EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the
11 day of May, 2007, by and between Rubicon Real Estate and Mortgages, Inc., a
California corporation (“Rubicon Mortgage”), and Joel Newman (“Newman”).

 

W I T N E S S E T H:

 

WHEREAS, Rubicon Mortgage is a wholly-owned subsidiary of Rubicon Financial
Incorporated (“RBCF”), a publicly traded Delaware corporation with a principal
place of business at 19200 Von Karman Ave., Suite 350, Irvine, California 92612.

 

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

 

WHEREAS, Rubicon Mortgage and Newman desire to enter into this Employment
Agreement, pursuant to which Newman shall be employed by Rubicon Mortgage, 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 Mortgage and Newman agree as follows:

 

 

1.

EMPLOYMENT: Rubicon Mortgage hereby agrees to employ Newman and Newman hereby
accepts such employment, upon the terms and conditions hereinafter set forth.

 

 

2.

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 May _11, 2007 and
expire on April 30, 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 Mortgage and Newman may, by mutual written agreement, extend
Newman’s employment under the terms of this Agreement for such additional
periods as they may agree.

 

 

3.

COMPENSATION:

 

 

3.1

Salary. Rubicon Mortgage shall pay Newman a base salary of Ten Thousand Dollars
($10,000) per month during the Original Term of this Agreement. Such salary
shall be payable in accordance with Rubicon Mortgage’s normal policies but in no
event less often than semi-monthly (the “Salary”).

 

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3.2

Commissions. As additional compensation for Newman’s services, Rubicon Mortgage
shall pay Newman a 50% commission based upon the net fee received by Rubicon
Mortgage resulting solely from Newman’s efforts relating to services offered by
Rubicon Mortgage to potential customers; mainly resulting from loan fees and
real estate commissions. Rubicon Mortgage agrees to pay these commissions to
Newman on a monthly basis after Rubicon Mortgage’s receipt of payment from the
end customer or other service organization for the duration of the Term of this
Agreement. Rubicon Mortgage shall withhold all applicable Federal, state or
local taxes from the commission amount to be paid to Newman.

Commissions owed upon termination will be honored and will be paid

Within the scheduled monthly pay periods.

 

 

3.3

Stock Options. RBCF shall grant to Newman Stock Options to purchase up to
200,000 common shares of RBCF at an exercise price of $1.00 per share. The
Options shall be valid for five (5) years from the date of grant. In addition,
the Options shall vest in accordance with the terms of the non-qualified stock
option agreement attached hereto as Addendum C.

 

 

3.4

Stock Option Plan/Stock Purchase Plan. Newman shall also be eligible to
participate in RBCF’s Stock Option Plans and Stock Purchase Plans, if any,
during the Term of this Agreement.

 

 

4.

NEWMAN BENEFITS:

 

 

4.1

General Benefits. Newman shall be entitled to receive or participate in all
benefit plans and programs of Rubicon Mortgage and/or RBCF currently existing or
hereafter made available to executives or senior management of Rubicon Mortgage
and/or RBCF, including but not limited to, medical insurance, 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. Newman 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
Newman’s compensation will be paid in full. Unused days of vacation will be
compensated in accordance with Rubicon Mortgage’s policy as established by
Rubicon Mortgage from time to time. Newman may take the vacation periods at any
time during the year as long as Newman schedules time off as to not create
hardship on Rubicon Mortgage. In addition, Newman shall have such other days off
as shall be determined by Rubicon Mortgage and shall be entitled to paid sick
leave and paid holidays in accordance with Rubicon Mortgage’s policy. 

 

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5.

DUTIES/SERVICE:

 

 

5.1

Position. Newman is employed as President and a nominated Member of the Board of
Directors Rubicon Mortgage 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 Mortgage.

 

 

5.2

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

 

 

5.3

Extent of Services. Newman 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 Mortgage. The precise services of
Newman may be extended or curtailed, from time to time at the discretion of
Rubicon Mortgage, and Newman agrees to render such different and/or additional
services of a similar nature as may be assigned from time to time by Rubicon
Mortgage.

 

5.3.1      Except as otherwise agreed by Rubicon Mortgage and Newman in writing,
it is expressly understood and agreed that Newman’s employment is fulltime and
of a critical nature to the success of Rubicon Mortgage and is therefore
exclusive. Newman 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 Mortgage acknowledges that
Newman 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 Mortgage or interfere with the
performance of Newman’s duties pursuant to this Agreement, as determined in the
reasonable judgment of the Board of Directors. Unless otherwise agreed by
Rubicon Mortgage and Newman in writing, employment of Newman at less than full
time shall not affect the vesting of the Option Shares pursuant to this
Agreement.

 

5.3.2      Additionally, Rubicon Mortgage recognizes that Newman 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 Mortgage in the reasonable judgment of the

 

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Board of Directors. Rubicon Mortgage recognizes that such equity positions may
occasionally require some limited attention from Newman during normal business
hours. However, Newman agrees that if such time is considered excessive by the
Board of Directors, Newman shall be so advised and noticed by Rubicon Mortgage
and Newman shall be required to make appropriate adjustments to ensure his
duties and obligations under this Agreement are fulfilled.

 

 

5.4

Licenses and Registrations. During the term of this Agreement, Newman shall
maintain in good standing all required licenses and registrations required for
the proper performance of his duties and functions.

 

 

6.

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 Newman’s resignation, death or permanent disability or
incapacity; or (b) by Rubicon Mortgage at any time for “Cause” (as defined in
Section 6.4 below) or without Cause.

 

 

6.1

By Resignation. If Newman resigns with “Good Reason” (as defined below), this
Agreement shall terminate but, Newman shall continue to receive, for a one-month
period, (i) Newman’s Salary payable in periodic installments on Rubicon
Mortgage’s regular paydays, at the rate then in effect, and (ii) Newman’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
Newman of duties substantially and materially inconsistent with the position and
nature of Newman’s employment, the substantial and material reduction of the
duties of Newman which is inconsistent with the position and nature of Newman’s
employment, or the change of Newman’s title indicating a substantial and
material change in the position and nature of Newman’s employment; or (ii) a
reduction in compensation and benefits that would substantially diminish the
aggregate value of Newman’s compensation and benefits without Newman’s written
consent. If Newman resigns without Good Reason, Newman shall be entitled to
receive Newman’s Salary only through the date of such resignation and Newman’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 Newman becomes so incapacitated by
reason of accident, illness, or other disability that Newman is unable to carry
on substantially all of the normal duties

 

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and obligations of Newman under this Agreement for a continuous period of thirty
(30) days (the “Incapacity Period”), this Agreement shall terminate. Further,
Newman’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, Newman’s permanent disability or incapacity shall be determined in
accordance with Rubicon Mortgage’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 Mortgage’s Board of
Directors in its good faith judgment based upon Newman’s inability to perform
normal and reasonable duties and obligations.

 

 

6.3

By Reason of Death. If Newman dies during the Term of this Agreement, Rubicon
Mortgage shall pay to the estate of Newman any earned Salary only through the
date of Newman’s death. Other death benefits, if any, will be determined in
accordance with the terms of Rubicon Mortgage’s benefit plans and programs.
Further, Newman’s Option Shares shall be deemed vested only through the end of
the calendar month of Newman’s death.

 

 

6.4

For Cause. If the Term of this Agreement is terminated by Rubicon Mortgage for
Cause Newman shall be entitled to receive Newman’s Salary only through the date
of termination and Newman’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 Mortgage and Newman that is not resolved within sixty (60) days
and neither party initiates arbitration proceedings pursuant to Section 14.8,
Rubicon Mortgage shall have the option to pay Newman the lump sum of two (2)
months base of Newman’s Salary at the time of termination (the “Severance
Payment”) rather than Newman’s Salary through the date of termination. Such
determination to pay the Severance Payment in lieu of Newman’s Salary shall be
made in the reasonable judgment of the Board of Directors. If Rubicon Mortgage
elects to make a payment to Newman of the Severance Payment, the parties hereto
agree that such payment shall be Newman’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 Mortgage; (ii) the
commission by Newman of a felony, a crime involving moral turpitude or other act
causing material harm to Rubicon Mortgage’s standing and reputation; (iii)
Newman’s continued material failure to perform Newman’s duties to Rubicon
Mortgage after ten (10) days’ written notice thereof to Newman; (iv) any
“back-dooring” set forth in Section 6.6 below; or (v) gross negligence or
willful misconduct by Newman with respect to Rubicon Mortgage. Rubicon Mortgage
shall provide Newman, within

 

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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, Newman shall have ten (10)
days to respond to Rubicon Mortgage’s notice and attempt to cure or resolve the
“For Cause” breach.

 

 

6.5

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

Newman will be entitled to access his clientele he brought with him from his
previous employer.

 

 

6.6

Back-Dooring. Newman hereby acknowledges and agrees that all loans and other
potential transactions or contacts established with potential customers of
Rubicon Mortgage during Newman’s employment hereby are assumed to be the result
of Rubicon Mortgage’s lead system. Further, leads Newman establishes through any
sort of “call-in” or referral from Rubicon Mortgage, RBCF or their respective
Affiliates, including leads from supplier’s, vendors or associates of Rubicon
Mortgage, RBCF or their respective Affiliates, would be considered a Rubicon
Mortgage lead. Newman shall not take, refer or in any way transfer a Rubicon
Mortgage lead or in any way personally profit from a Rubicon Mortgage lead,
other than as set forth in this Agreement. Any violation of this provision shall
be grounds for immediate termination For Cause and may be considered
embezzlement by law.

Commissions owed in the pipeline from the previous employer will not be a breach
of this agreement.

 

 

7.

Trade Secrets and Confidentiality:

 

 

7.1

Nondisclosure. Without the prior written consent of Rubicon Mortgage, Newman
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 Newman’s own benefit, gain, or otherwise, any customer
lists, plans, products, data, sales leads and related data, or any other trade
secrets or confidential materials or like information (collectively referred to
as the “Confidential Information”) of Rubicon Mortgage and/or its Affiliates, as
hereinafter defined, it being the intent of Rubicon Mortgage, with which intent
Newman hereby agrees, to restrict Newman from disseminating or using any like
information that is unpublished or not readily available to the general public.

 

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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 Mortgage.

 

 

7.2

Return of Property. Upon the termination of this Agreement, Newman shall deliver
to Rubicon Mortgage 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 Mortgage or its Affiliates and their activities,
business and customers.

 

 

7.3

Notice of Compelled Disclosure. If, at any time, Newman 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, Newman shall provide Rubicon Mortgage with prompt,
prior written notice of such requirement so that Rubicon Mortgage 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 Mortgage waives compliance with the provisions
hereof, Newman agrees to furnish only that portion of the Confidential
Information which Newman is advised by written opinion of counsel is legally
required and exercise Newman’s best efforts to obtain assurance that
confidential treatment will be accorded such Confidential Information. In any
event, Newman shall not oppose action by Rubicon Mortgage to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information.

 

 

7.4

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

 

 

8.

RETURN OF RUBICON MORTGAGE PROPERTY: Newman agrees that upon any termination of
his employment, Newman shall return to Rubicon Mortgage within a reasonable time
not to exceed two (2) weeks, any of Rubicon Mortgage’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 Mortgage with whom Newman
has had contact or done business.

 

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9.

NON-COMPETITION: For a period of one (1) year after the termination of this
Agreement, Newman expressly covenants and agrees that he will not and will not
attempt to, without the prior written consent of RBCF and Rubicon Mortgage,
directly or indirectly own, manage, operate, finance, join, control, or
participate in the ownership, management, operation, financing, or control of,
or be associated as an officer, director, employee, agent, partner, principal,
representative, consultant, or otherwise with, or use or permit his name to be
used in connection with, any line of business or enterprise that competes with
Rubicon Mortgage, RBCF or each of their respective Affiliates (as defined
herein) in any business of Rubicon Mortgage, RBCF or their respective
Affiliates, existing or proposed, wherever located, provided that Newman shall
not be prohibited from owning, directly or indirectly, less than one percent
(1%) of the outstanding shares of any corporation, the shares of which are
traded on a National Securities Exchange or in the over-the-counter markets.

 

 

10.

NO INTERFERENCE: For a period of two (2) years after the termination of this
Agreement, Newman expressly covenants and agrees that he will not and will not
attempt to, without the prior written consent of RBCF and Rubicon Mortgage,
directly or indirectly interfere with or disrupt or attempt to interfere with or
disrupt or take any action that could be reasonably expected to interfere with
or disrupt any past or present or prospective relationship, contractual or
otherwise, between Rubicon Mortgage, RBCF and/or any of their respective
Affiliates, and any customer, insurance company, mortgage company, financial
services company, supplier, sales representative, or agent or employee of
Rubicon Mortgage, RBCF or any of their respective Affiliates.

 

 

11.

NON-SOLICITATION; AGREEMENT NOT TO HIRE: Newman understands and appreciates that
Rubicon Mortgage and RBCF invest a tremendous amount of time, energy, resources
and expertise in the training and education of their respective employees and
subcontractors to be able to provide services to clients. Further, Newman
understands that in the event an employee or subcontractor of Rubicon Mortgage,
RBCF or any of their respective Affiliates is enticed to leave, then Rubicon
Mortgage shall be damaged in an amount the Parties are not capable of
calculating at the present time. Therefore, Newman agrees not to offer
employment or subcontractor status to any employee or subcontractor of Rubicon
Mortgage, RBCF or their respective Affiliates, nor to allow any person or entity
known to Newman to offer such employment or subcontractor status with Newman or
any other concern, venture or entity with whom Newman may be employed by,
associated or hold a financial stake in, for a period of three (3) years from
the date of expiration or termination of this Agreement. Further, in the event
an employee or subcontractor of Rubicon Mortgage, RBCF or their respective
Affiliates leaves the employ of, dissolves or breaks association with Rubicon
Mortgage, RBCF or their respective Affiliates and subsequently establishes
employment or an association of any kind with another financial services

 

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company, investment banking or other type of competing firm of Rubicon Mortgage,
RBCF or their respective Affiliates, Newman agrees not to do business with such
other competing firm for a period of three (3) years from the date of expiration
or termination of this Agreement.

 

 

12.

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

 

 

13.

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 Mortgage:

Rubicon Real Estate and Mortgages, Inc.

19200 Von Karman, Suite 350

Irvine, CA 92612

Attn: Chief Operating Officer

 

 

As to Newman:

Joel Newman

19200 Von Karman, Suite 350

Irvine, CA 92612

 

Address Change: Any party may change the address (as) 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 13.

 

 

14.

MISCELLANEOUS:

 

 

14.1

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.

 

 

14.2

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

 

 

14.3

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

 

 

14.4

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.

 

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14.5

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.

 

 

14.6

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.

 

 

14.7

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.

 

 

14.8

Arbitration.

 

 

14.8.1

Any controversy, dispute or claim of whatever nature in any way arising out of
or relating to Newman’s employment with Rubicon Mortgage, including, without
limitation (except as expressly excluded below in Section 14.8.2) any claims or
disputes by Newman against Rubicon Mortgage, or by Rubicon Mortgage against
Newman, concerning, arising out of or relating to the separation of that
employment; any other adverse personnel action by Rubicon Mortgage; any federal,
state or local law, statute or regulation prohibiting employment discrimination
or harassment; any public policy; any Rubicon Mortgage disciplinary action; any
Rubicon Mortgage decision regarding a Rubicon Mortgage policy or practice,
including but not limited to Newman’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.

 

 

14.8.2

The only claims or disputes excluded from binding arbitration under this
Agreement are the following: any claim by Newman for workers’ compensation
benefits or for benefits under a Rubicon Mortgage 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.

 

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14.8.3

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

 

 

14.9

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.

 

 

14.10

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

 

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

 

 

Rubicon Mortgage:

Rubicon Real Estate and Mortgages, Inc.

a California corporation

 

 

By:/s/ Michael Sederoff                    

 

Michael Sederoff, CEO

 

RBCF:

Rubicon Financial Incorporated

Only as applies to RBCF

a Delaware corporation

 

 

 

By:/s/ Joseph Mangiapane, Jr.            

 

Joseph Mangiapane, Jr., CEO

 

Newman:

 

 

By:/s/ Joel Newman                                

 

Joel Newman

 

 

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ADDENDUM A

 

Job Description for Joel Newman

 

Job Title:

President

Department:

Executive

Reports To:

Board of Directors

 

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

 

Investments:

 

•

Spearheads potential real estate investments e.g., distressed properties, land
purchase opportunities.

On the Real Estate Division:

 

•

Spearheads Marketing.

 

•

Co-ordinates open house inspections for prospective clients.

 

•

Co-ordinates open house for current listings.

 

•

Co-ordinates inspection reports and other essential requirements with both
buyers and sellers to prepare the house for contract date closing.

 

•

Co-ordinates final walk through with client.

 

On the Mortgage Loan Division:

 

•

Originates client loans.

 

•

Co-ordinates with lenders to price the loan.

 

•

Co-ordinates with the clients to sell the loan.

 

•

Negotiates the best terms with the lender on behalf of the client.

 

•

Schedules the final loan doc signings with the client to respond to open
questions.

 

General:

In addition to the above, the President shall take direction and perform
additional responsibilities as may be assigned by the CEO.

 

A-1

 

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ADDENDUM B

Approved Non-Rubicon Real Estate and Mortgages, Inc.

Business Activity Exemptions

 

Description of Business Activity

 

 

B-1

 

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ADDENDUM C

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (“Agreement”) is entered into as of
May 11, 2007, by and between Rubicon Financial Incorporated, a Delaware
corporation (“Corporation”), and Joel Newman (“Optionee”).

 

R E C I T A L S

 

A.           On April 16, 2007, the Board of Directors of the Corporation
adopted the 2007 Acquisition Stock Plan (the “Plan”).

 

B.           On May 11, 2007, Rubicon Real Estate and Mortgages, 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 May _11, 2007, the Governance, Compensation and
Nominating Committee of the Corporation’s Board of Directors 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 200,000 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.

 

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 Real Estate and Mortgages, Inc.’s

 

C-1

 

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(“Rubicon Mortgage”) “EBITDA” (as defined below) at a rate of one (1) Option
share for every $2.00 of EBITDA earned by Rubicon Mortgage. (For example, if
Rubicon Mortgage has an EBITDA of $200,000 for the fiscal year ended December
31, 2007, 100,000 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
Mortgage’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, or any subsidiary, ends as a
result of Optionee’s termination, resignation, incapacitation or death, as such
terms are defined in Optionee’s employment agreement with Rubicon Mortgage
(“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.

 

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.

 

C-2

 

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5.            AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be $1.00
per Share.

 

 

6.

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.

 

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

 

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-

 

C-3

 

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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, or any subsidiary,
as an employee 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.

 

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

 

C-4

 

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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.

 

11.          NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation, or any subsidiary,
to employ or have another relationship with Optionee for any period or interfere
in any way with the right of the Corporation, or any subsidiary, 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 May ____,
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.

 

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.

 

C-5

 

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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.

 

 

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.

 

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

 

C-6

 

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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:

 

 

If to Optionee:

Joel Newman

19200 Von Karman Ave.

 

Suite 350

 

Irvine, California 92612

 

 

If to Corporation:

Rubicon Financial Incorporated

19200 Von Karman Ave.

Suite 350

Irvine, California 92612

 

Such parties may designate in writing from time to time such other place or
places those 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

 

C-7

 

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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,
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

 

C-8

 

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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/

 

Joseph Mangiapane, Jr., Chief Executive Officer

 

 

“OPTIONEE”

 

/s/

Joel Newman

 

C-9

 

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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.