Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into as of the 6th day of December, 2011, by and
between Heritage Bank (“Bank”) and P. Michael Foley III (the “Employee”).

WHEREAS, the Employee has agreed to serve in a position of substantial
authority; and

WHEREAS, the Bank desires to ensure the Employee’s services for the term of this
Agreement; and

WHEREAS, the Employee is willing to serve in the employ of the Bank on the terms
and conditions set forth below, and the Board of Directors of the Bank (the
“Board”) has determined that such terms and conditions are reasonable and in the
best interests of the Bank.

NOW, THEREFORE, it is AGREED as follows:

1. Employment. Effective December 15, 2011 (“Effective Date”) the Employee is
hereby employed by the Bank as its Vice President, Chief Credit Officer. Except
to the extent that the President and Chief Executive Officer of the Bank shall
have delegated a portion of such authority to one or more other officers, as
Senior Vice President, Chief Credit Officer of the Bank the Employee shall
perform such administrative and management services for the Bank as are
currently rendered and as are customarily performed by persons situated in a
similar executive capacity, and as described in the Chief Credit Officer job
description attached as Exhibit A. The parties recognize that the job
description may not be an exhaustive list of all duties of Employee. Assignment
of different or additional duties shall not be construed as a breach of this
Agreement by the Bank. The Employee shall also promote by entertainment or
otherwise, as and to the extent permitted by law, the business of the Bank.

2. Base Compensation. The Bank agrees to pay the Employee as Vice President,
Chief Credit Officer during the term of this Agreement a salary (the “Base
Salary”) at the rate of $170,000.00 per annum, payable in cash not less
frequently than monthly. The Board shall review, not less often than annually,
the rate of the Employee’s Base Salary, and in its sole discretion may decide to
increase his Base Salary.

3. Discretionary Bonuses. The Employee shall participate in an equitable manner
with all other senior management employees of the Bank in discretionary bonuses
that the Board may award from time to time to the Bank’s senior management
employees. No other compensation provided for in this Agreement shall be deemed
a substitute for the Employee’s right to participate in such discretionary
bonuses. Any annual bonus awarded to the Employee will be paid to him no later
than March 15 following the fiscal year in which the bonus was earned.

4. Relocation Expense Reimbursement. The Bank agrees to deliver to the Employee
a one-time relocation expense reimbursement in the amount of $15,000.00
(“Expense Reimbursement”) which shall be paid in full no later than December 15,
2011. Provided, in the event the Employee ceases employment with the Bank at any
time prior to December 14, 2014, resulting from any reason other than death,
disability or change in control (under Section 12), then the Employee shall be
required to repay the Bank an amount equivalent to 1/36 of the Expense
Reimbursement for each full month remaining from the date of termination of
employment to December 14, 2014. Such repayment shall be due and payable
immediately, and the Bank shall be entitled to set off any amount due hereunder
from any compensation which may otherwise be due from Heritage to Employee.

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5. (a) Participation in Retirement, Medical and Other Plans. The Employee shall
be entitled to participate in any plan that the Bank maintains for the benefit
of its employees if the plan relates to (i) pension, profit-sharing, or other
retirement benefits, (ii) medical insurance or the reimbursement of medical or
dependent care expenses, or (iii) other group benefits, including disability and
life insurance plans.

(b) Employee Benefits. The Employee shall participate in any fringe benefits
that are or may become available to the Bank’s senior management employees,
including, for example: any stock option or incentive compensation plans and any
other benefits that are commensurate with the responsibilities and functions to
be performed by the Employee under this Agreement.

(c) Expenses. The employee shall be reimbursed for all reasonable out-of-pocket
business expenses that he shall incur in connection with his services under this
Agreement upon substantiation of such expenses in accordance with the policies
of the Bank.

6. Term. The Bank hereby employs the Employee, and the Employee hereby accepts
such employment under this Agreement, for the period commencing on the Effective
Date hereof and ending December 14, 2014 (or such earlier date as is determined
in accordance with Section 10 hereof). Additionally, on each annual anniversary
date from the Effective Date, the Employee’s term of employment may be extended
for an additional one-year-period beyond the then effective expiration date;
provided, however, that the Board of Directors of the Bank determines in a duly
adopted resolution that the performance of the Employee has met the Board’s
requirements and standards and that this Agreement shall be extended.

7. Loyalty, Full Time and Attention.

(a) During the period of his employment hereunder and except for illness,
reasonable vacation periods, and reasonable leaves of absence, the Employee
shall devote all his full business time, attention, skill, and efforts to the
faithful performance of this duties hereunder; provided that, from time to time,
the Employee may serve on the board of directors of, and hold any other offices
or positions in, companies or organizations, that will not present any conflict
of interest with the Bank or any of its subsidiaries or affiliates, or
unfavorably affect the performance of employee’s duties pursuant to this
Agreement, or will not violate any applicable statute or regulation. “Full
business time” is hereby defined as that amount of time usually devoted to like
companies by similarly situated executive officers. During the term of his
employment under this Agreement, the Employee shall not engage in any business
or activity contrary to the business affairs or interest of the Bank, or be
gainfully employed in any other position or job other than as provided above.

(b) Nothing contained in this Section 7 shall be deemed to prevent or limit the
Employee’s right to invest in capital stock or other securities of any business
dissimilar from that of the Bank, or, solely as a passive or minority investor,
in any business not in direct or indirect competition with the Bank.

8. Standards. The Employee shall perform his duties under this Agreement in
accordance with such reasonable standards as the Board may establish from time
to time. The Bank will provide the Employee with the working facilities and
staff customary for similar executive officers and necessary for him to perform
his duties.

 

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9. Vacation and Sick Leave. The Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his duties under this
Agreement in accordance with the terms set forth below, all such voluntary
absences to count as vacation time, provided that:

(a) The Employee shall be entitled to three (3) weeks of annual vacation in
accordance with the policies periodically established by the Board for senior
management employees at the Bank.

(b) The Employee shall not receive any additional compensation from the Bank on
account of his failure to take a vacation, and the Employee shall not accumulate
unused vacation from one fiscal year to the next, except in either case to the
extent authorized by the Board.

(c) In addition to the aforesaid paid vacations, the Employee shall be entitled
without loss of pay, to absent himself voluntarily from the performance of his
employment obligations with the Bank for such additional periods of time and for
such valid and legitimate reasons as the Board may in its discretion approve.
Further, the Board may grant to the Employee a leave or leaves of absence, with
or without pay, at such time or times and upon such terms and conditions as the
Board in its discretion may determine.

(d) In addition, the Employee shall be entitled to an annual sick leave benefit
as established by the Board.

10. Termination and Termination Pay. Subject to Section 12 hereof, the
Employee’s employment hereunder may be terminated under the following
circumstances:

(a) Death. The Employee’s employment under this Agreement shall terminate upon
his death during the term of this Agreement, in which event the Employee’s
estate shall be entitled to receive the compensation due the Employee for the
remaining term of the contract, paid on the payroll date that such installment
would have been paid had it constituted base salary to an active employee rather
than a death benefit to the Employee’s estate. In addition, the Employee’s
estate shall receive any accrued and unpaid discretionary bonus due the Employee
at the time of his death, payable in a lump sum amount within 30 days of the
Employee’s death.

(b) Disability. The Bank may terminate the Employee’s employment after having
established, through a determination by the Board, the Employee’s Disability.
For purposes of this Agreement, “Disability” means a physical or mental
infirmity that impairs the Employee’s ability to substantially perform his
duties under this Agreement and that results in the Employee becoming eligible
for long-term disability benefits under the Bank’s long-term disability plan
(or, if the Bank has no such plan in effect, that impairs the Employee’s ability
to substantially perform his duties under this Agreement for a period of 180
consecutive days). The Employee shall be entitled to the compensation and
benefits provided for under this Agreement for (i) any period during the term of
this Agreement and prior to the establishment of the Employee’s Disability
during which the Employee is unable to work due to the physical or mental
infirmity or (ii) any period of disability that is prior to the Employee’s
termination of employment pursuant to this Section 10(b); provided, however,
that any benefits paid pursuant to the Bank’s long-term disability plan will
continue as provided in such plan. Any compensation provided to Employee under
this Section 10(b) shall be paid on the payroll date that such installment would
have been paid had such installment constituted base salary to an active
employee.

(c) For Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause. Termination for “Just

 

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Cause” shall mean termination because of, in the good faith determination of the
Board, the Employee’s personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and desist order, or
material breach of any provision of this Agreement. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated for Just
Cause unless there shall have been delivered to the Employee a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board (excluding the Employee if a member of the
Board) at a meeting of the Board called and held for that purpose (after
reasonable notice to the Employee and an opportunity for the Employee to be
heard before the Board), finding that in the good faith opinion of the Board the
Employee was guilty of conduct set forth above in the second sentence of this
Section 10(c) and specifying the particulars thereof in detail.

(d) Without Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time for any reason; provided that,
if such termination is for any reason other than pursuant to Sections 10(a),
(b) or (c) above, the Employee shall be entitled to receive the salary provided
pursuant to Section 2 hereof, up to the date of expiration of the term of this
Agreement. Said sum shall be paid in one lump sum within 10 days of such
termination. Any payments due Employee under this Section 10(d) are subject to
the terms and conditions of Section 19 including, if applicable, any six-month
delay in payment.

(e) Termination or Suspension Under Federal Law.

(1) If the Employee is removed and/or permanently prohibited from participating
in the conduct of the Bank’s affairs by an order issued under Sections 8(e)(4)
or 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. §1818(e)(4)
or (g)(1)), all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.

(2) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all
obligations under this Agreement shall terminate as of the date of default, but
this Paragraph 10(e)(2) shall not affect the vested rights of the parties.

(3) All obligations under this Agreement shall terminate, except to the extent
that continuation of this Agreement is necessary of the continued operation of
the Bank: (A) by the Comptroller of the Currency (“Comptroller”), or his or her
designee, at the time that the Federal Deposit Insurance Corporation (“FDIC”)
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority contained in Section 13(c) of the FDIA; or (B) by the Comptroller,
or his or her designee, at the time that the Comptroller, or his or her
designee, approves a supervisory merger to resolve problems related to operation
of the Bank or when the Bank is determined by the Comptroller to be in an unsafe
or unsound condition. Such action shall not affect any vested rights of the
parties.

(4) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. §1818(e)(3) and (g)(1)), the
Bank’s obligations under this Agreement shall be suspended as of the date of
such service unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Bank may in its discretion (A) pay the Employee all or
part of the compensation withheld while its contract obligations were suspended,
and (B) reinstate (in whole or in part) any of its obligations which were
suspended.

 

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(5) If any of the provisions of this Paragraph 10(e) conflict with 12 C.F.R. §
163.39(b), the latter shall prevail.

(f) Voluntary Termination by Employee. The Employee may voluntarily terminate
employment with the Bank during the term of this Agreement, upon at least 60
days’ prior written notice to the Board, in which case the Employee shall
receive only his compensation, vested rights and employee benefits accrued up to
the date of his termination.

(g) Limitation by Section 18(k) of the FDIA. Any payments made to the employee
pursuant to this Agreement, or otherwise, are subject to and conditioned upon
their compliance with 12 U.S.C. § 1828(k) and FDIC regulation 12 CFR Part 359,
Golden Parachute and Indemnification Payments.

11. No Mitigation. The Employee shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.

12. Change in Control.

(a) Notwithstanding any provision herein to the contrary, if the Employee’s
employment under this Agreement is terminated by the Bank, without the
Employee’s prior written consent and for a reason other than for Just Cause,
death or disability, or the Employee resigns for Good Reason, in connection with
or within 12 months after any change in control of the Bank or HopFed Bancorp,
Inc. (the “Company”), the Employee shall be paid the Employee’s Base Salary from
the date of termination to the date of expiration of the term. Said sum shall be
paid in one lump sum within 10 days of such termination, and shall be paid in
lieu of the payment of any benefits under Section 10 hereof. The term “change in
control” shall mean (1) a change in the ownership, holding or power to vote more
than 25% of the voting stock of the Bank or of the Company, (2) a change in the
ownership or possession of the ability to control the election of a majority of
the Bank’s or the Company’s directors, or (3) a change in the ownership or
possession of the ability to exercise a controlling influence over the
management or policies of the Bank or the Company by any person or by persons
acting as a “group” (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934), except that, in the case of (1), (2) and (3) hereof,
ownership or control of the Bank or its directors by the Company itself shall
not constitute a change in control. The term “person” means an individual other
than the Employee, or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. Termination by the
Employee for “Good Reason” as used herein shall mean, termination by the
Employee based on: (1) without the Employee’s express written consent, a
material reduction by the Bank of the Employee’s Base Salary as the same may be
increased from time to time; (2) without the Employee’s express written consent,
a material diminution in the Employee’s authority, duties, or responsibilities;
(3) a material condition in the authority, duties or responsibilities of the
supervisor to whom the Employee is required to report; (4) the principal
executive office of the Bank is relocated more than thirty (30) miles from
Hopkinsville, Kentucky, or the Bank requires the Employee to be based anywhere
other than an area in which the Bank’s principal executive office is located,
except for reasonably required travel on behalf of the business of the Bank; or
(5) the failure by the Bank to obtain the assumption of and agreement to perform
this Agreement by any successor as contemplated in Section 14(a) hereof. The
Employee must provide written notice to the Bank or its successor of the
existence of the condition that constitutes Good Reason within 90 days of the
initial existence of such condition. The Bank shall have 30 days after receipt
of such notice to remedy the condition, and, if remedied, the Employee shall not
be entitled to be paid the benefits described in this Section 12 in connection
with the Employee’s termination of employment.

 

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(b) The sum of the amount payable under Section 12(a) hereof and any other
“parachute payment” as defined under Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended from time to time (the “Code”), shall not exceed 2.99
times the Employee’s “base amount” as defined in Section 280G(b)(3) of the Code.

(c) Any payments due the Employee under this Section 12 are subject to the terms
and conditions of Section 19 including, if applicable, any six-month delay in
payment.

(d) In the event that any dispute arises between the Employee and the Bank as to
the terms or interpretation of this Agreement, including this Section 12,
whether instituted by formal legal proceedings or otherwise, including an action
that the Employee takes to enforce the terms of this Section 12 or to defend
against any action taken by Bank, the Employee shall be reimbursed for all costs
and expenses, including reasonable attorneys’ fees, arising from such disputes
or proceedings, provided that the Employee shall have obtained a final judgment
by a court of competent jurisdiction in his favor. Such reimbursement shall be
paid within 10 days of the Employee’s providing the Bank with written evidence,
which may be in the form, among others, of a canceled check or receipt, of any
costs or expenses incurred by the Employee.

13. Non-Competition. Upon termination of employment other than in connection
with or within 12 months after any change in control of the Bank or the Company
(as defined in Section 12(a)), the Employee agrees that the Employee will not
engage (as an employee, associate, manager, partner, sole proprietor, owner,
shareholder, director, officer, consultant, member, or in any other capacity) in
the business of banking, residential mortgage or consumer lending, commercial or
agricultural lending, mortgage brokerage or any substantially similar activity
which competes, either directly or indirectly, against or with the Bank, within
a radius of fifty (50) miles from any office of the Bank, for a period of one
(1) year from such termination. The Employee agrees that this non-competition
section is necessary to protect the Bank’s business and that the Employee’s
violation of this section would result in irreparable harm to the Bank. If the
Employee breaches this section, the Bank shall be entitled to injunctive relief
in addition to any other remedies legally available. This section shall survive
termination of this Agreement.

14. Successors and Assigns.

(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank that shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the corporation.

(b) Since the Bank is contracting for the unique and personal skills of the
Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.

15. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.

16. Applicable Law. This Agreement shall be governed in all respects, whether as
to its validity, construction, capacity, performance or otherwise, by the laws
of the Commonwealth of Kentucky, except to the extent that Federal Law shall be
deemed to apply.

 

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17. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.

18. Entire Agreement. This Agreement, together with any understanding or
modification hereof as agreed to in writing by the parties, shall constitute the
entire agreement between the parties hereto.

19. Compliance with Section 409A of the Internal Revenue Code.

(a) This Agreement shall be interpreted to avoid any penalty sanctions under
Section 409A of the Internal Revenue Code of 1986, as amended, and applicable
Treasury Regulations and guidance thereunder (“Section 409A”). The timing of any
payment provided hereunder that is subject to Section 409A may not be
accelerated unless permitted under Section 409A.

(b) No payments or benefits provided under this Agreement intended to be paid
upon termination of employment shall be paid, unless such termination of
employment also constitutes a “separation from service” within the meaning of
Section 409A. If the Employee is a “specified employee” under Section 409A on
the date of separation from service, any cash payment to him, not including
reimbursement for benefits and not otherwise exempt from Section 409A, shall be
made on the first business day of the seventh month following separation from
service. If the Employee is a “specified employee” under Section 409A on the
date of separation from service and if any benefits provided to the Employee
under Section 10 or 12 are taxable to the Employee, then, with the exception of
medical insurance benefits, the value of the aggregate amount of such taxable
benefits provided to the Employee pursuant to Section 10 or 12 during the
six-month period following his separation from service shall be limited to the
amount specified by Code Section 402(g)(1)(B) for the year of the separation
from service. The Employee shall pay the cost of any benefits exceeding the
amount specified in the prior sentence during the six-month period following his
separation from service, and shall be reimbursed by the Employer during the
seventh month following the separation from service.

(c) All reimbursements and in-kind benefits provided under this Agreement shall
be made or provided in accordance with the requirements of Section 409A,
including, where applicable, the requirement that (i) any reimbursement is for
expenses incurred during the Employee’s lifetime (or during a shorter period of
time specified in this Agreement), (ii) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during a calendar year may not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other calendar year, (iii) the reimbursement of an eligible
expense will be made on or before the last day of the calendar year following
the year in which the expense is incurred, and (iv) the right to reimbursement
or in-kind benefits is not subject to liquidation or exchange for another
benefit. In no event shall the Employee, directly or indirectly, designate the
calendar year of payment.

20. The Employee acknowledges receipt and review of the Employee Handbook.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first above written.

 

ATTEST:     HERITAGE BANK

 

    By:  

 

Secretary       John E. Peck, President and       Chief Executive Officer
WITNESS:     EMPLOYEE

 

   

 

 

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