Exclusive Negotiation Agreement: Definition & Sample

An exclusive negotiation agreement, or ENA, is a legal contract that prevents one party from negotiating with another party for a specified amount of time. This type of agreement can avoid bidding wars and price competition in specific industries where exclusivity is highly desired.

The person who has an exclusive negotiation agreement has the opportunity to negotiate without being pressured by other offers on the table. They also have more leverage for pricing because they know their competitor cannot undercut them if they want the business. It's not uncommon for companies to use these agreements as part of their competitive strategy to maintain higher prices than competitors and still attract customers away from rivals.

Common Sections in Exclusive Negotiation Agreements

Below is a list of common sections included in Exclusive Negotiation Agreements. These sections are linked to the below sample agreement for you to explore.

Exclusive Negotiation Agreement Sample

THE PORTIONS OF THIS AGREEMENT, INCLUDING EXHIBIT A, MARKED WITH ASTERISKS WITHIN BRACKETS (“[***]”) HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406. A COMPLETE COPY OF THIS AGREEMENT HAS BEEN FILED SEPARATELY WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

Avadel Specialty Pharmaceuticals, LLC, a Delaware limited liability company (“Avadel”), is pleased to have entered into discussions with Serenity Pharmaceuticals, LLC, a Delaware limited liability company (“Serenity”), regarding a proposed exclusive license and assignment agreement in substantial form and substance as set forth on Exhibit A, between Serenity and Avadel (the “ELAA Agreement”), relating to Serenity’s right, title and/or interest in certain intellectual property (the “IP Rights”) in a certain formulation of the drug desmopressin acetate (the “Drug”), the New Drug Application for the Drug approved by the U.S. Food and Drug Administration (the “NDA”), and certain supply agreements relating to the Drug (the “Supply Agreements”). Under the terms and conditions of the ELAA Agreement, Serenity would grant to Avadel an exclusive license or sublicense (as applicable) under the IP Rights to develop and commercialize the Drug in the United States, Canada, and their respective territories and possessions (the “Territory”) and assign to Avadel the NDA and Serenity’s rights under the Supply Agreements (such license and assignments being the “Proposed Transaction”). Serenity recognizes that Avadel’s continued evaluation and pursuit of the Proposed Transaction will require Avadel to continue to expend significant additional time, effort, and resources to negotiate and consummate the Proposed Transaction. In consideration of, among other things, the willingness of Avadel to rapidly devote such additional time, effort, and resources to negotiate the Proposed Transaction, Serenity and Avadel (each a “Party”; collectively, the “Parties”), intending to be legally bound, hereby agree as follows (as so set forth, this “Agreement”):

1. (a) During the period (the “Exclusivity Period”) commencing on the date of this Agreement and ending on the earliest to occur of (1) 11:59 p.m., U.S. East Coast time on September 7, 2017 (subject to extension as provided below, the “Expiration Date”), (2) the time at which either Party receives written notice from the other Party that the other Party is thereby terminating negotiations of the ELAA Agreement in accordance with the provisions hereof (any such notice being a “Termination Notice”), and (3) the date of execution of a definitive ELAA Agreement between Serenity and Avadel, Avadel shall have the exclusive right (subject to the proviso set forth below) to negotiate with Serenity regarding the Proposed Transaction, and Serenity shall not, and shall cause its respective officers,

directors, employees, attorneys, accountants, financial advisors, agents and other representatives (collectively, the “Representatives”) not to, directly or indirectly:

initiate, solicit, encourage, or knowingly facilitate or induce the submission of any inquiries, proposals or offers that constitute, or may reasonably be expected to lead to, any Alternative Transaction Proposal (as defined below);

engage or participate in any discussions or negotiations regarding, or provide or cause to be provided any non-public information or data relating to, Serenity in furtherance of, or have any discussions with any person relating to, an actual or proposed Alternative Transaction Proposal; or

enter into any letter of intent, agreement in principle, option agreement, or other similar statement of intention or agreement relating to any Alternative Transaction Proposal.

(b) Immediately after the execution and delivery of this Agreement, Serenity will, and will instruct its Representatives to, immediately cease and terminate any existing solicitation, encouragement, discussion, or negotiation with any third Parties conducted heretofore by Serenity or any of its Representatives with respect to any possible Alternative Transaction Proposal (as defined below).

(c) If during the period from the date of this Agreement until and including the Expiration Date specified in Section 1(a) hereof, Avadel has been and is continuing to be engaged with Serenity in good faith negotiations relating to the Proposed Transaction and circumstances beyond the control of the Parties have made it unlikely to complete such negotiations and execute and deliver the ELAA Agreement by such Expiration Date, then, if at the time of such Expiration Date it is reasonable to assume that continuation of such negotiations will result in completion of such negotiations and execution and delivery by the Parties of the ELAA Agreement by 11:59 p.m., U.S. East Coast time on September 14, 2017, then the Expiration Date shall be extended to that later date.

(d) As used in this Agreement “Alternative Transaction Proposal” means any proposal or offer (whether or not in writing) from any person or “group” of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended), other than Avadel, regarding Serenity providing to such person or group of persons the rights under the IP Rights, the NDA, and/or the Supply Agreements to develop and/or commercialize the Drug in the Territory.

2. Unless and until a mutually acceptable definitive written ELAA Agreement between Serenity and Avadel with respect to the Proposed Transaction has been executed and delivered, neither Party will be under any legal obligation following the Expiration Date to continue discussions or negotiations about, to enter into definitive written agreements for, or to consummate the Proposed Transaction or any other transaction by virtue of this Agreement or any other written or oral expression with respect thereto. Neither Party shall have any obligation to authorize the Proposed Transaction or any other transaction

with the other Party. Subject to the provisions of Section 3 hereof, either Party may terminate this Agreement at any time prior to the Expiration Date by providing a Termination Notice to the other Party. Notwithstanding the foregoing, in the event that Serenity receives an unsolicited offer for an Alternative Proposed Transaction that is superior to Avadel’s offer for the Proposed Transaction, Serenity shall notify Avadel of such Alternative Proposed Transaction and shall provide Avadel with the opportunity to match such offer within five (5) Business Days.

3. (a) In consideration of Serenity’s agreement to the terms and conditions of this Agreement, including, without limitation, Serenity’s agreement to negotiate exclusively with Avadel in respect of the Proposed Transaction during the Exclusivity Period, Avadel agrees to deposit by wire transfer within three (3) days after the execution and delivery of this Agreement the amount of Five Million U.S. Dollars (US$5,000,000) (the “Escrow Amount”) with Signature Bank (the “Escrow Agent”), to be held and transferred by the Escrow Agent as set forth below.

(b) If the Parties execute and deliver the ELAA Agreement prior to the Expiration Date, the Escrow Agent will wire transfer to an account specified by Serenity the Escrow Amount in partial satisfaction of any upfront payment to be made by Avadel to Serenity required under the ELAA Agreement, which transfer will occur promptly following receipt by the Escrow Agent of written notice of such execution and delivery executed by both Parties.

(c) If Avadel terminates this Agreement without Cause (as defined below with respect to such termination by Avadel), Serenity terminates this Agreement with Cause (as defined below with respect to such termination by Serenity), or the Parties fail to execute and deliver the ELAA Agreement by the Expiration Date (notwithstanding Serenity’s good faith efforts to do so and provided that the ELAA Agreement is in substantial form and substance as set forth on Exhibit A), then upon receipt by the Escrow Agent of either a certified copy of the applicable Termination Notice or a written notice from either Party of the failure of the Parties to have executed and delivered the ELAA Agreement by the Expiration Date provided that the ELAA Agreement is in substantial form and substance as set forth on Exhibit A (an “Expired Negotiations Period Notice”), the Escrow Agent will wire transfer to an account specified by Serenity the Escrow Amount and Avadel shall also pay to Serenity by wire transfer an additional amount of Five Million U.S. Dollars (US$5,000,000) (the “Additional Avadel Payment”) within three (3) days of either providing or receiving such Termination Notice or Expired Negotiations Period Notice, as applicable. The sum of the Escrow Amount and the Additional Avadel Payment will be deemed to be consideration to Serenity for granting Avadel the exclusive negotiating rights hereunder.

(d) If Avadel terminates this Agreement with Cause or Serenity terminates this Agreement without Cause, then upon receipt by the Escrow Agent of a certified copy of the applicable Termination Notice, the Escrow Agent will return to Avadel the full amount of the Escrow Amount; and, in addition to such return to Avadel of the Escrow Amount, if Serenity terminates this Agreement without Cause, then Serenity shall pay to Avadel by wire transfer the additional amount of Ten Million U.S. Dollars (US$10,000,000) (the “Serenity Payment”) within three (3) days of providing such Termination Notice to Avadel. The Serenity Payment will be deemed to be consideration for Avadel’s expenditure of significant time, effort, and resources to evaluate, pursue, and negotiate the Proposed Transaction.

(e) For purposes of this Agreement, the term “Cause” means, with respect to termination of this Agreement by Avadel with Cause, (a) the receipt by Avadel of an opinion of counsel, which counsel shall be reasonably acceptable to Serenity, that Avadel will not have freedom to commercialize the Drug in the United States as such commercialization is contemplated by the ELAA Agreement because of

intellectual property rights held by third parties, (b) a change affecting the IP Rights, the NDA, or the Supply Agreements that would have a material and adverse effect on the commercialization by Avadel of the Drug in the United States contemplated by the Proposed Transaction, (c) a material misstatement or omission by Serenity in its disclosures to Avadel about the IP Rights, the NDA, or the Supply Agreements, (d) the bankruptcy or insolvency of Serenity, (e) the breach of the covenants set forth in Section 1(a)(i) – (iii) above by Serenity or (f) Serenity does not agree to execute the ELAA Agreement in substantial form and substance as set forth on Exhibit A by the Expiration Date (notwithstanding Avadel’s good faith effort to do so).

(f) For purposes of this Agreement, the term “Cause” means, with respect to termination of this Agreement by Serenity with Cause, (a) a material adverse change in the business, operations, or financial condition of Avadel, (b) a material misstatement or omission by Avadel in its disclosures to Serenity about Avadel or Avadel’s intentions with respect to the Proposed Transaction, that has a material and adverse effect on the Proposed Transaction or (c) the bankruptcy or insolvency of Avadel.

4. Each Party represents that it has the power, authority, and legal right, and is free to enter into this Agreement.

5. This Agreement shall be binding upon and inure solely to the benefit of the Parties, and nothing in this Agreement is intended, expressly or implicitly, to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

6. This Agreement is delivered in reliance upon, and shall be held confidential in accordance with, the provisions of that certain Confidentiality Agreement between Avadel and Serenity dated April 3, 2017 (the “Confidentiality Agreement”). Notwithstanding the foregoing and for clarity sake, this provision shall not apply for any disclosures or releases required by the U.S. Securities and Exchange Commission; however Avadel agrees to provide Serenity any such release in a reasonably timely manner for Serenity’s review and approval.

7. This Agreement may be amended, modified or supplemented only pursuant to a written instrument signed by the Parties. It is understood and agreed that no failure or delay by either Party in exercising any of its rights hereunder shall operate as a waiver thereof, nor shall any single or partial waiver thereof preclude any other or further exercise thereof. This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes other prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof.

8. All notices and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when personally delivered or sent by confirmed facsimile or email (with hard copy to follow); (b) one (1) Business Day after sent by reputable overnight express courier (charges prepaid); or (c) five (5) Business Days following mailing by certified or registered mail, postage prepaid and return receipt requested. Unless another address is specified in writing, such notices to each Party shall be sent to the addresses indicated below: