EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of February, 2007, by and between Rubicon Financial Insurance Services, Inc., a California corporation (“Rubicon Insurance”), and Xxxx Xxxxxx (“Torneo”).

W I T N E S S E T H:

WHEREAS, Rubicon Insurance is a wholly-owned subsidiary of Rubicon Financial Incorporated (“RBCF”), a publicly traded Delaware corporation with a principal place of business at 00000 Xxx Xxxxxx Xxx., Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000.

WHEREAS, the officers, managers and/or directors of Rubicon Insurance and RBCF are of the opinion that Torneo has education, experience and/or expertise which is of value to Rubicon Insurance and its stockholders, and

WHEREAS, Rubicon Insurance and Torneo desire to enter into this Employment Agreement, pursuant to which Torneo shall be employed by Rubicon Insurance, to set forth the respective rights, duties and obligations of the parties hereto.

NOW THEREFORE, in consideration of the promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which the parties hereto acknowledge, Rubicon Insurance and Torneo agree as follows:

EMPLOYMENT. Rubicon Insurance hereby agrees to employ Torneo and Torneo hereby accepts such employment, upon the terms and conditions hereinafter set forth.

TERM. For purposes of this Agreement, “Term” shall mean the original term (as defined in Section 2.1 below), if Renewal Term is initiated, then “Term” shall mean the renewal term period.

2.1

Original Term: The Term of this Agreement shall commence on February 1, 2007 and expire on January 31, 2008 unless sooner terminated pursuant to the terms and provisions herein stated.

2.2

Renewal: At any time prior to the expiration of the Original Term, as stated above, Rubicon Insurance and Torneo may, by mutual written agreement, extend Torneo’s employment under the terms of this Agreement for such additional periods as they may agree.

COMPENSATION.

3.1

Salary: Rubicon Insurance shall pay Torneo a base salary of Five Thousand Dollars ($5,000) per month during the Original Term of this Agreement. Such salary shall be payable in accordance with Rubicon Insurance’s normal policies but in no event less often than semi-monthly (the “Salary”).

3.2

Stock Options: RBCF shall grant to Torneo Stock Option Certificates to purchase up to 300,000 common shares of RBCF at an exercise price of $2.45 per share. The certificates shall be valid for five (5) years from the date of grant. The Certificates shall vest in accordance with the terms of the non-qualified stock option agreement attached hereto as Addendum C.

3.3

Stock Option Plan/Stock Purchase Plan: Torneo shall also be eligible to participate in RBCF’s Stock Option Plans and Stock Purchase Plans, if any, during the term of employment.

TORNEO BENEFITS.

4.1

General Benefits: Torneo will not participate in either Rubicon Insurance’s or RBCF’s medical insurance plan. However, Torneo shall be entitled to receive or participate in all other benefit plans and programs of Rubicon Insurance and/or RBCF currently existing or hereafter made available to executives or senior management of Rubicon Insurance and/or RBCF, including but not limited to, dental insurance, pension and profit sharing plans, 401(k) plans, incentive savings plans, stock option plans, group life insurance, and other fringe benefits.

4.2

Vacation: Torneo shall be entitled during each twelve (12) month period during the Term of this Agreement to a vacation of two (2) weeks during which time Torneo’s compensation will be paid in full. Unused days of vacation will be compensated in accordance with Rubicon Insurance’s policy as established by Rubicon Insurance from time to time. Torneo may take the vacation periods at any time during the year as long as Torneo schedules time off as to not create hardship on Rubicon Insurance. In addition, Torneo shall have such other days off as shall be determined by Rubicon Insurance and shall be entitled to paid sick leave and paid holidays in accordance with Rubicon Insurance’s policy.

4.3

Life Insurance: Rubicon Insurance shall pay for and maintain a 30-year Term Life Insurance Policy for the Term of this Agreement, including any Renewal Term(s), in the face amount of One Million ($1,000,000) Dollars, insuring the life of Torneo. The proceeds of such insurance shall be payable to Torneo’s estate.

DUTIES/SERVICE

5.1

Position: Torneo is employed as President and a nominated Member of the Board of Directors Rubicon Insurance and shall perform such services and duties as are defined in Addendum A, Job Description, attached hereto, and as are normally associated with such position, subject to the direction, supervision and rules and regulations of Rubicon Insurance.

5.2

Place of Employment: The place of Torneo’s employment and the performance of Torneo’s duties will be at Rubicon Insurance’s corporate headquarters or at such location as agreed upon by Rubicon Insurance and Torneo.

5.3

Extent of Services: Torneo shall at all times and to the best of his ability perform his duties and obligations under this Agreement in a reasonable manner consistent with the interests of Rubicon Insurance. The precise services of Torneo may be extended or curtailed, from time to time at the discretion of Rubicon Insurance, and Torneo agrees to render such different and/or additional services of a similar nature as may be assigned from time to time by Rubicon Insurance.

5.3.1 Except as otherwise agreed by Rubicon Insurance and Torneo in writing, it is expressly understood and agreed that Torneo’s employment is fulltime and of a critical nature to the success of Rubicon Insurance and is therefore exclusive. Torneo may not be employed by other entities or otherwise perform duties and undertakings on behalf of others or for his own interest unless pre-approved by the Board of Directors. Rubicon Insurance acknowledges that Torneo presently, or may in the future, serve on the Board of Directors of other companies and such action shall not be a breach of this section; provided, however, that such companies either: (a) are listed on Addendum B, attached hereto; or (b) do not compete with Rubicon Insurance or interfere with the performance of Torneo’s duties pursuant to this Agreement, as determined in the reasonable judgment of the Board of Directors. Unless otherwise agreed by Rubicon Insurance and Torneo in writing, employment of Torneo at less than full time shall not affect the vesting of the Option Shares pursuant to this Agreement.

5.3.2 Additionally, Rubicon Insurance recognizes that Torneo has, or may have in the future, non-passive equity positions in other companies, which either: (a) are listed on Addendum B attached hereto; or (b) do not compete with Rubicon Insurance in the reasonable judgment of the Board of Directors. Rubicon Insurance recognizes that such equity positions may occasionally require some limited attention from Torneo during normal business hours. However, Torneo agrees that if such time is considered excessive by the Board of Directors, Torneo shall be so advised and noticed by Rubicon Insurance and Torneo shall be required to make appropriate adjustments to ensure his duties and obligations under this Agreement are fulfilled.

TERMINATION. The Term of this Agreement shall end upon its expiration pursuant to Section 2 hereof, provided that this Agreement shall terminate prior to such date: (a) upon Torneo’s resignation, death or permanent disability or incapacity; or (b) by Rubicon Insurance at any time for “Cause” (as defined in Section 6.4 below) or without Cause.

6.1

BY RESIGNATION. If Torneo resigns with “Good Reason” (as defined below), this Agreement shall terminate but, Torneo shall continue to receive, for a one-month period, (i) Torneo’s Salary payable in periodic installments on Rubicon Insurance’s regular paydays, at the rate then in effect, and (ii) Torneo’s Option Shares shall vest only through the end of the current calendar month. For purposes of this Agreement, “Good Reason” shall mean: (i) the assignment to Torneo of duties substantially and materially inconsistent with the position and nature of Torneo’s employment, the substantial and material reduction of the duties of Torneo which is inconsistent with the position and nature of Torneo’s employment, or the change of Torneo’s title indicating a substantial and material change in the position and nature of Torneo’s employment; or (ii) a reduction in compensation and benefits that would substantially diminish the aggregate value of Torneo’s compensation and benefits without Torneo’s written consent. If Torneo resigns without Good Reason, Torneo shall be entitled to receive Torneo’s Salary only through the date of such resignation and Torneo’s Option Shares shall be deemed vested only through the end of the calendar month of such resignation.

6.2

BY REASON OF INCAPACITY OR DISABILITY: If Torneo becomes so incapacitated by reason of accident, illness, or other disability that Torneo is unable to carry on substantially all of the normal duties and obligations of Torneo under this Agreement for a continuous period of thirty (30) days (the “Incapacity Period”), this Agreement shall terminate. Further, Torneo’s Option Shares shall be deemed vested only through the end of the calendar month in which the Incapacity Period is determined. For purposes of the foregoing, Torneo’s permanent disability or incapacity shall be determined in accordance with Rubicon Insurance’s disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by Rubicon Insurance’s Board of Directors in its good faith judgment based upon Torneo’s inability to perform normal and reasonable duties and obligations.

6.3

BY REASON OF DEATH: If Torneo dies during the Term of this Agreement, Rubicon Insurance shall pay to the estate of Torneo any earned Salary only through the date of Torneo’s death. Other death benefits, if any, will be determined in accordance with the terms of Rubicon Insurance’s benefit plans and programs. Further, Torneo’s Option Shares shall be deemed vested only through the end of the calendar month of Torneo’s death.

6.4

FOR CAUSE. If the Term of this Agreement is terminated by Rubicon Insurance for Cause Torneo shall be entitled to receive Torneo’s Salary only through the date of termination and Torneo’s Option Shares shall be deemed vested only through the end of the calendar month of such termination. However, if a dispute arises between Rubicon Insurance and Torneo that is not resolved within sixty (60) days and neither party initiates arbitration proceedings pursuant to Section 11.8, Rubicon Insurance shall have the option to pay Torneo the lump sum of two (2) months base of Torneo’s Salary at the time of termination (the “Severance Payment”) rather than Torneo’s Salary through the date of termination. Such determination to pay the Severance Payment in lieu of Torneo’s Salary shall be made in the reasonable judgment of the Board of Directors. If Rubicon Insurance elects to make a payment to Torneo of the Severance Payment, the parties hereto agree that such payment and the payment provided by Section 6.6 shall be Torneo’s complete and exclusive remedy for such a termination for Cause. For purposes of this Agreement, “Cause” shall mean: (i) any act of dishonesty or fraud with respect to Rubicon Insurance; (ii) the commission by Torneo of a felony, a crime involving moral turpitude or other act causing material harm to Rubicon Insurance’s standing and reputation; (iii) Torneo’s continued material failure to perform Torneo’s duties to Rubicon Insurance after ten (10) days’ written notice thereof to Torneo; or (iv) gross negligence or willful misconduct by Torneo with respect to Rubicon Insurance. Rubicon Insurance shall provide Torneo, within ten (10) days of becoming aware of a “For Cause” breach, written notice, which shall include written documentation, if any, of the “For Cause” breach, as defined above. Upon receipt of the written notice, Torneo shall have ten (10) days to respond to Rubicon Insurance’s notice and attempt to cure or resolve the “For Cause” breach.

6.5

WITHOUT CAUSE. If, during the Term of this Agreement, Rubicon Insurance terminates Torneo’s employment without Cause, Torneo shall be entitled to receive, for a two-month period, Torneo’s Base Salary, payable in periodic installments on Rubicon Insurance’s regular paydays, at the rate then in effect and Torneo’s Option Shares shall be deemed vested only through the end of the calendar month of such termination.

Trade Secrets and Confidentiality:

7.1

Nondisclosure. Without the prior written consent of Rubicon Insurance, Torneo shall not, at any time, either during or after the term of this Agreement, directly or indirectly, divulge or disclose to any person, firm, association, or corporation, or use for Torneo’s own benefit, gain, or otherwise, any customer lists, plans, products, data, results of tests and data, or any other trade secrets or confidential materials or like information (collectively referred to as the “Confidential Information”) of Rubicon Insurance and/or its Affiliates, as hereinafter defined, it being the intent of Rubicon Insurance, with which intent Torneo hereby agrees, to restrict Torneo from disseminating or using any like information that is unpublished or not readily available to the general public.

7.1.1

Definition of Affiliate. For purposes of this Agreement, the term “Affiliate” shall mean any entity, individual, firm, or corporation, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with Rubicon Insurance.

7.2

Return of Property. Upon the termination of this Agreement, Torneo shall deliver to Rubicon Insurance all lists, books, records, data, and other information (including all copies thereof in whatever form or media) of every kind relating to or connected with Rubicon Insurance or its Affiliates and their activities, business and customers.

7.3

Notice of Compelled Disclosure. If, at any time, Torneo becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand, or similar process or otherwise) to disclose any of the Confidential Information, Torneo shall provide Rubicon Insurance with prompt, prior written notice of such requirement so that Rubicon Insurance may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement. In the event that such protective order or other remedy is not obtained, that Rubicon Insurance waives compliance with the provisions hereof, Torneo agrees to furnish only that portion of the Confidential Information which Torneo is advised by written opinion of counsel is legally required and exercise Torneo’s best efforts to obtain assurance that confidential treatment will be accorded such Confidential Information. In any event, Torneo shall not oppose action by Rubicon Insurance to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information.

7.4

Assurance of Compliance. Torneo agrees to represent to Rubicon Insurance, in writing, at any time that Rubicon Insurance so request, that Torneo has complied with the provisions of this section, or any other section of this Agreement.

RETURN OF RUBICON INSURANCE PROPERTY: Torneo agrees that upon any termination of his employment, Torneo shall return to Rubicon Insurance within a reasonable time not to exceed two (2) weeks, any of Rubicon Insurance’s property in his possession or under his control, including but not limited to, computer/office automation equipment, records and names, addresses, and other information with regard to customers or potential customers of Rubicon Insurance with whom Torneo has had contact or done business.

RELATIONSHIP OF PARTIES: The parties intend that this Agreement create an Employee-Employer relationship between the parties.

10.

NOTICES: All notices, required and demands and other communications hereunder must be in writing and shall be deemed to have been duly given when personally delivered or when placed in the United States Mail and forwarded by Registered or Certified Mail, Return Receipt Requested, postage prepaid, or when forwarded via reputable overnight carrier, addressed to the party to whom such notices is being given at the following address:

As to Rubicon Insurance:

Rubicon Financial Insurance Services, Inc.

00000 Xxx Xxxxxx, Xxxxx 000

Xxxxxx, XX 00000

Attn: Chief Operating Officer

As to Torneo:

Xxxx Xxxxxx

00000 Xxx Xxxxxx, Xxxxx 000

Xxxxxx, XX 00000

Address Change: Any party may change the address(es) at which notices to it or him, as the case may be, are to be sent by giving the notice of such change to the other parties in accordance with this Section 10.

11.	MISCELLANEOUS:

11.1

Entire Agreement. This Agreement and the Addendums hereto contain the entire agreement of the parties. This Agreement may not be altered, amended or modified except in writing duly executed by the parties.

11.2

Assignment. Neither party, without the written consent of the other party, can assign this Agreement.

11.3

Binding. This Agreement shall be binding upon and inure to the benefit of the parties, their personal representative, successors and assigns.

11.4

No Waiver. The waiver of the breach of any covenant or condition herein shall in no way operate as a continuing or permanent waiver of the same or similar covenant or condition.

11.5

Severability. If any provision of this Agreement is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way. The parties hereto agree to replace any invalid provision with at valid provision which most closely approximates the intent of the invalid provision.

11.6

Interpretation. This Agreement shall not be construed more strongly against any party hereto regardless of which party may have been more responsible for the preparation of Agreement.

11.7

Governing Law. This Agreement shall be governed by and construed under the laws of the State of California, without reference to the choice of law principles thereof.

11.8

Arbitration.

11.8.1

Any controversy, dispute or claim of whatever nature in any way arising out of or relating to Torneo’s employment with Rubicon Insurance, including, without limitation (except as expressly excluded below in Section 11.8.2) any claims or disputes by Torneo against Rubicon Insurance, or by Rubicon Insurance against Torneo, concerning, arising out of or relating to the separation of that employment; any other adverse personnel action by Rubicon Insurance; any federal, state or local law, statute or regulation prohibiting employment discrimination or harassment; any public policy; any Rubicon Insurance disciplinary action; any Rubicon Insurance decision regarding a Rubicon Insurance policy or practice, including but not limited to Torneo’s compensation or other benefits; and any other claim for personal, emotional, physical or economic injury (individually or collectively, “Covered Claims”) shall be resolved, at the request of any party to this Agreement, by final and binding arbitration in Santa Ana, California before Judicial Arbitration Mediation Services (“JAMS”) in accordance with JAMS’ then-current policies and procedures for arbitration of employment disputes.

11.8.2

The only claims or disputes excluded from binding arbitration under this Agreement are the following: any claim by Torneo for workers’ compensation benefits or for benefits under a Rubicon Insurance plan that provides its own arbitration procedure; and any claim by either party for equitable relief, including but not limited to, a temporary restraining order, preliminary injunction or permanent injunction against the other party.

11.8.3

This agreement to submit all Covered Claims to binding arbitration in no way alters the exclusivity of Torneo’s remedy under Section 6.5 in the event of any termination without Cause or the exclusivity of Torneo’s remedy under Section 6.4 in the event of any termination with Cause, and does not require Rubicon Insurance to provide Torneo with any type of progressive discipline.

11.9

Titles. Titles to the sections of this Agreement are solely for the convenience of the parties and shall not be used to explain, modify, simplify, or aid in the interpretation of the provisions of this Agreement.

11.10

Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but together which shall constitute one and the same instrument.

(BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK)

SIGNATURE PAGE TO FOLLOW

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.

Rubicon Insurance:

Rubicon Financial Insurance Services, Inc.

a California corporation

By:/s/ Xxxxxxx Xxxxxxxx

Xxxxxxx Xxxxxxxx, COO

RBCF:

Only as applies to RBCF

Rubicon Financial Incorporated

a Delaware corporation

By:/s/ Xxxxxx Xxxxxxxxxx

Xxxxxx Xxxxxxxxxx, Xx., CEO

Torneo:

By:/s/ Xxxx Xxxxxx

Xxxx Xxxxxx

ADDENDUM A

Job Description for Xxxx Xxxxxx

Job Title:

President

Department:

Executive

Reports To:

Board of Directors

SUMMARY

The President is responsible for planning, organizing, staffing, and managing Rubicon Insurance’s daily operations. The President develops the formal requirements, performance specifications, and metrics for assessing the operational effectiveness of these processes and, as directed by the COO develops strategies for sustaining this effectiveness in line with corporate goals.

Assists in preparing an annual business plan and budget for Rubicon Insurance’s operations and works in cooperation with the other executives for the orderly and efficient operation of Rubicon Insurance’s business

Aids COO in formulating and administering Rubicon Insurance policies and performs the following duties personally or through subordinate managers/employees.

ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be assigned.

•

Manage the day to day operations of Rubicon Financial Insurance Services, Inc.(RFIS)

•

Evaluate potential agents and administration personnel for RFIS

•

Hiring, firing and training of Agents and administrative personnel for RFIS

•

Negotiate compensation of Agents, Independent Agents and salaried employees

•

Oversee finances of RFIS, manage the Trust account and the Operating accounts of RFIS

•

Develop the growth strategies of the Property and Casualty, Life, Health, and Commercial departments of RFIS

•

Establish a web presence for RFIS

•

Assist parent company in the evaluation and negotiation of potential acquisition targets

•

Ensure compliance with the Department of Insurance and other regulatory agencies

•

Responsible for the evaluation and acquisition of an Agency Management System

•

Assist the COO with Payroll, Workers Compensation and E&O Insurance

•

Act as a liaison during the acquisition of Insurance products by parent company and subsidiary personnel

•

Integral member of the Board of Directors of RFIS

•

Assist in determining stock option distribution for key employees of RFIS

ADDENDUM B

Approved Non-Rubicon Financial Insurance Services, Inc.

Business Activity Exemptions

Description of Business Activity

Torneo has been developing a website, xxx.xxxxxx0xxxx.xxx, to be used to allow insurance inquiries to be directed to Rubicon Insurance. During the term of Torneo’s employment hereunder, Torneo has agreed to spend 100% of his business time and attention to Rubicon Insurance and will not actively continue development of the website without the prior written approval of Rubicon Insurance’s board of directors.

B-1

ADDENDUM C

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (“Agreement”) is entered into as of February 1, 2007, by and between Rubicon Financial Incorporated, a Delaware corporation (“Corporation”), and Xxxx Xxxxxx (“Optionee”).

R E C I T A L S

A. On February 1, 2007, the Board of Directors of the Corporation adopted the 2007 Stock Option Plan (the “Plan”).

B. On February 1, 2007, Rubicon Financial Insurance Services, Inc., a wholly-owned subsidiary of the Corporation, entered into an employment agreement with Optionee.

C. Pursuant to the Plan and in accordance with the terms of Optionee’s employment agreement, on February 1, 2007, the Board of Directors of the Corporation acting as the Plan Committee (“Committee”) authorized granting to Optionee options to purchase shares of the common stock, $0.001 par value, of the Corporation (“Shares”) for the term and subject to the terms and conditions hereinafter set forth.

A G R E E M E N T

It is hereby agreed as follows:

1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context otherwise clearly requires, terms with initial capital letters used herein shall have the meanings assigned to such terms in the Plan.

2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee, options (“Options”) to purchase all or any part of 300,000 Shares, upon and subject to the terms and conditions of the Plan, which is incorporated in full herein by this reference, and upon the other terms and conditions set forth herein.

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3. OPTION PERIOD. The Options shall be exercisable at any time during the period commencing on the following dates (subject to the provisions of Section 18) and expiring on the date five (5) years from the date of grant, unless earlier terminated pursuant to Section 7:

Vesting Terms:

The Options granted hereunder shall vest over a maximum of a three (3) year period from the Grant Date based upon Rubicon Financial Insurance Services, Inc.’s (“Rubicon Insurance”) “EBITDA” (as defined below) at a rate of one (1) Option share for every $0.50 of EBITDA earned by Rubicon Insurance. (For example, if Rubicon Insurance has an EBITDA of $100,000 for the fiscal year ended December 31, 2007, 200,000 Options shall vest and be immediately exercisable by the Optionee. The remaining 100,000 Options shall be subject to vesting over the remaining two (2) year period.)

The number of Options vested for each fiscal year ending on December 31 shall be determined within ten (10) days of the completion of the annual independent audit of the Corporation on a consolidated basis. Any Options remaining unvested at the expiration of three (3) years from the Grant Date shall immediately expire.

Definition of EBITDA. The term “EBITDA” as used herein, shall mean Rubicon Insurance’s net operating profits before taxes, interest, depreciation and amortization. EBITDA shall be determined and certified by the independent public accountants regularly retained by the Corporation in accordance with generally accepted accounting principles and the determination of such independent accountants shall be final, binding and conclusive on the parties hereto. In making such determination, all gains or losses realized in the sale or other distribution of capital assets shall be excluded. Furthermore, any payment of certain indirect corporate intercompany expense items shall also be excluded.

Vesting Upon Termination of Employment:

If Optionee’s relationship with the Corporation ends as a result of Optionee’s termination, resignation, incapacitation or death, as such terms are defined in Optionee’s employment agreement with Rubicon Financial Insurance Services, Inc. (“Termination Event”), the Options shall vest only through the end of the calendar month in which a Termination Event occurred. Upon the occurrence of a Termination Event, EBITDA shall be determined by the Corporation’s chief financial officer, within thirty (30) business days, in accordance with generally accepted accounting principles and the determination of the chief financial officer shall be final, binding and conclusive on the parties hereto.

C-2

4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by giving written notice to the Corporation of the election to purchase and of the number of Shares Optionee elects to purchase, such notice to be accompanied by such other executed instruments or documents as may be required by the Committee pursuant to this Agreement, and unless otherwise directed by the Committee, Optionee shall at the time of such exercise tender the purchase price of the Shares he has elected to purchase. An Optionee may purchase less than the total number of Shares for which the Option is exercisable, provided that a partial exercise of an Option may not be for less than One Hundred (100) Shares. If Optionee shall not purchase all of the Shares which he is entitled to purchase under the Options, his right to purchase the remaining unpurchased Shares shall continue until expiration of the Options. The Options shall be exercisable with respect of whole Shares only, and fractional Share interests shall be disregarded.

5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each Share which Optionee is entitled to purchase under the Options shall be $2.45 per Share.

PAYMENT OF PURCHASE PRICE.

6.1 Cash Exercise. At the time of Optionee’s notice of exercise of the Options, Optionee shall tender in cash or by certified or bank cashier’s check payable to the Corporation, the purchase price for all Shares then being purchased.

6.2 Stock Exercise. The Board of Directors of the Corporation may, in its sole discretion, permit payment of the purchase price in whole or in part with Shares of the Corporation’s common stock. If the Optionee is so permitted, and the Optionee elects to make payment with Shares of the Corporation’s common stock, the Optionee shall deliver to the Corporation certificates representing the number of Shares of common stock in payment for new Shares, duly endorsed for transfer to the Corporation, together with any written representations relating to title, liens and encumbrances, securities laws, rules and regulatory compliance, or other matters, reasonably requested by the Board of Directors of the Corporation. The value of Shares so tendered shall be their Fair Market Value Per Share on the date of the Optionee’s notice of exercise.

C-3

6.3 Cashless Exercise. The Board of Directors of the Corporation may, in its sole discretion, permit the Optionee to exercise on a cashless exercise. If the Optionee is so permitted, and the Optionee elects to make payment on a cashless basis, the Optionee shall deliver to the Corporation, during normal business hours on any business day during the Exercise Period by the presentation and surrender of this Option to the Corporation at its principal office along with a duly executed Notice of Exercise specifying the number of Options to be applied to such exercise. The number of Shares to be delivered upon exercise of this Option pursuant to this Section 6.3 shall equal the value of this Option (or the portion thereof being canceled) computed as of the date of delivery of this Option to the Corporation using the following formula:

X =

Y(A-B)
A

Where:

	X = the number of shares of Common Stock to be issued to Optionee under this Section 6.3;
	Y = the number of Shares identified in the Notice of Exercise as being applied to the subject exercise;
	A = the Fair Market Value Per Share on such date; and

B = the Exercise Price

C-4

6.4 Same-Day Sale Exercise. The Board of Directors of the Corporation may in its sole discretion, if established by the Corporation and permitted under applicable law (including the financial accounting rules associated with avoiding additional financial expense through the method of exercise), permit the Optionee to exercise through a “same-day sale” commitment from Optionee and a broker-dealer selected by the Corporation whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased sufficient to pay for the total Exercise Price for the Shares being exercised and whereby the broker-dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price for the Shares being exercised directly to the Corporation plus the applicable Federal, state and local income taxes required to be withheld by the Corporation by reason of such exercise.

7. EFFECT OF TERMINATION OF RELATIONSHIP OR DEATH. If Optionee’s relationship with the Corporation as an employee of the Corporation or one of its subsidiaries terminates (whether voluntarily or involuntarily), or if optionee dies, all options which have previously vested shall expire six (6) months thereafter. All unvested options shall laps and automatically expire. During such six (6) month period (or such shorter period prior to the expiration of the Option by its own terms), such Options may be exercised by the Optionee, his executor or administrator or the person or persons to whom the Option is transferred by will or the applicable laws of descent and distribution, as the case may be, but only to the extent such Options were exercisable on the date Optionee ceased to have a relationship with the Corporation as a director or died.

8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be transferable, either voluntarily or by operation of law, otherwise than by will or the laws of descent and distribution and shall be exercisable during the Optionee’s lifetime only by Optionee.

C-5

9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The Shares acquired pursuant to the exercise of Options shall be subject to the restrictions set forth in Exhibit “A” attached hereto and incorporated herein as if fully set forth.

10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the term “Adjustment Event” means an event pursuant to which the outstanding Shares of the Corporation are increased, decreased or changed into, or exchanged for a different number or kind of shares or securities, without receipt of consideration by the Corporation, through reorganization, merger, recapitalization, reclassification, stock split, reverse stock split, stock dividend, stock consolidation or otherwise. Upon the occurrence of an Adjustment Event, (i) appropriate and proportionate adjustments shall be made to the number and kind and exercise price for the shares subject to the Options, and (ii) appropriate amendments to this Agreement shall be executed by the Corporation and Optionee if the Committee determines that such an amendment is necessary or desirable to reflect such adjustments. If determined by the Committee to be appropriate, in the event of an Adjustment Event which involves the substitution of securities of a corporation other than the Corporation, the Committee shall make arrangements for the assumptions by such other corporation of the Options. Notwithstanding the foregoing, any such adjustment to the Options shall be made without change in the total exercise price applicable to the unexercised portion of the Options, but with an appropriate adjustment to the number of shares, kind of shares and exercise price for each share subject to the Options. The determination by the Committee as to what adjustments, amendments or arrangements shall be made pursuant to this Section 10, and the extent thereof, shall be final and conclusive. No fractional Shares shall be issued on account of any such adjustment or arrangement.

C-6

11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing contained in this Agreement shall obligate the Corporation to employ or have another relationship with Optionee for any period or interfere in any way with the right of the Corporation to reduce Optionee’s compensation or to terminate the employment of or relationship with Optionee at any time.

12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed granted, sometimes referred to herein as the “date of grant,” shall be February 1, 2007.

13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to the privileges of stock ownership as to any Shares not actually issued and delivered to Optionee. No Shares shall be purchased upon the exercise of any Options unless and until, in the opinion of the Corporation’s counsel, any then applicable requirements of any laws, or governmental or regulatory agencies having jurisdiction, and of any exchanges upon which the stock of the Corporation may be listed shall have been fully complied with.

14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently endeavor to comply with all applicable securities laws before any stock is issued pursuant to the Options. Without limiting the generality of the foregoing, the Corporation may require from the Optionee such investment representation or such agreement, if any, as counsel for the Corporation may consider necessary in order to comply with the Securities Act of 1933 as then in effect, and may require that the Optionee agree that any sale of the Shares will be made only in such manner as is permitted by the Committee. The Committee may in its discretion cause the Shares underlying the Options to be registered under the Securities Act of 1933 as amended by filing a Form S-8 Registration Statement covering the Options and the Shares underlying the Options. Optionee shall take any action reasonably requested by the Corporation in connection with registration or qualification of the Shares under federal or state securities laws.

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15. INTENDED TREATMENT AS NON-QUALIFIED STOCK OPTIONS. The Options granted herein are intended to be non-qualified stock options described in U.S. Treasury Regulation (“Treas. Reg.”) ?1.83-7 to which Sections 421 and 422A of the Internal Revenue Code of 1986, as amended from time to time (“Code”) do not apply, and shall be construed to implement that intent. If all or any part of the Options shall not be described in Treas. Reg. ?1.83-7 or be subject to Sections 421 and 422A of the Code, the Options shall nevertheless be valid and carried into effect.

16. PLAN CONTROLS. The Options shall be subject to and governed by the provisions of the Plan. All determinations and interpretations of the Plan made by the Committee shall be final and conclusive.

17. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation’s counsel, all certificates issued to represent Shares purchased upon exercise of the Options shall bear such appropriate legend conditions as counsel for the Corporation shall require.

18. CONDITIONS TO OPTIONS/COMPLIANCE WITH APPLICABLE LAWS. THE CORPORATION’S OBLIGATION TO ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS EXPRESSLY CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES UNDER ANY STATE AND/OR FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY GOVERNMENTAL REGULATORY BODY, OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS OR OTHER REPRESENTATIONS AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION FROM ANY SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE COMMITTEE SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH REQUIRED REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND AGREEMENTS THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i) IS NOT PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED UPON THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE COMMITTEE OR A REFERENCE THERETO.

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19.

MISCELLANEOUS.

19.1 Binding Effect. This Agreement shall bind and inure to the benefit of the successors, assigns, transferees, agents, personal representatives, heirs and legatees of the respective parties.

19.2 Further Acts. Each party agrees to perform any further acts and execute and deliver any documents which may be necessary to carry out the provisions of this Agreement.

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19.3 Amendment. This Agreement may be amended at any time by the written agreement of the Corporation and the Optionee.

19.4 Syntax. Throughout this Agreement, whenever the context so requires, the singular shall include the plural, and the masculine gender shall include the feminine and neuter genders. The headings and captions of the various Sections hereof are for convenience only and they shall not limit, expand or otherwise affect the construction or interpretation of this Agreement.

19.5 Choice of Law. The parties hereby agree that this Agreement has been executed and delivered in the State of California and shall be construed, enforced and governed by the laws thereof. This Agreement is in all respects intended by each party hereto to be deemed and construed to have been jointly prepared by the parties and the parties hereby expressly agree that any uncertainty or ambiguity existing herein shall not be interpreted against either of them.

19.6 Severability. In the event that any provision of this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement.

19.7 Notices. All notices and demands between the parties hereto shall be in writing and shall be served either by registered or certified mail, and such notices or demands shall be deemed given and made forty-eight (48) hours after the deposit thereof in the United States mail, postage prepaid, addressed to the party to whom such notice or demand is to be given or made, and the issuance of the registered receipt therefor. If served by telegraph, such notice or demand shall be deemed given and made at the time the telegraph agency shall confirm to the sender, delivery thereof to the addressee. All notices and demands to Optionee or the Corporation may be given to them at the following addresses:

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If to Optionee:

Xxxx Xxxxxx

00000 Xxx Xxxxxx Xxx.

Xxxxx 000

Xxxxxx, Xxxxxxxxxx 00000

If to Corporation:

Rubicon Financial Incorporated

00000 Xxx Xxxxxx Xxx.

Xxxxx 000

Xxxxxx, Xxxxxxxxxx 00000

Such parties may designate in writing from time to time such other place or places that such notices and demands may be given.

19.8 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, this Agreement supersedes all prior and contemporaneous agreements and understandings of the parties, and there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof except as set forth or referred to herein. No supplement, modification or waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

19.9 Attorneys’ Fees. In the event that any party to this Agreement institutes any action or proceeding, including, but not limited to, litigation or arbitration, to preserve, to protect or to enforce any right or benefit created by or granted under this Agreement, the prevailing party in each respective such action or proceeding shall be entitled, in addition to any and all other relief granted by a court or other tribunal or body, as may be appropriate, to an award in such action or proceeding of that sum of money which represents the attorneys’ fees reasonably incurred by the prevailing party therein in filing or otherwise instituting and in prosecuting or otherwise pursuing or defending such action or proceeding,

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and, additionally, the attorneys’ fees reasonably incurred by such prevailing party in negotiating any and all matters underlying such action or proceeding and in preparation for instituting or defending such action or proceeding.

(BALANCE OF PAGE INTENTIONALLY LEFT BLANK)

SIGNATURE PAGE TO FOLLOW

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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first set forth above.

“CORPORATION”

Rubicon Financial Incorporated

a Delaware corporation

By:/s/ Xxxxxx Xxxxxxxxxx

Xxxxxx Xxxxxxxxxx, Xx., Chief Executive Officer

“OPTIONEE”

/s/ Xxxx Xxxxxx

Xxxx Xxxxxx

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EXHIBIT A

RESTRICTIONS ON TRANSFERABILITY OF SHARES

The certificates evidencing Shares acquired upon exercise of the Options shall bear the following restrictive legend, unless and until such Shares have been registered in accordance with the Securities and Exchange Act of 1933, as amended (the “Act”):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE CORPORATION RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THE SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE CORPORATION, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

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EMPLOYMENT AGREEMENT

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