Document:

10.1 Employment Agreement between the Company and Sheldon C. Petersen

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into, effective as of January 1, 2015, by and between National Rural Utilities Cooperative Finance Corporation, a District of Columbia cooperative corporation (“CFC”), and Sheldon C. Petersen (the “Executive”).

WHEREAS, CFC and the Executive previously entered into an Employment Agreement, dated as of January 1, 2008 and as further amended (the “Prior Employment Agreement”) and hereby desire, through execution of this Agreement, to supersede such Prior Employment Agreement; and

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, 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 Executive’s employment under this Agreement shall commence as of January 1, 2015 and shall terminate on May 31, 2017, unless earlier 

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terminated as provided in Section 6 below or extended as provided in the following sentence (the “Initial Term of Employment”).  The Initial Term of Employment shall automatically be extended on June 1, 2017 and each subsequent June 1st thereafter for an additional year (each such extension, an “Extended Term of Employment”) unless, not later than six (6) months prior to any such June 1st, 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.  For purposes of this Agreement, “Term of Employment” shall mean the Initial Term of Employment and, if applicable, each subsequent Extended 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 $975,000 (the “Base Salary”), and (ii) if the applicable performance goals and/or other criteria are achieved with respect thereto, an opportunity to receive (A) an annual incentive (the “Short-Term Incentive”) pursuant to the terms set forth in the CFC Annual Incentive Plan and (B) 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, and Pension Restoration Deferred Compensation Plan.  

5.2.Vacation.  The Executive shall be entitled to seven (7) weeks of paid vacation granted on January 1st of each year, 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 three hundred twenty (320) hours at the close of each such twelve (12)-month period shall be settled in cash at the Executive’s 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 fifteen (15) weeks (which represents the maximum accrued vacation based on the year in which the termination occurs and the maximum accrued vacation which may be carried over from the year prior to the year in which such termination occurs), 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

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incurred by the Executive in connection with the performance of the Executive’s duties hereunder, including, an annual allowance approved by the Board to cover 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 an annual allowance approved by the Board to cover all reasonable expenses (including, insurance, repairs, maintenance, fuel, and oil) for an automobile selected by the Executive.

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 United States.  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 will be either paid directly by CFC or reimbursed to the Executive.
    
5.6.Supplemental Executive Retirement Plan.  During the Term of Employment, the Executive shall be eligible to participate in CFC’s Supplemental Executive Retirement Plan (the “SERP”).  CFC may, from time to time and in its sole discretion, make contributions to the SERP on the Executive’s behalf and establish vesting and other conditions applicable thereto.     

		
	6.
	Termination of Employment; Payments 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; 

iv.CFC shall pay the Executive a single lump-sum payment equal to the product of (A) three (3) 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 to the year in which such termination occurs; and

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v.CFC shall pay the Executive the benefits, if any, accrued under the Supplemental Executive Retirement Plan as set forth in Section 5.6.

b.If, during the Term of Employment, CFC terminates the employment of the Executive for Cause, the Term of Employment shall terminate immediately thereafter, and CFC shall pay the Executive such compensation as is set forth in Sections 6.1.a.i, 6.1.a.ii, and 6.1.a.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 ninety (90) days prior written notice to 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 thirty (30) days of the event or events that he believes constitute Good Reason, and such notice must specify such event or events in reasonable detail.  If during the Term of Employment the Executive’s employment is terminated for Good Reason, 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.

b.If during the Term of Employment the Executive terminates his employment for other than Good Reason, 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 earliest of (a) the end of the Term of Employment, (b) the Executive’s date of recovery, (c) the Executive’s actual termination of employment (in which case the applicable provisions of Section 6.1 or Section 6.2 shall apply and this Section 6.3 shall cease to apply), or (d) the Executive’s death (in which case Section 6.4 and any other relevant provisions shall apply and this Section 6.3 shall cease to apply), an annual “Disability Benefit” equal to sixty percent (60%) of the Base Salary the Executive was receiving at the commencement of the Disability and sixty percent (60%) of his target Short-Term Incentive award, if any, under CFC’s Annual 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 Annual 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 sixty percent (60%) of the Base Salary then in

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 effect under Section 4 (and sixty percent (60%) of his target award, if any, under CFC’s 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 in Section 6.5.d, shall be entitled to receive:

a.payment of the Executive’s unpaid Base Salary through the date of death;
b.payment of a pro-rated Short-Term Incentive award, if any, for the year of the Executive’s death (at one hundred percent (100%) of the target award);

c.the lesser of (i) a lump sum payment equal to one year’s Base Salary at the rate in effect on the date of death or (ii) the Base Salary that would have been paid 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 six (6)-month period);

d.reimbursement for any properly-documented, unreimbursed expenses; and

e.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 (2/3) 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; (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 fifty (50) miles from the principal office of CFC on the date of this Agreement; provided, 

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however, that the term Good Reason shall not include the occurrence of any of the above if such occurrence is remedied by CFC within twenty (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 (3) 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 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 the Term of 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 8 shall survive the termination of the Executive’s employment hereunder.

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	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 District of Columbia, 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 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, including the Prior Employment Agreement, are hereby canceled and superseded.  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 Commonwealth 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.

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	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:

If to CFC:

National Rural Utilities
Cooperative Finance Corporation
20701 Cooperative Way
Dulles, VA 20166
Attn: President of the Board of Directors

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.

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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/  JOEL B. CUNNINGHAM

	Name:
	Joel B. Cunningham 

	Title:
	President of the Board of Directors

	
		
	By:
	/s/ SHELDON C. PETERSEN

	 
	Sheldon C. Petersen

	 
	 

Signature Page to Employment Agreement

910.2 NRUCFC Supplemental Executive Retirement Plam

 
 
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
Effective January 1, 2015

NAME AND PURPOSE
The name of this plan is the National Rural Utilities Cooperative Finance Corporation Supplemental Executive Retirement Plan (the “Plan”).  The purpose of the Plan is to enable National Rural Utilities Cooperative Finance Corporation (“CFC”) to allow its Chief Executive Officer, Sheldon C. Petersen (the “Participant”), to earn retirement benefits in addition to those credited under any other plan of CFC.  CFC intends that the Plan shall constitute an “ineligible deferred compensation plan” within the meaning of Section 457(f) of the Code. This Plan is hereby established pursuant to the Employment Agreement by and between CFC and the Participant, effective January 1, 2015.  Sheldon C. Petersen shall be the sole Participant under this Plan.
EFFECTIVE DATE
The Plan is effective as of January 1, 2015.  
CONTRIBUTIONS TO ACCOUNT
The Board of Directors (the “Board”), in its sole and absolute discretion, may from time to time elect to make contributions in any amount to Participant’s Account. 
RETIREMENT BENEFIT
CFC shall establish an account on CFC’s books titled “Ineligible Deferred Compensation Account” (hereinafter referred to as the “Account”).  The Account shall be credited with the amounts contributed by CFC from time to time pursuant to the Plan.  No earnings or losses will be credited to the Account.  
VESTING
The Participant’s Account shall vest as follows:
		
	(a)
	Contributions Prior to the Initial Vesting Date

If CFC makes contributions to the Participant’s Account prior to the Initial Vesting Date, the Account shall vest on the Initial Vesting Date as long as the Participant remains an employee of CFC at that time.  Otherwise, except as next provided, if the Participant’s employment with CFC is terminated prior to the Initial Vesting Date, the Participant shall forfeit all of his right, title and interest (if any) in and to his Account and any other right or benefit under the Plan.  If the Participant incurs a Qualifying Termination prior to the Initial

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 Vesting Date, the Participant shall become fully vested in his Account as of the date of such employment termination.

		
	(b)
	Contributions After the Initial Vesting Date

If CFC determines to make contributions on or after the Initial Vesting Date, the amounts so contributed will be treated as fully vested if the Participant remains employed by CFC on the last day of the calendar year in which the amounts are contributed (the “Continuing Vesting Date”).  Except as next provided, if the Participant’s employment with CFC is terminated prior to the Continuing Vesting Date, the Participant shall forfeit all of his right, title and interest (if any) in and to his then Account and any other right or benefit under the Plan.  However, if the Participant incurs a Qualifying Termination prior to the Continuing Vesting Date, the Participant shall become fully vested in his then Account as of the date of such employment termination.

FORM AND TIMING OF DISTRIBUTIONS
CFC shall pay the amount of the Participant’s Account to the Participant or if applicable, the Participant’s designated beneficiary as soon as reasonably practicable, but in no event later than 75 days after the earlier of: (1) the Initial Vesting Date or Continuing Vesting Date, as applicable, or (2) the date of the Qualifying Termination Event. 
The amount of the Participant’s Account shall be paid to the Participant in a single lump sum.  
PARTICIPANT'S BENEFICIARY
The Participant may from time to time, by written notice delivered to the Board, designate any person(s) or legal entity(ies), including his estate, as his or beneficiary to receive the lump sum payment after his death in respect to any unpaid Account.  Such beneficiary designation shall be made by means of a written instrument, in form and substance acceptable to the Board or its designee, and may be revoked or changed by the Participant at any time by filing written notice of such revocation or change with the Board or its designee.  If the Participant does not designate a beneficiary or if the designated beneficiary does not survive the Participant, the Participant’s beneficiary shall be his estate.
UNFUNDED AND NON-TRANSFERABLE
The Plan is an unfunded plan of deferred compensation and the obligation of CFC hereunder is purely contractual.  Any and all payments made to the Participant pursuant to the Plan shall be made only from the general assets of CFC.  Any Accounts under the Plan shall be for bookkeeping purposes only and shall not represent a claim against 

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specific assets of CFC.  Nothing contained in the Plan shall be deemed to create a trust of any kind or create any fiduciary relationship.
To the fullest extent permitted by law, no right or benefit under the Plan or any interest in the Account shall be subject in any manner to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance, charge, garnishment, execution or levy of any kind, whether voluntary or involuntary, including but not limited to any liability for alimony or other payments for the support of a spouse, former spouse, or any other relative of the Participant, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber, charge, garnish, execute or levy the same shall be void and of no effect, and, in the absolute discretion of the Board, such right, benefit or interest may be extinguished and terminated by resolution of the Board.  Except as otherwise provided by law, no right or benefit under the Plan or any interest in the Account shall be in any manner liable for or subject to the debts, contracts, liabilities or torts of the Participant.  The Participant may not borrow against his benefit under the Plan or any interest in his Account.
ADMINISTRATION
Subject to the express provisions of the Plan, the Board or its delegate shall have plenary power to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of the Plan.  The determination of the Board or its delegate on Plan interpretations shall be conclusive.
AMENDMENT
The Board may at any time and from time to time modify or amend the Plan in such respects as it shall deem advisable; provided, however, that any such modification or amendment shall comply with all applicable laws and applicable requirements necessary to keep the Plan qualified as an “ineligible deferred compensation plan” within the meaning of Section 457(f) of the Code and to avoid imposition of any additional tax under Section 409A of the Code.  Except as relating to amendments required to satisfy objectives under the Code, no amendment or modification of the Plan may adversely affect any right or benefit awarded to the Participant under the Plan, whether vested or otherwise, without the Participant’s written consent.
TERMINATION
The Board may amend, discontinue, or terminate the Plan at any time, for any reason.   Any contributions prior to discontinuance or termination of the Plan shall, once vested, be distributed in a manner consistent with the terms of the Plan, and, if applicable, Section 409A.  If the plan is discontinued or terminated, the Participant will not be eligible for any future benefits. 

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CLAIMS PROCEDURE
The Participant’s Account must be paid in accordance with the specific provisions of the Plan.  If a claim for such benefits is wholly or partially denied, the Board shall provide written notice to the claimant setting forth:
		
	(a)
	The specific reason or reasons for the denial;

		
	(b)
	Specific references to the pertinent provisions of the Plan upon which the denial is based;

		
	(c)
	A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

		
	(d)
	An explanation of the Plan’s review procedures and the time limits applicable to such procedures, as required by Section 502(a) of ERISA.

DEFINITIONS
As used in this agreement, the following terms shall have the meaning ascribed below unless otherwise expressly provided, and when the defined meaning is intended, the term is capitalized.

 “Cause” shall have the meaning set forth in the Employment Agreement dated the same date hereof. 
“Code” means the Internal Revenue Code of 1986 as now in effect or hereafter amended from time to time, or any successor statute or statutes thereto, and shall also include all regulations thereunder.  References to any specific section of the Code shall include any successor section.
“Continuing Vesting Date” shall have the meaning set forth in the second paragraph of the section titled “Vesting”. 

“Disability” shall have the meaning set forth in the Employment Agreement dated the same date hereof.

 “ERISA” means the Employee Retirement Income Security Act of 1974 as now in effect or hereafter amended from time to time, or any successor statute or statutes thereto, and shall also include all regulations promulgated thereunder.  References to any specific section of ERISA shall include any successor section.

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“Good Reason” shall have the meaning set forth in the Employment Agreement dated the same date hereof. 

“Initial Vesting Date” means with respect to the Participant who remains an employee of CFC on such date the earlier of (i) December 31, 2016 or (ii) the date on which a Qualifying Termination occurs. 

“Qualifying Termination” means, with respect to the Participant, (i) termination of the Participant’s employment with CFC on account of death or Disability (ii) involuntary termination of the Participant’s employment by CFC without Cause, or (iii) resignation by the Participant for Good Reason. 

GENERAL PROVISIONS
		
	(a)
	Controlling Law.  Except to the extent superseded by federal law, the laws of the Commonwealth of Virginia (except the choice of law rules thereof), shall be controlling in all matters relating to the Plan, including construction and performance thereof.

		
	(b)
	Captions.  The captions of sections and paragraphs of the Plan are for convenience of reference only and shall not control or affect the meaning or construction of any of its provisions.

		
	(c)
	Facility of Payment. If the Participant is under legal disability or, in the judgment of the Board, is unable to properly manage his financial affairs, any amounts payable hereunder may be paid to his legal representative or may be applied for the benefit of such person in any manner that the Board may select, and any such payment shall be deemed to be payment for the Participant’s Account and shall be a complete discharge of all liability of CFC with respect to the amount so paid.

		
	(d)
	Withholding Payroll Taxes.  CFC shall withhold any federal, state and local income or employment tax (including F.I.C.A. obligations for both Social Security and Medicare) which by any present or future law it is, or may be, required to withhold with respect to any deferral of compensation pursuant to the Plan, or any lump sum cash distribution under the Plan due to the Participant in respect to his Account.

		
	(e)
	Administrative Expenses.  All expenses of administering the Plan shall be borne by CFC, and no part thereof shall be charged against the Participant’s Account or any amounts distributable under the Plan.

		
	(f)
	Prohibition of Law.  Any provision of the Plan prohibited by the law of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of 

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such prohibition without invalidating the remaining provisions hereof.  If any of the terms or provisions of the Plan conflict with the requirements of applicable law or applicable rules and regulations under such laws, then such terms and provisions shall be deemed inoperative to the extent necessary to avoid the conflict with such applicable law or applicable rules and regulations.

		
	(g)
	Parties Bound.  This Plan shall be binding upon the heirs, executors, administrators, successors, and assigns of CFC and the Participant.

IN WITNESS WHEREOF, CFC has caused this to be executed on December 22, 2014, to be effective as of January 1, 2015.

	
	
	NATIONAL RURAL UTILITIES

	COOPERATIVE  FINANCE CORPORATION

	
		
	By:
	/s/  JOEL B. CUNNINGHAM

	Name:
	Joel B. Cunningham 

	Title:
	President of the Board of Directors

6

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