UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
TIERONE CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
________________________________________________________________________________
(2) Form, schedule or registration statement no.:
________________________________________________________________________________
(3) Filing party:
________________________________________________________________________________
(4) Date filed:
[TIERONE CORPORATION LOGO]
1235 N Street
Lincoln, Nebraska 68508
March 22, 2004
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of TierOne Corporation to be held in the Regents A Room at the Embassy Suites
Hotel located at 1040 P Street, Lincoln, Nebraska, on Tuesday, May 4, 2004 at
10:00 a.m., Central Daylight Time.
At the Annual Meeting, you will be asked to elect two (2) directors for
a three-year term and ratify the appointment of KPMG LLP as our independent
auditors for the year ending December 31, 2004. Each of these matters is more
fully described in the accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to vote your shares today even if you plan to
attend the Annual Meeting. This will not prevent you from voting in person, but
will ensure that your vote is counted if you are unable to attend.
Your continued support of TierOne Corporation is sincerely appreciated.
Very truly yours,
/s/ Gilbert G. Lundstrom
Gilbert G. Lundstrom
Chairman of the Board and Chief Executive
Officer
TIERONE CORPORATION
1235 N STREET
LINCOLN, NEBRASKA 68508
(402) 475-0521
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2004
--------------------
Our Annual Meeting of Shareholders will be held in the Regents A Room
at the Embassy Suites Hotel located at 1040 P Street, Lincoln, Nebraska, on
Tuesday, May 4, 2004 at 10:00 a.m., Central Daylight Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect two (2) directors for a three-year term and until
their successors are elected and qualified;
(2) To ratify the appointment by the Audit Committee of the Board
of Directors of KPMG LLP as our independent auditors for the
fiscal year ending December 31, 2004; and
(3) To transact such other business as may properly come before
the meeting or at any adjournment thereof. We are not aware of
any other such business.
You are entitled to notice of and to vote at the Annual Meeting and at
any adjournment of the Annual Meeting if you are a shareholder of record as of
the close of business on February 27, 2004, the record date for the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Eugene B. Witkowicz
Eugene B. Witkowicz
Corporate Secretary
Lincoln, Nebraska
March 22, 2004
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO VOTE YOUR SHARES PROMPTLY. IF YOU ATTEND THE
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE
REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE OF THE
PROXY.
TABLE OF CONTENTS
Page
----
About the Annual Meeting of Shareholders........................................................... 1
Information with Respect to Nominees for Director, Continuing Directors and Executive Officers..... 3
Election of Directors......................................................................... 3
Directors Whose Terms are Continuing.......................................................... 4
Executive Officers Who Are Not Directors...................................................... 5
Meetings and Committees of the Board of Directors............................................. 5
Director Compensation......................................................................... 6
Directors Attendance at Annual Meetings....................................................... 7
Director Nominations.......................................................................... 7
Compensation Committee Interlocks and Insider Participation................................... 8
Management Compensation............................................................................ 8
Summary Compensation Table.................................................................... 8
Stock Options................................................................................. 9
Benefit Plans................................................................................. 12
Transactions with Certain Related Persons..................................................... 15
Report of the Compensation Committee............................................................... 15
General Compensation Objectives and Policies.................................................. 15
Components of Executive Compensation.......................................................... 16
Compensation of the Chief Executive Officer and Chief Operating Officer....................... 17
Performance Graph.................................................................................. 18
Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management................... 19
Section 16(a) Beneficial Ownership Reporting Compliance....................................... 21
Ratification of Appointment of Auditors............................................................ 21
Audit Fees.................................................................................... 22
Report of the Audit Committee...................................................................... 23
Shareholder Proposals, Nominations and Communications with the Board of Directors.................. 23
Annual Reports..................................................................................... 24
Other Matters...................................................................................... 24
TIERONE CORPORATION
PROXY STATEMENT
-----------------------
ANNUAL MEETING OF SHAREHOLDERS
-----------------------
This Proxy Statement is furnished to holders of common stock of TierOne
Corporation, the parent holding company of TierOne Bank. Our Board of Directors
is soliciting proxies to be used at the Annual Meeting of Shareholders to be
held in the Regents A Room at the Embassy Suites Hotel located at 1040 P Street,
Lincoln, Nebraska, on Tuesday, May 4, 2004, at 10:00 a.m., Central Daylight
Time, and at any adjournment of the Annual Meeting for the purposes set forth in
the Notice of Annual Meeting of Shareholders. This Proxy Statement is first
being mailed to shareholders on or about March 22, 2004.
ABOUT THE ANNUAL MEETING OF SHAREHOLDERS
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our Annual Meeting, shareholders will act upon the matters outlined
in the Notice of Meeting on the cover page of this Proxy Statement, including
the election of directors and ratification of our independent auditors. In
addition, management will report on the performance of TierOne Corporation and
respond to questions from shareholders.
WHO IS ENTITLED TO VOTE?
Only our shareholders of record as of the close of business on the
record date for the meeting, February 27, 2004, are entitled to vote at the
meeting. On the record date, we had 20,317,568 shares of common stock issued and
outstanding and no other class of equity securities outstanding. For each issued
and outstanding share of common stock you own on the record date, you will be
entitled to one vote on each matter to be voted on at the meeting, in person or
by proxy.
HOW DO I SUBMIT MY PROXY?
After you have carefully read this Proxy Statement, indicate on your
proxy card how you want your shares to be voted. Then sign, date and mail your
proxy card in the enclosed prepaid return envelope as soon as possible or, if
you are the record holder, you may appoint a proxy by utilizing our toll-free
telephone voting option by calling 1-800-PROXIES. This will enable your shares
to be represented and voted at the Annual Meeting.
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, COULD MY BROKER
AUTOMATICALLY VOTE MY SHARES FOR ME?
Yes. Your broker may vote in his or her discretion on the election of
directors and ratification of the auditors if you do not furnish instructions.
CAN I ATTEND THE MEETING AND VOTE MY SHARES IN PERSON?
Yes. All shareholders are invited to attend the Annual Meeting.
Shareholders of record can vote in person at the Annual Meeting. If your shares
are held in street name, then you are not the shareholder of record and you must
ask your broker or other nominee how you can vote at the Annual Meeting. You
will not be able to vote by using the toll-free number set forth above but may
be able to vote by telephone or Internet if provided for by your broker.
1
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. If you have not voted through your broker or other nominee, there
are three ways you can change your vote or revoke your proxy after you have sent
in your proxy card.
- First, you may send a written notice to our Corporate
Secretary, Mr. Eugene B. Witkowicz, TierOne Corporation, 1235
N Street, Lincoln, Nebraska 68508, stating that you would like
to revoke your proxy.
- Second, you may complete and submit a new proxy card. Any
earlier proxies will be revoked automatically.
- Third, you may attend the Annual Meeting and vote in person.
Any earlier proxy will be revoked. However, attending the
Annual Meeting without voting in person will not revoke your
proxy.
If you have instructed a broker or other nominee to vote your shares,
you must follow directions you receive from your broker or other nominee to
change your vote.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of votes considered
to be present at the meeting.
WHAT ARE THE BOARD OF DIRECTORS' RECOMMENDATIONS?
The recommendations of the Board of Directors are set forth under the
description of each proposal in this Proxy Statement. In summary, the Board of
Directors recommends that you vote FOR the nominees for election as directors
described herein and FOR the ratification of the appointment of KPMG LLP as
independent auditors for the fiscal year ending December 31, 2004.
The proxy solicited hereby, if properly signed and returned to us and
not revoked prior to its use, will be voted in accordance with your instructions
contained in the proxy. If no contrary instructions are given, each proxy signed
and received will be voted in the manner recommended by the Board of Directors
and, upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Proxies solicited hereby may be exercised only at the Annual Meeting
and any adjournment of the Annual Meeting and will not be used for any other
meeting.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
The election of directors will be determined by a plurality of the
votes cast at the Annual Meeting. The two nominees for director receiving the
most "for" votes will be elected. Approval of the ratification of the
appointment of our independent auditors and any other proposal will require the
affirmative vote of a majority of the votes cast on the proposal.
Abstentions, withholding of authority to vote or broker non-votes are
not counted as votes cast. Accordingly, abstentions, withholding of authority to
vote or broker non-votes will have no effect on the vote and will not be counted
in determining whether the proposals at the Annual Meeting receive the required
shareholder vote.
WHOM SHOULD I CALL WITH QUESTIONS?
You should call our proxy solicitor, Georgeson Shareholder
Communications, Inc., toll-free at 1-800-501-4431.
2
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
Our Articles of Incorporation provide that the Board of Directors shall
be divided into three classes as nearly equal in number as possible. The
directors are elected by our shareholders for staggered terms and until their
successors are elected and qualified.
At the Annual Meeting, you will be asked to elect one class of
directors, consisting of two directors, for a three-year term expiring in 2007
and until their successors are elected and qualified. LaVern F. Roschewski,
whose term expires at this Annual Meeting, will retire after more than four
decades of service to TierOne Bank. Our Nominating and Corporate Governance
Committee has nominated Mr. Charles W. Hoskins to stand for election to the
class of directors whose terms are expiring at this Annual Meeting. The
Nominating and Corporate Governance Committee considered nominees from a group
of individuals developed by the Committee in consultation with our Chief
Executive Officer. The Committee also identified a present need to select a
nominee who met the Audit Committee's financial expert criteria as defined by
the Securities and Exchange Commission. Mr. Hoskins, whose name was submitted
for consideration by the Chief Executive Officer, was deemed by the Committee as
the most qualified financial expert among the potential nominees presented. In
addition, the Nominating and Corporate Governance Committee has recommended the
re-election of Ann Lindley Spence as a director. No nominee for director is
related to any other director or executive officer by blood, marriage or
adoption. Shareholders are not permitted to use cumulative voting for the
election of directors. Our Board of Directors has determined that a majority of
our members are independent directors as defined in the Nasdaq National Market's
listing standards. The current independent members are Directors Roschewski,
Spence, McConnell and Pocras. Mr. Hoskins will also be deemed independent if
elected.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees for director listed
below. If any person named as a nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by our Board of
Directors. At this time, the Board of Directors knows of no reason why either of
the nominees listed below may not be able to serve as a director if elected.
The following tables present information concerning the nominees for
director and directors whose term continue, all of whom (other than Mr. Hoskins)
also serve as directors of TierOne Bank. Ages are reflected as of February 27,
2004.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERM EXPIRING IN 2007
Position with TierOne Corporation and TierOne Bank Director of
and Principal Occupation During TierOne
Name Age the Past Five Years Bank Since
---------------------------- --- -------------------------------------------------- -----------
Ann Lindley Spence 69 Director. Retired; previously, President of Spence 1989
Title Services, Inc., a title insurance company
located in Omaha, Nebraska.
Charles W. Hoskins 67 Self employed financial advisor since 1990; --
retired partner, National Director of Japanese
Business Development, Deloitte & Touche, Los
Angeles, California.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ELECTION OF THE NOMINEES
AS DIRECTORS.
3
DIRECTORS WHOSE TERMS ARE CONTINUING
DIRECTORS WITH A TERM EXPIRING IN 2005
Position with TierOne Corporation and TierOne Bank Director of
and Principal Occupation During TierOne
Name Age the Past Five Years Bank Since
---------------------------- --- -------------------------------------------------- -----------
James A. Laphen 55 Director. President and Chief Operating Officer of 2001
TierOne Corporation since April 2002 and TierOne
Bank since October 2001. Mr. Laphen joined
TierOne Bank in September 2000 as Senior Executive
Vice President and Chief Operating Officer. Prior
thereto he served as President and Chief Operating
Officer of Commercial Federal Bank, Omaha,
Nebraska from 1994 to July 2000.
Campbell R. McConnell, Ph.D. 75 Director. Retired; currently Professor Emeritus of 1974
the Economics Department of the University of
Nebraska-Lincoln.
DIRECTORS WITH A TERM EXPIRING IN 2006
Position with TierOne Corporation and TierOne Bank Director of
and Principal Occupation During TierOne
Name Age the Past Five Years Bank Since
---------------------------- --- -------------------------------------------------- -----------
Gilbert G. Lundstrom, Esq. 62 Chairman of the Board and Chief Executive Officer 1994
of TierOne Corporation since April 2002 and
TierOne Bank since October 2001. Previously,
Chairman of the Board, President and Chief
Executive Officer from September 1999. From 1996
to 1999, he served as director, President and
Chief Executive Officer. He joined TierOne Bank
in 1994. He was a director of the Federal Home
Loan Bank of Topeka and serves on the Board of
Directors of Sahara Enterprises, Inc., Chicago,
Illinois. Prior to 1994, he was the managing
partner of Woods & Aitken Law Firm, Lincoln,
Nebraska, where he practiced law for 25 years.
Woods & Aitken serves as general counsel to
TierOne Bank.
Joyce Person Pocras 61 Director. CPA (inactive), independent investor, 1994
retired in 1993 as the internal auditor of First
Federal Lincoln Bank, now known as TierOne Bank.
All existing directors have served as directors of TierOne Corporation
since 2002, the year our company was formed.
4
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is the information with respect to the principal
occupations during the last five years for the seven executive officers of
TierOne Bank who do not serve as directors. Mr. Witkowicz also serves as an
officer of TierOne Corporation. Ages are reflected as of February 27, 2004.
Name Age Principal Occupation During the Past Five years
---------------------------- --- ----------------------------------------------------------------------------
Eugene B. Witkowicz 56 Executive Vice President, Chief Financial Officer, Corporate Secretary and
Treasurer of TierOne Corporation. Executive Vice President, Corporate
Secretary, Treasurer and Director of Finance of TierOne Bank. Previously,
Executive Vice President, Treasurer and Chief Financial Officer since 1992.
Mr. Witkowicz joined TierOne Bank in 1972.
Gale R. Furnas 50 Executive Vice President and Director of Lending of TierOne Bank since 1998.
Previously, Senior Vice President/Loan Sales Manager and Assistant Director
of Lending since 1996. Mr. Furnas joined TierOne Bank in 1976.
Roger R. Ludemann 55 Executive Vice President and Director of Retail Banking since 1997.
Previously, Executive Vice President and Director of Consumer Services since
September 1997. Mr. Ludemann joined TierOne Bank in 1995.
Larry L. Pfeil 61 Executive Vice President and Director of Administration of TierOne Bank since
2000. Previously, Executive Vice President and Director of Financial
Services of TierOne Bank since 1982. Mr. Pfeil joined TierOne Bank in 1971.
Edward J. Swotek 42 Senior Vice President and Strategic Planning Officer of TierOne Bank since
February 2000; prior thereto, First Vice President and Strategic Planning and
Special Projects Manager. Mr. Swotek joined TierOne Bank in 1987.
James R. McLaughlin 49 First Vice President of TierOne Bank since September 2003; previously, Senior
Vice President and Controller of TierOne Bank since February 2000; and prior
thereto, Controller. Mr. McLaughlin joined TierOne Bank in 1984.
David L. Kellogg 45 Controller of TierOne Bank since September 2003. Prior thereto, Client
Relationship Manager, Fiserv, Inc., a banking software and services company,
from 2001 to 2003; previously, Assistant Corporate Controller, Commercial
Federal Bank, Omaha, Nebraska from 1982 to 2001.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2003, the Board of Directors
of TierOne Corporation and TierOne Bank met twelve times. All directors of
TierOne Corporation attended 100% of the aggregate of the total number of Board
meetings held during the period for which he/she has been a director and the
total number of meetings held by all committees of the Board on which he/she
served during the periods that he/she served. The Board of Directors of TierOne
Corporation has established an Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee.
AUDIT COMMITTEE. The primary purpose of the Audit Committee, as set
forth in the Committee's charter, is to assist the Board of Directors in
fulfilling its fiduciary responsibilities relating to corporate accounting and
reporting practices. The Audit Committee is comprised of three directors who are
independent directors as defined in the Nasdaq National Market's listing
standards and rules of the Securities and Exchange Commission. The current
members of the Audit Committee are Directors Spence, Pocras and McConnell, who
is Chairman. The report of the Audit Committee is set forth on page 23. The
Audit Committee of TierOne Corporation met six times in 2003.
5
COMPENSATION COMMITTEE. It is the responsibility of the Compensation
Committee of the Board of Directors to institute a program which effectively
provides incentive for executive management to lead TierOne Corporation to its
full potential. The current members of the committee are Directors McConnell,
Spence and Pocras who is Chairperson. No member of the Compensation Committee is
a current officer or employee of TierOne Corporation, TierOne Bank or any
subsidiary of us and all are independent directors under the Nasdaq National
Market's listing standards. The report of the Compensation Committee with
respect to compensation and benefits for the Chief Executive Officer and all
other executive officers is set forth on page 15. The Compensation Committee met
twice in fiscal 2003.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. TierOne Corporation
established a Nominating and Corporate Governance Committee in 2004 for the
purpose of nominating directors for election at this Annual Meeting. The current
members of the Nominating and Corporate Governance Committee are Directors
McConnell and Pocras who is Chairperson. The Nominating and Corporate Governance
Committee met three times in 2004 to consider director nominations and
recommended nominees to the full Board of Directors. The Nominating and
Corporate Governance Committee members are independent directors, as defined in
the Nasdaq National Market's listing standards.
COMMITTEE CHARTERS. TierOne Corporation's Audit, Compensation and
Nominating and Corporate Governance Committee charters are all available on our
website at www.tieronebank.com. We are not incorporating any information from
our website into this Proxy Statement.
DIRECTOR COMPENSATION
Our directors currently receive a fee of $2,500 for each regularly
scheduled monthly and special board meeting, regardless of attendance. In
addition, Mr. Roschewski, who is retiring as a director at the Annual Meeting,
receives an additional $2,500 for each regularly scheduled monthly and special
board meeting for service as the Vice Chairman of the Board. Members of the
Audit, Compensation and Nominating and Corporate Governance Committees of
TierOne Bank and/or TierOne Corporation receive a fee of one-half the regular
board meeting fee, only if present at the meeting in person or by telephone. For
each respective committee, only one fee is paid for joint meetings of TierOne
Bank and TierOne Corporation Board of Director committee meetings. Directors
also currently receive life, health and dental insurance benefits through
TierOne Bank. Directors currently do not receive additional fees for service as
directors of TierOne Corporation.
During fiscal 2003, we granted to our non-employee directors stock
options pursuant to the 2003 Stock Option Plan and awarded shares of restricted
stock pursuant to the 2003 Recognition and Retention Plan and Trust Agreement.
Our non-employee directors each received 112,875 stock options and 45,150
recognition plan shares both of which vest at 20% per year commencing on the
first anniversary of the date of grant or earlier upon death, disability or
change in control of TierOne Corporation.
We maintain a deferred compensation program for our directors. Under
the deferred compensation program, each director may defer, until retirement,
any portion of his or her annual remuneration for serving as a director. Each
director has the right, under the program, to direct the investment of his or
her deferred fees. A director may change his or her investment direction
quarterly. Payments commence under the program upon the earlier of death,
termination from service, disability, or a change in control of TierOne Bank.
Each director may elect, at the time he or she makes the deferral election, to
receive benefits in the form of a single lump sum payment, a life annuity, a
joint and survivor annuity, or monthly installments (over a period from 2 to 240
months). In the absence of any election, the benefits will be paid over a 240
month period. Our obligation to make or continue to make any payments to a
participant in the program terminates if, after the commencement of benefits,
the participant directly acts as an officer, director, employee or agent of or
performs consulting services for any firm, person, corporation or entity which
(a) directly competes with our primary business as then conducted by us and (b)
has an office within the boundaries of or within 50 miles from the boundaries of
any city in which we have an office. In addition, under the terms of TierOne
Bank's Consultation Plan for Directors, any retiring director with 10 or more
years of service who agrees to provide consulting or advisory services to the
Board of Directors will be entitled to receive an annual benefit equal to the
average of the annual monthly board fees and yearly retainer, if any, paid to
6
such retiring director for the last three years of service prior to his or her
retirement reduced by twenty percent for each subsequent year in which the
director provides consulting or advisory services to our Board of Directors. The
maximum duration for which benefits can be received is five years. An additional
benefit in the same amount as paid to retired directors participating in the
plan will be paid to any participant in the plan who served as chairman of the
board for at least three years. No persons are currently receiving any benefits
under this plan.
DIRECTORS ATTENDANCE AT ANNUAL MEETINGS
Although we do not have a formal policy regarding attendance by members
of the Board of Directors at Annual Meetings of Shareholders, we typically
schedule a Board meeting in conjunction with our Annual Meeting of Shareholders
and expect that our directors will attend, absent a valid reason for not doing
so. All of our directors attended our Annual Meeting of Shareholders held on
April 23, 2003.
DIRECTOR NOMINATIONS
In making recommendations to TierOne Corporation's Board of Directors
of nominees to serve as directors, the Nominating and Corporate Governance
Committee will examine each director nominee on a case-by-case basis regardless
of who recommended the nominee and take into account all factors it considers
appropriate, which may include strength of character, mature judgment, career
specialization, relevant technical skills or financial acumen, diversity of
viewpoint and industry knowledge. However, the Board of Directors believes the
following minimum qualifications must be met by a director nominee to be
recommended by the Nominating and Corporate Governance Committee:
1. Each director must display high personal and professional ethics,
integrity and values.
2. Each director must have the ability to exercise sound business
judgment.
3. Each director must be accomplished in his or her respective field, with
broad, experience at the administrative and/or policy-making level in
business, government, education, technology or public interest.
4. Each director must have relevant expertise and experience, and be able
to offer advice and guidance based on that expertise and experience.
5. Each director must be independent of any particular constituency, be
able to represent all shareholders of TierOne Corporation and be
committed to enhancing long-term shareholder value.
6. Each director must have sufficient time available to devote to
activities of the Board of Directors and to enhance his or her
knowledge of our business.
The Board of Directors also believes the following qualities or skills
are necessary for one or more directors to possess:
1. One or more directors generally should be an active or former chief
executive officer of a public or private company, managing partner of a
public accounting firm office, or a leader of a complex organization,
including commercial, scientific, government, educational and other
similar institution.
2. Directors should be selected so that the Board of Directors is a
diverse body.
3. One or more directors should possess the necessary qualifications to
satisfy the "audit committee financial expert" requirements as defined
in Item 401(h) of Regulation S-K.
The committee also may consider the extent to which the candidate would
fill a present need on the Board of Directors. The Nominating and Corporate
Governance Committee will also consider candidates for director
7
suggested by other directors as well as our management and shareholders. A
shareholder who desires to recommend a prospective nominee should notify our
Corporate Secretary in writing providing any supporting material the shareholder
considers appropriate. Procedures for shareholder nominations are described
under "Shareholder Proposals, Nominations and Communications with the Board of
Directors."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Determinations regarding compensation of our Chief Executive Officer,
Chief Operating Officer and other executive officers are made by the
Compensation Committee of the Board of Directors. Mesdames Pocras and Spence and
Dr. McConnell are members of the Compensation Committee.
No person who served as a member of the Compensation Committee during
2003 was a current or former officer or employee of TierOne Corporation or
TierOne Bank, other than Ms. Pocras who served as TierOne Bank's Internal
Auditor until 1993. None of the members engaged in certain transactions with
TierOne Corporation or TierOne Bank required to be disclosed by regulations of
the Securities and Exchange Commission. Additionally, there were no compensation
committee "interlocks" during 2003, which generally means that no executive
officer of TierOne Corporation served as a director or member of the
compensation committee of another entity, one of whose executive officers served
as a director or member of the Compensation Committee.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation paid by TierOne Bank (including amounts deferred to
future periods by the officers) for services rendered in all capacities during
the years ended December 31, 2003, 2002 and 2001, to the Chairman of the Board
and Chief Executive Officer and the next four highest paid officers of TierOne
Bank whose salary plus bonus exceeded $100,000 in 2003. No additional
compensation is paid for service as an executive officer of TierOne Corporation.
Long Term Compensation
Awards
-----------------------
Annual Compensation(1) Securities
Name and ---------------------- Restricted Underlying All Other
Principal Position Year Salary(2) Bonus(3) Stock(4) Options Compensation(5)
---------------------------------- ---- --------- -------- ---------- ---------- ---------------
Gilbert G. Lundstrom, 2003 $ 521,521 $328,090 $3,922,600 542,000 $ 54,255
Chairman of the Board and 2002 528,284 368,641 -- -- 23,578
Chief Executive Officer 2001 506,050 330,659 -- -- 20,077
James A. Laphen, President 2003 345,001 189,237 1,961,300 270,000 47,027
and Chief Operating Officer 2002 335,194 202,501 -- -- 15,538
2001 275,000 134,400 -- -- 8,160
Eugene B. Witkowicz, Executive 2003 162,955 74,285 713,200 90,000 39,728
Vice President, Chief Financial 2002 152,247 72,108 -- -- 12,927
Officer, Corporate Secretary/ 2001 142,585 59,220 -- -- 7,132
Treasurer and Director of Finance
Gale R. Furnas, Executive Vice 2003 173,140 81,888 713,200 90,000 42,123
President and Director of Lending 2002 157,993 77,542 -- -- 13,397
2001 143,554 59,850 -- -- 7,179
Roger R. Ludemann, Executive Vice 2003 149,747 45,890 713,200 90,000 36,622
President and Director of 2002 142,338 47,211 -- -- 12,117
Retail Banking 2001 135,046 45,375 -- -- 6,770
(Footnotes on following page.)
8
---------------------------
(1) We provide various miscellaneous benefits to the named executive
officers. The costs of providing such benefits to the named executive
officers did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported for each of such individuals.
(2) Includes with respect to Messrs. Lundstrom and Laphen director's fees
totaling $30,000, $37,500 and $35,000 each in 2003, 2002 and 2001,
respectively.
(3) Represents bonuses earned under the Management Incentive Compensation
Plan which were paid in the following year.
(4) Represents the grant of 220,000, 110,000, 40,000, 40,000 and 40,000
shares of restricted common stock to Messrs. Lundstrom, Laphen,
Witkowicz, Furnas and Ludemann, respectively, pursuant to the
Recognition Plan, which was deemed to have had the indicated value at
the date of grant. The entire grants were unvested at December 31, 2003
and had fair market values of $5,051,200, $2,525,600, $918,400,
$918,400 and $918,400, respectively, as of that date. The awards vest
20% per year from the date of grant. Dividends paid on the restricted
common stock are held in the Recognition Plan trust and paid to the
recipient when the restricted stock vests.
(5) Includes the fair market value of 1,748, 1,748, 1,476, 1,565 and 1,361
shares of common stock allocated to the ESOP accounts of Messrs.
Lundstrom, Laphen, Witkowicz, Furnas and Ludemann, respectively on
December 31, 2003, the date the shares were allocated. Under TierOne
Bank's 401(k) profit sharing plan for fiscal 2003, $6,900, $6,900,
$5,829, $6,180 and $5,373 was allocated to the accounts of Messrs.
Lundstrom, Laphen, Witkowicz, Furnas and Ludemann, respectively. In
addition, includes with respect to Mr. Lundstrom, the present value of
the premiums paid for split dollar life insurance purchased by TierOne
Bank. Under the terms of the policies, Mr. Lundstrom is entitled to
receive the difference between the cash surrender value of the policy
and the aggregate amount of premiums paid by TierOne Bank. Does not
include amounts allocated to Messrs. Lundstrom's and Laphen's accounts
in the supplemental executive retirement plan.
STOCK OPTIONS
STOCK OPTION GRANTS DURING 2003
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table above, information with respect to stock
options granted during 2003.
Individual Grants Potential Realizable Value
--------------------------------------------------------------------------------- at Assumed Annual Rates of
Number of Percent of Total Stock Price Appreciation
Securities Options Granted Exercise for Option Term(2)
Underlying to Employees in Price Expiration --------------------------
Name Options Granted Fiscal Year ($/Sh)(1) Date 5% 10%
-------------------- --------------- ---------------- -------- ---------- ---------- -----------
Gilbert G. Lundstrom 542,000 38.7% $ 17.83 4/23/13 $6,075,820 $15,403,640
James A. Laphen 270,000 19.3 17.83 4/23/13 3,026,700 7,673,400
Eugene B. Witkowicz 90,000 6.4 17.83 4/23/13 1,008,900 2,557,800
Gale R. Furnas 90,000 6.4 17.83 4/23/13 1,008,900 2,557,800
Roger R. Ludemann 90,000 6.4 17.83 4/23/13 1,008,900 2,557,800
--------------------
(1) The exercise price was based on the market price of TierOne
Corporation's common stock on the date of the grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares. The actual gains, if any, on the exercise of stock
options will depend, in part, on the future performance of the common
stock, the option holder's continued employment throughout the option
period and the date on which the options are exercised.
9
YEAR-END OPTION VALUES
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, information with respect to the number
of options held at the end of the year ended December 31, 2003 and the value
with respect thereto. No stock options were exercised in 2003.
Number of Securities Value of Unexercised
Underlying Unexercised Options In The Money Options
at Year End at Year End(1)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------- ----------- ------------- ----------- -------------
Gilbert G. Lundstrom -- 542,000 $ -- $ 2,780,460
James A. Laphen -- 270,000 -- 1,385,100
Eugene B. Witkowicz -- 90,000 -- 461,700
Gale R. Furnas -- 90,000 -- 461,700
Roger R. Ludemann -- 90,000 -- 461,700
--------------------
(1) Calculated by determining the difference between the fair market value
of a share of the common stock underlying the options at December 31,
2003 ($22.96) and the exercise price of the options.
EMPLOYMENT AGREEMENTS. TierOne Bank entered into an employment
agreement with Mr. Lundstrom effective January 1, 1994, as amended, providing
for a three-year term which is extended on an annual basis, unless either the
Board or Mr. Lundstrom gives written notice of non-renewal. Mr. Lundstrom's
employment agreement provides for an annual base salary review by the Board of
Directors. In addition to the base salary, Mr. Lundstrom's employment agreement
provides for, among other things, participation in retirement and executive
benefit plans and other fringe benefits applicable to executive personnel.
TierOne Bank's Board of Directors may terminate Mr. Lundstrom's employment
agreement at any time, but any termination, other than termination for "cause"
(as defined in the agreement) will not prejudice Mr. Lundstrom's right to
compensation or other benefits under his agreement. In the event of termination
for cause, Mr. Lundstrom has no right to receive compensation or other benefits,
for any period after termination for cause with the exception of vested benefits
under TierOne Bank's benefit plans or policies and incentive plans for the
benefit of the executive. In the event TierOne Bank chooses to terminate Mr.
Lundstrom's employment for reasons other than for cause, or in the event Mr.
Lundstrom resigns for "good reason" (as defined in the agreement), Mr. Lundstrom
or, in the event of his death, his beneficiary or estate, would be entitled to
receive (i) an amount equal to the remaining base salary payments and bonus due
under the agreement in addition to all life, health and disability benefits
provided under the agreement for the remaining term of employment; (ii) a lump
sum cash payment equal to Mr. Lundstrom's "base amount" of compensation, as
defined under Section 280G(b)(3) of the Internal Revenue Code, times the number
of years or fractional portion thereof remaining in the term of the agreement as
of the termination date; and (iii) ownership of any split dollar life insurance
policy on Mr. Lundstrom's life; provided that such payments and benefits do not
constitute a parachute payment under Section 280G of the Internal Revenue Code.
TierOne Bank entered into an employment agreement with Mr. Laphen
effective September 25, 2000. The employment agreement provides for a three-year
term which is extended on an annual basis, unless either the Board or Mr. Laphen
gives written notice of termination. Mr. Laphen's employment agreement provides
for an annual base salary review by the Board of Directors. In addition to the
base salary, Mr. Laphen's employment agreement provides for, among other things,
participation in retirement and executive benefit plans and other fringe
benefits applicable to executive personnel. TierOne Bank's Board of Directors or
Mr. Laphen may terminate Mr. Laphen's employment agreement at any time, upon the
occurrence of an "event of termination" (as defined in the agreement). In the
event of termination for cause, Mr. Laphen has no right to receive compensation
or other benefits for any period after termination for cause. In the event of
termination due to death or disability, Mr. Laphen, or his beneficiary or
estate, would be entitled to receive a payment equal to twelve months "base
salary" (as defined). In the event Mr. Laphen's employment is terminated for
reasons other than for cause, death, disability or retirement, Mr. Laphen or, in
the event of his subsequent death, his beneficiary or estate, would be entitled
to receive an amount
10
equal to thirty-six months "base salary" (as defined); provided that the
payments do not exceed three times his average annual compensation for the
preceding five years he was employed by TierOne Bank or such lesser period in
the event he was employed less than five years at the time of termination.
In connection with the conversion of TierOne Bank from mutual to stock
form, TierOne Corporation entered into employment agreements with Messrs.
Lundstrom and Laphen. Mr. Lundstrom's employment agreement has a term of three
years, beginning on the date the conversion was completed, October 1, 2002. The
term will be extended daily thereafter unless either we or Mr. Lundstrom give
notice that the daily extensions will cease. Extension of the term also will
cease automatically if Mr. Lundstrom's employment is terminated for any reason.
Mr. Lundstrom's employment agreement provides that he will serve as the Chairman
of the Board and Chief Executive Officer of TierOne Corporation during the term
of his employment agreement. As Chairman of the Board and Chief Executive
Officer, he has the authority and responsibilities prescribed by our Bylaws and
that are customary for such positions.
Under the terms of the employment agreement, Mr. Lundstrom's salary is
reviewed annually by the TierOne Corporation Board of Directors. Mr. Lundstrom
is entitled to participate in our benefit plans and programs and receive an
automobile allowance. However, under the terms of the employment agreement with
TierOne Corporation, to the extent that any of the payments and benefits
provided by the agreement are paid to or received by Mr. Lundstrom under his
employment agreement with TierOne Bank, such payments and benefits provided by
TierOne Bank are subtracted from any amounts due him under similar provisions of
the employment agreement with TierOne Corporation.
In the event that, during the term of his employment agreement, Mr.
Lundstrom's employment is terminated by us without cause or for other than death
or disability, or if Mr. Lundstrom resigns for any of the reasons specified
below, he will be entitled to receive as liquidated damages continued group
life, health and disability benefits and a cash lump sum payment to compensate
him for the loss of salary (on a present value basis), cash bonus and incentive
compensation and qualified and non-qualified retirement plan benefits (on a
present value basis) for the period of the remaining term of his employment
agreement, but not more than three years. To the extent that Mr. Lundstrom earns
salary, cash bonus or incentive compensation, fees or comparable fringe benefits
from another employer during this period, the liquidated damages for loss of
this type of compensation will be subject to repayment by Mr. Lundstrom. In
addition, if Mr. Lundstrom surrenders his then outstanding options and shares of
restricted stock within 30 days of the termination of his employment, we will
pay him the value of his outstanding options and his shares of restricted stock.
The reasons specified in Mr. Lundstrom's employment agreement that
would justify his resigning and receiving the liquidated damages described above
are a material breach of the agreement by us (including a reduction in his
salary or a material reduction in his fringe benefits), a failure to elect him
to the positions in which he has a right to serve under his employment
agreement, a failure to vest in him the authority and responsibilities
associated with those positions, a failure to nominate or elect him as a
director of TierOne Corporation or TierOne Bank, a change in his principal place
of employment to a location more than 25 miles from our corporate headquarters
in Lincoln, Nebraska, or the liquidation, dissolution, bankruptcy or insolvency
of TierOne Corporation or TierOne Bank, a termination by him of his employment
with TierOne Bank for good reason or a termination of his employment by TierOne
Bank for other than cause, regulatory action, death or disability.
If a change in control of TierOne Corporation occurs prior to the end
of the term of his employment agreement, Mr. Lundstrom will be entitled to
receive, in addition to any liquidated damages if his employment is terminated,
a lump sum payment equal to the greater of (i) the salary and cash bonus or
incentive compensation he would have received if his employment had continued
until the expiration of the term of his employment agreement or (ii) three times
his average annual gross income from us or our subsidiaries during the past five
full calendar years before the change in control. In the event that due to a
change in control, any amount paid or payable to Mr. Lundstrom is subject to the
20% excise tax under Section 4999 of the Internal Revenue Code, then he will be
entitled to an additional payment such that, on an after-tax basis, he is
indemnified for the excise tax.
11
Mr. Lundstrom's employment agreement contains a covenant not to
compete, under which he agrees that if his employment terminates before the
expiration of the term of his employment agreement, he will not compete with us
in any county in which we maintain an office until the expiration of the earlier
of two years from the date on which his employment terminates or the date on
which the term of his employment agreement would otherwise expire. In addition,
for two years after his employment terminates, he agrees to not solicit our
customers or solicit our employees to accept other employment in the counties
where we maintain offices.
In connection with the conversion, TierOne Corporation also entered
into a three-year employment agreement with Mr. Laphen as President and Chief
Operating Officer. The provisions of Mr. Laphen's contract, including the
non-duplication provisions, are substantially identical to Mr. Lundstrom's
except that in the event of a change of control of us which occurs prior to the
expiration of the term of his employment agreement, he will be entitled to
receive the greater of the amount of liquidated damages provided by the
employment agreement or the amount due as a result of a change in control. Mr.
Laphen will not receive both liquidated damages and change in control benefits.
Because the amount of the payments and benefits that could constitute a
parachute payment is dependent upon the timing, price and structure of any
change in control that may occur in the future, it is not possible at this time
to quantify the severance benefits payable to Messrs. Lundstrom and Laphen under
the employment agreements.
CHANGE IN CONTROL AGREEMENTS. In connection with the conversion, we
entered into three-year change in control agreements with Messrs. Furnas,
Ludemann, Pfeil and Witkowicz and two-year change in control agreements with
Messrs. James R. McLaughlin, Edward J. Swotek and Delmar E. Williams and
Mesdames Paula J. Luther and Patricia A. Young, none of whom are covered by an
employment agreement. The terms of the change in control agreements will be
renewed on an annual basis unless written notice of non-renewal is given by our
Board of Directors. The change in control agreements provide that in the event
of a change in control, as defined, of TierOne Corporation, the officer, upon
his voluntary (for good reason as defined in the change in control agreement) or
involuntary termination, would be entitled to receive a severance payment equal
to either three times or two times (depending on whether the officer has a
three-year or a two-year change in control agreement) the officer's highest
level of aggregate base salary and cash incentive compensation paid to him or
her during the calendar year in which the termination occurs (determined on an
annualized basis) or either of the two calendar years immediately preceding the
calendar year in which the termination occurs. We also maintain and provide, at
no cost to the officer, for his or her continued participation in all group
insurance, life insurance, health and accident insurance, disability insurance
and other employee benefit plans and arrangements (excluding the employee stock
ownership plan and any other stock benefit plans as well as any cash incentive
compensation) for the period ending the earlier of the expiration of the
remaining term of the change in control agreement or the date of the officer's
full-time employment with another party pursuant to which he or she receives
substantially similar benefits.
In the event payments and benefits under the change in control
agreements, together with other payments and benefits the officers may receive,
would constitute an excess parachute payment under Section 280G of the Internal
Revenue Code, such payments would be reduced to an amount necessary to avoid
such payments constituting parachute payments. Because the amount of the
payments and benefits that could constitute a parachute payment is dependent
upon the timing, price and structure of any change in control that may occur in
the future, it is not possible at this time to quantify the severance benefits
payable to the officers under the change in control agreements.
BENEFIT PLANS
RETIREMENT PLAN. During 2003, we maintained the TierOne Retirement
Plan, a defined benefit plan intended to satisfy the tax-qualification
requirements of Section 401(a) of the Internal Revenue Code. Employees, other
than employees paid solely on a retainer or fee basis, became eligible to
participate in the retirement plan upon the attainment of age 21 and the
completion of one year of eligibility service. Effective December 31, 2002,
there was a plan curtailment resulting in a freeze of future accrual of benefits
under the plan. Effective January 1, 2004, we merged our defined benefit plan
with an unrelated multiple employer plan.
12
The retirement plan provided for a monthly benefit upon a participant's
retirement at the age of 65, or if later, the fifth anniversary of the
participant's initial participation in the retirement plan (i.e., the
participant's "normal retirement date"). A participant may also receive a
benefit on his early retirement date, which is the date on which he attains age
60 and completes ten years of vesting service. Benefits received prior to a
participant's normal retirement date are reduced by certain factors set forth in
the retirement plan. All participants are now fully vested in their benefits
under the retirement plan upon termination. The participants' benefits under the
new multiple employer retirement plan are identical to those under our former
plan.
The following table sets forth the estimated annual benefits payable
upon normal retirement at age 65 at various levels of compensation and years of
service.
Years of Benefit Service
------------------------------------------------------------------------------
Final Average
Earnings 15 20 25 30 35
------------- -------- -------- -------- -------- --------
$ 50,000 $ 7,500 $ 10,000 $ 13,000 $ 18,000 $ 23,000
75,000 11,250 15,000 19,500 27,000 34,500
100,000 15,000 20,000 26,000 36,000 46,000
125,000 18,750 25,000 32,500 45,000 57,500
150,000 22,500 30,000 39,000 54,000 69,000
175,000 25,500 34,000 44,200 61,200 78,200
200,000(1) 25,500 34,000 44,200 61,200 78,200
-------------------------
(1) The maximum amount of annual compensation which the retirement plan can
consider in computing benefits is $205,000 for 2004 pursuant to Section
401(a)(17) of the Internal Revenue Code.
The approximate full years of credited service, as of December 31,
2003, for the named executive officers is listed below. Due to the curtailment
of the retirement plan, the named executive officers did not accrue additional
years of service after 2002.
Name Years of Service
-------------------- ----------------
Gilbert G. Lundstrom 8
James A. Laphen 1
Eugene B. Witkowicz 27
Gale R. Furnas 22
Roger R. Ludemann 7
MANAGEMENT INCENTIVE COMPENSATION PLAN. We maintain the TierOne Bank
Management Incentive Compensation Plan. The plan is administered by a committee
currently consisting of four executive officers (including two who serve as
directors) appointed by the Board. The Management Incentive Compensation Plan is
designed to give officers and key employees an incentive for effectively
operating TierOne Bank and to further its earning power by providing cash
payments, equal to a certain percentage of their base salaries, based on
individual and organization performance. The Board of Directors establishes
incentive compensation for any member of the committee who participates in the
plan. Eligibility in the Management Incentive Compensation Plan is limited to
individuals that the committee believes have a significant opportunity to
improve our profits and growth. Individuals participating in this plan cannot
participate in any other annual incentive plan of TierOne Bank. For 2004, five
performance criteria are being used: earnings per share of TierOne Corporation,
TierOne Bank's return on average assets, net interest margin, non-performing
assets to tangible capital ratio and efficiency ratio. Other than the
profitability and earnings per share criteria, each of the other criteria are
measured against a peer group set forth in the plan currently consisting of 11
similarly-sized financial institutions. The criteria are reviewed by the
committee
13
annually and may be revised by the Board upon the recommendation of the
committee. The level of payment under the terms of the plan is expressed in
terms of a range from minimum to maximum depending upon performance. The amount
of a participant's award is a function of the performance of TierOne Bank
compared to the organizational criteria as well as the participant's performance
compared to a series of individual goals. No awards (except a discretionary
award) may be made if TierOne Corporation does not achieve the earnings per
share criterion. In the event TierOne Bank does not satisfy the organizational
criteria, the Board of Directors may authorize a discretionary bonus to an
individual in the plan. However, the discretionary award may not exceed the
midpoint (target) level of payment from the plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS. We currently maintain a
supplemental executive retirement plan for Mr. Lundstrom. Under the plan, in
consideration for remaining in our employ until his retirement (upon or after
attaining age 65), Mr. Lundstrom will receive a supplemental benefit for a
period of 15 years. Mr. Lundstrom's annual supplemental benefit will equal his
average annual compensation (excluding bonuses and incentive compensation)
during the three years of employment affording the highest average compensation,
reduced by amounts paid under the retirement plan or any disability benefits
paid by us, multiplied by 50%. If Mr. Lundstrom dies after he retires but before
the supplemental benefits are paid for 15 years, the remaining supplemental
benefits will be paid to his beneficiary or estate. In the event he dies before
retirement, he will be covered by a split dollar life insurance agreement funded
by us. The supplemental executive retirement plan requires Mr. Lundstrom to
continue his services with us and not to compete with us in order to receive the
benefits thereunder. The unfunded plan represents only a promise on our part to
pay the benefits thereunder and is subject to the claims of our creditors.
In the event of disability, we may pay an annual supplemental benefit
for up to ten years or until (i) the discontinuance of such disability and
employment is fully restored, (ii) Mr. Lundstrom becomes eligible for benefits
provided at retirement under the plan, which benefits shall be exclusive of and
in addition to any disability payments, or (iii) death.
We have also implemented two additional supplemental executive
retirement plans to provide for supplemental benefits to certain employees
(initially Messrs. Lundstrom and Laphen) whose benefits under the employee stock
ownership plan and the 401(k) Plan are reduced by limitations imposed by the
Internal Revenue Code. The supplemental benefits will equal the amount of the
additional benefits the participants would receive if there were no income
limitations imposed by the Internal Revenue Code. From time to time, our Board
of Directors will designate which employees may participate in these additional
supplemental executive retirement plans.
DEFERRED COMPENSATION ARRANGEMENTS. We currently maintain deferred
compensation arrangements with approximately 15 individuals, including some
former employees who currently receive benefits pursuant to such arrangements.
The deferred compensation arrangements were established to reward employees for
their valuable services to us. Among the individuals with whom we maintain
deferred compensation arrangements are Messrs. Witkowicz, Pfeil and Roschewski.
The arrangements generally provide that the employees will receive a
monthly benefit, beginning at their retirement, for a fixed number of years. The
agreements require the employees to continue their employment with us until
their retirement (other than as a result of death), or they will forfeit any
benefit they had under the terms of the arrangement. In addition, the employee
agrees that after his retirement, he will not engage nor become associated with
any other employer engaged in competition with us, either directly or
indirectly. The majority of the arrangements provide for a monthly benefit of
approximately $100 to $600 for a period of 120 months.
The deferred compensation arrangements are unfunded, represent only
promises on our part to pay amounts in the future and are subject to the claims
of our creditors. As of December 31, 2003, the approximate present value of the
benefits payable pursuant to the 15 deferred compensation arrangements was
$432,000.
14
TRANSACTIONS WITH CERTAIN RELATED PERSONS
TierOne Bank currently only offers educational, checking overdraft and
loans on savings accounts to its senior executive officers and directors. In
accordance with applicable federal laws and regulations, TierOne Bank offers
mortgage loans to its other officers and employees as well as members of their
immediate families for the financing of their primary residences and certain
other loans. These loans are generally made on substantially the same terms as
those prevailing at the time for comparable transactions with non-affiliated
persons. It is the belief of management that these loans neither involve more
than the normal risk of collectibility nor present other unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides that any
credit extended by a savings institution, such as TierOne Bank, to its executive
officers, directors and, to the extent otherwise permitted, principal
shareholder(s), or any related interest of the foregoing, must be on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions by the savings institution
with non-affiliated parties; unless the loans are made pursuant to a benefit or
compensation program that (a) is widely available to employees of the
institution, and (b) does not give preference to any director, executive officer
or principal shareholder, or certain affiliated interests of either, over other
employees of the savings institution and must not involve more than the normal
risk of repayment or present other unfavorable features. TierOne Bank's policy
is in compliance with Section 22(h) of the Federal Reserve Act.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board is responsible for developing
executive compensation policies for TierOne Corporation and TierOne Bank and for
setting the compensation for the Chief Executive Officer and Chief Operating
Officer. Executive officers of TierOne Corporation who hold identical positions
with TierOne Bank do not receive any compensation for service as officers of
TierOne Corporation. As a result of the recently adopted amendments to the
Nasdaq listing requirements, the Compensation Committee will be responsible for
setting compensation for all of the executive officers in 2004 and in future
years. During fiscal 2003, the Stock Benefits Committee established the initial
grant levels of TierOne Corporation's stock option and restricted stock plans
which were approved by shareholders in April 2003.
The Compensation Committee and the Stock Benefits Committee of the
Board are comprised entirely of independent outside directors as defined under
the Nasdaq listing standards. During the year ended December 31, 2003, the
Compensation Committee met two times.
GENERAL COMPENSATION OBJECTIVES AND POLICIES
The Committee seeks to ensure that:
- the interests of TierOne Corporation's employees are aligned
with those of its shareholders through potential stock
ownership;
- rewards are closely linked to company-wide and individual
performance;
- incentives are provided for executive officers to work toward
achieving successful annual results as a step toward
fulfilling TierOne Corporation's long-term operating results
and strategic objectives;
- the structure of executive officers' compensation balances
short-term and long-term goals and objectives;
- compensation levels are reasonably competitive with comparable
financial institutions; and
- TierOne Bank and TierOne Corporation can attract, retain and
motivate top performing executive officers in a cost effective
manner for the long-term success of TierOne Corporation.
15
The Compensation Committee applies these objectives through a
compensation structure comprised of both base salary and incentive-based
compensation, both short and long-term. Since a large part of total compensation
is incentive based, a direct link is established between executive compensation
and the long-term performance of TierOne Bank and TierOne Corporation. During
2003, the Compensation Committee also focused on developing a long-term
incentive compensation plan utilizing the Option Plan and Recognition Plan
adopted in 2003. Although the discussion below describes the methodology used to
establish compensation levels in 2003, the process of evaluating and determining
the most appropriate executive compensation structure is an ongoing matter and
accordingly, the Compensation Committee may determine to use the same or a
different methodology to establish compensation levels in future years.
In determining the broad general salary and benefit policies, and to
establish base salary and incentive compensation levels, the Compensation
Committee utilizes outside consultants and labor market studies. The
compensation survey information is drawn from both national and regional
financial research organizations that report compensation practices and salary
levels for executive positions at comparably-sized financial institutions,
specifically community banks and thrifts. The Compensation Committee's objective
is to provide base salaries as well as the appropriate mix of total compensation
that is reasonably competitive with total compensation paid by TierOne
Corporation's peers as identified in such surveys. TierOne Corporation adopted
updated compensation guidelines recommended by an outside national professional
consulting firm in fiscal year 2002 and updated the compensation guidelines for
a select number of executives in 2003.
COMPONENTS OF EXECUTIVE COMPENSATION
The three primary components of executive compensation of our executive
officers are base salary, annual cash incentive compensation and long-term
equity-based incentive compensation.
BASE SALARY. The Compensation Committee reviews market data compiled by
outside consultants with respect to TierOne Corporation's peer group,
supplemented by general industry information, to assess the competitiveness of
the base salary of the Chief Executive Officer, the Chief Operating Officer and
the other executive officers. The Compensation Committee considers the job
performance and contribution to the successful operation of TierOne Corporation
and TierOne Bank by the Chief Executive Officer, the Chief Operating Officer and
the other executive officers (and in the case of executive officers other than
the Chief Executive Officer, the Compensation Committee also considers the job
performance evaluation and recommendation of the Chief Executive Officer before
approving a salary adjustment for such executive officer) in determining any
adjustment to the officer's salary. Executive base salaries are intended to be
at levels reasonably comparable to the peer group with the opportunity for
compensation at above market levels to come from the incentive compensation
portion of the compensation program.
ANNUAL INCENTIVE COMPENSATION. The Company's annual incentive
compensation program, referred to as the Management Incentive Compensation Plan,
is designed to provide performance-based annual compensation based on the
achievement of performance targets approved by the Compensation Committee and
the Board of Directors. For 2003, six criteria were used: profitability and
earnings per share of TierOne Corporation and TierOne Bank's return on average
assets, net interest margin, non-performing assets to tangible capital ratio and
efficiency ratio. Other than the profitability and earnings per share criteria,
each of the other criteria were measured against a peer group set forth in the
Plan consisting of 12 comparably-sized financial institutions. The amount of a
participant's award was a function of the performance of TierOne Corporation
and/or TierOne Bank compared to the organizational criteria as well as the
participant's performance compared to a series of individual goals.
The incentive compensation awards approved in February 2004 for 2003 by
the Compensation Committee for the Chief Executive Officer and Chief Operating
Officer were $328,090 and $189,237.
LONG-TERM INCENTIVES. In 2003, the Stock Benefits Committee approved
long-term incentive awards for executive officers which were in the form of
restricted stock or stock option awards pursuant to the Option Plan and the
Recognition Plans approved by the Board of Directors and the shareholders in
2003. Stock option awards have
16
an exercise price equal to the fair market value of a share of stock on the date
of the award. Stock option awards and restricted stock awards vest pro rata over
a five year period at the rate of 20% per year. In approving such awards, the
Stock Benefits Committee considered stock option and restricted stock awards as
a means to motivate the executive officers and reward them for the creation of
shareholder value; took into account the performance of TierOne Corporation and
TierOne Bank and relative total shareholder return; looked at the value of these
types of awards granted to executive officers in peer financial institutions and
the banking industry; and included consideration of the executive officers'
individual performance and retention considerations.
In April 2003, the Stock Benefits Committee approved restricted stock
awards pursuant to the Recognition Plan and stock option awards pursuant to the
Option Plan. The Chief Executive Officer and the Chief Operating Officer were
awarded 220,000 and 110,000 shares, respectively, of restricted stock. Awards of
options covering 542,000 and 270,000 shares were made to the Chief Executive
Officer and the Chief Operating officer, respectively, such options vesting pro
rata over five years and having an exercise price equal to the fair market value
of a share of stock on the date of the award was made pursuant to the Option
Plan.
Six other executive officers received restricted stock awards of
between 9,000 and 40,000 shares pursuant to the Recognition Plan. All such
awards vest pro rata over five years from the date of the award. The same six
executive officers also received option awards covering from 8,000 to 90,000
shares, such options vesting pro rata over five years pursuant to the Option
Plan and having an exercise price equal to the fair market value on the date of
the award.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND THE CHIEF OPERATING OFFICER
The compensation paid for the year ended December 31, 2003 to Gilbert
G. Lundstrom, Chief Executive Officer of the TierOne Corporation and TierOne
Bank, and James A. Laphen, President and Chief Operating Officer of TierOne
Corporation and TierOne Bank, reflected the considered judgment of the
Compensation Committee embracing the policies and processes described above.
Mr. Lundstrom's base salary was $491,521 for 2003, the same as for
2002. Mr. Laphen's base salary was $315,001for 2003, an increase of 5.0% over
2002. In determining the Chief Executive Officer's and Chief Operating Officer's
fiscal 2003 salary, the Compensation Committee considered salaries offered by
stock savings institutions and banks and their holding companies nationwide as
provided by the consultant study discussed above. The Compensation Committee
took into consideration the anticipated level of equity awards. The Compensation
Committee also took into account the 23.9% growth in total assets between
December 31, 2001 and December 31, 2002, the 179.2% increase in TierOne
Corporation's total equity between such dates (taking into account the
successful completion of TierOne Bank's conversion to stock form) as well as the
14.8% increase in net income for 2002 as compared to 2001. The Compensation
Committee also considered Mr. Lundstrom's and Mr. Laphen's contributions in
controlling TierOne Bank's operating expenses and in overseeing the successful
completion of TierOne Bank's conversion to stock form. No specific formula was
used by the Compensation Committee to establish the Chief Executive Officer's
and the Chief Operating Officer's base salary.
The Company's Compensation Committee consists of the following
Directors, each of whom is an independent outside director.
The Compensation Committee
Joyce Person Pocras
Campbell R. McConnell
Ann Lindley Spence
17
PERFORMANCE GRAPH
TierOne Corporation completed its initial public offering on October 1,
2002, during which we sold an aggregate of 22,075,075 shares of our common stock
at a price of $10.00 per share. The following graph represents $100 invested in
our common stock at the $14.00 per share closing price of the common stock on
the Nasdaq National Market on October 2, 2002, the date our common stock
commenced trading on the Nasdaq. The graph demonstrates comparison of the
cumulative total returns for the common stock of TierOne Corporation, the
Russell 2000 Index and the SNL Securities $1B-$5B Thrift Index for the periods
indicated.
[PERFORMANCE GRAPH]
PERIOD ENDING
-----------------------------------------------------------------
INDEX 10/02/02 12/31/02 3/31/03 6/30/03 9/30/03 12/31/03
------------------------ -------- -------- ------- ------- ------- --------
TierOne Corporation 100.00 108.29 117.50 139.64 150.79 164.00
Russell 2000 100.00 106.75 101.96 125.84 137.26 157.20
SNL $1B-$5B Thrift Index 100.00 103.32 106.90 123.99 137.33 154.96
------------------
* Source, SNL Financial LC.
18
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 27, 2004, the record date
for the Annual Meeting, certain information as to the common stock beneficially
owned by (a) each person or entity, including any "group" as that term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934, who or which was
known to us to be the beneficial owner of more than 5% of the issued and
outstanding common stock, (b) our directors, (c) certain executive officers
named in the Summary Compensation Table; and (d) all directors, nominee for
director and executive officers as a group.
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group February 27, 2004(1) Common Stock
--------------------------------------------------------------- -------------------- ------------
TierOne Corporation Employee Stock Ownership Plan Trust 1,805,931(2) 8.9%
1235 N Street
Lincoln, Nebraska 68508
Private Capital Management, L.P. 2,236,300(3) 11.0
Bruce S. Sherman
Gregg J. Powers
8889 Pelican Bay Boulevard
Naples, Florida 34108
Neuberger Berman, LLC 1,287,200(4) 6.3
605 Third Avenue
New York, New York 10158
Directors:
Gilbert G. Lundstrom 512,584(5)(6) 2.5
James A. Laphen 202,892(5)(7) 1.0
Campbell R. McConnell 117,725(5)(8) *
Joyce Person Pocras 98,225(5)(9) *
LaVern F. Roschewski 97,925(5)(10) *
Ann Lindley Spence 97,725(5)(11) *
Nominee for Director:
Charles W. Hoskins -- *
Other Named Executive Officers:
Roger R. Ludemann 121,351(5)(12) *
Gale R. Furnas 95,701(5)(13) *
Eugene B. Witkowicz 94,828(5)(14) *
All Directors, Nominee for Director and Executive Officers of
TierOne Corporation and TierOne Bank as a group (14 persons) 1,581,527(5) 7.7%
----------------------
* Represents less than 1% of the outstanding stock.
(Footnotes continued on following page.)
19
----------------------
(1) Based upon filings made pursuant to the Securities Exchange Act of 1934
and information furnished by the respective individuals. Under
regulations promulgated pursuant to the Securities Exchange Act of
1934, shares of common stock are deemed to be beneficially owned by a
person if he or she directly or indirectly has or shares (i) voting
power, which includes the power to vote or to direct the voting of the
shares, or (ii) investment power, which includes the power to dispose
or to direct the disposition of the shares. Unless otherwise indicated,
the named beneficial owner has sole voting and dispositive power with
respect to the shares.
(2) The TierOne Corporation Employee Stock Ownership Plan Trust was
established pursuant to the TierOne Corporation employee stock
ownership plan by an agreement between TierOne Corporation and RSGroup
Trust Company who acts as trustee of the plan.
As of December 31, 2003, a total of 188,051 shares held in the trust
had been allocated to the accounts of participating employees. Under
the terms of the employee stock ownership plan, the trustee votes all
allocated shares held in the employee stock ownership plan in
accordance with the instructions of the participating employees.
Allocated shares for which employees do not give instructions generally
will not be voted, subject to the fiduciary duties of the trustee and
unallocated shares generally are voted in the same ratio on any matter
as to those shares for which instructions are given.
(3) The information regarding beneficial ownership by Private Capital
Management, L.P., Bruce S. Sherman and Gregg J. Powers is reported by
them in an amended statement dated January 12, 2004, on Schedule 13G/A
filed with the Securities and Exchange Commission. Private Capital
Management, Mr. Sherman and Mr. Powers reported shared voting and
shared dispositive power over 2,236,300 shares. Private Capital
Management, L.P. filed the Schedule 13G/A on behalf of Private Capital
Management, L.P., Bruce S. Sherman, its Chief Executive Officer, and
Gregg J. Powers, its President.
(4) According to the Schedule 13G filed with the Securities and Exchange
Commission, Neuberger Berman, LLC reports that it has shared voting
power over 1,285,300 shares and shared dispositive power over 1,287,200
shares. Neuberger Berman, LLC and Neuberger Berman Management Inc.
serve as sub-advisor and investment manager, respectively, of Neuberger
Berman's various investment funds. No other Neuberger Berman, LLC
advisory client has an interest of more than 5% of TierOne Corporation.
(5) (a) Includes options to acquire shares of our common stock that are
exercisable on February 27, 2004, or 60 days thereafter, under our 2003
Stock Option Plan as follows:
Name Number of Shares
--------------------------- ----------------
Gilbert G. Lundstrom 108,400
James A. Laphen 54,000
Campbell R. McConnell 22,575
Joyce Person Pocras 22,575
LaVern F. Roschewski 22,575
Ann Lindley Spence 22,575
Roger R. Ludemann 18,000
Gale R. Furnas 18,000
Eugene B. Witkowicz 18,000
All Directors and Executive
Officers of TierOne Corporation
and TierOne Bank as a group
(13 persons) 328,300
(b) Includes shares over which the directors or officers have voting
power which have been granted pursuant to the 2003 Recognition and
Retention Plan and are held in the associated trust, as follows:
Name Number of Shares
--------------------------- ----------------
Gilbert G. Lundstrom 220,000
James A. Laphen 110,000
Campbell R. McConnell 45,150
Joyce Person Pocras 45,150
LaVern F. Roschewski 45,150
Ann Lindley Spence 45,150
Roger R. Ludemann 40,000
Gale R. Furnas 40,000
Eugene B. Witkowicz 40,000
All Directors and Executive
Officers of TierOne Corporation and
TierOne Bank as a group (13 persons) 697,600
None of the awards set forth in paragraphs (a) and (b) above had vested
as of the record date for the Annual Meeting.
(Footnotes continued on following page.)
20
--------------------
(6) Includes 80,000 shares held jointly with Mr. Lundstrom's wife, 5,992
shares held in Mr. Lundstrom's account in TierOne Bank's 401(k) savings
plan, 15,000 shares held in Mr. Lundstrom's IRA account, 81,000 shares
held in two trusts in which Mr. Lundstrom's spouse has a pecuniary
interest and 2,192 shares which have been allocated to Mr. Lundstrom's
account in the employee stock ownership plan.
(7) Includes 30,350 shares held jointly with Mr. Laphen's wife, 50 shares
held in Mr. Laphen's account in TierOne Bank's 401(k) savings plan,
2,192 shares which have been allocated to Mr. Laphen's account in the
employee stock ownership plan and 6,300 shares held by Mr. Laphen in
his IRA account.
(8) Includes 50,000 shares held jointly with Dr. McConnell's wife.
(9) Includes 16,000 shares held by Ms. Pocras' husband, 2,500 shares held
in Ms. Pocras' IRA account and 12,000 shares held in Ms. Pocras'
account in TierOne Bank's 401(k) savings plan.
(10) Includes 30,000 shares held in Mr. Roschewski's account in TierOne
Bank's 401(k) savings plan and 200 shares held in two trusts for the
benefit of Mr. Roschewski's children of which Mr. Roschewski is a
co-trustee.
(11) Includes 30,000 shares held jointly with Ms. Spence's husband.
(12) Includes 15,560 shares held by Mr. Ludemann's wife, 24,400 shares held
in Mr. Ludemann's account in TierOne Bank's 401(k) savings plan, 1,691
shares allocated to Mr. Ludemann's account in the employee stock
ownership plan and 9,700 shares held by Mr. Ludemann in his IRA
account.
(13) Includes 16,336 shares held in Mr. Furnas' account in TierOne Bank's
401(k) savings plan, 1,930 shares which have been allocated to Mr.
Furnas' account in the employee stock ownership plan and 1,935 shares
held by Mr. Furnas in his IRA account.
(14) Includes 8,500 shares held jointly with Mr. Witkowicz's wife, 26,500
shares held in Mr. Witkowicz's account in TierOne Bank's 401(k) savings
plan and 1,828 shares which have been allocated to Mr. Witkowicz's
account in the employee stock ownership plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the officers and directors, and persons who own more than 10% of our
common stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
shareholders are required by regulation to furnish us with copies of all Section
16(a) forms they file. We know of no person who owns 10% or more of common
stock, other than Private Capital Management, L.P.
Based solely on our review of the copies of such forms furnished to us,
or written representations from our officers and directors, we believe that
during, and with respect to, the fiscal year ended December 31, 2003, our
officers and directors complied in all respects with the reporting requirements
promulgated under Section 16(a) of the Securities Exchange Act of 1934.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee of the Board of Directors of TierOne Corporation
has appointed KPMG LLP, independent certified public accountants, to perform the
audit of our financial statements for the year ending December 31, 2004, and
further directed that the selection of auditors be submitted for ratification by
the shareholders at the Annual Meeting.
We have been advised by KPMG LLP that neither that firm nor any of its
associates has any relationship with TierOne Corporation or its subsidiaries
other than the usual relationship that exists between independent certified
public accountants and clients. KPMG LLP will have one or more representatives
at the Annual Meeting who will have an opportunity to make a statement, if they
so desire, and will be available to respond to appropriate questions.
21
In determining whether to appoint KPMG LLP as our auditors, the Audit
Committee considered whether the provision of services, other than auditing
services, by KPMG LLP is compatible with maintaining the auditors' independence.
In addition to performing auditing services as well as reviewing our public
filings, our auditors performed tax-related services, including the completion
of our corporate tax returns, in fiscal 2003. The Audit Committee believes that
KPMG LLP's performance of these other services is compatible with maintaining
the auditor's independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2004.
AUDIT FEES
The following table sets forth the aggregate fees paid by us to KPMG
LLP for professional services rendered by KPMG LLP in connection with the audit
of TierOne Corporation's consolidated financial statements for 2003 and 2002, as
well as the fees paid by us to KPMG LLP for audit-related services, tax services
and all other services rendered by KPMG LLP to us during 2003 and 2002.
Year Ended December 31,
-----------------------
2003 2002
--------- ---------
Audit fees (1)........................................... $ 126,677 $ 316,840
Audit-related fees (2)................................... 26,600 19,000
Tax fees (3)............................................. 66,300 32,540
All other fees........................................... -- --
---------- ---------
Total.................................................... $ 219,577 $ 368,380
========= =========
--------------------
(1) Audit fees consist of fees incurred in connection with the audit of our
annual financial statements and the review of the interim financial
statements included in our quarterly reports filed with the Securities
and Exchange Commission, as well as work generally only the independent
auditor can reasonably be expected to provide, such as statutory
audits, consents and assistance with and review of documents filed with
the Securities and Exchange Commission.
(2) Audit-related fees consist of fees incurred in connection with audits
of the financial statements of our employee benefit plans.
(3) Tax fees consist primarily of fees paid in connection with preparing
federal and state income tax returns and other tax related services.
The Audit Committee selects our independent auditors and pre-approves
all audit services to be provided by it to TierOne Corporation. The Audit
Committee also reviews and pre-approves all audit-related and non-audit related
services rendered by our independent auditors in accordance with the Audit
Committee's charter. In its review of these services and related fees and terms,
the Audit Committee considers, among other things, the possible effect of the
performance of such services on the independence of our independent auditors.
The Audit Committee pre-approves certain audit-related services and certain
non-audit related tax services which are specifically described by the Audit
Committee on an annual basis and separately approves other individual
engagements as necessary. The Chair of the Audit Committee has been delegated
the authority to approve non-audit related services in lieu of the full Audit
Committee. On a quarterly basis, the Chair of the Audit Committee presents any
previously-approved engagements to the full Audit Committee.
Each new engagement of KPMG LLP was approved in advance by the Audit
Committee or its Chair, and none of those engagements made use of the de minimis
exception to pre-approval contained in the Securities and Exchange Commission's
rules.
22
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is responsible for selecting our independent
auditors. The Audit Committee reviews with management and the independent
auditors the systems of internal control, reviews the annual financial
statements, including the Annual Report on Form 10-K and monitors TierOne
Corporation's adherence in accounting and financial reporting to generally
accepted accounting principles.
The Audit Committee of TierOne Corporation has adopted a charter which
was attached as Appendix A to our Proxy Statement for the 2003 Annual Meeting of
Shareholders. The Board of Directors has determined that Ms. Pocras meets the
Securities and Exchange Commission's definition of audit committee financial
expert. Also, if elected and appointed to the Audit Committee, our Board of
Directors has determined that Mr. Hoskins would likewise meet the Securities and
Exchange Commission's definition of audit committee financial expert.
The Audit Committee has reviewed and discussed TierOne Corporation's
audited financial statements with management. The Audit Committee has discussed
with TierOne Corporation's independent auditors, KPMG LLP, the matters required
to be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees." The Audit Committee has received the written disclosures and
the letter from the independent auditors required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees" and has
discussed with KPMG LLP, the independent auditors' independence. Based on the
review and discussions referred to above in this report, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in TierOne Corporation's Annual Report on Form 10-K for fiscal year
2003 for filing with the Securities and Exchange Commission.
Members of the Audit Committee
Campbell R. McConnell
Ann Lindley Spence
Joyce Person Pocras
SHAREHOLDER PROPOSALS, NOMINATIONS AND
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
SHAREHOLDERS PROPOSALS. Any proposal which a shareholder wishes to have
included in the proxy materials of TierOne Corporation relating to the next
Annual Meeting of Shareholders of TierOne Corporation, which is currently
expected to be held in May 2005, must be received at the principal executive
offices of TierOne Corporation, 1235 N Street, Lincoln, Nebraska 68508,
Attention: Eugene B. Witkowicz, Corporate Secretary, no later than November 22,
2004. If such proposal is in compliance with all of the requirements of Rule
14a-8 under the Securities Exchange Act of 1934, as amended, it will be included
in the Proxy Statement and set forth on the form of proxy issued for such Annual
Meeting of Shareholders. It is urged that any such proposals be sent certified
mail, return receipt requested.
Shareholder proposals which are not submitted for inclusion in our
proxy materials pursuant to Rule 14a-8 may be brought before an Annual Meeting
pursuant to Section 2.14 of TierOne Corporation's Bylaws. Notice of the proposal
must also be given in writing and delivered to, or mailed and received at, our
principal executive offices by November 22, 2004. The notice must include the
information required by Section 2.14 of our Bylaws.
23
SHAREHOLDER NOMINATIONS. Our Bylaws provide that, subject to the rights
of the holders of any class or series of stock having a preference over the
common stock as to dividends or upon liquidation, all nominations for election
to the Board of Directors, other than those made by the Board or a committee
thereof, shall be made by a shareholder who has complied with the notice
provisions in the Bylaws. Written notice of a shareholder nomination generally
must be communicated to the attention of the Corporate Secretary and either
delivered to, or mailed and received at, our principal executive offices not
later than, with respect to an Annual Meeting of Shareholders, 120 days prior to
the anniversary date of the mailing of proxy materials by us in connection with
the immediately preceding Annual Meeting of Shareholders or by November 22,
2004, in the case of the 2005 Annual Meeting. We did not receive any shareholder
nominations for the 2004 Annual Meeting.
OTHER SHAREHOLDER COMMUNICATIONS. Our Board of Directors has adopted a
formal process by which shareholders may communicate with the Board.
Shareholders who wish to communicate with the Board may do so by sending written
communications addressed to the Board of Directors of TierOne Corporation, c/o
Eugene B. Witkowicz, Corporate Secretary, at 1235 N Street, Lincoln, Nebraska
68508. Mr. Witkowicz will forward such communications to the director or
directors to whom they are addressed.
ANNUAL REPORTS
A copy of our Annual Report to Shareholders for the year ended December
31, 2003 accompanies this Proxy Statement. Such Annual Report is not part of the
proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, WE WILL FURNISH TO ANY SHAREHOLDER
WITHOUT CHARGE A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR FISCAL 2003 REQUIRED
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH WRITTEN REQUESTS
SHOULD BE DIRECTED TO MR. EDWARD J. SWOTEK, TIERONE CORPORATION, 1235 N STREET,
LINCOLN, NEBRASKA 68508.
OTHER MATTERS
Management is not aware of any business to come before the Annual
Meeting other than the matters described above in this Proxy Statement. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by TierOne
Corporation. TierOne Corporation will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending the proxy materials to the beneficial owners of TierOne Corporation's
common stock. In addition to solicitations by mail, directors, officers and
employees of TierOne Corporation may solicit proxies personally or by telephone
without additional compensation. We have also engaged Georgeson Shareholder
Communications, Inc., a professional proxy solicitation firm, to assist in the
solicitation of proxies. Such firm will be paid a fee of $6,000.00, plus
reimbursement of out-of-pocket expenses.
24
ANNUAL MEETING OF SHAREHOLDERS OF
TIERONE CORPORATION
MAY 4, 2004
Please date, sign and mail
your proxy/voting instruction
card in the envelope provided
as soon as possible.
Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE NOMINEES LISTED
BELOW AND "FOR" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. TO ELECT DIRECTORS: For three-year terms expiring in 2007.
NOMINEES:
[ ] FOR ALL NOMINEES ( ) Ann Lindley Spence
( ) Charles W. Hoskins
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instruction below)
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of the [ ] [ ] [ ]
independent auditors.
3. In their discretion, the proxies/trustees are authorized to vote upon such
other business as may properly come before the meeting.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS OF TIERONE CORPORATION, THE ACCOMPANYING PROXY STATEMENT AND ANNUAL
REPORT PRIOR TO THE SIGNING OF THIS PROXY/VOTING INSTRUCTION CARD.
THIS CARD ALSO CONSTITUTES YOUR VOTING INSTRUCTIONS FOR ANY SHARES HELD IN THE
TIERONE BANK 401(k) SAVINGS PLAN AND THE TIERONE CORPORATION ESOP AND THE
UNDERSIGNED HEREBY AUTHORIZES THE RESPECTIVE TRUSTEES OF SUCH PLANS TO VOTE THE
SHARES ALLOCATED TO THE UNDERSIGNED'S ACCOUNT(S) AS PROVIDED HEREIN. UNVOTED
SHARES IN THE TIERONE BANK 401(k) SAVINGS PLAN WILL BE VOTED IN THE SAME MANNER
AND PROPORTION AS THE SHARES OF COMMON STOCK HELD IN SUCH PLAN FOR WHICH VOTING
INSTRUCTIONS FROM PARTICIPANTS ARE RECEIVED. SHARES HELD IN THE TIERONE
CORPORATION ESOP ALLOCATED TO PARTICIPANTS' ACCOUNTS WILL GENERALLY NOT BE VOTED
UNLESS THE PROXY/VOTING INSTRUCTION CARD IS RETURNED.
INSTRUCTION: To withhold authority to vote for an individual nominee, mark
"FOR ALL EXCEPT" and fill in the circle next to the nominee you
wish to withhold, as shown here: (X)
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note [ ]
that changes to the registered name(s) on the account may not be
submitted via this method.
Signature of Shareholder Signature of Shareholder
and/or Plan Participant____________ Date: _________ and/or Plan Participant______________ Date: ____________
NOTE: Please sign exactly as your name or names appear on this
Proxy/instruction card. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please
sign in partnership name by authorized person.
PROXY/VOTING INSTRUCTION CARD
TIERONE CORPORATION
THIS PROXY/VOTING INSTRUCTION CARD
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TIERONE CORPORATION FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2004
The undersigned hereby appoints the Board of Directors of TierOne
Corporation or any successors thereto, as proxies with full powers of
substitution, and/or the Trustee of the 401(k) Plan of TierOne Bank or Trustee
of the Employee Stock Ownership Plan, to represent and vote, as designated on
the reverse side, all the shares of common stock of TierOne Corporation held of
record by the undersigned or allocated to the undersigned's accounts in the
401(k) Plan and/or ESOP, on February 27, 2004, at the Annual Meeting of
Shareholders to be held in the Regents A Room at Embassy Suites Hotel, located
at 1040 P Street, Lincoln, Nebraska on May 4, 2004, at 10:00 a.m., Central
Daylight Time, or at any adjournment thereof. The shares of TierOne
Corporation's common stock will be voted as specified. If not otherwise
specified, this proxy/voting instruction card will be voted for the Board of
Directors' nominees, for each of the other proposals presented and otherwise at
the discretion of the proxies.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
'
ANNUAL MEETING OF SHAREHOLDERS OF
TIERONE CORPORATION
MAY 4, 2004
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy/voting COMPANY NUMBER
instruction card in the envelope provided as ______________________________
soon as possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES ACCOUNT NUMBER
(1-800-776-9437) from any touch-tone ______________________________
telephone and follow the instructions. Have
your proxy/voting instruction card available
when you call.
Please detach along perforated line and mail in the envelope provided IF you
are not voting via telephone.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE NOMINEES LISTED
BELOW AND "FOR" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. TO ELECT DIRECTORS: For three-year terms expiring in 2007.
NOMINEES:
[ ] FOR ALL NOMINEES ( ) Ann Lindley Spence
( ) Charles W. Hoskins
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instruction below)
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of the [ ] [ ] [ ]
independent auditors.
3. In their discretion, the proxies/trustees are authorized to vote upon such
other business as may properly come before the meeting.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS OF TIERONE CORPORATION, THE ACCOMPANYING PROXY STATEMENT AND ANNUAL
REPORT PRIOR TO THE SIGNING OF THIS PROXY/VOTING INSTRUCTION CARD.
THIS CARD ALSO CONSTITUTES YOUR VOTING INSTRUCTIONS FOR ANY SHARES HELD IN THE
TIERONE BANK 401(k) SAVINGS PLAN AND THE TIERONE CORPORATION ESOP AND THE
UNDERSIGNED HEREBY AUTHORIZES THE RESPECTIVE TRUSTEES OF SUCH PLANS TO VOTE THE
SHARES ALLOCATED TO THE UNDERSIGNED'S ACCOUNT(S) AS PROVIDED HEREIN. UNVOTED
SHARES IN THE TIERONE BANK 401(k) SAVINGS PLAN WILL BE VOTED IN THE SAME MANNER
AND PROPORTION AS THE SHARES OF COMMON STOCK HELD IN SUCH PLAN FOR WHICH VOTING
INSTRUCTIONS FROM PARTICIPANTS ARE RECEIVED. SHARES HELD IN THE TIERONE
CORPORATION ESOP ALLOCATED TO PARTICIPANTS' ACCOUNTS WILL GENERALLY NOT BE VOTED
UNLESS THE PROXY/VOTING INSTRUCTION CARD IS RETURNED.
INSTRUCTION: To withhold authority to vote for an individual nominee, mark
"FOR ALL EXCEPT" and fill in the circle next to the nominee you
wish to withhold, as shown here: (X)
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note [ ]
that changes to the registered name(s) on the account may not be
submitted via this method.
Signature of Shareholder Signature of Shareholder
and/or Plan Participant_________ Date: ___________ and/or Plan Participant______________ Date: __________
NOTE: Please sign exactly as your name or names appear on this
Proxy/instruction card. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please
sign in partnership name by authorized person.
ANNUAL MEETING OF SHAREHOLDERS OF
TIERONE CORPORATION
MAY 4, 2004
(401K) VOTING INSTRUCTION BALLOT
Please date, sign and return
your instruction ballot as
soon as possible.
Please detach along perforated line and mail in the envelope provided.
TIERONE CORPORATION'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
BOARD'S NOMINEES FOR DIRECTOR AND "FOR" PROPOSAL 2. SUCH VOTES ARE HEREBY
SOLICITED BY TIERONE CORPORATION'S BOARD OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. TO ELECT DIRECTORS: For three-year terms expiring in 2007.
NOMINEES:
[ ] FOR ALL NOMINEES ( ) Ann Lindley Spence three-year term, 2007
( ) Charles W. Hoskins three-year term, 2007
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instruction below)
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of the [ ] [ ] [ ]
independent auditors.
3. In their discretion, the trustee is authorized to vote upon such
other business as may properly come before the meeting.
IF YOU RETURN THIS CARD PROPERLY SIGNED BUT YOU DO NOT OTHERWISE SPECIFY, SHARES
WILL BE VOTED FOR THE BOARD OF DIRECTORS' NOMINEES FOR DIRECTOR AND FOR PROPOSAL
2.
INSTRUCTION: To withhold authority to vote for an individual nominee, mark
"FOR ALL EXCEPT" and fill in the circle next to the nominee you
wish to withhold, as shown here: (X)
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note [ ]
that changes to the registered name(s) on the account may not be
submitted via this method.
Signature of Signature of
Plan Participant_____________ Date: ____________ Plan Participant____________ Date: ___________
NOTE: This ballot must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
401(K) VOTING INSTRUCTION BALLOT
TIERONE CORPORATION
The signatory hereby instructs the Trustee of the 401(k) Plan of
TierOne Bank to vote, as designated on the reverse side, all the shares of
common stock of TierOne Corporation allocated to my account pursuant to the
401(k) Plan as of February 27, 2004 at the Annual Meeting of Shareholders to be
held in the Regents A Room at Embassy Suites Hotel located at 1040 P Street,
Lincoln, Nebraska, on Tuesday, May 4, 2004, at 10:00 a.m., Central Daylight
Time, or at any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
RECOGNITION PLAN VOTING INSTRUCTION BALLOT
TIERONE CORPORATION
[X] PLEASE MARK VOTES AS
IN THIS EXAMPLE
The undersigned hereby instructs the Trustees of the 2003 Recognition and
Retention Plan and Trust of TierOne Corporation to vote, as designated below,
all the shares of common stock granted pursuant to the Recognition Plan to the
undersigned as of February 27, 2004 at the Annual Meeting of Shareholders to be
held in the Regents A Room at the Embassy Suites Hotel located 1040 P Street,
Lincoln, Nebraska on Tuesday, May 4, 2004, at 10:00 a.m., Central Daylight Time,
and any adjournment thereof.
1. ELECTION AS DIRECTORS of all nominees listed:
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
NOMINEES FOR THREE-YEAR TERM EXPIRING IN 2007: CHARLES W. HOSKINS AND ANN
LINDLEY SPENCE.
Instruction: To withhold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
___________________________________________________________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT by the Audit Committee of KPMG LLP as
TierOne Corporation's independent auditors for the fiscal year ending
December 31, 2004.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Trustees are authorized to vote upon such other
business as may properly come before the meeting.
Please be sure to sign and date Date
this Ballot in the box below. ______________________________
__________________________ ______________________________
Shareholder sign above Co-holder (if any) sign above
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD'S NOMINEES FOR
DIRECTOR AND FOR PROPOSAL 2. SUCH VOTES ARE HEREBY SOLICITED BY TIERONE
CORPORATION'S BOARD OF DIRECTORS.
IF YOU RETURN THIS CARD PROPERLY SIGNED BUT YOU DO NOT OTHERWISE
SPECIFY, SHARES WILL BE VOTED FOR THE BOARD OF DIRECTORS' NOMINEES FOR DIRECTOR
AND FOR PROPOSAL 2. IF YOU DO NOT RETURN THIS CARD, YOUR SHARES WILL BE VOTED IN
THE TRUSTEES' DISCRETION.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN
THE BALLOT TO EUGENE B. WITKOWICZ, CORPORATE SECRETARY.
[TIERONE CORPORATION LOGO]
1235 N Street
Lincoln, Nebraska 68508
March 22, 2004
To: Persons Granted Restricted Stock Under TierOne Corporation's 2003
Recognition and Retention Plan
As described in the attached materials, proxies are being solicited in
connection with the proposals to be considered at the upcoming Annual Meeting of
Shareholders of TierOne Corporation. We hope you will take advantage of the
opportunity to direct the manner in which shares of restricted common stock
granted to you pursuant to the 2003 Recognition and Retention Plan and Trust
Agreement and held in the Trust will be voted.
Enclosed with this letter is the Proxy Statement, which describes the
matters to be voted upon, the Annual Report to Shareholders and a voting
instruction ballot, which will permit you to vote the restricted shares granted
to you. After you have reviewed the Proxy Statement, we urge you to vote your
restricted shares held pursuant to the Recognition Plan by marking, dating,
signing and returning the enclosed voting instruction ballot to Eugene B.
Witkowicz, Corporate Secretary. The Corporate Secretary will certify the totals
to the Trustees of the Recognition Plan for the purpose of having those shares
voted by the Trustees.
We urge each of you to vote, as a means of participating in the
governance of the affairs of TierOne Corporation. If your voting instructions
for the shares held in the Recognition Plan are not received, the shares will be
voted in the Trustees' discretion. While I hope that you will vote in the manner
recommended by the Board of Directors, the most important thing is that you vote
in whatever manner you deem appropriate. Please take a moment to do so.
Please note that the enclosed material relates only to those shares
which have been granted to you under the Recognition Plan. You should receive
other voting material for those shares owned by you individually and not under
the Recognition Plan.
Sincerely,
/s/ Gilbert G. Lundstrom
Gilbert G. Lundstrom
Chairman of the Board and Chief Executive
Officer
[TIERONE CORPORATION LOOG]
1235 N Street
Lincoln, Nebraska 68508
March 22, 2004
To: Persons Allocated Common Stock Under TierOne Corporation's Employee
Stock Ownership Plan and/or TierOne Bank's 401(k) Savings Plan
As described in the enclosed materials, proxies are being solicited in
connection with the election of two (2) directors for a three-year term and to
ratify the appointment of our independent auditors at the upcoming Annual
Meeting of Shareholders of TierOne Corporation. Because you have been allocated
shares of common stock under our ESOP and/or 401(k) Savings Plan, you may have
received additional voting instruction card(s) for instructing the trustees of
the plan(s) to vote your shares in these plans as applicable to you. We hope you
will take advantage of the opportunity to direct the manner in which shares of
restricted common stock of TierOne Corporation allocated to you pursuant to the
plan(s) will be voted.
Please note that you must return all proxy/voting instruction cards that
you received in order to have all your shares voted at the Annual Meeting. While
I hope that you will vote in the manner recommended by the Board of Directors,
the most important thing is that you vote in whatever manner you deem
appropriate. Please take a moment to do so.
Thank you again for your continued support of TierOne Corporation.
Very truly yours,
/s/ GILBERT G. LUNDSTROM
Gilbert G. Lundstrom
Chairman of the Board and Chief Executive Officer