other companies have been joined as third-party defendants. The
third-party   complaint  alleges  claims  for  contribution  under  CERCLA.  The
third-party complaint alleges that H&B and the majority of the other third-party
defendants shipped waste to Chemical Control  Corporation,  which was commingled
with  other  wastes  and  shipped  to the Davis  Liquid  Waste  Site  located in
Smithfield,  RI. H&B had entered into an  agreement  to settle its  liability in
connection  with these claims for payment of the sum of $200,000.  The agreement
has not yet been approved by the court.

         The  estimates  provided  above do not include  costs that  Carlyle may
incur for  consultants  or  attorney's  fees or for  administrative  expenses in
connection  with their  participation  as part of the PRP group at the  Solvents
Recovery,  Old Southington  Landfill or Chemical  Control  Superfund  sites. The
reserve Carlyle has established for environmental liabilities,  in the amount of
$5.1  million,  represents  Carlyle's  best  current  estimate  of the  costs of
addressing all identified  environmental problems,  including the obligations of
Carlyle and its  subsidiaries  relating to the  Remedial  Investigation  and two
Non-Time Critical Removal Actions at the Solvents Recovery Superfund site, based
on  Carlyle's   review  of  currently   available   evidence,   and  takes  into
consideration  Carlyle's  prior  experience  in  remediation  and  that of other
companies,  as well as public information  released by EPA and by the PRP groups
in which Carlyle or its  subsidiaries  are  participating.  Although the reserve
currently  appears to be  sufficient to cover these  environmental  liabilities,
there  are  uncertainties  associated  with  environmental  liabilities,  and no
assurances can be given that Carlyle's  estimate of any environmental  liability
will not  increase or decrease in the future.  The  uncertainties  relate to the
difficulty  of  estimating  the  ultimate  cost of any  remediation  that may be
undertaken, including any operating costs associated with remedial measures, the
duration of any remediation  required,  the amount of consultants' or attorneys'
fees that may be incurred,  the administrative costs of participating in the PRP
groups,  and any additional  regulatory  requirements that may be imposed by the
federal or state environmental agencies.

         Under the terms of the Sale Agreement,  all of the matters described in
this section under the heading "Environmental  Matters" are excluded liabilities
and were not assumed by Hicking  Pentecost upon  consummation of the sale of the
Thread Division.

         NOEL DOES NOT BELIEVE,  BASED ON CURRENT APPLICABLE  ENVIRONMENTAL LAW,
THAT IT WILL BE  RESPONSIBLE  FOR ANY OF  CARLYLE'S  ENVIRONMENTAL  LIABILITIES.
HOWEVER, IN VIEW OF THE RAPIDLY DEVELOPING  ENVIRONMENTAL LAWS, NO ASSURANCE CAN
BE GIVEN AT THIS TIME THAT NOEL WOULD NOT HAVE SUCH  RESPONSIBILITY NOR, IF SUCH
LIABILITY  EXISTED,  CAN ANY  DETERMINATION  BE MADE OF THE AMOUNT THEREOF.  ANY
FINDING OF LIABILITY ON THE PART OF NOEL WOULD REDUCE THE AMOUNT  AVAILABLE  FOR
DISTRIBUTION TO NOEL'S SHAREHOLDERS.  IN ADDITION,  IN THE EVENT THAT THE AMOUNT
OF ANY SUCH  LIABILITY  EXCEEDED THE AMOUNT OF NOEL'S  ASSETS (AND THE ASSETS OF
ANY LIQUIDATING TRUST), THE SHAREHOLDERS COULD BE REQUIRED TO RETURN ALL AMOUNTS
PREVIOUSLY DISTRIBUTED.



                                      -27-






<PAGE>

<PAGE>



         Other Litigation. Carlyle purchased Carlyle International,  Inc. (which
prior to March 26,  1997 was known as Culver  International,  Inc.)  from  Bruce
Goldwyn  ("Goldwyn") in August of 1995.  Carlyle filed suit in September 1996 in
the  Superior  Court  for New York  County  against  Goldwyn  for  breach of the
representations  and  warranties  made about the  quality,  merchantability  and
salability  of the inventory  acquired in the  transaction,  seeking  damages of
approximately  $1.4  million.  As part of the  acquisition,  Carlyle  had  given
Goldwyn a note (the "Goldwyn Note") in the face amount of $530,964 (representing
the discounted value of Carlyle's  obligation to pay $200,000 per year for three
years),  the first $200,000 payment of which was due in August 1996. The Goldwyn
Note  allowed  Carlyle to set-off its damages  arising  from  violations  of the
representations  and  warranties  in the purchase  agreement  and,  based on its
claims,  Carlyle  withheld  the entire  August  1996  payment.  Goldwyn  filed a
counter-claim  seeking the face value of the Goldwyn Note plus  attorneys'  fees
and moved to dismiss  the action on the  grounds  that his  representations  and
warranties were not breached,  which motion was granted in December 1996 and has
been  appealed by Carlyle.  In  addition,  there is a pending  motion by Goldwyn
seeking summary judgment on his counter-claim for the full,  accelerated  amount
of the Goldwyn  Note  ($530,964)  together  with  accumulated  interest  and his
attorneys'  fees for the  collection  of the Goldwyn  Note.  Carlyle has opposed
Goldwyn's  motion for summary  judgment and cross moved for summary  judgment in
its favor on the  counter-claim.  Carlyle has also moved for  reconsideration of
Goldwyn's motion to dismiss. All of the motions are sub judice.

         In January 1997, the Pension  Benefit  Guarantee  Corporation  ("PBGC")
notified Carlyle that it was considering whether the sale of the Thread Division
would create an obligation under ERISA to immediately fund, in whole or in part,
Carlyle's  unfunded  liability to its defined benefit plan. In February 1997, at
the  request of the PBGC,  Carlyle  agreed to provide  the PBGC with at least 30
days advance  notice of any proposed  dividend,  stock  redemption,  stockholder
buyback or other  distribution  to  shareholders of any class of equity prior to
March 31, 2002. In consideration of such agreement,  the PBGC agreed not to take
action solely with respect to the proposed sale  transaction.  If the PBGC takes
the  position  that  Carlyle  should  fund,  in whole or in part,  the  unfunded
liability to the defined  benefit  plan,  after  receiving  notice of a proposed
dividend,  stock  redemption,  stockholder  buyback  or  other  distribution  to
shareholders, and if such position is upheld, the ability of Carlyle to take any
such proposed action would be adversely  affected.  Carlyle's unfunded liability
to its deferred benefit plan is estimated to be  approximately  $1,500,000 as of
December  31,  1996,  when  measured in  accordance  with  financial  accounting
standards.  Were the plan to be  terminated or were the PBGC to require that the
plan be  funded  according  to  different  standards,  Carlyle's  obligation  to
transfer cash to the plan could be  $3,500,000  to  $4,500,000  higher than this
amount. Any actual amounts transferred in the event of a plan termination, would
depend on PBGC action and market  conditions  at the time of transfer  and could
differ significantly from this estimate.

         Noel received a letter from the PBGC dated August 15, 1996 stating that
the PBGC believed that a "controlled  group"  existed  between Noel and Carlyle.
The letter  indicated  that the PBGC would like to discuss the  pending  Plan of
Liquidation  and its  impact on the  Carlyle  pension  plan.  Noel  submitted  a
memorandum to the PBGC setting forth Noel's position that a controlled group did
not exist  between  Noel and  Carlyle.  In the event that the PBGC's  belief was
correct, Noel could in certain circumstances be jointly and severally liable for
obligations   of  Carlyle  with  respect  to  its  pension  plan  including  the
obligations referred to above.

         Under the terms of the Sale Agreement,  the Goldwyn Note is included as
an assumed  liability under the Sale Agreement,  although Hicking Pentecost will
be entitled to seek  indemnification from Carlyle for any amounts required to be
paid by Hicking  Pentecost in respect of this litigation  (including  reasonable
legal fees), other than any payment in respect of the Goldwyn Note.



                                      -28-






<PAGE>

<PAGE>




                          CURTIS INDUSTRIES, INC. (62%)

         Curtis is a major national distributor of fasteners, security products,
chemicals,  automotive replacement parts, fittings and connectors, and tools and
hardware. Curtis distributes products to customers in the vehicle and industrial
maintenance and repair markets.  Curtis' products are sold through a sales force
of  approximately  700 sales  representatives  to over  40,000  active  customer
accounts  located  principally  in the  United  States,  Canada  and the  United
Kingdom.  Products  distributed by Curtis are purchased from multiple  suppliers
with the majority of these  products  purchased in bulk and repackaged by Curtis
in smaller quantities which are compatible with the repair and maintenance needs
of its customers.  Following the 1995 shutdown of its manufacturing  operations,
Curtis purchases all of its products from outside vendors.

         On November 13, 1995, Curtis sold certain assets of its retail division
to SDI  Operating  Partners  L.P.  for  $7.5  million  in  order to focus on its
automotive and industrial  division.  The proceeds from the sale of the division
in excess of net assets  offset the  expenses  related  to the  transaction  and
operating  losses  incurred  prior to the sale.  Therefore,  no gain or loss was
recorded on the sale.  In 1995, a one time charge of $1.1 million was  recorded,
primarily for severance and benefits,  following the close of its  manufacturing
operations at its Eastlake, Ohio facility.

         On May 13, 1996, Curtis acquired certain assets of the Mechanics Choice
business of Avnet Inc.  for $6.5  million.  Mechanics  Choice is a  distributor,
selling  industrial  maintenance and repair  operations  products similar to the
existing product line Curtis offers.

         The  business  conducted  by Curtis  and its  predecessors  has been in
continuous operation since 1932. Curtis' principal executive offices are located
at 6140 Parkland Boulevard,  Mayfield Heights,  OH 44124-4103;  telephone number
(216) 446-9700.  Two Noel executive officers,  Joseph S. DiMartino and Donald T.
Pascal,  and two  directors of Noel,  William L. Bennett and Livio M.  Borghese,
currently serve on Curtis' seven-member Board of Directors.

PRODUCTS

         Curtis  distributes  approximately  29,000 SKUs (stock keeping  units),
which  are  grouped  into six  major  product  categories:  fasteners,  security
products, chemicals,  automotive replacement parts, fittings and connectors, and
tools and  hardware.  Historically,  net sales of products in the  fasteners and
security  products  categories  have accounted for  approximately  two-thirds of
Curtis' total net sales.

         Fasteners.  Curtis  distributes  a broad line of  fasteners,  including
bolts,  nuts,  screws,  washers  and  rivets  which  range from light duty (used
primarily  in  consumer   applications)   to  heavy-duty   (used  in  industrial
applications),  maintaining  an emphasis on premium  quality  products.  Most of
Curtis' fasteners are manufactured in the United States and Canada.

         Security  Products.  Curtis  distributes  a line of security  products,
including key blanks, key duplicating machines, computerized and manual key code
cutters, padlocks, combination locks and a line of key accessories.

          Chemicals.  Curtis  distributes  a broad line of  chemicals  including
solvents, lubricants,  cleaners, adhesives and sealants designed for vehicle and
building maintenance applications.

         Automotive   Replacement   Parts.   Curtis  distributes  a  variety  of
automotive  replacement  parts,  including  specialty  fasteners such as molding
clips for body shop  applications,  fuses, lamps and bulbs,  cables,  clamps and
small parts kits.



                                      -29-






<PAGE>

<PAGE>





         Fittings and Connectors.  Curtis  distributes a variety of fittings and
connectors,  which include wire products,  electrical  connectors,  adapters and
terminals and standard  brass  fittings for vehicle and  industrial  maintenance
applications.

         Tools and Hardware.  Curtis distributes a variety of tools and hardware
including  saw  blades,  cutting  blades,  welding  products,  drill  bits,  and
specialized  application  tools, as well as standard tools such as screwdrivers,
wrenches and pliers.

SALES AND MARKETING

         Curtis markets its products to customers in two broad  classifications:
the vehicle maintenance market and the industrial maintenance market. All of the
markets served by Curtis are large and highly fragmented.

         The vehicle  maintenance  market consists of passenger car, truck,  and
recreational  vehicle  dealers;  business and governmental  entities  performing
internal  fleet  maintenance  functions;   and  independent  sales  and  service
establishments.  Franchised new car dealers represent the most important segment
in terms of sales by Curtis to the vehicle maintenance market.

         The  industrial  maintenance  market  consists  of  private  and public
institutions such as transportation facilities,  hotels, health care facilities,
schools and manufacturing plants.

CUSTOMERS

         Curtis sells its products to over 40,000  active  customer  accounts in
the United States,  Canada and the United Kingdom.  No single customer accounted
for more than 10% of Curtis'  annual  sales  during the year ended  December 28,
1996.

COMPETITION

         Curtis  competes with other  national  distributors  as well as a large
number of regional  distributors and local  suppliers.  Competition for national
accounts  is  intense.  Local  and  regional  distributors  pose  a  significant
challenge  to  national  distributors  by  virtue  of their  aggressive  pricing
strategies   and  ability  to  deliver   certain   items  faster  than  national
distributors.  There is also intense  competition  among national  distributors.
Because of the similarity of product types, competitive advantage is determined,
among other things, by sales representative performance and reliability, product
presentation, product quality, order fill rates, timing and, to a lesser extent,
price.  Curtis' ability to maintain and improve  financial  performance  will be
influenced strongly by its management of these factors.

FOREIGN OPERATIONS

         Curtis  maintains  sales and  warehouse  facilities  in Canada  and the
United  Kingdom.  Sales to customers in Canada and the United Kingdom  accounted
for approximately 15% of Curtis' revenue for the year ended December 28, 1996.

SUPPLIERS

         All of Curtis' sales are derived from products  manufactured by others.
There are many sources of supply for Curtis' requirements.



                                      -30-






<PAGE>

<PAGE>



PATENTS AND TRADEMARKS

         Curtis has developed  various  patents in connection  with its security
products, some of which have expired. The expiration of these patents,  however,
has not, in Curtis' management's  opinion, had any significant effect on Curtis'
business.  Most of Curtis' products are sold under  Curtis'r',  Fullwell'tm' and
Mechanics  Choice'tm' brand names. None of Curtis'  trademarks or copyrights is,
in Curtis' management's opinion, critical to the success of Curtis' business.

EMPLOYEES

         As of December 28,  1996,  Curtis  employed  1,047  employees.  Curtis'
management believes Curtis' relationship with employees is good.

FACILITIES

     The following is a summary description of Curtis' facilities:

                                                              SQUARE     OWNED/
LOCATION                           FUNCTION                    FEET      LEASED

Mayfield Heights, Ohio             Headquarters               33,600     Leased
Shelbyville, Kentucky              Repackaging/Warehouse     100,000     Owned
Atlanta, Georgia                   Warehouse                  60,000     Leased
Sparks, Nevada                     Warehouse                  50,000     Owned
Mississauga, Canada                Warehouse                  38,000     Leased
Andover, United Kingdom            Warehouse                  15,000     Leased
Corby Northants, United Kingdom    Warehouse                   3,800     Leased

         Curtis'  management  believes that Curtis'  facilities are adequate for
the needs of its business over the foreseeable future.

                          LINCOLN SNACKS COMPANY (60%)

         Lincoln  Snacks  Company  ("Lincoln  Snacks")  is one  of  the  leading
manufacturers  and  marketers  in the United  States  and Canada of  caramelized
pre-popped  popcorn.  The primary product line includes glazed popcorn/nut mixes
and  sweet  glazed  popcorn  sold  under the brand  names  Poppycock'r',  Fiddle
Faddle'r' and Screaming  Yellow  Zonkers'r'.  Lincoln  Snacks also processes and
distributes ten different nut varieties.

         Lincoln Snacks was formed in August 1992 by Noel and a management  team
of former executives of Nestle Foods  Corporation.  On August 31, 1992,  Lincoln
Snacks  acquired the business and certain  assets of Lincoln  Snack  Company,  a
division  of  Sandoz  Nutrition  Corporation,  an  indirect  subsidiary  of  the
Swiss-based drug, pharmaceutical and hospital care company, Sandoz Ltd. In March
1993,  Carousel Nut Company, a newly formed  wholly-owned  subsidiary of Lincoln
Snacks  ("Carousel"),  acquired the business and certain  assets of Carousel Nut
Products, Inc., a producer and marketer of roasted, dry roasted, coated, raw and
mixed nuts. In December 1993,  Carousel was merged with and into Lincoln Snacks,
and the  operations of Carousel were  integrated  with Lincoln  Snacks' plant in
Lincoln, Nebraska in the first quarter of 1994.

         On June 6, 1995, Lincoln Snacks entered into the Distribution Agreement
with  Planters  pursuant to which  Planters  was the  exclusive  distributor  of
Lincoln Snacks' Fiddle Faddle and Screaming  Yellow Zonkers in the United States
for an initial  term which was  originally  scheduled to expire on June 30, 1997
unless renewed



                                      -31-






<PAGE>

<PAGE>



for additional one year periods. The Distribution Agreement required Planters to
purchase  an annual  minimum  number of  equivalent  cases of Fiddle  Faddle and
Screaming Yellow Zonkers during the initial term. On February 28, 1997,  Lincoln
Snacks and Planters  entered into an  amendment  to the  Distribution  Agreement
pursuant to which,  among other things,  (i) the  distribution  arrangement  was
extended for an additional period of six months expiring December 31, 1997, with
Planters  continuing to distribute Fiddle Faddle through that date at which time
the  distribution  arrangement  will terminate;  and (ii) effective May 1, 1997,
Planters  will  cease,  and  Lincoln  will  resume  marketing  and  distributing
Screaming Yellow Zonkers. Although the amendment contains provisions designed to
effect a smooth  transfer of the  distribution  business back to Lincoln Snacks,
there can be no assurance  that this will be the case. In addition,  pursuant to
the amendment to the Distribution Agreement, Planters has agreed to negotiate in
good faith an agreement  pursuant to which Planters will grant Lincoln a license
to use the Planters'  trademarks  in connection  with the sale by Lincoln of its
products for a period of five years commencing January 1, 1998.

         Net sales to  Planters  for the year ended June 30,  1996 were equal to
the minimum  number of  equivalent  cases  required to be purchased  during that
fiscal year as part of the Distribution Agreement. Sales to Planters represented
43% of net sales for the year ended June 30, 1996. Net sales to Planters for six
month  periods  ended  December  31,  1996  and  1995  represented  46% and 48%,
respectively, of the minimum number of equivalent cases required to be purchased
annually as part of the Distribution  Agreement.  Sales to Planters  represented
32% and 36% of net sales for the three months ended  December 31, 1996 and 1995,
respectively,  and 41% and 32% of net  sales  for the six  months  period  ended
December 31, 1996 and 1995, respectively.

         Lincoln Snacks' principal executive offices are located at 4 High Ridge
Park,  Stamford,  Connecticut  06905;  telephone  number (203)  329-4545.  Karen
Brenner, a Managing Director of Noel is the Chairman and Chief Executive Officer
of Lincoln Snacks. Ms. Brenner and James G. Niven, a director of Noel, currently
serve on Lincoln Snacks' four-member Board of Directors.

PRODUCTS

         Lincoln  Snacks  manufactures  and markets three  nationally-recognized
branded products. Poppycock is a premium priced mixture of nuts and popcorn in a
deluxe buttery glaze. Fiddle Faddle is a more moderately priced brand of popcorn
and peanut  clusters with a candied  glaze;  a fat free version of Fiddle Faddle
consists of popcorn with a caramel glaze.  Screaming  Yellow Zonkers is produced
by coating  popcorn  clusters with a sweet buttery glaze.  In addition,  Lincoln
Snacks  processes and  distributes  ten different  nut  varieties.  The finished
products  comprise a full line of nuts for the retail market:  raw,  roasted and
salted, dry roasted, and specially coated (honey roasted).

MARKETING, SALES AND DISTRIBUTION

         Lincoln Snacks markets and  distributes  its Poppycock and nut products
directly. On July 17, 1995, Planters commenced  exclusively  distributing Fiddle
Faddle and Screaming Yellow Zonkers in the United States  (including Puerto Rico
and United States  territories and possessions).  Effective May 1, 1997, Lincoln
Snacks will commence  marketing and  distributing  its Screaming  Yellow Zonkers
product  directly and will resume  marketing and  distributing its Fiddle Faddle
product directly on January 1, 1998.

         Lincoln Snacks' brands are broadly  distributed through grocery stores,
supermarkets,   convenience  stores,  drug  stores,  mass  merchandise  outlets,
warehouse clubs, vending channels, military commissaries and other military food
outlets, and other retailers. Selling responsibilities for Poppycock and the nut
products in the United  States are currently  handled by four regional  business
managers located strategically across the United States. These regional business
managers manage approximately 80 brokers across the United States in all classes
of trade.  These  brokers  receive a  commission  on net  sales  plus  incentive
payments. Certain exports and



                                      -32-






<PAGE>

<PAGE>



large volume customers are handled directly by Lincoln Snacks personnel. Lincoln
Snacks  intends to distribute  its Fiddle Faddle and  Screaming  Yellow  Zonkers
products by means of its existing distribution network.

         Sales of Lincoln  Snacks'  products are  seasonal,  peaking  during the
third and fourth calendar quarters.

COMPETITION

         Lincoln Snacks' primary products  participate in the pre-popped caramel
popcorn segment of the snack food market.  Poppycock competes with other premium
quality snack products while Fiddle Faddle and Screaming  Yellow Zonkers compete
directly with Crunch N'Munch  (American  Home Products  Corp.,  Food  Division),
Cracker Jack  (Borden,  Inc.) and a number of other  regional and local  brands.
Lincoln Snacks' products also compete  indirectly with  traditional  confections
and other snack food products.

RAW MATERIALS AND MANUFACTURING

          Substantially  all  of the  raw  materials  used  in  Lincoln  Snacks'
production process are commodity items, including corn syrup, butter, margarine,
brown and granulated sugar,  popcorn,  various nuts, and oils. These commodities
are purchased directly from various suppliers.

         The  Lincoln  manufacturing  facility  includes,  among  other  things,
continuous  process  equipment  for enrobing  popcorn and nuts,  as well as four
distinct  high speed  filling  and packing  lines for  canisters,  jars,  single
serving packs and bag-in-box packages. The manufacturing and packaging equipment
is  sufficiently  flexible to allow for the manufacture of other similar product
lines or packaging  formats.  The facility is being  operated at an overall rate
varying  from  approximately  40% to 75% of  capacity  depending  on the season.
Lincoln  Snacks'  management  believes  that the  facility is  generally in good
repair  and  does  not  anticipate   capital   expenditures  other  than  normal
maintenance and selected equipment modernization programs.

TRADEMARKS

         Poppycock'r',  Fiddle  Faddle'r' and Screaming  Yellow  Zonkers'r'  are
registered  trademarks  of  Lincoln  Snacks.  Lincoln  Snacks  believes  all its
trademarks enjoy a strong market reputation denoting high product quality.

GOVERNMENTAL REGULATION

         The production,  distribution  and sale of Lincoln Snacks' products are
subject to the Federal Food, Drug and Cosmetic Act; the Occupational  Safety and
Health Act; the Lanham Act; various federal environmental  statutes; and various
other federal,  state and local statutes  regulating the production,  packaging,
sale, safety, advertising, ingredients and labeling of such products. Compliance
with the above described  governmental  entities and regulations has not had and
is not  reasonably  anticipated  to have a  material  adverse  effect on Lincoln
Snacks' capital expenditures, earnings or competitive position.

EMPLOYEES

         As of February 28, 1997, Lincoln Snacks had 75 full-time  employees and
one part time  employee.  Employment  at the Lincoln  plant varies  according to
weekly and  seasonal  production  needs.  None of Lincoln  Snacks' work force is
unionized. Lincoln Snacks' management believes that Lincoln Snacks' relationship
with its employees is good.



                                      -33-






<PAGE>

<PAGE>


EXPORT SALES

         Foreign  operations  accounted  for less  than 10% of  Lincoln  Snacks'
sales, assets and net income in each of Lincoln Snacks' last three fiscal years.

FACILITIES

         Lincoln  Snacks  manufactures  and  packages all of its products at its
owned Lincoln,  Nebraska manufacturing facility. The Lincoln plant,  constructed
in 1968, is a modern 74,000 square foot one-story  building on a 10.75 acre site
in a light industrial area in the city of Lincoln.  Approximately  67,000 square
feet of the facility is dedicated to  production  with the balance  utilized for
administration.  Also in Lincoln, Nebraska is Lincoln Snacks' 66,500 square foot
leased warehousing  facility,  which is located near Lincoln Snacks' plant. This
modern  facility can  accommodate  all of Lincoln  Snacks'  current  warehousing
needs.  Lincoln  Snacks' lease on this facility has been extended  until January
31, 1998,  and there is a five year renewal option beyond 1998. The initial term
of the lease of Lincoln Snacks principal  executive offices expires on September
30, 1999.  Lincoln Snacks believes its properties are sufficient for the current
and anticipated needs of its business.

LEGAL PROCEEDINGS

         Lincoln Snacks is not involved in any material legal proceedings.

                          FERROVIA NOVOESTE, S.A. (20%)

         In March,  1996,  Ferrovia  Novoeste,  S.A.,  a  Brazilian  corporation
("Novoeste"), was the successful bidder, at approximately $63.6 million, for the
concession  for  the  operation  of the  Brazilian  federal  railroad's  western
network.  The principal  investors in Novoeste include Noel, Chase Latin America
Equity Associates ("Chase"),  Brazil Rail Partners,  Inc. ("BRP"),  Western Rail
Investors, LLC ("WRI") and Brazilian Victory LLC ("Victory"). Noel's and Chase's
investment in Novoeste is approximately $8 million each, Victory's investment is
approximately $2 million,  WRI's investment is approximately  $1.6 million,  and
BRP's  investment is  approximately  $1.4  million.  The purchase of the network
consisted  of a  30-year  concession  and a  lease  of  the  federal  railroad's
equipment.  The western network links Bauru, in Sao Paulo state, with Corumba on
the Bolivian border, and covers approximately 1,000 miles of track.

                                 OTHER HOLDINGS

         Noel also had other holdings with a liquidation  value of approximately
$2.7 million at March 10, 1997. None of these holdings,  either  individually or
in  the  aggregate,   would  be  considered  material  with  respect  to  Noel's
consolidated financial position.

(d)  Financial  information  about  foreign  and  domestic operations and export
sales.

         Not material.



                                      -34-






<PAGE>

<PAGE>





ITEM 2. PROPERTIES.

        Noel's executive offices occupy  approximately  10,600 square feet in an
office  building  located in New York,  New York, of which 5,400 square feet are
rented pursuant to a lease expiring in 1998 and the remainder is sublet from The
Prospect Group Inc. pursuant to a sublease expiring in 1998. For descriptions of
certain  principal  properties of Noel's  operating  companies,  see  "Narrative
Description  of  Business"  above.  Management  of Noel  and of  each of  Noel's
operating  companies  believe that the  properties  owned or leased by each such
company are  adequate  for the conduct of their  respective  businesses  for the
foreseeable future.

ITEM 3. LEGAL PROCEEDINGS.

        Other  than as  described  below,  there are no pending  material  legal
proceedings  to which Noel or any of its  subsidiaries  or  principal  operating
companies  is a party or to which any of their  property is subject,  other than
ordinary routine litigation incidental to their respective businesses.

        Carlyle  and its  subsidiaries  are  party to  various  proceedings  and
possible proceedings under state and federal laws and regulations concerning the
discharge  of  materials  into  the  environment.   Reference  is  made  to  the
description of Carlyle Industries, Inc. under "Business of the Company".

        In 1995, Self Funded  Strategies,  L.L.C.  ("SFS"), a former provider of
marketing services to HealthPlan Services,  filed a complaint against HealthPlan
Services claiming wrongful  termination of an exclusive  marketing agreement and
breach of contract.  The complaint asserted damages of $25,000,000.  The parties
to the dispute agreed to binding  arbitration,  and the arbitration  proceedings
occurred during the week of October 29, 1996. The arbitration  panel's decision,
rendered in December  1996,  is not expected to  materially  alter the amount or
timing of future payments that HealthPlan Services is contractually obligated to
make  to SFS  under  the  marketing  agreement,  and  thus  is not  expected  to
materially affect the cash flows of HealthPlan Services' business.

        Pursuant  to  the  Harrington  acquisition  agreement  (the  "Harrington
Agreement"),  HealthPlan  Services  agreed  to use its  best  efforts  to file a
registration  statement sufficient to permit the public offering and sale of the
HealthPlan  Services common shares issued to the Harrington  stockholders in the
acquisition,  with such registration  statement to become effective on or before
October 31, 1996.  On October 30, 1996,  HealthPlan  Services  received a letter
from Harrington stockholders'  representative notifying HealthPlan Services that
it was in violation of the  Harrington  Agreement and reserving all rights under
such  Agreement.  As of the  date  hereof,  it is not  possible  for  HealthPlan
Services to evaluate  what, if any,  damages  might result from such notice.  In
November 1996, HealthPlan Services filed a form S-3 registration  statement with
the SEC registering the restricted shares of HealthPlan common stock held by the
former  Harrington  and  Consolidated  Group  stockholders.   This  registration
statement became effective on February 14, 1997.

        HealthPlan  Services'  Consolidated Group subsidiary is undergoing a DOL
audit in which the DOL has raised  various  questions  about the  application of
ERISA to the way that subsidiary does business. This audit is ongoing, and there
can be no  assurance  that the DOL will not take  positions  that could  require
changes to the way this  subsidiary  operates,  or result in the  imposition  of
administrative fines and penalties.

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

        None.



                                      -35-






<PAGE>

<PAGE>




                                     PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY
        AND RELATED STOCKHOLDER MATTERS.

(a)     Market Information.

        Noel's Common Stock trades on the Nasdaq Stock Market's  National Market
under the symbol NOEL. The following  table sets forth the range of high and low
sales prices for shares of Noel Common Stock for each fiscal quarter during 1996
and 1995 as reported by NASDAQ.

        1996                                      High                      Low
        ----                                      ----                      ---
                    First Quarter               $7.625                    $6.000
                    Second Quarter               9.750                     7.125
                    Third Quarter                8.750                     6.875
                    Fourth Quarter               8.125                     6.125

        1995

                    First Quarter               $6.500                    $5.000
                    Second Quarter               7.625                     5.750
                    Third Quarter                6.250                     4.750
                    Fourth Quarter               7.000                     5.000

(b)      Holders.

         As of March 25, 1997, 20,421,039 shares of Common Stock were issued and
outstanding  and were held of record by  approximately  116  persons,  including
several  holders  who are  nominees  for an  undetermined  number of  beneficial
owners.  Noel believes that there are  approximately  3,500 beneficial owners of
Noel Common Stock.

(c)      Dividends.

         Noel has not  declared  or paid any cash  dividends  on its  shares  of
capital stock.  Pursuant to the Plan, Noel will be liquidated (i) by the sale of
such of its assets as are not to be distributed in-kind to its shareholders, and
(ii) after paying or providing for all its claims,  obligations and expenses, by
cash and in-kind  distributions to its shareholders pro rata and, if required by
the Plan or deemed necessary by the Board of Directors,  by distributions of its
assets from time to time to one or more liquidating  trusts  established for the
benefit  of the  then  shareholders,  or by a  final  distribution  of its  then
remaining assets to a liquidating  trust established for the benefit of the then
shareholders.

ITEM 6.  SELECTED FINANCIAL DATA.

         The selected historical financial  information for the five years ended
December 31, 1996 are derived from the historical  financial  statements of Noel
and should be read in conjunction with Noel's Consolidated  Financial Statements
and related notes included elsewhere in this Form 10-K.


                                      -36-





<PAGE>

<PAGE>

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                      -----------------------
                                   1996(1)         1995(1)           1994(2)          1993       1992(3)(4)
                                   -------         -------           -------          ----       ----------
                                             (dollars in thousands, except per share amounts)
<S>                               <C>             <C>             <C>              <C>            <C>    
Revenue                           $189,325        $181,709        $119,121         $93,962        $32,417
Operating income (loss)             $9,194        $(29,451)       $(12,731)        $(6,935)       $(8,384)
Loss from continuing operations    $(3,105)       $(15,581)        $(9,453)        $(5,345)       $(7,289)
Loss from continuing operations
per common and common
equivalent share                    $(0.15)         $(0.77)         $(0.47)         $(0.26)        $(0.37)
Total assets                      $230,521        $239,757        $313,980     $186,845(4)       $185,542
Long-term debt                     $60,983         $69,197        $ 75,734      $33,635(4)        $28,550
Stockholders' equity               $97,360         $92,920        $100,269        $123,122       $134,942
</TABLE>

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

Historical information has been restated to reflect discontinued operations. See
Note 1 of Notes to Consolidated  Financial Statements on page F-9.

See Notes 3 and 4 of Notes to  Consolidated  Financial  Statements on pages F-12
and F-16 for factors that affect the comparability of the information  presented
above.

(1)  Includes  the  results of Carlyle  for the full  period  and  reflects  the
     results of HealthPlan Services under the equity method of accounting.
(2)  Includes the results of HealthPlan  Services from  September 30, 1994,  the
     date of its  acquisition.  Carlyle  is  included  in the  balance  sheet at
     December 31, 1994.
(3)  Includes the results of Curtis and Lincoln  Snacks from August 17, 1992 and
     August 31, 1992, the respective dates of their acquisitions.
(4)  Due to the restatement of the historical  financial statements this data is
     considered to be derived from unaudited financial statements.

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

        The following discussion and analysis of financial condition and results
of operations of Noel Group,  Inc.  ("Noel") and its  consolidated  subsidiaries
(collectively  the "Company")  should be read in conjunction  with the Company's
Consolidated   Financial   Statements  and  Notes  to   Consolidated   Financial
Statements.

LIQUIDITY AND CAPITAL RESOURCES:

Parent Company

        On  December  31,  1996,  Noel had cash and liquid  investments  of $9.2
million.  The future cash needs of Noel will be dependent on the  implementation
of the Plan which was  approved by the  shareholders  on March 19,  1997.  It is
management's  intention  that Noel's  liquidity will be available to fund Noel's
working capital requirements and to meet its other obligations.  Pursuant to the
Plan,  subject to the  payment or the  provision  for  payment of the  Company's
indebtedness  and  other  obligations,  the cash  proceeds  of any  asset  sales
together with other  available  cash will be  distributed  from time to time pro
rata to the holders of the Common Stock on record dates selected by the Board of
Directors with respect to each such distribution.

        Noel believes  that its cash and liquid  investments  are  sufficient to
fund its  working  capital  requirements  through  the  completion  of the Plan,
following Noel's sale of 1.32 million shares of HealthPlan Services common stock
to ADP for $26.4  million on February 7, 1997.  Noel expects that its  operating
subsidiaries  will be  able to meet  their  own  working  capital  requirements,
including  debt  service.  None of the debt on the  consolidated  balance  sheet
relates  to Noel.  Subject  to the  restrictions  set forth in the  Plan,  if an
operating  subsidiary  requires  additional funding for the purpose of making an
acquisition or to otherwise  support growth,  or suffers  operating or cash flow
deficits,   a  portion  of  Noel's  liquidity  may  be  utilized  to  fund  such
requirements.

        HealthPlan   Services'  operations  have  no  impact  on  the  Company's
liquidity and capital resources, since Noel has no obligation to fund HealthPlan
Services'  operations  and HealthPlan  Services does not anticipate  paying cash
dividends in the foreseeable  future.  While HealthPlan  Services is included in
the  Company's  financial  statements on the equity  method of  accounting,  the
Company will record its proportional share of



                                      -37-






<PAGE>

<PAGE>



HealthPlan  Services' income or loss. Noel's share of HealthPlan  Services' loss
for the year ended December 31, 1996, was $.5 million.

        Sources  of  potential  liquidity  include  the sale or  refinancing  of
current  holdings,  dividends  and  preferred  stock  redemptions  from  current
holdings.  Noel  does not  currently  receive,  nor  expect  to  receive  in the
immediate  future,  cash  dividends  from any of its  subsidiaries.  Except  for
Carlyle,  Noel's  subsidiaries  are prohibited from paying dividends by existing
borrowing agreements.

CARLYLE INDUSTRIES, INC.

        On March 26, 1997, Carlyle sold its thread division to Hicking Pentecost
PLC for an aggregate cash consideration of $54.9 million, subject to adjustment,
plus the assumption of certain liabilities.  The current estimate of the loss on
the disposal of this  division is $11.3  million,  but the actual loss  recorded
could vary  significantly  from this  estimate,  depending on the  resolution of
certain contingencies.  The net proceeds of the sale of the thread division were
used to pay off Carlyle's  outstanding bank indebtedness.  Accordingly,  Carlyle
currently has no outstanding bank indebtedness. Carlyle management believes that
Carlyle  has  sufficient  cash to support  its  operations  for the  foreseeable
future.

        Carlyle  has agreed to notify the PBGC  thirty (30) days prior to taking
certain  actions  including the payment of any dividend on or any  redemption of
stock. Accordingly,  Carlyle's decision to make any such payments will depend on
the successful resolution of any issues which may arise with the PBGC.

        All of Noel's  discontinued  operations have been disposed of except for
TDX Corporation  ("TDX").  TDX's operations are immaterial to Noel, and there is
no future requirement for additional cash or capital infusions for TDX.

        In 1995 and 1994,  Noel's  subsidiaries  sold  stock in  initial  public
offerings, raising net proceeds of $50.8 million and $9.6 million, respectively,
thereby improving their respective liquidity. Noel's subsidiaries may raise cash
from time to time using equity offerings in the future.

RESULTS OF OPERATIONS:

OVERVIEW

        The Company's  consolidated  statements of operations include Carlyle in
1996 and 1995 and  HealthPlan  Services for the period from  September 30, 1994,
through December 31, 1994. Noel's equity in HealthPlan  Services' income or loss
for the years ended  December  31, 1996 and 1995,  is included in income or loss
from equity investments.  The consolidated selling, general,  administrative and
other  expenses  include  salaries,  employee  benefits,  rent and other routine
overhead  expenses of the Company,  including  legal,  accounting and consulting
fees.  The  following  year to  year  comparisons  are  based  on the  Company's
consolidated  results.  An  analysis  of  each  subsidiary  is  included  in the
comparison of segments section.

        The results of  operations  for the year ended  December 31, 1994,  have
been restated to reflect (i) Simmons  Outdoor  Corporation,  (ii) Carlyle's Home
Furnishings division, (iii) Curtis Industries,  Inc. ("Curtis") retail division,
and  (iv) TDX as  discontinued  operations  due to  their  sale in 1995 or their
expected or actual sale in 1996 and to account for HealthPlan Services under the
equity method of  accounting  from January 1, 1995.  Noel's  voting  interest in
HealthPlan  Services dropped below 50% following  HealthPlan  Services'  initial
public offering May 19, 1995 and Noel's simultaneous  exchange of its holding of
HealthPlan  Services  preferred  stock and  accrued  dividends  into  HealthPlan
Services common stock.




                                      -38-






<PAGE>

<PAGE>


1996 VERSUS 1995

        Sales  increased by $7.6 million to $189.3 million due to an increase in
sales at  Curtis of $8.2  million  and a  decrease  in sales at  Lincoln  of $.6
million.  Cost of sales  increased by $1.1 million to $106.4 million from $105.3
million in 1995,  related to increases at Curtis and Lincoln of $3.7 million and
$.2  million,  respectively,  offset  by  a decrease at Carlyle of $2.8 million.
Selling, general,  administrative and other expenses decreased to $69.2  million
in  1996  from  $71.8  million in 1995.  The decrease of $2.6 million  primarily
relates to decreased  expenses at Lincoln and Carlyle of  $3.2 million  and $2.0
million, respectively,  offset  by increased expenses at Curtis at $2.5 million.
Other income decreased by $6.1 million  primarily  due to a 1995 gain recognized
by Noel on the receipt of payment of the Subordinated Note from Brae Group, Inc.
("Brae"). The loss from equity investments of $4.7 million in 1996 versus income
of $3.8 million in 1995  primarily  results from Noel's equity  in the losses of
HealthPlan  Services,  Staffing  Resources and Novoeste in 1996  of $.5 million,
$1.2 million and $3.1  million,  respectively,  versus  income  from  HealthPlan
Services of $3.4 million in 1995.

        After performing a review for impairment of long-lived assets related to
each of HealthPlan  Services' acquired businesses and applying the principles of
measurement contained in FASB 121, HealthPlan Services recorded a charge against
earnings  of  $13.7  million  in  the  third   quarter  of  1996,   representing
approximately 7.6% of HealthPlan Services' pre-charge goodwill.  This charge was
attributable  to impairment  of goodwill  recorded on the  acquisitions  made in
1995. Any further  significant  declines in HealthPlan  Services'  projected net
cash  flows,  with  respect  to such  acquisitions,  may  result  in  additional
write-downs of remaining goodwill.

        Starting  in  1994,   HealthPlan   Services   pursued   contracts   with
state-sponsored  health care purchasing alliances,  initially in Florida, and in
1995 and 1996, in North Carolina, Kentucky, and Washington.  HealthPlan Services
has  incurred  substantial  expenses in  connection  with the  start-up of these
contracts, and, to date, the alliance business has been unprofitable. HealthPlan
Services  recorded a pre-tax charge related to these  contracts in the amount of
$2.6 million in the third quarter of 1996  resulting  from  increased  costs and
lower than  anticipated  revenues  in Florida  and North  Carolina.  In Florida,
HealthPlan Services is negotiating a new contract which is scheduled to commence
in 1997.

        In the third quarter of 1996,  HealthPlan  Services recorded a charge of
$1.4  million to reflect the cost of exiting  certain  excess  office  space and
terminating employees.

        Noel and each of its  subsidiaries  file a separate  federal  income tax
return. As a result, the income tax provisions recorded by certain  subsidiaries
cannot be offset by the  losses  reported  by other  entities  on the  Company's
consolidated financial statements.

1995 VERSUS 1994

        The  increases  from 1994 to 1995 in sales of $87.8  million and cost of
sales of $66.6 million  principally  reflect the inclusion of Carlyle's sales of
$88.7 million and cost of sales of $66.0  million in 1995 only.  The increase in
selling,  general,  administrative  and other  expenses of $2.8 million to $71.8
million in 1995  reflects  the  inclusion of  Carlyle's  1995  expenses of $14.3
million,  offset both by Noel's decrease of $5.4 million  primarily related to a
1994  charge  for its  non-incentive  stock  option  plan and by a $5.5  million
decrease at Lincoln.

        The 1995 impairment  charge relates to Carlyle's thread  division.  This
charge of $29.2  million  includes  Noel's  write-off of $4.2 million of related
goodwill.

        Other income  decreased by $1.6 million to $6.7 million.  In 1995, other
income includes a $6.6 million capital gain recognized by Noel on the payment of
the subordinated  note from Brae. Other income in 1994 includes capital gains of
$9.0  million  primarily  from Noel's  sale of  marketable  securities  and $2.2
million of  dividend  income  from Noel's  holding of Carlyle  preferred  stock,
offset by a $3.9 million loss recognized on Noel's exchange of Carlyle preferred
stock for Carlyle common stock.



                                      -39-






<PAGE>

<PAGE>



        Income  (Loss)  from equity  investments  increased  by $3.9  million to
income of $3.8  million  reflecting  primarily  Noel's  equity in the  income of
HealthPlan Services of $3.4 million in 1995.

        Interest  expense  increased  by  $4.1  million,  primarily  due  to the
inclusion of Carlyle's interest expense of $4.0 million in 1995 only.

COMPARISON OF SEGMENTS:

General

        Noel and its subsidiaries  are collectively  referred to in this section
as the "Company".  The segment  discussion which follows analyzes the results of
operations for each of the Company's  segments.  Since the amounts  presented in
the  comparison  of segments are on a full year basis,  they are not  comparable
with the amounts included in the Company's consolidated statements of operations
in the  year in  which  the  segment  was  acquired  or  newly  included  in the
consolidated operating results.

1996 VERSUS 1995

FASTENERS AND SECURITY PRODUCTS DISTRIBUTION (CURTIS)

        On May 13, 1996,  Curtis acquired certain assets of the Mechanics Choice
business of Avnet, Inc.  Mechanics Choice is a distributor,  selling  industrial
maintenance and repair operations  products similar to the existing product line
Curtis offers.

        Sales for Curtis for 1996 increased $8.3 million or approximately 12% to
$77.1  million from $68.8  million in 1995.  Sales by Curtis'  Mechanics  Choice
Division accounted for $8.2 million of the increase. Sales of a new code cutting
machine utilizing state of the art technology  contributed an additional $1.7 in
1996. The sales gains from the new code cutter were  partially  offset by both a
loss of the  sales of the  Puerto  Rican  branch  totaling  $.7  million  and an
emergency key cutting program of $.3 million. These businesses were discontinued
as a result of the sale of the retail division and the shutdown of manufacturing
operations in 1996.

        The gross  margin  percentage  decreased  from 66.5% in 1995 to 65.3% in
1996.  The  decline in the margin is  attributable  to the lower  margins of the
Mechanics  Choice  division.  Mechanics  Choice's  customer  base  has a  larger
concentration  of large,  corporate and national  accounts  which are more price
sensitive.

        Selling,  general,  and  administrative  expenses,  exclusive of the $.7
million reserve  recorded for the 1995  manufacturing  shutdown,  increased $1.9
million for the year ended  December 31, 1996,  when compared to the same period
in 1995. The majority of the increase is selling and  distribution  costs of the
Mechanics Choice division.

SNACK FOODS (LINCOLN)

        On  June  6,  1995,  Lincoln  entered  into  an  exclusive  distribution
agreement  with Planters  Company,  a division of Nabisco,  Inc.,  ("Planters"),
commencing on July 17, 1995, for the sales and  distribution of Fiddle Faddle'r'
and Screaming Yellow  Zonkers'r' ("the  Products").  Under the agreement,  which
requires  Planters to purchase a minimum number of cases during each year ending
on June 30, Lincoln sells the Products to Planters at prices which are less than
historical  selling  prices.  Planters in turn is responsible  for the sales and
distribution  of the Products to its customers  and  therefore  Lincoln does not
have any selling, marketing or distribution costs on the Products. The financial
impact of the agreement versus historical  results is a reduction in revenue and
gross  profit which is offset by reduced  selling,  marketing  and  distribution
costs.



                                      -40-






<PAGE>

<PAGE>



        On February 28, 1997,  this  agreement  was amended,  extending the term
until  December  31,  1997,  at which  time the  distribution  arrangement  will
terminate.  Under the amendment,  Lincoln will resume sales and  distribution of
Screaming  Yellow  Zonkers on May 1, 1997.  Although the amendment and extension
contain  provisions  designed to effect a smooth  transfer  of the  distribution
business back to Lincoln, there can be no assurance that this will be the case.

        Sales decreased $.6 million to $23.6 million for the twelve months ended
December 31, 1996, versus $24.2 million in the corresponding period of 1995. The
decrease in sales is due to a decrease in  Lincoln's  nut  division  sales which
were partially  offset by increases in sales related to the Planter's  agreement
and of Lincoln's other branded product. Sales related to the Planter's agreement
represented  49% and 44% of sales for the twelve months ended  December 31, 1996
and 1995, respectively.

        Gross profit decreased $.8 million to $7.1 million for the twelve months
ended  December 31, 1996,  versus $7.9  million in the  corresponding  period of
1995.  Gross  profit  decreased  as a result of lower  selling  prices under the
Planter's agreement.

        Selling,  general and administrative  expenses decreased $2.7 million to
$5.6 million in the twelve months ended  December 31, 1996,  versus $8.3 million
the  same  period  in  1995.  These  expenses  decreased  primarily  due to cost
reductions resulting from the Planter's agreement.

INDUSTRIAL THREADS AND BUTTONS (CARLYLE)

        Sales for the year ended  December  31, 1996  totaled  $88.6  million as
compared  to $88.7  million  in 1995 for a  decrease  of $.1  million.  Sales in
Carlyle's  industrial  product segment totaled $39.4 million in 1996 as compared
to $45.1 million in 1995, for a decrease of $5.7 million or 12.6%.  The softness
in customer  order volume which began during the third quarter of 1995 continued
throughout all of 1996 creating the negative sales comparison. The reduced order
volume was  experienced  across a broad range of customers and products.  During
the second half of 1996,  sales in this  segment were  generally  at  comparable
levels as  compared  to the second  half of 1995.  Sales in  Carlyle's  consumer
product  segment  totaled  $49.2 million in 1996 for an increase of $5.6 million
over 1995 sales of $43.6  million.  The  increase in consumer  sales was largely
attributable to the inclusion of Culver Textile Corporation ("Culver") full year
sales in 1996.  Culver's sales are included from the date of its  acquisition on
August 31, 1995.  Sales increases of Carlyle's  button division also contributed
$1.8 million to the sales increase of this segment.

        Gross margin in 1996 was $25.5  million or 28.7% of sales as compared to
$22.7 million or 25.7% of sales in 1995 for an increase of $2.8  million.  Gross
margin in the  industrial  segment  during 1996 totaled $9.9 million or 25.1% of
net sales. In 1995, gross margin in the industrial  segment totaled $8.9 million
or 19.8% of sales.  The  increase in both gross  margin  dollars and percent was
attributable  to cost  reduction  efforts  which  were  begun  during the fourth
quarter of 1995 and continued throughout 1996. These cost reduction efforts were
especially  concentrated in the areas of product waste  management and headcount
control.  Gross margin in the consumer product segment during 1996 totaled $15.6
million  dollars or 31.7% of net sales.  In 1995,  gross  margin in the consumer
product  segment  totaled $13.8  million or 31.7% of net sales.  The increase in
gross margin  dollars of $1.8 million was the result of a  combination  of gross
margin  dollars  contributed  by Culver,  which results were included for a full
year in 1996 as compared to four months in 1995,  and  incremental  gross margin
dollars provided by increased sales in Carlyle's button division.

        Selling,  general and  administrative  expenses totaled $14.1 million in
1996 as compared to $15.9 million in 1995.  Selling,  general and administrative
expenses in the industrial  segment  totaled $4.9 million in 1996 as compared to
$8.3 million in 1995 for a decline of $3.4  million.  The  reduction in selling,
general and administrative  expenses was mostly the result of lower headcount in
the  areas  of  marketing,  research  and  engineering.  In  addition,  goodwill
amortization  was $.7  million  less in 1996 than  1995.  Selling,  general  and
administrative  expenses in the consumer product segment totaled $5.6 million as
compared to $6.5 million in 1995




                                      -41-




<PAGE>

<PAGE>



for  a  decline  of  $.9  million.   The  reduction  in  selling,   general  and
administrative  expenses  during 1996 was primarily the result of the closing of
separate  Culver  facilities at the end of 1995 and the elimination of redundant
administrative functions.

1995 VERSUS 1994

FASTENERS AND SECURITY PRODUCTS DISTRIBUTION (CURTIS)

        On November 13, 1995, Curtis Industries, Inc. ("Curtis") sold its retail
division to SDI Operating Partners,  LP. The results of the retail division have
been  reported as  discontinued  operations in the 1995  consolidated  financial
statements. Prior periods have been restated to present the retail division as a
discontinued  operation.  All costs  and  expenses  incurred  as a result of the
retail  division sale have been recorded in 1995 and no additional  expenses are
anticipated.

        Sales for Curtis  for 1995  increased  by $2.2  million or 3.3% to $68.8
million from $66.6 million in 1994. A telemarketing program,  created in January
1995, accounts for $1.2 million of the sales increase. Increased sales in Canada
of $.6 million and the core  domestic  business of $.7 million  were offset by a
decline in United Kingdom sales of $.3 million.

        A one-time charge of $1.1 million was recorded,  primarily for severance
and  benefits  following  the  close  of  its  manufacturing  operations  at its
Eastlake, Ohio facility, in June 1995.

        The gross margin decreased from 67.4% in 1994 to 66.5% in 1995. The 1995
decline in gross margin can be attributed to the high cost of manufacturing keys
and key duplicating machines prior to closing the manufacturing operations. Cost
savings  associated  with the purchase of keys and key machines  from an outside
source  were  realized  in the  fourth  quarter  of 1995 when the  gross  margin
increased to approximately 67% compared to 66.3% for the first three quarters.

        For the year, selling, general and administrative expenses, exclusive of
one-time  charges,  increased  $.6 million.  The increase  results from variable
selling  expenses  associated  with the higher 1995 sales  volumes and increased
expenses associated with the recruitment and retention of sales  representatives
of approximately $1 million in 1995, as management  intensified efforts to build
up the  domestic  sales  force in the  second  half of the year.  The  increased
domestic selling costs were offset by administrative  staff reductions,  reduced
health care costs and other cost containment measures.

SNACK FOODS (LINCOLN)

        Sales decreased  approximately  11% or $3.1 million to $24.2 million for
the  twelve  months  ended  December  31,  1995,  versus  $27.3  million  in the
corresponding  period of 1994.  Gross  sales  decreased  primarily  due to lower
selling prices resulting from the Planters agreement. In addition,  non-Planters
sales  declined 5% due to increased  domestic  competition  and changing  market
conditions  in the Far East.  Case sales to  Planters  for the six months  ended
December 31, 1995,  represent 44% of the minimum  number of cases required to be
purchased  during  Lincoln's  fiscal  year which ends June 30,  1996.  Lincoln's
business  is  seasonal  due to  buying  patterns  of both  Poppycock'r'  and nut
products during the traditional  holiday season.  As a result,  third and fourth
quarter sales account for a significant portion of annual sales.

        Gross  profit  decreased  by $2.4 million to $7.9 million for the twelve
months ended December 31, 1995, from $10.3 million in the  corresponding  period
of 1994 primarily due to lower revenue under the Planters agreement.




                                      -42-




<PAGE>

<PAGE>



        Selling,  general,  administrative  and other  expenses  decreased  $6.4
million to $8.3 million in the twelve months ended December 31, 1995, from $14.7
million in the same  period in 1994.  This  decrease is  primarily  due to lower
freight  costs,  reduced  trade and  consumer  promotional  spending and reduced
administrative expenses resulting from the Planters agreement.

INDUSTRIAL THREADS AND BUTTONS (CARLYLE)

        Sales for 1995 were $88.7 as  compared  with $76.8  million in 1994,  an
increase of $11.9  million or  approximately  16%.  Sales in Carlyle's  consumer
segment were $43.6 million in 1995, an increase of $13.4 million over 1994 sales
of $30.2 million.  The increase in these sales during 1995 was primarily  driven
by the full year inclusion of Carlyle  Threads,  Inc.  (which prior to March 26,
1997 was known as Danfield Threads,  Inc.  ("Carlyle  Threads") in 1995 results.
Carlyle  Threads was  acquired  on June 30, 1994 and had sales of $18.9  million
during 1995 versus $9.0 million in the six months ended December 31, 1994.  Also
contributing  to the favorable  sales variance in 1995 was $2.1 million of sales
contributed  by Culver  which was acquired on August 31, 1995 and a $1.4 million
increase in sales by Carlyle's  button and consumer thread  divisions.  Sales in
Carlyle's  industrial  segment were $45.1 million in 1995 as compared with $46.6
million in 1994, for a decline of $1.5 million.  Weakness in customers'  primary
markets resulted in approximately a 3% sales decline during 1995.

        The gross margin in 1995 was $22.7 million or 25.7% of sales as compared
with $22.7 million in 1994 or 29.6% of sales.  The consumer segment gross margin
in 1995 was $13.8  million as  compared  with $11.7  million in 1994.  The gross
margin  percentage  in 1995 was 31.7%  compared  with  38.9% in 1994.  The gross
margin dollar  improvement  in 1995 was primarily the result of Carlyle  Threads
which was  included  for a full year in 1995 as  compared to six months in 1994.
The gross margin  percentage  decline was principally the result of lower margin
on Culver  sales.  The gross margin in the  industrial  segment in 1995 was $8.9
million or 19.8% of sales as  compared  with  $11.0  million in 1994 or 23.6% of
sales,  for a decline of $2.1  million.  During  1995,  the  industrial  segment
experienced  higher raw  material  and labor  costs and higher  than  historical
levels of manufacturing  inefficiencies  due to the effects of the consolidation
and  relocation of facilities  that occurred in 1994 and  implementation  issues
related to the new management information system. These increased costs were not
fully recouped through sales price increases.

        Selling,  general and  administrative  expenses totaled $15.9 million or
18.0% of sales in 1995 as compared to $15.8 million or 20.6% of sales in 1994.

        Selling,  general and  administrative  expenses in the consumer  segment
totaled $4.8 million in 1995 or 11.0% of sales as compared  with $3.7 million in
1994 or 12.3% of sales. The dollar increase in consumer segment selling, general
and  administrative  expenses  was the result of a full year of Carlyle  Threads
activity in 1995 versus six months in 1994 in addition to the  inclusion of four
months of Culver  activity  in 1995 versus  none in 1994.  Selling,  general and
administrative  expenses  in the  industrial  segment  was $7.3  million in 1995
versus $7.1 million in 1994.

        An  impairment  charge  was  recorded  during  1995  related  to Carlyle
Threads.  The charge  represented a $6.4 million adjustment to the book value of
assets to  estimated  fair value as of December  31, 1995 and the write off of a
proportionate  amount of goodwill allocated to the thread division in connection
with the 1993  acquisition.  The goodwill  write-off was $17.4 million and other
related  charges were $1.2  million.  There were no such  impairment  charges in
1994.

        Interest  expense  increased  to $4.0  million in 1995  compared to $3.2
million  in 1994.  The  increase  was  attributable  to an  increase  in average
outstanding  debt during 1995 to $45.9  million from $41.4  million in 1994.  In
addition to the increase in the average debt level there was also an increase in
the weighted average interest rate from 7.8% in 1994 to 8.7% in 1995.




                                      -43-




<PAGE>

<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         Certain of the  information  required is set forth  under the  captions
"Consolidated   Balance  Sheets,"   "Consolidated   Statements  of  Operations,"
"Consolidated  Statements of Cash Flows," "Consolidated Statements of Changes in
Stockholders' Equity" and "Notes to Consolidated  Financial Statements" on pages
F-1 through  F-33  hereof.  See also the Noel Group,  Inc.  Financial  Statement
Schedule included elsewhere herein.

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

         None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        The  information  required with respect to directors and the information
required by Rule 405 of Regulation S-K is set forth under the caption  "Election
of Directors" in the Company's  definitive  Proxy Statement to be filed pursuant
to Regulation 14A and is incorporated herein by reference.

        The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                                                                       Officer
Name                      Position(s)                         Age      Since
----                      -----------                         ---      -------
<S>                       <C>                                 <C>            <C> 
Joseph S. DiMartino       Chairman of the Board               53       March 1995

Stanley R. Rawn, Jr.      Chief Executive Officer             69       March 1995

Karen Brenner             Managing Director                   41       April 1989

Donald T. Pascal          Managing Director                   37       May 1988

Samuel F. Pryor, IV       Managing Director                   41       November 1991

Todd K. West              Vice President-Finance, Chief       36       August 1990
                          Financial Officer and Secretary
</TABLE>


         There is no  arrangement  or  understanding  between  any  director  or
executive  officer and any other  person  pursuant to which he was selected as a
director or officer.  Directors  hold  office  until the next Annual  Meeting of
Shareholders  and until their  successors  have been elected and qualified.  The
executive officers of the Company are elected at the Annual Meeting of the Board
of Directors  immediately  following the Annual Meeting of Shareholders  held in
the month of May. With the exception of Messrs. Samuel F. Pryor, III, a director
of Noel and Samuel F. Pryor, IV, a Managing Director of Noel, who are father and
son, no family  relationship  exists  among any of the  executive  officers  and
directors of the Company.

                            Biographical Information

         Joseph S. DiMartino has served as a director of Noel since October 1990
and became Chairman of the Board of Noel effective March 20, 1995. Mr. DiMartino
serves as Chairman of the Dreyfus  Group of mutual funds and served as President
and Chief Operating Officer of The Dreyfus  Corporation,  an investment  adviser
and manager of the Dreyfus Group of mutual funds,  from 1982 until  December 31,
1994. Mr. DiMartino is also a director of Carlyle Industries,  Inc. ("Carlyle"),
a leading manufacturer and marketer of industrial sewing




                                      -44-




<PAGE>

<PAGE>



threads,  and a  distributor  of a line  of  home  sewing  and  craft  products,
principally  buttons,  Staffing  Resources,  a provider of diversified  staffing
services to a broad range of businesses  in various  industries  throughout  the
Mid- Atlantic,  Southeastern,  Southwestern  and Rocky  Mountain  regions of the
United States,  HealthPlan  Services  Corporation,  a leading managed healthcare
services company, and Curtis Industries, Inc. ("Curtis"), a national distributor
of  fasteners,  security  products,  chemicals,  automotive  replacement  parts,
fittings  and  connectors,  and  tools and  hardware.  Mr.  DiMartino  is also a
director of numerous funds in the Dreyfus Group of mutual funds.  Mr.  DiMartino
is a director of the National  Muscular  Dystrophy  Association and a trustee of
Bucknell University.

         Stanley R. Rawn,  Jr. served as a director of Noel and its  predecessor
company from 1969 until  January 1987 and has served as a director of Noel since
June 1990. Mr. Rawn became Chief  Executive  Officer of Noel effective March 20,
1995.  From  November  1985  until May 1992,  Mr.  Rawn was  Chairman  and Chief
Executive Officer and a director of Adobe Resources Corporation,  an oil and gas
exploration and production  company which merged into Santa Fe Energy Resources,
Inc.  in May 1992.  Mr.  Rawn is also a director  of The  Prospect  Group,  Inc.
("Prospect"),  a company  which,  prior to its  adoption  of a Plan of  Complete
Liquidation  and  Dissolution  in  1990  and  subsequent  dissolution  in  1997,
conducted its major operations through subsidiaries acquired in leveraged buyout
transactions, a Senior Managing Director and director of Swiss Army Brands, Inc.
("Swiss  Army"),   the  exclusive  United  States  and  Canadian   importer  and
distributor of Victorinox  Original Swiss Army Officers' knives and professional
cutlery, as well as the marketer of Swiss Army Brand watches and other products,
Chairman of the Executive Committee and a director of Staffing Resources,  and a
trustee of the California Institute of Technology.

         Karen Brenner has been a Managing Director of Noel since November 1991.
Previously,  Ms.  Brenner  served as a director of Noel from  October 1989 until
November  1991,  and as a Vice  President of Noel from April 1989 until November
1991.  Prior to joining Noel,  Ms.  Brenner was a principal in a management  and
financial  consulting business,  specializing in managing turnaround  situations
for venture capital and leveraged buyout companies.  Since June 1994 Ms. Brenner
has served as Chairman  and Chief  Executive  Officer of Lincoln  Snacks and has
also served as a director of Lincoln Snacks since its inception. Ms. Brenner was
formerly  Chairman of the Board of Swiss Army Brands.  Ms. Brenner has served as
Chairman of Carlyle  since May 1996, as President  and Chief  Executive  Officer
since  October 1996,  and as a director  since  February  1996.  Ms.  Brenner is
currently a director of On Assignment,  Inc., a leading  nationwide  provider of
science   professionals   on  temporary   assignments  to  laboratories  in  the
biotechnology,  environmental,  chemical, pharmaceutical,  food and beverage and
petrochemical  industries, a member of the Board of Trustees of Prep for Prep, a
charitable   organization   dedicated  to  providing  preparatory  education  to
disadvantaged children, and a trustee of the City Parks Foundation of New York.

          Donald T. Pascal has been a Managing  Director of Noel since  November
1991.  Previously,  Mr.  Pascal  served as a director of Noel from  October 1989
until November 1991, and as a Vice President and Secretary of Noel from May 1988
until November  1991,  when he became a Managing  Director.  He served as a Vice
President  of Prospect  from March 1986 until  February  1989.  Prior to joining
Prospect,  Mr. Pascal worked in the venture capital  operations of E. M. Warburg
Pincus  &  Co.,  Inc.  and  for  Strategic  Planning  Associates,  a  management
consulting  firm. Mr. Pascal has served as Chairman of the Board of Connectivity
since May 1996.  Mr. Pascal also serves as a director of  Connectivity  and as a
director of Sylvan Inc. ("Sylvan"),  a company which produces mushroom spawn and
fresh mushrooms.

          Samuel  F.  Pryor,  IV has  been a  Managing  Director  of Noel  since
November 1991.  Previously,  Mr. Pryor served as a director of Noel from October
1990 until November 1991. Mr. Pryor is also President,  Chief Executive  Officer
and a  director  of  Prospect.  Mr.  Pryor  joined  Prospect  in  1986 as a Vice
President, and served as Managing Director from 1988 until October 1991, when he
became President of Prospect.  Before joining Prospect,  Mr. Pryor worked at the
private  banking firm of Brown  Brothers  Harriman & Co. from 1979 to 1986.  Mr.
Pryor is a  director  of  HealthPlan  Services,  Carlyle  and  Illinois  Central
Corporation, a railroad holding company.




                                      -45-




<PAGE>

<PAGE>




         Todd K. West has served as Vice President-Finance since August 1990, as
Secretary since November 1991 and as Chief  Financial  Officer since January 27,
1993. Mr. West also served as Treasurer and Chief Financial  Officer from August
1990 until November 1991. Mr. West joined  Prospect in September 1988 and served
as Assistant Vice President-Finance, Assistant Treasurer and Assistant Secretary
from February 1989 until November 1990,  when he became Vice  President-Finance,
Chief Financial Officer,  Treasurer and Secretary of Prospect. Mr. West became a
certified public accountant in 1987.

ITEM 11.  EXECUTIVE COMPENSATION.

         The  information  required is set forth under the captions  "Management
Compensation"  and "Certain  Transactions"  in the  Company's  definitive  Proxy
Statement to be filed pursuant to Regulation 14A and is  incorporated  herein by
reference.

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

         The  information  required  is set forth  under the  caption  "Security
Ownership  of Certain  Beneficial  Owners"  in the  Company's  definitive  Proxy
Statement to be filed pursuant to Regulation 14A and is  incorporated  herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The  information  required  is set  forth  under the  caption  "Certain
Transactions"  in the Company's  definitive Proxy Statement to be filed pursuant
to Regulation 14A and is incorporated herein by reference.

                                     PART IV

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

(a)

          (1) - (2)  Financial statements and financial statement schedules.
                     -------------------------------------------------------

                  The consolidated  financial statements and financial statement
          schedules listed in the accompanying  Index to Consolidated  Financial
          Statements and Financial Statement Schedules are filed as part of this
          annual report.

          (3)        Exhibits.

                  The exhibits listed on the accompanying  Index of Exhibits are
filed as part of this annual report.

(b)       Reports on Form 8-K.

          None




                                      -46-


<PAGE>
<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.

                                                   NOEL GROUP, INC.

                                                     (Registrant)

                                                   By /s/ Stanley R. Rawn, Jr.
                                                     -------------------------
                                                     Stanley R. Rawn, Jr.
                                                     Chief Executive Officer

                                                   Date: April 15, 1997

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

/s/ Joseph S. DiMartino                                           April 15, 1997
-----------------------------------------------------
Joseph S. DiMartino
Chairman of the Board; Director

/s/ Stanley R. Rawn, Jr.                                          April 15, 1997
-----------------------------------------------------
Stanley R. Rawn, Jr.
Chief Executive Officer;
Director (Principal Executive Officer)

/s/ Todd K. West                                                  April 15, 1997
------------------------------------------------------
Todd K. West
Vice President-Finance, Chief Financial Officer
and Secretary (Principal Financial Officer and
Principal Accounting Officer)

/s/ William L. Bennett                                            April 15, 1997
------------------------------------------------------
William L. Bennett
Director

/s/ Livio M. Borghese                                             April 15, 1997
----------------------------------------------------
Livio M. Borghese
Director

/s/ Vincent D. Farrell, Jr.                                       April 15, 1997
----------------------------------------------------
Vincent D. Farrell, Jr.
Director


                                     -47-


<PAGE>

<PAGE>




/s/ Herbert M. Friedman                                           April 15, 1997
----------------------------------------------------
Herbert M. Friedman
Director

/s/ James K. Murray, Jr.                                          April 15, 1997
----------------------------------------------------
James K. Murray, Jr.
Director


/s/ James G. Niven                                                April 15, 1997
----------------------------------------------------
James G. Niven
Director

/s/ Samuel F. Pryor, III                                          April 15, 1997
----------------------------------------------------
Samuel F. Pryor, III
Director


/s/ James A. Stern                                                April 15, 1997
----------------------------------------------------
James A. Stern
Director

/s/ Edward T. Tokar                                               April 15, 1997
----------------------------------------------------
Edward T. Tokar
Director


                                      -48-



<PAGE>

<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                       AND

                          FINANCIAL STATEMENT SCHEDULES

                               Item 14(a)(1) - (2)

<TABLE>
<CAPTION>
                                                                                Page Reference
                                                                                --------------
<S>                                                                                       <C>
NOEL GROUP, INC. AND SUBSIDIARIES:

      Report of Independent Public Accountants                                          F-3

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

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

      Consolidated Statements of Cash Flows
        For the Years Ended December 31, 1996, 1995 and 1994                            F-6

      Consolidated Statements of Changes in
        Stockholders' Equity
        For the Years Ended December 31, 1996, 1995 and 1994                            F-8

      Notes to Consolidated Financial Statements                                        F-9

HEALTHPLAN SERVICES CORPORATION AND SUBSIDIARIES:

      Report of Independent Certified Public Accountants                               F-34

      Consolidated Balance Sheets
        December 31, 1996 and December 31, 1995                                        F-35

      Consolidated Statements of Operations
        For the year ended December 31, 1996, and December 31,
        1995 and for the period from Inception (October 1, 1994)
        through December 31, 1994                                                      F-36

</TABLE>

                                       F-1






<PAGE>

<PAGE>


<TABLE>
<S>                                                                                   <C>
      Consolidated Statements of Changes in
        Stockholders' Equity for the years ended
        December 31, 1996, December 31, 1995 and December 31, 1994

                                                                                       F-37

      Consolidated Statements of Cash Flows
        For the years ended December 31, 1996
        and December 31, 1995 and for the Period
        from Inception through December 31, 1994                                       F-38

      Notes to Consolidated Financial Statements                                       F-40

HEALTHPLAN SERVICES DIVISION

      Report of Independent Accountants                                                F-55

      Statement of Financial Position
        September 30, 1994                                                             F-56

      Statement of Income Nine-Month Period ended
        September 30, 1994                                                             F-57

      Statement of Cash Flows Nine-Month Period ended
       September 30, 1994                                                              F-58

      Notes to Financial Statements                                                    F-59

STAFFING RESOURCES, INC.

      Report of Independent Accountants                                                F-66

Financial  statement  schedules  not  included in this report have been  omitted
because they are not applicable.

Schedule
  No.
------
    II  Valuation and Qualifying Accounts
        For the Years Ended December 31, 1996, 1995 and 1994                            S-1
</TABLE>



Financial  statement  schedules  not  included in this report have been  omitted
because  they are not  applicable  or the required  information  is shown in the
consolidated financial statements or the notes thereto.



                                       F-2






<PAGE>

<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF NOEL GROUP, INC.

      We have  audited  the  accompanying  consolidated  balance  sheets of Noel
Group,  Inc., a Delaware  corporation,  and subsidiaries as of December 31, 1996
and 1995,  and the related  consolidated  statements of  operations,  changes in
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1996. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial  statements  based  on our  audits.  We did not  audit  the  financial
statements of HealthPlan Services  Corporation  ("HPS"), the investment in which
is reflected in the accompanying financial statements using the equity method of
accounting in 1996 and 1995.  The  investment in HPS  represents  18% and 14% of
consolidated  total assets as of December 31, 1996 and 1995,  respectively,  and
the equity in its net loss is $.5 million for 1996. The equity in its net income
is $3.4 million for 1995.  In 1994,  when HPS was a  consolidated  subsidiary of
Noel Group Inc.  (see Note 3), the  financial  statements  of HPS reflect  total
assets and total  revenues  of 18% and 21%,  respectively,  of the  consolidated
totals.  We also did not audit the financial  statements of Staffing  Resources,
Inc.  ("Staffing"),  the  investment  in which is reflected in the  accompanying
financial  statements  using  the  equity  method  of  accounting  in 1996.  The
investment in Staffing represents 9% of consolidated total assets as of December
31, 1996 and the equity in its net loss is $1.2 million for 1996. The statements
of HPS and  Staffing  were  audited by other  auditors  whose  reports have been
furnished to us and our opinion,  insofar as it relates to the amounts  included
for HPS in 1996,  1995 and 1994, and for Staffing in 1996 is based solely on the
reports of the other auditors.

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

      As described in Note 1 to the financial  statements,  the  shareholders of
Noel Group,  Inc.  approved a plan of liquidation  and  dissolution on March 19,
1997. As a result,  the Company has changed its basis of accounting  for periods
subsequent to March 19, 1997,  from the  going-concern  basis to the liquidation
basis.

      In our opinion, based on our audits and the reports of the other auditors,
the  financial  statements  referred to above  present  fairly,  in all material
respects,  the financial  position of Noel Group,  Inc. and  subsidiaries  as of
December 31, 1996 and 1995,  and the results of their  operations and their cash
flows for each of the three years in the period  ended  December  31,  1996,  in
conformity with generally accepted accounting principles.

      Our audit was made for the  purpose  of  forming  an  opinion on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
consolidated  financial  statements  is  the  responsibility  of  the  Company's
management  and is presented for purposes of complying  with the  Securities and
Exchange Commission's rules and is not part of the basic consolidated  financial
statements.  This schedule has been subjected to the auditing procedures applied
in the  audits  of the  basic  consolidated  financial  statements  and,  in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic consolidated  financial statements
taken as a whole.

April 3, 1997                                                Arthur Andersen LLP



                                       F-3






<PAGE>

<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                                        1996                    1995
                                                                                        ----                    ----
                                                                                        (DOLLARS IN THOUSANDS EXCEPT
                                                                                                PAR VALUES)
                                                      ASSETS
<S>                                                                                   <C>                     <C>     
CURRENT ASSETS:
       Cash and cash equivalents.......................................               $  1,117                $ 10,446
       Short-term investments..........................................                  8,983                  18,378
       Accounts receivable, less allowances
         of $3,718 and $2,867..........................................                 24,023                  21,111
       Inventories.....................................................                 34,157                  30,460
       Other current assets............................................                  4,232                   4,294
                                                                                         -----                   -----
       Total current assets............................................                 72,512                  84,689

Equity investments (Note 3)............................................                 68,026                  34,520
Other investments (Note 5).............................................                    639                  20,174
Property, plant and equipment, net (Note 6)............................                 37,671                  40,563
Intangible assets, net.................................................                 46,015                  44,562
Other assets...........................................................                  5,658                  15,249
                                                                                         -----                  ------
Total assets...........................................................               $230,521                $239,757
                                                                                      ========                ========


                                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
       Current portion of long-term debt
         (Note 7)......................................................                 $4,719                  $5,233
       Trade accounts payable..........................................                 13,226                  12,339
       Accrued compensation and benefits...............................                  5,567                   5,769
       Net liabilities of discontinued
         operations (Note 4)...........................................                  3,597                     793
       Other current liabilities.......................................                  8,417                  18,408
                                                                                         -----                  ------
       Total current liabilities.......................................                 35,526                  42,542

Long-term debt (Note 7)................................................                 60,983                  69,197
Other long-term liabilities............................................                 29,085                  28,913
Minority interest......................................................                  7,567                   6,185
                                                                                         -----                   -----
            Total liabilities..........................................                133,161                 146,837
                                                                                       -------                 -------

STOCKHOLDERS' EQUITY:  (NOTES 9 AND 10)
       Preferred stock, $.10 par value,
         2,000,000 shares authorized, none
         outstanding...................................................                     --                      --
       Common stock, $.10 par value, 48,000,000
         shares authorized, 20,222,642 and
         20,203,233 issued, respectively...............................                  2,022                   2,020
       Capital in excess of par value..................................                211,633                 204,466
       Accumulated deficit.............................................               (115,123)               (112,466)
       Cumulative translation adjustment...............................                   (481)                   (613)
       Treasury stock at cost, 34,937 and 11,000
         shares, respectively..........................................                   (691)                   (487)
                                                                                         -----                   -----
            Total stockholder's equity.................................                 97,360                  92,920
                                                                                        ------                  ------
            Total liabilities and stockholders' equity.................               $230,521                $239,757
                                                                                      ========                ========
</TABLE>


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



                                       F-4






<PAGE>

<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                    FOR THE YEARS ENDED DECEMBER 31,
                                                        1996                   1995                     1994
                                                        ----                   ----                     ----
                                                                    (DOLLARS IN THOUSANDS, EXCEPT
                                                                         PER SHARE AMOUNTS)
<S>                                                         <C>                   <C>                   <C>    
REVENUE ITEMS:
       Sales ....................................  $    189,325             $    181,709             $     93,888
       HealthPlan Services revenue from
         services ...............................          --                       --                     25,233
                                                   ------------             ------------             ------------
                                                        189,325                  181,709                  119,121
                                                   ------------             ------------             ------------

COST AND EXPENSE ITEMS:

       Cost of sales ............................       106,426                  105,318                   38,761
       HealthPlan Services costs of
         services ...............................          --                       --                     21,299
       Selling, general, administrative
         and other expenses .....................        69,246                   71,799                   68,993
       Impairment charge (Note 3) ...............          --                     29,155                     --
       Depreciation and amortization ............         4,459                    4,888                    2,799
                                                   ------------             ------------             ------------
                                                        180,131                  211,160                  131,852
                                                   ------------             ------------             ------------
Operating income (loss) .........................         9,194                  (29,451)                 (12,731)
                                                   ------------             ------------             ------------

OTHER INCOME (EXPENSE):

       Other income (Note 11) ...................           599                    6,703                    8,328
       Income (Loss) from equity
         investments ............................        (4,707)                   3,761                     (182)
       Interest expense .........................        (7,970)                  (7,801)                  (3,748)
       Minority interest ........................        (1,363)                  10,923                      575
                                                   ------------             ------------             ------------
                                                        (13,441)                  13,586                    4,973
                                                   ------------             ------------             ------------
Loss from continuing operations
  before income taxes ...........................        (4,247)                 (15,865)                  (7,758)
Benefit (Provision) for income taxes
  (Note 12) .....................................         1,142                      284                   (1,695)
                                                   ------------             ------------             ------------
Loss from continuing operations .................        (3,105)                 (15,581)                  (9,453)
Income (Loss) from discontinued
  operations (Note 4) ...........................           448                   (6,544)                  (7,614)
                                                   ------------             ------------             ------------
            Net loss ............................  $     (2,657)            $    (22,125)            $    (17,067)
                                                   ============             ============             ============

LOSS PER COMMON AND COMMON
  EQUIVALENT SHARE FROM:

       Continuing operations ....................  $      (0.15)            $      (0.77)            $      (0.47)
       Discontinued operations ..................          0.02                    (0.33)                   (0.38)
                                                   ------------             ------------             ------------
            Net loss per common and
              common equivalent share ...........  $      (0.13)            $      (1.10)            $      (0.85)
                                                   ============             ============             ============
Weighted average common and common
  equivalent shares .............................    20,187,705               20,192,233               20,192,233
                                                   ============             ============             ============
</TABLE>


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



                                       F-5






<PAGE>

<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED DECEMBER 31,
                                                                      --------------------------------
                                                                      1996           1995         1994
                                                                      ----           ----         ----
                                                                           (Dollars in thousands)
<S>                                                                 <C>           <C>           <C>      
Cash Flows from Operating Activities:
       Net Loss ..................................................  $ (2,657)     $(22,125)     $(17,067)
Adjustments to reconcile net income
  to net cash provided from (used for)
  operating activities:

       (Income) Loss from equity
         investments .............................................     4,707        (3,761)          182
       Depreciation and amortization .............................     6,873         7,717         5,196
       Net gain (loss) on securities .............................        85        (5,533)       (5,203)
       Provisions for doubtful accounts
         and valuation of inventories ............................       (40)        1,554           599
       (Benefit) Provision for deferred
         income taxes ............................................     2,729          (674)          244
       (Gain) Loss on property and
         equipment ...............................................      (131)          418           105
       Minority interest, net ....................................     1,363       (10,923)         (513)
       Non-incentive stock option
         expense .................................................      --            --           4,853
       Impairment charge .........................................      --          29,155          --
       Accrued dividends .........................................      --            --          (2,217)
       (Income) Loss on disposal of
         discontinued operations .................................      (448)        5,234         5,915
       Other, net ................................................       530           889           555

Changes in certain assets and liabilities, net of acquisitions:

       Accounts receivable .......................................    (2,885)        2,160           137
       Inventories ...............................................    (1,101)        2,147        (1,284)
       Restricted cash ...........................................      --            --          (2,150)
       Trade accounts payable ....................................        53           491         3,282
       Accrued compensation and benefits .........................      (209)          221          (321)
       Other, net ................................................    (5,534)       (6,136)        1,933
Discontinued operations ..........................................    (1,331)        8,872          --
                                                                    --------      --------      --------
                 Total adjustments ...............................     4,661        31,831        11,313
                                                                    --------      --------      --------
Net cash provided from (used for)
  operating activities ...........................................     2,004         9,706        (5,754)
                                                                    --------      --------      --------
</TABLE>



                                       F-6






<PAGE>

<PAGE>




<TABLE>
<CAPTION>
                                                  For the Years Ended December 31,
                                                  --------------------------------
                                                 1996            1995         1995
                                                 ----            ----         ----
                                                      (Dollars in thousands)
<S>                                             <C>            <C>           <C>     
Cash Flows From Investing Activities:
       Payments for companies purchased,
         net of cash acquired ..............    (6,716)        (3,050)       (17,391)
       Cash of deconsolidated subsidiary ...      --           (4,303)          --
       Sales of short-term investments,
         net ...............................     9,399          3,845          7,395
       Purchases of marketable
         securities ........................      --             --             (840)
       Sales of marketable securities ......      --             --           14,415
       Purchases of investments ............    (8,084)       (11,105)       (11,976)
       Sales of investments ................      --              972          3,683
       Sales of discontinued operations ....     8,190         23,977            899
       Purchases of property, plant and
         equipment .........................    (4,313)        (4,857)        (1,804)
       Sales of property, plant
         and equipment .....................     2,175          1,724            328
       Other, net ..........................    (1,653)          (845)          (214)
                                             ---------      ---------      ---------
Net cash provided from (used for)
  investing activities .....................    (1,002)         6,358         (5,505)
                                             ---------      ---------      ---------

Cash Flows From Financing Activities:
       Borrowings from revolving credit
         line and long-term debt ...........   135,441        143,848        115,176
       Repayments of revolving credit
         line and long-term debt ...........  (144,528)      (154,950)      (119,568)
       Issuance of common stock, net .......      --               25         14,884
       Change in other long-term
         liabilities .......................    (1,287)        (3,012)          --
       Other, net ..........................       (95)          --             (708)
                                             ---------      ---------      ---------
Net cash provided from (used for)
  financing activities .....................   (10,469)       (14,089)         9,784
                                             ---------      ---------      ---------
Effect of exchange rates on cash ...........       138             22              8
                                             ---------      ---------      ---------
Net increase (decrease) in cash and
  cash equivalents .........................    (9,329)         1,997         (1,467)
Cash and cash equivalents at
  beginning of year ........................    10,446          8,449          9,916
                                             ---------      ---------      ---------
Cash and cash equivalents at end of
  year ..................................... $   1,117      $  10,446      $   8,449
                                             =========      =========      =========
</TABLE>


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



                                     F-7






<PAGE>

<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                           Common Stock              Capital in                     
                                                           ------------              Excess of         Accumulated  
                                                      Shares          Amount         Par Value           Deficit    
                                                      ------          ------         ---------           -------    
<S>                                                   <C>             <C>            <C>                <C>       
Balance, January 1, 1994...........................   20,203          $2,020         $188,837           $(73,274) 
Net loss...........................................       --              --               --            (17,067) 
Distribution to stockholders (Note 9)..............       --              --             (708)                 -- 
Subsidiary stock transaction (Note 3)..............       --              --            2,424                  -- 
Unrealized holding gains...........................       --              --               --                  -- 
Cumulative translation adjustment..................       --              --               --                  -- 
Other..............................................       --              --             (837)                 -- 
                                                     -------          ------         --------           --------- 

Balance, December 31, 1994.........................   20,203           2,020          189,716            (90,341) 
Net loss...........................................       --              --               --            (22,125) 
Subsidiary stock transaction (Note 3)..............       --              --           14,442                  -- 
Cumulative translation adjustment..................       --              --               --                  -- 
Other..............................................       --              --              308                  -- 
                                                     -------          ------         --------           --------- 
Balance, December 31, 1995.........................   20,203           2,020          204,466           (112,466) 
Net loss...........................................       --              --               --             (2,657) 
Subsidiary stock transactions (Note 3).............       --              --            7,004                  -- 
Purchase of treasury stock.........................       --              --               --                  -- 
Issuance of common stock...........................       19               2              163                  -- 
Cumulative translation adjustment..................       --              --               --                  -- 
                                                     -------          ------         --------          ---------- 
Balance, December 31, 1996.........................   20,222          $2,022         $211,633          $(115,123) 
                                                     =======          ======         ========          ========== 


<CAPTION>
                                                      Unrealized       Cumulative
                                                       Holding         Translation          Treasury Stock          Stockholders'
                                                        Gains          Adjustment        Shares       Amount           Equity
                                                        -----          ----------        ------       ------           ------
<S>                                                    <C>               <C>              <C>       <C>               <C>     
Balance, January 1, 1994...........................    $6,592             $(566)          11         $(487)           $123,122
Net loss...........................................        --                --           --            --             (17,067)
Distribution to stockholders (Note 9)..............        --                --           --            --                (708)
Subsidiary stock transaction (Note 3)..............        --                --           --            --               2,424
Unrealized holding gains...........................    (6,592)               --           --            --              (6,592)
Cumulative translation adjustment..................        --               (73)          --            --                 (73)
Other..............................................        --                --           --            --                (837)
                                                      -------            ------          ---         -------           ------- 
Balance, December 31, 1994.........................         0              (639)          11          (487)            100,269
Net loss...........................................        --                --           --            --             (22,125)
Subsidiary stock transaction (Note 3)..............        --                --           --            --              14,442
Cumulative translation adjustment..................        --                26           --            --                  26
Other..............................................        --                --           --            --                 308
                                                      -------            ------          ---         -------           ------- 
Balance, December 31, 1995.........................         0              (613)          11          (487)             92,920
Net loss...........................................        --                --           --            --              (2,657)
Subsidiary stock transactions (Note 3).............        --                --           --            --               7,004
Purchase of treasury stock.........................        --                --           24          (204)               (204)
Issuance of common stock...........................        --                --           --            --                 165
Cumulative translation adjustment..................        --               132           --            --                 132
                                                      -------            ------          ---        ------             ------- 
Balance, December 31, 1996.........................        $0             $(481)         $35         $(691)            $97,360
                                                      =======            ======          ===        ======             =======
</TABLE>


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



                                       F-8






<PAGE>

<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION

     On March 19, 1997, the Shareholders of Noel Group, Inc.'s ("Noel") approved
a Plan of Complete  Liquidation  and  Dissolution  (the  "Plan")  which had been
adopted by Noel's Board of Directors on May 21, 1996.  Under the Plan, Noel will
be liquidated (i) by the sale of such of its assets as are not to be distributed
in-kind to its  shareholders,  and (ii) after  paying or  providing  for all its
claims,  obligations  and  expenses,  by cash and in-kind  distributions  to its
shareholders  pro rata, and, if required by the Plan or deemed  necessary by the
Board of Directors,  by  distributions of its assets from time to time to one or
more liquidating trusts established for the benefit of the then shareholders, or
by a final  distribution  of its then  remaining  assets to a liquidating  trust
established  for  the  benefit  of  the  then  shareholders.  Noel  adopted  the
liquidation basis of accounting as of March 19, 1997.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General:

     Prior to the approval of the Plan, Noel conducted its principal  operations
through small and medium-sized companies in which Noel held controlling or other
significant equity interests.  The 1994 financial  statements have been restated
to  reflect  Simmons  Outdoor  Corporation  ("Simmons"),  the  home  furnishings
division  of  Carlyle  Industries,  Inc.,  formerly  known as  Belding  Heminway
Company,  Inc. ("Carlyle"),  Curtis Industries,  Inc. ("Curtis") retail division
and TDX Corporation ("TDX") as discontinued operations. See Note 4. In addition,
the historical  financial  statements have been reclassified to conform with the
current year's presentation.

Consolidation:

     The consolidated  financial statements include the accounts of Noel and its
subsidiaries,   Carlyle,   Curtis,  and  Lincoln  Snacks  Company   ("Lincoln"),
(collectively the "Company"),  after the elimination of significant intercompany
transactions.  Carlyle is included in the  consolidated  statement of operations
from  January 1, 1995,  following  Noel's  December  1994,  exchange  of Carlyle
preferred  stock and accrued  dividends  for 30% of Carlyle's  common equity and
maintenance of voting  control  through  Noel's  remaining  holding of Carlyle's
preferred stock.

     HealthPlan  Services  Corporation  ("HPS"),  which was  acquired by Noel on
September 30, 1994, is included in the 1994 consolidated  financial  statements.
Following HPS' initial public  offering on May 19, 1995 and Noel's  simultaneous
exchange of its entire holding of HPS preferred stock and accrued dividends into
HPS common stock,  Noel's voting  interest in HPS dropped below 50%.  Therefore,
for the year ended  December  31, 1995,  HPS is  accounted  for under the equity
method of  accounting as if HPS had been an equity  investment  for all of 1995.
Noel's equity in HPS' results for the years ended December 31, 1996 and 1995, is
included in income (loss) from equity investments on the consolidated statements
of operations.

Cash and Cash Equivalents and Short-term Investments:

     The Company  considers  all highly  liquid  investments  with a maturity of
three  months  or less,  at the  date of  acquisition,  to be cash  equivalents.
Carrying amounts of short-term investments approximate fair value.



                                       F-9






<PAGE>

<PAGE>



Investments in Debt and Equity Securities:

     The Company's  marketable  securities  and its other  investments in equity
securities  that  have  readily  determinable  fair  values  are  classified  as
available-for-sale  securities.  The equity method of accounting is used for (i)
common equity  investments  in which the Company's  voting  interest is from 20%
through 50%, (ii) for investments  where Noel's voting interest is below 20% but
Noel has the  ability to exercise  significant  influence  over an investee  and
(iii) for limited partnership investments. The cost method of accounting is used
for common equity  investments  in which the Company's  voting  interest is less
than 20% for  which  fair  values  are not  readily  determinable  and for which
significant influence cannot be exercised.  A non-temporary decline in the value
of any equity or cost basis  investment  is expensed at the time such decline is
identified.

Use of Estimates:

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

Inventories:

          Inventories,  net of reserves,  consist of the  following  (dollars in
thousands):

                                              December 31,
                                    ---------------------------
                                        1996             1995
                                    -----------        --------
  Raw materials and supplies           $ 7,189          $ 6,088
  Work in process                        4,201            6,033
  Finished goods                        22,767           18,339
                                      --------          -------
                                       $34,157          $30,460
                                      ========          =======


     Inventories are stated at lower of cost or market,  determined  principally
by the FIFO method.  At December 31, 1996 and 1995,  inventories  of $18,533,000
and $12,455,000, respectively, are valued by the LIFO method, and inventories of
$5,905,000 are valued by the average cost method in 1995. If the FIFO method had
been used,  the stated  amounts of  inventories  would not have been  materially
affected.

Property, Plant and Equipment:

         Property,  plant and  equipment  are carried at cost.  Depreciation  is
provided  primarily  using the  straight-line  method over the estimated  useful
lives of the related assets as follows:

         Machinery and equipment                      3 - 25 years
         Buildings and leasehold improvements         7 - 35 years
         Furniture and fixtures                       3 - 30 years

     Leasehold  improvements are depreciated using the straight-line method over
the lives of the related leases or their estimated  useful lives,  whichever are
shorter.  The cost of repairs and maintenance is charged to expense as incurred,
while renewals and betterments are capitalized.



                                      F-10






<PAGE>

<PAGE>



Intangible Assets:

     Intangible  assets,  primarily  costs in  excess  of the fair  value of net
assets acquired, are being amortized using the straight-line method over periods
ranging from 3 to 30 years.  Intangible assets consist of the following (dollars
in thousands):

                                         December 31,
                                   ----------------------
                                     1996          1995
                                     ----          ----
Goodwill                           $ 53,180      $ 49,680
Other                                   612           839
                                   --------      --------
                                     53,792        50,519
Less: Accumulated amortization       (7,777)       (5,957)
                                   --------      --------
                                   $ 46,015      $ 44,562
                                   ========      ========

     The realizability of goodwill is evaluated by segment.  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."
("SFAS 121"), effective January 1, 1995. The adoption of SFAS 121 did not have a
material impact on the Company's financial position or results of operations.

Minority Interest:

     Minority interest includes  $4,193,000 and $2,741,000 related to redeemable
preferred stock of subsidiaries at December 31, 1996 and 1995, respectively.

Financial Instruments:

     The carrying amount of the Company's  financial  instruments,  for which it
was practicable to determine fair value, approximates fair value.

Foreign Currency Translation:

     Assets and  liabilities  of foreign  operations  are  translated  into U.S.
dollars  using  period-end  exchange  rates,  while  revenue  and  expenses  are
translated  at  average  exchange  rates  throughout  the  period.   Adjustments
resulting from translation are recorded as a separate component of stockholders'
equity.  Gains and losses  resulting  from  foreign  currency  transactions  are
recognized in the results of operations in the period incurred.

Revenue:

     Revenue from product sales is recorded at the time of shipment.

     HPS derives revenue from services and its revenue and expenses are shown as
revenue from services and costs of services in the 1994 statement of operations.
HPS recognizes  contractual and service revenue ratably over contractual periods
or as claims  processing  and  administrative  services are  performed.  Revenue
collected  in advance is recorded as deferred  revenue and  recognized  when the
related services are performed.



                                      F-11






<PAGE>

<PAGE>



Other Income:

     Interest  income is accrued and  reported as earned only to the extent that
management  anticipates  such  amounts to be  collectible.  Accrued  interest is
evaluated  periodically  and an allowance for  uncollectible  interest income is
established when necessary.

Loss Per Common and Common Equivalent Share:

     Loss per share is computed  based on the weighted  average number of shares
of Noel Common Stock and dilutive equivalents  outstanding during the respective
periods.  Fully  diluted  earnings per share have not been  presented  since the
computation would be antidilutive.

3.   INVESTMENTS AND ACQUISITIONS

Ferrovia Novoeste, S.A.

     On March 5, 1996,  a  consortium  led by Noel and Chase  Capital  Partners,
formerly Chemical Venture Partners,  purchased by auction the concession for the
Brazilian federal  railroad's  western network for approximately  $63.6 million.
The purchase of the network consists of a 30-year  concession and a lease of the
federal railroad's  equipment.  Noel invested $8.0 million for approximately 34%
of the concession holder,  Ferrovia Novoeste,  S.A.,  ("Novoeste"),  which began
operating the railroad on July 1, 1996.  Noel's share of Novoeste's loss for the
period ended December 31, 1996 is $3,066,000.

     Summarized  financial  information  for Novoeste is as follows  (dollars in
thousands):

                                                December 31,
                                                   1996
                                                   ----
         Current assets                          $ 4,999
         Noncurrent assets                       $71,652
         Current liabilities                     $ 3,178
         Noncurrent liabilities                  $61,311

                                             Six Months Ended
                                             December 31, 1996
                                             -----------------
         Revenue from services                   $17,498
         Operating costs and expenses            $19,959
         Net loss                                $(7,350)


Staffing Resources, Inc.

         On July 31, 1995,  Noel  received  1,026,104  shares of common stock of
Staffing Resources,  Inc.  ("Staffing") as payment for its $8,190,000 face value
subordinated note from Brae Group, Inc. ("Brae Note"),  plus accrued interest of
$3,097,000.  Noel  recognized  a gain of  $6,598,000  on the payment of the Brae
Note.

         On November 15, 1995, Noel purchased an additional  1,000,000 shares of
Staffing common stock for $11,000,000 in a private placement offering.



                                      F-12






<PAGE>

<PAGE>



         Staffing was recorded as a cost basis  investment at December 31, 1995.
During  1996,  Noel began  accounting  for Staffing  under the equity  method of
accounting and recorded an equity loss of $1,174,000  representing  its share of
Staffing's  losses from July 31,  1995,  the date of Noel's  acquisition  of the
Staffing shares,  through December 31, 1996.  Staffing issued  additional common
shares  in 1996  and  1995,  diluting  Noel's  common  ownership  percentage  to
approximately  16%.  These share  issuances  were recorded as  subsidiary  stock
transactions  by Noel with an increase of $1,199,000,  net of taxes of $618,000,
recorded directly to capital in excess of par value in 1996.

         Summarized financial information for Staffing is as follows (dollars in
thousands):

                                                December 31,
                                                    1996
                                                    ----
         Current assets                          $ 43,714
         Noncurrent assets                       $140,514
         Current liabilities                     $ 25,220
         Noncurrent liabilities                  $ 69,340

                                          Year Ended December 31,
                                                   1996
                                                   ----
         Revenue from services                   $300,898
         Operating costs and expenses            $296,908
         Net income (loss)                       $ (1,758)


         Staffing is a provider of staffing  services to  businesses  in various
industries in the Mid-Atlantic,  Southwest, Southeast and Rocky Mountain regions
of the United States.

HealthPlan Services Corporation

         Pursuant to a Stock Purchase  Agreement dated September 2, 1994, by and
among  The Dun &  Bradstreet  Corporation,  its  wholly-owned  subsidiary  Dun &
Bradstreet Plan Services, Inc., Noel, HPS, formerly GMS Acquisition Company, and
certain  other  investors,  HPS  purchased  all  of  the  outstanding  stock  of
HealthPlan  Services,  Inc. for a cash purchase price of $19,000,000,  excluding
$1,309,000 of related  expenses,  and the assumption of designated  liabilities.
Noel and  other  investors  capitalized  HPS with  $20,000,000  and  arranged  a
$20,000,000 line of credit to support working capital requirements.

         The  acquisition  was  accounted  for as a purchase.  The excess of the
allocated  purchase  price  over  the  fair  value  of the net  tangible  assets
acquired,  $30,730,000 was recorded as goodwill and is being amortized over a 25
year period.

         On May 19, 1995, HPS completed an initial public  offering of 4,025,000
newly issued common shares, raising net proceeds of $50,806,000.  Following HPS'
initial  public  offering  and  Noel's  exchange  of its  entire  holding of HPS
preferred stock and accrued  dividends into common equity,  Noel's common equity
ownership  percentage of HPS decreased from  approximately  58% to approximately
42%. The offering was recorded as a subsidiary stock transaction by Noel with an
increase  of  $14,421,000,  net of taxes of  $1,012,000,  recorded  directly  to
capital in excess of par value.  Following Noel's exchange of its holding of HPS
preferred  stock,  Noel's  holding of HPS common  stock  increased  to 5,595,846
shares.

         During 1996, Noel's ownership  percentage of HPS was further diluted to
approximately  37%  when HPS  issued  1,561,067  common  shares  related  to the
acquisition of two new operating units. These and other share



                                      F-13






<PAGE>

<PAGE>



issuances were also recorded as subsidiary  stock  transactions by Noel, with an
increase of $5,792,000, net of taxes of $2,984,000, recorded directly to capital
in excess of par value.

         On February 7, 1997, Noel sold 1,320,000 shares of HPS.  See Note 19.

         Summarized  financial  information  for HPS is as follows  (dollars  in
thousands):

                                             December 31,
                                          1996          1995
                                          ----          ----
         Current assets                 $ 46,495     $ 53,116
         Noncurrent assets              $198,206     $ 59,551
         Current liabilities            $ 73,424     $ 30,103
         Noncurrent liabilities         $ 62,494     $  1,598
                                       
                                        Year Ended December 31,
                                          1996         1995
                                          ----         ----
         Revenue from services          $191,493     $ 98,187
         Operating costs and expenses   $199,314     $ 84,550
         Net income (loss)              $ (6,716)    $  9,535
                                                
     After  performing a review for  impairment of long-lived  assets related to
each of HPS' acquired  businesses  and applying the  principles  of  measurement
contained in FASB 121, HPS recorded a charge against  earnings of $13,700,000 in
the third quarter of 1996,  representing  approximately  7.6% of HPS' pre-charge
goodwill. This charge was attributable to impairment of goodwill recorded on the
acquisitions  made in 1995. Any further  significant  declines in HPS' projected
net cash flows,  with  respect to such  acquisitions,  may result in  additional
write-downs of remaining goodwill.

     Starting in 1994, HPS pursued  contracts with  state-sponsored  health care
purchasing  alliances,  initially  in  Florida,  and in 1995 and 1996,  in North
Carolina,  Kentucky,  and  Washington.  HPS  incurred  substantial  expenses  in
connection  with the  start-up of these  contracts,  and, to date,  the alliance
business has been  unprofitable.  HPS recorded a pre-tax charge related to these
contracts in the amount of  $2,600,000  in the third  quarter of 1996  resulting
from increased  costs and lower than  anticipated  revenues in Florida and North
Carolina.  In Florida,  HPS is  negotiating a new contract which is scheduled to
commence in 1997.

     In the third  quarter  of 1996,  HPS  recorded  a charge of  $1,400,000  to
reflect  the  cost of  exiting  certain  excess  office  space  and  terminating
employees.

     HPS is a leading provider of marketing,  administrative and risk management
services and solutions for benefit  programs.  HPS' clients include managed care
organizations,  insurance  companies,  integrated  health care delivery systems,
self-funded benefit plans, and health care purchasing alliances.

Carlyle Industries, Inc.

     On July 21, 1993, BH Acquisition  Corporation ("BH Acquisition"),  a wholly
owned  subsidiary  of Noel,  concluded  a tender  offer  (the  "Offer")  for the
outstanding  common stock of Carlyle at $30.25 per share in cash.  Following the
Offer, on October 29, 1993, BH Acquisition owned 72.8% of the outstanding shares
and was merged with and into  Carlyle (the  "Merger").  The Offer and the Merger
are referred to together as the "Acquisition".



                                      F-14






<PAGE>

<PAGE>



     The Acquisition was financed by a $41,500,000 equity contribution from Noel
and by borrowings  from a group of banks.  The total  purchase  price  including
banking,  advisory and other fees, and shares  acquired  following the Offer was
approximately $64,500,000.

     The  acquisition  was  accounted  for  as a  purchase.  The  excess  of the
allocated  purchase  price  over  the  fair  value  of the net  tangible  assets
acquired, $40,000,000, was recorded as goodwill and is being amortized over a 30
year period.

     In February  1994,  Noel spun off its entire common equity  interest in the
recapitalized  Carlyle to Noel  stockholders  at a rate of .175434  new  Carlyle
share for every Noel share held. Pursuant to the accounting rules for spin-offs,
no gain was recognized.

     In  December  1994,  Noel  exchanged  $18,813,000  of  preferred  stock and
$3,216,000 of accrued dividends for 30% of Carlyle's  outstanding  common stock.
Noel retained voting control through its remaining  holding of Carlyle preferred
stock.  Because Noel had both a substantial  common  equity  interest and voting
control of Carlyle as of December 31, 1994,  Carlyle was consolidated as of that
date. In 1994,  Noel  recognized a loss of  $3,912,000  on the  preferred  stock
exchange and recorded  preferred  dividend income of $2,217,000 through the date
of the exchange.

     During 1995,  Carlyle's  thread division results were  substantially  below
historical  levels and the levels  expected  when  Carlyle was acquired in 1993.
Based on this performance and projected  future levels of operations,  Carlyle's
management  determined  that  certain  assets  were  impaired  and  recorded  an
impairment charge of $25,000,000. This charge represents a write-off of goodwill
of  $17,400,000,  a charge of  $6,400,000  to adjust the book value of assets to
their  December 1995 fair value and other related  charges of  $1,200,000.  Noel
also  recorded  a charge of  $4,155,000  to write off its  goodwill  related  to
Carlyle's thread division.

     In July 1996,  Carlyle completed the sale of its home furnishing  division.
See Note 4. In December 1996,  Carlyle announced an agreement to sell the assets
of its thread division. See Note 19.

     Carlyle  distributes a line of home sewing and craft products,  principally
buttons.

Curtis Industries, Inc.

     On August 17, 1992, Noel purchased newly-issued equity securities of Curtis
for $15,000,000  for  approximately  65% of Curtis' equity.  The acquisition was
accounted for as a purchase. The excess of the allocated purchase price over the
fair value of the net tangible  assets  acquired,  $17,592,000,  was recorded as
goodwill and is being  amortized  over a 30 year  period.  On November 13, 1995,
Curtis sold its retail division to SDI Operating Partners,  LP, ("SDI") in order
to focus on its automotive and industrial division. See Note 4.

     In May,  1996,  Curtis  acquired  certain  assets of the  Mechanics  Choice
business of Avnet,  Inc. for  approximately  $6,600,000.  Mechanics  choice is a
distributor,  selling  industrial  maintenance  and repair  operations  products
similar  to the  existing  product  line  Curtis  offers.  The  acquisition  was
accounted  for as a purchase  by Curtis.  The excess of the  allocated  purchase
price  over the fair  value of net  tangible  assets  acquired,  $2,900,000  was
recorded as goodwill and is being amortized over a 20 year period.

     Curtis  is  a  national   distributor  of  fasteners,   security  products,
chemicals,  automotive  replacement  parts,  fittings and connectors,  tools and
hardware.



                                      F-15






<PAGE>

<PAGE>



Lincoln Snacks Company

     On August 31, 1992,  Lincoln purchased certain assets of the Lincoln  Snack
Company,  a division of Sandoz Nutrition  Corporation  ("Sandoz").  The purchase
price,  which  was  paid in  cash,  was  $13,000,000,  including  expenses.  The
acquisition  was  accounted  for as a  purchase.  The  excess  of the  allocated
purchase  price  over  the  fair  value  of the net  tangible  assets  acquired,
$3,528,000,  was  recorded as  goodwill  and is being  amortized  over a 30 year
period.

     On January  14,  1994,  Lincoln  completed  an initial  public  offering of
2,472,500  shares of newly  issued  common  stock which  raised  $9,593,000  for
Lincoln, net of expenses. At the time of the offering, Noel converted its entire
holding of shares of Lincoln preferred stock and accrued dividends for 1,728,755
shares of Lincoln common stock.  Noel's interest in Lincoln's  common equity was
approximately  58%  following  the  offering.  The  offering  was  recorded as a
subsidiary  stock  transaction by Noel, with an increase of $2,438,000  recorded
directly to capital in excess of par value.

     Lincoln is one of the leading  manufacturers  and  marketers  in the United
States and Canada of  caramelized  pre-popped  popcorn  with a product line that
includes  Poppycock'r',  Fiddle Faddle'r',  and Screaming Yellow Zonkers'r'.  On
July 17, 1995, an exclusive distribution agreement with the Planters Company, an
operating  unit of Nabisco,  Inc.,  commenced for the sale and  distribution  of
Fiddle Faddle and Screaming Yellow Zonkers in the United States. On February 28,
1997, this agreement was amended, extending the term until December 31, 1997, at
which  time  the  distribution  arrangement  will  terminate.  Also,  under  the
amendment,  Lincoln  will resume  sales and  distribution  of  Screaming  Yellow
Zonkers on May 1, 1997.  Although the amendment and extension contain provisions
designed  to  effect a smooth  transfer  of the  distribution  business  back to
Lincoln, there can be no assurance that this will be the case.

4.   DISCONTINUED OPERATIONS

     The historical  financial statements have been restated to reflect Simmons,
Carlyle's  home  furnishings  division,  Curtis'  retail  division  and  TDX  as
discontinued operations.

     As  a  result  of  Carlyle's   decision  to  divest  its  home  furnishings
operations,  Carlyle recorded an estimated loss on disposal of $18,000,000,  net
of income tax benefit, including $7,599,000 of goodwill write-off, in the fourth
quarter of 1995.  Noel recorded a charge of $1,813,000 to write off its goodwill
related to Carlyle's  home  furnishings  division.  These  charges,  the related
minority  interest  benefit of  $8,584,000  and  Carlyle's  best estimate of the
amounts  to be  realized  on the  sale of its  home  furnishings  division  were
included in discontinued operations in the 1995 statement of operations. On July
31, 1996,  Carlyle completed the sale of the division.  Proceeds received on the
sale,  adjusted  for  closing  costs and  changes in the net asset  value of the
division  subsequent to the contract date totaling $8,200,000 were used to repay
outstanding  bank  indebtedness.   This  division  had  sales  of  approximately
$19,200,000  and  $30,084,000  for the period  ended July 31,  1996 and the year
ended December 31, 1995, respectively.

     On December 19, 1995,  S.O.C.  Corporation,  a  wholly-owned  subsidiary of
Blount Inc.,  completed a $10.40 per share cash tender offer for the outstanding
shares of common  stock of  Simmons.  Pursuant  to the tender  offer,  Noel sold
1,666,163  shares for  $17,328,000.  Simmons had revenue of $40,857,000  through
December 19, 1995,  and revenue of  $51,977,000  for the year ended December 31,
1994. Simmons imports, distributes and markets optical products for the sporting
goods  industry  in  the  United  States  and  Canada,   including  riflescopes,
binoculars and telescopes.



                                      F-16






<PAGE>

<PAGE>



     On November 13, 1995, Curtis sold its retail division to SDI for $7,200,000
and no gain or loss was realized on this sale. Retail sales for the period ended
November 13, 1995,  were  $13,937,000,  and were  $19,412,000 for the year ended
December 31, 1994.

     In December 1995,  Noel's Board of Directors  authorized the sale of Noel's
holding of TDX  common  stock.  TDX had  revenue  of  approximately  $5,110,000,
$6,700,000 and $3,143,000  during 1996, 1995 and 1994,  respectively,  and had a
net loss of approximately  $501,000 during 1996. Noel expects to sell TDX during
1997.

     The remaining net  liabilities  of Carlyle's home  furnishings  division at
December 31, 1996, of $3,597,000 and the liabilities of this division net of the
expected sales  proceeds at December 31, 1995, of $793,000 have been  segregated
in the  consolidated  balance sheets.  The net assets of TDX in 1996 of $268,000
and TDX and Curtis' retail  division  totaling  $779,000 in 1995 are included in
other assets at December 31, 1996 and 1995.

     The components of loss from discontinued operations are as follows (dollars
in thousands):

<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                                      ------------------------
                                                1996             1995               1994
                                                ----             ----               ----
<S>                                            <C>                <C>              <C>     
Income (Loss) from operations:
     Simmons                                   $     -            $  832           $  4,935
     Carlyle                                         -                46                  -
     Curtis                                          -            (1,489)            (1,095)
     TDX                                             -              (306)            (3,882)
                                             ---------         ---------           -------- 
                                                     -              (917)               (42)
     Less:   Income tax provision                    -              (393)            (1,657)
                                             ---------         ---------           -------- 
                                              $      -          $ (1,310)         $  (1,699)
                                             =========         =========           ======== 



Income (Loss) on disposal:
     Simmons                                   $     -         $   7,026        $         -
     Carlyle                                       709           (14,819)                 -
     TDX                                            -               (379)            (5,915)
                                             ---------         ---------           -------- 
                                                   709            (8,172)            (5,915)
     Add:  Income tax (provision)
         benefit                                  (261)            2,938                  -
                                             ---------         ---------           -------- 
                                             $     448         $  (5,234)          $ (5,915)
                                             =========         =========           ======== 
</TABLE>


     The 1994 loss on disposal  relates to TDX's 1994 decision to dispose of two
of its subsidiaries.  In September 1994,  substantially all of the operations of
TDX's subsidiary Safe Way Disposal Systems, Inc. ("Safe Way"), a



                                      F-17






<PAGE>

<PAGE>



regional  medical waste  disposal  company,  were sold to a third party.  Noel's
portion of the estimated  losses of Safe Way was  $2,230,000.  The operations of
another TDX  subsidiary,  Transactional  Media,  Inc.  ("TMI"),  an  infomercial
company,   were  also   discontinued   during  1994.  In  connection  with  this
discontinuance,  Noel  recorded a charge of  $3,685,000  to adjust the  carrying
value of its investment to estimated realizable value.

5.   OTHER INVESTMENTS

     Other  investments at December 31, 1995,  were primarily  Noel's holding of
Staffing as described in Note 3.

6.   PROPERTY, PLANT AND EQUIPMENT

     Property,  plant  and  equipment  consists  of the  following  (dollars  in
thousands):

                                                       December 31,
                                               --------------------------
                                                   1996            1995
                                                   ----            ----
      Land                                     $     2,157     $    3,536
      Buildings and leasehold improvements          20,330         20,015
      Machinery and equipment                       27,816         27,469
      Furniture and fixtures                           170            446
                                               -----------     ----------
                                                    50,473         51,466
      Less:  Accumulated depreciation              (12,802)       (10,903)
                                               -----------     ----------
                                               $    37,671     $   40,563
                                               ===========     ==========



                                      F-18






<PAGE>

<PAGE>




7.   LONG-TERM DEBT

     Long-term debt consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                                      December 31,
                                                             ----------------------------
                                                                 1996              1995
                                                             -----------       ----------
<S>                                                          <C>               <C>       
Carlyle senior bank facilities                               $    36,929       $   46,100
Carlyle Connecticut Development Authority note payable,
    5%, due 1999                                                      65               87
Curtis note payable on equipment purchase, 9 1/2%, due 1997           71             -
Curtis revolving line of credit, LIBOR plus 3% or prime
    plus 1%, due 1999                                              7,898            3,602
Curtis senior secured subordinated notes, 12%, due 1999           12,000           12,000
Curtis subordinated debentures, 13 1/8%, due 2002                  9,189            9,189
Curtis Delaware Industrial Revenue Bond, variable rate,
    due 2003                                                        -               1,000
Curtis note payable on leasehold improvement, 10% due 2006           491             -
Lincoln term loan,  prime plus 1 3/4% or
    a Eurodollar rate plus 3 1/4%, due 1997                          450            1,509
Capital lease obligations                                            276            2,968
                                                             -----------       ----------
                                                                  67,369           76,455
Less:
Current portion                                                   (4,719)          (5,233)
Unamortized discount                                              (1,667)          (2,025)
                                                             -----------       ----------
                                                             $    60,983       $   69,197
                                                             ===========       ==========
</TABLE>

     On December 30,  1996,  Carlyle  entered into a new credit  facility in the
aggregate  amount  of  $42,000,000,  consisting  of two term  loans  aggregating
$22,000,000 and a $20,000,000  revolving  credit  facility.  The term loans bear
interest,  at  Carlyle's  option,  at prime  plus 1.5% or LIBOR plus 3.5% on the
first  $14,000,000  borrowed  ("Term Loan A") and prime plus 1.75% or LIBOR plus
3.75% on the remaining  $8,000,000 in borrowings  ("Term Loan B"). The revolving
loan bears  interest,  at  Carlyle's  option,  at prime plus 1.25% or LIBOR plus
3.25%.

     Loans  outstanding  as of  December  31,  1996,  under  Term  Loan B  total
$8,000,000 and are repayable in consecutive quarterly installments of $1,000,000
each  beginning  March  31,  1997.  Loans  outstanding  under  Term Loan A total
$14,000,000  and  are  repayable  in  consecutive   quarterly   installments  of
$1,000,000  beginning  March 31, 1999 through  December 31, 2000 and consecutive
quarterly  installments  of  $1,500,000  from December 31, 2001, to December 30,
2001.

     The senior bank facilities are secured by a first priority lien or security
interest in substantially all the assets of Carlyle.  The senior bank facilities
contain  representations  and  warranties,   covenants  and  events  of  default
customary for credit facilities of this nature. Such customary covenants include
restrictions on the ability to borrow more debt,  acquire other  companies,  pay
dividends,  and the use of  proceeds  from  the  sale of  assets.  Carlyle  must
maintain certain current asset and debt to equity ratios.  In addition,  Carlyle
must meet certain coverage tests related to interest and cash flow. The Loan and
Security  Agreement also provides that it shall be an event of default if, prior
to December 31, 1997, Noel ceases to control at least 35% of the voting stock of
Carlyle as a result of Noel's "private sale" (as defined) of shares of preferred
stock of Carlyle without the



                                      F-19






<PAGE>

<PAGE>



consent of the  lenders  (which  consent  may be  withheld  only  under  certain
circumstances).  The term "private  sale" does not include any  distribution  by
Noel of preferred stock or common stock of Carlyle to Noel's stockholders or the
redemption by Carlyle of such shares pursuant to the terms of Carlyle's Restated
Certificate of Incorporation.

     In 1996,  Curtis  entered into a new credit  facility  which provides for a
revolving line of credit which  aggregates up to a maximum  principal  amount of
$15,000,000. At December 31, 1996, based on available collateral, $7,102,000 was
available  under the line of credit.  A fee of 3/8% per annum is required on the
unused  portion of the  revolving  credit  commitment.  The credit  agreement is
secured by substantially all of the assets of Curtis and contains  financial and
other covenants and ratios.  At December 28, 1996,  Curtis was in violation of a
covenant limiting capital  expenditures,  for which it received a waiver. Curtis
was in compliance with all other loan covenants.  Included in the agreement is a
provision  for the issuance of letters of credit up to a maximum of  $2,000,000.
There  were no letters of credit  outstanding  at  December  31,  1996.  Curtis'
subordinated debentures are redeemable at the option of Curtis.

     The Lincoln term loan bears  interest at a variable rate which was 8.65% at
December 31, 1996, and is expected to be repaid in 1997.

     The carrying  amount of long-term  debt,  for which it was  practicable  to
determine fair value,  approximates fair value at December 31, 1996. At December
31, 1996, long-term debt, including capital leases,  matures as follows (dollars
in thousands):

           1997                             $ 4,719
           1998                               4,106
           1999                              24,014
           2000                               4,067
           2001                              20,974
           Thereafter                         9,489
                                            -------
                                            $67,369
                                            =======


8.   LEASES

     At December 31, 1996, the Company's  minimum  future rental  payments under
noncancelable operating leases are as follows (dollars in thousands):

           1997                             $ 2,178
           1998                               1,899
           1999                               1,130
           2000                               1,023
           2001                                 953
           Thereafter                         5,094
                                            -------
                                            $12,277
                                            =======
                             
     The Company's rent expense for the years ended December 31, 1996,  1995 and
1994  was  $2,438,000,  $2,789,000,  and  $2,468,000,  respectively.  Noel has a
sublease with a company with certain  executive  officers who are also executive
officers of Noel for certain office space currently used by Noel.



                                      F-20






<PAGE>

<PAGE>




9.   STOCKHOLDERS' EQUITY

Preferred Stock:

     Noel is authorized to issue  2,000,000  shares of Preferred  Stock.  Noel's
Certificate  of  Incorporation  provides  that the Board of  Directors  of Noel,
without  stockholder  approval,  has the authority to issue Preferred Stock from
time to time in series  and to fix the  designation,  powers  (including  voting
powers, if any), preferences and relative, participating,  conversion, optional,
and other special rights, and the qualifications,  limitations, and restrictions
of each series.

Distributions:

     In 1994,  1993 and 1992, Noel made  distributions  of certain common equity
holdings to its stockholders (the  "Distributions").  On February 28, 1994, Noel
distributed to Noel stockholders substantially all of Noel's holdings in Carlyle
common  stock.  On  December  6, 1993,  Noel  distributed  to Noel  stockholders
substantially all of Noel's holdings in Sylvan Inc. ("Sylvan"). On September 21,
1992, Noel distributed to Noel stockholders substantially all of Noel's holdings
in Global  Natural  Resources  Inc.  ("Global"),  Garnet  Resources  Corporation
("Garnet") and VISX, Incorporated ("VISX").

     For financial accounting  purposes,  the Distributions have been treated as
common stock  dividends  recorded at the book values of the shares  distributed,
which  were  $708,000,  $9,124,000  and  $22,329,000  in 1994,  1993  and  1992,
respectively,  and deducted from capital in excess of par value. The excesses of
the fair values of the shares  distributed over their book values on the date of
distribution,  $2,620,000 and $30,760,000, in 1993 and 1992, respectively,  were
not reflected as income in the Company's financial statements in accordance with
the  financial  accounting   requirements  for  the  spin-off  of  equity  basis
affiliates.  The fair value of the Carlyle shares distributed approximated their
book value on the date of their distribution in 1994.

     The fair market  value on the date of  distribution  of one share of common
stock of Carlyle, Sylvan, Global, Garnet and VISX was $.20, $8.375, $6.56, $4.92
and  $9.57,  respectively.  The value of the  Distributions  per Noel  share was
$.035, $.58 and $2.63, in 1994, 1993 and 1992,  respectively.  The Distributions
were classified for tax purposes as a dividend in 1994 and as returns of capital
to Noel stockholders in 1993 and 1992.

10.  STOCK BASED COMPENSATION

     In the first quarter of 1995, Noel issued a total of 1,120,000  warrants to
certain Noel officers.  Each warrant  represents the right to purchase one share
of Noel Common  Stock.  Warrants  were  issued to  purchase  800,000 and 320,000
shares at $5.00 and $5.625 per share,  respectively,  the trading  price of Noel
Common Stock on the date that the warrants  were granted.  The weighted  average
grant-date fair value of these warrants was $2.01 and $2.22, respectively, using
the Black-Scholes option-pricing model with risk-free interest rates of 7.8% and
7.04%, respectively,  expected lives of 3 years, expected volatility of 48%, and
no expected dividends. The warrants vest 50% at issuance, 75% after one year and
100% after two years and expire ten years after the date of grant.  The warrants
are 75% vested and have not been exercised as of December 31, 1996.

     Noel adopted a stock option plan in 1988 (as amended,  the "1988 Plan") and
in 1995 (the "1995 Plan"; and together with the 1988 Plan, the "Employee Plans",
each being an Employee Plan),  providing for the grant of options to purchase up
to an aggregate of  2,000,000  shares and  1,000,000  shares,  respectively,  of
Noel's  Common  Stock.  Options  under  the  Employee  Plans may be  granted  to
employees of Noel and its  subsidiaries,  including  officers who are directors,
and any other persons who perform substantial services for or on behalf of Noel,
or any of its  subsidiaries,  affiliates  or any  entity  in  which  Noel has an
interest.  Each option  granted under either  Employee Plan  terminates no later
than ten years from the date of grant. Options issued under either Employee Plan
may be either incentive options or non-incentive options.



                                      F-21






<PAGE>

<PAGE>




     To date, non-incentive options have been granted under the 1988 Plan at the
fair market value on the date of grant.  No options have been granted  under the
1995 Plan.  Non-incentive options previously granted to employees under the 1988
Plan  generally  vest  over a  four-year  period,  so that 20% of the  option is
exercisable  immediately and an additional 20% of the option becomes exercisable
on each of the first  four  anniversaries  of the date of  grant.  Non-incentive
options previously  granted to non-employees  under the 1988 Plan generally vest
immediately.  Non-incentive  options  previously  granted  under  the 1988  Plan
generally  terminate  ten  years  after  the  date of grant  or,  in the case of
employees,  one year  after  the  termination  of the  status  with  Noel  which
qualified the option holder to receive such option, if earlier.

     Incentive  options granted under either Employee Plan may only be exercised
while an option holder is employed by Noel or one of its  subsidiaries or within
three months after the  termination of employment,  to the extent that the right
to exercise such incentive  option had accrued at the time of  termination.  The
terms of incentive options, none of which has been granted under either Employee
Plan, are subject to additional restrictions.

     In 1995,  Noel  adopted a  non-employee  directors'  stock option plan (the
"Directors' Plan"), providing for the grant of non-incentive options to purchase
an  aggregate of 50,000  shares of Noel Common  Stock to  directors  who are not
employees of Noel. Under the Directors' Plan each non-employee  director serving
as a director immediately following the 1995 Annual Meeting of Shareholders, who
had not  previously  been granted an option to purchase  Noel Common Stock under
any of Noel's stock option plans,  was granted a fully vested option to purchase
8,334  shares of Common  Stock at an exercise  price per share equal to the fair
market value on the date of shareholder approval of the plan (the "Plan Approval
Date").  Every  individual  who becomes a director after the Plan Approval Date,
who has not previously  been granted  options to purchase shares of Common Stock
under any of Noel's stock option plans and who is not an employee of Noel, shall
be granted a vested  option to purchase  8,334 shares of Noel Common  Stock,  to
have an exercise price equal to the fair market value on the date of grant. Each
option granted under the Directors'  Plan terminates no later than 10 years from
the date of grant.

     The outstanding  options expire in 1999-2005.  Share and price  information
for the 1988 Plan, the 1995 Plan and the Directors' Plan is as follows:



<TABLE>
<CAPTION>
                                                     Number of       Option Price    Weighted Average
                                                       Shares          per Share      Exercise Price
                                                       ------          ---------      --------------
<S>                                                  <C>            <C>                   <C>
     Outstanding, January 1, 1994                     1,869,459     $5.50 - $45.00        $8.494

        Redeemed                                          8,334              8.355         8.355

     Outstanding, December 31, 1994                   1,861,125       5.50 - 45.00         8.470

        Granted                                         116,668       5.25 - 6.875         5.366

     Outstanding, December 31, 1995                   1,977,793       5.25 - 45.00         8.289

        Exercised                                       (24,352)             8.355         8.355

     Outstanding, December 31, 1996                   1,953,441       5.25 - 45.00         8.289

     Available for grant, December 31, 1996           1,072,207
</TABLE>




                                      F-22






<PAGE>

<PAGE>



      The following table summarizes information about fixed-price stock options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>
                                                     Weighted
                               Number                 Average          Weighted            Number            Weighted
      Range of             Outstanding at            Remaining         Average         Exercisable at        Average
   Exercise Prices            12/31/96           Contractual Life   Exercise Price        12/31/96        Exercise Price
   ---------------         --------------        ----------------   --------------     --------------     --------------
<S>            <C>             <C>                   <C>               <C>                 <C>              <C>   
               $45.00          5,556                 3 years           $45.00              5,556            $45.00

        5.25 to 7.125        133,336                 8 years            5.531             73,336             5.761

                8.355      1,797,881                 5 years            8.355          1,797,881             8.355

                11.00         16,668                 6 years            11.00             16,668             11.00
                         -----------                                                 -----------
                           1,953,441                                                   1,893,441

</TABLE>

     In connection with the 1993 and 1992 Distributions, Noel retained shares of
the  distributees  to give to the 1988 Plan option  holders upon the exercise of
options  granted prior to the  Distributions.  Accordingly,  the option exercise
prices were not adjusted for the  Distributions.  In February 1994, the retained
shares of common stock were unstapled  from the options and sold,  recognizing a
$8,476,000 capital gain. Upon exercise,  Option holders with options outstanding
at the time of the Distributions  will therefore receive cash,  representing the
value of the distributed shares sold, along with Noel shares. Noel recorded both
a long-term  liability and an expense in the amount of  $4,853,000  representing
the value of the outstanding options on the new measurement date. This liability
is valued at $4,784,000 at December 31, 1996.



                                      F-23






<PAGE>

<PAGE>



     Noel applies APB Opinion No. 25 and related  Interpretations  in accounting
for its plans.  Had  compensation  expense  for 1996 and 1995 option and warrant
grants of Noel have been  determined  consistent  with FASB  Statement  No.  123
"Accounting for Stock Based Compensation"("SFAS 123"), net loss and net loss per
common share for 1996 and 1995 would  approximate  the pro forma  amounts  below
(dollars in thousands, except per share amounts):
  
<TABLE>
<CAPTION>
                                             1996                          1995
                                 As Reported      Pro Forma       As Reported     Pro Forma
<S>                                <C>             <C>             <C>             <C>      
Net loss                           $(2,657)        $(3,040)        $(22,125)       $(22,891)
                                   =======         =======         ========        ========
Net loss per common
  and common equivalent
  share                             $(0.13)         $(0.15)          $(1.10)         $(1.13)
                                   =======         =======         ========        ========
</TABLE>


     The  effects  of  applying  SFAS 123 in this pro forma  disclosure  are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995.

11.  OTHER INCOME (EXPENSE)

     Other income consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                                                      -----------------------------------------
                                                          1996             1995           1994
                                                          ----             ----           ----
<S>                                                   <C>              <C>           <C>       
  Interest income                                     $       856      $    1,148    $    1,621
  Gain (Loss) on sale of marketable securities                -            (1,052)        9,017
  Gain (Loss) on sale of non-marketable securities            (85)          6,657        (3,813)
  Dividend income                                             -                10         2,217
  Other                                                      (172)            (60)         (714)
                                                      -----------      ----------        ------
                                                      $       599      $    6,703        $8,328
                                                      ===========      ==========        ======
</TABLE>

     Income (Loss) from equity  investments  includes a loss of $500,000 in 1996
and income of $3,371,000 in 1995 related to Noel's investment in HPS, and losses
of $1,174,000 and  $3,066,000 in 1996 related to Noel's  investments in Staffing
and Novoeste, respectively.



                                      F-24






<PAGE>

<PAGE>



12.  INCOME TAXES

     The components of the benefit  (provision)  for income taxes are as follows
(dollars in thousands):

                                              Years Ended December 31,
                                         ---------------------------------
                                            1996      1995        1994
  Current tax benefit (expense):

         Federal                          $ 4,063      $  -      $(1,105)
         State                               (195)      (375)       (223)
         Foreign                              (63)       (15)       (123)
                                          -------      -----     ------- 
                                          $ 3,805      $(390)    $(1,451)
                                          =======      =====     ======= 

  Deferred tax benefit (expense):

         Federal                          $(2,484)     $ 681     $  (216)
         State                               (179)        (7)        (28)
                                          -------      -----     ------- 
                                          $(2,663)     $ 674     $  (244)
                                          =======      =====     ======= 

  A  reconciliation  of the  Company's  income tax benefit  (provision)  and the
amount  computed by applying the statutory tax rate of 34% to loss before income
taxes is as follows (dollars in thousands):

                                                   Years  Ended December 31,
                                                 ----------------------------
                                                  1996        1995      1994
                                                  ----        ----      ----
  Tax benefit (provision) at statutory rates     $1,444    $ 5,394    $ 2,638
  State and local, net of Federal benefit          (231)      (257)      (245)
  Minority interest                                (463)     3,714        195
  Reversal of prior valuation allowances              -        904          -
  Losses generating no current benefit                -       (820)    (3,806)
  Amortization and write-off of excess
     purchase costs                                (485)    (8,703)      (237)
  Benefit from book loss carryforward               879          -          -
  Other                                              (2)        52       (240)
                                                 ------    -------    ------- 
  Benefit (Provision) for income taxes           $1,142    $   284    $(1,695)
                                                 ======    =======    ======= 




                                      F-25






<PAGE>

<PAGE>



Significant  components  of the  Company's  net  deferred  income tax assets and
liabilities are as follows (dollars in thousands):

                                                December 31,
                                         -----------------------
                                            1996         1995
                                            ----         ----
Accounts receivable allowances           $  1,201      $    959
Inventories valuation differences             (63)          420
Accruals                                    2,799         3,788
Depreciation and amortization              (6,272)       (6,068)
Investments                                (3,325)       (1,201)
Deferred compensation and benefits          6,104         7,428
Loss on discontinued operations               264         6,658
Tax net operating loss carryforwards       20,148        17,320
Other                                       2,337         1,931
                                         --------      --------
Subtotal                                   23,193        31,235
Valuation allowance                       (20,813)      (22,419)
                                         --------      --------
                                         $  2,380      $  8,816
                                         ========      ========

The  deferred  tax assets and  liabilities  include  the  following  (dollars in
thousands):

                                          December 31,
                                     -----------------------
                                       1996          1995
                                       ----          ----
Current deferred tax asset           $  4,153      $  2,906
Valuation allowance                    (2,180)       (2,593)
                                                   --------
Net current deferred tax asset       $  1,973      $    313
                                     ========      ========
Long-term deferred tax asset         $ 19,755      $ 29,341
Valuation allowance                   (19,030)      (19,826)
                                     --------      --------
Net long-term deferred tax asset     $    725      $  9,515
                                     ========      ========
Long-term deferred tax liability     $ (1,860)     $ (1,012)
Valuation allowance                      --            --
                                     --------      --------
                                     $ (1,860)     $ (1,012)
                                     ========      ========


      Lincoln and Curtis  recorded a valuation  allowance equal to 100% of their
net deferred tax assets based upon their  historical  losses and significant net
operating loss carryforwards.  Noel recorded a valuation allowance on certain of
its deferred tax assets  because they are not  projected to be realized  through
future taxable income.  The valuation  allowance at December 31, 1996,  includes
$10,365,000  related  to  temporary  differences  which  existed on the dates of
acquisitions of certain of Noel's  subsidiaries.  Any future  recognition of the
tax  benefits  related  to this  portion  of the  valuation  allowance  would be
recorded as a reduction to the goodwill associated with the acquisitions.

     Noel had net operating loss  carryforwards of approximately  $17,059,000 at
December 31,  1996,  which expire from 2003  through  2011.  Noel has  undergone
"ownership changes" within the meaning of Section 382 of the



                                      F-26






<PAGE>

<PAGE>



Internal Revenue Code of 1986, as amended.  Consequently,  future utilization of
Noel's Federal tax loss carryforwards is limited.

13.  RETIREMENT PLANS

     The Company  sponsors a number of defined  contribution  retirement  plans.
Participation  in these plans is available to substantially  all employees.  The
Company's  contributions  to these plans are based on a  percentage  of employee
contributions. The expense of these plans for the years ended December 31, 1996,
1995, and 1994 totaled $763,000, $898,000 and $516,000, respectively.

     Carlyle and Curtis sponsor defined  benefit  pension plans.  Carlyle's plan
covers  substantially  all of its employees and requires no  contributions  from
employees. Benefits are based on years of service and compensation levels within
these years.  Carlyle's plan was frozen as of December 31, 1994,  after which no
new employees were eligible to join the plan.  Additionally,  employees  covered
under  Carlyle's  plan will not  receive  any  additional  accruals  for service
rendered  after  December 31, 1994.  Curtis'  plan covers  former  manufacturing
employees who were members of UAW Local 70, based on years of service.  In 1995,
Curtis  recorded a $480,000  curtailment  loss as a result of shutting  down its
manufacturing  operations.  Both plans fund pension  costs as required by ERISA.
The  projected  unit cost method is used to  determine  both  pension  costs and
funding  requirements  for the plans. The net periodic pension costs included in
the statement of operations  for the years ended December 31, 1996 and 1995 were
a benefit of $109,000 and an expense of $634,000, respectively. The 1994 amounts
are not material.

     As of December 31, 1994, as required by the purchase  method of accounting,
a liability was recorded by Carlyle reflecting the excess of Carlyle's projected
benefit obligation measured at an 8.5% discount rate over the fair value of plan
assets.

     The actuarial present value of accumulated  benefit  obligations ("ABO") is
as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                    -------------------------------------------------------------------------------
                                                    1996                  1996                 1995                  1995
                                                    Pension ABO           Pension Assets       Pension ABO           Pension Assets
                                                    Exceeds Assets        Exceed ABO           Exceeds Assets        Exceed ABO
                                                    --------------        ----------           --------------        ----------
<S>                                                 <C>                   <C>                  <C>                   <C>       
Vested benefit obligation                           $  19,488             $    1,860           $   19,352            $    1,877
                                                    ---------             ----------           ----------            ----------
Accumulated benefit obligation                      $  19,525             $    1,860           $   19,407            $    1,905
                                                    =========             ==========           ==========            ==========
Projected benefit obligation                        $  19,525             $    1,860           $   19,407            $    1,905
Plan assets at fair value                              19,877                  2,188               17,202                 2,284
                                                    ---------             ----------           ----------            ----------
Plan assets less projected benefit obligation             352                    328               (2,205)                  379
Unrecognized net gain                                  (1,854)                     -                 (583)                    -
                                                    ----------            ----------           -----------           ----------
Net pension asset (liability)                       $  (1,502)            $      328           $   (2,788)           $      379
                                                    ==========            ==========           ===========           ==========
</TABLE>


Major assumptions at year end:

<TABLE>
<CAPTION>
                                                                                          1996              1995
                                                                                        ---------         --------
<S>                                                                                       <C>               <C> 
         Discount rate                                                                    7.7%              7.5%
         Rate of increase of compensation levels                                          n/a               n/a
         Expected long-term rate of return on assets                                      9.4%              9.4%
</TABLE>



                                      F-27






<PAGE>

<PAGE>




     At December  31, 1996,  Curtis'  plan assets were  invested in a bank fixed
income fund,  and Carlyle's plan assets  consisted  principally of common stock,
United States government and corporate obligations.

14.       POSTRETIREMENT BENEFITS

     Carlyle  provides  certain health and life insurance  benefits for eligible
retirees and their dependents.  Curtis provides health care benefits for retired
members of UAW Local 70. Both plans are not funded and pay the costs of benefits
as  incurred.  The net periodic  postretirement  benefit  costs  included in the
statements of operations  for the years ended  December 31, 1996,  1995 and 1994
are not material.

     Carlyle's  predecessor  adopted,  effective  January 1, 1993,  Statement of
Financial  Accounting  Standards No. 106 and elected to amortize the accrual for
postretirement  benefits  over a 20 year  period.  As required  by the  purchase
method of accounting,  a similar  accrual was recorded when Carlyle was acquired
by Noel.

     The estimated accumulated postretirement benefit obligation at December 31,
1996  and  1995,  at  weighted   average   discount  rates  of  7.7%  and  7.5%,
respectively, is estimated as follows (dollars in thousands):

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

     Retirees                                    $ 5,861      $ 5,722
     Fully eligible active plan participants         299          647
     Other active participants                       371          769
                                                 -------      -------
                                                   6,531        7,138
     Unrecognized net loss                          (133)        (555)
                                                 -------      -------
                                                 $ 6,398      $ 6,583
                                                 =======      =======


     The assumed  health care cost trend rate used by Carlyle in  measuring  the
accumulated  postretirement  benefit  obligation at December 31, 1996, was 10.0%
for 1996, gradually declining to 5.5% in 2005. For Curtis' measurement purposes,
a 7.5% annual  rate of  increase  in the per capita cost of covered  health care
claims was assumed for 1997 and the rate was  assumed to decrease  gradually  to
5.5% by the year 2000 and  remain at that  level  thereafter.  A one  percentage
point  increase in the assumed  health care cost trend rate would  increase  the
accumulated  postretirement  benefit  obligation  as of December  31,  1996,  by
$190,000 and the sum of service  costs and interest  costs on an annual basis by
$14,000.

15.       COMMITMENTS AND CONTINGENCIES

     The Company is involved in various legal proceedings  generally  incidental
to its  businesses.  While the result of any  litigation  contains an element of
uncertainty,  management  believes  that the  outcome of any  known,  pending or
threatened legal  proceeding or claim, or all of them combined,  will not have a
material adverse effect on the Company's consolidated financial position.

     Lincoln has outstanding purchase order commitments as of December 31, 1996,
of $413,000.

     Following a field examination in 1995, the Internal Revenue Service ("IRS")
alleged  that as a result of certain tax law  changes  enacted in 1989 and 1991,
Curtis' expense reimbursement policy for its field sales force



                                      F-28






<PAGE>

<PAGE>



does not meet the  definition of an  accountable  plan,  and contended  that all
reimbursed  expenses  for 1994 and 1993  should be  treated  as  taxable  wages.
Consequently in January 1996, Curtis received a proposed assessment from the IRS
for  unpaid  federal  withholding,  FICA and FUTA taxes  totaling  approximately
$2,000,000.  Curtis  believes  it has  meritorious  legal  defenses  to the  IRS
position,  and since the ultimate  liability of Curtis, if any, arising from the
forgoing will not have a material  adverse impact on the financial  condition or
results of operations of Curtis,  no provision has been recorded related to this
claim.

16.  SUPPLEMENTAL CASH FLOWS INFORMATION

     Non-cash  investing and  financing  activities  are as follows  (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                            -------------------------------------------
                                                              1996              1995               1994
                                                              ----              ----               ----
<S>                                                          <C>               <C>                <C> 
Increase in investment in HPS related
  to share issuances                                         $8,776            $  -               $  -
                                                             ======            =======            ====
Increase in investment in Staffing related
  to share issuances                                         $1,817            $  -               $  -
                                                             ======            =======            ====
Gain on payment of Brae Note with
  Staffing common stock                                      $  -              $ 6,598            $  -
                                                             ======            =======            ====
Increase in investment in HPS related
  to HPS' initial public offering                            $  -              $15,433            $  -
                                                             ======            =======            ====
Conversion of TDX debt into TDX equity                       $  -              $  -               $ 8,780
                                                             ======            =======            =======
Loss on exchange of Carlyle preferred stock
  for Carlyle common stock                                   $  -              $  -               $(3,912)
                                                             ======            =======           ========
Acquisitions:
  Fair value of assets acquired                              $  -              $  -               $50,982
  Less:  Cash paid                                              -                 -                18,406
                                                             ------              -----            -------
Liabilities assumed                                          $  -              $  -               $32,576
                                                             ======            =======            =======
Distributions to stockholders                                $  -              $  -               $   708
                                                             ======            =======            =======
Interest paid                                                $7,883            $ 8,184            $ 4,433
                                                             ======            =======            =======
Income taxes paid                                            $  784            $ 1,473            $   813
                                                             ======            =======            =======
</TABLE>




                                      F-29






<PAGE>

<PAGE>





17.  INDUSTRY SEGMENT INFORMATION

     The  Company  is  classified  into  three  business  segments.   Summarized
financial information by business segment for the periods of Noel's consolidated
control is as follows (dollars in thousands):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                        Operating           Identifiable           Depreciation and       Capital
1996                                Sales              income (loss)           assets                amortization      expenditures
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                     <C>               <C>                        <C>               <C>   
Fasteners & Security                 $  77,072              $4,331            $  49,806                  $2,537            $3,120
Products Distribution

Snack Foods                             23,648               1,471               13,158                     796               164

Industrial Threads  &
Buttons                                 88,605              11,131               85,160                   3,462             1,003

Noel - Investments                        -                   -                  68,026                    -
                                                                                                                             -

Noel - Corporate                          -                 (7,739)              14,371                      78                26
                                      --------           ---------             --------                --------            ------
                                      $189,325              $9,194             $230,521                  $6,873(1)         $4,313
                                      ========           =========             ========                 =======            ======
</TABLE>



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                         Operating          Identifiable          Depreciation and       Capital
1995                                Sales              income (loss)           assets               amortization       expenditures
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                <C>                   <C>                    <C>              <C>        
Fasteners & Security                 $  68,842          $    2,067            $  43,680              $ 3,046               $  743
Products Distribution


Snack Foods                             24,213              (1,118)              14,335                  944                  214

Industrial Threads  &
Buttons                                 88,654             (22,715)              98,066                3,646                3,820

Noel -
 Investments                             -                   -                   34,520                   -                 -

Noel - Corporate                         -                  (7,685)              49,156                   81                   80
                                      --------            --------             --------             --------               ------
                                      $181,709            $(29,451)            $239,757             $  7,717(1)            $4,857
                                      ========            ========             ========             ========               ======
</TABLE>



                                      F-30






<PAGE>

<PAGE>




<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                   Sales and
                                  revenue from          Operating          Identifiable        Depreciation and          Capital
1994                                services          income (loss)           assets             amortization         expenditures
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                <C>                  <C>                     <C>                <C>   
Fasteners & Security
Products Distribution                $  66,614          $      858           $   49,244              $3,115             $  698
Snack Foods                             27,274              (4,477)              18,049               1,069                870
Health Care
Administration                          25,233               3,934               57,135                 948                182
Industrial Threads  &
Buttons                                    n/a                 n/a              107,939                 n/a                n/a
Noel - Investments                        -                   -                   3,041                 -                  -
Noel - Corporate                          -                (13,046)              78,572                  64                 54
                                      --------            --------            ---------            ----------           ------
                                      $119,121            $(12,731)           $ 313,980            $  5,196(1)          $1,804
                                      ========            ========            =========            ==========           ======
</TABLE>




(1)  Amounts include $2,414,000,  $2,829,000, and $1,449,000 which were included
     in cost of sales for the years  ended  December  31,  1996,  1995 and 1994,
     respectively and $948,000 included in HealthPlan  Services costs of revenue
     for the year ended December 31, 1994.

The snack foods segment had one customer that accounted for approximately 49% of
sales in 1996.

The  Company's  revenue and assets  attributable  to  operations  outside of the
United States are not significant.



                                      F-31






<PAGE>

<PAGE>




18.  QUARTERLY FINANCIAL DATA (unaudited)
       (Dollars in thousand, except per share amounts)

<TABLE>
<CAPTION>
Quarters Ended                                       March 31,            June 30,        September 30,           December 31,
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                  <C>                <C>                     <C>      
1996

Revenue                                            $  43,119            $  47,139          $  50,266               $  48,801

Operating Income                                         824                1,862              3,372                   3,136

Income (Loss) from continuing operations                (297)                 717             (3,016)                   (509)

Income from discontinued operations                       42                  -                  290                     116

Net income (loss)                                       (255)                 717             (2,726)                   (393)

Income (Loss) per common and common
 equivalent share from:
                                                       (0.01)                0.03              (0.15)                  (0.02)
  Continuing operations

  Discontinued operations                                -                    -                 0.02                      --

  Net income (loss)                                    (0.01)                0.03              (0.13)                  (0.02)

------------------------------------------------------------------------------------------------------------------------------------
1995

Revenue                                            $  45,079            $  44,286          $  44,694               $  47,650

Operating income (loss)                                 (278)                (481)             1,377                 (30,069)(1)

Income (Loss) from continuing operations              (2,137)              (2,557)             6,926                 (17,813)(1)

Loss from discontinued operations                       (452)                (341)              (517)                 (5,234)

Net income (loss)                                     (2,589)              (2,898)             6,409                 (23,047)

Income (loss) per common and common
  equivalent share from:

  Continuing operations                                (0.11)               (0.12)              0.33                   (0.88)

  Discontinued operations                              (0.02)               (0.02)             (0.02)                  (0.26)

  Net income (loss)                                    (0.13)               (0.14)              0.31                   (1.14)
</TABLE>





(1)  Amount  includes an impairment  charge of $29,155,000  related to Carlyle's
     thread division. See Note 3.





                                      F-32






<PAGE>

<PAGE>




19.      SUBSEQUENT EVENT

         On February 7, 1997,  pursuant to an agreement  dated December 18, 1996
by and among Noel, Automated Data Processing, Inc. ("ADP") and HPS, Noel sold to
ADP 1,320,000 shares of its common stock of HPS for an aggregate  purchase price
of $26,400,000 in cash.  Following the transaction,  Noel's ownership percentage
of HPS dropped to approximately 26%.

         On March 26, 1997,  pursuant to an asset purchase agreement dated as of
December 12, 1996, Belding sold its thread division to Hicking Pentecost PLC for
aggregate  cash   consideration   of  approximately   $54,900,000,   subject  to
adjustment, plus the assumption of certain liabilities.  The current estimate of
the loss on disposal on the sale of this division is $11,300,000, but the actual
loss recorded  could differ  significantly  from this estimate  depending on the
resolution  of  certain contingencies. The net proceeds from this sale were used
to  pay  off Carlyle's  outstanding  bank  indebtedness.   Accordingly,  Carlyle
currently has no outstanding bank indebtedness.



                                      F-33




<PAGE>

<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
and Stockholders of
HealthPlan Services Corporation

In  our  opinion,  the  accompanying  consolidated  balance  sheet  and  related
consolidated  statements of income,  of changes in  stockholders'  equity and of
cash flows present fairly, in all material  respects,  the financial position of
HealthPlan Services Corporation and its Subsidiaries (the "Company") at December
31, 1996 and 1995, and the results of their  operations and their cash flows for
the years ended  December  31,  1996 and 1995 and for the period from  inception
(October 1, 1994)  through  December  31, 1994,  in  conformity  with  generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Tampa, Florida
March 14, 1997



                                       F-34





<PAGE>

<PAGE>

                         HEALTHPLAN SERVICES CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS EXCEPT SHARE AMOUNTS)



<TABLE>
<CAPTION>

                                                                       DECEMBER 31,
                                                                  1996             1995
                                                              --------------   --------------
<S>                                                          <C>                <C>
                          ASSETS

Current assets:

  Cash and cash  equivalents ............................        $   3,725         $  4,738
  Restricted  cash.......................................           10,062            1,005
  Short-term investments.................................               -            36,723
  Accounts receivable, net of allowance for
     doubtful accounts of $99 and $23, respectively .....           17,899            6,411
  Refundable income taxes ...............................            6,083            1,041
  Prepaid  commissions...................................              223              748
  Prepaid expenses and other current assets..............            4,022            1,485
  Deferred taxes  .......................................            4,481              965
                                                                  --------         --------
          Total current assets  .........................           46,495           53,116
Property and equipment, net .............................           21,102            9,241
Other assets, net .......................................            2,182            1,463
Deferred taxes  .........................................            8,327                -
Note receivable  ........................................            6,389                -
Investments .............................................            3,685                -
Goodwill, net............................................          156,521           48,847
                                                                  --------         --------
          Total  assets .................................         $244,701         $112,667
                                                                  ========         ========

           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable    ...................................         $ 18,464         $  3,407
  Premiums payable to carriers...........................           29,536           17,209
  Commissions payable ...................................            4,691            2,897
  Deferred revenue    ...................................            1,560              947
  Accrued liabilities ...................................           14,905            5,093
  Accrued contract commitments  .........................            1,089              482
  Accrued restructure costs. ............................              462                -
  Current portion of long-term debt payable .............            2,717               68
                                                                  --------         --------
          Total current liabilities  ....................           73,424           30,103
 Note payable     .......................................           59,581            1,214
 Deferred taxes .........................................               -               354
 Other long-term liabilities  ...........................            2,913               30
                                                                  --------         --------
          Total liabilities .............................          135,918           31,701
                                                                  --------         --------

Commitments and contingencies (Note 11) .................

Stockholders' equity:

  Common stock voting, $0.01 par value, 100,000,000
     authorized and 14,974,126 issued and outstanding at
     December 31, 1996; 25,000,000 authorized and 13,395,357
     issued and outstanding at December 31, 1995 ........              150              134
  Additional paid-in capital ............................          106,153           71,636
  Retained earnings .....................................            2,480            9,196
                                                                  --------         --------
          Total stockholders' equity ....................          108,783           80,966
                                                                  --------         --------
         Total liabilities and stockholders' equity ....          $244,701         $112,667 
                                                                  ========         ========
</TABLE>

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

                                       F-35






<PAGE>

<PAGE>

                         HEALTHPLAN SERVICES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                                        FOR THE PERIOD
                                                                                                        FROM INCEPTION
                                                                      FOR THE YEAR ENDED DECEMBER 31,  (OCTOBER 1, 1994)
                                                                      -------------------------------      THROUGH
                                                                          1996            1995         DECEMBER 31, 1994
                                                                          ----            ----         -----------------
                                                                                       
<S>                                                                      <C>              <C>             <C>      
Operating  revenues ..............................................       $ 191,493        $  98,187       $  25,132
Interest  income .................................................           2,346            2,063             101
                                                                         ---------       ---------        ---------
        Total revenues ...........................................         193,839          100,250          25,233
Expenses:
   Agent commissions .............................................          48,507           36,100          10,047
   Personnel .....................................................          72,209           25,433           5,972
   General and administrative ....................................          41,614           16,967           4,226
   Pre-operating and contract start-up costs .....................             812            1,664               -
   Contract  commitment ..........................................           2,685                -           3,623
   Restructure charge ............................................           1,425                -               -
   Integration ...................................................           7,804                -               -
   Loss on impairment of  goodwill ...............................          13,710                -               -
   Depreciation and amortization .................................          10,548            4,386             870
                                                                         ---------        ---------       ---------
        Total expenses ...........................................         199,314           84,550          24,738
                                                                         ---------        ---------       ---------
   (Loss) income before interest expense and income taxes ........          (5,475)          15,700             495
   Interest expense ..............................................           2,601               69             105
                                                                         ---------        ---------       ---------
   (Loss) income before  income taxes ............................          (8,076)          15,631             390
   (Benefit) provision for income taxes ..........................          (1,360)           6,096             159
                                                                         ---------        ---------       ---------
        Net (loss) income ........................................       $  (6,716)       $   9,535       $     231
                                                                         =========        =========       =========
   Dividends on Redeemable Preferred Stock .......................       $       -        $     285       $     285
                                                                         =========        =========       =========
   Net (loss) income attributable to common stock ................       $  (6,716)       $   9,250       $     (54)
                                                                         =========        =========       =========
   Pro forma net income  per share ...............................                        $    0.71       $    0.03
                                                                                          =========       =========
   Pro forma weighted average shares outstanding .................                           13,414           9,339
                                                                                          =========       ==========
   Historical weighted average net (loss) income  per share ......       $   (0.47)       $    0.82
                                                                         =========        =========
   Historical weighted average shares outstanding ..................        14,266           11,336
                                                                         =========        =========


</TABLE>

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

                                      F-36





<PAGE>

<PAGE>


                         HEALTHPLAN SERVICES CORPORATION
        CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
                       (IN THOUSANDS EXCEPT SHARE AMOUNTS)


<TABLE>
<CAPTION>

                                              ---------     ------     ----------   --------     -----
                                             Non-voting     Voting     Additional
                                               Common       Common       Paid-in    Retained
                                               Stock         Stock       Capital    Earnings     Total
                                              ---------     ------     ----------   --------     -----
<S>                                          <C>          <C>         <C>          <C>          <C>
Initial issuance of Common Stock
  (October 1, 1994) ......................   $      75    $       -     $   925      $     -    $   1,000 
Issuance of management stock .............           5            -       1,226            -        1,231
Unvested interest in management stock ....           -            -      (1,170)           -       (1,170)
Dividends on Redeemable Preferred Stock ..           -            -           -         (285)        (285)
Net income ...............................           -            -           -          231          231
                                             ----------   ---------   ---------    ---------    --------- 
Balance at December 31, 1994 .............   $      80    $       -     $   981    $     (54)   $   1,007
Issuance of management stock .............           -            -          30            -           30
Unvested interest in management stock ....           -            -         (27)           -          (27)
Vesting of management stock ..............           -            -         330            -          330
Net proceeds of initial public offering ..           -           40      50,766            -       50,806
Conversion of Non-Voting Common Stock
  to Voting Common Stock .................         (80)          80           -            -            -
Exchange of Redeemable Preferred Stock
  Series A and Series B for Common Stock             -           14      19,556            -       19,570
Dividends on Redeemable Preferred
  Stock ..................................           -            -           -         (285)        (285)
Net income ...............................           -            -           -        9,535        9,535
                                             ----------   ---------   ---------    ---------    --------- 
Balance at December 31, 1995 .............   $       -      $   134   $  71,636    $   9,196    $  80,966   
Vesting  of management stock .............           -            -         456            -          456
Issuance of 11,400 shares in connection
  with stock options plans ...............           -            -         160            -          160
Issuance of 1,400,110 shares in connection
  with acquisition of Harrington Services
  Corporation ............................           -           14      30,088            -       30,102
Issuance of 160,957 shares to former
  affiliates of Consolidated Group, Inc. .           -            2       3,700            -        3,702
Issuance of 6,302 shares in connection
  with the employee stock purchase plan ..           -            -         113            -          113
Net loss .................................           -            -           -       (6,716)      (6,716)
                                             ----------   ---------   ---------    ---------    --------- 
Balance at December 31, 1996 .............   $       -      $   150   $ 106,153    $   2,480    $ 108,783
                                             ==========   =========   =========    =========    =========

</TABLE>


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


                                      F-37






<PAGE>

<PAGE>

                         HEALTHPLAN SERVICES CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                   PAGE 1 OF 2

<TABLE>
<CAPTION>
                                                                        FOR THE PERIOD
                                                                         FROM INCEPTION
                                                  FOR THE YEAR ENDED   (OCTOBER 1, 1994)
                                                     DECEMBER 31,           THROUGH
                                                     1996       1995   DECEMBER 31, 1994
                                                -----------   ------ -------------------
<S>                                              <C>         <C>         <C>     
Cash flows from operating activities:
  Net (loss) income ..........................   $ (6,716)   $  9,535    $    231
Adjustments to reconcile net (loss) income
  to net cash provided by operating
  activities:
Depreciation .................................      5,729       2,657         511
  Amortization of goodwill ...................      4,464       1,524         307
  Amortization of other assets ...............        355         205          51
  Contract commitment, net ...................        607      (2,633)      3,115
  Charge for restructuring, net ..............        462           -           -
  Loss on impairment of goodwill .............     13,710           -           -
  Issuance of Common Stock to management .....        456         332          62
  Deferred taxes .............................       (804)        935         244
Changes in assets and liabilities, net of
 effect from acquisitions:
  Restricted cash ............................     (9,057)      1,807      (2,150)
  Accounts receivable ........................      1,415        (702)       (975)
  Refundable income taxes ....................     (5,043)     (1,041)       --
  Prepaid commissions ........................        525         200         222
  Prepaid expenses and other current assets ..       (811)        (64)        (56)
  Other assets ...............................        565        (188)       --
  Accounts payable ...........................     10,608         643       1,425
  Premiums payable to  carriers ..............     12,327      (1,262)      2,061
  Commissions payable ........................        149         (12)        216
  Deferred revenue ...........................       (490)     (1,018)       (256)
  Accrued liabilities ........................     (7,728)     (1,707)     (1,835)
  Income taxes payable .......................        (54)       (135)        135
                                                 --------    --------    --------
          Net cash provided by operating
            activities .......................     20,669       9,076       3,308
                                                 --------    --------    --------
Cash flows from investing activities:
  Purchases of property and equipment ........     (5,731)     (5,286)       (182)
  Sales (purchases) of short-term
    investments, net .........................     36,723     (36,723)          -
  Payment for purchase of Predecessor
    Company, net of cash acquired ............          -           -     (18,406)
  Payment for purchase of Diversified
    Group Brokerage ..........................          -     (10,075)          -
  Payment for purchase of Third Party
    Claims Management, net of cash
    acquired .................................          -      (7,328)          -
  Cash paid for purchase of Harrington
    Services Corporation, net of cash
    acquired .................................    (29,274)          -           -
  Payment for purchase of Consolidated
    Group, Inc., net of cash acquired ........    (60,210)          -           -
  Increase in investments ....................     (3,311)          -           -
  Increase in note receivable ................     (6,388)          -           -
                                                 --------    --------    --------
          Net cash used in  investing
            activities .......................    (68,191)    (59,412)    (18,588)
                                                 --------    --------    --------
Cash flows from financing activities:

  Net borrowings under line of credit ........     55,000           -           -
  Payments on other debt .....................    (12,466)        (35)        (17)
  Net proceeds from initial public
    offering of Common Stock .................          -      50,806           -

  Payments of loan origination costs .........          -           -        (400)
  Issuance of Redeemable Preferred
    Stock ....................................          -           -      19,000
  Proceeds from exercise of  stock
    options ..................................        160           -           -
  Proceeds from Common Stock issued ..........      3,815           -       1,000

                                                 --------    --------    --------
          Net cash provided by
            financing activities .............     46,509      50,771      19,583
                                                 --------    --------    --------

Net (decrease) increase in cash and
 cash equivalents ............................     (1,013)        435       4,303
Cash and cash equivalents at beginning of
 period ......................................      4,738       4,303           -
                                                 --------    --------    --------
Cash and cash equivalents at end of period ...   $  3,725    $  4,738    $  4,303
                                                 ========    ========    ========
</TABLE>

                                      F-38





<PAGE>

<PAGE>



                                   PAGE 2 OF 2

<TABLE>

<S>                                              <C>       <C>       <C>    
Supplemental disclosure of cash flow
 information:

  Cash paid for interest .....................   $ 1,573   $    65   $   122
                                                 =======   =======   =======
  Cash paid for income taxes .................   $ 4,968   $ 6,321   $     -
                                                 =======   =======   =======

Supplemental disclosure of noncash activities:

  Exchange of Redeemable Preferred Stock
      Series A and Series B for Common
      Stock ..................................   $     -   $19,570   $     -
                                                 =======   =======   =======
  Issuance of Common Stock to management .....   $   456   $   332   $    62
                                                 =======   =======   =======
  Common Stock issued for purchase of
      Harrington Services Corporation ........   $30,102   $     -   $     -
                                                 =======   =======   =======
  Dividends on redeemable preferred
      stock ..................................   $     -   $   285   $   285
                                                 =======   =======   =======

</TABLE>



                 The accompanying notes are an integral part of
                    these consolidated financial statements.
   
                                       F-39






<PAGE>

<PAGE>


HEALTHPLAN SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
--------------------------------------------------------------------------------

1.  DESCRIPTION OF BUSINESS AND ORGANIZATION

    HealthPlan  Services  Corporation  (together  with its direct  and  indirect
    wholly   owned    subsidiaries,    the   "Company")    provides   marketing,
    administration,  and risk  management  services  and  solutions  for benefit
    programs.  The  Company  provides  these  services  for over  125,000  small
    businesses and large, self-funded organizations,  covering approximately 2.6
    million  members in the  United  States.  The  Company's  customers  include
    managed care  organizations,  insurance  companies,  integrated  health care
    delivery  systems,  self-funded  benefit plans,  and health care  purchasing
    alliances.

    On May 19,  1995,  the  Company  completed  an initial  public  offering  of
    4,025,000  shares of its Common Stock,  shares of which are presently traded
    on the New York Stock Exchange. Concurrent with the initial public offering,
    the Company also exchanged  Redeemable  Preferred Stock for 1,398,000 shares
    of Common Stock.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    METHOD OF ACCOUNTING

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

    CONSOLIDATION

    The consolidated  financial  statements  include the accounts of the Company
    and its wholly owned subsidiaries,  (i) HealthPlan Services,  Inc., together
    with its  wholly  owned  subsidiaries  ("HPSI"),  (ii)  Harrington  Services
    Corporation, together with its direct and indirect wholly owned subsidiaries
    ("Harrington"), (iii) Consolidated Group, Inc., together with its affiliates
    ("Consolidated  Group"), and (iv) Healthcare  Informatics  Corporation.  All
    intercompany   transactions   and   balances   have   been   eliminated   in
    consolidation.

    CASH AND CASH EQUIVALENTS

    Cash and cash equivalents are defined as highly liquid investments that have
    original  maturities  of three  months  or less.  Cash and cash  equivalents
    consist of bank deposits to meet anticipated short-term needs.

    RESTRICTED CASH

    The  Company  has  established  a bank  account  for  the  sole  purpose  of
    administering  the contracts with the Florida  Community  Health  Purchasing
    Alliances.  This  cash may be  withdrawn  only to meet  current  obligations
    connected with servicing these contracts.

    SHORT-TERM INVESTMENTS

    Investments  in marketable  securities  at December 31, 1995  consisted of a
    professionally   managed  portfolio  of  short-term  financial   instruments
    including  short-term  municipal  bonds.  As of January 1, 1995, the Company
    adopted  Statement of Financial  Accounting  Standards No. 115 ("SFAS 115"),
    "Accounting  for Certain  Investments  in Debt and Equity  Securities."  The
    effect  of SFAS 115 is  dependent  upon  classification  of the  investment.
    Because the  investments  are  classified as available  for sale,  they were
    measured  at fair  market  value,  which  approximated  cost.  There were no
    investments with maturities of greater than one year. The

                                      F-40






<PAGE>

<PAGE>



    remainder of the Company's  short-term  investments  were liquidated in July
    1996 in order to provide a portion of the cash needed for the Harrington and
    Consolidated Group acquisitions.

    PROPERTY AND EQUIPMENT

    Property and equipment is stated at cost.  Costs of the assets acquired have
    been recorded at their  respective  fair values at the date of  acquisition.
    Expenditures  for  maintenance  and repairs are expensed as incurred.  Major
    improvements  that  increase  the  estimated  useful  life of an  asset  are
    capitalized.  Depreciation is computed using the  straight-line  method over
    the following estimated useful lives of the related assets:

<TABLE>
<CAPTION>

                                                                   YEARS
                                                               --------------
       <S>                                                     <C>
       Building                                                           19
       Furniture and fixtures                                           3-10
       Computers and equipment                                           2-5
       Computer software                                                   3
       Leasehold improvements                                     Lease term

</TABLE>


    PREPAID COMMISSIONS

    Prepaid  commissions consist primarily of commissions paid to certain agents
    at  the  initiation  of  a  policy.  These  commissions  are  expensed  on a
    straight-line basis as revenues related to the policy are earned.

    PREPAID EXPENSES AND OTHER CURRENT ASSETS

    Prepaid expenses and other current assets consist primarily of prepaid rent,
    insurance, postage, and repair and maintenance contracts.

    GOODWILL AND IMPAIRMENT OF LONG-LIVED ASSETS

    The excess of cost over the fair value of net assets acquired is recorded as
    goodwill and amortized on a straight-line  basis over 25 years.  The Company
    reviews  long-lived  assets,  including  goodwill,  for impairment  whenever
    events or changes in circumstances  indicate that the carrying value of such
    assets may not be  recoverable.  The Company  compares the  expected  future
    undiscounted  cash flows to the carrying values of the long-lived  assets at
    the lowest  level of  identifiable  cash  flows.  When the  expected  future
    undiscounted  cash  flows are less than the  carrying  amount,  the asset is
    written down to its estimated fair value. The Company  calculates  estimated
    fair value as the  discounted  future value of  anticipated  cash flows (see
    Note 5).

    OTHER ASSETS

    Other assets consist primarily of loan origination fees and covenants not to
    compete, which are amortized over the terms of the respective agreements.

    PREMIUMS PAYABLE

    The Company collects  insurance  premiums on behalf of its insurance carrier
    and managed care  customers  and remits such amounts to the  customers  when
    due.

    REVENUE RECOGNITION

    Revenues  are  recognized  ratably  over  contractual  periods  or as claims
    processing  and  administrative   services  are  being  performed.   Revenue
    collected  in advance is  recorded  as  deferred  revenue  until the related
    services are performed.


                                      F-41







<PAGE>

<PAGE>




    ADVERSE CONTRACT COMMITMENTS

    On an ongoing basis,  the Company  estimates the revenues to be derived over
    the life of service contracts,  as well as the costs to perform the services
    connected therewith, in order to identify adverse commitments.  This process
    includes  evaluating  actual results  during the period and analyzing  other
    factors,  such as  anticipated  rates,  volume,  and costs.  If the  revised
    estimates  indicate that a net loss is expected  over the remaining  life of
    the contract, the Company recognizes the loss immediately.

    PRE-OPERATING AND CONTRACT START-UP COSTS

    The Company has elected to expense as  incurred,  and  segregate  from other
    operating   costs,   those  costs  related  to  the   preparation   for  and
    implementation  of new products and  contracts for services to new customers
    prior to the  initiation  of  significant  revenue  activity  from those new
    revenue initiatives.

    INTEGRATION EXPENSE

    Certain costs  amounting to $6.9 million  incurred by the Company in 1996 in
    relation  to the  post-acquisition  integration  of  information  systems at
    Consolidated Group, Inc. and Harrington Services Corporation are recorded as
    integration  expense.  Other  non-information  systems  costs  amounting  to
    $883,000  for items such as travel,  recruiting,  and moving  have also been
    recorded as integration expense.

    RESTRUCTURE CHARGES

    The  Company  recognizes  a  liability  for  restructuring   charges  and  a
    corresponding  charge to results of operations when the following conditions
    exist:  management approves and commits the Company to a plan of termination
    of employees,  or an exit plan,  and  establishes  the benefits that current
    employees  will  receive  upon  termination;   the  benefit  arrangement  is
    communicated to employees; the plan of termination identifies the number and
    type of employees;  and the exit plan or plan of  termination  will begin as
    soon as possible, and significant changes are not likely.

    In 1996,  the  Company  recorded  a  restructure  charge of $1.4  million to
    reflect the cost of exiting  certain  excess  office  space  ($650,000)  and
    terminating employees ($775,000). The Company's restructure plan was for the
    elimination  of an estimated 80 jobs in management,  claims  administration,
    and  information  systems  operations  in its  Tampa  and  Memphis  offices.
    Seventy-seven employees were actually terminated.

    AGENT COMMISSIONS

    The Company recognizes agent commissions expense in the same period that the
    related revenues are recognized.

    INCOME TAXES

    The Company  recognizes  deferred  assets and  liabilities  for the expected
    future tax  consequences  of  temporary  differences  between  the  carrying
    amounts and the tax bases of assets and liabilities.  For federal income tax
    purposes,  the Company files a consolidated tax return with its wholly owned
    subsidiaries.

    EARNINGS PER SHARE

    Earnings  per  share  in 1996  and  1995  have  been  computed  based on the
    historical  weighted  average  number of shares of Common Stock  outstanding
    during the period.  Pro forma  earnings  per share was  computed in 1995 and
    1994  based on the  weighted  average  number of common  shares  outstanding
    during the  periods,  after  giving  retroactive  effect  for the  mandatory
    conversion  of the  Company's  Redeemable  Series A and  Series B  Preferred
    Stock,  which  occurred  upon  completion of the  Company's  initial  public
    offering,  as well  as the  shares  issued  at the  time  of that  offering.
    Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
    83, all stock  options  and  common  shares  issued  have been  included  as
    outstanding for the entire period using the treasury stock method.

                                      F-42





<PAGE>

<PAGE>


    STOCK-BASED COMPENSATION

    The Company  applies the  intrinsic  value method  currently  prescribed  by
    Accounting  Principles Board Opinion No. 25 ("APB 25") and discloses the pro
    forma effects of the fair value based method,  as prescribed by Statement of
    Financial Accounting Standards No. 123 ("SFAS 123").

3.  ACQUISITIONS

    CONSOLIDATED GROUP

    On July 1, 1996, the Company  acquired all the issued and outstanding  stock
    of Consolidated  Group,  Inc. and three affiliated  entities  (collectively,
    "Consolidated Group") for approximately $61.9 million in cash.  Consolidated
    Group, headquartered in Framingham, Massachusetts,  specializes in providing
    medical benefits  administration  and other related services for health care
    plans. As of December 31, 1996,  Consolidated  Group provided these services
    for over  23,000  small  businesses  in a  variety  of  industries  covering
    approximately   250,000  members  in  50  states.   At  December  31,  1996,
    Consolidated Group employed  approximately 500 people. The purchase price of
    Consolidated  Group  was  allocated  to the  fair  value  of the net  assets
    acquired as follows:




<TABLE>

          <S>                                           <C>
          Tangible assets acquired                     $  19.7  million
          Goodwill                                        59.7  million
          Liabilities assumed                            (17.5) million
                                                       -----------------
                                                       $  61.9  million
                                                       =================
</TABLE>


    HARRINGTON SERVICES CORPORATION

    On July 1, 1996,  the Company also  acquired all the issued and  outstanding
    stock of  Harrington  for  approximately  $32.5  million cash and  1,400,110
    shares of the Company's  Common Stock valued at $30.1  million.  Harrington,
    headquartered  in  Columbus,   Ohio,  provides  administrative  services  to
    self-funded  benefit  plans.  As of December 31, 1996,  Harrington  provided
    these  services to over 3,000 large,  self-funded  plans for  employers in a
    variety of industries covering  approximately  960,000 members in 47 states.
    At December 31, 1996,  Harrington  employed  approximately  1,500 employees,
    with principal offices in Columbus,  Ohio, Chicago,  Illinois, and El Monte,
    California. The purchase price of Harrington, which totaled $62.6 million in
    cash and stock,  was allocated to the fair value of the net assets  acquired
    as follows:

<TABLE>
          <S>                                         <C>

          Tangible assets acquired                     $  27.7  million
          Goodwill                                        66.7  million
          Liabilities assumed                            (31.8) million
                                                       ----------------
                                                       $  62.6  million
                                                       ================
</TABLE>

    DIVERSIFIED GROUP BROKERAGE

    On October  12,  1995,  HPSI  acquired  substantially  all of the assets and
    assumed certain  liabilities of the third party  administration  business of
    Diversified Group Brokerage Corporation ("DGB"),  effective as of October 1,
    1995. As of December 31, 1996,  the DGB business  served  approximately  300
    medium-sized  businesses covering 45,000 members. The purchase price for the
    DGB business consisted of (i) approximately $5.1 million paid at closing and
    (ii) for the  seven-year  period  following the closing  date,  semi-monthly
    payments based on the number of enrollees in accounts that were DGB accounts
    as of the closing date,  to be reduced by any  attrition of enrollees.  HPSI
    placed $5.0  million in escrow,  as required by the  agreement to fund those
    payments,  and the present value of those estimated payments was recorded as
    goodwill.   Additionally,   HPSI  assumed   approximately  $1.0  million  in
    liabilities  related to this  purchase.  The success of the DGB  business is
    heavily  dependent  on its  ability to maintain  and grow market  share in a
    narrowly defined  geographic market -- the self-funded  health care plans of
    primarily  medium-sized  businesses  with an  emphasis  on the  New  England
    geographic market (see Note 5).


                                      F-43





<PAGE>

<PAGE>


    THIRD PARTY CLAIMS MANAGEMENT, INC.

    On August 31, 1995, HPSI acquired all of the issued and  outstanding  shares
    of capital  stock of Third Party Claims  Management,  Inc.  ("TPCM").  As of
    December  31,  1996,  TPCM  served   approximately  100  mid-to-large  sized
    organizations  covering  approximately  140,000 members.  In connection with
    this   acquisition,   the  Company   recorded  (i)  a  cash   investment  of
    approximately  $7.5 million,  subject to a post-closing  adjustment based on
    the  balance  sheet of TPCM as of  August  31,  1995,  (ii)  liabilities  of
    approximately  $2.7 million,  representing  an assumption of liabilities and
    additional  accruals  related to the  transaction,  and (iii) an  additional
    payment equal to $2.00 multiplied by the number of employees enrolled in any
    TPCM  account  as  of  the  anniversary  date  of  the  contract  which  was
    administered  by the Company on the closing date and  continued to be a TPCM
    account  administered by the Company on the  anniversary  date. This payment
    was  estimated at  approximately  $210,000 by the Company at the time of the
    acquisition  and was  recorded  as a  liability  and an increase in goodwill
    resulting  from the  acquisition.  TPCM is focused on providing  services to
    hospitals and other related health care  institutions that offer self-funded
    health care benefits.  The development of integrated delivery systems by the
    entities making up this target market is expected to increase.  The services
    provided  by these  customers'  systems  may  include the ability to replace
    those provided by the Company and possibly  result in  competition  with the
    Company (see Note 5).

    UNAUDITED PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS

    The following unaudited pro forma consolidated  results of operations of the
    Company  give  effect to all of the  above  acquisitions,  accounted  for as
    purchases, as if they occurred on January 1, 1995 (in thousands):

                                                YEAR ENDED        YEAR ENDED
                                               DECEMBER 31,       DECEMBER 31,
                                                   1996              1995
                                               -------------     -------------
          Revenues.........................   $    269,476      $     245,167
          Net income.......................         (7,839)             6,897
          Net income per common share......          (0.53)              0.46

    The above pro forma information is not necessarily indicative of the results
    of operations that would have occurred had the acquisitions  been made as of
    January 1, 1995 or of the results which may occur in the future.

4.  CONCENTRATION OF CUSTOMERS

    The Company is party to a variety of  contracts  with  insurance  companies,
    preferred provider organizations ("PPOs"),  health maintenance organizations
    ("HMOs"),  integrated  delivery  systems,  health care alliances,  and their
    business  customers  located  throughout  the United States to provide third
    party, marketing, administration, and risk management services for the small
    business  market.  For the year ended December 31, 1996, the Company's three
    largest payors accounted for approximately 16%, 13%, and 13%,  respectively,
    of total revenues. For the year ended December 31, 1995, the Company's three
    largest payors accounted for approximately 31%, 23%, and 11%,  respectively,
    of total revenues.

    The Company grants credit,  without  collateral,  to some of its self-funded
    clients under certain contracts.


                                      F-44




<PAGE>

<PAGE>


5.  GOODWILL

    At December 31, 1996 and 1995,  goodwill  resulting  from the excess of cost
    over the fair value of the respective net assets acquired was as follows (in
    thousands):

                                                 1996                   1995
                                            -------------          ------------
       HealthPlan Services...............  $       32,841          $     32,841
       Consolidated Group................          59,734                     -
       Harrington........................          66,705                     -
       Diversified Group Brokerage.......           2,388                 9,750
       Third Party Claims Management                  490                 8,087
                                            -------------          ------------
                                                  162,158                50,678
       Accumulated Amortization..........          (5,637)               (1,831)
                                            -------------          ------------
                                            $     156,521          $     48,847
                                            =============          ============

    In the third quarter of 1996,  the Company  recorded a charge for impairment
    of goodwill  originally  recorded upon the  acquisitions  of DGB and TPCM of
    $6.6 million and $7.1 million, respectively. Other adjustments were recorded
    to reduce the DGB and TPCM goodwill balances as a result of final resolution
    of acquisition contingencies.

    DGB,  located in Marlborough,  Connecticut,  is a third party  administrator
    providing  managed  health  care  administrative   services  to  self-funded
    employers,  typically  having  between  250 and 2,000  employees  in the New
    England market. At the time of this acquisition, the Company projected a 10%
    to 15% growth rate in net cash flows at DGB. Since this acquisition, DGB has
    not achieved,  and does not expect to achieve, the revenue and net cash flow
    projections  prepared  at the time of the  acquisition  due to,  among other
    things, higher than originally expected attrition rates resulting in ongoing
    decreases in net revenues (due in part to increased pricing resulting from a
    reinsurance  carrier's  departure  from  DGB's  market)  and  an  inadequate
    distribution  system,  as  evidenced by an  underperforming  sales force and
    greater than anticipated  operating costs. The Company's  efforts to correct
    these  deficiencies  have not enabled it to meet its  original  projections.
    Accordingly,  the Company  recorded  an  impairment  charge of $6.6  million
    associated with the DGB acquisition. Any further significant declines in the
    DGB's  projected  net cash flows may  result in  additional  write-downs  of
    remaining goodwill.

    TPCM  is  a  third  party   administrator   providing  managed  health  care
    administrative services to hospitals and other health care institutions that
    offer self-funded health care benefits. At the time of this acquisition, the
    Company  projected a 10% to 15% growth rate in net cash flows at TPCM. Since
    this acquisition, TPCM has not achieved, and does not expect to achieve, the
    revenue  and  net  cash  flow  projections  prepared  at  the  time  of  the
    acquisition  due to, among other  things,  higher than  originally  expected
    attrition  rates,  significantly  higher  than  expected  claims  experience
    (claims filed per enrollee),  and greater than  anticipated  operating costs
    due to the inability to obtain economies of scale through  integration.  The
    Company's efforts to correct these  deficiencies have not enabled it to meet
    its original  projections.  In 1996, TPCM lost one customer that represented
    over $1.0 million in  annualized  revenues  resulting in a decision to close
    one of its operating  facilities.  Accordingly,  the Company has recorded an
    impairment charge of $7.1 million associated with the TPCM acquisition.  Any
    further  significant  declines in TPCM's projected net cash flows may result
    in additional write-downs of remaining goodwill.

    The Company will continue to evaluate on a regular basis whether  events and
    circumstances  have occurred  that indicate the carrying  amount of goodwill
    may not be recoverable.  Although the net unamortized balance of goodwill at
    December  31,  1996  is not  considered  to be  impaired,  any  such  future
    determination requiring the recognition of an impairment charge could have a
    material adverse effect on the Company's results.



                                      F-45





<PAGE>

<PAGE>


6.  PROPERTY AND EQUIPMENT

    Property and equipment consists of the following (in thousands):

                                                        DECEMBER 31,
                                                 1996                   1995
                                            -------------          ------------
       Land...............................  $         438           $         -
       Building...........................          1,133                     -
       Furniture and fixtures.............         14,478                 3,433
       Computers and equipment............         14,961                 4,747
       Computer software..................         15,377                 3,452
       Leasehold improvements.............          4,076                 1,117
                                            -------------          ------------
                                                   50,463                12,749
         Less - accumulated depreciation..        (29,361)               (3,508)
                                            -------------          ------------
                                            $      21,102           $     9,241
                                            =============          ============

7.  INVESTMENTS AND NOTES RECEIVABLE

    On January 8, 1996,  the Company  entered into an agreement  with  Medirisk,
    Inc.,  a provider of health care  information,  to purchase  $2.0 million of
    Medirisk  preferred  stock  representing  a 9%  ownership  interest  and, in
    addition,  to lend  Medirisk up to $10.0 million over four years in the form
    of debt for which the Company would receive detachable  warrants to purchase
    up to 432,101 shares of Medirisk's common stock for $0.015 per share,  based
    on the amount of debt  actually  acquired.  This  investment  is recorded at
    cost.

    On March 13, 1996, Medirisk borrowed $6.9 million from the Company. The debt
    bears  interest of 10%  payable  quarterly  and is due upon the  earliest to
    occur of (i) an  initial  public  offering  by  Medirisk;  (ii) a change  of
    control of Medirisk;  or (iii) at maturity on January 8, 2003. In accordance
    with the agreement, warrants to purchase 298,150 shares of Medirisk's common
    stock were issued to the Company.

    The Company discounted the note receivable by the relative fair value of the
    warrants,  which was determined to be $573,000. The value of the warrants is
    accreted to income over the life of the note based on the maturity date.

    On January 28,  1997,  Medirisk  completed  an initial  public  offering and
    satisfied  the $6.9 million debt balance in accordance  with the  agreement.
    The remaining  value of the warrants will be accreted to income in the first
    quarter  of  1997.  Upon  completion  of  the  public  offering,  Medirisk's
    preferred stock was converted to common stock. The Company has agreed not to
    sell its  shares of  Medirisk  in the  public  market for 180 days after the
    effective date of the initial public  offering  without the prior consent of
    the offering's underwriters. After the 180 day period has lapsed, the shares
    will be eligible for sale in the public  market,  subject to the  conditions
    and restrictions of Rule 144 under the Securities Act of 1933. Assuming full
    conversion of the warrants issued to the Company,  its ownership  amounts to
    480,442 shares of common stock after the public  offering,  which represents
    an approximate 11% ownership interest.  On March 14, 1997, Medirisk's shares
    closed at $8.38 per share of common stock.

8.  NOTE PAYABLE AND CREDIT FACILITIES

    The Company  expanded its credit  facility  (the "Line of Credit")  from $20
    million to the lesser of (i) three times earnings before  interest  expense,
    income  taxes,  and  depreciation  and  amortization  expense  (with certain
    adjustments  called for in the credit agreement) or (ii) $175 million during
    1996. The maximum amount available through the Line of Credit as of December
    31,  1996  was  approximately  $109  million.  The  facility  operates  on a
    revolving  basis until May 18, 1998, on which date the  outstanding  balance
    shall be paid over a three year period with the first principal  payment due
    November 30, 1998 and the final  payment due April 30, 2001.  The  Company's
    borrowing under the Line of Credit includes interest ranging from LIBOR plus
    125 to 175 basis  points to New York prime plus 25 to 75 basis  points.  The
    Line of Credit  carries a commitment  fee of 0.25% of the unused portion and
    is  secured  by the  stock  of the  Company's  subsidiaries.  The  agreement
    contains  provisions  which include (among other  covenants)  maintenance of
    certain  minimum  financial  ratios,


                                      F-46






<PAGE>

<PAGE>



    limitations on capital  expenditures,  limitations on acquisition  activity,
    and  limitations  on the payment of  dividends.  The Company  incurred  $2.1
    million of  interest  expense on the Line of Credit for year ended  December
    31, 1996.

    Subsequent  to obtaining  the Line of Credit,  the Company  entered into two
    separate  interest rate swap  agreements  as a hedge  against  interest rate
    exposure on the variable rate debt. The agreements,  which expire in October
    1999 and September 2001,  effectively convert $40.0 million of variable debt
    under the Line of Credit to fixed  rate debt at a weighted  average  rate of
    6.42% plus a margin ranging from 125 to 175 basis points. For the year ended
    December 31, 1996, the Company recorded $110,000 of interest expense related
    to the swap  agreements.  The Company  considers the fixed rate and variable
    rate financial  instruments to be  representative of current market interest
    rates and, accordingly,  the recorded amounts approximate their present fair
    market value.

    In  conjunction  with the  acquisition  of the  Company  in 1994 by  certain
    Company officers and Noel Group, Inc.  ("Noel"),  the Company assumed a note
    payable to the Cal Group (the "Cal Group Note") of $1.3 million, which bears
    interest at 5% per annum.  The note payable requires  semi-annual  principal
    payments in May and November of $18,000 to $78,000  through  November  2008.
    Interest expense relating to the note payable was approximately  $62,000 and
    $64,000 for the years ended December 31, 1996 and 1995, respectively.

    On July 1, 1996,  the  Company  assumed  several  notes  payable  previously
    entered into by Consolidated Group (the "Consolidated  Group Notes"),  which
    were secured  primarily by computer  equipment.  The interest rates on those
    notes are LIBOR plus 150 to 175 basis  points.  The Company  also assumed an
    operating note (the "Consolidated Operating Note"), which is also secured by
    purchased equipment and has a fixed interest rate of 7.82%.

    Consolidated  Group  also has a mortgage  outstanding  secured by a building
    with a book value at December 31, 1996 of $1.1 million. The interest rate on
    the mortgage is fixed at 8.75%, with a final payment due in May 2016.

    On July 1, 1996, the Company assumed certain  equipment notes as a result of
    a  prior  agreement  that  had  been  executed  by  Harrington  ("Harrington
    Equipment  Notes").  The notes,  which are secured  primarily  by  telephone
    equipment,  have  interest  rates  ranging  from 7.2% to 9.0% with the final
    payment due in July 2004.

    The balances  outstanding on the above debt instruments at December 31, 1996
    are as follows (in thousands):

                 Line of Credit.....................   $  55,000
                 Cal Group Note.....................       1,214
                 Consolidated Group Notes...........       2,237
                 Consolidated Operating Note........         528
                 Consolidated Group Mortgage........       1,481
                 Harrington Equipment Notes.........       1,838
                                                       ---------
                                                         $62,298
                 Less: Amounts due within one year..      (2,717)
                                                       ---------
                 Long-term debt.....................     $59,581
                                                       =========


    Future minimum principal  payments for all notes as of December 31, 1996 are
    as follows (in thousands):

                          1997................  $   2,717
                          1998................      8,737
                          1999................     16,942
                          2000................     20,455
                          2001................     11,165
                          Thereafter..........      2,282
                                               ----------
                                                $  62,298
                                               ==========



                                      F-47





<PAGE>

<PAGE>



    As of March 14, 1997, the Company had liquidated  approximately $7.5 million
    of the above debt before its scheduled maturity,  including a pay-off of the
    Consolidated Group Notes.

9.  ACCRUED LIABILITIES

    Accrued liabilities consist of the following (in thousands):

                                                          DECEMBER 31,
                                                     1996              1995
                                                   ---------        ---------
       Adverse lease commitments............       $ 5,215           $      -
       Salaries and wages...................         3,573              1,297
       Office closure costs.................           919                325
       Interest.............................           906                 10
       Accrued legal and regulatory.........           555                683
       State and local taxes................           545                 71
       Severance............................           276                356
       Other................................         2,916              2,351
                                                   -------            -------
                                                   $14,905            $ 5,093
                                                   =======            =======

    Adverse lease  commitments  relate to office and equipment leases assumed by
    the Company upon its  acquisitions of  Consolidated  Group and Harrington at
    prices in excess of market rates or for  property  that will not be utilized
    for the full  term of the  lease.  Severance  and  office  closure  costs at
    December 31, 1996 refer to costs  connected with the Company's  acquisitions
    of Consolidated  Group and Harrington.  Through December 31, 1996,  $496,000
    had been charged against these accruals.  Other includes  approximately $1.3
    million and $1.1 million of other  acquisition-related costs at December 31,
    1996 and 1995, respectively.

10. ACCRUED CONTRACT COMMITMENTS

    Starting in 1994, the Company pursued contracts with state-sponsored  health
    care purchasing alliances,  initially in Florida, and in 1995-1996, in North
    Carolina,  Kentucky,  and Washington.  The Company has incurred  substantial
    expenses in connection with the start-up of these  contracts,  and, to date,
    the alliance  business in North Carolina and Florida has been  unprofitable.
    During the quarter ended December 31, 1994,  the Company  recorded a pre-tax
    charge of approximately $3.6 million related to state-sponsored  health care
    purchasing  alliances  in  Florida.  The Company  recorded a pre-tax  charge
    related to these  contracts in the amount of $2.6 million in 1996  resulting
    from  increased  costs and lower than  anticipated  revenues  in Florida and
    North Carolina.

    The balance of the accrual at December  31, 1996 is  approximately  $608,000
    for Florida and  $481,000  for North  Carolina.  The balance at December 31,
    1995 was approximately $482,000 for Florida.

11. EMPLOYEE BENEFIT PLANS

    Defined Contribution Plan

    The Company has a defined  contribution  employee  benefit plan  established
    pursuant  to  Section   401(k)  of  the  Internal   Revenue  Code   covering
    substantially all employees.  Through December 31, 1996, the Company matched
    up to 50% of  the  employee  contribution  limited  to 6% of the  employee's
    salary for its HPSI and  Harrington  employees,  and it  matched  50% of the
    employee  contribution  limited  to 4% of  the  employee's  salary  for  its
    Consolidated  Group employees.  Effective January 1, 1997, the Company began
    to match  one-third  of such  employee  contributions  limited  to 6% of the
    employee's salary. Under the provisions of the plan, participants' rights to
    employer contributions vest 40% after completion of three years of qualified
    service and increase by 20% for each  additional  year of qualified  service
    completed  thereafter.  Expense in  connection  with this plan for the years
    ended  December 31, 1996 and 1995 was  approximately  $884,000 and $339,000,
    respectively,  and for the period from  inception  (October 1, 1994) through
    December 31, 1994 was approximately $82,000.



                                      F-48






<PAGE>

<PAGE>



    Post-Retirement Benefit Plan

    Harrington,  the Company's wholly owned subsidiary acquired on July 1, 1996,
    provides  medical  and term  life  insurance  benefits  to  certain  retired
    employees of its subsidiary, American Benefit Plan Administrators,  Inc. The
    Company  funds the benefit  costs on a current  basis,  because there are no
    plan assets. The  post-retirement  benefit cost incurred since the Company's
    acquisition  of  Harrington  is $38,000.  At December 31,  1996,  an accrued
    post-retirement  liability  of $1.4  million is  included  in the balance of
    other long-term  liabilities.  Actuarial assumptions used in calculating the
    obligation include a discount rate of 7.5% and a health care cost trend rate
    of 7% in 1997, 6% in 1998, and 5% in 1999 and thereafter.

    Management Stock

    From the period 1994 through  January  1995,  certain  members of management
    received  473,000  shares of Common  Stock,  which  carries  limitations  on
    vesting over a four-year period and restrictions regarding the sale of stock
    in a public market.  Should the employee  terminate  employment prior to the
    completion of the vesting  period,  the Company will be entitled to purchase
    from the  executive  the number of shares that have not vested at a purchase
    price equal to the lower of fair market value or the initial issuance price.
    The Company recognizes  compensation  expense based on the vesting period of
    the shares.




                                      F-49



<PAGE>

<PAGE>

12. COMMITMENTS AND CONTINGENCIES

    Lease commitments

    The Company rents office space and equipment under non-cancelable  operating
    leases.  Rental expense under the leases  approximated  $7.7 million (net of
    $422,000  charged to adverse lease  accruals) and $4.0 million for the years
    ended December 31, 1996 and 1995, respectively,  and $932,000 for the period
    from inception  (October 1, 1994) through December 31, 1994.  Future minimum
    rental payments under these leases are as follows (in thousands):

<TABLE>
               <S>                                     <C>    
               1997                                    $10,166
               1998                                      9,107
               1999                                      8,538
               2000                                      6,373
               2001                                      4,962
               Thereafter                               15,242
                                                       -------
                                                       $54,388
                                                       =======
</TABLE>


    Litigation

    In 1995,  a former  provider of marketing  services for the Company  filed a
    complaint against the Company claiming wrongful  termination of an exclusive
    marketing  agreement  and breach of  contract.  The  parties to the  dispute
    agreed to binding  arbitration,  and the  arbitration  proceedings  occurred
    during the week of October  29,  1996.  The  arbitration  panel's  decision,
    rendered in December 1996, is not expected to materially alter the amount or
    timing of future  payments  that the Company is  contractually  obligated to
    make  to the  plaintiff  under  the  marketing  agreement,  and  this is not
    expected to materially affect the cash flows of the Company's business.

    Pursuant  to  the  Harrington   acquisition   agreement   (the   "Harrington
    Agreement"),  the  Company  agreed  to  use  its  best  efforts  to  file  a
    registration  statement sufficient to permit the public offering and sale of
    the  shares  of  the  Company's   Common  Stock  issued  to  the  Harrington
    stockholders in the acquisition,  with such registration statement to become
    effective on or before  October 31, 1996.  On October 30, 1996,  the Company
    received a letter from a representative of Harrington's shareholders stating
    that the Company was in violation of the Harrington  Agreement and reserving
    all rights  under such  Agreement.  It is not  possible  for the  Company to
    evaluate  what, if any,  damages might result from such notice.  In November
    1996,  the  Company  filed  a  Form  S-3  registration  statement  with  the
    Securities and Exchange Commission  registering the restricted shares of the
    Company's Common Stock held by the former Harrington and Consolidated  Group
    shareholders.  This registration  statement became effective on February 14,
    1997.

    The  Company's  Consolidated  Group  subsidiary is undergoing a DOL audit in
    which the DOL has raised various questions about the application of ERISA to
    the way that subsidiary does business.  This audit is ongoing, and there can
    be no  assurance  that the DOL will not take  positions  that could  require
    changes to the way this subsidiary operates,  or result in the imposition of
    administrative fines and penalties.

    The Company is involved in various  litigation  arising in the normal course
    of  business.  In the  opinion of the  Company's  management,  although  the
    outcomes of these claims are uncertain, in the aggregate they are not likely
    to have a  material  adverse  effect of the  Company's  business,  financial
    condition, or results of operations.

    Regulatory compliance

    The  Company's   activities  are  highly  regulated  by  state  and  federal
    regulatory   agencies   under   requirements   that  are  subject  to  broad
    interpretations.  The Company  cannot predict the position that may be taken
    by these third parties that could require changes to the manner in which the
    Company operates.



                                      F-50


<PAGE>

<PAGE>



13. INCOME TAXES

    The (benefit) provision for income taxes is as follows (in thousands):


<TABLE>
<CAPTION>

                                                                       Period from Inception
                          For the Year Ended     For the Year Ended   (October 1, 1994) through
                          December 31, 1996       December 31, 1995     December 31, 1994 
                         ---------------------   -----------------    ----------------------
<S>                      <C>                       <C>                <C>
Current
    Federal                          $   429             $ 3,211                    $  120
    State                                 61                 458                        15
                         -------------------     ---------------      --------------------
                                         490               3,669                       135
                         ===================     ===============      ====================
Deferred
    Federal                           (1,619)              2,116                        21
    State                               (231)                311                         3
                         -------------------     ---------------      --------------------
                                      (1,850)              2,427                        24
                         ===================     ===============      ====================
(Benefit) provision
for income taxes                     $(1,360)            $ 6,096                     $ 159
                         ===================     ===============      ====================
</TABLE>

    The components of deferred taxes  recognized in the  accompanying  financial
    statements are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                     December 31,
                                                                     ------------
                                                                 1996             1995
                                                              -----------      -----------
     <S>                                                       <C>             <C>
      Deferred tax asset - current
          Accrued expenses not currently deductible            $  4,617         $  1,120
          Prepaid expenses currently deductible                    (136)            (155)
                                                              ---------       ----------
                                                                  4,481              965
                                                              =========       ==========
      Deferred tax asset (liability) - non-current
          Deferred compensation                                     537                -
          Post retirement benefits                                  641                -
          Depreciation                                             (657)              80
          Intangibles                                             7,806             (434)
                                                              ---------       ----------
                                                               $  8,327        $    (354)
                                                              =========       ==========
</TABLE>


    The  deferred  tax asset  resulting  from  intangibles  relates  to  certain
    intangible  assets  acquired by the  Company  that are  amortizable  for tax
    purposes and to the tax  treatment of the  goodwill  impairment  charge (see
    Note 5).

    A valuation  allowance is provided when it is more likely than not that some
    portion  of the  deferred  tax  asset  will not be  realized.  No  valuation
    allowance is  considered  necessary at December 31, 1996 and 1995,  based on
    the Company's expectations of future taxable income.

    The provision for income taxes varies from the federal  statutory income tax
    rate due to the following:

<TABLE>
<CAPTION>

                                                    1996          1995            1994
                                                 -----------    ---------     -----------
<S>                                                 <C>           <C>              <C>  
Federal statutory rate applied to pre-tax           (35.0)%        34.0 %           35.0%
income (loss)
State income taxes net of federal tax benefit        (5.0)%         5.0 %            4.5%
Goodwill amortization                                20.1 %         0.2 %            1.3%
Tax exempt interest income                           (2.6)%        (1.3)%              -
Non-deductible items                                  5.7 %         1.1 %              -
                                                 -----------    ---------     -----------

Effective tax rate                                  (16.8)%        39.0 %           40.8%
                                                 ===========    =========     ===========
</TABLE>



                                      F-51


<PAGE>

<PAGE>


14. STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN

    Stock Option Plans

    The Company's  stock option plans  authorize the granting of both  incentive
    and  non-incentive  stock options for a total of 1,840,000  shares of Common
    Stock to key  executives,  management,  consultants,  and,  with  respect to
    240,000 shares, to directors. Under the plans, all options have been granted
    at  prices  not  less  than  market  value  on the  date of  grant.  Certain
    non-qualified  incentive  stock  options  may be granted at less than market
    value.  Options  generally  vest over a  four-year  period  from the date of
    grant, with 20% of the options becoming exercisable on the date of the grant
    and 20% becoming  exercisable on each of the next four  anniversaries of the
    date of the grant.

    A summary of option transactions during each of the two years ended December
    31, 1996 is shown below:

<TABLE>
<CAPTION>
                                                      Number            Weighted
                                                        of              Average
                                                      Shares          Option Price
                                                   -------------    -----------------
                <S>                                    <C>               <C> 
                Under  option,  December 31, 1994
                  Granted                              545,000          $  18.11
                  Exercised                                  -                 -
                                                   -----------
                Under  option,  December 31, 1995
                  (112,000 exercisable)                545,000             18.11
                  Granted                              922,500             18.75
                  Exercised                            (11,400)            14.00
                  Cancelled                            (12,600)            19.35
                                                   -----------
                Under  option,  December 31, 1996
                  (278,200 exercisable)              1,443,500             18.54
                                                   ===========
</TABLE>


    There were 372,500 and 795,000 shares  available for the granting of options
    at December 31, 1996 and 1995, respectively.

    The following table summarizes the stock options outstanding at December 31,
1996:


<TABLE>
<CAPTION>
            Range                Number         Weighted Average         Weighted
              of             outstanding at        Remaining             Average
       Exercise Prices      December 31, 1996   Contractual Life      Exercise Price
       -----------------    -----------------   -----------------    -----------------
      <S>                       <C>                <C>                    <C> 
       $14.00 - $18.50          979,500             9 years               $16.09
        19.38 -  25.50          464,000             9 years                23.72
</TABLE>

    Employee Stock Purchase Plan

    Under the 1996 Employee Stock Purchase Plan ("Employee  Plan"),  the Company
    is authorized to issue up to 250,000 shares of common stock to its employees
    who have  completed  one year of service.  The Employee  Plan is intended to
    provide a method whereby  employees have an opportunity to acquire shares of
    Common  Stock  of  the  Company.   The  Employee  Plan  was  implemented  by
    consecutive  quarterly offerings of the Company's Common Stock commencing on
    July 1, 1996.

    Under the terms of the Employee  Plan,  an employee may  authorize a payroll
    deduction of a specified dollar amount per pay period.  The proceeds of that
    deduction are used to acquire  shares of the  Company's  Common



                                      F-52


<PAGE>

<PAGE>



    Stock on the  offering  date.  The number of shares  acquired is  determined
    based on 85% of the closing price of the  Company's  Common Stock on the New
    York Stock Exchange on the offering date.

    During 1996,  the Company sold 6,302 shares to employees  under the Employee
    Plan.

    Measurement of Fair Value

    The Company applies APB 25 and related interpretations in accounting for its
    stock  option  plans and  employee  stock  purchase  plan.  Accordingly,  no
    compensation   cost  has  been  recognized   related  to  these  plans.  Had
    compensation cost for the Company's stock option and employee stock purchase
    plans  been  determined  based on the  fair  value at the  grant  dates,  as
    prescribed  in  Financial  Accounting  Standards  No. 123,  "Accounting  for
    Stock-Based  Compensation"  ("FASB  123"),  the Company's net income and net
    income per share would have been as follows:

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                 1996             1995
                                                              -----------      -----------
      <S>                                                      <C>              <C>
      Net (loss) income attributable to common
      stock (in thousands):
          As reported                                          $(6,716)           $9,250
          Pro forma                                             (8,596)            8,627
                                                               =======            ======
      Net (loss) income per share:
          As reported                                          $ (0.47)           $ 0.82
          Pro forma                                              (0.60)             0.76
</TABLE>

    The fair value of each option  grant is estimated on the date of grant using
    the Black-Scholes  option pricing model with the following  assumptions used
    for  grants  during the  applicable  year:  dividend  yield of 0.0% for both
    years;  expected  volatility of 30% for each of the years ended December 31,
    1996 and  1995;  risk-free  interest  rates of  6.30% to 6.69%  for  options
    granted  during  the year  ended  December  31,  1996 and 5.51% to 7.05% for
    options  granted  during the year ended  December 31,  1995;  and a weighted
    average expected option term of four years for both years.

15. SUBSEQUENT EVENTS

    On February 7, 1997, Noel, Automatic Data Processing,  Inc. ("ADP"), and the
    Company  completed a transaction in which Noel sold to ADP 1,320,000  shares
    of the  Company's  Common Stock at a purchase  price of $20 per share.  Upon
    completion of the transaction,  Noel and ADP owned approximately 29% and 9%,
    respectively,  of the Company's Common Stock.  The agreement  governing such
    purchase  generally  requires  that:  (i)  ADP  may  not  agree  to  acquire
    additional  shares of the Company's Common Stock prior to December 31, 1997,
    unless such acquisition is approved by the Company's Board of Directors,  or
    unless the Company entertains  alternative offers; (ii) Noel may not dispose
    of its remaining shares of the Company's Common Stock prior to September 30,
    1997  other  than  through a direct  distribution  to  Noel's  shareholders,
    subject to  specified  conditions;  and (iii) the  Company  may not take any
    action   prior  to   December   31,   1997   that   could   interfere   with
    "pooling-of-interests"  accounting.  On March 19, 1997, Noel's  shareholders
    approved a plan of  liquidation  and  dissolution.  In connection  with such
    approval, the Company expects to file a Form S-3 Registration Statement with
    the  Securities  and  Exchange  Commission  to  register  the  shares of the
    Company's  Common  Stock held by Noel,  after  which Noel has  announced  it
    intends  to  make  a   distribution   of  the  Company's   stock  to  Noel's
    shareholders.

    On March 5, 1997,  the  Company  and Health Risk  Management,  Inc.  ("HRM")
    mutually agreed to terminate a merger agreement  previously  entered into on
    September  12,  1996.  In  connection  with  the  termination,  the  Company
    purchased  200,000  shares of HRM common stock,  representing  approximately
    4.5% of HRM shares outstanding, at a price of $12.50 per share. On March 14,
    1997, HRM's shares closed at $10.25 per share of common stock.  These shares
    were not  registered  and are  subject  to  restrictions  on  transfer.  HRM
    provides comprehensive,  integrated health care management, information, and
    health benefit  administration  services to employers,  insurance companies,
    unions, HMOs, PPOs,  hospitals,  and governmental units in the United States
    and Canada.



                                      F-53


<PAGE>

<PAGE>



16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED; IN THOUSANDS EXCEPT PER
    SHARE DATA)

<TABLE>
<CAPTION>
                                               Fourth      Third     Second      First
                                               Quarter    Quarter    Quarter    Quarter
                                              ---------   -------    -------    -------
     <S>                                       <C>        <C>         <C>        <C>
      Year ended December 31, 1996
          Revenues                             $63,963    $67,006    $31,863    $31,007
          Net income                            (5,530)    (7,961)     3,441      3,334
          Net income per common share         $  (0.37)  $  (0.53)  $   0.26    $  0.25
                                                                             
</TABLE>

<TABLE>
<CAPTION>
                                               Fourth      Third     Second      First
                                               Quarter    Quarter    Quarter    Quarter
                                               ---------   -------    -------    -------
     <S>                                       <C>        <C>         <C>        <C>
      Year ended December 31, 1995
          Revenues                             $29,361    $24,115    $23,198    $23,576
          Net income                             2,985      2,623      2,072      1,570
          Net income per common share             0.22       0.20       0.20        N/A

          Net income - pro forma basis           2,985      2,623      2,072      1,855
          Pro forma net income per common 
          share                                $  0.22     $ 0.20    $  0.15    $  0.20
</TABLE>

    First quarter  earnings per share in 1995 has not been provided,  because it
    preceded the Company's initial public offering.



                                      F-54


<PAGE>

<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholder and Board of Directors of
Healthcare Informatics Corporation
  and
To The Dun & Bradstreet Corporation

    We  have  audited  the  accompanying  statement  of  financial  position  of
HealthPlan  Services Division (formerly Plan Services  Division,  a wholly owned
division of The Dun & Bradstreet  Corporation)  as of September 30, 1994 and the
related  statements  of income and cash  flows for the  nine-month  period  then
ended.  These  financial  statements  are the  responsibility  of the companies'
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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

    In our opinion,  the financial  statements referred to above present fairly,
in all material respects, the financial position of HealthPlan Services Division
as of September  30, 1994 and the results of its  operations  and its cash flows
for the nine-month  period then ended,  in conformity  with  generally  accepted
accounting principles.

    As discussed in Note 1 to the financial  statements,  on September 30, 1994,
HealthPlan  Services  Division was sold to Healthcare  Informatics  Corporation,
pursuant to a purchase agreement dated September 2, 1994.

Coopers & Lybrand L.L.P.
Tampa, Florida

December 2, 1994



                                      F-55


<PAGE>

<PAGE>



                          HEALTHPLAN SERVICES DIVISION
                         STATEMENT OF FINANCIAL POSITION
                               September 30, 1994
                                 (in thousands)

<TABLE>
<CAPTION>
                          ASSETS                      
    <S>                                                    <C>
    Current assets:
      Cash                                              $ 1,255
      Accounts receivable                                 3,252
      Prepaid expenses                                    2,303
                                                        -------
        Total current assets                              6,810
    Property and equipment, net                           2,715
    Computer software, net                                1,327
    Other intangible assets, net                          5,483
    Goodwill, net                                        11,436
    Deferred taxes                                           85
    Other assets                                             28
                                                        -------
        Total assets                                    $27,884
                                                        =======
            LIABILITIES AND DIVISIONAL EQUITY

    Current liabilities:
      Current portion of note payable                   $    92
      Accounts payable                                   19,581
      Accrued liabilities                                 3,585
      Deferred revenue                                    1,294
                                                        -------
        Total current liabilities                        24,552
    Note payable                                          1,162
    Commitments and contingencies (Notes 9 and 13)
    Divisional equity                                     2,170
                                                        -------
        Total liabilities and divisional equity         $27,884
                                                        =======
</TABLE>

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



                                      F-56


<PAGE>

<PAGE>



                          HEALTHPLAN SERVICES DIVISION
                               STATEMENT OF INCOME
                   Nine-month period ended September 30, 1994
                                 (in thousands)
<TABLE>
    
   <S>                                                         <C>
    Revenues                                                    $81,945
                                                                -------
    Costs and expenses:
      Agents' commissions                                        33,213
      Personnel expenses                                         24,476
      Rent and maintenance                                        4,106
      Postage and communication                                   3,563
      Depreciation and amortization                               3,347
      Staff reductions and office closings (Note 3)               4,671
      Other operating expenses (Note 8)                           5,322
                                                                -------
                                                                 78,698
                                                                -------
    Income before provision for income taxes                      3,247
    Provision for income taxes                                    1,500
                                                                -------
        Net income                                              $ 1,747
                                                                =======
</TABLE>


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



                                      F-57


<PAGE>

<PAGE>



                          HEALTHPLAN SERVICES DIVISION
                             STATEMENT OF CASH FLOWS
                   Nine-month period ended September 30, 1994
                                 (in thousands)
<TABLE>

            <S>                                                           <C>
    Cash flows from operating activities:
    Net income                                                          $ 1,747
    Reconciliation of net income to net cash
      provided by operating activities:

      Depreciation and amortization                                       3,347
      Staff reductions and office closings provisions                     4,671
      Staff reductions and office closings payments                      (1,992)
      Deferred taxes                                                          2
      Accounts receivable                                                   484
      Prepaid expenses                                                     (269)
      Accounts payable                                                   (2,312)
      Accrued liabilities                                                  (892)
      Deferred revenue                                                     (512)
                                                                        -------
        Net cash provided by operating activities                         4,274
                                                                        -------
     Cash flows for investing activities:
      Purchase of property and equipment, net                              (931)
      Purchases of and additions to computer software                      (534)
      Acquisitions of other intangible assets
        (net of deferred payments)                                          (21)
      Other assets                                                           11
                                                                        -------
        Net cash used in investing  activities                           (1,475)
                                                                        -------
     Cash flows for financing  activities:
      Net amount remitted to The Dun & Bradstreet
        Corporation and affiliates (Note 7)                              (3,602)
      Payments on note payable                                              (46)
                                                                        -------
        Net cash used in financing activities                            (3,648)
                                                                        -------
    Net change in cash                                                     (849)
    Cash, beginning of period                                             2,104
                                                                        -------
    Cash, end of period                                                 $ 1,255
                                                                        =======
</TABLE>

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



                                      F-58




<PAGE>

<PAGE>




                          HEALTHPLAN SERVICES DIVISION

                          NOTES TO FINANCIAL STATEMENTS

1.  ORGANIZATION AND BASIS OF PRESENTATION:

    Organization--HealthPlan  Services  Division  (HSI)  (formerly Plan Services
Division, a wholly-owned division of The Dun & Bradstreet Corporation (D&B)), is
engaged in the business of providing  distribution and  administration  services
for group-health-insurance programs throughout the United States.

    Basis of  Presentation--The  accompanying  financial  statements  have  been
prepared  in  conformity  with  generally  accepted  accounting  principles.  On
September 30, 1994, HSI was sold to Healthcare Informatics Corporation, pursuant
to a purchase agreement dated September 2, 1994.

    These  financial  statements  present  the  results  of  operations  for the
nine-month period to September 30, 1994 and financial  position at September 30,
1994.  Purchase  accounting  by the  acquirer  has not been  reflected  in these
financial  statements.  Expenses and  liabilities  which were incurred by HSI in
connection  with the sale,  which would not otherwise  have been  incurred,  are
reflected in the nine-month period ended September 30, 1994. See Note 3.

    Expense  Allocations--D&B  provides  certain services to, and incurs certain
costs on behalf of its  subsidiaries and divisions.  These costs,  which include
employee benefit and executive  compensation  programs,  retirement  savings and
health  plans,   treasury  and  business  insurance,   are  allocated  to  D&B's
subsidiaries,  including  HSI, on a pro-rata  basis.  The costs of D&B's general
corporate overheads are not allocated as such costs related to HSI are deemed to
be immaterial.  Liabilities related to the benefit plans described above are not
fully reflected in the Statement of Financial Position. As such, these financial
statements may not  necessarily  be indicative of the financial  position or the
results of operations had HSI been operated as an unaffiliated company. However,
management  believes  that with respect to general and  administrative  expenses
(see Note 8), the amounts reflected in the Statement of Income are not less than
the  amounts HSI would have  incurred  had HSI been an  unaffiliated  company in
those periods.

2.  SIGNIFICANT ACCOUNTING POLICIES:

    Cash--Substantially  all of the net  cash  flow of HSI was  remitted  to D&B
pursuant to a centralized  cash management  system.  The related interest income
which  would  otherwise  have  been  earned  by HSI is not  reflected  in  these
statements.  Cash held by D&B has  historically  resulted  in  negative  working
capital for HSI.

    Property and  Equipment--Property  and equipment are stated at cost,  net of
accumulated  depreciation computed using the straight-line method over estimated
useful  lives  of  three  to  ten  years.   Additions  and  major  renewals  are
capitalized.  Repairs and maintenance  are charged to expense as incurred.  Upon
disposal,  the related cost and  accumulated  depreciation  are removed from the
accounts, with the resulting gain or loss included in income.

    Computer  Software--HSI   capitalizes  the  direct  expenses  of  internally
produced software. As of September 30, 1994,  capitalized software costs, net of
amortization was (in thousands) $627. Software is generally amortized over three
years.  Amortization  expense was (in thousands)  $184 for the nine months ended
September 30, 1994.

    Other  Intangible  Assets--Other  intangible  assets  represent the costs of
acquiring new blocks of insurance administration business which are deferred and
amortized on an  accelerated  basis over  periods of up to seven years.  Amounts
included  in  the  accompanying  Statement  of  Financial  Position  are  net of
accumulated amortization of (in thousands) $3,491 as of September 30, 1994.

    Goodwill--Goodwill relates to D&B's original acquisition of HSI and is being
amortized  on a  straight-line  basis over  periods  of  expected  benefit,  not
exceeding 40 years.  Goodwill represents the excess purchase price over the fair
value of identifiable net assets. Amounts included in the accompanying Statement
of  Financial  Position  are  net of  accumulated  amortization  of  $4,620  (in
thousands) as of September 30, 1994. At the balance sheet date,  HSI reviews the
recoverability of goodwill and other intangible assets.





                                      F-59





<PAGE>

<PAGE>


    Revenue   Recognition--Revenues  consist  primarily  of  fees  for  services
provided to  insurance  carriers as a third party  administrator.  Revenues  are
recognized ratably over the applicable  contract period,  which is generally one
year, and  represents  the period such services are performed.  HSI accounts for
revenues  received  in advance  by  deferring  such  amounts  until the  related
services are performed. During the nine months ended September 30, 1994, HSI had
three   customers   that  accounted  for   approximately   27%,  26%,  and  11%,
respectively, of revenues.

    Agents'  Commissions--Agents'  commission  expense  is  accrued  in the same
period that the related revenues are recognized.

    Income Taxes--HSI participates in the consolidated federal income tax return
of D&B. For financial  reporting  purposes,  HSI computes a provision for income
taxes on a separate  return  basis  based on  statutory  rates in effect.  HSI's
current  income  taxes  payable  are  included  in  divisional   equity  in  the
accompanying  Statement of  Financial  Position.  Effective  January 1, 1992 HSI
adopted SFAS No. 109,  "Accounting for Income Taxes," applying the provisions of
this statement retroactively to prior years' financial statements.

    Postemployment Benefits--Effective January 1, 1993, D&B and HSI adopted SFAS
No. 112,  "Employers'  Accounting for Postemployment  Benefits." HSI accrues for
such costs at the time it is probable  that a liability  to  employees  has been
incurred  and  it  can be  reasonably  estimated.  The  implementation  of  this
statement  did not have a material  impact  upon  HSI's  financial  position  or
results of operations.

    Postretirement Benefits--Effective January 1, 1993, D&B and HSI adopted SFAS
No.  106,  "Employers'   Accounting  for  Postretirement   Benefits  Other  than
Pensions."  As a member of D&B's  Plan,  HSI  recognized  as net  postretirement
benefit cost the required  contribution to the plan based upon an allocation and
formula used by D&B. As a  participant  in D&B's  postretirement  benefit  plan,
amounts related to liabilities to HSI employees existing at the date of adoption
of SFAS No. 106 are not  reflected  in the  accompanying  Statement of Financial
Position.

3.  STAFF REDUCTIONS AND OFFICE CLOSINGS:

    HSI has recorded  charges for certain staff  reductions and office closings.
In March 1994, HSI closed its Fresno,  California processing center and recorded
a charge totaling $1,050,000.  Such charge consisted of the following:  $355,000
of lease termination costs; $380,000 of severance costs; $175,000 of fixed asset
write-offs;  and $140,000 of other office closing costs.  On September 30, 1994,
immediately  prior to the sale of HSI, as required  pursuant to the terms of the
related purchase  agreement,  HSI terminated 125 employees  throughout its Tampa
operations and recorded a severance charge totaling $1,860,000. In addition, HSI
recorded a $1,761,000  charge for severance of two former  officers in 1994. All
severance and office closing costs were paid as of September 30, 1994 or assumed
by D&B as part of the sale of HSI.

    Subsequent to September  30, 1994,  HSI  discontinued  its contract with The
Centennial Life Insurance  Company.  The revenues related to Centennial were (in
thousands) $4,680 for the nine months ended September 30, 1994.



                                      F-60




<PAGE>

<PAGE>


4.  PROPERTY AND EQUIPMENT:

    Property and  equipment at September  30, 1994 consists of the following (in
thousands):

    Computers and equipment                                            $ 13,372
    Furniture and fixtures                                                4,611
    Leasehold improvements                                                3,791
                                                                       --------
                                                                         21,774
    Accumulated depreciation and amortization                           (19,059)
                                                                       --------
    Net property and equipment                                         $  2,715
                                                                       ========

    Depreciation  expense for the nine months ended  September  30, 1994 was (in
thousands) $1,284.

5.  ACCRUED LIABILITIES:

    Accrued  liabilities  at  September  30, 1994 consist of the  following  (in
thousands):

    Accrued salaries and wages                                           $2,315
    Deferred payments--other intangible assets                              657
    Other                                                                   613
                                                                         ------
        Total accrued liabilities                                        $3,585
                                                                         ======

6.  NOTE PAYABLE:

    On May 27,  1993,  HSI entered  into an  agreement  with  Cal/Group  for the
purchase  of its  claims  processing  business  at a price  of  $2,000,000.  The
purchase  price  consisted of $500,000  cash paid at closing with the balance in
the form of a note  payable  of  $1,500,000.  On  March  25,  1994 the  original
agreement  was  modified and the  purchase  price was reduced by $150,000.  This
purchase is  collateralized  by the claims  business.  The note payable requires
semi-annual  payments of $50,000 to $80,000,  including  interest at 6%, through
November  2008.  Interest  paid by the  Company was  insignificant  for the nine
months ended September 30, 1994.

    Future  minimum  principal  payments as of September 30, 1994 are as follows
(in thousands):

    Year ending December 31,
    1994 (3 months)                                                      $    46
    1995                                                                      90
    1996                                                                      97
    1997                                                                      92
    1998                                                                      93
    Thereafter                                                               836
                                                                          ------
        Total                                                             $1,254
                                                                          ======




                                      F-61



<PAGE>

<PAGE>


7.  DIVISIONAL EQUITY:

    Divisional  equity reflects the historical  activity between D&B and HSI. An
analysis of the changes in divisional equity is as follows (in thousands):

    Balance at beginning of period                                      $  634
    Net income                                                           1,747
    Net remittances to D&B                                                (211)
                                                                         -----
    Balance at end of period                                            $2,170
                                                                         =====

    For the nine months ended September  30,1994,  net  remittances  include (in
thousands)  $3,391 of non-cash charges related to severance  expenses to be paid
by D&B in  connection  with the  purchase  agreement.  These  amounts  have been
excluded for purposes of the Statement of Cash Flows. Other non-cash charges and
allocations  reflected  in net  remittances  to D&B  have  not  been  separately
identified for purposes of the Statement of Cash Flows.

8.  OTHER OPERATING EXPENSES:

    Other  operating  expenses  for the nine  months  ended  September  30, 1994
consist of the following (in thousands):

    General and administrative expenses                                 $2,188
    Professional services                                                1,488
    Insurance, taxes and licenses                                          451
    Travel and entertainment                                               597
    Utilities                                                              384
    Advertising and promotion                                              217
    Gain on property and equipment                                          (3)
                                                                         -----
                                                                        $5,322
                                                                         =====
9.  LEASES:

    HSI leases certain facilities and equipment under long-term leases which are
accounted for as operating leases.

    Future minimum lease payments for long-term operating leases as of September
30, 1994 are approximately as follows (in thousands):

    Year ending December 31,

    1994 (3 months)                                                       $  930
    1995                                                                   2,780
    1996                                                                     880
                                                                           -----
        Total                                                             $4,590
                                                                           =====
    Rent expense for the nine months ended September 30, 1994 was (in thousands)
$3,331.


                                      F-62




<PAGE>

<PAGE>


10. POSTRETIREMENT AND DEFERRED COMPENSATION PLANS:

    HSI's  participation in D&B's  postretirement  medical plan, defined benefit
pension plan and deferred compensation plan terminated as of September 30, 1994.

    Prior to September 30, 1994,  HSI  recognized  postretirement  benefit costs
based upon an allocation and formula  determined by D&B. The amount allocated to
HSI as its share of the total pension costs for the nine months ended  September
30, 1994 was (in thousands)  $611. The costs  allocated to HSI and recognized as
net  postretirement  benefit  costs  were  not  material  to  HSI's  results  of
operations for the nine months ended September 30, 1994.

    As a participant in D&B's  postretirement and deferred  compensation  plans,
amounts related to liabilities to HSI employees existing at the date of adoption
of new accounting standards for pensions and other  postretirement  benefits are
not reflected in the accompanying  Statement of Financial Position.  Amounts due
to D&B relating to HSI's  allocated  costs under the above plans are included in
divisional  equity in the  accompanying  Statement  of Financial  Position.  The
following  information  relates  to the  D&B  plans  HSI  participates  in as of
December 31, 1993,  the most recent  valuation  date.  Such  information  is not
available on a separate company or divisional basis.

    D&B has defined benefit pension plans covering  substantially all associates
in the United  States.  The benefits to be paid to associates  under these plans
are based on years of credited service and average final  compensation.  Pension
costs are determined  actuarially  and funded to the extent  allowable under the
Internal Revenue Code. Supplemental plans in the United States are maintained to
provide retirement benefits in excess of levels allowed by ERISA.

    The status of D&B's U.S.  defined benefit pension plans at December 31, 1993
is as follows (millions of dollars):

                                                Funded               Unfunded(1)
                                                ------               -----------
                                                 1993                   1993
                                                 ----                   ----

    Fair value of plan assets                  $1,008.9              $       -
                                               --------              ---------
    Actuarial present value of
      benefit obligations:

      Vested benefits                             708.0                   69.1
      Non-vested benefits                          29.4                    7.2
                                                  -----                   ----
      Accumulated benefit obligations             737.4                   76.3
      Effect of projected future
        salary increases                          128.1                   37.4
                                                  -----                   ----
          Projected benefit obligations           865.5                  113.7
    Plan assets in excess of (less than)          -----                  -----

      projected benefit obligations               143.4                 (113.7)
    Unrecognized net (gain) loss                   56.2                   38.4
    Unrecognized prior service cost                15.4                   18.2
    Unrecognized net transition (asset)
      obligation                                  (93.6)                   2.9
    Adjustment to recognize minimum
      liability                                     -                    (22.1)
                                               --------                -------
    Prepaid (accrued) pension cost             $  121.4                $ (76.3)
                                               ========                ========


    (1)        Represents  supplemental  plans for which  grantor  trusts  (with
               assets of $60 million at December 31, 1993) have been established
               to pay plan benefits.

    The  weighted  average  expected  long-term  rate of return on pension  plan
assets  was 9.75%  for  1993.  At  December  31,  1993,  the  projected  benefit
obligations  were determined using a weighted average discount rate of 7.25% and
a weighted average rate of increase in future  compensation levels of 5.7%. Plan
assets are invested in diversified  portfolios that consist  primarily of equity
and debt securities.



                                      F-63



<PAGE>

<PAGE>

    In addition to providing  pension  benefits,  D&B provides  various  medical
benefits for retired  associates.  Substantially  all of D&B's associates in the
United States become eligible for these benefits if they reach normal retirement
age while working for D&B.

    Deferred   Compensation   Plans--HSI  also   participated  in  D&B's  Profit
Participation  Plan and  Investment  Plan  for  which  substantially  all of its
employees were eligible.  D&B had also granted stock options to purchase  shares
of D&B common stock to certain key  employees  of HSI. In addition,  certain key
employees  participated in incentive plans sponsored by D&B the cost of which to
HSI for such plans (in  thousands)  amounted to $589 for the nine  months  ended
September 30, 1994.

11. OTHER TRANSACTIONS WITH AFFILIATES:

    D&B  provides  HSI  with  payroll  processing  and  administration,  general
treasury  services and various  business  insurance  coverages  through policies
issued to D&B. Expenses allocated to HSI for these services,  which are included
in the Statement of Income,  were (in thousands)  $326 for the nine months ended
September  30,  1994.  Amounts due to D&B relating to the above  activities  are
included in divisional equity in the Statement of Financial Position.

    HSI  provides  computer  services to an affiliate  totaling  (in  thousands)
$1,312 for the nine months ended September 30, 1994.  These amounts are included
in revenues in the Statement of Income.

    HSI  provides  health  plan  claims  administration  for D&B,  totaling  (in
thousands)  $1,647 for the nine months ended  September 30, 1994. HSI records as
revenues services provided to D&B.

12. FEDERAL INCOME TAXES:

    HSI joins in filing a  consolidated  federal  income tax return with D&B and
its affiliates.  For financial reporting purposes,  HSI computes a provision for
income taxes on a separate-return basis.

    The reasons for the difference  between HSI's effective  income tax rate and
the statutory  rate for the nine months ended  September 30, 1994 are as follows
(thousands of dollars):

    Federal income tax calculated at statutory rate
      (35% for 1994)                                                     $1,136
    State income tax, net of federal benefit                                220
    Goodwill                                                                109
    Other                                                                    35
                                                                          -----
    Income tax provision                                                 $1,500
                                                                          =====

                                      F-64



<PAGE>

<PAGE>


    The income tax  provision  for the nine months ended  September  30, 1994 is
summarized as follows (thousands of dollars):

    Current:
      Federal                                                            $1,160
      State                                                                 338
                                                                          -----
                                                                          1,498
                                                                          =====
    Deferred:

      Federal                                                                 2
      State                                                                   0
                                                                          -----
                                                                              2
                                                                          -----
    Income tax provision                                                 $1,500
                                                                          =====

    The primary sources of temporary  differences  that give rise to significant
portions of the  deferred tax asset and  liability at September  30, 1994 are as
follows (thousands of dollars):

    Deferred tax assets:

      Property and equipment                                               $144

    Deferred tax liabilities:

      Other intangible assets                                               (59)
                                                                           ----
    Net deferred tax asset                                                $  85
                                                                           ====
13. COMMITMENTS AND CONTINGENCIES:

    HSI is  involved  in  litigation  arising  during the  normal  course of its
business. In the opinion of management, the resolution of these matters will not
have a material  effect on the  financial  position or results of  operations of
HSI.



                                      F-65

<PAGE>

<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of
Staffing Resources, Inc.:
 
We  have  audited  the  accompanying  consolidated  balance  sheet  of  Staffing
Resources, Inc. as of December 31, 1996, and the related consolidated statements
of operations, changes in shareholders' equity and cash flows for the year  then
ended.  These consolidated  financial statements  are the  responsibility of the
Company's management.  Our responsibility  is  to express  an opinion  on  these
consolidated statements based on our audit.
 
Except  as  discussed in  the  following paragraph,  we  conducted our  audit in
accordance with generally accepted  auditing standards. Those standards  require
that  we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements  are  free  of  material  misstatement. An
audit includes examining, on a test basis, evidence supporting  the amounts  and
disclosures  in the financial  statements. An audit  also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that  our
audit provides a reasonable basis for our opinion.
 
Included  in  trade  accounts  receivable at  December  31,  1996,  are accounts
receivable from one customer amounting to approximately $1,209,000 that have not
been  collected  as of  March 28,  1997.  We were  unable to  obtain sufficient,
competent, evidential matter to  satisfy ourselves as  to the collectibility  of
these  accounts receivable.  Management believes  these accounts  receivable are
collectible.
 
In our opinion, except  for the effects  of such adjustments,  if any, as  might
have  been determined  to be  necessary had we  been able  to obtain sufficient,
competent,  evidential  matter   to  assess  management's   assessment  of   the
collectibility  of  the  aforementioned  accounts  receivable,  the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of  Staffing Resources, Inc. as of  December
31,  1996 and the consolidated results of  its operations and its cash flows for
the  year  then  ended,  in   conformity  with  generally  accepted   accounting
principles.
 
As  discussed in  Note 17 to  the consolidated financial  statements, during the
year ended December 31, 1996, the  Company changed its method of accounting  for
staff employees' vacation accruals and adjusted its previously reported December
31, 1995 retained earnings for this change in accounting and for understatements
of its workers' compensation claim accrual and its accounts payable.

Coopers & Lybrand L.L.P.

Dallas, Texas
March 31, 1997
 
                                      F-66


<PAGE>

<PAGE>



                        Noel Group, Inc. and Subsidiaries            SCHEDULE II
                        Valuation and Qualifying Accounts
              For the Years Ended December 31, 1996, 1995 and 1994
                             (dollars in thousands)

<TABLE>
<CAPTION>
Column A                                   Column B                          Column C                        Column D     Column E
                                                                            Additions
                                                       ----------------------------------------------------
                                                              (1)             (2)             (3)
                                                                                          Acquisition                          
                                           Balance         Charged to     Charged to    Cost Allocated       Payments    Balance at
                                         Beginning of      Costs and         Other         to Assets           and         End of
Description                                 Period          Expenses       Accounts        Purchased         Charges       Period 
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                <C>          <C>               <C>          <C>            <C>   
Year Ended December 31, 1996
  Allowance for doubtful accounts             $2,013           $  724         $    -            $    -       $907 (a)       $1,830
  Allowance for returns and discounts         $  854           $1,181         $    -            $    -       $147 (a)       $1,888
  Inventory reserve                                                                                          $641 (a)          
                                              $3,113           $  274         $  135            $1,800       $974 (b)       $3,707

Year Ended December 31, 1995
  Allowance for doubtful accounts             $2,075           $  823         $  433            $  161     $1,479 (a)       $2,013
  Allowance for returns and discounts         $1,017           $  289         $    -            $    -     $  452 (a)       $  854
  Inventory reserve                           $2,247           $2,190         $  399            $    -     $1,723 (a)       $3,113

Year Ended December 31, 1994
  Allowance for doubtful accounts             $  722           $  645         $    -            $1,433     $  725 (a)       $2,075
  Allowance for returns and discounts         $    -           $  481         $   80            $  943     $  487 (a)       $1,017
  Inventory reserve                           $1,361           $  284         $  101            $  917     $  416 (a)       $2,247
</TABLE>


(a) Write-Offs
(b) Dispositions




                                       S-1



<PAGE>
<PAGE>




                                INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Item No.                Item Title                                                                              Exhibit No.
--------                ----------                                                                              -----------
<S>                     <C>                                                                                       <C>
(2)                     Plan of acquisition, reorganization, arrangement, liquidation or succession:

                        (A)  Stock Purchase Agreement dated as of December 18, 1996 by and among                   (a)
                             Noel Group, Inc., Automatic Data Processing, Inc. and HealthPlan Services

                             Corporation.

                        (B)  Plan of Complete Liquidation and Dissolution of Noel Group, Inc.                      (b)

(3)                     Articles of Incorporation and By-Laws:

                        (A)  Certificate of Incorporation, as amended.                                             (c)

                        (B)  Composite copy of the Certificate of Incorporation, as amended.                       (d)

                        (C)  By-Laws, as amended and restated.                                                     (e)

(4)                     Instruments defining the rights of security holders, including indentures:

                        (A)  Excerpts from Certificate of Incorporation, as amended.                               (c)

                        (B)  Excerpts from By-Laws, as amended and restated.                                       (e)

(9)                     Voting Trust Agreements:  None

(10)                    Material Contracts:

                        (A)  Noel Group, Inc. Retirement Plan (401(k) Plan), as amended.                           (f)

                        (B)  Noel Group, Inc. 1995 Stock Option Plan.                                              (g)

                        (C)  Noel Group, Inc. 1995 Non-Employee Directors' Plan.                                   (g)

                        (D)  Common Stock Purchase Warrant granted January 4, 1995 to Joseph S.                    (e)
                               DiMartino.

                        (E)  Employment Agreement dated as of February 15, 1995, by and between                    (e)
                               Noel Group, Inc. and Joseph S. DiMartino.

                        (F)  Employment Agreement dated as of March 20, 1995 by and between Noel                   (h)
                               Group, Inc. and Stanley R. Rawn, Jr.

                        (G)  Common Stock Purchase Warrant granted March 9, 1995 to Stanley R.                     (h)
                               Rawn, Jr.
</TABLE>



                                       -i-






<PAGE>

<PAGE>

<TABLE>
<CAPTION>

Item No.                Item Title                                                                            Exhibit No.
--------                ----------                                                                            -----------
<S>                     <C>                                                                                       <C>
                        (H)  Letter Agreement dated March 22, 1995 by and between Noel Group, Inc.                 (e)
                               and Karen Brenner with respect to Ms. Brenner serving as Chairman and
                               Acting Chief Executive Officer of Lincoln Snacks Company.

                        (I)  Letter Agreement dated March 1, 1996 by and between Noel Group, Inc.                  (f)
                              and Karen Brenner with respect to Ms. Brenner's employment by Noel.

                        (J)  Letter Agreements dated March 9, 1995 by and between Noel Group, Inc.                 (e)
                              and William L. Bennett.

                        (K)  Sublease Agreement dated January 1, 1995 by and between The Prospect                  (f)
                              Group, Inc. and Noel Group, Inc.

                        (L)  Life Insurance Agreement dated July 27, 1995 between Noel Group, Inc.                 (f)
                              and Howard M. Stein as Trustee u/a dated June 10, 1993 between
                              Joseph S. DiMartino, Grantor and Howard M. Stein, Trustee.

                        (M)   Assignment of Life Insurance  Policy as Collateral                                   (f)
                              dated as of July 27,  1995  by  Howard  M.   Stein
                              as Trustee u/a dated June 10, 1993 between  Joseph
                              S.   DiMartino,   Grantor  and  Howard  M.  Stein,
                              Trustee, to Noel Group, Inc.

                        (N)  Life Insurance Agreement dated as of May 17, 1995 between Noel Group,                 (h)
                              Inc. and Karen Brenner.

                        (O)   Assignment of Life Insurance  Policy as Collateral                                   (h)
                              dated as of May 17,  1995  by  Karen   Brenner  to
                              Noel Group, Inc.

                        (P)  Tax Allocation Agreement dated as of January 20, 1995 by and between                  (f)
                              Noel Group, Inc. and Carlyle Industries, Inc.

                        (Q)   Exclusive  Distribution  Agreement  dated  June 6,                                   (h)
                              1995   between   Lincoln   Snacks   Company    and
                              Planters' Company, a unit of Nabisco, Inc.

                        (R)  Tender and Option Agreement dated November 13, 1995 by and among                      (i)
                              Blount, Inc., S.O.C. Corporation, Noel Group, Inc. and The Forschner
                              Group, Inc.

                        (S)  Asset Purchase Agreement dated as of December 12, 1996 among Carlyle                    (j)
                             Heminway Company, Inc., certain of its subsidiaries, Hicking Pentecost
                             PCC and HP Belt-Acquisition Corporation.
</TABLE>

                                      -ii-






<PAGE>

<PAGE>




<TABLE>
<CAPTION>

Item No.                Item Title                                                                            Exhibit No.
--------                ----------                                                                            -----------
<S>                     <C>                                                                                       <C>
(11)                    Statement re computation of per share earnings is not required because the
                        relevant computations can be clearly determined from the material contained in
                        the financial statements included herein.

(12)                    Statements re Computation of Ratios:  Not Applicable.

(13)                    Annual Report to security holders:  Not Applicable

(16)                    Letter re Change in Certifying Accountant:  Not Applicable.

(18)                    Letter re Change in Accounting Principles:  Not Applicable.

(21)                    Subsidiaries of the registrant.                                                            (21)

(22)                    Published Report re Matters Submitted to Vote of Security Holders:  Not
                        Applicable

(23)                    Consent of Arthur Andersen LLP                                                             (23)-1

                        Consent of Price Waterhouse LLP                                                            (23)-2

                        Consent of Coopers & Lybrand L.L.P.                                                        (23)-3

                        Consent of Coopers & Lybrand L.L.P.                                                        (23)-4

(24)                    Power of Attorney:  Not Applicable

(27)                    Financial Data Schedules                                                                   (27)

(28)                    Information from Reports Furnished to State Insurance Regulatory Authorities:
                        None

(99)                    Additional Exhibits:  None
</TABLE>

--------------
(a)  This  exhibit was filed as an exhibit to the  Company's  Current  Report on
     Form 8-K dated February 7, 1997 and is incorporated herein by reference.

(b)  This exhibit was filed as an exhibit to the Company's  Proxy  Statement for
     the  Special  Meeting  of  Shareholders  held  on  March  19,  1997  and is
     incorporated herein by reference.

(c)  These  exhibits  were  filed  as  exhibits  to the  Company's  Registration
     Statement on Form S-1,  Registration  No. 33-44178,  effective  January 29,
     1992, and are incorporated herein by reference.

(d)  These  exhibits  were filed as exhibits to the  Company's  Annual Report on
     Form 10-K for the fiscal year ended December 31, 1992, and are incorporated
     herein by reference.



                                      -iii-






<PAGE>

<PAGE>



(e)  These  exhibits  were filed as exhibits to the  Company's  Annual Report on
     Form 10-K for the fiscal year ended December 31, 1994, and are incorporated
     herein by reference.

(f)  These  exhibits  were filed as exhibits to the  Company's  Annual Report on
     Form 10-K for the fiscal year ended December 31, 1995, and are incorporated
     herein by reference.

(g)  These exhibits were filed as exhibits to the Company's  Proxy Statement for
     the 1995 Annual  Meeting of  Stockholders  and are  incorporated  herein by
     reference.

(h)  These exhibits were filed as exhibits to the Company's  Quarterly Report on
     Form 10-Q for the quarter  ended  September  30, 1995 and are  incorporated
     herein by reference.

(i)  This  exhibit was filed as an exhibit to the  Company's  Current  Report on
     Form 8-K dated December 29, 1995, and is incorporated herein by reference.

(j)  This exhibit was filed as an exhibit to the Proxy Statement for the Special
     Meeting of Stockholders of Belding Heminway Company, Inc. held on March 26,
     1997, and is incorporated herein by reference.



                                      -iv-



                           STATEMENT OF DIFFERENCES
                           ------------------------
     The trademark symbol shall be expressed as .................... 'tm'
     The registered trademark symbol shall be expressed as .........  'r'




<PAGE>