Merger agreements should make clear that the shareholder representative can resign or be removed by the selling shareholders at any time. The representative represents a shareholder group, and that group should be able to designate a substitute whenever they wish. While this may seem obvious, SRS Acquiom has seen situations in which the agreement contains language that could limit that ability. There is an easy fix to avoid having this problem.

Specifically, avoid language, such as this:

If any shareholder representative dies or becomes legally incapacitated, or is otherwise similarly unable to carry out his duties hereunder, then the other Company Shareholders shall designate a single individual to replace any deceased or legally incapacitated or otherwise similarly unable shareholder representative as a successor shareholder representative hereunder.

The above language could inadvertently imply that a representative is entitled to resign or be replaced only if he dies or becomes incapacitated. Instead, consider language such as the following:

If any shareholder representative dies or becomes legally incapacitated, or is otherwise similarly unable to carry out his duties hereunder, or resigns or is otherwise removed by the Company Shareholders, then the other Company Shareholders shall designate a replacement shareholder representative as a successor shareholder representative hereunder.

In addition, it may be advisable to add a sentence that the representative can resign any time, and to provide for a replacement representative if the shareholders do not otherwise designate a replacement. For instance, language such as the following may be advisable:

If a shareholder representative resigns or is otherwise removed for any reason, the Company Shareholders shall designate a replacement shareholder representative within [ ] days. If no such replacement shareholder representative is so designated, the Company Shareholder with the then largest percentage interest in the Escrow Fund, or in any outstanding claim if the Escrow Fund has been fully depleted, shall be deemed to be the shareholder representative, and shall have all rights and obligations of a shareholder representative hereunder.

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