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                          PLAN AND AGREEMENT OF MERGER



                                     between



                               J. MICHAELS, INC.,
                             a New York corporation,



                                       and


                   MURIEL SIEBERT CAPITAL MARKETS GROUP INC.,
                             a Delaware corporation





                           Dated as of April 24, 1996








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<PAGE>

                                TABLE OF CONTENTS

             (This Table of Contents is for convenience of reference
            only and is not intended to define, limit or describe the
           scope or intent of any provision of this Merger Agreement.)


                                                                         Page
                                                                         ----


RECITALS ................................................................  1

ARTICLE I  MERGER OF THE COMPANY INTO MSCMG..............................  1
Section 1.1.  Merger.....................................................  1
Section 1.2.  Further Assurances.........................................  2

ARTICLE II  CERTIFICATE OF INCORPORATION, BY-LAWS,
              DIRECTORS AND OFFICERS, AND STOCK OPTIONS..................  2
Section 2.1.  Charter Amendment..........................................  2
Section 2.2.  Certificate of Incorporation...............................  2
Section 2.3.  By-Laws....................................................  2
Section 2.4.  Directors and Officers.....................................  3
Section 2.5.  Stock Options..............................................  3

ARTICLE III  CONVERSION AND EXCHANGE OF SHARES
               ND LIQUIDATION OF THE COMPANY.............................  3
Section 3.1.  Conversion of Shares.......................................  3
Section 3.2.  Liquidation of the Company Assets..........................  4
Section 3.3.  Option to Leave Assets in Company..........................  5
Section 3.4.  Exchange of Certificates...................................  6
Section 3.5.  Company Common Stock.......................................  6
Section 3.6.  No Further Transfers.......................................  6
Section 3.7.  Legended Certificates......................................  7

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF THE COMPANY................  7
Section 4.1.  Organization; Authority....................................  7
Section 4.2.  Subsidiaries...............................................  7
Section 4.3.  Capitalization of the Company..............................  8
Section 4.4.  Charter Documents..........................................  9
Section 4.5.  Subsidiary Capitalization..................................  9
Section 4.6.  Binding Obligation; Consents; Litigation...................  9
Section 4.7.  Financial Statements....................................... 10
Section 4.8.  Real Property.............................................. 11
Section 4.9.  Banking Facilities......................................... 11
Section 4.10.  Powers of Attorney and Suretyships........................ 11
Section 4.11.  Employee Benefits......................................... 11
Section 4.12.  Compliance With Law; Permits.............................. 15
Section 4.13.  Litigation................................................ 15
Section 4.14.  Material Contracts and Agreements......................... 16
Section 4.15.  Labor Matters............................................. 17
Section 4.16.  Tax Matters............................................... 17
Section 4.17.  Absence of Undisclosed Liabilities........................ 18

                                       -i-
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Section 4.18.  Insurance................................................. 18
Section 4.19.  No Material Adverse Change................................ 19
Section 4.20.  Required Consents......................................... 19
Section 4.21.  Proxy Statement........................................... 19
Section 4.22.  Commission Filings........................................ 20
Section 4.23.  Transfer of Assets and Liabilities
                                    to Liquidating Trust................. 20
Section 4.24.  Disclosure; Representations and Warranties................ 21
Section 4.25.  Finders or Brokers........................................ 21

ARTICLE V  REPRESENTATIONS AND WARRANTIES OF MSCMG....................... 21
Section 5.1.  Organization............................................... 21
Section 5.2.  Authority; Consents........................................ 21
Section 5.3.  Subsidiaries............................................... 22
Section 5.4.  Capitalization of MSCMG.................................... 22
Section 5.5.  Binding Obligation; Consents; Litigation................... 22
Section 5.6.  Financial Statements....................................... 23
Section 5.7.  Compliance With Law; Permits............................... 23
Section 5.8.  Litigation................................................. 24
Section 5.9.  Litigation................................................. 24
Section 5.10.  Consents.................................................. 24
Section 5.11.  No Material Adverse Change................................ 24
Section 5.12.  Proxy Statement........................................... 25
Section 5.13.  Disclosure; Representations and Warranties................ 25
Section 5.14.  Finders or Brokers........................................ 25

ARTICLE VI  TRANSACTIONS PRIOR TO THE EFFECTIVE
               TIME OF THE MERGER........................................ 26
Section 6.1.  Stockholders' Meeting...................................... 26
Section 6.2.  Approvals; Consents........................................ 27
Section 6.3.  Conduct and Liquidation of Business
               Prior To Effective Time of the Merger..................... 27
Section 6.4.  Access to Information and Documents........................ 28
Section 6.5.  Periodic Information....................................... 29
Section 6.6.  Representations............................................ 29
Section 6.7.  Mailing Date............................................... 30
Section 6.8.  Information................................................ 35
Section 6.9.  Notice of Breach........................................... 36
Section 6.10.  Negotiations with Third Parties........................... 36
Section 6.11.  Tax Matters............................................... 38

ARTICLE VII  CONDITIONS TO OBLIGATIONS OF THE PARTIES.................... 41
Section 7.1.  Stockholder Approvals...................................... 41
Section 7.2.  Filing of Charter Amendment................................ 41
Section 7.3.  Listing.................................................... 41
Section 7.4.  Mailing Date Documents..................................... 41
Section 7.5.  Regulatory Approvals....................................... 41
Section 7.6.  Escrow Agreement........................................... 42
Section 7.7.  Trust Agreement............................................ 42

ARTICLE VIII  CONDITIONS TO MSCMG'S OBLIGATIONS.......................... 42
Section 8.1.  Representations and Warranties............................. 42
Section 8.2.  The Company's Performance.................................. 43

                                      -ii-

<PAGE>

Section 8.3.  Authority.................................................. 43
Section 8.4.  Opinion of the Company's Counsel........................... 43
Section 8.5.  Legal Matters Satisfactory................................. 43

ARTICLE IX   CONDITIONS TO THE COMPANY'S OBLIGATIONS..................... 43
Section 9.1.  Representations and Warranties............................. 43
Section 9.2.  MSCMG's Performance........................................ 44
Section 9.3.  Authority.................................................. 44
Section 9.4.  Opinion of MSCMG's Counsel................................. 44
Section 9.5.  Legal Matters Satisfactory................................. 44

ARTICLE X  TERMINATION................................................... 44
Section 10.1.  Termination............................................... 44

Article XI  INDEMNIFICATION.............................................. 45
Section 11.1.  Indemnification by the Company............................ 45
Section 11.2.  Indemnification by the Company............................ 49
Section 11.3.  Legal Proceedings......................................... 51

ARTICLE XII  MISCELLANEOUS............................................... 52
Section 12.1.  Expenses.................................................. 52
Section 12.2.  Survival of Representations and Warranties................ 52
Section 12.3.  Governing Law............................................. 53
Section 12.4.  Notices................................................... 53
Section 12.5.  Jurisdiction; Agent For Service........................... 54
Section 12.6.  Press Releases............................................ 56
Section 12.7.  Assignment; Amendments, Waivers........................... 56
Section 12.8.  Entire Agreement.......................................... 56
Section 12.9.  Severability.............................................. 56
Section 12.10.  Headings................................................. 57
Section 12.11.  Counterparts............................................. 57


                                      -iii-

<PAGE>

                                    Schedules

Section 4.2                Names and Addresses of Subsidiaries;
                             Jurisdictions of Incorporation and
                             Qualification
Section 4.3                Incentive Stock Options
Section 4.5                Subsidiary Capitalization
Section 4.8                Real Property
Section 4.10               Powers of Attorney
Section 4.11               Employee Benefits
Section 4.12               Compliance with Applicable Law
Section 4.13               Litigation
Section 4.14               Material Contracts
Section 4.15               Labor Matters
Section 4.17               Scheduled Liabilities
Section 4.18               Insurance
Section 4.23               Retained Assets


Exhibit  A                 Form of Escrow Agreement
Exhibit  B                 Form of Voting Agreement
Exhibit  C                 Intentionally Omitted
Exhibit  D                 Form of Opinion of Counsel to MSCMG
Exhibit  E                 Form of Trust Agreement
Exhibit  F                 Form of Assignment and Assumption Agreement


                                      -iv-

<PAGE>

                          PLAN AND AGREEMENT OF MERGER


     This PLAN AND AGREEMENT OF MERGER (this "Merger  Agreement")  is made as of
April  24,  1996  between  J.  MICHAELS,  INC.,  a  New  York  corporation  (the
"Company"),   and  MURIEL  SIEBERT   CAPITAL  MARKETS  GROUP  INC.,  a  Delaware
corporation  wholly-owned by Muriel Siebert ("MSCMG"). The Company and MSCMG are
sometimes referred to herein as the "Constituent Corporations",  and the Company
is sometimes referred to herein as the "Surviving Corporation."

                                    RECITALS

     A. The Company was  incorporated in the State of New York on April 9, 1934.
Its principal executive offices are located at 182 Smith Street,  Brooklyn,  New
York 11201.  The authorized  capital stock of the Company  consists of 1,500,000
shares of common stock,  par value $1.00 per share (the "Company Common Stock"),
of which 891,282  shares were  outstanding  and entitled to vote as of April 24,
1996.  The number of such  outstanding  shares of the  Company  Common  Stock is
subject to change prior to the effective time of the merger herein  provided for
pursuant to the exercise of current outstanding employee stock options.

     B. MSCMG was  incorporated  in the State of Delaware on November  29, 1993.
Its principal executive offices are located at 885 Third Avenue, Suite 1720, New
York, New York 10022.  The  authorized  capital stock of MSCMG consists of 1,500
shares of common stock,  no par value (the "MSCMG Common  Stock"),  all of which
are outstanding and entitled to vote as of the date hereof.

     C. The Boards of  Directors  of the  Company and MSCMG have  approved  this
Merger  Agreement and deem it advisable and for the benefit of their  respective
corporations and their  stockholders  that MSCMG merge with and into the Company
on the terms and conditions herein set forth (the "Merger").

     NOW,  THEREFORE,  in consideration  of the covenants and agreements  herein
contained, the parties hereto agree as follows:


                                    ARTICLE I

                        MERGER OF THE COMPANY INTO MSCMG

     Section  1.1.  Merger.  Upon  the  approval  and  adoption  of this  Merger
Agreement  by the  stockholders  of  each  of the  Constituent  Corporations  in
accordance with the laws of the States of New York and Delaware, as appropriate,




<PAGE>

and the  satisfaction  or  waiver  of the  conditions  set  forth  herein to the
obligations of the parties hereto, a certificate of merger shall, subject to the
rights of termination and  abandonment  hereinafter set forth, be filed with the
Department of State of the State of New York in  accordance  with the law of the
State of New York  and the  Secretary  of  State  of the  State of  Delaware  in
accordance  with the law of the State of Delaware.  Effective as of the close of
business on the date on which the filing of such  certificate of merger is made,
MSCMG shall merge with and into the Company,  which as the Surviving Corporation
shall continue its corporate  existence  under the laws of the State of New York
under the name of Siebert  Financial  Corp.  The date and time of such filing is
herein referred to as the "Effective Time of the Merger".

     Section 1.2. Further Assurances. From time to time as and when requested by
the Surviving  Corporation,  or by its  successors or assigns,  the officers and
directors of MSCMG last in office shall execute and deliver such deeds and other
instruments  of  transfer  and shall take or cause to be taken  such  further or
other act as shall be  necessary or advisable in order to vest or perfect in the
Surviving  Corporation,  or to confirm of record or otherwise  to the  Surviving
Corporation,  title to and  possession of all the property,  interests,  assets,
rights, privileges,  immunities,  powers and purposes of each of the Constituent
Corporations.


                                   ARTICLE II

                     CERTIFICATE OF INCORPORATION, BY-LAWS,
                    DIRECTORS AND OFFICERS, AND STOCK OPTIONS

     Section 2.1. Charter  Amendment.  At or immediately  prior to the Effective
Time of the Merger,  the Company shall amend its Certificate of Incorporation to
increase the number of authorized  shares of Company Common Stock from 1,500,000
to 49,000,000 (the "Charter Amendment").

     Section 2.2. Certificate of Incorporation. Except for the change of name of
the Company as provided herein,  the Certificate of Incorporation of the Company
in effect  at the  Effective  Time of the  Merger  (as  amended  by the  Charter
Amendment)   shall  be  the  Certificate  of   Incorporation  of  the  Surviving
Corporation until amended as provided by law.

     Section 2.3. By-Laws. The by-laws of the Company in effect at the Effective
Time of the Merger  shall be the  by-laws  of the  Surviving  Corporation  until
amended or repealed as provided by law.

                                       -2-


<PAGE>

     Section  2.4.  Directors  and  Officers.  The  directors  of  MSCMG  at the
Effective Time of the Merger shall be the directors of the Surviving Corporation
and shall hold office as provided in the by-laws of the  Surviving  Corporation.
The officers of MSCMG at the Effective  Time of the Merger shall be the officers
of the Surviving Corporation and shall hold office as provided in the by-laws of
the Surviving Corporation.

     Section 2.5. Stock Options.  The Company's  Incentive Stock Option Plan and
the 1987 Stock Option Plan shall be terminated on the date of the Effective Time
of the Merger and any options issued  pursuant to such plans not exercised prior
to the Effective Time of the Merger shall be canceled.


                                   ARTICLE III

                        CONVERSION AND EXCHANGE OF SHARES
                         AND LIQUIDATION OF THE COMPANY

     Section 3.1.  Conversion of Shares.  The manner and basis of converting the
shares of each Constituent Corporation shall be as follows:

     (a) Subject to the  provisions of paragraph (b), each share of MSCMG Common
Stock  outstanding  immediately prior to the Effective Time of the Merger (other
than  shares of MSCMG  Common  Stock held in the  treasury of MSCMG)  shall,  by
virtue of the Merger and without  any action on the part of the holder  thereof,
be entitled to receive as of the Effective Time of the Merger  23,823.33  shares
of Company  Common  Stock for each share of MSCMG  Common  Stock owned as of the
Effective  Time of the Merger,  such number of shares of Company Common Stock to
be fixed  so that the  stockholders  of  MSCMG as of the  Effective  Time of the
Merger  receive an  aggregate of 97.5% of the issued and  outstanding  shares of
Company Common Stock as of the Effective Time of the Merger.

     (b) No certificates  for fractions of shares of Company Common Stock and no
scrip or other certificates evidencing fractional interests in such shares shall
be issu- able and any such  fractional  share  which would  otherwise  be issued
shall  be  canceled  without  the  payment  of any  amount  therefore.  No  such
stockholder  shall be  entitled to any  voting,  dividend  or other  rights as a
stockholder of the Company with respect to any fractional share.


                                       -3-

<PAGE>

     (c) The holders of Company Common Stock  immediately prior to the Effective
Time of the Merger other than the  Dissenting  Holders (as defined  below) (such
holders other than the Dissenting Holders,  the "Existing Holders") shall at the
Effective  Time of the Merger receive a cash payment equal to the Effective Date
Payment (as hereinafter  defined),  and the right to receive  distributions from
the liquidating  trust to be established by the Company  pursuant to Section 3.2
for the benefit of the Existing Holders (the "Liquidating Trust"). The Effective
Date Payment  shall be an amount equal to the  available  cash proceeds from the
liquidation referred to in Section 3.2 below (including in such proceeds the net
after-tax  proceeds  of any  assets  sold,  after  payment of all  expenses  and
liabilities  of  the  Company   (including  tax  liabilities   relating  to  the
liquidation),  and  the  cash  and  cash  equivalents  of the  Company  in  hand
immediately prior to the Effective Time of the Merger),  less (i) $500,000 to be
placed in escrow pursuant to Section 3.2 below,  (ii) $500,000 to be held by the
Liquidating Trust to pay liabilities, if any, pursuant to the proviso in Section
3.2 below,  and (iii) such amount as the trustees of the Liquidating  Trust (the
"Trustees") determine in good faith to retain in the Liquidating Trust to enable
the Liquidating Trust to (x) liquidate the assets in the Liquidating Trust in an
orderly fashion and (y) maintain an adequate reserve for liabilities  assumed by
the Liquidating Trust.

     (d) Each share of MSCMG  Common  Stock  issued and held in the  treasury of
MSCMG  immediately  prior to the Effective  Time of the Merger shall be canceled
and retired, and no shares or other securities of the Company shall be issuable,
and no cash shall be exchangeable, with respect thereto.

     (e) The  Merger  shall  effect no change  in any of the  shares of  Company
Common Stock  outstanding at the Effective Time of the Merger and no such shares
shall be converted as a result of the Merger.

     Section 3.2.  Liquidation of the Company Assets.  Prior to the date hereof,
the Company  commenced to liquidate the assets relating to the existing business
of the Company.  At the Effective Time of the Merger,  (i) the Existing  Holders
(other than those who have elected to enforce their right to receive payment for
their shares pursuant to Section 623 of the New York Business  Corporation  Law)
(such electing  holders,  the "Dissenting  Holders") shall receive the Effective
Date  Payment,  (ii)  $500,000  shall be placed in escrow  pursuant to an escrow
agreement substantially in the form of Exhibit A hereto (the "Escrow Agreement")
for one year from the  Effective  Time of the  Merger  and  (iii) the  Surviving
Corporation shall receive the Effective Date Payment for the Dissenting Holders.
Subject to Section 3.3 below, any and all assets of the Company immediately

                                       -4-


<PAGE>


prior to the  Effective  Time of the Merger  not so  disbursed  to the  Existing
Holders or placed in escrow  pursuant to this  Section 3.2 or  disbursed  to the
Surviving  Corporation  pursuant  to  clause  (iii)  above,   including  without
limitation any and all cash or cash equivalents not placed in escrow or included
in the Effective Date Payment or the payment to the Surviving Corporation, shall
be  transferred  to the  Liquidating  Trust  for the  exclusive  benefit  of the
Existing  Holders;   provided,   however,  that  on  or  immediately  after  the
liquidation of the last of the material assets of the Company transferred to the
Liquidating Trust (other than accounts receivable), an additional $500,000 shall
be  reserved  by the  Liquidating  Trust  for a period of one year from the date
thereof to be used to pay all amounts due to MSCMG (or the Surviving Corporation
as the successor in interest  thereto) pursuant to Section 11.1 hereto or to pay
liabilities other than liabilities set forth in Schedule 4.17.  Without limiting
the generality of the foregoing,  the assets of the Company immediately prior to
the Effective Time of the Merger which are to be transferred to the  Liquidating
Trust  shall  include  all  cash  and cash  equivalents,  all real and  personal
property,  all  rights  to tax or other  refunds  and all  rights of any kind or
nature whatsoever, whether choate or inchoate.

     Section  3.3.  Option to Leave  Assets  in  Company.  At the  option of the
Trustees and with the consent of the  Surviving  Corporation  which shall not be
unreasonably withheld,  assets of the Company immediately prior to the Effective
Time  of  the  Merger  which  would  otherwise  have  been  transferred  to  the
Liquidating  Trust and which  constitute an active business shall,  instead,  be
held by the Company pending their sale or other  disposition.  During the period
in which  any such  assets  are held by the  Company,  the  Company  irrevocably
designates  the Trustees as its agents to manage any such assets  pending  their
sale or other disposition and to arrange in all respects for their sale or other
disposition,  provided that the Company shall have no liability  with respect to
such  assets  or in  connection  with such  disposition,  and any  liability  in
connection  with such  assets or such  disposition  shall be a  liability  to be
assumed by the  Liquidating  Trust.  Such  assets,  and any  after-tax  revenues
generated by such assets (including  without  limitation any revenues  generated
from the operation of such assets or their sale or other  disposition) and after
payment of all expenses incurred as a result directly, or in any way indirectly,
of the  operation or  retention  of such  assets,  shall be held in trust by the
Company  for the  benefit  of the  Liquidating  Trust,  and any  such  after-tax
revenues  upon sale or  disposition  shall  immediately  be  transferred  to the
Liquidating  Trust. The determination of after-tax revenues for purposes of this
Section 3.3 shall be made in accordance with the procedures contained in Section
6.11(d) hereof.

                                       -5-

<PAGE>

     Section 3.4. Exchange of Certificates.
                  -------------------------

     (a) Each holder of record at the Effective  Time of the Merger of shares of
MSCMG Common Stock shall be entitled,  upon the  surrender to the Company or its
transfer  agent of the  certificate  for its  shares of MSCMG  Common  Stock for
cancellation,  to receive a certificate or certificates  representing the number
of shares of Company Common Stock into which the holder's shares of MSCMG Common
Stock shall have been converted in the Merger under Section 3.1(a).

     (b) Until so presented and  surrendered  in exchange for a  certificate  or
certificates representing shares of Company Common Stock, each certificate which
represented  issued and  outstanding  shares of MSCMG  Common  Stock  which were
converted at the Effective  Time of the Merger into the right to receive  shares
of Company  Common Stock shall be deemed for all corporate  purposes,  except as
set forth below,  to evidence  the  ownership of the number of shares of Company
Common  Stock into which the holder's  shares  shall have been  converted in the
Merger.  Unless and until any such  certificates  shall be so  surrendered,  the
holder of such  certificate  shall not be entitled  to receive  any  dividend or
other  distribution  payable  to  holders  of shares of  Company  Common  Stock.
Following  such  surrender,  there  shall be paid to the  record  holder  of the
certificate  representing  shares  of  Company  Common  Stock  issued  upon such
surrender the amount of dividends  (without  interest  thereon) which shall have
become  payable  with  respect to the number of shares of Company  Common  Stock
represented by the certificate issued in exchange upon such surrender;  provided
that such record  holder  shall not be entitled  to receive the  Effective  Date
Payment, or any other distributions from or in respect of the Liquidating Trust,
after the Effective Time of the Merger or any other proceeds of the  liquidation
referred to in Section 3.2 above.

     Section 3.5.  Company  Common  Stock.  Except for the issuance of shares of
Company Common Stock upon conversion of shares of MSCMG Common Stock pursuant to
Section 3.1,  the Merger  shall effect no change in the shares of the  Company's
capital  stock  and none of its  shares  shall be  converted  as a result of the
Merger.

     Section 3.6. No Further Transfers.  After the Effective Time of the Merger,
there shall be no registration of transfers on the stock transfer books of MSCMG
of the shares which were outstanding  immediately prior to the Effective Time of
the Merger.

                                       -6-

<PAGE>

     Section 3.7. Legended  Certificates.  Certificates  representing  shares of
Company Common Stock issued to each holder of securities of MSCMG,  shall bear a
legend substan- tially as follows:

               "The shares  represented by this  certificate  have not
          been  registered,  under  the  Securities  Act of 1933.  The
          shares may not be sold or  transferred  in the  absence of a
          current  prospectus  or an  exemption  therefrom  under  the
          Securities Act of 1933."


                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants as follows:

     Section  4.1.  Organization;   Authority.  The  Company  is  a  corporation
organized and existing in good standing under the laws of the State of New York.
The  Company is not  required  to be  qualified  or licensed to do business as a
foreign corporation in any jurisdiction by reason of the ownership or leasing of
real property, the maintenance of offices, the warehousing of goods, the conduct
of its  business  activities,  the nature of its business or  otherwise,  except
where the failure to be so qualified or licensed  would be curable by subsequent
qualification  without  such  failure  having a material  adverse  effect on the
Company or would not have a material adverse effect on the Company.  The Company
would not be subject to material penalties,  taxes or other burdens based on its
past conduct if it chose to qualify in any  jurisdiction  in which it is not now
qualified.  No jurisdiction in the United States in which the Company is not now
qualified  has  asserted  to the  Company  that the  Company is  required  to be
qualified to do business therein.

     The Company has all necessary  power and authority to own or to lease,  and
to operate,  its properties and assets and to carry on its business as it is now
being conducted.

     Section  4.2.  Subsidiaries.  Set  forth  on  Schedule  4.2  are  the  only
corporations  (the  "Company  Subsidiaries")  with  respect to which the Company
beneficially owns,  directly or indirectly,  in excess of 50% of the outstanding
stock or other equity  interests,  the holders of which are entitled to vote for
election  of a  majority  of the  board of  directors  or other  governing  body
thereof,  except for  corporations,  if any,  which have no  material  assets or
liabilities and have not conducted any operations for the past three years

                                       -7-

<PAGE>

("Inactive   Subsidiaries").   The   Company  is  not  aware  of  any   Inactive
Subsidiaries.  The other  entities  listed on Schedule 4.2 are the only entities
with respect to which (i) the Company  beneficially  owns directly or indirectly
in  excess  of 5% but not in  excess  of 50% of the  outstanding  stock or other
interests,  the holders of which are entitled to vote for election of a majority
of the board of directors or other governing body thereof,  (ii) the Company may
be deemed to be in control  because of factors or  relationships  other than the
quantity of stock or other interests owned, or (iii) the Company's investment in
which  is  accounted  for by the  equity  method.  Each  Company  Subsidiary  is
organized and existing and in good standing  under the laws of its  jurisdiction
of incorporation,  which jurisdiction is set forth on Schedule 4.2. Each Company
Subsidiary  has all  necessary  power and  authority to own or to lease,  and to
operate,  its  properties  and assets and to carry on its  business as it is now
being conducted. Each Subsidiary is duly licensed or qualified to do business as
a foreign  corporation  and in good standing in every  jurisdiction in which (i)
the  ownership or leasing of real  property,  the  maintenance  of offices,  the
warehousing  of goods,  the conduct of its business  activities or the nature of
its business makes such  qualification  necessary and (ii) failure so to qualify
or to become licensed would, if not remedied,  impair title to its properties or
its  rights to  enforce  contracts  against  others  or  expose  it to  material
liability in such jurisdictions.

     Section 4.3. Capitalization of the Company. The authorized capital stock of
the Company  consists of 1,500,000  shares of common stock,  par value $1.00 per
share, of which 891,282 shares are outstanding and have been duly authorized and
validly issued and are fully paid and nonassessable.  No shares of the Company's
capital stock are held by the Company or any of the Company Subsidiaries.  There
are no options,  warrants,  rights,  calls,  commitments  or  agreements  of any
character obligating the Company or any of the Company Subsidiaries to issue any
shares of capital  stock or any security  representing  the right to purchase or
otherwise receive any such shares,  except for options to purchase 25,000 shares
of the Company Common Stock pursuant to employee stock options granted under the
Company Incen- tive Stock Option Plan.  Schedule 4.3 contains a complete --- and
accurate  list of the  following  with  respect to each  employee  stock  option
outstanding  under the Company  Incentive  Stock  Option Plan and the 1987 Stock
Option  Plan:  the name of the holder of such  option,  the date such option was
granted, became or will become exercisable and will expire, the number of shares
of Company  Common Stock  covered by such option and the exercise  price of such
option. Except for restrictions on transfer arising under applicable Federal and

                                       -8-


<PAGE>

state securities laws, there are no existing restrictions imposed by the Company
or by its affiliates on the transfer of any outstanding  shares of capital stock
of the Company and there are no  registration  covenants  with respect  thereto.
None of the outstanding shares of the Company or any of the Company Subsidiaries
was  issued in  violation  of the  preemptive  rights of any  present  or former
stockholder.

     Section  4.4.  Charter  Documents.   The  copies  of  the  certificates  of
incorporation  and by-laws of the  Company and each of the Company  Subsidiaries
which have previously been delivered to MSCMG are complete and correct.

     Section  4.5.  Subsidiary  Capitalization.  Except as set forth on Schedule
4.5,  (i) the  authorized  capital  stock of the Company  Subsidiaries  consists
solely of shares of common stock; (ii) there are no options,  warrants,  rights,
calls,  commitments  or agreements of any kind  obligating the Company or any of
the  Company  Subsidiaries  to issue  any  shares of the  capital  stock of such
Company  Subsidiary  or any  security  representing  the  right to  purchase  or
otherwise  receive any such capital  stock or to transfer  any issued  shares of
such capital stock;  and (iii) the Company is the record and beneficial owner of
all the outstanding  shares of capital stock of the Company  Subsidiaries,  free
and clear of all mortgages,  security interests, liens, claims and encumbrances.
All such shares of common stock which are  outstanding  have been validly issued
and are fully paid and nonassessable.

     Section 4.6. Binding Obligation;  Consents;  Litigation.  The execution and
delivery of this Merger Agreement by the Company do not, and the consummation of
the transactions  contemplated hereby will not, violate (i) any provision of the
certificate  of  incorporation  or by-laws of the  Company or any of the Company
Subsidiaries or (ii) any provision of, or result in a breach of any of the terms
or provisions  of, or result in the  acceleration  of any obligation  under,  or
constitute a default under, any mortgage,  lien, lease,  agreement,  instrument,
order,  arbitration award, judgment or decree to which the Company or any of the
Company  Subsidiaries  is a party, or to which the Company or any of the Company
Subsidiaries is, or the assets,  properties or business of the Company or any of
the Company  Subsidiaries  are,  subject,  which  would have a material  adverse
effect on the  Company or any of its assets  (provided  that  neither a material
adverse  change in the  operations of the Company,  nor the  liquidation  of the
Company's  assets,  shall be deemed  to have a  material  adverse  effect on the
Company or its assets) (any such included  material  adverse effect, a "Material
Adverse Effect"). The Board of Directors of the Company has approved this Merger

                                       -9-


<PAGE>

Agreement,  has  authorized  the execution and delivery  hereof and has directed
that this Merger  Agreement be submitted to the  stockholders of the Company for
adoption at a special meeting of such stockholders.  The Company has full power,
authority  and  legal  right to enter  into  this  Merger  Agreement  and,  upon
appropriate  vote of its  stockholders in accordance with the law, to consummate
the  transactions   contemplated   hereby.   Except  for  the  approval  of  its
stockholders,  the Company has taken all action required by law, its certificate
of  incorporation,  its by-laws or  otherwise  to  authorize  and to approve the
execution and delivery of this Merger  Agreement and the  documents,  agreements
and  certificates  executed and delivered by the Company in connection  herewith
and the  consummation by the Company of the  transactions  contemplated  hereby.
This Merger  Agreement  has been duly  executed and delivered by the Company and
constitutes a valid and legally binding  obligation of the Company,  enforceable
against the Company in accordance with its terms. No consent,  action,  approval
or  authorization   of,  or  registration,   declaration  or  filing  with,  any
governmental  authority  arising  from the  Company's  obligations  prior to the
Merger is  required to be  obtained  by the  Company in order to  authorize  the
execution  and  delivery  by  the  Company  of  this  Merger  Agreement  or  the
consummation by the Company of the Merger.

     Section 4.7.  Financial  Statements.  The Company has furnished  MSCMG with
complete copies of the financial statements of the Company for each of the three
fiscal  years ended March 31, 1995 (as  restated in the case of the fiscal years
ended  March 31, 1994 and 1993),  including  in each case a balance  sheet,  the
related statements of income and of changes in financial position for the period
then ended, the accompanying  notes, and the report thereon of Richard A. Eisner
& Company,  LLP,  independent (of the Company) certified public accountants with
respect to the fiscal year ended March 31, 1995  ("Eisner & Co.") and the report
thereon of Ernst & Young LLP,  independent  (of the  Company)  certified  public
accountants  with  respect to the two fiscal  years ended March 31, 1994 and the
unaudited  financial  statements of the Company for the  nine-month  period from
March 31, 1995 to December 31, 1995,  including a balance  sheet and the related
statements  of income and of changes in financial  position  for the  nine-month
period then ended (the consolidated  balance sheet therein and the notes thereto
as at December  31, 1995 being  called the "Company  Balance  Sheet").  All such
financial statements (i) reflect and provide adequate reserves in respect of all
known liabilities of the Company and the Company Subsidiaries in accordance with
GAAP,  including all known contingent  liabilities as of their respective dates,
and (ii) present  fairly the financial  condition of the Company and the Company
Subsidiaries  at  such  dates  except  that a  diminution  in the  value  of the


                                      -10-

<PAGE>

Company's assets from that reflected on the Company Balance Sheet shall not be a
breach of the  representation so long as such diminution shall not result in the
Company's being rendered  insolvent at any time from the date hereof through the
Effective Time of the Merger.

     Section 4.8. Real  Property.  Except as set forth on Schedule 4.8,  neither
the Company nor the Company  Subsidiaries owns, has legal or equitable title in,
or has a leasehold interest in, any real property (the "Real Property").

     Section 4.9. Banking  Facilities.  Schedule 4.9 sets forth the name of each
bank with which the Company has an account or safe deposit box, the  identifying
numbers  or  symbols  thereof  and the name of each  person  authorized  to draw
thereon or to have access thereto.

     Section 4.10. Powers of Attorney and Suretyships. The Company has set forth
on Schedule 4.10 the name of each person,  if any, holding any power of attorney
from the Company and the Company  Subsidiaries  and a summary  statement  of the
terms  thereof.  The  Company  and the  Company  Subsidiaries  have no  material
obligation  or  material  liability,   either  actual,   accrued,   accruing  or
contingent, as guarantor, surety, co-signer,  endorser, co-maker,  indemnitor or
otherwise in respect of the obligation of any person, corporation,  partnership,
joint venture, association, organization or other entity.

     Section 4.11. Employee Benefits.
                   ------------------

     (a) Set forth on Schedule 4.11 is a correct and complete list of all funded
or unfunded,  written or oral,  employee benefit plans,  contracts,  agreements,
incentives, salary, wages or other compensation plans or arrangements, including
but not limited to all pension and profit sharing plans,  savings plans,  bonus,
deferred  compensation,  incentive  compensation,  stock purchase,  supplemental
retirement,   severance  or  termination  pay,  stock  option,  hospitalization,
medical, life insurance, dental, disability,  salary continuation,  vacation, or
supplemental  unemployment benefit programs,  policies,  plans, or arrangements,
union contracts,  employment contracts,  consulting agreements, retiree benefits
and agreements,  severance  agreements and each other employee  benefit program,
plan,  policy or  arrangement,  at any time  maintained  since  January 1, 1990,
contributed  to, or  required  to be  contributed  to by the Company or an ERISA
Affiliate for the benefit of present or former employees,  directors,  agents or
consultants,  or for which the Company  may be  responsible  or with  respect to
which it may have any  liability,  whether or not  subject to ERISA and  whether
legally binding or not (each a "Plan"); provided, however, Schedule 4.11 shall

                                      -11-


<PAGE>

set  forth  only  those  hospitalization,   medical,  life  insurance,   dental,
disability,  salary  continuation  and  vacation  programs,  policies,  plans or
arrangements  and only those  union  contracts  to which the Company or an ERISA
Affiliate  is  currently  contributing.  "ERISA  Affiliate"  means  any trade or
business,  whether or not incorporated,  that together with the Company would be
deemed a single employer under Section 414(b),  (c), (m), (n) or (o) of the Code
or Section  4001 of ERISA.  Each Plan  intended to be  qualified  under  Section
401(a)  of the Code (a  "Tax-Qualified  Plan",  which  term  shall  exclude  any
multiemployer plan (as defined in Section 3(37) of ERISA to which the Company or
any of its  subsidiaries  contribute  and which is the  subject of a  collective
bargaining agreement  ("Multiemployer  Plans")) is identified as a Tax-Qualified
Plan in such Schedule 4.11 and is so qualified.

     (b) The Company has heretofore  delivered to MSCMG true and complete copies
of the following:

          (i) each Plan listed on Schedule 4.11 and all amendments  thereto
     to the date hereof;

          (ii) each trust  agreement  and  annuity  contract  (or any other
     funding instruments)  pertaining to any Plan, including all amendments
     to such documents to the date hereof;

          (iii) the most recent determination letter issued by the Internal
     Revenue Service with respect to each of the Tax-Qualified Plans;

          (iv) the most recent actuarial valuation report for each Plan for
     which an actuarial valuation report is required to be prepared; and

          (v) the most  recent  Annual  Report  (IRS  Forms  5500  series),
     including  Schedules A and B and plan audits, if applicable,  required
     to be filed with respect to each Plan.

     (c) The status as of the date hereof of each Plan and Multiemployer Plan is
set forth in Schedule  4.11,  including  (i) the amount of the  Company's or the
ERISA  Affiliates  contribution  to such Plan for each of the past three  fiscal
years and the plan year in which the Effective Time of the Merger  occurs,  (ii)
the amount of any liability of the Company and the ERISA Affiliates for payments
or  contributions  past due with  respect to such Plan as of the last day of its
most recent plan year and as of the end of any subsequent  month ending prior to
the Effective Time of the Merger, and the date any such amounts were paid,

                                      -12-

<PAGE>

(iii)  any  contribution  to such  Plan in a form  other  than in cash  and (iv)
whether  such Plan has been  terminated.  Except as set forth on Schedule  4.11,
neither the Company nor the ERISA Affiliates has obligations or liabilities with
respect to any Plan or  liabilities  relating  to any Plan under any  collective
bargaining agreement to which they are a party or by which they are bound.

     (d) To the  knowledge  of the Company or any officer of the  Company,  each
Tax-Qualified  Plan and any related trust  agreements or annuity  contracts (and
any other funding instruments)  currently comply, and have complied in the past,
both as to form and  operation,  including  compliance  with all  reporting  and
disclosure  requirements,  with the provisions of ERISA and the Code, as well as
the provisions of any applicable collective  bargaining  agreement.  The IRS has
issued a favorable  determination letter with respect to the qualification under
Sections   401(a)  and  501(a)  of  the  Code  including   compliance  with  the
requirements  of the Tax Reform  Act of 1986,  of each Tax-  Qualified  Plan and
related trust,  if any, and has not taken any action to revoke such letters.  In
addition,  all necessary governmental approvals for the Tax-Qualified Plans have
been obtained.

     (e) With  respect  to each  Tax-Qualified  Plan that is subject to Title I,
Subtitle  B,  Part 3 of  ERISA  (a  "Pension  Plan")  the  present  value,  on a
termination  basis of all accrued  benefits  (vested and nonvested) of each such
Plan as of the  Effective  Time of the  Merger,  determined  on the basis of the
actuarial  assumptions set forth on Schedule  4.11(e),  will not exceed the fair
market  value of the  assets of each such Plan as of the  Effective  Time of the
Merger.

     (f) With  respect to all  Pension  Plans,  except as set forth on  Schedule
4.11, (i) the Company and ERISA  Affiliates have paid all premiums (and interest
charges and penalties for late payment, if applicable) due the PBGC with respect
to each plan year  thereof for which such  premiums  are  required;  (ii) on and
after  September 2, 1974,  there has been no  "reportable  event" (as defined in
Section  4043(b) of ERISA and the  regulations  of the PBGC under that  Section)
subject to Title IV of ERISA;  (iii) no liability to the PBGC has been  incurred
by the Company ERISA  Affiliates on account of any termination  subject to Title
IV of ERISA; (iv) on and after September 2, 1974, no filing has been made by the
Company ERISA  Affiliates with the PBGC, and no proceeding has been commenced by
the PBGC, to terminate any Pension Plan subject to Title IV of ERISA maintained,
or wholly or partially  funded,  by the Company and ERISA Affiliates (v) neither
the Company and the ERISA Affiliates have (A) ceased operations at a facility so
as to become  subject  to the  provisions  of  Section  4062(f)  of  ERISA,  (B)

                                      -13-



<PAGE>

withdrawn as a substantial employer so as to become subject to the provisions of
Section 4063 of ERISA,  (C) ceased making  contributions so as to become subject
to Section  4064(a) of ERISA to a Pension Plan to which the Company or any ERISA
Affiliates made  contributions  during the five years prior to the Closing Date,
or (D) made a complete or partial withdrawal from a Multiemployer Plan.

     (g) In addition, with respect to all Plans, except as set forth on Schedule
4.11, (i) other than routine claims for benefits, there are no material actions,
suits or  claims  pending  or  threatened  against  any Plan or the  fiduciaries
thereof,  or  against  the  assets of any Plan and (ii) on and after  January 1,
1975,  neither the Company nor any ERISA  Affiliate,  any plan  fiduciary of any
Plan has engaged in any prohibited  transaction within the meaning of Title I of
ERISA or Section 4975 of the Code and no  imposition of excise tax penalties has
occurred with respect thereto.

     (h) At the Effective Time of the Merger, the Company will have no employees
except to the extent  that a portion of the  business  is left in the Company as
contemplated by Section 3.3.

     (i) To the  knowledge  of the Company or any officer of the  Company,  each
"group health plan" (within the meaning of Section 4980B of the Code) maintained
by  the  Company  has  been   administered   in  compliance  with  the  coverage
continuation   requirements   contained  in  the  Consolidated   Omnibus  Budget
Reconciliation Act of 1985 ("COBRA") and any regulations promulgated or proposed
under the Code.

     (j) The Company shall  terminate or cause to be terminated,  on or prior to
the  Effective  Time of the Merger,  and without any  liability to the Surviving
Corporation  or MSCMG,  all Plans  described  in Schedule  4.11,  so that to the
extent permitted by applicable law the Company no longer maintains,  contributes
to or participates in such plans after the Effective Time of the Merger,  all in
accordance with the applicable requirements of ERISA, the Code, and the terms of
such plans or related instruments;  provided, however, that any plan required to
be  maintained  by  applicable  law shall be  terminated as soon as permitted by
applicable  law. The Company  shall  promptly  provide  MSCMG with copies of all
documents filed with any governmental  agencies and any other documents relating
to the amendment of such plans.

     (k) Without  limiting the generality of Section 3.2 of this Agreement,  the
parties hereto hereby further agree that the  Liquidating  Trust, on or prior to

                                      -14-

<PAGE>

the Effective Time, expressly assumes all obligations and responsibilities under
the Plans currently maintained or contributed to by the Company on behalf of the
employees or former employees,  including,  without limitation,  all obligations
and  liabilities  with respect to the  termination  of and  withdrawal  from the
Plans, all obligations and  responsibilities  to provide retiree health coverage
and  continuation   coverage  and  appropriate  notices  under  COBRA,  and  all
obligations and  responsibilities  under all severance and termination pay plans
and programs,  and shall indemnify  MSCMG and the Surviving  Corporation for and
hold them harmless from and against all liabilities, costs, and expenses arising
in  connection  with  such  Plans,   continuation   coverage   requirements  and
termination  obligations.  The Surviving  Corporation shall cooperate fully with
the Liquidating  Trust by making  available  records,  books of account or other
materials,  or taking such other  reasonable  actions,  as may be  necessary  or
helpful for the Liquidating  Trust to fulfill its obligations under this Section
4.11(k).

     (l) The Corporation does not maintain, sponsor or contribute to any plan or
program providing retiree medical or life insurance benefits.

     Section 4.12. Compliance With Law; Permits. Except as set forth in Schedule
4.12, and except in all cases for non-compliance which would not have a Material
Adverse Effect,  the Company and each Company  Subsidiary have complied with all
applicable  federal,  state,  local or foreign  laws,  regulations,  ordinances,
orders,  injunction,  or decrees, or administrative decisions or directives (the
"Requirements of Law"), relating to its securities,  property, employees, former
employees or applicants for  employment  ("Employees")  or business,  including,
without  limitation,  Title  VII of the Civil  Rights  Act of 1964,  as  amended
("Title  VII"),  OSHA,  the Age  Discrimination  in  Employment  Act of 1967, as
amended ("ADEA"),  the Equal Pay Act of 1963, as amended ("EPA"),  the NLRA, the
Foreign  Corrupt  Practices  Act  of  1977,  as  amended,   the  Foreign  Agents
Registration Act of 1938, as amended, the Federal Regulation of Lobbying Act, as
amended,  and  the  Ethics  in  Government  Act of  1978,  as  amended,  and all
applicable   statutes,   regulations,   orders  and  restrictions   relating  to
environmental standards or controls.

     Section 4.13.  Litigation.  (a) Except as set forth in Schedule 4.13, there
is no (i) action,  suit, claim,  proceeding or investigation  pending or, to the
knowledge  of the Company or any officer of the Company,  threatened  against or
affecting  the  Company  or any of the  Company  Subsidiaries  or their  assets,
Employees  or  properties,  at law or in  equity,  or  before or by any court or
governmental authority, (ii) arbitration proceeding relating to the Company or

                                      -15-

<PAGE>

any of the Company's  Subsidiaries  or their assets,  Employees or properties or
(iii)  governmental  inquiry  pending or, to the knowledge of the Company or any
officer of the Company,  threatened relating to or involving the Company, any of
the Company  Subsidiaries,  their assets or properties or the  businesses of the
Company or any of the Company  Subsidiaries or the transactions  contemplated by
this  Merger  Agreement  (including  inquiries  as to the  qualification  of the
Company or any of the  Company  Subsidiaries  to hold or receive any permit) and
the  Company  does not know of any basis for any of the  foregoing.  Except  for
actions  brought to collect  accounts  receivable in the ordinary  course of the
Company's business,  there are no pending actions,  suits, claims or proceedings
brought by the Company or any of the Company Subsidiaries against others.

     (b) Except as set forth in  Schedule  4.13,  neither the Company nor any of
the Company  Subsidiaries  has received any written opinion,  memorandum,  legal
advice or notice from legal counsel to the effect that they are exposed,  from a
legal  standpoint,  to any  liability or  disadvantage  which may be material to
their respective  businesses and which would continue past the Effective Time of
the  Merger.  Neither the  Company  nor any of the  Company  Subsidiaries  is in
default with respect to any order, writ, injunction or decree known to or served
upon the  Company  or any of the  Company  Subsidiaries  of any  court or of any
governmental authority.

     Section 4.14. Material Contracts and Agreements.  The Company has described
all material  contracts of the Company now in effect to which the Company or any
of the  Company  Subsidiaries  is a party or by which  it or its  properties  or
assets may be bound or affected, under which the total obligation of the Company
or any of the  Company  Subsidiaries  is in  excess  of  $100,000  or  which  is
otherwise  material to the Company on Schedule 4.14 (the "Material  Contracts").
No default,  alleged  default or  anticipatory  breach exists on the part of the
Company or any of the  Company  Subsidiaries  or, to the best  knowledge  of the
Company  or any of its  officers,  on the part of any  other  party,  under  any
Material Contract,  and there are no material agreements of the parties relating
to any Material  Contract  that have not been  disclosed to MSCMG.  All Material
Contracts  will be either (i)  terminated as of the Effective Time of the Merger
and evidence of such termination  shall be given to MSCMG or (ii) assumed by the
Liquidating  Trust. As of the Effective Time of the Merger,  neither the Company
nor any of the Company  Subsidiaries will be a party to any transaction with any
officer or  director  of the  Company or any of the  Company  Subsidiaries,  any
member  of the  family  of any such  officer  or  director  or any  corporation,
partnership,  trust (except the Liquidating  Trust) or other entity in which any
such officer or director has a substantial interest or is an officer,  director,
trustee or partner.

                                      -16-

<PAGE>

     Section 4.15. Labor Matters.  Except as set forth on Schedule 4.15, neither
the  Company nor any of the Company  Subsidiaries  is a party to any  collective
bargaining agreement with any labor organization. All such collective bargaining
agreements shall be terminated as of the Effective Time of the Merger.  There is
not pending, or to the knowledge of the Company  threatened,  any labor dispute,
strike or work  stoppage  involving  the employees of the Company or any Company
Subsidiaries.

     Section 4.16. Tax Matters.
                   ------------

     (a) Each of the Company and each of the Company  Subsidiaries has filed all
tax returns  required  to be filed by it under the laws of the United  States of
America,  the  jurisdiction  of its  incorporation,  and  each  state  or  other
jurisdiction in which it conducts  business  activities and is required to file.
The Company  has paid or set up an adequate  reserve in respect of all taxes for
the periods covered by such returns.  Neither the Company nor any of the Company
Subsidiaries  has any tax  liability  for which no tax  reserve has been made in
respect of any jurisdiction in which the Company has business  activities and is
required to file.  The Company has set up as provisions for taxes on the Company
Balance  Sheet amounts  sufficient  for all accrued and unpaid  federal,  state,
county and local taxes of the Company and the Company  Subsidiaries,  whether or
not disputed,  including any interest and penalties in connection therewith, for
all fiscal periods ending on or before the date of the Company Balance Sheet.

     (b) The  Company's  federal  income tax returns  have been  examined by the
United States Internal  Revenue  Service (or closed by applicable  statutes) for
all years to and  including  the fiscal  year ended  March 31,  1992 and no such
examinations  are in  progress.  Any  deficiencies  proposed as a result of said
audits  have been paid or finally  settled  and no issue has been  raised in any
such examinations which, by application of similar principles, reasonably can be
expected to result in the  assertion of a  deficiency  for any other year not so
examined.  The results of any settlements and any necessary adjustments in state
income tax resulting therefrom are properly reflected in the Company's financial
statements  referred  to in Section  4.7.  The  Company is not aware of any fact
which would constitute grounds for any further tax liability with respect to the
years which have not been  examined.  No agreements or waivers have been made by
or on behalf of the Company for the extension of time for the  assessment of any
tax or for any applicable statute of limitations.

                                      -17-

<PAGE>

     (c) Except for taxes for the payment of which an adequate  reserve has been
established  on the  Company  Balance  Sheet,  there are no tax  liens,  whether
imposed by any federal, state or local taxing authority, outstanding against any
of the assets, properties or business of the Company.

     (d) All taxes and  assessments  that the Company is required to withhold or
to  collect  have been duly  withheld  or  collected  and all  withholdings  and
collections  have  either  been duly and  timely  paid  over to the  appropriate
governmental  authority or are,  together with the payments due or to become due
in  connection  therewith,  duly  reflected  on the  Company  Balance  Sheet  in
accordance with GAAP.

     For purposes of this Section  4.16,  the term "the  Company"  includes each
other  corporation with which the Company files  consolidated or combined income
tax returns or reports.

     Section 4.17. Absence of Undisclosed  Liabilities.  Neither the Company nor
any Company Subsidiary has any material indebtedness, liability or obligation of
any  character  whatsoever,  whether or not  accrued and whether or not fixed or
contingent,  other than (i) liabilities  reflected in the Company Balance Sheet,
(ii) liabilities incurred in the ordinary course of business (or pursuant to the
liquidation) of the Company and the Company  Subsidiaries  since the date of the
Company Balance Sheet, (iii) indebtedness, liabilities and obligations listed on
Schedule  4.17 hereto,  and (iv)  liabilities  incurred in  connection  with the
performance  of this Merger  Agreement.  The Company has  described all material
indebtedness,  liabilities  or  obligations  of  the  Company  and  the  Company
Subsidiaries known to it on Schedule 4.17 (the "Scheduled Liabilities").

     Section 4.18.  Insurance.  All significant policies of insurance,  together
with the premiums currently paid thereon,  providing for business  interruption,
personal,  Employee,  product or public  liability  coverage with respect to the
business of the Company and the Company  Subsidiaries  are described on Schedule
4.18. The copies of such policies which have  previously been delivered to MSCMG
are complete and correct.  All such  policies  will be  outstanding  and in full
force  and  effect  at the  Effective  Time of the  Merger  and  thereafter,  as
applicable,  until the complete liquidation of the Company's business; provided,
that as of the Effective  Time of the Merger,  some or all of such policies will
be terminated and the balance (if any) of such policies will be assigned to, and
be for the benefit of, the Liquidating  Trust (and the Surviving  Corporation to
the extent that the Company is named as a party in any suit covered by such

                                      -18-


<PAGE>

policies).  Except as set forth on Schedule 4.18, there are no claims,  actions,
suits or  proceedings  arising  out of or based  upon  any of such  policies  of
insurance,  and,  so far as is known to the Company or any of its  officers,  no
basis  for any such  claim,  action,  suit or  proceeding  exists.  There are no
notices of any pending or  threatened  terminations  with respect to any of such
policies and each of the Company and the Company  Subsidiaries  is in compliance
with all conditions contained therein.

     Section 4.19.  No Material  Adverse  Change.  Since the date of the Company
Balance Sheet,  the Company has not experienced any damage,  destruction or loss
(whether  or not  covered by  insurance)  or adverse  change in the value of the
Company such that the Company has been or would be rendered insolvent.

     Section 4.20.  Required Consents.  There have been or will be timely filed,
given obtained or taken all applications,  notices, consents, approvals, orders,
registrations,  qualifications, waivers or other actions of any kind required by
virtue of the execution and delivery of this Merger  Agreement by the Company or
the consummation by the Company of any of the transactions contemplated hereby.

     Section  4.21.  Proxy  Statement.  When the  Proxy  Statement  (the  "Proxy
Statement")  to be  distributed to  stockholders  in connection  with the Merger
shall first be mailed or distributed to such  stockholders (the "Mailing Date"),
the  information  with respect to the Company and the Company  Subsidiaries  set
forth in the Proxy  Statement (a) will comply in all material  respects with the
provisions of the  Securities  Exchange Act of 1934,  as amended (the  "Exchange
Act"),  and the General Rules and  Regulations  of the  Securities  and Exchange
Commission  (the  "Commission")  thereunder  and (b) will not contain any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein  or  necessary  to make the  statements  contained  therein  not
misleading, except that no representation is hereby made as to any statements or
omissions as  described  in this clause (b) with respect to which,  prior to the
Mailing  Date,  the Company  shall have  requested  in writing  any  addition or
modification  to the Proxy  Statement  which shall be necessary in order to make
the Proxy  Statement not untrue or misleading  in any material  respect,  unless
such addition or  modification  shall have been made by the Company prior to the
Mailing  Date.  At all times  subsequent to the Mailing Date up to and including
the Effective Time of the Merger,  the  information  with respect to the Company
and the Company Subsidiaries set forth in the Proxy Statement and all amendments
and  supplements  thereto  (i) will  comply in all  material  respects  with the
provisions of the Exchange Act and the General Rules and Regulations of the

                                      -19-

<PAGE>

Commission  thereunder  and (ii) will not contain any untrue  statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements  contained therein not misleading,  except that
no  representation is hereby made as to any statements or omissions as described
in this clause (ii) with  respect to which,  after the Mailing Date and prior to
the Effective  Time of the Merger,  the Company shall have  requested in writing
any supplement to or amendment of the Proxy Statement,  which shall be necessary
in order to make the Proxy  Statement  not untrue or  misleading in any material
respect, unless such supplement or amendment shall have been made by the Company
prior to the Effective Time of the Merger.

     Section 4.22.  Commission Filings.  The Company has previously delivered to
MSCMG a copy of the Company's  Annual  Reports on Form 10-K for the fiscal years
ended March 31, 1994 and 1995, the Company's  annual reports to stockholders for
the fiscal years ended March 31, 1994 and 1995, the Company's  proxy  statements
in connection with its annual meetings of stockholders held on September 1, 1994
and September  15, 1995 and its  Quarterly  Reports on Form 10- Q for the fiscal
quarters  ended June 30, 1995,  September  30, 1995 and  December 31, 1995.  The
Company  has  heretofore  made public  disclosure  of such  additional  material
information  since the date of the Company's  report on Form 10-K for the fiscal
year  ended  March 31,  1995 as it was  required  to  disclose  pursuant  to the
requirements of applicable  federal and state  securities and other laws and has
furnished copies of such disclosures to MSCMG. Such Annual Reports on Form 10-K,
annual reports to  stockholders,  proxy  statements,  Quarterly  Reports on Form
10-Q,  and other public  disclosures of the dates thereof or the dates made, and
such other documents or information  with respect to the Company and the Company
Subsidiaries  required to be supplied to MSCMG pursuant to this Merger Agreement
or supplied to MSCMG at its request by the Company or on its behalf,  taken as a
whole, were or are true,  correct and complete and did not or do not contain any
statement  which is false or misleading with respect to a material fact, and did
not or do not  omit to  state a  material  fact  necessary  in order to make the
statements therein not false or misleading.

     Section 4.23.  Transfer of Assets and  Liabilities  to  Liquidating  Trust.
Except for those assets and liabilities  referred to in Section 3.3 or listed on
Schedule  4.23,  the Company  will have  transferred  to the  Liquidating  Trust
immediately  prior to the Effective Time of the Merger each and every one of its
assets  and  the  Liquidating  Trust  will  have  assumed  all of the  Company's
liabilities  and  obligations  now  existing  or  hereafter  arising  out of the
business and  operations of the Company  through the period  ending  immediately
prior to the Effective Time of the Merger.

                                      -20-

<PAGE>

     Section 4.24. Disclosure;  Representations and Warranties.  The Company has
made true and  complete  responses  to all  MSCMG's  requests  for  information,
documents,  contracts,  agreements  and  records of the  Company and the Company
Subsidiaries   relating  to  the   business  of  the  Company  and  the  Company
Subsidiaries.  Neither this Merger  Agreement  nor any  statement,  certificate,
writing or document  furnished to MSCMG by the Company in  connection  with this
Merger  Agreement  contains,  as of the  dates  of such  documents,  any  untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein not misleading.

     Section 4.25. Finders or Brokers. The Company has not utilized the services
of any investment banker,  broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or commission in
connection with this Merger  Agreement or upon  consummation of the transactions
contemplated hereby.


                                    ARTICLE V

                     REPRESENTATIONS AND WARRANTIES OF MSCMG

     MSCMG represents and warrants that:

     Section 5.1. Organization. MSCMG is a corporation organized and existing in
good standing under the laws of the State of Delaware.

     Section  5.2.  Authority;  Consents.  MSCMG  has the  corporate  power  and
authority  to execute,  deliver and  perform its  obligations  under this Merger
Agreement and the other  documents,  agreements  and  certificates  executed and
delivered by MSCMG in  connection  herewith.  The execution and delivery of this
Merger Agreement do not, and the  consummation of the transactions  contemplated
hereby will not,  violate any provision of the certificate of  incorporation  or
by-laws of MSCMG, or any provision of, or result in a breach of any of the terms
or provisions  of, or result in the  acceleration  of any obligation  under,  or
constitute a default under, any mortgage,  lien, lease,  agreement,  instrument,
order,  arbitration award,  judgment or decree, to which MSCMG is a party, or to
which MSCMG is, or the  assets,  properties  or business of MSCMG are,  subject.
MSCMG has taken all action  required by law, its  certificate of  incorporation,
its by-laws or otherwise, to authorize and to approve the execution and delivery
of this Merger Agreement and the documents, agreements and certificates executed

                                      -21-

<PAGE>

and delivered by MSCMG in connection  herewith by MSCMG and the  consummation by
MSCMG of the transactions  contemplated  hereby.  This Merger Agreement has been
duly executed and delivered by MSCMG and constitutes a valid and legally binding
obligation of MSCMG, enforceable against MSCMG in accordance with its terms.

     Section 5.3.  Subsidiaries.  Immediately prior to the Effective Time of the
Merger, Muriel Siebert & Co., Inc., a New York corporation  ("MS&Co."),  will be
the only corporation with respect to which MSCMG beneficially owns,  directly or
indirectly, in excess of 50% of the outstanding stock or other equity interests,
the  holders of which are  entitled  to vote for  election  of a majority of the
board of directors or other governing body thereof. The authorized capital stock
of MS&Co.  will consist solely of shares of common stock;  (ii) there will be no
options,  warrants,  rights,  calls,  commitments  or  agreements  of  any  kind
obligating MSCMG or MS&Co. to issue any shares of the capital stock of MS&Co. or
any security  representing  the right to purchase or otherwise  receive any such
capital stock or to transfer any issued shares of such capital stock;  and (iii)
MSCMG will be the record and beneficial  owner of all the outstanding  shares of
capital stock of MS&Co.,  free and clear of all mortgages,  security  interests,
liens,  claims  and  encumbrances.  All such  shares of common  stock  which are
outstanding have been validly issued and are fully paid and nonassessable.

     Section 5.4. Capitalization of MSCMG. The authorized capital stock of MSCMG
consists of 1,500 shares of common stock, no par value,  all of which shares are
issued  and  outstanding  and owned by  Muriel  Siebert.  There are no  options,
warrants,  rights, calls,  commitments or agreements of any character obligating
the  Company or any of the Company  Subsidiaries  to issue any shares of capital
stock or any security  representing  the right to purchase or otherwise  receive
any such shares.

     Section 5.5. Binding Obligation;  Consents;  Litigation.  The execution and
delivery of this Merger  Agreement by MSCMG do not, and the  consummation of the
transactions  contemplated  hereby will not,  violate (i) any  provision  of the
certificate of incorporation or by-laws of MSCMG or MS&Co. or (ii) any provision
of, or result in a breach of any of the terms or provisions of, or result in the
acceleration  of any  obligation  under,  or  constitute  a default  under,  any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which MSCMG or MS&Co. is a party,  or to which MSCMG or MS&Co.  is,
or the assets,  properties or business of MSCMG or MS&Co.  are,  subject,  which
would have a Material Adverse Effect on MSCMG or any of its assets. The Board of

                                      -22-

<PAGE>

Directors and the sole  stockholder of MSCMG have approved this Merger Agreement
and  authorized  the  execution  and  delivery  hereof.  MSCMG  has full  power,
authority and legal right to enter into this Merger  Agreement and to consummate
the  transactions  contemplated  hereby.  MSCMG has taken all action required by
law, its certificate of incorporation, its by-laws or otherwise to authorize and
to  approve  the  execution  and  delivery  of  this  Merger  Agreement  and the
documents,  agreements  and  certificates  executed  and  delivered  by MSCMG in
connection   herewith  and  the   consummation  by  MSCMG  of  the  transactions
contemplated  hereby. This Merger Agreement has been duly executed and delivered
by MSCMG  and  constitutes  a valid and  legally  binding  obligation  of MSCMG,
enforceable  against MSCMG in  accordance  with its terms.  No consent,  action,
approval or authorization  of, or registration,  declaration or filing with, any
governmental  authority arising from MSCMG's  obligations prior to the Merger is
required  to be  obtained  by  MSCMG in order to  authorize  the  execution  and
delivery by MSCMG of this Merger  Agreement or the  consummation by MSCMG of the
Merger.

     Section 5.6.  Financial  Statements.  MSCMG has  furnished the Company with
complete  copies of the  financial  statements  of MS&Co.  for each of the three
fiscal years ended  December 31,  1995,  including in each case a balance  sheet
(the consolidated balance sheet therein and the notes thereto as at December 31,
1995 being called the "MS&Co.  Balance Sheet"), the related statements of income
and of changes in financial position for the period then ended, the accompanying
notes, and the report thereon of Eisner & Co., independent (of MS&Co.  certified
public  accountants with respect to the two fiscal years ended December 31, 1995
and the report  thereon of  Shulman,  Jacobson & Co.,  independent  (of  MS&Co.)
certified public  accountants with respect to the fiscal year ended December 31,
1993. All such financial statements (i) reflect and provide adequate reserves in
respect of all known  liabilities of MS&Co. in accordance  with GAAP,  including
all known contingent  liabilities as of their respective dates, and (ii) present
fairly the financial condition of MS&Co. at such dates.

     Section  5.7.  Compliance  With  Law;  Permits.  Except  in all  cases  for
non-compliance  which would not have a Material Adverse Effect, MSCMG and MS&Co.
have complied with all Requirements of Law relating to its securities, property,
Employees or business, including, without limitation, Title VII, OSHA, the ADEA,
the EPA, the NLRA, the Foreign  Corrupt  Practices Act of 1977, as amended,  the
Foreign Agents  Registration Act of 1938, as amended,  the Federal Regulation of
Lobbying Act, as amended,  and the Ethics in Government Act of 1978, as amended,
and all applicable statutes,  regulations,  orders and restrictions  relating to
environmental standards or controls.

                                      -23-

<PAGE>

     Section  5.8.  Litigation.  (a)  There  is  no  (i)  action,  suit,  claim,
proceeding or investigation pending or, to the knowledge of MSCMG or any officer
of MSCMG  threatened  against  or  affecting  MSCMG or MS&Co.  or their  assets,
Employees  or  properties,  at law or in  equity,  or  before or by any court or
governmental authority,  (ii) arbitration proceeding relating to MSCMG or MS&Co.
or their assets,  Employees or properties or (iii) governmental  inquiry pending
or, to the knowledge of MSCMG or any officer of MSCMG, threatened relating to or
involving MSCMG,  MS&Co.,  their assets or properties or the businesses of MSCMG
or MS&Co. or the transactions  contemplated by this Merger Agreement  (including
inquiries  as to the  qualification  of MSCMG or MS&Co.  to hold or receive  any
permit) and MSCMG does not know of any basis for any of the foregoing. There are
no pending  actions,  suits,  claims or  proceedings  brought by MSCMG or MS&Co.
against others.

     (b) Neither MSCMG nor MS&Co. has received any written opinion,  memorandum,
legal  advice or notice from legal  counsel to the effect that they are exposed,
from a legal standpoint,  to any liability or disadvantage which may be material
to their respective  businesses and which would continue past the Effective Time
of the Merger. Neither MSCMG nor MS&Co. is in default with respect to any order,
writ,  injunction or decree known to or served upon MSCMG or MS&Co. of any court
or of any governmental authority.

     Section 5.9.  Litigation.  MSCMG knows of no pending or threatened  action,
suit, proceeding,  investigation,  order or injunction before or by any court or
governmental  body that seeks to restrain or to prevent the  consummation of the
transactions contemplated by this Merger Agreement.

     Section 5.10. Consents. Except as otherwise referred to herein, no consent,
action,  approval or authorization  of, or  registration,  declaration or filing
with, any governmental  authority having  jurisdiction over MSCMG is required to
be obtained by MSCMG in order to authorize  the  execution and delivery by MSCMG
of this Merger  Agreement or the  performance  by MSCMG of its terms (except for
filings and consents required pursuant to New York Stock Exchange requirements).

     Section  5.11.  No Material  Adverse  Change.  Since the date of the MS&Co.
Balance Sheet,  MS&Co. has not experienced any material  damage,  destruction or
loss  (whether or not covered by  insurance)  to its assets or material  adverse
change in the value of MS&Co.

                                      -24-
<PAGE>

     Section 5.12.  Proxy  Statement.  On the Mailing Date, the information with
respect to MSCMG and MS&Co.  set forth in the Proxy Statement (a) will comply in
all material  respects with the  provisions of the Exchange Act, and the General
Rules and Regulations of the Commission  thereunder and (b) will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated  therein or necessary  to make the  statements  contained  therein not
misleading, except that no representation is hereby made as to any statements or
omissions as  described  in this clause (b) with respect to which,  prior to the
Mailing Date, MSCMG shall have requested in writing any addition or modification
to the  Proxy  Statement  which  shall be  necessary  in order to make the Proxy
Statement not untrue or misleading in any material respect, unless such addition
or  modification  shall have been made by the Company prior to the Mailing Date.
At all times  subsequent  to the Mailing Date up to and  including the Effective
Time of the Merger,  the information  with respect to MSCMG and MS&Co. set forth
in the Proxy  Statement  and all  amendments  and  supplements  thereto (i) will
comply in all material  respects with the provisions of the Exchange Act and the
General Rules and  Regulations  of the  Commission  thereunder and (ii) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated  therein or  necessary  to make the  statements  contained
therein not misleading,  except that no  representation is hereby made as to any
statements  or omissions as described in this clause (ii) with respect to which,
after the Mailing  Date and prior to the  Effective  Time of the  Merger,  MSCMG
shall have  requested  in writing any  supplement  to or  amendment of the Proxy
Statement  which shall be  necessary  in order to make the Proxy  Statement  not
untrue  or  misleading  in any  material  respect,  unless  such  supplement  or
amendment shall have been made by the Company prior to the Effective Time of the
Merger.

     Section 5.13.  Disclosure;  Representations and Warranties.  MSCMG has made
true and complete  responses  to all the  Company's  requests  for  information,
documents, contracts, agreements and records of MSCMG and MS&Co. relating to the
business of MSCMG and MS&Co.  Neither this Merger  Agreement nor any  statement,
certificate, writing or document furnished to the Company by MSCMG in connection
with this Merger  Agreement  contains,  as of the dates of such  documents,  any
untrue  statement of a material fact or omits to state a material fact necessary
to make the statements contained therein not misleading.

     Section  5.14.  Finders or Brokers.  MSCMG has not utilized the services of
any investment  banker,  broker,  finder or  intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or commission in
connection with this Merger  Agreement or upon  consummation of the transactions
contemplated hereby.

                                      -25-

<PAGE>
                                   ARTICLE VI

             TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE MERGER

     Section  6.1.   Stockholders'   Meeting.   (a)  Subject  to  its  fiduciary
responsibilities,  the Board of  Directors  of the Company  will submit (i) this
Merger Agreement, (ii) the Charter Amendment, and (iii) the proposal to transfer
substantially  all of its assets to the Liquidating Trust as required by Section
909 of the New York Business  Corporation Law (the "Plan of Liquidation") to its
stockholders  for  their  adoption  and  will  solicit  proxies  in favor of and
recommend  to its  stockholders  such  adoption at a meeting  thereof to be duly
called and held as soon as  practicable.  In connection  therewith,  the Company
shall prepare and file with the Commission, as soon as practicable, the required
proxy  material and shall use its best efforts  promptly to obtain  clearance by
the staff of the Commission of the mailing of such material to its stockholders.
Subject to its fiduciary responsibilities, the Company will use its best efforts
to obtain the necessary approval of this Merger Agreement, the Charter Amendment
and  the  Plan of  Liquidation  by its  stockholders  and  will  take as soon as
practicable  such other and  further  actions as may be  required by this Merger
Agreement  and as may be required by law to effectuate  the Merger,  the Charter
Amendment  and the Plan of  Liquidation.  In  obtaining  the  authorization  and
approval of its  stockholders,  the  Company  shall  comply with all  applicable
Federal and state  securities and other laws in connection with the transactions
to be effected hereunder.  Without limiting the generality of the foregoing, the
Company agrees that the information contained in its proxy statement (other than
information  as to MSCMG  furnished to the Company in writing by MSCMG) (i) will
comply in all respects with the provisions of the Exchange Act and the rules and
regulations  promulgated  thereunder,  and (ii)  will  not  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary to make the statements  therein not  misleading,  in
each  case when  first  mailed to the  Company's  stockholders  and at all times
thereafter  through  the  Effective  Date of the Merger.  The Company  shall not
distribute  any  material to its  stockholders  in  connection  with this Merger
Agreement,  the Charter Amendment,  the Plan of Liquidation and the transactions
contemplated  hereby  other  than  materials  contained  in its proxy  statement
cleared by the staff of the Commission,  except such additional material cleared
by the staff of the Commission.


                                      -26-

<PAGE>

     (b) Without limiting the generality of the foregoing, MSCMG agrees that the
information as to MSCMG  furnished to the Company in writing by MSCMG for use in
the Proxy  Statement (i) will comply in all respects with the  provisions of the
Exchange Act and the rules and regulations promulgated thereunder, and (ii) will
not contain any untrue  statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the  statements  therein
not  misleading,  in each case on the Mailing  Date and at all times  thereafter
through the Effective Date of the Merger.

     Section 6.2.  Approvals;  Consents.  The Company will obtain or cause to be
obtained all consents,  approvals and authorizations  required by any applicable
requirement of law or by any contract or agreement to be obtained by the Company
in connection  with the  consummation of the Merger and the Plan of Liquidation.
MSCMG  will  obtain  or  cause  to  be  obtained  all  consents,  approvals  and
authorizations  required by any applicable requirement of law or by any contract
or agreement to be obtained by MSCMG in connection with the  consummation of the
Merger.

     Section 6.3. Conduct and Liquidation of Business Prior To Effective Time of
the Merger.  (a) The Company  agrees  that from and after the date  hereof,  the
Company will continue to use its best efforts to liquidate  the assets  relating
to the businesses of the Company and the Company Subsidiaries and to satisfy and
fully discharge the Scheduled Liabilities.

     (b) The Company  agrees that from the date hereof to the Effective  Time of
the Merger,  and except as  otherwise  consented to or approved by an officer of
MSCMG in writing or required by this Merger Agreement:

          (i) No change shall be made in the number of shares of authorized
     or  issued  capital  stock  of the  Company  or  any  of  the  Company
     Subsidiaries,  except  pursuant to the exercise of the employee  stock
     options  referred to in the third  sentence of Section  4.3; nor shall
     any option,  warrant,  call,  commitment,  right or  agreement  of any
     character  be  granted or made by the  Company  or any of the  Company
     Subsidiaries relating to their respective authorized or issued capital
     stock.

          (ii) No dividend shall be declared or paid or other  distribution
     or payment  declared,  made or paid in respect of the  Company  Common
     Stock.

          (iii) No powers of  attorney  shall be granted by the  Company or
     any of the Company  Subsidiaries  except as may be  necessary  for the
     conduct of  meetings  of  stockholders  or  directors  of the  Company
     Subsidiaries.

                                    -27-

<PAGE>

          (iv) The Company  shall use all  reasonable  efforts to terminate
     all contracts, agreements, commitments,  understandings or instruments
     of the  Company  or any of the  Company  Subsidiaries,  including  the
     Material Contracts,  except for those to be assumed by the Liquidating
     Trust,  and to deliver  evidence of such termination to MSCMG prior to
     the Effective Time of the Merger.

          (v)  Except as  agreed  pursuant  to  Section  3.3,  prior to the
     Effective  Time  of  the  Merger,   the  Company  will  terminate  the
     employment  of  all of its  employees,  and  shall  give  any  notices
     required to be given,  and provide any benefit  required to be paid or
     continued,   pursuant  to  the  Worker   Adjustment   and   Retraining
     Notification  Act  ("WARN"),  COBRA or any other  applicable  federal,
     state or local laws, regulations,  ordinances,  orders, injunction, or
     decrees,  or administrative  decisions or directives,  with respect to
     such termination of employment.

     Section 6.4. Access to Information and Documents.  (a) From the date hereof
to the Effective  Time of the Merger,  the Company shall give to, or cause to be
made available for, MSCMG and MSCMG shall give to, or cause to be made available
for,  the  Company  and  their  respective   counsels,   accountants  and  other
representatives  full access during  normal  business  hours to all  properties,
documents,  contracts,  employees  and  records of the  Company  and the Company
Subsidiaries  or MSCMG and furnish the other party with copies of such documents
and with  such  information  as such  party  from  time to time  reasonably  may
request; provided,  however, that nothing herein shall be deemed to obligate the
Company or MSCMG to provide the other party access to  information or operations
the access to which is restricted for statutory or other  governmental  security
purposes.  The Company will make available to MSCMG for examination  correct and
complete  copies of all Federal,  state,  local and foreign tax returns filed by
the Company and the Company  Subsidiaries,  together with all available  revenue
agents' reports,  all other reports,  notices and correspondence  concerning tax
audits or  examinations  and analyses of all provisions for reserves or accruals
of taxes including deferred taxes.

     (b) Until the Effective  Time of the Merger (and, if this Merger  Agreement
is terminated prior to the Effective Time of the Merger, at all times after such
termination),  the Company and MSCMG will not  disclose or use any  confidential
information obtained in the course of their respective investigations, except to
the extent that any such confidential  information  subsequently  becomes public
knowledge.

                                      -28-

<PAGE>

     (c)  If  the  Merger  is not  consummated  and  this  Merger  Agreement  is
terminated, then MSCMG promptly shall return all documents,  contracts,  records
or properties of the Company  furnished by the Company to MSCMG,  and all copies
thereof, and the Company promptly shall return all documents, contracts, records
or  properties  of  MSCMG  furnished  by MSCMG to the  Company,  and all  copies
thereof.

     Section  6.5.  Periodic  Information.  (a)  From  the  date  hereof  to the
Effective  Date of the  Merger,  the  Company  shall  furnish  MSCMG  with  such
additional  financial and operating data and other information  regarding its or
the Company  Subsidiaries'  business,  reasonably  available to the Company,  as
MSCMG shall from time to time reasonably request.

     (b) From the date hereof to the Effective  Date of the Merger,  the Company
shall, promptly and in a timely manner, notify MSCMG of any of the occurrence of
any  event,  or  the  failure  of  any  event  to  occur,   that  results  in  a
misrepresentation  by the Company or the breach of any  warranty by the Company,
or any  failure  by the  Company  to  comply  with any  covenant,  condition  or
agreement contained herein.

     (c) From the date hereof to the Effective  Date of the Merger,  MSCMG shall
furnish the Company with such additional  financial and operating data and other
information  regarding  its  business,  reasonably  available  to MSCMG,  as the
Company shall from time to time reasonably request.

     (d) From the date hereof to the Effective Date of the Merger,  MSCMG shall,
promptly and in a timely  manner,  notify the Company of the  occurrence  of any
event, or the failure of any event to occur, that results in a misrepresentation
by MSCMG or the  breach of any  warranty  by MSCMG,  or any  failure by MSCMG to
comply with any covenant, condition or agreement contained herein.

     Section 6.6.  Representations.  The Company and MSCMG (a) will take and, in
the case of the  Company,  cause the  Company  Subsidiaries  to take all  action
necessary  to render  accurate  as of the  Effective  Time of the  Merger  their
respective  representations  and warranties  contained herein,  (b) will refrain
from taking any action  which would render any such  representation  or warranty
inaccurate  in any  material  respect as of such time,  and (c) will  perform or
cause to be satisfied each covenant or condition to be performed or satisfied by
them under this Merger Agreement.

                                      -29-
<PAGE>

     Section 6.7. Mailing Date. (a) On or prior to the Mailing Date, MSCMG shall
have received the following:

          (i) A  letter  from  Eisner & Co.,  dated  the  Mailing  Date and
     addressed to MSCMG and the Company, in form and substance satisfactory
     to MSCMG, to the effect that:

                           (A) they are independent certified public accountants
                  with  respect  to the  Company  and the  Company  Subsidiaries
                  within the  meaning  of the  Exchange  Act and the  applicable
                  published rules and regulations thereunder;

                           (B)  in  their  opinion  the  consolidated  financial
                  statements  of  the  Company  and  the  Company   Subsidiaries
                  examined by them and included in the Proxy Statement comply as
                  to  form  in  all  material   respects  with  the   accounting
                  requirements  of the Exchange Act, and of the published  rules
                  and regulations issued by the Commission thereunder;

                           (C) at the  request  of MSCMG they have  carried  out
                  procedures  to a  specified  date not more than five  business
                  days prior to the Mailing  Date,  which do not  constitute  an
                  examination  in accordance  with generally  accepted  auditing
                  standards  of the  consolidated  financial  statements  of the
                  Company and the Company Subsidiaries, as follows: (1) read the
                  unaudited  consolidated  financial statements,  if any, of the
                  Company  and the  Company  Subsidiaries  included in the Proxy
                  Statement,  (2)  read  the  unaudited  consolidated  financial
                  statements of the Company and the Company Subsidiaries for the
                  period from the date of the most recent  financial  statements
                  included in the Proxy  Statement  through the date of the most
                  recent interim financial  statements available in the ordinary
                  course of  business,  (3) read the minutes of the  meetings of
                  stockholders  and boards of  directors  of the Company and the
                  Company Subsidiaries from March 31, 1994 to said date not more
                  than five  business  days prior to the Mailing  Date,  and (4)
                  made  inquiries  of  certain  officers  and  employees  of the
                  Company who have  responsibility  for financial and accounting
                  matters as to (i) whether the unaudited financial  statements,
                  if any, of the Company and the Company  Subsidiaries  included
                  in the  Proxy  Statement  comply  as to form  in all  material
                  respects with the applicable

                                                  -30-

<PAGE>

                  accounting requirements of the Exchange Act, and the published
                  rules and  regulations  issued by the  Commission  thereunder;
                  (ii) whether said financial statements are fairly presented in
                  conformity  with  generally  accepted  accounting   principles
                  applied on a basis  substantially  consistent with that of the
                  audited financial statements; and (iii) whether there has been
                  any change in capital  stock or long term debt or any decrease
                  in  consolidated  net current  assets,  stockholders'  equity,
                  revenues,  income  before  income taxes or in the total or per
                  share  amounts of  consolidated  net income of the Company and
                  the  Company  Subsidiaries;  and,  based  on such  procedures,
                  nothing has come to their  attention which would cause them to
                  believe that (1) the unaudited financial  statements,  if any,
                  of the Company and the  Company  Subsidiaries  included in the
                  Proxy  Statement  do not  comply  as to form  in all  material
                  respects with the applicable  accounting  requirements  of the
                  Exchange Act, and the published rules and  regulations  issued
                  by the Commission  thereunder;  (2) said financial  statements
                  are not fairly presented in conformity with generally accepted
                  accounting   principles  applied  on  a  basis   substantially
                  consistent with that of the audited financial statements;  (3)
                  as of said date not more than five  business days prior to the
                  Mailing  Date  there  was,  except  as set  forth in the Proxy
                  Statement,  any (x) material  change in capital  stock or long
                  term debt of the Company and the Company  Subsidiaries  or (y)
                  material  decrease  in  consolidated  net  current  assets  or
                  stockholders'   equity  of  the   Company   and  the   Company
                  Subsidiaries  in each case as compared  with the amounts shown
                  in the  consolidated  balance  sheet  of the  Company  and the
                  Company  Subsidiaries at the date of the most recent financial
                  statements  included  in the Proxy  Statement;  or (4) for the
                  period from the date of the most recent  financial  statements
                  included  in the  Proxy  Statement  to said date not more than
                  five  business  days prior to the  Mailing  Date,  there were,
                  except as set forth in the Proxy  Statement,  any decreases as
                  compared  with  the  corresponding  portion  of the  preceding
                  12-month period in consolidated revenues; and

                           (D) at the  request  of MSCMG they have  carried  out
                  described  procedures  acceptable to MSCMG to a specified date
                  not more than five  business  days prior to the  Mailing  Date
                  (which   procedures  do  not   constitute  an  examination  in
                  accordance with generally accepted auditing stan-

                                                  -31-

<PAGE>

                  dards of the consolidated  financial statements of the Company
                  and the Company  Subsidiaries)  with respect to such  tabular,
                  percentage,  statistical and financial information relating to
                  the  Company set forth in the Proxy  Statement  as MSCMG shall
                  have reasonably requested.

          (ii) An opinion  dated the Mailing  Date,  of Moses & Singer LLP,
     counsel to the Company to the effect that,  while such counsel assumes
     no  responsibility  for any events,  occurrences or statements of fact
     relating  to the  Company  or the  Company  Subsidiaries,  or for  the
     accuracy,  completeness or fairness of any statements contained in the
     Proxy Statement, and while such counsel expresses no opinion as to the
     financial  statements or other financial or statistical data contained
     therein,  with  respect  to the  information  in the  Proxy  Statement
     relating to the Company and the Company Subsidiaries, such counsel has
     no  reason  to  believe  that  the  Proxy  Statement,  as  amended  or
     supplemented  to  the  date  of  such  opinion,  contains  any  untrue
     statement  of a  material  fact or omits to state  any  material  fact
     required  to be stated  therein or  necessary  to make the  statements
     therein not misleading.

          (iii) A  certificate  of the  Company's  President  and its chief
     financial  officer,  dated the  Mailing  Date,  in form and  substance
     satisfactory  to MSCMG,  stating  that (A) the Company has complied in
     all material respects with the agreements contained herein on its part
     to be performed on or prior to such date, and (B) the  representations
     and warranties of the Company contained herein are true and correct in
     all  material  respects  at and as of the  date of  such  certificate,
     except to the extent affected by the transactions  contemplated hereby
     and by the  liquidation  of the Company as permitted by the provisions
     of Section  6.3 prior to the  Mailing  Date,  with the same  effect as
     though such  representations and warranties had been made at and as of
     such date.

          (iv) A  certificate  of the  Company's  President  and its  chief
     financial  officer,  dated the  Mailing  Date,  in form and  substance
     satisfactory  to  MSCMG,  stating  that all  approvals,  consents  and
     waivers  required  by  Section  4.6 have been  obtained,  specifically
     identifying  such  consents,  waivers and attaching  copies thereof to
     such certificate.

          (v) A voting  agreement having the terms and provisions set forth
     in  Exhibit B  attached  hereto  (the  "Voting  Agreement")  dated the
     Mailing  Date  shall  have  been  signed  by James H.  Michaels  (both


                                    -32-
<PAGE>


     individually  and as the  trustee  for the  trust for the  benefit  of
     Richard H.  Michaels and as a co-trustee  for the trust under the will
     of Jules  Michaels)  agreeing  to vote all of his  shares  of  Company
     Common Stock in favor of the Merger  Agreement,  the Charter Amendment
     and the  Plan of  Liquidation  subject  to the  conditions  set  forth
     therein.

          (vi) A complete  set of Schedules  to this  Agreement  shall have
     been  delivered  by the  Company to MSCMG and the form and  content of
     such Schedules shall be satisfactory to MSCMG in its sole and complete
     discretion.

     (b) On or prior to the Mailing  Date,  the Company  shall have received the
following:

          (i) A  letter  from  Eisner & Co.,  dated  the  Mailing  Date and
     addressed to the Company and MSCMG, in form and substance satisfactory
     to the Company, to the effect that:

                           (A) they are independent certified public accountants
                  with  respect  to MSCMG and MS&Co.  within the  meaning of the
                  Exchange   Act  and  the   applicable   published   rules  and
                  regulations thereunder;

                           (B) in their  opinion  the  financial  statements  of
                  MS&Co.  examined by them and  included in the Proxy  Statement
                  comply as to form in all material respects with the applicable
                  accounting  requirements  of  the  Exchange  Act,  and  of the
                  published  rules  and  regulations  issued  by the  Commission
                  thereunder;

                           (C) at the request of the Company  they have  carried
                  out procedures to a specified date not more than five business
                  days prior to the Mailing  Date,  which do not  constitute  an
                  examination  in accordance  with generally  accepted  auditing
                  standards of the financial  statements of MS&Co.,  as follows:
                  (1) read the unaudited consolidated  financial statements,  if
                  any, of MS&Co.  included in the Proxy Statement,  (2) read the
                  unaudited  consolidated financial statements of MS&Co. for the
                  period from the date of the most recent  financial  statements
                  included in the Proxy  Statement  through the date of the most
                  recent interim financial  statements available in the ordinary
                  course of  business,  (3) read the minutes of the  meetings of
                  stockholders and boards of

                                      -33-

<PAGE>

                  directors  of MS&Co.  from  December 31, 1995 to said date not
                  more than five business  days prior to the Mailing  Date,  and
                  (4) made inquiries of certain officers and employees of MS&Co.
                  who have  responsibility  for financial and accounting matters
                  as to (i) whether the unaudited financial statements,  if any,
                  of MS&Co. included in the Proxy Statement comply as to form in
                  all  material   respects   with  the   applicable   accounting
                  requirements  of the Exchange Act, and the published rules and
                  regulations issued by the Commission thereunder;  (ii) whether
                  said financial  statements are fairly  presented in conformity
                  with generally  accepted  accounting  principles  applied on a
                  basis  substantially  consistent  with  that  of  the  audited
                  financial  statements;  and (iii)  whether  there has been any
                  change in capital  stock or long term debt or any  decrease in
                  net current assets,  stockholders'  equity,  revenues,  income
                  before  taxes or in the  total  or per  share  amounts  of net
                  income of MS&Co.;  and, based on such procedures,  nothing has
                  come to their attention which would cause them to believe that
                  (1) the  unaudited  financial  statements,  if any,  of MS&Co.
                  included  in the Proxy  Statement  do not comply as to form in
                  all  material   respects   with  the   applicable   accounting
                  requirements  of the Exchange Act, and the published rules and
                  regulations  issued  by the  Commission  thereunder;  (2) said
                  financial  statements  are not fairly  presented in conformity
                  with generally  accepted  accounting  principles  applied on a
                  basis  substantially  consistent  with  that  of  the  audited
                  financial  statements;  (3) as of said date not more than five
                  business  days prior to the Mailing Date there was,  except as
                  set forth in the Proxy  Statement,  any (x)  change in capital
                  stock or long  term  debt of  MS&Co.  or (y)  decrease  in net
                  current assets or stockholders'  equity of MS&Co. in each case
                  as  compared  with the amounts  shown in the balance  sheet of
                  MS&Co.  at the date of the most  recent  financial  statements
                  included  in the Proxy  Statement;  or (4) for the period from
                  the date of the most recent financial  statements  included in
                  the Proxy  Statement to said date not more than five  business
                  days prior to the  Mailing  Date,  there  were,  except as set
                  forth in the Proxy  Statement,  any decreases as compared with
                  the corresponding  portion of the preceding 12-month period in
                  revenues or income  before  taxes or in the total or per share
                  amounts of net income; and


                                      -34-

<PAGE>

                           (D) at the request of the Company  they have  carried
                  out  described  procedures  acceptable  to  the  Company  to a
                  specified  date not more than five  business days prior to the
                  Mailing  Date  (which   procedures   do  not   constitute   an
                  examination  in accordance  with generally  accepted  auditing
                  standards of the financial  statements of MS&Co.) with respect
                  to  such  tabular,   percentage,   statistical  and  financial
                  information   relating  to  MS&Co.  set  forth  in  the  Proxy
                  Statement as the Company shall have reasonably requested.

          (ii) An opinion dated the Mailing Date, of Whitman Breed Abbott &
     Morgan,  counsel  to MSCMG to the  effect  that,  while  such  counsel
     assumes no responsibility for any events, occurrences or statements of
     fact relating to MSCMG or MS&Co., or for the accuracy, completeness or
     fairness of any statements contained in the Proxy Statement, and while
     such counsel  expresses no opinion as to the  financial  statements or
     other financial or statistical data contained therein, with respect to
     the information in the Proxy  Statement  relating to MSCMG and MS&Co.,
     such  counsel has no reason to believe  that the Proxy  Statement,  as
     amended or  supplemented  to the date of such  opinion,  contains  any
     untrue  statement  of a material  fact or omits to state any  material
     fact required to be stated therein or necessary to make the statements
     therein not misleading.

          (iii) A certificate of the President of MSCMG,  dated the Mailing
     Date, in form and substance satisfactory to the Company,  stating that
     (A) MSCMG has complied in all material  respects  with the  agreements
     contained herein on its part to be performed on or prior to such date,
     and (B) the  representations  and warranties of MSCMG contained herein
     are true and correct in all material respects at and as of the date of
     such  certificate,  except to the extent affected by the  transactions
     contemplated   hereby,   with  the  same   effect   as   though   such
     representations and warranties had been made at and as of such date.

          (iv) A certificate of MSCMG's  President and its chief  financial
     officer, dated the Mailing Date, in form and substance satisfactory to
     the Company, stating that all approvals, consents and waivers required
     by Section  5.10 have been  obtained,  specifically  identifying  such
     consents, waivers and attaching copies thereof to such certificate.

     Section  6.8.  Information.  (a) The Company  will  furnish  MSCMG with all
information  concerning  the Company  reasonably  required for  inclusion in any
application  made  by  MSCMG  to  any  stock  exchange  or any  governmental  or
regulatory body in connection with the transactions  contemplated by this Merger
Agreement.

                                      -35-

<PAGE>


     (b) MSCMG will furnish the Company with all  information  concerning  MSCMG
and MS&Co.  reasonably  required  for  inclusion  in the Proxy  Statement or any
application  made by the Company to the  Commission,  any stock  exchange or any
governmental or regulatory body in connection with the transactions contemplated
by this Merger Agreement.

     Section 6.9. Notice of Breach.  (a) MSCMG will  immediately  give notice to
the Company of the  occurrence of any event or the failure of any event to occur
that results in a breach of any representation or warranty by MSCMG or a failure
by MSCMG to comply with any covenant, condition or agreement contained herein.

     (b) The Company will  immediately give notice to MSCMG of the occurrence of
any event or the  failure of any event to occur that  results in a breach of any
representation  or warranty by the Company or a failure by the Company to comply
with any covenant, condition or agreement contained herein.

     Section  6.10.  Negotiations  with Third  Parties.  The  Company  will not,
without the prior  written  approval of MSCMG,  initiate,  solicit or  encourage
(including by way of furnishing  information or  assistance),  or take any other
action to facilitate,  any inquiries or the making of any proposal  relating to,
or that may  reasonably  be expected to lead to, any Competing  Transaction  (as
defined below), or enter into discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain a Competing Transaction,  or agree
to or endorse  any  Competing  Transaction,  or  authorize  or permit any of the
officers,  directors  or  employees  of  the  Company  or  any  of  the  Company
Subsidiaries or any investment banker, financial advisor,  attorney,  accountant
or  other  representative  retained  by  the  Company  or  any  of  the  Company
Subsidiaries  to take any such action,  and the Company  shall  promptly  notify
MSCMG of all relevant terms of any such inquiries and proposals  received by the
Company or any of the Company  Subsidiaries  or by any such  officer,  director,
investment   banker,   financial   advisor,   attorney,   accountant   or  other
representative  relating to any of such  matters and if such inquiry or proposal
is in writing,  the Company shall  promptly  deliver or cause to be delivered to
MSCMG a copy of such  inquiry  or  proposal;  provided,  however,  that  nothing
contained  in this  Section  6.10 shall  prohibit  the Board of Directors of the
Company from (i)  furnishing  information  to, or entering into  discussions  or
negotiations  with, any person or entity in connection with an unsolicited  bona


                                      -36-

<PAGE>

fide written  proposal,  which proposal is at a materially higher value, by such
person or entity to acquire  the Company  pursuant  to a merger,  consolidation,
share exchange,  business combination or other similar transaction or to acquire
a substantial  portion of the assets of the Company if the Board of Directors of
the Company,  after  consultation  with and based upon the advice of independent
legal  counsel (who may be the Company's  regularly  engaged  independent  legal
counsel),  determines  in good faith that such  action is  appropriate  for such
Board of Directors to comply with its  fiduciary  duties to  stockholders  under
applicable  law; (ii) complying with Rule 14e-2  promulgated  under the Exchange
Act  with  regard  to a  Competing  Transaction;  or  (iii)  failing  to make or
withdrawing  or modifying its  recommendation  referred to in Section 6.1 if the
Board of Directors of the Company,  after  consultation  with and based upon the
advice of independent legal counsel (who may be the Company's  regularly engaged
independent  legal  counsel),  determines  in good  faith  that  such  action is
necessary  for such Board of  Directors to comply with its  fiduciary  duties to
stockholders  under  applicable  law;  provided,   further,   however,  that  in
consideration  of MSCMG's  willingness to incur the expenses and devote the time
and resources  necessary to seek to  consummate  the  transactions  contemplated
hereby, if the transactions  contemplated  hereby fail to be consummated because
the  Company has taken any of the  actions  contemplated  in clauses (i) through
(iii) above and the Competing Transaction is consummated,  the Company shall pay
to MSCMG,  by bank check or wire transfer of  immediately  available  funds,  an
amount equal to  $750,000.  For  purposes of this Merger  Agreement,  "Competing
Transaction"  shall  mean any of the  following  (other  than  the  transactions
contemplated by this Merger Agreement,  including the Liquidation) involving the
Company or any of the Company Subsidiaries: (I) any merger, consolidation, share
exchange,  business  combination or similar  transaction;  (II) any sale, lease,
exchange,  mortgage, pledge, transfer or other disposition of 20% or more of the
assets of the Company and the Company Subsidiaries,  taken as a whole; (III) any
tender  offer or  exchange  offer for 20% or more of the  outstanding  shares of
capital stock of the Company or the filing of a registration statement under the
Securities  Act  in  connection  therewith;  (iv)  any  person  having  acquired
beneficial  ownership of, or any group (as such term is used in Section 13(d) of
the Exchange Act and the rules and regulations  promulgated  thereunder)  having
been  formed  which  beneficially  owns or has the right to  acquire  beneficial
ownership  of, 20% or more of the  outstanding  shares of  capital  stock of the
Company; or (v) any public  announcement of a proposal,  plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.


                                      -37-
<PAGE>

     Section 6.11.  Tax Matters.  (a) (i) Subject to the  limitations of Section
11.1(c), the Liquidating Trust shall be responsible for the payment of all taxes
of the Company  and each  Company  Subsidiary  attributable  to taxable  periods
ending on or before the date of the  Effective  Time of the Merger (the "Pre-ETM
Period") to the extent that payment of such taxes (through  payment of estimated
taxes,  withholding  or in any  other  manner)  has not been  made  prior to the
Effective Time of the Merger  including any taxes resulting from the transfer of
assets by the Company to the Liquidating  Trust. The term "Taxes" shall mean all
taxes,  charges,   fees,  interest,   penalties,   additions  to  tax  or  other
assessments, including but not limited to income (whether net or gross), excise,
property,  sales,  transfer,  use, value added,  franchise taxes, payroll, wage,
unemployment,  worker's  compensation,  social  security,  capital,  occupation,
estimated,  and  customs  duties  imposed  by any Tax  Authority.  The term "Tax
Authority"  as used in this  Section  6.11  shall mean any  domestic  or foreign
national, state or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any  quasi-governmental  body exercising any
regulatory or taxing authority.

          (ii) In the case of any taxable period that includes (but does not end
     on) the date of the Effective Time of the Merger,  the Taxes of the Company
     and each of the Company Subsidiaries which shall be considered attributable
     to the pre-ETM  Period shall be computed as if such  taxable  period had in
     fact  ended  at the  Effective  Time of the  Merger  and  such  Taxes as so
     computed shall be the responsibility of the Liquidating Trust to the extent
     that payment of such Taxes has not been made prior to the Effective Time of
     the Merger.

     (b) If the  amount  of Taxes  paid by the  Company  and any of the  Company
Subsidiaries  or by the  Liquidating  Trust  with  respect  to a Pre-ETM  Period
exceeds  the  amount  of  Taxes  for  which  the  Company,  any of  the  Company
Subsidiaries or the Liquidating Trust are responsible under this Agreement,  the
Surviving  Corporation  shall pay to the  Liquidating  Trust the  amount of such
excess after the final liability for such Taxes has been  determined;  provided,
however,  that the Surviving Corporation shall in any event immediately pay such
excess to the  Liquidating  Trust in the event  that such  excess is used by any
Company Subsidiary or by the Surviving  Corporation to reduce or eliminate taxes
that would otherwise be payable with respect to any taxable period subsequent to
a Pre-ETM Period.

     (c) The  amount  of any  Taxes  attributable  to any  taxable  period  that
includes  (but  does not end on) the date of the  Effective  Time of the  Merger
shall be determined on the basis of the permanent books and records (including

                                      -38-


<PAGE>

workpapers)  of the Company and the Company  Subsidiaries  by assuming  that the
Company and each Subsidiary had a taxable year which ended at the Effective Time
of the  Merger,  except  that  exemptions,  allowances  or  deductions  that are
calculated on an annual basis shall be apportioned on a time basis.

     (d) The  Surviving  Corporation  shall compute or cause (i) Eisner & Co. or
(ii) such national accounting firm as shall be approved by the Liquidating Trust
(which approval shall not be unreasonably withheld) to compute the Taxes for all
Pre-ETM Periods for which the  Liquidating  Trust is responsible for Taxes under
subsection  (a) of this  Section  6.11  including  any  taxes  determined  under
subsection  (c) above  (each a  "Pre-ETM  Return  Calculation").  The  Surviving
Corporation  shall pay the fees of Eisner & Co. or the national  accounting firm
for computing taxes under this Section 6.11(d). The Surviving  Corporation shall
submit the Pre-ETM Return  Calculation to the Liquidating Trust at least 60 days
prior to the due date,  including extensions actually obtained (the "Due Date"),
of any tax  return  on which  such  Taxes are  returnable.  The  Pre-ETM  Return
Calculation  shall include a statement of any Taxes paid by the Company prior to
the Effective Time of the Merger and the Liquidating Trust shall have 25 days in
which to object to the Pre-ETM Return Calculation.  In the event of a dispute as
to any Pre-ETM Return Calculation, the dispute shall be referred to such firm of
independent  certified public accountants  mutually agreed to by the Company and
the  Liquidating  Trust  (the  "Independent   Accountants").   Such  Independent
Accountants shall finally determine the Pre-ETM Return  Calculation at least ten
(10) business days prior to the Due Date of any such return. The Company and the
Liquidating  Trust  shall  each pay  one-half  of the  fees of such  Independent
Accountants relating to such determination.  The Liquidating Trust shall pay the
Pre-ETM Return  Calculation as finally  determined (less any Taxes paid prior to
the  Effective   Time  of  the  Merger  as  set  forth  in  the  Pre-ETM  Return
Calculation).

     (e)  The  Company  shall  prepare  and  timely  file  or  shall  cause  the
preparation  and timely filing of all tax returns  required to be filed prior to
the Effective Time of the Merger. The Surviving  Corporation shall have the sole
responsibility  for the  preparation  and filing of all other tax returns of the
Company and any Company  Subsidiary;  provided  that any returns with respect to
which the Liquidating  Trust shall have liability under Section 6.11(a) shall be
prepared by (i) Eisner & Co. or (ii) such national  accounting  firm as shall be
approved by the  Liquidating  Trust (which  approval  shall not be  unreasonably
withheld).


                                      -39-

<PAGE>
     (f) (i) The Surviving Corporation and the Company Subsidiaries shall elect,
where  permitted by law, to carry  forward any net operating  loss,  net capital
loss, charitable  contribution or other item arising on or after the date of the
Effective Time of the Merger that could,  absent such election,  be carried back
to  a  Pre-ETM  Period.   Neither  any  Company  Subsidiary  nor  the  Surviving
Corporation  shall amend,  without the prior written  consent of the Liquidating
Trust, any tax returns relating to a Pre-ETM Period.

     (ii) If the Company and the Company Subsidiaries shall have a net operating
loss for any Pre-ETM Period, the Surviving  Corporation shall carryback such net
operating loss to the extent permitted under Section 172 of the Internal Revenue
Code (the "Code") and shall apply, for the benefit of the Liquidating Trust, for
a tentative carryback adjustment of the tax pursuant to Section 6411 of the Code
for any prior taxable year affected by such net operating  loss  carryback  and,
upon receipt of such Section 6411 refund or any other refund of tax with respect
to a Pre-ETM  Period,  shall promptly  remit any such refund to the  Liquidating
Trust.

     (g) The Liquidating Trust and its duly appointed representatives shall have
the sole right,  at its sole expense,  to supervise or otherwise  coordinate any
examination  process and to negotiate,  resolve,  settle or contest any asserted
tax  deficiencies  or to assert any claim for a tax refund  (collectively a "Tax
Claim") with respect to any Pre-ETM Period and neither the Surviving Corporation
nor any Company Subsidiary shall negotiate,  resolve, settle or contest any such
Tax Claim without the prior written consent of the Liquidating Trust.

     (h)  The  Surviving  Corporation  agrees  to  give  prompt  notice  to  the
Liquidating  Trust of the  assertion of any claim,  or the  commencement  of any
suit, action,  proceeding,  investigation or audit with respect to any tax for a
Pre-ETM  Period,  which notice  shall  describe in  reasonable  detail the facts
pertaining  thereto and the amount or an estimate of the amount of the liability
arising  therefrom.  The  Company  shall  cooperate  fully in any such action by
furnishing or making available  records,  books of account or other materials or
taking such other actions  (including the granting of a power of attorney to the
Liquidating  Trust) as may be necessary  or helpful for the defense  against the
assertions  of any taxing  authority  as to any  return for such  periods to the
extent  that the  Liquidating  Trust has  responsibility  therefore  pursuant to
Section 6.11(a).

     (i) The  Company  and each  Company  Subsidiary  shall  retain its  records
relating to all tax periods  which remain  subject to audit by action or statute

                                      -40-

<PAGE>

or  waiver  for all Pre- ETM  Periods.  To the  extent  that  such  records  are
currently  maintained in both a hard copy and an electronic  media format,  both
such types of records  that pertain to the income or  operations  of the Company
and each  Company  Subsidiary  prior to the close of business on the date of the
Effective  Time of the Merger  will be  retained  by the Company and will not be
destroyed  without the prior written approval of the Liquidating  Trust prior to
the expiration of the applicable statute of limitations.


                                   ARTICLE VII

                    CONDITIONS TO OBLIGATIONS OF THE PARTIES

     The  obligations of the parties under this Merger  Agreement are subject to
the fulfillment and satisfaction of each of the following conditions, any one or
more of which may be waived by MSCMG and the Company.

     Section 7.1. Stockholder Approvals.  On or before the Effective Time of the
Merger, the stockholders of the Company and the stockholders of MSCMG shall have
adopted this Merger  Agreement by the affirmative vote of at least two-thirds of
the outstanding  shares of stock and the  stockholders of the Company shall have
approved the Charter Amendment and the Plan of Liquidation.  Stockholders owning
no more than 45,814  shares shall have elected to enforce their right to receive
payment for their shares of Company  Common Stock pursuant to Section 623 of the
New York Business Corporation Law.

     Section 7.2. Filing of Charter Amendment.  Before the Effective Time of the
Merger the  Company  shall have filed the  Charter  Amendment  with the New York
Department of State.

     Section 7.3.  Listing.  On or before the Effective Time of the Merger,  The
Nasdaq Stock Market shall have  approved the listing,  upon  official  notice of
issuance,  of the shares of Company  Common  Stock to be issued  pursuant to the
Merger as contemplated by Article Three.

     Section 7.4. Mailing Date Documents.  MSCMG and the Company shall each have
received  on the  Mailing  Date the  documents  which they are to receive  under
Section 6.4.

     Section 7.5. Regulatory  Approvals.  On or before the Effective Time of the
Merger, all applicable approvals of governmental  regulatory  authorities of the
United  States of  America  or of any  state or  political  subdivision  thereof
required to consummate the Merger shall have been obtained.

                                      -41-

<PAGE>

     Section  7.6.  Escrow  Agreement.  The  Company  and  a  person  or  entity
acceptable to the Company and MSCMG,  as escrow  agent,  shall have executed and
delivered  to MSCMG  the  Escrow  Agreement  and  placed  $500,000  in escrow in
accordance with the terms thereof.

     Section 7.7. Trust  Agreement.  (a) The Company and the Trustees shall have
executed and delivered a trust agreement  substantially in the form of Exhibit E
hereto creating the Liquidating Trust and the Company shall have transferred all
of its business  and assets  (other than the escrow  amount) to the  Liquidating
Trust (except as otherwise  provided in Section 3.3) and the  Liquidating  Trust
shall have assumed all the Company's obligations and liabilities  (including the
Scheduled Liabilities and all tax liabilities resulting from the transfer of the
owned Real Property to the  Liquidating  Trust) by executing an  assignment  and
assumption agreement substantially in the form of Exhibit F hereto.

     (b) In furtherance  of the Company's  transfer of its business and asset to
the Liquidating  Trust,  prior to the Effective Time of the Merger,  the Company
shall  execute a deed whereby it transfers  title to all owned Real  Property to
the Liquidating  Trust,  and a bill of sale and assignment  whereby it transfers
title to all of its personal  property,  inventory,  accounts  receivable,  bank
accounts and all other assets of the Company to the Liquidating Trust.  Further,
the Company and the  Liquidating  Trustee  shall enter into the  assignment  and
assumption agreement described above.


                                  ARTICLE VIII

                        CONDITIONS TO MSCMG'S OBLIGATIONS

     The obligations of MSCMG hereunder are subject to the  satisfaction,  at or
before the Effective  Time of the Merger,  of the following  conditions  (any of
which may be waived, in whole or in part, by MSCMG):

     Section  8.1.  Representations  and  Warranties.  The  representations  and
warranties  of the Company  contained in this Merger  Agreement  (including  the
Schedules and Exhibits hereto),  or in any certificate or document  delivered to
MSCMG in  connection  herewith,  shall be true in all  material  respects at the
Effective Time of the Merger as if made again on and as of the Effective Time of
the  Merger.  The  Company  shall  have duly  performed  and  complied  with all
agreements and conditions  required by this Merger  Agreement to be performed or
complied  with by the  Company at or before the  Effective  Time of the  Merger.
MSCMG shall have been furnished with certificates of appropriate officers of the

                                      -42-

<PAGE>

Company,  dated the Effective  Time of the Merger,  certifying in such detail as
MSCMG may reasonably request to the fulfillment of the foregoing conditions.

     Section 8.2. The  Company's  Performance.  Each of the  obligations  of the
Company  to be  performed  by it on or before the  Effective  Time of the Merger
pursuant to the terms of this Merger Agreement shall have been duly performed in
all material respects at the Effective Time of the Merger,  and at the Effective
Time of the Merger the Company shall have  delivered to MSCMG a  certificate  to
such effect signed by the President of the Company.

     Section 8.3. Authority.  All action required to be taken by, or on the part
of, the Company to authorize the  execution,  delivery and  performance  of this
Merger  Agreement  by the  Company  and  the  consummation  of the  transactions
contemplated  hereby  shall  have  been duly and  validly  taken by the Board of
Directors and stockholders of the Company.

     Section 8.4. Opinion of the Company's Counsel.  Moses & Singer LLP, special
counsel to the  Company,  shall have  delivered  to MSCMG an opinion,  dated the
Effective  Time of the  Merger and  addressed  to MSCMG,  in form and  substance
satisfactory to MSCMG.

     Section 8.5. Legal Matters  Satisfactory.  All legal matters,  and the form
and  substance  of all  documents to be delivered by the Company to MSCMG at the
Effective  Time of the  Merger,  shall  have  been  approved  by,  and  shall be
satisfactory to, MSCMG. The Trust shall have become a party to this Agreement by
executing an amendment hereto.

                                   ARTICLE IX

                     CONDITIONS TO THE COMPANY'S OBLIGATIONS

     The obligations of the Company  hereunder are subject to the  satisfaction,
at or before the Effective Time of the Merger, of the following  conditions (any
of which may be waived, in whole or in part, by the Company):

     Section  9.1.  Representations  and  Warranties.  The  representations  and
warranties of MSCMG contained in this Merger Agreement, or in any certificate or
document delivered to the Company in connection  herewith,  shall be true in all
material respects at the Effective Time of the Merger as if made again on and as
of the  Effective  Time of the  Merger.  MSCMG  shall  have duly  performed  and
complied with all agreements and conditions required by this Merger Agreement to
be performed or complied  with by MSCMG at or before the  Effective  Time of the
Merger. The Company shall have been furnished with certificates of appropriate

                                      -43-

<PAGE>

officers of MSCMG,  dated the Effective  Time of the Merger,  certifying in such
detail as the Company may reasonably request to the fulfillment of the foregoing
conditions.

     Section 9.2.  MSCMG's  Performance.  Each of the obligations of MSCMG to be
performed by it on or before the  Effective  Time of the Merger  pursuant to the
terms of this Merger  Agreement  shall have been duly  performed in all material
respects at the Effective  Time of the Merger,  and at the Effective Time of the
Merger MSCMG shall have  delivered to the Company a  certificate  to such effect
signed by the President of MSCMG.

     Section 9.3. Authority.  All action required to be taken by, or on the part
of, MSCMG to authorize the  execution,  delivery and  performance of this Merger
Agreement and the  consummation of the  transactions  contemplated  hereby shall
have  been  duly and  validly  taken  by the  Board  of  Directors  and the sole
stockholder of MSCMG.

     Section 9.4.  Opinion of MSCMG's  Counsel.  Whitman  Breed Abbott & Morgan,
special counsel to MSCMG, shall have delivered to the Company an opinion,  dated
the Closing  Date and  addressed to the  Company,  substantially  in the form of
Exhibit D.

     Section 9.5. Legal Matters  Satisfactory.  All legal matters,  and the form
and  substance  of all  documents to be delivered by MSCMG to the Company at the
Closing, shall have been approved by, and shall be satisfactory to, the Company.


                                    ARTICLE X

                                   TERMINATION

     Section 10.1. Termination.
                   ------------

     This Merger  Agreement  may be terminated  and the Merger  abandoned at any
time before the Effective Time of the Merger:

          (a) by the written consent of the Company and MSCMG;

          (b) by MSCMG, if there has been a material  misrepresentation  in this
     Merger Agreement by the Company, or a material breach by the Company of any
     of its  warranties  or  covenants  set forth  herein,  or a failure  of any
     condition to which the obligations of MSCMG hereunder are subject;


                                      -44-

<PAGE>

          (c) by the Company, if there has been a material  misrepresentation in
     this Merger Agreement by MSCMG, or a material breach by MSCMG of any of the
     warranties  or  covenants  of MSCMG set forth  herein,  or a failure of any
     condition to which the obligations of the Company hereunder are subject;

          (d) by either the Company or MSCMG if the Effective Time of the Merger
     shall not have occurred before July 30, 1996, for any reason other than the
     failure of the party seeking to terminate this Merger  Agreement to perform
     its obligations  hereunder or a misrepresentation  or breach of warranty by
     such party herein;

          (e) by the Company or MSCMG if the Company  shall not have received at
     the stockholder  meeting called to approve the Merger the favorable vote of
     at least two-thirds of its stockholders to approve the Merger; or

          (f) by the Company or MSCMG if the Board of  Directors  of the Company
     (i)  fails to make or  withdraws  or  modifies  its  recommendation  to the
     stockholders  of the  Company  to  vote in  favor  of the  Merger,  or (ii)
     recommends  to the  Company's  stockholders  approval  or  acceptance  of a
     Competing  Transaction,  in each case only if the Board of Directors of the
     Company,  after  consultation with and based upon the advice of independent
     legal counsel (who may be the Company's regularly engaged independent legal
     counsel), determines in good faith that such action is appropriate for such
     Board of  Directors  to comply with its  fiduciary  duties to  shareholders
     under applicable law.


                                   Article XI

                                 INDEMNIFICATION

     Section 11.1.  Indemnification by the Company.
                    -------------------------------

          (a) The Company  (through the Liquidating  Trust) shall be liable for,
     shall  indemnify  MSCMG (or the Surviving  Corporation  as the successor in
     interest  thereto) for, shall hold  harmless,  protect and defend MSCMG (or
     the Surviving  Corporation  as the successor in interest  thereto) from and
     against,  and shall  reimburse  MSCMG (or the Surviving  Corporation as the
     successor in interest thereto) for, any and all MSCMG Damages (as

                                      -45-

<PAGE>

     defined  in Section  11.1(b))  in the manner and to the extent set forth in
     this Section 11.1,  and subject in all cases to the limitation on the scope
     of the Company's obligation to indemnify set forth in Section 11.1(c).

          (b) The  term  "MSCMG  Damages"  means  any and all  damages,  losses,
     liabilities,  obligations,  penalties,  excise taxes,  income taxes, fines,
     actions,  claims,   litigation,   demands,  defenses,   judgments,   suits,
     proceedings,  equitable  relief,  costs,  sums  paid in  settlement  of the
     foregoing,   disbursements  or  expenses  (including,  without  limitation,
     attorneys'  and  experts'  fees  and  disbursements)  of any kind or of any
     nature whatsoever (whether based in common law, statute or contract;  fixed
     or  contingent;  known or  unknown)  suffered  or  incurred  by MSCMG,  its
     officers,   directors,   employees,   affiliates,   successors  or  assigns
     (including  the  Surviving   Corporation)  resulting  from  or  arising  in
     connection with:

               (i) any  misrepresentation  by the Company  contained  in or made
          pursuant to this Merger Agreement or in any certificate, instrument or
          agreement  delivered to MSCMG  pursuant to or in connection  with this
          Merger Agreement;

               (ii) any breach of warranty or any default in the  performance of
          any covenant or obligation of the Company under or in connection  with
          this Merger Agreement;

               (iii)  any  obligations  and  liabilities  of the  Company  to be
          assumed by the  Liquidating  Trust  pursuant to Section 6,  including,
          without limitation, the Scheduled Liabilities;

               (iv) any Taxes for which the  Liquidating  Trust is liable  under
          Section 6.11(a);

               (v) any pension,  severance,  health and other employee  benefit,
          including  severance  or  vacation  pay,   supplemental   unemployment
          benefits or any similar benefit,  that became payable to any employees
          of the Company in connection with a Shutdown (as hereinbelow  defined)
          and any other  costs,  expenses  or  payments  paid or  payable by the
          Company  in  connection  with the  transactions  contemplated  by this
          Merger  Agreement  that would not  otherwise  have been paid or become
          payable

                                      -46-


<PAGE>

          but for the liquidation of the Company, the Merger or the transactions
          contemplated by this Merger  Agreement.  The term "Shutdown" means the
          closure or deemed closure of any plant or the discontinuance or deemed
          discontinuance  of any department or business,  in any case related to
          the Company or the Company Subsidiaries or their respective businesses
          or operations; and

               (vi) the employment, termination of employment or application for
          employment of any Employee of the Company prior to the Effective  Time
          of the Merger or at any time in connection with Section  6.3(b)(viii);
          and

               (vii)  all  obligations  and  liabilities  with  respect  to  the
          termination  of and withdrawal  from the Plans,  all  obligations  and
          responsibilities  to provide retiree health coverage and  continuation
          coverage and appropriate  notices under COBRA, and all obligations and
          responsibilities  under all  severance and  termination  pay plans and
          programs.

          (c) MSCMG Damages shall only include actual liability or cost incurred
     and  paid by  MSCMG  (or the  Surviving  Corporation  as the  successor  in
     interest thereto) to a third party, and shall not include any claim for any
     diminution  in the  value  of any  assets  of the  Company  or MSCMG or the
     Surviving Corporation, or any other damages, direct or indirect, other than
     in an actual cost or expense paid by MSCMG (or the Surviving Corporation as
     the  successor  in  interest  thereto)  to a third  party.  Notwithstanding
     anything in this Agreement,  under law or otherwise,  the maximum liability
     of the Company  (through the Liquidating  Trust) to MSCMG (or the Surviving
     Corporation  as the successor in interest  thereto) for MSCMG Damages shall
     be limited as follows:

               (i) the Company shall not be liable for more than an amount equal
          to  $1,000,000  in the aggregate for all claims for such MSCMG Damages
          (excluding,  however,  liabilities  with respect to the non-payment of
          the Scheduled  Liabilities which shall be satisfied by the Liquidating
          Trust and excluding any Taxes  resulting  from the sale or transfer to
          the Liquidating  Trust of assets in connection with the liquidation of
          assets  relating to the  existing  businesses  of the  Company)  which
          liability shall be satisfied in full from  funds  deposited in  escrow
          pursuant to the Escrow Agreement; and


                                      -47-

<PAGE>

          (ii) the obligation of the Company (through the Liquidating  Trust) to
     indemnify  MSCMG for, and to hold MSCMG harmless from,  MSCMG Damages shall
     survive the Effective Time of the Merger until the first  anniversary  date
     of the  Effective  Time of the  Merger,  and no claim with  respect to such
     MSCMG  Damages  under this Section  11.1 shall be valid unless  asserted in
     writing prior to the  expiration  of such period,  specifying in reasonable
     detail  the  basis  for such  MSCMG  Damages,  as  provided  in the  Escrow
     Agreement.

The right of MSCMG (or the  Surviving  Corporation  as the successor in interest
thereto)  to be  indemnified  pursuant  to this  Section  11.1 up to the maximum
amount of $1,000,000 in the aggregate  (consisting  of $500,000 held pursuant to
the  Escrow  Agreement  and  $500,000  reserved  by  the  Liquidating  Trust  in
accordance  with the provisions of Section 3.2) is the sole and exclusive  right
of MSCMG for any breach of this  Agreement or any of the  documents  executed in
connection  herewith,  or otherwise in connection  with any of the  transactions
contemplated hereby,  including without limitation the Merger, and neither MSCMG
nor any of its  affiliates  shall have the right to assert any claim against the
Company,  any  controlling  person  of the  Company  or  any  of  the  Company's
affiliates,  directors, officers, employees or stockholders,  whether such claim
is based on tort (including fraud),  contract or otherwise,  and whether arising
under  statute,  common law or  otherwise,  arising out of this  Agreement,  the
Merger or any of the  transactions  contemplated  hereby or thereby,  except for
claims relating to the non-payment of the Scheduled Liabilities.

     In  addition,  no claim,  whether  such  claim is based on tort  (including
fraud), contract or otherwise,  and whether arising under statute, common law or
otherwise,  shall be asserted by the Company,  MSCMG or any of their  affiliates
against the Trustees or the  beneficiaries  of the  Liquidating  Trust. No claim
shall be asserted by the Company,  MSCMG or any of their affiliates  against the
Liquidating  Trust after the first anniversary date of the Effective Time of the
Merger, or in excess of an aggregate of $1,000,000  (consisting of $500,000 held
pursuant to the Escrow Agreement and $500,000  reserved by the Liquidating Trust
in accordance with the provisions of Section 3.2), except for claims relating to
the non-payment of the Scheduled Liabilities.


                                      -48-

<PAGE>
     Section 11.2. Indemnification by the Company.
                   -------------------------------

          (a) MSCMG  (through the  Surviving  Corporation)  shall be liable for,
     shall indemnify the Company (or the  Liquidating  Trust as the successor in
     interest thereto) for, shall hold harmless,  protect and defend the Company
     (or the  Liquidating  Trust as the successor in interest  thereto) from and
     against,  and shall reimburse the Company (or the Liquidating  Trust as the
     successor in interest thereto) for, any and all Company Damages (as defined
     in  Section  11.2(b))  in the  manner  and to the  extent set forth in this
     Section  11.2,  and subject in all cases to the  limitation on the scope of
     MSCMG's obligation to indemnify set forth in Section 11.2(c).

          (b) The term  "Company  Damages"  means any and all  damages,  losses,
     liabilities,  obligations,  penalties,  excise taxes,  income taxes, fines,
     actions,  claims,   litigation,   demands,  defenses,   judgments,   suits,
     proceedings,  equitable  relief,  costs,  sums  paid in  settlement  of the
     foregoing,   disbursements  or  expenses  (including,  without  limitation,
     attorneys'  and  experts'  fees  and  disbursements)  of any kind or of any
     nature whatsoever (whether based in common law, statute or contract;  fixed
     or contingent;  known or unknown) suffered or incurred by the Company,  its
     officers,   directors,   employees,   affiliates,   successors  or  assigns
     (including the Liquidating  Trust)  resulting from or arising in connection
     with:

               (i) any  misrepresentation by MSCMG contained in or made pursuant
          to  this  Merger  Agreement  or  in  any  certificate,  instrument  or
          agreement  delivered to the Company  pursuant to or in connection with
          this Merger Agreement;

               (ii) any breach of warranty or any default in the  performance of
          any covenant or obligation  of MSCMG under or in connection  with this
          Merger Agreement; and

               (iii) any Taxes for  which the  Surviving  Corporation  is liable
          under Section 6.11(e);

          (c)  Company  Damages  shall only  include  actual  liability  or cost
     incurred and paid by the Company (or the Liquidating Trust as the successor
     in interest  thereto) to a third party, and shall not include any claim for
     any diminution in the value of any assets of the Company or the Liquidating
     Trust, or any other damages, direct or indirect, other than in an actual

                                      -49-

<PAGE>

         cost or expense  paid by the Company (or the  Liquidating  Trust as the
         successor  in  interest  thereto)  to a  third  party.  Notwithstanding
         anything  in  this  Agreement,  under  law or  otherwise,  the  maximum
         liability of MSCMG (through the Surviving  Corporation)  to the Company
         (or the  Liquidating  Trust as the  successor in interest  thereto) for
         Company Damages shall be limited as follows:

               (i) MSCMG  shall not be liable  for more than an amount  equal to
          $1,000,000 in the  aggregate for all claims for such Company  Damages;
          and

               (ii) the obligation of MSCMG (through the Surviving  Corporation)
          to indemnify the Company for, and to hold the Company  harmless  from,
          Company  Damages shall survive the Effective  Time of the Merger until
          the first anniversary date of the Effective Time of the Merger, and no
          claim with  respect to such  Company  Damages  under this Section 11.2
          shall be valid unless  asserted in writing prior to the  expiration of
          such  period,  specifying  in  reasonable  detail  the  basis for such
          Company Damages.

The right of the Company (or the Liquidating  Trust as the successor in interest
thereto) to be indemnified  up to the maximum  amount of $1,000,000  pursuant to
this Section 11.2 is the sole and exclusive  right of the Company for any breach
of this Agreement or any of the documents  executed in connection  herewith,  or
otherwise  in  connection  with  any of the  transactions  contemplated  hereby,
including without  limitation the Merger, and neither the Company nor any of its
affiliates  shall  have  the  right to  assert  any  claim  against  MSCMG,  any
controlling person of MSCMG or any of MSCMG's affiliates,  directors,  officers,
employees  or  stockholders,  whether  such  claim is  based on tort  (including
fraud), contract or otherwise,  and whether arising under statute, common law or
otherwise,  arising out of this Agreement, the Merger or any of the transactions
contemplated hereby or thereby. In addition, (i) no claim, whether such claim is
based on tort  (including  fraud),  contract or otherwise,  and whether  arising
under statute,  common law or otherwise,  shall be asserted by the Company,  the
Liquidating  Trust or any of their  affiliates  against  MSCMG or the  Surviving
Corporation and (ii) no claim shall be asserted by the Company,  the Liquidating
Trust or any of their  affiliates  against  MSCMG or the  Surviving  Corporation
after the first  anniversary date of the Effective Time of the Merger, in excess
of the $1,000,000.


                                      -50-
<PAGE>

     Section 11.3.  Legal Proceedings.
                    ------------------

          (a) If any  legal  proceeding  shall be  instituted,  or any  claim or
     demand  made,  against an  indemnified  party or a party which  proposes to
     assert  that the  provisions  of this  Article XI apply  (the  "Indemnified
     Party") such Indemnified Party shall give prompt notice of the claim to the
     party obliged or alleged to be so obliged so to indemnify such  Indemnified
     Party  (the  "Indemnitor").  The  omission  so to notify  such  Indemnitor,
     however, shall not relieve such Indemnitor from any duty to indemnify which
     otherwise  might  exist with  regard to such claim  unless (and only to the
     extent that) the omission to notify  materially  prejudices  the ability of
     the  Indemnitor to assume the defense of such claim.  After any  Indemnitor
     has  received  notice  from an  Indemnified  Party  that a claim  has  been
     asserted  against such  Indemnified  Party,  the Indemnitor  shall have the
     right, upon giving written notice to the Indemnified  Party, to participate
     in the defense of such claim and to elect to assume the defense against the
     claim, at its own expense,  through the Indemnified  Party's attorney or an
     attorney selected by the Indemnitor and approved by the Indemnified  Party,
     which approval shall not be unreasonably  withheld. If the Indemnitor fails
     to give prompt notice of such election, then the Indemnitor shall be deemed
     to have elected not to assume the defense of such claim and the Indemnified
     Party may defend against the claim with its own attorney.

          (b) If the  Indemnitor so elects to participate in the defense of such
     claim or to assume the defense against a claim,  then the Indemnified Party
     will   cooperate   and  make   available   to  the   Indemnitor   (and  its
     representatives)  all  employees,  information,  books and  records  in its
     possession or under its control which are reasonably necessary or useful in
     connection with such defense;  and if the Indemnitor  shall have elected to
     assume the  defense  of a claim,  then the  Indemnitor  shall have the sole
     right to  compromise  and  settle  in good  faith  any such  claim.  If the
     Indemnitor shall elect to defend or to agree in writing to compromise or to
     settle any such claim,  then it shall be bound by any ultimate  judgment or
     settlement as to the  existence and amount of the claim,  and the amount of
     said judgment or settlement  shall be conclusively  deemed for all purposes
     of this  Merger  Agreement  to be a  liability  on  account  of  which  the
     Indemnified Party is entitled to be indemnified hereunder.


                                      -51-
<PAGE>

          (c) If the Indemnitor  does not elect to assume,  or is deemed to have
     elected not to assume, the defense of a claim then:

               (i) the  Indemnified  Party alone shall have the right to conduct
          such defense;

               (ii) the Indemnified Party shall have the right to compromise and
          to settle,  in good faith,  the claim without the prior consent of the
          Indemnitor; and

               (iii) if it is ultimately determined that the claim of loss which
          shall form the basis of such  judgment  or  settlement  is one that is
          validly an obligation of the Indemnitor that elected not to assume the
          defense,  then such Indemnitor shall be bound by any ultimate judgment
          or  settlement as to the existence and the amount of the claim and the
          amount of said judgment or settlement shall be conclusively deemed for
          all purposes of this Merger  Agreement to be a liability on account of
          which the Indemnified Party is entitled to be indemnified hereunder.


                                   ARTICLE XII

                                  MISCELLANEOUS

     Section 12.1.  Expenses.  Except as otherwise provided herein,  MSCMG shall
pay all of the  expenses  of the  Company  and  MSCMG,  in  connection  with the
preparation  and  performance  of the  terms of this  Merger  Agreement  and the
transactions  contemplated hereby (other than those incurred in association with
the  liquidation  of the  Company,  which  expenses  shall be paid solely by the
Company),  including all fees and expenses of each party's  investment  bankers,
counsel,  accountants  and actuaries.  MSCMG shall pay up to $25,000 of the fees
and expenses of the Company for investment  bankers,  counsel,  accountants  and
actuaries in connection  with the  negotiation and preparation of any letters of
intent between the parties related to the transactions contemplated hereby.

     Section 12.2.  Survival of  Representations  and Warranties.  (a) Except as
provided below, the  representations  and warranties of the Company contained in
Article 4 and the representations and warranties of MSCMG contained in Article 5
shall terminate upon (i) the first anniversary date of the Effective Time of the
Merger, or (ii) the termination of this Merger Agreement and abandonment of the

                                      -52-

<PAGE>

Merger  pursuant to the provisions of Section 10.1(a) or 10.1(d) (except for the
agreements  as to  confidentiality  contained  in Section 6.4 and as to expenses
contained in Section  12.1),  and the parties  hereto  shall have no  continuing
obligations or liabilities with respect thereto.

     (b) If either MSCMG or the Company  shall have the right to terminate  this
Merger  Agreement and abandon the Merger  pursuant to the  provisions of Section
10.1(b) or Section  10.1(c),  then the party which does not have the right so to
terminate  this Merger  Agreement  will use its  reasonable  efforts to cure the
condition  giving  rise to such  right.  If such  party  is  unable  to cure the
condition  giving rise to such  right,  the other may  exercise  its right under
Section 10.1(b) or Section 10.1(c) to terminate the Merger Agreement and abandon
the Merger, or may waive such right and proceed to consummate the Merger. In any
such event, the  representations,  warranties,  covenants and agreements (except
for the  agreements  as to  confidentiality  contained  in Section 6.4 and as to
expenses  contained in Section  12.1) of the parties  shall  terminate,  and the
parties hereto shall have no continuing  obligations or liabilities with respect
thereto, except as set forth in this Section 12.2(b).

     Section 12.3.  Governing Law. THIS MERGER  AGREEMENT  SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WITHIN SUCH STATE.

     Section  12.4.  Notices.  All notices,  consents,  requests,  instructions,
approvals and other  communications  provided for herein shall be deemed validly
given,  made or  served  if in  writing  and  delivered  personally  (as of such
delivery)  or sent by certified  mail (as of two days after  deposit in a United
States post office),  or sent by overnight courier service (as of two days after
delivery  to an  internationally  recognized  courier  service),  or  by  telex,
facsimile or telegraph (upon receipt), in any case, postage and charges prepaid,

     (a) if to MSCMG, addressed to:

                      Muriel Siebert Capital Markets Group Inc.
                      885 Third Avenue, Suite 1720
                      New York, New York  10022
                      Telephone:  (212) 644-2418
                      Facsimile:  (212) 486-2784
                      Attention:  Muriel Siebert

     with a copy to:

                      Whitman Breed Abbott & Morgan

                                      -53-

<PAGE>

                      200 Park Avenue
                      New York, New York  10166
                      Telephone: (212) 351-3000
                      Facsimile: (212) 351-3131
                      Attention:  Monte E. Wetzler, Esq.

     (b) if to the Company, addressed to:

                      J. Michaels, Inc.
                      182 Smith Street
                      Brooklyn, New York  11201
                      Telephone:  (718) 852-6100
                      Facsimile:  (718) 858-0396
                      Attention:  James H. Michaels

     with a copy to:

                      Moses & Singer LLP
                      1301 Avenue of the Americas
                      New York, NY  10019-6076
                      Telephone:  (212) 554-7800
                      Facsimile:  (212) 554-7700
                      Attention:  Irving Sitnick, Esq.

or such other  address as shall be  furnished  in writing by either party to the
other.

     Section 12.5. Jurisdiction; Agent For Service.
                   --------------------------------

     (a) Legal proceedings  commenced by the Company or MSCMG arising out of any
of the  transactions or obligations  contemplated by this Merger Agreement shall
be brought  exclusively  in the  Federal  courts  or, in the  absence of Federal
jurisdiction,  state courts,  in either case in New York,  New York. The Company
and MSCMG  irrevocably and  unconditionally  submit to the  jurisdiction of such
courts and agree to take any and all future  action  necessary  to submit to the
jurisdiction of such courts.  Each of MSCMG and the Company  irrevocably  waives
any  objection  that it may now or hereafter  have to the laying of venue of any
suit,  action or  proceeding  brought in any Federal or state court in New York,
New York and further irrevocably waives any claims that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient  forum.
Final  judgment  against the  Company or MSCMG,  as the case may be, in any such
suit shall be conclusive and may be enforced in other  jurisdictions  by suit on
the judgment,  a certified or true copy of which shall be conclusive evidence of
the fact and of the amount of any  indebtedness  or  liability of the Company or
MSCMG,  as the case may be, therein  described,  or by  appropriate  proceedings
under any applicable treaty or otherwise.


                                      -54-
<PAGE>

     (b) The Company consents to service of process in any suit, action or other
proceeding  arising out of this Merger Agreement or the subject matter hereof or
any of the transactions  contemplated  hereby in such Federal or state courts by
registered mail addressed to the Company at the address provided in Section 12.4
or to the  Company's  Agent  (defined  below).  The Company  hereby  irrevocably
designates  and appoints  Moses & Singer LLP, with offices on the date hereof at
1301 Avenue of the Americas,  New York, New York 10019-6076  (herein referred to
as the "Company's Agent"), as its attorney-in-fact to receive service of process
in such  action,  suit or  proceeding,  it being  agree that  service  upon such
attorney-in-fact  shall  constitute  valid  service  upon  the  Company  and its
successors and assigns. The Company's submission to jurisdiction is made for the
express benefit of MSCMG and its successors,  subrogees and assigns.  Nothing in
this Section shall affect the right of MSCMG,  or its  successors,  subrogees or
assigns to serve legal  process in any other  manner  permitted  by law or shall
affect the right of MSCMG or its  successors,  subrogees or assigns to bring any
action or proceeding  against the Company or its property in the courts of other
jurisdictions.  So long as this Merger Agreement shall be in effect, the Company
shall  maintain a duly  appointed  agent for the service of summonses give MSCMG
written notice prior to any change of the identity of or of the address for such
agent.

     (c) MSCMG  consents  to service  of  process  in any suit,  action or other
proceeding  arising out of this Merger Agreement or the subject matter hereof or
any of the transactions  contemplated  hereby in such Federal or state courts by
registered mail addressed to MSCMG at the address provided in Section 12.4 or to
MSCMG's Agent (defined below). MSCMG hereby irrevocably  designates and appoints
Whitman  Breed  Abbott & Morgan,  with  offices  on the date  hereof at 200 Park
Avenue, New York, New York 10166 (herein referred to as "MSCMG's Agent"), as its
attorney-in-fact  to  receive  service  of  process  in  such  action,  suit  or
proceeding,  it being  agree  that  service  upon  such  attorney-in-fact  shall
constitute  valid  service upon MSCMG and its  successors  and assigns.  MSCMG's
submission to  jurisdiction  is made for the express  benefit of the Company and
its successors,  subrogees and assigns. Nothing in this Section shall affect the
right of the  Company,  or its  successors,  subrogees or assigns to serve legal
process in any other  manner  permitted  by law or shall affect the right of the
Company  or its  successors,  subrogees  or  assigns  to  bring  any  action  or
proceeding  against MSCMG or its property in the courts of other  jurisdictions.
So long as this Merger Agreement shall be in effect, MSCMG shall maintain a duly
appointed  agent for the service of summonses  and other legal  processes in New
York, New York and shall give the Company  written notice prior to any change of
the identity of or of the address for such agent.


                                      -55-

<PAGE>

     Section  12.6.  Press  Releases.  MSCMG and the  Company  will  consult and
cooperate in the issuance, form, content and timing of any press releases issued
in connection with the transactions contemplated by this Merger Agreement.

     Section 12.7. Assignment; Amendments, Waivers.
                   --------------------------------

     (a)  Neither  MSCMG  nor the  Company  shall  assign  any of its  rights or
obligations under this Merger Agreement without the prior written consent of the
other,  except that the Company shall have the right to assign all of its rights
together with but not separate from all of its obligations  under this Agreement
and the Escrow Agreement to the Liquidating Trust; provided that the Liquidating
Trust shall have no right to further  assign such  rights or  obligations  which
shall  terminate  upon  the  termination  of the  Liquidating  Trust  except  as
otherwise provided in this Agreement.

     (b) This  Merger  Agreement  shall be binding  upon and shall  inure to the
benefit of the parties and their  respective  successors and permitted  assigns,
and no other person  shall  acquire or have any right under or by virtue of this
Merger Agreement.

     (c) No  provision  of this Merger  Agreement  may be  amended,  modified or
waived  except by written  agreement  duly  executed by each of the parties.  No
waiver by either party of any breach of any provision  hereof shall be deemed to
be a continuing  waiver thereof in the future or a waiver of any other provision
hereof;  nor shall any delay or omission of either  party to exercise  any right
hereunder  in any manner  impair the  exercise of any such right  accruing to it
thereafter.

     Section 12.8. Entire Agreement. This Merger Agreement represents the entire
agreement  between  the  parties  and  supersedes  and cancels any prior oral or
written  agreement,  letter of intent or  understanding  related to the  subject
matter hereof.

     Section 12.9. Severability. If any term, provision, covenant or restriction
of this Merger  Agreement  is held by a court of  competent  jurisdiction  to be
invalid,  void or  unenforceable,  then the remainder of the terms,  provisions,
covenants and  restrictions of this Merger  Agreement shall remain in full force
and effect, unless such action would substantially impair the benefits to either
party of the remaining provisions of this Merger Agreement.

                                      -56-

<PAGE>

     Section 12.10.  Headings.  The headings herein are for convenience only, do
not constitute a part of this Merger Agreement, and shall not be deemed to limit
or affect any of the provisions hereof.

     Section 12.11.  Counterparts.  This Merger Agreement may be executed in one
or more counterparts  which,  taken together,  shall constitute one and the same
instrument,  and this Merger  Agreement shall become  effective when one or more
counterparts have been signed by each of the parties.


                                      -57-

<PAGE>
     IN WITNESS  WHEREOF,  this Merger  Agreement  has been duly executed by the
parties hereto on the day and year first above written.

J. MICHAELS, INC.                                  MURIEL SIEBERT CAPITAL
                                                   MARKETS GROUP INC.


By  /S/  JAMES MICHAELS                            By  /S/  MURIEL SIEBERT
   ----------------------                             -------------------------


Name: James Michaels                               Name:  Muriel Siebert
      -------------------                                ----------------------


Title:  President                                  Title:  President
       ------------------                                 ---------------------


                                      -58-