SCHEDULE 14A

Information Required in Proxy Statement

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 2)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

SWISHER INTERNATIONAL GROUP INC.
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(Name of Registrant as Specified in Its Charter)

------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction
applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):

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

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
(5) Total fee paid:

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

[X] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

-2-

20 THORNDAL CIRCLE
DARIEN, CONNECTICUT 06820
April __, 1999
Dear Fellow Stockholder:

You are cordially invited to attend a special meeting ('Special Meeting')
of stockholders of Swisher International Group Inc. (the 'Company') to be held
on _______, 1999, at 10:00 a.m. local time, at the Maritime Aquarium at Norwalk,
Third Floor, 10 North Water Street, Norwalk, Connecticut.

At the Special Meeting, you will be asked by the Board of Directors of the
Company (the 'Board of Directors') to vote on the merger (the 'Merger') of the
Company with and into SIGI Acquisition Corporation ('Newco') pursuant to the
terms and conditions of the Agreement and Plan of Merger, dated as of December
9, 1998 (the 'Merger Agreement'), among the Company, Newco and Hay Island
Holding Corporation ('Hay Island' or the 'Class B Holder'), as more specifically
described below. Currently, the Company's Class A Common Stock, par value $0.01
per share (the 'Class A Shares'), is publicly owned by ___ holders of record
(the 'Class A Holders'), and all of the Company's Class B Common Stock, par
value $0.01 per share (the 'Class B Shares'), is owned by Hay Island, a holding
company. The Class A Shares and the Class B Shares are sometimes collectively
referred to herein as the 'Common Shares.'

If the Merger Agreement and the transactions contemplated thereby are
approved, adopted and consummated, the Class A Holders will receive $9.50 in
cash, without interest, for each Class A Share owned (the 'Class A Merger
Consideration'). The $9.50 per Class A Share price represents a premium of
approximately 39% over $6.8125 per share, the closing market price of the Class
A Shares on December 9, 1998, which was the last full trading day before the
proposed Merger was announced. A special committee formed by the Board of
Directors, consisting of an independent director of the Company (the 'Special
Committee'), negotiated the $9.50 per Class A Share price, as further described
below and in the enclosed Proxy Statement. If the Merger Agreement and the
transactions contemplated thereby are approved and consummated, the Class A
Holders will have no continuing equity interest in the Company, and the Class B
Holder will receive, upon conversion of its Class B Shares, shares of common
stock of Newco ('Newco Common Stock') representing all of the outstanding common
stock and voting power of Newco (the 'Class B Merger Consideration,' and
together with the Class A Merger Consideration, sometimes collectively referred
to herein as the 'Merger Consideration'), as more specifically described in the
enclosed Proxy Statement. William Ziegler, III, the Company's Chairman of the
Board and Chief Executive Officer, controls all of the outstanding capital stock
of Hay Island.

Since a majority of the members of the Board of Directors are either
employed by the Company or affiliated with the Class B Holder and, consequently,
may be considered to have divided interests in considering the proposed Merger,
the Board of Directors formed the Special Committee to negotiate the Class A
Merger Consideration and to evaluate the fairness of the Merger to the Class A
Holders, other than Hay Island or its affiliates (the 'Unaffiliated Class A
Holders').

The Special Committee has received a written opinion from PaineWebber
Incorporated ('PaineWebber'), its financial advisor, that, as of December 9,
1998, the $9.50 per Class A Share merger price was fair, from a financial point
of view, to the Unaffiliated Class A Holders. Such opinion is subject to various
limitations, qualifications and assumptions described in the opinion, a copy of
which accompanies the enclosed Proxy Statement.

The Board of Directors, taking into account the recommendation of the
Special Committee, has unanimously approved, adopted and declared advisable the
Merger Agreement and the Merger, subject to approval of the Merger Agreement and
the transactions contemplated thereby, as required by the General Corporation
Law of Delaware (the 'DGCL'), by the holders of at least a majority of the
voting power of the outstanding Common Shares (the 'DGCL Vote Requirement'),
and, in addition to the DGCL Vote Requirement, by holders owning at least a
majority of the Class A Shares voting as a separate class in person or

by proxy at the Special Meeting (the 'Majority of the Minority Vote
Requirement'). As the Class B Holder owns 98% of the voting power of the
outstanding Common Shares and has agreed in the Merger Agreement to vote its
Class B Shares in favor of the Merger, satisfaction of the DGCL Vote Requirement
is assured. The Special Committee believes that the Merger Agreement and the
Merger are fair to the Unaffiliated Class A Holders. The Board of Directors
believes that the Merger is in the best interests of the Company's stockholders
(including the Class A Holders), and unanimously recommends that you vote FOR
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby.

The attached Notice of Special Meeting of Stockholders and Proxy Statement
explain the proposed Merger and provide specific information concerning the
Special Meeting. Please read these materials carefully. In addition, you may
obtain information about the Company from documents that the Company has filed
with the Securities and Exchange Commission (the 'SEC'), including the Schedule
13E-3 Transaction Statement that has been filed therewith in connection with the
Merger.

If you do not vote in favor of the Merger Agreement and the transactions
contemplated thereby, you will have the right to dissent and to seek appraisal
of the fair market value of your Class A Shares if the Merger is consummated and
you comply with the procedures under Delaware law described on pages C-1 to C-4
of the Proxy Statement.

Whether or not you plan to attend the Special Meeting, I urge you to
complete, sign and promptly return the enclosed proxy card to ensure that your
Class A Shares will be voted at the Special Meeting. If you sign, date and
return your proxy card without indicating how you want to vote, your proxy will
be counted as a vote in favor of the Merger Agreement and the transactions
contemplated thereby. You may revoke your proxy at any time before it is voted
by submitting to the Secretary of the Company a written revocation or a proxy
bearing a later date, or by attending and voting in person at the Special
Meeting. Even if you plan to attend the Special Meeting, please complete and
return your proxy.

On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR the approval and adoption of the Merger Agreement and the
transactions contemplated thereby.

Sincerely,

William Ziegler, III

Chairman of the Board and
Chief Executive Officer

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION, NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THIS PROXY STATEMENT, THE NOTICE OF SPECIAL MEETING AND THE PROXY ARE FIRST
BEING MAILED TO THE STOCKHOLDERS OF THE COMPANY ON OR ABOUT _____________, 1999.

20 THORNDAL CIRCLE
DARIEN, CONNECTICUT 06820
---------------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------------

TO THE OWNERS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK OF SWISHER
INTERNATIONAL GROUP INC.:

Notice is hereby given that a Special Meeting of Stockholders of Swisher
International Group Inc. will be held on ______________, 1999, at 10:00 a.m.
local time, at the Maritime Aquarium at Norwalk, Third Floor, 10 North Water
Street, Norwalk, Connecticut, for the following purposes:

1. To consider and act upon a proposal to approve and adopt the Merger
Agreement among the Company, Hay Island and Newco, pursuant to which the
Company will merge with and into Newco, a wholly-owned subsidiary of the
Company that was formed solely to consummate the Merger, and the
transactions contemplated thereby. If the Merger Agreement and the
transactions contemplated thereby are approved and adopted by the
Company's stockholders, and the other conditions to the Merger are
satisfied or waived, each Class A Share will be converted into the right
to receive $9.50 per share in cash, without interest, and all 28,100,000
outstanding Class B Shares will be converted into 2,810 shares of Newco
Common Stock, representing all of the outstanding common stock and
voting power of Newco.

2. To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.

Any holder of Class A Shares who does not wish to accept the $9.50 per
Class A Share price and who does not vote in favor of the Merger Agreement and
the transactions contemplated thereby will have the right to have the fair value
of his Class A Shares determined by the Delaware Court of Chancery, assuming
such holder properly demands appraisal under the DGCL and otherwise perfects his
rights thereunder. This appraisal right is subject to a number of restrictions
and technical requirements described in the attached Proxy Statement.

The Board of Directors has fixed the close of business on April 16, 1999 as
the record date (the 'Record Date') for determination of the stockholders
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof. Any stockholder will be permitted to examine a list of holders of
record, for any purpose germane to the Special Meeting, during the 10-day period
before the Special Meeting, at the Maritime Aquarium at Norwalk, 10 North Water
Street, Norwalk, Connecticut. Such list will also be available at the principal
executive offices of Swisher International Group Inc. at 20 Thorndal Circle,
Darien, Connecticut 06820; telephone number (203) 656-8000.

Stockholders may vote in person at the Special Meeting or by proxy. The
enclosed Proxy Statement, which explains the Merger and the Merger Agreement in
detail, and the accompanying proxy card are attached to this notice. Holders of
record of Common Shares on the Record Date will be entitled to vote at the
Special Meeting or any adjournment thereof with respect to all matters described
above. PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY USING THE
ENCLOSED, POSTAGE-PAID ENVELOPE.

THE BOARD OF DIRECTORS, TAKING INTO ACCOUNT THE RECOMMENDATION OF THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS, HAS APPROVED, ADOPTED AND DECLARED
ADVISABLE THE MERGER AND THE MERGER AGREEMENT, AND RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.

By Order of the Board of Directors,

Karl H. Ziegler
Secretary

Darien, Connecticut
______________, 1999

SWISHER INTERNATIONAL GROUP INC.

20 THORNDAL CIRCLE
DARIEN, CONNECTICUT 06820
---------------------------

PROXY STATEMENT
---------------------------

SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
---------------------------

QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: WHAT WILL I RECEIVE IN THE MERGER?

A: Each Class A Holder (other than any Class A Holder who properly perfects his
appraisal rights under the DGCL) will be entitled to receive $9.50 in cash,
without interest, in exchange for each Class A Share owned. The Class B Holder
(all of the capital stock of which is controlled by William Ziegler, III, the
Company's Chairman of the Board and Chief Executive Officer) will receive, in
exchange for its 28,100,000 Class B Shares, 2,810 shares of Newco Common Stock,
representing, after consummation of the Merger, all of the equity interest and
voting power of Newco. The Special Committee, formed by the Board of Directors
to evaluate the Merger and consisting of Charles H. Mullen, an independent
director of the Company, upon consultation with PaineWebber, the Special
Committee's financial advisor, negotiated the $9.50 per Class A Share price.
Upon consummation of the Merger, the Class A Holders will have no continuing
equity interest in the Company.

Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE FOR THE MERGER AND THE
MERGER AGREEMENT?

A: In the opinion of the Board of Directors, taking into account the
recommendation of the Special Committee, the Merger is in the best interests of
the Company and all of its stockholders (including the Class A Holders). For the
Merger to be consummated, at least a majority of the voting power of the Common
Shares (and at least a majority of the outstanding Class A Shares, voting as a
separate class, present in person or by proxy at the Special Meeting) must
approve and adopt the Merger Agreement and the transactions contemplated thereby
at the Special Meeting. Pursuant to the terms of the Merger Agreement, Hay
Island has agreed to vote its Class B Shares in favor of the Merger and the
Merger Agreement. To review the purpose, background and reasons for the Merger
in greater detail, see page 10 of this Proxy Statement.

Q: WHAT DO I NEED TO DO NOW?

A: Please sign and mail your proxy card in the enclosed return envelope as soon
as possible, so that your Class A Shares may be represented at the Special
Meeting.

Q: WHAT RIGHTS DO I HAVE TO DISSENT FROM THE MERGER?

A: Class A Holders may dissent from the Merger either by voting against it or by
attending the Special Meeting but abstaining from voting on the Merger. Class A
Holders who do not vote in favor of the Merger may seek appraisal of the fair
market value of their Class A Shares, but only if they comply with all of the
procedures under the DGCL as further explained on pages C-1 to C-4 of the Proxy
Statement.

Q: WHO CAN VOTE ON THE MERGER?

A: All stockholders of record as of the Record Date of April 16, 1999 will be
entitled to notice of and to vote at the Special Meeting held to approve and
adopt the Merger and Merger Agreement.

Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?

A: No. If the Merger is completed, the Company will send you written
instructions for exchanging your stock certificates.

Q: IF MY SHARES ARE HELD IN 'STREET NAME' BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?

A: Your broker will vote your Class A Shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your Class A Shares.

Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?

A: Yes. Just send in a later dated, signed proxy card or a written revocation
before the Special Meeting or attend the Special Meeting and vote in person.

Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?

A: The Company is working toward completing the Merger as quickly as possible.
If the Merger Agreement, and the transactions contemplated thereby, are approved
and adopted, and the other conditions to the Merger are satisfied, the Company
expects to complete the Merger promptly following the Special Meeting.

Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?

A: Receipt of the $9.50 per Class A Share price payable to Class A Holders in
the Merger may be taxable to you for federal income tax purposes. A brief review
of the possible tax consequences to stockholders is set forth on pages 5 and 28
of this Proxy Statement. Because determining the tax consequences of the Merger
can be complicated, and should be considered in light of your particular
circumstances, you may wish to consult your tax advisor in order to understand
fully how the Merger will affect you.

Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?

A: We do not expect to ask you to vote on any other matters at the Special
Meeting. However, if other business should come before the Special Meeting, your
shares will be voted in the discretion of the Company's management identified on
the proxy card enclosed herewith.

WHO CAN HELP ANSWER YOUR QUESTIONS

The information provided above in 'Question and Answer' format is for your
convenience only, as it is merely a summary of certain information more fully
discussed in the Proxy Statement, and is subject thereto. You should review this
Proxy Statement in its entirety. If you have more questions about the Merger or
would like additional copies of this Proxy Statement, you should contact
Corporate Investor Communications, Inc., the proxy solicitation agent engaged by
the Company to assist with the Merger, at (888) 689-5805, or the Secretary of
the Company at (203) 656-8000.

TABLE OF CONTENTS

PAGE
----

SUMMARY.................................................................................................... 1
The Special Meeting...................................................................................... 1
Date, Time and Place of the Special Meeting........................................................... 1
Voting on the Merger and the Merger Agreement......................................................... 1
Effective Time of the Merger.......................................................................... 1
Special Factors.......................................................................................... 2
Purpose, Background and Effects of the Merger......................................................... 2
Recommendation of the Board of Directors.............................................................. 2
Factors Considered by the Board of Directors and the Special Committee................................ 3
Opinion of PaineWebber................................................................................ 3
Engagement of Wasserstein Perella by the Company...................................................... 3
Interests of Certain Persons in the Merger............................................................ 3
Litigation Regarding the Merger....................................................................... 4
Accounting Treatment.................................................................................. 4
Financing of the Merger............................................................................... 4
Federal Income Tax Consequences....................................................................... 5
The Merger............................................................................................... 5
The Class A Merger Consideration...................................................................... 5
Conditions to the Merger.............................................................................. 5
Termination of the Merger Agreement................................................................... 6
Appraisal Rights...................................................................................... 6
INFORMATION CONCERNING THE SPECIAL MEETING................................................................. 7
Date, Time and Place of the Special Meeting.............................................................. 7
Purpose of the Special Meeting........................................................................... 7
Record Date; Quorum; Outstanding Common Shares Entitled to Vote.......................................... 8
Vote Required; Certain Common Shares Voting in Favor of the Merger....................................... 8
Action to be Taken Under the Proxy....................................................................... 9
Proxy Solicitation....................................................................................... 9
SPECIAL FACTORS............................................................................................ 10
Purpose, Background and Effects of the Merger............................................................ 10
Recommendation of the Special Committee and the Board of Directors; Fairness of the Merger............... 15
Engagement by the Special Committee and Opinion of PaineWebber........................................... 17
Certain Effects of the Merger............................................................................ 20
Plans for the Company After the Merger................................................................... 21
Conduct of the Business of the Company if the Merger is Not Consummated.................................. 21
Interest of Certain Persons in the Merger; Treatment of Certain Class A Shares and Options............... 21
Litigation Regarding the Merger.......................................................................... 22
THE MERGER AND THE MERGER AGREEMENT........................................................................ 24
Merger Consideration..................................................................................... 24
Effective Time of the Merger............................................................................. 24
Exchange and Payment Procedures.......................................................................... 24
Transfer of Common Shares................................................................................ 24
The Merger Agreement..................................................................................... 25
Covenants............................................................................................. 25
Representations and Warranties........................................................................ 25
Conditions to the Consummation of the Merger.......................................................... 26
Termination; Amendments; Withdrawal of Recommendations................................................ 26
Delaware Statutory Appraisal Rights...................................................................... 27
Class A Shares........................................................................................ 27

Class B Shares........................................................................................ 29
Federal Income Tax Consequences.......................................................................... 29
Accounting Treatment..................................................................................... 30
Financing of the Merger and Description of New Credit Facility........................................... 30
Fees and Expenses........................................................................................ 30
Regulatory Requirements.................................................................................. 31
Market Price Information; Dividends; Repurchases of Class A Shares....................................... 31
THE PARTIES................................................................................................ 32
Newco.................................................................................................... 32
Hay Island Holding Corporation........................................................................... 32
The Company.............................................................................................. 32
Products.............................................................................................. 32
Sales and Marketing................................................................................... 34
Trademarks and Trade Secrets.......................................................................... 35
Manufacturing......................................................................................... 35
Competition........................................................................................... 36
Employees............................................................................................. 36
Regulation............................................................................................ 37
Legal Proceedings..................................................................................... 38
Excise Taxes.......................................................................................... 40
Selected Financial Data............................................................................... 42
Management's Discussion and Analysis of Financial Condition and Results of Operations................. 44
Certain Financial Projections of the Company.......................................................... 48
Cautionary Statement Concerning Forward-Looking Statements............................................ 49
Directors and Executive Officers of the Company and Newco............................................. 50
Certain Relationships and Related Transactions........................................................ 52
Relationship with Hay Island........................................................................ 52
Tax Sharing Agreement............................................................................... 52
Management Services Agreement....................................................................... 53
Family Relationships................................................................................ 53
Registration Rights Agreement....................................................................... 53
Other Agreements.................................................................................... 54
Security Ownership.................................................................................... 54
Certain Transactions in the Class A Shares............................................................ 56
OTHER MATTERS.............................................................................................. 57
Proposals by Stockholders of the Company................................................................. 57
Independent Accountants.................................................................................. 57
Where You Can Find More Information...................................................................... 57
Other Matters............................................................................................ 58
Financial Statements..................................................................................... F-1
APPENDIX A--AGREEMENT AND PLAN OF MERGER................................................................... A-1
APPENDIX B--OPINION OF PAINEWEBBER......................................................................... B-1
APPENDIX C--SECTION 262 OF THE DELAWARE GENERAL CORPORATION
LAW--APPRAISAL RIGHTS.................................................................................... C-1
APPENDIX D--RATIO OF EARNINGS TO FIXED CHARGES............................................................. D-1

SUMMARY

This Summary highlights selected information from this Proxy Statement.
This Summary may not contain all of the information that is important to you. To
understand the Merger more fully and for a more complete description of the
terms and conditions of the Merger, you should read carefully this entire Proxy
Statement and the other documents referred to herein. See 'Where You Can Find
More Information' on page 56 of this Proxy Statement. The actual terms and
conditions of the Merger are contained in the Merger Agreement. The Merger
Agreement is included in this Proxy Statement as Appendix A.

THE SPECIAL MEETING

DATE, TIME AND PLACE OF THE SPECIAL MEETING

The Special Meeting will be held on _____, 1999, at 10:00 a.m. local time,
at the Maritime Aquarium at Norwalk, Third Floor, 10 North Water Street,
Norwalk, Connecticut.

VOTING ON THE MERGER AND THE MERGER AGREEMENT

At the Special Meeting, all stockholders of the Company will vote on a
proposal to approve and adopt the Merger Agreement. At the Special Meeting, each
Class A Share will be entitled to one vote and each Class B Share will be
entitled to ten votes, in accordance with the Company's certificate of
incorporation. The DGCL requires that a majority of the voting power of all
outstanding Common Shares vote to approve and adopt the Merger Agreement and the
transactions contemplated thereby. William Ziegler, III, the Company's Chairman
of the Board and Chief Executive Officer, through his control of the Class B
Holder, controls all of the Class B Shares and can assure such a majority vote.
However, in order to ensure that the Class A Holders are, as a group, in favor
of the Merger Agreement and the transactions contemplated thereby, the Company
and the Special Committee, in negotiating the Merger Agreement, agreed that
holders owning at least a majority of the outstanding Class A Shares represented
in person or by proxy at the Special Meeting must approve and adopt the Merger
Agreement and the transactions contemplated thereby in order for the Merger to
be consummated.

The Merger Agreement provides that, subject to stockholder approval and
adoption as discussed above and the satisfaction or waiver of certain other
conditions contained in the Merger Agreement, the Company will merge with and
into Newco, and the separate existence of the Company will cease, at the
Effective Time (as defined below) of the Merger. Newco will be the surviving
corporation and will conduct the current business of the Company in the
Company's name. Each Class A Share that is outstanding immediately prior to the
Effective Time (other than Class A Shares held in the Company's treasury or with
respect to which appraisal rights have been perfected under the DGCL, as
discussed in this Proxy Statement) will be converted into the right to receive
$9.50 in cash. In exchange for its 28,100,000 Class B Shares, the Class B Holder
will be entitled to receive 2,810 newly-issued shares of Newco Common Stock.
Thereafter, William Ziegler, III, the Company's Chairman of the Board and Chief
Executive Officer, through his control of the Class B Holder, will control all
of the outstanding Newco Common Stock and voting power of Newco, and
accordingly, all of the equity interest in the Company. Upon consummation of the
Merger, Class A Holders will possess no continuing equity or other interest in,
or rights as stockholders of, the Company, other than their right to receive the
$9.50 in cash per Class A Share or to pursue appraisal rights. For a more
detailed description of the terms and conditions of the Merger Agreement, see
'THE MERGER AND THE MERGER AGREEMENT.'

The Board of Directors has set the Record Date as April 16, 1999 for
determining stockholders entitled to vote at the Special Meeting. On the Record
Date, there were 5,778,300 Class A Shares and 28,100,000 Class B Shares
outstanding and entitled to vote. As of such date, there were approximately ____
record Class A Holders. The only Class B Holder is Hay Island, a corporation
controlled by William Ziegler, III (the Chairman of the Board and the Chief
Executive Officer of the Company).

EFFECTIVE TIME OF THE MERGER

the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the stockholders of the Company at the Special Meeting
and the satisfaction or waiver of the other conditions to the Merger set forth
in the Merger Agreement. See 'THE MERGER AND THE MERGER AGREEMENT-- Effective
Time of the Merger' and '--Conditions to the Consummation of the Merger.' See
also 'SPECIAL FACTORS--Conduct of the Business of the Company if the Merger is
Not Consummated.'

SPECIAL FACTORS

PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER

The purpose of the Merger is to enable William Ziegler, III (the Company's
Chairman of the Board and Chief Executive Officer), through his control of the
Class B Holder, to control the entire equity interest in the Company while, at
the same time, affording the Class A Holders the opportunity to receive a cash
price for their Class A Shares that represents a premium over the market prices
at which the Class A Shares have traded for the six months prior to the
announcement of the proposed Merger. This will be accomplished by a merger of
the Company with and into Newco pursuant to which all of the Class A Shares that
are publicly traded will be converted into the right to receive $9.50 per share
in cash, and the Class B Shares will be converted into shares of Newco Common
Stock. In addition, after consummation of the Merger, the Company may enjoy
additional efficiencies since it will, among other things, no longer need to
incur the costs and management attention required to comply with the
requirements under the Securities Exchange Act of 1934, as amended (the
'Exchange Act') or the New York Stock Exchange (the 'NYSE'). The Company
considered various alternatives to the Merger, including an issuer tender offer
for the outstanding Class A Shares, but ultimately concluded that structuring
the transaction in the form of the proposed Merger would be simpler and would be
more likely to be in the best interests of all the stockholders of the Company
than the other alternative structures considered.

If the Merger is consummated, (i) Newco, as the surviving corporation in
the Merger, will continue to conduct the current business of the Company under
the current name of the Company, (ii) the Class A Shares (other than Class A
Shares held in treasury (which will be cancelled) or Class A Shares held by
Class A Holders who properly dissent from the Merger and perfect their rights of
appraisal of their Class A Shares in accordance with the DGCL, as further
described in this Proxy Statement) will cease to be publicly traded and will be
converted into the right to receive $9.50 per Class A Share in cash, and (iii)
the Class B Shares will be converted into 2,810 shares of Newco Common Stock. If
the Merger is consummated, all of the outstanding Newco Common Stock
(representing all of the equity interest and voting power in Newco) will be
owned by the Class B Holder and will be controlled by Mr. Ziegler, through his
control of the Class B Holder. The Class A Holders will have no continuing
equity interest in the Company. See 'SPECIAL FACTORS--Certain Effects of the
Merger.'

RECOMMENDATION OF THE BOARD OF DIRECTORS

In June 1998, the Board of Directors began to consider a 'going-private' or
similar transaction. Since six of the members of the Board of Directors are
affiliated with the Class B Holder and four other directors are employees of the
Company, the Board of Directors sought to avoid any actual or potential
conflicts of interest by forming the Special Committee to review any proposed
transaction, to negotiate the terms of any such transaction and to make a
recommendation to the Board of Directors regarding any proposed transaction.

The Board of Directors, taking into account the recommendation of the
Special Committee, has unanimously approved and adopted and declared advisable
the Merger and the Merger Agreement, and recommends that you vote FOR the Merger
Agreement and the transactions contemplated thereby. The Board of Directors
believes that the Merger is in the best interests of the Company and all of its
stockholders (including the Class A Holders). See 'SPECIAL
FACTORS--Recommendation of the Special Committee and the Board of Directors;
Fairness of the Merger' and '--Interest of Certain Persons in the Merger;
Treatment of Certain Class A Shares and Options.'

FACTORS CONSIDERED BY THE BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE

In reaching their decision to recommend the approval and adoption of the
Merger Agreement and the transactions contemplated thereby, the Board of
Directors and the Special Committee considered a number of factors, including,
without limitation,

o a comparison of the trading prices of the Class A Shares for the six
months prior to the public announcement of the Merger with the $9.50 per
Class A Share price offered in the Merger. The $9.50 per Class A Share
price represents a premium of approximately 39% over $6.8125, the
closing market price of the Class A Shares on the NYSE on December 9,
1998, which was the last full trading day prior to the announcement of
the proposed Merger;

o in view of the fact that the Class B Holder has, to date, been
consistently unwilling to sell its Class B Shares or agree to any
transaction that would diminish the Class B Holder's control, the
determination that the Company could not be sold in any transaction in
which the Class A Holders would have an opportunity to obtain a premium
to market prices for the Class A Shares, and that the only meaningful
comparison was between the $9.50 price per Class A Share payable in the
Merger and the potential for market appreciation in the Class A Shares
if the Company remained public and continued with its present business
plan;

o the opinion of PaineWebber addressed to the Special Committee that, as
of December 9, 1998, the $9.50 per Class A Share price payable to the
Unaffiliated Class A Holders in the Merger is fair, from a financial
point of view; and

o the requirement that the affirmative vote of at least a majority of the
Class A Shares present in person or by proxy at the Special Meeting is
required for approval and adoption of the Merger and the Merger
Agreement, which was made a term of the Merger Agreement as a result of
the negotiations between the Special Committee and the Company.

OPINION OF PAINEWEBBER

On December 9, 1998, PaineWebber delivered to the Special Committee an oral
opinion, later confirmed in writing as of such date, that, as of such date and
based upon and subject to the various limitations, qualifications and
assumptions stated therein, the $9.50 per Class A Share price to be received by
the Unaffiliated Class A Holders for their Class A Shares is fair, from a
financial point of view. PaineWebber's opinion is included as Appendix B to this
Proxy Statement. Please read this opinion carefully with respect to the
assumptions made, matters considered and limits of the review undertaken by
PaineWebber in rendering its opinion. See 'SPECIAL FACTORS--Engagement by the
Special Committee and Opinion of PaineWebber.'

ENGAGEMENT OF WASSERSTEIN PERELLA BY THE COMPANY

The Company entered into an engagement letter, dated as of September 11,
1998, with Wasserstein Perella & Co., Inc. ('Wasserstein Perella'), an
investment banking firm, to assist the Company in its analysis and consideration
with respect to (i) whether, and at what cost, an acquisition (pursuant to a
tender offer, merger, consolidation, reclassification, recapitalization,
reorganization, or similar corporate transaction) by the Company, or an
affiliate of the Company, of all or a majority of its outstanding Class A Shares
would be feasible, and (ii) the form of a potential transaction by which the
Company might effect such an acquisition. In connection with rendering advice to
the Company, Wasserstein Perella met with the Company's management and
familiarized itself with the business, operations, properties, financial
condition and prospects of the Company, as further described in this Proxy
Statement. On November 5, 1998, Wasserstein presented a summary of its analyses
to the Board of Directors.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Following the Merger, the Class B Holder will hold all of the outstanding
common stock of Newco (as the surviving corporation of the Merger). All of the
members of the Company's Board of Directors and executive officers own Class A
Shares or hold stock options ('Stock Options') to purchase Class A Shares under
the Company's 1996 Stock Option Plan (the 'Stock Option Plan') and, to that
extent, their interest in the Merger is

the same as yours. However, some of such officers and directors have
relationships, or interests in the Merger, that are or may be different from
your interests as a stockholder, or that present, or could present, a conflict
of interest. Some of these interests are described below. The Board of Directors
and the Special Committee were aware of these interests and considered them in
recommending and approving the Merger.

o Hay Island, the sole Class B Holder, is a corporation controlled by
William Ziegler, III, the Chairman of the Board and the Chief Executive
Officer of the Company. He is expected to continue to hold these same
positions with Newco.

o Six of the twelve members of the Board of Directors of the Company are
affiliates of the Class B Holder, including Mr. Ziegler and two of his
children.

o In addition, four other members of the Board of Directors (who are not
affiliates of the Class B Holder) are members of the Company's senior
management. Such senior management is expected to hold the same
positions with Newco (which will conduct the current business of the
Company under the current name of the Company) following the Merger.

See 'SPECIAL FACTORS--Interest of Certain Persons in the Merger; Treatment
of Certain Class A Shares and Options.'

LITIGATION REGARDING THE MERGER

After the Company announced the Merger on December 9, 1998, several
purported class action lawsuits challenging the Merger (the 'Stockholder
Actions') were filed, on various dates, in the Court of Chancery of the State of
Delaware in and for New Castle County. 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, allege substantially similar claims of
breach of fiduciary duty and 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 Stockholder Actions also generally seek an injunction against the
proposed Merger (or, if it is consummated, recission thereof), compensatory and
other damages; and an award of attorney's fees and expenses. The parties in the
Stockholder Actions have entered into a Memorandum of Understanding, dated as of
April 26, 1999, setting forth a proposed settlement of the Stockholder Actions,
subject to approval of the Delaware Court of Chancery. See 'SPECIAL FACTORS--
Litigation Regarding the Merger.' For information with respect to other
litigation involving the Company, see 'THE PARTIES--The Company--Legal
Proceedings.'

ACCOUNTING TREATMENT

The cost of Newco (the Company's wholly-owned subsidiary and the surviving
corporation in the Merger) purchasing the Class A Shares will be accounted for
as a treasury stock transaction under generally accepted accounting principles.
This means that the historical cost basis of the Company's assets and
liabilities will be carried forward to Newco with the aggregate cost, including
expenses, of such purchase being accounted for as a charge to stockholders'
equity. See 'THE MERGER AND THE MERGER AGREEMENT--Accounting Treatment.'

FINANCING OF THE MERGER

The Company has signed an engagement letter with BankBoston, N.A.
('BankBoston'), to act as agent, and with its subsidiary, BancBoston Robertson
Stephens, to act as arranger, for a new credit facility (the 'New Credit
Facility') providing for $200 million to finance 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. The Company and
Newco have a commitment from a syndicate of lenders (collectively, the 'Lender')
for the full amount of the New Credit Facility, which is sufficient (i) to
finance the aggregate Class A Merger Consideration, and to pay other fees and
expenses incurred in connection with the Merger, and (ii) to refinance the
Existing Credit Facility.

At the closing of the Merger, the Company, through Newco (which will be a
party to the related credit agreement), expects to pay to the Class A Holders an
aggregate purchase price of approximately $54.9 million for the Class A Shares,
assuming no Class A Holders dissenting from the Merger exercise their appraisal
rights provided under the DGCL, as further described in this Proxy Statement. In
addition, the Company will incur approximately $3.9 million in expenses related
to the Merger, including fees and expenses payable to the Lender, the financial
advisor, legal counsel and independent accountants of the Company, and the
financial advisor and legal counsel to the Special Committee. It is a condition
to the consummation of the Merger that Newco and the Company have obtained
sufficient funds for the foregoing purposes. At the Effective Time, the
indebtedness incurred under the New Credit Facility will become the indebtedness
of Newco as the surviving corporation of the Merger. See 'THE MERGER AND THE
MERGER AGREEMENT--Financing of the Merger.'

FEDERAL INCOME TAX CONSEQUENCES

Your receipt of the $9.50 per Class A Share price is a taxable event. You
will recognize gain or loss measured by the difference between the amount of
cash received by you in the Merger and your tax basis in your Class A Shares
exchanged therefor. Because determining the tax consequences of the Merger can
be complicated, and should be considered in light of your particular
circumstances, you may wish to consult your tax advisor in order to understand
fully how the Merger will affect you. There are no material income tax
consequences to the Company, the Class B Holder or Newco that are expected to
result from the Merger. See 'THE MERGER AND THE MERGER AGREEMENT--Federal Income
Tax Consequences.'

THE MERGER

THE CLASS A MERGER CONSIDERATION

If the Merger is completed, Newco will pay you $9.50 in cash for each Class
A Share owned. The aggregate payment to be made for all 5,778,300 Class A Shares
outstanding as of the Record Date will be approximately $54.9 million, assuming
no dissenting Class A Holders exercise appraisal rights under the DGCL.

CONDITIONS TO THE MERGER

There are a number of conditions that must be satisfied before any of the
Company, Newco or the Class B Holder is obligated to complete the Merger. The
most important of these conditions are:

o stockholders owning at least a majority of the voting power of the
outstanding Common Shares (the Class A Shares and the Class B Shares
voting together as a single class) approve and adopt the Merger and the
Merger Agreement, in satisfaction of the DGCL Vote Requirement;

o stockholders owning at least a majority of the outstanding Class A
Shares present in person or by proxy at the Special Meeting (voting as a
separate class) approve and adopt the Merger and the Merger Agreement,
in satisfaction of the Majority of the Minority Vote Requirement;

o there can be no legal restraints, proceedings or prohibitions that
prevent consummation of the Merger;

o all authorizations, consents and waivers necessary for the consummation
of the Merger must have been obtained;

o Newco and the Company must obtain financing in an amount sufficient to
pay the aggregate Class A Merger Consideration and other fees and
expenses related to the transactions contemplated by the Merger and the
Merger Agreement;

o the respective representations and warranties made in the Merger
Agreement by each of the parties to the Merger Agreement must be true;

o each of the parties to the Merger Agreement must comply with the terms
of the Merger Agreement;

o neither the Special Committee nor the Board of Directors has, prior to
the Effective Time, withdrawn, modified or changed its recommendation or
declaration regarding the Merger Agreement or the Merger, or recommended
or declared advisable any other offer or proposal, as, in the opinion of
the Special

Committee or the Board of Directors, required by the exercise of its
fiduciary duties to the Company's stockholders under applicable law; and

o the opinion of PaineWebber shall not have been withdrawn or revoked.

TERMINATION OF THE MERGER AGREEMENT

Any of the Company, Newco or the Class B Holder may terminate the Merger
Agreement if:

o the Merger has not been completed by June 30, 1999;

o the Majority of the Minority Vote Requirement or the DGCL Vote
Requirement is not satisfied; or

o a final court order or governmental ruling or decree prohibits the
Merger.

The Merger Agreement may also be terminated and the Merger may be abandoned
at any time prior to the Effective Time, before or after approval and adoption
by the stockholders at the Special Meeting, by the mutual written consent of the
Company (with the concurrence of the Special Committee), Newco and the Class B
Holder.

The Merger Agreement may be terminated by the Company and the Merger may be
abandoned prior to the Effective Time, before or after approval and adoption by
the stockholders of the Company at the Special Meeting, if (a) either of the
Special Committee or the Board of Directors withdraws, modifies or changes its
recommendation or declaration regarding the Merger Agreement or the Merger or
recommends or declares advisable any other offer or proposal or (b) the opinion
of PaineWebber is withdrawn or revoked. See 'THE MERGER AND THE MERGER
AGREEMENT.'

APPRAISAL RIGHTS

Any Class A Holder who does not wish to accept the $9.50 per share Class A
Merger Consideration has the right under the DGCL to have the 'fair value' of
his Class A Shares determined by the Delaware Court of Chancery. This 'right of
appraisal' is subject to a number of restrictions and technical requirements.
Generally, in order to exercise appraisal rights:

o you must NOT vote in favor of the Merger and the Merger Agreement;

o you must make a written demand for appraisal BEFORE the vote on the
Merger and the Merger Agreement in accordance with the DGCL;

o you must have been a record owner of Class A Shares on the Record Date
and own them through the Effective Time; and

o you, or another stockholder who has perfected his right of appraisal, or
the Company, must have filed an action in the Delaware Court of
Chancery, within 120 days after the effective date of the Merger,
seeking an appraisal of dissenting shares. The Company does not intend
to file such a suit.

MERELY VOTING AGAINST THE MERGER AND THE MERGER AGREEMENT WILL NOT PROTECT
YOUR RIGHT OF APPRAISAL. APPENDIX C TO THIS PROXY STATEMENT CONTAINS SECTION 262
OF THE DGCL REGARDING APPRAISAL RIGHTS. For more details, see 'THE MERGER AND
THE MERGER AGREEMENT--Delaware Statutory Appraisal Rights.'

INFORMATION CONCERNING THE SPECIAL MEETING

DATE, TIME AND PLACE OF THE SPECIAL MEETING

This Proxy Statement is being furnished to the holders of the outstanding
Common Shares as of the Record Date in connection with the solicitation of
proxies by the Board of Directors for use at the Special Meeting, to be held on
_____, 1999, at 10:00 a.m. local time, at the Maritime Aquarium at Norwalk,
Third Floor, 10 North Water Street, Norwalk, Connecticut, including any
adjournments or postponements thereof, in connection with the proposed Merger.

PURPOSE OF THE SPECIAL MEETING

At the Special Meeting, the stockholders of the Company will be asked (i)
to consider and vote upon a proposal to approve and adopt the Merger Agreement
and the transactions contemplated thereby, and (ii) to transact such other
business as may properly come before the Special Meeting. Additional information
concerning the Special Meeting, the Merger and the Merger Agreement is set forth
below, and a copy of the Merger Agreement is attached hereto as Appendix A.

As further discussed in this Proxy Statement, the Merger Agreement provides
for the merger of the Company with and into Newco, with Newco as the surviving
corporation carrying on the current business of the Company under the Company's
name. Pursuant to the Merger Agreement, (a) each outstanding Class A Share
(other than Class A Shares (i) held in treasury (which will be cancelled) or
(ii) Class A Shares held by Class A Holders dissenting from the Merger who
properly perfect their rights of appraisal of their Class A Shares in accordance
with the provisions of the DGCL), will be converted into the right to receive
$9.50 per Class A Share in cash, and (b) the 28,100,000 Class B Shares owned by
the Class B Holder will be converted into 2,810 newly-issued shares of Newco
Common Stock, representing all of the outstanding shares of common stock and
voting power of Newco. Newco will be the surviving corporation in the Merger,
and will carry on the current business of the Company in the Company's name
after the consummation of the Merger.

On November 5, 1998, the Board of Directors appointed, subject to the
Executive Committee's determination that the potential for a transaction
existed, Messrs. Charles H. Mullen and John R. Tweedy as members of the Special
Committee to review, evaluate and negotiate the terms of the proposed Merger
(including the fairness of the Merger to the Unaffiliated Class A Holders). On
December 8, 1998, after having met the day before with his doctor, Mr. Tweedy
resigned from the Special Committee due to a change in his health which he
believed would preclude him from properly discharging further the duties imposed
upon him by his membership in the Special Committee. The Special Committee was
then reconstituted by the Board of Directors to consist solely of Mr. Mullen.
Mr. Mullen is not an employee of the Company, nor a director or employee of
Newco or the Class B Holder, and does not have any commercial relationship with
the Company, Newco or of the Class B Holder. See 'SPECIAL FACTORS--Purpose,
Background and Effects of the Merger.'

The Special Committee has determined that the terms and provisions of the
Merger Agreement and the Merger are fair to the Unaffiliated Class A Holders,
and has recommended that the Board of Directors approve and adopt the Merger and
the Merger Agreement. As more fully described in this Proxy Statement, at a
meeting of the Board of Directors on December 9, 1998, the Board of Directors
unanimously determined, acting on the recommendation of the Special Committee,
that the terms of the Merger (including the Class A Merger Consideration) and
the Merger Agreement are advisable, and are fair to and in the best interest of
all of the stockholders of the Company (including the Class A Holders), and
recommended that such stockholders vote for approval and adoption of the Merger
Agreement and the transactions contemplated thereby.

The Special Committee and the Board of Directors, in reaching their
respective decisions, considered a number of factors, including the opinion of
PaineWebber, an investment banking firm engaged by the Special Committee as its
financial advisor, that, as of the date of such opinion and based upon and
subject to various limitations, qualifications and assumptions stated therein,
the Class A Merger Consideration to be received by the Unaffiliated Class A
Holders for their Class A Shares is fair, from a financial point of view.
PaineWebber's opinion is included as Appendix B to this Proxy Statement. See
'SPECIAL FACTORS--Recommendation of the Special Committee and the Board of
Directors; Fairness of the Merger' and '--Engagement by the Special Committee
and Opinion of PaineWebber.'

TAKING INTO ACCOUNT THE RECOMMENDATION OF ITS SPECIAL COMMITTEE, THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.

RECORD DATE; QUORUM; OUTSTANDING COMMON SHARES ENTITLED TO VOTE

The Board of Directors has fixed the close of business on _____, 1999 as
the Record Date. Only holders of record of Common Shares on the Record Date are
entitled to notice of and to vote at the Special Meeting. Pursuant to the
Company's certificate of incorporation, the Class A Holders are entitled to one
vote for each Class A Share held on the Record Date on matters properly
presented at the Special Meeting, and the Class B Holder is entitled to ten (10)
votes for each Class B Share held on the Record Date on matters properly
presented at the Special Meeting. A list of stockholders of the Company will be
available for examination by holders of Common Shares, for any purpose germane
to the Special Meeting, during the 10-day period preceding the Special Meeting,
at the Maritime Aquarium at Norwalk, 10 North Water Street, Norwalk, Connecticut
and at the offices of Swisher International Group Inc., 20 Thorndal Circle,
Darien, Connecticut 06820 (telephone (203) 656-8000).

At the close of business on the Record Date, there were 5,778,300 Class A
Shares outstanding owned by ___ holders of record of Class A Shares, and
28,100,000 Class B Shares owned by a single Class B Holder, Hay Island (which is
controlled by William Ziegler, III, the Chairman of the Board and the Chief
Executive Officer of the Company). The holders of a majority of the voting power
of the outstanding Common Shares entitled to vote at the Special Meeting will
constitute a quorum for the transaction of business at the Special Meeting.
Although the Class B Holder's ownership of approximately 98% of the outstanding
voting power of the Company (through its ownership of the Class B Shares, each
Class B Share being entitled to ten votes) will be sufficient to create a quorum
at the Special Meeting and to assure that the Merger Agreement and the
transactions contemplated thereby are approved and adopted under the DGCL, the
Merger Agreement requires that the Majority of the Minority Vote Requirement be
satisfied, in addition to the DGCL Vote Requirement, in order for the Merger to
be consummated.

VOTE REQUIRED; CERTAIN COMMON SHARES VOTING IN FAVOR OF THE MERGER

Pursuant to the DGCL, the Merger Agreement must be approved and adopted by
the affirmative vote of the holders of at least a majority of the voting power
of the outstanding Common Shares. On matters presented at the Special Meeting,
each Class A Share will be entitled to one vote and each Class B Share will be
entitled to ten votes, in accordance with the Company's certificate of
incorporation. Pursuant to the terms of the Merger Agreement, the Class B Holder
has agreed to vote its Class B Shares for approval and adoption of the Merger
and the Merger Agreement. As of the Record Date, the Class B Holder was the
record owner of 28,100,000 Class B Shares (or approximately 83% of the
outstanding Common Shares, or 98% of the outstanding voting power). Accordingly,
the satisfaction of the DGCL Vote Requirement is assured. HOWEVER, AS REQUIRED
BY THE MERGER AGREEMENT, A CONDITION TO CONSUMMATION OF THE MERGER IS THAT THE
MAJORITY OF THE MINORITY VOTE REQUIREMENT BE SATISFIED, PURSUANT TO WHICH THE
MERGER AND THE MERGER AGREEMENT ARE REQUIRED TO BE APPROVED AND ADOPTED BY
HOLDERS OWNING AT LEAST A MAJORITY OF THE CLASS A SHARES REPRESENTED IN PERSON
OR BY PROXY AND ENTITLED TO VOTE AT THE SPECIAL MEETING. THE MERGER IS ALSO
SUBJECT TO CERTAIN OTHER CONDITIONS. SEE 'THE MERGER AND THE MERGER
AGREEMENT--CONDITIONS TO THE CONSUMMATION OF THE MERGER.'

Failure to return an executed proxy card or to vote in person at the
Special Meeting (including broker non-votes) or voting to abstain will
constitute, in effect, a vote against approval and adoption of the Merger
Agreement and the transactions contemplated thereby for purposes of the DGCL
Vote Requirement. Class A Shares not represented in person or by proxy at the
Special Meeting will not be counted for purposes of determining whether the
Majority of the Minority Vote Requirement has been satisfied, but voting to
abstain will constitute, in effect, a vote against approval and adoption of the
Merger and the Merger Agreement for purposes of the Majority of the Minority
Vote Requirement.

ACTION TO BE TAKEN UNDER THE PROXY

All proxies in the enclosed form that are properly executed and returned to
the Company's transfer agent, BankBoston, 150 Royall Street, Canton,
Massachusetts 02121, on or before the date of the Special Meeting, and
subsequently not revoked, will be voted at the Special Meeting or any
adjournments or postponements thereof in accordance with any instructions
thereon, or, if no instructions are provided, will be voted FOR approval and
adoption of the Merger Agreement and the transactions contemplated thereby. Any
stockholder who has given a proxy pursuant to this solicitation may revoke it by
attending the Special Meeting and giving oral notice of his or her intention to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the Special
Meeting by delivering to the Secretary of the Company an instrument revoking it
or a duly executed proxy bearing a later date. As further discussed in 'Delaware
Statutory Appraisal Rights,' a vote in favor of the Merger Agreement and the
transactions contemplated thereby means that a Class A Holder will NOT have the
right to dissent and seek appraisal of the fair value of such Class A Holder's
Class A Shares.

Management of the Company does not know of any matters other than those set
forth herein which may come before the Special Meeting. If any other matters are
properly presented to the Special Meeting for action, it is intended that the
persons named in the enclosed form of proxy and acting thereunder will vote in
accordance with their best judgment on such matters. Such matters may include an
adjournment or postponement of the Special Meeting from time to time in the
event the Board of Directors determines so to adjourn or postpone. If any such
adjournment or postponement is made, additional proxies may be solicited during
such adjournment period.

PROXY SOLICITATION

The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by the Company. In addition to the use of
the mails, proxies may be solicited by officers and directors and regular
employees of the Company, without additional remuneration, by personal
interviews, written communication, telephone, telegraph or facsimile
transmission. The Company also will request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of Common Shares held of record and will provide reimbursement for the cost of
forwarding the material in accordance with customary charges. The Company has
retained Corporate Investor Communications, Inc. to coordinate the solicitation
of such proxies by and through such holders for a fee of approximately $6,000,
plus reasonable out-of-pocket expenses.

STOCKHOLDERS SHOULD NOT SEND ANY CERTIFICATES REPRESENTING COMMON SHARES
WITH THEIR PROXY CARD. IF THE MERGER IS CONSUMMATED, THE PROCEDURE FOR THE
EXCHANGE OF CERTIFICATES REPRESENTING COMMON SHARES WILL BE AS SET FORTH IN THIS
PROXY STATEMENT. SEE 'THE MERGER AND THE MERGER AGREEMENT--EXCHANGE AND PAYMENT
PROCEDURES' AND '--TRANSFER OF COMMON SHARES.'

SPECIAL FACTORS

PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER

The purpose of the Merger is to enable William Ziegler, III (the Company's
Chairman of the Board and Chief Executive Officer), through his control of the
Class B Holder, to control the entire equity interest in the Company while, at
the same time, affording the Class A Holders the opportunity to receive a cash
price for their Class A Shares that represents a premium over the market prices
at which the Class A Shares have traded for the six months prior to the
announcement of the proposed Merger. This will be accomplished by a merger of
the Company with and into Newco pursuant to which all of the Class A Shares that
are publicly traded will be converted into the right to receive $9.50 per share
in cash, and the Class B Shares will be converted into shares of Newco Common
Stock. In addition, after consummation of the Merger, the Company may enjoy
additional efficiencies since it will, among other things, no longer need to
incur the costs (estimated at approximately $600,000 annually) and management
attention required to comply with the requirements under the Exchange Act and
the NYSE. The Company considered various alternatives to the Merger, including
an issuer tender offer for the outstanding Class A Shares, but ultimately
concluded that structuring the transaction in the form of the proposed Merger
would be simpler and would be more likely to be in the best interests of all the
stockholders of the Company than the other alternative structures considered.

As described in the discussion set forth below, closing sale prices for the
Class A Shares on the New York Stock Exchange fell in the first quarter of 1998
from a high of $17.75 on the first day of trading in the quarter to a low of
$12.75 and, thereafter, continued to fall to a low of $4.375 in the fourth
quarter of 1998. The Company attributes these steady and significant decreases
to such factors as (i) mounting regulatory, legislative and public opinion
pressures on the entire tobacco industry and, increasingly, on the cigar
business as well; (ii) a significant increase in the number of lawsuits against
companies in the tobacco industry, especially class action lawsuits and actions
brought to recover Medicaid and Medicare costs which targeted the largest
tobacco manufacturers, and the highly publicized attempts to settle these cases,
culminating in a settlement with the attorneys general of almost all 50 states
requiring the five largest tobacco companies to make payments of significant
penalties; (iii) sharply reduced demand for certain cigar products and the
resulting higher inventories following several years of increased demand and
back orders; and (iv) announced and actual increases in federal and state
tobacco taxes.

Against this backdrop, a continuing threat that cigarette and smokeless
tobacco manufacturers may become subject to regulation by the U.S. Food and Drug
Administration ('FDA') and the adoption of new regulations affecting all tobacco
products (including cigars) in Massachusetts, Minnesota and Texas (see 'THE
PARTIES-- The Company--Regulation') raised the prospect of the higher cost of
increased compliance and escalated the debate about marketing tobacco products
and about smoking in public. Accordingly, the marketing climate for all tobacco
products (including cigars and smokeless tobacco) has become more hostile, and
stock prices of most tobacco manufacturers have suffered as a consequence.

The decision to proceed with the Merger was made, in part, in the belief
that the deteriorating public attitude toward tobacco products (including
cigars) as a consequence of this confluence of factors did, and would continue
to, place the Company's management under pressure to focus on short-term
operating results, quarterly reporting, meeting analysts' estimates and
addressing investors' perceptions of the Company's business and prospects,
rather than allowing the Company's management to apply their energies to longer
term strategies.

On December 17, 1996, the Company completed the Initial Public Offering of
6,000,000 Class A Shares at an initial price to the public of $17.00 per Class A
Share. The aggregate proceeds of the Initial Public Offering

were $102 million. Since that date, the Class A Shares have traded between a
high price of $21.625 per share on October 14, 1997 and a low price of $4.375
per share almost one year later on October 12, 1998. The Class A Shares closed
at a price of $6.8125 per share on the NYSE on December 9, 1998, which was the
last full trading day prior to the announcement of the proposed Merger.

From February through March 1998, the Company conducted a stock repurchase
program to take advantage of the investment opportunities afforded by the
declining market prices of its Class A Shares (which ranged, during such period,
from $12.75 to $15.50). The Board of Directors also reviewed and approved
several management recommendations arising out of a comprehensive review of its
long-range strategic plans. Among the conclusions reached were that the Company
should seek, over time and as appropriate, (i) to reorganize the cigar sales
force, (ii) to lower prices of premium cigars to increase unit sales, (iii) to
increase advertising and promotion programs, (iv) to reduce inventories through
temporary suspensions of production, (v) to identify and take opportunities to
reduce operating costs, and (vi) to reduce the Company's debt.

In March 1998, the Company began to use its excess cash flow to reduce
indebtedness rather than to repurchase additional Class A Shares.

On June 15, 1998, the sale price of the Class A Shares closed on the NYSE
at a price below $8 per share for the first time since the Initial Public
Offering. At a meeting of the Executive Committee of the Board of Directors on
June 17, 1998, Robert A. Britton, the Chief Financial Officer of the Company,
noted that fact and raised with the directors in attendance at the meeting the
possibility that the Company repurchase the Class A Shares in a 'going-private'
transaction.

On July 20, 1998, at another meeting of the Executive Committee of the
Board of Directors, the Executive Committee discussed alternative transactions
available to the Company to maximize shareholder value and the relative merits
of each of the alternatives including the greater management efficiencies and
flexibility generally associated with privately-held companies. At a meeting of
the full Board of Directors on August 5, 1998, several alternative structures
for 'going-private' and similar transactions were discussed, including an issuer
tender offer, which was ultimately rejected because of the length of time,
uncertainty of its outcome, and costs associated with its consummation. Also
considered by the Board of Directors in its consideration and ultimate rejection
of alternative transactions was the expressed unwillingness of the Class B
Holder to sell its position in the Company or accept a transaction that would
diminish the Class B Holder's control of the Company. At subsequent meetings in
August and September 1998, the Executive Committee continued to discuss whether
to undertake any such transaction.

On August 18, 1998, Mr. Britton contacted Wasserstein Perella to determine
whether it would serve as the Company's financial advisor in connection with any
such repurchase transaction. On August 27, 1998, after Wasserstein Perella
indicated an interest in such an appointment, the Executive Committee authorized
the Company to enter into an agreement engaging Wasserstein Perrella as the
Company's financial advisor to analyze and provide advice to the Board of
Directors with respect to the proposal to purchase Class A Shares and to assist
in negotiations related to any such transaction.

Over the next several weeks, Wasserstein Perella conducted its due
diligence review of the Company. In connection with its financial due diligence,
Wasserstein Perella reviewed, among other things, certain historical business
and financial information relating to the Company, including the Company's
periodic reports under the Exchange Act, and certain other communications from
the Company to its stockholders (collectively, the 'Company's Public
Documents'); certain financial forecasts and other non-public financial and
operating data concerning the business and operations of the Company that were
provided by the management of the Company; the financial terms of certain
business combinations in the industry; certain financial and stock market
information for certain other companies the common stock of which is publicly
traded; and certain market price information relating to the Class A Shares.
Wasserstein Perella also met with members of the senior management of the
Company on several occasions to discuss the past, current and future operations,
financial condition and prospects of the Company, including the financial
forecasts relating to both the proposed Merger and the possible synergies and
other financial benefits which the Company might realize as a result of the
Merger.

On September 29, 1998, the Company signed a definitive engagement agreement
with Wasserstein Perella, which was dated as of September 11, 1998.

In the normal course of business, management of the Company prepares annual
budgets and, from time to time, projections to analyze the anticipated financial
performance of the Company. In connection with the proposed transaction and to
facilitate the financial due diligence of Wasserstein Perella, the Company
provided Wasserstein Perella with a preliminary 1999 annual budget and unaudited
projections for the ensuing five years which reflected management's best
estimates and good faith judgments as to the future performance of the Company.
Such projections, including the limitations, qualifications and assumptions
underlying them (the 'Financial Projections'), are set forth in 'THE
PARTIES--The Company--Certain Financial Projections of the Company.'

At its meeting on October 13, 1998, the Executive Committee discussed
Wasserstein Perella's recommendation that, if the Company decided to proceed
with a going-private transaction, the Board should appoint a special committee
of independent directors to review, evaluate and negotiate any proposed
transaction (including the fairness thereof to the Unaffiliated Class A
Holders). During the discussion, it was suggested that the Chairman determine
whether Charles H. Mullen and John R. Tweedy would be willing to serve on such a
committee. At the Board meeting that followed, it was reported that the
Executive Committee was not yet prepared to recommend a specific transaction to
the full Board but would continue to work with Wasserstein Perella and advise
the full Board whether it recommended undertaking a going-private transaction.

On October 29, 1998, Mr. Mullen, after being approached with respect to the
potential special committee assignment, met preliminarily with representatives
of the law firm of Chadbourne & Parke LLP ('Chadbourne & Parke') to discuss its
qualifications and availability to represent such a special committee in the
event a transaction were proposed and such a special committee were constituted.

On November 5, 1998, representatives of Wasserstein Perella attended a
meeting of the Board of Directors of the Company. Wasserstein Perella made a
presentation with respect to a going-private transaction and reviewed the status
of its financial due diligence to date. Wasserstein Perella stated that it had
considered several alternatives to the proposed Merger, namely a one-time
dividend through a leveraged recapitalization and an additional equity offering,
but given market and industry conditions and the expressed unwillingness of the
Class B Holder to sell its position in the Company or accept a transaction that
would diminish the Class B Holder's control of the Company, concluded that the
Merger was the most feasible alternative. The Board of Directors and Wasserstein
Perella also discussed certain factors that might affect opportunities for
growth, including existing and future tobacco litigation and regulation that
could affect the Company's business and the results of its operations.
Wasserstein Perella's November 5, 1998 presentation to the Board of Directors is
attached to the Company's filing on Schedule 13E-3 as Exhibit 17(b)(3).

After the Wasserstein Perella representatives left the meeting, the Board
authorized the Executive Committee to consider whether the Company should
explore the going-private transaction further and agreed that it would be
prudent to appoint a special committee of independent directors so that if the
Executive Committee determined to recommend undertaking a going-private
transaction, the Company would be prepared. Accordingly, the Board appointed Mr.
Mullen and Mr. Tweedy, subject to the Executive Committee's determination that
the potential for such a transaction existed, as members of such Special
Committee. The Special Committee was charged with the responsibility of
reviewing, evaluating and negotiating any transaction recommended to the Board
of Directors (including the fairness thereof to the Unaffiliated Class A
Holders). In that connection, it was asked to interview investment bankers on a
preliminary basis in anticipation of the possibility of a transaction to
determine the qualifications and availability of such a bank to represent the
Special Committee and to act as its independent financial advisor.

On November 12, 1998, Messrs. Mullen and Tweedy met with Chadbourne & Parke
to discuss further the potential of a transaction. On the same date, Messrs.
Mullen and Tweedy also met with representatives of investment banks to discuss,
on a preliminary basis, the potential transaction as requested by the Board of
Directors. Following these meetings, Mr. Mullen notified Mr. Ziegler that the
Special Committee had determined that, if a going-private transaction were
commenced, it would retain PaineWebber as its independent financial advisor.

The Executive Committee met again on November 17, 1998, determined that a
going-private transaction was viable and authorized the Company's officers to
work with its legal counsel and with Wasserstein Perella to develop the terms of
a going-private transaction and to draft an agreement and plan of merger in
connection

therewith. The Executive Committee decided to reconvene after such terms had
been developed and the agreement and plan of merger had been drafted and to
decide at that time whether to approve the transaction.

At the same meeting, the Executive Committee directed that the Special
Committee be notified of the Executive Committee's actions and authorized it to
take those steps it believed necessary to be prepared to review the terms of a
transaction and a draft agreement and plan of merger upon approval by the
Executive Committee including the engagement of legal counsel and independent
financial advisors. After receiving such notice from the Executive Committee
later on November 17, 1998, the Special Committee formally engaged Chadbourne &
Parke as its legal counsel and engaged PaineWebber as its independent financial
advisor.

On November 18, 1998, there was a meeting with PaineWebber and Chadbourne &
Parke scheduled by the Special Committee to discuss the terms and timing of the
proposed transaction and the roles and responsibilities of the legal and
financial advisors of the Special Committee. Mr. Tweedy was absent from the
meeting due to ill health, and Mr. Mullen, as Chairman of the Special Committee,
instructed PaineWebber to begin its financial due diligence process and
Chadbourne & Parke to begin its legal due diligence process.

Over the course of the following week, PaineWebber conducted its financial
due diligence review of the Company, meeting with representatives from both the
Company and Wasserstein Perella. During this period, several teleconference
updates were made by Chadbourne & Parke and PaineWebber to the members of the
Special Committee.

On December 4, 1998, at a meeting of the Special Committee, PaineWebber
updated the members of the Special Committee on the status of its financial due
diligence review of the Company including its review of the Financial
Projections prepared by the Company See 'THE PARTIES--The Company--Certain
Financial Projections of the Company.'

Late in the afternoon of December 4, 1998, at a meeting of the Executive
Committee and Wasserstein Perella, the terms of a proposed agreement and plan of
merger among the Company, Newco and the Class B Holder, including a provision
that the Company pay $8.50 in cash for each of the outstanding Class A Shares,
were discussed. Thereafter, it was concluded that the Executive Committee would
recommend that the Company undertake the Merger and, to that end, enter into an
agreement and plan of merger with Newco and the Class B Holder on the terms
discussed subject to a determination by the Special Committee that the terms
were fair and approval by the full Board of Directors. The officers of the
Company were directed to inform the Special Committee of the Executive
Committee's conclusion.

After the close of business on December 4, 1998, the Special Committee
received the proposal that the Company purchase all of the outstanding Class A
Shares at a price of $8.50 per share together with a copy of the draft Agreement
and Plan of Merger approved by the Executive Committee. The Special Committee
and its advisers immediately discussed the proposal on a preliminary basis and
discussed the time frame for responding thereto.

On December 7, 1998, the Special Committee met with its legal and financial
advisers to discuss the offer received from the Company. At this meeting, the
Special Committee reviewed its legal duties and responsibilities under Delaware
law. PaineWebber then gave its financial presentation, including an analysis of
the Company and the various valuation methods it would be employing in advising
the Special Committee. PaineWebber indicated that it would be prepared within a
short time to give its opinion on the $8.50 offer price. Throughout the meeting,
the Special Committee members were given the opportunity to pose questions to
the Special Committee's legal and financial advisors. On a preliminary basis,
the Special Committee indicated its dissatisfaction with the $8.50 offer and
instructed PaineWebber to commence negotiations with Wasserstein Perella to
increase the $8.50 offer price. At this point, Mr. Tweedy left the meeting to
attend a scheduled doctor's appointment. Chadbourne & Parke then reviewed the
terms of the proposed Merger Agreement and its comments thereon with Mr. Mullen,
who indicated a strong preference to include a condition that the Merger
Agreement be approved and adopted not only by the majority of the voting power
of the outstanding Common Shares, as required under the DGCL, but also by the
majority of the Class A Shares present in person or by proxy at the required
stockholder meeting. Chadbourne & Parke was instructed to negotiate that issue
with the Company as well as other terms and conditions of the proposed Merger
Agreement.

On December 8, 1998, the Special Committee met again to discuss the terms
of the offer and the proposed Merger Agreement with its legal and financial
advisers. Immediately prior to the meeting, Mr. Tweedy resigned

as a member of the Special Committee, 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. Mr. Mullen, as chairman of the Special Committee, accepted
the resignation. Chadbourne & Parke reported on the status of the negotiations
with regard to the terms of the proposed Merger Agreement. PaineWebber then
presented the valuation analyses that it utilized and concluded that, if
requested, it would not be able to render a favorable opinion as to the
fairness, from a financial point of view, of the offer price of $8.50 per Class
A Share. The legal and financial advisors of the Special Committee were
instructed to continue negotiations to improve the $8.50 offer price per Class A
Share and to obtain agreement with respect to the Majority of the Minority Vote
Requirement.

From December 7, 1998 through December 9, 1998, representatives of the
Company and the Special Committee reviewed and further negotiated the terms and
conditions of the proposed Merger Agreement.

On the morning of December 9, 1998, PaineWebber received a telephone call
from Wasserstein Perella inquiring whether the Special Committee was prepared to
accept an offer of $9.25 per Class A Share. PaineWebber discussed the proposal
with the Chairman of the Special Committee, who again requested that PaineWebber
attempt to negotiate a higher price. PaineWebber telephoned Wasserstein Perella
and was advised that the Company was not prepared to increase its offer beyond
$9.25 per Class A Share. Subsequently, Mr. Mullen telephoned Mr. Ziegler, the
Chairman of the Board of Directors, directly in order to discuss the offer price
and the terms and conditions of the Merger Agreement. After a series of
telephone calls between Mr. Mullen and representatives of the Company, Mr.
Ziegler agreed to support both an increase by the Company of its offer to $9.50
per Class A Share and the inclusion in the Merger Agreement of the Majority of
the Minority Vote Requirement.

At a meeting of the Board of Directors that began later on December 9,
1998, Mr. Tweedy's resignation from the Special Committee was accepted. The
Board of Directors understood that Mr. Tweedy's resignation was the result of
his concern that personal health matters would preclude him from devoting the
requisite time and energy to the processes of the Special Committee and believed
it appropriate to defer to Mr. Tweedy's judgment on that subject matter. Mr.
Tweedy did not resign his position as a member of the Board of Directors,
although he did not attend the Board's December 9 meeting. Because the Board of
Directors believed that Mr. Mullen was capable of functioning as the Special
Committee, it reconstituted the Special Committee to consist solely of Mr.
Mullen during the Board's December 9 meeting. Neither PaineWebber nor
Wasserstein Perella commented on Mr. Tweedy's resignation or on the continuance
of Mr. Mullen as the sole member of the Special Committee. After consideration
of the issue, Chadbourne & Parke, counsel to the Special Committee, concurred
that Mr. Tweedy should resign as a member of the Special Committee if he
believed that he could no longer fulfill his duties as a member of the Special
Committee due to concerns about his personal health. Thereafter, during an
adjournment of the Board of Directors' meeting, the Special Committee met in
person with its advisors. At such meeting, PaineWebber delivered its oral
opinion, subsequently confirmed in writing as of that date, that the $9.50 per
Class A Share price was fair, from a financial point of view, to the
Unaffiliated Class A Holders. When the Board of Directors reconvened its
meeting, the Special Committee presented its conclusions to the full Board of
Directors and recommended the acceptance of the offer of $9.50 per Class A
Share, as well as the terms and conditions of the proposed Merger Agreement, as
amended to include the Special Committee's requirement that the proposed Merger
be conditioned on, and the Merger Agreement contain a provision requiring, the
Majority of the Minority Vote Requirement.

After a thorough discussion of the terms of the Merger and the Merger
Agreement, and after having been advised that the Special Committee had approved
the Merger and the Merger Agreement based, in part, on the oral opinion rendered
to the Special Committee by PaineWebber on December 9, 1998, later confirmed in
writing as of that date, the Board of Directors unanimously determined that the
terms of the Merger and the Merger Agreement were advisable, fair to, and in the
best interests of, the Company and all of its stockholders (including the Class
A Holders), and adopted resolutions approving the Merger and the Merger
Agreement, and recommended and deemed it advisable that all of the stockholders
of the Company vote to approve and adopt the Merger Agreement and the
transactions contemplated thereby. Subsequently, the Merger Agreement was
executed and delivered by authorized representatives of the Company, the Class B
Holder and Newco. Thereafter, the Company issued a press release disclosing that
the Company, Newco and the Class B Holder had signed a definitive Merger
Agreement pursuant to which Newco would acquire all of the Class A Shares at
$9.50

in cash per share, a premium of approximately 39% over $6.8125, the closing
market price of the Class A Shares on the NYSE on December 9, 1998, which was
the last full trading day prior to the announcement of the proposed Merger.

After the announcement of the proposed Merger, the Stockholder Actions were
initiated by Class A Holders (which suits purport to be brought as class actions
on behalf of all stockholders of the Company) against the Company and its
directors alleging, among other things, that the Class A Merger Consideration is
inadequate and that certain actions and negotiations leading up to the proposed
Merger were not conducted on an arm's-length basis. The Stockholder Actions were
initiated in Delaware Court of Chancery in and for New Castle County. See
'SPECIAL FACTORS--Litigation Regarding the Merger.'

Also subsequent to the announcement of the proposed Merger, on January 5,
1999, Timothy Mann, the President of the Company, received an unsolicited
telephone call from another tobacco company asking for a meeting to explore the
possibility of combining the businesses of the Company and the other tobacco
company. No specific proposal was made to Mr. Mann and no terms of any potential
transaction were proposed or discussed. Mr. Mann reported the inquiry to a
meeting of the Board of Directors on January 6, 1999 called for that purpose.
William Ziegler, III, the Chairman of the Board of Directors, reported that the
Company had received past inquiries about whether the Class B Holder would
consider selling its interest in the Company, and that the Class B Holder had
consistently refused to sell its position in the Company or accept a transaction
that would diminish the Class B Holder's control. Mr. Ziegler confirmed that the
Class B Holder's position had not changed. Accordingly, in view of the position
expressed by the Class B Holder, the Board of Directors authorized Mr. Mann to
so notify the other tobacco company of the position of the Class B Holder. The
other tobacco company was so notified by Mr. Mann.

In early February 1999, J. Thomas Ryan, Executive Vice President-Sales &
Marketing of the Company, met with a representative of an unrelated tobacco
company following an unsolicited telephone call requesting the meeting. The
other company's representative suggested exploring a combination of the
smokeless tobacco businesses of the two companies. The other company's
representative did not suggest any terms upon which such a combination could be
effected or any price or other consideration that might be paid or received in
connection with such a combination. Mr. Ryan replied that he doubted that such a
transaction was feasible. At a meeting of the Company's Board of Directors on
February 18, 1999, Mr. Ryan described the proposal that had been made. After
discussion, the Board determined that, even if such a combination could obtain
approval from federal regulatory authorities, it would not be consistent with
the Company's business plan. Mr. Ryan so notified the other company.

RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS; FAIRNESS OF
THE MERGER

At a meeting held on December 9, 1998, the full Board of Directors, based
upon the recommendation of the Special Committee made on that date, unanimously
concluded that the terms of the Merger Agreement were advisable, fair to, and in
the best interests of, the Company and all of its stockholders (including the
Class A Holders), and thereafter approved and adopted and declared advisable the
Merger Agreement and the transactions contemplated thereby, and recommended to
all of the stockholders of the Company that such stockholders vote to approve
and adopt the same at the Special Meeting. See 'SPECIAL FACTORS--Purpose,
Background and Effects of the Merger.'

In determining to recommend to all of the stockholders of the Company that
they approve and adopt the Merger Agreement and the transactions contemplated
thereby, and in determining that the terms of the Merger and the Merger
Agreement were advisable, fair to, and in the best interests of, the Company and
all of its stockholders, the Board of Directors and the Special Committee
considered certain factors, including but not limited to, the following:

(i) the financial condition, assets, results of operations, business and
prospects of the Company, and the risks inherent in achieving those
prospects;

(ii) the terms and conditions of the Merger Agreement, including the
amount and form of consideration payable to the stockholders of the
Company and the Majority of the Minority Vote Requirement, as more
fully discussed below;

(iii) the negotiations which took place between the Company and the
Special Committee with respect to the Class A Merger Consideration
that, among other things, led to an increase in the offer from $8.50
per Class A Share to $9.50 per Class A Share, and the belief by the
member of the Special Committee that $9.50 per Class A Share was the
highest price that the Company would agree to pay;

(iv) that the Class A Merger Consideration of $9.50 per Class A Share to
be received by the Class A Holders in the Merger represented a
premium of approximately 39% over the $6.8125 per Class A Share
closing price on December 9, 1998, the last full trading day before
the public announcement of the Merger; and, that during the preceding
six months, the Class A Merger Consideration represented a premium
ranging from 7%, when the Class A Shares traded at $8.875 on June 9,
1998, to 95%, when the Class A Shares traded at $4.875 on October 9,
1998;

(v) the Majority of the Minority Vote Requirement (which condition is in
addition to the DGCL Vote Requirement and is not otherwise required
by the DGCL or the Company's certificate of incorporation or bylaws)
whereby it is required that the Merger and the Merger Agreement be
approved and adopted by the affirmative vote of holders owning at
least a majority of the Class A Shares represented in person or by
proxy at the Special Meeting;

(vi) in view of the fact that the Class B Holder has consistently stated
its unwillingness to sell its Class B Shares in any transaction in
which its control would be diminished, the determination that the
Company could not be sold in any transaction in which the Class A
Holders would have an opportunity to obtain a premium to market
prices for the Class A Shares, and that the only meaningful
comparison was between the $9.50 price per Class A Share payable in
the Merger and the potential for market appreciation in the Class A
Shares if the Company remained public and continued with its present
business plan;

(vii) the trading prices and volume at which the Class A Shares traded
since the Initial Public Offering;

(viii) the opinion of PaineWebber as to the fairness, from a financial
point of view, of the Class A Merger Consideration of $9.50 per
Class A Share to be received by the Unaffiliated Class A Holders and
the analysis presented to the Special Committee by PaineWebber (see
'SPECIAL FACTORS-- Engagement by the Special Committee and Opinion
of PaineWebber');

(ix) specifically regarding the recommendation to the Class B Holder, the
advice by Wasserstein Perella that the Class A Merger Consideration
was reasonable to pay from the Company's point of view;

(x) the availability of appraisal rights under the DGCL to holders of
Common Shares who dissent in the Merger; and

(xi) the alternative transactions considered by Wasserstein Perella in
connection with its engagement by the Company, and the Company's
conclusion that the Merger was the most feasible alternative.

In light of the number and variety of factors the Board of Directors and
the Special Committee considered in connection with their evaluation of the
Merger, the Board of Directors did not find it practicable to assign relative
weights to the foregoing factors, and, accordingly, neither the Board of
Directors nor the Special Committee did so. Rather, the Special Committee and
the Board of Directors based their recommendation on the totality of the
information presented to and considered by them, except that particular
consideration was placed on (i) the opinion of PaineWebber that the Class A
Merger Consideration was fair to the Unaffiliated Class A Holders, from a
financial point of view; (ii) the arm's-length negotiation that took place
between the Special Committee, on the one hand, and the Company, on the other
hand, that resulted in the Class A Merger Consideration of $9.50 per share; and
(iii) the fact that the Merger must be approved by a majority of the Class A
Holders represented in person or by proxy at the Special Meeting in order for
the Merger to be consummated. The Board of Directors and the Special Committee
did not deem especially relevant net book value, going concern value or
liquidation value in light of the background, purpose and structure of the
proposed Merger.

The foregoing discussion of the factors considered by the Special Committee
and the Board of Directors is not meant to be exhaustive, but includes all
material factors considered by the Special Committee and the Board of Directors
to support their respective decisions to recommend the Merger.

The Board of Directors regularly consulted with its legal counsel and
Wasserstein Perella, and the Special Committee regularly consulted with
PaineWebber and Chadbourne & Parke during the course of their due diligence and
considerations in connection with the analysis of the Company and the evaluation
of the Merger (including the Class A Merger Consideration) and the terms of the
Merger Agreement.

As discussed elsewhere in this Proxy Statement, the Company does not
believe that there is any connection between the price paid in the Initial
Public Offering (as defined herein) or the price at which the Company
repurchased Class A Shares in February 1998 and the $9.50 price offered in the
Merger. Instead, the Company believes that, in determining whether to vote for
the Merger and the Merger Agreement, each Class A Holder will consider, among
other factors (i) the actual price at which such holder purchased his or her
Class A Shares (whether above or below the $9.50 price payable in the Merger),
(ii) the changed business, financial condition and prospects of the Company, and
of the tobacco industry generally, and such Class A Holder's own expectations
regarding the same, (iii) the relative risks and benefits inherent in the
Company's business and prospects, (iv) the trading history (including price and
volume declines) of the Class A Shares, including the general pattern of decline
since the Initial Public Offering (as defined herein), and (v) the individual
personal circumstances regarding such Class A Holder, and the tax ramifications
arising from his or her sale of Class A Shares at the current time.

The Board of Directors believes that the Merger is procedurally fair
because: (i) the Board of Directors and the Special Committee, based, in part,
on advice received from their respective financial advisors, voted unanimously
in favor of the Merger and the Merger Agreement; (ii) the Special Committee
retained PaineWebber to advise it in evaluating the fairness of the terms of the
Merger (including without limitation, the Class A Merger Consideration), which
firm had never been directly engaged by the Company for investment advisory or
corporate finance services; (iii) PaineWebber delivered its opinion to the
Special Committee that the Class A Merger Consideration was fair, from a
financial point of view, to the Unaffiliated Class A Holders, (iv) the Board of
Directors and the Special Committee were represented by separate legal counsel;
and (iv) the Merger Agreement contains a condition to the consummation of the
Merger, namely, the Majority of the Minority Vote Requirement, which requires
that the Merger Agreement and the Merger be approved and adopted by the
affirmative vote of holders owning at least a majority of the Class A Shares
represented in person or by proxy at the Special Meeting. The inclusion of the
Majority of the Minority Vote Requirement as a condition to the consummation of
the Merger was required by the Special Committee during negotiations with the
Company on the terms of the Merger Agreement, and is not otherwise required
under the DGCL or the Company's certificate of incorporation or bylaws. The
Majority of the Minority Vote Requirement effectively provides the Class A
Holders, voting as a separate class, the ability to accept or reject the Merger
Agreement regardless of the 98% voting power held by the Class B Holder. In
determining that the Merger was procedurally fair, the Board of Directors also
considered certain effects of the Merger, including that, upon consummation of
the Merger, the Class A Holders would have no continuing equity interest in the
Company.

The Board of Directors, at a meeting held on December 9, 1998, considered
the recommendation of the Special Committee, as well as the factors considered
by the Special Committee, and unanimously determined that the proposed Merger is
advisable, fair to, and in the best interests of, the Company and its
stockholders (including the Class A Holders), approved and adopted the Merger
Agreement, and recommended that such stockholders vote to approve and adopt the
Merger Agreement and the transactions contemplated thereby.

ENGAGEMENT BY THE SPECIAL COMMITTEE AND OPINION OF PAINEWEBBER

The Special Committee retained PaineWebber to act as its financial advisor
with respect to the Merger and the Merger Agreement and related matters pursuant
to an engagement letter dated November 30, 1998. At a meeting of the Special
Committee on December 9, 1998, PaineWebber delivered its oral opinion, which
opinion was later confirmed in writing as of such date, that, as of such date,
and based upon and subject to various limitations, qualifications and
assumptions set forth in the opinion, the Class A Merger Consideration to be
received by the Unaffiliated Class A Holders in the Merger is fair, from a
financial point of view.

The full text of the written opinion of PaineWebber, dated as of December
9, 1998, which sets forth the limitations, qualifications and assumptions made,
matters considered and limits of the review undertaken in connection with the
opinion, is attached hereto as Appendix B, and is incorporated by reference.
Stockholders of the Company are urged to read the opinion in its entirety.
PaineWebber's written opinion is addressed to the Special Committee of the Board
of Directors, is directed only to the Class A Merger Consideration to be paid to

the Unaffiliated Class A Holders pursuant to the Merger Agreement and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote at the Special Meeting. The summary of the opinion of
PaineWebber set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion (attached hereto as Appendix B).

In connection with the Special Committee's consideration of the draft
Merger Agreement, PaineWebber delivered its opinion to the effect that, as of
December 9, 1998 and based on its review and assumptions and subject to the
limitations summarized below, the Class A Merger Consideration to be paid in the
Merger is fair, from a financial point of view, to the Unaffiliated Class A
Holders. The opinion was directed to the Special Committee and does not
constitute a recommendation to any stockholder of the Company as to how any such
stockholder should vote on the Merger. The Company did not request, and the
opinion does not address, the relative merits of the Merger or any other
consideration that might be paid for the Class A Shares other than the Class A
Merger Consideration, nor did the opinion address any other transactions or
business strategies considered by the Board of Directors or the Special
Committee as alternatives to the Merger or the decision of the Board of
Directors to proceed with the Merger. The Special Committee did not place any
limitations upon PaineWebber with respect to the procedures followed or factors
considered in rendering its opinion.

In arriving at its opinion, PaineWebber, among other things: (1) reviewed,
among other public information, the Company's Annual Reports, Forms 10-K and
related financial information for the three fiscal years ended December 31,
1997, the Company's Form 10-Q and the related financial information for the nine
months ended September 30, 1998; (2) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets and
prospects of the Company furnished by the Company; (3) conducted discussions
with members of senior management of the Company concerning its businesses and
prospects; (4) reviewed the historical market prices and trading activity for
the Class A Shares and compared them with that of certain publicly-traded
companies which PaineWebber deemed to be relevant; (5) compared the results of
operations of the Company with that of certain companies which PaineWebber
deemed to be relevant; (6) compared the proposed financial terms of the Merger
with the financial terms of certain other business combinations which
PaineWebber deemed to be relevant; (7) reviewed a draft of the Merger Agreement
dated December 4, 1998; and (8) reviewed such other financial studies and
analyses and performed such other investigations and took into account such
other matters as PaineWebber deemed necessary, including its assessment of
general economic, market, regulatory and monetary conditions.

In preparing its opinion, PaineWebber relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to PaineWebber by or on behalf of the Company, and
PaineWebber did not assume any responsibility to independently verify such
information. With respect to the financial forecasts examined by PaineWebber,
PaineWebber assumed that they were reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of the management of
the Company as to the future performance of the Company. PaineWebber also relied
upon assurances of the management of the Company that they were unaware of any
facts that would make the information or financial forecasts provided to
PaineWebber incomplete or misleading. PaineWebber did not make any independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor was PaineWebber furnished with any such evaluations or
appraisals. PaineWebber also assumed, with the consent of the Special Committee,
that any material liabilities (contingent or otherwise, known or unknown) that
are required to be set forth in accordance with generally accepted accounting
principles are as set forth in the financial statements of the Company or the
notes related thereto. The opinion is based upon general economic, monetary,
regulatory and market conditions existing on the date thereof. Furthermore,
PaineWebber expressed no opinion as to the price or trading ranges at which the
Class A Shares will trade from the date of the opinion. It should be understood
that, although subsequent developments may affect the opinion, PaineWebber does
not have any obligation to update, revise or reaffirm its opinion.

The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative methods of financial analyses and
the application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. PaineWebber did not place particular reliance or weight on any
individual analysis. Accordingly, PaineWebber believes that its analysis must be
considered as a whole and that considering any portion of such analysis and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the opinion. In
its analyses, PaineWebber made numerous assumptions with respect to

industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. Accordingly, such estimates are inherently
subject to substantial uncertainty. PaineWebber assumes that such estimates were
reasonably prepared by the Company on bases reflecting the best currently
available estimates and good faith judgments of the Company's management as to
the future performance of the Company. PaineWebber assumes no responsibility for
the accuracy of such estimates. In addition, analyses relating to the value of a
business do not purport to be appraisals or to reflect the prices at which the
business may actually be sold.

The following summary describes the significant analyses performed by
PaineWebber in arriving at its opinion:

Selected Comparable Public Company Analysis. Using public information,
PaineWebber compared selected historical and projected financial, operating and
stock market performance data of the Company to the corresponding data of the
following companies: Consolidated Cigar Holdings Inc. and General Cigar
Holdings, Inc., comprising the Cigar Company Index (collectively, the 'Cigar
Comparable Companies').

With respect to the Company and the Cigar Comparable Companies, PaineWebber
compared multiples of total enterprise value ('TEV') (market value of equity,
based on stock market prices as of December 4, 1998, plus total debt less cash
and cash equivalents and unconsolidated investments as of their most recent Form
10-Q) and equity market value ('EMV') to latest twelve months ('LTM') net
revenue, LTM earnings before interest, taxes, depreciation and amortization
('EBITDA'), LTM earnings before interest and taxes ('EBIT'), LTM net income and
earnings per share estimates for the fiscal years ending 1998, 1999 and 2000.
The Company's TEV multiples of LTM net revenue, LTM EBITDA and LTM EBIT, based
on the $9.50 offer price, were 1.53x, 5.6x and 6.2x, respectively. The Company's
EMV multiples of LTM net income, and earnings per share estimates for fiscal
years ending 1998, 1999 and 2000 were 8.9x, 9.9x, 9.5x and 8.6x, respectively.
The relevant Cigar Comparable Companies' TEV multiples of LTM net revenue, LTM
EBITDA and LTM EBIT were 1.12x to 1.98x, 5.0x to 6.7x and 5.7x to 7.4x,
respectively. The relevant Cigar Comparable Companies' EMV multiples of LTM net
income and earnings per share estimates for fiscal years ending 1998, 1999 and
2000 were 7.3x to 8.5x, 9.9x to 10.7x, 8.2x to 9.1x and 7.7x to 8.5x.
PaineWebber applied the relevant Cigar Comparable Companies' multiples to the
Company's LTM net revenue, LTM EBITDA, LTM EBIT, LTM net income and earnings per
share estimates for fiscal years ending 1998, 1999 and 2000 and derived an
implied range of fully diluted equity values for the Company of $8.00 to $10.50
per share. PaineWebber noted that the Class A Merger Consideration fell within
this range.

Discounted Cash Flow Analysis: PaineWebber analyzed the Company's
projected after-tax free cash flows through December 31, 2005, based on the
Company's estimates provided to PaineWebber, utilizing a range of discount rates
and terminal value multiples. PaineWebber assumed terminal value exit multiple
ranges in December 2005 based on EBITDA and price to earnings of 5.0x-6.5x and
7.0x-10.0x, respectively, and assumed a discount rate range of 10.0%-13.0%.
These discount rates were determined through the use of the capital asset
pricing model and, in conducting its analysis, PaineWebber reviewed with the
Company's management the Company's projected financial performance and the risks
associated with the Company's business to derive what PaineWebber believed were
appropriate discount rates. Based on the foregoing, PaineWebber derived an
implied range of fully diluted equity values for the Company of $9.50 to $11.00
per share. PaineWebber noted that the Class A Merger Consideration fell at the
bottom end of this range.

Minority Interest Buyout Analysis. PaineWebber analyzed premiums paid to
noncontrol shareholders in all industries in cash transactions greater than $10
million announced and completed since 1987 (86 transactions), 1993 (41
transactions), and 1996 (19 transactions). This analysis indicated mean premiums
to the target's closing stock price one day, one week and four weeks prior to
the announcement of the transaction of 23.4%, 25.4% and 29.5%, respectively.
Based on the closing trading prices of the Class A Shares one day, one week and
four weeks prior to December 4, 1998, applying the relevant premiums to the
applicable closing stock prices yielded fully diluted equity values of $8.00 to
$9.00 per share. PaineWebber noted that the Class A Merger Consideration was
above this range.

Implied Share Price Based on Projected Earnings Per Share
Analysis: PaineWebber applied a range of forward price to earnings multiples
from 7.0x--10.0x to projected earnings per share provided by the Company's

management to derive a range of future stock prices at the end of 1999 and 2000.
The future stock prices were then discounted to derive a range of implied
present value stock prices of $8.00 to $10.00. PaineWebber noted that the Class
A Merger Consideration fell within this range.

Leveraged Recapitalization Analysis: PaineWebber analyzed the potential
stockholder value implications of a debt-financed special dividend. Future stock
prices at the end of 1999 and 2000 were determined by using the projected
earnings per share provided by the Company's management, adjusted for debt
service, multiplied by a range of forward price to earnings multiples from
7.0x--10.0x. The future stock prices were then discounted to derive a range of
implied present value stock prices of $9.50 to $11.50. PaineWebber noted that
the Class A Merger Consideration fell at the bottom end of this range.

The Special Committee selected PaineWebber to be its exclusive financial
advisor in connection with the Merger because PaineWebber is a prominent
investment banking and financial advisory firm with experience in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and valuations for corporate purposes. PaineWebber has had no prior
investment advisory or corporate finance relationship with the Company or the
Class B Holder.

In the ordinary course of business, PaineWebber may trade the securities of
the Company for its own account and for the accounts of its customers and,
accordingly, may at any time hold long or short positions in such securities.

The Company has paid PaineWebber a fee of $500,000 for its services in
rendering its opinion as to whether or not the Class A Merger Consideration is
fair, from a financial point of view, to the Unaffiliated Class A Holders,
together with its reasonable out-of-pocket expenses (including the fees and
disbursements of its counsel). The Special Committee, on behalf of the Company,
also agreed, under a separate agreement, to indemnify PaineWebber, its
affiliates and each of its directors, officers, agents and employees, and each
person, if any, controlling PaineWebber or any of its affiliates against certain
liabilities, including liabilities under the federal securities laws.

CERTAIN EFFECTS OF THE MERGER

Pursuant to the Merger Agreement, following approval and adoption of the
Merger Agreement and the transactions contemplated thereby and subject to the
fulfillment or waiver of certain conditions, the Company will be merged with and
into Newco, and Newco will conduct the current business of the Company under the
Company's name as the surviving corporation of the Merger. Each Class A Share
(other than Class A Shares held in treasury (which will be cancelled) or held by
Class A Holders who perfect their rights of appraisal of their Class A Shares in
accordance with the DGCL) will be converted into the right to receive the Class
A Merger Consideration in the Merger. The 28,100,000 Class B Shares held by the
Class B Holder will be converted in the Merger into 2,810 newly-issued shares of
Newco Common Stock. Upon consummation of the Merger, the Class B Holder will
own, and Mr. Ziegler will control, all of the outstanding common stock and
voting power of Newco, the surviving corporation of the Merger.

Accordingly, if the Merger is consummated, the Class A Holders will no
longer have any equity or other interest in, and will not be stockholders of,
the Company, and therefore, will not benefit from any future earnings or growth
of the Company or increases in the value of the Class A Shares that might have
occurred had the Merger not been consummated. Conversely, such Class A Holders
will no longer bear the risk of any decreases in the value of the Company that
might have occurred had the Merger not been consummated.

The Class A Shares are currently registered under the Exchange Act and are
listed for trading on the NYSE under the symbol 'SWR.' As a result of the
consummation of the Merger, the Class A Shares will be delisted from the NYSE,
the registration of the Class A Shares under the Exchange Act will be
terminated, the Company will be relieved of its current obligation to comply
with the reporting requirements of the Exchange Act (including the obligation to
comply with the proxy rules of Regulation 14A under Section 14 of the Exchange
Act), and its directors, officers and beneficial owners of more than 10% of the
Class A Shares will be relieved of the reporting requirements and restrictions
on insider trading under Section 16 of the Exchange Act. Accordingly, less
information will be required to be made currently available than is the case at
this time.

At the Effective Time of the Merger, certain unexercised Stock Options
outstanding under the Stock Option Plan held by certain executive officers and
key employees of the Company will be canceled. It is currently

expected that Newco will adopt an employee benefit plan in which such executive
officers and key employees will be permitted to participate, but it is not
anticipated that the terms of such plan will be determined or that such plan
will be adopted prior to the Merger.

The directors and officers of the Company at the Effective Time of the
Merger will be the directors and officers of Newco, as the surviving
corporation, from and after the Effective Time of the Merger.

PLANS FOR THE COMPANY AFTER THE MERGER

It is expected that, following consummation of the Merger, the operations
and business of the Company will, except as set forth in this Proxy Statement,
be conducted by Newco, as the surviving corporation of the Merger, substantially
as they are currently conducted by the Company.

Except as described in this Proxy Statement, neither the Company nor the
Class B Holder has any present plans or proposals that relate to or would result
in an extraordinary corporate transaction involving the Company's corporate
structure, business or management, such as a merger, reorganization,
liquidation, relocation of any operations or sale or transfer of a material
amount of assets. However, Newco (as the successor to the Company after the
Merger) and the Class B Holder will continue to evaluate the business and
operations of the Company after the Merger, and may propose or develop new plans
and proposals which either considers to be in the best interests of Newco and
its stockholders.

CONDUCT OF THE BUSINESS OF THE COMPANY IF THE MERGER IS NOT CONSUMMATED

Consummation of the Merger is subject to several conditions, including (i)
satisfaction of the DGCL Vote Requirement and the Majority of the Minority Vote
Requirement, (ii) absence of any legal restraints, proceedings or prohibitions
that prevent consummation of the Merger, (iii) all governmental authorizations
necessary for the consummation of the Merger must have been obtained and (iv)
the Company and Newco must obtain financing in an amount sufficient to pay the
aggregate Class A Merger Consideration and certain other fees and expenses
related to the transactions contemplated by the Merger and the Merger Agreement.
As described in 'THE MERGER AND THE MERGER AGREEMENT--Financing of the Merger,'
the Company and Newco have a commitment from the Lender for the required
financing, which contains several conditions. Accordingly, even if the requisite
stockholder approval is obtained, there can be no assurance that the Merger will
be consummated. See 'THE MERGER AND THE MERGER AGREEMENT--Conditions to the
Consummation of the Merger.'

If the Merger is not consummated for any reason, it is expected that the
business and operations of the Company will continue to be conducted by the
Company's current management, under the direction of the Board of Directors,
substantially as they are currently being conducted, and the Class B Holder will
continue to hold the Class B Shares. No other transaction is currently being
considered by the Company as an alternative to the Merger.

If the Merger is not consummated, the Company may purchase additional Class
A Shares on terms more or less favorable to the holders of the Class A Shares
than the terms of the Merger or offer or sell Class A Shares, from time to time,
in each case subject to availability at prices deemed acceptable to the Company,
pursuant to a merger transaction, tender offer, open market or privately
negotiated transactions or otherwise.

INTEREST OF CERTAIN PERSONS IN THE MERGER; TREATMENT OF CERTAIN CLASS A SHARES
AND OPTIONS

In considering the recommendation of the Special Committee and the Board of
Directors with respect to the Merger, stockholders of the Company should be
aware that certain officers and directors of the Company have certain interests
in the Merger or certain relationships, including those referred to below, that
may be considered to give rise to divided interests in considering the Merger.
The Special Committee and the Board of Directors were aware of these potential
or actual conflicts of interest and considered them along with other matters
described under '--Recommendation of the Special Committee and the Board of
Directors; Fairness of the Merger.'

At the Effective Time, the 28,100,000 Class B Shares owned by the Class B
Holder immediately prior to the Effective Time of the Merger will be converted
into 2,810 shares of Newco Common Stock, which will constitute the only
outstanding shares of Newco Common Stock, representing all of the outstanding
voting power of Newco. Newco was formed by the Company to consummate the Merger,
and since the majority of the voting power of the Company is held by the Class B
Holder (which is controlled by William Ziegler, III who is also the Chairman of
the Board and the Chief Executive Officer of the Company), the Class B Holder is
also the

controlling person of Newco. Accordingly, upon consummation of the Merger, Mr.
Ziegler, through his control of the Class B Holder, will control all of the
outstanding capital stock and voting power of Newco. 'THE PARTIES--The
Company--Security Ownership.'

The directors and executive officers of the Company (including any person
who served as a director or executive officer of the Company at any time during
1998) beneficially owned, as of December 31, 1998, an aggregate of 24,850 Class
A Shares, or less than 1% of the outstanding Class A Shares. Mr. Ziegler
controls all of the outstanding capital stock of the Class B Holder, which, in
turn, owns all of the outstanding Class B Shares. All Class A Shares held by
such directors and executive officers at the Effective Time will be converted,
upon consummation of the Merger, along with all other publicly-held Class A
Shares (other than Dissenting Shares, as defined below), into the right to
receive the Class A Merger Consideration. The Company believes that the present
intention of the Company's directors and executive officers who own Class A
Shares is to vote all Class A Shares with respect to which they possess sole or
shared voting power for approval and adoption of the Merger Agreement and the
transactions contemplated thereby. See 'THE PARTIES--The Company--Security
Ownership.'

Additionally, the Company's executive officers and certain other key
employees held, as of December 31,1998, Stock Options to purchase an aggregate
of 1,853,890 Class A Shares at exercise prices ranging from $17.00 to $17.875,
each of which is subject to cancellation in the Merger. At the Effective Time of
the Merger, all unexercised Stock Options outstanding under the Stock Option
Plan held by certain executive officers of the Company will be canceled. It is
currently expected that Newco will adopt an employee benefit plan in which such
executive officers and key employees will be permitted to participate, but it is
not anticipated that the terms of such plan will be determined or that such plan
will be adopted prior to the Merger.

LITIGATION REGARDING THE MERGER

After the Company announced the Merger on December 9, 1998, the following
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 parties in the Stockholder Actions have entered into a
Memorandum of Understanding, dated as of April 26, 1999, setting forth a
proposed settlement of the Stockholder Actions, subject to approval of the
Delaware Court of Chancery. Pursuant to the Memorandum of Understanding the
Company agreed: to permit counsel for plaintiffs to review and comment on a
draft of this Proxy Statement; to provide counsel for plaintiffs, based on a
confidentiality agreement, certain financial data to enable them, with the
assistance of an independent expert retained by plaintiffs, to form a belief as
to the fairness of the Class A Merger Consideration as of the date of the
Memorandum of Understanding; not to disband or restrict the scope of authority
of the Special Committee pending effectiveness of the Merger or termination of
the Merger Agreement; and, for a period of twelve months, without consultation
and negotiation with the Special Committee, not to cause the Company to engage
in any freeze-out merger (other than the Merger) pursuant to which the Class A
Shares are converted into cash without the consent of the holders thereof.
Plaintiffs agreed to

dismiss the Stockholder Actions and to release the Company, its directors, Newco
and Hay Island from all claims which were or could have been asserted against
the Company, its directors, Newco or Hay Island in the Stockholder Actions
relating to the Merger or the disclosures made in connection therewith.
Plaintiffs intend to apply for, and the defendants have agreed not to oppose, an
award of attorneys' fees and expenses in an aggregate amount not to exceed
$350,000.

The Company has included in this Proxy Statement certain language, proposed
by plaintiffs' counsel pursuant to the Memorandum of Understanding, and the
Company has been advised that the independent expert retained by plaintiffs has
concluded that the Class A Merger Consideration is fair to the Class A Holders.
It is anticipated that a Stipulation of Settlement will be filed in the Delaware
Court of Chancery seeking approval of the proposed settlement upon notice to the
class which the plaintiffs purport to represent.

For information with respect to other litigation involving the Company, see
'THE PARTIES--The Company--Legal Proceedings.'

THE MERGER AND THE MERGER AGREEMENT

The following includes a description of the material provisions of the
Merger Agreement, a copy of which is attached hereto as Appendix A and is
incorporated herein by reference.

MERGER CONSIDERATION

In the Merger, each Class A Share (other than Class A Shares held in
treasury (which will be cancelled) and Class A Shares owned by Class A Holders
who have properly perfected their appraisal rights under the DGCL ('Dissenting
Shares')), will be converted, without any action on the part of the Class A
Holders, into the right to receive $9.50 in cash. The outstanding 28,100,000
Class B Shares will be converted into 2,810 shares of newly-issued Newco Common
Stock.

EFFECTIVE TIME OF THE MERGER

The Merger will become effective when the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware in accordance with
the relevant provisions of the DGCL or at such later time as is specified in the
Certificate of Merger. The required filing is expected to be made promptly after
the approval and adoption of the Merger and the Merger Agreement by the
stockholders of the Company at the Special Meeting and the satisfaction or
waiver of the other conditions to the Merger set forth in the Merger Agreement.

EXCHANGE AND PAYMENT PROCEDURES

As soon as practicable after the Effective Time, BankBoston, the paying
agent for the Merger (the 'Paying Agent'), will mail to each record holder
(other than holders of Dissenting Shares) of an outstanding certificate or
certificates representing Common Shares as of the Effective Time, a letter of
transmittal and instructions for use in effecting the surrender of such
certificates for exchange for the applicable Merger Consideration. Upon
surrender to the Paying Agent of a certificate representing Common Shares,
together with such letter of transmittal, duly executed, the holder of such
certificate shall be entitled to receive $9.50 in cash per Class A Share, and a
certificate evidencing ownership of 2,810 newly-issued Newco Common Stock, in
the case of Class B Shares. Until surrendered in accordance with the foregoing
instructions, each certificate representing Class A Shares will represent for
all purposes only the right to receive such cash payment (if so surrendered).

STOCKHOLDERS OF THE COMPANY SHOULD NOT DELIVER THEIR COMMON SHARE
CERTIFICATES NOW, BUT SHOULD SEND THEM ONLY PURSUANT TO INSTRUCTIONS SET FORTH
IN THE LETTER OF TRANSMITTAL TO BE MAILED TO STOCKHOLDERS AS SOON AS PRACTICABLE
AFTER THE EFFECTIVE TIME. IN ALL CASES, THE MERGER CONSIDERATION WILL BE
PROVIDED ONLY IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS PROXY
STATEMENT AND SUCH LETTERS OF TRANSMITTAL.

The Company and Newco strongly recommend that certificates for Common
Shares and letters of transmittal be transmitted only by registered United
States mail, return receipt requested, appropriately insured. Holders of Common
Shares whose certificates are lost will be required at the holder's expense to
furnish a lost certificate affidavit and bond acceptable in form and substance
to BankBoston, the Company's Paying Agent.

Any Merger Consideration not validly claimed by stockholders of the Company
will be subject to surrender to governmental entities pursuant to applicable
abandoned property, escheat or similar laws. Neither the Paying Agent nor any
party to the Merger Agreement will be liable to any holder of certificates
formerly representing Common Shares for any amount paid to any such governmental
entity.

The Company will pay all charges and expenses of the Paying Agent in
connection with the Merger and the payment and issuance of the Merger
Consideration.

Any questions concerning exchange and payment procedures and requests for
letters of transmittal may be addressed to the Paying Agent at 150 Royall
Street, Canton, Massachusetts 02028.

TRANSFER OF COMMON SHARES

No transfer of Class A Shares will be made on the stock transfer books of
the Company after the close of business on the day immediately prior to the
Effective Time. If, on or after the Effective Time, certificates for Class A
Shares are presented, they will be canceled and exchanged for the right to
receive the Class A Merger Consideration, as provided in the preceding section
of this Proxy Statement.

THE MERGER AGREEMENT

COVENANTS

The Company has agreed in the Merger Agreement to submit the Merger
Agreement for consideration by the stockholders of the Company at the Special
Meeting and to recommend to the stockholders of the Company the approval and
adoption of the Merger and the other transactions contemplated by the Merger
Agreement, subject, however to the right (as set forth in the Merger Agreement)
of the Special Committee or the Board of Directors (i) to withdraw, modify or
change any recommendation and declaration with respect to the Merger Agreement
or (ii) to recommend and declare advisable any other offer or proposal as it
shall deem consistent with the exercise of its fiduciary duties to the
stockholders of the Company.

The Class B Holder has agreed to vote its Class B Shares in favor of the
Merger and the Merger Agreement, unless the Special Committee or the Board of
Directors withdraws, modifies or changes any recommendations or declaration
regarding the Merger Agreement or the Merger. Newco, with certain conditions,
has agreed to cause the Company to maintain the current levels of director and
officer liability insurance and that all rights to indemnification now existing
in favor of the present directors or officers of the Company and its
subsidiaries as in effect on the date of the Merger Agreement shall continue.

The Company, the Class B Holder and Newco have agreed in the Merger
Agreement (i) to prepare and file with the SEC this Proxy Statement and the
Schedule 13E-3 Transaction Statement and otherwise to make all necessary filings
and take all necessary actions in order to comply with federal and state
securities laws applicable to all the transactions contemplated by the Merger
Agreement; (ii) to consult with each other in advance of making public
announcements concerning the Merger; and (iii) to use best efforts to take or
cause to be taken all action and to do or cause to be done all things necessary
or advisable to consummate the transactions contemplated by the Merger
Agreement.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties of the
Company to each of Newco and the Class B Holder, including with respect to the
following matters: (i) the due organization and valid existence of the Company
and its subsidiaries and similar corporate matters; (ii) the capitalization of
the Company; (iii) the due authorization, execution and delivery of the Merger
Agreement and its binding effect on the Company; (iv) the lack of conflicts
between the Merger Agreement and the transactions contemplated thereby with the
Company's certificate of incorporation or bylaws, contracts to which it or its
subsidiaries are parties or any law, rule, regulation, order, writ, injunction
or decree binding upon the Company or its subsidiaries; (v) the accuracy of the
Company's filings with the SEC and financial statements; (vi) the opinion of
PaineWebber and the approval of the Merger by the Special Committee; (vii) the
accuracy of the information provided by the Company for inclusion in this Proxy
Statement and the Schedule 13E-3; and (viii) the compliance with law. Such
representations and warranties are subject, in certain cases, to specified
exceptions and qualifications.

The Merger Agreement also contains representations and warranties of each
of the Class B Holder and Newco, as the case may be, to the Company, including
with respect to the following matters: (i) the due organization and valid
existence of each of the Class B Holder and Newco, respectively, and similar
corporate matters; (ii) the due authorization, execution and delivery of the
Merger Agreement by the Class B Holder and Newco, respectively, and its binding
effect on each of them; (iii) regulatory filings and approvals, and the absence
of conflicts of the Merger Agreement and the transactions contemplated thereby
with the certificate of incorporation or bylaws of each of the Class B Holder
and Newco, or with any contract binding upon either of the Class B Holder or
Newco or with any law, rule, regulation, order, writ, injunction or decree
binding upon any of such parties; (iv) the formation, capitalization and absence
of prior activities of Newco; and (v) the accuracy of the information provided
by the Class B Holder and Newco, respectively, for inclusion in this Proxy
Statement and the Schedule 13E-3. Such representations and warranties are
subject, in certain cases, to specified exceptions and qualifications.

CONDITIONS TO THE CONSUMMATION OF THE MERGER

The obligations of each of the Company, Newco and the Class B Holder to
consummate the Merger are subject to the fulfillment or waiver (if permissible)
at or prior to the Effective Time of certain conditions, including (i) the
satisfaction of the DGCL Vote Requirement and the Majority of the Minority Vote
Requirement; (ii) there not being in effect any statute, rule, regulation,
executive order, decree, ruling or injunction or other order of a court or
agency directing that the transactions contemplated by the Merger Agreement not
be consummated; (iii) all required consents, waivers and approvals having been
obtained and continuing to be in effect at the Effective Time; and (iv) Newco
and the Company having obtained funds sufficient to consummate the Merger
(including, without limitation, funds sufficient to pay the Class A Merger
Consideration and to pay all of the costs, fees and other expenses incident to
the Merger as contemplated by the Merger Agreement and this Proxy Statement).

The obligation of the Company to effect the Merger is subject to the
fulfillment or waiver (if permissible) at or prior to the Effective Time of the
following conditions: (i) the representations and warranties of the Class B
Holder and Newco in the Merger Agreement being true when made and as of the
Effective Time; (ii) the Class B Holder and Newco having performed in all
material respects their respective material obligations contained in the Merger
Agreement to be performed or complied with by the Class B Holder or Newco,
respectively, at or prior to the Effective Time; (iii) that neither of the
Special Committee or the Board of Directors has, prior to the Effective Time,
withdrawn, modified or changed any recommendation or declaration regarding the
Merger Agreement or the Merger, or recommended or declared advisable any other
offer or proposal that, in the opinion of the Special Committee or the Board of
Directors, after consultation with their counsel, is required by the exercise of
its fiduciary duties to the stockholders of the Company under applicable law;
(iv) the opinion of PaineWebber has not been withdrawn or revoked; and (v) the
delivery to the Company of certificates of each of the Class B Holder and Newco
to the effect that the conditions set forth in (i) and (ii) have been fulfilled.

The obligation of the Class B Holder to effect the Merger is subject to the
fulfillment or waiver (if permissible) at or prior to the Effective Time of the
following conditions: (i) the representations and warranties of each of the
Company and Newco in the Merger Agreement being true when made and as of the
Effective Time, (ii) each of the Company and Newco having performed in all
material respects its material obligations contained in the Merger Agreement to
be performed or complied with by each of the Company and Newco at or prior to
the Effective Time; and (iii) the delivery to the Class B Holder of a
certificate of each of the Company and Newco to the effect that the conditions
set forth in (i) and (ii) have been fulfilled.

The obligation of Newco to effect the Merger is subject to the fulfillment
or waiver (if permissible) at or prior to the Effective Time of the following
conditions: (i) the representations and warranties of each of the Company and
the Class B Holder in the Merger Agreement being true when made and as of the
Effective Time, (ii) each of the Company and the Class B Holder having performed
in all material respects its material obligations contained in the Merger
Agreement to be performed or complied with by each of the Company and the Class
B Holder at or prior to the Effective Time; and (iii) the delivery to Newco of a
certificate of each of the Company and the Class B Holder to the effect that the
conditions set forth in (i) and (ii) have been fulfilled.

The Merger Agreement provides that the parties thereto may waive compliance
in whole or in part with any of the conditions contained therein to the extent
permitted by law, provided that any such waiver by the Company must be approved
by the Special Committee.

TERMINATION; AMENDMENTS; WITHDRAWAL OF RECOMMENDATIONS

The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval and adoption by the stockholders of the Company at the Special Meeting:
(i) by mutual written consent of Newco, the Class B Holder and the Company (with
the concurrence of the Special Committee); (ii) by any of Newco, the Company or
the Class B Holder if: (a) any court of competent jurisdiction in the United
States or some other governmental body or regulatory authority shall have issued
an order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable, (b) the Merger shall not
have been consummated by June 30, 1999, provided that the right to terminate the
Merger Agreement in such event is not available to any party whose failure to
fulfill any of its obligations under the Merger Agreement results in the failure
of the Merger to occur on or before such date, or

(c) the Merger Agreement and the Merger shall have been voted on by stockholders
of the Company at the Special Meeting and the vote shall not have been
sufficient to satisfy the DGCL Vote Requirement or the Majority of the Minority
Vote Requirement; or (iii) by the Company if (a) the Special Committee or the
Board of Directors withdraws, modifies or changes its recommendation or
declaration regarding the Merger Agreement or the Merger or recommends or
declares advisable any other offer or proposal, or (b) the opinion of
PaineWebber is withdrawn or revoked.

The Merger Agreement provides that it may be amended by the parties thereto
(with the concurrence of the Special Committee) at any time before or after
approval and adoption thereof by the stockholders of the Company, but, after
such approval and adoption, no amendment which by law requires further approval
and adoption by such stockholders can be made without such further approval and
adoption.

The Merger Agreement permits the Board of Directors or the Special
Committee, at any time prior to the Effective Time, to withdraw, modify or
change any recommendation and declaration regarding the Merger or the Merger
Agreement, or recommend and declare advisable any other offer or proposal, if,
in the opinion of the Board of Directors or the Special Committee, after
consultation with their respective counsel, such withdrawal, modification or
change is required by the exercise of its fiduciary duties to the stockholders
of the Company under applicable law.

DELAWARE STATUTORY APPRAISAL RIGHTS

CLASS A SHARES

Holders of Class A Shares are entitled to appraisal rights under Section
262 of the DGCL. A Class A Holder having a beneficial interest in Class A Shares
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.

THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262, WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX C TO THIS
PROXY STATEMENT. All references in Section 262 and in this summary to a
'stockholder' are to the record holder of Class A Shares as to which appraisal
rights are asserted. As used herein, 'Surviving Corporation' means Newco, the
corporation surviving the Merger.

Under the DGCL, Class A Holders who do not wish to accept, pursuant to the
Merger, the Class A Merger Consideration provided for in the Merger Agreement
and who follow the procedures set forth in Section 262 will be entitled to have
their Class A Shares appraised by the Delaware Court of Chancery and to receive
payment in cash of the 'fair value' of such Class A Shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, as determined by such court.

Under Section 262, where a merger is to be submitted for approval and
adoption at a meeting of stockholders, as in the case of the Special Meeting,
the corporation, not less than 20 days prior to the meeting, must notify each of
its stockholders entitled to appraisal rights that such appraisal rights are
available and include in such notice a copy of Section 262. THIS PROXY STATEMENT
SHALL CONSTITUTE SUCH NOTICE TO THE HOLDERS OF CLASS A SHARES AND THE APPLICABLE
STATUTORY PROVISIONS OF THE DGCL ARE ATTACHED TO THIS PROXY STATEMENT AS
APPENDIX C. Any stockholder who wishes to exercise such appraisal rights, or who
wishes to preserve his right to do so, should review the following discussion
and Appendix C carefully because failure to timely and properly comply with the
procedures specified will result in the loss of appraisal rights under the DGCL.

A Class A Holder wishing to exercise his appraisal rights must deliver to
the Secretary of the Company, before the vote on the Merger and the Merger
Agreement at the Special Meeting, a written demand for appraisal of his Class A
Shares and must not vote his shares of stock in favor of approval and adoption
of the Merger and the Merger Agreement. Because a proxy which does not contain
voting instructions will, unless revoked, be voted for approval and adoption of
the Merger and the Merger Agreement, a holder of Class A Shares who votes by
proxy and who wishes to exercise his appraisal rights must (i) vote against
approval and adoption of the Merger and the Merger Agreement or (ii) abstain
from voting on approval and adoption of the Merger and the Merger Agreement.
Neither voting (in person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to approve and adopt the Merger and the Merger
Agreement will constitute a written demand for

appraisal within the meaning of Section 262. The written demand for appraisal
must be in addition to and separate from any such proxy or vote. In addition, a
Class A Holder wishing to exercise his or her appraisal rights must hold of
record such Class A Shares on the date the written demand for appraisal is made
and must continue to hold such Class A Shares until the Effective Time.

Only a holder of record of Class A Shares is entitled to assert appraisal
rights for the Class A Shares registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the holder of record, fully and
correctly, as his or her name appears on the stock certificate(s). If the Class
A Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the Class A Shares are owned of record by more than one person, as in a
joint tenancy and tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds Class A Shares as
nominee for several beneficial owners may exercise appraisal rights with respect
to the Class A Shares held for one or more beneficial owners while not
exercising such rights with respect to the Class A Shares held for other
beneficial owners; in such case, the written demand should set forth the number
of Class A Shares as to which appraisal is sought and when no number of Class A
Shares is expressly mentioned the demand will be presumed to cover all Class A
Shares held in the name of the record owner. Class A Holders who hold their
Class A Shares in brokerage accounts or other nominee forms and who wish to
exercise appraisal rights are urged to consult with their brokers to determine
the appropriate procedures for the making of a demand for appraisal by such a
nominee. All written demands for appraisal should be delivered to Karl H.
Ziegler, Secretary of the Company, either in person or by mail (certified mail,
return receipt requested, being the recommended form of transmittal) addressed
to him at: Karl H. Ziegler, Secretary of the Company, Swisher International
Group Inc., 20 Thorndal Circle, Darien, Connecticut 06820.

Within ten days after the Effective Time, the Surviving Corporation must
send a notice as to the effectiveness of the Merger to each former stockholder
of the Company who has made such a written demand for appraisal and who has not
voted in favor of approval and adoption of the Merger and the Merger Agreement.
Within 120 days after the Effective Time, but not thereafter, the Surviving
Corporation, or any Class A Holder who is entitled to appraisal rights under
Section 262 and has complied with the requirements of Section 262, may file a
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the Class A Shares. The Surviving Corporation is under no obligation to
and has no present intention to file a petition in respect to the appraisal of
the fair value of the Class A Shares. Accordingly, it is the obligation of the
Class A Holders to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262.

Within 120 days after the Effective Time, any Class A Holder who has
complied with the requirements under Section 262 for exercise of appraisal
rights will be entitled, upon written request, to receive from the Surviving
Corporation a statement setting forth the aggregate number of Class A Shares
with respect to which demands for appraisal have been received and which have
not voted in favor of approval and adoption of the Merger and the Merger
Agreement, and the aggregate number of holders of such Class A Shares. Such
statements must be mailed within ten days after a written request therefor has
been received by the Surviving Corporation.

If a petition for appraisal is duly filed by a holder of Class A Shares and
a copy thereof is delivered to the Surviving Corporation, the Surviving
Corporation will then be obligated within 20 days to provide the Delaware Court
of Chancery with a duly verified list containing the names and addresses of all
holders of Class A Shares who have demanded appraisal of their shares. After
notice to such holders of Class A Shares, the Delaware Court of Chancery is
empowered to conduct a hearing upon the petition to determine those Class A
Holders who have complied with Section 262 and who have become entitled to
appraisal rights under that section. The Delaware Court of Chancery may require
the Class A Holders who have demanded payment for their Class A Shares to submit
their stock certificates to the Register in Chancery for a notation thereon of
the pendency of the appraisal proceedings; and if any Class A Holder fails to
comply with such direction, the Delaware Court of Chancery may dismiss the
proceedings as to such Class A Holder.

After determining the Class A Holders entitled to an appraisal, the
Delaware Court of Chancery will appraise the 'fair value' of their Class A
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the

amount determined to be the fair value. Class A Holders considering seeking
appraisal should be aware that the fair value of their Class A Shares as
determined under Section 262 could be more than, the same as or less than the
consideration they would receive pursuant to the Merger Agreement if they did
not seek appraisal of their Class A Shares and that investment banking opinions
as to fairness from a financial point of view are not necessarily opinions as to
fair value under Section 262. The Delaware Supreme Court has stated that 'proof
of value by any techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court' should be
considered in the appraisal proceedings. In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy. The Court also will determine
the amount of interest, if any, to be paid upon the amounts to be received by
persons whose Class A Shares have been appraised. The costs of the action may be
determined by the Court and taxed upon the parties as the Court deems equitable.
The Court also may order that all or a portion of the expenses incurred by any
stockholder in connection with an appraisal, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all of the Class
A Shares that have effectively pursued appraisal.

Any Class A Holder who has duly demanded an appraisal in compliance with
Section 262 will not be entitled, after the Effective Time, to vote the Class A
Shares subject to the appraisal demand for any purpose or be entitled to the
payment of dividends or other distributions, if any, on those shares (except
dividends or other distributions, other than the Class A Merger Consideration,
payable to holders of record of Class A Shares as of a date prior to the
Effective Time).

If any Class A Holder who demands appraisal of his Class A Shares under
Section 262 fails to perfect, or effectively withdraws or loses, his right to
appraisal as provided in the DGCL, the Class A Shares of such stockholder will
be converted into the right to receive the Class A Merger Consideration in
accordance with the Merger Agreement. A Class A Holder will fail to perfect, or
effectively lose or withdraw, his right to appraisal if he votes for approval
and adoption of the Merger and the Merger Agreement (or submits a proxy without
voting instructions) or if no petition for appraisal is filed within 120 days
after the Effective Time or if the Class A Holder delivers to the Company (or,
after the Effective Time, to the Surviving Corporation) a written withdrawal of
his demand for appraisal and an acceptance of the Merger, except that any such
attempt to withdraw made more than 60 days after the Effective Time will require
the written approval of the Surviving Corporation.

CLASS B SHARES

Although the foregoing discussion regarding appraisal rights available to
the Class A Holders would also be applicable to the Class B Holder, the Class B
Holder has agreed, pursuant to the terms of the Merger Agreement, that it will
vote its Class B Shares in favor of the Merger and the Merger Agreement, and
accordingly, has waived any appraisal rights in the Merger.

FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax consequences
of the receipt by Class A Holders of the Class A Merger Consideration. Such tax
treatment may vary depending upon a Class A Holder's particular situation. This
summary does not discuss all of the tax consequences which may be relevant to
certain types of Class A Holders subject to special treatment under the federal
income tax laws (such as individual retirement accounts and other tax-deferred
accounts, life insurance companies, tax-exempt organizations, dealers in
securities and foreign persons). Accordingly, Class A Holders may wish to
consult their own tax advisors with respect to the particular consequences to
them of the receipt of the Class A Merger Consideration in the Merger, including
the applicability and effect of any state, local or foreign tax laws to which
they may be subject and of any legislative or administrative changes in law.

Your receipt of the $9.50 per Class A Share price is a taxable event. You
may recognize gain or loss measured by the difference between the amount of cash
received by you in the Merger and your tax basis in your Class A Shares
exchanged therefor. If the Class A Shares are held by such Class A Holder as
capital assets, the gain or loss may be capital gain or loss (which will be long
term if the Class A Shares are held for more than 12 months). Because
determining the tax consequences of the Merger can be complicated and should be
considered in light of your particular circumstances, you should consult your
tax advisor in order to fully

understand how the Merger will affect you. There are no material income tax
consequences to the Company, the Class B Holder or Newco that are expected to
result from the Merger.

ACCOUNTING TREATMENT

The cost of Newco (the Company's wholly-owned subsidiary and the surviving
corporation in the Merger) purchasing the Class A Shares will be accounted for
as a treasury stock transaction under generally accepted accounting principles.
This means that the historical cost basis of the Company's assets and
liabilities will be carried forward to Newco, the surviving corporation in the
Merger, with the aggregate cost, including expenses, of such purchase being
accounted for as a charge to stockholders' equity.

FINANCING OF THE MERGER AND DESCRIPTION OF NEW CREDIT FACILITY

The Company has signed an engagement letter with BankBoston to arrange for
the New Credit Facility providing for $200 million (i) to finance the Merger
(approximately $59 million, including fees and expenses) and (ii) to refinance
the Company's $115 million Existing Credit Facility. The New Credit Facility
will consist of a $75 million five-year term loan (the 'Term Loan') and a $125
million five-year revolving credit facility (the 'Revolver'). The Company
anticipates that amounts borrowed under the New Credit Facility will be repaid
from cash generated from operations. The Company and Newco have a commitment
from the Lender for the full amount of the New Credit Facility, which is
sufficient (i) to finance the aggregate Class A Merger Consideration, and to pay
other fees and expenses incurred in connection with the Merger and (ii) to
refinance its Existing Credit Facility.

Simultaneously with the consummation of the Merger, the Company, Newco and
Swisher will enter into the New Credit Facility with a group of lenders led by
BankBoston. The Revolver and the Term Loan will mature in 2004 and will bear
interest at floating rates. The New Credit Facility will be secured by most of
the assets of the Company, Newco and Swisher and the domestic subsidiaries of
Swisher. Newco will also pledge the capital stock of all of Swisher's
subsidiaries. The New Credit Facility will be guaranteed by Hay Island and by
Newco and certain of Swisher's subsidiaries.

The New Credit Facility will contain various restrictive covenants
including, among others, limitations on the ability of Newco and Swisher to
incur debt, create liens, pay dividends, sell assets and make investments and
acquisitions. In addition, the New Credit Facility will require Newco to satisfy
financial covenants.

At the closing of the Merger, the Company, through Newco, expects to pay to
the Class A Holders an aggregate purchase price of approximately $54.9 million
for the Class A Shares, assuming no Class A Holders dissenting from the Merger
exercise their appraisal rights provided under the DGCL, as further described in
this Proxy Statement. In addition, the Company will incur approximately $3.9
million in expenses related to the Merger, including fees and expenses payable
to the Lender, the financial advisor, legal counsel and independent accountants
of the Company, and the financial advisor and legal counsel to the Special
Committee. It is a condition to the consummation of the Merger that Newco and
the Company have obtained sufficient funds for the foregoing purposes. At the
Effective Time, the indebtedness incurred under the New Credit Facility will
become the indebtedness of Newco as the surviving corporation of the Merger.

FEES AND EXPENSES

The estimated aggregate costs and fees incurred by the Company, the Special
Committee and Newco in connection with the Merger and related transactions are
as follows:

Purchase of 5,778,300 Class A Shares at $9.50 per share $54,893,850
Professional fees* 3,300,000
Other** 600,000
-----------
Total fees $58,793,850
-----------
-----------

- ------------------
* Investment bankers, commercial bankers, legal and accounting fees
** Filing fees, solicitation expenses, printing costs and other miscellaneous
expenses

REGULATORY REQUIREMENTS

Except for the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware pursuant to the DGCL after the approval and
adoption of the Merger Agreement and the transactions contemplated thereby, and
compliance with federal and state securities laws, none of Newco, the Company or
the Class B Holder is aware of any material United States federal or state or
foreign governmental regulatory requirement necessary to be complied with or
approval that must be obtained in connection with the Merger.

MARKET PRICE INFORMATION; DIVIDENDS; REPURCHASES OF CLASS A SHARES

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 and for December 8, 1998 (the last full trading day prior
to the day on which the proposal to consummate the Merger was announced),
December 9, 1998 (the trading day on which the proposed Merger was announced
after the close of trading on the NYSE), and April 16, 1999 (which is the Record
Date). Class A Holders are encouraged to obtain current market quotations.

HIGH LOW
---- ---

1997
- ---------------------------------------------------------------------------
First Quarter............................................................ $18 3/4 $131/4
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 /16
Third Quarter............................................................ 8 5 1/4
Fourth Quarter........................................................... 9 1/8 4 3/8
December 8, 1998......................................................... 6 13/16 6 1/2
December 9, 1998......................................................... 6 7/8 6 /16

1999
- ---------------------------------------------------------------------------
April 16, 1999........................................................... 9 1/8 9

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.

During the fiscal quarter ended March 31, 1998 only, the Company purchased
a total of 221,700 Class A Shares on the open market for $13.00 per share, for
an approximate aggregate purchase price (excluding brokerage commissions) of
$2.882 million, pursuant to its stock repurchase program. Other than in
connection with such stock repurchase program, neither the Company nor any of
its affiliates, including the Class B Holder (other than as described in 'THE
PARTIES--The Company--Security Ownership' and '--Certain Transactions in the
Class A Shares' with respect to isolated purchases by certain directors and
executive officers) has purchased any Class A Shares in the open market since
January 1, 1997.

THE PARTIES

NEWCO

Newco is a wholly-owned subsidiary of the Company formed to implement the
Merger. Newco has not engaged in any operations to date. If the Merger is
consummated and the Company is merged with and into Newco, Newco will generally
continue to conduct the current business of the Company under the current name
of the Company. The principal executive offices of Newco are located at the
Company's principal executive offices located at 20 Thorndal Circle, Darien,
Connecticut 06820. The telephone number of Newco is (203) 656-8000.

HAY ISLAND HOLDING CORPORATION

Hay Island (the Class B Holder) is a holding company owned by Pine Island
Associates, L.L.C. ('Pine Island') and by trusts established under the wills of
the parents of William Ziegler, III, of which Mr. Ziegler is the beneficiary
(the 'Ziegler Trusts'). Mr. Ziegler and First Union Bank of Connecticut are the
co-trustees of the Ziegler Trusts and, therefore, share voting and dispositive
power over all of the 28,100,000 Class B Shares currently outstanding. Pine
Island is controlled by Mr. Ziegler. Mr. Ziegler is also the Chairman of the
Board and the Chief Executive Officer of the Company. See 'THE PARTIES--The
Company--Certain Relationships and Related Transactions and--Security
Ownership.'

THE COMPANY

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, 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.

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 premium
brands 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 12%, 14% and 12% of the Company's
net sales in 1997, 1996, and 1995, 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 1997, approximately 3.5% 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 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. That holding is on appeal to the United
States Supreme Court. See '--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 '--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 '--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.

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 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 Fourth Circuit's reversal is on appeal 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.

For a description of certain litigation commenced against the Company and
some or all of the members of the Board of Directors of the Company regarding
the Merger, see 'SPECIAL FACTORS--Litigation Regarding the Merger.'

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.

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 American
Maize-Products Company ('AMPCo' or 'Amercian Maize'). On November 6, 1995, AMPCo
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 PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998(A) 1998 1997 1996 1995(B)
------------ ------------ ------------ ------------ ------------

STATEMENT OF OPERATIONS:
Net sales........................................ $266,998 $266,998 $275,644 $225,229 $186,386
Cost of sales.................................... 136,133 136,133 137,708 113,764 100,036
------------ ------------ ------------ ------------ ------------
Gross profit..................................... 130,865 130,865 137,936 111,465 86,350
Selling, general and administrative expenses..... 70,140 71,123 64,862 61,008 52,306
Restructuring expenses........................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Operating profit................................. 60,725 59,742 73,074 50,457 34,044
Interest expense, net............................ 11,953 7,073 8,049 9,505 8,445
Other expense (income), net...................... 1,018 1,018 340 153 --
------------ ------------ ------------ ------------ ------------
Income before income taxes and minority
interest....................................... 47,754 51,651 64,685 40,799 25,599
Provision for income taxes....................... 18,600 20,117 25,390 16,006 10,132
------------ ------------ ------------ ------------ ------------
Income before minority interest.................. 29,154 31,534 39,295 24,793 15,467
Minority interest................................ -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income....................................... $ 29,154 $ 31,534 $ 39,295 $ 24,793 $ 15,467
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
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(c)........................................ $ 65,438 $ 65,438 $ 78,765 $ 55,884 $ 39,453
EBITDA margin.................................... 24.5% 24.5% 28.6% 24.8% 21.2%
Gross margin..................................... 49.0 49.0 50.0 49.5 46.3
Operating margin................................. 22.7 22.4 26.5 22.4 18.3
Book value per share............................. N/A $ 3.36 $ 2.52 $ 1.36 N/A

BALANCE SHEET:
Working capital.................................. $ 74,818 $ 73,834 $ 72,911 $ 52,702 N/A
Total assets..................................... 255,761 257,089 237,757 198,930 N/A
Total debt....................................... 151,866 93,072 101,092 117,685 N/A
Total stockholders' equity(d).................... 55,425 114,563 85,949 46,543 N/A

PREDECESSOR
---------------------------
PERIOD FROM PERIOD FROM
NOVEMBER 7 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, NOVEMBER 6, DECEMBER 31,
1995 1995 1994
-------------- ------------- ------------

STATEMENT OF OPERATIONS:
Net sales........................................ $ 31,266 $ 155,120 $163,285
Cost of sales.................................... 16,514 83,522 88,720
-------------- ------------- ------------
Gross profit..................................... 14,752 71,598 74,565
Selling, general and administrative expenses..... 7,207 40,331 47,208
Restructuring expenses........................... -- -- 5,400
-------------- ------------- ------------
Operating profit................................. 7,545 31,267 21,957
Interest expense, net............................ 1,670 3,437 5,503
Other expense (income), net...................... 25 (2,360) (2,706)
-------------- ------------- ------------
Income before income taxes and minority
interest....................................... 5,850 30,190 19,160
Provision for income taxes....................... 2,228 11,536 7,461
-------------- ------------- ------------
Income before minority interest.................. 3,622 18,654 11,699
Minority interest................................ -- (967) (997)
-------------- ------------- ------------
Net income....................................... $ 3,622 $ 17,687 $ 10,702
-------------- ------------- ------------
-------------- ------------- ------------
Earnings per share:
Basic........................................

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

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

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

OTHER:
EBITDA(c)........................................ $ 8,337 $ 37,451 $ 29,176
EBITDA margin.................................... 26.7% 24.1% 17.9%
Gross margin..................................... 47.2 46.2 45.7
Operating margin................................. 24.1 20.2 13.5
Book value per share............................. $ 1.02 N/A N/A
BALANCE SHEET:
Working capital.................................. $ 31,925 $ 39,690 $ 46,794
Total assets..................................... 194,230 185,085 193,860
Total debt....................................... 128,152 61,050 77,104
Total stockholders' equity(d).................... 34,750 93,330 80,365

(Footnotes on next page)

- ------------------
(a) Pro forma results of operations presents the results of operations as if the
Going-Private transaction (see Pro Forma Financial Statements included
elsewhere within this Proxy Statement.) had taken place as of January 1,
1998. Pro forma balance sheet data presents balance sheet data as if the
Going-Private transaction had taken place as of December 31, 1998.

(b) 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.

(c) 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.

(d) See Note 4 to the Consolidated Financial Statements for restrictions on
dividend payments.

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 'THE PARTIES--The Company.'

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 consummated, 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 'THE PARTIES--The Company--Regulation.'

EXCISE TAXES

See 'THE PARTIES--The Company--Excise Taxes.'

LITIGATION

See 'THE PARTIES--The Company--Legal Proceedings.'

RECENT DEVELOPMENTS

See 'THE MERGER AND THE MERGER AGREEMENT.'

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 its 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.

CERTAIN FINANCIAL PROJECTIONS OF THE COMPANY

In the normal course of business, management of the Company prepares
internal budgets, plans, estimates, forecasts or projections as to future
revenues, earnings or other financial information in order to be able to
anticipate the financial performance of the Company. It does not, as a matter of
course, publicly disclose these internal documents. However, in connection with
the proposed merger, to facilitate the financial due diligence by the respective
financial advisors, the Company provided Wasserstein Perella with a preliminary
1999 annual budget and with the Financial Projections set forth below which
reflected management's best estimates and good faith judgments as to the future
performance of the Company. The same five-year projections were also provided to
PaineWebber during the course of its engagement on behalf of the Special
Committee. The Financial Projections were subject to and prepared on the basis
of estimates, limitations, qualifications and assumptions and involved judgments
with respect to, among other things, future economic, competitive, regulatory
and financial market conditions and future business decisions which may not be
realized and are inherently subject to significant business, economic,
competitive and regulatory uncertainties, all of which are difficult to predict
and many of which are beyond the control of the Company. While the Company
believes these estimates and assumptions to have been reasonable, there can be
no assurance that the projections will be accurate, and actual results may vary
materially from those shown. In light of the uncertainties inherent in forward
looking information of any kind, the inclusion of these projections herein
should not be regarded as a representation by the Company, the Class B Holder or
any other entity or person that the anticipated results will be achieved and

investors are cautioned not to place undue reliance on such information. See
'SPECIAL FACTORS-- Engagement by the Special Committee and Opinion of
PaineWebber.'

The Company has not updated and does not intend to update or otherwise
revise the Financial Projections to reflect circumstances existing after the
date of the most recent financial statements included in this Proxy Statement or
to reflect the occurrence of unanticipated events. The Financial Projections
should be read together with the Company's Consolidated Financial Statements and
the notes thereto included in this Proxy Statement and other information
contained or incorporated by reference in this Proxy Statement.

Subject to the qualifications and limitations stated above, the Financial
Projections presented below generally rely upon the material assumptions and
bases for projections set forth therein.

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------

Net sales............................................ $289,267 $299,230 $314,037 $329,969 $347,140
Cost of sales........................................ 151,893 154,874 162,306 170,281 178,855
-------- -------- -------- -------- --------
Gross profit......................................... 137,374 144,356 151,731 159,688 168,284
Selling, general and administrative expenses......... 76,825 80,666 84,700 88,935 93,381
-------- -------- -------- -------- --------
Operating profit..................................... 60,549 63,690 67,031 70,753 74,903
Interest expense (income), net....................... 4,885 2,296 (176) (2,642) (5,170)
Other expense (income), net.......................... (150) (375) (425) (480) (541)
-------- -------- -------- -------- --------
Income before income taxes........................... 55,814 61,769 67,632 73,875 80,615
Provision for income taxes........................... 21,767 24,090 26,377 28,812 31,439
-------- -------- -------- -------- --------
Net income........................................... $ 34,047 $ 37,679 $ 41,255 $ 45,063 $ 49,176
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

The projections included herein have been prepared by the Company based
upon management's estimates of the total market for cigars and smokeless tobacco
products and the Company's own performance through 2003. In the projections:

(i) The increase in net sales in each of 2000, 2001, 2002 and 2003
reflects higher cigar and smokeless tobacco sales. The increase in
cigar sales reflects higher unit sales and price increases in all
categories except premium cigars. The increase in smokeless tobacco
sales reflects price increases in all categories offset partially by
volume decline in all categories except moist snuff.

(ii) The increase in gross profit in each of 2000, 2001, 2002 and 2003
reflects the increase in net sales.

(iii) The increase in selling, general and administrative expenses in each
of 2000, 2001, 2002 and 2003 reflects increases primarily in selling
and marketing expenses.

(iv) The increase in operating profit in each of 2000, 2001, 2002 and 2003
reflects the increase in gross profit, offset partially by an
increase in selling, general and administrative expenses.

(v) Interest expense (income), net reflects the anticipated interest
expense related to the Company's revolving credit facility, and
anticipated interest income related to investments.

(vi) Income taxes reflect all state and federal income taxes, both
domestic and foreign.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Certain of the Company's filings under the Exchange Act (including this
Proxy Statement) contain forward-looking statements that are 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' and 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.

Certain matters discussed herein are forward-looking statements that
involve risks and uncertainties. Forward-looking statements include the
Financial Projections set forth in 'THE PARTIES--The Company--

Certain Financial Projections of the Company.' concerning the projected
consolidated income statement data as to the years ending December 31, 1999
through December 31, 2003. Such information has been included in this Proxy
Statement for the limited purpose of giving the Company's stockholders access to
financial projections by the Company's management. The Finanical Projections
were based on assumptions concerning the Company's business prospects in the
years 1999 through 2003. The information also was based on other revenue and
operating assumptions. Information of this type is based on estimates and
assumptions that are inherently subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the Company's control. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those set forth in the Financial
Projections. In addition, the consolidated income statement data as to the years
ending December 31, 1999 through December 31, 2003 were not prepared with a view
to public disclosure or compliance with the published guidelines of the SEC or
the guidelines established by the American Institute of Certified Public
Accountants regarding projections and forecasts. PricewaterhouseCoopers LLP, the
Company's independent accountants, has not examined or applied any agreed upon
procedures to this information and, accordingly, assume no responsibility for
this information.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND NEWCO

The following table sets forth certain information concerning the directors
and executive officers of the Company and Newco. Each individual listed below is
a citizen of the United States.

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. 62 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 65 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 61 Senior Vice President--Tobacco Procurement of the Company
Peter J. Ghiloni 48 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.

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 in this Proxy Statement, 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.

SECURITY OWNERSHIP

The following table sets forth certain information regarding the beneficial
ownership of the Class A Shares and 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 Common 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%
Scudder Kemper Investments, Inc. (3) 686,100 11.87%
Citigroup Inc. (4) 602,800 10.43%
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 in this Proxy
Statement). 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 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.

(4) Consists of 602,800 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 602,800 of these shares.

(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.

CERTAIN TRANSACTIONS IN THE CLASS A SHARES

There were no transactions in the Class A Shares that were effected during
the past 60 days by the Company or the Class B Holder, or any of their
respective subsidiaries, directors, executive officers or controlling persons.

OTHER MATTERS

PROPOSALS BY STOCKHOLDERS OF THE COMPANY

If the Merger is consummated, there will be no public stockholders of the
Company and no public participation in any future meetings of stockholders of
the Company. However, if the Merger is not consummated, the Company's public
stockholders will continue to be entitled to attend and participate in the
Company's stockholder meetings. If the Merger is not consummated, the next
Annual Meeting of Stockholders will be held no later than June 7, 1999 (the
'1999 Annual Meeting'). Any proposal by a stockholder of the Company who wishes
to present a proposal intended to be presented at the 1999 Annual Meeting must
have been received by the Company no later than December 8, 1998 in order to be
considered by the Board of Directors for inclusion in the proxy statement to be
used in connection with the 1999 Annual Meeting. In order for a stockholder to
nominate a candidate for director, under the Company's bylaws, timely notice of
the nomination must be received by the Company in advance of the meeting.
Ordinarily, such notice must be received not less than 30 nor more than 60 days
before the meeting (but if the Company gives less than 40 days' notice of the
meeting, then such notice must be received prior to the meeting and within 10
days after notice of the meeting is mailed or other public disclosure of the
meeting is made). The stockholder filing the notice of nomination must describe
various matters regarding the nominee, including such information as name,
address, occupation and shares held.

In order for a stockholder to bring other business before a stockholder
meeting, timely notice must be received by the Company within the time limits
described above. Such notice must include a description of the proposed
business, the reasons therefor, and other specific matters. These requirements
are separate from and in addition to the requirements a stockholder must meet to
have a proposal considered for inclusion in the Company's 1999 proxy statement.
In each case, the notice must be given to the Secretary of the Company, whose
address is 20 Thorndal Circle, Darien, Connecticut 06820. Any stockholder
desiring a copy of the Company's bylaws will be furnished one without charge
upon written request of the Secretary.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements of Swisher International Group Inc.
and subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years ended December 31, 1998 have been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their reports with respect thereto. Such
financial statements have been included herein in reliance on the reports of
PricewaterhouseCoopers LLP given on the authority of such firm as experts in
auditing and accounting. It is expected that representatives of
PricewaterhouseCoopers LLP will be present at the Special Meeting, both to
respond to appropriate questions of shareholders of the Company and to make a
statement if they so desire.

WHERE YOU CAN FIND MORE INFORMATION

As required by law, the Company files reports, proxy statements and other
information with the SEC. Because the Merger is a 'going-private' transaction,
the Company, Newco and the Class B Holder have filed with the SEC a Rule 13E-3
Transaction Statement on Schedule 13E-3 with respect to the Merger. The Schedule
13E-3 and the reports, proxy statements and other information contain additional
information about the Company. You can inspect and copy these materials at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the SEC: 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York 10048.
For further information concerning the SEC's public reference rooms, you may
call the SEC at 1-800-SEC-0330. Some of this information may also be accessed on
the World Wide Web through the SEC's Internet address at 'http://www.sec.gov.'
The Company's shares are listed on the NYSE, and materials may also be inspected
at its offices, 20 Broad Street, New York, New York 10005.

You should rely on the information contained in this Proxy Statement. The
Company has not authorized anyone to give any information different from the
information contained in this Proxy Statement. This Proxy Statement is dated
____________, 1999. You should not assume that the information contained in this
Proxy

Statement is accurate as of any later date, and the mailing of this Proxy
Statement to stockholders shall not create any implication to the contrary.

OTHER MATTERS

The management of the Company knows of no other matters which may be
presented at the Special Meeting. If any other matters should properly come
before the meeting, the persons named in the enclosed form of proxy will vote in
accordance with their best judgment on such matters.

By Order of the Board of Directors

Karl H. Ziegler
Secretary

____________, 1999

INDEX TO FINANCIAL STATEMENTS

PAGES
-----

Report of Independent Accountants.......................................................................... F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1998 and 1997.......................................... F-3
Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and
1996................................................................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996............ F-6
Notes to Consolidated Financial Statements............................................................ F-7
PRO FORMA CONDENSED FINANCIAL DATA:
Condensed Consolidated Balance Sheet and Pro Forma Condensed Consolidated Balance Sheet as of December
31, 1998 (unaudited)................................................................................. P-2
Condensed Consolidated Statement of Income and Pro Forma Condensed Consolidated Statement of Income
for the year ended December 31, 1998 (unaudited)..................................................... P-3
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)............................ P-4

F-1

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

F-2

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.

F-3

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.

F-4

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.

F-5

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.

F-6

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.

F-7

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

F-8

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.

F-9

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.

F-10

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%
----- ----- -----
----- ----- -----

F-11

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

F-12

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

F-13

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.

F-14

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

F-15

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

F-16

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

F-17

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

F-18

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 91/8
Stock price low........................................... 12 3/4 713/16 51/4 43/8

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 3/4 191/2 187/8 215/8
Stock price low........................................... 13 1/4 131/2 141/4 141/4

- ------------------
(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

F-19

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

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

15. 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.

F-20

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)

The following unaudited pro forma condensed consolidated financial data are
based on the consolidated financial statements included elsewhere in this Proxy
Statement, adjusted to give effect to the Going-Private transaction.

The Merger Agreement provides the Company will merge with and into Newco, a
wholly-owned subsidiary of the Company that was formed solely to consummate the
Merger. These pro forma financial statements assume the Merger Agreement is
approved and adopted by the Company's stockholders, and the other conditions to
the Merger are satisfied or waived, whereby each Class A Share will be converted
into the right to receive $9.50 per share in cash, without interest, 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 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 (estimated at $3.9 million), and refinance its
existing credit facility. At the closing of the Merger, the Company, through
Newco (which will be party to the new credit agreement), expects to pay to the
Class A Holders an aggregate purchase price of approximately $54.9 million for
the Class A Shares.

The unaudited pro forma condensed balance sheet as of December 31, 1998 is
derived from the consolidated balance sheet of the Company as of December 31,
1998, included elsewhere in this Proxy Statement and gives pro forma effect to
the Going-Private transaction as if it had occurred on December 31, 1998.

The unaudited pro forma condensed consolidated statement of income for the
year ended December 31, 1998 is derived from the consolidated statement of
income of the Company for the year ended December 31, 1998, included elsewhere
in this Proxy Statement and gives pro forma effect to the Going-Private
transaction as if it had occurred on January 1, 1998.

The unaudited pro forma condensed consolidated financial data are for
information purposes and does not purport to be representative of the results of
operations or financial position of the Company had the Going-Private
transaction actually taken place as of the aforementioned dates.

P-1

SWISHER INTERNATIONAL GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEET AND
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

PRO FORMA
DECEMBER 31, PRO FORMA DECEMBER 31,
1998 ADJUSTMENTS 1998
------------- ----------- -------------

ASSETS
Current assets:
Cash and cash equivalents........................................ $ 1,633 $ -- $ 1,633
Accounts receivable, less allowance for doubtful accounts of
$1,490......................................................... 30,770 -- 30,770
Inventories...................................................... 77,903 -- 77,903
Deferred income taxes............................................ 1,459 -- 1,459
Other current assets............................................. 4,699 -- 4,699
------------- ----------- -------------
Total current assets........................................... 116,464 -- 116,464
------------- ----------- -------------
Property, plant and equipment:
Land............................................................. 1,494 -- 1,494
Building and improvements........................................ 21,562 -- 21,562
Machinery and equipment.......................................... 57,743 -- 57,743
Construction in progress......................................... 2,991 -- 2,991
------------- ----------- -------------
83,790 -- 83,790
Less, accumulated depreciation................................... 11,327 -- 11,327
------------- ----------- -------------
72,463 -- 72,463
------------- ----------- -------------
Goodwill, net of accumulated amortization of $5,129................ 45,116 -- 45,116
Investment in Affiliates........................................... 11,733 -- 11,733
Prepaid pension costs.............................................. 4,954 -- 4,954
Other assets....................................................... 6,359 (1,328)(a) 5,031
------------- ----------- -------------
Total assets................................................... $ 257,089 $ (1,328) $ 255,761
------------- ----------- -------------
------------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................ $ 23,000 $ -- $ 23,000
Accounts payable................................................. 6,933 -- 6,933
Accrued expenses................................................. 9,870 -- 9,870
Income taxes payable............................................. 2,827 (984)(c) 1,843
------------- ----------- -------------
Total current liabilities...................................... 42,630 (984) 41,646
Long-term debt..................................................... 70,072 58,794(b) 128,866
Deferred income taxes.............................................. 9,877 -- 9,877
Accrued postretirement and postemployment benefits................. 15,364 -- 15,364
Other liabilities.................................................. 4,583 -- 4,583
------------- ----------- -------------
Total liabilities.............................................. 142,526 57,810 200,336
------------- ----------- -------------
Commitments and contingencies
Stockholders' equity:
Class A common stock, $.01 par value; 75,000,000 authorized,
6,000,000 issued and outstanding............................... 60 (60)(c) --
Class B common stock, $.01 par value; 28,100,000 authorized,
issued and outstanding......................................... 281 (281)(c) --
Common Stock, $.01 par value; 2,811 authorized, issued and
outstanding.................................................... -- --(c) --
Paid-in capital.................................................. 45,428 (45,428)(c) --
Retained earnings................................................ 71,603 (16,264)(c) 55,339
Treasury stock, at cost, 221,700 Class A shares.................. (2,895) 2,895(c) --
Cumulative translation adjustments............................... 86 -- 86
------------- ----------- -------------
Total stockholders' equity..................................... 114,563 (59,138) 55,425
------------- ----------- -------------
Total liabilities and stockholders' equity..................... $ 257,089 $ (1,328) $ 255,761
------------- ----------- -------------
------------- ----------- -------------

P-2

SWISHER INTERNATIONAL GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

PRO FORMA
DECEMBER 31, PRO FORMA DECEMBER 31,
1998 ADJUSTMENTS 1998
------------ ----------- ------------

Net sales........................................................... $266,998 $ -- $266,998
Cost of sales....................................................... 136,133 -- 136,133
------------ ----------- ------------
Gross profit...................................................... 130,865 -- 130,865
Selling, general and administrative expenses........................ 71,123 (983)(d) 70,140
------------ ----------- ------------
Operating profit.................................................. 59,742 983 60,725
Interest expense, net............................................... 7,073 4,880(e) 11,953
Other expense, net.................................................. 1,018 -- 1,018
------------ ----------- ------------
Income before income taxes.......................................... 51,651 (3,897) 47,754
Provision for income taxes.......................................... 20,117 (1,517)(f) 18,600
------------ ----------- ------------
Net income.......................................................... $ 31,534 $(2,380) $ 29,154
------------ ----------- ------------
------------ ----------- ------------

P-3

SWISHER INTERNATIONAL GROUP INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET:

(a) Other assets:
Write-off of deferred financing costs ($2,528) related to existing long-term
bank financing, net of amount capitalized ($1,200) related to new long-term
bank financing.

(b) Long-term debt:
Incremental financing of $58,794 associated with Going-Private transaction.

(c) Stockholders' equity:
Reflects buy-back and cancellation of Class A Common Stock and conversion of
Class B Common Stock to newly-issued Common Stock in connection with the
Going-Private transaction. In addition, retained earnings reflects the
write-off of deferred financing costs, net of income taxes ($1,544) related
to the existing long-term bank financing.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME:

(d) Selling, general and administrative expenses:
Elimination of historical amortization expense of deferred financing costs ($1,223), net of
amortization expense of new deferred financing costs ($240).................................... $ (983)
------------
------------

(e) Interest expense, net:
Increase in interest expense, net is as follows:
Elimination of historical interest expense..................................................... $ (7,156)

New interest expense assuming incremental borrowings of $58,794 associated with the
Going-Private transaction at an assumed weighted average interest rate of 7.72%................ 12,036
------------

$ 4,880
------------
------------

A change of 0.1% in the assumed borrowing rate would result in a change of $156 in the assumed interest
expense.

(f) Provision for income taxes:
Adjustment to income taxes resulting from above pro forma
adjustments.................................................................................... $ (1,517)
------------
------------

P-4

APPENDIX A

[THE PAGINATION OF THIS DOCUMENT AND ITS TABLE OF CONTENTS
SET FORTH BELOW DIFFERS FROM PAGINATION
OF THE AGREEMENT AND PLAN OF MERGER AS EXECUTED]

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

AGREEMENT AND PLAN OF MERGER

BY AND AMONG
SWISHER INTERNATIONAL GROUP INC.,
SIGI ACQUISITION CORPORATION
AND
HAY ISLAND HOLDING CORPORATION
DATED AS OF DECEMBER 9, 1998

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

A-1

TABLE OF CONTENTS

PAGE
----

RECITALS.................................................................................................. A-4

ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING....................................................................... A-4
Section 1.1. The Merger...................................................................... A-4
Section 1.2. Effective Time.................................................................. A-5
Section 1.3. Closing......................................................................... A-5

ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION...................................... A-5
Section 2.1. Certificate of Incorporation.................................................... A-5
Section 2.2. Bylaws.......................................................................... A-5

ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION....................................................... A-5
Section 3.1. Directors....................................................................... A-5
Section 3.2. Officers........................................................................ A-5

ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMMON SHARES IN THE MERGER...........................
A-5
Section 4.1. Merger Consideration; Conversion or Cancellation of Shares in the Merger........ A-5
Section 4.2. Payment for Common Shares in the Merger......................................... A-6
Section 4.3. Transfer of Common Shares After the Effective Time.............................. A-6
Section 4.4. Dissenting Class A Shares....................................................... A-7
Section 4.5. Withholding Tax................................................................. A-7

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................. A-7
Section 5.1. Corporate Organization and Qualification........................................ A-7
Section 5.2. Capitalization.................................................................. A-7
Section 5.3. Authority Relative to This Agreement............................................ A-8
Section 5.4. Consents and Approvals; No Violation............................................ A-8
Section 5.5. Fairness Opinion and Approval by the Special Committee.......................... A-8
Section 5.6. SEC Reports; Financial Statements............................................... A-8
Section 5.7. Schedule 13E3; Proxy Statement.................................................. A-9
Section 5.8. Compliance with Applicable Laws................................................. A-9

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO AND THE CLASS B HOLDER............................................ A-9
Section 6.1. Corporate Organization and Qualification........................................ A-9
Section 6.2. Authority Relative to This Agreement............................................ A-9
Section 6.3. Consents and Approvals; No Violation............................................ A-10
Section 6.4. Capitalization of Newco......................................................... A-10
Section 6.5. Schedule 13E3; Proxy Statement.................................................. A-10
Section 6.6. No Prior Activities............................................................. A-10

A-2

ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS....................................................................... A-10
Section 7.1. Stockholder Approval............................................................ A-10
Section 7.2. Schedule 13E3; Proxy............................................................ A-11
Section 7.3. Best Efforts.................................................................... A-11
Section 7.4. Publicity....................................................................... A-11
Section 7.5. Directors' and Officers' Indemnification........................................ A-11

ARTICLE VIII
CONDITIONS................................................................................................ A-12
Section 8.1. Condition to Each Party's Obligations........................................... A-12
Section 8.2. Additional Conditions to the Obligations of the Class B Holder.................. A-12
Section 8.3. Additional Conditions to the Obligations of Newco............................... A-12
Section 8.4. Additional Conditions to the Obligations of the Company......................... A-13

ARTICLE IX
TERMINATION............................................................................................... A-13
Section 9.1. Termination by Mutual Consent................................................... A-13
Section 9.2. Termination by Newco, the Class B Holder or the Company......................... A-13
Section 9.3. Termination by Company.......................................................... A-14
Section 9.4. Effect of Termination........................................................... A-14

ARTICLE X
MISCELLANEOUS AND GENERAL................................................................................. A-14
Section 10.1. Survival of Representations and Warranties...................................... A-14
Section 10.2. Modification or Amendment....................................................... A-14
Section 10.3. Waiver of Conditions............................................................ A-14
Section 10.4. Counterparts.................................................................... A-14
Section 10.5. Governing Law................................................................... A-14
Section 10.6. Notices......................................................................... A-14
Section 10.7. Entire Agreement; Assignment.................................................... A-15
Section 10.8. Parties in Interest............................................................. A-15
Section 10.9. Certain Definitions............................................................. A-16
Section 10.10. Validity........................................................................ A-16
Section 10.11. Captions........................................................................ A-16

A-3

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this 'Agreement'), dated as of December 9,
1998, by and among Swisher International Group Inc., a Delaware corporation (the
'Company'), SIGI Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Company ('Newco'), and Hay Island Holding
Corporation, a Delaware corporation (the 'Class B Holder').

RECITALS

WHEREAS, the Board of Directors of the Company, based upon the
recommendation of a special committee of independent directors of the Company
consisting of Mr. Charles H. Mullen (the 'Special Committee'), has determined
that it is in the best interests of all of the Company's stockholders for the
Company to merge with and into Newco (the 'Merger'), upon the terms and subject
to the conditions of this Agreement and pursuant to the provisions of the
Delaware General Corporation Law ('DGCL'), whereupon holders ('Class A Holders')
of shares of the Company's Class A Common Stock (the 'Class A Shares') would
receive $9.50 in cash, without interest, for each such Class A Share canceled in
the Merger (the 'Class A Merger Consideration'), and the Class B Holder, the
record owner of all of the outstanding shares of Company's Class B Common Stock
(the 'Class B Shares,' and together with the Class A Shares, sometimes
hereinafter referred to collectively as the 'Common Shares') would receive 2,810
shares of newly-issued common stock, par value $0.01 per share, of Newco ('Newco
Common Stock'), which would represent all of the outstanding common stock and
voting power of Newco, in exchange for the cancellation of all such Class B
Shares surrendered by the Class B Holder in the Merger (the 'Class B Merger
Consideration,' and together with the Class A Merger Consideration, sometimes
hereinafter referred to collectively as the 'Merger Consideration'); and

WHEREAS, after the consummation of the Merger, Newco, as the surviving
corporation in the Merger, would continue the operations and business of the
Company in the name of the Company substantially as they are currently conducted
by the Company; and

WHEREAS, as a result of the consummation of the Merger, the Class B Holder
would own all of the outstanding common stock and voting power of Newco as
described herein; and

WHEREAS, in addition to the affirmative vote of the majority of the
outstanding Common Shares, required under the DGCL, approving the Merger and the
terms and conditions of this Agreement (the 'DGCL Vote Requirement'), a
condition to the Merger is that at least a majority of the Class A Shares
present in person or by proxy at a special meeting of stockholders of the
Company to be held in connection with the Merger and this Agreement (the
'Special Meeting') vote to approve the Merger and this Agreement (the 'Majority
of the Minority Vote Requirement'); and

WHEREAS, the Class B Holder, pursuant to the terms and conditions of this
Agreement, has agreed to vote its Class B Shares in favor of the Merger and this
Agreement (the Class B Shares having ten votes per share).

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
Company, Newco and the Class B Holder hereby mutually agree as follows:

ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING

SECTION 1.1. THE MERGER. Subject to the terms and conditions of this
Agreement and the DGCL, at the Effective Time (as defined in Section 1.2
hereof), the Company and Newco shall consummate a merger (the 'Merger') in which
(a) the Company shall be merged with and into Newco and the separate corporate
existence of the Company shall thereupon cease, (b) Newco shall be the successor
or surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Delaware and (c) the separate corporate existence of Newco,
with all its rights, privileges, immunities, powers and franchises, shall
continue unaffected by the Merger and all debts, liabilities and duties of the
Company shall become the debts, liabilities and duties of Newco.

A-4

Newco, the corporation surviving the Merger, is sometimes hereinafter referred
to as the 'Surviving Corporation.' The Merger shall have the effects set forth
in the DGCL.

SECTION 1.2. EFFECTIVE TIME. Subject to the terms and conditions of this
Agreement, Newco and the Company will cause an appropriate Certificate of Merger
(the 'Certificate of Merger') to be executed and filed on the date of the
Closing (as defined in Section 1.3) (or on such other date as the parties may
agree) with the Secretary of State of the State of Delaware as provided in the
DGCL. The Merger shall become effective at the time and on the date on which the
Certificate of Merger has been duly filed with the Secretary of State of the
State of Delaware or such other time as is agreed upon by the parties and
specified in the Certificate of Merger as is permissible under the DGCL, and
such time is hereinafter referred to as the 'Effective Time.'

SECTION 1.3. CLOSING. The closing of the Merger (the 'Closing') shall
take place (a) at the offices of Schnader Harrison Segal & Lewis LLP, 330
Madison Avenue, New York, New York 10017, at 10:00 a.m., local time, on the
second business day next following the date on which the last of the conditions
set forth in Article VIII hereof shall be fulfilled or waived in accordance with
this Agreement or (b) at such other place, time and date as the parties may
agree (the 'Closing Date').

ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION

SECTION 2.1. CERTIFICATE OF INCORPORATION. As of the Effective Time, the
Certificate of Incorporation of Newco will be amended to read in its entirety as
set forth in Exhibit A hereto, and as so amended, will be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the DGCL.

SECTION 2.2. BYLAWS. The Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation,
until thereafter amended in accordance with the DGCL.

ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION

SECTION 3.1. DIRECTORS. The directors of the Company at the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until the earlier of their death, resignation or removal in accordance with
the Surviving Corporation's Certificate of Incorporation and Bylaws.

SECTION 3.2. OFFICERS. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until the earlier of their death, resignation or removal in accordance with
the Surviving Corporation's Certificate of Incorporation and Bylaws.

ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMMON SHARES IN THE MERGER

SECTION 4.1. MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN
THE MERGER. At the Effective Time, by virtue of the Merger and without any
action on the part of the Company, Newco, the Class B Holder or any Class A
Holder:

(a) Subject to Section 4.4 hereof with respect to the Dissenting Class
A Shares (as defined in Section 4.4), each Class A Share issued and
outstanding immediately prior to the Effective Time (other than Class A
Shares held in the treasury of the Company or Dissenting Class A Shares)
shall be converted into

A-5

the right to receive $9.50 in cash, payable to the holder thereof, without
interest thereon, upon surrender of the certificate(s) representing such
Class A Shares in accordance with Section 4.2.

(b) The 28,100,000 Class B Shares issued and outstanding immediately
prior to the Effective Time (other than Class B Shares held in the treasury
of the Company) shall be converted into the right to receive two thousand,
eight hundred ten (2,810) shares of Newco Common Stock, issuable upon
surrender and cancellation of the certificate(s) representing such Class B
Shares in accordance with Section 4.2.

(c) All Common Shares to be converted into the right to receive the
Merger Consideration pursuant to Sections 4.1 (a) and (b) above shall cease
to be outstanding, be canceled and retired and cease to exist, and each
holder of one or more certificates representing any such Common Shares
shall thereafter cease to have any rights with respect thereto, except the
right to receive therefor, upon the surrender of such certificate in
accordance with Section 4.2, the Merger Consideration.

(d) At the Effective Time, each Common Share issued and outstanding
and owned by the Company or Newco or any direct or indirect subsidiary of
the Company and all treasury shares held by the Company immediately prior
to the Effective Time shall cease to be outstanding, be canceled and
retired without payment of any consideration therefor and cease to exist.

SECTION 4.2. PAYMENT FOR COMMON SHARES IN THE MERGER. The manner of
making payment for Class A Shares in the Merger (or of effecting the exchange of
Class B Shares for shares of Newco Common Stock, in the case of Class B Shares)
shall be as follows:

(a) Pursuant to an agreement in form and substance reasonably
acceptable to the Company (the 'Paying Agent Agreement') to be entered into
on or before the Effective Time between Newco and a paying agent (the
'Paying Agent'), at or prior to the Effective Time, Newco shall deposit or
cause to be deposited with the Paying Agent, in trust for the benefit of
Class A Holders, cash in immediately available funds in amounts requested
by the Paying Agent from time to time sufficient to pay the Class A Merger
Consideration to holders of certificates in accordance with Section 4.2 (b)
(the 'Merger Payment Fund').

(b) As soon as reasonably practicable after the Effective Time, the
Paying Agent shall mail to each holder of record (other than to holders of
Dissenting Class A Shares, as set forth in Section 4.4 below) of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Common Shares (the 'Certificates') (i) a form of
letter of transmittal (in form and substance reasonably acceptable to the
Company which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Paying Agent) and (ii) instructions for use in
effecting the surrender of the Certificates for receipt of the applicable
Merger Consideration. Upon surrender of Certificates for cancellation to
the Paying Agent, together with such letter of transmittal duly executed
and any other required documents, the holder of such Certificates shall be
entitled to receive for each of the Common Shares represented by such
Certificates the applicable Merger Consideration (the Class A Merger
Consideration or the Class B Merger Consideration, as the case may be), and
the Certificates so surrendered shall forthwith be canceled. Until so
surrendered, such Certificates shall represent solely the right to receive
such Merger Consideration (if so surrendered) with respect to each of the
Common Shares represented thereby. No interest will accrue or be paid on
any amount payable as the Class A Merger Consideration. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to
a holder of Common Shares for any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.

(c) Subject to applicable abandoned property, escheat or similar laws,
any portion of the Class A Merger Consideration made available to the
Paying Agent which remains unclaimed by the former Class A Holders for six
months after the Effective Time shall be delivered to the Surviving
Corporation, and any former Class A Holders shall thereafter look only to
the Surviving Corporation for payment of their claim for the Class A Merger
Consideration.

SECTION 4.3. TRANSFER OF COMMON SHARES AFTER THE EFFECTIVE TIME. No
transfers of Common Shares shall be made on the stock transfer books of the
Company after the close of business on the day prior to the date of the
Effective Time.

A-6

SECTION 4.4. DISSENTING CLASS A SHARES.

(a) Notwithstanding any other provision of this Agreement to the
contrary, Class A Shares that are outstanding immediately prior to the
Effective Time and which are held by Class A Holders who have not voted in
favor of the Merger or consented thereto in writing and who shall have
properly demanded in writing an appraisal for such Class A Shares in
accordance with Section 262 of the DGCL and who shall not have withdrawn
such demand or otherwise have forfeited appraisal rights (collectively, the
'Dissenting Class A Shares') shall not be converted into or represent the
right to receive the Class A Merger Consideration. Such stockholders shall
be entitled to receive payment of the appraised value of the Class A Shares
held by them in accordance with the provisions of such Section 262 of the
DGCL, except that all Dissenting Class A Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or
lost their rights to appraisal of such Class A Shares under such Section
262 of the DGCL shall thereupon be deemed to have been converted into and
to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Class A Merger Consideration,
upon surrender, in the manner provided in Section 4.2, of the Certificates
that formerly evidenced such Class A Shares.

(b) The Company shall give Newco (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands and any
other instruments served pursuant to the DGCL and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Newco, make any payment with
respect to any demands for appraisal, or offer to settle, or settle, any
such demands.

SECTION 4.5. WITHHOLDING TAX. The Surviving Corporation shall be entitled
to deduct and withhold from the consideration otherwise payable to a Class A
Holder pursuant to the Merger, such amounts as are required to be withheld under
the Internal Revenue Code of 1986, as amended, or any applicable law. To the
extent that amounts are so withheld by the Surviving Corporation, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to each Class A Holder in respect of which such deduction and withholding was
made by the Surviving Corporation.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to each of Newco and the Class B
Holder that, except as otherwise known to Newco or the Class B Holder:

SECTION 5.1. CORPORATE ORGANIZATION AND QUALIFICATION. The Company (i) is
a corporation duly organized, validly existing and in good standing under the
DGCL, (ii) is qualified and in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by it require such qualification, and (iii) has all requisite power
and authority to own its properties and to carry on its business as it is now
being conducted.

SECTION 5.2. CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 75,000,000 Class A Shares, of which, as of the date hereof,
5,778,300 Class A Shares were outstanding, and (ii) 28,100,000 Class B Shares,
all of which, as of the date hereof, were outstanding. As of the date hereof,
there were 221,700 Class A Shares held in the treasury of the Company. All of
the outstanding Common Shares have been duly authorized and validly issued, and
are fully paid and nonassessable. As of the date hereof, 1,884,580 Class A
Shares were reserved for issuance upon exercise of outstanding Stock Options
under the Plan. Other than as contemplated in the foregoing sentence, there are
not, as of the date hereof, any outstanding or authorized options, warrants,
calls, rights (including preemptive rights), commitments or any other agreements
of any character to which the Company is a party, or by which it may be bound,
requiring it to issue, transfer, sell, purchase, redeem or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock of the
Company.

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SECTION 5.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, subject to stockholder
approval as described in Section 7.1 hereof. This Agreement and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than the
approval of this Agreement and the Merger by the stockholders of the Company in
accordance with the DGCL and the Company's Certificate of Incorporation and
Section 8.1(a) hereof). This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes the valid and
binding agreement of each of Newco and the Class B Holder, constitutes the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement hereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).

SECTION 5.4. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (a) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws of
the Company; (b) require of the Company or its subsidiaries any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) pursuant to any stockholder
approval required under the DGCL, (ii) pursuant to the applicable requirements
of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and the
rules and regulations promulgated thereunder, (iii) the filing of the
Certificate of Merger pursuant to the DGCL, (iv) pursuant to applicable state
blue sky takeover statute and (v) pursuant to New York Stock Exchange delisting
requirements; (c) result in a violation or breach of, or constitute a default
under any of the terms, conditions or provisions of any note, license, agreement
or other instrument or obligation by which the Company may be bound, except for
such violations, breaches and defaults as to which requisite waivers or consents
have been obtained; or (d) except as otherwise known to Newco or the Class B
Holder, violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its subsidiaries.

SECTION 5.5. FAIRNESS OPINION AND APPROVAL BY THE SPECIAL COMMITTEE. On
or prior to the date hereof, the Special Committee has (i) approved the terms of
this Agreement and the Merger as they relate to the Class A Holders (other than
affiliates of the Company), (ii) determined that the Class A Merger
Consideration and the Merger are fair to and in the best interest of the Class A
Holders and (iii) recommended that the Board of Directors of the Company approve
and authorize this Agreement and the Merger. The Special Committee has received
the opinion, dated as of the date hereof, of PaineWebber Incorporated
('PaineWebber') to the effect that the Class A Merger Consideration to be
received by the Class A Holders (other than affiliates of the Company) in the
Merger is fair, from a financial point of view, to such Class A Holders. Based
on such opinion, and such other factors as it deemed relevant, the Board of
Directors of the Company has approved and authorized this Agreement and the
Merger and has directed that this Agreement be submitted to a vote of the
holders of the Common Shares of the Company at the Special Meeting.

SECTION 5.6. SEC REPORTS; FINANCIAL STATEMENTS.

(a) The Company has filed all periodic reports required to be filed by
it since December 17, 1996 with the Securities and Exchange Commission (the
'SEC') pursuant to the Exchange Act and the rules and regulations
thereunder, all of which as of their respective dates complied in all
material respects with all applicable requirements of the Exchange Act
(collectively, the 'SEC Reports'). None of the SEC Reports, including,
without limitation, any financial statements or schedules included therein,
as of their respective dates, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(b) The consolidated financial statements (including the related notes
thereto) of the Company included in the SEC Reports complied in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally

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accepted accounting principles applied on a basis consistent with prior
periods (except as otherwise noted therein) and presented fairly the
consolidated financial position of the Company and its subsidiaries as of
their respective dates, and the consolidated results of their operations
and cash flows for the periods presented therein (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments
and the absence of notes thereto).

SECTION 5.7. SCHEDULE 13E-3; PROXY STATEMENT. None of the information to
be supplied by and relating to the Company for inclusion or incorporation by
reference in the Schedule 13E-3 or the Proxy Statement (as such terms are
hereinafter defined in Section 7.2) will, at the time of the mailing of the
Proxy Statement and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company should occur
and is required to be described in an amendment of, or a supplement to, the
Proxy Statement or the Schedule 13E-3, such event shall be so described, and
such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. With respect
to the information relating to the Company, the Schedule 13E-3 and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act. For purposes of this Section 5.7, any statement which is
made or incorporated by reference in the Proxy Statement or the Schedule 13E-3
shall be deemed modified or superseded to the extent any later filed document
incorporated by reference in the Proxy Statement or the Schedule 13E-3 or any
statement included in the Proxy Statement or the Schedule 13E-3 modifies or
supersedes such earlier statement.

SECTION 5.8. COMPLIANCE WITH APPLICABLE LAWS. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all governmental or regulatory authorities necessary
for the lawful conduct of its business, except where the failure to so hold
would not, individually or in the aggregate, have a Material Adverse Effect (the
'Company Permits'). The Company and its subsidiaries are in compliance with the
terms of the Company Permits, except where the failure so to comply would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in the SEC Reports filed prior to the date of this Agreement, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental or regulatory authorities, except
for possible violations which, individually or in the aggregate, would not have
a Material Adverse Effect.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO AND THE CLASS B HOLDER

Each of Newco and the Class B Holder represents and warrants, severally and
not jointly, to the Company that:

SECTION 6.1. CORPORATE ORGANIZATION AND QUALIFICATION. Each of Newco and
the Class B Holder (i) is a corporation duly organized, validly existing and in
good standing under the DGCL, (ii) is qualified and in good standing as a
foreign corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification and (iii)
has all requisite power and authority to own its properties and to carry on its
business as it is now being conducted.

SECTION 6.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Newco and the
Class B Holder has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement and the consummation by Newco and the Class B Holder of the
transactions contemplated hereby have been duly and validly authorized by the
respective Boards of Directors of Newco and the Class B Holder, and no other
corporate proceedings on the part of Newco or the Class B Holder are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Newco and the Class B Holder and, assuming this Agreement constitutes the
valid and binding agreement of the Company, constitutes the valid and binding
agreement of each of Newco and the Class B Holder, enforceable against each of
them in accordance with its terms, except that the enforcement hereof may be
limited by (a) bankruptcy, insolvency, reorganization,

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moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).

SECTION 6.3. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Class B Holder or Newco nor the
consummation by the Class B Holder or Newco of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
Certificate of Incorporation or the Bylaws, respectively, of the Class B Holder
or Newco; (b) require of the Class B Holder or Newco any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) pursuant to the applicable requirements of
the Exchange Act and the rules and regulations promulgated thereunder, or (ii)
the filing of the Certificate of Merger pursuant to the DGCL; (c) result in a
violation or breach of, or constitute a default under any of the terms,
conditions or provisions of any note, license, agreement or other instrument or
obligation by which the Class B Holder or Newco may be bound, except for such
violations, breaches and defaults as to which requisite waivers or consents have
been obtained; or (d) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Class B Holder or Newco.

SECTION 6.4. CAPITALIZATION OF NEWCO. The authorized capital stock of
Newco consists of 100 shares of Newco Common Stock, par value $0.01 per share,
of which 1 share is outstanding and held by the Company as of the date hereof.

SECTION 6.5. SCHEDULE 13E-3; PROXY STATEMENT. None of the information to
be supplied by the Class B Holder or Newco for inclusion or incorporation by
reference in the Schedule 13E-3 or the Proxy Statement will, at the time of the
mailing of the Proxy Statement and at the time of the Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
the Class B Holder or Newco or their respective officers and directors shall
occur and is required to be described in an amendment of, or a supplement to,
the Proxy Statement and the Schedule 13E-3, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. The Schedule
13E-3 and the Proxy Statement (except with respect to information relating to
the Company) will comply as to form in all material respects with the provisions
of the Exchange Act. For purposes of this Section 6.6, any statement which is
made or incorporated by reference in the Proxy Statement or the Schedule 13E-3
shall be deemed modified or superseded to the extent any later filed document
incorporated by reference in the Proxy Statement or the Schedule 13E-3 or any
statement included in the Proxy Statement or the Schedule 13E-3 modifies or
supersedes such earlier statement.

SECTION 6.6. NO PRIOR ACTIVITIES. Except for liabilities incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Newco
has not incurred any liabilities, and has not engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity. Newco is a wholly-owned subsidiary of
the Company.

ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS

SECTION 7.1. STOCKHOLDER APPROVAL.

(a) The Company shall submit this Agreement and the transactions
contemplated hereby for the approval of its stockholders at the Special
Meeting as promptly as practicable and shall use its best efforts to obtain
stockholder approval and adoption of this Agreement and the transactions
contemplated hereby, such Special Meeting to be held as soon as practicable
following the date hereof, and the Company shall, through its Board of
Directors, recommend to its stockholders approval of the transactions
contemplated by this Agreement, subject to the provisions of Section 7.1(b)
hereof.

(b) Notwithstanding the foregoing, the Special Committee or the Board
of Directors of the Company may, at any time prior to the Effective Time,
withdraw, modify or change any recommendation and

A-10

declaration regarding this Agreement or the Merger, or recommend and
declare advisable any other offer or proposal, if, in the opinion of the
Special Committee or the Board of Directors after consultation with their
counsel, such withdrawal, modification or change is required by the
exercise of its fiduciary duties to the stockholders of the Company under
applicable law.

(c) From the date hereof to the Effective Time, the Class B Holder
shall not sell or otherwise dispose of any of the Class B Shares owned by
it. At the Special Meeting, or any adjournment thereof, the Class B Holder,
unless the Special Committee or the Board of Directors withdraws, modifies
or changes any recommendation or declaration regarding this Agreement or
the Merger pursuant to Section 7.1 (b) above, shall vote the Class B Shares
owned by it in favor of the Merger and this Agreement.

SECTION 7.2. SCHEDULE 13E-3; PROXY. The Class B Holder, Newco and the
Company will, as promptly as practicable, prepare and file with the SEC a proxy
statement, a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the 'Schedule
13E-3') and forms of proxy in connection with the vote of the Company's
stockholders with respect to the Merger and this Agreement (such proxy
statements, together with any amendments thereof or supplements thereto, in each
case in the form or forms mailed to the Company's stockholders, are herein
called the 'Proxy Statement'). The Company, Newco and the Class B Holder will
each use its best efforts to cause the Schedule 13E-3 and the Proxy Statement to
be mailed to stockholders of the Company at the earliest practicable date.

SECTION 7.3. BEST EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using best efforts to obtain all necessary or appropriate waivers,
consents and approvals, to effect all necessary registrations, filings and
submissions and to lift any injunction or other legal bar to the Merger (and, in
such case, to proceed with the Merger as expeditiously as possible) subject to
the requisite vote of the stockholders of the Company.

SECTION 7.4. PUBLICITY. The parties will consult with each other and will
mutually agree upon any press releases or public announcements pertaining to the
Merger and shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use all
reasonable efforts to consult in good faith with the other party before issuing
any such press releases or making any such public announcements.

SECTION 7.5. DIRECTORS' AND OFFICERS' INDEMNIFICATION.

(a) The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification
and exculpation from liability set forth in the Company's Certificate of
Incorporation and Bylaws in effect on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a
period of six (6) years from the Effective Time in any manner that would
reasonably be expected to affect adversely the rights of any individuals
who, on or prior to the Effective Time, were directors or officers of the
Company, unless such modification is required by law.

(b) The Surviving Corporation shall maintain in effect for not fewer
than six (6) years after the Effective Time policies of directors' and
officers' liability insurance containing the terms and conditions which are
not less advantageous than any such policies of the Company in effect on
the date of this Agreement (the 'Company Insurance Policies') with respect
to matters occurring prior to and including the Effective Time, to the
extent available, and having the maximum available coverage under any such
Company Insurance Policies; provided, however, that in no event shall the
Surviving Corporation be required to pay annual premiums for insurance
under this Section 7.5(b) which exceed 150% of the premiums paid as of the
date of this Agreement for the Company Insurance Policies (provided that,
in such case, the Surviving Corporation shall purchase as much coverage as
possible for 150% of the premiums paid as of the date of this Agreement for
such insurance).

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ARTICLE VIII
CONDITIONS

SECTION 8.1. CONDITION TO EACH PARTY'S OBLIGATIONS. The respective
obligations of the Company, Newco and the Class B Holder to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:

(a) Stockholder Approval. This Agreement and the Merger shall have
been approved by the affirmative vote of: (i) a majority of the outstanding
Common Shares and (ii) a majority of the outstanding Class A Shares present
in person or by proxy at the Special Meeting, in satisfaction of the DGCL
Vote Requirement and the Majority of the Minority Vote Requirement,
respectively.

(b) Injunction. There shall not be in effect any statute, rule,
regulation, executive order, decree, ruling or injunction or other order of
a court or governmental or regulatory agency of competent jurisdiction
directing that the transactions contemplated herein not be consummated;
provided, however, that prior to invoking this condition each party shall
use all reasonable efforts to have any such decree, ruling, injunction or
order vacated.

(c) Filings and Consents. All consents, orders and approvals required
for the consummation of the Merger and the transactions contemplated hereby
shall have been obtained and be in effect at the Effective Time.

(d) Rule 13e-3. The Company, Newco and the Class B Holder shall have
complied with the provisions of Rule 13e-3, including the provisions
relating to the furnishing of the Proxy Statement to the Company's
stockholders.

(e) Financing. On or prior to the Effective Time, Newco and the
Company shall have obtained funds sufficient to consummate the Merger
(including, without limitation, funds sufficient to pay the Class A Merger
Consideration and to pay all of the costs, fees and other expenses incident
to the Merger as contemplated by this Agreement and the Proxy Statement).

SECTION 8.2. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE CLASS B
HOLDER. The obligations of the Class B Holder to satisfy its obligations under
this Agreement and to effect the Merger (including, without limitation, its
obligation to vote its Class B Shares in favor of this Agreement and the Merger
at the Special Meeting pursuant to Section 7.1(c) hereof) are subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any or all of which may be waived in whole or in part by the Class B Holder, to
the extent permitted by applicable law:

(a) Representations and Warranties. The representations and warranties
of each of the Company and Newco set forth in this Agreement shall be true
and correct when made and as of the Effective Time with the same force and
effect as though the same had been made on and as of the Effective Time
(except for changes permitted by this Agreement and except to the extent
they relate to a particular date), except for such failures to be true and
correct which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.

(b) Performance. Each of the Company and Newco shall have performed in
all material respects all of its material obligations under this Agreement
theretofore to be performed.

(c) Officer's Certificate. The Class B Holder shall have received, at
the Effective Time, a certificate dated the Effective Time and executed by
the President or a Vice President of each of the Company and Newco
certifying to the fulfillment of the conditions specified in Sections
8.2(a) and (b) hereof.

SECTION 8.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF NEWCO. The
obligations of Newco to effect the Merger are subject to the satisfaction, at or
prior to the Effective Time, of the following conditions, any or all of which
may be waived in whole or in part by Newco, to the extent permitted by
applicable law:

(a) Representations and Warranties. The representations and warranties
of each of the Company and the Class B Holder set forth in this Agreement
shall be true and correct when made and as of the Effective Time with the
same force and effect as though the same had been made on and as of the
Effective Time (except

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for changes permitted by this Agreement and except to the extent they
relate to a particular date), except for such failures to be true and
correct which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.

(b) Performance. Each of the Company and the Class B Holder shall have
performed in all material respects all of its material obligations under
this Agreement theretofore to be performed.

(c) Officer's Certificate. Newco shall have received, at the Effective
Time, a certificate dated the Effective Time and executed by the President
or a Vice President of each of the Company and the Class B Holder
certifying to the fulfillment of the conditions specified in Sections
8.3(a) and (b) hereof.

SECTION 8.4. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions, any and all of which
may be waived in whole or in part by the Company (with the concurrence of the
Special Committee) to the extent permitted by applicable law:

(a) Representations and Warranties. The representations and warranties
of each of the Class B Holder and Newco set forth in this Agreement shall
be true and correct when made and as of the Effective Time with the same
force and effect as though the same had been made on and as of the
Effective Time (except for changes permitted by this Agreement and except
to the extent they relate to a particular date), except for such failures
to be true and correct which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.

(b) Performance. Each of the Class B Holder and Newco shall have
performed in all material respects all of their respective material
obligations under this Agreement theretofore to be performed.

(c) Officer's Certificate. The Company shall have received, at the
Effective Time, a certificate dated the Effective Time and executed by the
President or a Vice President of each of the Class B Holder and Newco
certifying to the fulfillment of the conditions specified in Sections
8.4(a) and (b) hereof.

(d) Recommendation of the Special Committee or the Board of Directors.
Neither of the Special Committee or the Board of Directors has, prior to
the Effective Time, withdrawn, modified or changed any recommendation or
declaration regarding this Agreement or the Merger, or recommended or
declared advisable any other offer or proposal, that, in the opinion of the
Special Committee or the Board of Directors, after consultation with their
counsel, is required by the exercise of its fiduciary duties to the
stockholders of the Company under applicable law.

(e) Opinion of Financial Adviser. The opinion of PaineWebber referred
to in Section 5.5 hereof shall not have been withdrawn or revoked.

ARTICLE IX
TERMINATION

SECTION 9.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of stockholders of the Company, by the mutual
written consent of all of the Company (with the concurrence of the Special
Committee), Newco and the Class B Holder.

SECTION 9.2. TERMINATION BY NEWCO, THE CLASS B HOLDER OR THE
COMPANY. This Agreement may be terminated and the Merger may be abandoned by
any of the Company, Newco or the Class B Holder before or after the approval by
stockholders of the Company, if (a) any court of competent jurisdiction in the
United States or some other governmental body or regulatory authority shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable, (b)
the Merger shall not have been consummated by June 30, 1999, provided that the
right to terminate this Agreement pursuant to this Section 9.2 shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement results in the failure of the Merger to occur on or before such
date, or (c) this Agreement and the Merger shall have been voted on by

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stockholders of the Company at the Special Meeting and the vote shall not have
been sufficient to satisfy the condition set forth in Section 8.1(a).

SECTION 9.3. TERMINATION BY THE COMPANY. This Agreement may be terminated
by the Company and the Merger may be abandoned prior to the Effective Time,
before or after the approval by stockholders of the Company, if: (a) pursuant to
Section 7.1(b) of this Agreement, the Special Committee or the Board of
Directors withdraws, modifies or changes its recommendation or declaration
regarding this Agreement or the Merger or recommends or declares advisable any
other offer or proposal or (b) the opinion of PaineWebber referred to in Section
5.5 hereof shall have been withdrawn or revoked.

SECTION 9.4. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Article IX, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provisions of this Section 9.4 and the provisions of Sections 7.4, 10.1
and 10.2. Nothing contained in this Section 9.4 shall relieve any party from
liability for any breach of this Agreement.

ARTICLE X
MISCELLANEOUS AND GENERAL

SECTION 10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the earlier
of termination of this Agreement or the Effective Time. This Section 10.2 shall
not limit any covenant or agreement of the parties hereto which by its terms
contemplates performance after the Effective Time.

SECTION 10.2. MODIFICATION OR AMENDMENT. Subject to the applicable
provisions of the DGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement upon concurrence by the Special
Committee, by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after approval of
this Agreement by the stockholders of the Company no amendment shall be made
which by law requires further approval by such stockholders without such further
approval.

SECTION 10.3. WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to consummate the Merger are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law and this Agreement upon concurrence by the Special
Committee.

SECTION 10.4. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.

SECTION 10.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.

SECTION 10.6. NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:

(a) If to the Company, to it at:

20 Thorndal Circle
Darien, Connecticut 06820

Attention: Secretary

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and to the Special Committee at:

Chairman of the Special Committee
26 Winding Lane
Darien, Connecticut 06820

Attention: Charles H. Mullen

and to counsel to the Special Committee at:

Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112

Attention: Edward P. Smith, Esquire

(b) If to Newco, to it at:

20 Thorndal Circle
Darien, Connecticut 06820

Attention: Secretary

20 Thorndal Circle
Darien, Connecticut 06820

Attention: Secretary

or to such other persons or addresses as may be designated in writing
by the party to receive such notice.

SECTION 10.7. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise.

SECTION 10.8. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, other
than the right of stockholders of the Company to receive the consideration
payable in the Merger pursuant

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to Article IV hereof is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.

SECTION 10.9. CERTAIN DEFINITIONS. As used herein:

'Material Adverse Effect' with respect to the any of the Company,
Newco or the Class B Holder, shall mean any adverse change (other than any
change resulting from or arising out of the transactions contemplated by
this Agreement or the announcement thereof) in the financial condition,
business or properties of such entity, taken as a whole, which is material
to such entity.

SECTION 10.10. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect.

SECTION 10.11. CAPTIONS. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.

SIGI ACQUISITION CORPORATION

By: ___/s/ WILLIAM T. ZIEGLER_________
Name: William T. Ziegler
Title:

SWISHER INTERNATIONAL GROUP INC.

By: ___/s/ WILLIAM ZIEGLER, III_______
Name: William Ziegler, III
Title:

HAY ISLAND HOLDING CORPORATION

By: ___/s/ WILLIAM ZIEGLER, III_______
Name: William Ziegler, III
Title:

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APPENDIX B
OPINION OF PAINEWEBBER INCORPORATED

[Letterhead of PaineWebber Incorporated]

December 9, 1998

Special Committee of the
Board of Directors
Swisher International Group, Inc.
20 Thorndal Circle
Darien, CT 06820

Members:

Swisher International Group, Inc. (the 'Subject Company') proposes to enter
into an Agreement and Plan of Merger (the 'Agreement') with SIGI Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Subject
Company (the 'Purchaser'), and Hay Island Holding Corporation, a corporation
affiliated with William Ziegler, III (the 'Class B Holder' or 'HIHC'), pursuant
to which the Subject Company will be merged with and into the Purchaser (the
'Merger'). Following the Merger, each share of Class A common stock, par value
$0.01 (the 'Class A Shares'), of the Subject Company issued and outstanding
immediately prior to the effectiveness of the Merger will be converted into the
right to receive cash in an amount equal to $9.50 per share (the 'Cash
Consideration') and the Class B Holder, the record owner of all of the
outstanding shares of Class B common stock, par value $0.01 ('Class B Shares',
and together with the Class A Shares, sometimes hereinafter referred to
collectively as the 'Common Shares'), of the Subject Company would receive 2,810
shares of newly-issued common stock, par value $0.01, of the Purchaser (the
'Common Stock'), which would represent all of the outstanding common stock and
voting power of the surviving corporation in the Merger, in exchange for
cancellation of all such Class B Shares surrendered by the Class B Holder in the
Merger. The Merger is expected to be considered by the holders of Common Shares
at a meeting of the Subject Company's shareholders to be held as soon as
practicable after the date hereof.

You have asked us whether or not, in our opinion, the proposed Cash
Consideration to be paid by the Purchaser in the Merger is fair to the holders
of Class A Shares of the Subject Company (other than HIHC, and its affiliates)
from a financial point of view.

In arriving at the opinion set forth below, we have, among other things:

(1) Reviewed, among other public information, the Subject Company's Annual
Reports, Forms 10-K and related financial information for the three
fiscal years ended December 31, 1997 and the Subject Company's Form
10-Q and the related unaudited financial information for the nine
months ended September 30, 1998;

(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Subject Company furnished to us by the Subject Company;

(3) Conducted discussions with members of senior management of the Subject
Company concerning its businesses and prospects;

(4) Reviewed the historical market prices and trading activity for the
Class A Shares and compared them with that of certain publicly traded
companies which we deemed to be relevant;

(5) Compared the results of operations of the Subject Company with that of
certain companies which we deemed to be relevant;

(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other business combinations which we deemed to be
relevant;

(7) Reviewed a draft of the Agreement dated December 4, 1998;

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(8) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market,
regulatory and monetary conditions.

In preparing our opinion, we have relied on the accuracy and completeness
of all information that was publicly available, supplied or otherwise
communicated to us by or on behalf of the Subject Company, and we have not
assumed any responsibility to independently verify such information. With
respect to the financial forecasts examined by us, we have assumed that they
were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the Subject Company as
to the future performance of the Subject Company. We have also relied upon
assurances of the management of the Subject Company that they are unaware of any
facts that would make the information or financial forecasts provided to us
incomplete or misleading. We have not made any independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Subject
Company nor have we been furnished with any such evaluations or appraisals. We
have also assumed, with your consent, that any material liabilities (contingent
or otherwise, known or unknown) of the Subject Company that are required to be
set forth in accordance with Generally Accepted Accounting Principles (GAAP) are
set forth in the consolidated financial statements of the Subject Company. Our
opinion is directed to the Special Committee (the 'Special Committee') of the
Board of Directors of the Subject Company and does not constitute a
recommendation to any shareholder of the Subject Company as to how any such
shareholder should vote on the Merger. You have not requested, and this opinion
does not address the relative merits of the Merger and any other transactions or
business strategies discussed by the Board of Directors of the Subject Company
or the Special Committee as alternatives to the Merger or the decision of the
Board of Directors of the Subject Company to proceed with the Merger. Our
opinion is based on general economic, market, regulatory and monetary conditions
existing on the date hereof.

PaineWebber Incorporated is currently acting as the exclusive financial
advisor to the Special Committee in connection with the Special Committee's
evaluation of the Merger and will be receiving a fee in connection with the
rendering of this opinion.

In the ordinary course of business, PaineWebber Incorporated may trade in
the securities of the Subject Company for our own account and for the accounts
of our customers and, accordingly, may at any time hold long or short positions
in such securities.

On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Cash Consideration to be paid by the Purchaser in the Merger is
fair to the holders of the Class A Shares of the Subject Company (other than
HIHC and its affiliates) from a financial point of view.

This opinion has been prepared for the information of the Special Committee
in connection with the Merger and shall not be reproduced, summarized, described
or referred to, provided to any person or otherwise made public or used for any
other purpose without the prior written consent of PaineWebber Incorporated;
provided, however, that this letter may be reproduced in full in the Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Merger.

Very truly yours,
PAINEWEBBER INCORPORATED
/s/ PaineWebber Incorporated

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APPENDIX C
APPRAISAL RIGHTS

262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the Merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the Merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word 'stockholder' means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words 'stock' and 'share' mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words 'depository receipt' mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a Merger or consolidation to be
effected pursuant to Section 251 (other than a Merger effected pursuant to
subsection Section 251(g) of this title), Section 252, Section 254, Section 257,
Section 258, Section 263, or Section 264 of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of Merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a Merger if the Merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of Merger or consolidation pursuant to
Section Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such Merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the Merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;

c. cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs (a) and (b) of this paragraph;
or

d. any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs (a), (b) and (c) of this paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a Merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the Merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any Merger or consolidation in which the corporation is a
constituent corporation or the sale of all

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or substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed Merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the Merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the Merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such Merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the Merger or
consolidation of the date that the Merger or consolidation has become effective;
or

(2) If the Merger or consolidation was approved and adopted pursuant
to Section 228 or Section 253 of this title, each constituent corporation,
either before the effective date of the Merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights of
the approval of the Merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective date of
the Merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the Merger or consolidation,
shall, also notify such stockholders of the effective date of the Merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the Merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the Merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the Merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only to be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the Merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.

(e) Within 120 days after the effective date of the Merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the Merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the Merger or consolidation. Within 120 days after the

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effective date of the Merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the Merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the Merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the Merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertified stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

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(k) From and after the effective date of the Merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the Merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the Merger or
consolidation, either within 60 days after the effective date of the Merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the Merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

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APPENDIX D
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT RATIOS)

DECEMBER 31,
------------------
1998 1997
------- -------

Net earnings................................................................................ $31,534 $39,295
Add (deduct):
Income taxes................................................................................ 20,117 25,390
Amortization of capitalized interest costs.................................................. 93 57
Fixed charges............................................................................... 8,579 9,537
------- -------
Adjusted net earnings....................................................................... $60,323 $74,279
------- -------
------- -------
Fixed charges:
Interest expense............................................................................ $ 7,156 $ 8,203
Capitalized interest costs.................................................................. 457 402
Rental expense representative of an interest factor......................................... 966 932
------- -------
Total fixed charges......................................................................... $ 8,579 $ 9,537
------- -------
------- -------
Ratio of Earnings to Fixed Charges.......................................................... 7.0 7.8
------- -------
------- -------

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