Section 6.5(a) of the merger agreement contains the standard no-shop covenant and window-shop exception. Before its exercise, the window-shop requires the board of directors to make a determination that failure to provide information to a third-part bidder or engage in negotiations with it would be reasonably likely to be inconsistent with the board's fiduciary duties. Although some agreements do not require the target board to make a fiduciary determination before opening discussions with a bidder, the Delaware Court of Chancery in Compellent considered the inconsistency threshold to be an acceptable, "flexible formulation" (see In re Compellent Tech., Inc. S'holder Litig., , at *7 (Del. Ch. Dec. 9, 2011) and Legal Update, In re Compellent Technologies: Delaware Chancery Court Analyzes Deal Protections to Determine Plaintiffs' Fee). The fiduciary-determination requirement is therefore not all that remarkable.

The window-shop allows the board to discuss unsolicited bids for "Alternative Transactions," which is defined by reference to a 15% threshold of Jos. A. Bank's common stock or assets. Jos. A. Bank must first enter into a confidentiality agreement "at least as restrictive" as its confidentiality agreement with Men's Wearhouse. There are no references to standstill provisions, whether as a requirement to include one in the confidentiality agreement or to abide by any standstills that Jos. A. Bank already has in effect. (For more on the purpose and function of standstills, see Practice Note, Standstill Agreements in Public M&A Deals.) In short, the window-shop exception to the no-shop in this merger agreement is entirely ordinary.

Virtually all public merger agreements contain a fiduciary out that allows the board of the target company to change its recommendation for the merger if a third-party proposal is superior for the stockholders from a financial point of view. Most agreements define a "superior proposal" by reference to a 50% threshold of the target company's voting power or assets; more buyer-friendly agreements raise this threshold or add a requirement for financing certainty (or both), while, in rarer cases, the target company negotiates for a lower threshold than 50%.

Many agreements also allow the target board to exercise a fiduciary out if an intervening event unrelated to a superior proposal transpires that makes it necessary for the board to change its recommendation for the merger. In a smaller number of agreements, the target board has a general authorization to change its recommendation if it determines in good faith that its fiduciary duties so require.

In the Men's Wearhouse/Jos. A. Bank agreement, the board has a standard fiduciary out for superior proposals and intervening events and not for general reasons unconnected to any particular event (see Sections 6.5(b) and 6.5(d), respectively). The threshold for a superior proposal is 50% of the target company's voting power or all or substantially all of its consolidated assets. Although this is a more buyer-friendly formulation than 50% of the voting power or assets, it is still a common threshold. The agreement does not add an explicit requirement for financing certainty or absence of a financing condition.

The definition of an intervening event is a material event that did not exist or had not occurred as of the date of the agreement. This is a tighter definition than an event that was unknown before signing but that may have occurred before signing. Still, it is common and not a hallmark of a particularly buyer-friendly agreement.

The agreement grants Men's Wearhouse a matching right before the target company can exercise its fiduciary out in either circumstance. Matching rights are common in public merger agreements, but the time given to the buyer to match the third-party offer or remove the need to change the recommendation in response to an intervening event tends to vary. Common lengths for the matching-right period are three, four or five business days, with variation above and below. The Men's Wearhouse/Jos. A. Bank agreement gives Men's Wearhouse four business days for its matching right.

Somewhat surprisingly, however, is that the agreement does not give Men's Wearhouse a continuous, "last look" matching right. Most agreements allow the buyer to repeatedly match any revisions that the third-party bidder might make to its superior proposal (albeit usually with a shorter amount of time for those subsequent responses than in the first round of matching). Without that last-look right, the buyer has only one contractual opportunity to match the superior proposal. In the context of the deal between Men's Wearhouse and Jos. A. Bank, the expectation would have been that Men's Wearhouse would insist on this right.

Based on the agreement's drafting, there is reason to believe that the parties intended to include a last-look matching right. The agreement in Section 6.5(b)(D) requires Jos. A. Bank to negotiate in good faith with Men's Wearhouse "during such four Business Day period (or such shorter period as specified below)." However, there is no shorter period specified below or any other reference to a last-look right.

The agreement requires Jos. A. Bank to pay a $60 million break-up fee if its board changes its recommendation for the merger or enters into an agreement for a superior proposal. $60 million is 3.30% of the equity value of $1,819,245,480. This amount is well within market range, but once again, somewhat target-friendly. The Delaware Court of Chancery has repeatedly upheld break-up fees above that amount, including as high as 4.4% (see In re Answers Corp. S'holder Litig., , at *4 (Del. Ch. 2011)). Particularly when Men's Wearhouse had already raised its bid three times and is essentially covering the $48 million fee being paid for the termination of the Eddie Bauer agreement, a larger break-up fee could have been expected.

In addition to being triggered for a change of recommendation or agreement for a superior proposal, the break-up fee is also payable for a material breach of a material obligation of the no-shop covenant. A review of the What's Market public merger agreements database indicates that roughly half of all public merger agreements trigger a break-up fee for breach of the no-shop, based on some measure of materiality. More common than that trigger, however, is a payment obligation in a situation where a competing acquisition proposal had been announced before termination and then entered into during a tail period following termination. This trigger is completely absent from the Men's Wearhouse/Jos. A. Bank merger agreement. A possible explanation is that Men's Wearhouse did not feel that it needed this provision, given the low likelihood that a competing bid will be made at this point. Still, it is a relatively standard provision that would not have seemed out of place.

In their totality, the deal protections in this agreement are relatively neutral, or even skew towards target-friendly. The break-up fee is somewhat low and not payable in a tail-period scenario. The matching right is not as long as it could have been and does not include a last look. The conditions to the window-shop exception are ordinary, and while the fiduciary out can be said to be slightly buyer-friendly, the break-up fee and matching-right provisions make up for that. In no way are the deal-protection measures aggressively pro-buyer, despite the fact that Men's Wearhouse would have had strong arguments for negotiating buyer-friendly provisions.

One conceivable explanation for the relatively pro-target dynamic of the agreement is that Men's Wearhouse negotiated reciprocal flexibility for itself on antitrust issues. When Jos. A. Bank was the subject of a hostile bid from Men's Wearhouse, it insisted that the offer's antitrust condition, in light of a Second Request for information from the FTC, would create significant uncertainty over whether the transaction would ever close. Despite these concerns, however, the antitrust provisions of the merger agreement are not particularly onerous.

The agreement requires Men's Wearhouse to pay a $75 million reverse break-up fee, or 4.12% of the equity value, for failure to close due to failure to obtain antitrust approval. This is not a small fee, but many other transactions with antitrust concerns have charged larger amounts. For examples, see Practice Note, What's Market: Reverse Break-up Fees for Antitrust Failure. In addition, while the efforts covenant in Section 6.4(d) requires Men's Wearhouse to exert its "best efforts" to obtain antitrust approval, Section 6.4(e) contains a carve-out for actions or divestitures that would be reasonably likely, in the aggregate, to have a material adverse effect on the merged businesses. Moreover, the term "material adverse effect" in this provision is undefined and consequently does not include the carve-outs in the defined Material Adverse Effect term.

If Men's Wearhouse evaluated there to be a greater antitrust risk to the transaction than a risk of a third-party bidder or financing failure and decided to bargain those provisions in return for lighter antitrust-risk obligations, that decision is entirely reasonable.