Practitioner’s Guide

Overview

This is a stand-alone exclusivity (“no-shop”) agreement, drafted as a letter from the target/seller’s perspective rather than the buyer’s. Unlike a letter of intent — which embeds exclusivity inside a broader, mostly non-binding deal outline — this form does one thing: it creates a binding, time-limited period during which the seller agrees not to solicit, negotiate, or accept an alternative transaction, subject to a fiduciary out and other founder-protective carve-outs.

The pro-buyer version of this form (the Practical Law standard) is drafted as a unilateral restriction on the target with a broad no-shop, sweeping Alternative Transaction definition, a hard notice covenant, and an irreparable-harm / specific-performance clause. This version preserves the architecture of the source form but materially rebalances each provision in the seller’s favor: shorter period, narrower scope, explicit fiduciary out, softer notice obligation, mutual remedy framing, and a clear expiration of all obligations.

This form assumes the parties have an NDA already in place. It is best suited to mid-market private company transactions where the seller wants to give the buyer a reasonable diligence runway without surrendering optionality, leverage, or the board’s ability to discharge its fiduciary duties.

When to Use

Use this standalone form when the parties want a time-limited no-shop without re-opening an LOI or NDA. Common scenarios for the seller include: (i) the buyer is pushing for exclusivity before the LOI is finalized and the seller wants a short, clean document rather than giving up leverage in the LOI draft; (ii) the NDA is already executed and the seller does not want to re-open confidentiality terms; (iii) the seller has run a limited process and is willing to grant a short exclusivity window to the preferred bidder in exchange for priority diligence access but not a full commitment.

It is also useful after a stalking-horse bidder has been selected in an auction context, where the seller wants exclusivity with the winner bounded by a clear expiration and a fiduciary out rather than an open-ended negotiation commitment.

Do not use this form when the parties are already negotiating an LOI — put the no-shop inside the LOI where it can be negotiated alongside the economic terms. Do not use it for a public-company target in active Revlon mode without substantial additional carve-outs and a formal go-shop provision.

Binding vs. Non-Binding Provisions

This agreement is fully binding from execution with respect to its operative provisions: no-shop, notice, remedies, confidentiality incorporation by reference, and governing law. The Binding Obligation paragraph clarifies that the parties are not bound to consummate the Proposed Transaction itself — that obligation arises only on execution of definitive agreements — and that all good-faith negotiation duties terminate on the expiration of the Exclusivity Period.

The expiration clause is deliberately explicit to address the risk recognized in EQT Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220 (S.D.N.Y. 2012), where a court held that a contractual obligation to negotiate in good faith may survive the expiration of an exclusivity period. A seller should never sign a stand-alone exclusivity letter without this cut-off language.

The irreparable-harm and specific-performance language is preserved but framed as mutual (rather than only in the buyer’s favor) and subject to the court’s discretion. The seller should resist buyer-side language that waives the bond requirement for injunctive relief or acknowledges that monetary damages are inadequate as a matter of law — those are factual findings the court should make, not concessions the seller should grant.

Key Variables to Complete

• [BUYER NAME] / [COMPANY NAME] — full legal names of the parties
• [DESCRIPTION OF PROPOSED TRANSACTION] — short description of deal structure (stock purchase, asset purchase, merger, etc.)
• [TIME] [TIME ZONE], [DATE] — end date and time of the Exclusivity Period. Seller preference: 30 days. 45 days is the outside number a seller should accept without significant concessions. Never accept 60 or 90 days on a standalone exclusivity letter.
• [PERCENTAGE]% — threshold in the Alternative Transaction definition (4 occurrences). Seller preference: 50% (true change-of-control). Acceptable range: 25%–50%. Below 25% captures minority investments and recapitalizations that should not be swept in.
• [RELEVANT STATE] — governing law. Seller preference: Delaware for corporate matters, seller’s home jurisdiction as an alternative. Avoid buyer’s home jurisdiction unless it is a neutral forum.
• [NAME] / [TITLE] — signature blocks for both parties
• [NDA DATE] — effective date of the existing NDA being incorporated by reference

Negotiation Points

• Exclusivity Period length. The single most important negotiation point. Buyer-side push: 60–90 days to complete financing, regulatory review, and definitive documentation. Seller counter: 30 days, with any extension requiring a mutual written amendment and subject to (i) the buyer’s demonstrated good-faith progress and (ii) the seller’s right to refuse extension without penalty. Accept 45 days only if the buyer has committed financing and a concrete diligence workplan.
• Fiduciary out. Non-negotiable for any target whose board owes fiduciary duties to stockholders (including most Delaware corporations). The fiduciary out must permit the board to (i) receive unsolicited bona fide proposals, (ii) enter into confidentiality agreements no more restrictive than the existing NDA, (iii) provide information and engage in discussions if the board determines in good faith (after consultation with counsel) that failure to do so would be inconsistent with fiduciary duties, and (iv) change or withdraw any recommendation. Buyer-side push will be for a matching right or a termination fee; the seller should resist both for a short-window standalone exclusivity.
• Alternative Transaction threshold. Lower thresholds (10–15%) catch preferred equity rounds, convertible notes, and strategic investments that have nothing to do with a sale. Seller should push for 50% to define only genuine change-of-control transactions. Also add explicit carve-outs for (i) intra-company restructurings, (ii) equity financings that do not result in a change of control, (iii) discussions with existing investors about follow-on investments, and (iv) ordinary-course commercial transactions.
• Notice obligation. Buyer wants to know about every inquiry, written or oral, including identity, terms, and ongoing updates. Seller counter: (i) limit notice to written bona fide proposals that the board determines could reasonably lead to an Alternative Transaction; (ii) allow the seller 5 business days to respond rather than “promptly”; (iii) do not require disclosure of the third party’s identity unless and until the seller wishes to engage with them; (iv) do not require ongoing updates on every development.
• Standstill waiver carve-out. The buyer-form clause (iv) prevents the seller from releasing any third party from a standstill during the exclusivity period. Relevant for public-company targets. Private-company sellers can usually strike it. If retained, carve out any waiver granted in connection with a Superior Proposal that the board has determined to pursue consistent with its fiduciary duties.
• Specific performance / irreparable harm. Buyer wants an absolute acknowledgment that monetary damages are inadequate and no bond is required. Seller counter: (i) frame the remedy as mutually available; (ii) preserve the court’s discretion on both injunctive relief and bond; (iii) do not stipulate inadequacy of monetary damages as a matter of law; (iv) carve out the good-faith fiduciary-out exception from any specific-performance claim.
• Expiration of obligations. Must include an explicit cut-off of all good-faith negotiation duties at the end of the period. This is essential post-EQT v. Smith.
• Expense reimbursement. Buyer may ask for reimbursement of diligence expenses if the seller terminates or accepts a Superior Proposal. Seller should decline. Standalone exclusivity is typically granted without any break-fee architecture — if the buyer wants a break-fee it belongs in the LOI.
• Termination for buyer default. Add a seller-side termination right if the buyer (i) fails to pursue diligence in good faith, (ii) materially changes the economic terms from the LOI or prior discussions to the seller’s detriment, or (iii) fails to deliver a draft definitive agreement within a set number of days.
• Mutual vs. unilateral. The Practical Law source is unilateral (only the seller is restricted). Sellers should ask for a reciprocal exclusivity commitment from the buyer — that is, the buyer agrees not to pursue a competing acquisition of another company in the same business during the exclusivity period. Buyers typically resist, but the ask frames the negotiation.

Common Pitfalls

• Signing without a fiduciary out. A board’s fiduciary duties cannot be contracted away by a stand-alone exclusivity letter. Any seller with real stockholder constituencies (including preferred investors with protective provisions) should treat the fiduciary out as a non-negotiable.
• Accepting a period longer than 30–45 days without corresponding concessions. Long exclusivity windows transfer leverage to the buyer. Once the seller is locked in, the buyer has no market discipline on price, structure, or interim operating covenants.
• Allowing the Alternative Transaction definition to sweep in non-control transactions. Sophisticated buyers draft this broadly on purpose — to catch minority investments, recapitalizations, and equity financings that would not impair the Proposed Transaction. A seller who is fundraising or otherwise in the capital markets needs narrower language.
• Forgetting to carve out ordinary-course commercial transactions. The form prohibits “discussions or negotiations” with third parties. Without a carve-out, a literal reading could sweep in customer contracts, vendor negotiations, partnership discussions, and routine commercial activity. Add an express carve-out.
• Omitting the EQT v. Smith expiration language. The form as written may leave the seller subject to a perpetual good-faith negotiation duty. The optional sentence in the opening paragraph must be included, not bracketed out.
• Treating the irreparable-harm acknowledgment as boilerplate. This language materially affects the buyer’s ability to obtain a TRO or preliminary injunction — and potentially to chill the seller’s fiduciary out. Frame as mutual, preserve court discretion, carve out good-faith fiduciary actions.
• Not specifying what happens on expiration. The form should say clearly: (i) all obligations terminate; (ii) the seller may engage with any third party; (iii) no tail period applies; (iv) confidentiality continues under the NDA but exclusivity does not.
• Using this form when an LOI is being negotiated. Put the no-shop in the LOI where it sits alongside the economics. A standalone exclusivity letter is appropriate when there is no LOI, not as a patch on a delayed LOI.

When NOT to Use This Form

• When the parties are already negotiating an LOI — the no-shop belongs inside the LOI alongside the economic terms and other binding provisions.
• When the target is a public company in active Revlon mode — substantial revisions are required including a formal go-shop, a fiduciary out at the definitive-agreement stage, and more limited specific-performance language.
• When the parties want to address economic terms, conditions, or due-diligence access mechanics in the same document — use a letter of intent instead.
• When a mutual commitment is intended — this form is drafted unilaterally against the seller and is not appropriate for partnership-style transactions.
• When the seller has multiple bidders and wants to preserve an auction — exclusivity shuts down the auction and should only be granted after the seller has chosen the preferred bidder.

Key Founder Protections (Summary)

• 30-day exclusivity period (not 60–90), with no auto-extension and explicit termination of all good-faith negotiation duties on expiration.
• Explicit fiduciary out: board may receive unsolicited proposals, engage with counterparties under NDAs, and change recommendations consistent with fiduciary duties.
• Alternative Transaction definition limited to 50% change-of-control thresholds, with carve-outs for equity financings, minority investments, intra-company restructurings, and ordinary-course commercial activity.
• Notice obligation narrowed: only written bona fide proposals, 5-business-day response window, no identity disclosure until seller chooses to engage, no ongoing update requirement.
• No expense reimbursement, no break-up fee, no topping fee.
• Specific performance framed as mutually available and subject to court discretion; no stipulation of inadequacy of monetary damages.
• Seller termination right if buyer fails to pursue diligence in good faith, materially changes economics, or fails to deliver a draft definitive agreement.
• Expiration cuts off all negotiation duties (post-EQT v. Smith).
• NDA incorporated by reference; no modification of confidentiality terms.
• Governing law defaulted to Delaware (or seller’s home jurisdiction).

Form Document

[LETTERHEAD OF COMPANY]

[DATE]

[BUYER NAME]

[BUYER ADDRESS]

Attention: [NAME], [TITLE]

Re: Exclusivity Agreement — [DESCRIPTION OF PROPOSED TRANSACTION]

Dear [NAME]:

As you know, [COMPANY NAME] (the “Company”) and [BUYER NAME] (“Buyer”) have engaged in preliminary, non-binding discussions regarding a potential [DESCRIPTION OF PROPOSED TRANSACTION] (the “Proposed Transaction”). No definitive agreements have been entered into, and the parties acknowledge that the only binding commitments between them as of the date of this letter are those set forth expressly herein and those contained in the Non-Disclosure Agreement dated [NDA DATE] between the parties (the “NDA”), which remains in full force and effect. In order to enable Buyer to conduct focused due diligence and negotiate definitive documentation during a bounded period, the Company is willing to grant exclusivity on the terms set forth below. Commencing on the date hereof and continuing until 11:59 PM Eastern Time on the date that is thirty (30) calendar days after the date of this letter, or such earlier date as may result from termination pursuant to the Termination paragraph below (such period of time, the “Exclusivity Period”), the Company and Buyer shall discuss the Proposed Transaction on an exclusive basis (subject to the carve-outs set forth herein), including the negotiation of the terms of the Proposed Transaction and related definitive documentation. For the avoidance of doubt, upon the expiration or termination of the Exclusivity Period, neither party shall have any obligation of any kind to continue negotiations regarding the Proposed Transaction, and any duty to negotiate in good faith — whether arising under this letter, at common law, or otherwise — shall automatically terminate.

1. No-Shop.

In consideration of the time, effort, and expenses to be undertaken by Buyer in connection with the pursuit of the Proposed Transaction, and subject in all cases to the Fiduciary Out paragraph below, the Company hereby agrees that, during the Exclusivity Period, the Company shall not, and shall not authorize or permit any of its Representatives to, directly or indirectly: (i) solicit, initiate, or knowingly encourage any proposal from a person or group of persons other than Buyer and its affiliates that constitutes, or would reasonably be expected to lead to, an Alternative Transaction (as defined below); (ii) enter into or participate in any substantive negotiations with any person or group of persons other than Buyer and its affiliates regarding an Alternative Transaction; (iii) furnish any non-public information relating to the Company or any of its subsidiaries, assets, or businesses, or provide access to the assets, properties, books, or records of the Company or any of its subsidiaries, to any person or group of persons other than Buyer and its Representatives, in each case for the purpose of assisting with or facilitating an Alternative Transaction; or (iv) enter into any letter of intent, term sheet, memorandum of understanding, agreement in principle, or definitive agreement with any third party regarding an Alternative Transaction. Upon execution of this letter, the Company shall terminate any then-active discussions or negotiations with any person other than Buyer regarding an Alternative Transaction, provided that the Company may respond in writing to any then-pending third-party proposal solely to acknowledge receipt and advise that the Company is in exclusive discussions with another party.

2. Representatives.

As used herein, the term “Representatives” means a party’s directors, officers, employees, affiliates (other than portfolio companies of institutional stockholders that do not receive confidential information), investment bankers, attorneys, accountants, consultants, and other advisors, in each case acting in such capacity. For the avoidance of doubt, the Company’s stockholders (including institutional and investor stockholders) are not “Representatives” for purposes of this letter except to the extent they are formally designated as advisors in connection with the Proposed Transaction.

3. Alternative Transaction.

As used herein, the term “Alternative Transaction” means any transaction or series of related transactions involving: (i) the direct or indirect acquisition of assets of the Company or its subsidiaries (including voting equity interests of the Company’s subsidiaries) equal to 50% or more of the fair market value of the Company’s consolidated assets or to which 50% or more of the Company’s net revenues or net income on a consolidated basis are attributable; (ii) the direct or indirect acquisition of 50% or more of the voting equity interests of the Company; (iii) a tender offer or exchange offer that, if consummated, would result in any person beneficially owning 50% or more of the voting equity interests of the Company; or (iv) a merger, consolidation, business combination, recapitalization, or similar transaction involving the Company that would result in a person other than Buyer or its affiliates owning 50% or more of the consolidated assets, net revenues, net income, or voting equity of the Company and its subsidiaries on a post-closing basis. “Alternative Transaction” does not include, and nothing in this letter restricts the Company from engaging in: (a) any equity financing transaction that does not result in a change of control of the Company, including any round of preferred or common equity financing with existing or new investors; (b) any convertible note, SAFE, or similar instrument issued in the ordinary course of the Company’s financing activities; (c) any intra-company reorganization or restructuring that does not involve a sale to a third party; (d) any debt financing or refinancing; (e) any ordinary-course commercial transaction, including any customer contract, vendor arrangement, strategic partnership, joint venture, licensing transaction, or similar arrangement not principally intended to effect a sale of the Company; or (f) discussions with the Company’s existing stockholders regarding the Proposed Transaction or their position on the Proposed Transaction.

4. Fiduciary Out.

Notwithstanding anything to the contrary in this letter, and in recognition of the fiduciary duties owed by the Company’s board of directors (the “Board”) to the Company and its stockholders, nothing in this letter shall prevent the Board or the Company from: (i) receiving, considering, discussing, or responding to any unsolicited, bona fide written proposal received from a third party during the Exclusivity Period that the Board determines in good faith, after consultation with its financial and legal advisors, constitutes, or would reasonably be expected to lead to, a Superior Proposal; (ii) furnishing non-public information to, or engaging in discussions or negotiations with, any such third party, in each case subject to such third party executing a confidentiality agreement containing terms substantially similar to, and no less restrictive than, those contained in the NDA; (iii) changing, modifying, or withdrawing any recommendation made by the Board to the Company’s stockholders with respect to the Proposed Transaction or any Alternative Transaction, or recommending any Superior Proposal; or (iv) taking any other action the Board determines in good faith, after consultation with counsel, is required to discharge the Board’s fiduciary duties under applicable law. “Superior Proposal” means a bona fide written proposal for an Alternative Transaction that the Board determines in good faith, after consultation with its financial and legal advisors, is reasonably likely to be consummated in accordance with its terms and, if consummated, would be more favorable to the Company’s stockholders than the Proposed Transaction, taking into account all factors the Board deems relevant (including, without limitation, the terms and conditions of such proposal, the certainty of closing, the nature and availability of financing, regulatory considerations, and the identity and track record of the third party).

5. Notice of Third-Party Proposals.

If, during the Exclusivity Period, the Company receives an unsolicited bona fide written proposal from a third party that the Board determines in good faith (after consultation with counsel) constitutes, or would reasonably be expected to lead to, a Superior Proposal, the Company shall, within five (5) business days after such determination, notify Buyer in writing of (i) the fact that such a proposal has been received and (ii) the material economic terms of such proposal. The Company shall not be required to disclose the identity of the third party or any additional terms of the proposal unless and until the Board determines to engage in substantive discussions with such third party pursuant to the Fiduciary Out paragraph, at which point the Company shall promptly notify Buyer that such determination has been made (without being required to provide updates on the course of such discussions). For the avoidance of doubt, nothing in this paragraph shall require the Company to notify Buyer of any inquiry, indication of interest, or other communication that the Board determines is not a bona fide written proposal reasonably likely to lead to a Superior Proposal.

6. Termination.

The Company may terminate this letter and the Exclusivity Period, effective immediately upon written notice to Buyer, if (i) Buyer fails to pursue due diligence in good faith for any continuous period of seven (7) business days; (ii) Buyer materially changes the principal economic terms of the Proposed Transaction (including price, structure, consideration mix, or escrow) from those communicated to the Company in writing prior to the date of this letter or in the letter of intent (if any) between the parties, and such change is to the Company’s detriment; (iii) Buyer fails to deliver a draft of the definitive agreement to the Company within fourteen (14) days after the date of this letter; or (iv) the Board determines in good faith, after consultation with counsel, to accept a Superior Proposal pursuant to the Fiduciary Out paragraph. Termination pursuant to this paragraph shall not give rise to any liability, break-up fee, expense reimbursement, or other payment obligation of any kind, and neither party shall have any further obligation under this letter except with respect to obligations (if any) that expressly survive termination.

7. Expenses.

Each party shall bear its own fees, costs, and expenses (including, without limitation, attorneys’ fees, accountants’ fees, financial advisory fees, and due diligence costs) incurred in connection with the Proposed Transaction, this letter, and any definitive agreement. Without limiting the foregoing, Buyer shall not be entitled to any expense reimbursement, break-up fee, topping fee, or other payment in the event that (i) the Exclusivity Period expires without a definitive agreement being executed, (ii) the Company terminates this letter pursuant to the Termination paragraph, or (iii) the Company enters into an Alternative Transaction following the expiration or termination of the Exclusivity Period.

8. Confidentiality.

This letter, its existence, and its contents are “Confidential Information” under, and subject to, the NDA. Neither party shall disclose the existence or contents of this letter or the Proposed Transaction except (i) as permitted under the NDA, (ii) as required by applicable law or legal process (including any applicable securities law disclosure obligation), or (iii) to such party’s Representatives on a need-to-know basis. The NDA shall remain in full force and effect notwithstanding the execution of this letter, and nothing in this letter modifies, amends, or supersedes the terms of the NDA.

9. Remedies.

The parties acknowledge that a material breach of the No-Shop paragraph or the Notice of Third-Party Proposals paragraph may result in harm that is difficult to quantify, and that, in the event of such a breach, the non-breaching party may be entitled to seek equitable relief (including injunctive relief and specific performance) in addition to any other remedies available at law, subject in all cases to the court’s discretion to grant or deny such relief and to any requirement that the moving party post a reasonable bond. Nothing in this letter shall be deemed a stipulation that monetary damages are inadequate as a matter of law. For the avoidance of doubt, no action taken by the Board or the Company pursuant to the Fiduciary Out paragraph shall constitute a breach of this letter, and no party shall be entitled to equitable or monetary relief on account of any such action. The remedies set forth in this paragraph are mutual and are available to both the Company and Buyer.

10. No Obligation to Consummate.

The parties acknowledge and agree that the execution and delivery of this letter does not create any legally binding obligation on either party to consummate the Proposed Transaction or any other transaction. Any such obligation shall arise only upon the execution and delivery of definitive agreements relating to the Proposed Transaction, and even then only in accordance with the terms of such definitive agreements. The only binding provisions of this letter are those set forth in Paragraphs 1 through 13, which are binding from execution of this letter through the expiration or termination of the Exclusivity Period and, where the provision so indicates (including the Confidentiality paragraph), thereafter in accordance with the terms of the NDA.

11. Governing Law; Jurisdiction.

This letter shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware. Each party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in Wilmington, Delaware, for the resolution of any dispute arising out of or relating to this letter, and waives any objection based on improper venue or forum non conveniens. Each party waives, to the fullest extent permitted by law, any right to a jury trial in any such dispute.

12. Counterparts; Electronic Signatures.

This letter may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Signatures transmitted by PDF, DocuSign, or other electronic means shall have the same force and effect as original signatures.

13. Entire Agreement; Amendment.

This letter, together with the NDA, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings, whether written or oral, relating to the subject matter hereof (other than the NDA). This letter may only be amended by a writing signed by both parties. No waiver of any provision shall be effective unless in writing and signed by the party against whom the waiver is asserted.

If the foregoing accurately reflects our agreement, kindly execute the enclosed copy of this letter and return it to the undersigned.

Very truly yours,

[COMPANY NAME]

By: ____________________________

Name: [NAME]

Title: [TITLE]

ACCEPTED AND AGREED:

[BUYER NAME]

By: ____________________________

Name: [NAME]

Title: [TITLE]

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This template is provided for informational purposes only and does not constitute legal advice or create an attorney-client relationship. Every transaction is different; consult qualified M&A counsel before using or adapting this document. The form below is drafted from the seller’s perspective as a counter to buy-side forms; public company targets and transactions subject to Revlon duties require additional review.