Back to 8-K [rbcf-8k_22207.htm]

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 Todd Torneo
(“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 19200 Von Karman Ave., Suite 350, Irvine, California 92612.

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:

 

1.

EMPLOYMENT. Rubicon Insurance hereby agrees to employ Torneo and Torneo 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 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.

 

3.

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”).

 

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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.

 

4.

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.

 

5.

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.

 

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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.

 

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 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.

 

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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.

 

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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.

 

7.

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.

 

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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 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.

 

8.

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.

 

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9.

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.

19200 Von Karman, Suite 350

Irvine, CA 92612

Attn: Chief Operating Officer

 

 

As to Torneo:

Todd Torneo

19200 Von Karman, Suite 350

Irvine, CA 92612

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.

 

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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.

 

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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

 

 

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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/ Michael Sederoff                                         

     Michael Sederoff, COO

RBCF:

Only as applies to RBCF

Rubicon Financial Incorporated

a Delaware corporation

 

By:/s/ Joesph Mangiapane                                    

      Joseph Mangiapane, Jr., CEO

Torneo:

By:/s/ Todd Torneo                                                 

       Todd Torneo

 

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ADDENDUM A

Job Description for Todd Torneo

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

 

 

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•

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

 

 

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ADDENDUM B

Approved Non-Rubicon Financial Insurance Services, Inc.

Business Activity Exemptions

Description of Business Activity

Torneo has been developing a website, www.insure2fund.com, 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

 

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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 Todd Torneo (“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.

 

C-1

 

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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

 

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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.

 

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.

 

C-3

 

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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

 

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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

 

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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

 

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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.

 

C-7

 

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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.

 

C-8

 

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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.

 

C-9

 

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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:

 

C-10

 

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If to Optionee:

Todd Torneo

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 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,

 

C-11

 

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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

 

C-12

 

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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                                                      

Joseph Mangiapane, Jr., Chief Executive Officer

 

 

“OPTIONEE”

 

 

/s/ Todd
Torneo                                                                         

Todd Torneo

 

C-13

 

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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.