Exhibit 10.7
TIERONE BANK
AMENDED AND RESTATED EMPLOYEE SEVERANCE PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
     TierOne Bank (the “Bank” or the “Employer”) hereby amends and restates its
2002 Employee Severance Plan (as amended and restated, the “Plan”), effective as
of July 27, 2006.
     This Plan is being amended and restated in order to comply with the
requirements of Section 409A of the Code (as defined below), including the
guidance issued to date by the Internal Revenue Service (the “IRS”) and the
proposed regulations issued by the IRS in the fall of 2005.
ARTICLE II
PURPOSE OF THE PLAN
     The purpose of this Plan is to provide certain specified benefits to
eligible employees as provided herein whose employment is terminated in
connection with or subsequent to a Change in Control of either the Bank or the
Bank’s parent corporation, TierOne Corporation (the “Company”). The Bank and the
Company are hereinafter collectively referred to as the “Employers”.
ARTICLE III
DEFINITIONS
     3.01 Annual Compensation. An Employee’s “Annual Compensation” for purposes
of this Plan shall be deemed to mean the aggregate base salary and cash
incentive compensation earned by or paid to the Employee by the Employers or any
subsidiary thereof during the calendar year immediately preceding the calendar
year in which the Date of Termination occurs; provided, however, for purposes of
this Plan the Employee’s Annual Compensation does not include deferred
compensation earned by the Employee in a prior year but received in the calendar
year immediately preceding the calendar year in which the Date of Termination
occurs.
     3.02 Cause. Termination of an Employee’s employment for “Cause” shall mean
termination because of personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
For purposes of this paragraph, no act or failure to act on the Employee’s part
shall be considered “willful” unless done, or omitted to be done, by the
Employee not in good faith and without reasonable belief that the Employee’s
action or omission was in the best interests of the Employers.
     3.03 Change in Control. “Change in Control” shall mean a change in the
ownership of the Bank or the Company, a change in the effective control of the
Bank or the Company or a

 

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change in the ownership of a substantial portion of the assets of the Bank or
the Company as provided under Section 409A of the Code and the regulations
thereunder.
     3.04 Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
     3.05 Committee. “Committee” means a committee of two or more directors
appointed by the Board of Directors of the Bank pursuant to Article VII hereof.
     3.06 Date of Termination. “Date of Termination” shall mean (i) if an
Employee’s employment is terminated for Cause, the date on which the Notice of
Termination is given, and (ii) if an Employee’s employment is terminated for any
other reason, the date specified in the Notice of Termination.
     3.07 Disability. Disability” shall mean the Employee (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 Bank.
     3.08 Employee. “Employee” shall mean any person who at the time has been
employed by the Bank for at least 12 continuous months, excluding any Employee
who has an employment or change in control agreement with either of the
Employers.
     3.09 Good Reason. Termination by an Employee of the Employee’s employment
for “Good Reason” shall mean termination by the Employee following a Change in
Control based on:
     (i) Without the Employee’s express written consent, a reduction in the
Employee’s base salary as in effect immediately prior to the date of the Change
in Control or as the same may be increased from time to time thereafter;
     (ii) Without the Employee’s express written consent, the assignment of any
duties or responsibilities which are substantially diminished as compared with
the Employee’s duties and responsibilities immediately prior to a Change in
Control or a material change in the Employee’s reporting responsibilities,
titles or offices as an Employee and as in effect immediately prior to such a
Change in Control, or any removal of the Employee from or any failure to
re-elect the Employee to any of such responsibilities, titles or offices, except
in connection with the termination of the Employee’s employment for Cause,
Disability or Retirement or as a result of the Employee’s death or by the
Employee other than for Good Reason;
     (iii) A change in the Employee’s principal place of employment by a
distance in excess of 50 miles from its location immediately prior to the Change
in Control;

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     (iv) Any purported termination of the Employee’s employment for Disability
or Retirement which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3.11 below; or
     (v) The failure by the Employers to obtain the assumption of and agreement
to perform this Plan by any successor as contemplated in Article V hereof.
     3.10 IRS. “IRS” shall mean the Internal Revenue Service.
     3.11 Notice of Termination. Following a Change in Control, any purported
termination of an Employee’s employment by the Employers for any reason or by an
Employee for any reason, including without limitation for Good Reason, shall be
communicated by written “Notice of Termination” to the other party hereto. For
purposes of this Plan, a “Notice of Termination” shall mean a dated notice which
(i) indicates the specific termination provision in this Plan relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee’s employment under the provision
so indicated, (iii) specifies a Date of Termination, which shall be not less
than thirty (30) nor more than ninety (90) days after such Notice of Termination
is given, except in the case of the Employers’ termination of the Employee’s
employment for Cause, which shall be effective immediately; and (iv) is given in
the manner specified in Article VIII hereof.
     3.12 Retirement. “Retirement” shall mean voluntary termination by the
Employee in accordance with the Employers’ retirement policies, including early
retirement, generally applicable to their salaried Employees.
ARTICLE IV
BENEFITS
     4.01 Payments and Benefits Upon Termination.
     (a) If an Employee’s employment is terminated within one year subsequent to
a Change in Control by (i) the Employers for other than Cause, Disability,
Retirement or the Employee’s death or (ii) the Employee for Good Reason, then
the Employers shall pay to the Employee a lump sum cash severance amount equal
to one twelfth (1/12th) of the Employee’s Annual Compensation for each year of
service with the Employers, subject to a minimum of one twelfth (1/12th) of
Annual Compensation and a maximum of 100% of Annual Compensation, plus any
accrued but unused vacation leave.
     (b) If the payments pursuant to Section 4.01(a) hereof, either alone or
together with other payments and benefits which the Employee has the right to
receive from the Employers, would constitute a “parachute payment” under
Section 280G of the Code, the payments payable by the Employers pursuant to
Section 4.01(a) hereof shall be reduced by the minimum amount necessary to
result in no portion of the payments payable by the Employers under
Section 4.01(a) being non-deductible to the Employers pursuant to Section 280G
of the Code and subject to the excise tax imposed under Section 4999 of the
Code. The determination of any reduction in the payments to be made pursuant to
Section 4.01(a) shall be based upon the opinion of independent

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counsel selected by the Bank and paid by the Bank. Such counsel shall promptly
prepare the foregoing opinion, but in no event later than thirty (30) days from
the Date of Termination, and may use such actuaries as such counsel deems
necessary or advisable for the purpose.
     (c) Nothing contained herein shall result in a reduction of any payments or
benefits to which the Employee may be entitled upon termination of employment
under any circumstances other than as specified in Section 4.01(b) set forth
above, or a reduction in the payments and benefits specified in Section 4.01(a)
below zero.
     4.02 Mitigation; Exclusivity of Benefits.
     (a) An Employee shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Employee as a result of employment by another employer after the Date of
Termination or otherwise.
     (b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to an Employee upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
     4.03 Withholding. All payments required to be made by the Employers
hereunder to an Employee shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Employers may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
     4.04. Source of Payments. It is intended by the parties hereto that all
payments provided in this Plan shall be paid in cash or check from the general
funds of the Bank. Further, the Company guarantees such payment and provision of
all amounts and benefits due hereunder to the Executive and, if such amounts and
benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Company.
     4.05. No Attachment. Except as required by law, no right to receive
payments under this Plan shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to affect any such action shall
be null, void, and of no effect.
ARTICLE V
ASSIGNMENT
     The Employers may assign this Plan and its rights and obligations hereunder
in whole, but not in part, to any corporation, bank or other entity with or into
which the Bank or the Company may hereafter merge or consolidate or to which the
Bank or the Company may transfer all or substantially all of its respective
assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the Employers
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign

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this Plan or their rights and obligations hereunder. An Employee may not assign
or transfer any rights or benefits due hereunder.
ARTICLE VI
DURATION AND EFFECTIVE DATE OF PLAN
     6.01 Duration. Except in the event of a Change in Control, this Plan is
subject to change or termination, in whole or in part, at any time without
notice, in the Board’s sole discretion. In the event of a Change in Control,
this Plan may not be terminated or amended to reduce the benefits provided
hereunder for a period of 13 months from the date of the Change in Control. In
addition, notwithstanding anything in this Plan to the contrary, the Employers
may amend in good faith any terms of this Plan, including retroactively, in
order to comply with Section 409A of the Code.
     6.02 Effective Date. This Plan was originally effective as of October 1,
2002, and the amendment and restatement of the Plan is effective as of July 27,
2006.
ARTICLE VII
ADMINISTRATION
     7.01 Duties of the Committee. This Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board of
Directors of the Bank pursuant to Section 7.02. The Committee shall have the
authority to adopt, amend and rescind such rules, regulations and procedures as,
in its opinion, may be advisable in the administration of this Plan, including,
without limitation, rules, regulations and procedures with respect to the
operation of this Plan. The interpretation and construction by the Committee of
any provisions of this Plan or any rule, regulation or procedure adopted by it
pursuant thereto shall be final and binding in the absence of action by the
Board of Directors of the Bank.
     7.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board of
Directors of the Bank. The Board from time to time may remove members from, or
add members to, the Committee, provided the Committee shall continue to consist
of two or more members of the Board. The Committee shall act by vote or written
consent of a majority of its members. Subject to the express provisions and
limitations of this Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
     7.03 Limitation on Liability. Neither the members of the Board of Directors
of the Bank nor any member of the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any rule,
regulation or procedure adopted by it pursuant thereto. If a member of the Board
or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity

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under or with respect to this Plan, the Bank shall, subject to the requirements
of applicable laws and regulations, indemnify such member against all
liabilities and expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in the best interests of the Bank and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
ARTICLE VIII
MISCELLANEOUS
     8.01 Notice. For the purposes of this Plan, notices and all other
communications provided for in this Plan shall be in writing and shall be deemed
to have been duly given when delivered or mailed by certified or registered
mail, return receipt requested, postage prepaid, addressed, with respect to the
Bank, Secretary, TierOne Bank, 1235 N Street, Lincoln, Nebraska 68508, and with
respect to an Employee, to the home address thereof set forth in the records of
the Bank at the date of any such notice.
     8.02 Governing Law. The validity, interpretation, construction and
performance of this Plan shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Nebraska.
     8.03 Nature of Employment and Obligations.
     (a) Nothing contained herein shall be deemed to create other than a
terminable at will employment relationship between the Employers and an
Employee, and the Employers may terminate an Employee’s employment at any time,
subject to providing any payments specified herein in accordance with the terms
hereof.
     (b) Nothing contained herein shall create or require the Employers to
create a trust of any kind to fund any benefits which may be payable hereunder,
and to the extent that an Employee acquires a right to receive benefits from the
Employers hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Employers.
     8.04 Headings. The section headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan.
     8.05 Validity. The invalidity or unenforceability of any provision of this
Plan shall not affect the validity or enforceability of any other provisions of
this Plan, which shall remain in full force and effect.
     8.06 Regulatory Provisions. Notwithstanding any other provision of this
Plan to the contrary, any payments made to an Employee pursuant to this Plan, or
otherwise, are subject to and conditioned upon their compliance with
(a) Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and
the regulations promulgated thereunder, including 12 C.F.R. Part 359, and (b) 12
C.F.R. §563.39.

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