Document:

EX-10.1

EXHIBIT 10.1

DESCRIPTION OF MICHAEL MCNEIL 2004 BONUS PLAN

The Michael McNeil 2004 Bonus Plan is designed to link Mr. McNeil’s compensation more directly
to the Company’s corporate goals and performance. Under the 2004 Bonus Plan, the compensation
committee sets (a) goals for the Company’s earnings, known as the financial goals, and (b) certain
non-quantitative strategic goals. At the end of the year, the compensation committee determines
the bonus amount for Mr. McNeil based on the Company’s attainment of the goals. Mr. McNeil is
eligible to receive up to $100,000 based on the Company’s actual earnings relative to the financial
goals and up to $25,000 for the satisfaction of the non-quantitative strategic goals. The
compensation committee may adjust the earnings goals at the end of the year to address the
“quality” of the earnings and other environmental factors that may have contributed positively or
negatively to the Company’s actual earnings.EX-10.2

EXHIBIT 10.2

DESCRIPTION OF MICHAEL MCNEIL 2005 BONUS PLAN

The Michael McNeil 2005 Bonus Plan is designed to link Mr. McNeil’s compensation more directly
to the Company’s corporate goals and performance. Under the 2005 Bonus Plan, the compensation
committee sets (a) goals for the Company’s earnings, known as the financial goals, and (b) certain
non-quantitative strategic goals. At the end of the year, the compensation committee determines
the bonus amount for Mr. McNeil based on the Company’s attainment of the goals. Mr. McNeil is
eligible to receive up to $150,000 based on the Company’s actual earnings relative to the financial
goals and up to $25,000 for the satisfaction of the non-quantitative strategic goals. The
compensation committee may adjust the earnings goals at the end of the year to address the
“quality” of the earnings and other environmental factors that may have contributed positively or
negatively to the Company’s actual earnings.EX-10.3

EXHIBIT 10.3

HMN FINANCIAL, INC.

2001 OMNIBUS STOCK PLAN

Restricted Stock Agreement

	 	 	 
	Name of Employee:
	 
	 	 
	 
	 	 
	No. of Shares Covered:

	 	Date of Issuance:
	 
	 	 
	 
	 	 
	 
	 	 
	Vesting Schedule pursuant to Section 4:

	 
	 	 
	Vesting Date(s)

	 	No. of Shares Which

Become Vested as of Such Date
	 

	 	 

This is a Restricted Stock Agreement (“Agreement”) between HMN Financial, Inc., a Delaware
corporation (the “Company”), and the above-named employee of the Company (the “Employee”).

Recitals

WHEREAS, the Company maintains the HMN Financial, Inc. 2001 Omnibus Stock Plan (the “Plan”);

WHEREAS, the Board of Directors of the Company has appointed the Compensation Committee (the
“Committee”) with the authority to determine the awards to be granted under the Plan; and

WHEREAS, the Committee or its designee has determined that the Employee is eligible to receive
an award under the Plan in the form of restricted stock and has set the terms thereof;

NOW, THEREFORE, the Company and the Employee mutually agree as follows.

Terms and Conditions*

1. Purchase of Restricted Shares.

	 	 	 	 	 
	(a)

	 	Purchase.
	 	The Company hereby issues and sells to

the Employee the number of shares

specified at the beginning of this

Agreement (the “Restricted Shares”) on

the terms and conditions and subject to

the restrictions set forth in this

Agreement for a per share price of

**[$     ]** (the “Per Share

Consideration”). The term “Restricted

Shares” also refers to all securities

received by the Employee in replacement

of or in connection with the Restricted

Shares purchased hereby pursuant to a

recapitalization, reclassification,

stock dividend, stock split, stock

combination or other relevant event.
	 
	 	 	 	 
	(b)

	 	Certificate.
	 	As soon as practicable after the

execution of this Agreement by the

Employee and the Company, the Company

shall deliver to the Employee a

certificate or certificates representing

the Restricted Shares. The Company

shall pay all original issue or transfer

taxes, if any, with respect to the issue

or transfer of the Restricted Shares and

all fees and expenses necessarily

incurred by the Company in connection

therewith. All Restricted Shares so

issued shall be fully paid and

nonassessable. Notwithstanding anything

to the contrary in this Agreement, the

Company shall not be required to issue

or deliver any Restricted Shares prior

to the completion of such registration

or other qualification of such

Restricted Shares for sale under the

laws, rules or regulations of any state

or other jurisdiction as the Company

shall determine to be necessary or

desirable.

2. Repurchase Events and Transfer Restrictions.

	 	(a)	 	Repurchase Events. Upon the occurrence of a “Repurchase Event” (as defined
below), the Company shall have the irrevocable, exclusive right to purchase any or all
of the Restricted Shares that have not become vested pursuant to Section 3 at a per
share price equal to the Per Share Consideration, as adjusted from time to time for
recapitalizations, reclassifications, stock dividends, stock splits, stock combinations
or other relevant changes affecting the capital stock of the Company, by giving the
Employee or the Employee’s executor written notice of the Company’s intent to
repurchase. Upon delivery of such notice and payment of the repurchase price, the
Restricted Shares that are repurchased shall become authorized but unissued shares of
the Company’s capital stock. If the Company shall at the time of purchase hold, as
original payee or assignee, indebtedness of the Employee, the Company may, but shall
not be required to, by notice in writing to Employee, apply and offset all or any part
of the unpaid principal and accrued interest on such indebtedness, whether or not then
due or payable, against the payment of the purchase price of the Restricted Shares on a
dollar-for-dollar basis. A Repurchase Event shall be defined as any of the following
events:

	 	(i)	 	termination of the Employee’s employment with the Company or its Affiliates for
any reason, whether by the Company with or without cause, voluntarily or involuntarily
by the Employee or otherwise (“Termination of Employment”); or

	 	(ii)	 	any attempt to transfer or otherwise dispose of any of the Restricted Shares,
or to levy any attachment or pursue any similar involuntary process with respect to any
Restricted Shares, in violation of Section 2(b) of this Agreement.

For purposes of this Agreement, neither the transfer of the Employee between any combination
of the Company and its Affiliates, nor a leave of absence granted to the Employee by the
Company, shall be deemed a Termination of Employment.

	 	(b)	 	Limitation on Transfer. Until such time as the Restricted Shares have become
vested under Section 3 of this Agreement, the Employee shall not transfer the
Restricted Shares and the Restricted Shares shall not be subject to pledge,
hypothecation, execution, attachment or similar process. Any attempt to assign,
transfer, pledge, hypothecate or otherwise dispose of any Restricted Shares contrary to
the provisions hereof, and any attempt to levy any attachment or pursue any similar
process with respect to them, shall be null and void.

	 	3.	 	Vesting. The Restricted Shares shall cease to be subject to repurchase under
Section 2 hereof in the numbers and on the dates specified in the vesting schedule at the
beginning of this Agreement; provided, however, that the Restricted Shares shall immediately
cease to be subject to repurchase under Section 2 hereof upon the occurrence of a “Fundamental
Change” (as such term is defined in the Plan) with respect to the Company. Restricted Shares
that have so ceased to be subject to repurchase are sometimes referred to as “vested” or as
“Vested Shares” in this Agreement.

Death or Disability. If the Employee’s employment with the Company or an Affiliate
terminates because of death or disability, the number of shares that are subject to
repurchase under this Agreement shall be prorated for the portion of the term of this award
during which the Participant was employed by the Company and its Affiliates, and, with
respect to such Restricted Shares, shall be Vested Shares. Any Restricted Shares which do
not become vested under the preceding sentence shall terminate at the date of the Employee’s
termination of employment and such Restricted Shares shall be forfeited to the Company.

	 	4.	 	Shareholder Rights. As of the date of issuance specified at the beginning of this
Agreement, the Employee shall have all of the rights of a shareholder of the Company with
respect to the Restricted Shares, except as otherwise specifically provided in this Agreement.

	 	5.	 	Tax Withholding. The parties hereto recognize that the Company or a subsidiary of
the Company may be obligated to withhold federal and state taxes or other taxes upon the
vesting of the Restricted Shares, or, in the event that the Employee elects under Code Section
83(b) to report the receipt of the Restricted Shares as income in the year of receipt, upon
the Employee’s receipt of the Restricted Shares. The Employee agrees that, at such time, if
the Company or a subsidiary is required to withhold such taxes, the Employee will promptly
pay, in cash upon demand to the Company or the subsidiary having such obligation, such amounts
as shall be necessary to satisfy such obligation. The Employee further acknowledges that the
Company has directed the Employee to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or foreign country in
which the Employee may reside, and the tax consequences of the Employee’s death.

6. Restrictive Legends and Stop-Transfer Orders.

	 	(a)	 	Legends. The certificate or certificates representing the Restricted Shares
shall bear the following legend (as well as any legends required by applicable state
and federal corporate and securities laws) noting the existence of the restrictions and
the Company’s repurchase rights set forth in this Agreement:

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN
THE COMPANY AND THE EMPLOYEE, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.”

	 	(b)	 	Stop-Transfer Notices. The Employee agrees that, in order to ensure compliance
with the restrictions referred to herein, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same effect in
its own records.

	 	(c)	 	Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Restricted Shares that have been sold or otherwise transferred in violation
of any of the provisions of this Agreement or (ii) to treat as owner of the Restricted
Shares or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom the Restricted Shares shall have been so transferred.

	 	7.	 	Interpretation of This Agreement. All decisions and interpretations made by the
Committee with regard to any question arising hereunder or under the Plan shall be binding and
conclusive upon the Company and the Employee. If there is any inconsistency between the
provisions of this Agreement and the Plan, the provisions of the Plan shall govern.

	 	8.	 	Not Part of Employment Contract; Discontinuance of Employment. This Agreement awards
restricted stock to the Employee, but does not impose any obligation on the Company to make
any future grants or issue any future awards to the Employee or otherwise continue the
participation of the Employee under the Plan. This Agreement shall not give the Employee a
right to continued employment with the Company or any Affiliate, and the Company or Affiliate
employing the Employee may terminate his or her employment and otherwise deal with the
Employee without regard to the effect it may have upon him or her under this Agreement

By executing this Agreement, the Employee expressly acknowledges the above.

	 	9.	 	Interpretation of This Agreement. All decisions and interpretations made by the
Committee with regard to any question arising hereunder or under the Plan shall be binding and
conclusive upon the Company and the Employee. If there is any inconsistency between the
provisions of this Agreement and the Plan, the provisions of the Plan shall govern.

	 	10.	 	Binding Effect. This Agreement shall be binding in all respects on the heirs,
representatives, successors and assigns of the Employee.

	 	11.	 	Choice of Law. This Agreement is entered into under the laws of the State of
Delaware and shall be construed and interpreted thereunder (without regard to its
conflict-of-law principles).

	 	12.	 	Entire Agreement. This Agreement and the Plan set forth the entire agreement and
understanding of the parties hereto with respect to the issuance and sale of the Restricted
Shares and the administration of the Plan and supersede all prior agreements, arrangements,
plans, and understandings relating to the issuance and sale of these Restricted Shares and the
administration of the Plan.

	 	13.	 	Amendment and Waiver. Except as provided in the Plan, this Agreement may be amended,
waived, modified, or canceled only by a written instrument executed by the parties or, in the
case of a waiver, by the party waiving compliance.

	 	14.	 	Acknowledgment of Receipt of Copy. By execution hereof, the Employee acknowledges
having received a copy of the Plan.

IN WITNESS WHEREOF, the Employee and the Company have executed this Agreement as of the date
of issuance specified at the beginning of this Agreement.

EMPLOYEE

HMN FINANCIAL, INC.

By

Its

*Unless the context indicates otherwise, terms
that are not defined in this Agreement shall have the meaning set forth in the
Plan as it currently exists or as it is amended in the future.

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