Exhibit 10.9

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered into as of
December 17, 2007, by and between NovaStar Financial, Inc. (the “Company”) and
Todd M. Phillips (the “Employee”).

1. EMPLOYMENT BY THE COMPANY

1.1 Employment. The Company hereby employs Employee, and Employee hereby accepts
employment with the Company, upon the terms and conditions set forth in this
Agreement.

1.2 Duties. Employee initially shall be employed by the Company in the position
of Vice President - Controller. Employee shall perform for and on behalf of the
Company such duties as the chief executive officer or Board of Directors of the
Company shall assign from time to time, and shall perform such duties in
accordance with the Company’s policies and practices, including, but not limited
to, its employment policies and practices.

1.3 Efforts. Employee hereby agrees that he will devote all of his working time
and attention and give his diligent effort and skill exclusively to the business
and interests of Company, and that he will perform such services as may from
time to time be assigned to Employee, and shall do his utmost to further enhance
and develop the best interests and welfare of the Company in all respects.
Employee agrees that he will give full attention and fully comply with the rules
and procedures as may from time to time be promulgated by Company in its sole
discretion.

1.4 Conflicts. Employee shall not, without prior written consent of the Company,
at any time during his employment with the Company: (a) accept employment with,
or render services of a business, professional or commercial nature to any
person other than the Company; (b) engage in, own or provide financial or other
assistance to any person, venture or activity which the Company may in good
faith consider to be competitive with or adverse to the Company, whether
directly or indirectly, alone or with any other person as a principle, agent,
shareholder, participant, partner, promoter, director, officer, manager,
employee, consultant, sales representative or otherwise; or (c) engage in any
venture or activity that the Company may in good faith consider to interfere
with Employee’s performance of his duties.

1.5 Authority. Employee represents that he has not entered into any agreement
that is effective at the time of the execution of this Agreement which would
prevent Employee from performing his duties to the Company. Employee is not
authorized by the Company to take, use, disclose or otherwise misappropriate any
confidential, business proprietary, trade secret and/or other any other business
information from any of Employee’s former employers to perform his job duties
with the Company, and Employee hereby covenants and agrees that Employee shall
not use or disclose any such information to the Company in performing his job
duties for the Company or otherwise.

2. COMPENSATION

2.1 Base Salary. The Company agrees to pay Employee an annual base salary (“Base
Salary”) of $145,000.00, payable in accordance with the Company’s regular
payroll schedule and subject to applicable deductions and withholdings. The
Company may increase or decrease Employee’s Base Salary at any time in its sole
discretion, subject to the rights of Employee under Section 5 of this Agreement.

2.2 2007 Performance Bonus. Employee shall be paid a Performance Bonus of
$68,400 on the first regularly scheduled pay day in 2008. The foregoing is
hereby deemed to be fully earned and shall not be subject to modification by the
Company without the written consent of Employee.

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2.3 Future Performance Bonuses. Employee shall be eligible to receive incentive
compensation (“Incentive Pay”) based upon goals established by the Company from
time to time. The Incentive Pay target is 50% of Base Salary, with a maximum of
100%. The Company may prospectively increase or decrease Employee’s Incentive
Pay and any Incentive Pay target amount thereof, and may prospectively modify
any Incentive Pay program or structure, at any time in its sole discretion,
subject to the rights of Employee under Section 5 of this Agreement; provided,
however, that the Company shall not have the right to decrease or alter the
terms of any Incentive Pay to the extent the amount or terms thereof are set
forth in a written agreement between Employee and the Company, other than
modifications made in accordance with the terms of such agreement. Incentive Pay
for any calendar year or portion thereof shall be deemed earned only at the end
of such calendar year, except to the extent otherwise provided in this Agreement
or any other written agreement between Employee and the Company. Should Employee
no longer be employed by the Company on the date on which any Incentive Pay is
deemed pursuant to the foregoing to be earned, Employee shall not be eligible or
entitled to such Incentive Pay or to any pro-rata portion thereof, except to the
extent otherwise provided in this Agreement or any other written agreement
between Employee and the Company.

2.4 Benefits. Employee shall be entitled to participate in any employee benefits
plans, perquisites and fringe benefits that the Company extends generally from
time to time to employees of the Company at the level of Employee. Separate
written descriptions of available benefits will be provided or made available
from time to time, and the Company reserves, in its sole and absolute
discretion, the right to modify these benefits in whole or in part at any time.

2.5 Vacation. Employee shall be entitled to 3 weeks of paid vacation per
calendar year, with such vacation to be accrued and taken in accordance with the
Company’s standard vacation policies.

2.6 Business Expenses. The Company shall reimburse Employee for any and all
necessary, customary and usual expenses, properly receipted in accordance with
the Company’s policies and procedures, incurred by Employee on behalf of the
Company.

2.7 Equity Awards. Equity or equity-based compensation awards including, without
limitation, stock options and/or restricted stock (“Equity Awards”) may be
offered to certain employees of the Company from time to time, at the sole
discretion of the Company. Such Equity Awards, if any, shall be governed solely
by one or more separate agreements and the provisions of any plan governing such
awards.

3. AT WILL EMPLOYMENT

Employee and the Company acknowledge that there is no agreement, express or
implied, between them for any specified term or period of employment, nor for
continuing or long-term employment. The employment relationship between Employee
and the Company is completely and, in all respects, at-will. Each of Employee
and the Company has the separate and absolute right to terminate the employment
relationship, at any time, with or without cause, for any reason or no reason
and no reason need be given. The fact that other sections of this Agreement
provide differential post-termination benefits to Employee on the basis of
whether Employee is terminated with Cause or without Cause, as defined below,
and the fact that the other rights and obligations set forth in this Agreement
remain in effect for a specified period of time, do not undermine the at-will
nature of the employment relationship. This is the entire agreement between
Employee and the Company regarding the matters set forth in this paragraph.

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4. TERMINATION OF EMPLOYMENT BY THE COMPANY

4.1 Termination For Cause. Employee’s employment may be terminated by the
Company for Cause at any time. For purposes of this Agreement, “Cause” shall
mean the existence of or a good faith belief by the Company in the existence of
facts which constitute a basis for termination of Employee’s employment in view
of relevant factors and circumstances, which may include, but are not limited
to, Employee’s duties, responsibilities, conduct on the job or otherwise, job
performance, and employment record. Acts or omissions that constitute Cause
include, but are not limited to:

(a) Breach of any of the terms of this Agreement;

(b) Failure to perform material duties in accordance with the standards from
time to time established by the Company;

(c) Neglect in performance of or failure to attend to the performance of
material duties;

(d) Insubordination or willful breach of policies and procedures of the Company;

(e) Breach of fiduciary duties; or

(f) Conduct that the Company determines in good faith may impair or tend to
impair the integrity of the Company, including but not limited to commission of
a felony, theft, misappropriation, embezzlement, dishonesty, or criminal
misconduct.

4.2 Termination For Death or Disability. Employee’s employment shall be
terminated by the Company upon the death of Employee, and may be terminated by
the Company upon the disability of Employee, consistent with any rights or
obligations of the Company and the Employee under the Americans with
Disabilities Act, or any other applicable constitutional provision or statute.
Termination for death or disability is separate and distinct from termination
with Cause or Good Reason and from termination without Cause or Good Reason, and
will give rise only to the rights and obligations expressly provided in
Section 6.3 hereof.

4.3 Termination Without Cause. Employee’s employment may be terminated by the
Company without Cause at any time and at its sole discretion.

5. TERMINATION OF EMPLOYMENT BY EMPLOYEE

5.1 Termination for Good Reason. Employee’s employment may be terminated by
Employee at any time for Good Reason. For purposes of this Agreement, “Good
Reason” shall mean the occurrence, without the Employee’s consent, of any one or
more of the following events:

(a) Except in connection with the Company’s termination of Employee’s employment
for Cause pursuant to Section 4.1 or as a result of Employee’s death or
disability: (i) a material reduction in Employee’s Base Salary or Incentive Pay
target; or (ii) a decrease in the responsibilities of Employee to a level that,
on the whole, is materially inconsistent with the position for which Employee is
then employed by the Company; or

(b) The Company requires that Employee relocate more than fifty (50) miles from
the location at which Employee is employed by the Company on the date hereof,
and the Employee objects to such relocation in writing prior to Employee’s
actual relocation.

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(c) The Company’s material breach of any of the provisions of this Agreement or
of any other agreement between the Company and Employee concerning Incentive Pay
or Equity Awards.Error! No bookmark name given.

5.2 Notice and Cure. Notwithstanding the foregoing, a termination of employment
by Employee shall not be considered as having occurred for Good Reason unless
Employee provides written notice of his objection to the event constituting Good
Reason within thirty (30) days following the occurrence thereof, specifying that
Employee believes such event to constitute Good Reason, and the Company has been
afforded a period of at least thirty (30) days following delivery of such notice
to remedy the event constituting Good Reason and has not done so.

5.3 Termination Without Good Reason. Employee’s employment may be terminated by
Employee without Good Reason at any time.

6. TREATMENT OF COMPENSATION AND BENEFITS UPON TERMINATION

6.1 For Cause or Without Good Reason. If Employee is terminated by the Company
for Cause or if Employee terminates his employment without Good Reason:

(a) Employee shall not be entitled to any continuation of Base Salary, other
than Base Salary accrued but unpaid at the date of termination of Employee’s
employment;

(b) Employee shall not be entitled to Incentive Pay not earned prior to the date
of termination of Employee’s employment;

(c) Employee shall be entitled to receive reimbursement for business expenses
incurred prior to the date of termination of Employee’s employment to the extent
provided in Section 2.5 hereof;

(d) Employee shall not be entitled to continue to receive any benefits from the
Company after the date of termination of Employee’s employment, except as
otherwise required by the applicable benefit plan or applicable law.

6.2 Other than for Cause; for Good Reason. If Employee’s employment is
terminated by the Company other than for Cause, or by the Employee for Good
Reason:

(a) Employee shall receive compensation at the same rate as Employee’s Base
Salary in effect on the date of termination of Employee’s employment, for the
period commencing on the date of termination and continuing until the date that
is nine (9) months following the date of termination of Employee’s employment,
pursuant to a “Consultancy Agreement” between Employee and the Company, the
terms and conditions of which are outlined in Section 8.4 of this Agreement;

(b) Employee shall be entitled to payment, within ten (10) days following
termination, of (i) all Incentive Pay fully earned prior to or upon the date of
termination of Employee’s employment (including, without limitation, the full
amount of the 2007 Performance Bonus); and (ii) to the extent and only to the
extent determined by the Company in its sole and absolute discretion, or
required by any other written agreement between Employee and the Company,
Incentive Pay not otherwise fully earned prior to the date of termination of
Employee’s employment;

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(c) Employee shall be entitled to receive reimbursement for business expenses
incurred prior to the date of termination of Employee’s employment to the extent
provided in Section 2.5 hereof;

(d) Employee shall not be entitled to continue to receive any benefits from the
Company after the date of termination of Employee’s employment, except as
otherwise required by the applicable benefit plan or applicable law.

6.3 For Death or Disability. If Employee’s employment is terminated by reason of
the death or disability of Employee:

(a) Employee shall not be entitled to any continuation of Base Salary, other
than Base Salary accrued but unpaid at the date of termination of Employee’s
employment;

(b) Employee shall be entitled to payment, within ten (10) days following
termination, of (i) all Incentive Pay fully earned prior to or upon the date of
termination of Employee’s employment; and (ii) to the extent and only to the
extent determined by the Company in its sole and absolute discretion, or
required by any other written agreement between Employee and the Company,
Incentive Pay not otherwise fully earned prior to the date of termination of
Employee’s employment;

(c) Employee shall be entitled to receive reimbursement for business expenses
incurred prior to the date of termination of Employee’s employment to the extent
provided in Section 2.5 hereof;

(d) Employee shall not be entitled to continue to receive any benefits from the
Company after the date of termination of Employee’s employment, except as
otherwise required by the applicable benefit plan or applicable law.

6.4 After Change in Control by Company Other than for Cause or by Employee for
Good Reason. If Employee’s employment shall be terminated after a Change in
Control, as defined in Section 6.5, (a) by Company other than for Cause, or
(b) by Employee for Good Reason, Employee shall be entitled to the following
additional benefits, in addition to those otherwise provided for in this
Agreement (including, without limitation, Section 6.2 hereof):

(a) Employee shall be paid an amount (the “Severance Amount”) equal to one
(1) times the Employee’s combined current year Base Salary and actual Incentive
Pay for the preceding fiscal year; provided, however, the Severance Amount shall
not be less than Two Hundred Thousand Dollars ($200,000.00). The Severance
Amount shall be paid in a single lump sum within ten (10) days following
termination of Employee’s employment by the Company other than for Cause or by
Employee for Good Reason.

(b) Vesting for Equity Awards will accelerate to the date of termination. In
other words, Employee shall immediately be vested with all Equity Awards awarded
by Company which have not been exercised prior to the termination date. The
provisions of the agreements and/or plans governing the stock options and
restricted stock will otherwise be controlling.

6.5 Change in Control. A “Change in Control” shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied.

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(a) Any “person” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”) (other than Company; any
trustee or other fiduciary holding securities under an executive benefit plan of
Company; or any company owned, directly or indirectly, by the stockholders of
Company in substantially the same proportions as their ownership of the stock of
Company), is or becomes the “beneficial owner” (as defined by Rule 13d-3 under
the Exchange Act), directly or indirectly, of the securities of Company (not
including any securities acquired directly from Company or from a transferor in
a transaction expressly approved or consented to by the Board of Directors)
representing more than 25% of the combined voting power of Company’s then
outstanding securities; or

(b) During any period of two consecutive years (not including any period prior
to the execution of the Agreement), individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director designated by a person who has entered into an agreement with Company
to effect a transaction described in clause (a), (c) or (d) of this section),
(i) whose election by the Board of Directors or nomination for election by
Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved or (ii) whose election is to replace a person who ceases to be a
director due to death, disability or age, cease for any reason to constitute a
majority thereof; or

(c) The stockholders of Company approve a merger or consolidation of Company
with another corporation, other than (i) a merger or consolidation which would
result in the voting securities of Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an
executive benefit plan of Company, at least 75% of the combined voting power of
the voting securities of Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of Company (or similar
transaction) in which no person acquires more than 50% of the combined voting
power of Company’s then outstanding securities; or

(d) The stockholders of Company approve a plan of complete liquidation of
Company or an agreement for the sale or disposition by Company of all or
substantially all Company’s assets.

7. NON-COMPETITION

7.1 During Employment. Employee agrees that, during his employment by the
Company, he will not engage directly or indirectly, at any location within the
United States, in any business of the same or similar nature to the business of
the Company or of any Affiliate thereof or to any business in which the Company
or any Affiliate thereof is engaged in developing, nor will Employee participate
directly or indirectly in the ownership or management of any enterprise engaged
in such a business within the United States, including ownership or management
as defined by the Sarbanes-Oxley Act of 2002. As used in this Agreement, an
“Affiliate” of any person or entity means any other person or entity that
controls, is controlled by, or is under common control with such first person or
entity, with “control” of an entity meaning direct or indirect ownership of
fifty percent (50%) or more of the voting power or economic interests of such
entity.

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8. ADDITIONAL OBLIGATIONS

8.1 Non-Interference. Employee agrees that during the term of his employment
with the Company and for a period of one (1) year after termination of
employment with the Company for any reason, Employee shall not interfere with
the business of the Company or any of its Affiliates.

8.2 Non-Solicitation. Employee agrees that during the term of his employment
with the Company and for a period of one (1) year after termination of
employment with the Company for any reason, Employee shall not directly or
indirectly solicit or encourage any of the employees of the Company or of any
Affiliate thereof to leave such employment and/or to work for another company or
business, whether or not the solicited employee would commit any breach of his
own employment terms by leaving the service of the Company or of such Affiliate.

8.3 Non-Disparagement. Employee agrees that he will not, at any time during the
term of his employment with the Company or thereafter, in any way disparage the
Company or any of its Affiliates (or any of their respective directors,
officers, managers, employees or other representatives), and will not make or
solicit any comments, statements, or the like to others that are derogatory or
detrimental to the good name or business reputation of the Company or of any
Affiliate thereof.

8.4 Consultancy Agreement.

(a) Employee shall enter into, and shall be conclusively deemed to have entered
into, a consultancy agreement with Company upon the terms of this Section 8.4
(i) immediately upon termination of Employee’s employment without Cause by the
Company or for Good Reason by Employee, or (ii) at the Company’s sole
discretion, immediately upon the Company’s request following termination of
Employee’s employment with Cause by the Company or without Good Reason by
Employee. The term of the consultancy will commence on the date of termination
of Employee’s employment and shall continue until the date that is six
(6) months following the date of termination of Employee’s employment (the
“Consulting Period”). In exchange for Employee’s consulting services, Employee
shall receive compensation during the Consulting Period at the same rate as
Employee’s Base Salary in effect on the date of termination of Employee’s
employment (“Consultancy Pay”), payable in equal monthly installments.

(b) During the Consulting Period, Employee agrees to make himself available to
the Company for up to ten (10) hours per week, whether by telephone, e-mail, or
in person, on an as-needed basis to consult with respect to matters that were
within Employee’s job description during the course of Employee’s employment.
Employee agrees to respond promptly, reasonably and cooperatively to the
Company’s requests for assistance. Barring special circumstances, the consulting
hours shall not be cumulative; accordingly, hours not used within a given week
will be waived by the Company, but Employee will receive his full pay under
Section 8.4(a). However, the Company reserves the right to require Employee to
provide more than ten (10) hours of service per week in the event that special
circumstances arise in which Employee’s unique assistance is required by the
Company. (Examples of special circumstances include, but are not limited to
assistance in litigation or responding to regulatory inquiries). Notwithstanding
the foregoing, in the event that Employee accepts employment or other consulting
work within the Consulting Period, Employee will be required to spend no more
than five (5) hours per week consulting with the Company.

(c) In order to protect the Company’s confidential and trade secret information
from use or disclosure to a party other than the Company, and to enable the
Company to be able to obtain the benefits of Employee’s consulting obligations
hereunder, Employee agrees that during the Consulting Period, Employee (i) will
continue to abide by the provisions of

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paragraphs 8.1, 8.2 and 8.3 above, and (ii) shall not directly or indirectly
contact, solicit, divert or take away, or attempt to contact, solicit, divert,
or take away, the business or patronage of any of the clients, customers, or
accounts, or prospective clients, customers, or accounts of the Company or of
any of its Affiliates.

9. CONFIDENTIALITY/TRADE SECRETS

9.1 Confidential Information. For the purpose of this Agreement, “Confidential
Information” means any technology, ideas, concepts, design, devices or other
information belonging to or relating to the affairs of the Company or any
Affiliate thereof, including, but not limited to, (a) all trade secrets,
unpublished proprietary or other information with respect to any business
conducted or proposed to be conducted by the Company or any Affiliate thereof,
(b) any present or proposed services or products, (c) all lending policies and
procedures, contracts and agreements with lenders, investors, and other clients,
and information regarding lenders, investors, loan applicants, and borrowers,
(d) the manner in which business is conducted, sales techniques, and methods of
data processing, and (e) budgets, forecasts, and financial information;
provided, however, that Confidential Information shall not include any
information that has entered or enters the public domain through no fault of
Employee.

9.2 Value and Secrecy. Employee acknowledges and agrees that the Confidential
Information has independent actual or potential economic value from not being
generally known to the public or to other persons who can obtain economic value
from its disclosure or use, is not readily available or independently
ascertainable through any source other than Company and its Affiliates, and is
subject to reasonable efforts to maintain its secrecy.

9.3 Ownership. Employee understands and agrees that any and all Confidential
Information produced or used by Employee during the period of employment belongs
to the Company and its Affiliates and not to Employee.

9.4 Restrictions on Use and Disclosure. In recognition that the business of the
Company and that the nature of Employee’s work will require Employee to have
access to Confidential Information which, if disclosed in an unauthorized
manner, could be highly prejudicial to the Company, its Affiliates, and/or their
respective clients:

(a) Employee agrees not to make any use whatsoever, directly or indirectly, at
any time, of any Confidential Information, except as required in the course of
his employment with or provision of consulting services to the Company.

(b) Employee agrees not to disclose in any manner any Confidential Information,
directly or indirectly, during employment with the Company or following
termination of employment, except as required in the course of his employment
with or provision of consulting services to the Company, or as required by
applicable law, judicial or regulatory process, or other governmental authority.

(c) Employee agrees to take, during his employment with the Company and
following termination of employment, all precautions reasonably necessary to
prevent the unauthorized use, disclosure, or dissemination of Confidential
Information then his possession or control.

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(d) Upon termination of employment, Employee will immediately turn over to the
Company all Confidential Information, including all copies thereof, created or
obtained by, or otherwise in the possession of, Employee.

9.5 Other Rights. Employee recognizes and acknowledges that none of the above
provisions, nor the Company’s exercise of any rights under this Agreement, shall
limit the rights of the Company under applicable statutes and common law rules
regarding trade secrets, including, without limitation, the Uniform Trade
Secrets Act.

10. MISCELLANEOUS

10.1 Section 409A Requirements. To the extent applicable, this Agreement shall
be interpreted, construed and operated in accordance with the Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury
regulations and other guidance issued thereunder. If on the date of
the Employee’s separation from service (as defined in Treasury Regulation
§1.409A-1(h)) with the Company the Employee is a specified employee (as defined
in Code Section 409A and Treasury Regulation §1.409A-1(i)), then,
notwithstanding any other provision of this Agreement, no payment constituting
the “deferral of compensation” within the meaning of Treasury Regulation
§1.409A-1(b) and after application of the exemptions provided in Treasury
Regulation §§1.409A-1(b)(4) and 1.409A-1(b)(9)(iii) shall be made to the
Employee at any time during the six (6) month period following the Employee’s
separation from service, and any such amounts shall instead be paid in a lump
sum on the first payroll payment date following expiration of such six (6) month
period. For purposes of conforming this Agreement to Section 409A of the Code,
the parties agree that any reference to termination of employment, severance
from service or similar terms shall mean a “separation from service” as defined
in Treasury Regulation §1.409A-1(h).

10.2 Specific Performance. Employee understands and expressly acknowledges that
the provisions of Sections 7, 8 and 9 of this Agreement are material terms of
this Agreement. Employee acknowledges that any breach of the provisions of
Section 7, 8 or 9 of this Agreement shall result in serious and irreparable
injury to the Company for which the Company cannot be adequately compensated by
monetary damages alone. Employee agrees, therefore, that, in addition to any
other remedies it may have, the Company shall be entitled to enforce the
specific performance of this Agreement and to seek both temporary and permanent
injunctive relief (to the extent permitted by law).

10.3 Successors and Assigns. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of the Company. Employee cannot assign any right or obligation under
this Agreement without the prior written consent of the Company.

10.4 Entire Agreement; Amendment. Except for Incentive Pay and Equity Award
agreements and any other agreements referenced herein that have or may be
entered into by the Company and Employee, this Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supercedes any prior agreement by and between the parties with
respect to the subject matter hereof. This Agreement can be modified only by a
written instrument executed by Employee and an officer of the Company duly
authorized to do so by the Board of Directors of the Company.

10.5 Waiver. Failure to insist upon compliance with any of the terms, covenants
or conditions hereof shall not be deemed a waiver of such term, covenant or
condition, nor shall any waiver or relinquishment of, or failure to insist upon
strict compliance with, any right or power hereunder at any one or more times be
deemed a waiver of or relinquishment of such right or power at any other time or
times.

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10.6 Headings. Section headings in this Agreement are included for convenience
of reference only and shall not constitute a part of this Agreement for any
purpose.

10.7 Severability. In the event that one or more of the provisions contained
herein are held to be invalid by a court of competent jurisdiction, the
remainder of the contract will continue in full force and effect.

10.8 Attorney’s Fees. The prevailing party in any action or dispute between the
Company and Employee shall be entitled to recover reasonable attorneys’ fees and
other costs incurred in that action or proceeding in addition to any other
relief to which the prevailing party may be entitled.

10.9 Negotiation. The parties warrant and agree that the terms of this Agreement
were the subject of negotiations between them. Employee acknowledges that he has
read this Agreement and has had full opportunity to seek independent legal
advice before signing it.

10.10 Governing Law; Consent to Jurisdiction. This Agreement and the legal
relations thus created between the parties hereto shall be governed by and
construed under and in accordance with the laws of the State of Missouri,
without regard to conflicts of laws principles. FOR PURPOSES OF DETERMINING ANY
CONTROVERSY ARISING UNDER THIS AGREEMENT, EACH OF THE PARTIES HEREBY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION, PERSONAL AND OTHERWISE, OF THE FEDERAL AND STATE
COURTS OF THE STATE OF MISSOURI, AND HEREBY WAIVES ANY OBJECTIONS OF ANY NATURE
TO VENUE IN SUCH COURTS.

[Signatures on following page.]

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the date first written above.

 

EMPLOYEE:

/s/ Todd M. Phillips

Todd M. Phillips COMPANY: NOVASTAR FINANCIAL, INC. By:  

/s/ Rodney E. Schwatken

  Rodney Schwatken   Vice President