EXHIBIT 10.4

 

Execution Copy

 

ISDA®

International Swaps and Derivatives Association, Inc.

 

NOVATION AGREEMENT

 

dated as of September 22, 2005 among:

 

WACHOVIA BANK, NATIONAL ASSOCIATION (the “Remaining Party”),

NOVASTAR MORTGAGE, INC. (the “Transferor”)

 

AND

 

NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2005-3 (the “Transferee”).

 

The Transferor and the Remaining Party have entered into one or more
Transactions (each an “Old Transaction”), each evidenced by a Confirmation (an
“Old Confirmation”) attached hereto as Exhibit I-A and I-B and subject to a 1992
ISDA Master Agreement dated as of September 15, 2003 (the “Old Agreement”).

 

The Remaining Party and the Transferee are simultaneously entering into a 1992
ISDA Master Agreement dated as of the date hereof in the form attached hereto as
Exhibit II (the “New Agreement”) relative to the New Transactions (defined
below).

 

With effect from and including September 22, 2005 (the “Novation Date”) the
Transferor wishes to transfer by novation to the Transferee, and the Transferee
wishes to accept the transfer by novation of, all the rights, liabilities,
duties and obligations of the Transferor under and in respect of each Old
Transaction, with the exception of the Excluded Rights and Obligations referred
to below with the effect that the Remaining Party and the Transferee will enter
into a new transaction (each a “New Transaction” and, collectively, the “New
Transactions”) between them having terms identical to those of each applicable
Old Transaction, subject to the same exceptions and as more particularly
described below.

 

The Remaining Party wishes to accept the Transferee as its sole counterparty
with respect to each of the New Transactions.

 

The Transferor and the Remaining Party wish to have released and discharged, as
a result and to the extent of the transfer described above, their respective
obligations under and in respect of the Old Transactions.

 

Accordingly, the parties agree as follows: —

 

1. Definitions.

 

Terms defined in the ISDA Master Agreement (Multicurrency-Cross Border) as
published in 1992 by the International Swaps and Derivatives Association, Inc.
(the “1992 ISDA Master Agreement”) are used herein as so defined, unless
otherwise provided herein. For purposes of this Novation Agreement, “Excluded
Rights and Obligations” means all obligations of each of the Transferor and the
Remaining Party to Transfer (as defined in the Credit Support Annex to the Old
Agreement) Eligible Collateral (as so defined) in respect of the Old
Transactions and all related rights of the Remaining Party and the Transferor
under the Old Agreement.

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2. Transfer, Release, Discharge and Undertakings.

 

Subject to the execution and delivery of the New Agreement by each of the
parties thereto to the other, with effect from and including the Novation Date
and in consideration of the mutual representations, warranties and covenants
contained in this Novation Agreement and other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged by each of the
parties):

 

  (a) on the Novation Date, subject to Section 2(d) of this Novation Agreement,
the Transferor hereby transfers all of its rights, liabilities, duties and
obligations, with the exception of the Excluded Rights and Obligations, relative
to, and in connection with the Old Transaction to NovaStar Mortgage Supplemental
Interest Trust, Series 2005-3;

 

  (b) subject to Section 2(d) of this Novation Agreement, the Remaining Party
and the Transferor are each hereby released and discharged from further
obligations to each other with respect to each Old Transaction and their
respective rights against each other thereunder are cancelled, provided that
such release and discharge shall not affect any rights, liabilities or
obligations of the Remaining Party or the Transferor with respect to payments or
other obligations due and payable or due to be performed prior to the Novation
Date, and all such payments and obligations shall be paid or performed by the
Remaining Party or the Transferor in accordance with the terms of the Old
Transaction;

 

  (c) in respect of each New Transaction, the Remaining Party and the Transferee
each hereby undertake liabilities and obligations towards the other and acquire
rights against each other identical in their terms to each corresponding Old
Transaction (and, for the avoidance of doubt, as if the Transferee were the
Transferor and with the Remaining Party remaining the Remaining Party, save for
the Excluded Rights and Obligations and any other rights, liabilities or
obligations of the Remaining Party or the Transferor with respect to payments or
other obligations due and payable or due to be performed prior to the Novation
Date);

 

  (d) each New Transaction shall be governed by, form part of, and be subject to
the New Agreement and the relevant Old Confirmation (which, in conjunction and
as deemed modified to be consistent with this Novation Agreement, shall be
deemed to be a Confirmation between the Remaining Party and the Transferee), and
the offices of the Remaining Party and the Transferee for purposes of each New
Transaction shall be their offices at their addresses for notices provided for
in the New Agreement; and

 

  (e) on the Novation Date, the Remaining Party shall transfer any and all of
the Posted Collateral (as defined in the Credit Support Annex to the Old
Agreement) held by it in respect of the Old Transactions to the account or
accounts of the Transferor identified by it by notice given to the Remaining
Party as provided in the Old Agreement, and the Transferor shall transfer all
Posted Collateral held by it in respect of the Old Transactions to the account
or accounts of the Remaining Party identified by it by notice given to the
Transferor as provided in the Old Agreement, in each case together with all
Interest Amount and Distributions thereon (as so defined). The Remaining Party’s
or the Transferor’s failure to effect these transfers will continue to
constitute Potential Events of Default and may constitute Events of Default
under the Old Agreement notwithstanding the transfer by novation contemplated
herein.

 

3. Representations and Warranties.

 

  (a) On the date of this Novation Agreement:

 

  (i) Each of the parties makes to each of the other parties those
representations and warranties set forth in Section 3(a) of the 1992 ISDA Master
Agreement with references in such Section to “this Agreement” or “any Credit
Support Document” being deemed references to this Novation Agreement alone.

 

 

2

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  (ii) The Remaining Party and the Transferor each makes to the other, and the
Remaining Party and the Transferee each makes to the other, the representation
set forth in Section 3(b) of the 1992 ISDA Master Agreement, in each case with
respect to the Old Agreement or the New Agreement, as the case may be, and
taking into account the parties entering into and performing their obligations
under this Novation Agreement.

 

  (iii) Each of the Transferor and the Remaining Party represents and warrants
to each other and to the Transferee that:

 

  (A) it has made no prior transfer (whether by way of security or otherwise) of
the Old Agreement or any interest or obligation in or under the Old Agreement or
in respect of any Old Transaction; and

 

  (B) without prejudice to the obligations of the Remaining Party and the
Transferor referred to in Section 2(d) of this Novation Agreement, as of the
Novation Date, all obligations of the Transferor and the Remaining Party under
each Old Transaction required to be performed before the Novation Date have been
fulfilled.

 

  (iv) Each party represents to each of the other parties: —

 

  (A) Non-Reliance. It is acting for its own account, and it has made its own
independent decisions to enter into this Novation Agreement and as to whether
this Novation Agreement is appropriate or proper for it based upon its own
judgment and upon advice from such advisers as it has deemed necessary. It is
not relying on any communication (written or oral) of the other parties as
investment advice or as a recommendation to enter into this Novation Agreement;
it being understood that information and explanations related to the terms and
conditions of this Novation Agreement shall not be considered investment advice
or a recommendation to enter into this Novation Agreement. No communication
(written or oral) received from any of the other parties shall be deemed to be
an assurance or guarantee as to the expected results of this Novation Agreement;

 

  (B) Assessment and Understanding. It is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of this Novation
Agreement. It is also capable of assuming, and assumes, the risks of this
Novation Agreement; and

 

  (C) Status of Parties. None of the other parties is acting as a fiduciary for
or an adviser to it in respect of this Novation Agreement.

 

  (b) The Transferor makes no representation or warranty and does not assume any
responsibility with respect to the legality, validity, effectiveness, adequacy
or enforceability of any New Transaction or the New Agreement or any documents
relating thereto and assumes no responsibility for the condition, financial or
otherwise, of the Remaining Party, the Transferee or any other person or for the
performance and observance by the Remaining Party, the Transferee or any other
person of any of its obligations under any New Transaction or the New Agreement
or any document relating thereto and

 

3

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any and all such conditions and warranties, whether express or implied by law or
otherwise, are hereby excluded; provided, however, that nothing in the foregoing
shall be construed to relieve the Transferor from any liability it may have for
any of its representations, warranties or obligations as the servicer or
otherwise under the Pooling and Servicing Agreement among NovaStar Mortgage
Funding Corporation, NovaStar Mortgage, Inc., Wachovia Bank, National
Association, and JPMorgan Chase Bank, National Association dated as of
September 1, 2005 (the “Pooling and Servicing Agreement”).

 

4. Counterparts.

 

This Novation Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by facsimile
transmission), each of which will be deemed an original.

 

5. Costs and Expenses.

 

The parties will each pay their own costs and expenses (including legal fees)
incurred in connection with this Novation Agreement and as a result of the
negotiation, preparation and execution of this Novation Agreement.

 

6. Amendments.

 

No amendment, modification or waiver in respect of this Novation Agreement will
be effective unless in writing (including a writing evidenced by a facsimile
transmission) and executed by each of the parties or confirmed by an exchange of
telexes or electronic messages on an electronic messaging system.

 

7. (a)    Governing Law.

 

This Novation Agreement will be governed by and construed in accordance with the
laws of the State of New York without reference to the conflict of laws
provisions thereof (other than Section 5-1401 of the New York General
Obligations Law).

 

  (b) Jurisdiction.

 

The terms of Section 13(b) of the 1992 ISDA Master Agreement shall apply to this
Novation Agreement with references in such Section to “this Agreement” being
deemed references to this Novation Agreement alone.

 

  (c) Not Acting in Individual Capacity.

 

JPMorgan Chase Bank, National Association is signing this Novation Agreement
solely in its capacity as Trustee under the Pooling and Servicing Agreement and
not in its individual capacity, and all persons having any claim against the
Trustee by reason of the Transactions contemplated by this Novation Agreement
shall look only to the assets of NovaStar Mortgage Supplemental Interest Trust,
Series 2005-3 (subject to the availability of funds therefor in accordance with
the Flow of Funds as set forth in Article IV of the Pooling and Servicing
Agreement) for payment or satisfaction thereof unless due to the Trustee’s own
negligent action, negligent failure to act, or willful misconduct, provided
that:

 

  (i) this Section 7(c) does not limit the effect of paragraph (a) of
Section 8.01 of the Pooling and Servicing Agreement,

 

  (ii) the Trustee shall not be liable for any error of judgment made in good
faith by its Responsible Officer (as defined in the Pooling and Servicing
Agreement) unless it is proved that the Trustee was negligent in ascertaining
the pertinent facts, and

 

4

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  (iii) the Trustee shall not be liable with respect to any action it take or
omits to take in good faith in accordance with a direction received by it from
the Majority Certificateholders (as defined in the Pooling and Servicing
Agreement).

 

The foregoing may not be construed to give to Majority Certificateholders any
rights under this Novation Agreement.

 

5

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IN WITNESS WHEREOF the parties have executed this Novation Agreement on the
respective dates specified below with effect from and including the Novation
Date.

 

WACHOVIA BANK, NATIONAL ASSOCIATION

  

NOVASTAR MORTGAGE, INC.

By:

 

 

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By:

 

--------------------------------------------------------------------------------

Name:

      

Name:

 

David L. Farris

Title:

      

Title:

 

Vice President

Date:

      

Date:

   

 

NOVASTAR MORTGAGE SUPPLEMENTAL

INTEREST TRUST, SERIES 2005-3

 

By: JPMorgan Chase Bank, National Association,

as Trustee under the Pooling and Servicing Agreement,

acting not in its individual capacity, but solely in its

capacity as Trustee to NovaStar Mortgage

Supplemental Interest Trust, Series 2005-3

 

By:

 

 

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Name:     Title:     Date:    

 

6

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Exhibit I-A

 

[Old Swap Confirmations attached behind this page]

 

7

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SWAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    May 12, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”) Address:
   8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:   
816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1142024

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the confirmation relates are
as follows:

 

Transaction Type:    Interest Rate Swap Currency for Payments:    U.S. Dollars
Notional Amount:    USD 80,000,000.00 Term:     

Trade Date:

   April 19, 2005

Effective Date:

   April 25, 2005

Termination Date:

  

April 25, 2007 in respect of Floating Amounts, subject to adjustment in
accordance with the Modified Following Business Day Convention.

April 25, 2007 in respect of Fixed Amounts

Fixed Amounts:     

Fixed Rate Payer:

   Counterparty

Period End Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

 

Wachovia: 1142024

 

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Business Day:

   New York

Fixed Rate:

   3.87%

Fixed Rate Day Count Fraction:

   30/360 Floating Amounts:     

Floating Rate Payer:

   Wachovia

Period End Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through and
including the Termination Date, subject to adjustment in accordance with the
Modified Following Business Day Convention.

Payment Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through      and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

   3.02%

Calculation Period:

    

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day Count

   Actual/360

Fraction:

    

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding convention:

   5 decimal places per the ISDA Definitions. 2. The additional provisions of
this Confirmation are as follows: Calculation Agent:    As per the Master
Agreement Payment Instructions:    Wachovia Bank, N.A.      CIB Group, ABA
053000219      Ref: Derivative Desk (Trade No: 1142024)      Account #:
04659360006116 Wachovia Contacts:    Settlement and/or Rate Resets:     
1-800-249-3865      1-704-383-8429     

 

Documentation:

     Tel: (704) 383-4599      Fax: (704) 383-9139     

 

Collateral:

     Tel: (704) 383-9529      Please quote transaction reference number.
Payments to Counterparty:    Please provide written payment instructions.     
Wachovia will make no payments until written payment instructions are received.
     Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Wachovia: 1142024

 

2/3

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Additional Terms

 

For purposes of the Credit Support Annex to the ISDA Master Agreement dated as
of September 15, 2003 between Wachovia and Counterparty, the “Independent
Amount” for this Transaction is $400,000.00.

 

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours, Wachovia Bank, N.A. By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President

 

Ref. No. 1142024

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

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Name:   David L. Farris Title:   Vice President

 

Wachovia: 1142024

 

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SWAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    April 20, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”) Address:
   8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:   
816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1128030

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:    Interest Rate Swap Currency for Payments:    U.S. Dollars
Notional Amount:    USD 20,000,000.00 Term:     

Trade Date:

   April 19, 2005

Effective Date:

   April 25, 2005

Termination Date:

  

April 25, 2008 in respect of Floating Amounts, subject to adjustment in
accordance with the Modified Following Business Day Convention.

April 25, 2008 in respect of Fixed Amounts

Fixed Amounts:     

Fixed Rate Payer:

   Counterparty

Period End Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

 

Wachovia: 1128030

 

1/3

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Business Day:

   New York

Fixed Rate:

   4.048%

Fixed Rate Day Count Fraction:

   30/360 Floating Amounts:     

Floating Rate Payer:

   Wachovia

Period End Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through and
including the Termination Date, subject to adjustment in accordance with the
Modified Following Business Day Convention.

Payment Dates:

   Monthly on the 25th of each month commencing May 25, 2005, through      and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

   Determined two London Banking Days prior to the Effective Date

Calculation Period:

    

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day Count

   Actual/360

Fraction:

    

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:    As per the Master Agreement Payment Instructions:   
Wachovia Bank, N.A.      CIB Group, ABA 053000219      Ref: Derivative Desk
(Trade No: 1128030)      Account #: 04659360006116 Wachovia Contacts:   
Settlement and/or Rate Resets:      1-800-249-3865      1-704-383-8429     

 

Documentation:

     Tel: (704) 383-4599      Fax: (704) 383-9139     

 

Collateral:

     Tel: (704) 383-9529      Please quote transaction reference number.
Payments to Counterparty:    Please provide written payment instructions.     
Wachovia will make no payments until written payment instructions are received.
     Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Wachovia: 1128030

 

2/3

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Additional Terms

 

For purposes of the Credit Support Annex to the ISDA Master Agreement dated as
of September 15, 2003 between Wachovia and Counterparty, the “Independent
Amount” for this Transaction is $100,000.00.

 

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours,

Wachovia Bank, N.A.

By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1128030

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Wachovia: 1128030

 

3/3

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SWAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    July 08, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”) Address:
   8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:   
816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1176650

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:    Interest Rate Swap Currency for Payments:    U.S. Dollars
Notional Amount:    USD 50,000,000.00 Term:     

Trade Date:

   July 06, 2005

Effective Date:

   July 25, 2005

Termination Date:

  

July 25, 2007 in respect of Floating Amounts, subject to adjustment in
accordance with the Modified Following Business Day Convention.

July 25, 2007 in respect of Fixed Amounts

Fixed Amounts:     

 

Fixed Rate Payer:

   Counterparty

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

 

Wachovia: 1176650

 

1/3

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Business Day:

   New York

Fixed Rate:

   4.11%

Fixed Rate Day Count Fraction:

   30/360

 

Floating Amounts:

    

Floating Rate Payer:

   Wachovia

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date, subject to adjustment in accordance with the
Modified Following Business Day Convention.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

   Determined two London Banking Days prior to the Effective Date

Calculation Period:

    

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day Count

   Actual/360

Fraction:

    

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:    As per the Master Agreement Payment Instructions:   

Wachovia Bank, N.A.

CIB Group, ABA 053000219

Ref: Derivative Desk (Trade No: 1176650)

Account #: 04659360006116

Wachovia Contacts:   

Settlement and/or Rate Resets:

1-800-249-3865

1-704-383-8429

    

 

Documentation:

Tel: (704) 383–4599

Fax: (704) 383–9139

Payments to Counterparty:

  

 

Collateral:

Tel: (704) 383-9529

Please quote transaction reference number.

Please provide written payment instructions.

Wachovia will make no payments until written payment instructions are received.

Phone: 1-800-249-3865 Fax: 1-704-383-8429

  

 

Wachovia: 1176650

 

2/3

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Additional Terms

 

For purposes of the Credit Support Annex to the ISDA Master Agreement dated as
of September 15, 2003 between Wachovia and Counterparty, the “Independent
Amount” for this Transaction is $250,000.00.

 

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours,

Wachovia Bank, N.A.

By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1176650

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Wachovia: 1176650

 

3/3

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SWAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    July 08, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”) Address:
  

8140 Ward Parkway, Suite 300

Kansas City MO

64114 USA

Fax:    816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1177674

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:    Interest Rate Swap Currency for Payments:    U.S. Dollars
Notional Amount:    USD 80,000,000.00 Term:     

Trade Date:

   July 07, 2005

Effective Date:

   July 25, 2005

Termination Date:

  

July 25, 2007 in respect of Floating Amounts, subject to adjustment in
accordance with the Modified Following Business Day Convention.

July 25, 2007 in respect of Fixed Amounts

Fixed Amounts:     

Fixed Rate Payer:

   Counterparty

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

 

Wachovia: 1177674

 

1/3

--------------------------------------------------------------------------------

Business Day:

   New York

Fixed Rate:

   4.018%

Fixed Rate Day Count Fraction:

   30/360 Floating Amounts:     

Floating Rate Payer:

   Wachovia

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date, subject to adjustment in accordance with the
Modified Following Business Day Convention.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005,      through
and including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

   Determined two London Banking Days prior to the Effective Date

Calculation Period:

    

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day Count

   Actual/360

Fraction:

    

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:    As per the Master Agreement Payment Instructions:   
Wachovia Bank, N.A.      CIB Group, ABA 053000219      Ref: Derivative Desk
(Trade No: 1177674)      Account #: 04659360006116 Wachovia Contacts:   
Settlement and/or Rate Resets:      1-800-249-3865      1-704-383-8429     

 

Documentation:

     Tel: (704) 383-4599      Fax: (704) 383-9139     

 

Collateral:

     Tel: (704) 383-9529      Please quote transaction reference number.
Payments to Counterparty:    Please provide written payment instructions.     
Wachovia will make no payments until      written payment instructions are
received.      Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Wachovia: 1177674

 

2/3

--------------------------------------------------------------------------------

Additional Terms

 

For purposes of the Credit Support Annex to the ISDA Master Agreement dated as
of September 15, 2003 between Wachovia and Counterparty, the “Independent
Amount” for this Transaction is $400,000.00.

 

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours,

Wachovia Bank, N.A.

By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1177674

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Wachovia: 1177674

 

3/3

--------------------------------------------------------------------------------

SWAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    July 08, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”) Address:
  

8140 Ward Parkway, Suite 300

Kansas City MO

64114 USA

Fax:    816-237-7515 Attention: From:   

Jeremy Messerly

Wachovia Bank, N.A. (“Wachovia”)

Ref. No:    1176651

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:

   Interest Rate Swap

Currency for Payments:

   U.S. Dollars

Notional Amount:

   USD 20,000,000.00

Term:

    

Trade Date:

   July 07, 2005

Effective Date:

   July 25, 2005

Termination Date:

   July 25, 2008 in respect of Floating Amounts, subject to adjustment in     
accordance with the Modified Following Business Day Convention.      July 25,
2008 in respect of Fixed Amounts

Fixed Amounts:

    

 

Fixed Rate Payer:

   Counterparty

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date; No Adjustment

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

 

Wachovia: 1176651

 

1/3

--------------------------------------------------------------------------------

Business Day:

   New York

Fixed Rate:

   4.084%

Fixed Rate Day Count Fraction:

   30/360 Floating Amounts:     

Floating Rate Payer:

   Wachovia

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date, subject to adjustment in accordance with the
Modified Following Business Day Convention.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

   Determined two London Banking Days prior to the Effective Date

Calculation Period:

    

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day Count

   Actual/360

Fraction:

    

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:

Payment Instructions:

  

As per the Master Agreement

Wachovia Bank, N.A.

CIB Group, ABA 053000219

Ref: Derivative Desk (Trade No: 1176651)

Account #: 04659360006116

Wachovia Contacts:    Settlement and/or Rate Resets:      1-800-249-3865      1
704 383 8429     

 

Documentation:

    

Tel: (704) 383-4599

Fax: (704) 383-9139

    

 

Collateral:

    

Tel: (704) 383-9529

Please quote transaction reference number.

Payments to Counterparty:   

Please provide written payment instructions.

Wachovia will make no payments until written payment instructions are received.

Phone: l-800-249-3865 Fax: 1-704-383-8429

 

Wachovia: 1176651

 

2/3

--------------------------------------------------------------------------------

Additional Terms

 

For purposes of the Credit Support Annex to the ISDA Master Agreement dated as
of September 15, 2003 between Wachovia and Counterparty, the “Independent
Amount” for this Transaction is $100,000.00.

 

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours, Wachovia Bank, N.A. By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1176651

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Wachovia: 1176651

 

3/3

--------------------------------------------------------------------------------

SWAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    July 15, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”) Address:
  

8140 Ward Parkway, Suite 300

Kansas City MO

64114 USA

Fax:    816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1184129

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:    Interest Rate Swap Currency for Payments:    U.S. Dollars
Notional Amount:    USD 80,000,000.00 Term:     

Trade Date:

   July 14, 2005

Effective Date:

   July 25, 2005.

Termination Date:

  

July 25, 2007 in respect of Floating Amounts, subject to adjustment in
accordance with the Modified Following Business Day Convention.

July 25, 2007 in respect of Fixed Amounts

Fixed Amounts:     

Fixed Rate Payer:

   Counterparty

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date: No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Fixed Rate:

   4.1525%

Fixed Rate Day Count Fraction:

   30/360

 

Page 1 of 3

--------------------------------------------------------------------------------

Floating Amounts:     

Floating Rate Payer:

   Wachovia

Period End Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date, subject to adjustment in accordance with the
Modified Following Business Day Convention.

Payment Dates:

   Monthly on the 25th of each month commencing August 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial Calculation Period:

   Determined two London Banking Days prior to the Effective Date

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day Count Fraction:

   Actual/360

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding convention:

   5 decimal places per the ISDA Definitions. 2. The additional provisions of
this Confirmation are as follows: Calculation Agent:    As per the Master
Agreement Payment Instructions:    Wachovia Bank, N.A.      CIB Group, ABA
053000219      Ref: Derivative Desk (Trade No: 1184129)      Account #:
04659360006116 Wachovia Contacts:    Settlement and/or Rate Resets:     
1-800-249-3865      1-704-383-8429     

 

Documentation:

     Tel: (704) 383-4599      Fax: (704) 383-9139     

 

Collateral:

     Tel: (704) 383-9529      Please quote transaction reference number.
Payments to Counterparty:    Please provide written payment instructions.     
Wachovia will make no payments until written payment instructions are received.
     Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Additional Provision:

 

For purposes of the Credit Support Annex to the ISDA Master Agreement dated as
of September 15, 2003 between Wachovia and Counterparty, the “Independent
Amount” for this Transaction is 0.5% of the notional.

 

Page 2 of 3

--------------------------------------------------------------------------------

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours, Wachovia Bank, N.A. By:  

/s/ Mark P. Silke

--------------------------------------------------------------------------------

Name:   Mark P. Silke Title:   Assistant Vice President Ref. No. 1184129

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Page 3 of 3

--------------------------------------------------------------------------------

Exhibit I-B

 

[Old Cap Confirmations attached behind this page]

--------------------------------------------------------------------------------

AMENDED AND RESTATED

RATE CAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    September 16, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”)
Address:   

8140 Ward Parkway, Suite 300

Kansas City MO

     64114 USA Fax:    816-237-7515 Attention:    Jeremy Messerly From:   
Wachovia Bank. N.A. (“Wachovia”) Ref. No:    1114413,1114415

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 lSDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern. This Confirmation amends, restates and replaces
any prior Confirmation for this Transaction.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15,2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

I . The terms of the particular Transaction to which the Confirmation relates
are as follows:

 

Transaction Type:    Rate Cap Currency for Payments:    U.S. Dollars Notional
Amount:    USD 8,000,000.00 Term:     

Trade Date:

   May 05, 2005

Effective Date:

   May 25, 2005

Termination Date:

   May 23, 2007, subject to adjustment in accordance with the Modified Following
Business Day Convention. Fixed Amounts:     

Fixed Rate Payer:

   Counterparty

Fixed Amount:

   For a Calculation Period, the product of (i) Notional Amount (ii) Fixed Rate
(iii) Fixed Rate Day Count Fraction and (iv) 10.

Period End Dates:

   Monthly on the 25th of each month commencing June 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing June 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Fixed Rate:

   0.328%

Fixed Rate Day Count Fraction:

   30/360

 

Page 1 of 3

--------------------------------------------------------------------------------

Floating Amounts:     

 

Floating Rate Payer:

   Wachovia

Floating Amount:

   The amounts calculated shall be multiplied by 10 for each Calculation Period
and the resulting product shall be the actual Floating Amount, respectively,
with respect to each Calculation Period, payable by Wachovia.

Cap Rate:

   3.95%

Payment Dates:

   Monthly on the 25th of each month commencing June 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

    

Calculation Period:

   Determined two London Banking Days prior to the Effective Date

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day

    

Count Fraction:

   Actual/360

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding Convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:

   As per the Master Agreement Payment Instructions:    Wachovia Bank, N.A.     
CIB Group, ABA 053000219      Ref: Derivative Desk (Trade No: 1114413, 1114415)
     Account #: 04659360006116 Wachovia Contacts:    Settlement and/or Rate
Resets:      1-800-249-3865      1-704-383-8429     

 

Documentation:

     Tel: (704) 383-4599      Fax: (704)383-9139     

 

Collateral:

     Tel: (704) 383-9529      Please quote transaction reference number.
Payments to Counterparty:    Please provide written payment instructions.     
Wachovia will make no payments until written payment instructions are received.
     Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Page 2 of 3

--------------------------------------------------------------------------------

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours,

Wachovia Bank, N.A.

By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1114413, 1114415

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Page 3 of 3

--------------------------------------------------------------------------------

AMENDED AND RESTATED

RATE CAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    September 16, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”)
Address:    8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:
   816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1141251, 1141253

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern. This Confirmation amends, restates and replaces
any prior Confirmation for this Transaction.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

Transaction Type:

   Rate Cap

Currency for Payments:

   U.S. Dollars

Notional Amount:

   USD 8,000,000.00

Term:

    

Trade Date:

   June 14, 2005

Effective Date:

   June 27, 2005

Termination Date:

   June 25, 2007, subject to adjustment in accordance with the Modified
Following Business Day Convention.

Fixed Amount:

    

Fixed Rate Payer:

   Counterparty

Fixed Amount:

   For a Calculation Period, the product of (i) Notional Amount (ii) Fixed Rate
(iii) Fixed Rate Day Count Fraction and (iv) 10.

Period End Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Fixed Rate:

   0.295%

Fixed Rate Day Count Fraction:

   30/360

 

Page 1 of 3

--------------------------------------------------------------------------------

Floating Amounts:     

 

Floating Rate Payer:

   Wachovia

Floating Amount:

   The amounts calculated shall be multiplied by 10 for each Calculation Period
and the resulting product shall be the actual Floating Amount, respectively,
with respect to each Calculation Period, payable by Wachovia.

Cap Rate:

   4.05%

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

Calculation Period:

   Determined two London Banking Days prior to the Effective Date

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day

Count Fraction:

   Actual/360

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding Convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:

   As per the Master Agreement Payment Instructions:   

Wachovia Bank, N.A.

CIB Group, ABA 053000219

Ref: Derivative Desk (Trade No: 1141251, 1141253)

     Account #: 04659360006116 Wachovia Contacts:    Settlement and/or Rate
Resets:     

1-800-249-3865

1-704-383-8429

    

 

Documentation:

Tel: (704) 383-4599

Fax: (704) 383-9139

    

 

Collateral:

Tel: (704) 383-9529

     Please quote transaction reference number. Payments to Counterparty:   

Please provide written payment instructions.

Wachovia will make no payments until written payment instructions are received.

Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Page 2 of 3

--------------------------------------------------------------------------------

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours, Wachovia Bank, N.A. By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1141251

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Page 3 of 3

--------------------------------------------------------------------------------

AMENDED AND RESTATED

RATE CAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    September 16, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”)
Address:    8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:
   816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1141252,1141254

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern. This Confirmation amends, restates and replaces
any prior Confirmation for this Transaction.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:

   Rate Cap

Currency for Payments:

   U.S. Dollars

Notional Amount:

   USD 2,000,000.00

Term:

    

Trade Date:

   June 14, 2005

Effective Date:

   June 27, 2005

Termination Date:

   June 25, 2008, subject to adjustment in accordance with the Modified     
Following Business Day Convention.

Fixed Amount:

    

 

Fixed Rate Payer:

   Counterparty

Fixed Amount:

   For a Calculation Period, the product of (i) Notional Amount (ii) Fixed Rate
     (iii) Fixed Rate Day Count Fraction and (iv) 10.

Period End Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and     
including the Termination Date: No Adjustment

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and     
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Fixed Rate

   0.398%

Fixed Rate Day Count Fraction:

   30/360

 

 

Page 1 of 3

--------------------------------------------------------------------------------

Floating Amounts:     

Floating Rate Payer:

   Wachovia

Floating Amount:

   The amounts calculated shall be multiplied by 10 for each Calculation Period
and the resulting product shall be the actual Floating Amount, respectively,
with respect to each Calculation Period, payable by Wachovia.

Cap Rate:

   4.15%

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

Calculation Period:

   Determined two London Banking Days prior to the Effective Date

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day

Count Fraction:

   Actual/360

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding Convention:

   5 decimal places per the ISDA Definitions.

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:    As per the Master Agreement Payment Instructions:   

Wachovia Bank, N.A.

CIB Group, ABA 053000219

Ref: Derivative Desk (Trade No: 1141252, 1141254)

Account #: 04659360006116

Wachovia Contacts:   

Settlement and/or Rate Resets:

1-800-249-3865

1-704-383-8429

    

 

Documentation:

Tel: (704) 383-4599

Fax: (704) 383-9139

    

 

Collateral:

Tel: (704) 383-9529

Payments to Counterparty:   

Please quote transaction reference number.

Please provide written payment instructions.

Wachovia will make no payments until written payment instructions are received.

Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Page 2 of 3

--------------------------------------------------------------------------------

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours, Wachovia Bank, N.A. By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1141252 1141254

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Page 3 of 3

--------------------------------------------------------------------------------

AMENDED AND RESTATED

RATE CAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    September 16, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”)
Address:    8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:
   816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1165863, 1165865

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern. This Confirmation amends, restates and replaces
any prior Confirmation for this Transaction.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:    Rate Cap Currency for Payments:    U.S. Dollars Notional
Amount:    USD 8,000,000.00 Term:     

Trade Date:

   June 17, 2005

Effective Date:

   June 27, 2005

Termination Date:

   June 25, 2007, subject to adjustment in accordance with the Modified
Following Business Day Convention. Fixed Amount:     

Fixed Rate Payer:

   Counterparty

Fixed Amount:

   For a Calculation Period, the product of (i) Notional Amount (ii) Fixed Rate
(iii) Fixed Rate Day Count Fraction and (iv) 10.

Period End Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Fixed Rate:

   0.287%

Fixed Rate Day Count Fraction:

   30/360

 

Page 1 of 3

--------------------------------------------------------------------------------

Floating Amounts:     

 

Floating Rate Payer:

   Wachovia

Floating Amount:

   The amounts calculated shall be multiplied by 10 for each Calculation Period
and the resulting product shall be the actual Floating Amount, respectively,
with respect to each Calculation Period, payable by Wachovia.

Cap Rate:

   4.05%

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Floating Rate for initial

    

Calculation Period:

   Determined two London Banking Days prior to the Effective Date

Floating Rate Option:

   USD-LIBOR-BBA

Designated Maturity:

   1 Month

Spread:

   None

Floating Rate Day

    

Count Fraction:

   Actual/360

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding Convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:    As per the Master Agreement Payment Instructions:   

Wachovia Bank, N.A.

CIB Group, ABA 053000219

Ref: Derivative Desk (Trade No: 1165863, 1165865)

Account #: 04659360006116

Wachovia Contacts:   

Settlement and/or Rate Resets:

1-800-249-3865

1-704-383-8429

    

 

Documentation:

     Tel: (704) 383-4599      Fax: (704) 383-9139     

 

Collateral:

     Tel: (704) 383-9529      Please quote transaction reference number.
Payments to Counterparty:   

Please provide written payment instructions.

Wachovia will make no payments until written payment instructions are received.

Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Page 2 of 3

--------------------------------------------------------------------------------

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours,

Wachovia Bank, N.A.

By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President

Ref. No. 1165863,1165865

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Page 3 of 3

--------------------------------------------------------------------------------

AMENDED AND RESTATED

RATE CAP TRANSACTION CONFIRMATION

 

LOGO [g20342waclogo.jpg]

 

Date:    September 16, 2005 To:    Novastar Mortgage, Inc. (“Counterparty”)
Address:    8140 Ward Parkway, Suite 300      Kansas City MO      64114 USA Fax:
   816-237-7515 Attention:    Jeremy Messerly From:    Wachovia Bank, N.A.
(“Wachovia”) Ref. No:    1165864, 1165866

 

Dear Jeremy Messerly:

 

This confirms the terms of the Transaction described below between Counterparty
and Wachovia. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern. This Confirmation amends, restates and replaces
any prior Confirmation for this Transaction.

 

This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement between Wachovia and Counterparty dated as of September 15, 2003, as
amended and supplemented from time to time (the “ISDA Master Agreement”). All
provisions contained or incorporated by reference in the Master Agreement will
govern this Confirmation except as expressly modified herein.

 

1. The terms of the particular Transaction to which the Confirmation relates are
as follows:

 

Transaction Type:

  

 

Rate Cap

Currency for Payments:    U.S. Dollars Notional Amount:    USD 2,000,000.00
Term:     

Trade Date:

   June 17, 2005

Effective Date:

   June 27, 2005

Termination Date:

   June 25, 2008, subject to adjustment in accordance with the Modified
Following Business Day Convention. Fixed Amounts:     

Fixed Rate Payer:

   Counterparty

Fixed Amount:

   For a Calculation Period, the product of (i) Notional Amount (ii) Fixed Rate
(iii) Fixed Rate Day Count Fraction and (iv) 10.

Period End Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date; No Adjustment.

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

   New York

Fixed Rate:

   0.38%

Fixed Rate Day Count Fraction:

   30/360

 

Page 1 of 3

--------------------------------------------------------------------------------

Floating Amounts:     

 

Floating Rate Payer:

   Wachovia

Floating Amount:

   The amounts calculated shall be multiplied by 10 for each Calculation Period
and the resulting product shall be the actual Floating Amount, respectively,
with respect to each Calculation Period, payable by Wachovia.

Cap Rate:

   4.15%

Payment Dates:

   Monthly on the 25th of each month commencing July 25, 2005, through and
including the Termination Date

Business Day Convention:

   Modified Following

Business Day:

  

New York

Floating Rate for initial Calculation Period:

  

Determined two London Banking Days prior to the Effective Date

Floating Rate Option:

  

USD-LIBOR-BBA

Designated Maturity:

  

1 Month

Spread:

  

None

Floating Rate Day Count Fraction:

   Actual/360

Floating Rate determined:

   Two London Banking Days prior to each Reset Date.

Reset Dates:

   The first day of each Calculation Period.

Compounding:

   Inapplicable

Rounding Convention:

   5 decimal places per the ISDA Definitions.

 

2. The additional provisions of this Confirmation are as follows:

 

Calculation Agent:

  

 

As per the Master Agreement

Payment Instructions:    Wachovia Bank, N.A.     

CIB Group, ABA 053000219

Ref: Derivative Desk (Trade No: 1165864, 1165866 )

Account #: 04659360006116

Wachovia Contacts:   

Settlement and/or Rate Resets:

1-800-249-3865

1-704-383-8429

    

Documentation:

Tel: (704) 383-4599

Fax: (704) 383-9139

    

Collateral:

Tel: (704) 383-9529

Please quote transaction reference number.

Payments to Counterparty:   

Please provide written payment instructions.

Wachovia will make no payments until written payment instructions are received.

Phone: 1-800-249-3865 Fax: 1-704-383-8429

 

Page 2 of 3

--------------------------------------------------------------------------------

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter substantially similar to this letter, which letter sets
forth the material terms of the Transaction to which this Confirmation relates
and indicates your agreement to those terms.

 

Very truly yours,

Wachovia Bank, N.A.

By:  

/s/ James L. Collins

--------------------------------------------------------------------------------

Name:   James L. Collins Title:   Vice President Ref. No. 1165864, 1165866

 

Accepted and Confirmed as of date first written above:

 

Novastar Mortgage, Inc.

By:  

/s/ David L. Farris

--------------------------------------------------------------------------------

Name:   David L. Farris Title:   Vice President

 

Page 3 of 3

--------------------------------------------------------------------------------

Exhibit II

 

[Form of New Agreement attached behind this page]