Document:

Exhibit 10.2

 

 

Cathay Bank

 

Bonus Deferral Agreement

 

This Bonus Deferral Agreement ("Agreement"),
effective as of March 13, 2014, between Dunson K. Cheng, Chairman, President, and CEO of Cathay General Bancorp and Cathay
Bank (the "Executive"), and Cathay General Bancorp and Cathay Bank (collectively, the "Company"), constitutes
the agreement between the Executive and the Company for the deferral of payment of $300,000, the Executive's incentive bonus for
the fourth quarter of 2013 ("Deferred Amount"). Except as otherwise provided for below, the Company shall pay the Deferred
Amount on January 1 of the first year following the Executive's separation from service from the Company. If the Executive
is a specified employee (as defined in Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the "Code")
and determined pursuant to related IRS guidance and Treasury regulations now and as may be enacted in the future), the Company
shall pay the Deferred Amount on the later of: (i) January 1 of the first year following the Executive's separation from service
from the Company; or (ii) the first day of the seventh month following the Executive's separation from service with the Company.
The Company may delay the Deferred Amount payment in accordance with Section 1.409A-2(b)(7)(i) of the Treasury regulations to the
extent that it reasonably anticipates that if the payment were made as scheduled, the Company's deduction with respect to such
payment would not be permitted due to the application of Code Section 162(m).

 

1.  In exchange for the Agreement
by the Executive to defer payment of the Deferred Amount, the Company will compute interest beginning March 28, 2014, at 5.02%
per annum computed based on the actual number of days during each period divided by the actual number of days for the full year.
The Deferred Amount will be increased at the end of each quarter by the interest so computed for the last quarter. Beginning on
the fifth anniversary of the Agreement, the interest rate shall be adjusted to 350 basis points over the then prevailing interest
rate on a five-year U. S. Treasury note.

 

2.  Executive agrees to allow
the Company to amend the terms of the Agreement, including further deferring the date of the payment of the Deferred Amount, and
take such other actions as may be necessary, to comply with Code Section 409A and related IRS guidance and Treasury regulations
now and as may be enacted in the future and to comply with any corresponding California income tax law and regulations that may
be in effect as of or enacted subsequent to the date of this Agreement. However, any changes to the Deferred Amount and Section 1
above require the consent of the Executive.

 

3.  The Company shall indemnify
and reimburse to the Executive an amount which after payment of applicable Federal, state, and local taxes by the Executive would
be sufficient to pay any Federal and California taxes that are incurred by the Executive as a result of failure to comply with
Section 409A and related regulations of the Code and any corresponding California income tax law and regulations ("Gross-Up
Payment"). Except as provided in the preceding sentence, the Company is not providing any indemnification to the Executive
for any normal or regular Federal or state income taxes related to the Deferred Amount. Any Gross-Up Payment shall be promptly
paid by the Company to the Executive, but by no later than the end of the Executive's taxable year next following the Executive's
taxable year in which the Executive remits the related taxes.

    

4.  Cathay General Bancorp ("Bancorp")
and Cathay Bank ("Bank") shall require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of Bancorp or Bank, by agreement in form and substance
reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that Bancorp or the Bank would be required to perform it if no such succession had taken place. As used in this Agreement,
the "Company" shall mean the Bancorp and Bank as hereinbefore defined and any successor to their respective business
and/or assets as aforesaid that becomes bound by the terms and provisions of this Agreement, by operation of law or otherwise.

 

    	 

    	 

    

 

5.  This Agreement and all rights
of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, legatees, and beneficiaries. If the Executive should die
while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or,
if there be no such designee, to the Executive's estate.

 

6.  This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. If any of the provisions of this Agreement are determined to be unlawful or otherwise unenforceable, in whole
or in part, such determination shall not affect the validity of the remainder of this Agreement, and this Agreement shall be reformed
to the extent necessary to carry out its provisions to the greatest extent possible.

 

7.  This Agreement and all acts
and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted
in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

	 	 	 
	 	EXECUTIVE
	 	 	 
	 	/s/ Dunson K. Cheng
	 	Dunson K. Cheng, Chairman, President, and CEO
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	CATHAY GENERAL BANCORP
	 	 	 
	 	By:	/s/ Peter Wu
	 	 	Peter Wu, Executive Vice Chairman and COO
	 	 	 
	 	By:	/s/ Heng W. Chen
	 	 	Heng W. Chen, EVP & CFO
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	CATHAY BANK
	 	 	 
	 	By:	/s/ Peter Wu
	 	 	Peter Wu, Executive Vice Chairman and COO
	 	 	 
	 	By:	/s/ Heng W. Chen
	 	 	Heng W. Chen, EVP & CFOEXECUTION VERSION

 

EMPLOYMENT
AGREEMENT

 

This Employment Agreement
(this “Agreement”) is entered into as of the 18th day of March 2014, and made effective as of the
Effective Time, as defined below, by and between Home Federal Savings and Loan Association, a federally chartered stock savings
and loan association (the “Association”) and Bruce VanHorn (“Executive”). The Association
and Executive are sometimes collectively referred to herein as the “parties.” Any reference to the “Company”
shall mean Poage Bankshares, Inc., the stock holding company of the Association. The Company is a signatory to this Agreement for
the purpose of guaranteeing the Association’s performance hereunder.

 

WITNESSETH

 

WHEREAS, Executive
is the President and Chief Executive Officer of Town Square Financial Corporation, a Kentucky corporation, and Town Square Bank,
the wholly-owned subsidiary of Town Square Financial Corporation; and

 

WHEREAS, the Company,
Poage Merger Subsidiary, Inc., the Association, Town Square Financial Corporation and Town Square Bank have entered into an Agreement
and Plan of Merger dated October 21, 2013 (the “Merger Agreement”), whereby Poage Merger Subsidiary shall merge
with and into Town Square Financial Corporation, with Town Square Financial as the surviving corporation at the Effective Time
(as defined in the Merger Agreement); and

 

WHEREAS, the Company
and the Association recognize the substantial contributions Executive has made to Town Square Financial Corporation and Town Square
Bank, Inc. and wish to retain Executive as an employee of the Association and wish to protect Executive’s position with the
Association for the period provided in the Agreement; and

 

WHEREAS,
in order to induce Executive to accept employment with the Association, the parties desire to specify
the severance benefits which shall be due the Executive by the Association in the event that his employment with the Association
is terminated under specified circumstances; and

 

WHEREAS, Executive
has agreed to serve in the employ of the Association.

 

NOW THEREFORE, in consideration
of the mutual agreements herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree
as follows:

 

		1.	POSITION AND RESPONSIBILITIES.

 

The Executive shall
serve the Association as Executive Vice President of the Company and President of the Association. In such capacity, the Executive
shall perform such services and duties in connection with the business, affairs and operations of the Bank as may be assigned or
delegated to the Executive from time to time by or under the authority of the President and Chief Executive Officer of the Company
and the Chief Executive Officer of the Association and the Boards of Directors of the Company and Association. The Executive shall
adhere to all policies established by the Boards of Directors of the Company and Association or Committees thereof at all times.
The Executive’s office shall be located at 1500 Carter Avenue, Ashland, Kentucky 41105-0509.

 

    	 

    	 

    

  

		2.	TERM AND DUTIES.

 

(a)Three Year
Contract; Annual Renewal. The term of this Agreement will begin as of the Effective Time and shall continue thereafter for
a period of three (3) years. Beginning on May 1, 2014, and on each annual anniversary date thereafter, the term of this Agreement
shall be extended for a period of one year in addition to the then-remaining term; provided that (1) the Association has
not given notice to the Executive in writing at least thirty (30) days prior to such renewal date that the term of this Agreement
shall not be extended further; and (2) prior to such renewal date, the disinterested members of the Board of Directors of the Association
(the “Board”) have explicitly reviewed and approved the extension and the results thereof shall be included
in the minutes of the Board’s meeting. On an annual basis prior to the deadline for the notice period referenced above, the
Board shall conduct a performance review of the Executive for purposes of determining whether to provide notice of non-renewal.
Reference herein to the term of this Agreement shall refer to both such initial term and such extended terms. 

 

(b)Termination
of Agreement. Notwithstanding anything contained in this Agreement to the contrary, either Executive, the Company or the Association
may terminate Executive’s employment with the Company or the Association at any time during the term of this Agreement, subject
to the terms and conditions of this Agreement.

 

(c)Continued
Employment Following Expiration of Term. Nothing in this Agreement shall mandate or prohibit a continuation of Executive’s
employment following the expiration of the term of this Agreement, upon such terms and conditions as the Association and Executive
may mutually agree.

 

(d)Duties; Membership
on Other Boards. During the term of this Agreement, except for periods of absence occasioned by illness, reasonable vacation
periods, and reasonable leaves of absence approved by the Board, Executive shall devote substantially all of his business time,
attention, skill, and efforts to the faithful performance of his duties hereunder, including activities and services related to
the organization, operation and management of the Association; provided, however, that, Executive may serve, or continue to serve,
on the boards of directors of, and hold any other offices or positions in, business companies or business or civic organizations,
which, in the Board’s judgment, will not present any conflict of interest with the Association, or materially affect the
performance of Executive’s duties pursuant to this Agreement. Executive shall provide the Board of Directors annually for
its approval a list of organizations for which the Executive acts as a director or officer.

 

		3.	COMPENSATION, BENEFITS AND REIMBURSEMENT.

 

(a)               
Base Salary. In consideration of Executive’s performance of the duties set forth in Section 2, the Association
shall provide Executive the compensation specified in this Agreement. The Association shall pay Executive a salary of $202,000
per year (“Base Salary”). The Base Salary shall be payable biweekly, or with such other frequency as officers
of the Association are generally paid. During the term of this Agreement, the Base Salary shall be reviewed at least annually by
the Board or by a committee designated by the Board, and the Association may increase, but not decrease (except for a decrease
that is generally applicable to all employees) Executive’s Base Salary. Any increase in Base Salary shall become “Base
Salary” for purposes of this Agreement.

 

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(b)              
Retention Payment. As an incentive for the Executive to remain in the employ of the Association, the Executive will
be eligible for the following payments (the “Retention Payment”) only if the Executive is employed with the
Association on the following dates (“Required Employment Date”):

 

	
         

        If Employed On:
	Payment Amount
	Effective Time	$30,000
	One Year Anniversary of Effective Time	$30,000
	Second Annual Anniversary of Effective Time	$30,000
	Third Annual Anniversary of Effective Time	$30,000

 

If the Executive voluntarily
terminates employment without Good Reason (as defined in Section 4(a)(ii) of this Agreement) or if the Executive’s employment
is involuntarily terminated by the Association for Cause (as defined in Section 7 of this Agreement), the Executive will not receive
any Retention Payments subsequent to the Executive’s date of termination. The Retention Payment, if any, will be paid on
the next regular pay date following a Required Employment Date.

 

(c)               
Stock Options. As of the Effective Time, the Executive shall receive a grant of 20,000 incentive stock options, which
shall vest in five equal annual installments (i.e., 20% per year), commencing on the first anniversary of the date of grant and
continuing on each anniversary thereafter.

 

(d)              
Automobile.The Executive shall be entitled to the continued use of the same automobile, which he currently uses
as of the Effective Time, with the Association providing for the maintenance and adequate automobile insurance, including collision
and uninsured motorist coverage, as well as any other insurance coverage required under the laws of the State of Kentucky. If within
three years of the Effective Time, the automobile is returned to the leasing company, the Association shall pay Executive (i) a
cash automobile allowance of at least $5,000 per year to cover the expenses of an automobile, and (ii) mileage reimbursement for
any business use of the automobile at a rate established by the Internal Revenue Service or as mutually agreed to by the Association
and Executive. The Association shall annually include on Executive’s Form W-2 any amount attributable to Executive’s
personal use of such automobile. 

 

(e)               
Social Memberships. In addition, the Association shall reimburse or pay Executive amounts sufficient to establish
or maintain membership in a country club or any other club or organization (business, social or otherwise) which will benefit the
Association, as mutually agreed to by the Association and the Executive, with such reimbursement or payment to occur as soon as
practicable upon presentation to the Association of an itemized account of such expenses in such form as the Association may reasonably
require, provided that such payment or reimbursement shall be made as soon as practicable but in no event later than March 15 of
the year following the year in which such right to such payment or reimbursement occurred.

 

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(f)               
Bonus and Incentive Compensation. Executive shall be entitled to equitable participation in incentive compensation
and bonuses in any plan or arrangement of the Association or the Company in which Executive is eligible to participate. Nothing
paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled
under this Agreement.

 

(g)              
Employee Benefits. Subject to the terms of the applicable plan documents, generally applicable policies of the Association,
and applicable law, the Executive shall be entitled to participate in any tax-qualified plan, and at the discretion of the Board
of Directors or any administrative or other committee provided for in or contemplated by any such plan, employee benefit plans,
medical insurance plans, life insurance plans, disability income plans, retirement plans, vacation plans, expense reimbursement
plans and other benefit plans or credit card privileges which the Association may from time to time have in effect for its senior
executives, with credit recognized for Executive’s prior service with Town Square Bank, Inc. for purposes of eligibility
and vesting (but not benefit accrual) and as provided in the Merger Agreement (for purposes of clarity, this Agreement does not
give the Executive the right to participate in the Association’s frozen defined benefit pension plan). Nothing contained
in this Agreement shall be construed to create any obligation on the part of the Association to establish any such plan or to maintain
the effectiveness of any such plan which may be in effect from time to time.

 

(h)              
Paid Time Off. Executive shall be entitled to four weeks of paid vacation time each year during the term of this
Agreement (measured on a fiscal or calendar year basis, in accordance with the Association’s usual practices), as well as
sick leave, holidays and other paid absences in accordance with the Association’s policies and procedures for senior executives.
Any unused paid time off during an annual period shall be treated in accordance with the Association’s personnel policies
as in effect from time to time.

 

(i)                
Expense Reimbursements. The Association shall also pay or reimburse Executive for all reasonable travel, entertainment
and other reasonable expenses incurred by Executive during the course of performing his obligations under this Agreement, including,
without limitation, fees for memberships in such clubs and organizations as Executive and the Board shall mutually agree are necessary
and appropriate in connection with the performance of his duties under this Agreement, upon presentation to the Association of
an itemized account of such expenses in such form as the Association may reasonably require, provided that such payment or reimbursement
shall be made as soon as practicable but in no event later than March 15 of the year following the year in which such right to
such payment or reimbursement occurred.

 

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		4.	PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

 

(a)               
Upon the occurrence of an Event of Termination (as herein defined) during the term of this Agreement, the provisions of
this Section 4 shall apply; provided, however, that in the event such Event of Termination occurs within eighteen (18) months following
a Change in Control (as defined in Section 5 hereof), Section 5 shall apply instead. As used in this Agreement, an “Event
of Termination’’ shall mean and include any one or more of the following:

 

(i)                
the involuntary termination of Executive’s employment hereunder by the Association for any reason other than termination
governed by Section 5 (in connection with or following a Change in Control), Section 6 (due to Retirement), or Section 7 (for Cause),
provided that such termination constitutes a “Separation from Service” within the meaning of Section 409A of
the Internal Revenue Code (“Code”); or

 

(ii)              
Executive’s resignation from the Association’s employ upon any of the following, unless consented to by Executive:

 

(A)failure
to appoint Executive to the position set forth in Section 1,;

 

(B)a relocation
of Executive’s principal place of employment to a location that is more than 20 miles from the location of the Association’s
principal executive offices as of the date of this Agreement;

 

(C)a material
reduction in the benefits and perquisites, including Base Salary, to Executive from those being provided as of the Effective Time
(except for any reduction that is part of a reduction in pay or benefits that is generally applicable to officers or employees
of the Association);

 

(D)a liquidation
or dissolution of the Association; or

 

(E)a material
breach of this Agreement by the Association.

 

Upon the occurrence of
any event described in clause (ii) above, Executive shall have the right to elect to terminate his employment under this Agreement
by resignation for “Good Reason” upon not less than thirty (30) days prior written notice given within a reasonable
period of time (not to exceed ninety (90) days) after the event giving rise to the right to elect, which termination by Executive
shall be an Event of Termination. The Association shall have thirty (30) days to cure the condition giving rise to the Event of
Termination, provided that the Association may elect to waive said thirty (30) day period.

 

(b)              
Upon the occurrence of an Event of Termination, the Association shall pay Executive, or, in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, a
lump sum cash payment equal to one times the sum of (i) Executive’s highest annual rate of Base Salary paid to Executive
at any time under this Agreement, plus (ii) the highest bonus paid to Executive with respect to the three completed fiscal years
prior to the Event of Termination, plus (iii) the remaining Retention Payments that have not yet been paid. Such payment shall
be paid in a lump sum within ten (10) days of the Executive’s Separation from Service (within the meaning of Section 409A
of the Code) and shall not be reduced in the event Executive obtains other employment following the Event of Termination. Notwithstanding
the foregoing, Executive shall not be entitled to any payments or benefits under this Section 4 unless and until Executive executes
a release of his claims against the Association, the Company and any affiliate, and their officers, directors, successors and assigns,
releasing said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to
the employment relationship, including claims under the Age Discrimination in Employment Act, but not including claims for benefits
under tax-qualified plans or other benefit plans in which Executive is vested, claims for benefits required by applicable law or
claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement.

 

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(c)               
Upon the occurrence of an Event of Termination, the Association shall provide, at the Association’s expense, for twelve
months following such Event of Termination, nontaxable medical and dental coverage and life insurance coverage substantially comparable,
as reasonably available, to the coverage maintained by the Association for Executive prior to the Event of Termination, except
to the extent such coverage may be changed in its application to all Association employees. Notwithstanding the foregoing, if applicable
law (including, but not limited to, laws prohibiting discriminating in favor of highly compensated employees), or, if participation
by the Executive is not permitted under the terms of the applicable health plans, or if providing such benefits would subject the
Association to penalties, then the Association shall pay the Executive a cash lump sum payment reasonably estimated to be equal
to the value of such non-taxable medical, dental and life insurance benefits, with such payment to be made within ten (10) days
of the Event of Termination, or if later, the date on which the Association determines that such insurance coverage (or the remainder
of such insurance coverage) cannot be provided for the foregoing reasons.

 

(d)              
For purposes of this Agreement, a “Separation from Service” shall have occurred if the Association and
Executive reasonably anticipate that either no further services will be performed by the Executive after the date of the Event
of Termination (whether as an employee or as an independent contractor) or the level of further services performed will not exceed
49% of the average level of bona fide services in the 12 months immediately preceding the Event of Termination. For all purposes
hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii).
If Executive is a Specified Employee, as defined in Code Section 409A and any payment to be made under sub-paragraph (b) or (c)
of this Section 4 shall be determined to be subject to Code Section 409A, then if required by Code Section 409A, such payment or
a portion of such payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month
following Executive’s Separation from Service.

 

		5.	CHANGE IN CONTROL.

 

(a)               
Any payments made to Executive pursuant to this Section 5 are in lieu of any payments that may otherwise be owed to Executive
pursuant to this Agreement under Section 4, such that Executive shall either receive payments pursuant to Section 4 or pursuant
to Section 5, but not pursuant to both Sections.

 

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(b)              
For purposes of this Agreement, the term “Change in Control” shall mean:

 

(i)                
a change in control of a nature that would be required to be reported in response to Item 5.01(a) of the current report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”); or

 

(ii)              
a change in control of the Association within the meaning of the Home Owner’s Loan Act, as amended (“HOLA”),
and applicable rules and regulations promulgated thereunder, as in effect at the time of the Change in Control; or

 

(iii)            
any of the following events, upon which a Change in Control shall be deemed to have occurred:

 

(A)any
“person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Association or the
Company representing 25% or more of the combined voting power of such outstanding securities, except for any securities purchased
by any employee stock ownership plan or trust established by the Association or the Company; or

 

(B)individuals
who constitute the Board on the Effective Time (the “Incumbent Board”) cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director subsequent to the Effective Time whose election was approved
by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by stockholders
of the Association or the Company was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this subsection (B), considered as though they were members of the Incumbent Board; or

 

(C)a sale
of all or substantially all the assets of the Association or the Company, or a plan of reorganization, merger, consolidation, or
similar transaction occurs in which the security holders of the Association or the Company immediately prior to the consummation
of the transaction do not own at least 50.1% of the securities of the surviving entity to be outstanding upon consummation of the
transaction; or

 

(D)a tender
offer is made for 25% or more of the voting securities of the Association or the Company, and stockholders owning beneficially
or of record 25% or more of the outstanding securities of the Association or the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror.

 

(c)               
Upon the occurrence of a Change in Control followed within eighteen (18) months by an Event of Termination (as defined in
Section 4 hereof), Executive, shall receive as severance pay or liquidated damages, or both, a lump sum cash payment equal to three
times the sum of (i) Executive’s highest annual rate of Base Salary paid to Executive at any time under this Agreement, plus
(ii) the highest bonus paid to Executive with respect to the three completed fiscal years prior to the Change in Control, plus
(iii) the remaining Retention Payments that have not yet been paid. Such payment shall be paid in a lump sum within ten (10) days
of the Executive’s Separation from Service (within the meaning of Section 409A of the Code) and shall not be reduced in the
event Executive obtains other employment following the Event of Termination.

 

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(e)               
(d)Upon the occurrence of a Change in Control followed within eighteen (18) months by an Event of Termination (as defined
in Section 4 hereof), the Association (or its successor) shall provide at the Association’s (or its successor’s) expense,
nontaxable medical and dental coverage and life insurance coverage substantially comparable, as reasonably available, to the coverage
maintained by the Association for Executive prior to his termination, except to the extent such coverage may be changed in its
application to all Association employees and then the coverage provided to Executive shall be commensurate with such changed coverage.
Such coverage shall cease thirty-six (36) months following the termination of Executive’s employment. Notwithstanding the
foregoing, if applicable law (including, but not limited to, laws prohibiting discriminating in favor of highly compensated employees),
or, if participation by the Executive is not permitted under the terms of the applicable health plans, or if providing such benefits
would subject the Association to penalties, then the Association shall pay the Executive a cash lump sum payment reasonably estimated
to be equal to the value of such non-taxable medical, dental and life insurance benefits, with such payment to be made within ten
(10) days of the Event of Termination, or if later, the date on which the Association determines that such insurance coverage (or
the remainder of such insurance coverage) cannot be provided for the foregoing reasons.Notwithstanding the preceding paragraphs
of this Section 5, in the event that the aggregate payments or benefits to be made or afforded to Executive in the event of a Change
in Control would be deemed to include an “excess parachute payment” under Section 280G of the Internal Revenue Code
or any successor thereto, then such payments or benefits shall be reduced to an amount, the value of which is one dollar ($1.00)
less than an amount equal to three (3) times Executive’s “base amount,” as determined in accordance with Section
280G of the Code. In the event a reduction is necessary, then the cash severance payable by the Association pursuant to Section
5 shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Association
under Section 5 being non-deductible to the Association pursuant to Section 280G of the Code and subject to excise tax imposed
under Section 4999 of the Code.

 

		6.	TERMINATION UPON RETIREMENT.

 

Termination of Executive’s
employment based on “Retirement” shall mean termination of Executive’s employment at any time after Executive
reaches age 65 or in accordance with any retirement policy established by the Board with Executive’s consent with respect
to him. Upon termination of Executive based on Retirement, no amounts or benefits shall be due Executive under this Agreement,
and Executive shall be entitled to all benefits under any retirement plan of the Association and other plans to which Executive
is a party.

 

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		7.	TERMINATION FOR CAUSE.

 

(a)The Association
may terminate Executive’s employment at any time, but any termination other than termination for “Cause,”
as defined herein, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive
shall have no right to receive compensation or other benefits for any period after termination for “Cause.”

 

(b)The term termination
for “Cause” shall mean termination because of Executive’s: (i) personal dishonesty; (ii) incompetence; (iii)
willful misconduct; (iv) breach of fiduciary duty involving personal profit; (v) intentional failure to perform stated duties;
(vi) willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist
order; or (vii) material breach of any provision of this Agreement. Notwithstanding the foregoing, Cause shall not be deemed to
exist unless there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable
notice to the Executive and an opportunity for the Executive to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct described above and specifying the particulars thereof. Prior to holding a meeting
at which the Board is to make a final determination whether Cause exists, if the Board determines in good faith at a meeting of
the Board, by not less than a majority of its entire membership, that there is probable cause for it to find that the Executive
was guilty of conduct constituting Cause as described above, the Board may suspend the Executive from his duties hereunder for
a reasonable period of time not to exceed fourteen (14) days pending a further meeting at which the Executive shall be given the
opportunity to be heard before the Board. Upon a finding of Cause, the Board shall deliver to the Executive a Notice of Termination,
as more fully described in Section 9 below.

 

		8.	RESIGNATION
FROM BOARDS OF DIRECTORS

 

In the event of Executive’s
termination of employment due to an Event of Termination, Executive’s service, if any, as a director of the Association,
the Company, and any affiliate of the Association or the Company shall immediately terminate. This Section 8 shall constitute a
resignation notice for such purposes.

 

		9.	NOTICE.

 

(a)               
Any purported termination by the Association for Cause shall be communicated by Notice of Termination to Executive. If,
within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Association that a dispute exists
concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 19. Notwithstanding the pendency
of any such dispute, the Association shall discontinue paying Executive’s compensation until the dispute is finally resolved
in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 4
or 5, the payment of such compensation and benefits by the Association shall commence immediately following the date of resolution
by arbitration, with interest due Executive on the cash amount that would have been paid pending arbitration (at the prime rate
as published in The Wall Street Journal from time to time).

 

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(b)              
Any other purported termination by the Association or by Executive shall be communicated by a “Notice of Termination”
(as defined in Section 9(c)) to the other party. If, within thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall
promptly proceed to arbitration as provided in Section 19. Notwithstanding the pendency of any such dispute, the Association shall
continue to pay Executive his Base Salary, and other compensation and benefits in effect when the notice giving rise to the dispute
was given (except as to termination of Executive for Cause); provided, however, that such payments and benefits shall not continue
beyond the date that is 36 months from the date the Notice of Termination is given. In the event the voluntary termination by Executive
of his employment is disputed by the Association, and if it is determined in arbitration that Executive is not entitled to termination
benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest
thereon at the prime rate as published in The Wall Street Journal from time to time, if it is determined in arbitration
that Executive’s voluntary termination of employment was not taken in good faith and not in the reasonable belief that grounds
existed for his voluntary termination. If it is determined that Executive is entitled to receive severance benefits under this
Agreement, then any continuation of Base Salary and other compensation and benefits made to Executive under this Section 9 shall
offset the amount of any severance benefits that are due to Executive under this Agreement.

 

(c)               
For purposes of this Agreement, a “Notice of Termination” shall mean a written notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

 

		10.	POST-TERMINATION OBLIGATIONS.

 

(a)Non-Solicitation of Employees.
Executive agrees that during his employment and for a period of two years following the end of his employment, he shall not, directly
or indirectly, solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances
would expect) to have the effect of causing any officer or employee of the Association or the Company, or any of their respective
subsidiaries or affiliates, to terminate his or her employment and accept employment or become affiliated with, or provide services
for compensation in any capacity whatsoever to, any business whatsoever that competes with the business of the Association or the
Company, or any of their direct or indirect subsidiaries or affiliates or has headquarters or offices in any of the locations in
which the Association or the Company has business operations or has filed an application for regulatory approval to establish an
office.

 

(b)Non-Solicitation of Customers.
Executive agrees that during his employment and for a period of two years following the end of his employment, he shall not influence
or attempt to influence previous and existing customers, or otherwise, either directly or indirectly, divert or attempt to divert
from Association, any business Association had enjoyed or solicited anywhere during the last two years of Executive’s employment.

 

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(c)Covenant
Not to Compete. Executive agrees that during his employment and for a period of two years following the end of his employment,
he shall not, directly or indirectly, become an officer, employee, consultant, director, independent contractor, agent, sole proprietor,
joint venturer, greater than 5% equity owner or stockholder, partner or
trustee of any savings association, savings and loan association, savings and loan holding company, credit union, association
or association holding company, insurance company or agency, any mortgage or loan broker or any other financial services entity
or business that competes with the business of the Association or its affiliates or has headquarters or offices within fifty (50)
miles of any of the Company’s or Association’s offices; provided, however, that this restriction shall not apply
if Executive’s employment is terminated following a Change in Control.

 

(d) As used in
this Agreement, “Confidential Information” means information belonging to the Association which is of value
to the Association in the course of conducting its business and the disclosure of which could result in a competitive or other
disadvantage to the Association. Confidential Information includes, without limitation, financial information, reports, and forecasts;
inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market
or sales information or plans; customer lists; and business plans, prospects and opportunities (such as possible acquisitions or
dispositions of businesses or facilities) which have been discussed or considered by the management of the Association. Confidential
Information includes information developed by the Executive in the course of the Executive’s employment by the Association,
as well as other information to which the Executive may have access in connection with the Executive’s employment. Confidential
Information also includes the confidential information of others with which the Association has a business relationship. Notwithstanding
the foregoing, Confidential Information does not include information in the public domain. The Executive understands and agrees
that the Executive’s employment creates a relationship of confidence and trust between the Executive and the Association
with respect to all Confidential Information. At all times, both during the Executive’s employment with the Association and
after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the Association, except as may be necessary in the ordinary course
of performing the Executive’s duties to the Association.

 

(e)Executive shall,
upon reasonable notice, furnish such information and assistance to the Association as may reasonably be required by the Association,
in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however,
that Executive shall not be required to provide information or assistance with respect to any litigation between the Executive
and the Association or any of its subsidiaries or affiliates.

 

(f)All payments and benefits to
Executive under this Agreement shall be subject to Executive’s compliance with this Section 10. The parties hereto, recognizing
that irreparable injury will result to the Association, its business and property in the event of Executive’s breach of this
Section 10, agree that, in the event of any such breach by Executive, the Association will be entitled, in addition to any other
remedies and damages available, to an injunction to restrain the violation hereof by Executive and all persons acting for or with
Executive. Executive represents and admits that Executive’s experience and capabilities are such that Executive can obtain
employment in a business engaged in other lines and/or of a different nature than the Association, and that the enforcement of
a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting
the Association or the Company from pursuing any other remedies available to them for such breach or threatened breach, including
the recovery of damages from Executive.

 

    	11

    	 

    

  

		11.	SOURCE OF PAYMENTS.

 

All payments provided
in this Agreement shall be timely paid in cash or check from the general funds of the Association. The Company may accede to this
Agreement but only for the purposed of guaranteeing payment and provision of all amounts and benefits due hereunder to Executive.

 

		12.	EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

 

This Agreement contains
the entire understanding between the parties hereto and supersedes any prior employment agreement between the Association or any
predecessor of the Association and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without reference to this Agreement.

 

		13.	NO ATTACHMENT; BINDING ON SUCCESSORS.

 

(a)               
Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process
or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and
of no effect.

 

(b)              
This Agreement shall be binding upon, and inure to the benefit of, Executive and the Association and their respective successors
and assigns.

 

		14.	MODIFICATION AND WAIVER.

 

(a)               
This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

 

(b)              
No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate
only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as
to any act other than that specifically waived.

 

		15.	REQUIRED PROVISIONS.

 

(a)The Association
may terminate Executive’s employment at any time, but any termination by the Board other than termination for Cause shall
not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall have no right to
receive compensation or other benefits for any period after termination for Cause.

 

    	12

    	 

    

  

(b)If Executive
is suspended from office and/or temporarily prohibited from participating in the conduct of the Association’s affairs by
a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit
Insurance Act, the Association’s obligations under this contract shall be suspended as of the date of service, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the Association may in its discretion (i) pay Executive
all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.

 

(c)If Executive
is removed and/or permanently prohibited from participating in the conduct of the Association’s affairs by an order issued
under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, all
obligations of the Association under this Agreement shall terminate as of the effective date of the order, but vested rights of
the contracting parties shall not be affected.

 

(d)If the Association
is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the Federal Deposit Insurance Act, all obligations of
the Association under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested
rights of the contracting parties.

 

(e)All obligations
under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the
continued operation of the Association, (i) by The Office of the Comptroller of the Currency (the “Comptroller”)
or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Association
under the authority contained in Section 13(c) [12 USC §1823(c)] of the Federal Deposit Insurance Act; or (ii) by the
Comptroller or his or her designee at the time the Comptroller or his or her designee approves a supervisory merger to resolve
problems related to operation of the Association or when the Association is determined by the Comptroller to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

 

(f)Notwithstanding
anything herein contained to the contrary, any payments to Executive by the Association or the Company, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.

 

		16.	SEVERABILITY.

 

If, for any reason,
any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the
full extent consistent with law continue in full force and effect.

 

    	13

    	 

    

  

		17.	HEADINGS FOR REFERENCE ONLY.

 

The headings of sections
and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any
of the provisions of this Agreement.

 

		18.	GOVERNING LAW.

 

This Agreement shall
be governed by the laws of the State of Kentucky except to the extent superseded by federal law.

 

		19.	ARBITRATION.

 

Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil
litigation and without any trial by jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location
selected by Executive within fifty (50) miles from the main office of the Association, in accordance with the rules of the American
Arbitration Association’s National Rules for the Resolution of Employment Disputes (“National Rules”)
then in effect. One arbitrator shall be selected by Executive, one arbitrator shall be selected by the Association and the third
arbitrator shall be selected by the arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen
(15) days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance
with the National Rules. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

 

		20.	INDEMNIFICATION.

 

(a)               
Executive shall be provided with coverage under a standard directors’ and officers’ liability insurance policy
during the term of this Agreement, and shall be indemnified for the term of this Agreement and for a period of six years thereafter
to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer
of the Association or any affiliate (whether or not he continues to be a director or officer at the time of incurring such expenses
or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees
and the cost of reasonable settlements (such settlements must be approved by the Board), provided, however, Executive shall not
be indemnified or reimbursed for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising
from any illegal or fraudulent act committed by Executive. Any such indemnification shall be made consistent with Section 18(k)
of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and the regulations issued thereunder in 12 C.F.R. Part 359.

 

(b)Any indemnification
by the Association shall be subject to compliance with any applicable regulations of the Federal Deposit Insurance Corporation.

 

    	14

    	 

    

  

		21.	Notice.

 

For the purposes of
this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed
to the respective addresses set forth below:

 

	To the Association:	
        Home Federal Savings and Loan Association

        1500 Carter Avenue

        Ashland, KY 41101

         

	
        To Executive:

         
	
        _________

        At the address last appearing on

        the personnel records of the Association 

	 	 

 

    	15

    	 

    

 

SIGNATURES

 

IN WITNESS WHEREOF,
the Association and the Company have caused this Agreement to be executed by their duly authorized representatives, and Executive
has signed this Agreement, on the date first above written.

 

	 	HOME
FEDERAL SAVINGS AND LOAN ASSOCIATION 

	 	 	 
	 	 	 
	 	 	 
	 	
        By: 

        
	/s/ J. Thomas Rupert
	
         

         

         
	 	Chairman of the Board
	 	POAGE
BANKSHARES, INC.

	 	 	 
	 	 	 
	 	 	 
	 	
        By:

        
	/s/ J. Thomas Rupert
	 	 	Chairman of the Board
	 	 	 
	 	 	 
	 	EXECUTIVE:
	 	 	 
	 	 	 
	 	 	 
	 	/s/ Bruce VanHorn

	 	Bruce VanHorn

 

    	16

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