Exhibit 10.4

 
TierOne CORPORATION
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement") is made and
entered into as of December 17, 2008 by and between TierOne Corporation, a
business corporation organized and existing under the laws of the State of
Wisconsin (the "Company"), and James A. Laphen (the "Executive").

W I T N E S S E T H :

WHEREAS, the Executive is currently employed as the President and Chief
Operating Officer of the Company pursuant to an employment agreement between the
Company and the Executive entered into as of October 1, 2002 which was amended
and restated effective July 27, 2006 and amended as of December 20, 2006 (the
“Company Employment Agreement”);

WHEREAS, the Executive is currently employed as the President and Chief
Operating Officer of TierOne Bank (the “Bank”) pursuant to an employment
agreement between the Bank and the Executive entered into as of September 25,
2000, as subsequently amended by resolutions of the Board of Directors of the
Bank and as amended and restated effective July 27, 2006 and which is being
further amended and restated as of the date hereof (the “Bank Employment
Agreement”);

WHEREAS, the Company desires to amend and restate the Company Employment
Agreement in order to make changes to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), as well as certain other changes;

WHEREAS, the Company desires to assure itself of the continued availability of
the Executive's services as provided in this Agreement; and

WHEREAS, the Executive is willing to serve the Company on the terms and
conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
conditions hereinafter set forth, the Company and the Executive hereby agree as
follows:

SECTION 1.
EFFECTIVE DATE; EMPLOYMENT.

This Agreement shall be effective on the date first written above (the
“Effective Date”). The Company agrees to employ the Executive, and the Executive
hereby agrees to such employment, during the period and upon the terms and
conditions set forth in this Agreement.

 
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SECTION 2.           EMPLOYMENT PERIOD.

(a)           The terms and conditions of this Agreement shall be and remain in
effect during the period of three years beginning on October 7, 2008 and ending
on the third anniversary of the Commencement Date, plus such extensions, if any,
as are provided pursuant to Section 2(b) hereof (the "Employment Period").

(b)           Except as provided in Section 2(c), beginning on the Commencement
Date, on each day during the Employment Period, the Employment Period shall
automatically be extended for one additional day, unless either the Company, on
the one hand, or the Executive, on the other hand, elects not to extend the
Agreement further by giving written notice thereof to the other party, in which
case the Employment Period shall end on the third anniversary of the date on
which such written notice is given.  Upon termination of the Executive's
employment with the Company for any reason whatsoever, any daily extensions
provided pursuant to this Section 2(b), if not theretofore discontinued, shall
automatically cease.

(c)           Nothing in this Agreement shall be deemed to prohibit the Company
at any time from terminating the Executive's employment during the Employment
Period with or without notice for any reason, provided that the relative rights
and obligations of the Company and the Executive in the event of any such
termination shall be determined under this Agreement.

SECTION 3.
DUTIES.

Throughout the Employment Period, the Executive shall serve as the President and
Chief Operating Officer of the Company, having such power, authority and
responsibility and performing such duties as are prescribed by or under the
Bylaws of the Company and as are customarily associated with such
positions.  The Executive shall devote his full business time, attention, skills
and efforts (other than during weekends, holidays, vacation periods, and periods
of illness or leaves of absence and other than as permitted or contemplated by
Section 7 hereof) to the business and affairs of the Company as he has
customarily done as an officer and employee of the Bank and shall use his best
efforts to advance the interests of the Company.

SECTION 4.
CASH COMPENSATION.

(a)           In consideration for the services to be rendered by the Executive
hereunder, the Company and/or its subsidiaries shall pay to him a salary of
three hundred seventy-seven thousand and five hundred dollars ($377,500)
annually (“Base Salary”).  The Executive's Base Salary shall be payable in
approximately equal installments in accordance with the Company’s and its
applicable subsidiaries’ customary payroll practices for senior officers.  Base
Salary shall include any amounts of compensation deferred by the Executive under
any tax-qualified retirement or welfare benefit plan or any other deferred
compensation arrangement.  The Board of Directors of the Company (“Company
Board”) and the Board of Directors of the Bank (the “Bank Board”) shall review
the Executive's annual rate of salary at such times during the Employment Period
as they deem appropriate, but not less frequently than once every twelve months,
and may, in their respective discretion, approve an increase therein.  In
addition to

 
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salary, the Executive may receive other cash compensation from the Company or
its subsidiaries for services hereunder at such times, in such amounts and on
such terms and conditions as the Company Board or the Bank Board may determine
from time to time.  Any increase in the Executive’s annual salary shall become
the Base Salary of the Executive for purposes hereof.  The Executive’s Base
Salary as in effect from time to time cannot be decreased by the Company and/or
the Bank without the Executive’s express prior written consent.

(b)           The Executive shall be entitled to participate in an equitable
manner with all other executive officers of the Company in discretionary bonuses
as authorized by the Company Board to executive officers.  No other compensation
provided for in this Agreement shall be deemed a substitute for the Executive’s
right to participate in such bonuses when and as declared by the Company Board.

(c)           The Executive shall be entitled to receive fees for serving as a
director of the Company or as a member of any committee as received by other
members of the Company Board.

SECTION 5.
EMPLOYEE BENEFIT PLANS AND PROGRAMS.

During the Employment Period, the Executive shall be treated as an employee of
the Company and the Bank and shall be entitled to participate in and receive
benefits under any and all qualified or non-qualified retirement, pension,
savings, profit-sharing or stock bonus plans, any and all group life, health
(including hospitalization, medical and major medical), dental, accident and
long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company and the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and programs and
consistent with the Company's and the Bank’s customary practices.  The Company
agrees to maintain its current benefit restoration plan (or benefits equivalent
thereto) for the Executive while he is employed by the Company but not beyond
the expiration of the Employment Period.  Nothing paid to the Executive under
any such plan or program will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.

SECTION 6.
INDEMNIFICATION AND INSURANCE.

(a)           During the Employment Period and for a period of six years
thereafter, the Company shall cause the Executive 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 or service in
other capacities at the request of the Company.  The coverage provided to the
Executive pursuant to this Section 6 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.

 
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(b)           To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six years thereafter, the Company shall
indemnify the Executive against and hold him harmless from any costs,
liabilities, losses and exposures that may be incurred by the Executive in his
capacity as a director or officer of the Company or any subsidiary or affiliate.

SECTION 7.
OUTSIDE ACTIVITIES.

The Executive may serve as a member of the boards of directors of such business,
community and charitable organizations as he may disclose to and as may be
approved by the Company Board (which approval shall not be unreasonably
withheld), provided that in each case such service shall not materially
interfere with the performance of his duties under this Agreement or present any
conflict of interest.  The Executive may also engage in personal business and
investment activities which do not materially interfere with the performance of
his duties hereunder, provided that such activities are not prohibited under any
code of conduct or investment or securities trading policy established by the
Company and generally applicable to all similarly situated executives. If the
Executive is discharged or suspended, or is subject to any regulatory
prohibition or restriction with respect to participation in the affairs of the
Bank, he shall continue to perform services for the Company in accordance with
this Agreement but shall not directly or indirectly provide services to or
participate in the affairs of the Bank in a manner inconsistent with the terms
of such discharge or suspension or any applicable regulatory order.

SECTION 8.
WORKING FACILITIES AND EXPENSES.

It is understood by the parties that the Executive's principal place of
employment shall be at the Company's principal executive office located in
Lincoln, Nebraska, or at such other location within 25 miles of the address of
such principal executive office, or at such other location as the Company and
the Executive may mutually agree upon.  The Company shall provide the Executive
at his principal place of employment with a private office, secretarial services
and other support services and facilities suitable to his position with the
Company and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement.  The Company shall reimburse the Executive
for his ordinary and necessary business expenses attributable to the Company’s
business, including, without limitation, the Executive's travel and
entertainment expenses incurred in connection with the performance of his duties
for the Company under this Agreement, in each case upon presentation to the
Company of an itemized account of such expenses in such form as the Company may
reasonably require.  Such reimbursement shall be paid promptly by the Company
and in any event no later than March 15 of the year immediately following the
year in which such expenses were incurred. In addition, the Company and/or its
subsidiaries shall provide the Executive with either (a) an automobile allowance
of $1,000 per month to cover the Executive’s costs of operating the automobile
in connection with the business of the Company and its subsidiaries, or (b) in
lieu of the automobile allowance, regular transportation to and from work on a
regular basis.

 
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SECTION 9.
TERMINATION OF EMPLOYMENT WITH BENEFITS.

(a)           Subject to Section 9(d), the Executive shall be entitled to the
benefits described in Section 9(b) in the event that:

(i)           his employment with the Company terminates during the Employment
Period as a result of the Executive's termination for Good Reason (as defined in
Section 9(a)(i)(A) and (B) of this Agreement), which shall mean a termination
based on the following:

(A) any material breach of this Agreement by the Company, including without
limitation any of the following: (1) a material diminution in the Executive’s
base compensation, (2) a material diminution in the Executive’s authority,
duties, titles or responsibilities as prescribed in Section 3, or (3) a material
diminution in the authority, duties or responsibilities of the officer to whom
the Executive is required to report, or

(B) any material change in the geographic location at which the Executive must
perform his services under this Agreement;

provided, however, that prior to any termination of employment for Good Reason,
the Executive must first provide written notice to the Company within ninety
(90) days of the initial existence of the condition, describing the existence of
such condition, and the Company shall thereafter have the right to remedy the
condition within thirty (30) days of the date the Company received the written
notice from the Executive.  If the Company remedies the condition within such
thirty (30) day cure period, then no Good Reason shall be deemed to exist with
respect to such condition.  If the Company does not remedy the condition within
such thirty (30) day cure period, then the Executive may deliver a notice of
termination for Good Reason at any time within sixty (60) days following the
expiration of such cure period; or

(ii)           the Executive's employment with the Company is terminated by the
Company  during the Employment Period for any reason other than for "cause,"
death or “Disability,” as provided in Section 10(a).

(b)           Subject to Section 9(d) and if the Executive has offered to
continue to provide services on the terms contemplated by this Agreement and
such offer has been declined, upon the termination of the Executive’s employment
pursuant to Section 9(a) of this Agreement, the Company shall pay and provide to
the Executive (or, in the event of his subsequent death, to his estate):

(i)           his earned but unpaid Base Salary (including, without limitation,
all items which constitute wages under applicable law and the payment of which
is not otherwise provided for in this Section 9(b)) as of the date of the
termination of his employment, such payment to be made at the time and in the
manner prescribed by law applicable to the payment of wages but in no event
later than 30 days after termination of employment;

 
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(ii)           the benefits, if any, to which he is entitled under the employee
benefit plans and programs and compensation plans and programs maintained for
the benefit of the Company's and the Bank’s officers and employees through the
date of the termination of his employment;

(iii)           continued group life, health (including hospitalization, medical
and major medical), dental, accident and long term disability insurance
benefits, in addition to that provided pursuant to Section 9(b)(ii), and after
taking into account the coverage provided by any subsequent employer, if and to
the extent necessary to provide for the Executive, for the  period beginning on
the date on which his employment terminates and ending on the last day of the
Employment Period (the “Remaining Employment Period”) and at no cost to the
Executive, coverage equivalent to the coverage to which he would have been
entitled under such plans if he had continued to be employed during such period
at the highest annual rate of salary achieved during the Employment Period;
provided that any insurance premiums payable by the Company or any successors
pursuant to this Section 9(b)(iii) shall be payable at such times and in such
amounts (except that the Company shall also pay any employee portion of the
premiums) as if the Executive was still an employee of the Company, subject to
any increases in such amounts imposed by the insurance company or COBRA, and the
amount of insurance premiums required to be paid by the Company in any taxable
year shall not affect the amount of insurance premiums required to be paid by
the Company in any other taxable year; and provided further that if the
Executive’s participation in any group insurance plan is barred, the Company
shall either arrange to provide the Executive with insurance benefits
substantially similar to those which the Executive was entitled to receive under
such group insurance plan or, if such coverage cannot be obtained, pay a lump
sum cash equivalency amount within thirty (30) days following the date of
termination based on the annualized rate of premiums being paid by the Company
as of the date of termination;

(iv)           within 30 days following the date on which his employment
terminates, a lump sum payment, in an amount equal to the present value of the
Base Salary that the Executive would have earned if he had continued to be
employed during the Remaining Employment Period at the highest annual rate of
Base Salary achieved during the Employment Period, with such present value to be
determined using a discount rate equal to the applicable short-term federal rate
prescribed under Section 1274(d) of the Code, compounded using the compounding
periods corresponding to the Company's and the Bank’s regular payroll periods
for their officers, and with such lump sum to be paid in lieu of all other
payments of Base Salary provided for under this Agreement in respect of the
Remaining Employment Period;

(v)           within 30 days following the date on which his employment
terminates, a lump sum payment in an amount equal to the excess, if any, of:

(A)           the present value of the aggregate benefits to which he would be
entitled under any and all qualified defined benefit pension plans and
non-qualified plans related thereto maintained by, or covering employees of, the
Company and the Bank if he were 100% vested thereunder and had continued to be
employed during the Remaining

 
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Employment Period at the highest annual rate of Base Salary achieved during the
Employment Period; over

(B)           the present value of the benefits to which he is actually entitled
under such defined benefit pension plans as of the date on which his employment
terminates, with such present values to be determined using the mortality tables
prescribed under Section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of interest prescribed by the
Pension Benefit Guaranty Corporation for the valuation of immediate annuities
payable under terminating single-employer defined benefit plans for the month in
which the Executive's employment terminates ("Applicable PBGC Rate");

(vi)           within 30 days following the date on which his employment
terminates, a lump sum payment in an amount equal to the present value of the
additional employer contributions to which he would have been entitled under any
and all qualified defined contribution plans and non-qualified plans related
thereto maintained by, or covering employees of, the Company and the Bank as if
he were 100% vested thereunder and had continued to be employed during the
Remaining Employment Period at the highest annual rate of Base Salary achieved
during the Employment Period and making the maximum amount of employee
contributions, if any, required or permitted under such plan or plans, with such
present value to be determined on the basis of a discount rate, compounded using
the compounding period that corresponds to the frequency with which employer
contributions are made to the relevant plan, equal to the Applicable PBGC Rate,
provided that no payments shall be made pursuant to this subsection (vi) with
respect to the Company’s Employee Stock Ownership Plan (“ESOP”) if the ESOP  is
terminated effective as of a date within one year of the date of the termination
of the Executive’s employment;

(vii)           within 30 days following the  date on which his employment
terminates, a lump sum payment in an amount equal to the present value of the
payments that would have been made to the Executive under any cash bonus or
long-term or short-term cash incentive compensation plan maintained by, or
covering employees of, the Company and the Bank if he had continued to be
employed during the Remaining Employment Period and had earned in each calendar
year that ends during the Remaining Employment Period a bonus or incentive award
that equals the highest annual bonus or incentive award paid to the Executive
during the preceding 36 calendar months, with the present value of such payments
to be determined using a discount rate equal to the applicable short-term
federal rate prescribed under Section 1274(d) of the Code, compounded using the
compounding periods corresponding to the Company’s schedule of paying bonuses;
and

(viii)          within 30 days following the occurrence of an event described in
Section 9(a), upon the surrender of then outstanding options or appreciation
rights previously issued to the Executive under any stock option and
appreciation rights plan or program maintained by, or covering employees of, the
Company, a lump sum payment in an amount equal to the product of:

 
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(A)           the excess of (I) the fair market value of a share of stock of the
same class as the stock subject to the option or appreciation right, determined
as of the date on which his employment terminates, over (II) the exercise price
per share for such option or appreciation right, as specified in or under the
relevant plan or program; multiplied by

(B)           the number of shares with respect to which options or appreciation
rights are being surrendered.

The Company and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any such termination of employment are not
capable of accurate measurement as of the date first written above and that the
payments and benefits contemplated by this Section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage but subject to mitigation as provided in Section
9(d).  The Company and the Executive further agree that the Company may
condition the payments and benefits (if any) due under Sections 9(b)(iii), (iv),
(v), (vi) and (vii) on the receipt of the Executive's resignation from any and
all positions which he holds as an officer, director or committee member with
respect to the Company or any of its subsidiaries or affiliates.

(c)           If the Executive’s employment with the Bank is terminated at the
same time that his employment with the Company is terminated pursuant to Section
9(a) hereof, and if the termination benefits payable by the Bank to the
Executive pursuant to Section 4(b) or 5(c) of the Bank Employment Agreement are
limited by the proviso clause in Section 4(b) or 5(c) of the Bank Employment
Agreement, then the Company shall pay to the Executive the amount by which his
termination benefits under the Bank Employment Agreement are reduced by the
proviso clause in Section 4(b) or 5(c) thereof or by Section 6 thereof, provided
that the termination benefits payable to the Executive under the Bank Employment
Agreement are reduced to their present value using discounting methods similar
to those set forth in Section 9(b) of this Agreement.

(d)           In the event that a Change in Control as defined in Section 11(a)
hereof occurs on or before the date of termination of the Executive’s
employment, then the Company's payments under Section 11(b) hereof shall be in
lieu of and not in addition to payments under Sections 9(b)(iii) through
9(b)(vii) hereof.

SECTION 10.
TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.

(a)           In the event that the Executive's employment with the Company
shall terminate during the Employment Period on account of:

(i)            the discharge of the Executive for "cause," which, for purposes
of this Agreement, shall mean a discharge because the Company Board determines
that the Executive has: (A) willfully failed to perform his assigned duties
under this Agreement, other than any failure resulting from the Executive’s
incapacity due to physical or mental injury or illness; (B) committed an act
involving moral turpitude in the course of his employment with the Company and
its subsidiaries; (C) engaged in willful misconduct; (D) breached his fiduciary
duties for personal profit; (E) willfully violated, in any

 
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material respect, any law, rule or regulation (other than traffic violations or
similar offenses), written agreement or final cease-and-desist order with
respect to his performance of services for the Company or the Bank, as
determined by the Company Board; or (F) materially breached the terms of this
Agreement;

(ii)           the Executive's voluntary resignation from employment (including
voluntary retirement) with the Company for reasons other than those specified in
Section 9(a)(i); or

(iii)            the death of the Executive while employed by the Company, or
the termination of the Executive's employment because of "Disability" as defined
in Section 10(c) below;

then in any of the foregoing events, the Company shall have no further
obligations under this Agreement, other than (A) the payment to the Executive of
his earned but unpaid Base Salary as of the date of the termination of his
employment, (B) the payment to the Executive of the benefits to which he is
entitled under all applicable employee benefit plans and programs and
compensation plans and programs, and (C) the provision of such other benefits,
if any, to which he is entitled as a former employee under the Company's
employee benefit plans and programs and compensation plans and programs.

(b)           For purposes of this Section 10, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company.  Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Company Board or based upon the written advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company.  The cessation of employment of the Executive shall not be deemed to be
for "cause" within the meaning of Section 10(a)(i) unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of three-fourths of the members of the Company Board at a
meeting of such Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before such Board), finding that, in the good faith
opinion of such Board, the Executive is guilty of the conduct described in
Section 10(a)(i) above, and specifying the particulars thereof in detail.

(c)           “Disability” shall be deemed to have occurred if the Executive:
(i) is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Company and its
subsidiaries.  The existence of such physical or mental impairment shall be
determined by a physician selected by the Chief Medical Officer at

 
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the University of Nebraska Medical Center at Omaha, Nebraska, and the physician
shall certify the existence or absence of such impairment to the Company and the
Executive.

(d)           During any period in which the Executive is absent due to physical
or mental impairment, the Company may, without breaching this Agreement, appoint
another person or persons to act as interim President and interim Chief
Operating Officer pending the Executive’s return to his duties on a full-time
basis hereunder or his termination as a result of such Disability.  Prior to the
Executive’s employment being terminated due to Disability under Section 10(e)
hereof, the Executive shall continue to receive his full Base Salary, bonuses
and other benefits to which he is entitled under this Agreement, including
continued participation in all employee benefit plans and programs.

(e)           The Company may provide notice to the Executive in writing that it
intends to terminate the Executive’s employment under this Agreement, with the
termination date to be on or after the date that the Executive has been absent
from his duties hereunder on a full-time basis for six consecutive months due to
any physical or mental impairment.  At the time his employment hereunder is
terminated due to Disability, (i) the Executive shall not be entitled to any
payments or benefits pursuant to Sections 4 and 5 hereof for periods subsequent
to such date of termination, and (ii) the Executive shall become entitled to
receive the Disability payments that may be available under any applicable
long-term disability plan.

SECTION 11.
TERMINATION UPON OR FOLLOWING A CHANGE IN CONTROL.

(a)           The term “Change in Control” shall mean a change in the ownership
of the Company or the Bank, a change in the effective control of the Company or
the Bank or a change in the ownership of a substantial portion of the assets of
the Company or the Bank, in each case as provided under Section 409A of the Code
and the regulations thereunder.  In no event, however, shall a Change in Control
be deemed to have occurred as a result of any acquisition of securities or
assets of the Company, the Bank, or a subsidiary of either of them, by the
Company, the Bank, or any subsidiary of either of them, or by any employee
benefit plan maintained by any of them.

(b)           Upon the occurrence of a Change in Control prior to the expiration
of the Employment Period, the Company shall pay to the Executive a severance
benefit in a lump sum payment, within 25 days after the effective time of such
Change in Control equal to the greater of (i) the sum of the amounts payable as
Base Salary pursuant to Section 4 during the Remaining Employment Period and as
additional cash compensation pursuant to Section 9(b)(vii), (ii) three times the
Executive’s “base amount” from the Company and its subsidiaries as defined under
Section 280G of the Code, minus $1.00, or (iii) the amounts payable pursuant to
Sections 9(b)(iii) through 9(b)(vii) hereof.  Payments pursuant to this Section
11(b) shall be in lieu of and not in addition to payments pursuant to Sections
9(b)(iii) through 9(b)(vii), and vice versa.

SECTION 12.
TAX INDEMNIFICATION.

(a)           If the payments and benefits pursuant to this Agreement, either
alone or together with other payments and benefits which the Executive has the
right to receive from the

 
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Company and its subsidiaries (including, without limitation, the payments and
benefits which the Executive would have the right to receive from the Bank
pursuant to Section 4(b) or 5(c) of the Bank Employment Agreement), would
constitute a “parachute payment” as defined in Section 280G(b)(2) of the Code
(the “Initial Parachute Payment”), then the Company shall pay to the Executive,
within ten (10) business days after the date of termination and subject to
applicable withholding requirements, a lump sum cash amount equal to the sum of
the following:

(i)           twenty (20) percent (or such other percentage equal to the tax
rate imposed by Section 4999 of the Code) of the amount by which the Initial
Parachute Payment exceeds the Executive’s “base amount” from the Company and its
subsidiaries, as defined in Section 280G(b)(3) of the Code, with the difference
between the Initial Parachute Payment and the Executive’s base amount being
hereinafter referred to as the “Initial Excess Parachute Payment”; and

(ii)           such additional amount (tax allowance) as may be necessary to
compensate the Executive for the payment by the Executive of state, local and
federal income and excise taxes on the payment provided under clause (i) above
and on any payments under this clause (ii).  In computing such tax allowance,
the payment to be made under clause (i) above shall be multiplied by the “gross
up percentage” (“GUP”).  The GUP shall be determined as follows:

                Tax Rate                      
GUP  =   1- Tax Rate

The Tax Rate for purposes of computing the GUP shall be the highest marginal
federal, state and local income and employment-related tax rate (including
Social Security and Medicare taxes), including any applicable excise tax rate,
applicable to the Executive in the year in which the payment under clause (i)
above is made, and shall also reflect the phase-out of deductions and the
ability to deduct certain of such taxes.

(b)           Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which the Executive is a party that the actual excess parachute
payment as defined in Section 280G(b)(1) of the Code (before giving effect to
the payments under Sections 12(a)(i) and (ii) above) is different from the
Initial Excess Parachute Payment (such different amount being hereafter referred
to as the “Determinative Excess Parachute Payment”), then the Company’s
independent tax counsel or accountants shall determine the amount (the
“Adjustment Amount”) which either the Executive must pay to the Company or the
Company must pay to the Executive in order to put the Executive (or the Company,
as the case may be) in the same position the Executive (or the Company, as the
case may be) would have been if the Initial Excess Parachute Payment had been
equal to the Determinative Excess Parachute Payment. In determining the
Adjustment Amount, the independent tax counsel or accountants shall take into
account any and all taxes (including any penalties and interest) paid by or for
the Executive or refunded to the Executive or for the Executive’s benefit.  As
soon as practicable after the Adjustment Amount has been so determined, and in
no event more than thirty (30) days after the Adjustment Amount has been so

 
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determined, the Company shall pay the Adjustment Amount to the Executive or the
Executive shall repay the Adjustment Amount to the Company, as the case may be.

(c)           In each calendar year that the Executive receives payments of
benefits that constitute a parachute payment, the Executive shall report on his
state, local and federal income tax returns such information as is consistent
with the determination made by the independent tax counsel or accountants of the
Company as described above.  The Company shall indemnify and hold the Executive
harmless from any and all losses, costs and expenses (including without
limitation, reasonable attorneys’ fees, interest, fines and penalties) which the
Executive incurs as a result of so reporting such information, with such
indemnification to be paid by the Company to the Executive as soon as
practicable and in any event no later than March 15 of the year immediately
following the year in which the amount subject to indemnification  was
determined. The Executive shall promptly notify the Company in writing whenever
the Executive receives notice of the institution of a judicial or administrative
proceeding, formal or informal, in which the federal tax treatment under Section
4999 of the Code of any amount paid or payable under this Section 12 is being
reviewed or is in dispute.  The Company shall assume control at its expense over
all legal and accounting matters pertaining to such federal tax treatment
(except to the extent necessary or appropriate for the Executive to resolve any
such proceeding with respect to any matter unrelated to amounts paid or payable
pursuant to this Section 12) and the Executive shall cooperate fully with the
Company in any such proceeding.  The Executive shall not enter into any
compromise or settlement or otherwise prejudice any rights the Company may have
in connection therewith without the prior consent of the Company.

SECTION 13.
SOURCE OF PAYMENTS; NO DUPLICATION OF PAYMENTS.

(a)           All payments provided in this Agreement shall be timely paid in
cash or check from the general funds of the Company subject to Section 13(b).

(b)           Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by the Executive under the Bank Employment Agreement, such compensation
payments and benefits paid by the Bank will be subtracted from any amount due
simultaneously to the Executive under similar provisions of this
Agreement.  Payments pursuant to this Agreement and the Bank Employment
Agreement (other than severance and change in control payments and benefits
pursuant to Sections 9 and 11 hereof) shall be allocated in proportion to the
level of activity and the time expended on such activities by the Executive as
determined by the Company and the Bank on a quarterly basis.

SECTION 14.
COVENANT NOT TO COMPETE.

The Executive hereby covenants and agrees that, in the event of his termination
of employment with the Company for any reason prior to the expiration of the
Employment Period (other than a termination of employment in connection with or
within 12 months following a Change in Control), for a period of two years
following the date of his termination of employment with the Company (or, if
less, for the Remaining Employment Period), he shall not, without the written
consent of the Company, become an officer, employee, consultant, director

 
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or trustee of any savings bank, savings and loan association, savings and loan
holding company, bank or bank holding company, or any direct or indirect
subsidiary or affiliate of any such entity, that entails working within any
county in which the Company or the Bank maintains an office.

SECTION 15.
CONFIDENTIALITY.

Unless he obtains the prior written consent of the Company, the Executive 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 parent or
subsidiaries, in the course of his employment with 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 15 shall prevent the Executive,
with or without the Company's consent, 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 16.
SOLICITATION.

The Executive hereby covenants and agrees that, for a period of two years
following his termination of employment with the Company for any reason (other
than a termination of employment in connection with or within 12 months
following a Change in Control), he shall not, without the written consent of the
Company, either directly or indirectly:

(a)           solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to have
the effect of causing any officer or employee of the Company or any of its
subsidiaries or affiliates to terminate his employment and accept employment or
become affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, savings and loan association, bank, bank
holding company, savings and loan holding company, or other institution engaged
in the business of accepting deposits, making loans or doing business within the
counties specified in Section 14;

(b)           provide any information, advice or recommendation with respect to
any such officer or employee to any savings bank, savings and loan association,
bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits, making loans or doing
business within the counties specified in Section 14, that is intended, or that
a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Company or any of its
subsidiaries or affiliates to terminate his employment and accept employment or
become affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, savings and loan association, bank, bank
holding company, savings and loan holding company, or other institution engaged
in the

 
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business of accepting deposits, making loans or doing business within the
counties specified in Section 14; or

(c)           solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of the
Company or the Bank to terminate an existing business or commercial relationship
with the Company or the Bank.

SECTION 17.
NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

The termination of the Executive's employment during the Employment Period or
thereafter, whether by the Company or by the Executive, shall have no effect on
the vested rights of the Executive under the Company's or the Bank’s qualified
or non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans, ESOP
Supplemental Executive Retirement Plan, 401(k) Supplemental Executive Retirement
Plan or other employee benefit plans or programs, or compensation plans or
programs in which the Executive was a participant.

SECTION 18.
SUCCESSORS AND ASSIGNS.

(a)           This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; provided,
however, that the Company 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, by an assumption
agreement in form and substance  satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession or
assignment had taken place.  Failure of the Company to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the compensation
pursuant to Section 9 or 11 hereof.  For purposes of implementing the provisions
of this Section 18(a), the date which any such succession without an assumption
agreement becomes effective shall be deemed the date of termination of the
Executive’s employment.

(b)           This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive’s personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees.  If the Executive should die while any amounts would still
be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive’s beneficiary.

 
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SECTION 19.         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:

If to the Executive:

James A. Laphen
At the address last appearing
on the personnel records of
the Company

If to the Company:

TierOne Corporation
1235 N Street
Lincoln, Nebraska 68508
(or the address of the Company’s principal executive office, if different)
Attention: Chairman of the Board

with a copy, in the case of a notice to the Company, 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 20.
INDEMNIFICATION FOR ATTORNEYS' FEES.

(a) The Company shall indemnify, hold harmless and defend the Executive against
reasonable costs, including legal fees and expenses, incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement.  For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Company's obligations hereunder shall be conclusive evidence of the Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.

(b) The Company's obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected by any
set-

 
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off, counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others.  Unless it is determined that
a claim made by the Executive was either frivolous or made in bad faith, the
Company agrees to pay as incurred (and in any event no later than March 15 of
the year immediately following the year in which incurred), to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of or in connection with his consultation with legal counsel
or arising out of any action, suit, proceeding or contest (regardless of the
outcome thereof) by the Company, the Executive or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.  This Section 20(b) shall
apply whether such consultation, action, suit, proceeding or contest arises
before, on, after or as a result of a Change in Control.

SECTION 21.
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 22.
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 23.
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.

SECTION 24.
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 25.
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.

 
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SECTION 26.         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, except that the parties acknowledge that this  Agreement shall not
impact any of the rights and obligations of the parties to the Bank Employment
Agreement or any of the agreements or plans referenced in the Bank Employment
Agreement except as set forth in Section 13 hereof.  No modifications of this
Agreement shall be valid unless made in writing and signed by the parties
hereto; provided, however, that if the Company determines, after a review of the
final regulations issued under Section 409A of the Code and all applicable IRS
guidance, that this Agreement should be further amended to avoid triggering the
tax and interest penalties imposed by Section 409A of the Code, the Company may
amend this Agreement to the extent necessary to avoid triggering the tax and
interest penalties imposed by Section 409A of the Code.

SECTION 27.
REQUIRED REGULATORY PROVISIONS.

Notwithstanding anything herein contained to the contrary, any payments to the
Executive by the Company, 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.

SECTION 28.         DISPUTE RESOLUTION.

(a)           In the event of any dispute, claim, question or disagreement
arising out of or relating to this Agreement or the breach hereof, the parties
hereto shall use their best efforts to settle such dispute, claim, question or
disagreement.  To this effect, they shall consult and negotiate with each other,
in good faith, and, recognizing their mutual interests, attempt to reach a just
and equitable solution satisfactory to both parties.

(b)           If they do not reach such a solution within a period of thirty
(30) days, then the parties agree first to endeavor in good faith to amicably
settle their dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association (the “AAA”), before resorting to arbitration.

(c)           Thereafter, any unresolved controversy or claim arising out of or
relating to this Agreement or the breach thereof, upon notice by any party to
the other, shall be submitted to and finally settled by arbitration in
accordance with the Commercial Arbitration Rules (the “Rules”) of the AAA in
effect at the time demand for arbitration is made by any such party.  The
parties shall mutually agree upon a single arbitrator within thirty (30) days of
such demand.  In the event that the parties are unable to so agree within such
thirty (30) day period, then within the following thirty (30) day period, one
arbitrator shall be named by each party.  A third arbitrator shall be named by
the two arbitrators so chosen within ten (10) days after the appointment of the
first two arbitrators.  In the event that the third arbitrator is not agreed
upon, he or she shall be named by the AAA.  Arbitration shall occur in Lincoln,
Nebraska.

 
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(d)           The award made by all or a majority of the panel of arbitrators
shall be final and binding, and judgment may be entered based upon such award in
any court of law having competent jurisdiction.  The award is subject to
confirmation, modification, correction or vacation only as explicitly provided
in Title 9 of the United States Code.  The prevailing party shall be entitled to
receive any award of pre- and post-award interest as well as attorney’s fees
incurred in connection with the arbitration and any judicial proceedings relate
thereto.  The parties acknowledge that this Agreement evidences a transaction
involving interstate commerce.  The United States Arbitration Act and the Rules
shall govern the interpretation, enforcement, and proceedings pursuant to this
Section.  Any provisional remedy which would be available from a court of law
shall be available from the arbitrators to the parties to this Agreement pending
arbitration.  Either party may make an application to the arbitrators seeking
injunctive relief to maintain the status quo, or may seek from a court of
competent jurisdiction any interim or provisional relief that may be necessary
to protect the rights and property of that party, until such times as the
arbitration award is rendered or the controversy otherwise resolved.

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

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.

                                                                                               
/s/ James A. Laphen
James A. Laphen, Executive

ATTEST:                                                                TierOne CORPORATION

By   /s/ Judith A.
Klinkman                                                               By   /s/
Gilbert G. Lundstrom
    Name: Judith A. Klinkman
    Name: Gilbert G. Lundstrom

    Its: Assistant Secretary
 
    Its: Chairman of the Board and Chief Executive

 
  Officer

[Seal]
 
 
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