**Exhibit10.16**

 

**HFFINANCIAL CORP.**

**2002STOCK OPTION AND INCENTIVE PLAN**

 

**STOCKOPTION AGREEMENT**

 

HF Financial Corp., aDelaware corporation (the “Company”), hereby grants to «Name», (the “Optionee”), an option (the “Option”) to purchase atotal of «Number» shares of Common Stock(the “Shares”), at the price determined as provided herein, and in all respectssubject to the terms, definitions and provisions of the 2002 Stock Option andIncentive Plan (the “Plan”) adopted by the Company, which is incorporated hereinby reference. Unless otherwise defined herein, the terms defined in the Planshall have the same defined meanings herein.

 

1.             Nature of theOption. This Option is intended to qualify as an Incentive Stock Option asdefined in Section 422 of the Internal Code.

 

2.             Exercise Price.The exercise price for each share of Common Stock is the price at which sharessubject to this Option may be purchased upon exercise of the Option. TheExercise Price under this Agreement shall be the Market Value (as that term isdefined in the Plan) on the date of Grant, «GrantDate»,that being «GrantPrice» («Grant»).

 

3.             Exercise of Option.This Option shall be exercisable during its term in accordance with theprovisions of Section 7 of the Plan as follows:

 

(i)            Right to Exercise.

 

(a)           Subject to subsections3(i)(b), (c), (d) and (e) below, this Option shall be exercisable cumulatively,to the extent of thirty-three and one-third percent (33 1/3%) of the Sharessubject to the Option, commencing on June 30, «Vdate1»,and an additional thirty-three and one-third percent (33 1/3%) of the Sharessubject to the Option each consecutive June 30 as more completely described inExhibit A.

 

(b)           This Option may not beexercised for a fraction of a share.

 

(c)           Inthe event of Optionee’s death, disability or other termination of employment,the exercisability of the Option is governed by Sections 7, 8 and 9 below,subject to the limitations contained in subsections 3(i)(d) and (e).

 

(d)           In no event may thisOption be exercised after the date of expiration of the term of this Option asset forth in Section 11 below.

 

(e)           To the extent that theaggregate fair market value of the Shares with respect to which Optionsdesignated as Incentive Stock Options are exercisable for the first time by youduring any calendar year (under all plans of the Company) exceeds $100,000,such options shall be treated as Non-Qualified Stock Options. For purposes ofthe preceding sentence, (i) Options shall be taken into account in the order inwhich they were granted and (ii) the fair market value of the Shares shall bedetermined as of the time the Option with respect to such Shares is granted.

 

1

----

 

(ii)  Methodof Exercise. This Option shall be exercisable by written notice which shallstate the election to exercise the Option, the number of Shares in respect ofwhich the Option is being exercised, and such other representations andagreements as to the holder’s investment intent with respect to such shares ofCommon Stock as may be required by the Company pursuant to the provisions ofthe Plan. Such written notice shall be signed by the Optionee and shall bedelivered in person or by certified mail to the Secretary of the Company. Thewritten notice shall be accompanied by payment of the exercise price. Untilcertificates for the Shares are issued to the Optionee, such Optionee shall nothave any rights as a Shareholder of the Company.

 

No Shares will be issuedpursuant to the exercise of an Option unless such issuance and such exerciseshall comply with all relevant provisions of law and the requirements of anystock exchange upon which the Shares may then be listed. Assuming suchcompliance, for income tax purposes the Shares shall be considered transferredto the Optionee on the date on which the Option is exercised with respect tosuch Shares.

 

4.             Optionee’sRepresentations. In the event the Shares purchasable pursuant to theexercise of this Option have not been registered under the Securities Act of1933, as amended, at the time this Option is exercised, Optionee shall,concurrently with the exercise of all or any portion of this Option, deliver tothe Company an Investment Representation Statement in the form attached heretoas Exhibit B. The Company shall not be required to deliver any shares uponexercise of this Option prior to (i) the admission of such shares to listing onany stock exchange on which the shares of Common Stock may then be listed, and(ii) the completion of such registration as the Committee shall determine to benecessary or advisable.

 

5.             Method of Payment.Payment of the exercise price shall be by (i) cash; (ii) check, bank draft ormoney order; or (iii) if authorized by the Board of Directors’ Stock OptionCommittee (the “Committee”), by delivery of (A) Common Stock of the Company(valued at the fair market value thereof on the date of exercise) or (B) acombination of cash and Common Stock. The Committee may, in order to preventany possible violation of law, require the Exercise Price to be paid in cash.

 

6.             Restrictions onExercise. This Option may not be exercised if the issuance of such Sharesupon such exercise or the method of payment of consideration for such shareswould constitute a violation of any applicable federal or state securities orother law or regulation, including any rule under Part 207 of Title 12 of theCode of Federal Regulations (“Regulation G”) as promulgated by the FederalReserve Board. As a condition to the exercise of this Option, the Company mayrequire Optionee to make any representation and warranty to the Company as maybe required by any applicable law or regulation.

 

7.             Termination ofStatus as an Employee. In the event of termination, Optionee may, but onlywithin three months after the date of such termination (but in no event laterthan the date of expiration of the term of this Option as set forth in Section11 below), exercise this Option to the extent that Optionee was entitled toexercise it at the date of such termination. To the extent that Optionee wasnot entitled to exercise this Option at the date of such termination (as in theevent of Optionee’s termination of employment for cause), or if Optionee doesnot exercise this Option within the time specified herein, the Option shallterminate.

 

2

----

 

8.             Disability ofOptionee. Notwithstanding the provisions of Section 7 above, in the eventof termination of Optionee’s status as an employee as a result of Optionee’spartial or total disability, Optionee may, but only within three months fromthe date of termination of employment (but in no event later than the date ofexpiration of the term of this Option as set forth in Section 11 below),exercise his Option to the extent Optionee was entitled to exercise it at thedate of such termination. To the extent that Optionee was not entitled toexercise the Option at the date of termination, or if Optionee does notexercise such Option (which Optionee was entitled to exercise) within the timespecified herein, the Option shall terminate.

 

9.             Death of Optionee.In the event of the death of Optionee:

 

(i)            during the term ofthis Option and while an employee of the Company and having been in continuousemployment (as determined by the Board in its sole discretion) since the dateof grant of the Option, the Option may be exercised in full at any time withinone (1) year following the date of death (but in no event later than the dateof expiration of the term of this Option as set forth in Section 11 below), byOptionee’s estate or by a person who acquired the right to exercise the Optionby bequest or inheritance; or

 

(ii)           within three monthsafter termination, the Option may be exercised, at any time within twelve (12)months following the date of death (but in no event later than the date ofexpiration of the term of this Option as set forth in Section 11 below), byOptionee’s estate or by a person who acquired the right to exercise the Optionby bequest or inheritance, but only to the extent of the right to exercise thathad accrued at the date of termination.

 

(iii)          the Committee may, inits discretion, elect to pay to the person to whom such Option is transferredby will or by the laws of descent and distribution or pursuant to a qualifieddomestic relations order the amount by which the Market Value per share on thedate of exercise shall exceed the Exercise Price, multiplied by the number ofshares which can be properly purchased under the Option.

 

10.           Non-Transferabilityof Option. This Option may not be transferred in any manner otherwise thanby will or by the laws of descent or distribution and may be exercised duringthe lifetime of Optionee only by Optionee. The terms of this Option shall bebinding upon the Optionee and his or her personal representatives, heirs, successorsand assigns.

 

11.           Term of Option. ThisOption may not be exercised after «OptionTerm»,and may be exercised only in accordance with the Plan and the terms of thisOption.

 

3

----

 

12.           Early Disposition ofStock. Optionee understands that if he or she disposes of any Sharesreceived under this Option within two (2) years after the date of thisAgreement or within one (1) year after such Shares were transferred toOptionee, then Optionee may be treated for federal income tax purposes ashaving received ordinary income at the time of such disposition in an amountgenerally measured by the difference between the price paid for the Shares andthe lower of the fair market value of the Shares at the date of the exercise orthe fair market value of the Shares at the date of disposition. The amount ofsuch ordinary income may be measured differently if Optionee is an officer,director or 10% shareholder of the Company, or if the Shares were subject to asubstantial risk of forfeiture at the time they were transferred to Optionee. Optioneehereby agrees to notify the Company in writing within 30 days after the date ofany such disposition of the number of the Shares sold, the sales price and thedate of the sale. Optionee understands that if he or she disposes of suchShares at any time after the expiration of both the two-year and the one-yearholding periods, any gain on such sale will be taxed as long-term capital gain.

 

13.           Effect of MergerCombination or Consolidation. In the event of a merger, combination orconsolidation, this Option is subject to the agreement governing suchtransaction in accordance with Section 13 of the Plan.

 

14.           Plan Interpretation.Optionee hereby agrees to accept as binding, conclusive and final all decisionsand interpretations of the Board of Directors and, where applicable, the PlanCommittee, upon questions arising under the Plan.

 

15.           Withholding Taxes.As a condition to the issuance of Shares of Common Stock of the Company underthis Option, the Optionee authorizes the Company to withhold in accordance withapplicable law from any regular cash compensation payable to Optionee any taxesrequired to be withheld by the Company under federal or state law as a resultof his exercise of this Option.

 

16.           Notices. Anynotice to the Company hereunder shall be delivered or mailed to the Secretaryof HF Financial Corp., 225 South Main Avenue, Sioux Falls, South Dakota 57104. Anynotice to the Optionee shall be mailed or personally delivered to the addresslisted below, unless the Company receives notice of an address change.

 
| DATE OF GRANT:  «GrantDate» |               |
|--------------------------------------------|--------------------|
|                                       |               |
|                                       | HF FINANCIAL CORP. |
|                                       |               |
|                                       |               |
|                                       | By:                |   |   |
|                                       |               | Darrel L. Posegate |
|                                       |               | Executive Vice  President & CFO |

 

4

----

 

OPTIONEE ACKNOWLEDGES ANDAGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 3 HEREOF IS EARNED ONLYBY CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OFBEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEEFURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THECOMPANY’S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALLCONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT BYTHE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY’SRIGHT TO TERMINATE HIS EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

 

Optionee acknowledgesreceipt of a copy of the Plan and certain information related thereto andrepresents that Optionee is familiar with the terms and provisions thereof, andhereby accepts this Option subject to all of the terms and provisions thereof. Optioneehas reviewed the Plan and this Option in their entirety, has had an opportunityto obtain the advice of counsel prior to executing this Option and fullyunderstands all provisions of the Option. Optionee hereby agrees to accept asbinding, conclusive and final all decisions or interpretations of the Committeeupon any questions arising under the Plan. Optionee further agrees to notifythe Company upon any change in the residence address indicated below.

 
| DATE OF GRANT:  «GrantDate» |                  |
|--------------------------------------------|-----------------------|
|                                       |                  |
|                                       | Optionee:             |
|                                       |                  |
|                                       |                  |
|                                       |                  |   |
|                                       | «Name»      |
|                                       | «Title»     |
|                                       |                  |
|                                       | Residence Address:    |
|                                       |                  |
|                                       | «Street»    |   |
|                                       | «CitySTZIP» |   |

 

5

----

 

**EXHIBIT A**

 

**EMPLOYEEOPTION AND VESTING DATA**

 

Name of Employee:     «Name»

 

Date of Commencement ofEmployment:     «EmploymentDate»

 

Number of Shares Subjectto Option:     «Number»

 

Date of Grant:     «GrantDate»

 

**INCENTIVESTOCK OPTION VESTING SCHEDULE**

 
| ** **                  | ** ** | **NO. OF SHARES** | ** ** | **NO. OF SHARES** | ** ** |
|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **DATE**                    | ** ** | **VESTING**                 | ** ** | **EXERCISABLE**             | ** ** |
|                        |       |                        |       |                        |       |
| June 30, «Vdate1» |       | «Vesting1Yr»      |       | «Vesting1»        |       |
| June 30, «Vdate2» |       | «Vesting2Yr»      |       | «Vesting2»        |       |
| June 30, «Vdate3» |       | «Vesting3Yr»      |       | «Vesting3»        |       |

 

The above vestingschedule assumes continuous employment. Your rights to exercise the unvestedportion of your option will cease upon termination of employment. Reference ismade to Sections 7, 8 and 9 of this Agreement and Section 7 and 14 of the 2002Stock Option and Incentive Plan for your rights to exercise the vested portionof your option in the event of termination of employment during lifetime orupon death. The above vesting schedule is in all respects subject to the termsof the Plan.

 

A-1

----

 

**EXHIBIT B**

 

**INVESTMENTREPRESENTATION STATEMENT**

 
| PURCHASER:     | «Name»           |
|----------------|----------------------------|
|           |                       |
| ISSUER:        | HF Financial Corp.         |
|           |                       |
| SECURITY:      | COMMON STOCK               |
|           |                       |
| AMOUNT:        | «Number»  STOCKS |
|           |                       |
| DATE OF GRANT: | «GrantDate»      |

 

In connection with thepurchase of the Common Stock (“Securities”) of HF FINANCIAL CORP. (the “Company”),the undersigned represents to the Company the following:

 

(a)           I am aware of theCompany’s business affairs and financial condition, and have acquiredsufficient information about the Company to reach an informed and knowledgeabledecision to acquire the Securities. I am purchasing these Securities for my ownaccount for investment purposes only and not with a view to, or for the resalein connection with, any “distribution” thereof for purposes of the SecuritiesAct of 1933, as amended (the “Securities Act”)

 

(b)           I understand that theSecurities have not been registered under the Securities Act in reliance upon aspecific exemption therefrom, which exemption depends upon, among other things,the bona fide nature of my investment intent as expressed herein. In thisconnection, I understand that, in the view of the Securities and ExchangeCommission (the “SEC”), the statutory basis for such exemption may beunavailable if my representation was predicated solely upon a present intentionto hold these Securities for the minimum capital gains period specified undertax statutes, for a deferred sale, for or until an increase or decrease in themarket price of the Securities, or for a period of one year or any other fixedperiod in the future.

 

(c)           I further understandthat the Securities must be held indefinitely unless subsequently registeredunder the Securities Act or unless an exemption from registration is otherwiseavailable. Moreover, I understand that the Company is under no obligation toregister the Securities. In addition, I understand that the certificateevidencing the Securities will be imprinted with a legend which prohibits thetransfer of the Securities unless they are registered or such registration isnot required in the opinion of counsel for the Company.

 

(d)           I am familiar with theprovisions of Rule 701 and Rule 144, each promulgated under the Securities Act,which, in substance, permit limited public resale of “restricted securities”acquired, directly or indirectly, from the issuer thereof, in a non-public 

 

B-1

----

 

offering subject to thesatisfaction of certain conditions. Rule 701 provides that if the issuerqualifies under Rule 701 at the time of issuance of the Securities, suchissuance will be exempt from registration under the Securities Act. In theevent the Company later becomes subject to the reporting requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafterthe securities exempt under Rule 701 may be resold, subject to the satisfactionof certain of the conditions specified by Rule 144, including among otherthings:  (1) the sale being made througha broker in an unsolicited “broker’s transaction” or in transactions directlywith a market maker (as said term is defined under the Securities Exchange Actof 1934); and, in the case of an affiliate, (2) the availability of certainpublic information about the Company, and the amount of securities being soldduring any three month period not exceeding the limitations specified in Rule144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge andagree to the restrictions set forth in paragraph (e) hereof.

 

In the event that theCompany does not qualify under Rule 701 at the time of issuance of theSecurities, then the Securities may be resold in certain limited circumstancessubject to the provisions of Rule 144, which requires among other things:  (1) the availability of certain public informationabout the Company, (2) the resale occurring not less than two years after theparty has purchased, and made full payment for, within the meaning of Rule 144,the securities to be sold; and, in the case of an affiliate, or of a non-affiliatewho has held the securities less than three years, (3) the sale being madethrough a broker in an unsolicited “broker’s transaction” or in transactionsdirectly with a market maker (as said term is defined under the SecuritiesExchange Act of 1934) and the amount of securities being sold during any threemonth period not exceeding the specified limitations stated therein, ifapplicable.

 

(e)           I further understandthat in the event all of the applicable requirements of Rule 144 or Rule 701are not satisfied, registration under the Securities Act, compliance withRegulation A, or some other registration exemption will be required; and that,notwithstanding the fact that Rule 144 and Rule 701 are not exclusive, theStaff of the SEC has expressed its opinion that persons proposing to sellprivate placement securities other than in a registered offering and otherwisethan pursuant to Rule 144 or Rule 701 will have a substantial burden of proofin establishing that an exemption from registration is available for such offersor sales, and that such persons and their respective brokers who participate insuch transactions do so at their own risk.

 
|   | DATE OF GRANT: «GrantDate» |
|--------|--------------------------------------|
|   |                                 |
|   | Signature of Purchaser:              |
|   |                                 |
|   |                                 |
|   |                                 |   |
|   | «Name»                     |
|   | «Title»                    |

 

B-2

----