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Newco Inc. (Newco), a Delaware corporation , and XYZ Partners LP (herein the Fund), are currently involved in negotiations with respect to an investment by the Fund in Newco’s equity securities (herein the Investment, which term includes, as the context may allow or require, any acquisition of Newco securities or assets by way of a merger, sale of assets, consolidation or like transaction) by the Fund in Newco. Newco recognizes that the Fund has and will expend considerable resources and executive time in negotiating a definitive agreement with respect to the Investment and performing its due diligence review of Newco. Accordingly, following the execution of this letter [or the Term Sheet], Newco and its shareholders, directors, members, employees, financial advisors, brokers, stockholders or any person acting on their or its behalf (the Principals), shall immediately halt any discussions with other potential Investor in (including persons interested in an Acquisition) Newco (including persons with whom Newco or its Principals may have had discussions prior to the date hereof), except to advise such person that a prospective Investor has been granted the exclusive right to negotiate concerning a proposed Investment (without identifying the Fund) and that Newco and its Principals are legally bound to a quiet period covering any Investment transaction. Without limiting the generality of the foregoing, Newco and/or its Principals will not hold any discussions with, or provide any information to, any person, or respond to any inquiry made by any person, concerning a proposed Investment or cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any third party to do or seek any of the foregoing. The Fund, Newco and the Principals hereby agree to proceed in good faith toward negotiation and execution as soon as possible after the date hereof of the definitive documents [based on the Term Sheet] related to the consummation of the Investment, including the stock purchase agreement and any additional agreements deemed necessary or advisable by the parties (the Investment Documents) that will contain mutually agreeable terms, representations, conditions, covenants and indemnities. If at any time prior to [_____________] (the Expiration Date) Newco is approached by any third party concerning participation in a transaction involving its assets or business, or securities issued or to be issued by Newco, then Newco shall promptly inform the Fund of the nature of such contact and the parties thereto, and shall furnish the Fund a copy of any inquiry or proposal, or, if not in writing, a description thereof, including the name of the counterparty or parties (any such person, together with all other third parties referred to in this and the preceding paragraphs, being referred to herein as a Competing Person). It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Section by Newco or any of its Principals and that the Fund shall be entitled to seek equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach of this letter agreement but shall be in addition to all other remedies available at law or equity. Without limiting the generality of the foregoing, in the event of breach of the provisions hereof by Newco and/or any of its Principals, accompanied by an investment in Newco securities by a Competing Person at any time within 24 months following the Expiration Date, Newco will issue to the Fund a five (5) year transferable warrant to purchase shares of Newco common stock equal to [two percent] of Newco’s common stock (on a fully diluted basis, following the Investment by the Competing Person), the exercise price of such warrant to be equal to the price per share. Joseph W. Bartlett is a partner at Morrison & Foerster LLPin New York. This sample clause is intended to serve solely as an exemplar and may need to be modified to conform to the legal requirements of your jurisdiction. It in no way constitutes legal advice.

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