Right of First Refusal and Co-Sale Agreement - Dean & DeLuca Inc.


                               DEAN & DELUCA, INC.                  RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT                                                                           PAGE                                TABLE OF CONTENTS                                                                             1.  Certain Definitions.......................................................1    IPO.......................................................................1    Seller....................................................................1    Preferred Holder's Share..................................................1    Offered Stock.............................................................2    Right of Co-Sale..........................................................2    Right of First Refusal....................................................2    Stock.....................................................................2    Transfer .................................................................22.  Notice of Proposed Transfer...............................................23.  Right of First Refusal....................................................2    The Right.................................................................2    Purchase Price............................................................3    Payment  .................................................................3    Rights as a Stockholder...................................................3    Seller's Right To Transfer................................................44.  Right of Co-Sale..........................................................4    Right of Co-Sale..........................................................4    Consummation of Co-Sale...................................................4    Exceptions................................................................55.  [Intentionally Omitted]...................................................56.  Refusal to Transfer: Put Right............................................5    Refusal to Transfer.......................................................5    Put Right.................................................................57.  Restrictive Legend and Stop-Transfer Orders...............................5    Legend....................................................................5    Stop Transfer Instructions................................................6    Transfers.................................................................68.  Termination and Waiver....................................................6    Termination...............................................................6    Waiver....................................................................69.  Miscellaneous Provisions..................................................6                                        i
                                                                          PAGE    Notice....................................................................6    Binding on Successors and Assigns:  Inclusion Within Certain Definitions..7    Severability..............................................................7    Amendment.................................................................7    Continuity of Other Restrictions..........................................7    Governing Law.............................................................7    Obligation of Company: Binding Nature of Exercise.........................7    Further Assurances........................................................8    Conflict .................................................................8    Counterparts..............................................................8                                       ii
                  RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT         This Right of First Refusal and Co-Sale Agreement (this 'AGREEMENT') isentered into as of November 30, 1999 by and among Dean & Deluca, Inc., aDelaware corporation (the 'COMPANY'), the holders of shares of the Company'sSeries A Convertible Preferred Stock (the 'SERIES A HOLDERS' or the 'PREFERREDHOLDERS'), and those stockholders of the Company who are signatories to thisAgreement (the 'STOCKHOLDERS' and each individually a 'STOCKHOLDER').                                    RECITALS         A. The Stockholders currently own capital stock and/or stock optionsissued by the Company (the 'STOCK').         B. The Series A Holders intend to purchase from the Company shares ofits Series A Preferred Stock, pursuant to the Dean & Deluca, Inc. Series AConvertible Preferred Stock Purchase Agreement between the Company and theSeries A Holders dated of even date herewith (the 'SERIES A PURCHASEAGREEMENT').         C. To induce the Series A Holders to enter into this Agreement and theSeries A Purchase Agreement, each Stockholder has agreed to grant the Series AHolders and the Company certain rights of first refusal with respect to equitysecurities owned by each Stockholder and any other equity securities of theCompany hereafter owned or acquired by each Stockholder.         D. To induce the Series A Holders to enter this Agreement and theSeries A Purchase Agreement, each Stockholder has agreed to grant to the SeriesA Holders certain rights of co-sale with respect to equity securities owned byeach Stockholder and any other equity securities of the Company hereafter ownedor acquired by each Stockholder.         NOW, THEREFORE, in consideration of the mutual promises hereincontained, and other consideration, the receipt and adequacy of which hereby isacknowledged, the parties hereto agree as follows:         1. CERTAIN DEFINITIONS. For purposes of this Agreement, the followingterms have the following meanings:                  (a) 'IPO' means the closing of an underwritten public offeringof the Company's securities registered under the Securities Act of 1933, asamended.                  (b) 'SELLER' means any Stockholder proposing to transferStock.                  (c) 'PREFERRED HOLDER'S SHARE' means, as to the Right ofCo-Sale, the percentage determined by dividing (i) the number of shares of Stockheld by the Preferred Holder by (ii) the number of shares of Stock held by theSeller and all Preferred Holders participating in the Right of Co-Sale.                                        1
                  (d) 'OFFERED STOCK' means all Stock proposed to be Transferredby the Seller.                  (e) 'RIGHT OF CO-SALE' means all the right of co-sale providedto the Preferred Holders in Section 4 of this Agreement.                  (f) 'RIGHT OF FIRST REFUSAL' means the right of first refusalprovided to the Preferred Holders in Section 3 of this Agreement.                  (g) 'STOCK' means and includes all securities and optionsissued by the Company.                  (h) 'TRANSFER' means and includes any sale, assignment,encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer bybequest, devise or descent, or other transfer or disposition of any kind,including but not limited to transfers to receivers, levying creditors, trusteesor receivers in bankruptcy proceedings or general assignees for the benefit ofcreditors, whether voluntary or by operation of law, directly or indirectly,except:                           (i) any bona fide pledge if the pledgee executes acounterpart copy of this Agreement and becomes bound thereby as a Stockholder;or                           (ii) any transfers of Stock by a Seller to theSeller's spouse, lineal descendant or antecedent, father, mother, brother orsister of the Seller, the adopted child or adopted grandchild of the Seller, orthe spouse of any child, adopted child, grandchild or adopted grandchild of theSeller, or to a trust or trusts for the exclusive benefit of the Seller or theSeller's family members as described in this Section, or transfers of Stock bythe Seller by devise or descent or transfers of Stock to a general or limitedpartner of the Seller; PROVIDED, THAT, in all cases, the transferee or otherrecipient executes a counterpart copy of this Agreement and becomes boundthereby as was the Seller.         2. NOTICE OF PROPOSED TRANSFER. Before any Seller may effect anyTransfer of Stock, the Seller must give at the same time to the Company and tothe Preferred Holders a written notice signed by the Seller (the 'SELLER'SNOTICE') stating (a) the Seller's bona fide intention to Transfer such OfferedStock and the name and address of the proposed Transferee, (b) the number ofshares of the Offered Stock, and (c) the bona fide cash price or, in reasonabledetail, other consideration, per share for which the Seller proposes to Transfersuch Offered Stock (the 'OFFERED PRICE'). Upon the request of the Company or anyof the Preferred Holders, the Seller will promptly furnish information, to theCompany and to the Preferred Holders, as may be reasonably requested toestablish that the offer and proposed transferee (the 'TRANSFEREE') are bonafide.         3.       RIGHT OF FIRST REFUSAL.                  (a)      THE RIGHT.                                       2
                           (i) COMPANY'S INITIAL RIGHT. The Company has theright of first refusal to purchase all or any part of the Offered Stock, if theCompany gives written notice of the exercise of such right to the Seller withinfifteen (15) days (the 'COMPANY'S REFUSAL PERIOD') after the date of theSeller's Notice to the Company. If the Company desires to purchase less than allof the Offered Stock, within one (1) business day after expiration of theCompany's Refusal Period, the Company will give written notice to each PreferredHolder specifying the number of shares of Offered Stock that were not subscribedby the Company exercising its Rights of First Refusal (the 'COMPANY'S NOTICE').                           (ii) PREFERRED HOLDERS' RIGHT. If the Company desiresto purchase less than all of the Offered Stock, the Preferred Holders and theirassignees have the right of first refusal to purchase all or any part of theremaining Offered Stock; provided, that each Preferred Holder gives writtennotice of the exercise of such right to the Seller within thirty (30) days (the'PREFERRED HOLDERS' REFUSAL PERIOD') after the date of the Company's Notice tothe Preferred Holders. To the extent the aggregate number of shares thePreferred Holders desire to purchase exceeds the Offered Stock available, eachPreferred Holder will be entitled to purchase a fraction of the Offered Stock,the numerator of which is the number of shares of stock held by such PreferredHolder and the denominator of which is the number of Shares of Stock held by allPreferred Holders exercising their Right of First Refusal. If the Company andthe Preferred Holders exercise their right to purchase with respect to less thanall of the Offered Stock, then none of such exercises of rights shall beeffective. Within ten (10) days after expiration of the Preferred Holders'Refusal Period, the Seller will give written notice to the Company and eachPreferred Holder specifying the number of shares of Offered Stock that wassubscribed by the Preferred Holders exercising their Rights of First Refusal(the 'CONFIRMATION NOTICE').                  (b) PURCHASE PRICE. The purchase price for the Offered Stockto be purchased by the Company or by a Preferred Holder exercising its Right ofFirst Refusal under this Agreement will be the Offered Price, and will bepayable as set forth in Section 3(c) hereof. If the Offered Price includesconsideration other than cash, the cash equivalent value of the non-cashconsideration will be determined by the Board of Directors of the Company ingood faith, which determination will be binding upon the Company, each PreferredHolder and the Seller, absent fraud or error.                  (c) PAYMENT. Payment of the purchase price for the OfferedStock purchased by the Company or by a Preferred Holder exercising its Right ofFirst Refusal will be made within thirty (30) days after the later of (i) theend of the Company's Refusal Period, or (ii) the end of the Preferred Holders'Refusal Period. Payment of the purchase price will be made, at the option of theCompany or the exercising Preferred Holder, (x) in cash (by check), (y) bycancellation of all or a portion of any outstanding indebtedness of the Sellerto the Company or the Preferred Holder, as the case may be, or (z) by anycombination of the foregoing.                  (d) RIGHTS AS A STOCKHOLDER. If the Company or any PreferredHolder exercises its Right of First Refusal to Purchase the Offered Stock, then,upon the date the notice of such exercise is given by the Company or anyPreferred Holder, the Seller will have no further rights as a holder of theOffered Stock except the right to receive payment for the Offered Stock inaccordance with the terms of                                         3
this Agreement, and the Seller shall forthwith cause all certificate(s)evidencing such Offered Stock to be surrendered for transfer to the Company orthe Preferred Holder, as the case may be.                  (e) SELLER'S RIGHT TO TRANSFER. If the Company and eachPreferred Holder have not elected to purchase all of the Offered Stock, then,subject to the Preferred Holders' Right of Co- Sale as defined in Section 4hereof, the Seller may transfer the Offered Stock to any person named as apurchaser or other Transferee in the Seller's Notice, at the Offered Price or ata higher price, provided that such Transfer (i) is consummated within sixty (60)days after the end of the Preferred Holders' Refusal Period, (ii) is on terms nomore favorable than the terms proposed in the Seller's Notice and (iii) is inaccordance with all the terms of this Agreement. If the Offered Stock is not soTransferred during such thirty (30) day period, then the Seller may not Transferany of such Offered Stock without complying again in full with the provisions ofthis Agreement.         4.       RIGHT OF CO-SALE.                  (a) RIGHT OF CO-SALE. If the Company and the Preferred Holdershave waived or failed to timely exercise their Rights of First Refusal underSection 3 hereof with respect to the Offered Stock, then, subject to thePreferred Holders' Right of Co-Sale, the Seller may Transfer to the Transfereesuch Offered Stock, as is specified in the Seller's Notice, by giving writtennotice to each Preferred Holder within fifteen (15) days after the date of theexpiration of the Preferred Holders' Refusal Period (the 'RIGHT OF CO-SALENOTICE'), specifying the date of the Transfer of the Offered Stock to suchtransferee which shall not occur within fifteen (15) days of the Right of Co-Sale Notice (the 'CLOSING'), and the number of shares and type of Stock that theSeller desires to Transfer to the Transferee. If the Seller desires to transferto the Transferee such Offered Stock, the Preferred Holders shall have the rightto require, as a condition to such sale or transfer, that the Transfereepurchase from the Preferred Holder instead of the Seller, at the same price pershare and on the same terms and conditions as involved in such sale ordisposition by the Seller, the number of shares of the Preferred Holder's sharesequal to the percentage of the Offered Stock (regardless of whether the OfferedStock consists of preferred stock, common stock or common stock issued uponconversion of Stock) equivalent to the Preferred Holder's Share. This Right ofCo-Sale shall not apply with respect to Offered Stock sold or to be sold toPreferred Holders under the Right of First Refusal.                  (b) CONSUMMATION OF CO-SALE. A Preferred Holder may exercisethe Right of Co- Sale by giving notice thereof to the Seller within fifteen (15)days after the Right of Co-Sale Notice. If such notice is given, the PreferredHolder shall deliver to the Seller at or before the Closing, one or morecertificates, properly endorsed for Transfer, representing a number of sharesnot to exceed such Preferred Holder's Share multiplied by the Offered Stock,representing such Stock to be Transferred by the Seller on behalf of thePreferred Holder and such documents as the Seller may request so that thePreferred Holder's sale is on the same terms as the Seller's sale. If thePreferred Holder does not hold a certificate in that series, class or type ofstock representing the number of securities to be sold by such Preferred Holderpursuant to this Section 4, then the Company shall promptly issue a certificaterepresenting the proper number of shares to be sold pursuant to this Right ofCo-Sale. Following the Closing, the Company shall deliver a certificate for theremaining balance of the securities held by the Preferred Holder, if any, to                                        4
such Preferred Holder. At the Closing, such certificates or other instrumentswill be Transferred and delivered to the Transferee as set forth in the Right ofCo-Sale Notice in consummation of the transfer of the Offered Stock pursuant tothe terms and conditions specified in the Right of Co-Sale Notice, and theSeller will remit, or will cause to be remitted, to each participating PreferredHolder, within ten (10) days after such Closing, that portion of the proceeds ofthe Transfer to which each participating Preferred Holder is entitled by reasonof each Preferred Holder's participation in such Transfer pursuant to the Rightof Co-Sale.                  (c) EXCEPTIONS. The provisions of this Section 4 shall notapply unless the Seller is a holder of ten percent (10%) or more of the issuedand outstanding capital stock of the Company, on a fully diluted basis, and theOffered Stock constitutes at least ten percent (10%) of the capital stock heldby such Seller, on a fully diluted basis.         5.       [Intentionally Omitted]         6.       REFUSAL TO TRANSFER: PUT RIGHT.                  (a) REFUSAL TO TRANSFER. Any attempt by any Stockholder totransfer any Stock in violation of any provision of this Agreement will be void.The Company will not be required (i) to transfer on its books any Stock that hasbeen sold, gifted or otherwise transferred in violation of this Agreement, or(ii) to treat as owner of such Stock, or to accord the right to vote or paydividends to any purchaser, donee or other transferee to whom such Stock mayhave been so transferred.                  (b) PUT RIGHT. If a Stockholder transfers any Stock incontravention of the Preferred Holders' Right of Co-Sale under this Agreement (a'PROHIBITED TRANSFER'), or if the proposed transferee of Offered Stock isunwilling to purchase any Stock from a Preferred Holder, such Preferred Holdermay, by delivery of written notice to such Stockholder (a 'PUT NOTICE') withinten (10) days after (i) the Closing as defined in subsection 4(a) above, or (ii)the date on which such Preferred Holder becomes aware of the Prohibited Transferor the terms thereof, require such Stockholder to purchase from such PreferredHolder, for cash or such other consideration as the Stockholder received in theProhibited Transfer or at the Closing, a number of shares of Stock (of the sameclass or type as transferred in the Prohibited Transfer or at the Closing)having a purchase price equal to the aggregate purchase price the Seller wouldhave received in the closing of such Prohibited Transfer if such PreferredHolder had elected to exercise its right of Co-Sale with respect thereto or inthe Closing if the proposed transferee had been willing to purchase the Stock ofthe Preferred Holder. The closing of such sale to the Stockholder will occurwithin ten (10) days after the date of such Preferred Holder's Put Notice tosuch Stockholder.         7.       RESTRICTIVE LEGEND AND STOP-TRANSFER ORDERS.                  (a) LEGEND. Each Stockholder understands and agrees that theCompany will cause the legend set forth below, or a legend substantiallyequivalent thereto, to be placed upon any certificate(s) or other documents orinstruments evidencing ownership of Stock by the Stockholder:                                        5
         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN         RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A RIGHT         OF FIRST REFUSAL AND CO-SALE AGREEMENT DATED NOVEMBER 30, 1999, ENTERED         INTO BY THE HOLDER OF THESE SHARES, THE COMPANY AND CERTAIN         STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE         PRINCIPAL OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND         RIGHTS OF CO-SALE ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.                  (b) STOP TRANSFER INSTRUCTIONS. Each Stockholder agrees, toensure compliance with the restrictions referred to herein, that the Company mayissue appropriate 'stop transfer' certificates or instructions and that, if theCompany transfers its own securities, it may make appropriate notations to thesame effect in its records.                  (c) TRANSFERS. No securities shall be transferred by aStockholder unless (i) such transfer is made in compliance with all of the termsof this Agreement and in compliance with the terms of applicable federal andstate securities laws and (ii) prior to such transfer, the transferee ortransferees sign a counterpart to this Agreement pursuant to which it or theyagree to be bound by the terms of this Agreement other than Section 4. TheCompany shall not be required (x) to transfer on its books any shares that shallhave been sold or transferred in violation of any of the provisions of thisAgreement or (y) to treat as the owner of such shares or to accord the right tovote as such owner or to pay dividends to any transferee to whom such sharesshall have been so transferred.         8.       TERMINATION AND WAIVER.                  (a) TERMINATION. The Preferred Holders' Right of First Refusaland Right of Co- Sale will terminate upon the earliest to occur of (i) the IPO,(ii) the date on which this Agreement is terminated by a writing executed byholders of sixty-six and two-thirds percent (66 2/3%) of the shares then held bythe Preferred Holders, (iii) the dissolution of the Company, or (iv) theeffective date of a consolidation or merger with or into another corporation asa result of which the stockholders of the Company will own less than fiftypercent (50%) of the outstanding stock of the surviving corporation. TheCompany's Right of First Refusal will terminate upon the earliest to occur of(x) a written election of the Company pursuant to an action by the Board ofDirectors or (y) the occurrence of any of clauses (i), (iii) or (iv) in thepreceding sentence.                  (b) WAIVER. Any waiver by a party of its rights hereunder willbe effective only if evidenced by a written instrument executed by such party orits authorized representative.         9.       MISCELLANEOUS PROVISIONS.                  (a) NOTICE. Any notice required or permitted to be given to aparty pursuant to the provisions of this Agreement will be in writing and willbe effective upon the earliest of (i) the date of delivery by facsimile, (ii)the business day after deposit with a nationally-recognized overnight delivery                                         6
service, including Express Mail, or (iii) five (5) business days after depositin the United States mail by registered or certified mail, return receiptrequested. All notices not delivered personally or by facsimile will be sentwith postage and other charges prepaid and properly addressed to the party to benotified at the address set forth on the signature pages hereto or at such otheraddress as such party may designate by ten (10) days advance written notice tothe other parties hereto. All notices for delivery outside the United Stateswill be sent by facsimile, or by nationally recognized courier or overnightservice. Any notice given hereunder to more than one person will be deemed tohave been given, for purposes of counting time periods hereunder, on the dategiven to the last party required to be given such notice. Notices to the Companywill be marked to the attention of the President.                  (b) BINDING ON SUCCESSORS AND ASSIGNS: INCLUSION WITHINCERTAIN DEFINITIONS. This Agreement, and the rights and obligations of theparties hereunder, will inure to the benefit of, and be binding upon, theirrespective successors, assigns, heirs, executors, administrators and legalrepresentatives. Any permitted transferee of a Stockholder who is required tobecome a party hereto will be considered a 'Stockholder' for purposes of thisAgreement and any permitted transferee of Stock held by the Seller will beconsidered a 'Seller' for purposes of this Agreement.                  (c) SEVERABILITY. If any provision of this Agreement is heldto be invalid, illegal or unenforceable in any respect, such provision will beenforced to the maximum extent possible and such invalidity, illegality orunenforceability will not affect any other provision of this Agreement, and thisAgreement will be construed as if such invalid, illegal or unenforceableprovision had (to the extent not enforceable) never been contained herein.                  (d) AMENDMENT. This Agreement may be amended only by a writteninstrument executed by the Company, a majority in interest of the Stockholders,and a majority in interest of the Preferred Holders.                  (e) CONTINUITY OF OTHER RESTRICTIONS. Any Stock not purchasedby the Company or any Preferred Holder under their Right of First Refusalhereunder will continue to be subject to all other restrictions imposed uponsuch Stock by law, including any restrictions imposed under the Company'sRestated Certificate of Incorporation or by-laws, or by agreement.                  (f) GOVERNING LAW. This Agreement will be governed by andconstrued in accordance with the laws of Delaware, excluding that body of lawpertaining to conflict of laws.                  (g) OBLIGATION OF COMPANY: BINDING NATURE OF EXERCISE. TheCompany agrees to use its best efforts to enforce the terms of this Agreement,to inform the Preferred Holders of any breach hereof (to the extent the Companyhas knowledge thereof) and to assist the Preferred Holders in the exercise ofits rights and the performance of its obligations hereunder. Any exercise of theRight of First Refusal or Right of Co-Sale will be binding upon the party soexercising, and may not be withdrawn without the written consent of the Companyor the Stockholder as to whom it is given.                                        7
                  (h) FURTHER ASSURANCES. Each party hereby agrees to executeand deliver all such further instruments and documents and take all such otheractions as the other party may reasonably request in order to carry out theintent and purposes of this Agreement.                  (i) CONFLICT. In the event of any conflict between the termsof this Agreement and the Company's Restated Certificate of Incorporation, itsby-laws, the terms of the Company's Restated Certificate of Incorporation, orits by-laws, as the case may be, will control. In the event of any conflictbetween the terms of this Agreement and any other agreement to which aStockholder is a party or by which such Stockholder is bound, the terms of thisAgreement will control. In the event of any conflict between the Company's booksand records and this Agreement or any notice delivered hereunder, the Company'sbooks and records will control absent fraud or error.                  (j) COUNTERPARTS. This Agreement may be executed in any numberof counterparts, each of which when so executed and delivered will be deemed anoriginal, and all such counterparts together will constitute one and the sameinstrument.                                        8
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement asof the day and year first above written.                                  COMPANY:                                  DEAN & DELUCA, INC.                                  By: /s/ DANE J. NELLER             ,                                      -------------------------------                                  Name: Dane J. Neller                                  Title: President and Chief Executive Officer                                  STOCKHOLDERS:                                      /s/ LESLIE G. RUDD                                  ----------------------------                                        Leslie G. Rudd                                      /s/ DANE J. NELLER                                  ----------------------------                                        Dane J. Neller                                      /s/ GIORGIO G. DELUCA                                  ----------------------------                                        Giorgio G. DeLuca                                      /s/ JOEL B. DEAN                                  ----------------------------                                        Joel B. Dean                                      /s/ PATRICK A. RONEY                                  ----------------------------                                        Patrick A. Roney                                      /s/ MATTHEW P. WOGAN                                  ----------------------------                                        Matthew P. Wogan                                      /s/ DENNIS L. THOMPSON                                  ----------------------------                                        Dennis L. Thompson                                       9
                                     /s/ SHARON K. THOMPSON                                  ----------------------------                                       Sharon K. Thompson                                      /s/ WADE S. MCCLURE                                  ----------------------------                                        Wade S. McClure                                      /s/ THOMAS W. SHANNON                                  ----------------------------                                        Thomas W. Shannon                                       /s/ TIMOTHY CUSHMAN                                  ----------------------------                                         Timothy Cushman                                       /s/ RAMEY G. MILLETT                                  ----------------------------                                         Ramey G. Millett                                  Samantha Lauren Rudd Gift Trust by its Trustee                                  By: /s/ Dane J. Neller                                     --------------------------------                                  Name: Dane J. Neller                                  Title: Trustee                                  PREFERRED HOLDERS:                                  HUMMER WINBLAD VENTURE PARTNERS IV,                                  L.P. by its General Partner                                  By: /s/ HANK BARRY                                      -------------------------------                                      Name: Hank Barry                                      Title: Managing Member, General Partner                                       10