NATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

DEFERRED COMPENSATION PLAN

 

 

 

 

As Amended and Restated Effective July 1, 2003

 

 

 

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TABLE OF CONTENTS

Page         

 

 

 

ARTICLE I

INTRODUCTION

1

        

ARTICLE II

DEFINITIONS

2         

ARTICLE III

PARTICIPATION 3

ARTICLE IV

PARTICIPANT DEFERRALS

4          

ARTICLE V

EMPLOYER CREDITS

6

           

ARTICLE VI

ACCOUNTING AND ACCOUNT ADJUSTMENTS

7

           

ARTICLE VII.

PAYMENT OF PARTICIPANTS ACCOUNT BALANCES

9

           ARTICLE VIII DEATH BENEFITS 12       ARTICLE IX PLAN ADMINISTRATION
14       ARTICLE X GENERAL PROVISIONS 15            

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PREAMBLE

   

          WHEREAS, the National Rural Utilities Cooperative Finance Corporation
(NRUCFC) maintains the National Rural Utilities Cooperative Finance Corporation
Deferred Compensation Plan (Plan), which was first established, effective
January 1, 1981; and

   

          WHEREAS, the Homestead Funds were added as an additional investment
option under the Plan, effective January 1, 1997; and

   

          WHEREAS, the Plan's original investment option under the Plan was
frozen to new participants, effective as of January 1, 1999; and

   

          WHEREAS, NRUCFC now desires to amend and restate the Plan document to
(1) change the Plan's eligibility requirements, (2) incorporate all applicable
new law changes and (3) make other minor changes to the Plan.

   

          NOW THEREFORE, National Rural Utilities Cooperative Finance
Corporation, intending to be legally bound, hereby amends and restates the Plan,
effective July 1, 2003, as follows:

   

ARTICLE I

INTRODUCTION

    

          1.1. Name. The name of this Plan is the National Rural Utilities
Cooperative Finance Corporation Deferred Compensation Plan.

   

          1.2. Purpose. The purpose of the Plan is to make available to eligible
employees a nonqualified savings program which is an "eligible deferred
compensation plan" within the meaning of Code section 457(b). The Plan is not,
and is not intended to be, a qualified plan for federal income tax purposes. The
Employer acknowledges that the Plan is an "employee pension benefit plan" within
the meaning of Section 3(2) of the ERISA. To the extent applicable, the Plan is
intended to be an unfunded plan maintained "primarily for the purpose of
providing

   

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deferred compensation for a select group of management or highly compensated
employees" which is eligible for the exemptions applicable to such plans under
Title I of ERISA.     

          1.3. Effective Date. The original effective date of the Plan is
January 1, 1981. The effective date of this amendment and restatement is July 1,
2003.

  

          1.4. Plan Year. The Plan's annual accounting period is the calendar
year.

    

ARTICLE II

DEFINITIONS

    

          2.1. Account. A Participant's Deferral Account and Employer
Contribution Account, if any.

    

          2.2. Administrator. The Employer (or its designee).

   

          2.3. Code. The Internal Revenue Code of 1986, as amended from time to
time.

   

          2.4. Compensation. Except as otherwise provided by the Administrator,
the total amount of compensation (including incentive pay, if any) as determined
by the Employer in its sole discretion, earned by an Employee in any Plan Year
(or other applicable time period) for services rendered to the Employer in that
year that would (if paid to the Employee) be reportable on the Participant's
Federal income tax Form W-2 for the year.

     

          2.5. Deferral Account. The account established on the Employer's books
and records under Section 4.1.

   

          2.6. Employee. (a) Those employees of the Employer who are (i)
classified as a member of the senior management or executive team and (ii)
included in either the Employer's I or S band for compensation purposes, (b) any
other employee who was making Elective Deferrals under the Plan as of June 30,
2003 (but only so long as such employee continues to make Elective Deferrals
under the Plan thereafter), and (c) any other (or different group of) 

          

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highly compensation or management employees as may be designated by the Employer
from time to time in its sole discretion.           

          2.7. Employer. National Rural Utilities Cooperative Finance
Corporation (and any successor thereto whether by merger, consolidation,
liquidation or otherwise).

 

          2.8. Employer Contribution Account. The account established on the
Employer's books and records under Section 5.1.

          

          2.9. ERISA. The Employee Retirement Income Security Act of 1974, as
amended from time to time.

          

          2.10. Includible Income. Compensation for services performed for the
Employer in any year that is includible in gross income for Federal income tax
purposes.

          

          2.11. Investment Account. The investment account established by the
Employer in accordance with Article VI.

          

          2.12. Normal Retirement Age. Age 62.

          

          2.13. Participant. Any Employee or former Employee who has an Account
hereunder.

          

          2.14. Plan. The National Rural Utilities Cooperative Finance
Corporation Deferred Compensation Plan, as amended from time to time.

          

          2.15. Valuation Date. The last day of each Plan Year and such other
dates as the Administrator may designate from time to time in its sole
discretion.

          

ARTICLE III

PARTICIPATION

          

          3.1. Eligibility. Any Employee may elect to become a Participant as
provided in Section 3.2.

          

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          3.2. Participation. An Employee shall commence participation as soon
as administratively feasible after the later of the Plan's effective date or the
date he or she becomes an Employee, provided, that an Employee shall not become
a Participant hereunder until he or she completes such forms and takes such
actions as may be required by the Administrator, in its sole discretion, to
enroll in the Plan.

          

ARTICLE IV

PARTICIPANT DEFERRALS

          

          4.1. Elective Deferrals.

          

                    (a) Subject to the limits in Section 4.3, any Employee may
elect, in accordance with Section 4.2 hereof, to defer the receipt of a specific
percentage (or, if the Administrator permits in its discretion, a specific
dollar amount) of his or her Compensation for any Plan Year (or such other
period as may be established by the Administrator). Any amounts deferred under
this Section 4.1 shall be credited on the books and records of the Employer in a
Deferral Account maintained in the name of the Employee as of the date such
compensation would have been paid to the Employee but for the deferral election
hereunder.

          

                    (b) The Administrator may permit an Employee to elect, in
addition to (or in lieu of) the election provided under subsection (a) above, to
defer the receipt of a specific percentage (or, if the Administrator permits in
its discretion, a specific dollar amount) of any bonus payable to the Employee
for the Plan Year or other applicable period.

          

          4.2. Election to Defer Compensation.

          

                    (a) An Employee's election to defer Compensation under
Section 4.1 shall be submitted to the Employer on such forms (or by such other
means) as may be permitted by the Administrator. The election shall take effect
as of the first pay period beginning in the first

    

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 calendar month after the date on which the required election is submitted to
the Employer as provided herein.           

                    (b) An Employee may elect to change or revoke a prior
election at any time. Such an election shall be submitted to the Employer on
such forms (or by such other means) as may be permitted by the Administrator and
will be effective as of the first pay period beginning in the first calendar
month after the date on which the required election is submitted to the
Employer.

          

          4.3. Maximum Permissible Deferrals.

                    

                    (a) The maximum amount which may be deferred under the Plan
by an Employee in any Plan Year may not exceed the lesser of (i) 100% of his or
her Includible Compensation for the year, or (ii) the applicable dollar amount
in effect for the Plan Year, as set forth below:

          

 

For The Plan
Year Beginning In

2002
2003
2004
2005
2006 and thereafter

The Applicable
Dollar Amount

$11,000
$12,000
$13,000
$14,000
$15,000

          

Beginning in 2007, the applicable dollar amount shall be adjusted from time to
time for changes in the cost-of-living as provided in Code section 415(d). The
maximum amount that may be deferred by any Participant for a year shall be
reduced by the amount of any prior Employer contribution credits made under
Section 5.1 for that year.

          

                    (b) Notwithstanding subsection (a) above, for one or more of
the three Plan Years preceding the Plan Year in which an Employee reaches Normal
Retirement Age, the 

          

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maximum amount that may be deferred by the Employee in any such year may not
exceed the lesser of:           

                              (i) twice the applicable dollar amount in effect
under Section 4.3(a) for the year, or

 

>                     (ii) the limitation in effect under Section 4.3(a) for the
> taxable year, plus so much of the limitation in effect under Section 4.3(a)
> for all prior Plan Years in which the Participant was eligible to participate,
> but which he/she did not use in those years.

          

                    (c) Notwithstanding any other Plan provision to the
contrary, the Administrator may, in its sole discretion, impose such limits and
conditions on the maximum amount that may be deferred under the Plan at any time
as it deems necessary or appropriate to comply with applicable law.

          

          4.4. Vesting. A Participant's Deferral Account shall be fully vested
and nonforfeitable at all times.

          

ARTICLE V

EMPLOYER CREDITS

          

          5.1. Employer Credits. The Employer may, from time to time, credit
such additional amounts to an Employee under the Plan as it may determine in its
sole discretion. Any credits made under this Section 5.1 shall be credited on
the Employer's books and records to an Employer Contribution Account maintained
in the name of the Employee as of the date the credit is declared or such other
date as may be established by the Employer. Except as otherwise provided under
Code Section 457(e)(12) or other applicable law, the amount of such credits for
a Participant for any year shall not exceed the annual limit applicable to the
Participant for the year 

          

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under Section 4.3, reduced by any prior elective deferral credits under Section
4.1 made on behalf of the Participant for that year.           

          5.2. Vesting.

          

                    (a) Except as otherwise provided by the Employer, a
Participant's Employer Contribution Account shall be fully vested and
nonforfeitable at all times.

           

                    (b) Notwithstanding (a) above, a Participant shall forfeit
his or her Employer Contribution Account if the Participant's employment is
terminated by the Employer for Cause.

           

                    (c) For purposes of this Plan, "Cause" shall mean the
following:

           

                              (i) Dishonesty;

           

                              (ii) gross negligence or willful misconduct;

          

                              (iii) fraudulent or unethical conduct;

          

                              (iv) unreasonable neglect of or refusal to perform
the Employee's material duties;

          

> >           (v) a material violation of the Employer's established policies or
> > any employment or other written agreement with the Employer;

          

                              (vi) conduct constituting a felony or other crime
of moral turpitude; or

          

> >           (vii) willful or malicious conduct that causes injury to the
> > Employer's business or reputation or otherwise adversely affects its
> > interests.

   

ARTICLE VI

ACCOUNTING AND ACCOUNT ADJUSTMENTS

          

          6.1. Adjustments to the Accounts of Pre-1999 Participants.

          

                    (a) For Participants who first commenced participating in
the Plan before January 1, 1999, the Participant may elect, upon such terms and
conditions as may be established 

          

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by the Administrator, to have his or her Account credited (1) with simple
interest as of each Valuation Date at a rate to be determined by the
Administrator in its sole discretion (based on the rate of return on medium term
notes of the Employer) or (2) with investment gains and losses as provided in
Section 6.2 below.           

                    (b) The Accounts of such Participants shall be adjusted each
Valuation Date for (1) any payments made to, or on behalf of, the Participant or
his or her beneficiary under the Plan since the last Valuation Date (2) any
contribution (and, if applicable, interest) credits made to such Account since
that date and (3) any appreciation or depreciation in value of any Investment
Account established pursuant to Section 6.2 for the Participant since that date.

          

          6.2. Investment Accounts.

          

                    (a) For those Participants who (1) commenced participating
in the Plan on or after January 1, 1999 or (2) make an election under Section
6.1(a)(2), the Employer shall transfer to an Investment Account, funds equal to
the amounts credited to Deferral Accounts under Section 4.1 and Employer
Contribution Accounts under Section 5.1 as soon as administratively feasible on
or after the date on which such credits are to be entered on the Employer's
books and records as otherwise provided herein. A separate subaccount shall be
established under the Investment Account representing each Participant's
Deferral Account and Employer Contribution Account, to which the portion of each
transfer allocable to such Accounts (if any) shall be credited. Title to and
beneficial ownership of the assets of the Investment Account shall at all times
remain in the Employer and Participants shall not have any property interest
whatsoever in such assets. The Administrator may, in its sole discretion and
upon such terms

    

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and conditions as it may establish, permit Participants to direct the investment
of his or her subaccount under the Investment Account.           

          (b) For any period prior to the payment of benefits hereunder that
assets are not allocated to an Investment Account in accordance with (a) above,
the portion of a Participant's Account for which there are no assets in the
corresponding subaccount shall be credited with interest at the rate used under
Section 6.1(a); provided, that the Employer may, in lieu of using an interest
rate, make adjustments to that portion of the Account taking into account the
appreciation or depreciation of such deemed investment options (including, but
not limited to, mutual funds) as it may select in its sole discretion.

          

          (c) The value of the Participant's Account shall be adjusted each
Valuation Date for (1) any payments made to, or on behalf of, the Participant or
his or her beneficiary under the Plan since the last Valuation Date, (2) any
contribution (and, if applicable, interest) credits made to such Account since
that date and (3) any appreciation or depreciation in value of the Investment
Account under (a) above since that date.

          

          6.3. Notice to Participants. The Administrator shall periodically
provide statements to each Participant (no less than once each Plan Year)
setting forth the balance (if any) to the credit of the Participant's Account
and such other information as it deems appropriate.

          

ARTICLE VII

PAYMENT OF PARTICIPANT ACCOUNT BALANCES

          

          7.1. Commencement of Payments.

          

                    (a) The payment of the Participant's Account shall be made
on or about the 60th day following the date on which the Participant terminates
employment with the Employer.

          

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                    (b) Notwithstanding subsection (a) above, the Employer may,
upon such terms and conditions as it may establish in its sole discretion
consistent with Code Section 457 and Section 7.3, permit a Participant to make a
one-time irrevocable election before the date on which payment is otherwise to
be made, to defer the date for commencing payment hereunder.

 

                    (c) If a Participant has elected under subsection (b) above
to defer payment, the Employer may, upon such terms and conditions as it may
establish in its sole discretion consistent with Code Section 457 and Section
7.3, permit a Participant to make a one-time irrevocable election at any time
before the date on which payment is otherwise to be made, to defer further the
date for commencing payment hereunder.

          

          7.2. Form and Amount of Payments.

          

                    (a) Unless the Participant elects a different form of
payment in accordance with (b) below, payment of the Participant's Account shall
be made by the Employer in fifteen (15) substantially equal annual installments.

          

                    (b) A Participant may, upon such terms and conditions as the
Employer may establish in its sole discretion consistent with Code Section 457
and Section 7.3, make (in lieu, or as part, of the deferral election permitted
under Section 7.1(b)) a one-time irrevocable election to change the payment form
before the date on which payment is otherwise to be made under Section 7.1 to a
single lump sum payment or substantially equal annual installments of two (2) to
fourteen (14).

          

                    (c) For any Participant who has elected under Section 7.1(b)
to defer payment, the Participant may, upon such terms and conditions as the
Employer may establish in its sole discretion consistent with Code Section 457
and Section 7.3, permit a Participant to make (in lieu, or as part, of the
deferral election permitted under Section 7.1(c)) a one-time irrevocable 

          

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election to change the payment form before the date on which payment is
otherwise to be made under Section 7.1 to a single lump sum payment or
substantially equal annual installments of two (2) to fourteen (14).           

                    (d) The determination of the amount to be distributed under
this Section shall be based upon the value of the Participant's Account as of
the last Valuation Date preceding the date of distribution, determined in
accordance with Article VI.

          

          7.3. Special Rule For Unforeseeable Emergency.

          

                    (a) In the event of a severe financial hardship to a
Participant resulting (i) from a sudden and unexpected illness or accident of a
Participant or a Participant's dependent as defined in Code Section 152(a)),
(ii) loss of a Participant's property due to casualty, or (iii) other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond a Participant's control, the Participant may apply for a payment of all
or a part of his or her Account (to be paid first from the Deferral Account) as
may be necessary to meet the foregoing hardship. A hardship does not qualify
under this Section if it is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of the Participant's
assets (to the extent such liquidation would not cause severe financial
hardship) or (iii) by ceasing deferrals under the Plan.

          

                    (b) The Administrator shall have the authority, in its sole
discretion, to approve payment under (a) above in any amount up to the least of:
(i) the requested amount, (ii) the amount reasonably needed to satisfy the
hardship (which may include such additional amounts as may be necessary to pay
any taxes or penalties which may result from the distribution), as determined by
the Administrator in its sole discretion, or (iii) the value of the
Participant's Account as determined under Section 6.1.

          

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          7.4. Minimum Distribution Requirements. Notwithstanding any other
provision of the Plan to the contrary, the payment of a Participant's Account
shall be made in accordance with, and at the time(s) required by, the minimum
distribution requirements under Code Section 457(d)(2).

          

ARTICLE VIII

DEATH BENEFITS

          

          8.1. Payment of Death Benefits.

           

                    (a) Upon the death of a Participant, the unpaid balance (if
any) of the Participant's Account shall be paid to his or her beneficiary
(determined in accordance with Section 8.2) as soon as administratively feasible
after the Participant's death in one lump sum payment.

          

                    (b) Notwithstanding subsection (a) above, the Employer may,
upon such terms and conditions as it may establish in its sole discretion
consistent with the requirements under Code Section 457 and Section 8.1(e),
permit the beneficiary to make a one-time irrevocable election before the date
on which payment is otherwise to be made, to defer the date for commencing
payment hereunder.

          

                    (c) Notwithstanding subsection (a) above and in lieu of
deferral election permitted under Section 8.1(b), the Employer may, upon such
terms and conditions as it may establish in its sole discretion consistent with
Code Section 457 and Section 8.1(e), permit the beneficiary to make a one-time
irrevocable election to change the payment form before the date on which payment
is otherwise to be made under Section 8.1(a) to substantially equal annual
installments or other available form of payment.

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                    (d) The determination of the amount to be distributed under
this Section shall be based upon the value of the Participant's Account as of
the last Valuation Date preceding the date of distribution, determined in
accordance with Article VI.

          

                    (e) Notwithstanding any other provision of the Plan to the
contrary, the payment of a deceased Participant's Account to his or her
beneficiary shall be made in accordance with, and at the time(s) required by,
the minimum distribution requirements under Code Section 457(d)(2).

          

          8.2. Participant's Beneficiary.

 

                    (a) If a Participant is married at the time of his or her
death, the Participant's beneficiary shall be his or her spouse, unless the
Participant names another beneficiary in accordance with (c) below and the named
beneficiary is alive (or, in the case of a trust, in existence) on the
Participant's date of death.

          

                    (b) If a Participant is not married at the time of his or
her death, the Participant's beneficiary shall be the individual or trust the
Participant has designated in accordance with (c) below prior to his or her
death. If a Participant dies without naming a beneficiary or if the named
beneficiary is no longer living (or, in the case of a trust, in existence) on
the Participant's date of death, the Participant's beneficiary shall be his or
her estate.

          

                    (c) A Participant may make a beneficiary designation (or
change a prior designation) as provided in (a) or (b) above at any time prior to
his or her death by delivery of a written designation to the Employer's human
resources directorate (or its designee) on such forms as may be required by the
Administrator. Both individuals and trusts may be designated as beneficiaries
under this Section.

          

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          8.3. Proper Beneficiary. If there is a dispute as to the proper
beneficiary to receive payment hereunder, the Employer shall have the right to
withhold such payment until the matter is finally resolved or adjudicated;
provided that any payment made in good faith by the Employer shall fully
discharge the Employer and the Administrator from all further obligations with
respect to that payment.

          

ARTICLE IX

          

PLAN ADMINISTRATION

          

          9.1. Administration. The Administrator (or its delegate) shall, from
time to time, establish such rules, forms and procedures for the administration
of the Plan as it deems appropriate. The Administrator shall have full
discretionary power and authority to interpret and administer this Plan and to
delegate all or a part of its duties and responsibilities hereunder. The
interpretation and construction of the Plan by the Administrator or its
delegate, and any action taken hereunder, shall be final, binding and conclusive
upon all parties in interest. Neither the Administrator nor any of its agents or
employees shall be liable to any person for any action taken or omitted to be
taken in connection with the interpretation, construction or administration of
this Plan, so long as such action or omission to act is made in good faith.

          

          9.2. Determination of Benefits. The Administrator shall make all
determinations as to the rights to benefits under this Plan. Subject to and in
compliance with the specific procedures contained in the applicable regulations
under ERISA: (a) Any decision by the Administrator denying a claim by a
Participant or his beneficiary for benefits under this Plan shall be stated in
writing and delivered or mailed to the Participant or beneficiary; (b) each such
notice shall set forth the specific reasons for the denial, written in a manner
that is intended to be understandable to the claimant; and (c) the Administrator
shall afford a reasonable opportunity to the Participant 

          

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or beneficiary for a full and fair review of the decision denying such claim.
The benefit claims procedures then in effect under Section 503 of ERISA, and any
regulations thereunder, shall be followed by the Administrator in making any
benefit determinations under this Plan. All interpretations, determinations and
decisions of the Administrator with respect to any claim hereunder shall be made
in its sole discretion and shall be final and conclusive.           

          9.3. Expenses. Unless otherwise directed by the Employer, the expenses
of administering the Plan and any Investment Account established under Section
6.1 (including any income or other taxes owing on the investments of any such
account) shall be paid from the assets of the account and shall be allocated
among the then existing subaccounts thereunder on a pro rata or other
appropriate basis as determined by the Administrator in its sole discretion.

          

ARTICLE X

GENERAL PROVISIONS

          

          10.1. Amendment, Suspension and Termination.

          

                    (a) The Employer reserves the right to amend the Plan at any
time and from time to time. No amendment shall deprive a Participant of his or
her Account hereunder determined as of the last Valuation Date preceding the
amendment.

          

                    (b) The Employer reserves the right to terminate the Plan at
any time; provided that upon termination, no Participant shall be deprived of
his or her Account hereunder determined as of the last Valuation Date preceding
termination. Upon termination of the Plan, the payment of the Accounts shall be
made in accordance with the terms of the Plan in effect on the date of
termination (unless otherwise amended by the Employer).

 

          10.2. Nontransferability of Benefits. The rights of the Participant
and any beneficiary under the Plan are not subject to the claims of their
creditors and may not be voluntarily or 

          

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involuntarily transferred, assigned, alienated, accelerated or encumbered.
Notwithstanding the preceding sentence, the Accounts payable under the Plan may,
in the Employer's discretion, be offset by any liability of the Participant to
the Employer. An amount will be subject to offset hereunder if owed or otherwise
payable by the Participant at any time and for any reason, including, but not
limited to, a loan made by the Employer to the Participant, recovery of amounts
due to misconduct of the Participant, or any other liability or obligation of
the Participant of any type, as determined by the Employer.           

          10.3. Qualified Domestic Relations Orders. Notwithstanding any other
provision of this Plan, all or part of the Participant's Account may be
distributed to an alternate payee pursuant to terms of a qualified domestic
relations order within the meaning of Code section 414(p). Such distribution may
be made even if the Participant is not otherwise eligible to receive a
distribution at the time of payment to the alternate payee(s).

          

          10.4. Participant's Rights Unsecured. The Plan is intended to be
unfunded for purposes of both the Code and ERISA. The right of a Participant or
his or her beneficiary to receive payment of the Participant's Account hereunder
shall be a general unsecured claim against the general assets of the Employer,
and neither the Participant nor his or her beneficiary shall have any rights in
or against any amount credited to any Investment Account or any other specific
assets of the Employer. To the extent that any person acquires a right to
receive payments from an Employer under the Plan, such right shall be no greater
than the right of any general unsecured creditor of the Employer.

          

          10.5. Erroneous Payments. In the event that a Participant or a
beneficiary receives a distribution under this Plan in excess of the amount, if
any, to which he is entitled, by reason of a calculation error or otherwise, the
Administrator or its delegate may, in its sole discretion, adjust 

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future benefit payments to the Participant or the beneficiary to the extent
necessary to recoup the amount which the Participant or the beneficiary received
which was in excess of the amount to which he was entitled under the terms of
the Plan. If the Administrator or its delegate determines, in its sole
discretion, that it is not feasible or desirable to adjust future benefit
payments to the Participant or beneficiary, it may require him or her to repay
to the Plan the amount which is in excess of the amount to which he or she is
entitled under the terms of the Plan. All amounts received by a Participant or a
beneficiary under the Plan shall be deemed to be paid subject to this condition.
          

          10.6. Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the Commonwealth of Virginia, to the extent
applicable.

          

          10.7. Effect on Employment Rights. Nothing in this Plan shall be
construed as (a) giving any Participant any right to continued employment with
the Employer or otherwise modifying his or her employment with the Employer or
any affiliate or (b) affecting the eligibility for, or calculation of, any
benefit provided to any Participant by the Employer to the extent permitted by
law. No Participant shall have the right to receive any benefit under the Plan
except in accordance with the Plan's terms.

          

          10.8. Severability. If any provision of the Plan shall be held invalid
or illegal for any reason, such event shall not affect or render invalid or
unenforceable the remaining provisions of the Plan.

          

          10.9. Notice. Any notice, consent, election or demand required or
permitted to be given under the provisions of this Plan shall be in writing, and
shall be signed by the party giving or making the same. If such notice, consent,
election or demand is to be mailed, it shall be sent by 

             

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United States first class mail, postage prepaid, addressed to the addressee's
last known address. The date of such mailing shall be deemed the date of notice,
consent, election or demand.           

          10.10. Tax Liability. Any required federal, state or local tax
withholding may be withheld from any payment made pursuant to this Plan.

          

          10.11. No Guarantee of Benefits. Nothing in this Plan shall constitute
a guarantee by the Employer, the Administrator or any other person or entity
that the assets of the Employer will be sufficient to pay any benefits
hereunder.

          

          10.12. Incapacity of Recipient. If the Administrator shall find that
any person to whom any benefits are payable hereunder is (a) unable to care for
his or her affairs because of illness or accident or (b) a minor, any payment
due under the Plan may be paid to the duly appointed guardian or conservator of
such person or to any third party who is eligible to receive payment from the
Plan for the account of such person. Any such payment shall be a complete
discharge of the liabilities of the Employer hereunder.

          

          10.13. Construction. Titles of articles and sections herein are for
convenience of reference only and are not to be taken into account in
interpreting the Plan. The singular shall include the plural and the plural
shall include the singular whenever used herein unless the context requires
otherwise.

    

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          IN WITNESS WHEREOF, National Rural Utilities Cooperative Finance
Corporation has caused this document to be executed by its duly authorized
officer, this 24th day of July, 2003.                          NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE CORPORATION           By:    /s/ Sheldon C.
Petersen               Title: Chief Executive Officer           ATTEST:         

/s/ John T. Evans           

   SVP-Operations     

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