Exhibit 10.4
January 16, 2009
Joseph H. Towell
Yadkin Valley Financial Corporation
209 North Bridge Street
Elkin, North Carolina 28621
Dear Joe,
     Yadkin Valley Financial Corporation (the “Company”) anticipates entering
into a Securities Purchase Agreement (the “Participation Agreement”) with the
United States Department of Treasury (the “Treasury”) that provides, among other
things, for the purchase by the Treasury of securities issued by the Company.
This purchase is anticipated to occur as part of the Company’s participation in
the Treasury’s Troubled Asset Relief Program — Capital Purchase Program (the
“CPP”).
     As a condition to the closing of the investment contemplated by the
Participation Agreement, the Company is required to take certain actions with
respect to compensation arrangements of its senior executive officers. The
Company has determined that you are or may be a senior executive officer for
purposes of the CPP. To comply with the requirements of the CPP, and in
consideration of the benefits that you will receive as a result of the Company’s
participation in the CPP and for other good and valuable consideration, the
sufficiency of which you hereby acknowledge, you agree as follows:

  (1)   No Golden Parachute Payments. You will not be entitled to receive from
the Company any golden parachute payment (as defined below) during any period in
which the Treasury holds an equity or debt position acquired from the Company in
the CPP (the “CPP Covered Period”) (or during the year following any acquisition
of the Company, to the extent required by the CPP Limitations (as defined
below)).     (2)   Recovery of Bonus and Incentive Compensation. You will be
required to and shall return to the Company any bonus or incentive compensation
paid to you by the Company during the CPP Covered Period if such bonus or
incentive compensation is paid to you based on materially inaccurate financial
statements or any other materially inaccurate performance metric criteria.    
(3)   Compensation Program Amendments. Each of the Company’s compensation,
bonus, incentive and other benefit plans, arrangements and agreements ,
including your Employment Security Agreement (all such plans, arrangements and
agreements, the “Benefit Plans”) are hereby amended to the extent necessary to
give effect to provisions (1) and (2) of this letter.

     The Company is also required as a condition to participation in the CPP to
review the Benefit Plans to ensure that the Benefit Plans do not encourage its
senior executive officers to take unnecessary and excessive risks that threaten
the value of the Company. To the extent that the Company determines that the
Benefit Plans must be revised as a result of such review, or determines that the
Benefit Plans must otherwise be revised to comply with Section 111(b) of the
EESA (as defined below) as implemented by any guidance or regulation thereunder
that has been issued and is in effect as of the closing date of the Company’s
issuance of preferred stock and warrants to acquire common stock to the Treasury
pursuant to the CPP (the “CPP Limitations”), you and the Company agree to
negotiate and effect such changes promptly and in good faith.

  (4)   Definitions and Interpretation. This letter shall be interpreted as
follows:

 

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  •   “Senior executive officer” means the Company’s “senior executive officers”
as defined in Q&A 2 of the Interim Final Rule issued by the Treasury at 31 CFR
Part 30, effective on October 20, 2008 (the “Interim Final Rule”).     •  
“Golden parachute payment” shall have the meaning set forth in Q&A 9 of the
Interim Final Rule.     •   The term “Company” includes any entities treated as
a single employer with the Company under Q&A 1 and Q&A 11 of the Interim Final
Rule.     •   This letter is intended to, and shall be interpreted, administered
and construed to comply with Section 111 of the Emergency Economic Stabilization
Act of 2008 (the “EESA”) and the regulations and guidance promulgated thereunder
(and, to the maximum extent consistent with the preceding, to permit operation
of the Benefit Plans in accordance with their terms before giving effect to this
letter).

  (5)   Miscellaneous. To the extent not subject to federal law, this letter
will be governed by and construed in accordance with the laws of the State of
North Carolina. This letter may be executed in two or more counterparts, each of
which will be deemed to be an original. A signature transmitted by facsimile
will be deemed an original signature.     (6)   If the Treasury does not
purchase the securities contemplated by the Participation Agreement, then this
letter shall be of no force or effect. In addition, upon such time as the
Treasury no longer holds securities or debt of the Company acquired under the
CPP, this letter shall be of no further force or effect, except to the extent
required by the CPP Limitations. If you cease to be a senior executive officer
of the Company for purposes of the CPP, you shall be released from the
restrictions and obligations set forth in this letter to the extent permissible
under the CPP. If it is determined that you are not a senior executive officer
of the Company as of the date hereof, this letter shall be of no force or
effect.

     The Company appreciates the concessions you are making and looks forward to
your continued leadership during these financially turbulent times.
[Signature page follows]

 

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            Sincerely,

YADKIN VALLEY FINANCIAL CORPORATION
      By:   /s/ William A. Long       Name:   William A. Long      Title:  
President and Chief Executive Officer     

Intending to be legally bound, I agree with and accept the
foregoing terms on the date set forth below.

     
By:
  /s/ Joseph H. Towell
 
   
Name:
  Joseph H. Towell
Title:
  Chief Credit Officer
Date:
  January 16, 2009