EXHIBIT 10.11
TERMINATION PROTECTION AGREEMENT
AGREEMENT effective [DATE] between Xxxxxx and Xxxxx Corporation and its
successors and assigns (the "Company") and [NAME] ("Executive").
WHEREAS, Executive has important management responsibilities and
talents which benefit the Company and its affiliates; and
WHEREAS, the Company believes that its best interests are served if
Executive is encouraged to remain with the Company and the Company has
determined that Executive's ability to perform Executive's responsibilities and
utilize Executive's talents for the benefit of the Company, and the Company's
ability to retain Executive as an employee, will be significantly enhanced if
Executive is provided with fair and reasonable protection from the risks
associated with a change in ownership or control of the Company; and
WHEREAS, the Board has approved the terms and provisions of this
Agreement at its meeting on December 2, 2003,
NOW, THEREFORE, the Company and Executive hereby agree as follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this Agreement
which are defined in Schedule A shall have the meanings set forth in Schedule A.
The Company and the Executive both agree that the definition of "Change
of Control" listed in Schedule A shall be used for Executive in any and all
plans, programs or agreements in which the Executive participates or to which
Executive is a party in lieu of any similar definition used in such plans,
programs or agreements.
2. Effective Date; Term.
This Agreement shall commence on [DATE] (the "Effective Date") and
shall continue in effect through December 31, 2006; provided, however, that the
term of this Agreement shall automatically be extended for one additional year
beyond December 31, 2006 and for successive one year periods thereafter, unless,
not later than January 30 of the third calendar year preceding the year in which
the term would otherwise automatically extend (e.g., 2004 for the 2007 calendar
year, 2005 for the 2008 calendar year, etc.), the Company shall have given
written notice to Executive that it does not wish to extend this Agreement for
an additional year, in which event this Agreement shall continue to be effective
until December 31 of the calendar year immediately proceeding the calendar year
in which the term would have otherwise automatically extended; provided,
further, that, notwithstanding any such notice by the Company not to extend, if
a Change in Control occurs during the original or any extended term of this
Agreement, this Agreement shall remain in effect for a period of three (3) years
after such Change in Control.
3. Change in Control Benefits.
If Executive's employment with the Company or its affiliates is
terminated at any time within three (3) years following a Change in Control (i)
by the Company or its affiliates without Cause, or (ii) by Executive for any
reason (the effective date of either such termination hereafter referred to as
the "Termination Date"), Executive shall be entitled to the benefits provided
hereafter in this Section 3 and as otherwise set forth in this Agreement. If
Executive's employment is terminated within one (1) year prior to a Change in
Control, and Executive reasonably demonstrates after such Change in Control that
such termination was at the request or suggestion of any individual or entity
who or which ultimately effects a Change in Control (an "Anticipatory
Termination"), then Executive's Termination Date shall be deemed to have
occurred immediately following the Change in Control, and Executive shall be
entitled to the benefits provided hereafter in this Section 3 and as otherwise
set forth in this Agreement. In the event that Executive's employment is
terminated as a result of death or Disability, Executive shall not be entitled
to the benefits provided in this Section 3 however, the Executive and/or the
Executive's Family shall be entitled to receive benefits at least equal to the
most favorable benefits provided by the Corporation under such plans, programs
and policies relating to death and/or disability benefits as in effect at any
time during the 90-day period immediately preceding the Termination Date.
(a) Severance Benefits. Within ten (10) business days after the
Termination Date, the Company shall pay Executive the aggregate of the following
amounts:
(i) Executive's earned but unpaid base salary through the
Termination Date at the rate in effect on the Termination Date, or if higher, at
the highest rate in effect at any time within the 90-day period preceding the
Change in Control;
(ii) any unpaid annual bonus payable to Executive in respect
of the calendar year ending prior to the Termination Date (but not less than the
Average Bonus);
(iii) a prorated Average Bonus for the calendar year in which
the Termination Date occurs, calculated by multiplying the Average Bonus by a
fraction, the numerator of which is the number of days elapsed in the calendar
year up to and including the Termination Date and the denominator of which is
365;
(iv) a lump sum amount, in cash, equal to three (3) times
Executive's Annual Compensation;
(v) any unpaid earned and/or accrued vacation;
(b) Additional Health Care Coverage. Until the third anniversary of the
Termination Date, Executive and, as applicable, Executive's family shall be
eligible, at the Company's expense, to Participate in each of the Company's
welfare benefit plans, including, without limitation, all medical, prescription,
dental, disability, salary continuance, group life, accidental death and travel
accident insurance plans and programs of the Company, at the highest
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level provided to Executive during the period beginning one year prior to the
Change in Control and ending on the Termination Date; provided, however, that if
Executive becomes employed by a new employer, the coverages provided by the
Company pursuant to this sentence shall become secondary to those coverages
provided by Executive's new employer. In addition, Executive will be entitled to
full COBRA continuation coverage commencing on the third anniversary of the
Termination Date.
If the Company reasonably determines that the coverage required under this
Section 3(b) would cause a welfare plan sponsored by the Company to violate any
provision of the Code prohibiting discrimination in favor of highly compensated
employees or key employees, or if any benefits described in this Section 3(b)
cannot be provided (or the Company determines that it does not wish to provide
such benefits) pursuant to the appropriate plan or program maintained for
employees of the Company, the Company shall provide such benefits outside such
plan or program at no additional costs (including, without limitation, tax
costs) to the Executive or, as determined by the Company it its sole discretion,
the Company will pay to the Executive the cash equivalent thereof.
(c) Full Vesting of All Stock Options and Restricted Shares
Notwithstanding any provision to the contrary in the Company's equity incentive
plans (the "Equity Plans") or any award agreement under the Equity Plans, (i)
any outstanding, unexercisable stock options or unvested restricted shares shall
become fully exercisable and vested as of the Termination Date and (ii) all
stock options, whether or not such stock options first become exercisable
pursuant to this Agreement, shall remain exercisable until the option otherwise
expires; provided, however, that this sentence shall not restrict the Company's
ability to adjust or settle outstanding stock options pursuant to the terms of
the Equity Plans, so long as Executive is treated in any such adjustment or
settlement no less favorably than any other employee of the Company.
(d) Retirement Benefits. Executive shall be entitled to receive
retirement benefits under the change in control provisions of the Company's
Executive Retirement Plan.
(e) Deferred Compensation. Except as provided otherwise under the
Company's Supplemental Executive Investment Plan, within ten (10) business days
after the Termination Date, the Company shall pay Executive any undistributed
amounts relating to compensation which were previously deferred by Executive.
(f) Outplacement Services. The Company shall provide Executive with
executive outplacement services by any one qualified outplacement agency
selected by Executive and reasonably satisfactory to the Company.
(g) Other Payments And Benefits. Executive shall be entitled to receive
any payments or benefits that Executive is entitled to pursuant to the terms of
any Company plans, programs or arrangements (including, but not limited to,
retention arrangements), and any such payments or benefits shall vest, (except
as provided in the Xxxxxx & Xxxxx Pension Plan and the Xxxxxx & Xxxxx
Corporation Employee's Investment Plan) and, if applicable, become payable
immediately upon the Termination Date.
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4. Mitigation.
Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment or
otherwise, and compensation earned from such employment or otherwise shall not
reduce the amounts otherwise payable under this Agreement. No amounts payable
under this Agreement shall be subject to reduction or offset in respect of any
claims which the Company (or any other person or entity) may have against
Executive.
5. Gross-Up.
(a) In the event that any payment or benefit received or to be received
by Executive pursuant to the terms of this Agreement (the "Contract Payments")
or otherwise in connection with Executive's termination of employment or
contingent upon a change in ownership or control pursuant to any plan or
arrangement or other agreement with the Company (or any affiliate) ("Other
Payments" and, together with the Contract Payments, the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed by Section 4999 of the
Code, as determined as provided below, the Company shall pay to Executive, at
the time specified in Section 5(b) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by Executive, after deduction of the
Excise Tax on the Payments and any federal, state and local income or other tax
and excise tax upon the payment provided for by this Section 5(a), and any
interest, penalties or additions to tax payable by Executive with respect
thereto, shall be equal to the total value of the Payments at the time such
Payments are to be made. For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amounts of such Excise Tax, (1) the
total amount of the Payments shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, except to the extent that, in the opinion of independent tax
counsel selected by the Company's independent auditors and reasonably acceptable
to Executive ("Tax Counsel"), a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code, or such "excess parachute payments" (in whole or in part) are not subject
to the Excise Tax, (2) the amount of the Payments that shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Payments or (B) the amount of "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code (after applying clause (1) hereof),
and (3) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by Tax Counsel in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal income tax at the
highest marginal rates of federal income taxation applicable to individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest effective rates of taxation applicable to
individuals as are in effect in the state and locality of Executive's residence
or place of employment in the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
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(b) The Gross-Up Payments provided for in Section 5(a) hereof shall be
made upon the earlier of (i) the payment to Executive of any Payment or (ii) the
imposition upon Executive or payment by Executive of any Excise Tax.
(c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Executive is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the 30 day period following the date
on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company and reasonably satisfactory to Executive;
(iii) cooperate with the Company in good faith in
order to effectively contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including, but not limited to, additional interest and penalties and
related legal, consulting or other similar fees) incurred in connection with
such contest and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Excise Tax or other tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses.
(d) The Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such payment
to Executive on an interest-free basis, and shall indemnify and hold Executive
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harmless, on an after-tax basis, from any Excise Tax or other tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and
provided, further, that if Executive is required to extend the statute of
limitations to enable the Company to contest such claim, Executive may limit
this extension solely to such contested amount. The Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority. In addition, no position may be taken nor any final
resolution be agreed to by the Company without Executive's consent if such
position or resolution could reasonably be expected to adversely affect
Executive (including any other tax position of Executive unrelated to the
matters covered hereby).
(e) As a result of any uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Company or the Tax
Counsel hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the Company
exhausts its remedies and Executive thereafter is required to pay to the
Internal Revenue Service an additional amount in respect of any Excise Tax, the
Company or the Tax Counsel shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall promptly be paid by the Company to
or for the benefit of Executive.
(f) If, after the receipt by Executive of the Gross-Up Payment or an
amount advanced by the Company in connection with the contest of an Excise Tax
claim, Executive receives any refund with respect to such claim, Executive shall
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If after the
receipt by Executive of an amount advanced by the Company in connection with an
Excise Tax claim, a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify
Executive in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after such determination, such advance shall be
forgiven and shall not be required to be repaid.
6. Employment Status; No Effect Prior to Change in Control; Termination
for Cause.
(a) Executive and the Company acknowledge and agree that prior to a
Change in Control, Executive's employment is "at will" and may be terminated at
any time, by the Company with or without Cause or by Executive with or without
Good Reason, subject to applicable law. In the event Executive's employment is
terminated for any reason prior to a Change in Control, other than in the case
of an Anticipatory Termination, Executive shall have no rights to any payments
or benefits under this Agreement and after any such termination, this Agreement
shall be of no further force or effect.
(b) In the event Executive is terminated for Cause following a Change
in Control, Executive shall have no rights to any payments or benefits under
this Agreement.
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7. Indemnification; Director's and Officer's Liability Insurance.
Until the sixth anniversary of the Termination Date and for so long
thereafter as any claim for indemnification asserted on or prior to such date
has not been fully adjudicated (the "Indemnification Period"), the Company shall
indemnify, defend, and hold harmless Executive against all losses, claims,
damages, costs, expenses (including attorneys' fees) or liabilities (including
attorneys' fees) arising out of actions or omissions or alleged actions or
omissions which have occurred on or prior to the Termination Date to the same
extent and on the same terms and conditions (including with respect to
advancement of expenses) as permitted under applicable law and the Company's
certificate of incorporation and by-laws as in effect immediately prior to the
Change in Control. In addition, the Company shall maintain Director's and
Officer's liability insurance (from an insurance company rated not less than A
by A.M. Best Company) and, if Executive served or has served as a fiduciary of
any pension or benefit plan, ERISA fiduciary insurance, on behalf of Executive,
at the level in effect immediately prior to the Change in Control, for the
Indemnification Period.
8. Confidential Information.
Executive acknowledges that any confidentiality agreement entered into
by Executive and the Company remains in full force and effect and survives the
termination of his or her employment with the Company; provided that nothing
contained in such agreement or this Section 8 shall prevent Executive from being
employed by a competitor of any of the Company or utilizing Executive's general
skills, experience, and knowledge, including those developed while employed by
any of the Company or its affiliates.
9. Disputes.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Memphis, Tennessee or,
at the option of Executive, in the county where Executive then resides, in
accordance with the Rules of the American Arbitration Association then in
effect, except that Executive may, at Executive's option, bring that action in a
court of competent jurisdiction, even if the Company has earlier instituted an
action hereunder. Judgment may be entered on an arbitrator's award relating to
this Agreement in any court having jurisdiction.
10. Costs of Proceedings.
The Company shall pay for all costs and expenses of Executive, at least
monthly, including attorneys' fees and disbursements, in connection with any
legal proceeding (including arbitration), whether instituted by the Company or
by Executive, relating to the interpretation or enforcement of any provision of
this Agreement, except that if Executive instituted the proceeding and the
judge, arbitrator or other individual presiding over the proceeding
affirmatively finds that Executive instituted the proceeding in bad faith, then
Executive shall be required to pay all costs and expenses of Executive,
including attorney's fees and disbursements, and shall not be entitled to
reimbursement. The Company shall pay prejudgment interest on any money judgment
obtained by Executive as a result of such a proceeding, calculated at the prime
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rate of interest as reported in the Wall Street Journal, as in effect from time
to time, from the date that payment should have been made to Executive under
this Agreement.
11. Successors And Assigns.
Except as otherwise provided herein, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Company and Executive
and their respective heirs, legal representatives, successors and assigns. If
the Company shall be merged into or consolidated with another entity, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the entity surviving such merger or resulting from such consolidation. The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company, by agreement in form and substance satisfactory to
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. The provisions of this Section 11 shall
continue to apply to each subsequent employer of Executive in the event of any
subsequent merger, consolidation or transfer of assets of such subsequent
employer.
12. Withholding.
Notwithstanding the provisions of Sections 4 and 5 hereof, the Company
may, to the extent required by law, withhold applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee, without reference to principles of conflicts
of law, applicable to contracts made and to be performed therein.
14. Entire Agreement.
This Agreement constitutes the entire agreement between the parties
regarding severance benefits following a Change in Control and supersedes and
overrides any prior agreement entered into between the Company and Executive
regarding severance benefits following a Change in Control, including, but not
limited to the Employment Agreement dated [DATE], between the Company and
Executive. This Agreement may be changed only by a written agreement executed by
the Company and Executive.
15. Notice.
Notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered, delivered by a nationally recognized overnight delivery service, or
sent by certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses last given by each party to the other, provided that
all notices to the Company shall be directed to the attention of the Board
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with a copy to the Secretary of the Company. All notices and communications
shall be deemed to have been received on the date of delivery thereof or on the
third business day after the mailing thereof, except that notice of change of
address shall be effective only upon receipt.
16. Severability.
The provisions of this Agreement shall be deemed severable, and the
invalidity or unenforceability of any provision hereof shall not affect the
validity or enforceability of the other provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
____ day of ____________________, 2003.
XXXXXX & XXXXX CORPORATION
By:
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Name
Title
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Executive
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SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms, when capitalized, have the meaning indicated:
"Annual Compensation" means the sum of (i) Executive's annual rate of
base salary in effect on the date of the Change in Control or, if higher, the
Termination Date, (ii) the Average Bonus and (iii) Executive's perquisite
allowance for the calendar year immediately prior to the calendar year in which
the Change in Control occurs.
"Average Bonus" means the greater of (i) Executive's target bonus for
the calendar year immediately prior to the calendar year in which the Change in
Control occurs or (ii) the highest bonus paid or payable to Executive in respect
of any of the five (5) calendar years (annualized with respect to any such
calendar year for which Executive has been employed for only a portion thereof)
immediately prior to the calendar year in which the Change in Control occurs.
"Board" means the Company's Board of Directors.
"Cause" shall mean Executive's termination of employment due to:
(a) Executive's conviction of, or plea of guilty or nolo contendere to,
a felony; or
(b) the willful engaging by Executive in gross misconduct which is
materially and demonstrably injurious to the Company.
For a termination of employment to be for Cause: (i) Executive must
receive a written notice which indicates in reasonable detail the facts and
circumstances claimed to provide a basis for the termination of Executive's
employment for Cause; (ii) Executive must be provided with an opportunity to be
heard no earlier than 30 days following the receipt of such notice (during which
notice period Executive has the opportunity to cure and has failed to cure or
resolve the behavior in question); and (iii) there must be a good faith
determination of Cause by at least three-quarters of the non-employee outside
director members of the Board.
"Change in Control" For the purpose of this Agreement, a "Change in
Control" shall, without limitation, be deemed to have occurred if:
(a) A third person, including a "group" as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes the beneficial owner, directly or indirectly, of 25% or more of
the combined
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voting power of the Company's outstanding voting securities ordinarily having
the right to vote for the election of directors of the Company; or
(b) Individuals who, as of the date hereof, constitute the Board cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least three-quarters of the directors comprising the Board as of the date
hereof (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of directors of the Company) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Board as of the date hereof; or
(c) The consummation of (i) any consolidation, share exchange, merger
or amalgamation of the Company as a result of which the individuals and entities
who were the respective beneficial owners of the outstanding common stock of the
Company and the voting securities of the Company immediately prior to such
consolidation, share exchange, merger or amalgamation do not beneficially own,
immediately after such consolidation, share exchange, merger or amalgamation,
directly or indirectly, 50% or more, respectively, of the common stock and
combined voting power of the voting securities entitled to vote of the company
resulting from such consolidation, share exchange, merger or amalgamation; or
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all the assets or earning power
of the Company; or
(d) The approval by the shareholders of a plan of complete liquidation
or dissolution of the Company.
(e) For purposes of any plan or agreement that refers to a definition
of Change in Control in Section 2 of the Employment Agreement, the above
definition of Change in Control shall be deemed to be the reference definition.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Xxxxxx & Xxxxx Corporation and its successors and
assigns.
"Disability" means total disability or permanent disability as
determined under the Company's long-term disability plan in which Executive
participates, as it exists from time to time; provided, however, if Executive
does not participate in the Company's long-term disability plan, then
"Disability" means an illness or injury which prevents Executive from performing
his or her duties, as they existed immediately prior to the illness or injury,
on a full time basis for 180 consecutive business days, and is determined to be
total and permanent disability by a physician selected by the Company and
acceptable to Executive or Executive's legal representative.
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