Document:

ex10-2.htm

    
      

    

    Exhibit 10.2

     

    
      

       

      LOAN
AGREEMENT

       

      THIS LOAN
AGREEMENT (“Loan Agreement”) is made and entered into as of the 15th day of
August, 2008, by and between the Compensation Committee of the Board of
Directors of Auburn Savings Bank, as trustee (the “Trustee”), of the trust
(“Borrower”) established under Article VIII, and which forms a part, of the
Auburn Savings Bank, FSB Employee Stock Ownership Plan and Trust (“ESOP”), and
Auburn Bancorp, Inc. (“Lender”), a corporation organized and existing under the
laws of the United States of America.

       

      WITNESSETH

       

      WHEREAS,
the Borrower is authorized to purchase shares of common stock (“Common Stock”)
of the Lender, either directly from the Lender or in open market purchases in an
amount not to exceed Three and 43/100th percent
(3.43%) of the
number of shares of Common Stock issued in the offering (including shares issued
to Auburn Bancorp, MHC).

       

      WHEREAS,
the Borrower is authorized to borrow funds from the Lender for the purpose of
financing authorized purchases of Common Stock; and

       

      WHEREAS,
the Lender is willing to make a loan to the Borrower for such
purpose:

       

      NOW,
THEREFORE, the parties agree hereto as follows:

       

      ARTICLE
I

       

      DEFINITIONS

       

      The
following definitions shall apply for purposes of this Loan Agreement, except to
the extent that a different meaning is plainly indicated by the
context:

       

      BUSINESS
DAY means any day other than a Saturday, Sunday or other day on which banks are
authorized or required to close under federal or local law.

       

      CODE
means the Internal Revenue Code of 1986, as amended (including the corresponding
provisions of any succeeding law).

       

      DEFAULT
means an event or condition which would constitute an Event of Default. The
determination as to whether an event or condition would constitute an Event of
Default shall be determined without regard to any applicable requirements of
notice or lapse of time.

       

      ERISA
means the Employee Retirement Income Security Act of 1974, as amended (including
the corresponding provisions of any succeeding law).

       

      EVENT OF
DEFAULT means an event or condition described in Article V.

       

      LOAN
means the loan described in section 2.1.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      LOAN
DOCUMENTS means, collectively, the Loan Agreement, the Promissory Note and the
Pledge Agreement and all other documents now or hereafter executed and delivered
in connection with such documents, including all amendments, modifications and
supplements of or to all such documents.

       

      PLEDGE
AGREEMENT means the agreement described in section 2.8(a).

       

      PRINCIPAL
AMOUNT means the face amount of the Promissory Note, determined as set forth in
section 2.1(c).

       

      PROMISSORY
NOTE means the promissory note described in section 2.3.

       

      REGISTER
means the register described in section 2.9.

       

      ARTICLE
II

       

      THE LOAN;
PRINCIPAL AMOUNT;

      INTEREST;
SECURITY.

       

      SECTION
2.1  THE LOAN; PRINCIPAL AMOUNT.

       

      (a)           The
Lender hereby agrees to lend to the Borrower such amount, and at such time, as
shall be determined under this Section 2.1; provided, however, that in no event
shall the aggregate amount lent under this Loan Agreement from time to time
exceed the aggregate amount paid by the Borrower to purchase up to 17,262 shares
of Common Stock.

       

      (b)           Subject
to the limitations of Section 2.1(a), the Borrower shall determine the amounts
borrowed under this Agreement, and the time at which such borrowings are
affected. Each such determination shall be evidenced in a writing which shall
set forth the amount to be borrowed and the date on which the Lender shall
disburse such amount, and such writing shall be furnished to the Lender by
notice from the Borrower. The Lender shall disburse to the Borrower the amount
specified in each such notice on the date specified therein or, if later, as
promptly as practicable following the Lender’s receipt of such notice; provided,
however, that the Lender shall have no obligation to disburse funds pursuant to
this Agreement following the occurrence of a Default or an Event of Default
until such time as such Default or Event of Default shall have been
cured.

       

      (c)           For
all purposes of this Loan Agreement, the Principal Amount on any date shall be
equal to the excess, if any, of:

       

      (i)           
the aggregate amount disbursed by the Lender pursuant to section 2.1(b) on or
before such date; over

       

      (ii)           the
aggregate amount of any repayments of such amounts made before such
date.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      The
Lender shall maintain on the Register a record of, and shall record in the
Promissory Note, the Principal Amount, any changes in the Principal Amount and
the effective date of any changes in the Principal Amount.

       

      SECTION
2.2  INTEREST.

       

      (a)           The
Borrower shall pay to the Lender interest on the Principal Amount, for the
period commencing with the first disbursement of funds under this Loan Agreement
and continuing until the Principal Amount shall be paid in full, at the rate of
five percent (5.0%) per
annum.  Interest payable under this Agreement shall be computed on the
basis of a year of 365 days and actual days elapsed (including the first day but
excluding the last) occurring during the period to which the computation
relates, unless otherwise specified in the amortization schedule.

       

      (b)           Accrued
interest on the Principal Amount shall be payable by the Borrower on the dates
set forth in Schedule A to the Promissory Note. All interest on the Principal
Amount shall be paid by the Borrower in immediately available
funds.

       

      (c)           Anything
in the Loan Agreement or the Promissory Note to the contrary notwithstanding,
the obligation of the Borrower to make payments of interest shall be subject to
the limitation that payments of interest shall not be required to be made to the
Lender to the extent that the Lender’s receipt thereof would not be permissible
under the law or laws applicable to the Lender limiting rates of interest which
may be charged or collected by the Lender. Any such payment referred to in the
preceding sentence shall be made by the Borrower to the Lender on the earliest
interest payment date or dates on which the receipt thereof would be permissible
under the laws applicable to the Lender limiting rates of interest which may be
charged or collected by the Lender. Such deferred interest shall not bear
interest.

       

      SECTION
2.3  PROMISSORY NOTE.

       

      The Loan
shall be evidenced by the Promissory Note of the Borrower attached
hereto.

       

      SECTION
2.4  PAYMENT OF TRUST LOAN.

       

      The
Principal Amount of the Loan shall be repaid in accordance with Schedule A to
the Promissory Note on the dates specified therein until fully
paid.

       

      SECTION
2.5  PREPAYMENT.

       

      The
Borrower shall be entitled to prepay the Loan in whole or in part, at any time
and from time to time; provided, however, that the Borrower shall give notice to
the Lender of any such prepayment; and provided, further, that any partial
prepayment of the Loan shall be in an amount not less than $1,000. Any such
prepayment shall be: (a) permanent and irrevocable; (b) accompanied by all
accrued interest through the date of such prepayment; (c) made without premium
or penalty; and (d) applied on the inverse order of the maturity of the
installment thereof unless the Lender and the Borrower agree to apply such
prepayments in some other order.

       

      
        
          
          

        

        
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      SECTION
2.6  METHOD OF PAYMENTS.

       

      (a)           All
payments of principal, interest, other charges (including indemnities) and other
amounts payable by the Borrower hereunder shall be made in lawful money of the
United States, in immediately available funds, to the Lender at the address
specified in or pursuant to this Loan Agreement for notices to the Lender, on
the date on which such payment shall become due. Any such payment made on such
date but after such time shall, if the amount paid bears interest, and except as
expressly provided to the contrary herein, be deemed to have been made on, and
interest shall continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or interest becomes due on
a day other than a Business Day, such payment may be made on the next succeeding
Business Day, and when paid, such payment shall include interest to the day on
which payment is in fact made.

       

      (b)           Notwithstanding
anything to the contrary contained in this Loan Agreement or the Promissory
Note, the Borrower shall not be obligated to make any payment, repayment or
prepayment on the Promissory Note if doing so would cause the ESOP to cease to
be an employee stock ownership plan within the meaning of section 4975(e)(7) of
the Code or qualified under section 401(a) of the Code or cause the trust
established under Article VIII, and which forms a part, of the ESOP to cease to
be a tax exempt trust under section 501(a) of the Code or if such act or failure
to act would cause the Borrower to engage in any “prohibited transaction” as
such term is defined in the section 4975(c) of the Code and the regulations
promulgated thereunder which is not exempted by section 4975(c)(2) or (d) of the
Code and the regulations promulgated thereunder or in section 406 of ERISA and
the regulations promulgated thereunder which is not exempted by section 408(b)
of ERISA and the regulations promulgated thereunder; provided, however, that in
each case, the Borrower, may act or refrain from acting pursuant to this section
2.6(b) on the basis of an opinion of counsel, and any opinion of such counsel.
The Borrower may consult with counsel, and any opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with such
opinion of counsel. Nothing contained in this section 2.6(b) shall be construed
as imposing a duty on the Borrower to consult with counsel. Any obligation of
the Borrower to make any payment, repayment or prepayment on the Promissory Note
or refrain from taking any other act hereunder or under the Promissory Note
which is excused pursuant to this section 2.6(b) shall be considered a binding
obligation of the Borrower for the purposes of determining whether a Default or
Event of Default has occurred hereunder or under the Promissory Note and nothing
in this section 2.6(b) shall be construed as providing a defense to any remedies
otherwise available upon a Default or an Event of Default hereunder (other than
the remedy of specific performance).

       

      SECTION
2.7  USE OF PROCEEDS OF LOAN.

       

      The
entire proceeds of the Loan shall be used solely for acquiring shares of Common
Stock, and for no other purpose whatsoever.

       

      
        
          
          

        

        
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      SECTION
2.8  SECURITY.

       

      (a)           In
order to secure the due payment and performance by the Borrower of all of its
obligations under this Loan Agreement, simultaneously with the execution and
delivery of this Loan Agreement by the Borrower, the Borrower
shall:

       

      (i)           
pledge to the Lender as Collateral (as defined in the Pledge Agreement), and
grant to the Lender a first priority lien on and security interest in, the
Common Stock purchased with the Principal Amount, by the execution and delivery
to the Lender of the Pledge Agreement attached hereto as an exhibit;
and

       

      (ii)           execute
and deliver, or cause to be executed and delivered, such other agreement,
instruments and documents as the Lender may reasonably require in order to
effect the purposes of the Pledge Agreement and this Loan
Agreement.

       

      (b)           The
Lender shall release from encumbrance under the Pledge Agreement and transfer to
the Borrower, as of the date on which any payment or repayment of the Principal
Amount is made, a number of shares of Common Stock held as Collateral determined
pursuant to the applicable provisions of the ESOP.

       

      SECTION
2.9  REGISTRATION OF THE PROMISSORY NOTE.

       

      (a)           The
Lender shall maintain a Register providing for the registration of the Principal
Amount and any stated interest and of transfer and exchange of the Promissory
Note. Transfer of the Promissory Note may be effected only by the surrender of
the old instrument and either the reissuance by the Borrower of the old
instrument to the new holder or the issuance by the Borrower of a new instrument
to the new holder. The old Promissory Note so surrendered shall be canceled by
the Lender and returned to the Borrower after such cancellation.

       

      (b)           Any
new Promissory Note issued pursuant to section 2.9(a) shall carry the same
rights to interest (unpaid and to accrue) carried by the Promissory Note so
transferred or exchanged so that there will not be any loss or gain of interest
on the note surrender. Such new Promissory Note shall be subject to all of the
provisions and entitled to all of the benefits of this Agreement. Prior to due
presentment for registration or transfer, the Borrower may deem and treat the
registered holder of any Promissory Note as the holder thereof for purposes of
payment and other purposes. A notation shall be made on each new Promissory Note
of the amount of all payments of principal and interest theretofore
paid.

       

      ARTICLE
III

       

      REPRESENTATIONS
AND WARRANTIES OF THE BORROWER

       

      The
Borrower hereby represents and warrants to the Lender as follows:

       

      
        
          
          

        

        
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      SECTION
3.1  POWER, AUTHORITY, CONSENTS.

       

      The
Borrower has the power to execute, deliver and perform this Loan Agreement, the
Promissory Note and Pledge Agreement, all of which have been duly authorized by
all necessary and proper corporate or other action.

       

      SECTION
3.2  DUE EXECUTION, VALIDITY, ENFORCEABILITY.

       

      Each of
the Loan Documents, including, without limitation, this Loan Agreement, the
Promissory Note and the Pledge Agreement, has been duly executed and delivered
by the Borrower; and each constitutes the valid and legally binding obligation
of the Borrower, enforceable in accordance with its terms.

       

      SECTION
3.3  PROPERTIES, PRIORITY OF LIENS.

       

      The liens
which have been created and granted by the Pledge Agreement constitute valid,
first liens on the properties and assets covered by the Pledge Agreement,
subject to no prior or equal lien.

       

      SECTION
3.4  NO DEFAULTS, COMPLIANCE WITH LAWS.

       

      The
Borrower is not in default in any material respect under any agreement,
ordinance, resolution, decree, bond, note, indenture, order or judgment to which
it is a party or by which it is bound, or any other agreement or other
instrument by which any of the properties or assets owned by it is materially
affected.

       

      SECTION
3.5  PURCHASE OF COMMON STOCK.

       

      Upon
consummation of any purchase of Common Stock by the Borrower with the proceeds
of the Loan, the Borrower shall acquire valid, legal and marketable title to all
of the Common Stock so purchased, free and clear of any liens, other than a
pledge to the Lender of the Common Stock so purchased pursuant to the Pledge
Agreement. Neither the execution and delivery of the Loan Documents nor the
performance of any obligation thereunder violates any provisions of law or
conflicts with or results in a breach of or creates (with or without the giving
of notice of lapse of time, or both) a default under any agreement to which the
Borrower is a party or by which it is bound or any of its properties is
affected. No consent of any federal, state, or local governmental authority,
agency, or other regulatory body, the absence of which could have a materially
adverse effect on the Borrower is or was required to be obtained in connection
with the execution, delivery, or performance of the Loan Documents and the
transaction contemplated therein or in connection therewith, including without
limitation, with respect to the transfer of the shares of Common Stock purchased
with the proceeds of the Loan pursuant thereto.

       

      SECTION
3.6  ESOP; CONTRIBUTIONS.

       

      The ESOP
has been or will be duly created, organized and maintained in compliance with
all applicable laws, regulations and rulings. The ESOP is intended to qualify as
an “employee stock ownership plan” as defined in section 4975(e)(7) of the Code.
The ESOP provides that the ESOP sponsor may make contributions to the ESOP in an
amount necessary to enable the Borrower or the Trustee to amortize the Loan in
accordance with the terms of the Promissory Note; provided, however, that no
such contributions shall be required if they would adversely affect the
qualification of the ESOP under section 401(a) of the Code.

       

      
        
          
          

        

        
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      SECTION
3.7  TRUSTEE.

       

      The
Trustee has been duly appointed in accordance with the terms of the
ESOP.

       

      SECTION
3.8  COMPLIANCE WITH LAWS; ACTIONS.

       

      Neither
the execution and delivery by the Borrower of this Loan Agreement or any
instruments required thereby, nor compliance with the terms and provisions of
any such documents by the lender, constitutes a violation of any provision of
any law or any regulation, order, writ, injunction or decree or any court or
governmental instrumentality, or an event of default under any agreement, to
which the Borrower is a party of which the Borrower is bound or to which the
Borrower is subject, which violation or event of default would have a material
adverse effect on the Borrower. There is no action or proceeding pending or
threatened against either the ESOP or the Borrower before any court or
administrative agency.

       

      ARTICLE
IV

       

      REPRESENTATIONS
AND WARRANTIES OF THE LENDER

       

      The
Lender hereby represents and warrants to the Borrower and Trustee as
follows:

       

      SECTION
4.1  POWER, AUTHORITY, CONSENTS.

       

      The
Lender has the power to execute, deliver and perform this Loan Agreement, the
Pledge Agreement and all documents executed by the Lender in connection with the
Loan, all of which have been duly authorized by all necessary and proper
corporate or other action. No consent, authorization or approval or other action
by any governmental authority or regulatory body, and no notice by the Lender
to, or filing by the Lender with any governmental authority or regulatory body
is required for the due execution, delivery and performance of this Loan
Agreement.

       

      SECTION
4.2  DUE EXECUTION, VALIDITY, ENFORCEABILITY.

       

      This Loan
Agreement and the Pledge Agreement have been duly executed and delivered by the
Lender, and each constitutes a valid and legally binding obligation of the
Lender, enforceable in accordance with its terms.

       

      
        
          
          

        

        
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      ARTICLE
V

       

      EVENTS OF
DEFAULT

       

      SECTION
5.1  EVENTS OF DEFAULT UNDER LOAN AGREEMENT.

       

      Each of
the following events shall constitute an “Event of Default”
hereunder:

       

      (a)           Failure
to make any payment or mandatory prepayment of principal of the Promissory Note
when due, or failure to make any payment of interest on the Promissory Note not
later than five (5) Business Days after the date when due.

       

      (b)           Failure
by the Borrower to perform or observe any term, condition or covenant of this
Loan Agreement or of any of the other Loan Documents, including without
limitation, the Promissory Note and the Pledge Agreement.

       

      (c)           Any
representation or warranty made in writing to the Lender in any of the Loan
Documents, or any certificate, statement or report made or delivered in
compliance with this Loan Agreement, shall have been false or misleading in any
material respect when made or delivered.

       

      SECTION
5.2  LENDER’S RIGHTS UPON EVENT OF DEFAULT.

       

      If an
Event of Default under this Loan Agreement shall occur and be continuing, the
Lender shall have no rights to assets of the Borrower or the ESOP (including the
trust established under Article VIII, and which forms a part, of the ESOP) other
than: (a) contributions (other than contributions of Common Stock) that are made
by the ESOP sponsor to enable the Borrower to meet its obligations pursuant to
this Loan Agreement and earnings attributable to the investment of such
contributions and (b) “Eligible Collateral” (as defined in the Pledge
Agreement); provided, however, that: (i) the value of the Borrower’s assets
transferred to the Lender following an Event of Default in satisfaction of the
due and unpaid amount of the Loan shall not exceed the amount in default
(without regard to amounts owing solely as a result of any acceleration of the
Loan); (ii) the Borrower’s assets shall be transferred to the Lender following
an Event of Default only to the extent of the failure of the Borrower to meet
the payment schedule of the Loan; and (iii) all rights of the Lender to the
Common Stock purchased with the proceeds of the Loan covered by the Pledge
Agreement following an Event of Default shall be governed by the terms of the
Pledge Agreement.

       

      ARTICLE
VI

       

      MISCELLANEOUS
PROVISIONS

       

      SECTION
6.1  PAYMENTS DUE TO THE LENDER.

       

      If any
amount is payable by the Borrower to the Lender pursuant to any indemnity
obligation contained herein, then the Borrower shall pay, at the time or times
provided therefor, any such amount and shall indemnify the Lender against and
hold it harmless from any loss of damage resulting from or arising out of the
nonpayment or delay in payment of any such amount. If any amounts as to which
the Borrower has so indemnified the Lender hereunder shall be assessed or levied
against the Lender, the Lender may notify the Borrower and make immediate
payment thereof, together with interest or penalties in connection therewith,
and shall thereupon be entitled to and shall receive immediate reimbursement
therefor from the Borrower together with interest on each such amount as
provided in section 2.2(c). Notwithstanding any other provision contained in
this Loan Agreement, the covenants and agreements of the Borrower contained in
this section 6.1 shall survive payment of the Promissory Note and termination of
this Loan Agreement.

       

      
        
          
          

        

        
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      SECTION
6.2  PAYMENTS.

       

      All
payments hereunder and under the Promissory Note shall be made without set-off
or counterclaim and in such amounts as may be necessary in order that all such
payments shall not be less than the amounts otherwise specified to be paid under
this Loan Agreement and the Promissory Note, subject to any applicable tax
withholding requirements. Upon payment in full of the Promissory Note, the
Lender shall mark such Promissory Note “Paid” and return it to the
Borrower.

       

      SECTION
6.3  SURVIVAL.

       

      All
agreements, representations and warranties made herein shall survive the
delivery of this Loan Agreement and the Promissory Note.

       

      SECTION
6.4  MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE
AGREEMENT.

       

      No
modification, amendment or waiver of or with respect to any provision of this
Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the other
Loan Documents, nor consent to any departure from any of the terms or conditions
thereof, shall in any event be effective unless it shall be in writing and
signed by the party against whom enforcement thereof is sought. Any such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No consent to or demand on a party in any case shall, of
itself, entitle it to any other or further notice or demand in similar or other
circumstances. This Loan Agreement embodies the entire agreement and
understanding between the Lender and the Borrower and supersedes all prior
agreements and understandings relating to the subject matter
hereof.

       

      SECTION
6.5  CUMULATIVE.

       

      Each and
every right granted to the Lender hereunder or under any other document
delivered hereunder or in connection herewith, or allowed it by law or equity,
shall be cumulative and may be exercised from time to time. No failure on the
part of the Lender or the holder of the Promissory Note to exercise, and no
delay in exercising, any right shall operate as a waiver thereof, nor shall any
single or partial exercise of any right preclude any other or future exercise
thereof or the exercise of any other right. The due payment and performance of
the obligations under the Loan Documents shall be without regard to any
counterclaim, right of offset or any other claim whatsoever which the Borrower
or the Trustee may have against the Lender and without regard to any other
obligation of any nature whatsoever which the Lender may have to the Borrower or
the Trustee, and no such counterclaim or offset shall be asserted by the
Borrower or the Trustee in any action, suit or proceeding instituted by the
Lender for payment or performance of such obligations.

       

      
        
          
          

        

        
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      SECTION
6.6  FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS.

       

      At any
time and from time to time, upon the request of the Lender, the Borrower shall
execute, deliver and acknowledge or cause to be executed, delivered and
acknowledged, such further documents and instruments and do such other acts and
things as the Lender may reasonably request in order to fully effect the terms
of this Loan Agreement, the Promissory Note, the Pledge Agreement, the other
Loan Documents and any other agreements, instruments and documents delivered
pursuant hereto or in connection with the Loan.

       

      SECTION
6.7  NOTICES.

       

      Except as
otherwise specifically provided for herein, all notice, requests, reports and
other communications pursuant to this Loan Agreement shall be in writing, either
by letter (delivered by hand or commercial messenger service or sent by
registered or certified mail, return receipt requested, except for routine
reports delivered in compliance with Article VI hereof which may be sent by
ordinary first-class mail) or fax addressed as follows:

       

      
        	 
      	
                (a)

              	
                If
      to the Borrower:

              
	 
      	 
      	
                Trustee
      of the Auburn Savings Bank,

              
	 
      	 
      	
                FSB
      Employee Stock Ownership Plan and Trust

              
	 
      	 
      	
                c/o
      Compensation Committee of the Board of Directors of

              
	 
      	 
      	
                Auburn
      Savings Bank

              
	 
      	 
      	
                256
      Court Street, P.O. Box 3157

              
	 
      	 
      	
                Auburn,
      Maine 04210

              
	 
      	 
      	 
      
	 
      	
                (b)

              	
                If
      to the Lender:

              
	 
      	 
      	
                Auburn
      Bancorp, Inc.

              
	 
      	 
      	
                256
      Court Street, P.O. Box 3157

              
	 
      	 
      	
                Auburn,
      Maine 04210

              

      

      

      Any
notice, request or communication hereunder shall be deemed to have been given on
the day on which it is delivered by hand or by commercial messenger service, or
sent by facsimile, to such party at its address specified above, or, if sent by
mail, on the third Business Day after the day deposited in the mail, postage
prepaid, addressed as aforesaid. Any party may change the person or address to
whom or which notices are to be given hereunder, by notice duly given hereunder;
provided, however, that any such notice shall be deemed to have been given only
when actually received by the party to whom it is addressed.

       

      SECTION
6.8  COUNTERPARTS.

       

      This
Loan
Agreement may be signed in any number of counterparts which, when taken
together, shall constitute one and the same document.

       

      
        
          
          

        

        
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      SECTION
6.9  CONSTRUCTION; GOVERNING LAW.

       

      The
headings used in the table of contents and in this Loan Agreement are for
convenience only and shall not be deemed to constitute a part hereof. All uses
herein of any gender or of singular or plural terms shall be deemed to include
uses of the other genders or plural or singular terms, as the context may
require. All references in this Loan Agreement of an Article or section shall be
to an Article or section of this Loan Agreement, unless otherwise specified.
This Loan Agreement, the Promissory Note, the Pledge Agreement and the other
Loan Documents shall be governed by, and construed and interpreted in accordance
with, the laws of the State of
Maine.

       

      SECTION
6.10  SEVERABILITY.

       

      Wherever
possible, each provision of this Loan Agreement shall be interpreted in such
manner as to be effective and valid under applicable law; however, the
provisions of this Loan Agreement are severable, and if any clause of provision
hereof shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provisions in this Loan Agreement in any jurisdiction. Each of the
covenants, agreements and conditions contained in this Loan Agreement
independent, and compliance by a party with any of them shall not excuse
non-compliance by such party with any other. The Borrower shall not take any
action the effect of which shall constitute a breach or violation of any
provision of this Loan Agreement.

       

      SECTION
6.11  BINDING EFFECT; NO ASSIGNMENT OR DELEGATION.

       

      This Loan
Agreement shall be binding upon and inure to the benefit of the Borrower and its
successors and the Lender and its successors and assigns. The rights and
obligations of the Borrower under this Agreement shall not be assigned or
delegated without the prior written consent of the Lender, and any purported
assignment or delegation without such consent shall be void.

       

      IN
WITNESS WHEREOF, the parties have caused this Loan Agreement to be executed as
of the date first written above.

       

      
        	 
      	
                Auburn
      Savings Bank, FSB Bank Employee

                Stock
      Ownership Plan and Trust

              
	 	 	 	 
	 	 	 	 
	 
      	
                By:

              	
                /s/ M. Kelly Matzen

              	 
      
	 
      	 
      	
                M.
      Kelly Matzen, Trustee

              	 
      
	 	 	 	 
	 	 	 	 
	 
      	Auburn
      Bancorp, Inc.	 
      
	 	 	 
	 	 	 	 
	 
      	
                By:

              	
                /s/ Allen T.
      Sterling

              	 
      
	 
      	 
      	
                Allen
      T. Sterling

              	 
      
	 
      	 
      	
                President
      and Chief Executive Officer

              

      

       

      11ex10-3.htm

    
      

    

    Exhibit 10.3

     

    
      AUBURN
SAVINGS BANK, FSB

      EMPLOYMENT
AGREEMENT

      

      THIS AGREEMENT (the
“Agreement”), is made this 15th day of
August, 2008, by and between AUBURN SAVINGS BANK, FSB, a
federally chartered savings bank (the “Bank”), and Allen T. Sterling
(“Executive”).

      

      WHEREAS, Executive serves in a
position of substantial responsibility; and

      

      WHEREAS, the Bank wishes to
assure Executive’s services for the term of this Agreement; and

      

      WHEREAS, Executive is willing
to serve in the employ of the Bank during the term of this
Agreement.

      

      NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and upon the
other terms and conditions provided for in this Agreement, the parties hereby
agree as follows:

      

      1.     Employment. The Bank will employ
Executive as its President and Chief Executive Officer and, as such, Executive
will be responsible for the overall management of the Bank, including
responsibility for establishing the business objectives, policies and strategic
plan of the Bank in conjunction with the Board of Directors of the Bank (the
“Board”).  Executive shall also have all additional powers commonly
incident to his position, or which, consistent with his position, the Board
delegates to Executive. Executive also agrees to serve, if elected, as a
director of the Bank and as an officer and/or director of any subsidiary or
affiliate of the Bank and to carry out the duties and responsibilities
reasonably appropriate to those offices.

      

      2.     Location.  Executive shall
be principally located at the principal administrative offices of the Bank,
which are currently located at 325 Sabattus Street, Lewiston,
Maine.

      

      3.     Term.

      

      (a)           The
term of this Agreement shall include: (i) the initial term, consisting of the
period commencing on the date of this Agreement (the “Effective Date”) and
ending on the second anniversary of the Effective Date, plus (ii) any and all
extensions of the initial term made pursuant to this Section 3.

      

      (b)           During
the 30-day period concluding on each anniversary of the Effective Date, the
disinterested members of the Board may extend the Agreement term for an
additional year, so that the remaining term of the Agreement again becomes
twenty-four (24) months, unless Executive elects not to extend the term of this
Agreement by giving written notice in accordance with Section 17 of this
Agreement.

      

      4.     Base
Compensation.

      

      (a)           For
his services as President and Chief Executive Officer, the Bank agrees to pay
Executive an annual base salary at the rate of $103,700 per year, payable in
accordance with the Bank’s standard payroll policies and practices for officers
of the Bank.  Executive will receive no additional compensation for
his service as a director of the Bank or as an officer and/or director of any
subsidiary or affiliate of the Bank.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b)           During
the term of this Agreement, the Board will review the level of Executive’s base
salary at least annually, based upon factors deemed relevant to the Board in its
sole discretion, in order to determine Executive’s base salary through the
remaining term of the Agreement.

      

      5.     Bonuses. Executive will participate
in discretionary bonuses or other incentive compensation programs that the Bank
may sponsor for or award from time to time to senior management
employees.

      

      6.     Benefit
Plans. Executive
will participate in life insurance, medical, dental, pension, profit sharing,
retirement and stock-based compensation plans and other programs and
arrangements that the Bank may sponsor or maintain for the benefit of its
employees.

      

      7.     Vacations
and Leave.  Executive may
take vacations and other leave in accordance with the Bank’s policy for senior
executives, or otherwise as approved by the Board.

      

      8.     Expense
Payments and Reimbursements. The Bank will reimburse
Executive for all reasonable out-of-pocket business expenses incurred in
connection with his services under this Agreement upon substantiation of such
expenses and in accordance with applicable policies of the Bank.

      

      9.     Loyalty and
Confidentiality.

      

      (a)           During
the term of this Agreement, Executive will devote all his business time,
attention, skill, and efforts to the faithful performance of his duties under
this Agreement; provided, however, that from time to time, Executive may serve
on the boards 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, unfavorably affect the
performance of Executive’s duties pursuant to this Agreement, or violate any
applicable statute or regulation. Executive will not engage in any business or
activity contrary to the business affairs or interests of the Bank or any of its
subsidiaries or affiliates.

      

      (b)           The
Executive understands and agrees that the Executive's employment creates a
relationship of confidence and trust between the Executive, on the one hand, and
the Bank, on the other hand, with respect to all Confidential Information (as
defined in Section 9(c) below).  At all times, both during the period
of the Executive's employment by the Bank and after the termination of the
Executive’s employment, the Executive shall keep in confidence and trust all
such Confidential Information and, except as required by law, shall not use or
disclose any such Confidential Information other than for the benefit of the
Bank without the written consent of the Bank.

      

      (c)           “Confidential
Information” means information belonging to the Bank or its affiliates that is
of value to the Bank or its affiliates in the course of conducting their
business and the disclosure of which could result in a competitive or other
disadvantage to any of them.  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) that have been
discussed or considered by the management of the Bank or its
affiliates.  Confidential Information includes information developed
by the Executive in the course of the Executive's employment by the Bank, 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, including suppliers and
customers, with which the Employer has a business
relationship.  Notwithstanding the foregoing, Confidential Information
does not include information in the public domain, unless due to breach of the
Executive's duties under Section 9(b).

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      10.   Termination
and Termination Pay.
Subject to Section 11 of this Agreement, Executive’s employment under
this Agreement may be terminated in the following circumstances:

      

      (a)           Death. Executive’s
employment under this Agreement will terminate upon his death during the term of
this Agreement, in which event Executive’s estate will receive the base
compensation and any accrued and unpaid bonus due to Executive through the date
of death.  No further compensation or benefits shall be provided in
the event of a termination under this Section 10(a), except to the extent
required by law or under the terms of Company’s benefit plans or
programs.

      

      (b)           Disability.  Executive’s
employment under this Agreement will terminate upon Executive’s Disability upon
30 days' written notice by the Bank.  For purposes of this Agreement,
“Disability” shall be defined as any mental or physical condition that, with or
without reasonable accommodation, prevents Executive from performing his duties
for a period of twenty consecutive weeks, or for shorter periods aggregating
twenty weeks in any twelve (12) month period during the Term.  No
further compensation or benefits shall be provided in the event of a termination
under this Section 10(b), except to the extent required by law or under the
terms of Company’s benefit plans or programs.

      

      (c)           Termination for
Cause.

      

      (i)           The
Company may terminate this Agreement, immediately upon written notice to
Executive, for Cause.  In the event of a termination for Cause,
Executive shall only be entitled to such base compensation as may have been
earned and unpaid through the date of termination and no further compensation or
benefits shall be provided, except to the extent required by law or under the
express terms of Bank’s other benefit plans or programs.

      

      (ii)           For
purposes of this Agreement, “Cause” shall mean Executive’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.

      

      (d)           Voluntary Termination by
Executive. Executive may voluntarily terminate employment during the term
of this Agreement upon at least sixty (60) days prior written notice to the
Board. Upon Executive’s voluntary termination, he will receive only his
compensation and vested rights and benefits through the date of his termination.
Following termination pursuant to this Section 10(d), Executive will be subject
to the restrictions set forth in Section 10(f) of this Agreement for a period of
one (1) year from his termination date.

      

      (e)           Without Cause or With Good
Reason.

      

      (i)           In
addition to termination pursuant to Sections 10(a) through 10(d), the Bank may,
by written notice to Executive, immediately terminate his employment at any time
for a reason other than Cause (a termination “Without Cause”) and Executive may,
by written notice to the Board, immediately terminate this Agreement at any time
within ninety (90) days following an event constituting “Good Reason,” as
defined below (a termination “With Good Reason”).

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      (ii)           Subject
to Section 11 of this Agreement, in the event of termination Without Cause or
With Good Reason, Executive will receive his base salary as of one (1) year from
the date of termination, with such amount paid in one lump sum within ten (10)
calendar days of his termination. Executive will also continue to participate in
any benefit plans of the Bank (subject to the terms and conditions of such
plans) that provide medical, dental and life insurance coverage for the twelve
(12) calendar months following such termination.

      

      (iii)           For
purposes of this Agreement, “Good Reason” exists if, without Executive’s express
written consent, any of the following occur:

      

      (1)           a
material reduction in Executive’s responsibilities or authority in connection
with his employment with the Bank;

      

      (2)           assignment
to Executive of duties of a non-executive nature or duties for which he is not
reasonably equipped by his skills and experience;

      

      (3)           a
reduction in salary or benefits contrary to the terms of this Agreement, or,
following a Change in Control as defined in Section 11 of this Agreement, any
reduction in salary or material reduction in benefits below the amounts
Executive was entitled to receive prior to the Change in Control;

      

      (4)           termination
of incentive and benefit plans, programs or arrangements, or reduction of
Executive’s participation, that is not applicable to other similarly situated
participants and to such an extent as to materially reduce their aggregate value
below their aggregate value as of the Effective Date;

      

      (6)           a
requirement that Executive relocate his principal business office or his
principal place of residence outside of the area consisting of a thirty-five
(35) mile radius from the current main office and any branch of the Bank, or the
assignment to Executive of duties that would reasonably require such a
relocation; or

      

      (7)           liquidation
or dissolution of the Bank.

      

      (iv)           Notwithstanding
the foregoing, a reduction or elimination of Executive’s benefits under one or
more benefit plans, programs or arrangements maintained by the Bank as part of a
good faith, overall reduction or elimination of such plans or benefits,
applicable to all participants in a manner that does not discriminate against
Executive (except as such discrimination may be necessary to comply with law),
will not constitute an event of Good Reason or a material breach of this
Agreement, provided that benefits of the same type or to the same general extent
as those offered under such plans prior to the reduction or elimination are not
available to other officers of the Bank or any affiliate under a plan or plans
in or under which Executive is not entitled to participate.

      

      (v)           Notwithstanding
anything to the contrary contained in this Agreement, in order to be eligible
for payment of the severance benefits set forth in this Section 10(e), Executive
must first within the ten (10) day period following termination (1) execute and
deliver to the Bank a general release and waiver of claims in a form reasonably
satisfactory to the Bank, be and remain in full compliance with all obligations
under this Agreement, and agree to cooperate reasonably with the Bank at the
Bank’s sole expense and upon the Bank’s reasonable request for a period of
twelve (12) months following the termination, and (2) resign from any and all
positions, including, without limitation, as a director or officer, that the
Executive then holds with the Bank, any affiliate of the Bank, or any benefit
plan of the Bank or any of its affiliates.

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      (f)           Continuing Covenant Not to
Compete or Interfere with Relationships. Notwithstanding anything to the
contrary contained in this Agreement, during the term of this Agreement and
following a termination by the Bank or Executive pursuant to Section 10(d) or
10(e):

      

      (i)           Executive’s
obligations under Section 9(b) of this Agreement will continue in effect;
and

      

      (ii)           during
the period ending on the first anniversary of the termination, Executive will
not serve as an officer, director or employee of or consultant to any bank
holding company, bank, savings association, savings and loan holding company,
mortgage company, credit union or other financial institution that both (1)
offers products or services competing with those offered by the Bank and (2) has
one or more offices or branches located within thirty-five (35) miles from
the main office or any branch of the Bank and, further, Executive will not
interfere in any way with the relationship of the Bank, its subsidiaries or
affiliates and any of their employees, agents, or representatives.

      

      (iii)           during
the period ending on the first anniversary of such termination, Executive (1)
shall not, directly or indirectly, recruit or otherwise solicit, induce or
influence any person to leave employment with the Bank (other than terminations
of employment of subordinate employees undertaken in the course of Executive's
employment with the Bank) and (2) shall not solicit or encourage any customer or
supplier to terminate or otherwise modify adversely its business relationship
with the Bank other than actions taken by Executive in good faith in the
ordinary course of business during the course of Executive’s employment with the
Bank.  Nothing contained in this Section 10(f)(iii) shall restrict
Executive from advertising employment opportunities to the general public or
from hiring individuals who have not been directly or indirectly solicited,
induced or influenced by Executive to leave employment with the
Bank.

      

      (g)           To
the extent Executive is a member of the Board on the date of termination of
employment with the Bank, Executive will resign from the Board immediately
following such termination of employment with the Bank. Executive will be
obligated to tender this resignation regardless of the method or manner of
termination, and such resignation will not be conditioned upon any event or
payment.  Executive acknowledges that termination of his employment
shall constitute cause for removal of his position on the Board by either the
other members of the Board or the stockholders of the Bank.

      

      11.   Termination in Connection
with a Change in Control.

      

      (a)           For
purposes of this Agreement, a “Change in Control” means any of the following
events:

      

      (i)           Merger: Auburn
Bancorp, Inc. (the “Company”) merges into or consolidates with another entity,
or merges another corporation into the Company, and as a result, less than a
majority of the combined voting power of the resulting corporation immediately
after the merger or consolidation is held by persons who were stockholders of
the Company immediately before the merger or consolidation;

      

      (ii)           Acquisition of Significant
Share Ownership: There is filed, or is required to be filed, a report on
Schedule 13D or another form or schedule (other than Schedule 13G) required
under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended, if the schedule discloses that the filing person or persons acting in
concert has or have become the beneficial owner of 25% or more of a class of the
Company’s voting securities, but this clause (ii) shall not apply to beneficial
ownership of Company voting shares by Auburn Bancorp, MHC or held in a fiduciary
capacity by an entity of which the Company directly or indirectly beneficially
owns 50% or more of its outstanding voting securities;

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

      (iii)           Change in Board
Composition: During any period of two consecutive years, individuals who
constitute the Company’s Board of Directors at the beginning of the two-year
period cease for any reason to constitute at least a majority of the Company’s
Board of Directors; provided, however, that for purposes of this clause (iii),
each director who is first elected by the board (or first nominated by the board
for election by the members) by a vote of at least two-thirds (2/3) of the
directors who were directors at the beginning of the two-year period shall be
deemed to have also been a director at the beginning of such period;
or

      

      (iv)           Sale of Assets: The
Company or the Bank sells to a third party all or substantially all of its
assets.

      

      Notwithstanding
anything in this Agreement to the contrary, in no event shall the conversion of
the Bank’s mutual holding company parent, Auburn Bancorp, MHC, from mutual to
stock form, i.e., a “second step conversion,” constitute a “Change in Control”
for purposes of this Agreement.

      

      (b)           Termination. If
within the period ending one year after a Change in Control, (i) the Bank
terminates Executive’s employment without Cause, or (ii) Executive voluntarily
terminates his employment With Good Reason, the Bank will, within ten (10)
calendar days of the termination of Executive’s employment, make a lump-sum cash
payment to him equal to two times Executive’s average annual taxable
compensation (as reported on Form W-2) over the five (5) most recently completed
calendar years (or years of employment, annualized for partial years of
employment, if less than five), ending with the year immediately preceding the
effective date of the Change in Control. The cash payment made under this
Section 11(b) shall be made in lieu of any payment also required under Section
10(e) of this Agreement because of Executive’s termination of employment;
however, Executive’s rights under Section 10(e) are not otherwise affected by
this Section 11. Following termination of employment, Executive will also
continue to participate in any benefit plans of the Bank (subject to the terms
and conditions of such plans) that provide medical, dental and life insurance
coverage until the earlier of: (i) Executive’s death; (ii) Executive’s
employment by another employer other than one of which he is the majority owner;
or (iii) twenty-four (24) months after his termination of
employment.

      

      12.   Reimbursement
of Executive’s Expenses to Enforce this Agreement. The Bank will reimburse
Executive for all out-of-pocket expenses, including, without limitation,
reasonable attorneys’ fees, incurred by Executive in connection with his
successful enforcement of the Bank’s obligations under this Agreement.
Successful enforcement means the grant of an award of money or the requirement
that the Bank take some specified action: (i) as a result of court order; or
(ii) otherwise following an initial failure of the Bank to pay money or take
action promptly following receipt of a written demand from Executive stating the
reason that the Bank must make payment or take action under this
Agreement.

      

      13.   Limitation
of Benefits Under Certain Circumstances. Notwithstanding any other
provision of this Agreement, in the event that it is determined by the Bank in
its reasonable discretion that the payments and benefits pursuant to Section 11
of this Agreement, either alone or together with other payments and benefits
Executive has the right to receive from the Bank, would constitute a “parachute
payment” under Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), the payments and benefits pursuant to Section 11 shall be reduced
to the minimum extent necessary to result in no portion of the payments and
benefits under Section 11 being non-deductible to the Bank pursuant to Section
280G of the Code and subject to the excise tax imposed under Section 4999 of the
Code.

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

       

      14.   Injunctive
Relief. Upon a
breach or threatened breach of Section 10(f) of this Agreement or the
prohibitions upon disclosure contained in Section 9(b) of this Agreement, the
parties agree that there is no adequate remedy at law for such breach, and the
Bank shall be entitled to injunctive relief restraining Executive from such
breach or threatened breach, but such relief shall not be the exclusive remedy
for a breach of this Agreement. The parties further agree that Executive,
without limitation, may seek injunctive relief to enforce the obligations of the
Bank under this Agreement.

      

      15.   Successors and
Assigns.

      

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

      

      (b)           Since
the Bank is contracting for the unique and personal skills of Executive,
Executive shall not assign or delegate his rights or duties under this Agreement
without first obtaining the written consent of the Bank.

      

      16.   No
Mitigation.
Executive 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 Executive in any subsequent employment.

      

      17.   Notices. All notices, requests,
demands and other communications in connection with this Agreement shall be made
in writing and shall be deemed to have been given when delivered by hand or 48
hours after mailing at any general or branch United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Bank at its
principal business office and to Executive at his home address as maintained in
the records of the Bank.

      

      18.   No Plan
Created by this Agreement. Executive and the Bank
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act of 1974 (“ERISA”) or any other law or regulation, and each party
expressly waives any right to assert the contrary. Any assertion in any judicial
or administrative filing, hearing, or process that an ERISA plan was created by
this Agreement shall be deemed a material breach of this Agreement by the party
making the assertion.

      

      19.   Amendment
and Waiver.

      

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

      

      (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 will not constitute a waiver or
such term or condition for the future as to any act other than that specifically
waived.

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

       

      20.   Applicable
Law. Except to
the extent preempted by federal law, the laws of the State of Maine shall govern
this Agreement in all respects, whether as to its validity, construction,
capacity, performance or otherwise.

      

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

      

      22.   Headings. Headings contained in this
Agreement are for convenience of reference only.

      

      23.   Entire
Agreement. This
Agreement, together with any modifications subsequently agreed to in writing by
the parties, shall constitute the entire agreement among the parties with
respect to the foregoing subject matter, other than written agreements
applicable to specific plans, programs or arrangements described in Sections 5
and 6.

      

      24.   Required
Provisions. In
the event any of the foregoing provisions of this Agreement conflict with the
terms of this Section 24, this Section 24 shall prevail.

      

      (a)           The
Bank’s Board of Directors may terminate Executive’s employment at any time, but
any termination by the Bank, other than termination for Cause, shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after termination for Cause as defined in Section 10(c)
of this Agreement.

      

      (b)           If
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1818(e)(3) or (g)(1), the Bank’s obligations under this Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank 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 the obligations which were suspended.

      

      (c)           If
Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 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 contracting parties
shall not be affected.

      

      (d)           If
the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1813(x)(1), all obligations 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 terminate, except to the extent
determined that continuation of the Agreement is necessary for the continued
operation of the institution: (i) by the Director of the Office of Thrift
Supervision (OTS), or his designee, at the time the Federal Deposit Insurance
Corporation (FDIC) enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act, 12 U.S.C. Section 1823(c), or (ii) by the Director of the
OTS (or his designee) at the time the Director (or his designee) approves a
supervisory merger to resolve problems related to the operations of the Bank or
when the Bank is determined by the Director 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.

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      (f)           Any
payments made to Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and FDIC
Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification
Payments.

      

      IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on August 15, 2008.

      

      AUBURN
SAVINGS BANK, FSB

      

      
        	
                By:

              	
                /s/ Rachel A. Haines

              	 
      
	 
      	
                Rachel
      A. Haines

              	 
      
	 	Senior
      Vice President and Treasurer	 

      

      

      

      
        	
                EXECUTIVE

              	 
      
	 
      	 
      
	
                /s/ Allen T. Sterling

              	 
      
	
                Allen
      T. Sterling

              	 
      

      

       

       

      -9-

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