exv10w4





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:




 









 












	 	•	 	“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]





 









 








	 	 	 	 	 
	 	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