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In the video, Simon from the Contract Company explains that a key clause every distributor wants in a distribution agreement is exclusivity. This clause ensures that the distributor is the only one allowed to market and sell the supplier's goods in a specific region. The rationale behind this is that distributors invest time and money into promoting the brand, so having exclusive rights protects their efforts and investment. Without exclusivity, the distributor risks competition from other entities, including the supplier itself. Therefore, ensuring exclusivity is crucial for distributors to maintain their market position and profitability.