PROMOTIONAL SHARES LOCK-UP AGREEMENT
I. Parties. This Promotional Shares Lock-Up Agreement ("Agreement"), which
was entered into this _____ day of August, 1997, by and between Premium
Cigars International, Ltd. ("Issuer"), whose principal place of
business is located in Scottsdale, Arizona, and
______________________________________________ ("Security Holder")
witnesses that:
A. Registration in Merit Review States. The Issuer has filed a
Coordinated Equity Review application with the Securities
Administrators of the States of Alaska, Arizona, Arkansas,
Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts,
Michigan, Mississippi, Montana, New Mexico, North Dakota,
Oklahoma, Oregon, Pennsylvania, South Dakota, Texas, Vermont,
Virginia and Washington ("Administrators") and with other
jurisdictions to register certain of its Equity Securities for
sale to public investors who are residents of those states
("Registration");
B. Security Holder and Promoter. The Security Holder is the owner
of the Issuer's shares of common stock or similar securities
and/or possesses convertible securities, warrants, options or
rights which may be converted into, or exercised to purchase
shares of common stock or similar securities of the Issuer.
Security Holder, along with other promoters who have entered
the Promotional Shares Lock-Up Agreement, are collectively
referred to as "Promoters."
C. Condition of Registration in Merit Review States. As a
condition to Registration, the Issuer and Security Holder
("Signatories") agree to be bound by the terms of this
Agreement.
II. Agreement to Lock-Up/Transfer Prohibitions. The Security Holder agrees
not to sell, pledge, hypothecate, assign, grant any option for the sale
of, or otherwise transfer or dispose of, whether or not for
consideration, directly or indirectly Promotional Shares as defined in
the North American Securities Administrators Association ("NASAA")
Statements of Policy Regarding Corporate Securities Definitions and on
Promotional Shares and all certificates representing stock dividends,
stock splits, recapitalizations, and the like, that are granted to, or
received by, the Security Holder while the Promotional Shares are
subject to this Agreement ("Restricted Securities") on the following
terms:
A. Term of Lock-Up. The term of this Agreement shall begin on the
date that the Registration is declared effective by the
Administrators ("Effective Date") and shall terminate:
1. Two years following the completion of the offering;
or
2. On the date the Registration has been terminated if
no securities were sold pursuant thereto; or
1
3. If the Registration has been terminated, the date
that checks representing all of the gross proceeds
that were derived therefrom and addressed to the
public investors have been placed in the U.S. Postal
Service with first class postage affixed; or
4. On the date the securities subject to this agreement
become "Covered Securities," as defined under the
National Securities Markets Improvement Act of 1996.
B. Release of Certain Restricted Securities in Second Year.
Beginning one year from the date of completion of the
Offering, two and one-half percent (2.5%) of the Restricted
Securities shall be released from the restrictions of this
Agreement each quarter pro rata among the Promoters.
C. Release of Remaining Restricted Securities after Second Year.
All remaining Restricted Securities shall be released from any
restriction under this Agreement on the second anniversary
from the date of completion of the Offering.
D. Securities Not Restricted. This Agreement shall not apply to
any securities of the Issuer which Security Holder acquires
after the effective date of the Registration and which are not
related by stock dividend, stock split or recapitalization to
the Restricted Securities.
III. Other Issuer or Security Holder Obligations. The Signatories agree and
will cause the following:
A. Priority of Asset Distributions. In the event of a
dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the Issuer's assets or
securities (including by way of tender offer), or any other
transaction or proceeding with a person who is not a Promoter,
which results in the distribution of the Issuer's assets or
securities ("Distribution"), while this Agreement remains in
effect that:
1. All holders of the Issuer's Equity Securities will
initially share on a pro rata, per shares basis in
the Distribution, in proportion to the amount of cash
or other consideration that they paid per share for
their Equity Securities (provided that the
Administrator has accepted the value of the other
consideration), until the shareholders who purchased
the Issuer's Equity Securities pursuant to the public
offering ("Public Shareholders") have received, or
have had irrevocably set aside for them, an amount
that is equal to one hundred percent (100%) of the
public offering's price per share times the number of
shares of Equity Securities that they purchased
pursuant to the public offering and which they still
hold at the time of the Distribution, adjusted for
stock splits, stock dividends, recapitalizations and
the like; and
2
2. All holders of the Issuer's Equity Securities shall
thereafter participate on an equal, per share basis
times the number of shares of Equity Securities they
hold at the time of the Distribution, adjusted for
stock splits, stock dividends, recapitalizations and
the like.
3. The Distribution may proceed on lesser terms and
conditions than the terms and conditions stated in
paragraphs 1 and 2 above if a majority of the Equity
Securities that are not hold by Security Holders,
officers, directors, or Promoters of the Issuer, or
their associates or affiliates vote, or consent by
consent procedure, to approve the lesser terms and
conditions.
B. Restrictions Survive Distribution. In the event of a
dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the issuer's assets or
securities (including by way of tender offer), or any other
transaction or proceeding with a person who is a Promoter,
which results in a Distribution while this Agreement remains
in effect, the Restricted Securities shall remain subject to
the terms of this Agreement.
C. Permitted Transfers.
1. Restricted Securities may be transferred by will, the
laws of descent and distribution, the operation of
law, or by order of any court of competent
jurisdiction and proper venue.
2. Restricted Securities of a deceased Security Holder
may be hypothecated to pay the expenses of the
deceased Security Holder's estate. The hypothecated
Restricted Securities shall remain subject to the
terms of this Agreement. Restricted Securities may
not be pledged to secure any other debt.
3. Restricted Securities may be transferred by gift to
the Securities Holder's family members, provided that
the Restricted Securities shall remain subject to the
terms of this Agreement.
D. Voting Rights. With the exception of paragraph III.A.3 above,
the Restricted Securities shall have the same voting rights as
similar Equity Securities not subject to the Agreement.
E. Legend Requirements.
1. A notice shall be placed on the face of each stock
certificate of the Restricted Securities covered by
the terms of the Agreement stating that the transfer
of the stock evidenced by the certificate is
restricted in accordance with the conditions set
forth on the reverse side of the certificate; and
3
2. A typed legend shall be placed on the reverse side of
each stock certificate of the Restricted Securities
representing stock covered by the Agreement which
states that the sale or transfer of the shares
evidenced by the certificate is subject to certain
restrictions until _____________ (that date which is
two years after the date of the completion of the
Offering) pursuant to an agreement between the
Security Holder (whether beneficial or of record) and
the Issuer, which agreement is on file with the
Issuer and the stock transfer agent from which a copy
of available upon request without charge.
F. Modification. This Agreement may be modified only with the
written approval of the Administrators.
IV. Issuer Technical Requirements. The Issuer will cause the following:
A. Copy to Administrators. A manually signed copy of the
Agreement signed by the Signatories to be filed with the
Administrators prior to the Effective Date;
B. Copy to Transfer Agent. Copies of the Agreement and a
statement of the per share initial public offering price to be
provided to the issuer's stock transfer agent;
C. Stop Transfer Restrictions. Appropriate stop transfer orders
to be placed with the Issuer's stock transfer agent against
the sale or transfer of the shares covered by the Agreement
prior to its expiration, except as may otherwise be provided
in this Agreement;
D. Uncertificated Securities. The above stock restriction legends
to be placed on the periodic statement sent to the registered
owner if the securities subject to this Agreement are
uncertificated securities.
Pursuant to the requirements of this Agreement, the Signatories have
entered into this Agreement, which may be written in multiple counterparts and
each of which shall be considered an original. The Signatories have signed the
Agreement in the capacities, and on the dates, indicated.
4
IN WITNESS WHEREOF, the Signatories have executed this Agreement.
PREMIUM CIGARS INTERNATIONAL, LTD.
By_____________________________________
Steven A. Lambrecht, President
- ---------------------------------------
Signature
- ---------------------------------------
Printed Name of Security Holder
- ---------------------------------------
Title, if applicable
5