ENGAGEMENT AGREEMENT

December__, 1998

Mr. John E. Greenwell
Chairman and Chief Executive Officer
Premium Cigars International, Ltd.
15849 N. 77th Street
Scottsdale, Arizona 85260

         1. This letter will confirm the  understanding  between  Premium Cigars
International,  Ltd.  and/or its  affiliates  and  successors  (the "Company" or
"PCIG") and RCG Capital Markets Group, Inc. and/or any affiliates and successors
("RCG").   The  letter  and  the  attachments  hereto,  as  amended,   shall  be
collectively  referred to as the  "Agreement".  RCG will provide  consulting and
other services  described by the attachment  ("services") and will represent the
Company during the engagement as exclusive  Financial  Relations  Consultants of
the kind described by that attachment, all on the terms and conditions set forth
in this  letter  agreement.  That  attachment  is  incorporated  in this  letter
agreement and forms a part hereof.  Unless  otherwise  terminated as provided in
paragraph  nine of this letter  agreement,  the  contract  period will be for an
Eighteen  (18) month  period  commencing,  immediately  upon  execution  of this
agreement. During this engagement period, PCIG or RCG may terminate the contract
after Nine (9) months by providing written notice of Thirty (30) days.

         2. The Company  agrees to furnish or cause to be  furnished  to RCG all
information  concerning  the  Company  as  RCG  reasonably  requests  and  deems
appropriate for purposes of this  engagement.  The Company and RCG represent and
warrant to each other that all information  provided and  representations  made,
with  respect to the Company,  to third  parties will be complete and correct in
all material  respects  and will not contain any untrue  statement of a 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. In rendering RCG's services hereunder,  PCIG understands that RCG will
be using and  relying on  publicly  available  information  and the  information
furnished  to RCG by PCIG without  independent  verification  thereof.  RCG will
treat as confidential  any non-public  information  provided to it hereunder and
will not disclose the same to third parties unless  required by applicable  law.
In the event  disclosure has been or will be made by RCG, RCG will use it's best
efforts to cooperate as reasonably  requested by the Company in  minimizing  any
potential  loss or injury to the Company as a consequence  of any such necessary
disclosure.  In  addition,  RCG will use its best  efforts  to  comply  with all
applicable  state  and  Federal  securities  laws  in the  performance  of  this
agreement.

         3.  RCG  will be  generally  available  to you in  connection  with its
rendering of services. Specifically, RCG (a) will outline, develop and implement
a financial relations program to assist the Company in creating and/or enhancing
a positive and more visible public image, (b) may contact existing shareholders,
broker/dealers,  potential investors, registered representatives,  institutions,
mutual  fund  managers,   investment  banking  sources,   securities   analysts,
<PAGE>
November 12, 1998
Page 2

independent  portfolio  managers,  and other professional  investment  community
contacts  including certain financial media sources for the purpose of enhancing
the Company's  public image and perceived  value, (c) will assist the Company in
the creation,  production  and  distribution  of certain  financial  markets and
investor/shareholder  corporate image materials,  including  corporate profiles,
due  diligence  manual and investor  packages,  as well as all  financial  press
releases;  (d) when  appropriate,  assist the Company in its  endeavor to secure
research analyst through a targeted securities professionals campaign.

         4. The  Company  will use its best  efforts  to afford  RCG 48 hours to
review any disclosure,  prior to its release, which the Company plans to make to
any of the sources  described in paragraph  (3) within the general  terms of the
proposal.  In addition,  RCG will be  responsible  for  assisting the Company in
writing and/or editing, producing,  coordinating and disseminating all financial
industry press  releases.  RCG agrees that it will not release or distribute any
press release without the Company's prior consent.

         5. In consideration of RCG's services hereunder,  the Company agrees to
pay  RCG,  promptly  when  due,  the  compensation  described  by and in  strict
accordance  with the  attachment  ("Compensation")  to this  engagement  letter.
Should RCG and the Company  determine  to extend the term of the  engagement  or
change the scope of the  engagement,  then a mutually  acceptable  amendment  or
supplement to that attachment shall be promptly  executed at the time by RCG and
Company.  Absent any such amendment,  all terms and conditions of this agreement
shall be binding to the parties.

         6. RCG shall be  entitled  to such  additional  fees as may be mutually
agreed upon by separate  agreement  between the parties  hereto,  for additional
consulting services rendered during the engagement term.

         7.  The  Company  agrees  to  pay  all of  RCG's  direct  and  indirect
out-of-pocket  expenses reasonably incurred, in connection with this engagement.
An expense retainer shall be utilized for this purpose.  Amounts and limitations
shall be set forth in the attachment ("Compensation").

         8. The Company  acknowledges  that RCG will be acting on the  Company's
behalf,  therefore,  RCG  requires  indemnification,  and  assumes  the  Company
requires  and  agrees  to the  same.  A copy of the  indemnification  provisions
("Indemnification  Provisions")  is  attached to this  engagement  letter and is
incorporated herein and made a part hereof.

         9. Either party hereto may terminate this engagement as follows:

               (a)  WITHOUT  CAUSE.  The Company may  terminate  this  Agreement
during the  eighteen-month  period "without  cause",  upon providing RCG 30 days
written  notice.  In the  event of such  termination  by the  Company,  "without
cause",  RCG shall be entitled to receive cash  compensation to the extent it is
unpaid for (i) the remaining term of this Agreement or (ii) four and one-half (4
1/2)  months,  whichever  period is shorter,  pro-rated  from the notice date of
termination, along with reimbursement of any non paid, out-of-pocket expenses up
to the  effective  date of  termination.  Such payment is due and payable on the
effective date of termination.
<PAGE>
November 12, 1998
Page 3

               (b) WITH CAUSE.  In  addition,  the Company  may  terminate  this
Agreement at any time upon written notice to RCG and the Company may immediately
exercise  its rights to  repurchase  the  Shares as  provided  in the  Financial
Relations Compensation Attachment:

                    (i)  If  RCG  fails  to  cure  any  material  breach  of any
               provision of this Agreement  within thirty (30) days from written
               notice from the Company  (unless such breach cannot be reasonably
               cured within the thirty (30) days and RCG is actively pursuing to
               cure said breach).

                    (ii)  For  RCG's  negligence,   willful  misconduct,  fraud,
               misappropriation, embezzlement, or other dishonesty;

                    (iii)  Upon  RCG's   failure  to   materially   comply  with
               applicable  law or  regulation  relating to the  Services it will
               perform; or

                    (iv) Upon the filing by or against RCG of a petition to have
               RCG  adjudged  as bankrupt or a petition  for  reorganization  or
               arrange met under any law relating to  bankruptcy,  and where any
               such involuntary petition is not dismissed within 90 days.

               (c)  RENEWAL.  This  Agreement  shall  renew if not  specifically
terminated.  The Company  agrees to notify RCG Thirty (30) days prior to the end
of the Eighteen (18) month period of its intent to not renew. Should the Company
fail to notify RCG, the contract will revert to a month to month agreement until
specifically  renewed in writing  for the next  consecutive  contract  period or
terminated  with the  Thirty  (30) day  notice.  Such  renewal or month to month
engagement shall be on the same terms and conditions  contained  herein,  unless
modified and agreed in writing by both parties.

               (d) RCG may  terminate  this  Agreement  at any time upon written
notice to the Company.

                    (i) If the Company fails to cure any material  breach of any
               provision  of this  Agreement  with thirty (30) days from written
               notice from the Company  (unless such breach cannot be reasonably
               cured  within the thirty  (30) days and the  Company is  actively
               pursuing to cure said breach);

                    (ii) For the Company's negligence, willful misconduct, fraud
               or misrepresentation;
<PAGE>
November 12, 1998
Page 4

               Such  termination  under  9(d)(i  or ii)  shall be deemed to be a
               termination  by  the  Company  "without  cause"  as  provided  in
               paragraph 9 (a) above.

                    (iii) Upon the Company's  failure to materially  comply with
               any applicable  law or regulation  relating to the Services being
               provided; or

                    (iv) Upon the filing by or against the Company of a petition
               to have the  Company  adjudged  as  bankrupt  or a  petition  for
               reorganization   or   arrangement   under  any  law  relating  to
               bankruptcy,  and  where  any  such  involuntary  petition  is not
               dismissed within 90 days.

Upon  termination  under  Subsections  9 (b) above,  the  Company  shall have no
liability to RCG for Compensation accruing after such termination, and RCG shall
have no  further  entitlement  thereto.  Upon  such  termination,  RCG  shall be
entitled  to receive and retain only  accrued  Compensation  to the date of such
termination,  to the  extent  it is  unpaid,  together  with  expenses  not  yet
reimbursed and the Company may immediately  exercise its right to repurchase the
Shares  in  accordance  with the  terms  set  forth in the  Financial  Relations
Compensation Attachments

         10. RCG hereby fully  discloses  that certain  associates,  affiliates,
officers and employees of RCG are:

               A)   Licensed as Registered  Securities  Principals issued by the
                    National Association of Securities Dealers ("NASD"); and/or

               B)   Licensed as Registered Representatives issued by the NASD.

         All NASD registrations are carried BTS (Brokers Transaction  Services),
which is a non-RCG affiliated NASD-registered broker/dealer.

         RCG FURTHER  DISCLOSES AND THE COMPANY  SPECIFICALLY  ACKNOWLEDGES THAT
RCG IS NOT A  BROKER/DEALER  REGISTERED  WITH THE NASD OR ANY  OTHER  REGULATORY
AGENCY, NOR IS IT, OR ANY OF ITS OFFICERS,  AFFILIATES AND EMPLOYEES AN OWNER IN
ANY BROKER/DEALER.  FURTHERMORE,  IN THE PERFORMANCE OF SERVICES UNDER THE TERMS
AND  CONDITIONS OF THIS  AGREEMENT,  SUCH SERVICES SHALL NOT BE CONSIDERED TO BE
ACTING IN ANY  BROKER/DEALER  OR UNDERWRITING  CAPACITY AND THEREFORE RCG IS NOT
RECEIVING ANY COMPENSATION FROM THE COMPANY AS SUCH.

         11. The Company  understands and  acknowledges  that RCG provides other
and  similar  consulting  services  to  companies  which may or may not  conduct
business and activities similar to those of the Company.  RCG is not required to
devote its full time and attention to the  performance of its duties detailed in
this  Agreement,  and may devote  only so much of its time and  attention  as it
deems reasonable or necessary.

         12. The validity and interpretation of this Agreement shall be governed
by the laws of the State of  Arizona  applicable  to  agreements  made and to be
fully performed therein.
<PAGE>
November 12, 1998
Page 5

         13. In the  event of any  controversy  or  dispute  arising  out of, or
relating to this Agreement or breach thereof,  RCG and PCIG agree to settle such
controversy by arbitration pursuant to Arizona Revised Statutes, 12-1501 et seq.
and in  accordance  with the  rules,  of the  American  Arbitration  Association
governing commercial  transactions then existing,  to the extent that such Rules
are not  inconsistent  with said Statutes and this Agreement.  Judgment upon the
award   rendered  under   arbitration   may  be  entered  in  any  court  having
jurisdiction. The cost of the arbitration procedure shall be borne by the losing
party,  or, if the  decision  is not clearly in favor of one party or the other,
the costs shall be borne as determined by the arbitrator. The parties agree that
the arbitration procedure provided herein shall be the sole and exclusive remedy
to resolve any  controversy or dispute  arising  hereunder,  and that the proper
venue for such arbitration proceeding shall be Maricopa County, Arizona.

         14. For the  convenience of the parties,  any number of counterparts of
this  letter  agreement  may  be  executed  by the  parties  hereto.  Each  such
counterpart  shall  be  deemed  to be  an  original  instrument,  but  all  such
counterparts taken together shall constitute one and the same letter agreement.

         If the foregoing  correctly sets forth our  agreement,  please sign the
enclosed copy of the letter in the space provided and return it to us, whereupon
all parties will be bound to the terms of this engagement.

Very truly yours,                              Confirmed and agreed to:

RCG Capital Markets Group, Inc.                This ____ day of  ________, 1998.


By:                                           Premium Cigars International, Ltd.
    ----------------------------- 
Title:                                        By:                               
       --------------------------                 ------------------------------
                                              Title:                         
                                                    ----------------------------
<PAGE>
November 12, 1998
Page 6

                           INDEMNIFICATION PROVISIONS

         The Company  agrees to defend,  indemnify  and hold  harmless  RCG, its
officers,  directors,  and  employees  (hereafter  jointly  referred  to as RCG)
against any and all losses, claims, demands, suits, actions, judgments,  awards,
damages,  liabilities,  costs,  reasonable  attorneys'  fees (and all actions in
respect thereof and any reasonable real or other expenses in giving testimony or
furnishing documents in response to a subpoena or otherwise) including the costs
of  investigating,  preparing or defending any such action or claim,  whether or
not in  connection  with  litigation  in  which  RCG  is a  party,  directly  or
indirectly  caused by, relating to, or asserted by a third party,  based upon or
arising  out  of  (a)  the  Company's  breach  of or  the  incorrectness  of any
representation,  warranty,  or covenant of Company  contained in this Agreement;
and/or (b)  failure of Company to  perform  any term  condition,  or  obligation
required by this  Agreement  to be  performed  by Company;  or (c) any  Services
rendered by the Company as defined in or  contemplated by the Agreement to which
these  Provisions  are attached,  as it may be amended from time to time; or (d)
any act or omission by the Company in  connection  with its  performance  of its
obligations  under the Agreement.  Notwithstanding  the  foregoing,  the Company
shall not have any liability to RCG for, or in connection  with,  the engagement
of RCG or with any of the foregoing,  for any such liability for losses, claims,
demand,  suits,  actions,  judgments,  awards,  damages,  liabilities,  costs or
expenses that is found in a final judgment by a court of competent  jurisdiction
or mutually acceptable  arbitrator to have resulted from RCG's gross negligence,
willful   misconduct,   RCG's  material  breach  or  the  incorrectness  of  any
representation, warranty or covenant of RCG contained in this Agreement.

         RCG agrees to defend,  indemnify  and hold  harmless the  Company,  its
officers,  directors,  and  employees  (hereafter  jointly  referred  to as  the
Company) against any and all losses, claims, demands, suits, actions, judgments,
awards, damages, liabilities, costs, reasonable attorneys' fees (and all actions
in respect thereof and any reasonable real or other expenses in giving testimony
or furnishing  documents in response to a subpoena or  otherwise)  including the
costs of investigating, preparing or defending any such action or claim, whether
or not in connection with  litigation in which the Company is a party,  directly
or indirectly  caused by, relating to, or asserted by a third party,  based upon
or  arising  out  of  (a)  RCG's   breach  of  or  the   incorrectness   of  any
representation, warranty, or covenant RCG contained in this Agreement; and/or or
(b) failure of RCG to perform any term condition, or obligation required by this
Agreement to be performed by RCG; or (c) any Services rendered by RCG as defined
in or contemplated by the Agreement to which these  Provisions are attached,  as
it may be  amended  from  time to  time;  or (d) any act or  omission  by RCG in
connection  with  its  performance  of  its  obligations  under  the  Agreement.
Notwithstanding  the foregoing,  RCG shall not have any liability to the Company
for, or in connection  with, the engagement of RCG or with any of the foregoing,
for any such liability for losses, claims, demands,  suits, actions,  judgments,
awards,  damages,  liabilities,  costs or  expenses  that is found by a court of
competent  jurisdiction or mutually acceptable  arbitrator to have resulted from
the Company's  gross  negligence,  willful  misconduct,  the Company's  material
breach or the incorrectness of any  representation,  warranty or covenant of the
Company contained in this Agreement.
<PAGE>
November 12, 1998
Page 7

         As a  condition  to  the  foregoing  indemnity,  in  the  event  of the
assertion of any claim or demand,  or the institution of any suit or action with
respect to which  either party is required by this  paragraph  to Indemnify  the
other party (the indemnifying party hereinafter referred to as the "Indemnitor",
and  the  party  entitled  to  indemnification  hereinafter  referred  to as the
"Indemnitee") the Indemnitee will give notice thereof to the Indemnitor and will
afford the  Indemnitor  the  opportunity  to defend , settle,  or compromise the
same. Unless the Indemnitor agrees to duly, promptly and diligently discharge or
defend against such claim, demand, suit or action in such manner as will, in the
Indemnitee's  reasonable  judgment,  protect the Indemnitee  from any liability,
loss,  cost  or  damage  as  a  result  thereof,  the  Indemnitee  may,  at  the
Indemnitee's  option, for the Indemnitor's  account and risk, assume the defense
of the same,  may implead,  interplead or claim over against the  Indemnitor and
may thereafter hold the Indemnitor  responsible for all sums paid and all costs,
expenses and reasonable  attorney's fees incurred by the Indemnitee in so doing.
The  Indemnitee  may,  at the  Indemnitee's  option,  participate  in any  legal
proceedings  being  conducted by the  Indemnitor  hereunder  with counsel of the
Indemnitee's  choosing, but such participation shall be at the Indemnitee's sole
expense,  so long as the  Indemnitor  is diligently  conducting  the same in the
Indemnitee's  reasonable  judgment,  and the  Indemnitee's  counsel shall to the
fullest extent consistent with its professional  responsibilities cooperate with
the Indemnitor and any counsel designated by the Indemnitor.

         In the event that a court of competent  jurisdiction,  or an arbitrator
mutually acceptable to the parties, determines that the Indemnification provided
for hereunder is unavailable hereunder, but that both Company and RCG are liable
to a third party  asserting  a claim  against  Company and RCG,  then as between
Company and RCG, they each agree to contribute  such amounts as may be necessary
to  satisfy  such  liability,  in  amounts  proportionate  to  their  respective
comparative  negligence/responsibility  as  determined  by a court of  competent
jurisdiction or a mutually acceptable arbitrator.  If either Company or RCG pays
such third party more than its proportionate  share as determined above, then it
shall be  entitled  to seek  contribution  from the other party to the extent of
such excess.

         No  person  or   affiliated   entity  found  liable  for  a  fraudulent
misrepresentation   shall  be  entitled  to  contribution  from  any  person  or
affiliated   entity  that  is  not  also  found   liable  for  such   fraudulent
misrepresentation.

         These Indemnification Provisions shall be in addition to any liability,
which either  party may  otherwise  have to the other party or their  respective
controlling  persons  within the meaning of the  federal  securities  laws.  The
foregoing  Indemnification  Provisions are in addition to any rights or remedies
available  under  applicable law and are not to the exclusion of any such rights
or remedies.
<PAGE>
November 12, 1998
Page 8

                               FINANCIAL RELATIONS

                             COMPENSATION ATTACHMENT

         In accordance with the contract terms for Premium Cigars International,
Ltd. ("PCIG"), the following is the compensation required by RCG Capital Markets
Group,  Inc.  and/or its affiliates  ("RCG") to perform the Financial  Relations
services outlined herein.  The contract period for Financial  Relations services
will be for an  eighteen  (18) month  period from the date of  execution  of the
Agreement. During this engagement period, PCIG or RCG may terminate the contract
after nine (9) months by providing written notice of thirty (30) days.

         During the term of the Agreement, RCG shall receive $5,500 per month in
compensation. In addition, RCG requires reimbursement for all direct and certain
pre-approved indirect  miscellaneous  expenses and out of pocket costs, such as,
but not limited to  photocopying,  messenger  service,  long-distance  telephone
calls,  printing  charges or similar  expenses.  It is the policy of RCG that an
expense  debit account of $5,000 be utilized for these direct  allocable  costs.
RCG will provide PCIG with a detailed  breakdown  of all  reimbursable  expenses
debited against the remaining monthly balance by the twentieth (20th) day of the
following  month of service.  When the remaining  unused  portion of the expense
debit account falls below $1,500, PCIG will be required to reinstate the account
balance to $5,000.

         RCG will obtain prior  approval  from PCIG if any single  miscellaneous
expense item is in excess of $600. RCG  acknowledges  and understands  that PCIG
will have specific amounts budgeted for these expenditures and will use its best
efforts to ensure those budget amounts are not exceeded.

                  As additional  compensation for Financial  Relation  Services,
PCIG will sell to RCG 100,000  shares of PCIG common  stock (the  "Shares") at a
price of $.01 per Share,  for a total price of $1,000.  On or before  January 1,
1999,  RCG will pay the purchase  price for the Shares to PCIG,  which will then
promptly issue the Shares in the name of RCG,  however such Shares shall be held
by PCIG. On or after one year from their  issuance or earlier as provided for in
the  Agreement,  and on or before January 28, 2000,  PCIG may repurchase  Shares
from  RCG,  at the  same  price  paid by RCG to PCIG  for the  Shares,  upon the
following conditions:

          1.   PCIG may repurchase  25,000 Shares if PCIG's stock price fails to
               hold and  maintain a closing  bid equal to or greater  than $1.00
               per share for ten (10)  consecutive  trading  days (the  "Trading
               Period")  prior to January 23, 1999;  or the  applicable  date if
               extended

          2.   PCIG may repurchase 25,000 additional Shares if: (i) PCIG's stock
               fails to satisfy the requirements set forth in paragraph 1 above,
               or (ii) after the  Trading  Period and for a period of six months
               thereafter, PCIG's stock fails to maintain sufficient levels such
               that the stock does not become subject to a delisting letter from
               NASDAQ.
<PAGE>
November 12, 1998
Page 9

          3.   PCIG may repurchase up to 30,000 additional Shares unless,  prior
               to the repurchase date, PCIG has received  reasonably  acceptable
               proof for each new  institutional  investor  who has  purchased a
               total of $100,000 or more worth of PCIG's stock.  PCIG's right to
               repurchase  Shares shall  expire as to 10,000  Shares at the time
               that proof of such purchase is provided as to each  institutional
               investor,  up to a total  of  three  (3).  For  example,  if only
               $200,000 worth of PCIG stock is purchased by new investors,  then
               only 10,000 Shares may be repurchased by PCIG.

          4.   PCIG may  repurchase  an  additional  5,000  Shares  unless  PCIG
               receives  a written  publication  confirming  corporate  research
               coverage of PCIG by a buy or sell side analyst, or endorsement by
               an appropriate  investment newsletter from a pre-approved list of
               such publications.

          5.   PCIG may  repurchase  an  additional  15,000  shares  unless  the
               average  weekly  trading  volume of PCIG stock for the six months
               ended December 31, 1999 exceeds the average weekly trading volume
               of PCIG stock for the six months  ended June 30, 1999 by at least
               20%.

         In order to  repurchase  Shares,  PCIG shall give RCG at least five (5)
days written notice of its intent to repurchase any Shares.  Upon receipt of the
repurchase  price in full,  RCG  shall  execute  such  documents  as PCIG  shall
reasonably request to transfer Shares back to PCIG.

         RCG  acknowledges  that the Shares discussed herein shall be restricted
securities  subject to the provisions of S.E.C.  Rule 144, 17 C.F.R.  ss.230.144
and that all such Shares shall bear an  appropriate  restrictive  legend to that
effect.  Certificates representing Shares shall be held by PCIG unless and until
RCG  formally  requests  that  the  restrictive  legend  be  removed  from  such
certificates.  PCIG shall  provide  acceptable  evidence to RCG that such Shares
have been issued and are held in safe keeping for the benefit of RCG and without
additional conditions other than what is provided for in this Agreement.  At the
time that RCG requests  the removal of a  restrictive  legend from  certificates
representing  any  Shares,  RCG shall pay to PCIG:  (a) $.99 per Share as to the
first 50,000 Shares  covered under items 1 and 2 above;  and (b) $1.49 per Share
as to the  second  50,000  Shares  covered  under  items 3, 4 and 5 above.  Upon
payment of the required  amount,  PCIG shall promptly forward the certificate to
its transfer agent,  together with  appropriate  instructions for the removal of
restrictive  legends and  delivery to RCG of  certificates  without  restrictive
legends for the requested number of Shares.