Illness or Incapacity; Termination on Death or Permanent Disability Clause Samples
This clause defines the procedures and rights of the parties if an individual involved in the agreement becomes ill, incapacitated, or dies. It typically outlines what constitutes permanent disability, the process for verifying such a condition, and the resulting steps, such as suspension or termination of the agreement. For example, if a key employee or contractor is unable to perform their duties due to a long-term illness, the clause may allow the employer to terminate the contract without penalty. Its core function is to provide a clear and fair mechanism for ending or adjusting contractual obligations in the event of serious health issues, thereby reducing uncertainty and potential disputes.
Illness or Incapacity; Termination on Death or Permanent Disability. (a) If during the term of this Agreement Employee becomes permanently disabled, as defined below, or dies, Employer shall pay to Employee or his estate compensation through the date of death or determination of permanent disability, including salary, any prior-year STIP compensation earned but not yet paid and the prorated portion of any current year STIP as and when determined in the ordinary course of the calculation of current year STIP due to other executive officers of Employer. Employer shall continue to provide medical insurance and other benefits to which Employee’s dependents would otherwise have been entitled for 90 days following the date of death or determination of permanent disability, provided that Employee and Employee’s dependents, as applicable, shall continue to pay the active-employee contribution toward such benefits. Effective upon the date of death or determination of permanent disability, any and all options, rights or awards under any of Employer’s incentive compensation plans that have been granted to, and that have not been forfeited by, Employee before the date of death or termination on account of permanent disability shall immediately vest on a prorated basis to reflect the portion of the applicable vesting period lapsed as of the date of death or termination on account of permanent disability. Except for the benefits set forth in the preceding sentences and any life or disability insurance benefits included in the benefit package provided at such time by Employer to Employee, Employer shall have no additional financial obligation under this Agreement to Employee or his estate. After receiving the payments and health, life, or disability insurance benefits provided in this subparagraph (a), Employee and his estate shall have no further rights under this Agreement.
(b) The terms “permanently disabled” and “permanent disability” as used in this Agreement shall mean that Employee is unable to engage in any substantial gainful activity for a period of at least ninety (90) consecutive days (provided that a return to full work status of less than five full days shall be deemed not to interrupt the calculation of such 90 days), or one hundred twenty (120) days in any twelve (12) month period, by reason of any physical or mental impairment. In the event that Employee becomes “permanently disabled,” the Board may terminate Employee’s employment under this Agreement upon written notice. If any determination with respect to “permanent di...