As part of the sale, General Cigar and Swedish Match have also entered into an ongoing strategic relationship. A tobacco supply agreement calls for General Cigar to supply Swedish Match's tobacco needs for the acquired business, while a master distribution agreement would provide for Swedish Match's U.S. sales force to sell a select number of General Cigar's premium cigar brands that are currently sold through mass-market distribution channels.

Commenting on the transaction, Edgar M. Cullman Jr., General Cigar's c.e.o., said, "This transaction allows us to focus our efforts on the branded premium cigar business, the largest portion of our business, where we can add the greatest strategic value because of our heritage and expertise."

"The addition of the General Cigar mass-market business to our existing U.S. operations will complement our operations in the U.S. perfectly, and will help to ensure that we can defend our leadership position for our entire product range in the U.S.," said Lennart Sundn, Swedish Match's c.e.o. and president. "This strengthening of sales and distribution channels will provide a growth platform for our key strategic products such as snuff." Sundn added, "The transaction will have a positive effect on net earnings and on net cash flow for Swedish Match."

General Cigar expects to use the net proceeds from the sale to reduce outstanding debt, make selective acquisitions of premium cigar brands, for general corporate purposes, and to take advantage of opportunities that may arise in the international cigar market place.

Swedish Match, an international group with headquarters in Stockholm, manufactures a broad range of tobacco products, matches, and disposable lighters, sold in approximately 140 countries. Swedish Match is among the world's largest cigar makers but sells few cigars in the U.S., where it is better known for smokeless tobacco products like Red Man and Timberwolf. The company is listed on the Stockholm Stock Exchange and on Nasdaq.

"It is unfortunate - just one of those things," said Caribbean president Ron Jenkins, a principle of Tennessee-based SJI Group Inc., which assumed controlling interest in Caribbean last August. Jenkins declined further comment.

The bankruptcy was filed in Knoxville, Tenn., where the company moved to from Miami when Jenkins assumed control.

At the time of the filing, Caribbean had assets of $176,138, which did not include an accounting for stock that Caribbean held in two U.S. corporations - Precision Mold Inc., and Caribbean A.W.C. Corp. - and two foreign companies, Caribbean Cigar Co. (Cayman) Ltd. and Inversiones Calle 8, S.A., a Dominican Republic corporation.

The bankruptcy filing also stated that Caribbean had claims of unknown amounts against two individuals, Fred Berger and Larry Frutkins.

Caribbean's liabilities were $3.3 million, including $700,000 owed to Finova Capital Corp., New York, N.Y.; $310,000 claimed by the Zimmerman Agency, Tallahassee, Fla., an advertising company; and $295,000 claimed by Esamu, Katsky, Korins and Siger, a Miami law firm. Two individuals, Robert Humber of Fayette, Ala., and P.D. Taru Martini of Indonesia, were listed as being owed $250,000 and $175,000, respectively. The company had three lawsuits pending against it at the time of the filing in early February.

No cigars were listed as asset inventory, although Jenkins' attorney, Maurice Guinn of Knoxville, Tenn., said Inversiones owns an unspecified inventory of tobacco in the Dominican Republic.

At its peak, Caribbean was a vertically integrated company that manufactured cigars in the United States, Dominican Republic, and Indonesia, distributed cigars made by other companies, and operated five retail stores in south Florida.

Caribbean closed its factory in Miami's Little Havana area, which at one time employed 50 cigar rollers, in July 1997. The company quit making cigars in Indonesia in early 1998 after political turbulence destabilized the country. Three stores owned by Caribbean in Key Largo, Miami's South Beach area, and Key West were sold prior to the bankruptcy and their names changed by their current owners. Jenkins closed two others in Fort Lauderdale and Miami. Jenkins had hoped to revitalize Caribbean and its brands, Calle Ocho, Signature Collection , Celestino Vega, Rum Runner, West Indies Vanilla, and Free Cuba, and distribute them through SJI Group.

Kevin Doyle, the company's founder, was frequently criticized for his aggressive tactics in a tradition- bound industry that was trying to deal with the growth demands placed on it by the cigar boom. He left the company within weeks of Jenkins assuming ownership, although Jenkins initially said Doyle would stay on to manage the company's cigar-making operation in the Dominican Republic.

Caribbean went public in August 1996 and traded on the Nasdaq exchange. Most recently its stock was selling for about 18 cents a share, even after an 8-1 reverse stock split that Jenkins directed in an attempt to keep its price over $1 per share.

For the quarter that ended Sept. 30, 1998, Caribbean lost $89,000 on sales of $766,000. The company lost about $9 million since its inception, according to financial statements.

"There's no safe form of tobacco," said Surgeon General Dr. David Satcher. Requiring health warnings on cigarettes and smokeless tobacco, but not cigars, send the wrong message, he said, adding, "The absence of labels on cigars implies cigars are different and don't carry the same risk."

Experts state that cigar smoking by teens poses a particularly troublesome problem. In a recent report, more than one-third of teenagers admitted to have smoked a cigar in the past 30 days, and half of those expected to be a cigar smoker five years in the future.

The Department of Health and Human Services is pushing the Federal Trade Commission (FTC) towards the warning label requirement, even though most boxes already include one, under a settlement of a California court case.

"Why do you need another one?" wondered Norman Sharp, president of the Cigar Association of America.

"Cigar smokers aren't like cigarette smokers," added Felix Assouline, manager of Cigarros del Mundo in Florida. "We do it for leisure, as a lifestyle choice, not because we're addicted and have to light one after the other."

The lawsuit was filed in July 1997 against Reon of San Diego, Calif., which was marketing a product called "Tobacco Keeper." The end result saw Gary Scott awarded an undisclosed cash settlement, and a permanent injunction against Reon. The case prohibits Reon from manufacturing, selling, distributing, advertising, promoting, or displaying any item called "Tobacco Keeper."

Commented Gary Scott c.e.o. Gary Pituck, "We realize that our product has been knocked off by a host of companies, and we will continue to fight until we regain our market share. The Cigar Jar is a staple in the tobacco industry, and was revolutionary when introduced into the marketplace in 1993.

The filing was brought on by a civil decision this past winter that found Phillips & King guilty of breach of contact, stemming from a case in which Cuba Libra, a now-defunct humidor manufacturer, charged that P&K promised to be the exclusive distributor of its products. In awarding Cuba Libra approximately $1.8 million in damages, the decision appeared to have severely strained P&K's finances. P&K is appealling the decision.

Chapter 11 status would prevent P&K from being sued by creditors while it restructures its financial situation and reorganizes for the future.

Founded in 1906 and based in City of Industry, Calif., P&K is one of the industry's oldest and largest distributors of tobacco accessories, premium cigars, and specialty cigarettes. It remains family-owned and operated.