CHANGE IN CONTROL AGREEMENT

EXHIBIT 10.2

CHANGE IN CONTROL AGREEMENT

(as amended and restated)

between and among

APPALACHIAN BANCSHARES, INC.

a Georgia corporation, and its

wholly-owned subsidiary

APPALACHIAN COMMUNITY BANK

a Georgia banking company,

and

J. KEITH HALES

As of

May 1, 2008

TABLE OF CONTENTS

AGREEMENT

THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”), as amended and restated, effective as of May 1, 2008, is made by and among APPALACHIAN BANCSHARES, INC., a Georgia corporation (“Holding Company”), and its wholly-owned subsidiary, APPALACHIAN COMMUNITY BANK, a Georgia banking company (“Bank”) (Holding Company and Bank hereinafter collectively referred to as “Employer”), and J. KEITH HALES (“Executive”).

WHEREAS Employer considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel; and

WHEREAS the Board of Directors of each of Holding Company and Bank (collectively and/or individually, as the context shall require, the “Board”) recognizes that, as is the case with many publicly-held corporations, the possibility of a Change in Control (as defined in Section 13 hereof) exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of Holding Company, Bank and their respective shareholders; and

WHEREAS the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of Employer’s management, including Executive, to their assigned duties, without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control;

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, Employer and Executive hereby agree as follows:

1. Defined Terms . The definitions of capitalized terms used in this Agreement, unless provided elsewhere in the text of this Agreement, are provided in Section 13 hereof.

2. Term of Agreement . This Agreement shall be for a term commencing on the date set forth above (the “Effective Date”) and ending thirty-six (36) months thereafter, unless sooner terminated in accordance with this Agreement. Additionally, on each anniversary date of Effective Date, this Agreement shall be extended for an additional one-year period beyond the then effective expiration date, provided that the Board determines, in a duly adopted resolution, that the performance of Executive has met with the Board’s requirements and standards, and that this Agreement shall be extended.

3. Employer’s Covenants Summarized . In order to induce Executive to remain in the employ of Employer, Employer agrees, subject to the conditions described herein, to pay to Executive the Severance Payments (as defined in Section 5.01 hereof) and the other payments and benefits described herein, in the event Executive’s employment with Employer is terminated following a Change in Control and during the term of this Agreement. Except as provided by the second sentence of Section 5.01 hereof or the last sentence of Section 8.01 hereof, no amount or benefit shall be payable under this Agreement, unless there shall have been a termination of Executive’s employment with Employer following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment and, except as required by applicable law or as otherwise agreed in writing between Executive and Employer, Executive shall have no rights hereunder to be retained in the employ of Employer.

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4. Compensation Other Than Severance Payments .

4.01 Following a Change in Control and during the term of this Agreement, during any period prior to the establishment of Executive’s Disability (as defined herein), in which Executive is unable to perform Executive’s full-time duties with Employer, due to Executive’s mental or physical infirmity, Employer shall pay Executive’s full salary to Executive, at the rate in effect at the time Executive is first unable to perform his or her duties due to such infirmity. If Executive’s Disability is subsequently established through a good-faith determination of the Board (as provided herein), Employer shall continue to pay Executive’s full salary at such rate, until Executive’s employment is terminated by Employer for Disability in accordance with the terms of this Agreement. Alternatively, if Executive’s Disability is subsequently established by Executive’s becoming eligible for disability benefits provided pursuant to a disability benefit plan of the Employer, Employer shall not be required to pay Executive any salary from such time through the termination of Executive’s employment for Disability, except as provided under the terms of Employer’s long-term disability plan.

4.02 If Executive’s employment shall be terminated for any reason other than the Executive’s Retirement, death or Disability, following a Change in Control and during the term of this Agreement, Employer shall pay Executive’s full salary to Executive through the Date of Termination, at the rate in effect at the time that the Notice of Termination is given, together with all compensation and benefits payable to Executive through the Date of Termination under the terms of any compensation or benefit plan, program or arrangement maintained by Employer during such period.

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5. Severance Payments .

5.01 Subject to Sections 5.03and 5.05 hereof, following a Change in Control and during the term of this Agreement, the Employer, upon the termination of Executive’s employment (i) by Employer Without Cause, or (ii) voluntarily by Executive following the occurrence of an event constituting Good Reason, as defined herein, shall pay Executive the payments described below in this Section 5.01 (the “Severance Payments”). For purposes of the immediately preceding sentence, if a termination of Executive’s employment, either by Employer Without Cause or by Executive for Good Reason, occurs within six (6) months prior to a Change in Control, such termination shall be deemed to have occurred following a Change in Control, and the Date of Termination (as defined herein) shall be deemed to have occurred, on and as of, the date of the occurrence of the Change in Control; thus entitling Executive to the payments contemplated in Section 4.02 hereof and the Severance Payments described below in this Section 5.01.

The Severance Payments are as follows:

(A) Employer shall pay to Executive a lump sum severance payment, in cash, in an amount which is equal to the sum of (i) the higher of two (2) times Executive’s annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based, or two (2) times the average of Executive’s annual base salary for the three (3) years immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based, and (ii) the higher of one (1) times the amount paid to Executive as an annual discretionary bonus in the year preceding the year in which the Date of Termination occurs, or one (1) times the average annual discretionary bonus paid to Executive in the three (3) years preceding that in which the Date of Termination occurs.

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(B) Employer shall pay to Executive a lump-sum amount, in cash, equal to the sum of (i) any annual discretionary bonus which has been allocated or awarded to Executive for a completed fiscal year preceding the Date of Termination, but has not yet been paid (pursuant to Section 4.02 hereof or otherwise), and (ii) a pro rata portion of an annual discretionary bonus for the fiscal year in which the Date of Termination occurs, determined by multiplying Executive’s annual discretionary bonus, awarded or paid for the most-recently-completed fiscal year, by a fraction, the numerator of which shall be the number of full days Executive was employed by Employer during the fiscal year in which Executive’s Date of Termination occurred and the denominator of which shall be three hundred sixty-five (365).

(C) At the election of Executive, exercised by written notice to the Board no later than thirty (30) days following the Date of Termination, Employer shall repurchase all Options for shares in Holding Company or Bank held by Executive (“Options”) that Executive elects to sell to Employer (which Options shall be cancelled upon the making of the payment referred to below) by the payment of a lump-sum amount, in cash, equal to the product of:

(i) that amount which is equal to the excess of (x) the higher of (1) the Current Market Value of Holding Company or Bank Shares (“Shares”) or (2) the highest per-share price for Shares actually paid within six (6) months preceding the Executive’s written notice of election to sell the Option, over (y) the per-share exercise price of each such Option held by Executive, times

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(ii) the number of Shares covered by each such Option.

As used in this subparagraph, the term “Current Market Value” shall mean the Closing Price of such shares on the Date of Termination, or if no shares were traded or bid or ask quotations were published on such date, then on the next preceding date on which such sales transactions or quotations were actually made. The term “Closing Price” shall mean:

(1) if the Shares are listed on a national securities exchange, the NASDAQ National Market, or authorized for trading in any other market or quotation system in which last sale transactions are reported on a contemporary basis, the last reported sales price, regular way, of such security on such exchange or in such quotation system for such day; or

(2) if the Shares are not listed, or authorized for trading in the markets described in (1) above, the last bid quotation in the over-the-counter market on such trading day as reported by the National Association of Securities Dealers, Inc. through NASDAQ, its automated system for reporting quotations, or its successor or such other generally accepted source of publicly reported bid quotations as the Board may reasonably designate; or

(3) if the Shares are not traded in the organized securities markets, the fair market value of the Shares as determined by the Board in good faith.

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(D) For a twelve (12) month period after the Date of Termination, Employer shall arrange to provide Executive with life, disability, accident and health insurance benefits substantially similar to those which Executive is receiving immediately prior to the Notice of Termination (without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by Executive pursuant to this Section 5.01(D) shall be reduced to the extent comparable benefits are actually received by, or made available to, Executive without cost during the twelve (12) month period following the Date of Termination (any such benefits actually received by Executive shall be reported to Employer by Executive).

5.02 The payments and other items provided for in Section 5.01 (other than Section 5.01(D)) hereof shall be made not later than the tenth (10th) day following the Date of Termination or the date of exercise by Executive of any of Executive’s rights hereunder; provided, however, that, if the amounts of such payments cannot be finally determined on or before such day, Employer shall pay to Executive on such day an estimate, as determined in good faith by Employer, of the minimum amount of such payments to which Executive is clearly entitled and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by Employer to Executive, payable on the fifth (5th) business day after demand by Employer (together with interest at the rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this Section, Employer shall provide Executive with a written statement setting forth the manner in which such payments were

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calculated and the basis for such calculations including, without limitation, any opinions or other advice Employer has received from outside counsel, auditors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).

5.03 In the event that any compensation or other payments, paid or deemed paid to, or benefits received or deemed received by, Executive, pursuant to this Agreement or pursuant to other agreements with the Employer (including deferred compensation agreements, salary continuation agreements and retirement plans), result in (i) the imposition of an excise tax under Section 4999 of the Code, as amended from time to time, or under similar state law, or (ii) the acceleration of the reporting of income pursuant to Internal Revenue Code Section 409A, as amended from time to time, or (iii) the imposition of any interest and penalties with respect to said excise tax or acceleration of income referenced in (i) and (ii) hereof, Employer agrees to pay to Executive, or for Executive’s benefit, an additional amount (the “Gross-Up Payment”), such that the net amount of compensation and benefit retained by Executive, after loss of time value of money and the imposition of such interest and penalties, and including any federal, state, and local income taxes or employment taxes, as well as any other taxes interest or penalties, upon the Gross-Up Payment provided for by this Section 5.03, shall be equal to the full amount of compensation or benefits to be received by Executive, had such compensation and benefits not been subject to any such excise tax, acceleration of income, or interest and penalties.

Such Gross-Up Payment shall be made by Employer to Executive, or to the applicable taxing authority on beha