exv10w3



 





Exhibit 10.3




SUPPLEMENTAL BENEFIT AGREEMENT




     This Agreement is made and entered into effective as of July 22, 2004, by
and between Rural Telephone Finance Cooperative, a South Dakota cooperative
corporation (“RTFC”) and Sheldon C. Petersen (the “Executive”).



     WHEREAS, RTFC desires to retain the executive as its 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 RTFC 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, RTFC hereby agrees to employ the Executive and the Executive
hereby agrees
to be employed by RTFC 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 RTFC, or
in such other senior executive capacity or capacities as may be mutually
satisfactory to
the Executive and RTFC. The Executive will be the senior executive
officer of RTFC,
reporting only to the Board of Directors of RTFC (the “Board”).



          3. Term of Employment. The Term of Employment under this
Agreement shall commence as of July 22, 2004, and shall terminate on
February 28, 2009
unless earlier terminated as provided in Section 5 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. RTFC has created, on its books of account, a
deferred compensation account with respect to the Executive (the
“Account”). As of
March 1, 1995, and on January 1 of each year thereafter, RTFC has credited
the Account
in the amount of $30,000. Each year thereafter during the term of
employment, RTFC
shall make a similar credit. Except as provided in Section 5 below, the
balance in the
Account shall be deemed to be credited with interest annually on December
31st of each
year during the Term of Employment at a rate equal to the effective cost
to RTFC’s
affiliate corporation, the National Rural Utilities Cooperative Finance
Corporation
(CFC), for 20 year Medium Term Notes computed at the time of each annual
deposit.
RTFC shall provide an alternative investment mechanism whereby the
opportunity to
earn a higher rate of return could be offered, if at Mr. Petersen’s
option, such an
alternative were requested. RTFC shall not be required to create a
separate account or
any reserve of cash or investments in connection with its obligations with
respect to this



 









 





Account and the Executive will have the status of a general creditor of RTFC
with respect to any benefits to be provided under this Agreement.



          5. Payments to the Executive Upon Termination of
Employment.



               5.1 Termination by RTFC.



               (a) RTFC shall have the right to terminate the Executive’s
employment at any time with or without “Cause” as defined in Section 5.6. If,
during the Term of Employment, RTFC terminates the employment of the Executive
under this Section 5 without Cause, the Term of Employment shall terminate
immediately thereafter; provided, however, that:



                    (i) the Account will be deemed to be continued in effect
for a period of 12 months or, if less, the remaining period of the Term of
Employment prior to such termination (but in no case less than 6 months) (the
“Extended Period”) and all credits described in Section 4 shall continue to be
made;



                    (ii) if the end of the Extended Period occurs on other than
a December 31st, RTFC shall further credit the Account with simple interest
for the period from January 1 to the end of the Extended Period at the same
rate that was used to credit interest on the prior
December 31st; and



                    (iii) within 15 days after the end of the Extended Period,
RTFC will pay to the Executive in a single lump sum an amount equal to the
balance in the Account at the end of the Extended Period after the additional
credit described in (ii) above has been made.



               (b) If during the Term of Employment, RTFC terminates the
employment of the Executive for “Cause”, as defined below, the Term of
Employment
shall terminate immediately thereafter, and the Executive shall not be
entitled to any
payment with respect to the Account.



               5.2
Termination by the Executive. 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 RTFC. If
during the Term of Employment the Executive terminates his employment with
RTFC, the Term of Employment shall terminate immediately, and RTFC shall pay
the Executive such compensation as is set forth in Section 5.1(a).



               5.3 Disability. In the event of the termination of
the
Executive’s employment by reason of “Disability”, as defined below, during
the Term of
Employment, RTFC shall pay the Executive the amount described in Section
5.1 (a).



               5.4 Death. In the event of the termination of the Executive’s
employment by reason of death during the Term of Employment, RTFC shall
pay the
Executive’s Designated Beneficiary the amount described in Section 5.1(a).



 









 






               5.5 Expiration of Term. In the event of the termination of the
Executive’s employment by reason of the completion of the Term of
Employment
without further extension as described in Section 3, within 15 days from
the expiration of
the Term of Employment RTFC shall pay to the Executive an amount equal to
the
Account balance, after the additional credit described in Section 5.1 (a)
above as if the
February 28th date were the end of the Extended Period.



               5.6 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 RTFC, or (ii) willful conduct materially
injurious to
RTFC or to an affiliate of RTFC 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 5.6(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 RTFC.



               (b) “Disability”. For purposes of this Agreement, Disability
shall
mean that the Executive has not performed his full-time duties with RTFC
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 termination is given to
the Executive he
shall not have returned to the full-time performance of his duties
hereunder.



               (c) “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 RTFC to be the
beneficiary of
payments to be made by RTFC 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 or times by a written instrument signed by the Executive and
delivered to
RTFC. If no Designated Beneficiary survives the Executive, the Designated
Beneficiary
shall be the estate of the Executive.



               6. No Mitigation. RTFC 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 RTFC 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 RTFC or any of its subsidiaries or otherwise.



               7. Confidential Information. The Executive shall not at any time
during his employment with RTFC or following termination or expiration of
this
Agreement, directly or indirectly, disclose, publish or divulge to any
person (except in the
regular course of RTFC’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 RTFC 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 RTFC 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 RTFC all materials of a proprietary, secret or
confidential nature relating to RTFC together with any other property of RTFC
which may have theretofore been delivered to or may then be in the possession
or control of the Executive. RTFC and the Executive agree that the provisions
of this Section shall survive the termination of the executive’s employment
hereunder.



          8. 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 in
pursuing such claim,
provided that the Executive is successful as to at least part of the
disputed claim by
reason of litigation, arbitration or settlement.



          9. 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 RTFC, whether in writing or not, relating to
terms and
conditions of employment are hereby cancelled. No waiver by RTFC 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.



          10. 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 RTFC and its successors or assigns.



          11. 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.



          12. Withholding of Taxes. RTFC 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.



 









 





          13. 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.



          14. 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.



          15. 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:



	 	 	 
	If to RTFC:
	 	 
	 
	 	 
	

	 	The Rural Telephone Finance Cooperative
	

	 	Woodland Park
	

	 	2201 Cooperative Way
	

	 	Herndon, Virginia 20171
	

	 	ATTN: President
	 
	 	 
	If to the Executive:
	 
	 	 
	

	 	Mr. Sheldon C. Petersen
	

	 	510 Fortress Circle S.E.
	

	 	Leesburg, Virginia 20175







          16. 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.



	 	 	 	 	 
	 	 	RURAL TELEPHONE FINANCE
	 	 	COOPERATIVE
	 
	 	 	 	 
	

	 	By:
	 	-s- William Hegmann

	

	 	 	 	William Hegmann, President
	 
	 	 	 	 
	

	 	 
	 	-s- Sheldon C. Petersen

	

	 	 	 	Sheldon C. Petersen, CEO