EXHIBIT 10.5

                   [TITUS BRUECKNER & BERRY, P.C. LETTERHEAD]


                                February 18, 1998

                                HOLD FOR PICK-UP


Karissa Nisted
6746 S. Bonarden Lane
Tempe, Arizona 85283

         Re:      Premium Cigars International, Ltd. ("PCI")
                  Severance Compensation

Dear Karissa:

         This letter  responds  to your  request  that PCI confirm  with you the
compensation and other benefits which you are entitled to upon termination under
the terms of your  Employment  Agreement  dated  October 15,  1997  ("Employment
Agreement").   Please   confirm  below  that  the  following   represents   your
understanding of the terms of your severance with PCI in accordance with Section
7 of your Employment Agreement:

1.       That your  employment  with PCI terminated  effective at the end of the
         workday Monday, February 9, 1998;

2.       For a six (6) month  period,  you will  continue to receive your normal
         salary  amount,  at  the  salary  level  in  effect  on the  date  your
         employment was terminated minus all applicable  deductions (such as for
         taxes, etc.) payable biweekly;

3.       Section 7(c) provides for group medical insurance eligibility,  at your
         own expense,  under the Consolidated Omnibus Budget  Reconciliation Act
         of 1986  ("COBRA"),  as  amended,  for such  duration  as  provided  by
         existing law at the time of your termination; it is PCI's understanding
         that,  because the Company normally employed fewer than 20 employees on
         a typical  business day during the calendar year  preceding the date of
         your termination, you are not eligible for COBRA coverage;

4.       That you understand that, without  limitation,  Sections 8, 9 and 10 of
         your  Employment  Agreement  dated October 15, 1997  represent  ongoing
         obligations   on  your  part  relating  to  PCI's   customer   records,
         confidential information and your covenant not to compete with PCI.
<PAGE>
Karissa Nisted
February 18, 1998
Page 2

         In  addition  to the  foregoing  severance  terms  from the  Employment
Agreement,  PCI  waives any and all claims  that it might  have  against  you in
exchange for your mutual waiver
below.

         Please contact me if you have any questions regarding this letter.

                                             Very truly yours,

                                             TITUS, BRUECKNER & BERRY, P.C.


                                                  /s/ Michael F. Patterson
                                             -----------------------------------
                                             Michael F. Patterson

MS.  NISTED'S  ACKNOWLEDGEMENT  AND RELEASE:  I acknowledge  that except for the
items  set  forth in this  letter,  I have no other  claims  and waive all other
claims to  compensation  or other  benefits  from PCI. I waive all other  claims
against  the  Company,  its  directors,  officers,  shareholders  and  agents in
exchange for the Company's  mutual waiver of all claims against me. My foregoing
waiver shall not, however, be deemed to prevent me from asserting any defense in
any  action  brought  against  me by any third  party and which  relates  to the
Company's  business.  Additionally,  I reserve  any  rights I may have under the
Articles of Incorporation, Bylaws or common law for indemnification.


Date: February 18, 1998                      /s/ Karissa Nisted
                                        ----------------------------------------
                                        Karissa Nisted

COMPANY AGREEMENT TO THE TERMS SET FORTH ABOVE:

PREMIUM CIGARS INTERNATIONAL, LTD.


By:     /s/ David S. Hodges             Date: February 18, 1998
   --------------------------------
Printed Name: David S. Hodges
Its: Chief Financial Officer