Exclusivity Agreement Template

In plain language: Identifies the contracting parties by full legal name and entity type, and describes the context and purpose of the exclusivity arrangement.

Common mistake: Using trade names instead of registered legal entity names. If the party name on the agreement doesn't match the party name on the subsequent definitive agreement, enforcing breach remedies or break-up fees becomes procedurally complicated.

In plain language: Sets the precise start and end dates of the exclusive window and the conditions under which it may be extended or will automatically lapse.

Common mistake: Stating a duration without a hard end date. 'Sixty days from signing' creates ambiguity when the signing date is disputed — always include both the duration and the calculated calendar date.

In plain language: Defines exactly what the restricted party cannot do — and with whom — by specifying the geography, product or service category, and transaction type covered.

Common mistake: Drafting scope so broadly that it inadvertently covers the restricted party's existing business operations. Overly wide scope clauses are challenged in court and may void the entire restriction.

In plain language: Specifies whether the restriction covers only active solicitation (no-shop) or also passive receipt of unsolicited approaches (no-talk), and any permitted exceptions.

Common mistake: Including a no-talk clause without a fiduciary-out carve-out for corporate sellers with public shareholders. Courts have found that boards cannot contractually bind themselves to ignore superior offers when they have a fiduciary duty to maximize shareholder value.

In plain language: Lists specific activities or pre-existing arrangements that are explicitly excluded from the exclusivity restriction so the restricted party retains freedom to operate its normal business.

Common mistake: Omitting a carve-out for pre-existing contracts. If the restricted party has an existing distribution arrangement with a third party that technically falls within the exclusivity scope, the omission creates an immediate breach on day one.

In plain language: States what the beneficiary of exclusivity pays or provides as consideration for the other party's commitment to forgo competing opportunities.

Common mistake: Providing no consideration for the exclusivity commitment beyond 'mutual promises.' In several jurisdictions, an exclusivity obligation unsupported by independent consideration — particularly a fee or a meaningful concession — may be unenforceable as a standalone agreement.

In plain language: Sets out the consequences of a breach — typically a liquidated damages or break-up fee — and preserves the non-breaching party's right to seek injunctive relief.

Common mistake: Setting a break-up fee so low that it is cheaper to breach than to honor the exclusivity. A nominal fee provides no real deterrent and signals to counterparties that the restriction is not seriously intended.

In plain language: Requires both parties to keep confidential all information exchanged during due diligence or negotiations within the exclusive window.

Common mistake: Relying solely on a separate NDA and omitting confidentiality from the exclusivity agreement itself. If the NDA is challenged or narrower in scope than the exclusivity arrangement, information exchanged during the exclusive period may not be protected.

In plain language: Defines the events that end the exclusivity early — expiry of the period, execution of a definitive agreement, mutual written consent, or material breach.

Common mistake: Not specifying what happens to accrued obligations — confidentiality, break-up fee liability — upon termination. 'This Agreement terminates' without survival language can extinguish obligations the parties intended to survive.

In plain language: Specifies the jurisdiction whose laws govern the agreement and the mechanism for resolving disputes — arbitration, mediation, or litigation.

Common mistake: Choosing a governing law with no connection to where either party operates. Some jurisdictions — particularly Delaware for US M&A and England for international deals — are chosen precisely for their developed case law on exclusivity and M&A agreements, but only if both parties operate under or consent to those courts.

An exclusivity agreement is a contract in which one party — the restricted party — agrees, for a defined period, not to negotiate, contract, or deal with third parties regarding a specific transaction, product, or market while the other party — the beneficiary — has the exclusive right to proceed. It is used in M&A due diligence, distribution arrangements, and supply negotiations to protect the time and cost invested by the beneficiary from being undermined by a competing deal.

A no-shop clause prohibits the restricted party from actively soliciting or initiating discussions with competing third parties. A no-talk clause goes further and also bars the restricted party from responding to unsolicited approaches — even when a third party initiates contact without any encouragement. No-talk clauses are harder to enforce and, for corporate sellers with shareholders, typically require a fiduciary-out carve-out to be legally defensible.

The appropriate duration depends on the transaction type. M&A due diligence typically runs 30 to 90 days, with one extension option of 15 to 30 days if both parties agree in writing. Distribution exclusivity can run 12 to 36 months, often tied to performance milestones. The period should be long enough for the beneficiary to complete their diligence or establish the relationship, but no longer — courts and counterparties scrutinize unusually long exclusive periods as unreasonable restraints of trade.

Yes, in most jurisdictions a standalone exclusivity agreement requires independent consideration to be enforceable — the restriction must be exchanged for something of real value. A dedicated exclusivity fee is the cleanest solution. Alternatively, access to proprietary diligence materials, a price concession, or a binding reciprocal obligation from the beneficiary can constitute sufficient consideration. A nominal $1 recital is generally insufficient for a material commercial restriction.

The non-breaching party is typically entitled to the contractually agreed break-up fee as liquidated damages, plus the right to seek injunctive relief to stop the breach if damages would be inadequate. Courts in the US, UK, and Canada have granted specific performance and injunctions to enforce exclusivity obligations in M&A and distribution contexts. The practical remedy depends on how quickly the breach is discovered — once a competing deal closes, monetary damages are often the only available remedy.

No. A letter of intent (LOI) is a broader preliminary document that outlines the proposed terms of a transaction — price, structure, and conditions — and typically includes an exclusivity clause as one provision. A standalone exclusivity agreement covers only the exclusive dealing obligation, without committing either party to the substantive terms of any transaction. Many M&A deals use an LOI that incorporates exclusivity rather than a separate exclusivity agreement.

Yes, particularly in distribution and supply contexts. Courts evaluate whether the scope, duration, and geographic reach of the exclusivity obligation are proportionate to the legitimate business interest being protected. An exclusivity arrangement that covers an unreasonably broad market, lasts for an unusually long period, or locks out competitors in a way that harms consumers can be challenged under competition law in the EU, the UK, and US antitrust frameworks. Limiting scope to specific products, channels, and territories reduces this risk.

A break-up fee is a pre-agreed liquidated damages sum payable when the restricted party terminates early or enters a competing deal in breach of the exclusivity obligation. For M&A transactions, break-up fees are commonly set at 1–3% of the deal value, calibrated to cover the beneficiary's diligence costs and opportunity cost. For distribution or supply exclusivity, the fee is often expressed as a multiple of anticipated monthly revenue. Courts are more likely to enforce fees labeled as a reasonable pre-estimate of damages than those described as penalties.

For straightforward distribution or supply exclusivity with a defined scope and a modest fee, a high-quality template is generally sufficient. Legal review is strongly recommended for M&A exclusivity where the deal value exceeds $500K, where no-talk clauses are included, where the restricted party has public shareholders, or where the governing jurisdiction has complex competition-law implications. A 1–2 hour review by an M&A or commercial lawyer typically costs $400–$800 and is proportionate to the stakes in most situations.

Exclusive dealing arrangements — particularly in distribution and supply — can raise concerns under US antitrust law (Sherman Act Section 1), EU competition law (Article 101 TFEU), and UK competition law if they foreclose a significant portion of a market or harm consumer welfare. Agreements covering a minor share of a defined market and limited in duration are generally permissible. Exclusive arrangements involving dominant market players, or those with very long durations and broad scope, should be reviewed for competition-law compliance before execution.