THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of January 1, 2002 by and among
HMN Financial, Inc., a Delaware corporation (the "Company"), Home Federal Savings Bank, a federally
chartered savings bank (the "Bank") and a wholly owned subsidiary of the Company and Michael McNeil, a
resident of Rochester, Minnesota ("Executive").
A. The Company, the Bank and Executive are parties to an Employment Agreement effective as of November 1,
2000; (the "Original Agreement");
B. The parties desire to terminate the Original Agreement and enter into this Agreement;
C. The Company has granted Executive an incentive stock option; and
D. This Agreement amends and restates the Original Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the respective agreements of the Bank, the
Company and Executive set forth below, the Bank, the Company and Executive, intending to be legally bound,
agree as follows:
1. Employment . Effective as of January 1, 2002 Executive shall perform services for the Company and the Bank,
upon the terms and conditions set forth in this Agreement.
2. Term of Employment . Unless terminated at an earlier date in accordance with Section 7 hereof, the term of
Executive's employment with the Company and the Bank under this Agreement shall be for a period commencing
on January 1, 2002 and ending on December 31, 2004, or any extension hereof (such term, the "Employment
Period"). Commencing on April 30, 2003 (the "Extension Date"), this Agreement shall be extended through
December 31, 2005 and on each subsequent anniversary of the Extension Date this Agreement shall be extended
for a period of twelve (12) months in addition to the then-remaining term of employment under this Agreement,
unless any of the Company, the Bank or the Executive gives contrary written notice to the others not less than 60
days in advance of the date on which the term of employment under this Agreement would otherwise be
extended, and provided that no