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EXHIBIT 10.11
 HMN FINANCIAL, INC.
 EMPLOYEE STOCK OWNERSHIP PLAN
 WORKING COPY
(Through Ninth Amendment)
 
 NOTE:




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PagePREAMBLE
    
    
    1ARTICLE I DEFINITION OF TERMS AND CONSTRUCTION
    
    
    11.1 Definitions
    
    
    1(a) Act
    
    
    1(b) Administrator
    
    
    1(c) Annual Additions
    
    
    1(d) Authorized Leave of Absence
    
    
    2(e) Beneficiary
    
    
    2(f) Board of Directors
    
    
    2(g) Break
    
    
    2(h) Code
    
    
    2(i) Compensation
    
    
    2(j) Date of Hire
    
    
    2(k) Disability
    
    
    2(l) Disability Retirement Date
    
    
    2(m) Early Retirement Date
    
    
    2(n) Effective Date
    
    
    3(o) Eligibility Period
    
    
    3(p) Employee
    
    
    3(q) Employer
    
    
    3(r) Employer Securities
    
    
    3(s) Entry Date
    
    
    3(t) Exempt Loan
    
    
    3(u) Former Participant
    
    
    3(v) Fund
    
    
    3(w) Hour of Service
    
    
    3(x) Investment Adjustments
    
    
    4(y) Limitation Year
    
    
    4(z) Normal Retirement Date
    
    
    4(aa) Participant
    
    
    4(bb) Plan
    
    
    4(cc) Plan Year
    
    
    4(dd) Qualified Domestic Relations Order
    
    
    4(ee) Retirement
    
    
    4(ff) Service
    
    
    4(gg) Sponsor
    
    
    4(hh) Trust Agreement
    
    
    4(ii) Trustee
    
    
    4(jj) Valuation Date
    
    
    4(kk) Year of Service
    
    
    4(ll) Leased Employee
    
    
    5(mm) Affiliate
    
    
    51.2 Plurals and Gender
    
    
    51.3 Incorporation of Trust Agreement
    
    
    51.4 Headings
    
    
    51.5 Severability
    
    
    51.6 References to Governmental Regulations
    
    
    5
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PageARTICLE II PARTICIPATION
    
    
    52.1 Commencement of Participation
    
    
    52.2 Termination of Participation
    
    
    62.3 Resumption of Participation
    
    
    62.4 Determination of Eligibility
    
    
    6ARTICLE III CREDITED SERVICE
    
    
    63.1 Service Counted for Eligibility Purposes
    
    
    63.2 Service Counted for Vesting Purposes
    
    
    63.3 Credit for Pre-Break Service
    
    
    73.4 Service Credit During Authorized Leaves
    
    
    73.5 Service Credit During Maternity or Paternity Leave
    
    
    73.6 Ineligible Employees
    
    
    73.7 Periods of Military Service
    
    
    7ARTICLE IV CONTRIBUTIONS
    
    
    74.1 Employee Stock Ownership Contributions
    
    
    74.2 Time and Manner of Employee Stock Ownership Contributions
    
    
    84.3 Records of Contributions
    
    
    84.4 Erroneous Contributions
    
    
    8ARTICLE V ACCOUNTS, ALLOCATIONS AND INVESTMENTS
    
    
    95.1 Establishment of Separate Participant Accounts
    
    
    95.2 Establishment of Contribution Holding and Suspense Accounts
    
    
    95.3 Allocation of Earnings, Losses and Expenses
    
    
    105.4 Allocation of Forfeitures
    
    
    105.5 Allocation of Annual Employee Stock Ownership Contributions
    
    
    105.6 Limitation on Annual Additions
    
    
    105.7 Erroneous Allocations
    
    
    135.8 Value of Participants Interest in Fund
    
    
    135.9 Investment of Account Balances
    
    
    13ARTICLE VI RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
    
    
    146.1 Normal Retirement
    
    
    146.2 Early Retirement
    
    
    146.3 Disability Retirement
    
    
    146.4 Death Benefits
    
    
    146.5 Designation of Death Beneficiary and Manner of Payment
    
    
    14ARTICLE VII VESTING AND FORFEITURES
    
    
    157.1 Vesting on Death, Disability and Normal Retirement
    
    
    157.2 Vesting on Termination of Participation
    
    
    157.3 Disposition of Forfeitures
    
    
    15ARTICLE VIII EMPLOYEE STOCK OWNERSHIP PROVISIONS
    
    
    158.1 Right to Demand Employer Securities
    
    
    158.2 Voting Rights
    
    
    168.3 Nondiscrimination in Employee Stock Ownership Contributions
    
    
    168.4 Dividends
    
    
    168.5 Exempt Loans
    
    
    178.6 Exempt Loan Payments
    
    
    178.7 Put Option
    
    
    188.8 Diversification Requirements
    
    
    188.9 Independent Appraiser
    
    
    19ARTICLE IX PAYMENTS AND DISTRIBUTIONS
    
    
    199.1 Payments on Termination of Service  In General
    
    
    19
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Page9.2 Commencement of Payments
    
    
    199.3 Mandatory Commencement of Benefits
    
    
    199.4 Required Beginning Dates
    
    
    219.5 Form of Payment
    
    
    219.6 Medium of Distribution
    
    
    219.7 Payments Upon Termination of Plan
    
    
    219.8 Distributions Pursuant to Qualified Domestic Relations Orders
    
    
    219.9 Cash-Out Distributions
    
    
    229.10 ESOP Distribution Rules
    
    
    229.11 Withholding
    
    
    229.12 Waiver of 30-day Notice
    
    
    239.13 Direct Transfer Option
    
    
    23ARTICLE X PROVISIONS RELATING TO TOP-HEAVY PLANS
    
    
    2310.1 Top-Heavy Rules to Control
    
    
    2310.2 Top-Heavy Plan Definitions
    
    
    2310.3 Calculation of Accrued Benefits
    
    
    2410.4 Determination of Top-Heavy Status
    
    
    2510.5 Determination of Super Top-Heavy Status
    
    
    2610.6 Minimum Contribution
    
    
    2610.7 Vesting
    
    
    26ARTICLE XI ADMINISTRATION
    
    
    2711.1 Appointment of Administrator
    
    
    2711.2 Resignation or Removal of Administrator
    
    
    2711.3 Appointment of Successors: Terms of Office, Etc.
    
    
    2711.4 Powers and Duties of Administrator
    
    
    2711.5 Action by Administrator
    
    
    2811.6 Participation by Administrators
    
    
    2811.7 Agents
    
    
    2811.8 Allocation of Duties
    
    
    2811.9 Delegation of Duties
    
    
    2811.10 Administrators Action Conclusive
    
    
    2811.11 Compensation and Expenses of Administrator
    
    
    2811.12 Records and Reports
    
    
    2911.13 Reports of Fund Open to Participants
    
    
    2911.14 Named Fiduciary
    
    
    2911.15 Information from Employer
    
    
    2911.16 Reservation of Rights by Employer
    
    
    2911.17 Liability and Indemnification
    
    
    2911.18 Service as Trustee and Administrator
    
    
    29ARTICLE XII CLAIMS PROCEDURE
    
    
    3012.1 Notice of Denial
    
    
    3012.2 Right to Reconsideration
    
    
    3012.3 Review of Documents
    
    
    3012.4 Decision by Administrator
    
    
    3012.5 Notice by Administrator
    
    
    30ARTICLE XIII AMENDMENTS, TERMINATION AND MERGER
    
    
    3013.1 Amendments
    
    
    3013.2 Consolidation, Merger or Other Transactions of Employer
    
    
    3113.3 Consolidation or Merger of Trust
    
    
    3113.4 Bankruptcy or Insolvency of Employer
    
    
    3113.5 Voluntary Termination
    
    
    3113.6 Partial Termination of Plan or Permanent Discontinuance of Contributions
    
    
    32
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PageARTICLE XIV MISCELLANEOUS
    
    
    3214.1 No Diversion of Funds
    
    
    3214.2 Liability Limited
    
    
    3214.3 Incapacity
    
    
    3214.4 Spendthrift Clause
    
    
    3214.5 Benefits Limited to Fund
    
    
    3214.6 Cooperation of Parties
    
    
    3214.7 Payments Due Missing Persons
    
    
    3314.8 Governing Law
    
    
    3314.9 Nonguarantee of Employment
    
    
    3314.10 Counsel
    
    
    33
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PREAMBLE
   ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
 Definitions
  Act
 Administrator
 Annual Additions
            1




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Authorized Leave of Absence
   Beneficiary
 Board of Directors
 Break
 Code
 Compensation
  Date of Hire
 Disability
 Disability Retirement Date
 Early Retirement Date
 2




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Effective Date
 Eligibility Period
 Employee
 Employer
 Employer Securities
 Entry Date
 Exempt Loan
 Former Participant
 Fund
 Hour of Service
 3




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Investment Adjustments
 Limitation Year
 Normal Retirement Date
 Participant
 Plan
 Plan Year
 Qualified Domestic Relations Order
        Retirement
 Service Sponsor
 Trust Agreement
 Trustee
 Valuation Date
 Year of Service
 4




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Leased Employee
 Affiliate
 Plurals and Gender
  Incorporation of Trust Agreement
  Headings
  Severability
  References to Governmental Regulations
  ARTICLE II
PARTICIPATION
 Commencement of Participation
  5




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Termination of Participation
     Resumption of Participation
    Determination of Eligibility
  ARTICLE III
CREDITED SERVICE
 Service Counted for Eligibility Purposes
  Service Counted for Vesting Purposes
     6




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Credit for Pre-Break Service
     Service Credit During Authorized Leaves
  Service Credit During Maternity or Paternity Leave
     Ineligible Employees
    Periods of Military Service
  ARTICLE IV
CONTRIBUTIONS
 Employee Stock Ownership Contributions
  7




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Time and Manner of Employee Stock Ownership Contributions
    Records of Contributions
      Erroneous Contributions
  8




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ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS
 Establishment of Separate Participant Accounts
  Employee Stock Ownership Accounts
  Distribution Accounts
  Other Accounts
  Establishment of Contribution Holding and Suspense Accounts
  Contribution Holding Account
  Exempt Loan Suspense Account
  9




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Allocation of Earnings, Losses and Expenses
  Allocation of Forfeitures
  Allocation of Annual Employee Stock Ownership Contributions
  Limitation on Annual Additions
   10




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1 2
     11




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12




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Erroneous Allocations
  Value of Participants Interest in Fund
  Investment of Account Balances
  13




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ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
 Normal Retirement
  Early Retirement
  Disability Retirement
  Death Benefits
    Designation of Death Beneficiary and Manner of Payment
    14




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ARTICLE VIIVESTING AND
FORFEITURES
 Vesting on Death, Disability and Normal Retirement
  Vesting on Termination of Participation
   Years of Service Completed
    
    Percentage VestedLess than 3
    
    0%3 or more
    
    100%
  Years of Service Completed
    
    Percentage VestedLess than 5
    
    0%5 or more
    
    100%
  Disposition of Forfeitures
    ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PROVISIONS
 Right to Demand Employer Securities
  15




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Voting Rights
  Nondiscrimination in Employee Stock Ownership Contributions
       Dividends
  16




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Exempt Loans
    Exempt Loan Payments
  17




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Put Option
  Diversification Requirements
  18




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Independent Appraiser
  ARTICLE IX
PAYMENTS AND DISTRIBUTIONS
 Payments on Termination of Service  In General
  Commencement of Payments
 Distributions upon Retirement or Death
 Distribution following Termination of Service
 Distribution of Accounts Greater Than $1,000
 Mandatory Commencement of Benefits
   (i)
    
    the life of the Participant,(ii)
    
    the life of the Participant and the designated beneficiary,(iii)
    
    a period certain not extending beyond the life expectancy of the
Participant, or(iv)
    
    a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated beneficiary.
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20




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Required Beginning Dates
 1 2 1 2
 Form of Payment
  Medium of Distribution
  Payments Upon Termination of Plan
  Distributions Pursuant to Qualified Domestic Relations Orders
  21




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Cash-Out Distributions
  ESOP Distribution Rules
  Withholding
   1 2
   22




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Waiver of 30-day Notice
  Direct Transfer Option
       ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS
 Top-Heavy Rules to Control
  Top-Heavy Plan Definitions
  Accrued Benefit
 Determination Date
 23




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Calculation of Accrued Benefits
   24




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Determination of Top-Heavy Status
  25




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Determination of Super Top-Heavy Status
  Minimum Contribution
         Vesting
  Years of Service Completed
    
    Percentage VestedLess than 3
    
    0%3 or more
    
    100%
  26




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ARTICLE XI
ADMINISTRATION
 Appointment of Administrator
  Resignation or Removal of Administrator
  Appointment of Successors: Terms of Office, Etc
  Powers and Duties of Administrator
           27




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Action by Administrator
  Participation by Administrators
  Agents
  Allocation of Duties
  Delegation of Duties
  Administrators Action Conclusive
  Compensation and Expenses of Administrator
  28




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Records and Reports
  Reports of Fund Open to Participants
  Named Fiduciary
  Information from Employer
  Reservation of Rights by Employer
  Liability and Indemnification
   Service as Trustee and Administrator
  29




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ARTICLE XII
CLAIMS PROCEDURE
 Notice of Denial
     Right to Reconsideration
  Review of Documents
  Decision by Administrator
  Notice by Administrator
  ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER
 Amendments
       30




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Consolidation, Merger or Other Transactions of Employer
  Consolidation or Merger of Trust
     Bankruptcy or Insolvency of Employer
  Voluntary Termination
  31




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Partial Termination of Plan or Permanent Discontinuance of Contributions
  ARTICLE XIV
MISCELLANEOUS
 No Diversion of Funds
  Liability Limited
  Incapacity
  Spendthrift Clause
  Benefits Limited to Fund
  Cooperation of Parties
  32




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Payments Due Missing Persons
  Governing Law
  Nonguarantee of Employment
  Counsel
   HMN FINANCIAL, INC.ATTEST:ByRoger P. WeiseRoxanne M. Hellickson,
Secretary
    
    
    
    
    
    President[Corporate Seal]
 33