Document:

Acknowledgement and Assignment Agreement

 Exhibit 4.2 
 Acknowledgement and Assignment Agreement 
 This Acknowledgement and Assignment Agreement is
dated as of September 18, 2006 (this “Agreement”) and relates to NovaStar Mortgage Funding Trust, Series 2006-3 (the “Trust”), which was created pursuant to the Pooling and Servicing Agreement dated as of
June 1, 2006 (the “Agreement”) by and among NovaStar Mortgage Funding Corporation, as Company (the “Company”), NovaStar Mortgage, Inc., as Servicer and as Seller (the “Servicer” and the
“Seller”), U.S. Bank National Association as Custodian (the “Custodian”), J.P. Morgan Chase Bank, National Association as Trustee (the “Trustee”) and J.P. Morgan Trust Company, National Association, as
Co-Trustee (the “Co-Trustee”) Capitalized terms used herein and not otherwise defined herein shall have their respective meanings as set forth in the Agreement. 
 Section 11.01(a), second, third and fourth paragraphs, of the Agreement provide as follows: 
 The Servicer may, at its option, terminate this Agreement on any date on which the aggregate of the Principal Balances of the Mortgage
Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal
Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period
preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties, any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap
Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Swap Counterparties, the Cap Counterparties and the Custodian under this Agreement; provided, however, that in no event shall
such price be less than the amount necessary to pay the sum of (i) 100% of the aggregate Certificate Principal Balance of each Class of Certificates, (ii) accrued and unpaid interest thereon at the related Pass-Through Rate through the
date on which the trust is terminated, (iii) any unpaid Administrative Fees and (iv) any unpaid amount due to the Swap Counterparties or the Cap Counterparties (the “Termination Price”); provided, however, that such option
may only be exercised if the Termination Price is sufficient to pay all interest accrued on, as well as amounts necessary to retire the principal balance of, each class of net interest margin notes issued pursuant to the Indenture at the time the
option is exercised. 
 In connection with any such purchase pursuant to the preceding paragraph, the Servicer shall deposit
in the Distribution Account all amounts then on deposit in the Collection Account, which deposit shall be deemed to have occurred immediately preceding such purchase. 

 Any such purchase shall be accomplished by deposit into the Distribution Account on the
Distribution Date of the Termination Price. 
 For clarification and simplification with respect to this provision, the parties hereto, such
parties being (i) the Servicer, (ii) the Certificateholders owning 100% of the Class CA Certificates, (iii) the Certificateholders owning 100% of the Class CB Certificates and (iv) the Certificateholders owning 100% of the Class
R Certificates, for good and valuable consideration, the receipt of which is hereby acknowledged, do hereby acknowledge and agree as follows: 
  

	 	(a)	to the extent that the Termination Price calculated pursuant to the Agreement would exceed the sum of (i) 100% of the aggregate Certificate Principal Balance of each Class of
Certificates, (ii) accrued and unpaid interest thereon at the related Pass-Through Rate through the date on which the Trust is terminated, (iii) any unpaid Administrative Fees, (iv) any unpaid amount due to the Swap Counterparties or
the Cap Counterparties and (v) any additional amounts necessary to pay all interest accrued on, as well as necessary to retire the principal balance of, any class of net interest margin notes issued pursuant to the Indenture (any such excess,
the “Surplus”), the Class CA Certificateholders, the Class CB Certificateholders and the Class R Certificateholders hereby acknowledge that, as among the three of them, the intent of the Agreement is that such Surplus would be
payable in its entirety to the Class CA Certificateholders; and 

  

	 	(b)	the Servicer shall make all calculations in connection with the determination of the Termination Price, Surplus and the amount to be deposited to the Distribution Account in
connection with the redemption. The Servicer shall provide such information in writing to the Trustee not less than ten (10) Business Days prior to the Termination Date. The Trustee shall cooperate with the Servicer in making such calculations.

 It is the intent of the parties hereto that this Agreement bind all subsequent Class CA, Class CB and Class R
Certificateholders, as well as any successor Servicer. 
  

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	Greenwich Capital Financial Products, Inc., as Certificateholder of 100% of the Class CA Certificates
		
	By:	 	 /s/ Ara Balabanian

		
	Name:	 	 Ara Balabanian

		
	Title:	 	 Vice President

	
	Greenwich Capital Financial Products, Inc., as Certificateholder of 100% of the Class CB Certificates
		
	By:	 	 /s/ Ara Balabanian

		
	Name:	 	 Ara Balabanian

		
	Title:	 	 Vice President

	
	Wachovia Bank National Association, as Certificateholder of 100% of the Class R Certificates
		
	By:	 	 /s/ Joseph H. Gieker

		
	Name:	 	 Joseph H. Gieker

		
	Title:	 	 Director

	
	NovaStar Mortgage Inc., as Servicer
		
	By:	 	 /s/ Matt Kaltenrieder

		
	Name:	 	 Matt Kaltenrieder

		
	Title:	 	 Vice PresidentSecond Amendment to Lease Agreement

 Exhibit 10.1 
 SECOND AMENDMENT TO LEASE AGREEMENT 
 This SECOND AMENDMENT TO LEASE AGREEMENT (this
Amendment) is made and entered into as of September 18, 2006 by and between TIAA Realty, Inc., a Delaware corporation (Landlord), and Educational Products, Inc., a Texas corporation (Tenant). 
 BACKGROUND: 
  

	A.	On or about April 15, 1999, Landlord and Tenant entered into a Lease Agreement for approximately 95,600 square feet of space (the Original Premises) located at 2155
Silber Road, Houston, Texas (the Building). 

  

	B.	Landlord and Tenant amended the above referenced Lease to reduce the Original Premises by approximately 41,950 square feet as of August 31, 2006 (the Reduction Premises)
for a total area in the Original Premises of approximately 53,650 square feet of space (the Premises) pursuant to the First Amendment to Lease Agreement dated as of December 13, 2005, (the above-referenced lease as so amended is the
Lease). 

  

	C.	Landlord and Tenant desire to further amend the Lease to, among other things, expand the Premises. 

 AGREEMENT: 
 NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows: 
  

	1.	Capitalized Terms. All capitalized terms which are not otherwise defined herein shall have the meaning set forth in the Lease, as amended hereby. 

  

	2.	Expansion. Effective as of September 1, 2006 (the Expansion Effective Date), the Premises shall be expanded by approximately 16,200 square feet of space more
fully described in Attachment A hereto (the Expansion Space), thereby enlarging the Premises from approximately 53,650 square feet of space to approximately 69,850 square feet of space (the Expansion Premises). Landlord
and Tenant agree that on the Expansion Effective Date, the Expansion Premises will contain approximately 69,850 square feet of space. On the Expansion Effective Date, all references to the Premises in the Lease shall thereafter refer to the
Expansion Premises as expanded in this Paragraph and Exhibit A to the Lease is deleted and replaced with Attachment A hereto. 

  

	3.	Base Rent. From the Expansion Effective Date through December 31, 2010, the Base Rent payable under the terms and conditions of the Lease is as follows:

  

			
	 9/1/06 – 12/31/08
	  	$24,440.99
	 1/1/09 – 12/31/10
	  	$25,146.00

 Tenant shall continue to pay all other amounts payable under the Lease. 
  

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	4.	Acceptance of Expansion Premises. Tenant accepts the Expansion Premises in their “AS-IS” condition and Landlord shall have no obligation to improve, repair, restore
or refurbish the Expansion Premises except as otherwise specifically provided in this Amendment. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty, except as otherwise expressly provided in
this Amendment, with respect to the Expansion Premises or any other portion of the Building, including, without limitation, any representation or warranty with respect to the suitability or fitness of the Expansion Premises or any other portion of
the Building for the conduct of Tenant’s business. Landlord does not intend to immediately construct a demising wall separating the Expansion Space from the remainder of the Reduction Space but reserves the right to build such a wall on the
perimeter of the Expansion Premises at any time during the Term. Until such time as the demising wall is complete, Tenant shall continue to pay the proportionate share of electricity for the Reduction Premises and the Expansion Premises. Once the
demising wall is complete, Tenant will only pay the proportionate share of electricity for the Expansion Premises. Construction of the demising wall will be performed by Landlord while Tenant occupies the Expansion Premises therefore Tenant
acknowledges that it will have to vacate only those portions of the Expansion Premises where improvements are being made upon 5 business days notice from Landlord. Tenant is responsible for relocation and protection of its furniture, equipment, and
other personal property during the installation of the improvements. Tenant and Landlord shall use commercially reasonable efforts to cooperate and coordinate with each other to minimize disruption of Landlord’s construction activities and of
Tenant’s business operations in portions of the Expansion Premises where improvements are not being installed. 

  

	5.	Calculation of Charges. Tenant understands and accepts the methods of calculation for determining charges and amounts of assessed against Tenant under this Lease, and agrees
that they comply with Section 93.012 (Assessment of Charges) of the Texas Property Code, as amended or succeeded from time to time. Tenant waives, to the fullest extent permitted by Applicable Law, all rights and benefits of Tenant under
Section 93.012 of the Texas Property Code, as amended or succeeded from time to time. 

  

	6.	Brokerage; Mutual Indemnities. 

  

	 	a.	Tenant warrants that it has had no dealings with any broker or agent in connection with the negotiation or execution of this Amendment other than Transwestern Commercial Services
and The Arledge Co. (collectively, Brokers). Tenant shall indemnify, defend, and hold Landlord harmless against all costs, expenses, attorneys’ fees, or other liability for commissions or other compensation or charges claimed by any
broker or agent other than Brokers claiming by, through, or under Tenant with respect to this Amendment. 

  

	 	b.	Landlord warrants that it has had no dealings with any broker or agent in connection with the negotiation or execution of this Amendment other than Brokers. Landlord shall
indemnify, defend, and hold Tenant harmless against all costs, expenses, attorneys’ fees, or other liability for commissions or other compensation or charges claimed by any broker or agent, including Brokers, claiming by, through or under
Landlord with respect to this Amendment. 

  

	 	c.	Any brokerage commissions payable to Brokers are payable by Landlord pursuant to the terms of separate agreements between Landlord and Brokers. 

  

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	7.	No Offsets. Tenant hereby represents to Landlord that to the best of Tenant’s knowledge, as of the date of this Amendment, Tenant has no defenses to or offsets against
the full and timely payment and performance of each and every covenant and obligation required to be performed by Tenant under the terms of the Lease. 

  

	8.	Conflicts. The terms of this Amendment prevail if there is a conflict with the terms of the Lease. 

  

	9.	Headings. The headings or captions of the paragraphs in this Amendment are for convenience only and shall not act and shall not be implied to act to limit or expand the
construction and intent of the contents of the respective paragraph. 

  

	10.	Binding Effect. This Amendment is binding upon and shall inure to the benefit of the parties and their respective successors and assigns (but this reference to assigns shall
not be deemed to act as a consent to an assignment by Tenant). 

  

	11.	Ratification. The Lease, as amended and modified hereby, is ratified and confirmed by the parties as being in full force and effect. 

 EXECUTED as of the date first above written. 
  

					
	LANDLORD:
	
	TIAA REALTY, INC.
	 a Delaware corporation

		
	 By:
	 	 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA,
 a New York corporation
 its Authorized Representatives

			
		 	 By:
	 	 /s/ Leonard Balducci

		 	 Print Name:
	 	 Leonard Balducci

		 	 As Its:
	 	 Director

  

			
	TENANT:
	
	 EDUCATIONAL PRODUCTS, INC.,

	 a Texas corporation

		
	 By:
	 	 /s/ Judith McGuinn

	 Print Name:
	 	 Judith McGuinn

	 As Its:
	 	 President

  

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