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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR

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

FOR THE TRANSITION PERIOD FROM ____________ TO ____________

COMMISSION FILE NUMBER 1-12521

SWISHER INTERNATIONAL GROUP INC.
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(Exact name of registrant as specified in its charter)

DELAWARE 13-3857632
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

20 THORNDAL CIRCLE, DARIEN, CT 06820
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(Address of principal executive offices)

203-656-8000
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(Telephone Number)

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

Class A Common Stock, $.01 par value New York Stock Exchange
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Title of each class Name of each exchange on
which registered

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [X]

The aggregate market value of Class A Common Stock (par value $.01) held by
non-affiliates at March 23, 1999 was approximately $51,643,556.

The number of shares of Class A Common Stock (par value $.01) outstanding
as of March 23, 1999 was 5,778,300.

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PART I

ITEM 1. BUSINESS

THE COMPANY

Swisher International Group Inc. (the 'Company') and its subsidiaries
manufacture and sell cigars and smokeless tobacco products. Founded in 1861, the
Company believes it is currently the largest manufacturer and marketer of cigars
in the world, as measured by units sold. Through November 6, 1995, Swisher
International, Inc. ('Swisher'), the Company's operating subsidiary, was a
wholly-owned subsidiary of American Maize-Products Company ('American Maize').
On November 6, 1995, in connection with the acquisition of American Maize and
its subsidiaries by Eridania Beghin-Say, S.A. ('EBS'), all of the outstanding
common stock of Swisher was simultaneously sold to the Company (the 'American
Maize Transaction'), which was a wholly-owned subsidiary of Hay Island Holding
Corporation ('Hay Island' or the 'Class B Holder'), the Class B Holder. EBS
retained a 12% beneficial interest in Swisher through its ownership of 12% of
the shares of capital stock of Hay Island. On June 21, 1996, all of the shares
of capital stock of Hay Island owned by EBS were redeemed.

On December 17, 1996, the Company completed an initial public offering (the
'Initial Public Offering') of 6,000,000 Class A Shares for $17.00 per share,
with aggregate proceeds of $102 million.

The principal executive offices of the Company are located at 20 Thorndal
Circle, Darien, Connecticut 06820. The telephone number of the Company at that
address is (203) 656-8000.

RECENT DEVELOPMENTS

On December 9, 1998, the Company, SIGI Acquisition Corporation, its
wholly-owned subsidiary ('Newco') and Hay Island entered into an Agreement and
Plan of Merger (the 'Merger Agreement') pursuant to which the Company will merge
with and into Newco (the 'Merger'). If the Merger is approved and consummated,
holders (the 'Class A Holders') of the Company's Class A Common Stock, par value
$0.01 per share (the 'Class A Shares') will receive $9.50 in cash, without
interest, for each Class A Share owned (the 'Class A Merger Consideration'), and
will have no continuing equity interest in the Company. Hay Island, as the
holder of record of all of the outstanding shares of the Company's Class B
Common Stock, par value $0.01 per share (the 'Class B Shares,' and together with
the Class A Shares, sometimes hereinafter collectively referred to as the
'Common Shares'), will receive, upon conversion of its Class B Shares, shares of
common stock of Newco representing all of the outstanding common stock and
voting power of Newco. If the Merger is consummated, Newco will conduct the
current business of the Company under the Company's name as the surviving
corporation of the Merger. William Ziegler, III, the Company's Chairman of the
Board and Chief Executive Officer, controls all of the outstanding capital stock
of Hay Island.

The Company and Newco have a commitment from a syndicate of lenders to
provide for a new credit facility (the 'New Credit Facility') in an amount of
$200 million in order to finance the Class A Merger Consideration to be paid for
the Class A Shares in the Merger (as well as certain other fees and expenses
incurred in connection with the Merger), and to refinance the Company's $115
million existing revolving credit facility (the 'Existing Credit Facility'). The
New Credit Facility will consist of a $75 million five-year term loan and a $125
million five-year revolving credit facility.

After the Company announced the Merger on December 9, 1998, several
purported class action lawsuits challenging the Merger were filed against one or
more of the Company, Newco and some or all of the members of the Board of
Directors of the Company. See ITEM 3. LEGAL PROCEEDINGS.'

At a Special Meeting of Stockholders of the Company (the 'Special Meeting')
expected to be held during the second quarter of 1999, the Merger Agreement and
the transactions contemplated thereby will be submitted to the holders of the
Common Shares for approval. In connection with the Special Meeting, the Company
expects to mail definitive proxy materials to holders of Common Shares in the
near future. On March 17, 1999, the Company filed revised preliminary proxy
materials with the Securities and Exchange Commission (the 'SEC'), including a
preliminary proxy statement further describing, among other things, the purpose,
background and effects of the Merger, as well as the appraisal rights of Class A
Holders who dissent from the Merger under the

Delaware General Corporation Law. The Merger Agreement is attached as Appendix A
to the preliminary proxy statement.

PRODUCTS

CIGARS. Cigar products can be divided into three principal categories: mass
market large cigars, premium cigars and little cigars. All cigars, except little
cigars, which do not have a binder, generally consist of filler tobacco that is
wrapped first with a binder and then with a wrapper.

Mass Market Large Cigars. Mass market large cigars are generally
machine-made and have a retail price of one dollar or less per cigar. Mass
market large cigars are made with filler threshed into short uniform pieces
and manufactured binder tobacco. The more expensive of these cigars are then
wrapped in natural leaf wrapper tobacco while the less expensive use wrapper
made from reconstituted tobacco. In 1998, the market for mass market large
cigars in the United States consisted of an estimated 3.2 billion units or
approximately 61% of the total cigar market. The Company has the leading
unit market share of domestic mass market large cigars at an estimated 25%
in 1998. The Company's mass market large cigar brands include, among others,
Swisher Sweets, King Edward and Optimo.

Premium Cigars. Premium cigars are generally hand-made and have a retail
price above one dollar per cigar. Premium cigars, generally, are made with
natural leaf tobacco wrapper, binder and long filler. Higher grades of
tobacco are generally used in premium cigars with tobacco blends varying
from brand to brand depending on the desired characteristics. Premium cigars
are made by wrapping natural leaf binder tobacco around the long filler
tobacco to create a bunch which is placed into a mold to create the shape of
the cigar. Then natural leaf wrapper tobacco is hand-rolled around the bunch
creating a hand-made premium cigar. In 1998, the market for premium cigars
in the United States represented an estimated 400 million units or 7% of the
total cigar market. The Company's unit share of the premium cigar market in
1998 was estimated at 4%. The Company's premium brands include, among
others, Bering, Siglo 21, Santiago Silk and La Primadora. The Company's
premium brands are manufactured in the Dominican Republic, Honduras and
Nicaragua. The Company also has exclusive rights to the United States
distribution of several premium brands including Pleiades, Casa Buena and
Carlin which are manufactured in the Dominican Republic, Canary Islands and
Nicaragua, respectively. Societe Nationale d'Exploitation Industriaelle des
Tabacs et Allumettes S.A. ('SEITA'), the manufacturer of Pleiades, recently
announced its acquisition of Consolidated Cigar Holdings, Inc., a competitor
of the Company in the United States. The Company expects that as a result of
this transaction, its right to distribute Pleiades will cease after the
current term of its existing distribution agreement ends. See 'Competition.'
The Company does not anticipate that such event will have a material adverse
effect on the Company's business.

Little Cigars. Little cigars are mass market cigars that weigh less than
three pounds per thousand. Most little cigars consist of cut filler tobacco,
a wrapper made from reconstituted tobacco and a filter. Little cigars are
machine made and do not use a binder. Generally, little cigars are the
lowest priced products of the mass market category of cigars. In 1998, the
market for little cigars in the United States represented an estimated 1.7
billion units, or 32% of the total cigar market. The Company has the leading
unit market share of mass market little cigars at an estimated 46% in 1998.
The Company's little cigar brands include Swisher Sweets, King Edward and
Blackstone.

Despite growth in little cigar unit volume at a compound annual rate of
0.6% from 1985 to 1993, the overall United States cigar market experienced
steady declines in unit volume from 1973 to 1993. Beginning in 1993, however,
that trend reversed. Led by unexpected growth in premium and mass market large
cigars, the overall United States cigar market, from 1993 through 1998,
increased at an estimated compound annual rate of 9.2% in unit terms and at
nearly three times that rate in retail dollar sales. This reflected
industry-wide increases in the 1993-98 period of unit sales of premium and mass
market large cigars at compound annual rates of 29.5% and 9.7%, respectively,
and even more rapid growth of retail dollar sales due to price increases. During
the same 1993 to 1998 period, little cigar unit volume also increased at an
estimated compound annual rate of 5.5%.

While major manufacturers of premium cigars, including the Company, sought
to obtain the increased quantities of aged tobaccos and to train the additional
cigar-makers needed to meet this dramatically expanding demand, a number of
smaller, frequently inexperienced, manufacturers attempted to fill the void with
start-up

brands. It is believed that some of these manufacturers, to capitalize on the
boom, resorted to using improperly aged tobaccos and untrained personnel; as a
result, the market was flooded with inconsistent products.

Starting in late 1997, and continuing into 1998, as more properly aged
tobaccos and a greater number of trained cigar makers became available, the
major manufacturers, including the Company, began to produce significantly more
premium cigars. This increased production, coming on top of the large
inventories of cigars already acquired by wholesalers and retailers from the
smaller manufacturers, caused the trade to experience excessive inventories of
premium cigars. As a consequence, prices for these products, particularly for
start-up brands, began to be discounted heavily. The Company expects that until
the inventory glut of these brands is diminished, sales of established premium
brands, including those manufactured by the Company, will continue to suffer.

In addition to the impact of oversupplies of premium cigars, industry sales
were also adversely affected in 1998 by unusually heavy sales of mass market
large cigars by domestic manufacturers, including the Company, at the end of
1997. The resulting large wholesale and retail inventories of mass market large
cigar products continued through the first half of 1998 and diminished in the
second half.

SMOKELESS TOBACCO PRODUCTS. Smokeless tobacco products are made from
tobacco that has been cured, aged, fermented and then dried and flavored. The
smokeless tobacco market can be divided into two distinct categories: snuff and
chewing tobacco. There are two types of snuff: moist and dry. Chewing tobacco is
available in three varieties: loose leaf, plug and twist. Loose leaf is the
predominant product in the chewing tobacco category, with plug and twist
representing less than 10% of the chewing tobacco market in 1998. Smokeless
tobacco products in the United States are used orally and either placed between
the cheek and gum or chewed.

Moist Snuff. Moist snuff is made from Kentucky or Tennessee dark
fired tobacco that has been aged for at least three years and then cut,
flavored and fermented for approximately eight weeks. Following
fermentation, a second flavoring process is completed before the product is
packaged in plastic or paper cans. Moist snuff, with 1998 estimated
industry retail sales of $2.2 billion (60.1 million pounds), is the largest
segment of the smokeless tobacco market in terms of retail sales. The
Company's moist snuff brands include, among others, Silver Creek, Redwood,
Cooper and Gold River. The Company's moist snuff comes in various flavors,
such as natural, wintergreen, cherry and spearmint, and in both fine and
long cut varieties. The Company also produces private label moist stuff for
certain marketing groups and wholesalers.

Loose Leaf Chewing Tobacco. Loose leaf chewing tobacco is made from
air cured tobacco grown primarily in Wisconsin and Pennsylvania that has
been aged for at least two years and then threshed to remove stems and
blended. The blended tobacco is flavored and packaged in foil pouches.
Retail sales of loose leaf chewing tobacco in 1998, which represented over
90% of the chewing tobacco market, were an estimated $457 million (50.2
million pounds). The Company's products include, among others, Mail Pouch,
Lancaster Limited-Reserve Chewing-Tobacco and Chattanooga Chew. The Company
also produces private label loose leaf tobacco products for certain
marketing groups and wholesalers.

Dry Snuff. Dry snuff is made from Kentucky, Tennessee and Virginia
dark fired tobacco that has been aged for at least three years and then
fermented for approximately thirty days. After fermentation is completed,
the tobacco is dried and cut into a fine tobacco flour that is flavored
prior to packaging. Aggregate retail sales of all dry snuff manufacturers
in 1998 were an estimated $74 million (4.1 million pounds). The Company
sells dry snuff under numerous brands including, among others, Tops, Navy,
Railroad Mills, Superior, Buttercup, Square, Society and Honey Bee.

Although total unit consumption of smokeless tobacco products has remained
relatively stable since the late 1980s, retail dollar sales have increased at an
estimated compound annual rate of 7.8% from $1.03 billion in 1985 to an
estimated $2.72 billion in 1998 primarily due to the growth of the moist snuff
category. Consumption of moist snuff, which represents over one-half of the
pounds sold in the smokeless tobacco market and an estimated 79% of the retail
sales, has increased in terms of retail dollar sales at an estimated compound
annual rate of 10.6% from 1985 to 1998. Loose leaf chewing tobacco sales, in
terms of pounds, declined from 1985 to 1998 at an estimated compound annual rate
of 2.7%. However, industry retail dollar sales of all chewing tobacco, of which
over 90% is loose leaf, increased from $381.8 million to an estimated $493.0
million over the same period as a result of the industry's ability to increase
product prices. Although the mature dry snuff market has been

declining in terms of pounds sold from 1985 to 1998 at an estimated 6.2%
compound annual rate, dry snuff has continued to provide a significant source of
cash flow to the industry participants as a result of the industry's ability to
offset such declines with price increases.

The Company pioneered the price/value portion of the moist snuff market.
Starting in 1991, the Company launched its 'buy one, get one free' marketing
program. From 1991 to 1997, the Company's moist snuff market share grew from
1.5% to 5.1% and profitability greatly improved.

Beginning in late 1995 and 1996, the Company began experiencing competition
from other smokeless tobacco competitors who adopted similar price/value
strategies to compete with the Company's success. As a result, by 1998, the
Company lost a total of almost 1% of the market share that it had previously
achieved. Competition in this category, which has always been strong, has become
even stronger, forcing the Company to alter its marketing strategy in response.
The results of this change in marketing strategy cannot yet be determined.

SALES AND MARKETING

The Company uses targeted, regionally focused market segmentation
strategies in combination with market research, computerized information systems
and a large sales force to achieve its sales and marketing objectives. The
Company sells its cigar and smokeless tobacco products through a national sales
force which covers all 50 states in the United States and is believed by the
Company to be the largest in the cigar industry. The Company employs
approximately 320 full-time sales and marketing professionals. The sales force
is organized by territory and calls on direct buying accounts, such as tobacco
distributors, wholesale grocers and retail chains, as well as retailers who
purchase from such direct buying accounts. Direct retail account contact enables
the Company to introduce new products and improve shelf coverage and placement
of point-of-sale materials for the Company's products. In addition, the Company
believes its effectiveness in developing relationships with wholesalers and
retailers is a competitive strength that is important to its continued growth.
The Company's sales force also calls on key national and regional chain accounts
through a national account program.

Most of the Company's sales are to tobacco distributors, including McLane
Company Inc. which accounted for approximately 15%, 15% and 14% of the Company's
net sales in 1998, 1997, and 1996, respectively, and grocery wholesalers, with
the remainder principally made up of food and drug chains, such as Food Lion,
Winn Dixie, Rite Aid, CVS and Walgreens. The Company's products are ultimately
sold through grocery and drug stores, mass merchandisers, convenience stores,
smokeshops and restaurants and other stores.

The Company's systems and market research have enabled it to develop and
implement a highly targeted and regionalized marketing strategy. The Company's
sales force managers use laptop computers to provide on-line access to customer
account and product information while in the field. Through its national account
organization, the Company has become the category manager for the 'other tobacco
products' category with several of its national and regional retail chain
accounts, allowing the Company to better market its products.

The Company is the leading exporter of American made cigars. The Company
has also licensed brands, such as King Edward, to manufacturers in The
Netherlands, England, Germany and the Canary Islands (for distribution to Spain)
for which it receives royalties. Export sales are generated through an
international network of distributors and through Swisher International,
Limited, a wholly-owned duty-free sales company in the United Kingdom. The
European Commission has adopted regulations that are expected to eliminate
intra-European Union duty-free merchandise beginning in July 1999. The Company
does not expect such regulations to have a material adverse effect on its
business. The Company estimates that its products are available in over 70
countries worldwide. In 1998, approximately 3% of the Company's revenues were
derived from export sales.

The Company's advertising strategy focuses largely on selected print
advertising and point-of-sale promotions. The Company's promotional programs are
primarily geared to provide price incentives such as discounts, coupons and
rebate offers to its customers and to offer display fixtures to the retail
stores it services.

TRADEMARKS AND TRADE SECRETS

Trademarks and brand name recognition are important to the Company's
business. The Company owns most of the trademarks under which its products are
sold. The Company has registered its trademarks (or has made application for
registration) in the United States and many other countries and will continue to
do so as new trademarks are

developed or acquired. The Company owns or has applications pending for numerous
trademarks, including the following: Mass Market Cigar Trademarks: Swisher
Sweets, King Edward, Optimo, Santa Fe, El Trelles, Keep Moving, Corral Wodiska's
Cazadores, Outlaws and Blackstone; Premium Cigar Trademarks: Bering, Siglo 21,
La Primadora, Sabroso, Don Julio, Flor de Jalapa, Santiago Silk, MacBeth and La
Diligencia; Moist Snuff Trademarks: Silver Creek, Gold River, Redwood, Cooper
and Bowie; Loose Leaf Chewing Tobacco Trademarks: Mail Pouch, Chattanooga Chew,
Lancaster Limited-Reserve Chewing-Tobacco and Earl Caulfield's; Dry Snuff
Trademarks: Navy, Tops, Railroad Mills, Superior, Buttercup, Square, Society and
Honey Bee.

The Company also relies upon unpatented trade secrets for the protection of
certain intellectual property rights. There can be no assurance that the Company
will be able to prevent unauthorized use or disclosure of such information. In
addition, no assurance can be given that others will not independently develop
substantially equivalent proprietary information, or otherwise gain access to
the Company's trade secrets, or that the Company can meaningfully protect its
rights to unpatented trade secrets.

MANUFACTURING

The Company's manufacturing strategy is to strive to be the low cost
producer in the industry through continued operational improvements, to produce
high quality products and to maintain flexible manufacturing capabilities which
enable the Company to respond to changing market demands, develop new products
and extend the product line of existing brands.

The Company manufactures mass market large and little cigars at its
Jacksonville, Florida facility and smokeless tobacco products at its Wheeling,
West Virginia facility. The Company also packages its cigar products and
manufactures most of its mass market cigar boxes and its reconstituted tobacco
wrapper and substantially all of its reconstituted binder tobacco in the
Jacksonville facility.

The Company believes that its Jacksonville facility, which currently
manufactures approximately 7.6 million cigars daily, would have a manufacturing
capacity of over nine million cigars daily, with the addition of an extra shift
for little cigars. It also believes that the Jacksonville facility is the most
automated cigar manufacturing facility in the United States. As a result of the
Company's automation and the fact that it manufactures large quantities of
certain cigar sizes, it typically manufactures in large production runs, thereby
maximizing economies of scale.

During 1997, the Company acquired interests in two joint ventures in the
Dominican Republic, each of which was intended to supply the Company with a
portion of its premium cigars. In October 1998, due to the decline in demand for
premium cigars, the Company terminated one of its joint ventures and, in that
connection, incurred a pre-tax charge of $806,000. The Company also constructed
a new facility in Honduras in 1997 which produces its Bering and La Primadora
cigars and other Company brands. The Company has strong, long-standing
relationships with a third party manufacturer which uses the Company's Honduras
plant and a plant of its own in Nicaragua. This manufacturer is under contract
to produce certain of the Company's premium cigar brands according to Company
specifications and under Company supervision.

The Company believes that its manufacturing capacity is adequate for its
current production needs.

Tobacco is the Company's primary raw material. The Company buys tobacco for
its mass market cigars from leaf dealers that obtain the tobacco from a large
number of suppliers located in the United States, Latin America, Europe and
parts of Asia. The Company buys the tobacco for its smokeless tobacco products
from leaf dealers and farmers in the United States. The Company does not believe
that it is dependent on any single source for tobacco for any of such products.
The Company's third party manufacturer and its joint venture partner provide
most of the tobacco necessary to produce the Company's premium cigars which they
make. Generally, the joint venture partner and this third party manufacturer
grow a large portion of their tobacco requirements and acquire the balance from
leaf dealers and other growers throughout the world.

COMPETITION

Founded in 1861, the Company believes it is currently the world's largest
manufacturer and marketer of cigars, as measured by units sold. Its four most
significant competitors in the domestic cigar market are Consolidated Cigar,
Inc., General Cigar Company Inc., Havatampa, Inc. (a subsidiary of the Spanish
company,

Tabacalera, S.A.) and John Middleton, Inc. In addition, Tobacco Exporters
International (USA) Ltd. (a subsidiary of Rothmans International B.V.) is a
significant competitor in the little cigar market. The Company's major
competitors in the smokeless tobacco products market are United States Tobacco
Company, Conwood Company, L.P., Swedish Match North America Inc., National
Tobacco Company and Brown & Williamson Tobacco Corporation. Certain competitors
of the Company are better capitalized than the Company and may have greater
financial and other resources than those available to the Company. The Company
attributes its strong market position in the cigar industry to its well-known
brand names, broad range of product offerings, commitment to and reputation for
manufacturing quality cigars, marketing expertise and customer service and
efficient manufacturing operations. It attributes its declining position in
smokeless tobacco (especially in moist snuff) to increased competition,
particularly in the price/value sector, from larger competitors.

The Company is unable to determine whether the recent acquisition of
Consolidated Cigar Holdings, Inc. by SEITA, or the sale of General Cigar
Holdings, Inc.'s mass market cigar business to Swedish Match AB will have a
material adverse effect on its business. Recent press reports also indicate the
agreement of British-American Tobacco PLC (the parent of Brown & Williamson
Tobacco Corporation) and Rothmans International B.V. to combine their
businesses. At this time, the Company is unable to determine the impact of such
proposed transaction on the Company's business.

EMPLOYEES

As of December 31, 1998, the Company had approximately 1,360 full-time
employees. The Company believes its relations with its union and non-union
employees are and will continue to be good. The Retail, Wholesale & Department
Store Union and the International Association of Machinists and Aerospace
Workers Union represent the hourly employees at the Jacksonville facility. Both
labor agreements at this location were renewed for three years during 1997.
There has not been a work stoppage in Jacksonville in over 20 years. The Bakery,
Confectionery, Tobacco, Grain Millers International Union ('BCTG') and the
International Association of Machinists and Aerospace Workers Union ('IAM')
represent the hourly employees at the Wheeling facility. The BCTG agreement at
this location was renewed for three years during 1999, and the IAM agreement at
this location was renewed for three years during 1996. To the Company's
knowledge, there has never been a work stoppage at this facility.

REGULATION

The tobacco industry has been under public scrutiny for over thirty years.
Industry critics include special interest groups, the Surgeon General and many
legislators at the state and federal levels. Much of the focus has been directed
at the cigarette industry because it is substantially larger than the cigar and
smokeless tobacco businesses. Nevertheless, cigar and smokeless tobacco
companies have also been affected by this scrutiny.

Cigar and smokeless tobacco manufacturers, like producers of other tobacco
products, are subject to regulation in the United States at federal, state and
local levels. Changing public attitudes towards smoking and the expansion of
tobacco regulations since the early 1970s have been major causes of the overall
decline in consumption of tobacco products.

Federal law now requires all states to establish 18 as the minimum age of
purchase for tobacco products and to enforce that standard at the risk of losing
federal substance abuse block grants. The federal Comprehensive Smokeless
Tobacco Health Education Act of 1986 requires manufacturers of smokeless tobacco
products to, among other things, provide prescribed health warnings on all of
their products and in each of their advertisements, abstain from broadcast
advertising and file annual reports listing all ingredients added to tobacco in
the manufacturing process. The Federal Trade Commission requires those who
manufacture smokeless tobacco products or cigars to report all advertising and
marketing expenses incurred with respect to each of their products in each year.
Moreover, regulations directed at the industry continue to increase not only in
the United States but also in Canada, the European Union and other foreign
markets.

In 1996, the United States Food and Drug Administration ('FDA') for the
first time asserted jurisdiction over nicotine in tobacco as a 'drug' and issued
regulations purporting to regulate smokeless tobacco products as 'medical
devices'. These regulations prohibit the sale of smokeless tobacco products to
minors and severely restrict advertising, marketing and promotion of smokeless
tobacco products. The regulations also require the

Company and other manufacturers to comply with a wide range of labeling,
reporting, manufacturing and other requirements. In 1995, the Company and other
manufacturers mounted a court challenge to the FDA's authority to regulate
tobacco and, after a United States District Court found that the FDA was not
precluded from such regulatory authority in general but was prohibited from
restricting advertising or promotion of tobacco products, appealed the matter to
the United States Court of Appeals for the Fourth Circuit. In 1998, the Court of
Appeals reversed the District Court decision and held that the FDA had no
jurisdiction to regulate tobacco. The Company understands that the FDA has filed
a petition for certiorari to the United States Supreme Court. See 'ITEM 3. LEGAL
PROCEEDINGS.'

In 1997, the five largest tobacco companies announced a proposed settlement
of a number of cases brought by the Attorneys General of several states to
recoup Medicare and Medicaid expenses. Legislation was introduced in Congress to
implement the settlement by increasing the price of cigarettes, regulating all
tobacco products including those manufactured by the Company (which was not a
party to the suits being settled), imposing full FDA regulation and adopting new
and highly restrictive marketing requirements. Although the Congress failed to
adopt the legislation, the five tobacco companies engaged in the 1997 proposed
settlement entered into separate settlement agreements in 1998 with the
Attorneys General of all fifty states except for one pursuant to which they
agreed to pay significant penalties annually and to certain marketing
restrictions. The Company is not a party to any of these settlement agreements
and is unable to determine whether or to what extent it may be affected by
changes in the marketing of tobacco products resulting from such settlements.

Although federal law has required health warnings on cigarettes since 1965
and on smokeless tobacco products since 1986, there is no federal law requiring
that cigars carry such warnings. However, in 1988, the Company and other cigar
manufacturers entered into a settlement of legal proceedings filed against them
pursuant to California Proposition 65 (which requires 'clear and reasonable'
warnings to consumers who are exposed to chemicals determined by the state to
cause cancer or reproductive harm, including tobacco smoke and several of its
constituent chemicals) under which they agreed to label retail packages of
cigars manufactured or imported for sale in California with a specified warning
label. Because of distribution requirements, this resulted in placing the
California health warnings on the vast majority of all cigars distributed in the
United States. Actions commenced against the Company and other cigar and
smokeless tobacco manufacturers in 1998 under Proposition 65 seek additional
warnings for smokeless tobacco products and to nonsmokers who are exposed to
'secondhand' tobacco smoke. The Company cannot predict the outcome of these
actions or the effect that any outcome may have on the Company's business. See
'ITEM 3. LEGAL PROCEEDINGS.'

Massachusetts adopted legislation in 1997 requiring manufacturers of
cigarettes and smokeless tobacco to disclose the identity and relative weight of
ingredients added to tobacco during the manufacturing process by brand and to
report the nicotine yield ratings of each brand they produce. A United States
District Court has enjoined the effectiveness of the ingredient disclosure
requirement, but the Company is complying with the nicotine reporting provision.
See 'ITEM 3. LEGAL PROCEEDINGS.' Other regulations issued by Massachusetts and
scheduled to take effect later in 1999 and 2000 require health warnings on cigar
packages sold in Massachusetts and cigar advertisements in Massachusetts and
impose certain other restrictions on the marketing of cigars. In addition,
Minnesota and Texas have recently enacted statutes requiring reporting,
beginning in 1999, of constituents of tobacco products by brand including cigars
as well as (in the case of Texas) nicotine yield ratings of smokeless tobacco
products.

Most states restrict or prohibit smoking of cigarettes and cigars in
certain public places and the sale of tobacco products to minors. Local
legislative and regulatory bodies have also increasingly moved to curtail
smoking by prohibiting smoking of cigars in certain buildings or areas or by
requiring designated 'smoking' areas. In a few states, legislation has been
introduced, but has not yet passed, which would require all little cigars sold
in those states to be 'fire safe' (i.e., little cigars which extinguish
themselves if not continuously smoked). Passage of this type of legislation
could have a material adverse effect on the Company's little cigar sales because
of the technological difficulties in complying with such legislation.

In manufacturing and distributing tobacco products, the Company uses,
handles and disposes of hazardous chemicals, including petroleum products and
denatured alcohol, at a number of its facilities, and as a result is subject to
environmental regulations relating to such use, handling and disposal. Although
the Company is currently in substantial compliance with all material
environmental regulations, the Company has been subject

and may continue to be subject to liability for the cleanup of contamination and
other environmental remedial actions. The Company does not expect that such
liability, or any effort to comply with present and future environmental
regulation, will have a material adverse effect on the Company's business.

EXCISE TAXES

Cigars and smokeless tobacco products have long been subject to federal,
state and local excise taxes, and such taxes have frequently been increased or
proposed to be increased, in some cases significantly, to fund various
legislative initiatives.

From 1977 until 1990, cigars were subject to a federal excise tax of 8.5%
of wholesale list price, capped at $20.00 per thousand cigars. In 1991, the
federal excise tax rate on large cigars increased to 10.625%, capped at $25.00
per thousand, and, in 1993, increased again to 12.75%, capped at $30.00 per
thousand. (The base on which the federal excise tax is calculated was lowered in
1991 to the manufacturer's selling price, net of the federal excise tax and
certain other exclusions.) The federal excise tax on little cigars increased
from $0.75 per thousand cigars to $0.9375 per thousand in 1991 and then to
$1.125 per thousand in 1993. Neither the 1991 nor the 1993 increase had a
material adverse effect on the Company's product sales.

Since 1986, smokeless tobacco products have been subject to federal excise
tax as well. Unlike the excise tax on large cigars, which are ad valorem, the
federal tax on smokeless tobacco is calculated on the basis of weight. From 1986
through 1990, the federal excise tax on snuff was $0.24 per pound; in 1991 it
increased to $0.30 per pound, and again to $0.36 per pound in 1993. From 1986
through 1990, the excise tax on chewing tobacco was $0.08 per pound; in 1991 it
increased to $0.10 per pound, and in 1993, to $0.12 per pound. Neither the
imposition of the federal excise tax in 1986 nor the increases in 1991 and 1993
have had a material adverse effect on the Company's product sales.

In the past, there have been various proposals by the federal government to
fund legislative initiatives through increases in federal excise taxes on
tobacco products. The Company is unable to predict the likelihood of the passage
of legislation providing such additional revenues. In addition, the Balanced
Budget Act adopted by Congress in 1997, provides for further increases in
federal excise taxes on all tobacco products in two stages, beginning in 2000.
Management does not believe that these increases will have a material adverse
effect on the Company's operations; however, enactment of new or significant
further increases in federal excise taxes, or legislation requiring the Company
to pay additional fees or penalties with respect to its products could have a
material adverse effect on the Company's business.

Tobacco products are also subject to certain state and local taxes. Deficit
concerns at the state level continue to exert pressure to increase tobacco
excise taxes. State excise taxes on cigars and smokeless tobacco products
generally range from 2% to 75% of the wholesale purchase price. The number of
states that impose excise taxes on cigars and smokeless tobacco products is
forty-two. Several states impose excise taxes on little cigars at the same rates
as cigarettes.

State cigar and smokeless tobacco excise taxes are not subject to caps
similar to the federal cigar excise tax. From time to time, the imposition of
state and local taxes has had an adverse impact on the Company's sales
regionally. The enactment of new state excise taxes and the increase in existing
state excise taxes could have an adverse effect on regional sales of cigars and
smokeless tobacco products.

OTHER

Certain statements contained in this Form 10-K which are not historical
facts contain forward-looking statements based on current expectations,
estimates and projections about the industry in which the Company operates,
management's beliefs and assumptions made by management. Words such as
'expects,' 'believes,' 'estimates,' variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions which are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecast in
such forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.

ITEM 2. PROPERTIES

As of December 31, 1998, in addition to a suite used as its principal
executive offices (approximately 7,500 square feet) which it leases in Darien,
Connecticut, the Company owned or leased the following properties for use in its
business:

OWNED APPROXIMATE
LOCATION PRINCIPAL USE OR LEASED FLOOR SPACE
- ------------------------------------------ ---------------------------------- --------- -----------

Jacksonville, Florida..................... Cigar Manufacturing Owned 456,400
Wheeling, West Virginia................... Smokeless Tobacco Manufacturing Owned(1) 415,800
Edgerton, Wisconsin....................... Warehouse-Smokeless Tobacco Aging Owned 166,100
Hopkinsville, Kentucky.................... Warehouse-Smokeless Tobacco Aging Leased 100,800
El Paraiso, Honduras...................... Cigar Manufacturing Owned 87,000
Brookneal, Virginia....................... Warehouse-Smokeless Tobacco Aging Owned 54,000
Helmetta, New Jersey...................... For Sale Owned 385,000
Hopkinsville, Kentucky.................... For Sale Owned 47,500

- ------------------
(1) The Company beneficially owns the property subject to a lease purchase
agreement with Ohio County, West Virginia, which permits the Company to
receive certain property and sales tax benefits.

The Company believes that its properties are well maintained and in
substantial compliance with environmental laws and regulations.

ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in three health-related lawsuits. It is named
along with other tobacco manufacturers, wholesaler/retailers and other
defendants, in Sontag v. United States Tobacco, et al., 14th Judicial District
Court, Parish of Calcasieu, Louisiana, State Docket No. 95-6434. Plaintiff, an
individual, alleges fraud and misrepresentation in the marketing and sale of
tobacco products, breach of warranty, negligence and other claims and seeks
unspecified damages, attorneys fees and costs. On December 22, 1997, the Company
was served with a complaint in Thompson v. Brown & Williamson Tobacco
Corporation, et al. which was filed in the 105th Judicial District Court, Nueces
County, Texas, Cause No. 97-2981-D, naming the Company along with other tobacco
manufacturers, certain asbestos companies, wholesaler/retailers and others as
defendants. As in Sontag, the plaintiff in Thompson is an individual alleging
fraud and misrepresentation in the marketing and sale of tobacco products,
breach of warranty, negligence and other claims. He also seeks unspecified
damages, attorneys fees and costs. Engolio v. Philip Morris, Inc., et al., State
Docket No. 51.783-D, was filed on February 19, 1999 in the 18th Judicial Court,
Parish of Iberville, Louisiana. The action names the Company, along with other
tobacco manufacturers, distributors, retailers and industry associations, as
defendants. The plaintiffs are the widow and children of a decedent who was
allegedly a consumer of tobacco products manufactured by one or more of the
defendants. Plaintiffs seek damages in excess of $50,000 for the wrongful death
of the decedent together with costs and fees. The Company is vigorously
defending these lawsuits.

On October 1, 1998, a group of 65 cases were filed jointly in the Circuit
Court of Kanawha County, West Virginia against 34 defendants including the
Company under the collective title, Kelly Allen, et al. v. Philip Morris
Incorporated, et al. Among the defendants named are manufacturers of cigarettes,
roll-your-own tobacco and/or smokeless tobacco products, as well as distributors
and retailers and certain trade associations. On October 28, 1998, a group of 18
cases were filed jointly in the same Court against 27 defendants including the
Company under the collective title Billie J. Akers v. Philip Morris
Incorporated, et al. Among the defendants are cigarette and smokeless tobacco
manufacturers as well as distributors and certain trade associations. Each of
these groups of distinct plaintiffs seeks to have their cases consolidated to
take advantage of a mass litigation panel recently established by the West
Virginia courts and each of the plaintiffs alleges that he or she is a West
Virginia resident (or the representative of a deceased West Virginia resident)
who uses or has used tobacco products manufactured by one or more of the
defendants and has developed 'some form of cancer or vascular disease.' None of
the complaints attempts to establish that any specific plaintiff used any
specific product or the

name of the manufacturer thereof or the damage that was allegedly caused
thereby; nevertheless, each seeks damages in an unspecified amount against all
the defendants in his or her respective case. The Company intends to defend
these actions vigorously.

Although claims have been made against manufacturers of smokeless tobacco
products and manufacturers of cigars, the Company is not aware of any adverse
decision or judgment having been rendered against any smokeless tobacco or cigar
manufacturer. There can be no assurance, however, that the Company may not be
named as a defendant in future suits. There can also be no assurance that any
litigation to which the Company is now, or may become, subject will not result
in an adverse judgment against the Company which could have a material adverse
effect on the Company's business, future results of operations and cash flows.
The Company does not carry insurance to protect against health related product
liability because the cost of obtaining such insurance is commercially
prohibitive. Additionally, a judgment against the Company with respect to one of
its products and any related products, could preclude the further sale of such
products, the result of which could materially adversely affect the Company's
business.

On March 31, 1998, The City and County of San Francisco, et al. v. United
States Tobacco Company, Inc., et al. was filed in Superior Court of the State of
California for the County of San Francisco against the Company, five other
smokeless tobacco manufacturers and eleven retailers. The plaintiffs in the
action, Environmental Law Foundation and the City and County of San Francisco,
allege that the defendants violated California Proposition 65 and the California
Unfair Competition Act by (a) selling products that expose California residents
(without providing a 'clear and reasonable warning' thereof) to substances known
to the State of California to cause cancer, birth defects and reproductive harm,
and (b) engaging in fraudulent and unfair business practices by marketing
smokeless tobacco products to 'young consumers.' Plaintiffs claim uncalculated
penalties under Proposition 65 and seek disgorgement of an unspecified amount of
revenues obtained through allegedly wrongful sales. On December 17, 1998, the
defendants filed a demurrer based on a claim of federal pre-emption; the court
overruled the demurrer. The Company is vigorously defending the action.

On July 14, 1998, The People of the State of California, et al. v. Philip
Morris Incorporated, et al. was filed in Superior Court of the State of
California for the County of Los Angeles against the Company, six other cigar
manufacturers, six cigarette manufacturers, fifteen retailers and one pipe
tobacco manufacturer. The plaintiffs in the action, the Los Angeles City
Attorney on behalf of the People of California and American Environmental Safety
Institute, allege that the defendants violated California Proposition 65 and the
California Unfair Competition Act by (a) selling products that expose California
non-smokers to environmental tobacco smoke (resulting in exposure without
warning 'to chemicals known to the State of California to cause cancer and/or
reproductive toxicity'), and (b) thereby engaging in fraudulent and unfair
business practices. Plaintiffs claim uncalculated penalties under Proposition 65
and seek disgorgement of an unspecified amount of revenues obtained through
allegedly wrongful sales. On September 17, 1998, the defendants filed a demurrer
based on res judicata and collateral estoppel and the court sustained the
demurrer. Plaintiffs have appealed the Court's decision.

On July 28, 1998, The People of the State of California, et al. v. General
Cigar Co., Inc., et al. was filed in Superior Court of the State of California
for the County of San Francisco against the Company and nine other manufacturers
of cigars and pipe tobacco. The plaintiffs in the action, the San Jose City
Attorney on behalf of the People of California and Lexington Law Group, allege
that the defendants violated California Proposition 65 and the California Unfair
Competition Act by (a) selling products that expose California non-smokers to
environmental tobacco smoke (resulting in exposure without warning 'to chemicals
known to the State of California to cause cancer and/or reproductive toxicity'),
and (b) thereby engaging in fraudulent and unfair business practices. Plaintiffs
claim uncalculated penalties under Proposition 65 and seek disgorgement of an
unspecified amount of revenues obtained through allegedly wrongful sales. On
October 5, 1998, the defendants filed a demurrer based on res judicata and
collateral estoppel and the court overruled the demurrer. The Company is
vigorously defending the action.

In 1996, the Company along with other smokeless tobacco manufacturers
commenced an action, United States Tobacco, et al. v. Harshbarger, et al., in
the United States District Court for the District of Massachusetts. The
plaintiffs filed a motion for summary judgment, arguing that Massachusetts was
preempted by the federal Comprehensive Smokeless Tobacco Health Education Act of
1986 ('CSTHEA') from enforcing a statute

requiring manufacturers to disclose the identity and relative quantities of
ingredients added to tobacco in the manufacturing process on a brand specific
basis. Early in 1997, the Court denied the plaintiffs' motion and that denial
was upheld by the United States Court of Appeals for the First Circuit. However,
in December 1997, the Court granted plaintiffs' motion for a preliminary
injunction on the grounds that enforcement of the statute would constitute an
unconstitutional taking of plaintiffs' proprietary information. Cross motions
for summary judgment in the matter are now pending.

The Company is also a plaintiff along with other manufacturers of tobacco
products, certain organizations representing the advertising industry and
representatives of the retailing community in United States Tobacco, et al. v.
United States Food and Drug Administration, et al., an action filed in the
United States District Court for the Middle District of North Carolina in 1995.
Plaintiffs in the action are challenging the FDA's ability to enforce
regulations promulgated in 1996 with respect to the marketing of and public
access to certain tobacco products. In 1996, plaintiffs moved for summary
judgment in the suit arguing that the FDA's enforcement of certain of the
regulations pertaining to advertising and promotion of plaintiffs' products was
preempted by CSTHEA and, further, that the FDA lacked jurisdiction to regulate
plaintiffs. In 1997, the Court granted the plaintiffs' motion with respect to
the advertising and promotion issue but denied the motion with respect to the
FDA's jurisdiction. However, in 1998, the Fourth Circuit Court of Appeals
reversed the lower Court's finding on jurisdiction and found for the plaintiffs.
The Company understands that the FDA has filed a petition for certiorari to the
United States Supreme Court.

In the opinion of management, the cost, if any, of resolving the specific
cases referred to above which are presently pending should not have a
significant impact on the Company's consolidated financial position; however,
the cost of resolving such litigation, if any, could have a significant effect
on the future results of operations and cash flows. There can be no assurance
that there will not be an increase in health-related litigation in the future.
With respect to litigation other than the pending cases specifically referred to
above, the costs to the Company of defending or prosecuting any prolonged
litigation or the cost of a judgment against the Company could have a material
adverse effect on the Company's business.

The Company is party to various other legal claims in respect to
environmental, tax and commercial disputes. The Company believes that the
outcome of such pending legal proceedings in the aggregate will not have a
material adverse effect on the Company's consolidated financial position. The
Company carries general liability insurance, but has no health hazard policy,
which, to the best of the Company's knowledge, is consistent with industry
practice. There can be no assurance, however, that the Company will not
experience material health-related litigation in the future.

LITIGATION REGARDING THE MERGER

After the Company announced the Merger on December 9, 1998, the following
actions ('Stockholder Actions') challenging the Merger were filed, on various
dates, in the Court of Chancery of the State of Delaware in and for New Castle
County: Ruthie Parnes v. Cynthia Z. Brighton, et al., Civil Action #16834NC; Ann
Mark v. William Ziegler, III, et al., Civil Action #16839NC; John Michael Dawson
v. Cynthia Z. Brighton, et al., Civil Action #16837NC; Harbor Finance Partners
v. William Ziegler, III, et al., Civil Action #16838NC; Joseph Falzone v.
Cynthia Z. Brighton, et al., Civil Action #16842NC; and Donald Seeth v. William
Ziegler, III, et al., Civil Action #16861NC. Each Stockholder Action names the
Company and some or all of the members of the Board of Directors of the Company
as defendants; one also names Newco as a defendant.

Generally, the Stockholder Actions purport to be brought on behalf of the
holders of Common Shares of the Company and allege substantially similar claims
of breach of fiduciary duty. In general, plaintiffs allege that the Class A
Merger Consideration is unjust and inadequate in that the intrinsic value of
Class A Shares is allegedly greater than the Class A Merger Consideration, in
view of the Company's prospects; the Class A Merger Consideration includes an
inadequate premium; and the Class A Merger Consideration is designed to cap the
market price of the Class A Shares before the trading price for the Class A
Shares could recover from an alleged temporary downturn in the market. Certain
of the complaints also allege that the proposed Merger is unfair because the
Ziegler family allegedly possesses proprietary corporate information concerning
the Company's prospects and that the Ziegler family's ownership position in the
Company through its beneficial ownership of the Class B Shares will preclude an
effective 'market check.' The Stockholder Actions also generally seek

injunctive relief, an injunction of the proposed Merger (or, if it is
consummated, recission thereof), compensatory and other damages; and an award of
attorney's fees and expenses. The Company, Newco and the Class B Holder believe
that their respective actions, and those of the Company's Board of Directors, in
connection with the proposed Merger have fully complied with the Delaware
General Corporation Law and are otherwise fair and appropriate in all respects.

Since the dates on which the Stockholder Actions were filed, there have
been no material developments in such Stockholder Actions.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Not applicable.

PART II

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

The Class A Shares are traded on the NYSE under the symbol 'SWR.' The
following table shows the per share high and low sales prices reported in the
consolidated transaction reporting system for transactions in Class A Shares for
the periods indicated. As of March 23, 1999, there were 5,778,300 Class A Shares
outstanding and held of record by 63 Class A Holders, and all 28,100,000 Class B
Shares were held of record by Hay Island.

HIGH LOW
---- ---
1997
- ----
First Quarter.................................. $18 3/4 $13 1/4
Second Quarter................................. 19 1/2 13 1/2
Third Quarter.................................. 18 7/8 14 1/4
Fourth Quarter................................. 21 5/8 14 1/4

1998
- ----
First Quarter.................................. 17 3/4 12 3/4
Second Quarter................................. 13 7 13/16
Third Quarter.................................. 8 5 1/4
Fourth Quarter................................. 9 1/8 4 3/8

Since the consummation of the Initial Public Offering, the Company has not
paid any dividends on its Common Shares. Because the Company is a holding
company with no business operations of its own, it is dependent on distributions
from Swisher to pay any cash dividends or distributions on the Common Shares.
Under its Existing Credit Facility, the Company's ability to pay dividends is
limited to a pool of $10 million plus 25% of net income (as defined therein) for
the four quarters most recently ended prior to the dividend payment date. The
Company expects that similar restrictions will be contained in the New Credit
Facility. Subject to these restrictions, any future declarations of cash
dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant by the Board of
Directors.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data was derived from the consolidated
financial statements of the Company. This data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and the related notes
thereto. As discussed in Note 1 to the consolidated financial statements, prior
to November 6, 1995, the Predecessor was a wholly-owned subsidiary of Amercian
Maize. On November 6, 1995, American Maize was acquired by Eridania Beghin-Say,
S.A., which simultaneously entered into an agreement to sell the Predecessor to
the Successor. As a result of the acquisition on November 6, 1995, the
Successor's consolidated balance sheets, results of operations and cash flows
for the years ended December 31, 1998, 1997 and 1996 and for the period from
November 7, 1995 to December 31, 1995 are not comparable to prior periods.

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

SUCCESSOR
--------------------------------------------------------------------------
PRO FORMA PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 7 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995(A) 1995
------------ ------------ ------------ ------------ --------------

STATEMENT OF OPERATIONS:
Net sales.......................... $266,998 $275,644 $225,229 $186,386 $ 31,266
Cost of sales...................... 136,133 137,708 113,764 100,036 16,514
-------- -------- -------- -------- --------
Gross profit....................... 130,865 137,936 111,465 86,350 14,752
Selling, general and administrative
expenses......................... 71,123 64,862 61,008 52,306 7,207
Restructuring expenses............. -- -- -- -- --
-------- -------- -------- -------- --------
Operating profit................... 59,742 73,074 50,457 34,044 7,545
Interest expense, net.............. 7,073 8,049 9,505 8,445 1,670
Other expense (income), net........ 1,018 340 153 -- 25
-------- -------- -------- -------- --------
Income before income taxes and
minority interest................ 51,651 64,685 40,799 25,599 5,850
Provision for income taxes......... 20,117 25,390 16,006 10,132 2,228
-------- -------- -------- -------- --------
Income before minority interest.... 31,534 39,295 24,793 15,467 3,622
Minority interest.................. -- -- -- -- --
-------- -------- -------- -------- --------
Net income......................... $ 31,534 $ 39,295 $ 24,793 $ 15,467 $ 3,622
======== ======== ======== ======== ========
Earnings per share:
Basic.......................... $ .93 $ 1.15 $ .73
======== ======== ========
Diluted........................ $ .93 $ 1.15 $ .73
======== ======== ========
Weighted average shares
outstanding:
Basic.......................... 33,910 34,100 34,100
======== ======== ========
Diluted........................ 33,910 34,152 34,100
======== ======== ========
OTHER:
EBITDA(b).......................... $ 65,438 $ 78,765 $ 55,884 $ 39,453 $ 8,337
EBITDA margin...................... 24.5% 28.6% 24.8% 21.2% 26.7%
Gross margin....................... 49.0 50.0 49.5 46.3 47.2
Operating margin................... 22.4 26.5 22.4 18.3 24.1
BALANCE SHEET:
Working capital.................... $ 73,834 $ 72,911 $ 52,702 N/A $ 31,925
Total assets....................... 257,089 237,757 198,930 N/A 194,230
Total debt......................... 93,072 101,092 117,685 N/A 128,152
Total stockholders' equity(c)...... 114,563 85,949 46,543 N/A 34,750

PREDECESSOR
------------------------------
PERIOD FROM
JANUARY 1 TO YEAR ENDED
NOVEMBER 6, DECEMBER 31,
1995 1994
------------- ------------

STATEMENT OF OPERATIONS:
Net sales.......................... $ 155,120 $163,285
Cost of sales...................... 83,522 88,720
--------- --------
Gross profit....................... 71,598 74,565
Selling, general and administrative
expenses......................... 40,331 47,208
Restructuring expenses............. -- 5,400
--------- --------
Operating profit................... 31,267 21,957
Interest expense, net.............. 3,437 5,503
Other expense (income), net........ (2,360) (2,706)
--------- --------
Income before income taxes and
minority interest................ 30,190 19,160
Provision for income taxes......... 11,536 7,461
--------- --------
Income before minority interest.... 18,654 11,699
Minority interest.................. (967) (997)
--------- --------
Net income......................... $ 17,687 $ 10,702
========= ========
Earnings per share:
Basic..........................

Diluted........................

Weighted average shares
outstanding:
Basic..........................

Diluted........................

OTHER:
EBITDA(b).......................... $ 37,451 $ 29,176
EBITDA margin...................... 24.1% 17.9%
Gross margin....................... 46.2 45.7
Operating margin................... 20.2 13.5
BALANCE SHEET:
Working capital.................... $ 39,690 $ 46,794
Total assets....................... 185,085 193,860
Total debt......................... 61,050 77,104
Total stockholders' equity(c)...... 93,330 80,365

(Footnotes on next page)

(Footnotes from previous page)
- ------------------
(a) Pro forma results of operations presents the results of operations as if the
Acquisition (see Note 1 to the Consolidated Financial Statements) had taken
place as of January 1, 1995 and as if the Management Services Agreement (see
Notes 1 and 11 to the Consolidated Financial Statements) between Hay Island
and the Company had been in effect as of January 1, 1995.

(b) EBITDA is defined as earnings before interest expense, net, provision for
income taxes and depreciation and amortization. The Company believes that
EBITDA is a measure commonly used by analysts and investors. Accordingly,
this information has been disclosed herein to permit a more complete
analysis of the Company's operating performance. EBITDA should not be
considered in isolation or as a substitute for net income or other
consolidated statement of operations or cash flow data prepared in
accordance with generally accepted accounting principles as a measure of the
profitability or liquidity of the Company. EBITDA does not take into account
the Company's debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available
for discretionary uses.

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

The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the related notes thereto.

The Company's net sales have increased from $186.4 million in the fiscal
year ended December 31, 1995 ('Fiscal 1995') to $275.6 million in the fiscal
year ended December 31, 1997 ('Fiscal 1997'), representing a compound annual
growth rate of 21.6%. During the same period, the Company's operating profit
increased from $34.0 million (on a pro forma basis) to $73.1 million,
representing a compound annual growth rate of 46.5%. For the fiscal year ended
December 31, 1998 ('Fiscal 1998'), net sales were $267.0 million and operating
profits were $59.7 million. The Company believes that its operating performance
has been due to: (i) the strength of the Company's brands, especially its
Swisher Sweets brand, which is the largest selling cigar brand in the world,
(ii) the resurgence in cigar smoking, (iii) the Company's significant market
position in each of the major cigar product categories in which it competes,
(iv) its ability to increase prices of its cigar and smokeless tobacco product
categories in each of the last several years, except premium cigars in 1998,
with respect to which the Company did not increase (and, in some cases,
decreased) pricing, (v) its continuous efforts to reduce manufacturing unit
costs and improve its manufacturing process and (vi) the strength of the
Company's sales and marketing organization. There can be no assurance that the
Company's net sales and operating profits achieved since Fiscal 1995 can be
maintained at such levels, or at any other level.

The Company's profitability depends, to a significant extent, on the level
of utilization of its manufacturing capacity and the efficiencies of its
operations. As the Company has increased its volume, coupled with the Company's
processing improvements and pricing increases, the Company's gross margin
improved from 46.3% of net sales in Fiscal 1995 to 50.0% of net sales in Fiscal
1997, and its operating profit margin improved from 18.3% of net sales (on a pro
forma basis) in Fiscal 1995 to 26.5% of net sales in Fiscal 1997. In Fiscal
1998, the Company's gross margin was 49.0% of net sales and its operating profit
margin was 22.4% of net sales.

The Company believes that the gross profit margins in the cigar industry
vary by cigar product category. The Company's gross profit margins also vary.
The relative gross profit margins of its major cigar categories in descending
order are, generally, little cigars, mass market large cigars and premium
cigars. In general, the gross profit margins on smokeless tobacco products are
higher than the gross profit margins on cigar products.

The Company's raw material inventory requirements for cigar production are
relatively modest due to its long-standing relationships with major tobacco
suppliers who commit to supply tobacco as needed by the Company. The Company's
largest working capital requirements are driven by its smokeless tobacco
operations. The tobacco for dry and moist snuff and loose-leaf chewing tobacco
requires aging of two to three years before being processed into finished
products.

The Company maintains sufficient smokeless tobacco raw material inventories
to ensure proper aging and an adequate supply. Although the Company's business
is not seasonal, purchases of smokeless tobacco raw material inventory typically
occur from the middle of the fourth quarter through the end of the first quarter
of each year. Therefore, smokeless tobacco inventories at year end and at the
end of the first quarter are typically higher than during the rest of the year.

During Fiscal 1997, the Company acquired interests in two joint ventures
which were to supply the Company with a portion of its premium cigars. The
Company also purchases premium cigars from third-party manufacturers. Prices for
each year are generally agreed to prior to the start of the year. Typically,
prices are subject to adjustment if affiliates and third-party manufacturers can
substantiate that their costs of manufacturing have increased by a fixed
percentage over the costs assumed in setting the prices. The Company's ability
to maintain its gross margins for premium cigars in the event of price increases
by affiliates and third-party manufacturers is dependent on its ability to pass
along these cost increases in the form of price increases to its customers. Over
the last few years, the Company has been able to raise prices to recover product
price increases, although there is no assurance it will be able to do so in the
future to the full extent needed to maintain its gross margins.

In October 1998, the Company announced that COTABEX, a joint venture
between the Company, Manufactura de Tabacos, S.A., a cigar manufacturer in the
Dominican Republic, and Tabacos de Canarias, a

Canary Islands tobacco company, would be terminated and closed in 1999. The
Company incurred a pre-tax charge of $806,000 as a result of this termination.
Due to industry-wide excess retail inventory levels of premium cigars and the
resulting excess manufacturing capacity available in the Dominican Republic for
premium cigars, all three joint venturers agreed to the termination.
Additionally, the Company has also reduced production at its other offshore
facilities.

The Company sources its tobacco requirements from vendors in countries
throughout the world. In addition, approximately 3% of the Company's net sales
in Fiscal 1998 were to customers in foreign countries. Virtually all of the
Company's sales are denominated in U.S. dollars, as are its raw material and
finished product purchases. Thus, the Company has no material exposure to
foreign exchange gains or losses.

The Company is a holding company that owns the outstanding capital stock of
Swisher, through which the Company conducts its business operations. The results
of operations and financial position of the Company reflect the consolidated
results of operations and financial condition of Swisher and its predecessors.
Before November 6, 1995, Swisher was a wholly-owned subsidiary of American
Maize. On November 6, 1995, the Company acquired all of the outstanding shares
of Swisher in the American Maize Transaction. See 'ITEM 1. BUSINESS.'

The results of operations and financial position of the Company have been
significantly affected by adjustments resulting from the acquisition, including
a substantial increase in debt associated with the American Maize Transaction,
the allocation of purchase price and amortization of goodwill. As a result of
these adjustments, the results of operations and financial position of the
Company before the American Maize Transaction are not comparable with its
results of operations and financial position thereafter.

FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997

Net Sales. Net sales decreased $8.6 million or 3.1% to $267.0 million for
Fiscal 1998 from $275.6 million for Fiscal 1997. The decrease in net sales was
due to lower sales of smokeless tobacco products and higher product returns,
offset partially by higher sales of cigars. Cigar sales increased principally
due to price increases in all categories except premium cigars, offset by unit
volume decline, in all categories except little cigars. Smokeless tobacco sales
decreased as a result of volume decline, offset partially by price increases in
all smokeless tobacco categories. Higher product returns were due to excess
wholesale inventories of premium and mass market large cigars and a moderation
in the growth of retail sales.

Gross Profit. Gross profit decreased $7.1 million or 5.1% to $130.9
million (49.0% of net sales) for Fiscal 1998 from $137.9 million (50.0% of net
sales) for Fiscal 1997. The decrease in gross profit for 1998 was due to the
decrease in net sales and a shift in sales mix.

Selling, General and Administrative ('SG&A') Expenses. SG&A expenses
increased $6.3 million or 9.7% to $71.1 million (26.6% of net sales) for Fiscal
1998 from $64.9 million (23.5% of net sales) for Fiscal 1997. The increase of
$6.3 million is principally due to an increase in selling and marketing
expenses.

Operating Profit. Operating profit decreased $13.3 million or 18.2% to
$59.7 million (22.4% of net sales) for Fiscal 1998 from $73.1 million (26.5% of
net sales) for Fiscal 1997. The decrease, as a percentage of net sales, was
primarily due to an increase in SG&A expenses both absolutely and as a
percentage of net sales, and lower gross profit margins.

Interest Expense, Net. Interest expense, net decreased $1.0 million or
12.1% to $7.1 million for Fiscal 1998 from $8.0 million for Fiscal 1997. For
Fiscal 1998, the average debt balance was $97.1 million, with an average
effective interest rate of 7.3%. For Fiscal 1997, the average debt balance was
$109.4 million, with an average effective interest rate of 7.4%.

Other Expense, Net. For Fiscal 1998, other expense, net includes a charge
of $0.8 million related to the closure of the COTABEX joint venture, a three
party arrangement between the Company and two other cigar manufacturers.

Income Taxes. The effective income tax rate was 38.9% and 39.3% for Fiscal
1998 and Fiscal 1997, respectively. The lower effective income tax rate for
Fiscal 1998 reflects a change in the geographical composition of earnings.

Net Income. Net income decreased $7.8 million or 19.8% to $31.5 million
(11.8% of net sales), for Fiscal 1998 from $39.3 million (14.3% of net sales),
for Fiscal 1997.

FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1996

Net Sales. Net sales increased $50.4 million or 22.4% to $275.6 million
for Fiscal 1997 from $225.2 million for Fiscal 1996. The increase in net sales
was due to higher sales of cigars and smokeless tobacco products. Cigar sales
increased principally due to unit volume growth and, to a lesser extent, price
increases in all cigar categories. Cigar sales also increased as a result of a
shift in sales mix to higher priced cigars. Smokeless tobacco sales increased as
a result of volume growth in all smokeless tobacco categories and, to a lesser
extent, price increases in all smokeless tobacco categories.

Gross Profit. Gross profit increased $26.5 million or 23.8% to $137.9
million (50.0% of net sales) for Fiscal 1997 from $111.5 million (49.5% of net
sales) for Fiscal 1996. The increase in gross profit for Fiscal 1997 was due to
the increase in net sales in all cigar and smokeless tobacco product categories.
As a percentage of net sales, gross profit increased due to a shift in sales
mix, offset partially by an increase in labor costs as a result of adding a
third production shift and bringing little cigar production in-house at the
Company's facility in Jacksonville, Florida.

SG&A Expenses. SG&A expenses increased $3.9 million or 6.3% to $64.9
million (23.5% of net sales) for Fiscal 1997 from $61.0 million (27.1% of net
sales) for Fiscal 1996. The increase is principally due to an increase in
marketing expenses, offset in part by a reduction in administrative expenses, as
a result of the management services agreement between the Company and Hay Island
and the one-time special bonuses paid to management in Fiscal 1996. The
decrease, as a percentage of net sales, was primarily due to SG&A expenses
increasing at a lower rate relative to the increase in net sales as a
consequence of management's monitoring of, and efforts to control, expenses.

Operating Profit. Operating profit increased $22.6 million or 44.8% to
$73.1 million (26.5% of net sales) for Fiscal 1997 from $50.5 million (22.4% of
net sales) for Fiscal 1996. The increase, as a percentage of net sales was
primarily due to higher gross profits margins, and a decrease in SG&A expenses
as a percentage of net sales.

Interest Expense, Net. Interest expense, net decreased $1.5 million or
15.3% to $8.0 million for Fiscal 1997 from $9.5 million for Fiscal 1996. For
Fiscal 1997, the average debt balance was $109.4 million, with an average
effective interest rate of 7.4%. For Fiscal 1996, the average debt balance was
$122.9 million, with an average effective interest rate of 7.7%.

Income Taxes. The effective income tax rate was 39.25% and 39.23% for
Fiscal 1997 and Fiscal 1996, respectively.

Net Income. Net income increased $14.5 million or 58.5% to $39.3 million
(14.3% of net sales) for Fiscal 1997 from $24.8 million (11.0% of net sales) for
Fiscal 1996.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows provided by operating activities were $27.1 million and
$38.3 million for Fiscal 1998 and Fiscal 1997, respectively. The decrease of
$11.2 million was primarily due to higher working capital requirements resulting
from increased inventory levels and lower net income.

The Company's raw material inventory requirements for mass market cigar
production are relatively modest due to its long standing relationships with
major tobacco suppliers who commit to supply tobacco inventory as needed by the
Company. As a result of developments in the premium cigar market, the Company
has experienced increases in its premium cigar inventory levels, which the
Company currently believes is not long-term in nature. The Company's largest
working capital requirements are driven by its smokeless tobacco operations. The
tobacco for dry and moist snuff and loose-leaf chewing tobacco requires aging of
two to three years before being processed into finished products. The Company
maintains sufficient smokeless tobacco raw material inventories to ensure proper
aging and an adequate supply. Although the Company's business is not seasonal,
purchases of smokeless tobacco raw material inventory typically occur from the
middle of the fourth quarter through the end of the first quarter of each year.
Therefore, smokeless tobacco inventories at year end and at the end of the first

quarter are typically higher than during the rest of the year. The Company will
fund its working capital requirements through operating cash flows, and, if
needed, bank borrowings.

Cash flows used in investing activities were $15.6 million and $22.5
million for Fiscal 1998 and Fiscal 1997, respectively. Cash flows used in Fiscal
1998 and 1997 were primarily related to investments in joint ventures for the
production of premium cigars, and purchases of property, plant and equipment.
Capital expenditures are estimated to be between $5 million and $8 million for
each of 1999 and 2000 and are expected to be used to maintain existing equipment
and facilities as well as increase production capacity. The capital expenditures
referred to above are expected to be funded by cash flows from operations and,
if needed, bank borrowings.

Cash flows used in financing activities were $10.9 million and $16.6
million for Fiscal 1998 and Fiscal 1997, respectively. The 1998 amount is due
principally to changes in long-term borrowings and the repurchase of Class A
Shares. The 1997 amount is due principally to changes in long-term borrowings.

As of December 31, 1998, borrowings under the Existing Credit Facility were
$93.0 million, and the Company had $20.825 million of unused availability
thereunder, after taking into account approximately $1.175 million utilized to
support letters of credit.

To convert floating rate debt into fixed rate debt, the Company previously
entered into two interest rate swap agreements. As of December 31, 1998, the
total notional amount covered by the one remaining swap agreement was $15.0
million. The agreement terminates on July 2, 1999. Under the terms of this
agreement, the Company receives a variable interest rate equal to three-month
LIBOR and pays a fixed rate of approximately 5.9% as of December 31, 1998. If
the Company had terminated these agreements on December 31, 1998 or December 31,
1997, the effect, as of the end of each period, would have been insignificant.

The Company believes that the net cash flow generated from future
operations and the availability of borrowings under the Existing Credit
Facility, or the New Credit Facility if the Merger is consumated, will be
sufficient to fund its working capital requirements, capital expenditures and
debt service requirements for the foreseeable future.

INFLATION

The Company has historically been able to pass inflationary increases for
raw materials and other costs on to its customers through price increases;
however, there is no assurance it will be able to do so in the future.

SEASONALITY

Although the Company's business is generally non-seasonal, consumption of
smokeless tobacco products increases slightly during the summer months.
Additionally, purchases of smokeless tobacco raw materials typically occur from
the middle of the fourth quarter to the end of the first quarter.

REGULATION

See 'ITEM 1. BUSINESS'

EXCISE TAXES

See 'ITEM 1. BUSINESS'

LITIGATION

See 'ITEM 3. LEGAL PROCEEDINGS'

RECENT DEVELOPMENTS

See 'ITEM 1. BUSINESS--Recent Developments'

YEAR 2000

The 'Year 2000 Issue' is the result of computer programs that were written
using two digits rather than four to define the applicable year. If the
Company's computer programs with date-sensitive functions are not Year 2000
compliant, they may recognize a date using '00' as the Year 1900 rather than the
Year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.

The Company has modified all of its significant computer applications and
believes they are Year 2000 compliant. All databases currently contain
four-digit years in their date fields, instead of the former two-digit years,
and all software has been tested to ensure that these dates are read and
interpreted correctly. All non-compliant hardware has been replaced with
machinery represented as compliant, and all significant non-IT systems have been
reviewed with their manufacturers and are now believed to be compliant.

The Company's use of third-party software applications is limited to UNIX-
and Microsoft Windows-based operating systems and standard personal computer
office software such as word processing and spreadsheet applications. The
manufacturers have reported all such software as Year 2000 compliant. As the
Company uses Electronic Data Interchange extensively to communicate with certain
customers, specifically for order taking and invoicing, this area is being
monitored carefully to ensure that these customers are able to send and receive
compliant data no later than June 30, 1999.

Most Year 2000 compliance efforts were completed by the Company's IT staff
with minimal time and without affecting progress of other IT projects. As a
result, the Company's Year 2000 expenditures have approximated only $50,000, and
future costs are expected to be insignificant.

The Company has identified those of its vendors, suppliers and customers
which it expects to be material to its operations after January 1, 2000 ('Key
Business Partners'). Through inquiry and other available means, the Company is
taking steps to determine the state of their Year 2000 readiness. The Company
will continue to monitor the readiness of such Key Business Partners and will
develop contingency plans, as appropriate, to the extent that there appears a
significant risk, in the Company's reasonable judgment, of Year 2000 compliance
failure with respect to any of them.

Although the Company cannot quantify the worst case consequences that may
result from any failure of Year 2000 readiness on the part of the Company or any
of its Key Business Partners, it anticipates that such consequences could
include, among other things, temporary delays in the delivery of products as
well as delays and errors in customer/vendor remittances. Consequently, even a
temporary inability of the Company to conduct its business in the ordinary
course due to the Year 2000 issue could have a material adverse effect on the
business and results of operations of the Company. While the Company has no
contingency plans regarding the failure of its systems or the systems of Key
Business Partners, the Company believes that actions taken to date, as described
above, should reduce the risk of any disruption and the resulting impact on the
Company and its business.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Swisher
International Group Inc. and Subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 5, 1999

SWISHER INTERNATIONAL GROUP INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

AS OF DECEMBER 31,
--------------------
1998 1997
-------- --------

ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 1,633 $ 1,057
Accounts receivable, less allowance for doubtful accounts of $1,490 and $1,643,
respectively......................................................................... 30,770 32,348
Inventories............................................................................. 77,903 60,714
Deferred income taxes................................................................... 1,459 1,218
Other current assets.................................................................... 4,699 3,096
-------- --------
Total current assets................................................................. 116,464 98,433
-------- --------
Property, plant and equipment:
Land.................................................................................... 1,494 1,299
Buildings and improvements.............................................................. 21,562 10,812
Machinery and equipment................................................................. 57,743 51,300
Construction in progress................................................................ 2,991 11,998
-------- --------
83,790 75,409
Less, accumulated depreciation.......................................................... 11,327 7,155
-------- --------
72,463 68,254
-------- --------

Goodwill, net of accumulated amortization of $5,129 and $3,512, respectively.............. 45,116 46,733
Investments in affiliates................................................................. 11,733 13,315
Prepaid pension cost...................................................................... 4,954 4,972
Other assets.............................................................................. 6,359 6,050
-------- --------
Total assets......................................................................... $257,089 $237,757
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....................................................... $ 23,000 $ --
Accounts payable........................................................................ 6,933 8,102
Accrued expenses........................................................................ 9,870 8,657
Due to affiliates....................................................................... -- 5,900
Income taxes payable.................................................................... 2,827 2,863
-------- --------
Total current liabilities............................................................ 42,630 25,522
Long-term debt............................................................................ 70,072 101,092
Deferred income taxes..................................................................... 9,877 7,296
Accrued postretirement and postemployment benefits........................................ 15,364 14,241
Other liabilities......................................................................... 4,583 3,657
-------- --------
Total liabilities.................................................................... 142,526 151,808
-------- --------
Commitments and contingencies
Stockholders' equity:
Common Stock............................................................................ 341 341
Paid-in capital......................................................................... 45,428 45,428
Retained earnings....................................................................... 71,603 40,069
Treasury stock, at cost, 221,700 shares................................................. (2,895) --
Cumulative translation adjustments...................................................... 86 111
-------- --------
Total stockholders' equity........................................................... 114,563 85,949
-------- --------
Total liabilities and stockholders' equity........................................... $257,089 $237,757
======== ========

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

SWISHER INTERNATIONAL GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------

Net sales............................................................. $266,998 $275,644 $225,229
Cost of sales......................................................... 136,133 137,708 113,764
-------- -------- --------
Gross profit..................................................... 130,865 137,936 111,465
Selling, general and administrative expenses.......................... 71,123 64,862 61,008
-------- -------- --------
Operating profit...................................................... 59,742 73,074 50,457
Interest expense, net................................................. 7,073 8,049 9,505
Other expense, net.................................................... 1,018 340 153
-------- -------- --------
Income before income taxes............................................ 51,651 64,685 40,799
Provision for income taxes............................................ 20,117 25,390 16,006
-------- -------- --------
Net income............................................................ $ 31,534 $ 39,295 $ 24,793
======== -------- --------
Earnings per share:
Basic............................................................ $ .93 $ 1.15 $ .73
======== ======== ========
Diluted.......................................................... $ .93 $ 1.15 $ .73
======== ======== ========
Weighted average shares outstanding:
Basic............................................................ 33,910 34,100 34,100
======== ======== ========
Diluted.......................................................... 33,910 34,152 34,100
======== ======== ========

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

SWISHER INTERNATIONAL GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

CUMULATIVE TOTAL
COMMON PAID-IN RETAINED TREASURY TRANSLATION STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK ADJUSTMENTS EQUITY
------ ------- -------- -------- ----------- -------------

Balance, December 31, 1995.............. $ --(a) $31,128 $ 3,622 $ 34,750
Common Stock Offering (Note 9).......... 341 94,759 -- 95,100
Dividends to Hay Island................. -- (80,459) (27,641) (108,100)
Net income.............................. -- -- 24,793 24,793
---- ------- ------- ---------
Balance, December 31, 1996.............. 341(b) 45,428 774 $ -- 46,543
Net income.............................. -- -- 39,295 -- 39,295
Foreign currency translation
adjustments........................... -- -- -- 111 111
---- ------- ------- ----- ---------
Balance, December 31, 1997.............. 341(b) 45,428 40,069 $ -- 111 85,949
Net income.............................. -- -- 31,534 -- -- 31,534
Stock repurchased....................... -- -- -- (2,895) -- (2,895)
Foreign currency translation
adjustments........................... -- -- -- -- (25) (25)
---- ------- ------- -------- ----- ---------
Balance, December 31, 1998.............. $341(b) $45,428 $71,603 $(2,895) $ 86 $ 114,563
==== ======= ======= ======= ===== =========

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

(a) Prior to the Common Stock Offering, and as of December 31, 1995, the Company
had 100 shares of issued and outstanding Common Stock with a $1 par value.

(b) As of December 31, 1998, 1997 and 1996, the Company had 103,100,000 shares
authorized with 34,100,000 shares issued and outstanding at a par value of
$.01, of which 221,700 shares are held in Treasury as of December 31, 1998.

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

SWISHER INTERNATIONAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 31,534 $ 39,295 $ 24,793
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 6,714 6,031 5,580
Deferred income taxes.............................................. 2,340 2,691 2,612
Provision for loss on closure of joint venture..................... 806 -- --
Loss on disposal of property, plant and equipment.................. 234 100 --
Changes in assets and liabilities:
Accounts receivable.............................................. (533) (9,959) 1,331
Inventories...................................................... (13,246) (5,754) (4,154)
Other current assets............................................. (1,604) (847) (487)
Prepaid pension cost............................................. 18 (312) (340)
Other assets..................................................... (1,560) (1,086) (1,573)
Accounts payable and accrued expenses............................ 40 3,764 (857)
Income taxes..................................................... 319 3,603 (1,423)
Accrued postretirement and postemployment benefits............... 1,123 453 1,015
Other liabilities................................................ 926 346 1,142
Other, net....................................................... -- -- (26)
-------- ---------- ---------
Net cash provided by operating activities............................ 27,111 38,325 27,613
-------- ---------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment........................... (8,448) (15,647) (5,653)
Proceeds from disposal of property, plant and equipment.............. 93 604 --
Investments in affiliates............................................ (7,259) (7,415) --
-------- ---------- ---------
Net cash used in investing activities................................ (15,614) (22,458) (5,653)
-------- ---------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt............................................ -- -- (20,000)
Long-term borrowings................................................. 639,300 82,100 316,263
Payments of long-term debt........................................... (647,319) (98,694) (306,729)
Dividends paid to Hay Island......................................... -- -- (108,100)
Proceeds from Common Stock Offering.................................. -- -- 95,100
Repurchase of common stock........................................... (2,895) -- --
-------- ---------- ---------
Net cash used in financing activities................................ (10,914) (16,594) (23,466)
-------- ---------- ---------
Effect of foreign exchange rate changes on cash...................... (7) 40 --
-------- ---------- ---------
Net increase (decrease) in cash and cash equivalents................. 576 (687) (1,506)
Cash and cash equivalents, beginning of period....................... 1,057 1,744 3,250
-------- ---------- ---------
Cash and cash equivalents, end of period............................. $ 1,633 $ 1,057 $ 1,744
======== ========== =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)............................... $ 7,022 $ 8,381 $ 10,545
Income taxes....................................................... $ 17,332 $ 18,970 $ 14,782

SUPPLEMENTAL NON-CASH DISCLOSURE:

During the year ended December 31, 1998, a decision was made to close the
COTABEX joint venture, a three-party arrangement between the Company and two
other cigar manufacturers. As a result, the Company received inventory and
machinery and equipment with a total value of $4,238, as settlement of a
receivable from one of its partners ($2,103), and return of its investment
($2,941) which resulted in a loss of $806.
The accompanying notes are an integral part of the consolidated financial
statements.

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

1. GENERAL AND ACQUISITION:

General. Swisher International Group Inc. and Subsidiaries (the 'Company'
or the 'Successor') manufactures and sells cigars and smokeless tobacco
products. The principal market for the Company's products is the United States.

Acquisition. Through November 6, 1995, Swisher International, Inc. (the
'Predecessor') was a wholly owned subsidiary of American Maize-Products Company
('AMPCo'). On November 6, 1995, in connection with the acquisition of AMPCo and
its subsidiaries by Eridania Beghin-Say, S.A. ('EBS'), the common stock of the
Predecessor was simultaneously sold for $169,773 to the Company, which was a
wholly owned subsidiary of Hay Island Holding Corporation ('Hay Island') prior
to the Offering (see Note 10). This transaction is referred to as the
'Acquisition.'

The aggregate purchase price was comprised of cash of $39,773, senior bank
debt of $110,000, the proceeds of which were paid to the seller, and
subordinated debt of $20,000 payable to the seller.

The Acquisition was accounted for as a purchase, which results in a new
basis of accounting for periods subsequent to the acquisition date. The fair
value of assets acquired aggregated $203,859, including goodwill of $50,245
(net), and the fair value of liabilities aggregated $164,086. Based on Hay
Island's previous ownership interest in AMPCo, the amount of goodwill and
shareholders' equity recognized as of the acquisition date was reduced by
$8,645. For income tax purposes, the Acquisition has been treated as an asset
purchase. Accordingly, goodwill will be amortized over 15 years for income tax
purposes.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:

Principles of Consolidation. The consolidated financial statements include
the accounts of Swisher International Group Inc. and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation. Except as indicated to the contrary, all references
to 'the Company' are to the Predecessor or to the Successor. Foreign currency
translation adjustments resulting from the translation of the financial position
and results of operations of the Company's United Kingdom subsidiary are
accumulated as a separate component of stockholders' equity. Investments in
affiliated companies with a 20% or greater ownership interest, but less than
majority control, are accounted for on an equity basis and, accordingly,
consolidated income includes the Company's share of their income.

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

Revenue Recognition. Revenue is recognized when shipments are made to
customers.

Earnings Per Share. In 1997, the Financial Accounting Standards Board
('FASB') issued SFAS No. 128, 'Earnings per Share.' SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the previously required
fully diluted earnings per share. All earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to the SFAS No.
128 requirements. Weighted average shares used in computing diluted earnings per
share may differ from the weighted average shares used in computing basic
earnings per share as a result of employee stock options.

Comprehensive Income. In 1997, the FASB issued SFAS No. 130, 'Reporting
Comprehensive Income.' SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. The Company's comprehensive
income consists of net income and foreign currency translation adjustments.

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:--(CONTINUED)

Comprehensive income for the years ended December 31, 1998, 1997 and 1996 was
$31,509, $39,406 and $24,793, respectively.

Advertising Costs. Advertising costs of $5,365, $4,072 and $2,521 for the
years ended December 31, 1998, 1997 and 1996, respectively, were expensed as
incurred.

Research and Development Costs. Research and development expenditures are
expensed as incurred. Expenditures amounted to $1,244, $1,142 and $940 for the
years ended December 31, 1998, 1997 and 1996, respectively.

Cash and Cash Equivalents. Cash and cash equivalents include highly liquid
investments with original maturities of three months or less when purchased. The
carrying value of cash equivalents approximates fair value.

Concentration of Credit Risk. Financial instruments which potentially
subject the Company to a concentration of credit risk are cash and cash
equivalents and accounts receivable.

The Company maintains its cash and cash equivalents with various high
quality banks. Amounts held in individual banks may periodically exceed, for
brief time periods, federally insured amounts. The Company's customers are
primarily wholesale tobacco and candy distributors, wholesale grocers and food
and drug chains, in many geographic regions. To reduce credit risk, the Company
performs ongoing credit evaluations of its customers' financial condition but
does not generally require collateral.

Inventories. Inventories are stated at the lower of cost or market. The
last-in, first-out (LIFO) method is used to determine the cost of tobacco and
packaging contents in inventory. All tobacco inventory is included in current
assets in conformity with standard industry practice, notwithstanding the fact
that significant quantities of inventory are carried for several years for
purposes of the curing process. The average cost and the first-in, first-out
(FIFO) methods are used to calculate the cost of the remaining inventories.

Property, Plant and Equipment. Property, plant and equipment is stated at
cost less accumulated depreciation. Expenditures for new facilities and those
which increase useful lives are capitalized. Maintenance and repairs are
expensed as incurred. When property, plant and equipment is sold or retired, the
cost and accumulated depreciation applicable to those assets are removed and any
gain or loss on the transaction is included in income.

Plant and equipment is depreciated over its estimated useful life, using
the straight-line method. Depreciation is based on the following useful lives:
buildings and improvements, 10 to 30 years; machinery and equipment, 5 to 15
years. Assets recorded under capital leases are amortized over the lease term
or, if title ultimately passes to the Company, over their estimated useful
lives. Depreciation expense approximated $4,201, $3,568 and $3,172,
respectively, for the years ended December 31, 1998, 1997 and 1996.

Goodwill. Goodwill arising from the Acquisition in November 1995 is being
amortized over 40 years.

Investments in Affiliates. During 1997, the Company acquired interests in
two joint ventures which were to supply the Company with premium cigars, for a
total cost of $14,491. As of December 31, 1997, $5,900 of the total cost is
reflected as Due to Affiliates. During 1998, a decision was made to close one of
the joint ventures, resulting in a write-off of the Company's investment of
$2,941 and a loss of $806, which is included in other expense, net. The excess
of the purchase price, which is insignificant, over the Company' s equity
interest in the net assets of the joint venture is being amortized over 40
years.

Assessment of Long-Lived Assets. The Company periodically evaluates
whether there has been a permanent impairment in the carrying value of
long-lived assets, including goodwill by comparing them to

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:--(CONTINUED)

anticipated future operating cash flows. Factors which management considers in
performing this assessment include current operating results and trends, demand,
competition and other economic factors.

Deferred Financing Costs. Deferred financing costs relate to costs
incurred in connection with long-term bank financing obtained by the Company.
Costs of $6,090, which are included in other assets, are being amortized on a
straight-line basis (which approximates the interest method) over the term of
the financing agreements. Amortization expense for the years ended December 31,
1998, 1997 and 1996 was $1,223, $1,121 and $1,074, respectively.

Interest Rate Swaps. The Company periodically enters into interest rate
swap agreements which change the interest payable on a portion of its
outstanding long-term debt from a variable to a fixed rate basis. These
agreements involve the receipt of variable rate payments in exchange for fixed
rate payments over the life of the agreements without an exchange of the
underlying principal amount. The differential to be paid or received is accrued
and recognized as an adjustment to interest expense as interest rates change.

Income Taxes. Under the liability method of accounting for income taxes,
the Company recognizes deferred tax liabilities and assets which are determined
based on the difference between the financial statement basis and tax basis of
assets and liabilities, using enacted tax rates in effect for the year in which
the differences are expected to reverse.

A valuation allowance against deferred tax assets is required if, based on
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized. Management has determined, based on the
reversal of existing taxable temporary differences and its expectations for the
future, taxable income will more likely than not be sufficient to fully
recognize deferred tax assets.

3. INVENTORIES:

Inventories consist of the following:

AS OF DECEMBER 31, 1998 1997
- ------------------ ------- -------
Finished goods................................... $22,822 $16,908
Work-in-process.................................. 2,604 2,871
Raw materials.................................... 42,005 33,485
Stores and supplies.............................. 10,472 7,450
------- -------
$77,903 $60,714
======= =======

The tobacco content of inventories is stated using the LIFO method. As of
December 31, 1998 and 1997, inventories of $64,263 and $52,647, respectively,
are stated using the LIFO method of accounting. These amounts are less than the
corresponding replacement costs by $1,877 and $169 as of December 31, 1998 and
1997, respectively.

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

4. DEBT:

Long-term debt consists of the following:

AS OF DECEMBER 31, 1998 1997
- ------------------ -------- --------
Revolving credit borrowings.................... $ 93,000 $101,000
Capital lease obligations(a)................... -- --
Miscellaneous.................................. 72 92
-------- --------
93,072 101,092
Less, current portion.......................... 23,000 --
-------- --------
$ 70,072 $101,092
======== ========

- ------------------
(a) The Company leases land, buildings and equipment under a capital lease. As
of December 31, 1998 and 1997, property, plant and equipment included $7,624
and $8,336 (net of accumulated depreciation of $3,226 and $2,514,
respectively), relating to the assets under lease. As of November 1, 1995,
the Company has extinguished its liability under the capital lease by
purchasing investments and placing such investments in an irrevocable trust,
which will be used to satisfy principal and interest payments for the
remainder of the lease.

In November 1997, the Company modified its credit agreement with
BankBoston, N.A., as administrative agent, which consisted of a $27 million
revolving credit facility and term loans aggregating $130 million. The modified
credit agreement is a $130 million unsecured revolving credit facility ('the
Existing Credit Facility'), maturing in November 2001. The facility reduces by
$15 million on each anniversary date. At the Company's option, interest is
payable based on (a) 'alternate base rate' plus an applicable margin, as
defined, which was 7.75% as of December 31, 1998, or (b) Eurodollar rate plus an
applicable margin, as defined, which was 6.38% as of December 31, 1998.

The Existing Credit Facility contains various restrictive covenants
including, among other things, limitations on the ability of the Company to
incur debt, create liens, pay dividends, sell assets and make investments and
acquisitions. The Company's ability to pay dividends is limited to a pool of $10
million plus 25% of net income, as defined, for the four quarters most recently
ended prior to the dividend payment date. In addition, the Existing Credit
Facility requires the Company to maintain specified financial ratios and satisfy
certain tests, including minimum net worth and indebtedness to EBITDA and
maximum leverage ratios. The Existing Credit Facility also contains customary
events of default.

As of December 31, 1998, the Company had $20.8 million of unused
availability thereunder after taking into account approximately $1.175 million
utilized to support letters of credit. The weighted average interest rate on all
outstanding debt as of December 31, 1998 and 1997 was 7.29% and 7.36%,
respectively.

The Company previously entered into an interest rate swap agreement which
has an aggregate notional amount of $15 million as of December 31, 1998 and
terminates on July 2, 1999. Under the terms of the swap agreement, the Company
pays a fixed interest rate of 5.9% and receives a variable interest rate equal
to three month LIBOR. Such agreement effectively converts the interest on $15
million of long-term debt from a variable rate to a fixed rate of interest. In
the event of nonperformance by the counterparties, the Company could lose some
or all of any future positive cash flows. However, the Company does not
currently anticipate nonperformance by such counterparties. The fair value of
the interest rate swap agreement represents the estimated receipts or payments
that would be made to terminate the agreement. As of December 31, 1998 and 1997,
the Company would have had to pay insignificant amounts to terminate the swap
agreement.

The fair value of the Company's long-term debt approximates the carrying
value as of December 31, 1998 and 1997 based on interest rates available for
debt with similar terms.

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

4. DEBT:--(CONTINUED)

Interest costs incurred during the years ended December 31, 1998, 1997 and
1996 were $7,156, $8,203 and $9,638, respectively. Interest capitalized in those
periods approximated $364, $345 and $223, respectively.

Interest income approximated $83, $154 and $133 for the years ended
December 31, 1998, 1997 and 1996, respectively.

5. INCOME TAXES:

Prior to the Acquisition, the Company's income tax filings were the
responsibility of AMPCo. For periods subsequent to November 6, 1995, the Company
is included in consolidated income tax filings with Hay Island. In accordance
with a tax sharing agreement with Hay Island, the Company has computed its
provision for income taxes for the years ended December 31, 1998, 1997 and 1996
on a separate company basis.

The provision for income taxes consists of:

YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------

CURRENT:
Federal..................................................... $ 15,562 $ 19,779 $ 11,780
State and local............................................. 2,215 2,920 1,614
-------- -------- --------
17,777 22,699 13,394
Deferred, principally federal............................... 2,340 2,691 2,612
-------- -------- --------
$ 20,117 $ 25,390 $ 16,006
======== ======== ========

The difference between the actual income tax provision and the income tax
provision computed by applying the statutory federal income tax rate to income
before provision for income taxes is attributable to the following:

YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- ------------- -------------

Federal statutory rate.................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal income tax
benefit................................................. 3.0 3.2 3.1
Nondeductible expenses.................................... 0.3 0.3 0.4
Other, net................................................ 0.6 0.8 0.7
---- ---- ----
38.9% 39.3% 39.2%
==== ==== ====

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

5. INCOME TAXES:--(CONTINUED)

The components of net deferred tax assets and liabilities are as follows:

AS OF DECEMBER 31, 1998 1997
- ------------------ ------- ------
CURRENT DEFERRED TAX ASSETS:
Accrued expenses and reserves............................... $ 492 $ 604
Inventory capitalization.................................... 1,329 1,052
LIFO reserve................................................ -- 58
------- ------
1,821 1,714
------- ------
CURRENT DEFERRED TAX LIABILITIES:
Accounts receivable......................................... 362 496
------- ------
362 496
------- ------
Current deferred income taxes............................... $ 1,459 $1,218
======= ======
NONCURRENT DEFERRED TAX ASSETS:
Postretirement and postemployment benefit accruals.......... $ 841 $ 703
Other....................................................... 477 219
------- ------
1,318 922
------- ------
NONCURRENT DEFERRED TAX LIABILITIES:
Goodwill.................................................... 2,085 1,312
Depreciation................................................ 7,700 5,922
Pension..................................................... 488 298
Other....................................................... 922 686
------- ------
11,195 8,218
------- ------
Noncurrent deferred income taxes............................ $ 9,877 $7,296
======= ======

6. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:

The Company has several non-contributory defined pension benefit plans
which cover substantially all employees. Pension benefits are generally based on
either years of service and employee compensation during the last years of
employment, or years of service times a multiplier. The Company's policy is to
make annual contributions sufficient to meet the minimum funding requirements
set forth in the Employees Retirement Income Security Act of 1974 ('ERISA').

Actuarially determined pension costs are accrued currently and include
amounts for current service and prior service costs, which are amortized on a
straight-line basis over the participants' estimated remaining service period.

In addition, the Company provides certain health care benefits for retired
employees and their eligible dependants. A significant number of the Company's
employees may become eligible for these benefits if they are employed until
retirement age and have fulfilled certain service requirements.

The Company has adopted the disclosure provisions of SFAS No. 132,
'Employers' Disclosures about Pensions and Other Postretirement Benefits'. As
of December 31, 1998 and 1997, the pension plans' assets were cash and
investments in equity and fixed income securities. The funded status and amounts
recognized in the

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

6. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:--(CONTINUED)

Company's consolidated balance sheets for the pension plans and postretirement
benefit plans other than pensions were as follows:

POSTRETIREMENT
BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
------------------ ----------------------
CHANGE IN BENEFIT OBLIGATION: 1998 1997 1998 1997
------- ------- -------- --------

Benefit obligation at beginning of year.............. $48,937 $44,317 $ 10,719 $ 10,404
Service cost......................................... 1,601 1,367 409 316
Interest cost........................................ 3,550 3,292 750 705
Actuarial (gain)/loss................................ 4,787 2,604 536 (381)
Benefits paid........................................ (2,765) (2,643) (437) (325)
------- ------- -------- --------
Benefit obligation at end of year.................... 56,110 48,937 11,977 10,719
------- ------- -------- --------

CHANGE IN PLAN ASSETS:

Fair value of plan assets at beginning of year....... 58,841 53,289 -- --
Actual return on plan assets......................... 8,220 8,195 -- --
Employer contributions............................... -- -- 437 325
Benefits paid........................................ (2,765) (2,643) (437) (325)
------- ------- -------- --------
Fair value of plan assets at end of year............. 64,296 58,841 -- --
------- ------- -------- --------

Funded status (underfunded).......................... 8,186 9,904 (11,977) (10,719)
Unrecognized actuarial gain.......................... (4,078) (6,461) (2,170) (2,857)
Unrecognized prior service cost...................... 1,406 1,529 -- --
Adjustment to recognize minimum liability............ (560) -- -- --
------- ------- -------- --------
Prepaid pension cost (accrued postretirement
benefits)......................................... $ 4,954 $ 4,972 $(14,147) $(13,576)
======= ======= ======== ========

AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL
POSITION CONSIST OF:

Prepaid benefit cost................................. $ 7,725 $ 6,961 $ -- $ --
Accrued benefit liability............................ (2,771) (1,989) (14,147) (13,576)
------- ------- -------- --------
Prepaid pension cost (accrued postretirement
benefits)......................................... $ 4,954 $ 4,972 $(14,147) $(13,576)
======= ======= ======== ========
Intangible asset related to minimum liability,
included in Other Assets.......................... $ 560 $ -- $ -- $ --
======= ======= ======== ========

ACTUARIAL ASSUMPTIONS:

Discount rate as of January 1........................ 7.25% 7.50% 7.25% 7.75%
Discount rate as of December 31...................... 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets....................... 10% 10% N/A N/A
Rate of compensation increase........................ 5.0-6.5% 5.0-7.0% N/A N/A

For measurement purposes, a 10 percent annual rate of increase in the per
capita cost of covered health care benefits for the Other Postretirement Benefit
plan was assumed as of December 31, 1998. The rate was assumed to decrease
gradually to 5.5 percent for 2001 and remain at that level thereafter.

Assumed health care costs trend rates have a significant effect on the
amounts reported for the health care plan. A one percentage point change in the
assumed health care cost trend rates would increase (decrease) the accumulated
postretirement benefit obligation as of December 31, 1998 by $1,556 and
($1,220), respectively, and

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

6. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:--(CONTINUED)

the aggregate of the service cost and interest cost by $176 and ($143) for the
year ended December 31, 1998, respectively.

The provisions for the pension plans and postretirement benefit plans other
than pensions include the following:

POSTRETIREMENT
BENEFITS
OTHER THAN
PENSION BENEFITS PENSIONS
---------------- ----------------
COMPONENTS OF NET PERIODIC BENEFIT (INCOME) COST: 1998 1997 1998 1997
------ ------ ------ ----

Service cost.................................................. $1,601 $1,367 $ 409 $316
Interest cost................................................. 3,550 3,292 750 705
Expected return on plan assets................................ (5,765) (5,075) -- --
Net amortization and deferral................................. 72 104 (151) (228)
------ ------ ------ ----
Net periodic benefit (income) cost............................ $ (542) $ (312) $1,008 $793
====== ====== ====== ====

The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were ($24,508), ($23,920), and $21,310 respectively, as
of December 31, 1998 and ($21,672), ($21,242) and $20,025, respectively, as of
December 31, 1997.

Supplemental Plan: In addition to benefits provided under the Company's
qualified pension plans, the company also provides pension benefits under a
non-contributory supplemental retirement plan (the 'Supplemental Plan'). The
Supplemental Plan, which covers certain executives and other key employees,
provides for benefits in addition to the funded plans for limitations enacted
under ERISA and the Internal Revenue Code, and maintains pre-1989 benefit levels
for service prior to that date. The Company recorded pension expense under the
Supplemental Plan of $926, $595 and $610 for the years ended December 31, 1998,
1997 and 1996, respectively.

Savings Plan: The Company has a savings plan (the 'Plan') under Section
401(k) of the Internal Revenue Code, to provide its eligible employees with
additional income upon retirement. The Plan requires specified contributions and
allows discretionary contributions by the Company. Expense under the Plan was
$571, $527 and $526 for the years ended December 31, 1998, 1997 and 1996,
respectively.

7. POSTEMPLOYMENT BENEFITS OTHER THAN TO RETIREES:

The Company provides certain postemployment benefits to former or inactive
employees after employment but before retirement. Postretirement service cost
expense amounted to approximately $752, $202 and $207 for the years ended
December 31, 1998, 1997 and 1996, respectively.

The amount recognized on the Company's consolidated balance sheets for
postemployment benefits other than to retirees is as follows:

AS OF DECEMBER 31, 1998 1997
- ------------------ ------- -----

ACTUARIAL PRESENT VALUE OF ACCUMULATED POSTEMPLOYMENT BENEFIT OBLIGATIONS:
Former employees..................................................................... $(1,421) $(697)
Unrecognized loss.................................................................... 204 32
------- -----
Accrued postemployment benefits...................................................... $(1,217) $(665)
======= =====

The assumed discount rate used to determine the accumulated postemployment
benefit obligation is 6.75%, 7.25% and 7.5% for the years ended December 31,
1998, 1997 and 1996, respectively.

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

8. COMMITMENTS AND OTHER:

As of December 31, 1998, the Company was committed under long-term
operating leases expiring through 2003. Minimum annual rental and lease
commitments were as follows:

TRANSPORTATION
YEAR ENDING DECEMBER 31: EQUIPMENT OTHER TOTAL
- ------------------------ -------------- ----- ------

1999.................................................................. $2,050 $606 $2,656
2000.................................................................. 2,153 417 2,570
2001.................................................................. 230 329 559
2002.................................................................. 242 190 432
2003.................................................................. 254 190 444
Thereafter............................................................ 266 190 456

Rent and lease expense was $2,897, $2,796 and $2,481 for the years ended
December 31, 1998, 1997 and 1996, respectively.

Commitments relating to contracts to purchase tobacco from various
suppliers approximated $8,677 as of December 31, 1998.

During the years ended December 31, 1998, 1997 and 1996, sales to one
customer aggregated approximately 15%, 15% and 14%, respectively.

9. STOCKHOLDERS' EQUITY:

On December 18, 1996, the Company completed an initial public offering (the
'Offering') of 6,000,000 shares of Class A Common Stock at a price of $17 per
share, resulting in net proceeds (after issuance costs) of $95.1 million. The
net proceeds were paid as a dividend to Hay Island.

Prior to consummation of the Offering, the Company amended its authorized
capital stock to 75,000,000 shares of Class A Common Stock and 28,100,000 shares
of Class B Common Stock and converted each outstanding share of its current
common stock into 281,000 shares of its newly created Class B Common Stock
(totaling 28,100,000 shares of Class B Common Stock). Immediately after
consummation of the Offering and as of December 31, 1998 and 1997, the Company
had 6,000,000 shares of Class A Common Stock and 28,100,000 shares of Class B
Common Stock outstanding.

The preference and relative rights of the Class A Common Stock and the
Class B Common Stock are substantially identical in all respects except for
disparity in voting power and conversion rights. Each share of Class A Common
Stock and Class B Common Stock entitles the holder of record to one vote and ten
votes, respectively. Each share of Class B Common Stock is convertible at the
option of the holder into one share of Class A Common Stock. The Class A Common
Stock has no conversion rights.

In February 1998, the Company approved the repurchase of up to $15 million
of Class A Common Stock. The per share prices of such repurchases are subject to
prevailing market prices at the time of repurchase. The timing of such
repurchases is at the discretion of management, and subject to the terms of the
repurchase program. During 1998, the Company repurchased 221,700 shares of Class
A Common Stock.

10. STOCK OPTION PLAN:

The 1996 Stock Option Plan (the 'Plan'), provides that selected employees,
consultants and directors may be granted incentive stock options, nonqualified
stock options and stock appreciation rights ('SARs') at exercise prices not less
than the fair market value per share at the date of grant. Pursuant to the Plan,
the aggregate number of shares of Class A Common Stock which may be made subject
to awards of stock options or

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

10. STOCK OPTION PLAN:--(CONTINUED)

SARs shall not exceed at any time 10% of the then outstanding shares of common
stock, in the aggregate. The maximum term of any stock option granted under the
Plan is ten years and generally will vest in annual one-third increments.
Concurrently with the consummation of the Offering, the Company granted
1,564,000 options under the Plan at an exercise price of $17 per share. During
1997, an additional 320,580 options were granted under the Plan at a weighted
average exercise price of $17.29 per share. During 1998, no options were
granted. No SARs were granted during 1998, 1997 and 1996. No stock options were
exercised during 1998, 1997 and 1996. During 1998, 20,461 stock options were
forfeited and 10,229 were canceled. No stock options were forfeited or canceled
during 1997 and 1996. As of December 31, 1998, 1,853,890 options are
outstanding, of which 1,132,209 options are exercisable at a weighted average
exercise price of $17.03 per share, and 1,556,110 shares were available for
grant of options or SARs.

The Company has adopted the disclosure-only provisions of SFAS No. 123
'Accounting for Stock-Based Compensation' ('SFAS No. 123'), but applies
Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for the Plan. If the Company had elected to recognize compensation
cost for the Plan consistent with the method prescribed by SFAS No. 123, net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:

YEAR ENDED DECEMBER 31, 1998 1997 1996
- ----------------------- ------- ------- -------

Net income:
As reported.......................................................... $31,534 $39,295 $24,793
Pro forma............................................................ 28,850 36,678 24,600
Basic earnings per share:
As reported.......................................................... $ .93 $ 1.15 $ .73
Pro forma............................................................ .85 1.08 .72
Diluted earnings per share:
As reported.......................................................... $ .93 $ 1.15 $ .73
Pro forma............................................................ .85 1.07 .72

The fair value of stock options used to compute pro forma net income and
earnings per share in accordance with SFAS No. 123 is the estimated present
value at grant using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1998: dividend yield of 0%; expected volatility
of 30.3%; a risk free interest rate of 6.15% and an expected holding period of
five years; for 1997: dividend yield of 0%; expected volatility of 30.3%; a risk
free interest rate of 6.14% and an expected holding period of five years; for
1996: dividend yield of 0%; expected volatility of 30.0%; a risk free interest
rate of 6.14% and an expected holding period of five years.

11. RELATED PARTIES:

Certain members of the Company's Board of Directors are affiliated with
entities which provide legal, consulting and other advisory services to the
Company. Payments to such entities aggregated $290, $646 and $922 for the years
ended December 31, 1998, 1997 and 1996, respectively.

In connection with the Offering, the Company and Hay Island entered into a
Management Services Agreement. The services provided by Hay Island to the
Company include, among other things, treasury and cash management, risk
management, human resource management, marketing support, long-term strategic
planning, business development and investor relations.

The Management Services Agreement has a term of five years and will
automatically renew thereafter for successive one-year terms. After the initial
five-year term, the Management Services Agreement may be

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

11. RELATED PARTIES:--(CONTINUED)

terminated at any time by either party upon six months' prior written notice.
The Management Services Agreement will also be terminable by either the Company
or Hay Island upon six months' written notice if Hay Island ceases to own shares
of Common Stock representing more than 50% of the combined voting power of the
Common Stock of the Company.

The amount payable under the Management Services Agreement for the years
ended December 31, 1998 and 1997 was $938 and $925, respectively, payable in
twelve monthly installments. The Management Services Agreement provides that the
amounts payable thereunder will be reviewed on an annual basis and, based on an
agreed upon allocation of Hay Island's costs for the services performed, the
amount payable thereunder will be increased or decreased, provided that any
increase in such amount will be limited to a percentage increase based upon the
change in the Consumer Price Index for all Urban Consumers, Northeast for the
preceding twelve-month period.

Each party will agree to indemnify the other, except in certain limited
circumstances, against liabilities that the other may incur that are caused by
or arise in connection with such party's failure to fulfill its material
obligations under the Management Services Agreement.

12. CONTINGENCIES:

The tobacco industry continues to experience significant health-related
litigation. Plaintiffs in such cases typically seek compensation and, in some
cases, punitive damages, for various injuries allegedly sustained from the use
of tobacco products or exposure to tobacco smoke, including health care costs.
The Company is not aware of any adverse decision or judgment having been
rendered against smokeless tobacco or cigar manufacturers.

The Company is a defendant, along with other defendants in an action
brought by an individual plaintiff in Louisiana seeking damages and other relief
in connection with injuries allegedly resulting from use of the Company's and
the other defendants' products. The Company and other defendants have been named
in a Texas action brought by another individual seeking damages and other relief
in connection with injuries allegedly caused to plaintiff by products
manufactured by the Company and the other defendants. The Company is also a
defendant, along with other defendants, in a wrongful death action commenced in
Louisiana. In that case, plaintiffs allege that decedent suffered injury after
consuming products manufactured by one or more of the defendants including the
Company and seek damages for the wrongful death of the decedent in excess of $50
together with fees and costs. The Company is vigorously defending these
lawsuits.

In addition, the Company is named in two groups of cases filed in a West
Virginia court in 1998 in an apparent effort to take advantage of a mass
litigation panel recently established by the West Virginia courts. In the first
group of cases, 65 different plaintiffs filed simultaneous actions against 20
manufacturers of tobacco products including the Company and 14 other defendants.
In the second group, 18 different plaintiffs filed simultaneous actions against
19 manufacturers of tobacco products including the Company and eight other
defendants. In each group of cases, each plaintiff alleges that he or she became
ill after using tobacco products manufactured by one or more of the defendands
in that group of cases. None alleges that any particular plaintiff used any
specific product or the products of any specific defendant and none alleges the
damage that any specific plaintiff incurred; nevertheless, each plaintiff seeks
damages in an unspecified amount against all the defendants in the group of
cases in which he or she is a participant.

The Company is also a defendant along with multiple other defendants in
three actions brought under California Proposition 65 and the California Unfair
Competition Act.

Further, the Company is subject to other litigation, claims and contractual
agreements arising in the ordinary course of business. In the opinion of
management, the cost, if any, of resolving all litigation and contingencies
should not have a significant impact on the Company's consolidated financial
position. There can be no assurance, however, that the Company may not be named
as a defendant in future suits, nor can there be any

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

12. CONTINGENCIES:--(CONTINUED)

assurance that existing or future litigation will not result in an adverse
judgment against the Company which could have a material adverse effect on the
Company's business, future results of operations or cash flows. The Company does
not carry insurance to protect against health-related product liability because
the cost of obtaining such coverage is commercially prohibitive. Additionally, a
judgment against the Company with respect to a product or any related products
could preclude the further sale of such product, which could have a material
adverse effect on the Company's business.

In 1996, the federal Food and Drug Administration ('FDA') for the first
time asserted jurisdiction over nicotine in tobacco as a 'drug' and issued
regulations purporting to regulate smokeless tobacco products as 'medical
devices.' These regulations prohibit the sale of smokeless tobacco products to
minors and severely restrict advertising, marketing and promotion of smokeless
tobacco products. The regulations also require the Company and other
manufacturers to comply with a wide range of labeling, reporting and other
requirements. In April 1997, ruling in a case filed by the Company and other
smokeless tobacco manufacturers to challenge the FDA's authority, a federal
court held that the FDA as a matter of law is not precluded from regulating
smokeless tobacco products as 'medical devices' or from implementing certain
labeling and access restrictions. At the same time, however, the court said that
the FDA has no authority to restrict the advertising and promotion of smokeless
tobacco products and stayed the effectiveness of any of the restrictions related
to labeling, access, advertising and promotion due to take effect in 1997 and
1998 pending further order of the court. The court's opinion was appealed to the
U.S. Court of Appeals for the Fourth Circuit which reversed the District Court
ruling in 1998 and held that the FDA had no jurisdiction to regulate tobacco.
The Fourth Circuit's ruling has been appealed to the United States Supreme
Court. The Company is unable to predict the outcome of the appeal or its impact
on those portions of the regulations that have not been given effect. Any
further provisions of these regulations that become effective could have a
materially adverse effect on the Company's business.

Cigars and smokeless tobacco products have long been subject to federal,
state and local excise taxes. Such taxes are frequently subject to proposed
increases, in some cases significant increases, to fund various legislative
initiatives. The Balanced Budget Act adopted by Congress in 1997, provides for
increases in federal excise taxes on all tobacco products in two stages,
beginning in 2000. Management does not believe that these increases will have a
material adverse effect on the Company's operations, however, enactment of new
or significant further increases in existing federal, state or local excise
taxes could have a material adverse effect on the Company's business.

The Company is subject to laws and regulations relating to the protection
of the environment. While it is not possible to quantify with certainty the
potential impact of future actions regarding environmental matters, in the
opinion of management, compliance with the present environmental protection laws
will not have a material adverse impact upon the Company's consolidated
financial position, results of operations or cash flows.

In June 1997, the five largest tobacco companies announced an agreement
with trial lawyers and the Attorneys General of several states suing to recoup
Medicare and Medicaid expenses (the 'Proposed Settlement'). Although the Company
was not a party to any of the actions being settled (the 'State AG Actions'),
legislation introduced in Congress in the wake of the Proposed Settlement sought
to raise the price of cigarettes and other tobacco products significantly and to
regulate all tobacco products (including smokeless tobacco and, in some cases,
cigars) by imposing full FDA regulation and adopting new and highly restrictive
marketing requirements. In September 1998, when insufficient votes could be
found to support a cloture motion, Congressional leadership tabled the proposed
legislation. However, the five tobacco companies announced later in 1998 a
master settlement agreement with all fifty state Attorneys General except for
one to settle the State AG Actions pursuant to which the companies agreed to pay
significant penalties annually and to certain restrictions on the marketing of
their products. The Company is not a participant in the master settlement
agreement and was not a party to any of the actions settled thereby. The federal
Administration has announced that it is considering

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

12. CONTINGENCIES:--(CONTINUED)

filing an action against tobacco manufacturers to recoup Medicare and Medicaid
expenses. The Company cannot determine whether such an action will be filed or
whether it would impact the Company's business.

On February 9, 1998, the Company was notified by the Federal Trade
Commission ('FTC') of the adoption by the FTC of an Order to File a Special
Report on the Company's advertising and marketing expenditures with regard to
its cigar business for 1997 and 1996. This information, which is similar to
information which the Company has filed with the FTC for many years with respect
to its smokeless tobacco products, was filed on April 9, 1998.

13. QUARTERLY FINANCIAL DATA (UNAUDITED):

QUARTER ENDED: MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- -------------- -------- ------- ------------ -----------

1998
Net sales................................................. $60,283 $70,223 $ 73,738 $62,754
Gross profit.............................................. 30,831 34,562 35,459 30,013
Operating profit.......................................... 14,435 16,316 17,522 11,469
Income before income taxes................................ 12,797 14,383 14,607 9,864
Net income................................................ 7,868 8,756 8,899 6,011
Earnings per share:
Basic................................................... $ .23 $ .26 $ .26 $ .18
Diluted................................................. $ .23 $ .26 $ .26 $ .18
Stock price high.......................................... 17 3/4 13 8 9 1/8
Stock price low........................................... 12 3/4 7 13/16 5 1/4 4 3/8

1997(A)
Net sales................................................. $63,799 $70,669 $ 75,491 $65,685
Gross profit.............................................. 30,479 35,745 37,711 34,001
Operating profit.......................................... 14,947 19,470 20,062 18,595
Income before income taxes................................ 12,833 17,346 18,068 16,438
Net income................................................ 7,765 10,500 10,924 10,106
Earnings per share:
Basic................................................... $ .23 $ .31 $ .32 $ .30
Diluted................................................. $ .23 $ .31 $ .32 $ .30
Stock price high.......................................... 18 3/4 19 1/2 18 7/8 21 5/8
Stock price low........................................... 13 1/4 13 1/2 14 1/4 14 1/4

- ------------------
(a) The first three quarters of 1997 earnings per share amounts have been
restated to comply with SFAS No. 128.

14. GOING-PRIVATE TRANSACTION:

On December 9, 1998, the Company announced that its Board of Directors
approved a transaction to take the Company private (the 'Going-Private
transaction'). Subject to the approval of (i) the holders of a majority of its
Class A Common Stock present at a shareholder's meeting, and (ii) the holders of
a majority of its Common Stock, the Company will merge (the 'Merger') with its
wholly-owned subsidiary, SIGI Acquisition Corporation ('Newco'). Holders of all
outstanding shares of the Company's Class A Common Stock will receive $9.50 per
share, and all 28,100,000 outstanding Class B shares will be exchanged by the
Class B holder for 2,810 newly-issued shares of Newco common stock, representing
all of the outstanding shares of common stock, and voting

SWISHER INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

14. GOING-PRIVATE TRANSACTION:--(CONTINUED)

power of Newco. In connection with the Merger, the Company intends to enter into
a new credit facility, which will consist of a $75 million five-year term loan
and a $125 million five-year revolving credit facility, whereby the Company will
finance the purchase price of the Class A shares in the Merger, pay other fees
and expenses incurred in connection with the Merger, and refinance its existing
credit facility.

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information concerning the directors
and executive officers of the Company.

NAME AGE POSITION WITH THE COMPANY OR NEWCO
---- --- ----------------------------------

William Ziegler, III* 70 Chairman of the Board, Chief Executive Officer and Director of the Company;
Chairman of the Board, Chief Executive Officer and Director of Newco
William T. Ziegler* 43 Chairman of the Executive Committee, Chief Operating Officer and Director of the
Company
Timothy Mann 56 President and Director of the Company
Robert A. Britton 52 Executive Vice President, Chief Financial Officer and Director of the Company
Nicholas J. Cevera, Jr. 61 Executive Vice President--Operations and Director of the Company
Blake T. Newton, III 56 Executive Vice President and General Counsel of the Company
J. Thomas Ryan, III 51 Executive Vice President--Sales & Marketing and Director of the Company
Justo S. Amato 64 Senior Vice President--Finance of the Company
Joseph R. Augustus 37 Senior Vice President--Government Relations
Paul M. Arvia 61 Senior Vice President--Sales of the Company
Barry L. Drugg 52 Senior Vice President--Human Resources of the Company
John E. Fraleigh 60 Senior Vice President--Tobacco Procurement of the Company
Peter J. Ghiloni 47 Senior Vice President--Marketing of the Company
Karl H. Ziegler 29 Secretary of the Company; Secretary of Newco
Cynthia Z. Brighton 39 Vice President--Financial Services, Treasurer and Director of the Company
C. Keith Hartley 56 Director of the Company
Alfred F. La Banca 67 Director of the Company
Donald E. McNicol 77 Director of the Company
Charles H. Mullen 71 Director of the Company
John R. Tweedy 69 Director of the Company

- ------------------
* William Ziegler, III is the father of William T. Ziegler, Karl H. Ziegler and
Cynthia Z. Brighton.

WILLIAM ZIEGLER, III has been a Director, Chief Executive Officer and
Chairman of the Board of the Company since November 1995. Mr. Ziegler served as
a Director of American Maize from 1958 to 1995; as Chairman of its Board from
1964 to 1995; and as its Chief Executive Officer from 1976 to 1993. He has also
been a Director of Swisher since 1966. Mr. Ziegler is President of the E.
Matilda Ziegler Foundation for the Blind (a private foundation) and also has
served as Trustee of Connecticut College and as a member of the Board of
Directors of the Maritime Aquarium at Norwalk, Connecticut. Mr. Ziegler is the
father of William T. Ziegler, Cynthia Z. Brighton and Karl H. Ziegler. Mr.
Ziegler is a member of the Executive Committee.

WILLIAM T. ZIEGLER has been a Director and Chief Operating Officer of the
Company since November 1995. From 1991 to 1994, Mr. Ziegler served as Director
of Corporate Development for Helme Tobacco Company, a former subsidiary which
was merged into the Company in 1994 ('Helme'). William T. Ziegler is a son of
William Ziegler, III. William T. Ziegler is Chairman of the Executive Committee.

TIMOTHY MANN has been a Director and President of the Company since
November 1995. He has also served as President and a Director of Swisher since
1986. Mr. Mann is Vice President of the Cigar Association of America, and serves
on its Board of Directors. He is also a Director of the Tobacco Merchants'
Association and a member of the National Association of Wholesale Marketers by
whom he was named a Dean of the Industry. Mr. Mann is a member of the Executive
Committee.

ROBERT A. BRITTON was named Executive Vice President, Chief Financial
Officer and a Director of the Company in October 1996 after serving as Vice
President and Chief Financial Officer of the Company since

November 1995. From 1990 to 1995, Mr. Britton served as Vice President and
Treasurer of American Maize. Mr. Britton is a member of the Pension Committee.

NICHOLAS J. CEVERA, JR. has been a Director and Executive Vice
President-Operations of the Company since November 1995. He has also served as
Executive Vice President-Operations of Swisher since July 1986 and, prior
thereto, as its Vice President-Manufacturing since April 1980.

BLAKE T. NEWTON, III has been Executive Vice President and General Counsel
of the Company since April 1997. For more than 20 years prior thereto, Mr.
Newton was a member of the law firm of Keck Mahin & Cate and its predecessor,
Hall, McNicol, Hamilton & Clark.

J. THOMAS RYAN, III has been a Director and Executive Vice President-Sales
and Marketing of the Company since November 1995. Mr. Ryan, who has also been
Executive Vice President-Sales and Marketing of Swisher since April 1994, was
President of Helme from 1985 to 1994 and Senior Vice President of Helme from
1983 to 1985. Mr. Ryan serves on the Boards of the Cigar Association of America,
the Smokeless Tobacco Council and the Smokeless Tobacco Research Council.

JUSTO S. AMATO was named Senior Vice President-Finance of the Company in
September 1996 after serving as Vice President-Finance since November 1995. He
also has been Senior Vice President-Finance of Swisher since September 1996 and,
prior thereto, its Vice President-Finance since 1978.

PAUL M. ARVIA was named Senior Vice President-Sales of the Company in
September 1996 after serving as Vice President-Sales since November 1995. He
also has been Senior Vice President-Sales of Swisher since September 1996 and,
prior thereto, its Vice President-Sales since 1983.

JOSEPH R. AUGUSTUS was named Senior Vice President-Government Relations of
the Company in October 1998 after serving as Vice President-Government Relations
since October 1996, prior to which he was Director-Government Relations of the
Company and of Swisher.

BARRY L. DRUGG was named Senior Vice President-Human Resources of the
Company in September 1996 after serving as Vice President-Personnel and
Administration since November 1995. He also has been Senior Vice President-Human
Resources of Swisher since September 1996 and, prior thereto, its Vice
President-Personnel and Administration since 1983.

JOHN E. FRALEIGH was named Senior Vice President-Tobacco Procurement of the
Company in October 1996 after serving as Vice President-Tobacco Procurement
since November 1995. He also has been Senior Vice President-Tobacco Procurement
of Swisher since October 1996 and, prior thereto, its Vice President-Tobacco
Procurement since 1976. Mr. Fraleigh, who joined Swisher in 1964, is also
responsible for quality control and product development.

PETER J. GHILONI was named Senior Vice President-Marketing of the Company
in September 1996 after serving as Vice President-Marketing since November 1995.
He also has been Senior Vice President-Marketing of Swisher since September 1996
and, prior thereto, its Vice President-Marketing since April 1994. Prior
thereto, Mr. Ghiloni served as Senior Vice President-Markeeting and Sales for
Helme since October 1991.

CYNTHIA Z. BRIGHTON has been Treasurer, Vice President-Financial Services
and Director of the Company since November 1995. From 1986 to 1993, she is also
served as a director and corporate secretary of American Fructose Corporation,
an American Maize affiliate, and as the corporate secretary of American Maize
from 1992 to 1994. Ms. Brighton is a daughter of William Ziegler, III. Ms.
Brighton is a member of the Pension Committee.

KARL H. ZIEGLER has been Secretary of the Company since November 1995. Mr.
Ziegler is a son of William Ziegler, III.

C. KEITH HARTLEY has been a director of the Company since November 1995.
Since August 1995 he has been the Managing Partner-Corporate Finance at Forum
Capital Markets L.P., an investment banking firm and a co-manager of the Initial
Public Offering. From May 1991 to August 1995, Mr. Hartley was an independent
financial consultant. From February 1990 to May 1991, Mr. Hartley served as
Managing Director of Peers & Co., a merchant banking firm. Mr. Hartley also
serves as a director of Comdisco, Inc., a lessor of high technology equipment,
and as a director of U.S. Diagnostics, Inc., an operator of diagnostic imaging
centers. Mr. Hartley is Chairman of the Audit Committee and a member of the
Executive, Pension and Compensation Committees.

ALFRED F. LA BANCA has been a Director of the Company since November 1995.
He is also Chairman of the Board of the Mailex Corporation, and of Action
Letter, Inc., which he founded in 1961. Both Mailex Corporation

and Action Letter, Inc. specialize in the production of direct mail data
processing and outsource management for client firms. Mr. La Banca is Chairman
of the Compensation Committee and a member of the Executive Committee and the
Audit Committee.

DONALD E. MCNICOL has been a Director of the Company since November 1995.
He is presently of counsel to the law firm of Schnader Harrison Segal & Lewis
LLP. Mr. McNicol was a partner of Hall, McNicol, Hamilton & Clark from 1956 to
1992 and of counsel to the firm of Keck, Mahin & Cate from 1992 to 1996. Mr.
McNicol served as a Director and General Counsel of American Maize from 1964 to
1991. Mr. McNicol is Chairman of the Pension Committee and a member of the
Executive, Compensation and Audit Committees.

CHARLES H. MULLEN has been a director of the Company since February 1997.
Mr. Mullen retired in 1992 as chairman and chief executive officer of American
Tobacco Company, which was a subsidiary of American Brands, Inc. He was also a
vice president and a member of the board of directors of American Brands, Inc.
Prior thereto he was chairman of American Cigar, a former subsidiary of American
Brands, Inc. In addition, Mr. Mullen serves as a director of Standard Commercial
Corporation. Mr. Mullen is a member of the Audit and Compensation Committees.
Mr. Mullen is the sole member of the Special Committee formed in connection with
the proposed Merger.

JOHN R. TWEEDY has been a Director of the Company since November 1995. Mr.
Tweedy served in various management positions at American Maize and its
affiliates from 1972 until he retired as Senior Vice President of American Maize
in 1993. Mr. Tweedy is a member of the Audit and Compensation Committees. Mr.
Tweedy was a member of the Special Committee until his resignation on December
8, 1998, after having met the day before with a doctor, due to a change in his
health which he believed would preclude him from properly discharging further
the duties imposed upon him by membership in the Special Committee.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth a summary of all compensation awarded or
paid by or on behalf of the Company to the chief executive officer and the four
other most highly compensated executive officers of the Company (the 'Named
Executive Officers') for services rendered in all capacities to the Company
(including its subsidiaries) for the periods covered:

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
(A) (B) (C) (D) (E) (F) (G)
SECURITIES
UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/SARS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) # COMPENSATION(3)
- ------------------------------- ---- -------- -------- --------------- ------------ ---------------

William Ziegler, III (1)....... 1998 -- -- -- -- --
Chairman of the Board and 1997 -- -- -- -- --
Chief Executive Officer 1996 $360,000 $410,400 $ 9,810 -- --
Timothy Mann................... 1998 $338,150 $330,414 $86,100 -- --
President 1997 $316,250 $372,525 $82,777 37,583 --
1996 $271,833 $282,200 $78,390 275,000 $ 500,000
J. Thomas Ryan, III............ 1998 $268,760 $204,253 $17,742 -- --
Executive Vice President, 1997 $251,160 $230,108 $18,146 27,333 --
Sales and Marketing 1996 $218,400 $174,300 $21,843 200,000 $ 400,000
Nicholas J. Cevera, Jr. ....... 1998 $245,525 $186,595 $20,290 -- --
Executive Vice President, 1997 $229,425 $210,194 $16,898 27,333 --
Operations 1996 $199,500 $159,200 $18,248 200,000 $ 400,000
Robert A. Britton.............. 1998 $223,255 $169,670 $23,213 -- --
Executive Vice President and 1997 $208,650 $204,542 $17,225 77,333 --
Chief Financial Officer 1996 $160,500 $146,376 $19,066 150,000 $ 300,000

(Footnotes on next page)

(Footnotes from previous page)
- ------------------
(1) William Ziegler, III is an employee of Hay Island and, as such, has been
compensated exclusively by Hay Island since January 1, 1997. He received no
compensation from the Company in 1998; however, under the Management
Services Agreement, the Company paid $937,730 to Hay Island in 1998, some of
which may have been used by Hay Island to compensate Mr. Ziegler. (See 'ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Management Services
Agreement' and '--Family Relationships').
(2) Includes for Messrs. Mann, Ryan, Cevera and Britton, respectively, (a)
imputed income for executive life insurance premiums paid by the Company in
1998 of $34,500, $1,963, $2,461 and $2,555 and in 1997 of $34,500, $1,848,
$1,968 and $2,412 and in 1996 of $34,500, $2,134, $985 and $2,253; (b)
imputed income for use of a Company car in 1998 of $12,321, $7,479, $6,895
and $8,268 and in 1997 of $12,030, $8,097, $6,768 and $6,848 and in 1996 of
$7,657, $9,916, $6,321 and $8,187; and (c) reimbursement of taxes in
connection with imputed income derived from payment by the Company of
premiums on executive life insurance policies, imputed income derived from
use of a Company car, imputed income derived from the the aggregate payment
of Medicare taxes by the Company in regard to accruals under supplemental
pension programs and other perquisites for 1998 of $39,279, $8,300, $10,934
and $12,390 and for 1997 of $36,247, $8,201, $8,162 and $7,965 and for 1996
of $36,233, $9,793, $9,255 and $8,626. Includes for William Ziegler, III in
1996, imputed income for use of a Company car of $5,294 and reimbursement of
taxes in connection with imputed income derived from payment by the Company
of premiums on executive life insurance policies, derived from the use of a
Company car, derived from aggregate payment of Medicare taxes by the Company
in regard to accruals under supplemental pension programs and other
perquisites of $4,516. Also includes for Mr. Cevera in 1996 imputed income
for group term life insurance of $1,687.
(3) Represents special, one-time bonuses paid in connection with the Initial
PublicOffering.

OPTION GRANTS

In Fiscal 1998, no stock options were granted to the Named Executive
Officers under the 1996 Stock Option Plan (as described below).

AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND
FISCAL 1998 YEAR-END OPTION VALUES (1)

NUMBER OF SECURITIES VALUES OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)(2)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------

William Ziegler, III....................................... -- -- -- --
Timothy Mann............................................... 195,860 116,723 0 0
J. Thomas Ryan, III........................................ 142,443 84,890 0 0
Nicolas J. Cevera, Jr. .................................... 142,443 84,890 0 0
Robert A. Britton.......................................... 125,777 101,556 0 0

- ------------------
(1) No options were exercised in 1998.
(2) The closing price of the Class A Shares on December 31, 1998, the last
trading day in 1998, was $9.00.

MANAGEMENT INCENTIVE PLAN

The Company maintains a management incentive plan ('MIP') to compensate
eligible full-time employees for their contributions to the Company's
performance in revenue growth, improved operating profit, cost control and
production facility utilization. Bonuses under the MIP are based on achievement
of financial performance targets and individual performance goals that are
developed for each participant at the beginning of each year by management and
such participant and are approved by the Compensation Committee. Each
participant in the MIP has a target bonus opportunity that is expressed as a
percentage of base salary. The percentage varies based on the potential of the
position to have a positive impact on the performance of the Company. The actual
award is based on management's recommendation and must be approved by the
Compensation Committee. In 1999, the Company paid bonuses of approximately $2.5
million under the MIP for the year ended December 31, 1998.

For 1998, the bonuses under the MIP for Timothy Mann, J. Thomas Ryan, III,
Nicholas J. Cevera, Jr. and Robert A. Britton are set forth in the Summary
Compensation Table. William Ziegler, III was an employee of Hay Island for all
of 1998 and received no bonus under the MIP.

1996 STOCK OPTION PLAN

In 1996, the Company adopted, and Hay Island, as the sole stockholder of
the Company, approved, the 1996 Stock Option Plan (the '1996 Stock Option
Plan'), which provides that the aggregate number of Class A Shares which may be
made subject to awards of stock options or stock appreciation rights ('Awards')
shall not exceed at any time 10% of the then outstanding Common Shares. The 1996
Stock Option Plan is administered by the Compensation Committee of the Board of
Directors. Awards may be made thereunder (subject to specified aggregate limits
and annual individual limits on certain types of awards) to selected employees,
consultants and directors of the Company. The Company granted no stock options
under the 1996 Stock Option Plan in Fiscal 1998.

The Compensation Committee and the Board of Directors each has authority,
subject to the terms of the 1996 Stock Option Plan, to determine, among other
things, when and to whom to grant Awards under the 1996 Stock Option Plan, the
number of Class A Shares to be covered by Awards, the types and terms of stock
options and stock appreciation rights granted and the exercise price of the
stock options and stock appreciation rights and to prescribe, amend and rescind
the rules and regulations relating to the 1996 Stock Option Plan.

Stock options granted under the 1996 Stock Option Plan may be either
'incentive stock options,' as such term is defined in Section 422 of the Code,
or nonqualified stock options. The exercise price of nonqualified stock options
must equal or exceed the fair market value per Class A Share on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting power of all classes of the Company's outstanding capital stock (a
'10% Stockholder'), the exercise price of any incentive stock option granted
must equal at least 110% of the fair market value of the Class A Shares on the
date of the grant. The exercise price of incentive stock options for all other
employees must equal or exceed the fair market value per share of Class A Shares
on the date of grant. The maximum term of any incentive stock option granted
under the 1996 Stock Option Plan is ten years (five years in the case of an
incentive stock option granted to a 10% Stockholder). Stock options granted
under the 1996 Stock Option Plan generally vest in annual one-third increments.

Stock appreciation rights may be granted alone or in tandem with stock
options under the 1996 Stock Plan. A stock appreciation right is a right to be
paid an amount equal to the excess of the fair market value of the Class A
Shares on the date of exercise over the base price. Settlement of stock
appreciation rights may be in cash, Class A Shares or both, as specified in the
award agreement or as otherwise determined by the Compensation Committee or the
Board of Directors.

No person may be granted stock options or stock appreciation rights under
the 1996 Stock Option Plan in any calendar year representing an aggregate of
more than 2.5% of the then outstanding Common Shares. Stock options and stock
appreciation rights shall be exercisable at the times and upon the conditions
that the Compensation Committee or the Board of Directors may determine, as
reflected in the applicable award agreement.

Unless otherwise provided in a grantee's award agreement, (i) upon
termination of such grantee's employment or service as a consultant or a
director due to death or disability, any unvested options and stock appreciation
rights shall vest in full and shall remain exercisable for a period of one year
and shall terminate thereafter and (ii) upon termination of such grantee's
employment or service as a consultant or a director for any reason other than
death or disability, any unvested options and stock appreciation rights shall
terminate and all vested options and stock appreciation rights shall remain
exercisable for a period of three months and shall terminate thereafter.

Unless otherwise provided in a grantee's award agreement, awards granted
under the 1996 Stock Option Plan may be transferred by the grantee only by will
or by the laws of descent and distribution, and may be exercised only by the
grantee during his or her lifetime. The 1996 Stock Option Plan may, at any time
and from time to time, be altered, amended, suspended or terminated by the Board
of Directors, in whole or in part, provided, that no amendment which requires
stockholder approval in order for the 1996 Stock Option Plan to continue to
comply with Section 162(m) of the Code will be effective unless such amendment
has received the requisite approval by the Company's stockholders. In addition,
no amendment may be made which adversely

affects any of the rights of the grantee under any Award theretofore granted
without such grantee's consent. No awards will be made under the 1996 Stock
Option Plan following the tenth anniversary of the date of adoption of the 1996
Stock Option Plan.

BENEFIT PLANS

Capital Accumulation Plan--401(k). The Company sponsors The Capital
Accumulation Plan (the 'CAP'), a tax qualified 401(k) defined contribution plan,
effective October 31, 1995, which covers eligible salaried employees employed at
the Company's locations within the United States. The CAP permits participants
to contribute up to 15% of their base salary to the plan (highly compensated
employees, including officers, are limited to 6% or a percentage determined by
testing under applicable regulations). The Company may make a matching
contribution, depending on profits. The Company also may make a contribution of
1% of base salary. Participant contributions are 100% vested when made and
Company contributions vest ratably over 4 years. Participants may direct the
investment of all contributions among the funds offered by the CAP. The amount
of base salary that may be used under the CAP to determine employer matching
contributions was limited to $160,000 for 1998.

Retirement Plan. The Company sponsors the Retirement Plan for Salaried
Employees of Swisher International, Inc. (the 'Retirement Plan'), a tax
qualified defined benefit plan effective December 31, 1959, which covers
eligible salaried employees employed at the Company's locations within the
United States. The Retirement Plan benefits are based on credited service (up to
35 years) with Swisher International, Inc., and may include credited service
with members of a controlled group of corporations of which Swisher
International, Inc. was a part, and the participant's compensation (base pay and
regular annual performance bonus) for such service averaged over the 60
consecutive months out of the 120 months prior to termination of employment
which produces the highest average. The Retirement Plan's benefits are reduced
to partially reflect social security benefits received by the participant.
Benefits are paid at Normal Retirement Date (age 65), and vest after 5 years of
service.

Supplemental Pension Program. The Company established a Supplemental
Pension Program, effective October 31, 1995 (the 'SERP'), to restore retirement
benefits under the Retirement Plan and contributions under the CAP limited by
the Employee Retirement Income Security Act of 1974, as amended ('ERISA') and by
Treasury regulations relating to maximum retirement benefits, contributions and
compensation (which may be used in calculating benefits and contributions). The
SERP also provides an increased level of retirement benefits for certain
executives of the Company. All other SERP provisions follow those of the
Retirement Plan and CAP. The SERP is a nonqualified, unfunded plan under ERISA
and the Code. The Company may make contributions to a trust established for the
benefit of the SERP participants or establish a reserve on its books against
future benefit obligations. However, the assets of any such trust or any amount
so reserved shall not be protected from the claims of creditors.

The following illustration shows the annual benefits under the Retirement
Plan and the SERP, expressed as straight life annuities beginning at age 65.

5 YEAR
AVERAGE ANNUAL 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- -------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

$ 50,000 $ 3,943 $ 7,887 $ 11,830 $ 15,774 $ 19,717 $ 23,660 $ 23,660
75,000 6,448 12,897 19,345 25,794 32,242 38,691 38,691
100,000 9,055 18,110 27,165 36,221 45,276 54,331 54,331
200,000 19,482 38,964 58,445 77,927 97,409 116,891 116,891
300,000 29,908 59,817 89,725 119,634 149,542 179,451 179,451
400,000 40,335 80,670 121,005 161,340 201,675 242,011 242,011
500,000 50,762 101,523 152,285 203,047 253,809 304,570 304,570
600,000 61,188 122,377 183,565 244,754 305,942 367,130 367,130
700,000 71,615 143,230 214,845 286,460 358,075 429,690 429,690
800,000 82,042 164,083 246,125 328,167 410,208 492,250 492,250
900,000 92,468 184,937 277,405 369,873 462,342 554,810 554,810

Benefits under the Retirement Plan are subject to the maximum limitations
imposed by federal law on pension benefits. For 1998, these limitations include
a maximum straight life annuity at age 65 of $130,000 per year, $10,833 per
month and a maximum annual compensation of $160,000.

As of December 31, 1998, the years of employment recognized by the
Retirement Plan and SERP for Messrs. Mann, Ryan, Cevera and Britton were 20.13,
12.80, 18.68, and 21.04 (including 17.95 years of service with a predecessor
company), respectively. Mr. Ziegler does not participate in the Company's
Retirement Plan or SERP. Special incentive payments such as those described in
the Summary Compensation Table are excluded from pensionable earnings. As the
Company's Management Incentive Plan is based on the performance of the Company,
it is possible that the total of an executive's base pay and regular annual
performance bonus may be more or less than the total of base pay and regular
annual performance bonus in the prior year by more than 10%. See 'Management
Incentive Plan.'

Executive Life Insurance. The Company sponsors a life insurance program,
which replaces the group plan for certain selected officers, that provides the
participants with policies that continue coverage into retirement. As of
December 31, 1998, at least $1,000,000 of coverage is provided to covered
officers. The Company pays the policy premiums and makes payments to the
executives to enable their payment of any taxes resulting from imputed income on
the premiums. The cost of this program for 1998 for the covered Named Executive
Officers was, in the aggregate, approximately $140,000.

EMPLOYMENT AGREEMENTS

Each of Timothy Mann, J. Thomas Ryan, III, Nicholas J. Cevera, Jr. and
Robert A. Britton entered into employment agreements with the Company, dated as
of October 23, 1996. The term of each employment agreement is three years. Each
employment agreement may be terminated by the Company at any time. In the case
of termination without Cause (as defined in the employment agreements), the
Company is required to pay the executive's salary and provide the executive with
certain perquisites for the remainder of the term. In addition, the Company will
be obligated to pay the executive's target bonus pro-rated for the year in which
the termination occurs. An executive may terminate his employment agreement at
any time upon two weeks' notice. Any such termination will result in the
forfeiture by the executive of any further payments or benefits pursuant to the
employment agreement as of such termination. Also, each employment agreement
contains a non-compete provision extending for twelve months following voluntary
termination by the executive or termination for cause or for any period during
which severance is being paid to such executive. Pursuant to his respective
employment agreement, commencing on January 1, 1999, Messrs. Mann, Ryan, Cevera
and Britton will receive an annual salary of $355,058, $287,573, $262,712 and
$245,581 respectively, and certain current perquisites (including tax
reimbursement for certain perquisites). Each executive is entitled to
participate in the Company's MIP (See 'Management Incentive Plan'). Pursuant to
his employment agreement, each executive is entitled to participate in the
Company's 1996 Stock Option Plan (See '1996 Stock Option Plan').

COMPENSATION COMMITTEE REPORT

COMPENSATION OVERVIEW

The Compensation Committee of the Board of Directors (the 'Committee') has
the responsibility for the design, implementation and administration of the
Company's executive compensation including the MIP, awards under the 1996 Stock
Option Plan and compensation of the President and Executive Vice Presidents of
the Company. The Committee is comprised entirely of outside independent
directors.

The objective of the Company's executive compensation program is to attract
and retain the management talent necessary to maximize long-term profitability
and shareholder value. The program is designed to accomplish this objective
through plans that (i) motivate senior managers, and align their interests with
those of the Company's shareholders, by tying incentive compensation to Company
profitability and individual performance and (ii) provide a base level of
compensation that is competitive with similar businesses as well as a cross
section of general industry.

ELEMENTS OF COMPENSATION

The three principal components of the Company's executive compensation
program are salary, annual incentives and stock options, each of which is
discussed in detail below.

1. Salary

Of the three elements of executive compensation, salary is the least
affected by the Company's performance; although it is very much dependent on
individual performance. Salary is intended to provide a base level of
compensation that is competitive at the market median with similar companies.
The Compensation Committee reviews and approves salary levels and increases for
the President and the Executive Vice Presidents.

Following a procedure used for all salaried employees of the Company, each
of the executive officers is assigned a salary range for his or her particular
job. The range is set at 80% to 120% of the median market value of the position.
The median market value is established by an evaluation of the degree of
accountability, expertise and problem solving required in each position and the
results of salary surveys conducted by major compensation consultants and
associations. The salary ranges are reviewed annually using current survey data
to determine the amount of adjustment, if any.

Individual salaries are reviewed annually. The timing and amount of any
increase to salaried employees, including executive officers, are both dependent
upon (i) the performance of the individual and, to a lesser extent (ii) the
relationship of his or her actual salary to the midpoint of the salary range.

Salaries for the President and Executive Vice Presidents of the Company are
recommended by the Chief Executive Officer and reviewed and approved by the
Compensation Committee. The Chief Executive Officer's recommendations on the
amount of increase are based on his subjective evaluation of each individual's
performance in his or her respective functional area.

2. Annual Incentives

The executive officers of the Company all participate in a Management
Incentive Plan (see 'Management Incentive Plan' above) under which annual cash
bonuses are paid, based on the achievement of specific financial and/or
operational targets and each participant's individual performance.

3. Stock Options

Stock options are designed to provide long-term incentives and rewards tied
to increases in the price of the Company's Class A Common Stock. The Committee
believes that stock options, which provide value to the participants only when
the Company's shareholders benefit from stock price appreciation, are an
integral component of the Company's executive compensation program. Thirty-seven
(37) key employees, including the executive officers, participate in the
stockholder-approved 1996 Stock Option Plan. The factors considered in awarding
the specific number of options to each participant included the individual's
total compensation, organizational level, and his or her potential for
contributing to the successful operations of the Company. The options granted
were all incentive stock options except where the limits of the plan and
Treasury regulations required the granting of non-qualified options. (See '1996
Stock Option Plan' above).

COMPLIANCE WITH SECTION 162(M) OF THE CODE

Section 162(m) of the Code, generally disallows a tax deduction to any
public company for compensation over $1 million paid to such company's chief
executive officer and four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. Absent extraordinary circumstances, the
Company's current compensation programs are not likely to trigger the $1 million
limit on deductibility. The Company will consider whether new compensation
programs should be structured in a manner that would be exempt from the
deduction limit at the time such programs are designed.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Mr. Ziegler's compensation is paid entirely by Hay Island. See 'EXECUTIVE
COMPENSATION-- Summary Compensation Table.'

MEMBERS OF THE COMPENSATION COMMITTEE

Alfred F. La Banca (Chairman)
C. Keith Hartley
Donald E. McNicol
Charles H. Mullen
John R. Tweedy

PERFORMANCE GRAPH

The following graph compares the cumulative total stockholder return on the
Company's Class A Common Stock with the cumulative total return of the S&P 500
Index and a market weighted index of publicly traded peers for the period from
December 17, 1996 through December 31, 1998. The returns are calculated by
assuming an investment in the Class A Common Stock and each index of $100 on
December 17, 1996. The publicly traded companies in the peer group are:
Consolidated Cigar, Inc., General Cigar Company Inc. and United States Tobacco
Company.

Measurement Period Swisher S&P 500 Peer Companies
- ------------------ ------- ------- --------------
12/17/96 100.0 100.0 100.0
12/31/96 93.4 102.0 96.8
3/31/97 86.0 104.3 99.7
6/30/97 101.5 121.9 118.3
9/30/97 106.3 130.5 136.7
12/31/97 100.0 133.7 112.2
3/31/98 76.5 151.8 71.8
6/30/98 47.1 156.2 55.6
9/30/98 35.3 140.1 52.0
12/31/98 52.9 169.3 69.4

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Class A Shares and the Class B Shares, as of December 31, 1998,
by (i) each person known by the Company to own beneficially more than 5% of the
outstanding Class A Shares or Class B Shares, (ii) each of the Company's
directors, (iii) each of the executive officers of the Company, and (iv) all
directors and executive officers of the Company, as a group (20 persons). Except
as set forth in the notes to the table, the business address of each person is
20 Thorndal Circle, Darien, Connecticut 06820. The information set forth in the
table and the notes thereto is based solely upon information provided to the
Company directly by such stockholders. As described in the notes to the table,
voting and/or dispositive power with respect to certain Class A Shares and Class
B Shares is shared by the named individuals or entities. In these cases, such
shares are shown as beneficially owned by each of those sharing voting and/or
dispositive power.

CLASS A SHARES CLASS B SHARES (1)
------------------------ -------------------------
NUMBER PERCENT OF NUMBER PERCENT OF
NAME OF SHARES CLASS OF SHARES CLASS
---- --------- ---------- ---------- ----------

Hay Island Holding Corporation (2)(17) -- -- 28,100,000 100.0%
First Union Bank of Connecticut, as trustee (2)(17) -- -- 28,100,000 100.0%
Citigroup Inc. (3) 754,152 13.05%
Scudder Kemper Investments, Inc. (4) 686,100 11.87%
Marsh & McLennan Companies, Inc. (5) 377,200 5.83% -- --
Cynthia Z. Brighton (6) 1,750 * -- --
Robert A. Britton (7)(18) 1,000 * -- --
Nicholas J. Cevera, Jr. (8)(18) 1,000 * -- --
C. Keith Hartley (9) 1,500 * -- --
Alfred F. La Banca (10) 500 * -- --
Timothy Mann (11)(18) 2,000 * -- --
Donald E. McNicol (12) 1,000 * -- --
Charles H. Mullen (13) 500 * -- --
J. Thomas Ryan, III (14)(18) 1,000 * -- --
John R. Tweedy (15) 1,000 * -- --
William T. Ziegler (16) 2,250 * -- --
William Ziegler, III, individually and as trustee (2)(17) 200 * 28,100,000 100.0%
All directors and executive officers as a group (19) 24,850 * 28,100,000 100.0%

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

(1) Each Class B Share is convertible at the option of the holder into one
Class A Share, and is automatically converted into a Class A Share upon transfer
to a person who is not a Ziegler Family Member (as defined herein). The number
of Class A Shares and the percentages contained under this heading do not
account for such conversion right.

(2) All 28,100,000 of the outstanding Class B Shares are owned by Hay
Island. Hay Island is owned by Pine Island and by the Ziegler Trusts, of which
Mr. Ziegler is the beneficiary. Mr. Ziegler and First Union Bank of Connecticut
are the co-Trustees of the Ziegler Trusts and share voting and dispositive power
over all 28,100,000 Class B Shares. Mr. Ziegler owns 25% of the outstanding
equity interest in Pine Island and Mr. Ziegler's six children own the remaining
75% equity interest in Pine Island, although Mr. Ziegler has sole voting power
with respect to such 75% equity interest owned by his children. First Union Bank
of Connecticut's business address is 300 Main Street, Stamford, Connecticut
06904.

(3) Consists of 754,152 Class A Shares owned beneficially by Citigroup
Inc., its subsidiary, Salomon Smith Barney Holdings Inc. ('SSBH') and SSBH's
subsidiary, Mutual Management Corp. ('MMC'). MMC shares voting and dispositive
power over (and is deemed a beneficial holder of ) 600,000 of these shares.
Citigroup Inc. and SSBH share voting and dispositive power (and are deemed
beneficial holders of) all 754,152 of these shares.

(4) Consists of 686,100 Class A Shares beneficially owned or deemed to be
owned beneficially by Scudder Kemper Investments, Inc. ('Scudder'), an
investment advisor registered with the SEC. Scudder has sole voting power over
and dispositive power with respect to all 686,100 such Class A Shares. Scudder's
business address is 345 Park Avenue, New York, New York 10154.

(5) Consists of 377,200 Class A Shares owned by clients of Putnam
Investment Management, Inc. ('PIM') and clients of The Putnam Advisory Company,
Inc. ('PAC'), both of which are Investment Advisors registered with the SEC and
wholly-owned subsidiaries of Putnam Investments Inc. ('PII'), a subsidiary of
Marsh & McLennan Companies, Inc. PAC is deemed the beneficial owner of the
168,200 Class A Shares owned by its clients and shares voting and dispositive
power over said shares with its said clients. PIM is deemed the beneficial owner
of the 209,000 Class A Shares owned by its clients and shares dispositive power
over said shares with its clients; PIM's clients have retained full voting power
over such shares. PII is deemed to share with PAC and PIM any voting and
dispositive power which PAC and PIM may have over their respective clients'
Class A Shares and PII is deemed a beneficial owner of all of such shares
beneficially owned by PIM and PAC. Nevertheless, both PII and Marsh & McLennan
Companies, Inc. disclaim beneficial ownership of all such shares. Marsh &
McLennan Companies, Inc.'s business address is 1166 Avenue of the Americas, New
York, New York 10036. PIM, PAC and PII share the following business address: One
Post Office Square, Boston, Massachusetts 02109.

(6) Consists of 1,750 Class A Shares beneficially owned or deemed to be
owned beneficially by Cynthia Z. Brighton directly and with respect to which she
has sole voting and dispositive power.

(7) Consists of 1,000 Class A Shares beneficially owned or deemed to be
owned beneficially by Robert A. Britton directly and with respect to which he
has sole voting and dispositive power.

(8) Consists of 1,000 Class A Shares beneficially owned or deemed to be
owned beneficially by Nicholas J. Cevera, Jr. directly and with respect to which
he has sole voting and dispositive power; but does not include 4,000 Class
Shares owned by Mr. Cevera's wife and with respect to which he disclaims
beneficial ownership. Mr. Cevera's business address is 459 East 16th Street,
Jacksonville, Florida 32206

(9) Consists of 1,500 Class A Shares beneficially owned or deemed to be
owned beneficially by C. Keith Hartley directly and with respect to which he has
sole voting and dispositive power. Mr. Hartley's business address is Forum
Capital Markets LLC, 53 Forest Avenue, Old Greenwich, Connecticut 06870.

(10) Consists of 500 Class A Shares beneficially owned or deemed to be
owned beneficially by Alfred F. La Banca directly and with respect to which he
has sole voting and dispositive power. Mr. La Banca's business address is Mailex
Corporation, 11 Elm Street, Stamford, Connecticut 06902.

(11) Consists of 2,000 Class A Shares beneficially owned or deemed to be
owned beneficially by Timothy Mann directly and with respect to which he has
sole voting and dispositive power. Mr. Mann's business address is 459 East 16th
Street, Jacksonville, Florida 32206.

(12) Consists of 1,000 Class A Shares beneficially owned or deemed to be
owned beneficially by Donald E. McNicol directly and with respect to which he
has sole voting and dispositive power. Mr. McNicol's business address is
Schnader Harrison Segal & Lewis LLP, 330 Madison Avenue, New York, New York
10017.

(13) Consists of 500 Class A Shares beneficially owned or deemed to be
owned beneficially by Charles H. Mullen directly and with respect to which he
has sole voting and dispositive power.

(14) Consists of 1,000 Class A Shares beneficially owned or deemed to be
owned beneficially by J. Thomas Ryan, III directly and with respect to which he
has sole voting and dispositive power. Mr. Ryan's business address is 459 East
16th Street, Jacksonville, Florida 32206.

(15) Consists of 1,000 Class A Shares beneficially owned or deemed to be
owned beneficially by John R. Tweedy directly and with respect to which he has
sole voting and dispositive power.

(16) Consists of 2,250 Class A Shares beneficially owned or deemed to be
owned beneficially by William T. Ziegler directly and with respect to which he
has sole voting and dispositive power.

(17) Includes shares beneficially owned or deemed to be owned beneficially
by William Ziegler, III as follows: 200 Class A Shares directly and with respect
to which he has sole voting and dispositive power; and 28,100,000 Class B Shares
owned by Hay Island. Hay Island is deemed to be beneficially owned by William
Ziegler, III, individually and as co-trustee with First Union Bank of
Connecticut of the Ziegler Trusts.

(18) Excludes Stock Options in respect of Class A Shares granted to the
executive under the 1996 Stock Option Plan as follows: Mr. Britton (227,333);
Mr. Cevera (227,333), Mr. Mann (312,583) and Mr. Ryan (227,333).

(19) Excludes Stock Options in respect of an aggregate of 859,308 Class A
Shares granted to officers whose names do not appear in this table.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

RELATIONSHIP WITH HAY ISLAND

As a result of Hay Island's stock ownership of the Company, the Board of
Directors is, and is expected to continue to be, comprised entirely of designees
of Hay Island, and Hay Island is, and is expected to continue to be, able to
direct and control the policies of the Company and its subsidiaries, including
those with respect to mergers, sales of assets and similar transactions. Hay
Island is deemed to be beneficially owned by William Ziegler, III, individually
and as trustee. Messrs. William Ziegler, III, William T. Ziegler, Hartley, La
Banca and McNicol, and Ms. Brighton, all of whom are members of the Board of
Directors, and some of whom are officers of the Company, are also members of the
Board of Directors of Hay Island.

TAX SHARING AGREEMENT

The Company and Hay Island have been, for federal income tax purposes,
members of an affiliated group of corporations of which Hay Island is the common
parent (the 'Tax Group'). As a result of such affiliation, the Company and Hay
Island are included in a consolidated federal income tax return.

A tax sharing agreement was entered into between the Company and Hay Island
(the 'Tax Sharing Agreement') pursuant to which the Company is required to pay
to Hay Island with respect to each tax year an amount equal to the consolidated
federal income taxes that would have been incurred by the Company had it not
been included in the consolidated federal income tax returns filed by the Tax
Group.

Under existing federal income tax regulations, each of the Company and Hay
Island is liable for the consolidated federal income taxes of the Tax Group for
any taxable year in which each is a member of the Tax Group. Pursuant to the Tax
Sharing Agreement, each of Hay Island and the Company will agree to indemnify
the other for any and all claims, demands, actions (including liens, levies,
audits, investigations and assessments), causes of action, suits, proceedings,
damages, liabilities, and costs and expenses incident thereto relating to
federal and state taxes on account of the actions or failure to act of the other
party.

MANAGEMENT SERVICES AGREEMENT

The Company and Hay Island entered into a Management Services Agreement
('MSA'), effective January 1, 1997. The services provided by Hay Island to the
Company include, among other things, operations, treasury and cash management,
risk management (including obtaining liability, property and casualty
insurance), human resource management, marketing support, long-term strategic
planning, business development and investor relations.

The MSA has a term of five years and will automatically renew thereafter
for successive one-year terms. After the initial five-year term, the MSA may be
terminated at any time by either party upon six months' prior written notice.
The MSA is terminable by either the Company or Hay Island upon six months'
written notice if Hay Island ceases to own Common Shares representing more than
50% of the aggregate voting power of the Common Shares.

The amount payable under the MSA for the year ending December 31, 1998 is
$937,730, payable in twelve monthly installments. The MSA provides that the
amounts payable thereunder will be reviewed on an annual basis and, based on an
agreed upon allocation of Hay Island's costs for the services performed, the
amount payable thereunder will be increased or decreased, provided that any
increase in such amount will be limited to a percentage increase based upon the
change in the Consumer Price Index for all Urban Consumers, Northeast for the
preceding twelve month period. Each party agreed to indemnify the other, except
in certain limited circumstances, against liabilities that the other may incur
that are caused by or arise in connection with such party's failure to fulfill
its material obligations under the MSA.

FAMILY RELATIONSHIPS

William Ziegler, III is the Chief Executive Officer and Chairman of the
Board of Directors of the Company. William T. Ziegler is Chief Operating Officer
and Chairman of the Executive Committee of the Board of Directors of the
Company. Cynthia Z. Brighton is a Director, Vice President--Financial Services
and Treasurer of the Company. Karl H. Ziegler is Secretary of the Company.
William Ziegler, III is the father of William T.

Ziegler, Cynthia Z. Brighton and Karl H. Ziegler; all four of them are also
employees of Hay Island and were compensated during 1997 and 1998 solely by Hay
Island for their services to the Company.

As used herein, the term 'Ziegler Family Members' includes only the
following persons: (A) William Ziegler, III and his estate, guardian,
conservator or committee; (B) each descendant of William Ziegler, III (a
'Ziegler Descendant') and their respective estates, guardians, conservators or
committees; (C) each Family Controlled Entity (defined below); and (D) the
trustees, in their respective capacities as such, of each Family Controlled
Trust (defined below). For purposes of this Proxy Statement, the term 'Family
Controlled Entity' shall mean (A) any not-for-profit corporation if at least 80%
of its board of directors is composed of William Ziegler, III and/or Ziegler
Descendants; (B) any other corporation if at least 80% of the value of its
outstanding equity is owned by Ziegler Family Members; (C) any partnership if at
least 80% of the value of its partnership interests are owned by Ziegler Family
Members; and (D) any limited liability or similar company if at least 80% of the
value of the company is owned by Ziegler Family Members. For purposes of this
Proxy Statement, the term 'Family Controlled Trust' shall mean (A) the Ziegler
Trusts and (B) any trust the primary beneficiaries of which are William Ziegler,
III, Ziegler Descendants and/or charitable organizations (collectively, 'Ziegler
Beneficiaries').

REGISTRATION RIGHTS AGREEMENT

Hay Island and the Company are parties to a Registration Rights Agreement
(the 'Registration Rights Agreement'), pursuant to which Hay Island and certain
permitted transferees of the Class B Shares held by Hay Island (Hay Island and
such permitted transferees being referred to herein as the 'Permitted Holders')
will have the right to require the Company to register under the Securities Act
of 1933, as amended (a 'Demand Registration') all or part of the Class A Shares
issuable upon conversion of the Class B Shares owned by such Permitted Holders;
provided that the Company may postpone giving effect to a Demand Registration
for up to a period of 60 days if the Company believes such registration might
have a material adverse effect on any plan or proposal by the Company with
respect to any financing, acquisition, recapitalization, reorganization or other
material transaction, or the Company is in possession of material non-public
information that, if publicly disclosed, could result in a material disruption
of a major corporate development or transaction then pending or in progress or
in other material adverse consequences to the Company. Hay Island has advised
the Company that it does not have any present intention to request any such
registration by the Company of its Class A Shares. In addition, the Permitted
Holders will have the right to participate in registrations (a 'Piggyback
Registration'). The Company will pay any expenses incurred in connection with
any Demand Registration or Piggyback Registration, except for underwriting
discounts, commissions and certain expenses attributable to the shares of Class
A Shares sold by such Permitted Holders.

OTHER AGREEMENTS

On February 1, 1996, Donald E. McNicol, a director of the Company and of
counsel to Schnader Harrison Segal & Lewis LLP, entered into an agreement with
the Company regarding his services to the Company. Immediately prior to the
Initial Public Offering, Mr. McNicol assumed the responsibilities of Vice
President of Hay Island and resigned as Vice Chairman of the Company. Hay Island
assumed all obligations under such agreement. Pursuant to the agreement, an
aggregate amount of $500,000 was payable to Mr. McNicol, although payment was
deferred, with interest at the prime rate, until February 1, 2001, when payment
will be made.

PART IV

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

FORM 10-K
PAGE NUMBER
-----------

(A) 1. CONSOLIDATED FINANCIAL STATEMENTS OF SWISHER INTERNATIONAL GROUP INC. AND
SUBSIDIARIES
Report of Independent Accountants........................................................... 21
Consolidated balance sheets................................................................. 22
Consolidated statements of income........................................................... 23
Consolidated statements of stockholders' equity............................................. 24
Consolidated statements of cash flows....................................................... 25
Notes to consolidated financial statements.................................................. 26-39
(A) 2. FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants on Financial Statement Schedule........................... S-1
Financial statement schedule
II--Valuation and qualifying accounts..................................................... S-2

(A) 3. EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

2.1 -- Agreement and Plan of Merger, dated as of December 9, 1998, among the Registrant, Hay Island and
Newco.(4)
3.1 -- Amended and Restated Certificate of Incorporation of the Registrant.(3)
3.2 -- Amended and Restated Bylaws of the Registrant.(3)
4.1 -- Specimen stock certificate.(2)
16.1 -- Letter regarding change in certifying accountant.(1)
21.1 -- List of Subsidiaries.
27.1 -- Financial Data Schedule.

- ------------------
(1) Incorporated by reference from Amendment No. 1 of the Registrant's
Registration Statement on Form S-1 (Registration No. 333-14975).

(2) Incorporated by reference from Amendment No. 3 of the Registrant's
Registration Statement on Form S-1 (Registration No. 333-14975).

(3) Incorporated by reference to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.

(4) Incorporated by reference to Registrant's preliminary proxy statement on
Schedule 14A filed on January 29, 1999 with the Securities and Exchange
Commission.

(B) REPORTS ON FORM 8-K

On January 8, 1999, the Company filed a Current Report on Form 8-K
describing the proposed Merger.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in the Town of Darien,
State of Connecticut, on the 30th day of March, 1999.

SWISHER INTERNATIONAL GROUP INC.

By: /s/ROBERT A. BRITTON
---------------------------------
Robert A. Britton
Executive Vice President
and Chief Financial Officer

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

/s/ WILLIAM ZIEGLER, III Chairman of the Board, Chief March 30, 1999
- ------------------------------------------ Executive Officer and Director
William Ziegler, III (principal executive officer)

/s/ WILLIAM T. ZIEGLER Chairman of the Executive March 30, 1999
- ------------------------------------------ Committee, Chief Operating
William T. Ziegler Officer and Director

/s/ ROBERT A. BRITTON Executive Vice President, Chief March 30, 1999
- ------------------------------------------ Financial Officer and Director
Robert A. Britton (principal financial and
accounting officer)

/s/ TIMOTHY MANN President and Director March 30, 1999
- ------------------------------------------
Timothy Mann

/s/ J. THOMAS RYAN, III Executive Vice President-Sales March 30, 1999
- ------------------------------------------ & Marketing and Director
J. Thomas Ryan, III

/s/ NICHOLAS J. CEVERA, JR. Executive Vice President- March 30, 1999
- ------------------------------------------ Operations and Director
Nicholas J. Cevera, Jr.

/s/ CYNTHIA Z. BRIGHTON Vice President-Financial March 30, 1999
- ------------------------------------------ Services, Treasurer, and Director
Cynthia Z. Brighton

/s/ C. KEITH HARTLEY Director March 30, 1999
- ------------------------------------------
C. Keith Hartley

/s/ ALFRED F. LA BANCA Director March 30, 1999
- ------------------------------------------
Alfred F. La Banca

/s/ DONALD E. McNICOL Director March 30, 1999
- ------------------------------------------
Donald E. McNicol

/s/ CHARLES H. MULLEN Director March 30, 1999
- ------------------------------------------
Charles H. Mullen

/s/ JOHN R. TWEEDY Director March 30, 1999
- ------------------------------------------
John R. Tweedy

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and the Shareholders of Swisher International Group
Inc.:

Our audits of the consolidated financial statements referred to in our
report dated February 5, 1999 appearing in this Annual Report on Form 10-K also
included an audit of the financial statement schedule listed in Item 14(a)(2) of
this Form 10-K. In our opinion, that financial statement schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 5, 1999

S-1

SCHEDULE II
SWISHER INTERNATIONAL GROUP INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------

Allowance for Doubtful Accounts:
For the year ended December 31, 1996............ $2,365 $(49) $-- $ (533) $1,783
For the year ended December 31, 1997............ 1,783 128 -- (268) 1,643
For the year ended December 31, 1998............ 1,643 100 -- (253) 1,490

S-2