THIS SEPARATION AGREEMENT (this “Agreement”) is made and entered into by and among
Timothy P. Johnson (“Johnson”), a resident of Minnesota, HMN Financial, Inc., a Delaware corporation (the
“Company”), and Home Federal Savings Bank, a federally chartered savings bank (the “Bank”) and a wholly
owned subsidiary of the Company.
A. Johnson was employed by the Company and/or the Bank since 1992. Johnson has served as a
director and as the Chief Financial Officer for the Company and as a director and as the Chief Financial Officer
for the Bank since November 1, 2000.
B. Johnson was employed under the terms of an Employment Agreement effective as of January 1,
2002 (the “Employment Agreement”), is party to Incentive Stock Option Agreements dated as of June 21, 1995
and April 16, 2002 (the “Option Agreements”), owns one share preferred stock of Home Federal REIT, Inc., a
Delaware corporation and indirect subsidiary of the Bank (“REIT”), and also was eligible to participate in other
plans and programs of the Company and other plans and programs of the Bank.
C. Johnson has announced his intent to resign as an employee, officer and director of the Company
and of the Bank effective as of March 31, 2003 (the “Separation Date”).
D. The parties are concluding Johnson’s employment relationship amicably, but mutually recognize
Johnson’s employment relationship may give rise to potential claims or liabilities.
E. The Company and the Bank expressly deny that they may be liable to Johnson on any basis or
that they have engaged in any unlawful or improper conduct toward Johnson or treated Johnson unfairly.
F. The parties desire to resolve all issues now in dispute between Johnso