**EXHIBIT10.19**

 

June 3, 2003

 

 

Mr. Darrel L. PosegateEVP/CFOHF Financial Corp.P.O. Box 5000Sioux Falls, South Dakota 57117-5000

 

Dear Darrel:

 

First Tennessee BankNational Association, hereinafter called (“FTB” and/or “Lender”) has approved a**Revolving Line of Credit** in anamount of **Three Million Dollars($3,000,000.00)** to **HF FinancialCorp.,** hereinafter called (“**HFC**”and/or “Borrower”).  **HFC**may use advances under this line ofcredit for: i) capital infusion to its subsidiaries to support growth and/orbank or branch acquisitions, ii) acquisition of bank holding companies, andiii) other liquidity needs.  Prior tothe first year anniversary of this line of credit and on an annual basisthereafter, FTB will review the line of credit for possibly another one yearextension.

 

The interest on theoutstanding balance will be payable quarterly at a variable rate per annum onthe outstanding balance.  The variablerate of interest shall be **1⁄4% discount to**First Tennessee’s Base Rate, which is currently **4.25%.**  Thus, yourborrowing rate today would equal **4.00%.**

 

This indebtedness shallbe governed by the following covenants and conditions:

 

1)              **HFC**shall obtain all the necessaryregulatory approvals, if any, from any****andall federal, state or other regulatory agency from which approval is necessaryfor the completion of this transaction.

 

2)              **HFC** shall execute all of the followingin form and substance satisfactory to FTB:

 

a)              TheNote;

 

b)             ThisLetter Agreement;

 

c)              HFC covenants andagrees with FTB that while this Agreement is in effect, Borrower shall not,without the prior written consent of Lender sell, transfer or otherwise disposeof any of its common capital stock in its subsidiaries now owned including HomeFederal Bank and the subsidiaries of Home Federal Bank including HometownInsurors, Inc., Mid-America Service Corporation, and PMD, Inc.,(“Subsidiaries”) or hereafter acquired or create or grant a security interest,encumbrance, pledge or grant similar interest in the common stock of any of its“Subsidiaries”.

 

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HF Financial Corp.June 3, 2003

 

 

d)             Certified corporateresolutions of **HFC** authorizing theexecution, delivery and performance of this Letter Agreement and of the otherinstruments and documents to be executed and delivered in connection herewith.

 

e)              **HFC** shall provide true and exact copiesof the current financial statements of the **HFC**and along with the audit report and opinion of the **HFC**’s Certified Public Accountants.

 

3)              **HFC** agrees to the following covenants andconditions:

 

a)              Capital – **Home Federal Bank** (“Bank”) shall maintainat all times maintain a “Well Capitalized” rating as required by any applicableregulatory authority as such requirement may be revised from time to time;provided, however, Bank shall maintain a consolidated leverage ratio (Tier 1Capital to tangible assets) of not less than 6.00% as calculated from theirrespective 3/31/03 Thrift Financial Report and subsequent quarterly Reportsthereafter;

 

b)             Borrower on aconsolidated basis to have an annualized return on average assets (“ROA”) as ofthe date of all financial reports required by regulatory authorities of notless than 60/100th’s of one percent (.60%);

 

c)              Borrower’ on aconsolidated basis and Bank’s non-performing loans (those 90 days or more pastdue plus those on non-accrual plus those which have been renegotiated asdefined by regulatory authorities) shall not exceed two and one-half percent(2.50%) of total loans as of the date of all financial reports as required byregulatory authorities;

 

d)             Bank shall maintainat all times loan loss reserves in amounts deemed adequate by all regulatoryauthorities with FTB to allow a cure period of 30 days to remedy anydeficiencies of an inadvertent and immaterial nature;

 

e)              Borrower nor itssubsidiaries shall create, incur or assume, contingent or otherwise, anyadditional indebtedness, except for the following indebtedness: (i) theindebtedness of **HFC** under thiscontemplated loan and (ii) operating expenses and trade payables incurred inthe ordinary course of business and (iii) federal funds purchased andborrowings from the Federal Home Loan Bank in the ordinary course ofbusiness.  However, **HFC** may issue additional Trust PreferredSecurities as needed so long as the issuance thereof will not materially affectthe financial condition of **HFC**and/or the ability to service the debt of Lender.

 

f)                **HFC** may pay cash dividends withoutrestriction provided an event of default has not occurred and default is notcontinuing or if the payment of such dividends would result in an event ofdefault.

 

g)             **HFC** shall within (10) days after thetransmission or receipt thereof, forward copies of all correspondence,memoranda or other written communication between any Regulatory Agency andBorrower, Bank or any subsidiary of **HFC**relatingto any material safety and soundness issues provided such disclosure does notviolate HFC compliance with applicable law or regulation..

 

h)             The issuance by or atthe request of any bank regulatory authority of any Supervisory Action or thetaking by Borrower or Bank of any action of the sort described herein toprevent or forestall the imposition by such bank regulatory authority of anysuch Supervisory Action, which may prohibit the payment of dividends to **HFC** from its subsidiaries an amountsufficient to service debt or could reasonably believed to cause such action inthe future shall constitute an Event of Default with actual Declaration ofDefault being at the discretion of **FTB**.  “Supervisory Action” shall mean and includethe issuance by any bank regulatory

 

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authority of aletter agreement or memorandum of understanding, cease and desist order,injunction, directive, restraining order, notice of charges, or civil moneypenalties (regardless of whether consented or agreed by to by the party to whomit is addressed), against **HFC, Bank**or any subsidiary or the directors or officers of any of them, whethertemporary or permanent.  However, ifsuch Supervisory Action is issued and **HFC**hasno outstanding balance owed to Lender and **HFC**agrees that Lender is not required to advance any funds under this or any otherfacility going forth, the issuance of such Supervisory Action shall not bedeemed an event of default.

 

i)                 Furnish to FTB assoon as available and in any event within 120 days after the end of eachcalendar year: (i) a copy of HFC’s 10K as filed with the Security ExchangeCommission and (ii) a copy of HFC’s Annual Report.  Borrower shall provide quarterly Thrift Financial Reports and 10Qfilings promptly as allowed by law or regulation upon the filing with theappropriate regulatory agency.

 

j)                 At the time ofBorrower or Bank’s first knowledge or notice, furnish written notice or theoccurrence of any event or the existence of any condition, which upon writtennotice or lapse of time or both would constitute an Event of Default under theterms of this Loan Agreement to FTB within Ten (10) days of **HFC**’s knowledge or notice.

 

 

If you are in agreementwith the terms and conditions contained herein, please indicate your acceptanceby signing in the space provided below.

 
| Sincerely,         |
|--------------------|
|               |
|               |
| /s/ Marquis Sledge |   |
| Marquis Sledge     |
| Vice President     |

 

 
|   | **Accepted this the 4th day of June, 2003** |
|--------|---------------------------------------------|
|   |
|   | **HF Financial Corp.**                      |
|   |
|   |
|   | **By:**                                     | **/s/  Darrel L. Posegate** |   |
|   | **Title: EVP/CFO**                          |   |

 

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