exv10w2



 





Exhibit 10.2




EMPLOYMENT AGREEMENT




     This Agreement is made and entered into, effective as of March 1, 2004, by
and between National Rural Utilities Cooperative Finance Corporation, a
District of Columbia cooperative corporation (“CFC”) and Sheldon C. Petersen
(the “Executive”).



     WHEREAS, CFC desires to retain the Executive as its Governor and Chief
Executive Officer under this Agreement for the period provided for in this
Agreement, and the Executive is willing to serve in the employ of CFC on a
full-time basis for such period, upon such terms and conditions as are provided
herein;



     NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the parties
hereby agree as follows:



     1. Employment. Subject to and upon the terms and conditions herein
provided, CFC hereby agrees to employ the Executive and the Executive
hereby agrees to be
employed by CFC for the Term of Employment, as defined in Section 3
hereof.



     2. Position and Responsibilities. During the Term of Employment
hereunder, the Executive shall be employed as the Chief Executive Officer
of CFC, and/or in
such other senior executive capacity or capacities as may be mutually
satisfactory to the
Executive and CFC. The Executive will be the senior executive officer of
CFC, reporting only to
the Board of Directors of CFC (the “Board”), and all other officers of CFC
shall report to the
Executive or to other officers designated by the Executive. The Executive
shall, at the request of
the Board, serve as an officer or director of any subsidiary or affiliated
entity of CFC.



     During the Term of Employment, except as hereinafter provided and except
for vacation, holidays observed by CFC and periods of illness, the Executive
agrees to devote substantially all of his business time and attention to
carrying out his duties and responsibilities under this Agreement and shall use
his best efforts, skills and abilities to further the interests of CFC. The
Executive shall be permitted, to the extent such activities do not
substantially interfere with the performance of the Executive’s
responsibilities and duties hereunder, (i) to manage his personal, financial
and legal affairs and (ii) to serve on civic, charitable, religious or
educational boards or committees. However, the Executive may not serve on the
board of directors of any other business entities without the prior express
written consent of the Board and subject to such reasonable limitations as may
be imposed by the Board in granting such consent.



     3. Term of Employment. The Term of Employment under this Agreement
shall commence as of March 1, 2004, and shall terminate on February 28,
2009 unless earlier
terminated as provided in Section 6 below or extended as provided in the
following sentence (the
“Term of Employment”). The Term of Employment shall automatically be
extended on



 









 





March 1, 2009 and each subsequent March 1 for an additional year unless, not
later than 6 months prior to any such date, either party to this Agreement
shall have given written notice to the other party that he or it does not wish
to extend or further extend the Term of Employment.



     4. Compensation. For all services rendered by the Executive during
the
Term of Employment, CFC shall pay the Executive as compensation (i) a base
salary, in periodic
installments in accordance with CFC’s usual payroll practice for its
senior executives, at an
annual rate of no less than $500,000 (the “Base Salary”), (ii) an annual
incentive (the “Short-
Term Incentive”) pursuant to the terms set forth in the CFC Annual
Incentive Plan; and (iii) a
long-term incentive pursuant to the terms of the CFC Long Term Incentive
Plan. During the
Term of Employment, the Executive’s Base Salary shall be reviewed for
possible increase at
least annually, and the term “Base Salary” shall thereafter refer to the
Base Salary as so
increased.



     5. Executive Benefits, Perquisites and Expenses.



          5.1 CFC Plans. The Executive shall be entitled to participate in
all
CFC health, accident, life insurance, savings, retirement, disability and
other benefit plans,
programs or practices from time to time in effect for senior executives of
CFC at least to the
same extent as other senior executives (or, where applicable, retired
senior executives) of CFC,
including, without limitation, CFC’s Annual Incentive Plan, Long-Term
Incentive Plan, Pension
Restoration Deferred Compensation Plan and Pension Restoration Severance
Pay Plan.



          5.2 Vacations. The Executive shall be entitled to an amount of paid
vacation during each twelve-month period during the Term of Employment
equal to the
maximum amount of vacation allowed for any full-time employee of CFC (but
not less than five
weeks of paid vacation earned uniformly during each such period), plus
such holidays, sick leave
and other time off as are established by the policies of CFC. Unused days
of vacation may be
carried over to subsequent years, provided, however, that amounts
of unused vacation in excess
of 480 hours at the close of each such twelve-month period shall be
settled in cash at the current
rate of pay.. The Executive shall receive within thirty (30) days after
his employment terminates,
a payment (based on the Executive’s Base Salary in effect on the date the
Executive terminated
employment with CFC) for any accrued but unused vacation at the
termination but not in excess
of 12 weeks regardless of the reason for such termination of employment of
the Executive.



          5.3 Perquisites; Expenses. During the Term of
Employment, the
Executive shall be entitled to receive such perquisites as CFC may determine to
provide to its senior executive officers, and CFC shall reimburse the Executive
for all reasonable and documented expenses incurred by the Executive in
connection with the performance of the Executive’s duties hereunder, including,
without limitation, expenses incurred as a result of the attendance by the
Executive’s wife at a function or meeting where the Executive determines that
her attendance is appropriate.



          5.4 Automobile. During the Term of Employment, CFC shall
provide
the Executive with, and shall pay all reasonable expenses (including,
without limitation,



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insurance, repairs, maintenance, fuel and oil) for, an automobile selected by
the Executive with the approval of the Board.



          5.5 Executive Health Physical. During the Term of Employment,
the Executive shall be entitled to have an executive health physical on an
annual basis, at a medical institution of his choice within the continental US.
The health physical shall be comprehensive, and consistent with the standards
that are established practice within the medical profession at the time. All
diagnostic and ancillary fees that qualify will be submitted by the Executive
for insurance reimbursement, and all remaining fees for the health physical
services will be either paid directly by CFC or reimbursed to the Executive.



     6. Payments to the Executive Upon Termination of
Employment.



          6.1 Termination by CFC.



          (a) CFC shall have the right to terminate the Executive’s employment
at any time during the Term of Employment with or without “Cause”, as
defined in Section
6.5(a). If, during the Term of Employment, CFC terminates the employment
of the Executive
under this Section 6 without Cause, the Term of Employment shall terminate
immediately
thereafter, and:



               (i) CFC shall pay the Executive such Base Salary provided herein as he may
be entitled to receive for services rendered prior to the date of such
termination;



               (ii) CFC shall pay the Executive for any accrued but unused vacation as
set forth in Section 5.2 and for any properly-documented unreimbursed expenses;



               (iii) CFC shall pay the Executive the benefits which the Executive
is, or may become, entitled to receive under the terms and conditions of such
CFC plans as are in effect from time to time; and



               (iv) CFC shall pay the Executive a single lump-sum
payment
equal to the product of (a) three and (b) the sum of (1) his annual Base Salary
at the rate in effect on the date of such termination, and (2) the Executive’s
Short-Term Incentive award, if any, for the year prior (or annual bonus, if
any, for 2003) to the year in which such termination occurs.



          (b) If, during the Term of Employment, CFC terminates the
employment of the Executive for “Cause”, as defined below, the Term of
Employment shall terminate immediately thereafter, and CFC shall pay the
Executive such compensation as is set forth in Section 6.1(a)(i), (ii) and
(iii) herein.



          6.2 Termination by the Executive.



          (a) The Executive has the right to terminate his employment
hereunder at any time during the Term of Employment upon not less than 90 days
prior written notice to



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CFC, provided, however, that if the Executive wishes to terminate his
employment for “Good Reason” as defined in Section 6.5(b), the Executive must
notify CFC in writing of such intent within 30 days of the event or events that
he believes constitute Good Reason and such notice must specify such events in
reasonable detail. If during the Term of Employment the Executive’s employment
is terminated for “Good Reason”, as defined below, the Term of Employment shall
terminate immediately thereafter, and CFC shall pay the Executive such
compensation as is set forth in Section 6.1(a)(i)-(iv).



          (b) If during the Term of Employment the Executive terminates his
employment for other than “Good Reason”, as defined below, the Term of
Employment shall terminate immediately thereafter, and CFC shall pay the
Executive such compensation as is set forth in Section 6.1(b).



          6.3 Disability. Upon the “Disability”, as defined in Section
6.5(c), of
the Executive during the Term of Employment, and for the period of
Disability, in addition to
any other benefits to which he may be entitled pursuant to this Agreement,
but in lieu of his Base
Salary and any Short-Term Incentive award, the Executive shall receive
through the end of the
Term of Employment or, if earlier, the Executive’s date of recovery,
actual termination of
employment (in which case the applicable provisions of Section 6.1 or 6.2
shall apply and this
Section 6.3 shall cease to apply) or death (in which case Section 6.4 and
any other relevant
provisions shall apply) an annual Disability Benefit equal to 60% of the
Base Salary the
Executive was receiving at the commencement of the Disability and 60% of
his target award, if
any, under CFC’s Short-Term Incentive Plan for the year in which the
Executive became
disabled. Payment of the Disability Benefit shall be in equal monthly
installments, and such
payments shall be reduced by the monthly payments received by the
Executive under any other
CFC-sponsored disability plan or program and the monthly disability
benefits received by the
Executive pursuant to the applicable provisions of the Social Security
Act. During the period
that Disability Benefits are payable to the Executive, he shall continue
to participate in CFC’s
plans described in Section 5.1 (other than the Short-Term Incentive Plan
and the Long-Term
Incentive Plan) as if he had continued to be an active CFC employee and as
if he had received
60% of the Base Salary then in effect under Section 4 (and 60% of his
target award, if any, under
the CFC Annual Incentive Plan for the year in which he became disabled).



          6.4 Death. In the event of the termination of the
Executive’s
employment by reason of death during the Term of Employment, the Executive’s
“Designated Beneficiary”, as defined below, shall be entitled to receive:



               (i) payment of the Executive’s unpaid Base Salary through the date of
death;



               (ii) payment of a pro-rated Short-Term Incentive award, if any, for the
year of the Executive’s death (at 100% of the target award);



               (iii) the lesser of (a) a lump sum payment equal to one year’s Base Salary
at the rate in effect on the date of death or (b) the Base Salary that would
have been paid



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to the Executive in the remaining period of the Term of Employment prior to
death (but in no case less than the Base Salary that would have been paid to
the Executive for a 6 month period);



               (iv) reimbursement for any properly-documented unreimbursed expenses; and



               (v) such survivor benefits and payments for the Executive’s family or with
respect to the Executive that are provided, or may be provided, under CFC’s
plans described in Section 5.1 determined in accordance with the then
applicable provisions of such plans, programs or arrangements.



          6.5 Definitions.



          (a) “Cause”. For purposes of this Agreement, Cause shall mean (i) the
willful and continued failure by the Executive, as determined in good
faith by two-thirds of the
members of the Board (after notice to the Executive and providing the
Executive an opportunity
to meet with the Board), to perform his duties under this Agreement or
comply with written
policies of CFC, or (ii) willful conduct materially injurious to CFC or
(iii) conviction of a felony
involving moral turpitude; provided, however, that any act or omission by
the Executive shall not
fall within the scope of this Section 6.5(a)(i) and (ii) if it was done or
omitted to be done by the
Executive in good faith and with a reasonable belief that such action or
omission was in the best
interests of CFC.



          (b) “Good
Reason”. For purposes of this Agreement, Good Reason
shall mean, without the prior written consent of the Executive, (i) a
reduction in the rate of the
Executive’s Base Salary, (ii) a decrease in the Executive’s titles, duties
or responsibilities
hereunder or the assignment of new responsibilities hereunder which, in
either case, is materially
less favorable to the Executive when compared to the Executive’s titles,
duties and
responsibilities which were in effect immediately prior to such
assignment, or (iii) the relocation
of CFC’s principal office or the relocation of the Executive to a location
more than 50 miles
from the principal office of CFC on the date of this Agreement; provided,
however, that the term
“Good Reason” shall not include the occurrence of any of the above if such
occurrence is
remedied by CFC within 20 business days after receipt by CFC of the
Executive’s written notice
of resignation for Good Reason under Section 6.2(a) setting forth in
specific detail the facts and
circumstances resulting in the Good Reason upon which his resignation is
based.



          (c) “Disability”. For purposes of this Agreement, Disability
shall
mean that the Executive has not performed his full-time duties with CFC for
three consecutive months as a result of his incapacity due to physical or
mental illness and within thirty (30) days after written notice of such
incapacity is given to the Executive he shall not have returned to the
full-time performance of his duties hereunder.



          (d) “Designated Beneficiary”. For purposes of this
Agreement the
Designated Beneficiary shall be any person designated by the Executive in a
written instrument signed by the Executive and delivered to CFC to be the
beneficiary of payments to be made by



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CFC hereunder upon the death of the Executive if such person survives the
Executive. Any Designated Beneficiary may be changed by the Executive at any
time and from time to time by a written instrument signed by the Executive and
delivered to CFC. If no Designated Beneficiary survives the Executive, the
Designated Beneficiary shall be the estate of the Executive.



     7. No Mitigation. CFC agrees that if the Executive’s employment is
terminated during the Term of Employment, the Executive is not required to
seek other
employment or to attempt in any way to reduce the amounts payable and the
benefits to be
provided to the Executive by CFC under this Agreement. Further, the amount
or nature of any
such payment or benefit to be paid to or with respect to the Executive
shall not be reduced by
any compensation earned by the Executive as a result of employment by
another employer, by
retirement benefits, or offset against any amount claimed to be owed by
the Executive to CFC or
any of its subsidiaries or otherwise.



     8. Confidential Information . The Executive shall not at any time
during his
employment with CFC or following termination or expiration of this
Agreement, directly or
indirectly, disclose, publish or divulge to any person (except in the
regular course of CFC’s
business or as required by law or regulations), or appropriate, use or
cause, permit or induce any
person to appropriate or use, any proprietary, secret or confidential
information of CFC
including, without limitation, knowledge or information relating to its
copyrights, trade secrets,
business methods, the names or requirements of its customers, vendors,
contractors, agents,
dealers and distributors or the prices, credit or other terms extended or
granted to any of such
persons, all of which the Executive agrees are and will be of great value
to CFC and shall at all
times be kept confidential. Upon the termination of the Term of Employment
hereunder, the
Executive shall promptly deliver or return to CFC all materials of a
proprietary, secret or
confidential nature relating to CFC together with any other property of
CFC which may have
theretofore been delivered to or may then be in the possession or control
of the Executive. CFC
and the Executive agree that the provisions of this Section shall survive
the termination of the
Executive’s employment hereunder.



     9. Indemnification. CFC agrees that if the Executive is made, or is
threatened to be made, a party to any action or proceeding, whether civil
or criminal, by reason
of the fact that he is or was a director or officer of CFC or any of its
subsidiaries or, at the
request of CFC, serves or served any other corporation, partnership, joint
venture, trust or other
enterprise in any capacity, CFC shall indemnify him to the fullest extent
permitted by the Charter
and By-Laws of CFC or, if greater, by the applicable laws of the State of
Virginia, against all
costs, expenses, liabilities and losses reasonably incurred or suffered by
the Executive in
connection therewith. CFC shall advance to the Executive all reasonable
costs and expenses
incurred by him in connection with any such proceeding upon receipt of an
itemized list of such
costs and expenses.



     10. Legal
Fees and Expenses, In the event that a claim for payment
or
benefits under this Agreement is disputed, the Executive shall be
reimbursed for all reasonable
attorney fees and expenses incurred by the Executive on a proportionate
basis in pursuing such



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claim, to the extent that the Executive is successful as to all or part of
the disputed claim by reason of litigation, arbitration or settlement.



     11. Amendment; Waiver. This Agreement contains the entire agreement
of
the parties with respect to the matters set forth herein, and may only be
amended by subsequent
written agreement of the parties hereto. All prior agreements between the
Executive and CFC,
whether in writing or not, relating to terms and conditions of employment
are hereby canceled.
No waiver by CFC of any breach by the Executive of any term, condition or
provision of this
Agreement to be performed by the Executive shall be deemed a waiver of a
similar or dissimilar
condition or provision at the same or prior or subsequent time.



     12. Binding Effect. The Executive’s rights and obligations under
this
Agreement shall not be transferable by assignment or otherwise, such
rights shall not be subject
to commutation, encumbrance, or the claims of the Executive’s creditors,
and any attempt to do
any of the foregoing shall be null and void. The provisions of this
Agreement shall be binding
upon and inure to the benefit of the Executive and his heirs,
beneficiaries and personal
representatives, and shall be binding upon and inure to the benefit of CFC
and its successors or
assigns.



     13. Governing
Law; Severability. Except as otherwise set forth
herein, this
Agreement is governed by and is to be construed and enforced in accordance
with the laws of the
State of Virginia without regard to principles of conflicts of law. If any
provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in
full force and effect to the fullest extent permitted by law.



     14. Withholding of Taxes. CFC may withhold from any compensation
payable under this Agreement all federal, state, city, or other taxes as
shall be required pursuant
to any law, regulation or ruling.



     15. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.



     16. Headings. The headings contained in this Agreement are for
reference
purposes only and shall not be deemed to be part of the Agreement or to
affect the meaning or
interpretation of this Agreement.



     17. Notices. Any notice given to either party hereto shall be in
writing and

shall be deemed to have been given when delivered personally or sent by
certified or registered
mail, postage prepaid, return receipt requested, duly and properly
addressed to the party
concerned at the address indicated below or to such changed address as
party may subsequently
give notice of:



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	If to CFC:
	 	 
	 
	 	 
	

	 	National Rural Utilities
	

	 	      Cooperative Finance Corporation
	

	 	Woodland Park
	

	 	2201 Cooperative Way
	

	 	Herndon, Virginia 22071
	

	 	Attn: President
	 
	 	 
	If to the Executive:
	 
	 	 
	

	 	Mr. Sheldon C. Petersen
	

	 	510 Fortress Circle S.E.
	

	 	Leesburg, Virginia 22075







     18. Enforcement of Agreement. The respective rights and obligations
of the parties hereunder shall survive any termination of this Agreement or the
Term of Employment for any reason to the extent necessary to obtain the
intended provision of such rights and the intended performance of such
obligations.



     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.



	 	 	 	 	 
	 	 	NATIONAL RURAL UTILITIES COOPERATIVE
	 	 	FINANCE CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	-s- Stephen R. Louder
	

	 	 	 	

	

	 	 	 	President
	 
	 	 	 	 
	 	 	 	 	-s- Sheldon C. Petersen
	 	 	 	 	

	 	 	 	 	Sheldon C. Petersen








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