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                                                                    Exhibit 10.2

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is entered into as of the first day of July, 2002, by
and between Heritage Bank (the "Bank") and Michael L. Woolfolk (the "Employee").

         WHEREAS, the Employee currently serves as Executive Vice President and
Chief Operations Officer of the Bank pursuant to an employment agreement dated
August 15, 2000 (the "2000 Agreement"); and

         WHEREAS, the Employee is willing to continue employment with the Bank
on the terms and conditions set forth below, which shall supersede the 2000
Agreement, and the Board of Directors of the Bank 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 as Executive Vice
President and Chief Operations Officer of the Bank. 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, 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 Executive
Vice President and Chief Operations Officer during the term of this Agreement a
salary (the "Base Salary") at the rate of $100,000. 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.  (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.



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             (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.

         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 36 months thereafter (or such
earlier date as is determined in accordance with Section 9 hereof).
Additionally, on each annual anniversary date from the Effective Date, 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
that 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 each such anniversary date, the Board
shall meet to review the Employee's performance and determine whether this
Agreement should be extended.

         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 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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         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.

             (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 that any
benefits paid pursuant to the Bank's long-term disability plan will continue as
provided in such plan.

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             (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
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. Subject to the provisions of Section 11
hereof, 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 following compensation and benefits:
(i) 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") and (ii) the cost to the Employee of
obtaining all health, life, disability and other benefits (excluding any bonus,
stock option or other compensation benefits) 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, at the option of
the Employee, either (1) in periodic payments over the remaining term of this
Agreement, as if the Employee's employment had not terminated, or (2) in one
lump sum within 10 days of such termination.

             (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. ss.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 a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C.ss.1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits
the Employee from participating in the conduct of the Bank's affairs, 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.ss. 563.39(b), the latter shall prevail.

             (f) 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, 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. 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. ss. 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 in connection with or 12 months after any change in control
of the Bank or which has not been approved in advance by a two-thirds vote of
the full Board of Directors of each of the Bank and the Company, the Employee
shall be paid an amount equal to two 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 Bank's or Company's
voting stock, (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


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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.

             (b) The sum of the amount payable under Section 11(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) Notwithstanding the foregoing, but only to the extent required
under federal banking law, the amount payable under Section 11(a) hereof shall
be reduced to the extent that on the date of the Employee's termination of
employment, the amount payable under Section 11(a) exceeds the limitation on
severance benefits set forth in Regulatory Bulletin 27a of the OTS, as in effect
on such termination date.

             (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 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. 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.

         13. 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.

         14. 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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         15. 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

         16. 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.



         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
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Secretary                                       John E. Peck, President and
                                                Chief Executive Officer

WITNESS:

                                                 /s/ Michael L. Woolfolk
------------------------------                  --------------------------------
                                                 Michael L. Woolfolk