Exhibit 10.3

RETIREMENT AND TRANSITION AGREEMENT

This Retirement and Transition Agreement (the “Agreement”) is made this 28th day
of January 2010, by and among Gilbert G. Lundstrom (the “Vice Chairman”),
TierOne Corporation, a Wisconsin corporation (the “Company”), and its wholly
owned subsidiary, TierOne Bank, a federally chartered savings bank with its
principal office in Lincoln, Nebraska (the “Bank”).

WITNESSETH:

WHEREAS, the Vice Chairman currently serves as Chairman of the Board and Chief
Executive Officer of the Company and the Bank (collectively, “TierOne”);

WHEREAS, the Vice Chairman currently is a party to amended and restated
employment agreements with both the Company and the Bank, each dated as of
December 17, 2008 (the “Employment Agreements”), setting forth the terms and
conditions of his employment; and

WHEREAS, the Vice Chairman desires to retire from his current positions, and the
parties hereto desire to set forth the terms and conditions under which the Vice
Chairman will provide certain transitional and other services to TierOne.

NOW, THEREFORE, in consideration of the mutual premises and covenants contained
herein, and intending to be legally bound, the parties agree as follows:

Section 1.  New Position; Term.

As of January 28, 2010 (the “Effective Date”), Mr. Lundstrom is hereby appointed
as the Vice Chairman of the Board of Directors of each of the Company and the
Bank for a period of one year following the Effective Date; provided, however,
that the Board of Directors of the Company, the Board of Directors of the Bank
or the Vice Chairman may terminate this Agreement by giving at least 30 days’
prior written notice to the other parties.

Section 2.   Duties as Vice Chairman.

During the term of this Agreement, the Vice Chairman shall provide the following
services: (a) assistance to the new Chairman of the Board and Chief Executive
Officer of the Company and the Bank in order to ensure a smooth transition; (b)
assistance with the pending branch sale by the Bank; (c) assistance with the
raising of additional capital; and (d) such other duties as shall be mutually
agreed to by the Chairman and Chief Executive Officer of Tier One and the Vice
Chairman.  The Vice Chairman shall report directly to the Chairman and Chief
Executive Officer of TierOne and shall provide him periodically and no less
frequently than monthly a written report summarizing the status of the various
projects and matters on which he is assisting the Chairman and Chief Executive
Officer. Such report shall describe the work performed for the period covered by
the report. The Company and the Bank reasonably anticipate that the level of
services to be provided by the Vice Chairman to the Company and the Bank after
the Effective Date will permanently decrease to no more than twenty percent
(20%) of the average level of the Vice Chairman’s bona fide services to the
Company and the Bank over the immediately preceding thirty-six (36) month period
prior to the Effective Date.

 
 

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Section 3.  Compensation as Vice Chairman.

(a)           In consideration of his performing the services required under
Section 2 of this Agreement, the Vice Chairman shall receive a Vice Chairman fee
of $12,500 per month, payable monthly starting in February 2010.  The Vice
Chairman fee shall be in addition to and not in lieu of any Board fees or
committee fees otherwise payable to the Vice Chairman in his capacity as a
director of the Company and the Bank.  No Vice Chairman fee shall be payable by
the Company or the Bank (i) in the event of the failure of the Vice Chairman to
provide the services required to be provided under Section 2 hereof or (ii)
following the expiration or termination of this Agreement in accordance with its
terms.

(b)           The Vice Chairman shall be entitled to receive insurance coverage
on the same terms as other non-employee directors of the Company and the Bank.

Section 4.  Working Facilities and Expenses.

The Company and the Bank shall provide the Vice Chairman with an office for his
use at the principal executive offices of the Company and the Bank in Lincoln,
Nebraska, or at such other location as the Chief Executive Officer and the Vice
Chairman may mutually agree upon.  TierOne shall provide the Vice Chairman with
a private office, secretarial services and other support services and facilities
suitable to his position with TierOne and necessary or appropriate in connection
with the performance of his assigned duties under this Agreement.  TierOne shall
reimburse the Vice Chairman for his ordinary and necessary business expenses
attributable to TierOne’s business in accordance with the policies and practices
of TierOne and that are customarily incurred by persons with similar duties and
positions, including the Vice Chairman's travel and entertainment expenses
incurred in connection with the performance of his duties for TierOne under this
Agreement, in each case upon presentation to TierOne of an itemized account of
such expenses in such form as TierOne may reasonably require.  Such
reimbursement shall be paid promptly by TierOne.

Section 5.  Continued Indemnification.

(a)           In accordance with its existing Employment Agreement with the Vice
Chairman, and to the same extent and scope as provided therein, for a period of
six years following the Effective Date, the Company agrees to cause the Vice
Chairman to be covered by and named as an insured under any policy or contract
of insurance obtained by it to insure its directors and officers against
personal liability for acts or omissions in connection with service as an
officer or director of the Company (including his prior service as Chairman of
the Board and Chief Executive Officer of TierOne) or service in such other
capacities at the request of TierOne.  The coverage provided to the Vice
Chairman pursuant to this Section 5(a) shall be of the same scope and on the
same terms and conditions as the coverage (if any) provided to other officers or
directors of the Company or any successor.  To the maximum extent permitted
under applicable law, for a period of six years following the Effective Date,
the Company shall indemnify the Vice Chairman against and hold him harmless from
any costs, liabilities, losses and exposures that may be incurred by the Vice
Chairman in his capacity as a director or officer of the Company or any
subsidiary or affiliate (including his prior service as Chairman of the Board
and Chief Executive Officer of TierOne).

 
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(b)           In accordance with the provisions of 12 C.F.R. §545.121, the Bank
shall save harmless and indemnify the Vice Chairman against any financial
losses, claims, damages or liabilities arising out of any alleged negligence or
other act of the Vice Chairman occurring while serving as Vice Chairman as well
as continue to indemnify him for any acts or omissions in connection with his
prior service as Chairman of the Board and Chief Executive Officer of the Bank,
provided that at the time of such loss, claim, damage or liability was
sustained, the Vice Chairman was acting in the discharge of his duties hereunder
or his prior duties as Chairman of the Board and Chief Executive Officer of the
Bank and such loss, claim, damage or liability did not result from any willful
and wrongful act or gross negligence of the Vice Chairman in his current or
prior capacities.

Section 6.  Termination of Existing Employment Agreements.

By the mutual agreement of the parties hereto, the existing Employment
Agreements shall be terminated and be of no further force and effect as of the
Effective Date, and the Vice Chairman shall be entitled to the rights and
payments set forth herein in lieu of any rights and payments under the
Employment Agreements, except that any compensation under the Employment
Agreements which has been earned but remains unpaid as of the Effective Date
shall be paid as soon as practicable following the Effective Date in accordance
with TierOne’s regular payroll practices.  The Vice Chairman shall no longer be
considered an officer or employee of the Company or the Bank or any of their
respective subsidiaries as of the Effective Date.  This Agreement shall have no
effect on the Vice Chairman’s service as a director of each of the Company and
the Bank or on the Vice Chairman’s rights to receive his vested benefits under
TierOne’s benefit plans.

Section 7.  Source of Payments; No Duplication of Payments.

All payments provided in this Agreement shall be timely paid in cash or check
from the general funds of the Company or the Bank.  Payments pursuant to this
Agreement shall be allocated between the Company and the Bank in proportion to
the level of activity and the time expended on such activities by the Vice
Chairman as determined by the Company and the Bank on a monthly basis, unless
the applicable provision of this Agreement specifies that the payment shall be
made either by the Company or the Bank.  In no event shall the Vice Chairman
receive duplicate payments or benefits from the Company and the Bank.

Section 8.  Tax Withholding.

The Company and the Bank may make such provisions as they deem appropriate for
the withholding pursuant to federal or state income tax laws of such amounts as
the Company and the Bank determine they are required to withhold in connection
with the payments to be made pursuant to this Agreement.

 
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Section 9.  No Effect on Employee Benefit Plans or Programs.

Neither the termination of the Employment Agreements nor the execution and
expiration or termination of this Agreement shall have any effect on the vested
rights of the Vice Chairman under the Company’s or the Bank’s qualified or
non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, split dollar agreement, or any other employee benefit plans or
programs in which the Vice Chairman was a participant in his prior capacity as
Chairman of the Board and Chief Executive Officer of TierOne.

Section 10.  Confidentiality.

Unless he obtains the prior written consent of the Company and the Bank, the
Vice Chairman shall at all times keep confidential and shall refrain from using
for the benefit of himself, or any person or entity other than the Company or
any entity which is a subsidiary of the Company or of which the Company is a
subsidiary, any material document or information obtained from the Company, or
from its subsidiaries, in the course of his service to any of them concerning
their properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this Section 10 shall prevent the Vice
Chairman, with or without the consent of the Company and the Bank, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding or the Company’s
public reporting requirements to the extent that such participation or
disclosure is required under applicable law.

Section 11.  Successors and Assigns.

This Agreement is personal to each of the parties hereto, and none of the
parties may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other parties; provided,
however, that the Company and the Bank will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company or the
Bank, by an assumption agreement in form and substance satisfactory to the Vice
Chairman, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company and the Bank would be required to
perform it if no such succession or assignment had taken place.

Section 12.  Notices.

Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one such
party may by written notice specify to the other party:

 
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If to the Vice Chairman:

Gilbert G. Lundstrom
At the address last appearing
on the personnel records of
the Company and the Bank

If to TierOne:

TierOne Corporation
TierOne Bank
1235 N Street
Lincoln, Nebraska 68508
(or the address of TierOne’s principal executive offices, if different)
Attention: Chief Executive Officer

with a copy, in the case of a notice to TierOne, to:

Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C.  20005
Attention:   Raymond A. Tiernan, Esq.
     Gerald F. Heupel, Jr., Esq.

Section 13.  Severability.

A determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision hereof.

Section 14.  Waiver.

Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or
condition.  A waiver of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought.  Any waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.

Section 15.  Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and all of which shall constitute one and the same
Agreement.

 
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Section 16.  Governing Law.

This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Nebraska applicable to contracts entered into and
to be performed entirely within the State of Nebraska, except to the extent that
federal law controls.

Section 17.   Headings and Construction.

The headings of sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section.  Any reference to a
section number shall refer to a section of this Agreement, unless otherwise
stated.

Section 18.  Entire Agreement; Modifications.

This instrument contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof (including the Employment Agreements, except for the continued
indemnification provisions set forth in Section 5 hereof), except that the
parties acknowledge that this Agreement shall not impact any of the rights and
obligations of the parties with respect to the vested rights of the Vice
Chairman under any of TierOne’s benefit plans. No modifications of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.

Section 19.  Required Regulatory Provisions.

Notwithstanding anything herein contained to the contrary, any payments to the
Vice Chairman by the Company or the Bank, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with Section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the
regulations promulgated thereunder in 12 C.F.R. Part 359.

 
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IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to be
executed and the Vice Chairman has hereunto set his hand, all as of the day and
year first written above.

      /s/ Gilbert G. Lundstrom       Gilbert G. Lundstrom, Vice Chairman        
                      ATTEST:   TierOne CORPORATION                     By:
/s/ Judith A. Klinkman
  By:
/s/ Charles W. Hoskins
 
Judith A. Klinkman
   
Charles W. Hoskins
 
Assistant Secretary
   
Lead Director
                              ATTEST:   TierOne BANK                     By:
By:/s/ Judith A. Klinkman
  By:
/s/ Charles W. Hoskins
 
Judith A. Klinkman
   
Charles W. Hoskins
 
Assistant Secretary
   
Lead Director

 
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