Document:

Novation Agreement

 Exhibit 10.2 
 ISDA® 
 International Swaps and Derivatives Association, Inc. 
 NOVATION AGREEMENT 
 dated as of April 28, 2006 among: 
 THE
ROYAL BANK OF SCOTLAND PLC. (the “Remaining Party”), 
 NOVASTAR FINANCIAL, INC. (the “Transferor”)

 AND 
 NOVASTAR MORTGAGE FUNDING
TRUST, SERIES 2006-1 (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”) with reference numbers D6871653, D6881523, D6881524, D6884026, D6890279, D6890293 and D6896960, respectively, attached hereto as Exhibit I
and subject to a 1992 ISDA Master Agreement dated as of June 30, 2005 (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”). 
 With effect from and including April 28, 2006 (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 enter into a new transaction (each a “New Transaction”) between them having terms identical to those of each 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 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)	subject to Section 2(d) of this Novation Agreement, the Remaining Party and the Transferor are each 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
Transactions; 

  

	 	(b)	in respect of each New Transaction, the Remaining Party and the Transferee each 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). For the sake of clarity, all references to
Independent Amounts shall be deemed deleted from the confirmations for each New Transaction; 

  

	 	(c)	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 

  

	 	(d)	on the Novation Date, the Remaining Party shall transfer 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. 

  

	 	(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 

  

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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 any and all such conditions and warranties, whether express or implied by law or
otherwise, are hereby excluded. 

  

	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. 
  

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	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 and subject to the Rating Agency Condition as defined in the New Agreement. 
  

	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. 
  

	 	(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. 

 It is expressly
understood and agreed by the parties hereto that (i) this Novation Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of Party B, in the exercise of the powers and
authority conferred and vested in it under the Trust Agreement, (ii) each of the representations, undertakings and agreements herein made on the part of Party B is made and intended not as personal representations, undertakings and agreements
by Wilmington Trust Company but is made and intended for the purpose of binding only Party B, (iii) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (iv) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or expenses of Party B or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by Party B under this Novation Agreement
or any other related documents. 
  

	 	(d)	Sale and Servicing Agreement. 

 Capitalized terms
used in this Novation Agreement that are not defined herein and are defined in the Sale and Servicing Agreement among NovaStar Certificates Financing Corporation, NovaStar Mortgage Inc., NovaStar Mortgage Funding Trust 2006-1, JPMorgan Chase Bank,
National Association (the “Indenture Trustee”) and U.S. Bank Corporate Trust Services dated as of April 1, 2006 (the “Sale and Servicing Agreement”) shall have the respective meanings assigned to them in the
Sale and Servicing Agreement. 
  

	 	(e)	Agency Role of Greenwich Capital Markets, Inc. In connection with this Novation Agreement, Greenwich Capital Markets, Inc. has acted as agent on behalf of the Remaining
Party. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of the Remaining Party under this Agreement. 

  

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	 	(f)	Calculation 

 Promptly after each Reset Date, but in
no event later than three New York Business Days prior to each related Distribution Date, the Calculation Agent shall deliver the reset notice in writing via mail or facsimile to the Indenture Trustee at the address provided in the notices portion
of the New Agreement. 
  

	 	(g)	Account Details 

 Remaining Party 
 The Royal Bank of Scotland 
 Bank: JPMorgan
Chase Bank 
 ABA No.: 021000021 
 Account No.: 400930153 
 Attention: Financial Markets Fixed Income and Interest Rate Derivative Operations, London 
 SWIFT Code: SWIFT RBOSGB2RTCM with JPMorgan Chase Bank, New York CHASUS33 
 Transferee 
 JPMorgan Chase Bank, N.A. 
 ABA # 021000021 
 Acct # 507947541

 Acct Name SFS-NY Incoming Wire Account 
 Attn Ariella Kaminer 
 Ref Novastar 2006-1, Cap/Swap confirm #
[            ] 
  

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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. 
  

									
	 THE ROYAL BANK OF SCOTLAND PLC
	 		 	 NOVASTAR FINANCIAL, INC.

			
	 By: Greenwich Capital Markets, Inc., its agent
	 		 	
					
	 By:
	 	  	 		 	 By:
	 	  
		 	Name:	 		 		 	Name: David L. Farris
		 	Title:	 		 		 	Title: Vice President
			
	NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1	 		 	
			
	 By: Wilmington Trust Company, not in its individual
 capacity but solely as Owner Trustee under the Trust
 Agreement
	 		 	
				
	 By:
	 	  	 		 	
		 	Name:	 		 		 	
		 	Title:	 		 		 	

  

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 Exhibit I 
 [Old Swap Confirmations attached behind this page] 

 Exhibit II 
 [Form of New Agreement attached behind this page]Master Agreement

 Exhibit 10.3 
 (Multicurrency – Cross Border) 
 ISDA® 
 International Swap Dealers
Association, Inc. 
 MASTER AGREEMENT 
 dated as of April 28, 2006 
  

					
	 THE ROYAL BANK OF
 SCOTLAND PLC
	  	and	  	 NOVASTAR MORTGAGE FUNDING
 TRUST, SERIES 2006-1, a Delaware statutory trust

			
	(“Party A”)	  		  	(“Party B”)

 have entered and/or anticipate entering into one of more transactions (each a “Transaction”) that are or
will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties confirming those Transactions.

 Accordingly, the parties agree as follows: — 
  

	1.	Interpretation 

 (a) Definitions. The terms
defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. 
 (b)
Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. 
 (c)
Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the
parties would not otherwise enter into any Transactions. 
  

	2.	Obligations 

 (a) General Conditions.

 (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions
of this Agreement. 
 (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account
specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such
delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. 
 (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other
applicable condition precedent specified in this Agreement. 

 (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving
notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. 
 (c) Netting. If on any date amounts would otherwise be payable: — 
  

	 	(i)	in the same currency; and 

  

	 	(ii)	in respect of the same Transaction, 

 by each party to the other, then, on
such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would
otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate
amount. 
 The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same
date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be
made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. 
 (d) Deduction or Withholding for Tax. 
 (i) Gross-Up. All payments under this Agreement
will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a
party is so required to deduct or withhold, then that party (“X”) will: — 
 (1) promptly notify the other party
(“Y”) of such requirement; 
 (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the
full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has
been assessed against Y; 
 (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable
to Y, evidencing such payment to such authorities; and 
 (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to
which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y
would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for: — 
 (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or 
 (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for
(I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this
Agreement) or (II) a Change in Tax Law. 
  

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 (ii) Liability. If: — 
 (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding
in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); 
 (2) X does not so deduct or
withhold; and 
 (3) a liability resulting from such Tax is assessed directly against X, 
 then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability
(including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). 
 (d) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other
party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of
daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be
settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 
  

	2.	Representations 

 Each party represents to the other party (which
representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that: —

 (a) Basic Representations. 
 (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; 
 (ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a
party and has taken all necessary action to authorise such execution, delivery and performance; 
 (iii) No Violation or Conflict. Such
execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or
any contractual restriction binding on or affecting it or any of its assets; 
 (iv) Consents. All governmental and other consents that
are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and

 (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its
legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). 
  

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 (b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its
knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which
it is a party. 
 (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any
action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit
Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. 
 (d) Accuracy
of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information,
true, accurate and complete in every material respect. 
 (e) Payer Tax Representation. Each representation specified in the Schedule as being
made by it for the purpose of this Section 3(e) is accurate and true. 
 (f) Payee Tax Representations. Each representation specified in
the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 
  

	3.	Agreements 

 Each party agrees with the other that, so long as
either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: — 
 (a) Furnish
Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs: — 
 (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; 
 (ii) any other documents specified in the Schedule or any Confirmation; and 
 (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or
document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed
and to be delivered with any reasonably required certification, 
 in each case by the date specified in the Schedule or such Confirmation or, if none is
specified, as soon as reasonably practicable. 
 (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and
effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become
necessary in the future. 
 (c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may
be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. 
 (d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. 
 (e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated, 

  

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organised, managed and controlled. or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this
Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party’s execution or performance of this Agreement by any such
Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 
  

	4.	Events of Default and Termination Events 

 (a) Events of
Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an “Event of
Default”) with respect to such party: — 
 (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; 
 (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance
with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; 
 (iii) Credit Support Default. 
 (1) Failure by the party or any Credit Support Provider of such party to comply with or
perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; 
 (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect
for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of
the other party; or 
 (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document; 
 (iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any
material respect when made or repeated or deemed to have been made or repeated; 
 (v) Default under Specified Transaction. The party,
any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of,
an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment,
delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms,
disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); 
 (vi) Cross Default. If “Cross Default” is specified in the Schedule as applying to the party, the occurrence or existence of (1) a
default, event of default or other similar condition or event (however 

  

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described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements
or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness
becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such
Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period); 
 (vii) Bankruptcy. The party, any Credit Support Provider of such party or any
applicable Specified Entity of such party: — 
 (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger);
(2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition
is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order
for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof, (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes
or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or 
 (viii) Merger Without Assumption. The
party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or
transfer: — 
 (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or 
 (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or
transferee entity of its obligations under this Agreement. 
 (b) Termination Events. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below
or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event 

  

 6 

 
Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:
— 
 (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered
into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date. it becomes unlawful (other than as a result of a breach by
the party of Section 4(b)) for such party (which will be the Affected Party): — 
 (1) to perform any absolute or contingent
obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or 
 (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support
Provider) has under any Credit Support Document relating to such Transaction; 
 (ii) Tax Event. Due to (x) any action taken by a
taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); 
 (iii) Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding Scheduled Payment Date will either (1) be
required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or
amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); 
 (iv) Credit Event Upon Merger. If “Credit Event Upon Merger” is specified in the Schedule as applying to the party, such party
(“X”), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); of 
 (v)
Additional Termination Event. If any “Additional Termination Event” is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as
specified for such Additional Termination Event in the Schedule or such Confirmation). 
 (c) Event of Default and Illegality. If an event or
circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 
  

 7 

	5.	Early Termination 

 (a) Right to Terminate Following Event of
Default. If at any time an Event of Default with respect to a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting Party”) may, by not more than 20 days
notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, “Automatic Early
Termination” is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified
in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with
respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). 
 (b) Right to Terminate
Following Termination Event. 
 (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware
of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. 
 (ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts
(which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. 
 If the Affected Party is not able to
make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). 
 Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party’s policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. 
 (iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. 
 (iv) Right to Terminate. If: — 
 (1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or 
 (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs
and the Burdened Party is not the Affected Party, 
 either party in the case of an Illegality, the Burdened Party in the case of a Tax Event
Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional
Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then 

  

 8 

 
continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions.

 (c) Effect of Designation. 
 (i)
If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing.

 (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under
Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e). 
 (d) Calculations. 
 (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and
will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account
to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation. 
 (ii) Payment Date. An amount calculated as being due in respect of any Early Termination
Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local
Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days elapsed. 
 (e) Payments on Early Termination. If an Early
Termination Date occurs, the following provisions shall apply based on the parties’ election in the Schedule of a payment measure, either “Market Quotation” or “Loss”, and a payment method, either the “First
Method” or the “Second Method”. If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that “Market Quotation” or the “Second Method”, as the case may be, shall
apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. 
 (i) Events of Default. If the Early Termination Date results from an Event of Default: — 
 (1) First Method and
Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party)
in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.

 (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party’s Loss in respect of this Agreement. 
 (3) Second Method and Market Quotation. If the
Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the 

  

 9 

 
Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting
Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. 
 (4) Second Method and Loss. If the Second
Method and Loss apply, an amount will be payable equal to the Non-defaulting Party’s Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. 
 (ii) Termination Events. If the
Early Termination Date results from a Termination Event: — 
 (1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be
deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated
Transactions. 
 (2) Two Affected Parties. If there are two Affected Parties: — 
 (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable
equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount (“X”) and the Settlement Amount of the party with the lower Settlement Amount (“Y”) and
(b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and 
 (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be
payable equal to one-half of the difference between the Loss of the party with the higher Loss (“X”) and the Loss of the party with the lower Loss (“Y”). 
 If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. 

(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because “Automatic Early Termination” applies
in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and
retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). 
 (iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 
  

 10 

	6.	Transfer 

 Subject to Section 6(b)(ii), neither this Agreement
nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: — 
 (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all
its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and 
 (b) a party may make such a transfer of all
or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). 
 Any purported transfer that is not in compliance
with this Section will be void. 
  

	7.	Contractual Currency 

 (a) Payment in the Contractual
Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the “Contractual Currency”). To the extent permitted by applicable law, any obligation to make payments
under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is
owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the
amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such
additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of such excess. 
 (b) Judgments. To the extent
permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating
to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the
aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums
paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable
manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term “rate of
exchange” includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. 
 (c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as
separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in
respect of this Agreement. 
 (d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate
that it would have suffered a loss had an actual exchange or purchase been made. 
  

 11 

	8.	Miscellaneous 

 (a) Entire Agreement. This Agreement
constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. 
 (b) Amendments. No amendment, modification or waiver in respect of this 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. 
 (c) Survival of Obligations.
Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. 
 (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by
law. 
 (e) Counterparts and Confirmations. 
 (i) This 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.

 (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic
messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation. 
 (f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or
privilege or the exercise of any other right, power or privilege. 
 (g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 
  

	9.	Offices; Multibranch Parties 

 (a) If Section 10(a) is
specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or
organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is
entered into. 
 (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without
the prior written consent of the other party. 
 (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and
receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation.

  

	10.	Expenses 

 A Defaulting Party will, on demand, indemnify and hold
harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support
Document 

  

 12 

 
to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection.

  

	11.	Notices 

 (a) Effectiveness. Any notice or other
communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or
number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated: — 
 (i) if in writing and delivered in person or by courier, on the date it is delivered; 
 (ii) if sent by telex, on the date the
recipient’s answerback is received; 
 (iii) if sent by facsimile transmission, on the date that transmission is received by a
responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender’s facsimile machine); 
 (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or
its delivery is attempted; or 
 (v) if sent by electronic messaging system, on the date that electronic message is received, 
 unless the date of that delivery (or attempted delivery) or that receipt as applicable, is not a Local Business Day or that communication is delivered (or attempted) or
received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. 
 (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system
details at which notices or other communications are to be given to all 
  

	12.	Governing Law and Jurisdiction 

 (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. 
 (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably: — 
 (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction
of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and 
 (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. 
 Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English
law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other jurisdiction. 
 (c) Service of Process. Each party irrevocably appoints the
Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any 

  

 13 

 
reason any party’s Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute
process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any
other manner permitted by law. 
 (d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law,
with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of
injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise
be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 
  

	13.	Definitions 

 As used in this Agreement: — 
 “Additional Termination Event” has the meaning specified in Section 5(b). 
 “Affected Party” has the meaning specified in Section 5(b). 
 “Affected Transactions” means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. 
 “Affiliate” means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, “control” of any entity or person means ownership of a majority of the voting power of the entity or person. 
 “Applicable Rate” means: — 
 (a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; 
 (b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; 
 (c) in
respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and 
 (d) in all other cases, the Termination Rate. 
 “Burdened Party” has the meaning specified in
Section 5(b). 
 “Change in Tax Law” means the enactment, promulgation, execution or ratification of, or any change in or amendment to,
any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. 
 “Consent” includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. 
 “Credit Event Upon Merger” has the meaning specified in Section 5(b). 
 “Credit Support Document” means any
agreement or instrument that is specified as such in this Agreement. 
 “Credit Support Provider” has the meaning specified in the Schedule.

 “Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as
certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. 
  

 14 

 “Defaulting Party” has the meaning specified in Section 6(a). 
 “Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv). 
 “Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule. 
 “Illegality” has the meaning specified in Section 5(b). 
 “Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation
authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). 
 “Law” includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and “lawful” and
“unlawful” will be construed accordingly. 
 “Local Business Day” means, subject to the Schedule, a day on which commercial banks
are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if
different. in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for
performance with respect to such Specified Transaction. 
 “Loss” means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection
with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result
of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(c)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include
a party’s legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. 
 “Market Quotation” means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each
quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit
Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would have the effect of preserving for such party the economic
equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have 

  

 15 

 
been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included.
The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its
quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are
to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation
will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values, If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest
and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market
Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. 
 “Non-default Rate” means a
rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. 
 “Non-defaulting Party” has the meaning specified in Section 6(a). 
 “Office” means a
branch or office of a party, which may be such party’s head or home office. 
 “Potential Event of Default” means any event which, with
the giving of notice or the lapse of time or both, would constitute an Event of Default. 
 “Reference Market-makers” means four leading
dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding
whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. 
 “Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which
the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. 
 “Scheduled Payment Date” means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. 

“Set-off” means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an
amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. 
 “Settlement Amount” means, with respect to a party and any Early Termination Date, the sum of. — 
 (a)
the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and 
 (b) such party’s Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions
for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. 
 “Specified Entity” has the meaning specified in the Schedule. 
  

 16 

 “Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future,
contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. 
 “Specified Transaction” means, subject to the
Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such
party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation. 
 “Stamp Tax” means any stamp, registration, documentation or similar tax.

 “Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. 
 “Tax Event” has the meaning specified in Section 5(b). 
 “Tax Event Upon Merger” has the meaning specified in Section 5(b). 
 “Terminated Transactions” means with
respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of
the notice designating that Early Termination Date (or, if “Automatic Early Termination” applies, immediately before that Early Termination Date). 
 “Termination Currency” has the meaning specified in the Schedule. 
 “Termination Currency Equivalent” means, in
respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the “Other Currency”), the amount in the
Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may
be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination
Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination
Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties 
 “Termination Event” means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event. 
 “Termination Rate” means a rate per annum equal to the arithmetic mean of the cost (without proof or
evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. 
 “Unpaid Amounts”
owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such
party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction. for each obligation under Section 2(a)(i) which was
(or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market

  

 17 

 
value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination
Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably
determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties.

 IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page
of this document. 
  

									
	THE ROYAL BANK OF SCOTLAND PLC	 		 	 NOVASTAR MORTGAGE FUNDING TRUST,
 SERIES 2006-1

			
	By: Greenwich Capital Markets, Inc., its agent	 		 	By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement.
					
	 By
	 	  	 		 	 By
	 	  
	 Name:
	 		 		 	 Name:
	 	
	 Title:
	 		 		 	 Title:
	 	
	 Date:
	 		 		 	 Date:
	 	

 SCHEDULE 
 TO THE 
 MASTER AGREEMENT 
 DATED AS OF APRIL 28, 2006 
 between 
 THE ROYAL BANK OF SCOTLAND PLC, 
 Established as a bank under the laws of Scotland 
 (“Party A”) 
 and 
 NOVASTAR MORTGAGE FUNDING
TRUST, SERIES 2006-1, 
 a Delaware statutory trust 
 (“Party B”) 
 PART 1 
 TERMINATION PROVISIONS 
  

	(a)	“Specified Entity” means in relation to Party A and Party B: Not Applicable. 

  

	(b)	Specified Transaction means, Not Applicable. 

  

	(c)	The “Cross-Default” provisions of Section 5(a)(vi) 

 will not apply to Party A. 
 will not apply to Party B. 
  

	(d)	The “Credit Event Upon Merger” provisions of Section 5(b)(iv) 

 will not apply to Party A. 
 will not apply to Party B. 
  

	(e)	The “Automatic Early Termination” provision of Section 6(a) 

 will not apply to Party A. 
 will not apply to Party B. 
  

	(f)	Payments on Early Termination. For the purpose of Section 6(e) of this Agreement: 

 (i) Market Quotation will apply; and 
 (ii) Second Method will apply; provided, however, that Party B shall have no obligation to make any payment to Party A under Section 6 as a result of any Event of Default or Termination Event other than an Event of Default of
Party B under Section 5(a)(i) of this Agreement or an Additional Termination Event in Part 1(i)(iii) or (iv). This modification of the terms of Section 6 of this Agreement has been freely bargained for by the parties and will not affect
the obligation, if any, of Party B with respect to Unpaid Amounts. Party A acknowledges having received 

 
consideration sufficient to warrant its agreement to the approach contemplated in this Part 1(f) provision. 
  

	(g)	“Termination Currency” means United States Dollars. 

  

	(h)	 Rating Event. If a Ratings Event (as defined below) occurs with respect to Party A (or any applicable credit support provider), then (i) Party A will
promptly give notice of the circumstances to Party B and to the rating agencies that at the time are providing ratings for the Notes (each a “Rating Agency”) and (ii)(A) Party A will at its own expense (and subject to the Rating Agency
Condition), assign the Transactions under this Agreement to a third party within thirty (30) days of such Ratings Event that meets or exceeds, or as to which any applicable credit support provider meets or exceeds, the Approved Ratings
Thresholds (as defined below) on terms substantially similar to this Agreement and must obtain a release of the mutual obligations of Party A and Party B under this Agreement, subject to survival of indemnities in respect of tax matters (a
“Release”) and provided (x) the right to designate an Early Termination Date under a substitute agreement with such third party on the grounds contemplated in Section 5(a)(vii) of this Agreement would be enforceable
against that entity (or a receiver, conservator or trustee for it or its property), subject, if applicable, only to such limitations as are provided for in the Federal Deposit Insurance Act (the “FDIA”), (y) Party B would, in
proceedings of the kinds contemplated in that provision, have an enforceable right to apply any collateral posted by the proposed counterparty to secure its obligations under the proposed replacement agreement without need for leave of court or any
other person (subject, if applicable, only to such qualifications as may be relevant under the FDIA), and (z) no withholding taxes would be applicable to payments to be made by or to Party B in respect of payments due under Section 2(a) of
the proposed agreement or (B) Party A will at its own expense (and subject to the Rating Agency Condition), deliver collateral, in an amount sufficient to restore or maintain the rating of the Notes immediately prior to the Rating Event, within
thirty (30) days of such Ratings Event and an executed ISDA Credit Support Annex, with such modifications as shall be agreed upon at the time and subject to the Rating Agency Condition, as soon as practicable or (C) otherwise provide
Alternative Credit Support, as defined below, subject to the Rating Agency Condition (provided, however, that if Standard & Poor’s, a division of The McGraw Hill Companies, Inc. (it or its successor, “S&P”),
Moody’s Investors Service, Inc. (it or its successor, “Moody’s”) or Fitch, Inc. (it or its successor, “Fitch”, and collectively with S&P and Moody’s, the “Rating Agencies”) (A) withdraws its
rating for the short-term unsecured and unsubordinated debt (the “Short Term Rating”) of Party A, (B) reduces its Short Term Rating of Party A to a level below “A-3” by S&P or “F2” by Fitch, or (C)(1) if Party
A has only a long-term senior, unsecured debt obligation rating, financial program rating or other similar rating (as the case may be, the “Long-Term Rating”) by Moody’s, reduces its Long Term Rating to a level at or below
“A2” by Moody’s or (2) if Party A has a Long-Term Rating and a Short Term Rating by Moody’s, reduces its Long-Term Rating to a level at or below “A3” and its Short Term Rating to a level at or below
“P-2”, (as applicable, a “Second Trigger Event”), Party A will no longer be eligible to deliver collateral pursuant to clause (ii)(B) or provide Alternative Credit Support pursuant to clause (ii)(C), but must assign the
Transactions hereunder to a third party within five (5) days of such Second Trigger Event that meets or exceeds, or as to which any applicable credit support provider meets or exceeds, the Approved Ratings Thresholds (as defined below) on terms
substantially similar to this Agreement and must obtain a Release under this Agreement). For purposes of this Transaction, a “Ratings Event” will occur with respect to Party A (or any applicable credit support provider), if its rating
falls below (A) a Short Term Rating at least equal to “A-1” by S&P or “F1” by Fitch or (B)(1) if such entity has only a Long-Term Rating by Moody’s, a Long-Term Rating of at least “Aa3” by Moody’s and
if rated “Aa3” by Moody’s such entity is not on negative credit watch by Moody’s or (2) if such entity has a Long-Term Rating and a Short Term Rating by Moody’s, a Long-Term Rating of at 

  

 2 

	 	 
least “A1” by Moody’s and a Short Term Rating of “P-1” by Moody’s and, in each case, such rating is not on negative credit
watch by Moody’s (including in connection with a merger, consolidation or other similar transaction by Party A or any applicable credit support provider) such ratings being referred to herein as the “Approved Ratings Thresholds.” For
purposes of this provision, “Rating Agency Condition” means, with respect to any particular proposed act or omission to act hereunder that the party acting or failing to act must consult with any Rating Agency making a rating reduction or
withdrawal (each such Rating Agency, a “Downgrading Rating Agency”) and receive from any Downgrading Rating Agency a confirmation in writing that their respective ratings of the Notes as in existence immediately prior to the Rating Event
will be restored or maintained. For purposes of this Agreement, “Alternative Credit Support” means an absolute and unconditional guarantee, credit intermediation arrangement, letter of credit or other additional credit support or
collateral. Any Credit Support Annex or document governing Alternative Credit Support shall be made a Credit Support Document for Party A pursuant to an amendment to this Agreement acceptable to the Owner Trustee 

  

	(i)	Additional Termination Events will apply. Each of the following will be an “Additional Termination Event”: 

 (i) A Ratings Event has occurred and Party A has not complied with (h) above, then an Additional Termination Event will have occurred with respect to
Party A. 
 (ii) A Swap Disclosure Event (as defined below) has occurred and Party A has not, within ten (10) Business Days after such
Swap Disclosure Event, complied with one of the solutions listed below. 
 It shall be a swap disclosure event (“Swap Disclosure
Event”) if at any time after the date hereof NovaStar Mortgage, Inc. (the “Sponsor”) shall notify Party A that in the reasonable discretion of the Sponsor acting in good faith, the “aggregate significance percentage” of all
derivative instruments (as such term is defined in Item 1115(b)(2) of Regulation AB) provided by Party A and any of its affiliates to Party B (the “Significance Percentage”) is 10% or more. 
 Following a Swap Disclosure Event, Party A shall take one of the following actions at its own expense: either (A) (1) if the Significance
Percentage is 10% or more, but less than 20%, Party A shall provide the information set forth in Item 1115(b)(1) (or, in its sole discretion, the information set forth in Item 1115(b)(2)) of Regulation AB for Party A (or for the group of
affiliated entities, if applicable) or (2) if the Significance Percentage is 20% or more, Party A shall provide the information set forth in Item 1115(b)(2) of Regulation AB for Party A (or for the group of affiliated entities, if
applicable) (collectively, the “Additional Swap Disclosure Information”) to the Sponsor or (B) Party A shall assign all of its rights and obligations under one or more Transactions (such that the Significance Percentage of Party A no
longer exceeds 10% in the reasonable discretion of the Sponsor acting in good faith ) to a replacement counterparty that is rated at or above the Approved Ratings Threshold and subject to the Rating Agency Condition, pursuant to documentation
substantially similar to the documentation then in place and subject to prior notification to the Rating Agencies, which counterparty is willing to provide the Additional Swap Disclosure Information (with respect to itself or for its group of
affiliated entities, if applicable) to the Sponsor, in the event that the Significance Percentage of Transactions to which it is a counterparty exceeds 10% in the reasonable discretion of the Sponsor acting in good faith. 
 “Regulation AB” means Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be
amended from time to time, and subject to such clarification and interpretation as have been provided by the Securities and Exchange 

  

 3 

 
Commission (“SEC”) in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7,
2005)) or by the staff of the SEC, or as may be provided by the SEC or its staff from time to time. 
 For the purposes of the Termination
Events (i) and (ii) above, Party A shall be the sole Affected Party. 
 (iii) All Indenture Collateral is liquidated and the
proceeds thereof distributed following an Event of Default as defined in the Indenture that has resulted in the principal of all the Notes being declared to be immediately due and payable (and such declaration has not been rescinded and annulled
pursuant to the terms of the Indenture), with Party B as the sole Affected Party. 
 (iv) JPMorgan Chase Bank, National Association, as
indenture trustee (the “Indenture Trustee”) receives direction (a “Redemption Notice”) for an optional redemption, in whole, of the Notes under Article X of the Indenture (a “Redemption Termination”) and (ii) there
remains no more than 5 Business Days prior to the proposed Redemption Date. In the case of a Redemption Termination, both Party A and Party B shall have the right to cause a termination of this Agreement. Following notification from the Indenture
Trustee that it has received a Redemption Notice, Party A shall provide the Indenture Trustee from time to time, upon request, with good faith estimates of the amount that would be payable under Section 6(e)(ii) in the event of such Redemption
Termination. Any termination payment payable in respect of such Additional Termination Event shall be paid on the relevant Redemption Date. 
  

	(j)	Events of Default. 

 (i) The following Events of
Default will not apply to Party A: Section 5(a)(ii), Section 5(a)(iii), Section 5(a)(iv), Section 5(a)(v) and Section 5(a)(viii). 
 (ii) The following Events of Default will not apply to Party B: Section 5(a)(ii), Section 5(a)(iii), Section 5(a)(iv), Section 5(a)(v) and Section 5(a)(viii). In addition,
Section 5(a)(vii) is hereby modified by deleting clause (2). 
 The foregoing is without prejudice to application to Party A and Party B
of the Events of Default in Paragraph 7 of any Credit Support Annex made part of this Agreement pursuant to Part 1(h) of this Schedule and is also without prejudice to the further exclusion in Part 1(c) of this Schedule. 
  

 4 

 PART 2 
 TAX REPRESENTATIONS 
  

	(a)	Payer Tax Representation. For the purpose of Section 3(e) of this Agreement, each party will make with respect to itself the following representation:

 It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any
Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In
making this representation, it may rely on (i) the accuracy of any representation made by the other party pursuant to Section 3(f) of this Agreement; (ii) the satisfaction of the agreement of the other party contained in
Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and (iii) the satisfaction of the agreement of
the other party contained in Section 4(d) of this Agreement, 
 provided that it shall not be a breach of this representation
where reliance is placed on sub-clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. 
  

	(b)	Payee Tax Representations. For the purposes of Section 3(f), each party makes the following representations: 

 (i) The following representation will apply to Party A: 
 (a) It is a tax resident of the United Kingdom. 
 (b) It is a “foreign person” within the meaning
of the applicable U.S. Treasury Regulations concerning information reporting and backup withholding tax (as in effect on January 1, 2001), unless Party A provides written notice to Party B that it is no longer a foreign person. 
 (c) In respect of each Transaction it enters into through an office or discretionary agent in the United States or which otherwise is allocated (in whole
or part) for United States federal income tax purposes to such United States trade or business, each payment received or to be received by it under such Transaction (or portion thereof, if applicable) will be effectively connected with its conduct
of a trade or business in the United States; and 
 (d) In respect of all other Transactions or portions thereof, no such payment received or
to be received by it in connection with this Agreement is attributable to a trade or business carried on by it through a permanent establishment in the United States. 
 If applicable, Party A is eligible for the benefits of the “Interest”, “business profits” or “other income” article of the Specified Treaty, and pursuant to this benefit, any payment
(other than those described in (c) above and interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) received by Party A under the terms of this agreement is wholly exempt from any deduction or withholding for or on account of
Tax. “Specified treaty” means the double tax convention between The United States of America and the United Kingdom. 
  

 5 

 (ii) The following representation will apply to Party B: 
 NovaStar Mortgage Funding Trust, Series 2006-1 is a Delaware statutory trust and not a foreign trust for United States tax purposes. 
  

 6 

 PART 3 
 AGREEMENT TO DELIVER DOCUMENTS 
 For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable: 
  

							
	 PARTY
REQUIRED TO
DELIVER
DOCUMENT
	  	 FORM/DOCUMENT/
 CERTIFICATE
	  	 DATE BY WHICH
 TO BE DELIVERED
	  	COVERED BY
SECTION 3(d)
REPRESENTATION
				
	Party A & B	  	Any form or document reasonably requested by the other party to permit payments without (or with minimal) withholding of Tax as specified in Section 4(a)(iii) of this Agreement.	  	As soon as practicable after request.	  	No
				
	Party A & B	  	Signing Authority, being evidence of authority, incumbency and specimen signature of each person executing any document on its behalf in connection with this Agreement and any Credit Support
Document.	  	Upon execution of this Agreement and, if requested, any Confirmation.	  	Yes
				
	Party A	  	The audited annual report of such party.	  	As soon as practicable after request.	  	Yes
				
	Party A	  	Agency Agreement between Party A and Greenwich Capital Markets, Inc., dated as of December 8, 2000, as amended from time to time.	  	Upon execution of this Agreement.	  	No
				
	Party B	  	Executed copies of the Indenture and the Sale and Servicing Agreement (each as defined below), the Prospectus Supplement, and such other documents as requested by Party A.	  	Upon execution of this Agreement.	  	No

  

 7 

							
				
	Party B	  	Any and all proposed and executed amendments to the Indenture as required by the Indenture (as defined below).	  	Each (i) date of distribution to the Noteholders for executed amendments that relate to Party A or (ii) date of proposal by Party B for amendments that require consent of Party A, as
applicable.	  	No
				
	Party B	  	Such information in connection with the Notes or the Indenture (as defined below) as Party A may reasonably request.	  	As soon as practicable after request.	  	No
				
	Party A & Party B	  	Legal opinions acceptable to the other party in the form and substance to be satisfactory to the other party.	  	Upon execution of this Agreement.	  	No

 PART 4 
 MISCELLANEOUS 
  

	(a)	Addresses For Notices. For the purpose of Section 12(a) of this Agreement: 

 (i) Notices or communications shall, with respect to a particular Transaction, be sent to the address, telex number or facsimile number reflected in the Confirmation of that Transaction. In addition (or in the event
the Confirmation for a Transaction does not provide relevant addresses/information for notice), with respect to notices provided pursuant to Section 5 and 6 of this Agreement, notice shall be provided to: 
 Address for notices or communications to Party A: 
  

			
	 Address:
	  	c/o RBS Financial Markets, Level 4, 280 Bishopsgate
		  	London, EC2M 3UR
	 Attention:
	  	Swaps Administration
	 Telephone:
	  	020 7085 5000
	 Facsimile:
	  	020 7085 5050

 Notices provided pursuant to Section 5 and 6 of this Agreement shall be provided to:

  

			
	 Address:
	  	c/o RBS Financial Markets
		  	Level 7, 280 Bishopsgate
		  	London, EC2M 3UR
	 Attention:
	  	Financial Markets Legal
	 Telephone:
	  	44 207 085 5000
	 Facsimile:
	  	44 207 085 8411

  

 8 

 With a copy to: 
  

			
	 Address:
	  	600 Steamboat Road
		  	Greenwich, CT 06830
	 Attention:
	  	Legal Department – Derivatives Documentation
	 Telephone:
	  	203 618-2531/32
	 Facsimile:
	  	203 618-2533/34

 Address for notices or communications to Party B: 
  

			
	 Address:
	  	c/o NovaStar Mortgage Inc.
		  	8140 Ward Parkway, Suite 300
		  	Kansas City, Missouri 64114
	 Attention:
	  	Matt Kaltenrieder
	 Facsimile No.:
	  	816-237-7515

 With a copy to: 
  

			
	 Address:
	  	Wilmington Trust Company
		  	1100 North Market Street
		  	Wilmington, Delaware 19890
	 Attention:
	  	Corporate Trust Administration
	 Facsimile No.:
	  	302-636-4140

 With a copy to: 
  

			
	 Address:
	  	JPMorgan Chase Bank, National Association
		  	4 New York Plaza, 6th Floor
		  	New York, New York 10004-2477
	 Attention:
	  	Worldwide Securities Services/Structured Finance Services (NovaStar Mortgage Funding Trust, Series 2006-1)
	 Facsimile No.:
	  	212-623-5930/5931

 With a copy to: 
  

			
	 Address:
	  	Standard & Poor’s Ratings Services
		  	55 Water Street
		  	New York, New York 10041-0003
	 Attention:
	  	Residential Mortgage Surveillance Group
	 Facsimile No.:
	  	212-438-2652

 With a copy to: 
  

			
	 Address:
	  	Moody’s Investors Service
		  	99 Church Street
		  	New York, New York 10007
	 Attention:
	  	RMBS Monitoring Department
	 Facsimile No.:
	  	212 298 7139

  

 9 

 With a copy to: 
  

			
	 Address:
	  	Fitch Ratings
		  	One State Street Plaza - 30th Floor
		  	New York, New York 10004
	 Attention:
	  	Michele Patterson
	 Tel. No.:
	  	212-908-0779

 (ii) Notices. Section 12(a) is amended by adding in the third line thereof after the
phrase “messaging system” and before the “)” the words “; provided, however, any such notice or other communication may be given by facsimile transmission (it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the sender’s facsimile machine)”. 
  

	(b)	Process Agent. For purposes of Section 13(c) of this Agreement: 

 Party A appoints as its Process Agent: Not applicable 
 Party B appoints as its Process Agent: Not applicable

  

	(c)	Offices. The provisions of Section 10(a) will apply to this Agreement. 

  

	(d)	Multibranch Party. For purpose of Section 10(c) of this Agreement: 

 Party A is a Multibranch Party and may act through its Offices in London and New York. 
 Party B is not a
Multibranch Party. 
  

	(e)	Calculation Agent. Party A. 

  

	(f)	Credit Support Documents. Details of any Credit Support Documents: 

 In the case of Party A, any ISDA Credit Support Annex (New York law) or document governing Alternative Credit Support made a part of this Schedule to the extent required in Part 1(h) of this Schedule due to a Ratings
Event (as defined in Part 1(h) of this Schedule). 
 In the case of Party B, not applicable. 
  

	(g)	Credit Support Provider means 

 in relation to Party
A: In the case of Party A, not applicable; provided, however, that each party (other than Party A) executing a document governing Alternative Credit Support shall be a Credit Support Provider hereunder beginning on the effective date of such
document.; and 
 in relation to Party B: Not applicable. 
  

	(h)	Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS WHOLLY PERFORMED WITHIN NEW YORK,
WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE. 

  

	(i)	Netting of Payments. Sub-paragraph (ii) of Section 2(c) of this Agreement will apply to all Transactions hereunder, unless otherwise provided in the relevant
Confirmation(s). 

  

 10 

	(j)	“Affiliate” will have the meaning specified in Section 14 but will have no meaning as applied to Party B. 

 PART 5 
 OTHER PROVISIONS

 (a) ISDA Definitions Incorporated by Reference. The definitions and provisions of the 2000 ISDA Definitions (the “ISDA Definitions”)
(as published by the International Swaps and Derivatives Association, Inc. — “ISDA”) are incorporated by reference herein. Any terms used and not otherwise defined herein which are contained in the ISDA Definitions shall have the
meaning set forth therein. In the event of any conflict between the ISDA Definitions and any other ISDA-published definitions referenced in a Confirmation, such Confirmation and the ISDA-published definitions referred to therein shall control for
purposes of the particular Transaction. For the avoidance of doubt, any reference to a “Swap Transaction”, if any, in the Definitions is deemed to be a reference to a “Transaction” for the purpose of interpreting this Agreement
or any Confirmation, and any reference to a “Transaction” in this Agreement or any Confirmation is deemed to be a reference to a “Swap Transaction” for the purpose of interpreting the Definitions. 
 (b) Condition Precedent. The condition precedent specified in Section 2(a)(iii)(1) of this Agreement does not apply to a payment or delivery owing by a party
if the other party shall have satisfied in full all of its payment and delivery obligations under Section 2(a)(i) of this Agreement and shall at the relevant time have no future payment or delivery obligations, whether absolute or contingent,
under Section 2(a)(i). 
 (c) Additional Representations. Section 3 is hereby amended by adding at the end thereof the following
subparagraph: 
 “(g) No Agency. It is entering into this Agreement, any Credit Support Document and any other document relating
to this Agreement and each Transaction hereunder as principal and not as agent or in any capacity, fiduciary or otherwise, and no other person has an interest herein.” 
 (d) Swap Exemption. Each party hereto represents to the other party on and as of the date hereof and on each date on which a Transaction is entered into between them hereunder, that it is an “eligible
contract participant” as defined in the Commodity Exchange Act, as amended. 
 (e) Relationship between Parties. In connection with the
negotiation of, the entering into, of this Agreement, and any other documentation relating to this Agreement to which it is a party or that it is required by this Agreement to deliver, each party hereby represents and warrants, and, in connection
with the negotiation of, the entering into, and the confirming of the execution of each Transaction, each party will be deemed to represent, to the other party as of the date hereof (or, in connection with any Transaction, as of the date which it
enters into such Transaction) that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): 
 (i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction 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 party as investment advice or as a recommendation to enter into that Transaction; it being
understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No 

  

 11 

 
communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that 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 that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. It has determined to its satisfaction whether or not the
rates, prices or amounts and other economic terms of each Transaction and the indicative quotations (if any) provided by the other party reflect those in the relevant market for similar transactions, and all trading decisions have been the result of
arm’s length negotiations between the parties. 
 (iii) Status of Parties. The other party is not acting as a fiduciary for
or an adviser to it in respect of that Transaction. 
 (iv) Related Transactions. It is aware that each other party to this Agreement
and its Affiliates may from time to time (A) take positions in instruments that are identical or economically related to a Transaction or (B) have an investment banking or other commercial relationship with the issuer of an instrument
underlying a Transaction. 
 (f) Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION. 
 (g) Consent to Telephonic Recording. Each party hereto consents to the monitoring
or recording, at any time and from time to time, by the other party of the telephone conversations of trading and marketing personnel of the parties and their authorized representatives in connection with this Agreement or any Transaction or
potential Transaction; and each party, waives any further notice of such monitoring or recording and agree to give proper notice and obtain any necessary consent of such personnel or any such monitoring or recording. 
 (h) Agency Role of Greenwich Capital Markets, Inc. In connection with this Agreement, Greenwich Capital Markets, Inc. has acted as agent on behalf of Party A.
Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Party A under this Agreement. 
 (i) Sale and
Servicing Agreement. Capitalized terms used in this Agreement that are not defined herein and are defined in the Sale and Servicing Agreement among NovaStar Certificates Financing Corporation, NovaStar Mortgage Inc., Party B, the Indenture
Trustee and U.S. Bank Corporate Trust Services dated as of April 1, 2006 (the “Sale and Servicing Agreement”) shall have the respective meanings assigned to them in the Sale and Servicing Agreement. 
 (j) Amendment of the Indenture and Sale and Servicing Agreement. 
 (1) Party B will not amend, supplement or otherwise modify the Indenture except in compliance with the provisions of Article IX of the
Indenture, or the Sale and Servicing Agreement except in compliance with the provisions of Section 11.03 of the Sale and Servicing Agreement. 
 (2) As provided in Section 9.02 of the Indenture, Party A will be provided with any proposed amendment to the Indenture that requires the consent of Party A, and with a copy of any executed amendment to the
Indenture. As provided in Section 11.03 of the Sale and Servicing 

  

 12 

 
Agreement, Party A will be provided with any proposed amendment to the Sale and Servicing Agreement that requires the consent of Party A, and with a copy of
any executed amendment to the Sale and Servicing Agreement. 
 (k) Consent to Assignment. Notwithstanding Section 7 of this Agreement, Party A
hereby acknowledges and consents to the assignment of this Agreement, solely for security purposes for the benefit of the Noteholders, by Party B to the Indenture Trustee under the Indenture. The Indenture Trustee shall not be deemed to be a party
to this Agreement; provided, however, that the Indenture Trustee, acting on behalf of the Noteholders, shall have the right to enforce this Agreement, including the terms of Part 1(i), against Party A. Party A shall be entitled to rely on any notice
or communication from the Indenture Trustee to that effect; provided, further, that any such notice or communication shall be in writing and delivered to Party A in accordance with Section 12 hereof. Party A shall be entitled to assume the
authenticity of any such notice or communication and shall have no obligation to verify the accuracy of any facts asserted therein or the authority of the sender thereof. Party B hereby indemnifies Party A against any losses, costs, claims or
liabilities arising from Party A’s reliance on any such notice or communication and Party A shall be released from any further obligations to Party B with respect to the rights transferred to the Indenture Trustee (for so long as Party A has
fulfilled its obligations hereunder to the Indenture Trustee). Notwithstanding any provision to the contrary contained herein, the parties acknowledge that the indemnity contained in this Part 5(k) shall be considered an accrued and unpaid expense
of the Trust (reimbursable to Party A) (which expense shall be payable with Interest Proceeds under Article V of the Indenture and not as a payment due to a Swap Provider under the Swap Agreement) and is only due to the extent funds are available
for the payment thereof in accordance with the priority of payments described in Article VIII of the Indenture. 
 (l) Regarding Party A. Party B
acknowledges and agrees that Party A has had and will have no involvement in and, accordingly Party A accepts no responsibility for: (i) the establishment, structure, or choice of assets of Party B; (ii) the selection of any person
performing services for or acting on behalf of Party B; (iii) the selection of Party A as a Swap Counterparty; (iv) the terms of the Notes; (v) the preparation of or passing on the disclosure and other information contained in the
prospectus supplement dated April 20, 2006 (other than certain information provided by Party A expressly for inclusion therein in the form attached hereto as Exhibit I), the Indenture or any other agreements or documents used by Party B or any
other party in connection with the marketing and sale of the Notes; (vi) the ongoing operations and administration of Party B, including the furnishing of any information to Party B which is not specifically required under this Agreement; or
(vii) any other aspect of Party B’s existence. 
 (m) No Petition for Bankruptcy. Party A, by entering into this Agreement, hereby covenants
and agrees that in connection with any obligations of Party B under this Agreement, Party A will not institute against Party B, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal
or state bankruptcy or similar law, for one year and a day after the latest maturing security issued by Party B is paid; provided however, that nothing herein shall preclude or estop Party A (i) from taking any action in (x) any
case or proceeding voluntarily filed or commenced by or on behalf of Party B or (y) any involuntary bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceeding under any federal or state bankruptcy or
similar law filed or commenced against Party B by a person other than Party A or (ii) from commencing against Party B or any properties of Party B any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium
or liquidation proceeding. This provision shall survive termination of this Agreement for any reason whatsoever. 
  

 13 

 (n) Representations of Party B. As an inducement to Party A for entering into this Agreement and each Transaction
hereunder, Party B represents that for the purposes of the Indenture: 
 (i) Party A is a “Swap Counterparty”, 
 (ii) each Transaction entered into between Party A and Party B hereunder is a “Swap Agreement” or a “Cap Agreement” and 
 (iii) any net payments (a difference between a Fixed and a Floating Amount) due to Party A under each Swap Agreement is a “Swap Amount”.

 (o) Not Acting in Individual Capacity. It is expressly understood and agreed by the parties hereto that (i) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of Party B, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (ii) each of the
representations, undertakings and agreements herein made on the part of Party B is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose of binding only
Party B, (iii) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (iv) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses
of Party B or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by Party B under this Agreement or any other related documents. 
 (p) Amendment of Provisions and Transfer of Rights and Obligations. Without limiting the provisions of Section 7(a) of this Agreement, no amendment or
transfer of the rights or obligations under this Agreement will be effective without the prior written confirmation of each Rating Agency that such amendment or transfer will not result in the reduction or withdrawal of the then current ratings for
any outstanding Notes. 
 (q) Acknowledgement of Pledge of Collateral. Party A acknowledges Party B’s pledge of its assets under the Indenture
and understands that the proceeds of such assets will be applied, including to payments hereunder, only in the order set forth in the Indenture. 
 (r)
Set-Off. Notwithstanding any provision of this Agreement or any other existing or future agreement, Party A hereby irrevocably waives any and all rights it may have to set-off, net, recoup or otherwise withhold or suspend or condition payment
or performance of any obligation between it and Party B against any obligation between it and Party B under any other agreements; provided that nothing herein shall be construed as limiting the provisions contained in Section 2(c), 9(c) or any
other Section of this Agreement with respect to the netting of the parties’ respective obligations under this Agreement or the right of Party B to exercise any set-off right, by operation of law or otherwise. Except as stated above, the
provisions for Set-off set forth in Section 6(e) of the Agreement shall not apply. 
  

 14 

 IN WITNESS WHEREOF, Party A and Party B have caused this Schedule to be duly executed as of the date first written above.

  

									
	 THE ROYAL BANK OF SCOTLAND PLC
	 		 	 NOVASTAR MORTGAGE FUNDING TRUST,
 SERIES 2006-1

			
	 By: Greenwich Capital Markets, Inc., its agent
	 		 	By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement
					
	 By
	 	  	 		 	 By
	 	  
	 Name:
	 		 		 	 Name:
	 	
	 Title:
	 		 		 	 Title:
	 	

  

 15 

 Exhibit I 
 (Party A disclosure for prospectus supplement) 
 The Royal Bank of Scotland plc (“RBS”) is a company
limited by shares incorporated under the law of Scotland and is the principal operating subsidiary of The Royal Bank of Scotland Group plc (“RBS Group”), which, together with its subsidiaries, is a diversified financial services group
engaged in a wide range of banking, financial and finance related activities in the United Kingdom and internationally. The short-term unsecured and unguaranteed debt obligations of RBS are currently rated “A-1+” by S&P,
“P-1” by Moody’s and “F1+” by Fitch, Inc. The long-term, unsecured, unsubordinated and unguaranteed debt obligations of RBS are currently rated “AA” by S&P, “Aa1” by Moody’s and
“AA+” by Fitch, Inc. Except for the information provided in this paragraph, neither RBS nor the RBS Group has been involved in the preparation of, and do not accept responsibility for, this [free writing prospectus] [prospectus
supplement] or the accompanying prospectus. RBS is an affiliate of Greenwich Capital Markets, Inc., an underwriter.

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