Novation Agreement - Deutsche Bank AG New York



 Exhibit 10.6 
 Execution copy 
  
 ISDA® 
 International Swaps and Derivatives Association, Inc. 
  
 NOVATION AGREEMENT 
  
 dated as of February 22, 2005 among: 
  
 DEUTSCHE BANK AG NEW YORK (the “Remaining Party”), 
 NOVASTAR FINANCIAL, INC. (the “Transferor”)

  
 AND 
 NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2005-1 (the “Transferees”). 
  
 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 and subject to a 1992 ISDA Master Agreement dated as of September 21, 2004 (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 February 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. 
  










	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 2005-1. 

  

	 	(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. 

  

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	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. 

  

	 	(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 



  

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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 February 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
2005-1 (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 

  

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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. 
  

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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. 
  

									
	 DEUTSCHE BANK AG NEW YORK
	 	 	 	 NOVASTAR FINANCIAL, INC.

					
	By:	 	 /s/    Steven
Kessler        
	 	 	 	By:	 	 /s/    David L.
Farris        

	 	 	 Name:Steven Kessler
	 	 	 	 	 	 Name: David L. Farris

	 	 	 Title: Director
	 	 	 	 	 	 Title: Vice President

	 	 	 Date:
	 	 	 	 	 	 Date:


  

									
	NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2005-1	 	 	 	 
			
	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 2005-1	 	 	 	 
					
	By:	 	 /s/    Kathleen Yohe
	 	 	 	 	 	 
	 	 	 Name: Kathleen Yohe
	 	 	 	 	 	 
	 	 	 Title: Vice President
	 	 	 	 	 	 
	 	 	 Date:
	 	 	 	 	 	 

  

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 Exhibit I 
  

[Old Swap Confirmations attached behind this page] 
  

 7 









					
	 Deutsche Bank
 Aktiengesellschaft
	 	 	 	



  
 Revised as of
January 19, 2005 
  

			
		
	 Date:
	  	January 12, 2005
		
	 To:
	  	Novastar Financial, Inc.
		
	 Attention:
 Facsimile no.:
	  	 Swaps Operations Department
 612 9236
6020

		
	 Our Reference:
	  	Global No. N357137N
		
	 Re:
	  	Interest Rate Swap Transaction- This Confirmation supersedes and replaces all prior communication between the parties hereto with respect to the Transaction described
below

  
 Ladies and Gentlemen: 
  
 The purpose of this letter agreement is to set forth the terms and conditions of the
Transaction entered into between Deutsche Bank AG (“DBAG”) and Novastar Financial, Inc. (“Counterparty”) on the Trade Date specified below (the “Transaction”). This letter agreement constitutes a
“Confirmation” as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions (the
“Definitions”) as published by the International Swaps and Derivatives Association, Inc. are incorporated by reference herein. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern.

  
 For the purpose of this Confirmation, all references in the Definitions or the
Agreement to a “Swap Transaction” shall be deemed to be references to this Transaction. 
  
 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of September 21, 2004 (as the same may be amended or supplemented from time to time, the “Agreement”),
between DBAG and Counterparty. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. 
  
 2. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
		
	 Notional Amount:
	  	USD 80,000,000.00
		
	 Trade Date:
	  	January 12, 2005
		
	 Effective Date:
	  	January 25, 2005
		
	 Termination Date:
	  	January 25, 2007, subject to adjustment in accordance with the Modified Following Business Day Convention

  










			
		
	 Filed Amounts:
	  	 
		
	 Fixed Rate Payer
	  	Counterparty
		
	 Fixed Rate Payer Period End Dates:
	  	The 25th day of each month of each year, commencing February 25, 2005, through and including the Termination Date with No Adjustment
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th day of each month of each year, commencing February 25, 2005, through and including the Termination Date
		
	 Fixed Rate:
	  	3.58%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 Fixed Rate Payer Business Days:
	  	New York
		
	 Fixed Rate Payer Business Day Convention:
	  	Modified Following
		
	 Floating Amounts:
	  	 
		
	 Floating Rate Payer
	  	DBAG
		
	 Floating Rate Payer Period End Dates:
	  	The 25th day of each month of each year, commencing February 25, 2005, through and including the Termination Date
		
	 Floating Rate Payer Payment Dates:
	  	The 25th day of each month of each year, commencing February 25, 2005, through and including the Termination Date
		
	 Floating Rate for initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	One month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first Floating Rate Payer Business Day of each Calculation Period or Compounding Period, if Compounding is applicable.
		
	 Compounding:
	  	Inapplicable
		
	 Floating Rate Payer Business Days:
	  	New York
		
	 Floating Rate Payer Business Day Convention:
	  	Modified Following

  

 2 









			
	3. Account Details:	  	 
		
	 USD DBAG Payment Instructions:
	  	 
	 Account With:
	  	Deutsche Bank AG, New York
	 SWIFT Code:
	  	DEUTUS33
	 Favor Of:
	  	Deutsche Bank AG, New York
	 Account Number:
	  	100440170004
		
	 USD Counterparty Payment Instructions:
	  	 
	 PLEASE PROVIDE AT YOUR EARLIEST CONVENIENCE


  
 4. Offices: 
  
 The Office of DBAG for this Transaction is New York. 
  

			
	5. Calculation Agent:	  	The party specified as such in the Agreement, or if not specified therein, DBAG.

  
 6. Representations 
  
 Counterparty, if it is a nonresident alien individual, foreign, corporation, foreign
partnership, foreign trust, or foreign estate, represents that it is a foreign person for purposes of US Treasury regulations relating to information reporting and backup withholding. 
  
 Each party will be deemed to represent to the other party on the date on which it enters into this Transaction that (absent a written
agreement between the parties that expressly imposes affirmative obligations to the contrary for this Transaction): 
  
 (i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is
appropriate or proper for it based upon its own judgement and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter
into this Transaction; it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication
(written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction. 
  
 (ii) 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 Transaction. It is also capable of assuming, and assumes, the risks of this Transaction. 
  
 (iii) Status of Parties. The other party is not acting as a fiduciary for, or an adviser to it in respect of this Transaction. 
  

 3 








 7. Please confirm that the foregoing correctly sets forth the terms of our agreement by having an authorized officer sign
this Confirmation and return it via facsimile or e-mail to: 
  
 Attention: Derivative Documentation 
 Telephone: 44 20 7547 4755 
 Facsimile: 44 20 7545 9761 
 E-mail:
Derivative. Documentation@db.com 
  
 This message will be the only form of
Confirmation dispatched by us. If you wish to exchange hard copy forms of this Confirmation, please contact us. 
  
 Yours sincerely, 
  

			
	Deutsche Bank AG
		
	By:	 	 /s/ Serge J. Reyser

	 Name:
	 	 Serge J. Reyser

	
	 Authorized Signatory

		
	 By:
	 	 /s/ Illegible

	 Name:
	 	 
	
	 Authorized Signatory

	
	 Confirmed as of the date first written above:

	
	 Novastar Financial, Inc.

		
	 By:
	 	 /s/ David L. Farris

	 Name:
	 	 David L. Farris

	 Title:
	 	 V.P.


  

 4 









					
	 Deutsche Bank
 Aktiengesellschaft
	 	 	 	



  
 Revised as of
January 18, 2005 
  

			
	Date:	  	January 3, 2005
		
	To:	  	Novastar Financial, Inc.
		
	Attention:	  	Swaps Documentation Department
	Facsimile no.:	  	612 9236 6020
		
	Our Reference:	  	Global No. N349548N
		
	Re:	  	Interest Rate Swap Transaction. This Confirmation supersedes and replaces all prior communication between the parties hereto with respect to the Transaction described
below.

  
 Ladies and Gentlemen: 
  
 The purpose of this letter agreement is to set forth the terms and conditions of the
Transaction entered into between Deutsche Bank AG (“DBAG”) and Novastar Financial, Inc. (“Counterparty”) on the Trade Date specified below (the “Transaction”). This letter agreement constitutes a
“Confirmation” as referred to in the Agreement specified below. 
  
 The
definitions and provisions contained in the 2000 ISDA Definitions (the “Definitions”) as published by the International Swaps and Derivatives Association, Inc. are incorporated by reference herein. In the event of any inconsistency between
the Definitions and this Confirmation, this Confirmation will govern. 
  
 For the
purpose of this Confirmation, all reference in the Definitions or the Agreement to a “Swap Transaction” shall be deemed to be references to this Transaction. 
  
 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of September 21, 2004. (as the
same may be amended or supplemented from time to time, the “Agreement”), between DBAG and Counterparty. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. 
  
 2. The terms of the particular Transaction to which this Confirmation relates are as follows:

  

			
		
	 Notional Amount:
	  	USD 75,000,000.00
		
	 Trade Date:
	  	December 3, 2004
		
	 Effective Date:
	  	December 27, 2004
		
	 Termination Date:
	  	December 25, 2006
		
	 Fixed Amounts:
	  	 
		
	 Fixed Rate Payer:
	  	Counterparty

  










			
	 Fixed Rate Payer Period End Dates:
	  	The 25th day of each month of each year, commencing January 25, 2005, through and including the Termination Date with No Adjustment
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th day of each month of each year, commencing January 25, 2005, through and including the Termination Date
		
	 Fixed Rate:
	  	3.32%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 Fixed Rate Payer Business Days:
	  	New York
		
	 Fixed Rate Payer Business Day Convention:
	  	Modified Following
		
	 Floating Amounts:
	  	 
		
	 Floating Rate Payer:
	  	DBAG
		
	 Floating Rate Payer Period End Dates:
	  	The 25th day of each month of each year, commencing January 25, 2005, through and including the Termination Date
		
	 Floating Rate Payer Payment Dates:
	  	The 25th day of each month of each year, commencing January 25, 2005, through and including the Termination Date
		
	 Floating Rate for initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	One month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first Floating Rate Payer Business Day of each Calculation Period or Compounding Period, if Compounding is applicable.
		
	 Compounding:
	  	Inapplicable
		
	 Floating Rate Payer Business Days:
	  	New York
		
	 Floating Rate Payer Business Day Convention:
	  	Modified Following

  

 2 








 3. Account Details: 
  

			
	USD DBAG Payment Instructions:	 	Deutsche Bank AG, New York
	Account With:	 	DEUTUS33
	SWIFT Code:	 	Deutsche Bank AG, New York
	Favor Of	 	100440170004
	Account Number:	 	 
		
	USD Counterparty Payment Instructions:	 	 
	PLEASE PROVIDE AT YOUR EARLIEST CONVENIENCE	 	 

  
 4. Offices: 
  
 The Office of DBAG for this Transaction is New York. 
  

			
	5. Calculation Agent:	 	The Party specified as such in the Agreement, or if not specified therein, DBAG.
	 	 

  
 6. Representations 

 
 Counterparty, if it is a nonresident alien individual, foreign corporation, foreign
partnership, foreign trust, or foreign estate, represents that it is a foreign person for purposes of US Treasury regulations relating to information reporting and backup withholding. 
  
 Each party will be deemed to represent to the other party on the date on which it enters into this Transaction that (absents written
agreement between the parties that expressly imposed affirmative obligations to the contrary for this Transaction): 
  
 (i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction
is appropriate or proper for it based upon its own judgement and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to
enter into this Transaction; it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication
(written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction. 
  
 (ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on it own behalf or through independent professional advice), and
understands and accepts, the terms, conditions and risks of this Transaction. It is also capable of assuming, and assumes, the risks of this Transaction. 
  
 (iii) Status of Parties. The other party is not acting as a fiduciary for, or an adviser to it in respect of this Transaction. 
  

 3 








 7. Please confirm that the foregoing correctly sets forth the terms of our agreement by having an authorized officer sign
this Confirmation and return it via facsimile or e-mail to: 
  
 Attention: Derivative Documentation 
 Telephone: 44 20 7547 4755 
 Facsimile: 44 20 7545 9761 
 E-mail:
Derivative.Documentation@db.com 
  
 This message will be the only form of
Confirmation dispatched by us. If you wish to exchange hard copy forms of this Confirmation, please contact us. 
  

			
	 Yours sincerely,

	
	Deutsche Bank AG
		
	By:	 	 /s/ Serge J. Reyser

	 Name: Serge J. Reyser


  

			
		
	By:	 	 /s/ Illegible

	 Name:
	 	 
	 Authorized Signatory


  
 Confirmed as of the date first written
above: 
  

			
	Novastar Financial, Inc.
		
	By:	 	 /s/ David L. Farris

	 Name:
	 	 David L. Farris

	 Title:
	 	 V.P.


  

 4 








 Exhibit II 
  

[Form of New Agreement attached behind this page] 
  

 8