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                            SCHEDULE 14A INFORMATION
 
          PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.   )
 
Filed by the Registrant /X/
 
Filed by a Party other than the Registrant / /
 
Check the appropriate box:
 
                                             
/ /  Preliminary Proxy Statement                / /  Confidential, for Use of the Commission
                                                     Only (as permitted by Rule 14a-6(e)(2))
/X/  Definitive Proxy Statement
/ /  Definitive Additional Materials
/ /  Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12


 
                               J. Michaels, Inc.
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
 
- --------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
/ /  $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
     or Item 22(a)(2) of Schedule 14A.
 
/ /  $500 per each party to the controversy pursuant to Exchange Act Rule
     14a-6(i)(3).
 
/ /  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
     (1)  Title of each class of securities to which transaction applies:
 
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     (2)  Aggregate number of securities to which transaction applies:
 
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     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):
 
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     (4)  Proposed maximum aggregate value of transaction:
 
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     (5)  Total fee paid:
 
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/X/  Fee paid previously with preliminary materials.
 
/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
 
     (1)  Amount Previously Paid:
 
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     (2)  Form, Schedule or Registration Statement No.:
 
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     (3)  Filing Party:
 
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     (4)  Date Filed:
 
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                               J. MICHAELS, INC.
                                182 SMITH STREET
                            BROOKLYN, NEW YORK 11201
                            ------------------------
 
                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                        TO BE HELD ON SEPTEMBER 19, 1996
                            ------------------------
 
     A special meeting of shareholders (the "Special Meeting") of J. Michaels,
Inc., a New York corporation ("JMI"), will be held at the Grand Hyatt New York,
Park Avenue at Grand Central, New York, New York 10017, on Thursday, September
19, 1996 at 10:00 a.m. (local time), for the following purposes:
 
          1. To consider and vote upon a proposal to approve and adopt a Plan
     and Agreement of Merger, dated as of April 24, 1996, as amended as of June
     28, 1996, between JMI and Muriel Siebert Capital Markets Group Inc.
     ("MSCMG"), providing for the merger of MSCMG with and into JMI on the terms
     and conditions contained in such Plan and Agreement of Merger, a copy of
     which is attached as Annex A to the accompanying Proxy Statement and, in
     connection therewith, after a distribution concurrently with the
     consummation of the merger with MSCMG, to transfer all of JMI's remaining
     assets to a liquidating trust pursuant to the Plan and Agreement of Merger
     and to sell such assets and distribute the proceeds thereof to the
     shareholders of JMI;
 
          2. If the Plan and Agreement of Merger is approved and adopted, to
     consider and vote upon a proposal to amend the Certificate of Incorporation
     of JMI to increase the number of authorized shares of common stock of JMI
     from 1,500,000 to 49,000,000 shares and change the par value of the common
     stock of JMI from $1.00 par value per share to $.01 par value per share;
     and
 
          3. To consider and act upon such other matters as may properly come
     before the Special Meeting.
 
     All shareholders are cordially invited to attend. Only shareholders of
record at the close of business on August 12, 1996 will be entitled to notice of
and to vote at the Special Meeting or any adjournment thereof. A copy of JMI's
proxy statement with respect to the Special Meeting is enclosed.
 
                                          By Order of the Board of Directors
 
                                          Specimen Signature Attached
 
                                          JOHN PAGANO,
                                          Secretary
 
August 13, 1996
 
     WHETHER YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE READ THE
ACCOMPANYING PROXY STATEMENT AND PROMPTLY COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED WITHIN THE UNITED STATES OF AMERICA. THE PROXY IS REVOCABLE BY YOU AT ANY
TIME PRIOR TO ITS USE AT THE SPECIAL MEETING. IF YOU RECEIVE MORE THAN ONE PROXY
CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH
PROXY CARD SHOULD BE SIGNED AND RETURNED TO ASSURE THAT ALL YOUR SHARES WILL BE
VOTED AT THE MEETING.
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                               J. MICHAELS, INC.
                                182 SMITH STREET
                            BROOKLYN, NEW YORK 11201
                                 (718) 852-6100
                            ------------------------
 
                                PROXY STATEMENT
                            ------------------------
 
                                  INTRODUCTION
 
GENERAL
 
     This Proxy Statement is being furnished to the holders of common stock, par
value $1.00 per share (the "JMI Common Stock"), of J. Michaels, Inc., a New York
corporation ("JMI"), in connection with the solicitation by the Board of
Directors of JMI of proxies for use at the special meeting of shareholders of
JMI (the "Special Meeting") to be held at 10:00 a.m. (local time), on Thursday,
September 19, 1996 at the Grand Hyatt New York, Park Avenue at Grand Central,
New York, New York 10017, and any adjournment thereof. This Proxy Statement is
first being sent to shareholders of JMI on or about August 13, 1996.
 
     At the Special Meeting, shareholders of JMI will (i) consider and vote upon
a proposal to approve and adopt a Plan and Agreement of Merger, dated as of
April 24, 1996, as amended as of June 28, 1996 (the "Merger Agreement"), between
JMI and Muriel Siebert Capital Markets Group Inc., a New York corporation
("MSCMG") wholly-owned by Muriel Siebert, providing for the merger (the
"Merger") of MSCMG with and into JMI, on the terms and conditions contained in
the Merger Agreement and, in connection therewith, after a distribution
concurrently with the consummation of the Merger, to transfer all of JMI's
remaining assets to a liquidating trust pursuant to the Merger Agreement and to
sell such assets and distribute the proceeds thereof to the shareholders of JMI
(the "Related Transactions"), and (ii) if the Merger is approved, consider and
vote upon a proposal to amend the Certificate of Incorporation of JMI to
increase the number of authorized shares of JMI Common Stock from 1,500,000 to
49,000,000 and change the par value of the JMI Common Stock from $1.00 par value
per share to $.01 par value per share (collectively, the "Charter Amendments").
 
     Shareholders may also consider and act upon such other matters as may
properly come before the Special Meeting or any adjournment thereof.
 
RECORD DATE; SHARES ENTITLED TO VOTE
 
     The Board of Directors of JMI has fixed the close of business on August 12,
1996 as the record date (the "Record Date") for determining holders of
outstanding shares of JMI Common Stock entitled to notice of and to vote at the
Special Meeting or any adjournment thereof. Only holders of record of JMI Common
Stock at the close of business on such date will be entitled to notice of and to
vote at the Special Meeting or any adjournment thereof. On that date, there were
916,282 shares of JMI Common Stock issued and outstanding, each of which is
entitled to one vote on each matter presented at the Special Meeting.
 
     James H. Michaels, the Chairman of the Board, President and Principal
Executive Officer of JMI and the record owner of 94,862 shares of JMI Common
Stock constituting approximately 10.4% of the issued and outstanding shares of
JMI Common Stock, has agreed to vote such shares for the approval and adoption
of the Merger Agreement and Related Transactions and the Charter Amendments
(collectively, the "Special Meeting Matters") at the Special Meeting. In
addition, as the trustee for a trust for the benefit of Richard H. Michaels
which is the record owner of 101,532 shares of JMI Common Stock constituting
approximately 11.1% of the issued and outstanding shares of JMI Common Stock,
Mr. Michaels has agreed to vote such shares for the Special Meeting Matters at
the Special Meeting. Also, if his co-trustee for a trust under the will of Jules
Michaels which is the record owner of 139,449 shares of JMI Common Stock,
constituting approximately 15.2% of the issued and outstanding shares of JMI
Common Stock, is willing to so vote, Mr. Michaels has agreed to vote such shares
for the Special Meeting Matters at the Special Meeting. See

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"Outstanding Voting Securities and Principal Holders" in JMI's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996.
 
VOTE REQUIRED
 
     The affirmative vote of the holders of two-thirds of all outstanding shares
of JMI Common Stock is required to approve and adopt the Merger Agreement and
Related Transactions, and the obligations of MSCMG and JMI to consummate the
Merger are subject to the condition that such affirmative vote shall have been
obtained. See "The Merger and Related Transactions -- The Merger -- Conditions
to the Merger; Amendment and Termination." The affirmative vote of the holders
of a majority of the outstanding shares of JMI Common Stock is required to
approve the Charter Amendments. Abstentions will have the same effect as a vote
against the Special Meeting Matters. Broker non-votes will have no effect on the
votes with respect to the Special Meeting Matters.
 
SOLICITATION OF PROXIES
 
     Each shareholder of JMI is requested to complete, sign, date and return the
enclosed form of proxy without delay in order to ensure that his shares are
voted at the Special Meeting. Each properly executed proxy returned will be
voted as directed. If no directions are given or indicated, properly executed
proxies will be voted FOR the approval and adoption of the Merger Agreement and
Related Transactions and FOR the approval and adoption of the Charter
Amendments. JMI does not know of any other matters to be presented at the
Special Meeting. If any additional matters are properly presented to the Special
Meeting for action, the persons named in the enclosed proxy and acting
thereunder will have discretion to vote on such matters in accordance with their
judgment.
 
REVOCATION OF PROXIES
 
     Any shareholder may revoke his proxy at any time before it is voted by: (i)
delivering to the Secretary of JMI a written notice of revocation bearing a date
later than the date of the proxy; (ii) executing a subsequent proxy relating to
the same shares of JMI Common Stock and delivering it to the Secretary of JMI;
or (iii) attending the Special Meeting and stating to the Secretary of the
Company an intention to vote in person. Any subsequent proxy or written notice
of revocation of a proxy should be delivered to J. Michaels, Inc., 182 Smith
Street, Brooklyn, New York 11201, Attention: John Pagano, Secretary.
 
COST OF SOLICITATION
 
     MSCMG will bear the cost of soliciting proxies in connection with the
Special Meeting estimated at approximately $50,000 in the aggregate. Proxies
will be solicited by telephone, telegram, mail or personal contact. Copies of
solicitation material will be furnished to fiduciaries, custodians, nominees and
brokerage houses for forwarding to beneficial owners of shares of JMI Common
Stock held in their names and MSCMG will reimburse them for reasonable
out-of-pocket expenses incurred in connection therewith.
 
APPRAISAL RIGHTS
 
     Shareholders have dissenters' rights of appraisal with respect to the
approval and adoption of the Merger Agreement and Related Transactions if such
actions are approved at the Special Meeting (such electing shareholders, the
"Dissenting Holders"). In order to perfect such dissenters' rights, shareholders
must file with JMI before the Special Meeting, or at the Special Meeting but
before the vote on such matters, written objection to the action. The objection
must include a notice of the shareholder's election to dissent, the
shareholder's name and residence address, the number of shares as to which the
shareholder dissents and a demand for payment of the fair value of the
shareholder's shares if the action is taken.
 
     The affirmative vote for the proposed action to be voted upon at the
Special Meeting will constitute a waiver of a shareholder's appraisal right. A
vote against a proposal will not be deemed to satisfy the requirement of giving
notice under New York State law. Such objection is not required from any
shareholder to whom JMI did not give notice of such Special Meeting.
 
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     Within ten days after the date of the shareholders' authorization of the
Merger Agreement and Related Transactions, JMI shall give written notice of such
approval by registered mail to each shareholder who filed a written objection or
from whom written objection was not required, except any shareholder who voted
for the action.
 
     Within twenty days after giving notice to him, any shareholder from whom
written objection was not required and who elects to dissent shall file with JMI
a written notice of such election containing the same information required to be
stated in the objection described above.
 
     A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. Likewise, a nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such owner, as to which
such nominee or fiduciary has a right to dissent, held of record by such nominee
or fiduciary.
 
     Upon consummation of the Merger, the Dissenting Holders shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
their shares and any other rights under Section 623 of the New York Business
Corporation Law ("NYBCL"), a copy of which is attached hereto as Annex C. A
notice of election may be withdrawn by the Dissenting Holders at any time prior
to their acceptance in writing of an offer made by JMI, but in no case later
than sixty days from the date of consummation of the Merger except that if JMI
fails to make a timely offer, the time for withdrawing a notice of election will
be extended. In order to be effective, withdrawal of a notice of election must
be accompanied by the return to JMI of any advance payment made to the
shareholder. If a notice of election is withdrawn or if the Dissenting Holders
shall otherwise lose their dissenters' rights, they shall not have the right to
receive payment for their shares and shall be reinstated to all their rights as
shareholders as of the consummation of the Merger.
 
     At the time of the filing of the notice of election to dissent or within
one month thereafter the shareholder of shares represented by certificates shall
submit the certificates to JMI or to its transfer agent which shall note
conspicuously thereon that a notice of election has been filed and shall return
the certificates to the shareholder or other person who submitted them on their
behalf.
 
     Within fifteen days after the expiration of the period within which
Dissenting Holders may file their notices of election to dissent, or within
fifteen days after the proposed Merger is consummated, whichever is later, the
Surviving Company (as hereinafter defined) shall make a written offer by
registered mail to each Dissenting Holder who has filed such notice of election
to pay for his shares at a specified price which the Surviving Company considers
to be their fair value. Such offer shall be accompanied by a statement setting
forth the aggregate number of shares with respect to which notices of election
to dissent have been received and the number of holders of such shares. If the
Merger has been consummated, such offer shall be accompanied by (1) advance
payment to each such Dissenting Holder who has submitted the certificates
representing his shares to JMI of an amount equal to eighty percent of the
amount of such offer or (2) a statement to each Dissenting Holder who has not
yet submitted the certificates that advance payment of an amount equal to eighty
percent of the amount of such offer will be made promptly upon submission of the
certificates. Acceptance of such payment does not constitute a waiver of any
dissenters' rights. The offer shall be made at the same price per share to all
Dissenting Holders.
 
     If JMI fails to make an offer within the fifteen day period or if it makes
the offer and any Dissenting Holder fails to agree with the offer within the
period of thirty days thereafter, JMI shall institute, within twenty days after
the expiration of the applicable periods just mentioned, a special proceeding in
the supreme court of New York in the jurisdiction in which JMI is located to
determine the rights of Dissenting Holders and fix the value of their shares. If
JMI fails to institute such proceeding any Dissenting Holder may institute such
proceeding not later than thirty days after the expiration of the twenty day
period. If the proceeding is not instituted within such period, all dissenter's
rights shall be lost. Each party to such proceeding shall bear its own costs and
expenses. However, the court may, in its discretion, apportion and assess all or
any part of the costs, expenses and fees incurred by JMI or the shareholders
under certain limited circumstances.
 
     The enforcement by a shareholder of his right to receive payment for his
shares in the manner described in Section 623 of the NYBCL shall exclude the
enforcement by such shareholder of any other right to which
 
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he might be otherwise entitled by virtue of share ownership except as to the
shareholder's rights upon his withdrawal of notice of election or the
shareholder's right to bring an action to obtain relief on the ground that such
corporate action is unlawful or fraudulent as to him.
 
     The description of dissenters' rights of appraisal is qualified in its
entirety by reference to NYBCL Section 623, a copy of which is attached hereto
as Annex C and is incorporated herein by reference.
 
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                      THE MERGER AND RELATED TRANSACTIONS
 
THE MERGER
 
     General.  The Merger Agreement provides that, subject to the approval of
the shareholders of JMI and to the satisfaction or waiver of certain other
conditions, MSCMG will merge with and into JMI. As a result of the Merger, the
separate corporate existence of MSCMG will cease and JMI will continue its
corporate existence under the name of Siebert Financial Corp. (the "Surviving
Company") and will continue to be governed by the laws of the State of New York.
 
     The description of the terms and conditions of the Merger and Related
Transactions and the Merger Agreement included in this Proxy Statement is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is attached hereto as Annex A and is incorporated herein by reference.
 
     Effective Time of the Merger.  As soon as practicable after the Merger
Agreement is approved and adopted by the requisite vote of the shareholders of
JMI and all other conditions to the Merger Agreement have been satisfied or
waived, a certificate of Merger will be executed by MSCMG and JMI and filed with
the Secretary 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. The Merger will become
effective as of the time of filing of such certificate of merger and such time
and date are referred to herein as the "Effective Time of the Merger." In the
event the Merger is not consummated on or prior to September 30, 1996 or both
parties consent in writing, the Merger Agreement may be terminated and the
Merger abandoned, notwithstanding the approval and adoption of the Merger
Agreement by the shareholders of JMI. See "The Merger and Related
Transactions -- The Merger -- Conditions to the Merger; Amendment and
Termination."
 
     Merger Consideration.  Each share of common stock, no par value (the "MSCMG
Common Stock"), of MSCMG outstanding immediately prior to the Effective Time of
the Merger shall, by virtue of the Merger and without any action on the part of
the holders thereof, be entitled to receive as of the Effective Time of the
Merger 23,823.33 shares of JMI Common Stock for each share of MSCMG Common Stock
owned as of the Effective Time of the Merger, such number of shares of JMI
Common Stock to be fixed so that the shareholders of MSCMG as of the Effective
Time of the Merger receive an aggregate of 97.5% of the issued and outstanding
shares of the JMI Common Stock as of the Effective Time of the Merger. No
certificates for fractions of shares of JMI Common Stock and no scrip or other
certificates evidencing fractional interests in such shares shall be issuable
and any such fractional share which would otherwise be issuable shall be
canceled without the payment of any amount therefor. No such shareholder will be
entitled to any voting, dividend or other rights as a shareholder of JMI with
respect to any fractional shares.
 
     The holders of the JMI Common Stock immediately prior to the Effective Time
of the Merger other than the Dissenting Holders (the "Existing JMI Holders")
will, at the Effective Time of the Merger, receive (i) a cash payment equal to
the available cash of JMI less the amounts to be held in escrow and by the
liquidating trust (the "Liquidating Trust") to be established by JMI for the
benefit of the Existing JMI Holders and (ii) the right to receive distributions
from the Liquidating Trust. See "The Merger and Related Transactions -- The
Related Transactions."
 
     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 shall be issuable and no cash shall
be exchanged with respect thereto.
 
     The Merger will effect no change in any of the shares of JMI Common Stock
outstanding at the Effective Time of the Merger and no such shares shall be
converted as a result of the Merger.
 
     Exchange of MSCMG Stock Certificates.  Each holder of record at the
Effective Time of the Merger of MSCMG Common Stock shall be entitled, upon
surrender to JMI or its transfer agent of the certificate for his shares of
MSCMG Common Stock for cancellation, to receive a certificate or certificates
representing the number of shares of JMI Common Stock into which the holder's
shares of MSCMG Common Stock shall
 
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have been converted in the Merger. As of the date hereof, Muriel Siebert is the
only holder of record of MSCMG Common Stock.
 
     Until 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 JMI Common Stock is presented and surrendered in
exchange for a certificate or certificates representing shares of JMI Common
Stock, such certificate will be deemed for all corporate purposes, except as set
forth below, to evidence the ownership of the number of shares of JMI Common
Stock into which the holder's shares shall have been converted in the Merger.
Unless and until any such certificates are surrendered, the holder of such
certificate will not be entitled to receive any dividend or other distribution
payable to holders of shares of JMI Common Stock. Following such surrender,
there shall be paid to the record holder of the certificate representing shares
of JMI Common Stock issued upon such surrender the amount of dividends (without
interest thereon) which have become payable with respect to the number of shares
of JMI 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 (as hereinafter defined), or any other distributions from
or in respect of the Liquidating Trust.
 
     Conditions to the Merger; Amendment and Termination.  In addition to the
approval and adoption of the Merger Agreement by at least two thirds of the
shareholders of JMI, the obligations of JMI and MSCMG to consummate the Merger
are subject to the satisfaction or waiver of certain conditions including, among
others, (i) the filing of the Charter Amendment with the New York Department of
State; (ii) approval by The Nasdaq Stock Market, Inc. ("Nasdaq") of the shares
of JMI Common Stock to be issued in the Merger; (iii) the receipt of all
applicable governmental regulatory approvals; (iv) the execution of an escrow
agreement between JMI and a person or entity acceptable to JMI and MSCMG as
escrow agent and the deposit by JMI of $500,000 in the escrow account; (v) the
execution of a trust agreement between JMI and one or more trustees and the
transfer by JMI of its remaining assets to the Liquidating Trust; and (vi) that
no more than 45,814 shares of JMI Common Stock shall have elected to enforce
their right to receive payment for their shares of JMI Common Stock pursuant to
Section 623 of the NYBCL.
 
     Any one or more of such conditions, other than the approval and adoption of
the Merger Agreement by the shareholders of JMI, may be waived by the party
entitled to the benefits thereof. Neither JMI nor MSCMG presently intends to
waive any condition to its obligation to consummate the Merger if such waiver
would materially adversely affect its shareholders. JMI and MSCMG may, by
written agreement, at any time before or after the approval of the Merger
Agreement by the shareholders of JMI, amend or supplement the Merger Agreement,
provided that after such shareholder approval, the number and percentage of
shares of JMI Common Stock into which MSCMG Common Stock will be converted may
not be changed. Amendments or supplements to the Merger Agreement made after the
date hereof but prior to the Special Meeting that would materially affect the
shareholders of JMI will be the subject of additional proxy solicitation
material. Any amendments made after the Special Meeting will be limited to those
permitted by state and federal law.
 
     The Merger Agreement may be terminated and the Merger abandoned, whether
before or after approval and adoption of the Merger Agreement by the
shareholders of JMI, (a) at any time prior to the Effective Time of the Merger
by the written consent of JMI and MSCMG; (b) by MSCMG, if there has been a
material misrepresentation in the Merger Agreement by JMI, or a material breach
by JMI of any of its warranties or covenants set forth in the Merger Agreement,
or a failure of any condition to which the obligations of MSCMG under the Merger
Agreement are subject; (c) by JMI, if there has been a material
misrepresentation in the Merger Agreement by MSCMG, or a material breach by
MSCMG of any of its warranties or covenants set forth in the Merger Agreement,
or a failure of any condition to which the obligations of JMI under the Merger
Agreement are subject; (d) by either JMI or MSCMG if the Effective Time of the
Merger shall not have occurred before September 30, 1996, for any reason other
than the failure of the party seeking to terminate the Merger Agreement to
perform its obligations thereunder or a misrepresentation or breach of warranty
by such party in the Merger Agreement; or (e) by JMI or MSCMG if JMI (i) fails
to make or modifies its recommendation that JMI shareholders approve the Merger
or (ii) recommends that its shareholders approve or accept a competing
transaction.
 
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THE RELATED TRANSACTIONS
 
     General.  The Merger Agreement contemplates that JMI will continue to sell
its assets relating to its existing business prior to the date of the Merger
Agreement. After the completion of the Merger, shareholders of JMI will receive
the proceeds from the sale of assets as well as retain 2.5% of the shares of the
Surviving Company. See "The Merger and Related Transactions -- The
Merger -- Merger Consideration."
 
     Proceeds from the Sale of Assets.  At the Effective Time of the Merger, (i)
the Existing JMI Holders (other than the Dissenting Holders) will receive the
"Effective Date Payment," which will be an amount equal to the available cash
(including in such cash the net after-tax proceeds of any assets sold, after
payment of all expenses and liabilities of JMI, and the cash and cash
equivalents of JMI in hand immediately prior to the Effective Time of the
Merger) less $500,000 to be placed in escrow, $500,000 to be held by the
Liquidating Trust (as set forth below) and such further amount as the trustees
of the Liquidating Trust (the "Trustees") determine to retain to enable the
Liquidating Trust to dispose of the assets in the Liquidating Trust and to
maintain an adequate reserve for liabilities assumed by the Liquidating Trust,
(ii) $500,000 will be placed in escrow pursuant to an escrow agreement
substantially in the form of Exhibit A to the Merger Agreement for one (1) year
from the Effective Time of the Merger and (iii) the Surviving Company will
receive the Effective Date Payment for the Dissenting Holders. Subject to the
Trustees' option to leave assets in JMI described below (which JMI does not
expect the Trustees to utilize), any and all assets of JMI immediately prior to
the Effective Time of the Merger not so disbursed to the Existing JMI Holders or
placed in escrow or disbursed to the Surviving Company 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 Company, will be transferred to the Liquidating Trust for the
exclusive benefit of the Existing JMI Holders; provided, however, that on or
immediately after the sale of the last of the material assets of JMI transferred
to the Liquidating Trust (other than accounts receivable), an additional
$500,000 will be reserved by the Liquidating Trust for a period of one (1) year
from the date thereof to be used to pay all amounts due to MSCMG (or the
Surviving Company as the successor in interest thereto) pursuant to the
indemnification provisions of the Merger Agreement or to pay liabilities other
than liabilities set forth in Schedule 4.17 to the Merger Agreement. The assets
of JMI immediately prior to the Effective Time of the Merger which are to be
transferred to the Liquidating Trust will 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.
 
     Option to Leave Assets in JMI.  At the option of the Trustees and with the
consent of the Surviving Corporation which will not be unreasonably withheld,
assets of JMI 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 will, instead, be held by JMI pending their sale or other
disposition. During the period in which any such assets are held by JMI, JMI has
irrevocably designated 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 JMI will 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 will 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, will be held in trust by JMI for
the benefit of the Liquidating Trust, and any such after-tax revenues upon sale
or disposition will immediately be transferred to the Liquidating Trust. JMI
does not anticipate that the Trustees will utilize this option.
 
BACKGROUND OF THE MERGER AND RELATED TRANSACTIONS
 
     Although JMI has been in the retail furniture business for more than 100
years, the last few years have witnessed an overall decline in the strength of
its core retail furniture business in Brooklyn, New York. This decline has
worsened markedly in the last year. In light of this, management of JMI
concluded that the return on JMI's assets generated by the retail furniture
business was insufficient. Although JMI had from time to
 
                                        7
   10
 
time informally considered expanding its operations, management did not believe
that any such expansion would materially increase the return on assets in JMI's
core retail furniture business.
 
     As a result, management decided that it would be in the best interests of
the shareholders of JMI to sell JMI's assets, and distribute the net proceeds,
after payment of all liabilities, to the shareholders of JMI.
 
     As JMI was considering whether to proceed on that basis, and the steps it
would be required to take, Daniel Jacobson, a partner of Richard A. Eisner &
Company, LLP, independent certified public accountants for both JMI and MSCMG,
arranged an introduction of JMI and MSCMG. The first meeting between Mr. James
Michaels, President of JMI, and Ms. Muriel Siebert, President of MSCMG, took
place on October 31, 1995.
 
     Subsequently, during the first three weeks of November 1995,
representatives of MSCMG and JMI discussed a number of different transaction
structures and exchanged proposed forms of letters of intent. The transactions
considered at that point contemplated that only those shares held by the
Michaels family would be purchased for cash and notes, and the non-Michaels
family shareholders would continue as shareholders of the surviving company. No
transaction was agreed to at that point, in part because the Michaels family
decided not to engage in any transaction which did not treat all of the
shareholders of JMI equally, and in part because management of JMI was
continuing to consider the consequences of a liquidation, and the likely value
that might be realized by the shareholders on a liquidation.
 
     Subsequent to those discussions, representatives of MSCMG periodically
called representatives of JMI to determine the status of JMI's considerations.
 
     Discussions between JMI and MSCMG resumed in January 1996, when management
of JMI was close to making a decision on a liquidation. A meeting between MSCMG
and its representatives and JMI and its representatives was held on January 23,
1996, at which point the parties tentatively agreed to a merger of MSCMG into
JMI, and the distribution to the JMI shareholders of all of the pre-merger
assets of JMI. Representatives of JMI and MSCMG proceeded to negotiate a letter
of intent (the "Letter of Intent"), which was signed on February 1, 1996.
 
     During this period of time, JMI also had informal discussions with
representatives of other possible purchasers of JMI. However, none of these
discussions provided meaningful alternatives to the Merger and Related
Transactions.
 
JMI BOARD DELIBERATIONS
 
     The Board of Directors of JMI is composed of executives of JMI, including
Mr. James Michaels. The Board did not feel it was necessary to appoint a special
committee to consider the Merger and Related Transactions.
 
     The Board of Directors of JMI held two meetings to consider the proposed
Merger and Related Transactions, and all of the members of the Board of
Directors attended each of such meetings. In addition, since all of the members
of the Board are executives of JMI, they held numerous and frequent informal
meetings to discuss the advisability of the Merger and Related Transactions.
 
     The deliberations by JMI's Board of Directors at the two formal meetings
are summarized below:
 
     At a meeting of the Board of Directors held on February 14, 1996, the Board
was informed of the execution of the Letter of Intent. At that meeting, Mr.
Michaels and counsel to JMI presented a detailed report to the Directors on the
proposed Merger as outlined in the Letter of Intent, and why, in the opinion of
Mr. Michaels, the Merger would be in the best interest of the shareholders of
JMI. At the meeting, the Board also heard an informal report by BDO Seidman &
Co. ("BDO Seidman"), who had been retained by JMI to review the financial
statements of MSCMG which had been made available to JMI, and to discuss with
the Board the financial condition of MSCMG and what a range of values for MSCMG
might be based on their analysis of comparable companies. BDO Seidman did not
deliver a written report or distribute any written materials to the Board at the
meeting.
 
                                        8
   11
 
     The second meeting of the JMI Board of Directors was held on April 24, 1996
to discuss the terms of the definitive Merger Agreement, and to decide whether
to vote in favor of the Merger and Related Transactions and recommend them to
shareholders of JMI. At that meeting, counsel to JMI summarized the provisions
of the Merger Agreement. The Board also discussed the continuing prospects for
sale of JMI's assets, and the continued deterioration of JMI's furniture
business. After discussion, the Board unanimously voted to approve the Merger
and Related Transactions and the Charter Amendment, and to recommend that the
shareholders of JMI vote in favor of the Merger and Related Transactions and the
Charter Amendment.
 
JMI REASONS FOR THE MERGER AND RELATED TRANSACTIONS
 
     In reaching its decision to approve the Merger and Related Transactions and
the Charter Amendment, and to recommend their adoption to the shareholders, the
JMI Board of Directors consulted with its advisors and independently considered
the material factors described below. Based upon its independent review of such
factors, the JMI Board of Directors recommended approval of the Merger and
Related Transactions and the Charter Amendment.
 
     The JMI core retail furniture business in Brooklyn has deteriorated over
the last few years, and was expected to deteriorate in the immediate future.
This deterioration is substantially a function of the economy of the lower
income Brooklyn markets in which the Company principally operates. Although
JMI's capital position was very strong, and it was able to achieve economies in
terms of financing customer receivables that less well capitalized competitors
were not able to achieve, and was able to bear losses for an extended period of
time, the JMI Board of Directors did not believe that it was in the interests of
the shareholders to continue utilizing the assets of JMI in this way.
 
     JMI has long believed that certain of its assets, and particularly its real
estate, have a market value substantially in excess of the value which had been
shown on JMI's financial statements. Sale of this real estate would allow the
shareholders to realize this built-in value, but JMI's continued operation would
be problematic if the real estate were sold.
 
     JMI's Board of Directors viewed the prospects for MSCMG favorably. Although
the Board gave very little consideration to the value of MSCMG, given the
relatively small interest of the JMI shareholders in MSCMG after the Merger, the
strong reputation and financial position of MSCMG were factors in recommending
the Merger, in addition to the sale of JMI's assets.
 
     The Board of Directors of JMI considered each of the foregoing, and such
other factors as it considered relevant, in approving the Merger and Related
Transactions and the Charter Amendment, and in recommending that the
shareholders approve the Merger and Related Transactions and the Charter
Amendment. In making its determination, the Board was aware of the golden
parachute payment to Mr. Michaels pursuant to the terms of his employment
contract (see "The Merger and Related Transactions -- Interests of Certain
Persons in the Merger and Related Transactions"), and his agreement to vote his
shares, and certain shares controlled by him, in favor of the Merger, and of the
interest of the Michaels family in the Company and, as shareholders, in the
proceeds of the sale of JMI's assets.
 
     The JMI Board of Directors unanimously approved the Merger and Related
Transactions and the Charter Amendment, as being in the best interests of the
stockholders of JMI.
 
     For the reasons discussed above, the JMI Board of Directors unanimously
recommended that the shareholders of JMI vote for approval of the Merger and
Related Transactions.
 
NO OPINION OF FINANCIAL ADVISOR
 
     The terms of the Merger were negotiated at arm's-length between the
management of MSCMG and JMI. In view of the arm's-length negotiations and the
cost of obtaining any third-party investment banking opinion on the fairness of
the terms of the Merger, neither MSCMG nor JMI has sought or obtained such an
opinion. Accordingly, there can be no assurance that consummation of the Merger
will be fair to or in the best interests of JMI or its shareholders or to MSCMG
or its shareholder.
 
                                        9
   12
 
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED TRANSACTIONS
 
     Certain directors and executive officers of JMI have an interest in the
consummation of the Merger and Related Transactions. These interests include
stock ownership as described below. For a discussion of other relationships of
certain persons with MSCMG and JMI, including information concerning the
ownership of shares of JMI Common Stock and MSCMG Common Stock, see "Outstanding
Voting Securities and Principal Holders" in JMI's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and "Beneficial Ownership of MSCMG Common
Stock."
 
     As of August 12, 1996, James H. Michaels held 94,862 of the outstanding
shares of JMI Common Stock. Mr. Michaels also holds 101,532 shares of JMI Common
Stock as trustee of a trust for the benefit of Richard H. Michaels and 139,449
shares of JMI Common Stock as co-trustee of a trust under the will of Jules
Michaels. Susan Michaels Smith and Margaret Michaels each hold 34,862 shares of
JMI Common Stock; Phyllis Michaels holds 168,396 shares of JMI Common Stock; and
Doris Rosenson holds 10,209 shares of JMI Common Stock directly and 139,449
shares of JMI Common Stock as co-trustee of a trust under the will of Jules
Michaels. The Michaels Philanthropic Foundation, of which Mr. James Michaels and
his wife are directors, holds 17,550 shares.
 
     Edward P. Sullivan, a director and officer of JMI, is the holder of 5,000
shares of JMI Common Stock. This amounts to less than 1% of the issued and
outstanding shares of JMI Common Stock and, other than James Michaels, no
officer or director owns more than 1% of the issued and outstanding shares.
 
     Pursuant to the provisions of his employment agreement, Mr. James Michaels
will be entitled, upon consummation of the Merger (or the sale by JMI of its
assets), to a lump sum payment in an amount equal to three times the base
compensation payable to him under the contract at the time of the Merger plus an
amount equal to three times the average annual incentive compensation paid or
payable to Mr. Michaels in respect of the most recent two fiscal years prior to
the Merger, together with additional payments to the extent necessary to
compensate Mr. Michaels for excise taxes payable on such lump sum payments; but
in any event the aggregate payments to Mr. Michaels may not exceed an amount
such that any excise tax payments would become due. It is currently estimated
that the payment to Mr. Michaels under this provision will be $1,179,161. During
JMI's tax year commencing April 1, 1996, to the extent that Mr. Michaels'
applicable employee remuneration (as defined in Section 162(m)(4) of the
Internal Revenue Code of 1986) in such year exceeds $1,000,000, such excess will
not be deductible by JMI as an expense for income tax purposes.
 
     Mr. James Michaels and Mr. John Pagano, directors and officers of JMI, will
be trustees of the Liquidating Trust. In such capacity, they will receive annual
payments of $45,000 each, together with reimbursement of all expenses.
 
     The Merger Agreement provides that the holders of JMI Common Stock at the
Effective Time of the Merger will receive the Effective Date Payment and the
right to receive distributions from the Liquidating Trust. See "The Merger and
Related Transactions -- The Related Transactions -- Proceeds from the Sale of
Assets."
 
PLANS FOR THE SURVIVING COMPANY AFTER THE MERGER
 
     Immediately after the Merger, the Surviving Company will engage in the
present business of MSCMG, providing discount brokerage and investment banking
services. See "Business of MSCMG." Upon consummation of the Merger, the
directors of the Surviving Company will be the directors of MSCMG and will hold
office as provided in the by-laws of the Surviving Company. New directors will
be elected by the shareholders at each annual meeting, or, in the case of a
vacancy, appointed by the directors then in office, to serve until the next
annual meeting or until their successors are elected and qualified.
 
     The officers of the Surviving Company will be the officers of MSCMG and
will hold office as provided in the by-laws of the Surviving Company. Officers
will serve at the discretion of the Board of Directors.
 
                                       10
   13
 
REGULATORY REQUIREMENTS
 
     Other than the approval of the Merger by JMI shareholders at the Special
Meeting, certain filings with the States of New York and Delaware and compliance
with the proxy rules of the Securities and Exchange Commission (the
"Commission"), JMI is currently unaware of any federal or state regulatory
requirements, consents or approvals applicable to it required to be obtained in
order to consummate the Merger and proceed with the Related Transactions.
 
EXPENSES
 
     Except as otherwise provided in the Merger Agreement, MSCMG shall pay all
of the expenses in connection with the preparation and performance of the terms
of the Merger Agreement and the transactions contemplated thereby (other than
those incurred in association with the sale of JMI's assets, which expenses
shall be paid solely by JMI), including all fees and expenses of its investment
bankers, counsel, accountants and actuaries.
 
NASDAQ LISTING
 
     It is the intention of the parties that on or before the Effective Date of
the Merger, Nasdaq shall approve the listing of the shares of JMI Common Stock
to be issued to MSCMG pursuant to the Merger, upon official notice of the
issuance thereof.
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     The following summary of the material federal income tax consequences of
the Merger and Related Transactions is based upon the Internal Revenue Code of
1986 (the "Code"), the Treasury regulations promulgated thereunder (the
"Treasury Regulations"), judicial authority and current administrative rulings
and practice. As set forth below, the summary represents the opinion of Moses &
Singer LLP, counsel to JMI, insofar as it relates to matters of law and legal
conclusions. No rulings have been requested from the Internal Revenue Service
(the "Service") with respect to these matters. Further, the federal income tax
consequences of the Merger and Related Transactions to any particular Existing
JMI Holder may be affected by matters not discussed below. There also may be
state, local or foreign income tax or estate tax considerations applicable to
each Existing JMI Holder. THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND
RELATED TRANSACTIONS TO AN EXISTING JMI HOLDER ARE UNCERTAIN. EACH EXISTING JMI
HOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE
CONSEQUENCES OF THE MERGER AND RELATED TRANSACTIONS TO SUCH HOLDER, IN LIGHT OF
HIS, HER OR ITS PARTICULAR CIRCUMSTANCES, UNDER FEDERAL AND APPLICABLE STATE,
LOCAL AND FOREIGN TAX LAWS.
 
     The Merger.  JMI has been advised that no gain or loss will be recognized
by JMI as a result of the Merger.
 
  The Related Transactions.
 
     Consequences to JMI.  With respect to any assets sold by JMI prior to the
Effective Time of the Merger, JMI will recognize gain measured by the excess of
the amount realized on the sale of any such asset (including in such amount
realized any liabilities assumed by the buyer or to which such asset is subject)
over JMI's adjusted tax basis in such asset.
 
     The transfer of assets by JMI to the Liquidating Trust (the "Transferred
Assets") will be treated for federal income tax purposes as if JMI made such
transfer of assets directly to the Existing JMI Holders and such Holders then
transferred such assets (including cash) to the Liquidating Trust. Accordingly,
JMI will be required to recognize gain, if any, with respect to each Transferred
Asset in an amount equal to the excess of the fair market value of such asset
over JMI's adjusted tax basis in such asset. JMI will not be permitted to
recognize any loss with respect to any of the Transferred Assets.
 
                                       11
   14
 
     Consequences to Existing JMI Holders of Common Stock.  An Existing JMI
Holder should be treated as having received the Effective Date Payments, and,
directly from JMI, his, her or its portion of the $500,000 to be placed in
escrow and the Transferred Assets, net of their portion of the liabilities
assumed by the Liquidating Trust and then as having transferred all such assets
to the Liquidating Trust. Because the sale of JMI's assets and the distribution
of the net proceeds thereof along with other JMI assets in conjunction with the
Merger may be viewed by the Service or the courts in a number of different ways,
thereby rendering the income tax characterization of the transactions uncertain,
the federal income tax effects to the Existing JMI Holders of the payments to
them likewise cannot be stated with certainty. Accordingly, counsel to JMI is
unable to opine as to which characterization ultimately will prevail.
 
      (a) Characterization of the Merger and Related Transactions as a
Redemption of Common Stock.
 
     One way to view the contemplated transactions is as a redemption by JMI of
JMI Common Stock from the Existing JMI Holders in exchange for (i) the Effective
Date Payments to the Existing JMI Holders, (ii) the $500,000 to be placed in
escrow and (iii) the Transferred Assets, less all liabilities assumed by the
Liquidating Trust (collectively the "Redemption Payments"), in connection with
the related merger of MSCMG into JMI and the issuance of additional JMI Common
Stock to the shareholders of MSCMG. If the redemption with respect to an
Existing JMI Holder is either "not essentially equivalent to a dividend" under
Section 302(b)(1) of the Code or "substantially disproportionate" with respect
to such Holder under Section 302(b)(2) of the Code, the redemption should result
in a taxable gain or loss to the Existing JMI Holder equal to the difference
between the Holder's share of the Redemption Payments and such Holder's adjusted
tax basis in the Common Stock redeemed. Such gain or loss would be a long-term
capital gain or loss where the Existing JMI Holder has held the Common Stock for
more than one year. The redemption will be "not essentially equivalent to a
dividend" as to a particular Existing JMI Holder if it results in a meaningful
reduction in that Holder's interest in JMI. The redemption will be
"substantially disproportionate" as to a particular Existing JMI Holder if after
the Merger such Holder owns less than 50 percent of the voting power of all of
JMI's outstanding stock and the value of such Holder's ownership interest and
voting interest in JMI have each decreased by more than 20 percent as a result
of the redemption. In determining whether these three tests have been met,
shares considered to be owned by an Existing JMI Holder by reason of certain
constructive ownership rules in Sections 302(c) and 318(a) of the Code, as well
as shares actually owned by such Holder, must be taken into account. Since after
the Merger no Existing JMI Holder will own more than 2 1/2% of the Common Stock
owned by such Holder prior to the Merger and no Existing JMI Holder will own 50%
or more of all of JMI's outstanding stock after the Merger, it would appear that
each Existing JMI Holder will have suffered a meaningful reduction in that
Holder's interest in JMI and also that the redemption will be "substantially
disproportionate" as to each such Existing JMI Holder.
 
     (b) Characterization of the Merger and the Related Transactions as a
Liquidation of JMI.
 
     Because the Existing JMI Holders will be receiving prior to and
concurrently with the Merger a distribution of JMI's assets (or the net proceeds
of the sale thereof) subject to assumed liabilities, it is possible that the
Related Transactions could be characterized as a complete liquidation of JMI
which includes an additional liquidating distribution to the Existing JMI
Holders of the 2 1/2% of the JMI Common Stock which each Existing JMI Holder
retains after the Merger. If this characterization of the transaction were
accepted, the Existing JMI Holders would not only be taxed on the Redemption
Payments as discussed above but would also be taxed on the fair market value of
such retained Common Stock.
 
     It is also possible that the Related Transactions could be characterized as
a partial liquidation of JMI as a result of the termination of the business it
conducted, the distribution of the assets related thereto and the Merger. If
this characterization were accepted, there is a risk that if it were also
determined that less than all of JMI's assets had been used in the conduct of
its business, that portion of the Redemption Payments so attributable to assets
not used in the conduct of JMI's business could be taxable to non-corporate
Existing JMI Holders as an ordinary income dividend and for corporate Holders
all of its Redemption Payments could constitute a taxable ordinary income
dividend.
 
                                       12
   15
 
     (c) Basis and Holding Period.
 
     Under all of the possible characterizations of the contemplated
transactions discussed above, the tax basis of an Existing JMI Holder's
undivided interest in the Transferred Assets will be equal to the fair market
value thereof on the date of receipt, which fair market value will be determined
by reference to the aggregate fair market values of the Transferred Assets.
Additionally, such Existing JMI Holder's holding period for such Holder's
undivided interest in the Transferred Assets will begin on the day after the
transfer of assets to the Liquidating Trust. Assuming the treatment of the
contemplated transactions as a redemption, the tax basis and holding period of
the retained JMI Common Stock will be unchanged. If the contemplated
transactions were treated as a liquidation of JMI, the tax basis of the Existing
JMI Holder's retained Common Stock would be equal to the fair market value of
such retained Common Stock and a new holding period would commence with respect
to such stock. A corporate Existing JMI Holder which is treated as having
received a dividend under any of the above alternatives will be entitled to
dividends received deduction under Section 243 of the Code, subject to the
holding period rules of Section 246(c) of the Code and the possible application
of the basis reduction rules of Section 1059 of the Code.
 
     Treatment of the Liquidating Trust.  The Liquidating Trust should be
classified for federal income tax purposes as a liquidating trust under Treasury
Regulation sec. 301.7701-4(d), the Existing JMI Holders should be treated as the
beneficial owners of the Liquidating Trust under Sections 671 and 677 of the
Code, and under such Sections the Liquidating Trust should not be considered to
be a separate taxable entity. As a result, under Treasury Regulation
sec. 1.671-4, the Trustee(s) annually will be required to provide information to
the beneficial owners of the Liquidating Trust with respect to the income,
expense and other tax items of the Liquidating Trust, and such owners must
report such items in their respective federal income tax returns.
 
ACCOUNTING TREATMENT
 
     The Merger will be treated as a reorganization of Muriel Siebert & Co.,
Inc. ("Siebert"), the only asset of MSCMG. The net assets of Siebert will be
accounted for at their historical cost.
 
RIGHTS OF HOLDERS OF JMI COMMON STOCK
 
     There will be no change in the rights of the holders of JMI Common Stock
before and after the Merger. There are no arrearages in dividends with respect
to the JMI Common Stock.
 
APPRAISAL RIGHTS
 
     For a description of the dissenters' rights of appraisal with respect to
the approval and adoption of the Merger Agreement and Related Transactions
available to JMI shareholders, see "Introduction -- Appraisal Rights."
 
VOTE REQUIRED
 
     The affirmative vote of the holders of two-thirds of all outstanding shares
of JMI Common Stock is required to approve and adopt the Merger Agreement and
Related Transactions. Holders of JMI Common Stock are entitled to one vote per
share. There are no cumulative voting rights and no preemptive rights.
 
     THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND RELATED TRANSACTIONS.
 
                                       13
   16
 
           APPROVAL OF INCREASE IN NUMBER OF COMMON SHARES AUTHORIZED
                           AND REDUCTION IN PAR VALUE
 
     The Board of Directors is submitting for shareholder approval a proposal to
amend the Certificate of Incorporation, if the Merger Agreement is approved and
adopted. The full text of such amendment is set forth in its entirety in Annex B
hereto and is incorporated by reference herein. If approved by the shareholders,
the proposed amendment will become effective upon the filing of an amendment to
JMI's Certificate of Incorporation with the Secretary of the State of New York,
which will occur as soon as reasonably practicable and in any event immediately
prior to the Effective Time of the Merger.
 
AMENDMENTS TO INCREASE SHARES AND REDUCE THE PAR VALUE
 
     The principal reason for recommending the amendment to the Certificate of
Incorporation increasing the authorized shares and reducing the par value from
$1.00 to $.01 is to accommodate the conversion to JMI Common Stock of the shares
of MSCMG Common Stock as required by the Merger Agreement. In addition,
following the Effective Time of the Merger, the Surviving Company intends to
effect a reverse split of the shares of JMI Common Stock outstanding on a
one-for-seven basis and to offer to JMI shareholders the right to round up to
100 shares any holdings of less than that amount. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY
ADDITIONAL SHARES OF JMI COMMON STOCK. Any such offers will be made by means of
a prospectus sent or given to JMI shareholders.
 
     As of the Record Date, a total of 583,718 shares of JMI Common Stock were
authorized but not issued or reserved for issuance. As of that date, a total of
916,282 shares of JMI Common Stock were issued and outstanding. It is
anticipated that approximately 35,735,000 shares of JMI Common Stock will be
issued in connection with the Merger.
 
     If the authorized shares of JMI Common Stock are increased as proposed, the
authorized shares of JMI Common Stock would be available for issuance from time
to time upon such terms and for such purposes as the Board of Directors of the
Surviving Company may deem advisable without further action by the shareholders
of JMI except as may be required by law or the rules of any stock exchange on
which the JMI Common Stock may be listed at a time or under circumstances as may
decrease or increase the book value per share of JMI Common Stock presently
issued and outstanding, depending on whether the consideration paid for such
newly issued shares is less or more than the book value per share prior to such
issuance. The issuance of additional shares could dilute the voting power or
equity of the holders of outstanding JMI Common Stock and may have the effect of
discouraging attempts by a person or group to take control of JMI.
 
VOTE REQUIRED
 
     The affirmative vote of the holders of a majority of the outstanding shares
of JMI Common Stock is required to approve the proposal to amend JMI's
Certificate of Incorporation. Holders of JMI Common Stock are entitled to one
vote per share. There are no cumulative voting rights and no preemptive rights.
 
     THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO APPROVE THE AMENDMENT TO JMI'S CERTIFICATE OF INCORPORATION.
 
                                       14
   17
 
                                BUSINESS OF JMI
 
     Information with respect to the business of JMI is incorporated by
reference to JMI's Annual Report on Form 10-K for the fiscal year ended March
31, 1996 filed with the Commission.
 
                         SELECTED FINANCIAL DATA OF JMI
 
     Information with respect to JMI's financial position is incorporated by
reference to JMI's Annual Report on Form 10-K for the fiscal year ended March
31, 1996 filed with the Commission.
 
                        DESCRIPTION OF JMI CAPITAL STOCK
 
     The authorized capital stock of JMI consists of 1,500,000 shares of common
stock, par value $1.00 per share (the "JMI Common Stock"). There are presently
916,282 shares of the JMI Common Stock outstanding and entitled to vote. This
number of outstanding shares is not subject to change prior to the Effective
Time of the Merger. Pursuant to the Merger Agreement, JMI has agreed to not
issue any options or warrants to purchase JMI Common Stock. If Item 2 presented
at the meeting is approved, the number of authorized shares will be increased to
49,000,000, and the par value reduced to $.01 per share. If the Merger is
approved, there will be 36,651,277 shares of JMI Common Stock outstanding.
 
     No shares of JMI's capital stock are held by JMI or any of the JMI
Subsidiaries. There are no options, warrants, rights, calls, commitments or
agreements of any character obligating JMI or any of the JMI Subsidiaries to
issue any shares of capital stock or any security representing the right to
purchase or otherwise receive any such shares.
 
     Except for restrictions on transfer arising under the federal securities
laws, there are no existing restrictions imposed by JMI or by its affiliates on
the transfer of any outstanding shares of capital stock of JMI and there are no
registration covenants with respect thereto. None of the outstanding shares of
JMI or any of the JMI Subsidiaries was issued in violation of the preemptive
rights of any present or former shareholder.
 
     Holders of JMI Common Stock are entitled to one vote per share for the
election of directors and on all other matters requiring stockholder action.
Holders of JMI Common Stock are entitled to dividends, when, as, and if declared
by the Board of Directors out of funds legally available for the payment of
dividends. Upon any liquidation, dissolution, or winding up of JMI, the net
assets of JMI remaining after payment of creditors will be distributed pro rata
to the holders of JMI Common Stock in proportion to their interests. Holders of
JMI Common Stock are not entitled to vote cumulatively for the election of
directors and have no conversion rights, preemptive rights, or rights to
subscribe for or purchase additional shares or other securities of JMI. All
outstanding shares of JMI Common Stock are, and the shares of JMI Common Stock
to be issued pursuant to the Merger will be, fully paid and nonassessable.
 
                             AVAILABLE INFORMATION
 
     JMI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, New York, New York 10048, and
Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Web site is
http://www.sec.gov. In addition, copies of such reports, proxy statements and
other information concerning the Company may also be inspected and copied at the
offices of The Nasdaq Stock Market, Inc. at 1735 K Street, N.W., Washington,
D.C. 20006-1506 where the JMI Common Stock is traded.
 
                                       15
   18
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The following document(s) filed by the Company with the Commission are
incorporated herein by reference: (a) the Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
 
     All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement and to be a part
hereof from the respective date of filing of each such document. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement.
 
     JMI will provide without charge to each person to whom this Proxy Statement
is delivered, upon written or oral request, a copy of any or all of the
documents incorporated by reference herein, other than certain exhibits to such
documents. Requests for such documents should be directed to John Pagano,
Secretary, J. Michaels, Inc. at 182 Smith Street, Brooklyn, New York 11201 or
telephone number (718) 852-6100.
 
                                       16
   19
 
                               BUSINESS OF MSCMG
 
GENERAL
 
     MSCMG is a holding company which conducts all of its business activities
through its wholly-owned subsidiary, Siebert, in the retail discount brokerage
and investment banking business. Muriel Siebert, the first woman member of the
New York Stock Exchange, is the President and the sole stockholder of MSCMG.
 
     Siebert provides discount brokerage services and related services to more
than 80,000 investor accounts. Siebert's focus in its discount brokerage
business is to serve retail clients who seek a wide selection of quality
investment services at commissions that are substantially lower than those of
full-commission firms and competitive with the leading national discounters.
Through the Capital Markets division, the firm offers institutional clients
equity execution services on an agency basis and equity, fixed income and
municipal underwriting and investment banking services. The firm is an active
participant in the secondary markets for Municipal and U.S. Treasury securities.
The Capital Markets division executes listed bond fund, and certain other,
trades for its own account. The proprietary trading business is strictly
segregated from that of the agency business executed on behalf of institutional
clients.
 
     The firm is unique among discount brokerage firms in that through its
Capital Markets division it offers a wide array of underwriting and investment
banking services such as participating in the management underwriting teams of
major municipal, corporate debt and equity, government agency and mortgage/asset
backed securities issues.
 
     MSCMG was incorporated on November 29, 1993 under the laws of the State of
Delaware. Siebert was incorporated on June 13, 1969 under the laws of the State
of Delaware. The principal executive offices of both companies are located at
885 Third Avenue, 17th Floor, New York, New York 10022.
 
THE RETAIL DISCOUNT BROKERAGE BUSINESS
 
     DISCOUNT BROKERAGE AND RELATED SERVICES.  The Commission eliminated fixed
commission rates on securities transactions on May 1, 1975, a date that would
later come to be known as "May Day", spawning the discount brokerage industry;
that very day, on the opening bell, Siebert executed its first discounted
commission trade. The firm has been a member of The New York Stock Exchange,
Inc. (the "NYSE") longer than any other discount broker.
 
     Siebert provides discount brokerage and related services to more than
80,000 investor accounts. Siebert's focus in its discount brokerage business is
to serve retail clients who seek a wide selection of quality investment services
at commissions that are substantially lower than those of full-commission firms
and competitive with the national discounters.
 
     Siebert clears securities transactions on a fully-disclosed basis through
National Financial Services Corp. ("NFSC"), a wholly owned subsidiary of
Fidelity Investments, as its clearing agent for all transactions. NFSC, with
over $4 billion in assets, adds state-of-the-art technology as well as
back-office experience to the operations of Siebert supplementing Siebert's
in-house systems.
 
     Siebert serves investors who make their own investment decisions. Siebert
seeks to assist its customers in their investment decisions by offering a number
of value added services, including quick and easy access to account information.
The firm provides its customers with information via toll-free 800 service
direct to its representatives between 7:30 a.m. and 7:30 p.m. Eastern Time.
Through its MarketPhone(TM) Voice Response service and its Siebert OnLine
software, 24 hour access is available to customers. Siebert's exclusive
PerformanceFax(TM) P&L analysis service provides by facsimile profit and loss
account information before the market opens each morning.
 
     INDEPENDENT RETAIL EXECUTION SERVICES.  Siebert is independent of the
Over-the-Counter ("OTC") and "Third" market makers and consequently offers the
best possible trade executions for customers. Siebert does not make markets in
securities, nor does it position against customer orders. Substantially all of
the firm's listed orders are routed to the primary exchange for execution. This
allows the customer the opportunity for
 
                                       17
   20
 
price improvement when trading directly on the NYSE. Through a new program
called NYSE Prime,* Siebert has the ability to document to customers all price
improvements received on orders executed on the are filled at better than the
National Best Bid/Offer.
 
     The firm's OTC orders are executed through a network of unaffiliated Nasdaq
market makers with no single market maker executing all trades. This allows
Siebert to fill its customer orders by choosing the market maker it deems best
in each particular stock quickly and efficiently, in all market conditions.
Additionally, the firm offers customers execution services through the
SelectNet* and Instinet* systems. These systems are not generally offered by
other discounters. Siebert believes that its OTC executions afford its customers
the best possible opportunity for consistent price improvement. Siebert does not
execute OTC trades through affiliated market makers.
 
     Siebert executes trades of fixed income securities through its Capital
Markets division. Representatives of Siebert's Capital Markets division help
clients to buy, sell or shop for competitive yields of fixed income securities,
including municipal bonds, corporate bonds, U.S. Treasuries, mortgage-backed
securities, Government Sponsored Enterprises, Unit Investment Trusts ("UIT's")
or Certificates of Deposit ("CDs"). See "Business of MSCMG -- Capital Markets
Division."
 
     RETAIL CUSTOMER SERVICE.  Siebert provides retail customers at no
additional charge with personal service via toll-free access to dedicated
customer support personnel for all of its products and services. The customer
service department is located in its home office in New York City. The
department is staffed and supervised by securities professionals qualified to
address all of the clients' needs. Each representative is equipped with powerful
workstations running multiple software programs simultaneously for quick
response to customer inquiries. The workstations display real-time quotes,
market information, up-to-date equity and margin balances, positions and account
history. In addition, each terminal runs the firm's own in-house tracking
system. This system monitors representative performance, tracks the important
details of the calls received and can transmit certain reports to regulators on
specified schedules.
 
     PRODUCTS AND SERVICES.  Siebert offers retail customers a variety of
products and services designed to assist them with their investment needs and
allow them the convenience of maintaining a single brokerage account for
simplicity and security. The firm backs up its order execution service with a
no-hassle service guarantee that states, "If you are dissatisfied with a trade
for any reason, that trade is commission free".
 
     Siebert's products and services include the Siebert Asset Management
account featuring no-fee, no minimum check writing; a dividend reinvestment
program that allows for the automatic reinvestment of cash dividends as well as
capital gains distribution; retirement accounts that are free of fees if the
account maintains assets of at least $10,000; $50 million in account protection
per account consisting of $500,000 in standard insurance and $49.5 million in
additional protection, at no charge; free safekeeping services; and the Siebert
Syndicate Hotline, Siebert's exclusive municipal bond syndicate notification
program.
 
     ELECTRONIC SERVICES.  Siebert provides customers with electronic delivery
of services through a variety of means, as discussed below. Siebert believes,
however, that the electronic delivery services, while cost efficient, do not
offer a customer the ultimate in flexibility. Siebert believes a combination of
electronic services and personalized telephonic service maintains customer
loyalty and best serves the needs of most customers. To that end, all of the
services of the firm are supported by trained licensed securities professionals.
 
     Siebert OnLine -- the firm's popular PC software runs on Windows 3.1+ and
Windows95+ through a secure private connection. It features easy installation
and intuitive operations but its design lends itself to the active trader as
well. With the click of a mouse investors can check their account status, get
real-time quotes and trade securities 24 hours a day.
 
- ---------------
 
* NYSE Prime is a service mark of the New York Stock Exchange, Inc.; SelectNet
  is a trademark of Nasdaq; Instinet is a trademark of Reuters.
 
+ Windows 3.1 and Windows95 are trademarks of the Microsoft Corporation.
 
                                       18
   21
 
     Siebert MarketPhone(R) -- allows customers to trade at their convenience
through touch-tone phones and to check balances and executions and receive
real-time quotes, free. The service also permits automatic transfer to a live
broker or the use of the fax-on-demand feature to select an investment report to
be delivered to a fax machine within 90 seconds through the firm's Research by
Fax(R) service.
 
     PerformanceFax(TM) -- allows customers to receive a comprehensive profit
and loss analysis of their portfolios faxed each morning before the market
opens. Alternatively, the customer can select from weekly and monthly schedules
for receipt of PerformanceFax(TM) reports.
 
     Siebert FundExchange(R) -- The FundExchange(R) Mutual Fund service provides
customers with access to approximately 4,500 mutual funds, including 1,000
no-load funds, about 340 of which have no-transaction fees.
 
     Siebert is currently developing and will offer during the next year new
products and services including the following:
 
     - On-line statement imaging system -- Electronic imaging of customer
       statements will be displayed directly on the screen of Siebert
       representatives for fast, accurate reconciliation of customer accounts.
 
     - Upgrade of Siebert OnLine software, Version 3.0 -- The upgrade includes
       links to news, charting, market digest statistics, option chain look-up,
       historical transaction storage and other significant improvements.
 
     - PerformanceFax(TM) enhancements -- New reports will become available to
       customers.
 
     - No annual fee VISA(R)** credit card -- Will allow customers to make
       purchases with a Siebert VISA credit card.
 
     - Internet Access -- Siebert's new home page will feature account
       information, quotes, market news as well as upcoming Siebert events and
       other news items.
 
     - Enhanced MarketPhone(R) telephone brokerage service -- Features will
       include quotes on mutual funds and Canadian securities; the ability to
       purchase mutual funds; a new upgraded menu system; and additional access
       ports.
 
     - Siebert Fax on Demand service -- Customers will be able to call toll free
       from any touch tone telephone and select from a list of reports that will
       be faxed 24 hours a day.
 
     - News and trade execution alert service via PC, beeper and
       fax -- Customers will be able to keep abreast of the market whether at
       home or traveling using the firm's alert service.
 
     - VIP Premiere Statement -- The statements will offer a more sophisticated
       view of the brokerage account information including a new account
       valuation section, an asset allocation pie chart, a new improved activity
       section, and a more detailed income summary section.
 
     - A Charitable Common Fund account that will allow customers to contribute
       appreciated securities and designate the beneficiaries of income and
       principal without incurring capital gains taxes on the appreciation.
 
     RETAIL NEW ACCOUNTS.  Siebert maintains a separate New Accounts department
to familiarize each customer with Siebert's array of services, policies and
procedures. The department assists in the development of new business received
through the firm's print and broadcast advertising as well as its referral
programs. Additionally, requests to upgrade services such as option and margin
approval are handled by this department.
 
     The Retail New Accounts department assesses the creditworthiness of
customers and monitors control procedures for each new customer. These
procedures include the use of a combination of nationally recognized fraud
prevention services and internal controls developed and maintained by Siebert.
Management feels that these procedures minimize Siebert's exposure to customers'
fraudulent activities.
 
- ---------------
 
** VISA is a registered trademark of VISA International.
 
                                       19
   22
 
     The New Accounts department staff also assist customers in document
management and compliance with regulatory requirements.
 
     RETIREMENT ACCOUNTS.  Siebert offers customers a variety of self-directed
retirement accounts for which it acts as agent on all transactions. Custodial
services are provided through NFSC, the firm's clearing agent, which also serves
as Trustee for such accounts. IRA, SEPP IRA and KEOGH accounts can be invested,
and 401(k) plans will in the near future be able to be invested, in a wide array
of mutual funds, stocks, bonds and other investments all through one
consolidated account. Cash balances in these accounts are swept daily to the
money market fund chosen by the customer. Retirement accounts in excess of
$10,000 in assets are free of maintenance fees. Retirement accounts also enjoy
free dividend reinvestment in more than 6,000 publicly traded securities
allowing customers to automatically reinvest cash dividends and capital gains
distributions for additional shares of the same security.
 
     CUSTOMER FINANCING.  Customers' securities transactions are effected on
either a cash or margin basis. Generally, a customer buying securities in a
cash-only brokerage account is required to make payment by the settlement date,
currently three business days after the trade is executed. However, for
purchases of certain types of securities, such as options, a customer must have
a cash or a money market fund balance in his or her account sufficient to pay
for the trade prior to its execution. When selling securities, a customer is
required to deliver the securities, and is entitled to receive the proceeds, on
the settlement date. In an account authorized for margin trading, Siebert
arranges for the clearing agent to lend its customer a portion of the market
value of certain securities up to the limit imposed by the Federal Reserve
Board, which for most equity securities is initially 50%. Such loans are
collateralized by the securities in the customer's account. Short sales of
securities represent sales of borrowed securities and create an obligation to
purchase the securities at a later date. Customers may sell securities short in
a margin account subject to minimum equity and applicable margin requirements
and the availability of such securities to be borrowed.
 
     In permitting a customer to engage in transactions, Siebert assumes the
risk of its customer's failure to meet his or her obligations and in the event
of adverse changes in the market value of the securities positions in his or her
account. Both Siebert and its clearing agent reserve the right to set margin
requirements higher than those established by the Federal Reserve Board.
 
     Pursuant to its clearing agreement, Siebert participates in its clearing
agent's income from financing Siebert customers' transactions. See also
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
 
     OFFICES.  Siebert maintains four offices. See "Business of
MSCMG -- Properties." Customers can visit the offices to obtain market
information, place orders, open accounts, deliver and receive checks and
securities, and obtain related customer services in person. Nevertheless, most
of Siebert's activities are conducted by telephone and mail.
 
     The New York office remains open Monday through Friday from 7:30 a.m. to
7:30 p.m., Eastern Time, daily while branch offices remain open from 9 a.m. to 5
p.m., Eastern Time, daily to service customers in person and by telephone.
 
     INFORMATION SYSTEMS.  Siebert's operations rely heavily on its information
processing and communications systems. Siebert's system for processing a
securities transaction is automated. Registered representatives equipped with
online computer terminals can access customer account information, obtain
securities prices and related information and enter and confirm orders online.
 
     To support its customer service delivery systems, as well as other
applications such as clearing functions, account administration, record keeping
and direct customer access to investment information, Siebert maintains a
computer network in New York. Through its clearing agent, Siebert's computers
are also linked to the major registered United States securities exchanges, the
National Securities Clearing Corporation and The Depository Trust Company.
Failure of Siebert's information processing or communication systems for a
significant period of time could limit its ability to process its large volume
of transactions accurately and rapidly. This could cause Siebert to be unable to
satisfy its obligations to customers and other securities firms, and could
result in regulatory violations. External events, such as an earthquake or power
failure, loss of
 
                                       20
   23
 
external information feeds, such as security price information, as well as
internal malfunctions, such as those that could occur during the implementation
of system modifications, could render part or all of such systems inoperative.
 
     To enhance the reliability of the system and integrity of data, Siebert
maintains carefully monitored backup and recovery functions. These include
logging of all critical files intra-day, duplication and storage of all critical
data outside of its central computer site each evening, and maintenance of
facilities for backup and communications located in facilities provided by NFSC,
its clearing agent, at the World Financial Center.
 
CAPITAL MARKETS DIVISION
 
     In 1991, Siebert formalized its commitment to its institutional customer
base by creating the Siebert Capital Markets Division (the "Capital Markets
Division"). This group has served as a co-manager, selling group member or
underwriter on a full spectrum of new issue offerings by municipalities,
corporations and federal agencies. The Division has been involved in issues from
New York to California. In addition, the Division's distribution system is
extensive. It is one of the few firms with an active retail account base in
excess of 80,000 accounts, and an institutional account base which numbers
approximately 600 accounts.
 
     The two principal areas of the Capital Market Division are Investment
Banking and Institutional Equity Execution Services.
 
     INVESTMENT BANKING.  Siebert offers investment banking services to
corporate and municipal clients through its Capital Markets Division which
participates in public offerings of equity and debt securities with
institutional and individual investors.
 
     Siebert has participated as an underwriter for taxable and tax-exempt debt
raising capital for many types of issuers including states, counties, cities,
transportation authorities, sewer and water authorities and housing and
education agencies. Since it began underwriting in 1989, the firm has co-managed
over $61.6 billion in municipal debt. Investment Banking revenues from the
underwriting of taxable and tax-exempt debt and fees from financial advisor and
remarketing activities are set forth in the table "Selected Financial Data of
Siebert."
 
     Siebert has participated as an underwriter in several of the largest common
stock offerings that have come to market, including Conrail, Allstate, PacTel
Corporation, Estee Lauder and Lucent Technologies. To date, the firm has
participated as an underwriter in over 105 offerings including corporate debt
issuance totaling over $3.6 billion.
 
     The principal sources of revenue of the Capital Markets Division are
underwriting profits and management fees derived from equity underwriting.
Certain risks are involved in the underwriting of securities. Underwriting
syndicates agree to purchase securities at a discount from the initial public
offering price. If the securities must be sold below the syndicate cost, an
underwriter is exposed to losses on the securities that it has committed to
purchase. In the last several years, investment banking firms have increasingly
underwritten corporate and municipal offerings with fewer syndicate participants
or, in some cases, without an underwriting syndicate. In such cases, the
underwriter assumes a larger part or all of the risk of an underwriting
transaction. Under federal securities laws, other laws and court decisions, an
underwriter is exposed to substantial potential liability for material
misstatements or omissions of fact in the prospectus used to describe the
securities being offered. While municipal securities are exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), underwriters of municipal securities nevertheless are exposed
to substantial potential liability in connection with material misstatements or
omissions of fact in the offering documents prepared in connection with
offerings of such securities.
 
     INSTITUTIONAL EQUITY EXECUTION SERVICES.  The firm emphasizes personalized
service, professional order handling and client satisfaction to approximately
400 institutional accounts. It utilizes up to 15 independent floor brokers that
use an extensive network linked via direct "ring down" circuits. Each broker is
strategically located on a major exchange, which allows Siebert to execute
orders in all market environments. Utilizing its clearing arrangement, Siebert
expects to provide foreign execution and clearing services to institutional
customers by the end of 1996. Although the firm from time to time positions
stocks, options or futures, it does
 
                                       21
   24
 
not execute customer orders against such positions because Siebert believes its
client's interest in a transaction should always be placed above any other
interest. The firm's institutional client list includes some of the largest
pension funds, investment managers and banks across the country. The firm trades
an average of 668,000 shares daily for institutional investors and for its own
account.
 
     INSTITUTIONAL BASKET TRADING TECHNOLOGY.  The Capital Markets Division has
recently completed the design and commenced operation of the exclusive Siebert
Real-time List Execution System ("SRLX"). SRLX is designed exclusively for
institutional customers who employ the use of basket trading strategies in their
portfolio management.
 
     SRLX enables the Capital Markets Division to simultaneously manage an array
of baskets for multiple clients while providing real-time analysis. SRLX can be
integrated into an existing local area network. It is built with the latest 32
bit technology to take advantage of today's Pentium-based PC's running Microsoft
Windows95+or Windows NT+. Data integrity is assured through a private digital T1
line with built-in network redundancy.
 
     SRLX is built for institutional customers with features designed to add
significant value to their trading capabilities. SRLX features include: Written
almost entirely in VB native code by in-house staff for reliability and speed;
sophisticated graphical interface allowing exceptional control and monitoring;
real-time order entry, reporting and messaging from the inter-market trading
network; real-time basket analysis including average pricing and liquidity;
multiple basket management from a single window; account allocation and end-
of-day report uploading; customized client reports; active intervention for
large blocks or inactive stocks; and built-in automatic fail-safe and recovery
system.
 
ADVERTISING, MARKETING AND PROMOTION
 
     Siebert develops and maintains its retail customer base through printed
advertising in financial publications, broadcast commercials over national and
local cable TV channels as well as promotional efforts and public appearances by
Ms. Siebert. Additionally, a significant portion of the firm's new business is
developed directly from referrals by satisfied customers.
 
     The Capital Markets Division maintains a practice of announcing in advance
that it will contribute a portion of the net commission revenues it derives from
sales of negotiated new issue equity, municipal and government bonds to
charitable organizations. Siebert is certified as a Woman-Owned Business ("WBE")
with numerous states, agencies and authorities. Siebert is the only "WBE" which
offers both retail and institutional product distribution capabilities. Although
it has been a member of the New York Stock Exchange since 1967, new business
opportunities have become available to it based upon its status as a "WBE."
 
     Many of the firm's competitors expend substantial funds in advertising and
direct solicitation of prospects and customers to increase their share of the
market.
 
COMPETITION
 
     Siebert encounters significant competition from full-commission and
discount brokerage firms, as well as from financial institutions, mutual fund
sponsors and other organizations many of which are significantly larger and
better capitalized than Siebert. The general financial success of the securities
industry over the past several years has strengthened existing competitors.
Siebert believes that such success will continue to attract additional
competitors such as banks, insurance companies, providers of online financial
and information services, and others as they expand their product lines. Many of
these competitors are larger, more diversified, have greater capital resources,
and offer a wider range of services and financial products than Siebert. Siebert
competes with a wide variety of vendors of financial services for the same
customers. Siebert believes that the
 
- ---------------
 
+ Pentium is a trademark of the Intel Corporation; Microsoft Windows95 and
  WindowsNT are trademarks of the Microsoft Corporation.
 
                                       22
   25
 
main competitive advantages are quality of execution and service,
responsiveness, price of services and products offered, and the breadth of
product line.
 
     Among Siebert's principal competitors are Charles Schwab, Quick and Reilly,
Fidelity Investments, Waterhouse Securities, Jack White & Co. and Kennedy Cabot.
Siebert charges commissions lower than some other discount brokers including
Charles Schwab, Quick & Reilly and Fidelity Investments.
 
REGULATION
 
     The securities industry in the United States is subject to extensive
regulation under both Federal and state laws. The Commission is the federal
agency charged with administration of the federal securities laws. Siebert is
registered as a broker-dealer with the Commission, the NYSE and the National
Association of Securities Dealers ("NASD"). Much of the regulation of
broker-dealers has been delegated to self-regulatory organizations, principally
the NASD and the national securities exchanges such as the NYSE which is
Siebert's primary regulator with respect to financial and operational
compliance. These self-regulatory organizations adopt rules (subject to approval
by the Commission) governing the industry and conduct periodic examinations of
broker-dealers. Securities firms are also subject to regulation by state
securities authorities in the states in which they do business. Siebert was
registered as a broker-dealer in 47 states, the District of Columbia and Puerto
Rico as of March 31, 1996.
 
     The principal purpose of regulations and discipline of broker-dealers is
the protection of customers and the securities markets, rather than protection
of creditors and stockholders of broker-dealers. The regulations to which
broker-dealers are subject cover all aspects of the securities business,
including sales methods, trading practices among broker-dealers, uses and
safekeeping of customers' funds and securities, capital structure of securities
firms, record keeping, fee arrangements, disclosure to clients, and the conduct
of directors, officers and employees. Additional legislation, changes in rules
promulgated by the Commission and by self-regulatory organizations or changes in
the interpretation or enforcement of existing laws and rules may directly affect
the method of operation and profitability of broker-dealers and investment
advisers. The Commission, self-regulatory organizations and state securities
authorities may conduct administrative proceedings which can result in censure,
fine, cease and desist orders, or suspension or expulsion of a broker-dealer or
an investment adviser, its officers, or employees. Neither MSCMG nor Siebert has
been the subject of such administrative proceedings.
 
     As a registered broker-dealer and NASD member organization, Siebert is
required by federal law to belong to the Securities Investor Protection
Corporation ("SIPC"), which provides, in the event of the liquidation of a
broker-dealer, protection for securities held in customer accounts held by the
firm of up to $500,000 per customer, subject to a limitation of $100,000 on
claims for cash balances. SIPC is funded through assessments on registered
broker-dealers. In addition, Siebert, through its clearing agent, has purchased
from private insurers additional account protection of up to $49.5 million per
customer, as defined, for customer securities positions only. Stocks, bonds,
mutual funds and money market funds are considered securities and are protected
on a share basis for the purposes of SIPC protection and the additional
protection (i.e., protected securities may either be replaced or converted into
an equivalent market value as of the date a SIPC trustee is appointed). Neither
SIPC protection nor the additional protection applies to fluctuations in the
market value of securities.
 
     Siebert is also authorized by the Municipal Securities Rulemaking Board to
effect transactions in municipal securities on behalf of its customers and has
obtained certain additional registrations with the Commission and state
regulatory agencies necessary to permit it to engage in certain other activities
incidental to its brokerage business.
 
     Margin lending arranged by Siebert is subject to the margin rules of the
Board of Governors of the Federal Reserve System and the NYSE. Under such rules,
broker-dealers are limited in the amount they may lend in connection with
certain purchases and short sales of securities and are also required to impose
certain maintenance requirements on the amount of securities and cash held in
margin accounts. In addition, those rules and rules of the Chicago Board Options
Exchange govern the amount of margin customers must provide and maintain in
writing uncovered options.
 
                                       23
   26
 
NET CAPITAL REQUIREMENTS; NET CAPITAL
 
     As a registered broker-dealer, Siebert is subject to the Uniform Net
Capital Rule (Rule 15c3-1) promulgated by the Commission (the "Net Capital
Rule"), which has also been adopted through incorporation by reference in NYSE
Rule 325. Siebert is a member firm of the NYSE and the NASD. The Net Capital
Rule specifies minimum net capital requirements for all registered
broker-dealers and is designed to measure financial integrity and liquidity.
Failure to maintain the required net capital may subject a firm to suspension or
expulsion by the NYSE and the NASD, certain punitive actions by the Commission
and other regulatory bodies and, ultimately, may require a firm's liquidation.
 
     "Net capital" is defined as net worth (assets minus liabilities), plus
qualifying subordinated borrowings, less certain deductions that result from
excluding assets that are not readily convertible into cash and from
conservatively valuing certain other assets. These deductions include charges
(haircuts) that discount the value of firm security positions to reflect the
possibility of adverse changes in market value prior to disposition.
 
     The Net Capital Rule requires notice of equity capital withdrawals to be
provided to the Commission prior to and subsequent to withdrawals exceeding
certain sizes. Such rule prohibits withdrawals that would reduce a
broker-dealer's net capital to an amount less than 25% of its deductions
required by the Net Capital Rule as to its security positions. The Net Capital
Rule also allows the Commission, under limited circumstances, to restrict a
broker-dealer from withdrawing equity capital for up to 20 business days.
 
     The firm falls within the provisions of Regulation 240.15c3-1(a)(1)(ii)
promulgated by the Commission. Siebert has elected to use the alternative
method, permitted by the rule, which requires that Siebert maintain minimum net
capital, as defined, equal to the greater of $250,000 or 2 percent of aggregate
debit balances arising from customer transactions, as defined. (The net capital
rule of the NYSE also provides that equity capital may not be withdrawn or cash
dividends paid if resulting net capital would be less than 5 percent of
aggregate debits.) At December 31, 1995 and 1994 and at March 31, 1996, Siebert
had net capital of $4,606,280, $4,465,314 and $7,474,113, respectively, and net
capital requirements of $250,000 under Regulation 240.15c3-1(a)(1)(ii). Siebert
is not subject to Commission Rule 15c3-3 and claims exemption from the reserve
requirement under Section 15c3-3(k)(2)(ii). The firm maintains net capital in
excess of the Commission Rule 17a-11 requirement.
 
EMPLOYEES
 
     As of March 31, 1996, Siebert had approximately 85 employees, 3 of whom
were executives. None of the employees is represented by a union, and Siebert
believes that its relations with its employees are good.
 
PROPERTIES
 
     Siebert operates its business out of the following four offices:
 


                                     APPROXIMATE          EXPIRATION DATE
                                   OFFICE AREA IN           OF CURRENT           RENEWAL
          LOCATION                   SQUARE FEET               LEASE              TERMS
- ----------------------------    ---------------------     ---------------     --------------
                                                                     
885 Third Ave.,                        7,828 SF               7/15/97         5 year option
Suite 1720
New York, NY 10022
4400 North Federal Highway,            1,038 SF               2/28/97              None
Suite 106D
Boca Raton, FL 33431
2020 Avenue of the Stars,                846 SF                   n/a         Month-to-month
Concourse Level,
Suite C216
Los Angeles, CA 90067
400 Fifth Avenue South,                1,008 SF               4/22/99              None
Suite 100
Naples, FL 33940

 
                                       24
   27
 
LEGAL PROCEEDINGS
 
     Siebert is involved in various routine lawsuits of a nature which is deemed
customary and incidental to its business. In the opinion of management, the
ultimate disposition of such actions will not have a material adverse effect on
its financial position or results of operations.
 
                                       25
   28
 
                       SELECTED FINANCIAL DATA OF SIEBERT
 


                                                                                                          THREE MONTHS ENDED
                                                       YEAR ENDED DECEMBER 31,                                MARCH 31,
                                  ------------------------------------------------------------------   ------------------------
                                     1995          1994          1993          1992          1991         1996          1995
                                  -----------   -----------   -----------   -----------   ----------   -----------   ----------
                                                                                                             (UNAUDITED)
                                                                                                
Income statement data:
  Revenues:
    Commissions.................  $15,645,334   $12,128,797   $14,349,051   $ 9,874,853   $6,143,399   $ 5,080,919   $3,094,538
    Trading profits.............    2,608,078     3,215,288     3,133,722     1,378,293    1,636,848       483,656      871,091
    Interest and dividends......    1,389,612       462,618       261,198       234,770      194,429       199,483      142,915
    Investment banking..........    1,396,967     1,536,030     2,462,309     2,435,734      873,703       719,376      231,720
                                  -----------   -----------   -----------   -----------   ----------   -----------   ----------
        Total revenues..........   21,039,991    17,342,733    20,206,280    13,923,650    8,848,379     6,483,434    4,340,264
                                  -----------   -----------   -----------   -----------   ----------   -----------   ----------
  Expenses:
    Salaries, commissions and
      employee benefits.........    8,586,116     6,132,899     8,999,567     4,844,544    3,023,262     1,747,867    1,065,592
    Clearing fees, including
      floor brokerage...........    4,249,050     3,967,558     4,473,740     3,017,085    2,201,056     1,116,018    1,058,349
    Advertising and promotion...    2,485,426     2,299,030     2,171,858     1,838,707      874,172     1,214,722      510,985
    Communications..............    1,119,189     1,001,957       896,986       590,034      476,523       315,065      222,582
    Interest....................      568,326       602,759       323,876       290,185      237,297        69,386      122,762
    Rent and occupancy..........      326,089       323,123       323,235       200,976      156,492        89,793       80,278
    Other general and
      administrative............    2,461,122     2,458,237     1,932,143     1,930,238    1,384,882       603,382      428,359
                                  -----------   -----------   -----------   -----------   ----------   -----------   ----------
        Total expenses..........   19,795,318    16,785,563    19,121,405    12,711,769    8,353,684     5,156,233    3,488,907
                                  -----------   -----------   -----------   -----------   ----------   -----------   ----------
Net income -- historical........    1,244,673       557,170     1,084,875     1,211,881      494,695     1,327,201      851,357
Pro forma provision for income
  taxes (1).....................      548,000       245,000       477,000       533,000      218,000       584,000      375,000
                                  -----------   -----------   -----------   -----------   ----------   -----------   ----------
PRO FORMA NET INCOME............  $   696,673   $   312,170   $   607,875   $   678,881   $  276,695   $   743,201   $  476,357
                                  ===========   ===========   ===========   ===========   ==========   ===========   ==========
Balance Sheet data (at
  period-end):
  Total assets..................  $16,291,195   $ 9,372,230   $12,161,104   $ 4,784,663   $3,078,678   $12,617,461
  Total liabilities.............    9,154,065     3,479,773     6,825,817     1,530,795    1,036,691     3,653,130
  Subordinated debt to
    shareholder.................    2,000,000     2,000,000     2,000,000     1,000,000    1,000,000     2,500,000
  Stockholder's equity..........    5,137,130     3,892,457     3,335,287     2,253,868    1,041,987     6,464,351

 
- ---------------
(1) The pro forma provision for income taxes represents income taxes which would
    have been provided had Siebert operated as a C Corporation.
 
(2) Salaries, commissions and employee benefits include $2,763,033, $1,165,000,
    $3,663,713, $1,369,406 and $600,000 for 1995 through 1991 of S Corporation
    compensation of Muriel Siebert in excess of the amounts that would have been
    paid had her proposed employment agreement been in effect. The results of
    operations for the three months ended March 31, 1996 include compensation
    which approximates the contractual amount set forth in the proposed
    employment agreement.
 
                                       26
   29
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MSCMG
 
     This discussion should be read in conjunction with "Selected Financial Data
of Siebert" and Siebert's Financial Statements and the Notes thereto contained
elsewhere in this Proxy Statement.
 
BUSINESS ENVIRONMENT
 
     Market conditions during the first few months of 1996 reflected a
continuation of the 1995 bull market characterized by record volume and record
high market levels. Declines in market volumes or increases in interest rates
could limit Siebert's growth or even lead to a decline in Siebert's customer
base which would adversely affect its results of operations.
 
     Also during 1996, competition has continued to intensify both among all
classes of brokerage firms and within the discount brokerage business as well as
from new firms not previously in the discount business announcing plans to
become significantly involved. Other firms, traditionally discount execution
firms primarily, have announced their intention to broaden their offerings to
include advice and investment management. Since 1994, some firms have offered
low flat rate execution fees that are difficult for any conventional discount
firm to meet. Many such flat fee brokers, however, impose charges for services
such as mailing, transfers and handling exchanges which Siebert does not and
also direct their execution to captive market makers. Increased competition,
broader service offerings or the prevalence of a flat fee environment could also
limit Siebert's growth or even lead to a decline in Siebert's customer base
which would adversely affect its results of operations.
 
CURRENT DEVELOPMENTS
 
     For the quarter ended March 31, 1996, commission and fee income and
investment banking revenues continued to experience strong and record growth.
Equity trading activities, however, continued to lag the growth in the balance
of the firm. Siebert's equity trading activities are dependent on one trader,
whose loss could adversely affect its results of operations.
 
     New products and services introduced include Siebert OnLine in the first
quarter of 1996 and PerformanceFax(TM) and Siebert Real-Time List Execution
System in the second quarter of 1996.
 
     Siebert intends to open an office in New Jersey and relocate its office in
Los Angeles to better serve its customers. Siebert is exploring the feasibility
of opening satellite offices in Florida.
 
     During the second quarter of 1996, the firm reached an agreement with its
clearing firm whereby the clearing firm would guarantee the availability of up
to 14 trading positions and related telephone and computer equipment for the use
of Siebert personnel in the event Siebert's main trading facility was
unavailable for any reason. Furthermore, the 14 trading positions would be
supported by the clearing agent's internal licensed representatives.
 
RESULTS OF OPERATIONS
 
  THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
 
     Total revenues for the first three months of 1996 were approximately $6.5
million, an increase of approximately $2.1 million or 49% over the first three
months of 1995. Revenues increased in all categories except equity trading
profits.
 
     Commissions and fees increased by approximately $2.0 million or 64% to
approximately $5.1 million due to the continued bull market and increased
spending for advertising and promotion to attract additional clients.
 
     Equity trading profits decreased $387,000 or 44% to $484,000 due to a lack
of liquidity and substantially reduced volatility in markets in which the firm
trades, thus limiting trading and arbitrage opportunities compared to the prior
period.
 
                                       27
   30
 
     Interest and dividends increased $57,000 or 40% to $199,000 due to
increases in long trading positions and in trading strategies which generated
dividend income in 1996 over the corresponding period in 1995.
 
     Investment banking income increased $488,000 or 210% to $719,000 due to
increased participation in equity underwritings over the prior year period. This
resulted from the Capital Markets Division allocating additional resources to
the development of this business.
 
     Total costs and expenses for the first three months of 1996 were $5.2
million, an increase of $1.7 million or 48% over the first three months of 1995.
Costs increased in all categories except interest.
 
     Compensation and benefit costs increased $682,000 or 64% to $1.7 million
due to increases in staffing to cover the trading and service needs of the
retail commission business. Increased staff and incentive bonus accruals were up
approximately $380,000 reflecting volume, improved performance and firm
profitability. The balance of the increase relates primarily to an increase in
firm head count from 63 at March 31, 1995 to 86 at March 31, 1996. This increase
is primarily related to the increase in equity commission business.
 
     Clearing and brokerage fees increased $58,000 or 5.4% to $1.1 million. Such
costs increased substantially less than commission volume due to the effect of a
new clearing cost structure that became effective in the second quarter of 1995.
 
     Advertising and promotion expense increased $704,000 or 138% to $1.2
million due to increased branch and service promotion (for example, the opening
of a Naples office and the introduction of "Siebert OnLine") and increased
advertising to differentiate Siebert from other firms in an increasingly
competitive environment.
 
     Communications expense increased $93,000 or 42% to $315,000 as the client
base and volume increased and more services were offered directly on-line.
 
     Interest expense decreased $53,000 or 44% to $69,000 primarily due to
decreased use of equity trading strategies that involve large short positions.
Dividend charges against short positions are included as part of interest
expense.
 
     Rent and occupancy costs increased $10,000 or 12% to $90,000 principally
due to opening a new branch in Naples, Florida in December 1995.
 
     Other general and administrative expenses increased $175,000 or 41% to
$603,000. Supplies, printing and postage expenses were up $47,000, a significant
portion of which related to a lead mailing program which follows up leads
developed from advertising. Registration expense rose $54,000 over the same
period of the prior year. Consulting expense increased $25,000 primarily in
connection with updating the look and image of the firm's products and
background materials. The balance of the increase was due generally to increases
in a wide variety of expenses with the increase in both volume and personnel.
 
     Siebert's pro forma provision for income taxes increased $209,000, or 56%,
to $584,000 and pro forma net income increased $267,000, or 56%, to $743,000.
Both are based on proportional increases in pre-tax income.
 
  YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
 
     Total revenues for 1995 were $21.0 million, an increase of $3.7 million or
21% over 1994. Commission and fee income and interest and dividend revenues
increased and trading and investment banking revenues declined.
 
     Commission and fee income increased $3.5 million or 29% to $15.6 million
due to the continued bull market and increased spending for advertising to
attract additional clients.
 
     Trading profits declined $607,000 or 19% to $2.6 million due to a lack of
liquidity and substantially reduced volatility in the firm's markets during the
second half of the year, thus limiting the trading and arbitrage opportunities
present in the first half of the year and in the prior period.
 
     Interest and dividends increased $927,000 or 200% to $1.4 million due to
increases in long trading positions and in trading strategies which generated
greater dividend income.
 
                                       28
   31
 
     Investment banking decreased $139,000 or 9.1% to $1.4 million due to
reduced underwriting volume generally in municipal markets and a shift from
negotiated underwriting transactions to competitively bid transactions which are
relatively less profitable for participants.
 
     Total costs and expenses for 1995 were $19.8 million, an increase of $3.0
million or 18% over 1994. All categories of costs increased except interest
expense.
 
     Compensation and benefit costs increased $2.5 million or 40% to $8.6
million due to an increase in Subchapter-S compensation to Ms. Siebert of $1.76
million, an increase in contractual incentive bonus compensation of $355,000 and
an increase in the bonus provision for other staff and executives of $365,000.
 
     Clearing and brokerage fees increased $282,000 or 7.1% to $4.2 million.
Such costs increased substantially less than commission volume due to the effect
of a new clearing cost structure that became effective in the second quarter of
1995.
 
     Advertising and promotion expense increased $186,000 or 8.1% to $2.5
million primarily in increased advertising to differentiate Siebert from other
firms in an increasingly competitive environment.
 
     Communications expense increased $117,000 or 12% to $1.1 million due to
increased market volume, increased use of "800" number service resulting from
national television advertising and increased use of Siebert's MarketPhone(R)
service for orders as well as customer inquiries. Also as a result of increased
volume, the cost of quote services increased $58,000 or 14%.
 
     Interest expense declined $34,000 or 5.7% to $568,000 primarily due to the
decreased use of equity trading strategies that involve large short positions.
Dividend charges against short positions are included as part of interest
expense.
 
     Rent and occupancy costs increased $3,000 or 0.9% to $326,000 primarily
from cost escalation provisions in existing leases.
 
     Siebert's pro forma provision for income taxes increased $303,000 or 124%
to $548,000 and pro forma net income for 1995 was $697,000, an increase of
$385,000 or 123% over 1994, both proportional to a similar increase in pre-tax
income.
 
  YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
 
     Total revenues for 1994 were $17.3 million, a decrease of $2.9 million or
14% compared to 1993. Commissions and fees and investment banking revenues
declined. Trading and interest income increased, but to a much lesser extent.
 
     Commissions and fees were $12.1 million, a decrease of $2.2 million or 16%
compared to 1993. Principal factors were a general decline in overall stock
market volume and activity and increased competition in the discount brokerage
industry, particularly from a class of new flat fee discount brokers.
 
     Trading profits increased $82,000 or 2.6% to $3.2 million due to the
continued success of firm trading strategies suited to relatively liquid and
volatile markets.
 
     Interest and dividends increased $201,000 or 77% to $463,000, due to
increases in long trading positions and in trading strategies which generated
greater dividend income in 1994 compared to 1993.
 
     Investment banking decreased $926,000 or 38% to $1.5 million, due primarily
to a reduction of approximately $500,000 in taxable fixed income syndicate
income which had been significant in 1993. This was due to market conditions,
the termination of certain Resolution Trust Company and FannieMae underwriting
programs and the loss of a key employee. The municipal bond area principally
accounted for the remaining decline due to a softening in the municipal bond
market.
 
     Total costs and expenses for 1994 were $16.8 million, a decrease of $2.3
million or 12% compared to 1993. Compensation and benefits and clearing costs
accounted principally for the decrease, with some offsetting increases in other
categories.
 
                                       29
   32
 
     Compensation and benefits decreased $2.9 million or 32% to $6.1 million.
Ms. Siebert's Subchapter-S Corp. compensation declined $2.7 million in 1994
compared to 1993 and a reduction in staff and in the executive bonus provision
accounted for the balance, in each case due to reduced firm profitability.
 
     Clearing and brokerage fees decreased $506,000 or 11% to $4.0 million due
to a decrease in the retail commission business. The decrease was less than the
percentage decrease in commissions because the 1994 mix of commissions had a
shift toward listed securities in 1994 which incur floor brokerage costs not
applicable to OTC trades.
 
     Advertising and promotion expense increased $127,000 or 5.9% to $2.3
million. The increased expenditures represented a campaign to minimize the
effects of reduced market volume by capturing increased market share. Due to
reduced municipal market activity, contributions, included as promotional
expense, decreased approximately $560,000. Expenditures for other advertising
and promotional costs increased approximately $685,000 over the prior year.
 
     Communications expense increased $105,000 or 12% to $1.0 million. Although
commission volume declined, the firm's emphasis on customer service resulted in
more service-oriented representatives providing a wider range of services,
specifically including substantially more quote services.
 
     Interest expense increased $279,000 or 86% to $602,000 due to the trading
strategies involving large short positions which incur dividend charges.
Dividend charges against short positions are included as part of interest
expense.
 
     Rent and occupancy costs remained the same at $323,000.
 
     Other general and administrative expenses increased $526,000 or 27% to $2.5
million, principally due to legal defense fees and expenses with two actions
involving former employees; both cases were settled.
 
     Siebert's pro forma provision for income taxes decreased $232,000 or 49% to
$245,000 and pro forma net income decreased $296,000 or 49% to $312,000, both
proportional to a similar decrease in pre-tax income.
 
  YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
 
     Total revenues for 1993 were $20.2 million, an increase of $6.3 million or
45% over 1992. All categories of revenue increased, although commissions and
fees and trading were the principal contributors to the increase.
 
     Commissions and fees increased $4.5 million or 45% to $14.3 million, due
primarily to an aggressive price-based advertising campaign coupled with a broad
increase in market level and activity.
 
     Trading profits increased $1.8 million or 127% to $3.1 million, due to
successful trading strategies and significantly higher volume and volatility in
the markets in which the firm was active.
 
     Interest and dividends increased $26,000 or 11% to $261,000 resulting from
larger long positions in firm trading activities.
 
     Investment banking increased $27,000 or 1.1% to $2.46 million.
 
     Total costs and expenses for 1993 were $19.1 million, an increase of $6.4
million or 50% over 1992.
 
     Compensation and benefits increased $4.2 million or 86% to $9.0 million.
Ms. Siebert's Subchapter-S Corp. compensation increased $2.5 million on improved
firm profitability. The staff and executive bonus provision increased $625,000.
The balance, approximately $1.1 million, is principally due to the increase in
retail and investment banking head count.
 
     Clearing and brokerage fees increased $1.5 million or 48% to $4.5 million
due primarily to the increase in commission income.
 
     Advertising and promotion expense increased $333,000 or 18% to $2.2 million
primarily due to increased business with participants in certain of Siebert's
advertising and promotional activities.
 
                                       30
   33
 
     Communications expense increased $307,000 or 52% to $897,000 due
principally to the increase in commission business coupled with a shift to
increased use of incoming "800" lines which are promoted in national
advertising.
 
     Interest expense increased $34,000 or 12% to $324,000 due to the use of
trading strategies involving larger carrying charges caused by larger trading
positions.
 
     Rent and occupancy costs increased $122,000 or 60% to $323,000 primarily
due to moving to new and larger facilities at 885 Third Avenue in New York City
in May 1993.
 
     Other general and administrative expenses increased $2,000 or 0.1% to
$1.932 million.
 
     Siebert's pro forma provision for income taxes decreased $56,000 or 11% to
$477,000 and pro forma net income decreased $71,000 or 11% to $608,000, both
proportional to a similar decrease in pre-tax income.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Siebert's assets are highly liquid, consisting generally of cash, money
market funds and securities freely salable in the open market. Siebert's total
assets at March 31, 1996 were $12.6 million, of which $2 million took the form
of a secured demand note. $10.2 million or 81% of total assets were highly
liquid.
 
     Siebert is subject to the net capital requirements of the Commission, the
NYSE and other regulatory authorities. At March 31, 1996, Siebert's net capital
was $7.5 million, $7.2 million in excess of its minimum capital requirement of
$250,000.
 
RISK MANAGEMENT
 
     The principal credit risk to which Siebert is exposed on a regular basis is
to customers who fail to pay for their purchases or who fail to maintain the
minimum required collateral for amounts borrowed against securities positions.
 
     Siebert has established policies with respect to maximum purchase
commitments for new customers or customers with inadequate collateral to support
a requested purchase. Managers have some flexibility in allowing certain
transactions. When transactions occur outside normal guidelines, such accounts
are monitored closely until their payment obligation is completed; if the
customer does not meet the commitment, steps are taken to close out the purchase
and minimize any losses.
 
     Siebert has a risk unit specifically responsible for monitoring all
customer positions for the maintenance of required collateral. The unit also
monitors accounts that may be concentrated unduly in one or more securities
whereby a significant decline in the value of a particular concentrated security
could reduce the value of the account's collateral below the account's loan
obligation.
 
     Siebert has not had significant credit losses in the last five years.
 
                                       31
   34
 
                       DESCRIPTION OF MSCMG CAPITAL STOCK
 
     The authorized capital stock of MSCMG consists of 1,500 shares of common
stock, no par value ("MSCMG Common Stock"), all of which are presently
outstanding and entitled to vote.
 
     Except for restrictions on transfer arising under the federal securities
laws, there are no existing restrictions imposed by MSCMG on the transfer of any
outstanding shares of capital stock of MSCMG and there are no registration
covenants thereto. None of the outstanding shares of MSCMG was issued in
violation of the preemptive rights of any present or former stockholder.
 
                   BENEFICIAL OWNERSHIP OF MSCMG COMMON STOCK
 
     Muriel F. Siebert is the sole holder of the 1,500 authorized and issued
shares of MSCMG Common Stock.
 
               SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
 
     Shareholder proposals intended to be represented at the 1997 Annual Meeting
of Shareholders of JMI must be received by JMI no later than May 21, 1997 for
inclusion in JMI's proxy material for that meeting.
 
                                 OTHER MATTERS
 
     The Board of Directors does not know of any other matters to be presented
at the Special Meeting. If any additional matters are properly presented to the
Special Meeting for action, the persons named in the enclosed proxies and acting
thereunder will have discretion to vote on such matters in accordance with their
own judgment.
 
                                          By Order of the Board of Directors
 
                                          John Pagano,
                                          Secretary
 
Dated: August 13, 1996
 
     PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE.
 
     A COPY OF JMI'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH
31, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED
WITHOUT CHARGE (EXCEPT FOR EXHIBITS TO SUCH ANNUAL REPORT, WHICH WILL BE
FURNISHED UPON PAYMENT OF JMI'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBITS)
BY ANY SUCH PERSON SOLICITED HEREUNDER BY WRITING TO JOHN PAGANO, SECRETARY, J.
MICHAELS, INC., 182 SMITH STREET, BROOKLYN, NEW YORK 11201.
 
                                       32
   35
 
                         INDEX TO FINANCIAL STATEMENTS
 


                                                                                        PAGE
                                                                                        ----
                                                                                     
MURIEL SIEBERT & CO., INC.
  Report of Independent Auditors......................................................   34
  Statements of Financial Condition at December 31, 1994 and 1995 and March 31, 1996
     (unaudited)......................................................................   35
  Statements of Income for the three years ended December 31, 1995 and the three
     months ended March 31, 1995 and 1996 (unaudited).................................   36
  Statement of Retained Earnings for the year ended December 31, 1995 and the three
     months ended March 31, 1996 (unaudited)..........................................   37
  Statements of Cash Flows for the three years ended December 31, 1995 and the three
     months ended March 31, 1995 and 1996 (unaudited).................................   38
  Notes to Financial Statements.......................................................   39
SIEBERT FINANCIAL CORP.
  Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996.......   44
  Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three
     months ended March 31, 1996......................................................   45
  Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year
     ended December 31, 1995..........................................................   46

 
                                       33
   36
 
                         REPORT OF INDEPENDENT AUDITORS
 
Board of Directors
Muriel Siebert & Co., Inc.
 
     We have audited the accompanying statements of financial condition of
Muriel Siebert & Co., Inc. as of December 31, 1995 and December 31, 1994, and
the related statements of income, retained earnings and cash flows for each of
the years in the three-year period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Muriel Siebert & Co., Inc.
as of December 31, 1995 and December 31, 1994, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1995, in conformity with generally accepted accounting principles.
 
Richard A. Eisner & Company, LLP
 
New York, New York
February 9, 1996
 
April 24, 1996 as to
Note G
 
                                       34
   37
 
                           MURIEL SIEBERT & CO., INC.
 
                       STATEMENTS OF FINANCIAL CONDITION
 


                                                              DECEMBER 31,
                                                       --------------------------
                                                          1995            1994
                                                       -----------     ----------      MARCH 31,
                                                                                         1996
                                                                                      -----------
                                                                                      (UNAUDITED)
                                                                             
ASSETS
Cash and cash equivalents............................  $   164,071     $  367,372     $   868,266
Securities owned, at market value....................   13,746,931      5,740,354       8,681,809
Receivable from brokers and dealers..................                   2,914,819         692,159
Secured demand note receivable from shareholder......    2,000,000                      2,000,000
Property and equipment, net..........................      238,864        210,453         229,736
Prepaids and other...................................      141,329        139,232         145,491
                                                       -----------     ----------     -----------
          Total......................................  $16,291,195     $9,372,230     $12,617,461
                                                       ===========     ==========     ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Payable to brokers and dealers.......................  $ 5,236,346
Accounts payable and accrued liabilities.............    3,339,229     $1,906,289     $ 3,321,995
Securities sold, not yet purchased, at market
  value..............................................      578,490      1,573,484         331,135
                                                       -----------     ----------     -----------
          Total......................................    9,154,065      3,479,773       3,653,130
                                                       -----------     ----------     -----------
Commitment and contingencies
Liability to shareholder subordinated to claims of
  general creditors..................................    2,000,000      2,000,000       2,500,000
                                                       -----------     ----------     -----------
Shareholder's equity:
  Common stock, voting, $1 par value; authorized
     1,000 shares; issued 743........................          743            743             743
  Additional paid-in capital.........................       59,133         59,133          59,133
  Retained earnings..................................    5,101,777      3,857,104       6,428,978
  Less 94 shares of treasury stock, at cost..........      (24,523)       (24,523)        (24,523)
                                                       -----------     ----------     -----------
     Total shareholder's equity......................    5,137,130      3,892,457       6,464,331
                                                       -----------     ----------     -----------
     Total subordinated liability and shareholder's
       equity........................................    7,137,130      5,892,457       8,964,331
                                                       -----------     ----------     -----------
          Total......................................  $16,291,195     $9,372,230     $12,617,461
                                                       ===========     ==========     ===========

 
  The accompanying notes to financial statements are an integral part hereof.
 
                                       35
   38
 
                           MURIEL SIEBERT & CO., INC.
 
                              STATEMENTS OF INCOME
 


                                                                              THREE MONTHS ENDED
                                          YEAR ENDED DECEMBER 31,                  MARCH 31,
                                  ---------------------------------------   -----------------------
                                     1995          1994          1993          1996         1995
                                  -----------   -----------   -----------   ----------   ----------
                                                                                  (UNAUDITED)
                                                                          
Revenues:
  Commissions.................... $15,645,334   $12,128,797   $14,349,051   $5,080,919   $3,094,538
  Trading profits................   2,608,078     3,215,288     3,133,722      483,656      871,091
  Interest and dividends.........   1,389,612       462,618       261,198      199,483      142,915
  Investment banking.............   1,396,967     1,536,030     2,462,309      719,376      231,720
                                  -----------   -----------   -----------   ----------   ----------
          Total revenues.........  21,039,991    17,342,733    20,206,280    6,483,434    4,340,264
                                  -----------   -----------   -----------   ----------   ----------
Expenses:
  Salaries, commissions and
     employee benefits...........   8,586,116     6,132,899     8,999,567    1,747,867    1,065,592
  Clearing fees, including floor
     brokerage...................   4,249,050     3,967,558     4,473,740    1,116,018    1,058,349
  Advertising and promotion......   2,485,426     2,299,030     2,171,858    1,214,722      510,985
  Communications.................   1,119,189     1,001,957       896,986      315,065      222,582
  Interest.......................     568,326       602,759       323,876       69,386      122,762
  Rent and occupancy.............     326,089       323,123       323,235       89,793       80,278
  Other general and
     administrative..............   2,461,122     2,458,237     1,932,143      603,382      428,359
                                  -----------   -----------   -----------   ----------   ----------
          Total expenses.........  19,795,318    16,785,563    19,121,405    5,156,233    3,488,907
                                  -----------   -----------   -----------   ----------   ----------
NET INCOME -- HISTORICAL.........   1,244,673       557,170     1,084,875    1,327,201      851,357
Pro forma provision for
  income taxes...................     548,000       245,000       477,000      584,000      375,000
                                  -----------   -----------   -----------   ----------   ----------
PRO FORMA NET INCOME............. $   696,673   $   312,170   $   607,875   $  743,201   $  476,357
                                  ===========   ===========   ===========   ==========   ==========

 
  The accompanying notes to financial statements are an integral part hereof.
 
                                       36
   39
 
                           MURIEL SIEBERT & CO., INC.
 
                         STATEMENT OF RETAINED EARNINGS
                      FOR THE YEAR ENDED DECEMBER 31, 1995
 
                                                                                
Balance -- January 1, 1993.....................................................    $2,218,516
Net income.....................................................................     1,084,875
Distribution...................................................................        (3,457)
                                                                                   ----------
Balance -- December 31, 1993...................................................     3,299,934
Net income.....................................................................       557,170
                                                                                   ----------
Balance -- December 31, 1994...................................................     3,857,104
Net income.....................................................................     1,244,673
                                                                                   ----------
Balance -- December 31, 1995...................................................     5,101,777
Net income -- three months ended March 31, 1996 (unaudited)....................     1,327,201
                                                                                   ----------
BALANCE -- MARCH 31, 1996 (UNAUDITED)..........................................    $6,428,978
                                                                                    =========


 
  The accompanying notes to financial statements are an integral part hereof.
 
                                       37
   40
 
                           MURIEL SIEBERT & CO., INC.
 
                            STATEMENTS OF CASH FLOWS
 


                                                                                   THREE MONTHS ENDED
                                               YEAR ENDED DECEMBER 31,                  MARCH 31,
                                       ---------------------------------------   -----------------------
                                          1995          1994          1993          1996         1995
                                       -----------   -----------   -----------   ----------   ----------
                                                                                       (UNAUDITED)
                                                                               
Cash flows from operating activities:
  Net income.......................... $ 1,244,673   $   557,170   $ 1,084,875   $1,327,201   $  851,357
  Adjustments to reconcile net income
     to net cash provided by (used in)
     operating activities:
       Depreciation and
          amortization................      67,360        55,668        21,267       19,219       15,140
       Changes in operating assets and
          liabilities:
          Decrease (increase) in
            prepaids and other........      (2,097)      137,781      (202,522)      (4,161)     (13,907)
          Net decrease (increase) in
            securities owned, at
            market value..............  (8,006,577)      382,928    (6,099,871)   5,065,122   (4,770,592)
          (Decrease) increase in
            receivable from/payable to
            brokers and dealers.......   8,151,165     2,309,964      (863,913)    (692,159)   2,914,819
          (Decrease) increase in
            accounts payable and
            accrued liabilities.......   1,432,940       (70,391)      450,635   (5,253,581)     594,797
          Net increase (decrease) in
            securities sold, not yet
            purchased, at market
            value.....................    (994,994)   (3,275,653)    4,844,387     (247,355)     383,826
                                       -----------   -----------   -----------   ----------   ----------
            Net cash provided by (used
               in) operating
               activities.............   1,892,470        97,467      (765,142)     214,286      (24,560)
                                       -----------   -----------   -----------   ----------   ----------
Cash flows from investing activities:
  Purchase of property and
     equipment........................     (95,771)      (48,587)     (238,801)     (10,091)
                                       -----------   -----------   -----------   ----------
Cash flows from financing activities:
  Subordinated loan borrowings from
     shareholder......................                   225,000     1,000,000      500,000
  Repayment of subordinated loan to
     shareholder......................  (2,000,000)
  Distribution to shareholder.........                                  (3,457)
                                       -----------   -----------   -----------   ----------
            Net cash (used in)
               provided by financing
               activities ............  (2,000,000)      225,000       996,543      500,000
                                       -----------   -----------   -----------   ----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS....................    (203,301)      273,880        (7,400)     704,195      (24,560)
Cash and cash equivalents -- beginning
  of year.............................     367,372        93,492       100,892      164,071      367,372
                                       -----------   -----------   -----------   ----------   ----------
CASH AND CASH EQUIVALENTS -- END OF
  YEAR................................ $   164,071   $   367,372   $    93,492   $  868,266   $  342,812
                                       ===========   ===========   ===========   ==========   ==========
  Supplemental disclosures of cash
     flow information:
     Cash paid during the year for:
     Interest......................... $   568,326   $   602,759   $   323,876   $   69,386   $  122,762
     Franchise taxes..................     126,342        83,680       253,845       11,000

 
- ---------------
 
Supplemental information on noncash financing activities:
  During 1995, the shareholder issued a secured demand note to Muriel Siebert &
     Co., Inc. and Muriel Siebert & Co., Inc. issued a subordinated note to the
     shareholder, both in the amount of $2,000,000.
  During 1994, a loan to the shareholder was offset by subordinated liabilities.
 
  The accompanying notes to financial statements are an integral part hereof.
 
                                       38
   41
 
                           MURIEL SIEBERT & CO., INC.
 
                         NOTES TO FINANCIAL STATEMENTS
               (UNAUDITED WITH RESPECT TO MARCH 31, 1996 AND THE
                  THREE MONTHS ENDED MARCH 31, 1995 AND 1996)
 
(NOTE A) -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  (1) Organization:
 
     Muriel Siebert & Co., Inc. ("Siebert") engages in the business of providing
discount brokerage services for customers, investment banking and trading
securities for its own account.
 
  (2) Security transactions:
 
     Prior to 1996, security transactions, commissions, revenues and expenses
were recorded on a settlement date basis, generally the third day following the
transaction for securities and the next day for options. Revenues and related
expenses on a trade date basis were not materially different. Effective January
1, 1996, security transactions, commissions, revenues and expenses are recorded
on a trade date basis.
 
     Siebert clears all its security transactions through an unaffiliated
clearing firm on a fully disclosed basis. Accordingly, Siebert does not hold
funds or securities for or owe funds or securities to its customers. Those
functions are performed by the clearing firm. Based on its balance sheet, the
clearing firm had regulatory net capital as defined in Commission Rule 15c3-1 in
excess of $250 million.
 
  (3) Income taxes:
 
     The historical financial statements do not include a provision for federal
taxes, since Siebert elected to be treated as an S Corporation under Section
1362 of the Internal Revenue Code. Undistributed S Corporation earnings of
approximately $5,845,000 at March 31, 1996 may be distributed to the shareholder
without further tax consequences, subject to regulatory approval.
 
     A pro forma provision for income taxes has been presented which represents
income taxes which would have been provided had Siebert operated as a C
Corporation.
 
  (4) Property and equipment:
 
     Property and equipment is stated at cost and depreciation is calculated
using the straight-line method over the lives of the assets, generally five
years. Leasehold improvements are amortized over the period of the lease.
 
  (5) Cash equivalents:
 
     For purposes of reporting cash flows, cash equivalents include money market
funds.
 
  (6) Advertising costs:
 
     Advertising costs are expensed as incurred.
 
  (7) Use of estimates:
 
     The financial statements have been prepared by management in conformity
with generally accepted accounting principles which require the use of
estimates.
 
  (8) Reclassifications:
 
     Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform to the 1995 presentation.
 
                                       39
   42
 
                           MURIEL SIEBERT & CO., INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(NOTE A) -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
            POLICIES: -- (CONTINUED)

  (9) Interim financial statements:
 
     The accompanying financial statements as at March 31, 1996 and for the
three months ended March 31, 1996 and March 31, 1995 are unaudited but, in the
opinion of management of Siebert, reflect all adjustments (consisting only of
normal and recurring adjustments) necessary for a fair presentation. The results
of operations for the three-month period are not necessarily indicative of the
results that may be expected for the full year ending December 31, 1996.
 
(NOTE B) -- COMMITMENT AND CONTINGENCIES:
 
     Siebert rents office space in New York, Boca Raton, Florida and Naples,
Florida under long-term operating leases which expire on May 5, 1998, January
31, 1997 and April 22, 1999, respectively. These leases call for base rent plus
escalations for taxes and operating expenses.
 
     Future minimum rental payments for base rent plus operating expenses under
these operating leases are as follows:
 


                                       YEAR                                  AMOUNT
        ------------------------------------------------------------------  --------
                                                                         
        1996..............................................................  $290,000
        1997..............................................................   273,000
        1998..............................................................   106,000
        1999..............................................................     8,000
                                                                            --------
                                                                            $677,000
                                                                            ========

 
     Siebert also leases office space in Los Angeles on a month-to-month basis
for approximately $1,600 per month.
 
     Rent expense, including share of operating costs and escalations, amounted
to $289,000, $309,264 and $301,509 for the years ended December 31, 1995, 1994
and 1993, respectively. Payments due under the New York lease are being expensed
over the entire lease term on a straight-line basis. Amounts expensed but not
paid at December 31, 1995 was $18,000; amounts paid but not expensed at December
31, 1994 was $19,601.
 
     Siebert is party to certain claims, suits and complaints arising in the
ordinary course of business. In the opinion of management, all such claims,
suits and complaints are without merit, or involve amounts which would not have
a significant effect on the financial position of Siebert.
 
     Siebert sponsors a defined contribution retirement plan under Section
401(k) of the Internal Revenue Code that covers substantially all employees.
Participant contributions to the plan are voluntary and are subject to certain
limitations. Siebert may also make discretionary contributions to the plan. No
contributions were made by Siebert in 1995, 1994 and 1993 and for the
three-month periods ended March 31, 1996 and 1995.
 
                                       40
   43
 
                           MURIEL SIEBERT & CO., INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(NOTE C) -- LIABILITY TO SHAREHOLDER SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
            AND SECURED DEMAND NOTE RECEIVABLE FROM SHAREHOLDER:
 
     The subordinated liabilities consist of the following:
 


                                                          AS OF DECEMBER 31,
                                                       -------------------------         AS OF
                                                          1995           1994        MARCH 31, 1996
                                                       ----------     ----------     --------------
                                                                            
Subordinated note, due December 31, 1998, interest                                     $2,000,000
  payable at 4% per annum............................  $2,000,000
Subordinated notes, due on demand....................                 $  200,000
Subordinated notes, due December 31, 1996, interest
  payable at three percentage points over the
  Citibank, N.A. prime rate..........................                    575,000
Subordinated note due December 31, 1996, interest
  payable at 8% per annum............................                  1,000,000
Subordinated note due December 31, 1997, interest
  payable at 8% per annum............................                    225,000
Subordinated note due January 31, 1999, interest                                          500,000
  payable
  at 8%..............................................
                                                       ----------     ----------       ----------
          Total......................................  $2,000,000     $2,000,000       $2,500,000
                                                       ==========     ==========       ==========

 
     The long-term borrowings under subordination agreements will be
automatically renewed for a period of one year if notice of demand for payment
is not given thirteen months prior to maturity.
 
     The subordinated borrowing is covered by an agreement approved by the New
York Stock Exchange and is thus available in computing net capital under the
Securities and Exchange Commission's Uniform Net Capital Rule. To the extent
that such borrowings are required for Siebert's continued compliance with
minimum net capital requirements, they may not be repaid.
 
     Interest paid on subordinated borrowings was $160,000, $160,000 and
$120,000 for the years ended 1995, 1994 and 1993 and $35,000 and $40,000 for the
three months ended March 31, 1996 and 1995, respectively.
 
     During 1994, secured demand notes in the aggregate of $225,000 due from the
sole shareholder and the related subordinated liabilities in the same amount
were canceled; the underlying collateral was returned to the shareholder.
Concurrently, the shareholder loaned $225,000 in cash to Siebert and Siebert
issued a new subordinated note.
 
     The secured demand note receivable from shareholder of $2,000,000 at March
31, 1996 and at December 31, 1995 is collateralized by marketable securities
with a market value of $2,331,000 and $2,394,000, respectively.
 
                                       41
   44
 
                           MURIEL SIEBERT & CO., INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(NOTE D) -- PROPERTY AND EQUIPMENT -- NET:
 
     Property and equipment consist of the following:
 


                                                       AS AT DECEMBER 31,
                                                     ----------------------         AS AT
                                                       1995          1994       MARCH 31, 1996
                                                     ---------     --------     --------------
                                                                       
    Leasehold improvements.........................  $  36,305     $ 35,810       $   36,305
    Furniture and fixtures.........................     38,612       28,779           38,612
    Equipment......................................    306,819      221,376          316,910
                                                     ---------     --------        ---------
                                                       381,736      285,965          391,827
    Less accumulated depreciation and
      amortization.................................   (142,872)     (75,512)        (162,091)
                                                     ---------     --------        ---------
              Total................................  $ 238,864     $210,453       $  229,736
                                                     =========     ========        =========

 
     Depreciation and amortization expense for the years ended December 31,
1995, 1994 and 1993 amounted to $67,360, $55,668 and $21,267, respectively. For
the three months ended March 31, 1996 and March 31, 1995 depreciation and
amortization expense amounted to $19,219 and $15,140, respectively.
 
(NOTE E) -- NET CAPITAL:
 
     Siebert is subject to the Securities and Exchange Commission's Uniform Net
Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net
capital. Siebert has elected to use the alternative method, permitted by the
rule, which requires that Siebert maintain minimum net capital, as defined,
equal to the greater of $250,000 or 2 percent of aggregate debit balances
arising from customer transactions, as defined. (The net capital rule of the New
York Stock Exchange also provides that equity capital may not be withdrawn or
cash dividends paid if resulting net capital would be less than 5 percent of
aggregate debits.) At December 31, 1995 and 1994 and at March 31, 1996, Siebert
had net capital of $4,606,280, $4,465,314 and $7,474,113, respectively, and net
capital requirements of $250,000. Siebert claims exemption from the reserve
requirement under Section 15c3-3(k)(2)(ii).
 
(NOTE F) -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS
OF CREDIT RISK:
 
     In the normal course of business, Siebert enters into transactions in
various financial instruments with off-balance sheet risk. This risk includes
both market and credit risk, which may be in excess of the amounts recognized in
the statement of financial condition.
 
     Retail customer transactions are cleared through National Financial
Services Corp. ("NFSC") on a fully disclosed basis. In the event that customers
are unable to fulfill their contractual obligations, NFSC may charge Siebert for
any loss incurred in connection with the purchase or sale of securities at
prevailing market prices to satisfy customers' obligations. Siebert regularly
monitors the activity in its customer accounts for compliance with its margin
requirements.
 
     Siebert records customer transactions on a settlement date basis, which is
generally three business days after trade date. Siebert is therefore exposed to
the risk of loss on unsettled transactions in the event customers and other
counterparties are unable to fulfill contractual obligations. Securities
transactions entered into as of December 31, 1995 settled with no adverse effect
on Siebert's statement of financial condition.
 
     Siebert's equity in accounts held by NFSC, consisting of securities owned
and securities sold, not yet purchased, collateralize the margin amounts due to
NFSC.
 
                                       42
   45
 
                           MURIEL SIEBERT & CO., INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(NOTE G) -- MERGER AGREEMENT:
 
     On April 24, 1996 Muriel Siebert Capital Markets Group, Inc. ("MSCMG"), a
corporation with 1,500 common shares outstanding, signed a definitive Plan and
Agreement of Merger (the "Merger Agreement") with J. Michaels, Inc. ("JMI")
providing for the merger (the "Merger") of MSCMG with and into JMI. Shortly
before the effective time of the Merger, Muriel Siebert will contribute 1,000
common shares, being 100% of the shares outstanding, of Siebert to MSCMG. The
Merger Agreement provides that JMI will liquidate all its assets, other than the
shares of Siebert, and distribute the proceeds to the pre-Merger stockholders of
JMI who will, by virtue of the merger, collectively retain a 2 1/2% interest in
the surviving company (the "Surviving Company") which will be renamed Siebert
Financial Corp.
 
                                       43
   46
 
                            SIEBERT FINANCIAL CORP.
 
            UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 1996
                                 (IN THOUSANDS)
 
     On April 24, 1996 MSCMG, a corporation with 1,500 common shares
outstanding, signed the Merger Agreement with JMI. Shortly before the effective
time of the Merger, Muriel Siebert will contribute 1,000 common shares, being
100% of the shares outstanding, of Siebert to MSCMG.
 
     The following unaudited pro forma condensed consolidated balance sheet
gives affect to the following transactions as if they had occurred on March 31,
1996: (1) the contribution to capital of undistributed S Corporation earnings,
and (2) the reduction of par value per share from $1.00 to $.01. The unaudited
pro forma consolidated condensed balance sheet should be read in conjunction
with the unaudited pro forma consolidated statement of operations and the
audited historical financial statements of Siebert appearing elsewhere herein
and are not necessarily indicative of the results that would have been attained
had the transactions been completed at March 31, 1996.
 


                                                                                            PRO
                                                            SIEBERT       ADJUSTMENTS      FORMA
                                                            -------       -----------     -------
                                                                                 
ASSETS
Cash and equivalents......................................  $   868                       $   868
Securities owned, at market...............................    8,682                         8,682
Receivables from brokers and dealers......................      692                           692
Secured demand note from shareholder......................    2,000                         2,000
Property and equipment, net...............................      230                           230
Other assets..............................................      146                           146
                                                            -------                       -------
          TOTAL...........................................  $12,618                       $12,618
                                                            =======                       =======
LIABILITIES
- -------------------------------------------------------------------------------------------------
Accounts payable and accruals.............................  $ 3,322                       $ 3,322
Securities sold not yet purchased, at market value........      331                           331
                                                            -------                       -------
                                                              3,653                         3,653
                                                            -------                       -------
Subordinated debt to shareholder..........................    2,500                         2,500
                                                            -------                       -------
SHAREHOLDER'S EQUITY
- -------------------------------------------------------------------------------------------------
Common stock..............................................        1(a)      $   366           367
Additional paid-in capital................................       59(a)         (390)        5,514
                                                                   (b)        5,845
Retained earnings.........................................    6,429(b)       (5,845)          584
Treasury stock............................................      (24)(a)          24             0
                                                            -------                       -------
                                                              6,465                         6,465
                                                            -------                       -------
          TOTAL...........................................  $12,618                       $12,618
                                                            =======                       =======

 
- ---------------
Notes to pro forma consolidated balance sheet:
 
(a) To record the par value and additional paid-in capital of 36,651,280 shares
    of common stock of the merged company including 35,734,995 shares issued in
    exchange for all the outstanding common stock of MSCMG (parent of Siebert);
    to eliminate Siebert common stock, additional paid-in capital and treasury
    stock.
 
(b) To record transfer to capital of the deemed distribution of $5,845,000 of
    undistributed S Corporation earnings by Ms. Siebert.
 
                                       44
   47
 
                            SIEBERT FINANCIAL CORP.
 
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS ENDED MARCH 31, 1996
                                 (IN THOUSANDS)
 
     The following unaudited pro forma condensed consolidated statement of
operations of Siebert Financial Corp. (formerly Siebert) gives effect to the
provision for federal, state, and city income tax at normally expected rates.
The unaudited pro forma financial statement should be read in conjunction with
the audited historical financial statements of Siebert appearing elsewhere
herein and are not necessarily indicative of the results of operations of the
merged company.
 


                                                          SIEBERT     ADJUSTMENTS     PRO FORMA
                                                          -------     -----------     ---------
                                                                             
    Revenues............................................  $ 6,483                      $ 6,483
                                                           ------                       ------
    Expenses:
      Salaries and commissions..........................    1,748(b)                     1,748
      Clearing costs....................................    1,116                        1,116
      Other.............................................    2,292                        2,292
                                                           ------                       ------
                                                            5,156                        5,156
                                                           ------                       ------
    Income before tax...................................    1,327                        1,327
    Income tax..........................................                 $ 584(a)          584
                                                           ------                       ------
    NET INCOME..........................................  $ 1,327                      $   743
                                                           ======                       ======
    Pro forma earnings per share based on 36,651,280
      common shares and equivalents outstanding.........                               $   .02
                                                                                        ======

 
- ---------------
 
Notes to unaudited pro forma consolidated condensed statement of operations:
 
(a) To provide for income tax at the normally expected rate of 44%.
 
(b) Ms. Siebert's compensation approximates the contractual amount set forth in
    her proposed employment agreement.
 
                                       45
   48
 
                            SIEBERT FINANCIAL CORP.
 
       UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1995
                                 (IN THOUSANDS)
 
     The following unaudited pro forma condensed consolidated statement of
operations of Siebert Financial Corp. (formerly Siebert) gives effect to: (1)
the adjustment of Ms. Siebert's salary for the year to the amount provided for
in her employment agreement effective at the time of the Merger, and (2) the
provision for federal, state, and city income tax at normally expected rates.
The unaudited pro forma financial statement should be read in conjunction with
the audited historical financial statements of Siebert appearing elsewhere
herein and are not necessarily indicative of the results of operations of the
Surviving Company.
 


                                                         SIEBERT     ADJUSTMENTS     PRO FORMA
                                                         -------     -----------     ---------
                                                                            
    Revenues...........................................  $21,040                      $21,040
                                                         -------                      -------
    Expenses:
      Salaries and commissions.........................    8,586(1)    $(2,763)         5,823
      Clearing costs...................................    4,249                        4,249
      Other............................................    6,959                        6,959
                                                         -------                      -------
                                                          19,794                       17,031
                                                         -------                      -------
    Income before tax..................................    1,246                        4,009
    Income tax.........................................         (2)      1,764          1,764
                                                         -------                      -------
    NET INCOME.........................................  $ 1,246                      $ 2,245
                                                         =======                      =======
    Pro forma earnings per share based on 36,651,280
      common shares and equivalents outstanding........                               $  0.06
                                                                                      =======

 
- ---------------
Notes to unaudited pro forma consolidated condensed statement of operations:
 
(1) To adjust Ms. Siebert's salary to the contractual amount set forth in her
    proposed employment agreement.
 
(2) To provide for income tax at the normally expected rate of 44%.
 
                                       46
   49
 
                                                                         ANNEX A
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                          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
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                                       A-1
   50
 
                          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,
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.
 
                                       A-2
   51
 
                                   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.
 
     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 issuable and any such fractional share which would
     otherwise be issued shall be canceled without the payment of any amount
     therefor. 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.
 
          (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
 
                                       A-3
   52
 
     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
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.
 
                                       A-4
   53
 
     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.
 
     SECTION 3.7. LEGENDED CERTIFICATES.  Certificates representing shares of
Company Common Stock issued to each holder of securities of MSCMG shall bear a
legend substantially 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.
 
                                       A-5
   54
 
     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
("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 Incentive 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
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.
 
                                       A-6
   55
 
     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
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
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.
 
                                       A-7
   56
 
     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
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, (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.
 
                                       A-8
   57
 
     (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, and (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) 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.
 
                                       A-9
   58
 
     (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
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, injunctions, 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
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
 
                                      A-10
   59
 
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.
 
     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.
 
     (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
 
                                      A-11
   60
 
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
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
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
 
                                      A-12
   61
 
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.
 
     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
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.
 
                                      A-13
   62
 
     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
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
 
                                      A-14
   63
 
Government Act of 1978, as amended, and all applicable statutes, regulations,
orders and restrictions relating to environmental standards or controls.
 
     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.
 
     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.
 
                                      A-15
   64
 
     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.
 
                                   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.
 
     (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.
 
                                      A-16
   65
 
     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.
 
          (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, injunctions,
     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.
 
     (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.
 
                                      A-17
   66
 
     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.
 
     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 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
 
                                      A-18
   67
 
        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
        standards 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
 
                                      A-19
   68
 
     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 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
 
                                      A-20
   69
 
             (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.
 
     (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
 
                                      A-21
   70
 
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 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.
 
     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.
 
                                      A-22
   71
 
     (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
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).
 
     (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.
 
                                      A-23
   72
 
     (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 therefor 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
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.
 
     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
 
                                      A-24
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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 assets 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
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.
 
                                      A-25
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                                   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
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;
 
          (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;
 
                                      A-26
   75
 
          (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 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 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
 
                                      A-27
   76
 
          (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
 
          (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.
 
     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
 
                                      A-28
   77
 
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 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.
 
     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")
 
                                      A-29
   78
 
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.
 
     (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
Merger pursuant to the
 
                                      A-30
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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
       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
 
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     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.
 
     (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 agreed 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 and other
legal processes in New York, New York and shall 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 agreed 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
 
                                      A-32
   81
 
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.
 
     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.
 
     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.
 
     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 H. MICHAELS                        By: /s/ MURIEL SIEBERT
- ---------------------------------------------    ---------------------------------------------
    Name: James H. Michaels                      Name: Muriel Siebert
    Title: President                             Title: President


 
                                      A-33
   82
 
                   AMENDMENT TO PLAN AND AGREEMENT OF MERGER
 
     AMENDMENT, made and entered into as of June 28, 1996 (this "Amendment"), to
the PLAN AND AGREEMENT OF MERGER, dated as of April 24, 1996 (the "Merger
Agreement"), by and 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").
 
                              W I T N E S S E T H:
 
     WHEREAS, the Company and MSCMG have entered into the Merger Agreement; and
 
     WHEREAS, the Company and MSCMG desire to amend the Merger Agreement.
 
     NOW, THEREFORE, the parties hereto agree as follows:
 
     1. Amendment to the Merger Agreement.  Section 10.1(d) of the Merger
Agreement shall be amended by deleting reference to "July 30, 1996" appearing in
the third line thereof and substituting in its place "September 30, 1996."
 
     2. Approval of this Amendment.  All authorizations, approvals and consents
(including consents of the Boards of Directors) necessary for the execution and
delivery by the Company and MSCMG of this Amendment have been given or made.
 
     3. Governing Law.  This Amendment shall be construed and enforced in
accordance with and governed by the laws of the State of New York applicable to
contracts executed in and to be performed solely within such state.
 
     4. Status of the Merger Agreement.  All other terms and conditions of the
Merger Agreement shall remain in full force and effect, as amended hereby.
 
     5. Miscellaneous.  (a) Headings.  All headings in this Amendment are for
convenience of reference only and are not intended to limit or affect the
meaning of any provision hereof.
 
     (b) Counterparts.  This Amendment may be executed in one or more
counterparts with the same effect as if the signatures to all such counterparts
were upon the same instrument, and all such counterparts shall constitute but
one instrument.
 
     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by a duly authorized officer and to become effective as of the day and year
first above written.
 
                                              
J. MICHAELS, INC.                                MURIEL SIEBERT CAPITAL MARKETS
                                                 GROUP INC.
By: /s/ JAMES H. MICHAELS                        By: /s/ MURIEL SIEBERT
- ---------------------------------------------    ---------------------------------------------
    Name: James H. Michaels                      Name: Muriel Siebert
    Title: President                             Title: President


 
                                      A-34
   83
 
                                    ANNEX B
 
                            CERTIFICATE OF AMENDMENT
                                     OF THE
                          CERTIFICATE OF INCORPORATION
                                       OF
                               J. MICHAELS, INC.
                            (A NEW YORK CORPORATION)
 
                       (UNDER SECTION 805 OF THE BUSINESS
                   CORPORATION LAW OF THE STATE OF NEW YORK)
                            ------------------------
 
     The undersigned, desiring to amend a certificate of incorporation under the
provisions of the Business Corporation Law of the State of New York (hereinafter
referred to as the "BCL"), hereby certifies as follows:
 
     FIRST.  The name of the corporation is J. Michaels, Inc. (hereinafter
referred to as the "Corporation"). The name under which the Corporation was
originally formed is Michaels & Co., Inc.
 
     SECOND.  The Certificate of Incorporation of the Corporation was filed by
the New York Department of State on the 9th day of April, 1934.
 
     THIRD.  Paragraph THIRD of the Restated Certificate of Incorporation of the
Corporation, which sets forth the aggregate number and designations of shares of
stock which the Corporation shall have the authority to issue, is hereby
eliminated in its entirety and the following language is substituted in lieu
thereof:
 
        "THIRD: The aggregate number of shares of stock which the Corporation
        shall have the authority to issue is forty nine million (49,000,000)
        shares, of one class only which shares shall be designated Common Stock,
        each such share having a par value of $0.01."
 
     FOURTH:  The aforesaid amendment has been authorized by (i) the Board of
Directors of the Corporation and (ii) the majority vote of the shareholders of
the Corporation entitled to vote thereon taken at a meeting of said
shareholders, respectively, all in accordance with Section 803(a) of the BCL.
 
     IN WITNESS WHEREOF, the Corporation has caused this instrument to be signed
and subscribed in its name this __ day of September, 1996, and the statements
contained herein are affirmed as true under the penalties of perjury.
 
                                          J. MICHAELS, INC.
 
                                          By
                                          --------------------------------------
                                            James H. Michaels
                                            President
 
                                          By
                                          --------------------------------------
                                            John Pagano
                                            Secretary
 
                                       B-1
   84
 
                                    ANNEX C
 
                       NEW YORK BUSINESS CORPORATION LAW
                         SHAREHOLDER'S RIGHT TO RECEIVE
                               PAYMENT FOR SHARES
 
     Sec. 623.  PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR
SHARES. -- (a) A shareholder intending to enforce his right under a section of
this chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
 
     (b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
 
     (c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of Section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
 
     (d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
 
     (e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other right under this section. A notice of election
may be withdrawn by the shareholder at any time prior to his acceptance in
writing of an offer made by the corporation, as provided in paragraph (g), but
in no case later than sixty days from the date of consummation of the corporate
action except that if the corporation fails to make a timely offer, as provided
in paragraph (g), the time for withdrawing a notice of election shall be
extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters' rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening pre-emptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
 
                                       C-1
   85
 
     (f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
 
     (g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve-month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or in consent to
the proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
 
     (h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
 
          (1) The corporation shall, within twenty days after the expiration of
     whichever is applicable of the two periods last mentioned, institute a
     special procedure in the supreme court in the judicial district in which
     the office of the corporation is located to determine the rights of
     dissenting shareholders and to fix
 
                                       C-2
   86
 
     the fair value of their shares. If, in the case for merger or
     consolidation, the surviving or new corporation is a foreign corporation
     without an office in this state, such proceeding shall be brought in the
     county where the office of the domestic corporation, whose shares are to be
     valued was located.
 
          (2) If the corporation fails to institute such proceeding within such
     period of twenty days, any dissenting shareholder may institute such
     proceeding for the same purpose not later than thirty days after the
     expiration of such twenty day period. If such proceeding is not instituted
     within such thirty day period, all dissenter's rights shall be lost unless
     the supreme court, for good cause shown, shall otherwise direct.
 
          (3) All dissenting shareholders, excepting those who, as provided in
     paragraph (g), have agreed with the corporation, upon the price to be paid
     for their shares, shall be made parties to such proceeding, which shall
     have the effect of an action quasi in rem against their shares. The
     corporation shall serve a copy of the petition in such proceeding upon each
     dissenting shareholder who is a resident of this state in the manner
     provided by law for the service of a summons, and upon each nonresident
     dissenting shareholder either by registered mail and publication, or in
     such other manner as is permitted by law. The jurisdiction of the court
     shall be plenary and exclusive.
 
          (4) The court shall determine whether each dissenting shareholder, as
     to whom the corporation requests the court to make such determination, is
     entitled to receive payment for his shares. If the corporation does not
     request any such determination or if the court finds that any dissenting
     shareholder is so entitled, it shall proceed to fix the value of the
     shares, which, for the purposes of this section, shall be the fair value as
     of the close of business on the day prior to the shareholders'
     authorization date. In fixing the fair value of the shares, the court shall
     consider the nature of the transaction giving rise to the shareholder's
     right to receive payment for shares and its effects on the corporation and
     its shareholders, the concepts and methods then customary in the relevant
     securities and financial markets for determining fair value of shares of a
     corporation engaging in a similar transaction under comparable
     circumstances and all other relevant factors. The court shall determine the
     fair market of the shares without a jury and without referral to an
     appraiser or referee. Upon application by the corporation or by any
     shareholder who is a party to the proceeding, the court may, in its
     discretion, permit pretrial disclosure, including, but not limited to,
     disclosure of any expert's reports relating to the fair value of the shares
     whether or not intended for use at the trial in the proceeding and
     notwithstanding subdivision (d) of section 3101 of the civil practice laws
     and rules.
 
          (5) The final order in the proceeding shall be entered against the
     corporation in favor of each dissenting shareholder who is a party to the
     proceeding and is entitled thereto for the value of his shares so
     determined.
 
          (6) The final order shall include an allowance for interest at such
     rate as the court finds to be equitable, from the date the corporate action
     was consummated to the date of payment. In determining the rate of
     interest, the court shall consider all relevant factors, including the rate
     of interest which the corporation would have had to pay to borrow money
     during the pendency of the proceeding. If the court finds that the refusal
     of any shareholder to accept the corporate offer of payment for his shares
     was arbitrary, vexatious or otherwise not in good faith, no interest shall
     be allowed to him.
 
          (7) Each party to such proceeding shall bear its own costs and
     expenses, including the fees and expenses of its counsel and of any experts
     employed by it. Notwithstanding the foregoing, the court may, in its
     discretion, apportion and assess all or any part of the costs, expenses and
     fees incurred by the corporation against any or all of the dissenting
     shareholders who are parties to the proceeding, including any who have
     withdrawn their notices of election as provided in paragraph (e), if the
     court finds that their refusal to accept the corporate offer was arbitrary,
     vexatious or otherwise not in good faith. The court may, in its discretion,
     apportion and assess all or any part of the costs, expenses and fees
     incurred by any or all of the dissenting shareholders who are parties to
     the proceeding against the corporation if the court finds any of the
     following: (A) that the fair value of the shares as determined materially
     exceeds the amount which the corporation offered to pay; (B) that no offer
     or required advance payment was made by the corporation; (C) that the
     corporation failed to institute the special proceeding within the period
 
                                       C-3
   87
 
     specified therefor; or (D) that the action of the corporation in complying
     with its obligations as provided in this section was arbitrary, vexatious
     or otherwise not in good faith. In making any determination as provided in
     clause (A), the court may consider the dollar amount or the percentage, or
     both, by which the fair value of the shares as determined exceeds the
     corporate offer.
 
          (8) Within sixty days after final determination of the proceeding, the
     corporation shall pay to each dissenting shareholder the amount found to be
     due him, upon surrender of the certificates for any such shares represented
     by certificates.
 
     (i) Shares required by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be canceled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan or merger or consolidation may otherwise
provide.
 
     (j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
 
          (1) Withdraw his notice of election, which shall in such event be
     deemed withdrawn with the written consent of the corporation; or
 
          (2) Retain his status as a claimant against the corporation and, if it
     is liquidated, be subordinated to the rights of creditors of the
     corporation, but have rights superior to the non-dissenting shareholders,
     and if it is not liquidated, retain his right to be paid for his shares,
     which right the corporation shall be obliged to satisfy when the
     restrictions of this paragraph do not apply.
 
          (3) The dissenting shareholder shall exercise such option under
     subparagraph (1) or (2) by written notice filed with the corporation within
     thirty days after the corporation has given him written notice that payment
     for his shares cannot be made because of the restrictions of this
     paragraph. If the dissenting shareholder fails to exercise such option as
     provided, the corporation shall exercise the option by written notice given
     to him within twenty days after the expiration of such period of thirty
     days.
 
     (k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
 
     (l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
 
     (m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations). (Last amended by L. 1986, Ch 117, Sec. 3.)
 
                                       C-4
   88
                                J. MICHAELS, INC.

                  PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
                          TO BE HELD SEPTEMBER 19, 1996

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         The undersigned hereby appoints James H. Michaels or John Pagano, and
each of them, proxies of the undersigned, with full power of substitution, to
vote all the shares of Common Stock of J. Michaels, Inc., a New York corporation
("JMI"), which the undersigned is entitled to vote at the Special Meeting of
Shareholders of JMI to be held at the Grand Hyatt New York, Park Avenue at Grand
Central, New York, New York 10017 on Thursday, September 19, 1996 at 10:00 a.m.
(local time), or any adjournment thereof, with all the powers the undersigned
would have if personally present, on the following matters:

1.       APPROVAL AND ADOPTION OF THE PLAN AND AGREEMENT OF MERGER, DATED AS OF
         APRIL 24, 1996, AS AMENDED, BETWEEN JMI AND MURIEL SIEBERT CAPITAL
         MARKETS GROUP INC. ("MSCMG"), PROVIDING FOR THE MERGER OF MSCMG WITH
         AND INTO JMI ON THE TERMS AND CONDITIONS CONTAINED IN SUCH PLAN AND
         AGREEMENT OF MERGER AND, IN CONNECTION THEREWITH, AFTER A DISTRIBUTION
         CONCURRENTLY WITH THE CONSUMMATION OF THE MERGER WITH MSCMG, TO
         TRANSFER ALL OF JMI'S REMAINING ASSETS TO A LIQUIDATING TRUST PURSUANT
         TO THE PLAN AND AGREEMENT OF MERGER AND TO SELL SUCH ASSETS AND
         DISTRIBUTE THE PROCEEDS THEREOF TO THE SHAREHOLDERS OF JMI.

                    FOR |_|           AGAINST |_|           ABSTAIN |_|

2.       IF THE PLAN AND AGREEMENT OF MERGER IS APPROVED AND ADOPTED, AMENDMENT
         OF THE CERTIFICATE OF INCORPORATION OF JMI TO INCREASE THE NUMBER OF
         AUTHORIZED SHARES OF COMMON STOCK OF JMI FROM 1,500,000 TO 49,000,000
         SHARES AND CHANGE THE PAR VALUE OF THE COMMON STOCK OF JMI FROM $1.00
         PAR VALUE PER SHARE TO $.01 PAR VALUE PER SHARE.

                    FOR |_|           AGAINST |_|           ABSTAIN |_|

     3.  IN THEIR DISCRETION, THE ABOVE-NAMED PROXIES ARE AUTHORIZED TO VOTE IN
         ACCORDANCE WITH THEIR OWN JUDGMENT UPON SUCH OTHER BUSINESS AS MAY
         PROPERLY COME BEFORE THE MEETING.


THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED "FOR" ITEMS 1 AND 2 AND THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT
TO ANY MATTERS REFERRED TO IN ITEM 3.

                                                 The undersigned hereby
                                                 acknowledges receipt of a copy
                                                 of the accompanying Notice of
                                                 Special Meeting of Shareholders
                                                 and Proxy Statement and hereby
                                                 revokes any Proxy or Proxies
                                                 heretofore given. You may
                                                 strike out the persons named as
                                                 proxies and designate a person
                                                 of your choice, and may send
                                                 this Proxy directly to such
                                                 person.

                                                 DATED:                   , 1996

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




                                            

   89


                                                 Please complete, date and sign
                                                 exactly as your name appears
                                                 hereon. When signing as
                                                 attorney, administrator,
                                                 executor, guardian, trustee or
                                                 corporate official, please add
                                                 your title. If shares are held
                                                 jointly, each holder should
                                                 sign.