NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION
DEFERRED COMPENSATION PENSION
RESTORATION PLAN
1.
Participants . The participants in the National Rural
Utilities Cooperative Finance Corporation Deferred Compensation
Pension Restoration Plan (the "Deferred Compensation PRP") eligible
for benefits shall be a select group of management or highly
compensated employees of the National Rural Utilities Cooperative
Finance Corporation (the "Cooperative") who on the date of their
termination of employment from the Cooperative (or on vesting of
the Deferred Compensation PRP benefit, if earlier) have a Pension
Limitation, as defined in Section 2(b) of this Deferred
Compensation PRP, applied to reduce the amount of payment that
would otherwise be payable by the "Retirement Security Plan
sponsored by the National Rural Electric Cooperative Association
(the "NRECA").
2.
Benefit Payment
(a). The Deferred Compensation PRP
Benefit payable under the Deferred Compensation PRP is the amount
of the Pension Limitation minus the Severance Pay Limit.
(b). The "Pension Limitation" is the
difference between the single lump sum equivalent of (i) the
participant's accrued benefit from the Retirement Security Plan as
calculated by NRECA without the limitations provided in Sections
415 and 401 (a)( 17) of the Internal Revenue Code of 1986 (the
"Code"), and (ii) the participant's accrued benefit from the
Retirement Security Plan as calculated by NRECA after application
of the limitations of Sections 415 and 401 (a)( 17) of the Code,
each of which is calculated at the time a participant is entitled
to a payment hereunder. The single lump sum equivalent shall be
calculated using the lump sum methodology and assumptions specified
in the Retirement Security Plan.
(c). The "Severance Pay Limit" is an amount
equal to the lesser of (i) the Frozen Benefit under the National
Rural Utilities Cooperative Finance Corporation Severance Pay
Pension Restoration Plan (the "Severance Pay Plan"), or (ii) twice
the participant's annual compensation for the year immediately
preceding the year in which the participant terminates employment
with the Cooperative less the amount of any other severance pay
benefits paid by the Cooperative to the participant. "Annual
Compensation" means the total of all compensation paid by the
Cooperative to the participant including wages, salary, and any
other benefit of monetary value (whether paid in cash or
otherwise), such as for example, the cost of any fringe, welfare or
pension benefit. In the event a participant's Deferred Compensation
PRP Benefit vests before the Severance Pay Plan benefit is payable,
for purposes of calculating the Deferred Compensation PRP Benefit,
the Severance Pay Limit shall be determined as of the date the
Deferred Compensation PRP Benefit vests.
(d). In determining the participant's pension
benefit from the Retirement Security Plan under Section 2(b), there
shall be included in the calculation amounts paid in cash to
the
participant or
his beneficiary, transferred to an individual retirement account or
annuity for the benefit of the participant or beneficiary or
transferred to the participant's account in the NRECA 401 (k)
Pension Plan.
(e) In the event a participant in the Deferred
Compensation PRP is eligible to receive more than one Deferred
Compensation PRP Benefit, (for example, in the case of a
participant who receives his Deferred Compensation PRP Benefit
before the Retirement Security Plan benefit can be paid, and
subsequently earns and becomes vested in another Deferred
Compensation PRP Benefit), the Pension Limitation shall be
calculated for each benefit payment. In addition, any subsequent
Deferred Compensation PRP Benefit shall be offset to take into
account any Deferred Compensation PRP Benefit previously paid to
the participant by adding the differences between 2(b)(i) and
2(b)(ii) for the previous payments to the amount under 2(b)(ii) for
the current payment.
3.
Benefit Forfeitable by Participant . The Deferred
Compensation PRP Benefit provided in Section 2 is subject to a
substantial risk of forfeiture and shall be forfeited in its
entirety if the participant's employment with the Cooperative is
terminated for any reason before the vesting date the Cooperative
has specified in writing for each participant under this Deferred
Compensation PRP. If the Cooperative does not specify such a date
for any participant then such date shall be the normal retirement
date for the participant under the Retirement Security Plan. In any
event, forfeiture shall not occur if the termination of the
participant's employment with the Cooperative is caused by death,
disability, or involuntary termination without cause. For purposes
of the Deferred Compensation PRP, the term "cause" means, as
determined by the Board of Directors of the Cooperative (i) gross
negligence or willful misconduct in connection with the performance
of duties; (ii) conviction of a criminal offense (other than minor
traffic offenses); or (iii) material breach of any term of any
employment, consulting or other services, confidentiality,
intellectual property or non-competition agreements, if any,
between the participant and the Cooperative. Notwithstanding the
foregoing, the benefit forfeited by a participant under the
Deferred Compensation PRP maintained by the Cooperative (the
''Transferor Cooperative"), can be reinstated if the participant is
hired by another NRECA member cooperative participating in the
NRECA Pension Plan (the "Transferee Cooperative") immediately
following termination of employment with the Transferor
Cooperative, provided the Transferee Cooperative adopts the
Deferred Compensation PRP. The participant shall vest in all
benefits earned under the Deferred Compensation PRP of the
Transferor Cooperative and under the Deferred Compensation PRP of
the Transferee Cooperative on the vesting date specified by the
Transferee Cooperative. It is the intention of the Cooperative that
the forfeiture provision of this Deferred Compensation PRP shall
constitute a substantial risk of forfeiture as defined in Section
457(f)(3)(B) of the Code.
4.
Timing and Form of Payment . The Deferred Compensation PRP
Benefit shall be payable to the participant (or if deceased to his
estate) in a lump sum payment immediately upon the lapse of the
substantial risk of forfeiture specified by the Cooperative in
writing pursuant to Section
