<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, 1997    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. [X] Yes [ ] 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. [X]

      The aggregate market value of voting stock held by non-affiliates of the
registrant on March 20, 1998, was approximately $43,733,000. On such date, the
last sale price of registrant's common stock was $2.875 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 20, 1998.

               Class                               Outstanding on March 20, 1998
               -----                               -----------------------------
Common Stock, par value $.10 per share                         20,567,757

                      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 1998 Annual Meeting



<PAGE>

      This Annual Report on Form 10-K contains, in addition to historical
information, certain forward-looking statements including those regarding
valuation of Noel's assets and liabilities, the amounts ultimately to be
distributed to shareholders and Noel's plans for the liquidation or disposition
of assets and future plans of entities in which Noel holds interests. 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")
pursuant to which the assets of Noel will either be distributed in kind to
Noel's shareholders or sold; the proceeds of such sales, after paying or
providing for all claims, liabilities, expenses and other obligations of Noel,
will be distributed to Noel's shareholders together with other available cash;
and thereafter Noel will be dissolved. The Plan was approved by the shareholders
at a Special Meeting of Shareholders held on March 19, 1997.

      Prior to the approval of the Plan, Noel conducted its principal operations
through small and medium-sized operating companies in which Noel held
controlling or other significant equity interests. As a consequence of the
approval of the Plan, 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.

      Prior to the approval of the Plan by the shareholders, on February 7,
1997, Noel sold to Automatic Data Processing, Inc. 1,320,000 shares of
HealthPlan Common Stock at a price of $20 per share or $26.4 million in the
aggregate.

      On April 25, 1997, Noel distributed pro rata to its shareholders 3,754,675
shares of common stock, par value $.01 per share ("HealthPlan Common Stock"), of
HealthPlan Services Corporation ("HealthPlan Services") at the rate of 0.1838631
shares of HealthPlan Common Stock for each share of common stock, par value $.10
per share ("Common Stock"), of Noel issued and outstanding at the close of
business on the April 18, 1997 record date. The value of the distribution was
$2.64 per share (i.e. $14.375 (the value per share of HealthPlan Common Stock on
the distribution date) multiplied by 0.1838631). In addition, in connection with
the HealthPlan distribution, Noel withheld 521,171 shares of HealthPlan Common
Stock for possible transfer to Noel's warrant and/or option holders upon
exercise of their respective warrants and options, 108,570 of which were
subsequently transferred in connection with the exercise of such options and
warrants.

      On October 6, 1997, Noel distributed pro rata to its shareholders its
remaining 412,601 shares of HealthPlan Common Stock at the rate of 0.02006
shares of HealthPlan Common Stock for each share of Common Stock issued and
outstanding at the close of business on the September 29, 1997 record date. The
value of the distribution was $.4244 per share (i.e. $21.157 (the value per
share of HealthPlan Common Stock on the distribution date) multiplied by
0.02006). Accordingly, Noel has no remaining shares of HealthPlan Common Stock.
HealthPlan Services is a provider of marketing, administrative and risk
management services and solutions for health and other benefit programs.

      On December 1, 1997, Noel distributed pro rata to its shareholders
2,205,814 shares of common stock, par value $.01 per share ("Carlyle Common
Stock"), of Carlyle Industries, Inc. ("Carlyle"), f/k/a Belding Heminway
Company, Inc., at the rate of 0.107246 shares of Carlyle Common Stock for each
share of Common Stock issued and outstanding at the close of business on the
November 21, 1997 record date. The value of the


                                       -1-



<PAGE>

distribution was $.1501 per share (i.e. $1.40 (the value per share of Carlyle
Common Stock on the distribution date) multiplied by .107246). Noel continues to
hold approximately 93% of the outstanding Series B Preferred Stock of Carlyle,
which represents approximately 68% of the aggregate voting power of Carlyle.
Carlyle is a distributor of a line of home sewing and craft products,
principally buttons.

      On December 5, 1997, pursuant to an Agreement and Plan of Merger dated
November 6, 1997 (the "Merger Agreement") by and among Curtis Industries, Inc.
("Curtis"), Paragon Corporate Holdings, Inc. ("Paragon") and Curtis Acquisition
Corp. ("Merger Subsidiary"), a wholly-owned subsidiary of Paragon, Merger
Subsidiary was merged with and into Curtis. As a Curtis shareholder Noel
received, under the Merger Agreement for all of its holdings of Curtis,
approximately $4.3 million in cash and a note for approximately $10.4 million
bearing interest at an annual rate of 7% and secured by a letter of credit. Noel
expects to monetize this note at face value or receive early repayment from
Paragon, but there can be no assurance that a lesser amount will not be
realized. Curtis is a distributor of fasteners, security products, chemicals,
automotive replacement parts, fittings and connectors, tools and hardware.

      On March 13, 1998, Noel declared a liquidating distribution of $.70 per
share payable on March 27, 1998 to holders of record at the close of business
on the March 20, 1998 record date.

Principal Remaining Assets of the Company

      Set forth below is a table setting forth Noel's principal remaining
holdings as of March 20, 1998.

<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 20, 1998 Traded on       Stock        March 20, 1998
---------------               ----------   -------------- ------------    ----------   --------------
<S>                            <C>               <C>       <C>             <C>             <C>
Staffing Resources, Inc.(1)    2,026,104         11%          --(2)            --            --

Carlyle Industries, Inc.(3)       --             --           --           19,312,838      93%(4)
                                                                            Series B

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

Ferrovia Novoeste,(1)          1,200,000         18%          --            5,657,142        42%
 S.A.
</TABLE>

(1)   Not subject to the reporting obligations of the Securities Exchange Act of
      1934, as amended (the "Exchange Act").

(2)   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."

(3)   Subject to the reporting obligations of the Exchange Act.

(4)   Carlyle's ownership of Series B Preferred Stock represents ownership of
      68% of Carlyle's aggregate voting power.


                                       -2-



<PAGE>

Factors to be Considered with Respect to the Distribution or Sale of the
Company's Remaining Assets

      Set forth below is a brief description of the status of Noel's current
plans to sell or distribute its principal remaining 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 remaining 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 highest possible value to
Noel's shareholders and will be based on several factors, including, and not
necessarily in order of priority (i) whether the security in question is
publicly traded; (ii) the anticipated effect on the market price of a
distribution as opposed to a sale; (iii) whether the security in question could
be sold with little disruption to the public market; (iv) whether an orderly
public market exists and would continue to exist after distribution; (v) whether
a distribution or a sale would require registration under the Securities Act of
1933, as amended (the "Securities Act") and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); (vi) the need to raise cash through sales of
securities to pay corporate taxes payable upon the distribution and sale of the
Company's assets and the amount of additional cash required to be raised; (vii)
the availability of one or more purchasers of the security in a private sale;
(viii) the Board's opinion as to the future prospects of the entity; (ix) the
prices obtainable for such asset in public or privately negotiated transactions;
and (x) with respect to assets to be sold in private transactions, the
availability of purchasers for such assets. Currently, the Company's publicly
traded holdings are thinly traded. Accordingly, a public sale or distribution
thereof could result in a disruption in the public market.

      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 Securities 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 Exchange
Act and, if required by applicable law and regulation, the Securities Act.
Accordingly, the issuer of 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 a 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.

      The sale by the Company or the distribution by the Company to its
shareholders of an appreciated asset results 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, the sale and distribution by the
Company of its holdings in HealthPlan Services resulted in the recognition by
the Company of significant taxable gain. On February 7, 1997, Noel sold to
Automatic Data Processing, Inc. ("ADP") 1,320,000 shares of its common stock of
HealthPlan Services for an aggregate purchase price of $26.4 million. The
proceeds of such sale were 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. The remaining proceeds after payment of such taxes and expenses are
available for cash distributions to the shareholders. The Company currently
believes that it has sufficient cash to pay taxes and expenses, although there
can be no assurance that this will be the case. In the event that available cash
is 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


                                       -3-



<PAGE>

additional assets would be sold to raise the cash to pay any additional taxes
and expenses will depend on a variety of factors, including, those set forth in
the preceding paragraph.

Staffing Resources, Inc.

      Noel currently holds 2,026,104 shares of common stock of Staffing
Resources, representing approximately 11% of the outstanding shares of such
common stock, with an estimated value as of December 31, 1997 of approximately
$22.3 million. See Footnote 2 of Notes to Financial Statements on page F-10.
Noel management is currently assessing the most advantageous way to realize its
investment in Staffing Resources and does not expect a transaction to occur
until the second half of 1998 at the earliest. On December 31, 1997, Staffing
Resources acquired in a merger Career Blazers Personnel Services, Inc ("Career
Blazers"), a New York based family of companies that provide computer training
services in the Northeast and is a licenser and franchiser of training centers
throughout the U.S. and Canada.

Carlyle Industries, Inc.

      Noel currently holds 19,312,838 shares of Series B preferred stock of
Carlyle, representing approximately 93% of the outstanding shares of such Series
B preferred stock (the "Preferred Stock"), or 68% of the aggregate voting power,
with an estimated value as of December 31, 1997 of approximately $21.0 million.
See Footnote 2 of Notes to Financial Statements on page F-10. Under the terms of
Carlyle's charter, dividends are payable upon the Preferred Stock when, as and
if declared by the Carlyle Board of Directors out of legally available funds. In
addition, the Preferred Stock is required to be redeemed by Carlyle in annual
installments of $4.2 million beginning March 15, 1995 through March 15, 1999,
subject, among other things, to the extent of legally available funds as
determined by the Board of Directors and the approval of Carlyle's senior
lenders, if any. Prior to March 27, 1997, Carlyle did not make any payments on
account of the Preferred Stock (either dividend or redemption) as Carlyle's
lenders declined to approve such payments. However, as of that date, Carlyle
discharged the last of its credit facilities. Consequently, Carlyle is now in
default of its obligations to redeem the Preferred Stock to the extent of its
legally available funds. As of December 31, 1997, the Preferred Stock payment
arrearages aggregated $16.7 million including accrued but unpaid dividends of
$4.2 million. Accrued but unpaid dividends are added to the redemption value of
the Preferred Stock and the total continues to accrue interest at a compound
rate of 6% per annum.

      Carlyle is engaged in discussions with Noel, with a view of satisfying its
obligations to the holders of the Preferred Stock in accordance with the terms
of its charter and to the extent consistent with Carlyle's resources.
Discussions have dealt with the amount and timing of payments and possible
modifications of the terms of the Preferred Stock. Any such modifications would
require the agreement of Carlyle and the holders of the Preferred Stock.

      Carlyle has informed Noel that it intends to fulfill its obligation to the
holders of the Preferred Stock as required by the Company's charter to the
extent Carlyle has cash resources in excess of those required to operate its
business. Carlyle has also informed Noel that, as Carlyle believes that it does
not currently have such excess resources, its ability to make payments on
account of the Preferred Stock in the future will depend on Carlyle's future
cash flow, the timing of the settlement of the liabilities recorded in its
financial statements, the outcome of the negotiations with Noel described above,
and the ability of Carlyle to obtain additional financing. The Carlyle board of
directors is continuing its review of Carlyle's strategic alternatives,
including, among other things, the sale of Carlyle through merger, sale of stock
or otherwise, possible acquisitions by Carlyle and possible refinancing. Any
such transaction and/or the discussions between the companies may result in the
modification of the terms of the Preferred Stock or in the acceleration of the
redemption of the Preferred Stock and/or the reduction in the total amounts
eventually received by Noel for its holdings of Preferred Stock. In addition, as
Carlyle has agreed to notify the Pension Benefit Guaranty Corporation ("PBGC")
prior to making any redemption payments, Carlyle's decision to make any such
payments will depend on the successful resolution


                                       -4-



<PAGE>

of any issues which may arise with the PBGC relating to Carlyle's unfunded
liability to its defined benefit plan. In December 1997, Carlyle notified the
PBGC that it intends to redeem $10 million of Preferred Stock as soon after year
end as is practicable, but only to the extent of legally available funds as
determined by its Board of Directors and after appropriate bank financing has
been satisfactorily obtained. Following such notice, the PBGC indicated that it
would not take any action with respect to such payments. Carlyle is currently
exploring the possibility of securing bank financing which would enable such
payments to be made, assuming the Carlyle Board of Directors determines there
are sufficient legally available funds.

Lincoln Snacks Company

      Noel holds 3,769,755 shares of common stock of Lincoln Snacks,
representing approximately 60% of the outstanding shares of Lincoln Snacks'
common stock, with an estimated value (based on the closing market price) as of
December 31, 1997 of approximately $5.9 million. See Footnote 2 of Notes to
Financial Statements on page F-10. Noel has not determined the method or timing
of disposition of its interest in Lincoln Snacks or whether this asset or a
portion thereof will be sold or distributed in-kind.

Ferrovia Novoeste, S.A.

      Noel's wholly-owned subsidiary, Noel Brazil, Inc., holds 1,200,000 shares
of common stock of Novoeste, S.A. ("Novoeste") representing 18% of the
outstanding shares of common stock and 5,657,142 shares of preferred stock of
Novoeste, representing approximately 42.3% of such outstanding shares. The
estimated value of Noel's interest in Novoeste as of December 31, 1997 was
$8 million. See Footnote 2 of Notes to Financial Statements on page F-10. The
transfer of Noel's interest in Novoeste is subject to certain restrictions,
both regulatory and contractual. It is possible that Noel's interest in
Novoeste will be converted in a business combination into securities of a larger
Brazilian railroad entity. Noel does not anticipate a public distribution to its
shareholders of its interest in Novoeste or in any such larger Brazilian
railroad entity 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 Assets

      Noel holds various other assets with an aggregate estimated value of
approximately $12.4 million as of December 31, 1997, including a note for
approximately $10.4 million secured by a letter of credit, received as part of
the purchase price for its holdings of Curtis. Noel expects to be able to
monetize this note at approximately face value but there can be no assurance
that a lesser amount will not be realized.

Principal Provisions of the Plan

Pursuant to the Plan:

      (a) The Company is in the process of distributing pro rata to its
shareholders, in-kind or selling or otherwise disposing of all its property and
assets. The liquidation is expected to be concluded prior to March 19, 2000 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 sale 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 Remaining Assets." Reference
is made to "Factors to be Considered with Respect to Distribution or Sale of the
Company's Remaining 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.


                                       -5-



<PAGE>

      (b) Subject to the payment or the provision for payment of the Company's
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's accrued obligations at December 31, 1997 were
approximately $5.4 million. The Company currently has no plans to repurchase
shares of Common Stock from its shareholders. However, if the Company were to
repurchase its shares of 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 further distributions 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 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 Exchange Act and, if required by applicable
law and regulation, the Securities Act. Accordingly, the issuer of such
securities will be subject to substantially the same reporting and proxy rules
as currently apply to the Company. As described under "Principal Remaining
Assets of the Company" only certain of Noel's holdings constitute entities which
are currently subject to the reporting obligations of 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 Remaining 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 March 19, 2000, it is anticipated that the Company would
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


                                       -6-



<PAGE>

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 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) A Certificate of Dissolution will be filed with the State of Delaware
dissolving the Company following completion of the foregoing steps or earlier as
determined by the Board of Directors. 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
further distributions to shareholders, the Board of Directors will, subject to
exigencies inherent in winding up the Company's business, make further
distributions as promptly as practicable. The liquidation is expected to be
concluded prior to March 20, 2000, 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


                                       -7-



<PAGE>

further distributions pursuant to the Plan. The actual nature, amount and timing
of, and record date for all further 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 Remaining 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 further distributions to its shareholders, but
instead will reserve assets deemed by management and the Board of Directors to
be 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.

      Uncertainties as to the precise value of Noel's remaining assets and the
ultimate amount of its liabilities may materially affect the net values
ultimately distributable to shareholders. Estimated claims, liabilities and
expenses from operations (including operating costs, salaries, income taxes,
payroll and local taxes and miscellaneous office expenses), projected to occur
during execution of the Plan, have been accrued for along with expenses for
professional fees and other expenses of liquidation. 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. Any increase to the Company's obligations,
liabilities, expenses and claims above the accrued amount will reduce the net
assets ultimately available to shareholders.

Sales of the Company's Remaining Assets

      The Plan gives the Board of Directors the authority to sell all of the
assets of the Company. Any sales of the Company's remaining 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 such 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, the Board and management have effectively
terminated the Company's participation in acquisitions. Accordingly, since the
adoption of the Plan, Joseph S. DiMartino has resigned as Chairman, Louis Marx,
Jr., has resigned as a director and as Chairman of the Executive Committee,
Samuel F.


                                       -8-



<PAGE>

Pryor, IV, Karen Brenner and Donald T. Pascal have each resigned as Managing
Directors, Livio M. Borghese, Vincent D. Farrell, Jr., Thomas C. Israel, James
G. Niven, John A. MacDonald and Edward T. Tokar have each resigned as directors.
It is anticipated that certain of the current directors and executive officers
of the Company will continue to serve in such capacities. These officers and
directors receive compensation for the duties 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 paid to directors and executive officers
of the Company. Such compensation is 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.

      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. In addition, if all of the Company's assets (other than the
Contingency Reserve) are not sold or


                                       -9-



<PAGE>

distributed prior to March 19, 2000, it is anticipated that the Company would
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
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.


                                      -10-



<PAGE>

      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.

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


                                      -11-



<PAGE>

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
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 current holdings in operating companies include holdings in
(i) 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; (ii)
Carlyle, a distributor of a line of home sewing and craft products, principally
buttons; (iii) Lincoln Snacks, a manufacturer and marketer of caramelized
pre-popped popcorn in the United States and Canada; and (iv) 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 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 23 of Notes to Financial
Statements on page F-33 hereof.

(c) Narrative description of business.

      The following information relates to Noel's principal remaining operating
companies. The percentage appearing next to the name of each company indicates
the common equity ownership (or in the case of Carlyle, the percentage of the
aggregate voting power) currently held by Noel.


                                      -12-



<PAGE>

                         STAFFING RESOURCES, INC. (11%)

      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 temporary staffing
services to a broad range of businesses in various industries throughout the
Northeastern, Mid-Atlantic, Southeastern, Southwestern and Rocky Mountain
regions of the United States.

      On December 31, 1997 subsidiaries of Staffing Resources and Career Blazers
Personnel Services, Inc. and its affiliated companies ("Career Blazers") merged.
Career Blazers, founded in 1949, primarily operates in the Northeastern United
States and provides temporary, temporary to permanent and permanent placement
services in the clerical, legal and higher-end office support areas as well as
training services. The merged company (hereinafter referred to as "SRI/Career
Blazers") is being renamed Career Blazers Inc. effective March 31, 1998.
SRI/Career Blazers offers training, temporary and permanent staffing services
through a network of approximately 184 staffing branches and 72 training
locations (including company-owned, licensed and franchised operations) across
the Northeastern, Mid-Atlantic, Southeastern, Southwestern and Rocky Mountain
regions of the United States, as well as Canada and Puerto Rico.

      SRI/Career Blazers is the parent corporation of several specialty and
commercial staffing and training companies that offer short-term and longer-term
contract, seasonal or project support, temporary-to-permanent transitional
hiring, direct hire, payroll administration services and licensed training
centers. SRI/Career Blazers also offers computer training programs and
franchises throughout North America.

      SRI/Career Blazers' principal executive offices are located at 222 West
Las Colinas Boulevard, Suite 1250, Irving, Texas 75039 and its telephone number
is (972) 432-3000. William M. Lewis, SRI/Career Blazers' largest shareholder, is
its Chairman and Chief Executive Officer and Stanley R. Rawn, Jr., the Chief
Executive Officer of Noel, is Chairman of the Executive Committee. Mr. Rawn and
Joseph S. DiMartino, a director of Noel, currently serve on SRI/Career Blazers'
board of directors.

      SRI/Career Blazers currently operates approximately 194 branches under a
variety of brand names in 20 states and is organized into three core groups --
support services, training services and strategic services. Additional branches
are operated by franchisees (who use the Career Blazers name) and licensees (who
do not use the Career Blazers name).

      Support Services. The support services group offers legal, traditional
secretarial, clerical and light industrial support, including numerous light
duty manufacturing applications.

      Training Services. SRI/Career Blazers offers training in software
applications, operating systems, client server, groupware, information
technology, internet, office support skills, keyboarding, workplace literacy and
career search skills through a network of 72 training locations located in the
United States, Canada and Puerto Rico, of which 6 are company-owned, 18 are
franchised and 48 are licensed.

      Strategic Services. SRI/Career Blazers' strategic services group provides
to clients its employees who are industry specialists in financial information,
information technology, skilled manufacturing and transportation.

      Financial Information. The financial and accounting personnel provide
clients with a means of handling the uneven or peak workloads associated with
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 personnel qualified to work as
auditors, tax accountants, controllers, financial executives, bookkeepers and
data entry clerks.


                                      -13-



<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, consulting, system design and
implementation, network engineers and network and program analysts.

      Skilled Manufacturing. 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. SRI/Career Blazers' truck drivers and machine operators
offer a broad range of clients a means of handling the uneven or peak workloads
for short and long-haul over the road truck driving. SRI/Career Blazers has
Class "A", "B" and "C" Certified Drivers, short and long-haul over the road
drivers and heavy equipment operators.

Sales and Marketing

      The demand for the staffing services provided by SRI/Career Blazers
differs significantly by locale and by type of service. SRI/Career Blazers
obtains clients through its sales force and by referrals from existing clients.
SRI/Career Blazers' sales force consists primarily of full-time employees whose
duties include calling on potential clients and maintaining relationships with
existing clients.

Operations

      Field Offices. SRI/Career Blazers typically commences operations in a
market by offering support services followed by the introduction of strategic
services described above as dictated by each market. Because all services are
not appropriate for all markets, SRI/Career Blazers evaluates each market
individually as it expands.

      Corporate Services. SRI/Career Blazers 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. SRI/Career Blazers 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

      SRI/Career Blazers currently operates company-owned locations in 20 states
through a network of approximately 200 branches, including its corporate
headquarters in Irving, Texas and New York, New York. 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.

Regulation

      Certain states in which SRI/Career Blazers operates, or may operate in the
future, have licensing requirements and other regulations specifically governing
the provision of staffing services. There can be no


                                      -14-



<PAGE>

assurance that states in which SRI/Career Blazers operates, or may in the future
operate, will not adopt more strict licensing requirements or other regulations
that would affect or limit SRI/Career Blazers' operations.

      Federal and state laws regulate the offering of franchises. These laws
would impact additional franchise offerings by SRI/Career Blazers.

      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 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 may 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, 1998, SRI/Career Blazers employed approximately 1,275
full-time employees. None of SRI/Career Blazers' employees, including its
staffing employees, is represented by a collective bargaining agreement.

      In order to recruit its staffing employees, SRI/Career Blazers 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.
SRI/Career Blazers 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 all applicants.

                         CARLYLE INDUSTRIES, INC. (68%)

      Carlyle (which prior to March 26, 1997 was known as Belding Heminway
Company, Inc.) and its subsidiaries 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 March 26, 1997, Carlyle sold the assets and specified liabilities of
its former Thread Division (the "Thread Division") to an affiliate of Hicking
Pentecost PLC ("HP") for an aggregate cash consideration of $54.9 million of
which $3.0 million was placed in escrow, subject to certain post-closing
adjustments, plus the assumption of approximately $6.8 million of 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 One Palmer Terrace,
Carlstadt, New Jersey; its telephone number is (201) 935-6220. Joseph S.
DiMartino, a Noel director, currently serves on Carlyle's three member Board of
Directors.


                                      -15-



<PAGE>

      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 business as described in
Carlyle's Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1997
filed with the Commission.

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

      Markets. Carlyle'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, local and
regional fabric specialty chains of 4 to 25 stores, independent fabric stores,
notions wholesalers, and craft stores and chains. During the years ended
December 31, 1997 and 1996 sales to three major customers (Wal-Mart,
Fabri-Centers of America and Hancock Fabrics) accounted for 78% and 75%
respectively of Carlyle's aggregate sales volume. A reduction in sales among any
of these customers could adversely impact the financial condition and results of
operations of Carlyle.

      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. Carlyle also blister-packages and shrink-wraps
some products. Shipments are made primarily to individual stores with a small
percentage to warehouse locations.

      Carlyle'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 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. Carlyle enjoys long-standing ties to all of its key
accounts and the average relationship with its ten largest customers extends
over 20 years. 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 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


                                      -16-



<PAGE>

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. In response to this
trend, Carlyle has broadened its button product line to include embellishments
and novelty buttons used now in the craft industry which is not viewed as a
mature market.

      The bulk of Carlyle's revenues are derived in the United States. In 1997,
less than 1% of revenues related to export sales. Inventory levels remain
relatively constant throughout the year. Carlyle's policies related to
merchandise return and payment terms are in accordance with industry standards.

      Employees; Labor Relations. Carlyle has approximately 140 employees, none
of whom are covered by a collective bargaining agreement. Carlyle management
believes relations with employees are satisfactory.

      Properties. Carlyle operates from a 104,000 square foot packaging and
distribution facility located in Lansing, Iowa which is owned by Carlyle.
Corporate headquarters and divisional management, sales and marketing, product
development, fashion and purchasing are headquartered in a 7,307 square foot
office facility in Carlstadt, New Jersey which is leased by Carlyle. Carlyle
management believes that Carlyle's facilities are in good condition and adequate
for Carlyle's present and reasonably foreseeable future needs.

      Carlyle also owns a 214,000 square foot former dye facility located in
Emporia, Virginia, which facility is leased to the purchaser of Carlyle's former
Home Furnishings' Division under a triple net fifty-year lease with a nominal
base rent. In addition, Carlyle also owns two facilities no longer used in
operations: a 100,000 square foot former production facility at Watertown,
Connecticut of which approximately 48,000 square feet are leased to unrelated
third parties and a 160,000 square foot former production facility at North
Grosvenordale, Connecticut.

Legal Proceedings

      General. To the best of the Company's knowledge, 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.

      Several years ago a property, owned by the Carlyle Manufacturing Company,
Inc. ("CM") 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").


                                      -17-



<PAGE>

      CM 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 ("BCTC") and CM had been identified, along
with 1,300 other parties, as PRP's in connection with the alleged release of
hazardous substances from the Solvents Recovery Superfund Site in Southington,
Connecticut (the "SRS site").

      Carlyle settled its alleged liability in this matter by paying $1,626 in
connection with a settlement offered to de minimis parties at the SRS site in
1994. BCTC and CM, along with other PRP's committed to perform the Remedial
Investigation and Feasibility Study ("RIFS") and two Non-Time Critical Removal
Actions ("NTCRA") at the SRS site. The RIFS and the first NTCRA have been
completed. The aggregate cost to complete the second NTCRA is estimated at
approximately $3 million. BCTC and CM have been allocated .03% and 1.19%,
respectively, of costs incurred to date, based on their alleged volume of waste
shipped to the SRS site. The EPA is expected to issue its "Record of Decision"
concerning the final remedy at the SRS site during 1998. Carlyle is unable, at
this time, to estimate the ultimate cost of the remedy for this site.

      By letter dated January 21, 1994, the EPA gave notice to CM that it had
been identified as a PRP along with about 335 other parties in connection with
the alleged release of hazardous waste at the Old Southington Landfill Superfund
site located in Southington, Connecticut (the "OSL site"). The EPA's claim is
predicated on the allegation that certain waste sent to the SRS site prior to
October 1967 was commingled and transshipped to the OSL site.

      On September 3, 1996, CM entered into an agreement (with the EPA and other
members of the SRS PRP Group) to settle its liability in connection with the
First Operable Unit of work ("OU#1") at the OSL site for $2,000. The foregoing
settlement is contingent upon court approval of the OU#1 Consent Decree.

      In September 1997, Pratt and Whitney and the Town of Southington proposed
a de minimis settlement which would allow CM and certain other members of the
SRS PRP Group (as well as certain Direct Shippers) to settle their future OSL
site liability for a sum certain (subject to certain reservation of rights by
the U.S.) Under this proposal, it is anticipated that CM's required payment will
be no greater than $5,000. CM has accepted the de minimis offer.

      The U.S. and the other parties to the above de minimis settlement are
presently negotiating the terms of a Consent Decree which will memorialize the
settlement. The de minimis settlement will be contingent upon court approval of
this Consent Decree.

      By letter dated October 30, 1987, the Department of Environmental
Protection of the State of New Jersey ("DEP") notified Carlyle that CM, together
with 122 parties, had been identified as a party responsible for cleanup costs
and damage claims paid in connection with the Chemical Control Corporation
hazardous waste site located in Elizabeth, New Jersey (the "CCC site"). Pursuant
to the New Jersey Spill Compensation and Control Act, the DEP and the Spill
Compensation Fund (the "Fund") have demanded payment of $34 million. The DEP and
the Fund reserved the right to collect any costs and damages incurred during the
ongoing cleanup of the CCC site. Carlyle has cooperated with the committees
established to represent the interest of the parties in negotiations with the
DEP. The committees have advised Carlyle that there may be defenses to the
claim.


                                      -18-



<PAGE>

      Negotiations with the State of New Jersey concerning the settlement of the
State's past costs for the CCC site have been ongoing since March of 1995. A
draft settlement agreement has been prepared and negotiations concerning the
terms and conditions of such settlement are continuing.

      Given the de minimis nature of CM's alleged contribution of waste disposed
of at the CCC site (less than 1%), Carlyle currently believes that its liability
for this site shall not exceed $200,000, although no assurance can be given that
the ultimate cost will not exceed such amount.

      By third-party summons and complaint dated November 27, 1991, CM was 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 v. Davis. In
addition to CM, approximately 60 other companies were joined as third-party
defendants. Amended third-party complaints have named additional third-party
defendants. The third-party complaint against CM alleges claims for contribution
under CERCLA, common law indemnification and state law contribution. The
third-party complaint alleges that CM (and the majority of the other third-party
defendants) shipped waste to the CCC site, which waste was commingled and then
shipped to the Davis Liquid Waste site located in Smithfield, Rhode Island.

      CM has entered into an agreement to settle liability in connection with
the above claims for payment of the sum of $200,000. The foregoing settlement
agreement is contingent upon Court approval of Consent Decrees between the (i)
U.S., CM and other settling parties and (ii) the state of Rhode Island, CM and
other settling parties. The United States District Court approved the Consent
Decree involving the U.S. in February 1998 but it remains subject to appeal. As
of December 31, 1997, payments totaling $176,000 have been made in connection
with this settlement.

      The estimates provided above do not include costs that Carlyle or its
subsidiaries 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
SRS, OSL and CCC sites. The reserve Carlyle has established for environmental
liabilities, in the amount of $1.9 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.

      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.

      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


                                      -19-



<PAGE>

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 which is projected to occur
at any time 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. In December 1997, Carlyle notified the PBGC that it intends to
redeem $10 million of preferred stock as soon after year end as is practicable,
but only to the extent of legally available funds as determined by the board of
directors and if appropriate bank financing has been satisfactorily obtained.
Following such notice, the PBGC indicated that it would not take any action with
respect to such payments. 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 were 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 recorded
at $1.0 million as of December 31, 1997, when measured in accordance with
financial accounting standards. Based on an actuarial estimate, the obligation
to transfer cash in the event of a termination would be $2.2 million in excess
of the balance sheet liability. 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 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.

      Escrow Agreement. In connection with the sale of the Thread Division to an
affiliate of HP, $3.0 million of the proceeds were placed in escrow. Pursuant to
an indemnification obligation arising from the sale of the Thread Division,
Carlyle has assumed the defense and indemnity of Barbour Threads, Inc.
("Barbour"), as the successor in interest to Carlyle Threads, Inc., Barbour
Industries, Inc. and Blue Mountain Industries, Inc. and an individual, H.D.
Whitlow ("Whitlow"), in an adversary proceeding which relates to a Chapter 11
reorganization, In re Needlecraft Industries, Inc. ("Needlecraft"), Case No. LA
97-41233 L. Carlyle has no role in the bankruptcy or the prosecution of
Barbour's claims against Needlecraft. In the adversary proceeding, Needlecraft
seeks compensatory damages of $600,000 and punitive damages of $1 million,
reformation of contract, and declaratory relief from Barbour for alleged breach
of an oral contract, detrimental reliance, and negligent and intentional
interference with prospective economic advantage. At a hearing on January 6,
1998, the Bankruptcy Court dismissed the claims against Whitlow for lack of
subject matter jurisdiction. Needlecraft has recently filed a notice of appeal
from the dismissal. No discovery has occurred.

      It is HP's position that any amounts payable to Needlecraft as a result of
the Needlecraft Claim would be recoverable by HP or its affiliates from the
escrowed portion of the purchase price paid for the Thread division. Carlyle
believes that there are meritorious defenses to the Needlecraft claim and has
reserved its rights with respect to HP's indemnification claim.


                                      -20-



<PAGE>

                          LINCOLN SNACKS COMPANY (60%)

      Lincoln Snacks Company ("Lincoln Snacks" or "Lincoln") 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, markets and distributes nuts.

      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, beginning July 17, 1995, became 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 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 (the "Amendment") which was further
modified on May 9, 1997 (the "Letter Agreement") pursuant to which, among other
things, the exclusive distribution arrangement with respect to the Fiddle Faddle
product was extended for an additional period of six months expiring December
31, 1997, at which time the distribution arrangement terminated. Effective May
1, 1997, and January 1, 1998 Planters ceased, and Lincoln resumed marketing and
distributing the Screaming Yellow Zonkers and Fiddle Faddle products,
respectively. 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.

      The Amendment and Letter Agreement required Planters to purchase a
specified number of manufactured cases of Screaming Yellow Zonkers and Fiddle
Faddle and for Planters to compensate Lincoln for the remaining contract
minimums for the twelve month period ended June 30, 1997. The Amendment and
Letter Agreement also required Planters to compensate Lincoln for contract
minimums for the six month period ended December 31, 1997 (six month minimums).
Planters has compensated Lincoln for specified minimums, which were 24% and 27%
less than case sales made to Planters for the three month and the six month
period ended December 31, 1996, respectively. The Amendment also required
Planters to compensate Lincoln in the event that certain sales levels were not
achieved during the calendar year ending December 31, 1997. These sales levels
were not achieved during the calendar year ending December 31, 1997 resulting in
Planters compensating Lincoln $1.88 million which was partially offset by
approximately $500,000 in non-recurring charges associated with Lincoln's
initial efforts to rebuild the Fiddle Faddle brand ("Net Planters Other
Income").

      In July and October, 1997, Lincoln Snacks entered into five year trademark
license agreements with Nabisco, Inc. granting Lincoln Snacks the right to use,
commencing January 1, 1998, the Planters' trademarks in connection with the
sales and marketing of Lincoln Snacks' Fiddle Faddle products in the United
States and Canada.

      Sales to Planters, excluding Net Planters Other Income, represented 9% and
32% of net sales for the three months ended December 31, 1997 and 1996,
respectively; 14% and 41% of net sales for the six months period ended December
31, 1997 and 1996, respectively. Sales to Planters during the three months and
the six


                                      -21-



<PAGE>

months ended December 31, 1997 represented payments, in lieu of manufactured
cases, at predetermined rates which are lower than the rates Planters paid for
manufactured cases. Sales to Planters during the three month and the six month
period ended December 31, 1996 represented manufactured cases.

      Lincoln Snacks' principal executive offices are located at 4 High Ridge
Park, Stamford, Connecticut 06905; telephone number (203) 329-4545.

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, markets and distributes nuts.

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) the term of which expired on
December 31, 1997. Effective May 1, 1997, Lincoln Snacks commenced marketing and
distributing its Screaming Yellow Zonkers product directly and on January 1,
1998 resumed marketing and distributing its Fiddle Faddle product directly.

      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 its 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 large volume customers are handled directly by Lincoln Snacks
personnel.

      Sales of Lincoln Snacks' products are seasonal, peaking during the third
and fourth calendar quarters. During the fiscal year ended June 30, 1997,
Planters accounted for 47% of Lincoln Snacks sales.

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 in Lincoln, Nebraska includes, among
other things, continuous process equipment for enrobing popcorn and nuts, as
well as four distinct high speed filling and packing lines


                                      -22-



<PAGE>

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. In
addition, Nabisco has granted Lincoln Snacks the right, commencing January 1,
1998, to use the Planter's trademarks in connection with the sale and marketing
of Lincoln Snacks' Fiddle Faddle product in the United States and Canada for a
period of five years.

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 March 20, 1998, Lincoln Snacks had 74 full-time employees and one
part time employee. Employment at the Lincoln plant varies according to weekly
and seasonal production needs and averaged approximately 85 employees during
fiscal 1997. None of Lincoln Snacks' work force is unionized. Lincoln Snacks'
management believes that Lincoln Snacks' relationship with its employees is
good.

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. In October 1996, Lincoln Snacks sold land adjacent to its
manufacturing facility in Lincoln, Nebraska. At the same time, Lincoln Snacks
entered into a ten year lease agreement for 50,000 square feet of a new
warehouse which has been constructed on the land. This facility accommodates all
of Lincoln Snacks current warehousing needs. Lincoln Snacks' lease on this
facility expires in July 2006 and there is a five year renewal option beyond
2006. 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.


                                      -23-



<PAGE>

                         FERROVIA NOVOESTE, S.A. (18%)

      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. It is
possible that Noel's interest in Novoeste will be converted in a business
combination into securities of a larger Brazilian railroad entity.

                                  Other Assets

      Noel also holds other assets with an aggregate estimated value of
approximately $12.4 million at December 31, 1997, which assets include a note
for approximately $10.4 million, bearing interest at an annual rate of 7% and
secured by a letter of credit, received by Noel as part of the purchase price
for the sale by Noel of its holdings in Curtis. Noel expects to be able to
monetize this note at approximately face value but there can be no assurance
that a lesser amount will not be realized.

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

      Not material.

Item 2. Properties.

      Noel's executive offices occupy approximately 10,600 square feet in an
office building located in New York, New York pursuant to a lease expiring in
November 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 under "Business of the Company", 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.

Item 4. Submission of Matters to a Vote of
        Security Holders.

      None.


                                      -24-



<PAGE>

                                     PART II

Item 5. Market for Registrant's 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 Common Stock for each fiscal quarter during 1997 and
1996 as reported by NASDAQ.

                      1997                High                    Low
                      ----                ----                    ---

              First Quarter              $7.500                  $6.375
              Second Quarter(1)           6.625                   3.125
              Third Quarter(2)            4.375                   3.875
              Fourth Quarter(3)           4.125                   3.218

(1) Reflects the distribution of shares of HealthPlan Common Stock on April 25,
1997, valued at $2.643 per share of Noel Common Stock.
(2) Reflects the distribution of shares of HealthPlan Common Stock on October 6,
1997 (September 25, 1997, ex-dividend date), valued at $.4244 per share of Noel
Common Stock.
(3) Reflects the distribution of shares of Carlyle Common Stock on December 1,
1997, valued at $.1501 per share of Noel Common Stock.

                      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

(b) Holders.

            As of March 20, 1998, 20,567,757 shares of Common Stock were issued
and outstanding and were held of record by approximately 103 persons, including
several holders who are nominees for an undetermined number of beneficial
owners. Noel believes that there are approximately 1,200 beneficial owners of
Common Stock.

(c) Dividends.

            Pursuant to the Plan, Noel's remaining assets will either be
distributed in kind to Noel's shareholders or sold; the proceeds of sale, after
paying or providing for all claims, liabilities, expenses and other obligations
of Noel, will be distributed to Noel's shareholders together with other
available cash; and thereafter Noel will be dissolved. The value of any further
liquidating distributions will depend on a variety of factors including, among
others, the actual market prices of any securities distributed in kind, the
proceeds of the sale of any of Noel's assets and the actual timing of
distributions.


                                      -25-



<PAGE>

            On April 25, 1997, Noel distributed pro rata to its shareholders
approximately 3,754,675 shares of HealthPlan Common Stock at the rate of
0.1838631 shares of HealthPlan Common Stock for each share of Common Stock
issued and outstanding at the close of business on the April 18, 1997 record
date. The value of the distribution was $2.64 per share of Common Stock.

            On October 6, 1997, Noel distributed pro rata to its shareholders
its remaining 412,601 shares of HealthPlan Common Stock at the rate of 0.02006
shares of HealthPlan Common Stock for each share of Common Stock issued and
outstanding at the close of business on the September 29, 1997 record date. The
value of the distribution was $.4244 per share of Common Stock.

            On December 1, 1997, Noel distributed pro rata to its shareholders
approximately 2,205,814 shares of Carlyle Common Stock at the rate of 0.107246
shares of Carlyle Common Stock for each share of Common Stock issued and
outstanding at the close of business on the November 21, 1997 record date. The
value of the distribution was $.1501 per share of Common Stock.

            On March 13, 1998, the Board declared a liquidating distribution of
$.70 per share of Common Stock payable on March 27, 1998 to holders of record
at the close of business on the March 20, 1998 record date.

Item 6. Selected Financial Data.

            The selected historical financial information as of December 31,
1997, for the three months ended March 31, 1997 and 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 Financial Statements and related
notes included elsewhere in this Form 10-K. (Dollars in thousands, except per
share amounts)

<TABLE>
<CAPTION>
                                                                            Years Ended
                                                                            December 31,
                                                          ------------------------------------------------
                                December 31,  March 31,
                                    1997        1997       1996(1)      1995(1)      1994(2)       1993
                                  -------      -------    ---------    ---------    ---------    ---------
<S>                               <C>          <C>        <C>          <C>          <C>          <C>
Revenue                               N/A      $38,473    $ 189,325    $ 181,709    $ 119,121    $  93,962

Operating income (loss)               N/A      $(4,684)   $   9,194    $ (29,451)   $ (12,731)   $  (6,935)

Loss from continuing
operations                            N/A      $(1,309)   $  (3,105)   $ (15,581)   $  (9,453)   $  (5,345)

Basic earnings per share
from continuing operations(4)         N/A      $ (0.06)   $   (0.15)   $   (0.77)   $   (0.47)   $   (0.26)

Total assets                      $88,912          N/A    $ 230,521    $ 239,757    $ 313,980    $ 186,845(3)

Long-term debt                    $     0          N/A    $  60,983    $  69,197    $  75,734    $  33,635(3)

Stockholders' equity                  N/A          N/A    $  97,360    $  92,920    $ 100,269    $ 123,122

Net assets in liquidation         $83,561          N/A          N/A          N/A          N/A          N/A

Net assets in liquidation per
share                             $  4.06          N/A          N/A          N/A          N/A          N/A
</TABLE>

----------


                                      -26-



<PAGE>

As a result of the adoption of the Plan, Noel has adopted the liquidation basis
of accounting for all periods subsequent to March 31, 1997. See Note 1 of Notes
to Financial Statements on page F-10.

See Notes 11 and 12 of Notes to Financial Statements on pages F-18 and F-22 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)   Due to the restatement of the historical financial statements, this
      information is considered to be derived from unaudited financial
      statements.

(4)   Earnings per share amounts prior to 1997 have been restated to comply with
      Financial Accounting Standards No. 128. See Notes to 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
Financial Statements and Notes to Financial Statements.

Liquidity and Capital Resources:

      On December 31, 1997, Noel had cash and short-term investments of $13.2
million. The future cash needs of Noel will be dependent on the implementation
of the Plan. 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 through the remainder of the liquidation period. 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 short-term investments are sufficient to fund its working capital
requirements through the completion of the Plan.

      In February 1998, Noel received a $3.5 million refund of estimated taxes
paid during 1997. In March 1998, Noel declared a liquidating distribution of
$.70 per outstanding share of Common Stock payable on March 27, 1998 to
shareholders of record at the close of business on the March 20, 1998
record date, for a total of $14.4 million. See Footnote 8 of Notes to
Financial Statements on F-15.

      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 holdings. See Footnote 2 of Notes to Financial
Statements on F-10 for a discussion of Carlyle. Lincoln is prohibited from
paying dividends by existing borrowing agreements.

Results of Operations:

Overview

      Noel's equity in HealthPlan Services', Novoeste's and Staffing Resources'
income or loss for the period ended March 31, 1997 and 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


                                      -27-



<PAGE>

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.

      Noel's share of the income of HealthPlan Services for the three months
ended March 31, 1997 was $1.0 million, and its share of the losses of Novoeste
and Staffing was $.9 million and $.4 million, respectively.

      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.

Three Months ended March 31, 1997 versus March 31, 1996

      Sales decreased by $4.6 million to $38.5 million primarily due to
decreased sales at Carlyle of $7.4 million, offset by increased sales at Curtis
Industries, Inc. ("Curtis") of $2.7 million. Cost of sales decreased by $3.9
million to $20.7 million from $24.6 million in 1996, primarily due to decreased
cost of sales at Carlyle of $5.5 million offset by increased cost of sales at
Curtis of $1.5 million. Selling, general, administrative and other expenses
increased by $.5 million to $17.2 million in 1997 from $16.7 million in 1996.
Other income increased by $8.8 million primarily due to a gain recognized by
Noel in 1997 on the sale of 1.3 million shares of HealthPlan Common Stock,
offset by greater losses at Carlyle and Curtis of $5.3 million and $.6 million,
respectively. Provision for income taxes increased $9.8 million due to increased
tax provisions at Noel and Carlyle of $4.6 million and $5.2 million,
respectively.

Comparison of Segments:

Three Months ended March 31, 1997 versus March 31, 1996

Industrial Threads and Buttons (Carlyle)

      As a result of its sale on March 26, 1997 (see Footnote 11 to Notes to
Financial Statements on F-18), only two months of operating results from
Carlyle's thread division are included in the first quarter of 1997 as compared
to three full months during 1996.

      Sales during the first quarter of 1997 totaled $14.7 million as compared
with $22.0 million during the first quarter of 1996. Sales in the consumer
product segment decreased to $8.4 million as compared with $11.7 during the same
period in 1996. Sales in the industrial product segment decreased to $6.3
million as compared with $10.3 million during the first quarter of 1996. The
decrease in both segment's sales was attributable to the sale of Carlyle's
thread division.

      The gross margin during the first quarter of 1997 totaled $4.2 million or
29.0% as compared with $6.1 million or 27.7% during the first quarter of 1996.
Gross margin in the consumer product segment totaled $3.1 million or 36.9% as
compared to $3.7 million or 31.5% in the first quarter of 1996. Gross margin in
the industrial product segment totaled $1.2 million or 18.5% as compared with
$2.4 million or 23.4% during the first quarter of 1996. The decrease in both
segment's gross margin dollars was primarily attributable to the sale of the
thread division.

      Selling, general, and administrative expenses totaled $2.6 million as
compared with $3.6 million during the same period in 1996. Selling, general, and
administrative expenses in the consumer product segment totaled $1.1 million
during the first quarter of 1997 as compared with $1.2 million during the first
quarter of 1996. Selling, general and administrative expenses in the industrial
product segment totaled $1.5 million during the first quarter of 1997 as
compared with $2.5 million during the first quarter of 1996. The decrease in
these expenses was primarily attributable to the sale of the thread division.


                                      -28-



<PAGE>

Fasteners and Security Products Distribution (Curtis)

      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 Curtis product line offering.

      Sales for the first quarter of 1997 increased $2.7 million or 15.8% to
$19.5 million from $16.8 million in the first quarter of 1996. Sales from the
Mechanics Choice division accounted for the increase.

      The gross margin percentage decreased to 64.6% in 1997 from 68.9% in 1996.
Lower margins incurred by the Mechanics Choice division are responsible for the
majority of the first quarter decline.

      For the first quarter of 1997, selling, general and administrative
expenses, net of the Internal Revenue Service ("IRS") settlement discussed
below, increased $.9 million from the comparable 1996 quarter. The majority of
the first quarter increase is due to the added selling and distribution costs of
the Mechanics Choice division.

      Following a field examination in 1995, the IRS alleged that as a result of
certain tax law changes enacted in 1989 and 1991 Curtis' expense reimbursement
policy for the field sales force did not meet the definition of an accountable
plan, and thus contended all reimbursed expenses for 1993 and 1994 should be
treated as taxable wages. In April 1997, Curtis reached a settlement with the
IRS in connection with the expense reimbursement policy requiring the payment of
$1.0 million of taxes for 1993 through 1996. A $.9 million charge to record this
settlement, net of reserves, was recorded in the first quarter of 1997.

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 and Screaming
Yellow Zonkers ("the Products"). Under the agreement, Planters is required 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.

      On February 28, 1997, this agreement was amended, extending its term until
December 31, 1997, at which time the distribution arrangement terminated.
Although the amendment and extension contained provisions designed to effect a
smooth transfer of the distribution business back to Lincoln, there can be no
assurance as to the long-term effects of this transition.

      Sales of $4.3 million for the quarter ended March 31, 1997, were equal to
sales in the corresponding period of 1996. Sales to Planters represented
approximately 68% and 64% of sales for the quarter ended March 31, 1997, and
1996, respectively.

      Gross profit decreased $.1 million to $.9 million for the three months of
1997 versus $1.0 million in the corresponding period of 1996 due to the mix of
products sold.

      Selling, general, and administrative expenses decreased approximately 13%
or $.2 million to $.8 million in the 1997 quarter versus $1.0 million in the
same period in 1996. These expenses decreased during this period primarily due
to lower variable selling expenses relating to the mix of products sold.


                                      -29-



<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 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.

Comparison of Segments:

1996 versus 1995

Fasteners and Security Products Distribution (Curtis)

      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 higher 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.


                                      -30-



<PAGE>

Snack Foods (Lincoln)

      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 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.

Item 7A. Quantitative and Qualitative Disclosures About
         Market Risk

      Not applicable.

                                      -31-



<PAGE>

Item 8. Financial Statements and Supplementary Data.

      Certain of the information required is set forth under the captions
"Statement of Net Assets in Liquidation", "Consolidated Balance Sheet,"
"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-36 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:

                                                                  Officer
         Name                   Position(s)               Age     Since
         ----                   -----------               ---     -------

         Stanley R. Rawn, Jr.   Chief Executive Officer   70      March 1995

         Todd K. West           Vice President-Finance,
                                Chief Financial Officer   37      August 1990
                                and Secretary

      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 and hold office until
their successors have been elected and qualified or their earlier resignation or
removal. No family relationship currently exists among any of the executive
officers and directors of the Company.

                            Biographical Information

      Stanley R. Rawn, Jr. became Chief Executive Officer of Noel effective
March 1995. Mr. Rawn 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. 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 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'r' Brand watches and
other products, Chairman of the Executive Committee and a


                                      -32-



<PAGE>

director and Chairman of the Executive Committee of Staffing Resources, and a
trustee of the California Institute of Technology.

      Todd K. West has served as Vice President-Finance since August 1990, as
Secretary since November 1991 and as Chief Financial Officer since January
1993. Mr. West also served as Treasurer and Chief Financial Officer from August
1990 until November 1991. Mr. West joined 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,
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 Financial Statements and
      Financial Statement Schedules are filed as part of this annual report.

(b) Reports on Form 8-K.

            On December 15, 1997, Noel filed a Form 8-K reflecting (i) the
December 1, 1997 distribution to its shareholders of 2,205,814 shares of Carlyle
Common Stock at the rate of 0.107246 shares of Carlyle Common Stock for each
share of Common Stock outstanding on the November 21, 1997 record date and (ii)
the receipt by Noel of approximately $4.3 million in cash and a note for
approximately $10.4 million, bearing interest at an annual rate of 7% and
secured by a letter of credit, for all of its holdings of Curtis. No pro forma
financial information was required pursuant to Article 11 of Regulation S-X.


                                      -33-



<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: March 30, 1998

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/ Stanley R. Rawn, Jr.                                    March 30, 1998
-------------------------------------------------
Stanley R. Rawn, Jr.
Chief Executive Officer;
Director (Principal Executive Officer)


/s/ Todd K. West                                            March 30, 1998
-------------------------------------------------
Todd K. West
Vice President-Finance, Chief Financial Officer
and Secretary (Principal Financial Officer and
Principal Accounting Officer)


/s/ Joseph S. DiMartino                                     March 30, 1998
-------------------------------------------------
Joseph S. DiMartino
Director


/s/ Herbert M. Friedman                                     March 30, 1998
-------------------------------------------------
Herbert M. Friedman
Director


/s/ James K. Murray, Jr.                                    March 30, 1998
-------------------------------------------------
James K. Murray, Jr.
Director


                                      -34-



<PAGE>


/s/ Samuel F. Pryor, III                                    March 30, 1998
-------------------------------------------------
Samuel F. Pryor, III
Director


/s/ James A. Stern                                          March 30, 1998
-------------------------------------------------
James A. Stern
Director


                                      -35-



<PAGE>

                                NOEL GROUP, INC.
                          INDEX TO FINANCIAL STATEMENTS
                                       AND
                          FINANCIAL STATEMENT SCHEDULES

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

                                                                  Page Reference
                                                                  --------------

     Report of Independent Public Accountants ............................  F-2

Noel Group, Inc.
     Statement of Net Assets in Liquidation
       December 31, 1997 .................................................  F-3

     Statement of Changes in Net Assets in Liquidation
       For the Nine Months Ended December 31, 1997 .......................  F-4

Noel Group, Inc. and Subsidiaries:
     Consolidated Balance Sheet
       December 31, 1996 .................................................  F-5

     Consolidated Statements of Operations
       For the Three Months Ended March 31, 1997 and for the Years Ended
       December 31, 1996 and 1995 ........................................  F-6

     Consolidated Statements of Cash Flows
       For the Three Months Ended March 31, 1997 and for the Years Ended
       December 31, 1996 and 1995 ........................................  F-7

     Consolidated Statements of Changes in Stockholders' Equity
       For the Three Months Ended March 31, 1997 and for the Years Ended
       December 31, 1996 and 1995 ........................................  F-9

     Notes to Financial Statements .......................................  F-10

HealthPlan Services Corporation and Subsidiaries:
     Report of Independent Certified Public Accountants ..................  F-35

Staffing Resources, Inc.:
     Report of Independent Accountants ...................................  F-36

Schedule
  No.
--------

II   Valuation and Qualifying Accounts
       For the Years Ended December 31, 1996 and 1995 ....................  S-1

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-1



<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Noel Group, Inc.

We have audited the accompanying consolidated balance sheet of Noel Group, Inc.,
a Delaware corporation, and subsidiaries as of December 31, 1996, and the
consolidated statements of operations, changes in stockholders' equity and cash
flows for the period from January 1, 1997 to March 31, 1997 and for each of the
two years in the period ended December 31, 1996. We also have audited the
statement of net assets in liquidation as of December 31, 1997, and the related
statement of changes in net assets in liquidation for the period from April 1,
1997 to December 31, 1997. 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 consolidated
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%
of consolidated total assets as of December 31, 1996; the equity in its net
loss is $.5 million for 1996; the equity in its net income is $3.4 million for
1995. We also did not audit the financial statements of Staffing Resources, Inc.
("Staffing"), the investment in which is reflected in the accompanying
consolidated 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 financial statements of HPS and Staffing were audited by other auditors
whose reports thereon have been furnished to us and our opinion, insofar as
it relates to the amounts included for HPS in 1996 and 1995 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 statement 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 complete liquidation and dissolution on March 19,
1997, and the Company commenced carrying out the plan shortly thereafter. As a
result, the Company has changed its basis of accounting for periods subsequent
to March 31, 1997, from the going-concern basis to a liquidation basis.
Accordingly, the carrying values of the remaining assets as of December 31,
1997, are presented at estimated realizable value and liabilities are presented
at estimated settlement amounts.

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, the results of their operations and their cash flows for the period from
January 1, 1997 to March 31, 1997, and for each of the two years in the period
ended December 31, 1996, Noel Group, Inc.'s net assets in liquidation as of
December 31, 1997, and the changes in its net assets in liquidation for the
period from April 1, 1997 to December 31, 1997, in conformity with generally
accepted accounting principles applied on the basis described in the preceding
paragraph.

Our audits were 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.


                               Arthur Andersen LLP
New York, New York
March 25, 1998


                                       F-2



<PAGE>

                         PART 1 - FINANCIAL INFORMATION

Item 1. - Financial Statements

                                NOEL GROUP, INC.
                     STATEMENT OF NET ASSETS IN LIQUIDATION
                               (Liquidation Basis)
                (Dollars in thousands, except per share amounts)

                                                              December 31,
                                                                  1997
                                                              ------------
Assets

Cash and cash equivalents ..................................    $  3,493

Short-term investments  ....................................       9,697
                                                                --------

Total cash and short-term investments   ....................      13,190

Investments (Note 2)  ......................................      58,183

Income taxes (Note 4)    ...................................       5,134

Other assets (Note 2)  .....................................      12,405
                                                                --------

Total assets  ..............................................      88,912
                                                                --------

Liabilities

Accounts payable  ..........................................         281

Accrued expenses (Note 5)  .................................       5,070
                                                                --------

Total liabilities  .........................................       5,351
                                                                --------

Net assets in liquidation  .................................    $ 83,561
                                                                ========

Number of common shares outstanding  .......................  20,567,757
                                                              ==========

Net assets in liquidation per outstanding share  ...........       $4.06
                                                                   =====

    The accompanying notes are an integral part of this financial statement.


                                       F-3



<PAGE>

                                NOEL GROUP, INC.
                STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
                               (Liquidation Basis)
                             (Dollars in thousands)

                                                                For the Nine
                                                                Months Ended
                                                              December 31,1997
                                                              ----------------

Net assets in liquidation at April 1 (Note 6)  ................  $ 158,353
Changes in estimated liquidation values of
 assets and liabilities (Note 3) ..............................     (9,001)
Distributions to shareholders (Note 8)  .......................    (65,791)
                                                                 ---------
Net assets in liquidation at December 31  .....................  $  83,561
                                                                 =========

    The accompanying notes are an integral part of this financial statement.


                                       F-4



<PAGE>

                        NOEL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Going-Concern Basis)
                    (Dollars in thousands, except par values)

                                                                    December 31,
                                                                        1996
                                                                    ------------
                                    ASSETS
Current assets:
     Cash and cash equivalents......................................   $  1,117
     Short-term investments.........................................      8,983
     Accounts receivable, less allowance of $3,718 .................     24,023
     Inventories....................................................     34,157
     Other current assets...........................................      4,232
                                                                       --------
Total current assets ...............................................     72,512

Equity investments (Note 11) .......................................     68,026
Other investments ..................................................        639
Property, plant and equipment, net (Note 13)........................     37,671
Intangible assets, net .............................................     46,015
Other assets .......................................................      5,658
                                                                       --------
     Total assets ..................................................   $230,521
                                                                       ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt  (Note 14)...................     $4,719
     Trade accounts payable.........................................     13,226
     Accrued compensation and benefits..............................      5,567
     Net liabilities of discontinued operations (Note 12)...........      3,597
     Other current liabilities......................................      8,417
                                                                       --------
Total current liabilities...........................................     35,526

Long-term debt (Note 14)............................................     60,983
Other long-term liabilities.........................................     29,085
Minority interest...................................................      7,567
                                                                       --------
          Total liabilities.........................................    133,161
                                                                       --------

Stockholders' equity:  (Notes 16 and 17)
     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 issued............................................      2,022
     Capital in excess of par value.................................    211,633
     Accumulated deficit............................................   (115,123)
     Cumulative translation adjustment..............................       (481)
     Treasury stock at cost, 34,937 shares .........................       (691)
                                                                       --------
Total Stockholders' equity .........................................     97,360
                                                                       --------
          Total liabilities and stockholders' equity................   $230,521
                                                                       ========

    The accompanying notes are an integral part of this financial statement.


                                       F-5



<PAGE>

                        NOEL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Going-Concern Basis)
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                           For the Three
                                                            Months Ended       For the Years Ended
                                                               March 31,           December 31,
                                                                1997           1996           1995
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Revenue Items:
       Sales .............................................  $     38,473   $    189,325   $    181,709

Cost and Expense Items:
       Cost of sales .....................................        20,711        106,426        105,318
       Selling, general, administrative and other expenses        17,220         69,246         71,799
       Loss on disposal of Carlyle's thread division .....         4,364             --             --
       Impairment charge (Note 11) .......................            --             --         29,155
       Depreciation and amortization .....................           862          4,459          4,888
                                                            ------------   ------------   ------------
                                                                  43,157        180,131        211,160
                                                            ------------   ------------   ------------
Operating income (loss) ..................................        (4,684)         9,194        (29,451)
                                                            ------------   ------------   ------------

Other Income (Expense):
       Gain on sale of HealthPlan Services Corporation
           (Note 11) .....................................        15,098             --             --
       Other income (Note 18) ............................           237            599          6,703
       Income (Loss) from equity investments .............          (354)        (4,707)         3,761
       Interest expense ..................................        (1,670)        (7,970)        (7,801)
       Minority interest .................................           501         (1,363)        10,923
                                                            ------------   ------------   ------------
                                                                  13,812        (13,441)        13,586
                                                            ------------   ------------   ------------
Income (Loss) from continuing operations before income
  taxes ..................................................         9,128         (4,247)       (15,865)
Benefit (Provision) for income taxes (Note 19) ...........       (10,437)         1,142            284
                                                            ------------   ------------   ------------
Loss from continuing operations ..........................        (1,309)        (3,105)       (15,581)
Income (Loss) from discontinued operations (Note 12) .....            --            448         (6,544)
                                                            ------------   ------------   ------------
            Net loss .....................................  $     (1,309)  $     (2,657)  $    (22,125)
                                                            ============   ============   ============

Basic earnings per share from:
       Continuing operations .............................  $      (0.06)  $      (0.15)  $      (0.77)
       Discontinued operations ...........................          0.00           0.02          (0.33)
                                                            ------------   ------------   ------------
            Net loss .....................................  $      (0.06)  $      (0.13)  $      (1.10)
                                                            ============   ============   ============
Weighted average shares outstanding ......................    20,402,891     20,189,647     20,192,233
                                                            ============   ============   ============
</TABLE>

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


                                       F-6



<PAGE>

                        NOEL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Going-Concern Basis)
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                              For the Three
                                                               Months Ended  For the Years Ended
                                                                 March 31,       December 31,
                                                                   1997        1996       1995
                                                                 --------    --------   --------
<S>                                                              <C>         <C>        <C>
Cash Flows from Operating Activities:
       Net Loss ...............................................  $ (1,309)   $ (2,657)  $(22,125)
Adjustments to reconcile net income to net cash
  provided from (used for) operating activities:
       Loss (Income) from equity investments ..................       354       4,707     (3,761)
       Depreciation and amortization ..........................     1,260       6,873      7,717
       Net (gain) loss on securities ..........................   (15,098)         85     (5,533)
       Provisions for doubtful accounts and valuation of
       inventories ............................................       174         (40)     1,554
       (Benefit) Provision for deferred income taxes ..........    (2,664)      2,729       (674)
       (Gain) Loss on property and equipment ..................        --        (131)       418
       Minority interest, net .................................      (501)      1,363    (10,923)
       Impairment charge ......................................        --          --     29,155
       Loss on disposal of Carlyle thread division ............     4,364          --         --
       (Income) Loss on disposal of discontinued
       operations .............................................        --        (448)     5,234
       Other, net .............................................        86         530        889

Changes in certain assets and liabilities, net of acquisitions:
       Accounts receivable ....................................      (521)     (2,885)     2,160
       Inventories ............................................      (673)     (1,101)     2,147
       Trade accounts payable .................................       406          53        491
       Income taxes payable ...................................     8,493          --         --
       Accrued compensation and benefits ......................      (430)       (209)       221
       Other, net .............................................     3,251      (5,534)    (6,136)
        Discontinued operations ...............................    (3,141)     (1,331)     8,872
                                                                 --------    --------   --------

                 Total adjustments ............................    (4,640)      4,661     31,831
                                                                 --------    --------   --------

Net cash provided from (used for) operating activities ........    (5,949)      2,004      9,706
                                                                 --------    --------   --------
                                                                                      (continued)
</TABLE>


                                       F-7



<PAGE>

<TABLE>
<CAPTION>
                                                       For the Three
                                                        Months Ended  For the Years Ended
                                                          March 31,       December 31,
                                                           1997        1996        1995
                                                         ---------   ---------   ---------
<S>                                                              <C>         <C>        <C>
Cash Flows From Investing Activities:
       Payments for companies purchased, net of cash
       acquired .......................................         --      (6,716)     (3,050)
       Cash of deconsolidated subsidiary ..............         --          --      (4,303)
       (Purchases) Sales of short-term investments, net     (2,752)      9,399       3,845
       Sales (Purchases) of investments ...............     26,400      (8,084)    (11,105)
       Sales of investments ...........................     51,924          --         972
       Sales of discontinued operations ...............         --       8,190      23,977
       Purchases of property, plant and equipment .....       (787)     (4,313)     (4,857)
       Sales of property, plant and equipment .........         --       2,175       1,724
       Other, net .....................................       (148)     (1,653)       (845)
                                                         ---------   ---------   ---------

Net cash provided from (used for) investing activities      74,637      (1,002)      6,358
                                                         ---------   ---------   ---------

Cash Flows From Financing Activities:
       Borrowings from revolving credit line and long-
       term debt ......................................     41,121     135,441     143,848
       Repayments of revolving credit line and long-
       term debt ......................................    (76,698)   (144,528)   (154,950)
       Issuance of common stock, net ..................        910          --          25
       Change in other long-term liabilities ..........         90      (1,287)     (3,012)
       Other, net .....................................        (19)        (95)         --
                                                         ---------   ---------   ---------

Net cash used for financing activities ................    (34,596)    (10,469)    (14,089)
                                                         ---------   ---------   ---------

Effect of exchange rates on cash ......................        (38)        138          22
                                                         ---------   ---------   ---------

Net increase (decrease) in cash and cash equivalents ..     34,054      (9,329)      1,997
Cash and cash equivalents at beginning of period ......      1,117      10,446       8,449
                                                         ---------   ---------   ---------
Cash and cash equivalents at end of period ............  $  35,171   $   1,117   $  10,446
                                                         =========   =========   =========
</TABLE>

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


                                       F-8



<PAGE>

                        NOEL GROUP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
   FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND THE YEARS ENDED DECEMBER 31,
                                  1996 AND 1995
                              (Going-Concern Basis)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                            Common Stock      Capital in              Cumulative   Unrealized
                                                            ------------      Excess of  Accumulated  Translation    Holding
                                                          Shares     Amount   Par Value    Deficit    Adjustment      Gains
                                                         --------   --------  ---------    --------   ----------     -------
<S>                                                       <C>        <C>      <C>          <C>          <C>         <C>
Balance, January 1, 1995 ............................     20,203     $2,020   $189,716     $(90,341)    $ (639)
Net loss.............................................         --         --         --      (22,125)        --
Subsidiary stock transaction (Note 11)...............         --         --     14,442           --         --
Cumulative translation adjustment....................         --         --         --           --         26
Other................................................         --         --        308           --         --
                                                          ------     ------    -------     --------     ------
Balance, December 31, 1995...........................     20,203      2,020    204,466     (112,466)      (613)
Net loss.............................................         --         --         --       (2,657)        --
Subsidiary stock transactions (Note 11)..............         --         --      7,004           --         --
Purchase of treasury stock...........................         --         --         --           --         --
Issuance of common stock.............................         19          2        163           --         --
Cumulative translation adjustment....................         --         --         --           --        132
                                                          ------     ------   --------     --------     ------         ----
Balance, December 31, 1996...........................     20,222      2,022    211,633     (115,123)      (481)        $  0
Net Loss ............................................         --         --         --       (1,309)        --           --
Subsidiary stock transactions (Note 11) .............         --         --         48           --         --           --
Issuance of common stock ............................        233         24      1,610           --         --           --
Unrealized holding gains ............................         --         --         --           --         --          908
Cumulative translation adjustment ...................         --         --         --           --        (38)          --
                                                          ------     ------   --------     ---------    ------         ----
Balance, March 31, 1997..............................     20,455     $2,046   $213,291     (116,432)    $ (519)        $908
                                                          ======     ======   ========     =========    ======         ====

<CAPTION>
                                                            Treasury Stock
                                                           -----------------  Stockholders'
                                                           Shares    Amount      Equity
                                                           -------  --------    --------
<S>                                                        <C>      <C>        <C>
Balance, January 1, 1995 ............................         11     $(487)     $100,269
Net loss.............................................         --        --       (22,125)
Subsidiary stock transaction (Note 11)...............         --        --        14,442
Cumulative translation adjustment....................         --        --            26
Other................................................         --        --           308
                                                           -----    ------      --------
Balance, December 31, 1995...........................         11      (487)       92,920
Net loss.............................................         --        --        (2,657)
Subsidiary stock transactions (Note 11)..............         --        --         7,004
Purchase of treasury stock...........................         24      (204)         (204)
Issuance of common stock.............................         --        --           165
Cumulative translation adjustment....................         --        --           132
                                                           -----    ------      --------
Balance, December 31, 1996...........................         35      (691)       97,360
Net Loss ............................................         --        --        (1,309)
Subsidiary stock transactions (Note 11) .............         --        --            48
Issuance of common stock ............................         --        --         1,634
Unrealized holding gains ............................         --        --           908
Cumulative translation adjustment ...................         --        --           (38)
                                                           -----    ------      --------
Balance, March 31, 1997..............................         35    $ (691)     $ 98,603
                                                           =====    ======      ========
</TABLE>

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


                                       F-9



<PAGE>

                                NOEL GROUP, INC.

                          NOTES TO FINANCIAL STATEMENTS

      This Report on Form 10-K contains, in addition to historical information,
certain forward-looking statements, including those regarding valuation of
assets and liabilities. Such statements, including, as more fully set forth
below, those relating to management's estimates of the net value of the
Company's assets in liquidation, involve certain risks and uncertainties,
including, without limitation, those risks and uncertainties discussed below.
Should one or more of these risks or uncertainties materialize, actual outcomes
may vary materially from those indicated.

LIQUIDATION BASIS STATEMENTS

1. PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION

      On March 19, 1997, the shareholders of Noel Group, Inc. ("Noel") approved
a Plan of Complete Liquidation and Dissolution (the "Plan"), which was adopted
by Noel's Board of Directors on May 21, 1996. Under the Plan, Noel is being
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.

      As a result of the adoption of the Plan by the shareholders, Noel adopted
the liquidation basis of accounting as of April 1, 1997. Under the liquidation
basis of accounting, assets are stated at their estimated net realizable values
and liabilities are stated at their anticipated settlement amounts. See Note 2
for a specific discussion of the methods used to determine estimated net
realizable values of investments.

      The valuation of assets and liabilities necessarily requires many
estimates and assumptions and there are substantial uncertainties in carrying
out the provisions of the Plan. The actual value of any liquidating
distributions will depend upon a variety of factors including, but not limited
to, the actual market prices of any securities distributed in-kind when they are
distributed, the actual proceeds from the sale or other disposition of any of
Noel's assets, the ultimate settlement amounts of Noel's liabilities and
obligations, actual costs incurred in connection with carrying out the Plan,
including administrative costs during the liquidation period and the actual
timing of distributions.

      The valuations presented in the accompanying Statement of Net Assets in
Liquidation represent management's estimates, based on present facts and
circumstances, of the net realizable values of assets and costs associated with
carrying out the provisions of the Plan based on the assumptions set forth in
the accompanying notes, which assumptions management believes to be reasonable,
based on present facts and circumstances. The actual values and costs are
expected to differ from the amounts shown herein and could be higher or lower
than the amounts recorded. Accordingly, it is not possible to predict the
aggregate net values ultimately distributable to shareholders and no assurance
can be given that the amount to be received in liquidation will equal or exceed
the price or prices at which Noel Common Stock has generally traded or is
expected to trade in the future.

2. INVESTMENTS AND OTHER ASSETS

      Investments:

      Investments are recorded at their estimated net realizable value in
liquidation. For investments where a public market exists, and the entity is
subject to the periodic reporting requirements of the Securities Exchange Act of
1934, as amended, the estimated liquidation basis amount is calculated by
multiplying the market price by the number of


                                      F-10



<PAGE>

common shares owned without adjustment for whether the shares owned are
registered for sale, any other restriction on transfer, control premiums, or
whether the market has sufficient liquidity to support the sale of the volume of
securities owned at the quoted prices.

      This valuation may not be reflective of actual amounts obtained when and
if these investments are distributed or of prices that might be obtained in
actual future transactions. Because of the inherent uncertainty of the valuation
of securities both where a public market exists and where it does not exist, the
estimated liquidation basis amounts shown may materially differ from the actual
amounts which may be received in the future.

      Noel's holding of the common shares of Lincoln Snacks Company ("Lincoln")
and Staffing Resources, Inc. ("Staffing") are unregistered except for 421,000
shares of Lincoln which are subject to restrictions under Rule 144. Lincoln
trades on the Nasdaq Stock Market's Small Cap Market under the symbol SNAX.

<TABLE>
<CAPTION>
                                                                                            Estimated
                                                                                        Liquidation Basis
                                                                  Common     Price Per       Amount
                                                               Shares Owned    Share    December 31, 1997
                                                               ------------  ---------  -----------------
                                                          (Dollars in thousands, except per share amounts)
<S>                                                              <C>         <C>             <C>
Carlyle Industries, Inc. ("Carlyle") preferred stock (a)                                     $21,000

Staffing (b)                                                     2,026,104   $11.0000         22,287

Ferrovia Novoeste, S.A.  ("Novoeste") (c)                                                      8,000

Lincoln (d)                                                      3,769,755     1.5625          5,890

Other holdings                                                                                 1,006
                                                                                             -------
Total investments at estimated liquidation basis amounts                                     $58,183
                                                                                             =======
</TABLE>

(a)   Recorded based on management's assessment of a variety of market factors
      including, but not limited to, comparisons to transactions of publicly
      traded preferred stock, and an evaluation of the projected operating
      results of Carlyle. Because of the unique characteristics of the
      investment in Carlyle and non-marketability of the Carlyle preferred
      stock, the valuation of this investment is highly judgmental and subject
      to an unusual degree of uncertainty. The eventual amount realized in an
      actual transaction may be substantially less than the recorded value.
      Also, for various reasons, included those stated below, there may be
      delays in realizing Noel's holding of Carlyle preferred stock.

      Noel holds 19,312,837.5 shares of Carlyle series B preferred stock which
      has an annual dividend rate of 6%. As of December 31, 1997, Carlyle is in
      default on its obligation to Noel to redeem $11,588,000 of the liquidation
      preference of its preferred stock plus accumulated unpaid dividends of
      $3,899,000 through December 31, 1997, to the extent of its legally
      available funds. Noel and Carlyle are engaged in discussions with a view
      of satisfying Carlyle's obligations to the holders of the preferred stock
      in accordance with the terms of its charter and consistent with Carlyle's
      resources. Discussions have dealt with the amount and timing of payments
      and possible modifications of the terms of the preferred stock. Any such
      modifications would require the agreement of Carlyle and the holders of
      the preferred stock. Carlyle has informed Noel that it intends to fulfill
      its obligations to its preferred shareholders, as required by Carlyle's
      charter, to the extent that Carlyle has cash resources in excess of those
      required to operate its business. Carlyle has also informed Noel that, as
      Carlyle believes that it does not currently have such excess resources,
      its ability to make payments on account of the preferred stock in the
      future will depend on Carlyle's future cash flow, the timing of the
      settlement of the liabilities recorded on its financial


                                      F-11



<PAGE>

      statements, the outcome of its negotiations with Noel described above and
      the ability of Carlyle to obtain additional financing.

      The Carlyle board of directors is continuing its review of Carlyle's
      strategic alternatives, including, among other things, the sale of Carlyle
      through merger, sale of stock or otherwise, possible acquisitions by
      Carlyle and possible refinancing. Any such transaction and/or the
      discussions between the companies may result in the modification of the
      terms of the preferred stock or in the acceleration of the redemption of
      the preferred stock and/or the reduction in the total amounts eventually
      received by Noel for its holdings of Carlyle preferred stock.

      In addition, Carlyle has agreed to notify the Pension Benefits Guaranty
      Corporation ("PBGC") prior to making any dividend or redemption payments.
      Carlyle's decision to make any such payments will depend on the successful
      resolution of any issues which may arise with the PBGC relating to
      Carlyle's unfunded liability to its benefit plan.

      In December 1997, Carlyle notified the PBGC that it intends to redeem $10
      million of preferred stock as soon after year end as is practicable, but
      only to the extent of legally available funds as determined by its board
      of directors and after appropriate bank financing has been satisfactorily
      obtained. Following such notice, the PBGC indicated that it would not take
      any action with respect to such payments. Carlyle is currently exploring
      the possibility of securing bank financing which would enable such
      payments to be made, assuming the board of directors determines that there
      are sufficient legally available funds.

(b)   Recorded based upon Noel's review of an analysis completed by Staffing and
      its independent advisors. This analysis determined Staffing's value based
      upon actual and projected results in relation to comparable companies.
      Compared to the quoted price on the limited trading market for Staffing
      shares, Noel believes that, at the present time, this analysis is a better
      estimate of the value in liquidation of its Staffing shares at December
      31, 1997, because the trading market for Staffing is so limited, Staffing
      is not subject to periodic reporting requirements under the Securities
      Exchange Act of 1934, as amended, and Noel's shares of Staffing are not
      registered to trade in this market. This valuation may not be reflective
      of actual amounts obtained when and if this investment is distributed or
      of prices that might be obtained in an actual future transaction. The
      closing over-the-counter bid price on December 31, 1997 and March 20,
      1998, was $6.00 and $6.25 per common share of Staffing, respectively. Noel
      management is currently assessing the most advantageous way to realize its
      investment in Staffing and does not expect a transaction to occur until
      the second half of 1998, at the earliest.

      Subsidiaries of Staffing and Career Blazers Personnel Services, Inc. and
      its affiliated companies ("Career Blazers") merged on December 31, 1997,
      to form ("SRI/Career Blazers"). The merged company is being renamed Career
      Blazers Inc. effective March 31, 1998. SRI/Career Blazers offers training,
      temporary and permanent staffing services across the Northeastern,
      Mid-Atlantic, Southeastern, Southwestern and Rocky Mountain regions of the
      United States, as well as Canada and Puerto Rico.

(c)   Recorded at cost. This investment was made in March and June of 1996.
      Novoeste was organized to acquire a railroad in Brazil via a privatization
      transaction. In the absence of a ready market, or other transactional
      evidence, Noel management believes that cost is the best indicator of the
      value of this investment. Realization of this investment is dependent upon
      establishing successful operations in Brazil and a sale by Noel of its
      interest in Novoeste and is subject to the risks of operations in Brazil,
      including foreign currency risk. The actual amount realized for this
      investment could be lower or higher than the amount recorded.

(d)   Recorded based on the closing market price of the common stock on December
      31, 1997. Using the closing market price of $2.00 on March 20, 1998, this
      investment would have been valued at $7,540,000.


                                      F-12



<PAGE>

Other Assets:

The components of other assets at December 31, 1997, are as follows (dollars in
thousands):

Note receivable for Curtis sale                                          $10,454

TDX distribution receivable (Note 12)                                        892

Other                                                                      1,059
                                                                         -------
                                                                         $12,405
                                                                         =======

On November 6, 1997, an agreement was signed merging Curtis Industries, Inc.
("Curtis") with a subsidiary of Paragon Corporate Holdings, Inc. Under this
agreement, Curtis shareholders received a total of $22,200,000 for all of the
outstanding shares of Curtis preferred and common stock, comprising cash
totaling $6,500,000 and two year, 7% interest bearing notes in the aggregate
principal amount of $15,700,000, secured by letters of credit. Under the
agreement, Noel received $14,712,000 for its entire holding of Curtis,
comprising $4,258,000 in cash and a note for $10,454,000, which is included in
other assets in the Statement of Net Assets in Liquidation. The investment in
Curtis was valued at $18,438,000 on the date that the liquidation basis of
accounting was adopted by Noel, March 31, 1997. Noel expects to be able to
monetize this note at approximately face value, but there can be no assurance
that a lesser amount will not be realized.

3. CHANGES IN NET ASSETS IN LIQUIDATION

      The changes in the estimated liquidation values of assets and liabilities
for the nine month period ended December 31, 1997, are as follows (dollars in
thousands):

To adjust investments to estimated liquidation value, net               $(6,387)

To adjust estimated accrued expenses                                      2,523

To adjust estimated income taxes                                            679

To adjust other assets                                                     (364)
                                                                        -------

Total adjustments                                                        (3,549)

To reflect impact of settlement of options and warrants (Note 7)         (5,452)
                                                                        -------

                                                                        $(9,001)
                                                                        =======

4. INCOME TAXES

      The income tax asset at December 31, 1997, reflects the liquidation basis
of accounting. Estimated income taxes are calculated at a 35% rate on the
taxable income and losses which would be generated if the assets were realized
and liabilities settled at the amounts shown. This estimate is subject to
significant variation if, among other things, the actual values of assets
distributed, sold or otherwise disposed of varies from current estimates. The
income tax asset is projected to be realized in part through the filing of the
1998 tax return and assumes that the liquidation will be completed by December
31, 1998.


                                      F-13



<PAGE>

The components of the income tax asset at December 31, 1997, are as follows
(dollars in thousands):

Net unrealized capital gain                                            $   (222)

Net realized capital gain                                               (16,130)

Realizable net operating loss carryforwards                               3,280

Loss from the settlement of recorded liabilities                          8,442
                                                                       --------

Net income tax liability                                                 (4,630)

Estimated taxes paid in 1997 and refund carryforwards                     9,764
                                                                       --------

Net income tax asset                                                   $  5,134
                                                                       ========

      Noel had additional net operating loss carryforwards of approximately
$8,117,000 at December 31, 1997, which expire from 2003 through 2011. Noel has
undergone "ownership changes" within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended. Consequently, future utilization of these
Federal tax loss carryforwards is significantly limited. If Noel's assets
and liabilities are realized at the values recorded at December 31, 1997, these
carryforwards will not be realizable because Noel will not generate future
taxable income.

      In February 1998, Noel received $3,531,000 as a partial refund of the
estimated over-payment of taxes paid to the IRS in 1997.

5. ACCRUED EXPENSES

      Accrued expenses include estimates of costs to be incurred in carrying out
the Plan and provisions for known liabilities. These costs include a provision
for costs to be incurred in connection with the distribution, sale or other
disposition of Noel's investments including legal and investment banking fees
and salaries and related expenses of officers and employees assigned to effect
the distribution, sale or other disposition of specific investments.

      The components of accrued expenses at December 31, 1997, are as follows
(dollars in thousands):

Salaries and benefits                                                     $2,414

Rent and other expenses                                                    1,147

Professional fees                                                            823

Other, net                                                                   686
                                                                          ------

                                                                          $5,070
                                                                          ======

      Included in rent and other expenses at December 31,1997, are minimum 1998
rental payments under noncancellable operating leases of $793,000.

      The actual costs incurred could vary significantly from the related
accrued expenses due to uncertainty related to the length of time required to
complete the Plan, the exact method by which each of Noel's assets will be
realized and contingencies.

      For the nine months ended December 31, 1997, Noel's cash operating
expenses exceeded the return on its cash and cash equivalents and short-term
investments by $5,910,000. Cash operating expenses exclude payments made to
settle preexisting contractual obligations which have been accrued for. These
obligations primarily include employee


                                      F-14



<PAGE>

benefit programs and consulting arrangements, payments for which total
$2,582,000 for the nine month period ended December 31, 1997.

      Noel's cash operating expenses for the nine months ended December 31,
1997, were as follows (dollars in thousands):

Salaries and benefits                                                     $3,924

Rent and other office expenses                                             1,679

Insurance                                                                    499

Professional fees                                                            695
                                                                          ------

                                                                          $6,797
                                                                          ======

6. ADJUSTMENTS FROM GOING-CONCERN TO LIQUIDATION BASIS OF ACCOUNTING

      The adjustments from stockholders' equity on the going-concern basis to
net assets in liquidation on the liquidation basis of accounting at March 31,
1997, were as follows (dollars in thousands):

Stockholders' equity at March 31, 1997, (Going-Concern Basis)         $  98,603
                                                                      ---------

To increase investments to estimated net realizable values               71,307

To increase liabilities to anticipated settlement amounts                (8,939)

To adjust other assets                                                   (2,618)
                                                                      ---------

Total adjustments                                                        59,750
                                                                      ---------

Net assets in liquidation at March 31, 1997 (Liquidation Basis)       $ 158,353
                                                                      =========

7. OPTIONS AND WARRANTS

      On July 7, 1997, as authorized by the Stock Option and Compensation
Committee of the Board of Directors, Noel settled 2,840,107 options and warrants
outstanding for the purchase of Noel Common Stock. As a result of the settlement
and exercise of the options and warrants, Noel issued 146,718 shares of Noel
Common Stock, transferred 108,570 shares of HealthPlan Services Corporation
("HPS") common stock, paid $10,537,000 in cash for payroll taxes and settlement
amounts and received $722,000 in cash exercise proceeds. Noel's federal income
tax benefit for the compensation expense related to the settlement was
approximately $4,363,000.

8. LIQUIDATING DISTRIBUTIONS

      On April 25, 1997, Noel distributed 3,754,675 shares of HPS common stock
valued at $14.375 per HPS share for a total value of $53,974,000 to Noel
shareholders of record on April 18, 1997. The distribution rate was 0.1838631 of
a share of HPS common stock per share of Noel Common Stock and the value of the
distribution was $2.6430 per share of Noel Common Stock.

      On October 6, 1997, Noel distributed 412,601 shares of HPS common stock
valued at $21.1565 per HPS share for a total value of $8,729,000 to Noel
shareholders of record on September 29, 1997. The distribution rate was 0.02006
of a share of HPS common stock per share of Noel Common Stock and the value of
the distribution was $.4244 per share of Noel Common Stock.


                                      F-15



<PAGE>

      On December 1, 1997, Noel distributed 2,205,814 shares of Carlyle common
stock valued at $1.40 per Carlyle share for a total value of $3,088,000 to Noel
shareholders of record on November 21, 1997. The distribution rate was .107246
of a share of Carlyle common stock per share of Noel Common Stock and the value
of the distribution was $.1501 per share of Noel Common Stock.

      On March 27, 1998, Noel distributed $.70 per outstanding Noel share for a
total value of $14,397,000 to shareholders of record at the close of business on
March 20, 1998.

9. COMMITMENTS AND CONTINGENCIES

      Certain of Noel's holdings are involved in various legal proceedings
generally incidental to their 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 Noel's financial position.

GOING-CONCERN BASIS STATEMENTS

10. 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.

Consolidation:

      The consolidated financial statements include the accounts of Noel and its
subsidiaries, Carlyle, Curtis, and Lincoln, (collectively the "Company"), after
the elimination of significant intercompany transactions.

      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 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.

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


                                      F-16



<PAGE>

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

      Raw materials and supplies                    $ 7,189
      Work in process                                 4,201
      Finished goods                                 22,767
                                                    -------
                                                    $34,157
                                                    =======

      Inventories are stated at lower of cost or market, determined principally
by the FIFO method. At December 31, 1996, inventories of $18,533,000 are valued
by the LIFO method. 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.

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

      Goodwill                                                  $53,180
      Other                                                         612
                                                                -------
                                                                 53,792
      Less: Accumulated amortization                             (7,777)
                                                                -------
                                                                $46,015
                                                                =======


                                      F-17



<PAGE>

      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 related to redeemable preferred
stock of subsidiaries at December 31, 1996.

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.

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.

Basic Earnings per Share:

      In 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share." SFAS No. 128 replaced the calculation of primary and
fully diluted earnings per shares with basic and diluted earnings per share.
Basic earnings per share excludes the dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share gives effect to all dilutive
securities that were outstanding during the period. All earnings per share
amounts have been presented or restated to conform to the SFAS No. 128
requirements. Diluted earnings per share have not been presented since the
computation would be antidilutive.

11. 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.


                                      F-18



<PAGE>

      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

                                        Three Months Ended    Six Months Ended
                                          March 31, 1997     December 31, 1996
                                       --------------------  -----------------
      Revenue from services            $             6,858   $          17,498
      Operating costs and expenses     $             7,877   $          19,959
      Net loss                         $            (2,705)  $          (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.

            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                 $            43,536
      Noncurrent assets              $           140,514
      Current liabilities            $            25,690
      Noncurrent liabilities         $            69,340

                                      Three Months Ended         Year Ended
                                         March 31, 1997      December 31, 1996
                                     --------------------   -------------------
      Revenue from services          $            73,711    $           300,898
      Operating costs and expenses   $            74,370    $           297,978
      Net loss                       $            (1,527)   $            (2,405)


                                      F-19



<PAGE>

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 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, 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%.

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

                                      December 31,
                                          1996
                                    ----------------
     Current assets                 $         46,495
     Noncurrent assets              $        198,206
     Current liabilities            $         73,424
     Noncurrent liabilities         $         62,494

                                   Three Months Ended   Years Ended December 31,
                                     March 31, 1997       1996          1995
                                    ----------------    ---------     --------
     Revenue from services          $         73,593    $ 191,493     $ 98,187
     Operating costs and expenses   $         67,355    $ 199,314     $ 84,550
     Net income (loss)              $          2,799    $  (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.


                                      F-20



<PAGE>

      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, through December 31, 1996,
the alliance business was 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 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 provider of marketing, administration and risk management
services and solutions for benefit programs. HPS' clients include managed care
organizations, integrated health care delivery systems, insurance companies,
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".

      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 2,205,814 shares or 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.

      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.

      On March 26, 1997, pursuant to an asset purchase agreement dated as of
December 12, 1996, Carlyle 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 estimated loss on
disposal on the sale of this division was $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.

      Carlyle distributes a line of craft products, principally buttons.


                                      F-21



<PAGE>

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.

      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.

Lincoln Snacks Company

      On August 31, 1992, Lincoln purchased certain assets of the Lincoln Snack
Company, a division of Sandoz Nutrition Corporation. 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.
Also, under the amendment, Lincoln resumed sales and distribution of Screaming
Yellow Zonkers on May 1, 1997. Although the amendment and extension contained
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.

12. DISCONTINUED OPERATIONS

      The historical financial statements reflect Simmons Outdoor Corporation
("Simmons"), Carlyle's home furnishings division, Curtis' retail division and
TDX Corporation ("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


                                      F-22



<PAGE>

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. Simmons imports, distributes and markets optical products for
the sporting goods industry in the United States and Canada, including
riflescopes, binoculars and telescopes.

      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.

      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, and
$6,700,000 during 1996 and 1995 respectively, and had a net loss of
approximately $501,000 during 1996. Noel sold TDX during 1997 for a nominal
amount and received a cash distribution from TDX of $892,000 in January 1998.

      The remaining net liabilities of Carlyle's home furnishings division at
December 31, 1996, of $3,597,000 have been segregated in the consolidated
balance sheet. The net assets of TDX in 1996 of $268,000 are included in other
assets at December 31, 1996.

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

                                                        Years Ended December 31,
                                                          1996           1995
                                                        --------       --------
Income (Loss) from operations:
   Simmons                                              $     --       $    832
   Carlyle                                                    --             46
   Curtis                                                     --         (1,489)
   TDX                                                        --           (306)
                                                        --------       --------
                                                              --           (917)
Less: Income tax provision                                    --           (393)
                                                        --------       --------
                                                        $     --       $ (1,310)
                                                        ========       ========

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


                                      F-23



<PAGE>

13. PROPERTY, PLANT AND EQUIPMENT

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

                                                          December 31,
                                                             1996
                                                           --------
            Land                                           $  2,157
            Buildings and leasehold improvements             20,330
            Machinery and equipment                          27,816
            Furniture and fixtures                              170
                                                           --------
                                                             50,473
            Less:  Accumulated depreciation                 (12,802)
                                                           --------
                                                           $ 37,671
                                                           ========

14. LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                                    1996
                                                                                  --------
<S>                                                                               <C>
Carlyle senior bank facilities                                                    $ 36,929
Carlyle Connecticut Development Authority note payable, 5%, due 1999                    65
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
Curtis senior secured subordinated notes, 12%, due 1999                             12,000
Curtis subordinated debentures, 13 1/8%, due 2002                                    9,189
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
Capital lease obligations                                                              276
                                                                                  --------
                                                                                    67,369
Less:
Current portion                                                                     (4,719)
Unamortized discount                                                                (1,667)
                                                                                  --------
                                                                                  $ 60,983
                                                                                  ========
</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,


                                      F-24



<PAGE>

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 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 were paid 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
                                                   =========

15. LEASES

      The Company's rent expense for the period ended March 31, 1997 and for the
years ended December 31, 1996 and 1995 was $486,000, $2,438,000 and $2,789,000,
respectively.

16. 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").


                                      F-25



<PAGE>

      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
$.0351, $.5816 and $2.6291, 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.

17. 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.

      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.

      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


                                      F-26



<PAGE>

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.

      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, 1995           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

        Exercised                            (233,334)        8.355            8.355

     Outstanding, March 31, 1997            1,720,107      5.25 - 45.00        8.279

     Available for grant, March 31, 1997    1,072,207
</TABLE>

      See Note 7 for a description of the settlement of the outstanding options
and warrants.

      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.

      Noel applies APB Opinion No. 25 and related Interpretations in accounting
for its plans. Had compensation expense for the three months ended March 31,
1997, and for the years ended December 31, 1996 and 1995 option and warrant
grants of Noel been determined consistent with FASB Statement No. 123
"Accounting for Stock Based Compensation"("SFAS 123"), net loss and net loss per
common share for the three months ended March 31, 1997, and for the years ended
December 31, 1996 and 1995 would approximate the pro forma amounts below
(dollars in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                   1997                    1996                    1995
                          ----------------------  ----------------------  ----------------------
                          As Reported  Pro Forma  As Reported  Pro Forma  As Reported  Pro Forma
                          -----------  ---------  -----------  ---------  -----------  ---------
<S>                         <C>         <C>        <C>          <C>        <C>          <C>
Net loss                    $(1,309)    $(1,405)   $(2,657)     $(3,040)   $(22,125)    $(22,891)
                            ========    ========   ========     ========   =========    =========
Basic net loss per share    $ (0.06)    $ (0.07)   $ (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.


                                      F-27



<PAGE>

18. OTHER INCOME (EXPENSE)

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

<TABLE>
<CAPTION>
                                                  Three Months       Years Ended
                                                 Ended March 31,     December 31,
                                                      1997         1996      1995
                                                     -------      -------   -------
<S>                                                  <C>          <C>       <C>
Interest income                                      $   308      $   856   $ 1,148
Gain (Loss) on sale of marketable securities              --           --    (1,052)
Gain (Loss) on sale on non-marketable securities          (7)         (85)    6,657
Other                                                    (64)        (172)      (50)
                                                     -------      -------   -------
                                                     $   237      $   599   $ 6,703
                                                     =======      =======   =======
</TABLE>

      Income (Loss) from equity investments consists of the following (dollars
in thousands):

                                     Three Months          Years Ended
                                    Ended March 31,        December 31,
                                        1997             1996        1995
                                       -------          -------     -------
HPS                                    $   964          $  (500)    $ 3,371
Novoeste                                  (927)          (3,066)         --
Staffing                                  (356)          (1,174)         --
Other                                      (35)              33         390
                                       -------          -------     -------
                                       $  (354)         $(4,707)    $ 3,761
                                       =======          =======     =======


                                      F-28



<PAGE>

19. INCOME TAXES

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

                                 Three Months Ended  Years Ended December 31,
                                   March 31, 1997       1996         1995
                                 ------------------  -----------  -----------

Current tax benefit (expense):
Federal                               $(8,780)        $ 4,063      $    --
State                                    (717)           (195)        (375)
Foreign                                    (6)            (63)         (15)
                                      -------         -------      -------
                                      $(9,503)        $ 3,805      $  (390)
                                      =======         =======      =======
Deferred tax benefit (expense):
Federal                               $  (516)        $(2,484)     $   681
State                                    (418)           (179)          (7)
                                      -------         -------      -------
                                      $  (934)        $(2,663)     $   674
                                      =======         =======      =======

      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):

<TABLE>
<CAPTION>
                                           Three Months Ended
                                                March 31,      Years Ended December 31,
                                                  1997             1996       1995
                                                --------         --------   --------
<S>                                             <C>              <C>        <C>
Tax benefit (provision) at statutory rates      $ (3,104)        $  1,444   $  5,394
State and local, net of Federal benefit             (742)            (231)      (257)
Minority interest                                    170             (463)     3,714
Reversal of prior valuation allowances                --               --        904
Losses generating no current benefit                (324)              --       (820)
Amortization and write-off of excess
   purchase costs                                 (6,349)            (485)    (8,703)
Benefit from book loss carryforward                   --              879         --
Other                                                (88)              (2)        52
                                                --------         --------   --------
Benefit (Provision) for income taxes            $(10,437)        $  1,142   $    284
                                                ========         ========   ========
</TABLE>


                                      F-29



<PAGE>

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

                                                                   December 31,
                                                                       1996
                                                                     --------
Accounts receivable allowances                                       $  1,201
Accruals                                                                2,799
Depreciation and amortization                                          (6,272)
Investments                                                            (3,325)
Deferred compensation and benefits                                      6,104
Loss on discontinued operations                                           264
Tax net operating loss carryforwards                                   20,148
Other                                                                   2,274
                                                                     --------
Subtotal                                                               23,193
Valuation allowance                                                   (20,813)
                                                                     --------
                                                                     $  2,380
                                                                     ========

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

                                                                    December 31,
                                                                       1996
                                                                     --------
Current deferred tax asset                                           $  4,153
Valuation allowance                                                    (2,180)
                                                                     --------

Net current deferred tax asset                                       $  1,973
                                                                     ========

Long-term deferred tax asset                                         $ 19,755
Valuation allowance                                                   (19,030)
                                                                     --------

Net long-term deferred tax asset                                     $    725
                                                                     ========

Long-term deferred tax liability                                     $ (1,860)
                                                                     ========

      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.

20. 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
and 1995 totaled $763,000, and $898,000, 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


                                      F-30



<PAGE>

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

                                                           December 31,
                                                   ---------------------------
                                                        1996           1996
                                                     Pension ABO  Pension Assets
                                                   Exceeds Assets   Exceed ABO
                                                   --------------   ----------
Vested benefit obligation                             $ 19,488       $  1,860
                                                      --------       --------
Accumulated benefit obligation                        $ 19,525       $  1,860
                                                      ========       ========
Projected benefit obligation                          $ 19,525       $  1,860
Plan assets at fair value                               19,877          2,188
                                                      --------       --------
Plan assets less projected benefit obligation              352            328
                                                        (1,854)            --
                                                      --------       --------
Unrecognized net gain

Net pension asset (liability)                         $ (1,502)      $    328
                                                      ========       ========

Major assumptions at year end:
                                                                1996
                                                                ----
Discount rate                                                    7.7%
Rate of increase of compensation levels                          n/a
Expected long-term rate of return on assets                      9.4%

      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.

21. 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 and 1995 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.


                                      F-31



<PAGE>

      The estimated accumulated postretirement benefit obligation at December
31, 1996, at a weighted average discount rate of 7.7% is estimated as follows
(dollars in thousands):

                                                             December 31, 1996
                                                             -----------------
Retirees                                                                $5,861
Fully eligible active plan participants                                    299
Other active participants                                                  371
                                                                       -------
                                                                         6,531
Unrecognized net loss                                                     (133)
                                                                       -------
                                                                        $6,398
                                                                       =======

      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.

22. SUPPLEMENTAL CASH FLOWS INFORMATION

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

<TABLE>
<CAPTION>
                                                             Three Months
                                                            Ended March 31,  Years Ended December 31,
                                                                 1997              1996     1995
                                                               -------           -------  -------
<S>                                                            <C>               <C>      <C>
Increase in investment in HPS related to share issuances       $    74           $ 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
                                                               =======           =======  =======

Interest paid                                                  $ 2,003           $ 7,883  $ 8,184
                                                               =======           =======  =======

Income taxes paid                                              $    41           $   784  $ 1,473
                                                               =======           =======  =======
</TABLE>


                                      F-32



<PAGE>

23. 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
1997                       Sales     income (loss)    assets       amortization    expenditures
-----------------------------------------------------------------------------------------------
<S>                      <C>          <C>           <C>              <C>            <C>
Fasteners & Security
Products Distribution    $  19,513    $     (54)          N/A        $     565      $     589
Snack Foods                  4,310           43           N/A              188             55
Industrial Threads &
Buttons                     14,650        1,601           N/A              489            143
Noel - Investments              --           --           N/A               --             --
Noel - Corporate                --       (1,891)          N/A               18             --
                         ---------     --------                      ---------      ---------
                         $  38,473     $   (301)                     $   1,260      $     787
                         =========     ========                      =========      =========
</TABLE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                       Operating   Identifiable  Depreciation and    Capital
1996                       Sales     income (loss)    assets       amortization    expenditures
-----------------------------------------------------------------------------------------------
<S>                      <C>          <C>           <C>              <C>            <C>
Fasteners & Security
Products Distribution    $  77,072    $   4,331     $  49,806        $   2,537      $   3,120
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
Products Distribution    $  68,842    $   2,067     $  43,680        $   3,046      $     743
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>

(1)   Amounts include $398,000, $2,414,000 and $2,829,000 which were included in
      cost of sales for the period ended March 31, 1997 and the years ended
      December 31, 1996 and 1995, respectively.


                                      F-33



<PAGE>

The snack foods segment had one customer that accounted for approximately 68%
and 49% of sales in 1997 and 1996, respectively.

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

24. QUARTERLY FINANCIAL DATA
    (Unaudited, dollars in thousands, except per share amounts)

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

1996
------------------------------------------------------------------------------------------
<S>                                       <C>       <C>          <C>           <C>
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)

Basic earnings per share from:

  Continuing operations                      (0.01)       0.03      (0.15)        (0.02)

  Discontinued operations                       --          --       0.02            --

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

Diluted earnings per share from:

   Continuing operations                       N/A        0.03        N/A           N/A

   Discontinued operations                     N/A          --        N/A           N/A

   Net income (loss)                           N/A        0.03        N/A           N/A
</TABLE>

All earnings per share amounts have been restated to comply with Statement of
Financial Accounting Standards No. 128, "Earnings per Share".


                                      F-34



<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
and Stockholders of
HealthPlan Services Corporation

In our opinion, the consolidated financial statements of HealthPlan Services
Corporation and its subsidiaries (the "Company") (not presented separately
herein) present fairly, in all material respects, the financial position of
HealthPlan Services Corporation and its subsidiaries at December 31, 1996, and
the results of their operations and their cash flows for each of the two years
in the period ended December 31, 1996, 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
financial 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

Price Waterhouse LLP
Tampa, Florida
March 14, 1997


                                      F-35




<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.

               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.

               In our report dated March 31, 1997, we expressed a qualified
opinion on the 1996 consolidated financial statements because of a scope
limitation related to December 31, 1996 accounts receivable from one customer,
the uncollected balance of which was approximately $1,209,000 at March 28, 1997.
As described in Note 20, the Company has obtained previously unavailable
financial information on this customer as of December 31, 1996 and March 29,
1997, and based on this information has provided an additional $600,000
allowance for this accounts receivable as of December 31, 1996 and has restated
its 1996 consolidated financial statements to reflect this provision.
Accordingly, our present opinion on the 1996 consolidated financial statements,
as present herein is different from that expressed in our previous report.

               In our opinion, 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, except for Note 20
 as to which the date is July 3, 1997


                                      F-36


<PAGE>
                                                                     SCHEDULE II
                        Noel Group, Inc. and Subsidiaries
                       Valuation and Qualifying Accounts
                 For the Years Ended December 31, 1996 and 1995
                             (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

</TABLE>




(a) Write-offs
(b) Dispositions
                                       S-1


<PAGE>

                                INDEX OF EXHIBITS

Item No.          Item Title                                         Exhibit No.
--------          ----------                                         -----------

(2)               Plan of acquisition, reorganization,
                  liquidation or succession:

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

                  (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)   Letter Agreement dated March 22,
                        1995 by and between Noel Group, Inc.
                        and Karen Brenner with respect to
                        Ms. Brenner serving as Chairman and
                        Acting Chief Executive Officer of
                        Lincoln Snacks Company.                            (e)

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

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

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

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



<PAGE>

Item No.          Item Title                                         Exhibit No.
--------          ----------                                         -----------

                  (F)   Assignment of Life Insurance Policy
                        as Collateral 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.                                        (f)

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

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

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

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

                  (K)   Asset Purchase Agreement dated as of
                        December 12, 1996 among Carlyle
                        Industries, Inc., certain of its
                        subsidiaries, Hicking Pentecost PLC
                        and its subsidiary HP
                        Belt-Acquisition Corporation.                      (i)

                  (L)   Agreement and Plan of Merger dated
                        November 6, 1997 among Paragon
                        Corporate Holdings, Inc., Curtis
                        Acquisition Corp. and Curtis
                        Industries, Inc.                                   (j)

(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)              Consents: None

(24)              Power of Attorney: Not Applicable.

(27)              Financial Data Schedule                                  (27)



<PAGE>

Item No.          Item Title                                         Exhibit No.
--------          ----------                                         -----------

(99)              Additional Exhibits: None

-------

(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.

(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 dated December 31, 1995, and are incorporated herein by
      reference.

(g)   These exhibits were filed as exhibits to the Company's Quarterly Report on
      Form 10-Q for the quarter ended September 30, 1995 are incorporated herein
      by reference.

(h)   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.

(i)   This exhibit was filed as an exhibit to the Proxy Statement for the
      Special Meeting of Stockholders of Carlyle Industries, Inc. (f/k/a Belding
      Heminway Company, Inc.) held on March 26, 1997, and is incorporated herein
      by reference.

(j)   This exhibit was filed as an exhibit to Company's Current Report on Form
      8-K dated December 1, 1997 and is incorporated herein by reference.



                             STATEMENT OF DIFFERENCES

The registered trademark symbol shall be expressed as......................'r'