Document:

Guarantee of Russell Smith III

 Exhibit 10.4 
 W. Russell Smith, III 
 CONTINUING UNCONDITIONAL GUARANTY 
 WHEREAS, VSURANCE, INC., a Nevada corporation, (“Vsurance”) (referred to as the “Borrower”) have entered into a Loan and
Security Agreement dated December 15, 2005, (as amended, amended and restated or otherwise modified from time to time, the “Loan Agreement”) with Samir Financial, L.L.C., an Illinois limited liability company
(“Lender”) pursuant to which Lender, subject to the terms and conditions contained therein, has agreed to make a Loan (Secured) in the amount of Four Million Dollars ($4,000,000) evidenced by a Promissory Note to Borrower dated as
of December 15, 2005 in a like amount payable by Borrower to Lender (the “Note”); 
 WHEREAS, the undersigned is
desirous of having Lender extend credit to Borrower and Lender has required that Guarantor (as hereinafter defined) execute and deliver this Guaranty to Lender as a condition to the extension of credit by Lender; and 
 WHEREAS, the extension and/or continued extension of credit, as aforesaid, by Lender is necessary and desirable to the conduct and operation of the
business of Borrower and will inure to the personal and financial benefit of Guarantor; 
 NOW, THEREFORE, for value received and in
consideration of any loan, advance, or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to Borrower by Lender (including, without limitation, the Loans as defined in, and made or to be made by Lender
to Borrower pursuant to, the Loan Agreement), the undersigned, and each of them, if there be more than one, (the “Guarantor”) unconditionally guaranties (i) the full and prompt payment when due, whether at maturity or earlier,
by reason of acceleration or otherwise, and at all times thereafter, of all of the indebtedness, liabilities and obligations of every kind and nature of Borrower to Lender or any parent, affiliate or subsidiary of Lender (the term “Lender”
as used hereafter shall include such parents, affiliates and subsidiaries), howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, joint or several, now or hereafter existing, or due or to become due, and
howsoever owned, held or acquired by Lender, whether through discount, overdraft, purchase, direct loan or as collateral or otherwise, including without limitation all obligations and liabilities of Borrower to Lender under the Loan Agreement and
(ii) the prompt, full and faithful discharge by Borrower of each and every term, condition, agreement, representation and warranty now or hereafter made by Borrower to Lender (all such indebtedness, liabilities and obligations being hereinafter
referred to as the “Borrower’s Liabilities”). Guarantor further agrees to pay all costs and expenses, including, without limitation, all court costs and reasonable attorneys’ and paralegals’ fees paid or incurred by
Lender in endeavoring to collect all or any part of Borrower’s Liabilities from, or in prosecuting any action against, Guarantor or any other guarantor of all or any part of Borrower’s Liabilities. All amounts payable by Guarantor under
this Guaranty shall be payable upon demand by Lender. 
 Notwithstanding any provision of this Guaranty to the contrary, it is intended that
this Guaranty, and any liens and security interests granted by Guarantor to secure this Guaranty, not constitute a “Fraudulent Conveyance” (as defined below). Consequently, Guarantor agrees 
  

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 that if the Guaranty, or any liens or security interests securing this Guaranty, would, but for the application of this
sentence, constitute a Fraudulent Conveyance, this Guaranty and each such lien and security interest shall be valid and enforceable only to the maximum extent that would not cause this Guaranty or such lien or security interest to constitute a
Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have been amended accordingly at all relevant times. For purposes hereof, “Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of the
“Bankruptcy Code” (as hereinafter defined) or a fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental
unit, as in effect from time to time. 
 Guarantor hereby agrees that, except as hereinafter provided, its obligations under this Guaranty
shall be unconditional, irrespective of (i) the validity or enforceability of Borrower’s Liabilities or any part thereof, or of any promissory note or other document evidencing all or any part of Borrower’s Liabilities, (ii) the
absence of any attempt to collect Borrower’s Liabilities from Borrower or any other guarantor or other action to enforce the same, (iii) the waiver or consent by Lender with respect to any provision of any instrument evidencing
Borrower’s Liabilities, or any part thereof or any other agreement heretofore, now or hereafter executed by Borrower and delivered to Bank, (iv) failure by Lender to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrower’s Liabilities, (v) the institution of any proceeding under Chapter 11 of Title 11 of the United States Code (11 U.S.C. §101 et seq.), as amended (the “Bankruptcy
Code”), or any similar proceeding, by or against Borrower, or Lender’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by
Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code, (vii) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Lender’s claim(s) for repayment of Borrower’s
Liabilities, or (viii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. 
 Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of Borrower, protest or notice with respect to Borrower’s Liabilities and all demands
whatsoever, and covenants that this Guaranty will not be discharged, except by complete performance of the obligations and liabilities contained herein. Upon any default by Borrower as provided in any instrument or document evidencing all or any
part of Borrower’s Liabilities, including without limitation the Loan Agreement, Lender may, at its sole election, proceed directly and at once, without notice, against Guarantor to collect and recover the full amount or any portion of
Borrower’s Liabilities, without first proceeding against Borrower, or any other person, firm, or corporation, or against any security or collateral for Borrower’s Liabilities. 
 Except as specifically provided in the Loan Agreement, Lender is hereby authorized, without notice or demand and without affecting the liability of
Guarantor hereunder, to at any time and from time to time (i) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, Borrower’s Liabilities or otherwise modify, amend or change the terms of any
promissory note or other agreement, document or instrument now or hereafter executed by Borrower and delivered to Lender; (ii) accept partial payments on 
  

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 Borrower’s Liabilities; (iii) take and hold security or collateral for the payment of Borrower’s
Liabilities guaranteed hereby, or for the payment of this Guaranty, or for the payment of any other guaranties of Borrower’s Liabilities or other liabilities of Borrower, and exchange, enforce, waive and release any such security or collateral;
(iv) apply such security or collateral and direct the order or manner of sale thereof as in its sole discretion it may determine; and (v) settle, release, compromise, collect or otherwise liquidate Borrower’s Liabilities and any
security or collateral therefor in any manner, without affecting or impairing the obligations of Guarantor hereunder. Lender shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received
from Borrower or any other source, and such determination shall be binding on Guarantor. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of Borrower’s Liabilities as Lender shall determine in
its sole discretion without affecting the validity or enforceability of this Guaranty. 
 To secure the payment and performance of
Guarantor’s obligations and liabilities contained herein, Guarantor grants to Lender a security interest in all property of Guarantor delivered concurrently herewith or which is now, or at any time hereafter in transit to, or in the possession,
custody or control of Lender or any affiliate of Lender, and all proceeds of all such property. Guarantor agrees that Lender shall have the rights and remedies of a secured party under the Uniform Commercial Code of Illinois, as now existing or
hereafter amended, with respect to all of the aforesaid property, including without limitation thereof, the right to sell or otherwise dispose of any or all of such property and apply the proceeds of such sale to the payment of Borrower’s
Liabilities. In addition, at any time after maturity of Borrower’s Liabilities by reason of acceleration or otherwise, Lender may, in its sole discretion, without notice to Guarantor and regardless of the acceptance of any security or
collateral for the payment hereof, appropriate and apply toward the payment of Borrower’s Liabilities (i) any indebtedness due or to become due from Lender to Guarantor, and (ii) any moneys, credits or other property belonging to
Guarantor, at any time held by or coming into the possession of Lender whether for deposit or otherwise. 
 Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of Borrower, and any and all endorsers and/or other guarantors of any instrument or document evidencing all or any part of Borrower’s Liabilities and of all other
circumstances bearing upon the risk of nonpayment of Borrower’s Liabilities or any part thereof that diligent inquiry would reveal and Guarantor hereby agrees that Lender shall have no duty to advise Guarantor of information known to Lender
regarding such condition or any such circumstances or to undertake any investigation not a part of its regular business routine. If Lender, in its sole discretion, undertakes at any time or from time to time to provide any such information to any
Guarantor, Lender shall be under no obligation to update any such information or to provide any such information to Guarantor on any subsequent occasion. 
 Guarantor consents and agrees that Lender shall be under no obligation to marshal any assets in favor of Guarantor or against or in payment of any or all of Borrower’s Liabilities. Guarantor further agrees that,
to the extent that Borrower makes a payment or payments to Lender, or Lender receives any proceeds of collateral, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, its estate, trustee, receiver or any other party, 
  

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 including, without limitation, Guarantor, under any bankruptcy law, state or federal law, common law or equitable theory,
then to the extent of such payment or repayment, Borrower’s Liabilities or the part thereof which has been paid, reduced or satisfied by such amount, and Guarantor’s obligations hereunder with respect to such portion of Borrower’s
Liabilities, shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. 
 Guarantor agrees that any and all claims of Guarantor against Borrower, any endorser or any other guarantor of all or any part of Borrower’s Liabilities, or against any of Borrower’s properties, whether arising by reason of any
payment by Guarantor to Lender pursuant to the provisions hereof, or otherwise, shall be subordinate and subject in right of payment to the prior payment, in full, of all of Borrower’s Liabilities. 
 Lender may, without notice to anyone, sell or assign Borrower’s Liabilities or any part thereof, or grant participations therein, and in any such
event each and every immediate or remote assignee or holder of, or participant in, all or any of Borrower’s Liabilities shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder, or
participant, as fully as if herein by name specifically given such right, but Lender shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of Bank, as to any
part of Borrower’s Liabilities retained by Lender. 
 This Guaranty shall be binding upon Guarantor and upon the successors (including
without limitation, any receiver, trustee or debtor in possession of or for Guarantor) of Guarantor and shall inure to the benefit of Lender and its successors and assigns. If there is more than one signatory hereto, all references to Guarantor
herein shall include each and every Guarantor and each and every obligation of Guarantor hereunder shall be the joint and several obligation of each Guarantor. Each Guarantor that is a corporation or a partnership hereby represents and warrants that
it has all necessary corporate or partnership authority, as the case may be, to execute and deliver this Guaranty and to perform its obligations hereunder. 
 This Guaranty shall continue in full force and effect, and Lender shall be entitled to make loans and advances and extend financial accommodations to Borrower on the faith hereof until such time as Lender has, in
writing, notified Guarantor that all of Borrower’s Liabilities have been paid in full and discharged and the Loan Agreement has been terminated or until Lender has actually received written notice from any Guarantor of the discontinuance of
this Guaranty as to that Guarantor, or written notice of the death, incompetency or dissolution of any Guarantor. In case of any discontinuance by, or death, incompetency or dissolution of, any Guarantor (collectively, a “Termination
Event”), this Guaranty and the obligations of such Guarantor and his or its heirs, legal representatives, successors or assigns, as the case may be, shall remain in full force and effect with respect to all of Borrower’s Liabilities
incurred prior to the receipt by Lender of written notice of the Terminating Event. The occurrence of a Terminating Event with respect to one Guarantor shall not affect or impair the obligations of any other Guarantor hereunder. 
 Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this
Guaranty. 
  

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 THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.

 Guarantor irrevocably agrees that, subject to Lender’s sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER
OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID CITY AND STATE. Guarantor hereby irrevocably appoints and designates John Miller, 3250 W. Market St., STE. 307, Akron, Ohio 44333 (or any other person having and maintaining a place of business in such state whom Guarantor may
from time to time hereafter designate upon ten (10) days written notice to Lender and who Lender has agreed in its sole discretion in writing is satisfactory and who has executed an agreement in form and substance satisfactory to Lender
agreeing to act as such attorney and agent), as Guarantor’s true and lawful attorney and duly authorized agent for acceptance of service of legal process. Guarantor agrees that service of such process upon such person shall constitute personal
service of such process upon Guarantor, GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST GUARANTOR BY LENDER IN ACCORDANCE WITH THIS PARAGRAPH.  
 GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS GUARANTY.

 Notwithstanding anything to the contrary contained in the Guaranty, no payment made by or for the account of Guarantor including,
without limitation, (i) a payment made by Guarantor in respect of Borrower’s Liabilities or (ii) a payment made by any other person under any other guaranty, shall entitle the Guarantor by subrogation or otherwise, to any payment from
Borrower or from or out of any property of Borrower and Guarantor shall not exercise any right or remedy against Borrower or any property of Borrower by reason of any performance by Guarantor under the Guaranty. 
 IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned as of this 15th day of December, 2005. 
  

	
	 /s/ W. Russell Smith

	W. Russell Smith, III
	
	 Address:
 721 24th Street N.E.
 Canton, Ohio 44714

  

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	STATE OF ILLINOIS	 	)
		 	) ss
	COUNTY OF COOK	 	)

 On this 15th day of December, 2005, before me personally came W. Russell Smith, III, to me known to be the individual described in and who executed the foregoing instrument. 
  

			
	 Official Seal
 B T Bailey
 Notary Public State of Illinois
 My Commision Expires 10/14/2008
	 	 /s/ B T Bailey

	 	Notary Public

  

 6Amendment No. 2 to the Pooling and Servicing Agreement

 Exhibit 4.1 
 EXECUTION VERSION 
 AMENDMENT NO. 2 
 TO THE 
 POOLING AND SERVICING AGREEMENT 
 Amendment No. 2, dated as of September 18, 2006 (the “Amendment”), to the Pooling and Servicing Agreement (the
“Agreement”) dated as of September 1, 2005 as amended by Amendment No. 1 dated as of March 27, 2006, among NovaStar Mortgage Funding Corporation (the “Company”), NovaStar Mortgage, Inc., as seller and
servicer (the “Seller” or “Servicer”), U.S. Bank National Association as successor to Wachovia Bank, National Association, as custodian (the “Custodian”), JPMorgan 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 and not defined herein shall have the meaning set forth in the Agreement and
Appendix A thereto. 
 WHEREAS, the parties hereto have entered into the Agreement; 
 WHEREAS, the Company has been informed by the Servicer and certain Certificateholders that they have entered into an “Acknowledgement and Assignment
Agreement,” and the Servicer and such Certificateholders propose including a copy of such “Acknowledgement and Assignment Agreement” as an exhibit to the Agreement, and amending the Forms of Class CR, Class CT and Class R Certificates
to include a reference to such “Acknowledgement and Assignment Agreement” therein, all for the purpose of giving future Certificateholders knowledge of the existence thereof. 
 NOW, THEREFORE, in consideration of the promises and mutual agreements contained herein, the parties hereto agree to amend the Agreement pursuant to
Section 12.01 thereof as follows: 
 1. New Exhibit. 
 There is hereby added a new Exhibit M to the Agreement, such Exhibit being a copy of the “Acknowledgement and Assignment
Agreement” in the form attached as Exhibit A hereto. 
 2. Additional Paragraph Added to Forms of Certain Certificates.

 There is hereby added as a final paragraph the following, to be inserted in the Forms of Class CR, Class CT and Class R
Certificates: 
 “The Servicer, the Holders of 100% of the Class CR Certificates, the Holders of 100% of the Class CT Certificates and
the Holders of 100% of the Class R Certificates entered into an Acknowledgement and Assignment Agreement dated as of September 18, 2006. Such Acknowledgement and Assignment Agreement concerns the allocation among the Servicer, the Class CR,

 the Class CT and the Class R Certificateholders of certain amounts in connection with the termination of
the Trust, and the terms thereof are intended to bind successor Servicers and all future Holders of the Class CR, Class CT and Class R Certificates. A copy of such Acknowledgement and Assignment Agreement has been included as Exhibit M to the
Pooling and Servicing Agreement.” 
 3. Condition to Effectiveness. 
 As a condition to the effectiveness of this Amendment, an Opinion of Counsel satisfying the requirements of Section 12.01 of the
Agreement has been received by the parties hereto. 
 4. Effect of Amendment. 
 This Amendment to the Agreement shall be effective and the Agreement shall be deemed to be modified and amended in accordance herewith on
the Distribution Date on the date on which the Trustee receives an executed copy of this Amendment. This Amendment, once effective, shall be effective as of the date first set forth above. The respective rights, limitations, obligations, duties,
liabilities and immunities of the Company, the Seller, the Servicer, the Custodian and the Trustee shall hereafter be determined, exercised and enforced subject in all respects to such modifications and amendments, and all the terms and conditions
of this Amendment shall be and be deemed to be part of the terms and conditions of the Agreement for any and all purposes. The Agreement, as amended hereby, is hereby ratified and confirmed in all respects. 
 5. The Agreement in Full Force and Effect as Amended. 
 Except as specifically amended hereby, all the terms and conditions of the Agreement shall remain in full force and effect and, except as
expressly provided herein, the effectiveness of this Amendment shall not operate as, or constitute a waiver or modification of, any right, power or remedy of any party to the Agreement. All references to the Agreement in any other document or
instrument shall be deemed to mean the Agreement as amended by this Amendment. 
 6. Counterparts. 
 This Amendment may be executed by the Parties in several counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Amendment shall become effective when counterparts hereof executed on behalf of such Party shall have been received. 
  

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 7. Governing Law. 
 This Amendment shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements made and
to be performed therein. 
  

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 IN WITNESS WHEREOF, the Seller, the Servicer, the Company, the Trustee, the Co-Trustee and the Custodian,
have caused this Amendment to be duly executed by their officers thereunto duly authorized, all as of the day and year first above written. 
  

									
		 		 		 	 NOVASTAR MORTGAGE FUNDING CORPORATION,
 as
Company

					
		 		 		 	By:	 	 /s/ Matt Kaltenrieder
  

		 		 		 	Name:	 	Matt Kaltenrieder
		 		 		 	Title:	 	Vice President
				
		 		 		 	NOVASTAR MORTGAGE, INC.,
		 		 		 	as Servicer and as Seller
					
		 		 		 	By:	 	 /s/ Matt Kaltenrieder
  

		 		 		 	Name:	 	Matt Kaltenrieder
		 		 		 	Title:	 	Vice President
				
		 		 		 	U.S. BANK NATIONAL ASSOCIATION, as successor to Wachovia Bank, National Association, as Custodian
					
		 		 		 	By:	 	 /s/ Maureen Bodine
  

		 		 		 	Name:	 	Maureen Bodine
		 		 		 	Title:	 	As Authorized Agent for U.S. Bank National Association
			
	WACHOVIA INVESTMENT HOLDINGS, LLC, hereby consents to the foregoing Amendment:	 		 	JPMORGAN CHASE BANK, NATIONAL ASSOCIATION as Trustee
					
	By:	 	 /s/ Andrew W. Riebe
  
	 		 	By:	 	 /s/ Andrew M. Cooper
  

	Name:	 	Andrew W. Riebe	 		 	Name:	 	Andrew M. Cooper
	Title:	 	Vice President	 		 	Title:	 	Assistant Vice President
			
	MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED hereby consents to the foregoing Amendment:	 		 	J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Co-Trustee
					
	By:	 	 /s/ Brodie Johnson
  
	 		 	By:	 	 /s/ Marie P. Merritt
  

	Name:	 	Brodie Johnson	 		 	Name:	 	Marie P. Merritt
	Title:	 	Authorized Signatory	 		 	Title:	 	SVP Authorized Signer

 [Signature Page for Amendment No. 2 to the 2005-3 Pooling and Servicing Agreement] 

 Exhibit A 
 Exhibit M 
 Form of Acknowledgement and Assignment Agreement 
 This Acknowledgement and Assignment Agreement is dated as of
[                    ], 2006 (this “Agreement”) and relates to NovaStar Mortgage Funding Trust, Series 2005-3 (the
“Trust”), which was created pursuant to the Pooling and Servicing Agreement dated as of September 1, 2005 (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 (f/k/a Wachovia 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. 
  

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 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 CR Certificates, (iii) the Certificateholders owning 100% of the Class CT 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 CR Certificateholders, the Class CT 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 CR 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 CR, Class CT and Class R
Certificateholders, as well as any successor Servicer. 
  

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	 Wachovia Investment Holdings, LLC, as
 Certificateholder of 100% of the Class CR
 Certificates

		
	By:	 	 /s/ Andrew W. Riebe
  

		
	Name:	 	 Andrew W. Riebe
  

		
	Title:	 	 Vice President
  

	
	 Wachovia Investment Holdings, LLC, as
 Certificateholder of 100% of the Class CT
 Certificates

		
	By:	 	 /s/ Andrew W. Riebe
  

		
	Name:	 	 Andrew W. Riebe
  

		
	Title:	 	 Vice President
  

	
	 Merrill Lynch, Pierce, Fenner & Smith
 Incorporated, as Certificateholder of 100%
 of the Class R Certificates

		
	By:	 	 /s/ Brodie Johnson
  

		
	Name:	 	 Brodie Johnson
  

		
	Title:	 	 Authorized Signatory
  

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

		
	Name:	 	 Matt Kaltenrieder
  

		
	Title:	 	 Vice President

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