Separatin Settlement And Non-competition Agreement

EXHIBIT 10.9


SEPARATION, SETTLEMENT AND NON-COMPETITION AGREEMENT


This SEPARATION, SETTLEMENT AND NON-COMPETITION AGREEMENT ("Non-Compete Agreement") is entered into between KENT W. SANFORD (hereinafter "Employee") and APPALACHIAN COMMUNITY BANK and APPALACHIAN BANCSHARES, INC. (Appalachian Community Bank and Appalachian Bancshares, Inc. are hereinafter collectively referred to as the "Company"), as follows:


WITNESSETH:


WHEREAS, Employee has been employed by Appalachian Community Bank as its Executive Vice President and is a member of the Board of Directors of Appalachian Community Bank;


WHEREAS, Employee has been employed by Appalachian Bancshares, Inc. as its Executive Vice President and is a member of the Board of Directors of Appalachian Bancshares, Inc.;


WHEREAS, the parties hereto wish to enter into this Non-Compete Agreement for the purposes of providing for certain limited restraints on possible competition by the Employee with the Company, to provide for an orderly termination of their employment relationship and of the Employee's positions on the respective Boards of Directors of Appalachian Community Bank and Appalachian Bancshares, Inc., and to provide for a full and final settlement of any and all claims arising out of or pertaining to those relationships, including their termination, whether past, present or future, including claims for attorney's fees and expenses;


NOW, THEREFORE, in consideration of the mutual promises and undertakings contained herein, and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do agree as follows:


1. Separation From Employment. The Employee's employment with the Company terminated effective January 11, 2002 (hereinafter, the "Separation Date"). On and after the Separation Date, the employment relationship that existed between Employee and the Company terminated in all respects.


2. Resignation from Board of Directors. Employee hereby resigns from the Boards of Directors of Appalachian Community Bank and Appalachian Bancshares, Inc., and from all committees thereof, effective January 11, 2002.


3. Post-Separation Non-Compete Payments.


(a) Employee, upon his continuing compliance with the terms and
conditions of this Non-Compete Agreement, shall receive
payments from the Company in the


amount of $165,000 payable as follows: (1) $23,000 payable
upon execution of this Non-Compete Agreement; (2) twenty-three
(23) payments of $4,000, payable on the 15th of each month,
beginning on February 15, 2002; and (3) a payment of $50,000,
payable on January 15, 2004. In addition, Company shall pay
Employee $21,363.52 upon execution of this Non-Compete
Agreement, which payment represents payment for all accrued
leave and vacation days owed by Company to Employee. The
Company will withhold all applicable taxes and statutory
deductions from said payments.


(b) Company will issue Employee a COBRA notice, and Company agrees
to reimburse Employee for the monthly COBRA payments in order
to continue Employee's present level of medical insurance
coverage until July 15, 2003 or until Employee becomes covered
under a different health insurance plan, whichever occurs
sooner. Employee agrees to immediately provide the Company
with notice should he become covered under a health insurance
plan on or before July 15, 2003.


(c) Appalachian Bancshares, Inc. agrees to fully vest all of
Employee's unexercised stock options in Appalachian
Bancshares, Inc. and Employee and Appalachian Bancshares, Inc.
hereby agree that stock options for 86,000 shares of
Appalachian Bancshares, Inc. common stock remain unexercised
as of the date Employee executes this Non-Compete Agreement.
Company further agrees that, in the event Employee chooses to
exercise his stock options and Employee requires a loan to
exercise such stock options, Company will lend sufficient
funds for Employee to exercise his stock options at its prime
lending rate (as determined and announced from time to time by
the Company), minus .25%, such loan rate to float, and be
determined, as of each anniversary date of the loan; provided,
however, that Employee shall execute all necessary loan
documentation and provide adequate security (all as determined
in the discretion of the Company) for such loan. Company and
Employee further agree that, if the loan is secured by
Appalachian Bancshares, Inc. stock, the applicable
loan-to-value ratio will be determined by the book value of
the stock, not the market value thereof, subject to compliance
with applicable regulatory guidelines, and, further, that the
terms and provisions of the loan will be subject to all
applicable laws and regulations.


4. Additional Consideration. The Company agrees to transfer all title and interest to the 2000 Chrysler Town & Country van now being used by Employee ("Van") to Employee, in an "as is" condition, by January 15, 2002 (the "Transfer Date"). Employee will be solely responsible for all insurance coverage, tag, taxes, maintenance and any other expenses related to the Van on and after the Transfer Date.


5. Non-Competition. Employee expressly covenants and agrees that, for a period of two (2) years following the execution of this Non-Compete Agreement, he will not, directly or indirectly, seek, obtain or accept a "Competitive Position" in the "Restricted Territory" with a


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"Competitor" of the Company (as such terms are defined below), if the Company or its successors or assigns are also then still engaged in the "Company's Business." For purposes of this Non-Compete Agreement, a "Competitor" of the Company means any business, individual, partnership, joint venture, association, firm, corporation or other entity engaged, wholly or partly, in the Company's Business; the "Company's Business" means the business of banking, as such business is contemplated and permitted for "financial institutions" (as such term is defined in Section 7-1-4(21) of the Official Code of Georgia Annotated) un ...