INVESTMENT BANKING AGREEMENT
This agreement made by and between PREMIUM CIGARS INTERNATIONAL, having
its business offices at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company") and ▇.▇. ▇▇▇▇▇ SECURITIES, INC. (the "Consultant") with principal
offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
Because the Company desires to retain the Consultant and the Consultant
desires to be retained by the Company, all pursuant to the terms and conditions
hereinafter set forth; and in consideration of the foregoing and the mutual
promises and covenants herein contained, the parties agree as follows:
1. Retention. The Company hereby retains the consultant to perform
consulting services related to corporate finance and other matters on an
exclusive basis, and the Consultant hereby accepts such retention and shall
perform for the Company the duties described herein to the best of its ability.
In this regard, subject to paragraph 12 hereof, Consultant shall devote such
business time and attention to matters on which the Company, through its Chief
Operating Officer, shall request its services.
a) The Consultant agrees to the extent reasonably required in the
conduct of the business of the Company, to utilize its best efforts to
provide review, advice, analysis, consultation, recommendations and
other services to the Company which may include the following:
(i) Based upon our discussions and preliminary information
submitted by the Company to us, but subject to our due diligence,
and the successful completion of a merger between the company and
an existing public shall, we hereby confirm in principle our
interest in underwriting, on a firm commitment basis, a secondary
public offering of the Company's securities.
(ii) analyze and assess financing alternatives for the
Company for raising capital to finance acquisition equity
holders, provide advice on the Company's market valuation, and
examine potential sources for private offerings of the Company's
securities; assist the Company in its negotiations with financing
sources;
(iii) review and make written recommendations regarding
budgets, business plans and financial projections;
(iv) review and make written recommendations regarding the
Company's managerial and financial requirements and corporate
focus;
(v) advise with regard to shareholder relations and public
relations matters, including the preparation of and dissemination
of financing documents to certain of the Consultant's clients and
other members of the financial community (as determined by the
Consultant);
(vi) attend quarterly Board of Directors meetings as an
non-voting observer. The Company will pay Consultatn no
compensation for attending these meetings, but will pay all
out-of-pocket expenses relating to the attendance by the
Consultant.
b) The Consultant agrees to use its best efforts in a timely
fashion in the furnishing of advice and recommendations, and for this
purpose the Consultant shall at all times maintain or keep available an
adequate organization of personnel or a network of outside
professionals for the performance of its obligations under this
Agreement. In order to allow the Consultant to be kept current with the
coroporate affairs of the Company, at the Consultant's request, the
Company will provide "due diligence" presentations to Registered
representatives of the Consultant. The dates and locations for
presentations will be mutually agreed upon between the Company and the
Consultant. The Consultant may
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request the Company to present due diligence presentations to other
broker dealers and/or investors at appropriate periods of time.
2. Term. The Consultant's retention hereunder shall be for a trem of
eighteen months commencing on the day this agreement is signed. The Company
shall have the option to extend the term of this Agreement by written notice to
Consultant for an additional six months term ("Extension Term"). This Agreement
may be terminated by either party upon 30 days written notice to the other.
3. Compensation.
a) The Company shall pay the Consultant a non refundable
retainer, payable in the amount of $25,000 upon the signing of this agreement.
The retainer will be credited against success fees from a public offering of the
Company's securities.
(b) If the Company announces or enters into an agreement with
respect to a Transaction either during the term of Consultant's engagement
hereunder or at any time during a period of 12 months following the effective
date of termination of Consultant's engagement hereunder and the party or
parties to the Transaction were identified by Consultant or whether Consultant
rendered advice concerning the Transaction, and such transaction is thereafter
consummated, the Company shall pay to the Consultant 10% of the total
Consideration paid in each of such Transactions.
4. Securities Offerings. In the event of a private and/or public
offering of the of the Company's securities, the Company shall pay the
Consultant a commission fee equal to 10% of gross equity proceeds plus a 3% non
accountable expense allowance and 7% of any gross debt proceeds resulting from
the closing, or each closing, of the offering.
a) As additional compensation, the Company will grant to the
Consultant warrants (Warrants) to purchase that number of shares of its
securities which will equal ten percent (10%) of the post money isued securities
upon the closing the Offering. The exercise price of the warrants wil be 120% of
the issued price of the securities and the Warrants will have a term of five (5)
years from the date of this Agreement and will contain certain anti-dilution
provisions acceptable to the Consultant. The Warrants will have a value of $.001
per Warrant.
5. Right of First Refusal. The Consultant shall have the right of first
refusal, on the same or better terms as offered by a bona fide third party
investment banker, to participate as Underwriter, Co-Underwriter or Placement
Agent for any public or private offering of the securities of the Company or any
successor to the Company or any officer or director of the Company or any
stockholder of the Company owning beneficially at least 5% of the Company's
Common Stock. The Company shall provide Consultant written notice of such
proposed terms and Consultant shall have fifteen (15) days thereafter to
exercise its right of first refusal.
6. Expenses. The Company agrees to reimburse the Consultant for
reasonable expenses incurred by the Consultant in connection with srvices
rendered hereunder. Such expenses, if greater than $300 per month, shall be
reimbursed only if they have been incurred with the prior written approval of
the Company.
7. Company Expenses. The Company shall bear all costs and expense
incident to the issuance, offer, sale and delivery of the Shares or Debt
Instruments, including any legal and accounting fees, expenses of Company due
diligence meetings, costs of any printing and mailing of the Offering or
supporting documents, including supplements and amendments.
8. Liability of Consultant. The Consultant shall have no liability with
respect to decisions made or actions taken by the Company in reliance on advice
or recommendations given by Consultant or transactions presented to the Company
by the Consultant. The Company agrees to
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indemnify and hold harmless the Consultant and its affiliates, the respective
directors, officers, partners, agents and employees and each other person, if
any, controlling the Consultant or any of its affiliates (collectively the
"Consultant Parties"), to the full extent lawful, form and against all losses
claims, damages, liabilites and expenses incurred by them (including attorney's
fees and disbursements) that result from actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
the Company, its agents or employees. The Consultant will indemnify and hold
harmless the Company and the respective directors, officers, agents and
employees of the Company (the "Company Parties") from and against all losses,
claims, damages, liabilities and expenses that result from bad faith, gross
negligence or unauthorized representations of the Consultant; provided, however,
in no event shall the Consultant be responsible for any amount in excess of the
compensation paid to the Consultant under the Agreement. Each person or entity
seeking indemnification hereunder shall promptly notify the Company, or the
Consultant as applicable, of any loss, claim, damage or expenses for which the
Company or the Consultant as applicable, may become liable pursuant to this
Section, shall not pay, settle or acknowledge liability under any such claim
without consent of the party liable for indemnification, and shall permit the
Company or Consultant as applicable a reasonable opportunity to cure any
underlying problem or to mitigate actual or potential damages. The scope of this
indemnification between the Consultant and the Company shall be limited to, and
pertain only to certain transactions contemplated or entered into pursuant to
this letter of engagement.
The Company or the Consultant, as applicable, shall have the
opportunity to defend any claim for which it may be liable hereunder, provided
it notifies the party claiming the right to indemnification within 15 days of
notice of the claim.
The rights stated pursuant to the preceding two paragraphs shall be in
addition to any rights that the Consultant, the Company, or any other person
entitled to indemnification may have in common law or otherwise, including, but
not limited to, any right to contribution.
9. Status of Consultant. The Consultant shall be deemed to be an
independent contractor. The Consultant shall have no authority to, and shall
not, bind the Company to any agreement or obligation with a third party. Nothing
in this Agreement will constitute the parties here to co-partners or
joint-ventures with each other.
10. Other Activities of Consultant. The Company recognizes that the
Consultant now renders, and may continue to render, financial consulting and
other investment banking services similar to those services being rendered under
this Agreement to other companies, some of which may conduct business and
activities similar to those of the Company. The Consultant shall not be required
to devote its full time and attention to the performance of its duties under
this Agreement, but shall devote only so much of its time and attention as it
deems reasonable or necessary for such puposes.
11. Control. Nothing contained herein shall be deemed to require the
Company to take any action contrary to its Certificate of Incorporation or
By-Laws, or any applicable statute or regulation, or to deprive its Board of
Directors of their responsibility for any control of the conduct of the affairs
of the Company.
12. Due Diligence of Consultant. The Consultant may be required, in
connection with its technical and due diligence investigation, to retain third
parties for technical advice and assistance. The Company shall bear the costs of
such third parties, provided the Company has approved the costs in advance.
13. Notices. Any notices hereunder shall be sent to the Company and the
Consultant at their respective addresses above set forth. Any notice shall be
given by registered or certified mail, postage prepaid, and shall be deemed to
have been given when deposited in the United States
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mail. Either party may designate any other address to which notice shall be
given, by giving written notice to the other of such change of address in the
manner herein provided.
14. Governing Law. This Agreement has been made in the State of Arizona
and shall be construed and governed in accordance with the laws thereof without
regard to conflicts of laws. In the event that disagreement arises between the
parties to this contract, and these parties are unable to resolve them, then
these parties agree to settle those disagreements through the use of a duly
licensed and current arbitrator.
15. Entire Agreement. This Agreement contains the entire agreement
between the parties, may not be altered or modified, except in writing and
signed by the party to be charged thereby and supersedes any and all previous
agreements between the parties.
16. Conditions. This agreement is conditioned by the Consultants
acceptance of a Letter of Understanding from current equity holders stating
sellers terms. In addition, the Company agrees to expeditiously provide 5 year
projections, a revised organizational chart, and a current business plan.
17. Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective heirs, administrators, successors, and assignees.
Merger and Acquisition Agreement
This will confirm the understanding and agreement (the "Agreement")
between ▇.▇. ▇▇▇▇▇ Securities, Inc. ("Consultant") and Premium Cigars
International, Inc. (the "Company") as follows:
1. The Company hereby engages Consultant and Consultant hereby accepts such a
engagement, as the Company's agent for the purpose of (a) identifying
opportunities for a transaction involving the Company including, without
limitation, the sale of the Company, or any of its businesses, assets, or
properties, or the purchase by the Company of other companies, or any of their
businesses, assets, or properties, (b) advising the Company concerning
opportunities for such a transaction and (c) as requested by the Company,
participating on the Company's behalf in negotiations concerning such a
transaction or assisting the Company in structuring such transaction.
2. For the purposes of this Agreement:
(a) A "Transaction" shall mean any transaction or series or combination
of transactions involving the Company, other than in the ordinary course of
trade or business, whereby, directly or indirectly, control of, or a material
interest in any business, assets or properties is sold, purchased, leased or
otherwise transferred, including, without limitation, a sale, purchase or
exchange of capital stock or assets, a lease of assets with or without a
purchase option, a merger or consolidation, a tender or exchange offer, a
leveraged buy-out, a restructu9ring, a recapitalization, a repurchase of capital
stock, an extraordinary dividend or distribution (whether cash, property,
securities or a combination thereof), a liquidation, the formation of a joint
venture or partnership, a minority investment or any other similar transaction.
(b) "Consideration" shall mean the total value of all cash, securities,
other property and any other consideration, including, without limitation, any
contingent, earned or other consideration paid or payable, directly or
indirectly, in connection with a Transaction and consideration shall be
determined at the closing. The value of any such securities (whether debt or
equity) or other property shall be determined as follows: (1) the value of
securities that are freely tradable in an established public market shall be the
last closing market price of such securities which are not prior to the public
announcement of the Transaction; and (2) the value of securities which are not
freely tradable or which have no established public market, or if the
consideration consists of property
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other than securities, the value of such securities or other property shall be
the fair market value thereof as mutually agreed by the Company and Consultant.
Consideration shall also be deemed to include any indebtedness, including,
without limitation, pension liabilities, guarantees and other obligations
assumed, directly or indirectly, in connection with, or which survives the
closing of, a Transaction. If the consideration to be paid is computed or
payable in any foreign currency, the value of such foreign currency shall, for
the purpose hereof, be converted into U.S. Dollars at the prevailing exchange
rate on the dates on which such consideration is payable.
3. The term of Consultant's engagement hereunder shall extend for eighteen (18)
months from the date of the signing of this agreement. Either party may
terminate Consultant's engagement hereunder at any time, with or without cause,
by giving the other party at least 30 days prior written notice.
4. The Company shall furnish to Consultant the names of all parties with which
the Company has had discussions or contact prior to the date hereof concerning a
Transaction.
5. As compensation for the services rendered by Consultant hereunder, the
Company shall pay Consultant as follows:
(a) If the Company announces or enters into an agreement with respect
to a Transaction either during the term of Consultant's engagement hereunder or
at any time during a period of 12 months following the effective date of
termination of Consultant's engagement hereunder and the party or parties to the
Transaction were identified by Consultant or whether Consultant rendered advice
concerning the Transaction and such Transaction is thereafter consummated, the
Company shall pay to Consultant the following percentages of the total
Consideration paid in each of such Transactions:
Total Consideration Percent
------------------- -------
On amounts under $3,000,000 5.0%
On amounts between $3,000,000
and $5,000,000 plus 2.5%
On amounts between $5,000,000
and $10,000,000 plus 2.0%
On amounts over $10,000,000 1.0%
(b) Compensation which is payable to Consultant pursuant to
subparagraph 5(a) shall be paid by the Company to Consultant at the closing of
any Transaction.
6. The Company shall reimburse Consultant, for its out-of-pocket and incidental
expenses incurred in connection with its engagement hereunder promptly as
requested, including the fees and expenses of in legal counsel and those of any
advisor retained by Consultant.
7. Because Consultant will be acting on behalf of the Company in connection with
this engagement, the Company agrees to indemnify Consultant as set forth in a
separate letter agreement dated the date hereof between Consultant and the
Company and attached as Rider 1 to this Agreement.
8. Consultant shall have the right to place advertisements in financial and
other newspapers and journals at its own expense describing its services to the
Company hereunder.
9. Any advice, either oral or written, provided to the Company by Consultant
hereunder shall not be publicly disclosed or made available to their parties
without the prior written consent of Consultant. In addition, Consultant may not
be otherwise publicly referred to without its prior consent.
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10. In connection with Consultant's engagement, the Company will furnish
Consultant with all information concerning the Company which Consultant
reasonably deems appropriate and will provide Consultant with access to the
Company's officers, directors, accountants, counsel and other, advisers. The
Company represents and warrants to Consultant that all such information
concerning the Company and its affiliates is and will be true and accurate in
all material respects and does not and will not contain any untrue statement or
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which such
statements are made. The Company acknowledges and agrees that Consultant will be
using and relying upon such information supplied by the Company and its
officers, agents and others and any other publicly available information
concerning the Company and its affiliates and any prospective acquirer of the
Company, its business or assets without any independent investigation or
verification thereof or independent appraisal by Consultant of the Company and
business or assets.
11. The benefits of this Agreement, together with the separate indemnity letter,
shall inure to the respective successors and assigns of the parties hereto and
of the indemnified parties hereunder and their successors, assigns and
representatives, and the obligations and liabilities assumed in this Agreement
by the parties hereto shall be binding upon their respective successors and
assigns.
12. This Agreement may not be amended or modified except in writing and shall be
governed by and construed in accordance with the laws of the State of Arizona,
without regard to principles of conflicts of laws.
RIDER 1 TO MERGER & ACQUISITION AGREEMENT
CONFIDENTIAL INDEMNIFICATION AGREEMENT
In connection with the Merger & Acquisition Agreement, dated December 13, 1996,
between ▇.▇. ▇▇▇▇▇ Securities, Inc. ("Consultant") and Premium Cigars
International ("the Company"), the Company hereby agrees to indemnify and hold
harmless Consultant, their respective directors, officers, controlling persons
(within the meaning of Section 15 of The Securities Exchange Act of 1934), if
any, (collectively, "Indemnified Persons" and individually, and "Indemnified
Person's") from and against any and all claims, liabilities, losses, damages and
expenses incurred by any Indemnified Person (including fees and disbursements of
Consultant and an Indemnified Person's counsel) which (A) are related to arise
out of (i) actions taken or omitted to be taken (including any untrue statements
made or any statements omitted to be made) by the Company or (ii) actions taken
or omitted to be taken by an Indemnified Person with the Company's consent or in
conformity with the Company's instructions or the Company's actions or omissions
or (B) are otherwise related to or arise out of Consultant's engagement, and
will reimburse Consultant and any other Indemnified Person for all costs and
expenses, including fees of Consultant or an Indemnified Person's counsel as
they are incurred, in connection with investigating, preparing for, or defending
any action, formal or informal claim, investigation, inquiry or other
proceeding, whether or not in connection with pending or threatened litigation,
caused by or arising out of or in connection with Consultant's acting pursuant
to the engagement, whether or not Consultant or any Indemnified Person is named
as a party thereto and whether or not any liability results therefrom. The
Company will not, however, be responsible for any claims liabilities, losses,
damages, or expenses pursuant to clause (B) of the preceding sentence which are
finally judicially determined to have resulted primarily from Consultant's bad
faith or gross negligence. The Company further agrees that the Company will not,
without the prior written consent of Consultant, settle or compromise or consent
or the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder.
In order to provide for just and equitable contribution, if a claim for
indemnification is made pursuant to these provisions but is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification is not available for any reason (except, with respect
to indemnification sought solely pursuant to clause (B) of the first paragraph
hereof, for the reasons specified in the second sentence thereof), even though
the express provisions hereof provide for indemnification in such case, then the
Company, on one hand, and Consultant on the other hand, shall contribute to such
claim, liability, loss, damage or expense for which such indemnification or
reimbursement is held unavailable in such proportion as is appropriate to
reflect the relative benefits to the Company, on one hand, and Consultant on the
other hand, in connection with the
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transactions contemplated by the engagement, subject to the limitation that in
any event Consultants aggregate contribution to all losses, claims, damages,
liabilities and expenses to which contribution is available hereunder shall not
exceed the amount of fees actually received by Consultant pursuant to the
management.
The foregoing right to indemnity and contribution shall be in addition
to any rights that Consultant and/or any other Indemnified Person may have at
common law or otherwise and shall remain in full force and effect following the
completion or any termination of your engagements.
The Company further understands that if Cosultant is asked to act for
the Company as dealer manager in a exchange or tender offer or as an underwriter
in connection with the issuance of securities by the Company or to furnish the
Company a financial opinion letter or in any other formal capacity, such further
action may be subject to a separate agreement containing provisions and terms to
be mutually agreed upon.
Expiration. This offer shall remain valid during a consideration
period, but will automatically expire if not signed by Premium cigars
International by 5:00 P.D.T. on December 30, 1996.
▇. ▇. ▇▇▇▇▇ Securities, Inc., is delighted to accept this engagement
and looks forward to working with you on this assignment. Please confirm that
the foregoing correctly sets forth our agreement by signing the enclosed
duplicate of this letter in the space provided and returning it, where upon this
letter shall constitute a binding agreement as of the date first above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective
the day and year written below.
▇.▇. ▇▇▇▇▇ SECURITIES, INC. PREMIUM CIGARS INTERNATIONAL
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Its: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Chairman Vice President
Date: 12/14/96 Date: 12/14/96
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13. $210,000 dollars are excluded from the financing fees stated by ▇▇▇▇ ▇▇▇▇▇▇
$110,000 and $100,000 total from either ▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ under
compensation to Consultant of 10% as stated in #3 compensation.
PCI /s/ S.L. /s/ WBM
12/14/96