Form 10-K - Exhibit 10.1




 


  
  	
        

        

         

         

        NATIONAL RURAL UTILITIES

        COOPERATIVE FINANCE CORPORATION

        DEFERRED COMPENSATION PLAN

        
         

         

         

         

        
        As Amended and Restated Effective July 1, 2003

         

         

        
         



  







  
  	
        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
	  	  	  
	  	
        -i-
	   
	    


  





  
  	
        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
      

	
           
	
        -1-

	   
	
        

        


	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) 

	          
	
        -2-

	          
	
        

      

	
 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.

	          
	
        -3-

	          
	          
        

      

	
                  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

	
            
	
        -4-

	
            
	
        

         


	
         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 

	
                  
	
        -5-

	
                  
	
        

         


	
 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 

	          
	
        -6-

	          
	
        

         


	 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 

	
                  
	
        -7-

	
                  
	
        

      

	
 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

	
            
	
        -8-

	
            
	
        

      

	
 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.

	          
	
        -9-

	          
	
        

      

	
                            (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 

	          
	
        -10-

	     
	
        

      

	 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.

	          
	
        -11-

	          
	
        

      

	
                  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.

	
	
        -12-

	          
        

        

      
	
                            (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.

	          
	
        -13-

	          
	
        

      

	
                  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 

	          
	
        -14-

	
	
        

      

	 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 

	          
	
        -15-

	          
	
        

      

	 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 

	          
	-16-
	          
	
        

      

	 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 

	             
	
        -17-

	               
	
        

      

	 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.

	
            
	
        -18-

	
             
	
        

      

	
                  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	
      
	
            
	
        -19-