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Exclusivity Clause Defined
Exclusivity clauses, also called non-compete provisions, prevent one party from soliciting offers or negotiating with a third party within a specific period. They are often located within a confidentiality agreement. Speak with lawyers if you need an alternative to exclusivity clauses.
Learn more about exclusivity clauses by checking out this article.
Exclusivity clauses provide reassurance to buyers by limiting the actions that a purchaser can take with competitors after signing an agreement. For example, a phone manufacturer may agree to only sell their phones through a specific cell phone service provider.
Here’s an article that also explains exclusivity clauses.
Purpose of an Exclusivity Clause
The purpose of an exclusivity clause is to protect buyers from being outbid by third parties since significant time and money are spent securing a deal. For example, a real estate agent can prevent employees from working within a specific geographic region. It’s an “exclusive relationship” that mitigates risk.
Exclusivity Clause Examples
Examples of exclusivity clauses include:
- Example 1: Limiting third-party relationships for business partners
- Example 2: Obtaining exclusivity to produce a specific product
- Example 3: Stopping a partner from working with certain network providers
- Example 4: Preventing employees from working for agency competitors
- Example 5: Exclusivity with restaurants to a single beverage brand.
Check out this web page to see an exclusivity clause example.
Exclusivity Clause Samples
Sample 1 – Distribution Agreement:
Vendor grants to Ingram Micro and its Affiliates as defined above the exclusive (as set forth below), nontransferable right to market and distribute the Products to its Resellers in the United States and Canada (the “Territory”). Unless otherwise agreed between the parties, this exclusivity shall be effective for one (1) year after the execution of this Agreement; thereafter, Vendor grants to Ingram Micro and its Affiliates the nontransferable right to market and distribute the Products to its Resellers in the United States and Canada on a non-exclusive basis. Notwithstanding the foregoing, although Vendor agrees to use commercially reasonable efforts to direct its resellers to Ingram Micro, this exclusivity shall apply only to Vendor’s sale of its Products through other distributors in the Territory, not to sales by Vendor directly to its Resellers or its other customers or when its Products are a component of another product. Additionally, the parties agree that they will meet approximately one hundred eighty (180) days after the execution of this Agreement to review the exclusivity arrangement and if this arrangement is not working to the parties’ mutual satisfaction, mutually agree to terminate the one (1) year exclusivity requirement. Any Ingram Micro Affiliate located within the United States or Canada that elects to distribute Products in its local region will determine if it will purchase Products from Ingram Micro in accordance with this section or purchase Products directly from Vendor. Any other Ingram Micro Affiliate outside of the United States or Canada that elects to distribute Products in its local region will determine if it will purchase Products from Ingram Micro in accordance with this section or purchase Products directly from Vendor’s affiliate, Websense International Limited (“Vendor’s Affiliate”). If the Affiliate chooses to purchase Products directly from either Vendor or Vendor’s Affiliate, the Affiliate and Vendor (or Vendor’s Affiliate) shall enter into a separate agreement governing the terms of such purchases.
Security Exchange Commission - Edgar Database, EX-10.4 2 dex104.htm DISTRIBUTION AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1098277/000119312509103080/dex104.htm >.
Sample 2 – Supply Agreement:
EXCLUSIVITY AND NON-COMPETE
4.1 During the Term of the Supply Agreement, MIP is excluded from entering into any other supply agreements with other third parties for ****** therapeutic products that are similar to the Compound or Product within the defined Territory (Exhibit F).
4.2 During the Term of the Supply Agreement, BIOMEDICA is precluded from distributing any product similar to the Compound or Product in the Territory (Exhibit F), specifically products that are targeted to ****** using a ****** targeting molecule attached to a radionuclide.
Security Exchange Commission - Edgar Database, EX-10.5 4 dex105.htm SUPPLY AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1340752/000119312510052762/dex105.htm >.
Sample 3 – Exclusive Distribution Agreement:
Exclusivity, NDA and Intellectual Property. Rosemont hereby warrants to Oncogenerix that, with respect to the Licensed Product, as of the Effective Date: (i) it has not previously granted, and is not currently obligated to grant, to any Third Party the rights granted to Oncogenerix hereunder in the Field in the Territory with respect to the Licensed Product, and (ii) to the best of Rosemont’s knowledge, as of the Effective Date no person other than Rosemont or its Affiliates has any right, title or interest in any of the Licensed Know-How Controlled by Rosemont or its Affiliates within the Field in the Territory.
Security Exchange Commission - Edgar Database, EX-10.36 2 d303308dex1036.htm EXCLUSIVE DISTRIBUTION AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/919745/000119312512112331/d303308dex1036.htm >.
Sample 4 – Exclusive Distribution Agreement:
3.1. Notwithstanding anything in Section 2 of this Agreement to the contrary, the License Rights and Distribution Rights shall be exclusive within the Territory on the condition that, and only for so long as: (i) Geospatial pays the Exclusivity fees as defined in Schedule 3.1 timely, and (ii) Geospatial achieves at least 70% of its Intercompany Sales as defined in Schedule 3.1 hereof; and (iii) the Company is not otherwise entitled to terminate the License Rights or Distribution Rights pursuant to this Agreement; and (iv) all other payments are received on time.
3.2. On January 15th of each year, starting in 2007, a base Exclusivity fee of € 100.000 ( One hundred thousand Euro) is due. At the latest on December 31st, starting in 2007, the performance based Exclusivity fee settlement conform Schedule 3.1 is due. For 2006, the payment and settlement of the Exclusivity fees is due at the latest on December 31st, 2006.
3.3. In addition to the annual Exclusivity fee described in article 3.2, Geospatial will pay an additional fee of € 500.000 ( Five hundred thousand Euro), on January 15th, 2007 and an additional fee of € 500.000 ( Five hundred thousand Euro) on January 15th, 2008. Either or both payments are waved in case Geospatial has a majority ownership in Company the moment the payment becomes due.
3.4. Nothing in this Agreement shall cause Company to be found in breach on account of Products Transferred within the Territory prior to the date hereof; provided, however, that: (a) the Company shall not appoint Distributors other than Geospatial in the Territory for the Company Products, and the Company shall not allow Distributors, nor Geospatial to distribute outside their respective territories for the respective Company Products, and the Company shall transmit to Geospatial any orders or inquiries that it may receive with respect to orders within the Territory for the Company Products, and in case of future distribution of Company Products within the Territory by third parties other than End Users, both Parties will agree on a course of action to restrict or limit such distribution; (b) Company has accurately and comprehensively disclosed all contracts or pending Transfers as required in Section 3.3 hereof; and (c) the Company terminates its existing Canadian distributorship agreement within 10 days of the date hereof, and terminates any other agreements or contracts disclosed pursuant to Section 3.3 hereof as soon as is reasonably practicable and permitted under those agreements or contracts without penalty to Company.
3.5. Company sets forth in Schedule 3.3 hereof all agreements and pending agreements (those in the course of negotiation, not yet concluded and which Company either is obligated or otherwise intends to conclude notwithstanding this Agreement) that relate to the Transfer of Products within the Territory, and indicates whether and to what extent Company possesses the right under each agreement to prevent the further use or Transfer of Products within the Territory.
Security Exchange Commission - Edgar Database, EX-10.2 3 dex102.htm EXCLUSIVE LICENSE AND DISTRIBUTION AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1011395/000119312508099347/dex102.htm >.
Common Contracts with Exclusivity Clauses
Here are common contracts with exclusivity clauses:
- In supply agreements
- In partnership agreements
- In employment contracts
- In service agreements
Service agreements are commonly used when working as a contractor or company providing a service.
Supply agreements are helpful when working exclusively with a supplier by committing to purchase quantities and limitations to time and territory.
Partnership agreements establish the provisions by which business partners will work.
Employment contracts set the terms and conditions of work between a company and an employee.
Distribution agreements establish a product’s distribution, including manufacturing, storage, transportation, and other logistics.
Exclusivity Clause FAQs
Below, find the answers to exclusivity clause FAQs:
Are exclusivity clauses legal?
Exclusivity clauses are legal under federal laws. However, your state may have specific provisions that limit their use.
How do you negotiate exclusivity?
You negotiate exclusivity by determining if it creates value for your company. If so, speak with business lawyers to help you negotiate the deal and draft an exclusivity clause that protects your rights.