EXHIBIT 10.4

EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into as of the 17th day of April, 2008, by and between
Heritage Bank (the “Bank”) and Michael L. Woolfolk (the “Employee”).

WHEREAS, the Employee serves in a position of substantial authority; and

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

WHEREAS, the Employee is willing to continue 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. The Employee is hereby employed by the Bank as its Executive Vice
President and Chief Operations Officer. Except to the extent that the President
and Chief Executive Officer shall have delegated a portion of such authority to
one or more other officers, as its Executive Vice President and Chief Operations
Officer, the Employee shall provide general supervision of the operations of the
Bank, and shall perform such other administrative and management services for
the Bank as are currently rendered and as are customarily performed by persons
situated in a similar executive capacity. 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 President and Chief
Executive Officer during the term of this Agreement a salary (the “Base Salary”)
at the rate of $184,275 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.

4. 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.

(a) 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.

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(b) 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.

5. Term. The Bank hereby employs the Employee, and the Employee hereby accepts
such employment under this Agreement, for the period commencing on the date
hereof (the “Effective Date”) and ending June 30, 2010 (or such earlier date as
is determined in accordance with Section 9 hereof). Additionally, prior to
July 1 of each year, this Agreement and the Employee’s term of employment shall
be extended for an additional one-year period beyond the then effective
expiration date; provided, however, that the Compensation Committee of the Board
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. Prior to July 1 of each such year, the Compensation Committee and the
Board shall meet to review the Employee’s performance and determine whether this
Agreement should be extended. By written notice, the Board will inform the
Employee as soon as possible after the Board’s annual review whether the Board
has determined to extend the term of this Agreement.

6. 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 his 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 interests of the Bank, or be
gainfully employed in any other position or job other than as provided above.

(b) Nothing contained in this Section 6 shall be deemed to prevent or limit the
Employee’s right to invest in the 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.

7. Standards. The Employee shall perform his duties under this Agreement in
accordance with such reasonable standards as the Board or the President and
Chief Executive Officer 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.

8. 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 an annual vacation in accordance with the
policies periodically established by the Board for senior management employees
of the Bank.

 

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(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.

9. Termination and Termination Pay. Subject to Section 11 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 through
the last day of the calendar month in which his death occurred.

(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 9(b); provided, however, that
any benefits paid pursuant to the Bank’s long-term disability plan will continue
as provided in such plan.

(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 Cause” shall mean
termination because of, in the good faith determination of the Board, the
Employee’s personal dishonesty, incompetence, willful misconduct, breach of

 

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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 the 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 Subsection (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 9(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
(including any renewal term then in effect) of this Agreement (the “Termination
Date”). Said sum shall be paid in one lump payment within 10 days of such
termination.

(e) Health, Life, Disability and Other Benefits. If the Employee’s termination
is for death, or by the Bank for any reason other than Just Cause pursuant to
Section 9(c), or by the Employee for Good Reason pursuant to Section 11(a), the
Employee (or the Employee’s estate in the event of the Employee’s death) shall
be entitled to receive the cost to the Employee of obtaining all health, life,
disability and other benefits (excluding any bonus, stock option or other
compensation benefits, but including all 401(k) contributions), in which the
Employee would have been eligible to participate through the Termination Date
based upon the benefit levels substantially equal to those that the Bank
provided for the Employee at the date of termination of employment. Said sum
shall be paid in one lump payment within 10 days of such termination.

(f) 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;
however, this Paragraph 9(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 for the continued operation of
the Bank: (A) by the Director of the Office of Thrift Supervision (“OTS”), or
his or her designee, at the time that the Federal Deposit Insurance Corporation
enters into an agreement to provide

 

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assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the FDIA; or (B) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, 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 Director of the OTS 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)(l) of the FDIA (12 U.S.C. § 1818(e)(3) or (g)(l), 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 that were
suspended.

(5) If any of the provisions of this Paragraph 9(e) conflict with 12 C.F.R. §
563.39(b), the latter shall prevail.

(g) Voluntary Termination by Employee. Subject to the provisions of Section 11
hereof, 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 or to the President and Chief Executive Officer, in which case the
Employee shall receive only his compensation, vested rights and employee
benefits accrued up to the date of his termination.

(h) Limitation by Section 18(k) of the FDIA. Notwithstanding anything herein to
the contrary, any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with
Section 18(k) of the FDIA (12 U.S.C. § 1828(k)) and any regulations promulgated
thereunder.

10. 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.

11. 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 an amount equal to 2.9 times
the Employee’s Base Salary as of the date of termination. Said sum shall be paid
in one lump sum within 10 days of such termination. 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’s or 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 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
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meaning of Section 13(d) of the Securities Exchange Act of 1934). 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 dimunition in the
Employee’s authority, duties, or responsibilities; (3) a material dimunition 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 13(a) hereof. The Employee must provide
written notice to the Bank or its sucessor of the existence of such 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 11 in connection with the Employee’s
termination of employment.

(b) 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 11,
whether instituted by formal legal proceedings or otherwise, including an action
that Employee takes to enforce the terms of this Section 11 or to defend against
any action taken by the 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 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.

12. Non-Interference. 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 11(a)), the Employee agrees that the Employee will not
make contact with any of the employees of the Bank with whom he had contact
during the course of his employment with the Bank for the purpose of soliciting
such employee for hire, whether as an employee or independent contractor, or
otherwise disrupting such employee’s relationship with the Bank.

 

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13. 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. The Bank shall
require any successor to or assignee of (whether direct or indirect, by
purchase, merger, consolidation or otherwise) all or substantially all of the
assets or business of the Bank (i) to assume unconditionally and expressly this
Agreement and (ii) to agree to perform or to cause to be performed all of the
obligations under this Agreement in the same manner and to the same extent as
would have been required of the Bank had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably satisfactory to the
Employee. The Bank shall also require all entities that control or that after
the transaction will control (directly or indirectly) the Bank or any such
successor or assignee to agree to cause to be performed all of the obligations
under this Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Employee.

(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.

14. 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.

15. 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.

16. 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

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

18. Section 409A of the Internal Revenue Code. The severance payments provided
in this Agreement are intended to qualify as short-term deferrals under
Section 409A of the Internal Revenue Code of 1986, as amended, and the
regulations and guidance thereunder.

 

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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:  

/s/ John E. Peck

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

 

   

/s/ Michael L. Woolfolk

    Michael L. Woolfolk

 

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