Document:

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Exhibit 10.28

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                     LENDING AND CREDIT SUPPORT AGREEMENT

                            _______________________

                                 July 1, 2000

                            _______________________

                            NFI HOLDING CORPORATION
                            NOVASTAR CAPITAL, INC.
                            NOVASTAR MORTGAGE, INC.
                                 as Borrowers

                                      and

                           NOVASTAR FINANCIAL, INC.
                                   as Lender

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                     LENDING AND CREDIT SUPPORT AGREEMENT

     LENDING AND CREDIT SUPPORT AGREEMENT, dated as of July 1, 2000, between NFI
     HOLDING CORPORATION, a Delaware corporation ("Holding"), NOVASTAR CAPITAL,
     INC., a Delaware corporation ("Capital"), NOVASTAR MORTGAGE,  INC., a
     Virginia corporation ("Mortgage"), and such other subsidiaries of Holding
     as may from time to time execute a copy of this Agreement and the Note
     (collectively, the "Borrowers" and each individually,  a "Borrower") and
     NOVASTAR FINANCIAL, INC., a Maryland corporation (the "Lender").

                                   RECITALS

     The Borrowers have requested that the Lender from time to time consider
making revolving credit loans to them for working capital purposes or to finance
certain residential and/or commercial mortgage loans owned or to be acquired by
the Borrowers, and the Lender is prepared to consider making such loans upon the
terms and conditions hereof.  The Borrowers have further requested that the
Lender from time to time consider lending credit support to the Borrowers to
facilitate Borrowers' financings from third-party lenders and Borrowers' hedging
arrangements with counterparties.  Such credit support may be provided by the
Lender by guarantying a Borrower's borrowings from third-party lenders or by
entering into co-borrowing or co-obligor arrangements with a Borrower.
Furthermore, credit support may be provided by the Lender by guarantying the
performance under loan sale agreements, including sales of loans by a Borrower
in an asset-securitization transaction executed by a Borrower.  In addition,
credit support may be provided by the Lender to the mortgage servicing
operations of the Borrowers.  The Lender is prepared to consider lending such
credit support upon the terms and conditions hereof.  Accordingly, the parties
hereto agree as follows:

     Section 1.     Definitions and Accounting Matters.
                    ----------------------------------

     1.01    Certain Defined Terms.  As used herein, the following terms shall
             ---------------------
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
                  ---- -----

     "Adjusted Net Worth" shall mean at any date the sum of (1) GAAP Net Worth,
     plus (2) the amount of reserves of Holding and its consolidated
     Subsidiaries, if any, for credit losses (as reflected on the financial
     statements referred to in 6.01 below), minus (3) the amount of the
     unrealized gains on debt securities (as defined in FASB 115) of Holding and
     its consolidated Subsidiaries, if any, plus (4) the amount of unrealized
     losses on debt securities (as defined in FASB 115) of Holding and its
     consolidated Subsidiaries, if any, plus (5) the amount of Loan
     Indebtedness, minus (6) the excess of the amount of assets securing
     nonrecourse indebtedness over the amount of such nonrecourse indebtedness.

     "Affiliate" means, (i) with respect to Lender, NAC, NCFC, and NovaStar
Capital Access Corporation, and any other wholly-owned subsidiaries in
corporate, trust or other form, whether owned directly or indirectly, and (ii)
with respect to the Borrowers, any affiliate of any Borrower as such term is
defined in the United States Bankruptcy Code in effect from time to time.

     "Agreement" shall mean this Lending and Credit Support Agreement, as may be
amended, supplemented or otherwise modified from time to time.

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     "Applicable Margin" shall mean 1.75% unless a different percentage shall be
indicated in the related Loan Commitment pursuant to Section 2.03(b) hereof.

     "Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as
amended from time to time.

     "Borrower" and "Borrowers" shall have the meanings provided in the heading
hereof.

     "Business Day" shall mean any day other than (i) a Saturday or Sunday, or
(ii) a day in which the New York Stock Exchange or the Federal Reserve Bank of
New York is authorized or obligated by law or executive order to be closed.

     "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

     "Commitment Amount" shall be the maximum aggregate outstanding principal
amount of the Loans as specified in Section 4.02 hereof.

     "Credit Support" shall have the meaning specified in Section 2.B. hereof.

     "Credit Support Commitment" shall mean a commitment issued pursuant to
Section 2.B. hereof.

     "Credit Support Documents" shall mean any form of guarantee or co-borrowing
or co-obligor agreement and related documentation entered into pursuant to
Section 2.B.

     "Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.

     "Dollars" and "$" shall mean lawful money of the United States of America.

     "Effective Date" shall mean the date set forth in the first paragraph
hereof.

     "Event of Default" shall have the meaning assigned thereto in Section 7
hereof.

     "Funding Date" shall mean the date on which a Loan is made hereunder or a
Credit Support becomes effective hereunder.

     "GAAP" shall mean generally accepted accounting principles in effect in the
United States.

     "GAAP Net Worth" shall mean the excess of total assets of Holding and its
consolidated Subsidiaries, if any, over Total Liabilities of Holding determined
in accordance with GAAP.

     "Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over a Borrower,
any of its Subsidiaries or any of its properties.

     "Interest Period" shall mean with respect to any Loan:

          (a)  initially, the period commencing on the Funding Date, with
     respect to such Loan and ending one month thereafter; and

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          (b)  thereafter, each period commencing on the last day of the next
     preceding Interest Period applicable to such Loan and ending one month
     thereafter.

provided that, all of the foregoing provisions relating to Interest Periods are
--------
subject to the following:

     (i)   if any Interest Period pertaining to a Loan would otherwise end on a
     day which is not a Business Day, such Interest Period shall be extended to
     the next succeeding Business Day unless the result of such extension would
     be to carry such Interest Period into another calendar month in which event
     such Interest Period shall end on the immediately preceding Business Day;

     (ii)  any Interest Period that would otherwise extend beyond the
     Termination Date shall end on the Termination Date; and

     (iii) any Interest Period pertaining to a Loan that begins on the last
     Business Day of a calendar month (or on a day for which there is no
     numerically corresponding day in the calendar month at the end of such
     Interest Period) shall end on the Last Business Day of a calendar month.

     "Lender" shall have the meaning assigned thereto in the heading hereto.

     "LIBOR" shall mean the arithmetic mean of the London interbank offered
     rates for one-month U.S. dollar deposits in the London market based on
     quotations at four major banks selected by the Lender, which rates appear
     in the display designated as page "LIUS01M" on the Bloomberg Financial
     Markets Commodities News (or such other comparable displaying LIBOR
     quotations on the Bloomberg service) as of 11:00 a.m., London Time, on the
     date of determination.  LIBOR shall be determined separately for each
     Interest Period.

     "Lien" shall mean any mortgage, lien, pledge, charge, security interest or
similar encumbrance.

     "Loan" shall have the meaning specified in Section 2.A. hereof.

     "Loan Commitment" shall mean a commitment issued pursuant to Section 2.B.
hereof.

     "Loan Documents" shall mean, collectively, this Agreement and the Note.

     "Loan Indebtedness" shall mean, at any date, the principal amount of Loans
outstanding on such date.

     "Note" shall mean the promissory note provided for by Section 2.02(a)
hereof for Loans and any promissory note delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time.

     "Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).

     "Post-Default Rate" shall mean, in respect of any principal of any Loan or
any other amount under this Agreement, the Note or any other Loan Document that
is not paid when due to the Lender

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(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 2% per annum plus the rate otherwise applicable.
                      ----

     "Regulations G, T, U and X" shall mean Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may be modified and supplemented and in effect from time to time.

     "Requirements of Law" shall mean, as to any person, the Articles or
Certificate of Incorporation and Bylaws or other organization or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitration or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such person or any of its property is
subject.

     "Responsible Officer" shall mean, as to any Person, the chief executive
officer or, with respect to financial matters, the chief financial officer of
such Person.

     "Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

     "Termination Date" shall mean July 1, 2001 or such earlier date on which
this Agreement shall terminate in accordance with the provisions hereof or by
operation of law.

     "Total Indebtedness" shall mean total indebtedness for borrowed monies of
     Holding and its consolidated Subsidiaries, if any, determined in accordance
     with GAAP, less the amount of any nonrecourse indebtedness of Holding and
     its consolidated Subsidiaries.

     "Total Liabilities" shall mean total liabilities of Holding and its
consolidated Subsidiaries, if any, determined in accordance with GAAP.

     "Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of Kansas; provided that if by reason of
mandatory provisions of law, the perfection or the effect of perfection or non-
perfection of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than Kansas, "Uniform
Commercial Code" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.

     1.02 Accounting Terms and Determinations. Except as otherwise expressly
          -----------------------------------
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared, in
accordance with GAAP.

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     Section 2.A.   Loans, Notes and Prepayments.
                    ----------------------------

     2.01 Loans.
          -----

     (a)  The Lender agrees to consider from time to time each Borrower's
     requests that the Lender make, on the terms and conditions of this
     Agreement, loans (individually, a "Loan"; collectively, the "Loans") to the
     Borrower in Dollars, from and including the Effective Date to and including
     the Termination Date.  This Agreement is not a commitment to lend but
     rather sets forth the procedures to be used in connection with periodic
     requests for Loans.  Each Borrower hereby acknowledges that the Lender is
     under no obligation to agree to make, or to make, any Loan pursuant to this
     Agreement.

     (b)  Subject to the terms and conditions of this Agreement, during such
period each Borrower may borrow, repay and reborrow hereunder.

     (c)  In no event shall a Loan be made when any Default or Event of Default
has occurred and is continuing.

     2.02 Notes.
          -----

     (a)  The Loans made by the Lender shall be evidenced by a single promissory
     note of the Borrowers substantially in the form of Exhibit A hereto (the
     "Note"), dated the date hereof, payable to the Lender in a principal amount
     equal to the amount of the Loans outstanding from time to time.  The Lender
     shall have the right to have its Note subdivided, by exchange for
     promissory notes of lesser denominations or otherwise.

     (b)  The date, amount and interest rate of each Loan made by the Lender to
          a Borrower, and each payment made on account of the principal thereof,
          shall be recorded by the Lender on its books and, prior to any
          transfer of the Note, endorsed by the Lender on the schedule attached
          to the Note or any continuation thereof; provided, that the failure of
                                                   --------
          the Lender to make any such recordation or endorsement shall not
          affect the obligations of the Borrower to make a payment when due of
          any amount owing hereunder or under the Note in respect of the Loans.

     (c)  The Borrowers shall be jointly and severally liable for all loans made
          hereunder.

     2.03 Procedure for Borrowing.
          -----------------------

     (a)  Each Borrower may request a borrowing hereunder, on any Business Day
     during the period from and including the Effective Date to and including
     the Termination Date, by delivering to the Lender an irrevocable written
     request for borrowing, which request must be countersigned by Holding if
     Holding is not the requesting Borrower and must be received by the Lender
     prior to 10:00 a.m. (Central time) at least one (1) Business Day prior to
     the requested Funding Date unless otherwise agreed by the Lender.  Such
     request for borrowing shall specify the requested Funding Date.

     (b)  Upon the Borrower's request for a borrowing, the Lender may, at its
option, offer to make a Loan to the Borrower by confirming to the Borrower
(telephonically or via electronic communication) (i) the Funding Date, (ii) the
amount of the Loan to be made on such Funding Date, and (iii) the Applicable
Margin, and may contain additional terms or conditions which may or may

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not be inconsistent with this Agreement (the "Loan Commitment"). In the event
there is a conflict between the terms of this Agreement and the terms of the
Loan Commitment, the terms of the Loan Commitment shall control. Each Loan
Commitment, together with this Agreement, shall be conclusive evidence of the
terms of the Loan(s) covered thereby.

     (c)  The Borrower shall, no later than 3:00 p.m. (Central time) on the
Business Day that it receives a Loan Commitment from the Lender, either:

          (i)  decline the offer contained in such Loan Commitment by notifying
     the Lender by telephone or electronic communication to that effect; or

          (ii) accept such offer contained in such Loan Commitment by notifying
     the Lender by telephone or electronic communication to that effect.

     Notwithstanding the foregoing, the Borrower shall be deemed to have
accepted such offer, and such Loan Commitment, together with this Agreement,
shall be conclusive evidence of the terms of the Loan covered thereby, unless
the Borrower has declined such offer by the time set forth above.

Subject to Section 4 hereof, each loan will be made available to the Borrower by
the Lender transferring, via wire transfer, to an escrow account or account
maintained by the Borrower prior to 3:00 p.m., (Central time), on the Funding
Date, the aggregate amount of such borrowing in funds  immediately  available
to  the  Borrower.

     2.04 Repayment of Loans; Interest.
          ----------------------------

     (a)  Each Borrower hereby promises to repay in full the outstanding
     principal amount of each Loan no later than the date (the "Stated
     Maturity") which is twelve (12) months after the Funding Date of such Loan.

     (b)  Each Borrower hereby promises to pay to the Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to LIBOR plus the Applicable Margin.  Notwithstanding the
                              ----
foregoing, each Borrower hereby promises to pay to the Lender interest at the
applicable Post-Default Rate on any principal of any Loan and on any other
amount payable by the Borrower hereunder or under the Note, that shall not be
paid in full when due (whether at Stated Maturity, by acceleration or by
mandatory prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full.  Accrued
interest on each Loan shall be payable monthly commencing on the date one month
from the Funding Date and on each successive date which is one month thereafter
or the date of final payment of principal on such Loan, except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Lender shall give notice thereof to the Borrowers.

     2.05 Voluntary Prepayments.  The Borrowers may prepay the outstanding
          ---------------------
principal of any Loan, in whole or in part, at any time prior to the Stated
Maturity thereof.

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     Section 2.B.   Credit Support.
                    --------------

     2.06 Issuance of Credit Support.
          --------------------------

     (a)  The Lender agrees to consider from time to time each Borrower's
     requests that the Lender issue credit support of loans made to the Borrower
     by third parties or of mortgage sale and/or servicing agreements or hedging
     or other arrangements to be entered into by the Borrower with
     counterparties on the terms and conditions of this Agreement from and
     including the Effective Date to and including the Termination Date.  Such
     credit support could be in the form of guarantees by the Lender or co-
     borrowing or co-obligor arrangements with the Borrower in which the Lender
     is jointly and severally liable for the Borrower's obligations thereunder
     (individually, a "Credit Support"; collectively, the "Credit Supports").
     This Agreement is not a commitment to enter into Credit Supports but rather
     sets forth the procedures to be used in connection with periodic requests
     for Credit Supports.  The Borrowers hereby acknowledge that the Lender is
     under no obligation to agree to enter into, or to enter into, any Credit
     Support pursuant to this Agreement.

     (b)  Subject to the terms and conditions of this Agreement, during such
period each Borrower may borrow, repay and reborrow amounts from third parties
covered by Credit Supports issued hereunder.

     (c)  In no event shall Credit Support Documents be entered into when any
Default or Event of Default has occurred and is continuing.

     2.07 Credit Supports.  The Credit Supports entered by the Lender shall be
          ---------------
evidenced by such Credit Support Documents as the Lender may from time to time
approve.

     2.08 Procedure for Obtaining Credit Supports.
          ---------------------------------------

     (a)  Each Borrower may request Credit Support hereunder, on any Business
     Day during the period from and including the Effective Date to and
     including the Termination Date, by delivering to the Lender, an irrevocable
     written request for Credit Support, which request must be received by the
     Lender prior to 10:00 a.m. (Central time), at least one (1) Business Day
     prior to the requested Funding Date unless otherwise agreed by the Lender.
     Such request for Credit Support shall specify the requested Funding Date.

     (b)  Upon the Borrower's request for Credit Support, the Lender may, at its
option, offer to enter into Credit Support Documents in favor of the Borrower by
confirming to the Borrower (telephonically or via electronic communication) (i)
the Funding Date, (ii) the amount of the Credit Support to be entered into on
such Funding Date, (iii) the Applicable Margin, (iv) Credit Support Fee and may
contain additional terms and conditions which may or may not be inconsistent
with this Agreement (the "Credit Support Commitment").  In the event there is a
conflict between the terms of this Agreement and the terms of the Credit Support
Commitment, the terms of the Credit Support Commitment shall control.  Each
Credit Support Commitment, together with this Agreement, shall be conclusive
evidence of the terms of the Credit Support(s) covered thereby.

     (c)  The Borrower shall, no later than 3:00 p.m. (Central time) on the
Business Day that it receives a Credit Support Commitment from the Lender,
either:

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          (i)  decline the offer contained in such Credit Support Commitment by
     notifying the Lender by telephone or electronic communication to that
     effect; or

          (ii) accept such offer contained in such Credit Support Commitment by
     notifying the Lender by telephone or electronic communication to that
     effect.

     Notwithstanding the foregoing, the Borrower shall be deemed to have
accepted such offer, and such Credit Support Commitment, together with this
Agreement, shall be conclusive evidence of the terms of the Credit Support
covered thereby, unless the Borrower has declined such offer by the time set
forth above.

     2.09 Repayment of Credit Support Disbursements; Interest.  Each Borrower
          ---------------------------------------------------
     hereby promises to make payments to the Lender in respect of any amount
     expended by the Lender pursuant to any Credit Support on the following
     terms and conditions, unless otherwise provided in the related Credit
     Support Commitment:

     (a)  The amount of any such expenditure, whether used to repay principal,
     interest or other amounts due to the third-party lender, shall be treated
     as principal of a Loan, the Stated Maturity of which is the first Business
     Day following the date of the expenditure; and

     (b)  Interest will be payable on such constructive Loan at the Post-Default
     Rate and on the same terms as if such Loan was in default with respect to
     repayment of principal due on the Stated Maturity thereof as set forth in
     (a) above.

     2.10 Credit Support Fee.  As compensation for the Lender's issuance of
          ------------------
     each Credit Support, the Borrowers agree to pay the Lender a Credit Support
     Fee on each Funding Date in the amounts as shown in the Schedule of Credit
     Support Fees (Exhibit B).   These amounts may be amended from time to time
     by the parties hereto.

     Section 3.     Payments; Computations; Etc.
                    ----------------------------

     3.01 Payments.
          --------

     (a)  Except to the extent otherwise provided herein, all payments of
     principal, interest and other amounts to be made by the Borrowers under
     this Agreement and the Note, shall be made in Dollars, in immediately
     available funds, without deduction, set-off or counterclaim, to the Lender
     at the account maintained by the Lender and specified in writing to the
     Borrower, not later than 1:00 p.m., (Central time), on the date on which
     such payment shall become due (each such payment made after such time on
     such due date to be deemed to have been made on the next succeeding
     Business Day).  The Borrowers acknowledge that they have no rights of
     withdrawal from the foregoing account.

     (b)  Except to the extent otherwise expressly provided herein, if the due
     date of any payment under this Agreement or the Note would otherwise fall
     on a day that is not a Business Day, such date shall be extended to the
     next succeeding Business Day, and interest shall be payable for any
     principal so extended for the period of such extension.

     3.02 Computations.  Interest on the Loans shall be computed on the basis
          ------------
     of a 360-day year for the actual days elapsed (including the first day but
     excluding the last day) occurring in the period for which payable.

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     Section 4.     Conditions Precedent.
                    --------------------

     4.01 Initial Loan and Credit Supports.  The obligation of the Lender to
          --------------------------------
     make its initial Loan and enter into the initial Credit Supports hereunder
     is subject to the satisfaction, immediately prior to or concurrently with
     the making of such Loan and the issuance of such Credit Supports, of the
     following conditions precedent:

     (a)  Loan Documents.  The Lender shall have received the following
          --------------
     documents, each of which shall be satisfactory to the Lender in form and
     substance:

     (i)  Note.  the Note, duly completed and executed; and
          ----

     (ii) Credit Supports.  one or more agreements constituting Credit Supports,
          ---------------
     duly executed and delivered by the Borrower and the Lender.

     In addition, the Borrowers shall have taken such other action as the Lender
     shall have requested in order to perfect the security interests created
     pursuant to the Agreement; and

     (b)  Organization Documents.  A good standing certificate and certified
          ----------------------
     copies of the charter and bylaws (or equivalent documents) of each Borrower
     and of all corporate or other authority for each Borrower with respect to
     the execution, delivery and performance of the Loan Documents and each
     other document to be delivered by the Borrowers from time to time in
     connection herewith (and the Lender may conclusively rely on such
     certificate until it receives notice in writing from any Borrower to the
     contrary);

     (c)  Other Documents.  Such other documents as the Lender may reasonably
          ---------------
     request.

     4.02 Initial and Subsequent Loans and Credit Supports.  The making of each
          ------------------------------------------------
     Loan to a Borrower and issuance of each Credit Support (including the
     initial Loan and initial Credit Supports) on any Business Day is subject to
     the following further conditions precedent, both immediately prior to the
     making of such Loan or issuance of such Credit Support and also after
     giving effect thereto and to the intended use thereof:

     (a)  no Default or Event of Default shall have occurred and be continuing;

     (b)  (i) both immediately prior to the making of such Loan or issuance of
     such Credit Support and also after giving effect thereto and to the
     intended use thereof, the representations and warranties made by each
     Borrower in Section 5 hereof, and in each of the other Loan Documents,
     shall be true and complete on and as of the date of the making of such Loan
     or issuance of such Credit Support in all material respects with the same
     force and effect as if made on and as of such date (or, if any such
     representation or warranty is expressly stated to have been made as of a
     specific date, as of such specific date) and (ii) with respect to any
     Credit Support being issued to support a third party borrowing to finance
     the acquisition or maintenance of assets, the value of such assets must be
     equal to or greater than the sum of such third party indebtedness plus any
     Loan obtained to facilitate such acquisition or maintenance.  The Lender
     shall have received an officer's certificate signed by a Responsible
     Officer of the Borrower certifying as to the truth and accuracy of the
     above, which certificate shall specifically include a statement that the
     Borrower is in compliance with all governmental licenses and authorizations
     and is qualified to do business and in good standing in all required
     jurisdictions; and

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<PAGE>

     (c)  the aggregate outstanding principal amount of the Loans at the time
     shall not exceed $150,000,000 and the aggregate outstanding principal
     amount covered by Credit Supports at the time shall not exceed
     $5,000,000,000.

     Section 5.     Representations and Warranties.
                    ------------------------------

     Each Borrower represents and warrants to the Lender that throughout the
     term of this Agreement:

     5.01 Existence.  The Borrower (a) is a corporation duly organized, validly
          ---------
     existing and in good standing under the laws of the jurisdiction of its
     organization; (b) has all requisite corporate or other power, and has all
     governmental licenses, authorizations, consents and approvals, necessary to
     own its assets and carry on its business as now being or as proposed to be
     conducted, the lack of which would be reasonably likely to have a material
     adverse effect on its property, business or financial condition, or
     prospects; and (c) is qualified to do business and is in good standing in
     all other jurisdictions in which the nature of the business conducted by it
     makes such qualification necessary and where failure so to qualify would be
     reasonably likely (either individually or in the aggregate) to have a
     material adverse effect on its property, business or financial condition,
     or prospects.

     5.02 Financial Condition.  Holdings has heretofore furnished to the Lender
          -------------------
a copy of its consolidated balance sheets and the consolidated balance sheets of
its consolidated Subsidiaries for the fourth quarterly fiscal period of 1998.
Holdings has also heretofore furnished to the Lender the related consolidated
statements of operations, stockholders' equity and cash flows for Holdings and
its consolidated Subsidiaries for the fourth quarterly fiscal period of 1998.
All such financial statements are complete and correct and  fairly  present the
consolidated financial condition of Holdings and its Subsidiaries and the
consolidated results of their operations for the fiscal period needed on said
date, all in accordance with GAAP applied on a consistent basis.

     5.03 Litigation.  There are no actions, suits, arbitrations,
          ----------
     investigations or proceedings pending or, to its knowledge, threatened
     against the Borrower or any of its Subsidiaries or affecting any of the
     property thereof before any Governmental Authority, (i) as to which
     individually or in the aggregate there is a reasonable likelihood of an
     adverse decision which would be reasonably likely to have a material
     adverse effect on the property, business or financial condition, or
     prospects of the Borrower or (ii) which questions the validity or
     enforceability of any of the Loan Documents or any action to be taken in
     connection with the transactions contemplated hereby.

     5.04 No Breach.  Neither (a) the execution and delivery of the Loan
          ---------
     Documents or (b) the consummation of the transactions therein contemplated
     in compliance with the terms and provisions thereof will conflict with or
     result in a breach of the charter or bylaws of the Borrower, or any
     applicable law, rule or regulation, or any order, writ, injunction or
     decree of any Governmental Authority, or any Servicing Agreement or other
     material agreement or instrument to which the Borrower, or any of its
     Subsidiaries, is a party or by which any of them or any of their property
     is bound or to which any of them is subject, or constitute a default under
     any such material agreement or instrument, or (except for the Liens created
     pursuant to this Agreement) result in the creation or imposition of any
     Lien upon any property of the Borrower or any of its Subsidiaries pursuant
     to the terms of any such agreement or instrument.

                                       10
<PAGE>

     5.05  Action.  The Borrower has all necessary corporate or other power,
           ------
     authority and legal right to execute, deliver and perform its obligations
     under each of the Loan Documents; the execution, delivery and performance
     by the Borrower of each of the Loan Documents have been duly authorized by
     all necessary corporate or other action on its part; and each Loan Document
     has been duly and validly executed and delivered by the Borrower and
     constitutes a legal, valid and binding obligation of the Borrower,
     enforceable against the Borrower in accordance with its terms.

     5.06  Approvals.  No authorizations, approvals or consents of, and no
           ---------
     filings or registrations with, any Governmental Authority, or any
     securities exchange, are necessary for the execution, delivery or
     performance by the Borrower of the Loan Documents or for the legality,
     validity or enforceability thereof, except for filings and recordings in
     respect of the Liens created pursuant to this Agreement.

     5.07  Margin Regulations.  Neither the making of any Loan hereunder, nor
           ------------------
     the use of the proceeds thereof, will violate or be consistent with the
     provisions of Regulation G, T, U or X.

     5.08  Taxes.  The Borrower and its Subsidiaries have filed all Federal
           -----
     income tax returns and all other material tax returns that are required to
     be filed by them and have paid all taxes due pursuant to such returns or
     pursuant to any assessment received by any of them, except for any such
     taxes, if any, that are being appropriately contested in good faith by
     appropriate proceedings diligently conducted and with respect to which
     adequate reserves have been provided.  The charges, accruals and reserves
     on the books of the Borrower and its Subsidiaries in respect of taxes and
     other governmental charges are, in the opinion of the Borrower, adequate.

     5.09  Investment Company Act.  Neither the Borrower nor any of its
           ----------------------
     Subsidiaries is an "investment company," or a company "controlled" by an
     "investment company," within the meaning of the Investment Company Act of
     1940, as amended.

     5.10  Chief Executive Office. Holding's, Capital's and Mortgage's chief
           ----------------------
     executive offices on the Effective Date are each located at 1901 West
     47/th/ Place, Suite 105, Westwood, Kansas, 66205.

     5.11  Location of Books and Records.  The location where the Borrower keeps
           -----------------------------
     its books and records is its chief executive office.

     Section 6A.    Affirmative Covenants of the Borrower.
                    -------------------------------------

     Each Borrower covenants and agrees with the Lender that, so long as any
     Loan or Credit Support is outstanding and until payment in full of all
     Obligations:

     6.01 Financial Statements. Holding shall deliver to the Lender as soon as
          --------------------
     available all financial statements it prepares, including at a minimum the
     following:

     (a)  as soon as available and in any event within forty-five (45) days
     after the end of each of the operations, stockholders' equity and quarterly
     fiscal periods of each fiscal year of Holdings, the consolidated balance
     sheets of Holdings and its consolidated Subsidiaries as at the end of such
     period and the related unaudited consolidated statements of operations,

                                       11
<PAGE>

     stockholders' equity and cash flows for Holdings and its consolidated
     Subsidiaries for such period and the portion of the fiscal year through the
     end of such period;

     (b)  as soon as available and in any event within ninety (90) days after
     the end of each fiscal year of Holdings, the consolidated balance sheets of
     Holdings and its consolidated Subsidiaries as at the end of such fiscal
     year and the related consolidated statements of operations, stockholders'
     equity and cash flows for Holdings and its consolidated Subsidiaries for
     such year, setting forth in each case in comparative form the figures for
     the previous year, accompanied by an opinion thereon of independent
     certified public accountants of recognized national standing previously
     approved by the Lender, which opinion shall not be qualified as to scope of
     audit or going concern and shall state that said consolidated financial
     statements fairly present the consolidated financial condition and results
     of operations of Holdings and its consolidated Subsidiaries as at the end
     of, and for, such fiscal year in accordance with GAAP;

     (c)  from time to time such other information regarding the financial
     condition, operations, or business of Holding as the Lender may reasonably
     request, including but not limited to quarterly audited financial
     statements.

     6.02 Litigation.  The Borrower will promptly, and in any event within 10
          ----------
     days after service of process on any of the following, give the Lender
     notice of all legal or arbitrable proceedings affecting the Borrower or any
     of its Subsidiaries that questions or challenges the validity or
     enforceability of any of the Loan Documents or as to which there is a
     reasonable likelihood of adverse determination which would result in a
     material adverse effect.

     6.03 Existence, Etc.  The Borrower will:
          ---------------

     (a)  preserve and maintain its legal existence and all of its material
     rights, privileges, licenses and franchises (provided, that nothing in this
                                                  --------
     Section 6.03 shall prohibit any transaction expressly permitted under
     Section 6.04 hereof);

     (b)  comply with the requirements of all applicable laws, rules,
     regulations and orders of Government Authorities (including, without
     limitation, all environmental laws) if failure to comply with such
     requirements would be reasonably likely (either individually or in the
     aggregate) to have a material adverse effect on its property, business or
     financial condition, or prospects;

     (c)  keep adequate records and books of account, in which complete entries
     will be made in accordance with GAAP consistently applied; and

     (d)  not move its chief executive office from the address referred to in
     Section 6.11 unless it shall have provided the Lender 30 days prior written
     notice of such change.

     6.04 Cooperation and Access to Records.  The Borrower agrees to cooperate
          ---------------------------------
     fully and in a timely fashion with the Lender's requests for information or
     access to data, reports, records and personnel made for purposes of the
     Lender's compliance with securities law reporting and filing requirements,
     federal and state tax reporting and filing requirements or any other legal
     or regulatory reporting and filing requirements applicable to it.  As part
     of this cooperation, the Borrower will agree to provide the following
     information:

                                       12
<PAGE>

     (a)  keep proper books of record and account in which full, true and
     correct entries in conformity with GAAP and all Requirements of Law shall
     be made of all dealings and transactions in relation to its business and
     activities; and

     (b)  permit: (i) representatives of the Lender to (A) visit and inspect any
     of its properties and examine and make abstracts from any of its books and
     records at any reasonable time and as often as may reasonably be desired by
     the Lender (but, prior to the occurrence of an Event of Default, only upon
     not less than two (2) Business Days' prior notice), and (B) discuss the
     business, operations, properties and financial and other condition of the
     Borrower with officers and employees of the Borrower, and with its
     independent certified public accountants, and (ii) representatives of the
     Lender to conduct periodic operational audits of the Borrower's business
     and operations

     6.05 Notices.  The Borrower shall give notice to the Lender:
          -------

     (a)  promptly of the occurrence of any Default or Event of Default; and

     (b)  any event or change in circumstances, in each case which could
     reasonably be expected to have a material adverse effect on the Borrower's
     property, business or financial condition, or prospects.

     Each notice pursuant to this Section shall be accompanied by a statement of
     a Responsible Officer of the Borrower setting forth details of the
     occurrence referred to therein and stating what action the Borrower has
     taken or proposes to take with respect thereto.

     Section 6B.    Negative Covenants.
                    ------------------

     Each Borrower covenants and agrees with the Lender that, so long as any
     Loan or Credit Support is outstanding:

     6.07 Total Indebtedness to Adjusted Net Worth Ratio. Holding will not
          ----------------------------------------------
     permit its ratio at any date of Total Indebtedness to Adjusted Net Worth to
     be more than 10.0:1.0.

     6.08 Loan Indebtedness to GAAP Net Worth.  Holding will not permit its
          -----------------------------------
     ratio at any date of Loan Indebtedness to GAAP Net Worth to be more that
     2.0:1.0.

     6.09 Minimum GAAP Net Worth.  Holding will not permit its GAAP Net Worth
          ----------------------
     as of the last day of any fiscal quarter to be less than the sum of (1)
     $7,000,000, plus (2) fifty percent (50%) of (A) the cash proceeds of any
     sale or issuance of equity securities of any Borrower (or of any options,
     warrants or rights in respect of any such equity securities) which issuance
     takes place after the date of this Agreement, plus (B) cumulative after-tax
     earnings earned after the date hereof less cumulative dividends paid after
     the date of this Agreement.

     Section 7.     Events of Default.
                    -----------------

     Each of the following events shall constitute an event of default (an
     "Event of Default") hereunder:

                                       13
<PAGE>

     (a) the Borrowers shall default in the payment of any principal of or
     interest on any Loan when due (whether at Stated Maturity, upon
     acceleration or at mandatory or optional prepayment) or any Credit Support
     when due; or

     (b) the Borrowers shall default in the payment of any other amount payable
     hereunder or under any other Loan Document after notification by the Lender
     of such default, and such default shall have continued unremedied for five
     Business Days; or

     (c) any representation, warranty or certification made or deemed made
     herein or in any other Loan Document by any Borrower or any certificate
     furnished to the Lender pursuant to the provisions thereof, shall prove to
     have been false or misleading in any material respect as of the time made
     or furnished; or

     (d) any Borrower shall fail to comply with the requirements of Section 6.03
     (as to existence), Section 6.04, Section 6.05, Section 6.06, Section 6.07
     or Section 6.08 hereof; or any Borrower shall otherwise fail to comply with
     the requirements of Section 6.03 hereof and such default shall continue
     unremedied for a period of five Business Days; or any Borrower shall fail
     to observe or perform any other agreement contained in this Agreement or
     any other Loan Document and such failure to observe or perform shall
     continue unremedied for a period of seven Business Days; or

     (e) a final judgment or judgments for the payment of money in excess of
     $5,000,000 in the aggregate shall be rendered against any Borrower or any
     Subsidiary of a Borrower by one or more courts, administrative tribunals or
     other bodies having jurisdiction over them and the same shall not be
     discharged (or provision shall not be made for such discharge) or bonded,
     or a stay of execution thereof shall not be procured, within 60 days from
     the date of entry thereof and the Borrower or any such Subsidiary shall
     not, within said period of 60 days, or such longer period during which
     execution of the same shall have been stayed or bonded, appeal therefrom
     and cause the execution thereof to be stayed during such appeal; or

     (f) any Borrower shall admit in writing its inability to pay its debts as
     such debts become due; or

     (g) any Borrower  or any Subsidiary of a Borrower shall (i) apply for or
     consent to the appointment of, or the taking of possession by, a receiver,
     custodian, trustee, examiner or liquidator of itself or of all or a
     substantial part of its property, (ii) make a general assignment for the
     benefit of its creditors, (iii) commerce a voluntary case under the
     Bankruptcy Code, (iv) file a petition seeking to take advantage of any
     other law relating to bankruptcy, insolvency, file a petition seeking to
     take advantage of any other law relating to bankruptcy, insolvency,
     reorganization, liquidation, dissolution, arrangement or winding-up, or
     composition or readjustment of debts, (v) fail to controvert in a timely
     and appropriate manner, or acquiesce in writing to, any petition filed
     against it in an involuntary case under the Bankruptcy Code or (vi) take
     any corporate or other action for the purpose of effecting any of the
     foregoing; or

     (h) a proceeding or case shall be commenced with respect to any Borrower or
     any Subsidiary of a Borrower, without the application or consent of the
     Borrower or any such Subsidiary, in any court of competent jurisdiction,
     seeking (i) its reorganization, liquidation, dissolution, arrangement or
     winding-up, or the composition or readjustment of its debts, (ii) the
     appointment of a receiver, custodian, trustee, examiner, liquidator or the
     like of the

                                       14
<PAGE>

     Borrower or any such Subsidiary or of all or any substantial part of its
     property, or (iii) similar relief in respect of the Borrower or any such
     Subsidiary under any law relating to bankruptcy, insolvency,
     reorganization, winding-up, or composition or adjustment of debts, and such
     proceeding or case shall continue undismissed, or an order, judgment or
     decree approving or ordering any of the foregoing shall be entered and
     continue unstayed and in effect, for a period of 60 or more days; or an
     order for relief against the Borrower or any such Subsidiary shall be
     entered in an involuntary case under the Bankruptcy Code; or

     (i) any Borrower grants, or suffers to exist, any Lien not contemplated
     herein; or

     (j) any materially adverse change in the properties, business or financial
     condition, or prospects of any Borrower or any Subsidiary of a Borrower, in
     each case as determined by the Lender in its sole discretion, or the
     existence of any other condition which, in the Lender's sole discretion,
     constitutes a material impairment of the Borrowers' collective ability to
     perform their obligations under this Agreement, the Note, the Credit
     Supports or any other Loan Document.

     Section 8.     Remedies Upon Default.
                    ---------------------

     (a) Upon the occurrence of one or more Events of Default other than those
     referred to in Section 7(g) or (h), the Lender may immediately declare the
     principal amount of the Loans then outstanding under the Note to be
     immediately due and payable, together with all interest thereon and fees
     and expenses accruing under this Agreement; provided that upon the
                                                 --------
     occurrence of an Event of Default referred to in Sections 7(g) or (h) such
     amounts shall immediately and automatically become due and payable without
     any further action by any Person.  Upon such declaration or such automatic
     acceleration, the balance then outstanding on the Note shall become
     immediately due and payable, without presentment, demand, protest or other
     formalities of any kind, all of which are hereby expressly waived by the
     Borrowers.

     (b) Upon the occurrence of one or more Events of Default, the Lender shall
     be entitled to specific performance of all agreements of the Borrowers
     contained in this Agreement.

     Section 9.     No Duty on Lender's Part.
                    ------------------------

     The powers conferred on the Lender shall not impose any duty upon it to
     exercise any such powers.  The Lender shall be accountable only for amounts
     that it actually receives as a result of the exercise of such powers, and
     neither it nor any of its officers, directors, employees or agents shall be
     responsible to the Borrowers for any act or failure to act hereunder,
     except for its own gross negligence or willful misconduct.

     Section 10.    Miscellaneous.
                    -------------

     10.01  Waiver.  No failure on the part of the Lender to exercise and no
            ------
     delay in exercising, and no course of dealing with respect to, any right,
     power or privilege under any Loan Document shall operate as a waiver
     thereof, nor shall any single or partial exercise of any right, power or
     privilege under any Loan Document preclude any other or further exercise
     thereof or the exercise of any other right, power or privilege.  The
     remedies provided herein are cumulative and not exclusive of any remedies
     provided by law.

                                       15
<PAGE>

     10.02  Notices.  Except as otherwise expressly permitted by this Agreement,
            -------
     all notices, requests and other communications provided for herein
     (including, without limitation, any modifications of, or waivers, requests
     or consents under, this Agreement) shall be given or made in writing
     (including, without limitation, by telex or telecopy) delivered to the
     intended  recipient at the "Address for Notices" specified below its name
     on the signature pages hereof); or, as to any party, at such other address
     as shall be designated by such party in a written notice to each other
     party.  Except as otherwise provided in this Agreement and except for
     notices given under Section 2 (which shall be effective only on receipt),
     all such communications shall be deemed to have been duly given when
     transmitted by telex or telecopier or personally delivered or, in the case
     of a mailed notice, upon receipt, in each case given or addressed as
     aforesaid.

     10.03  Indemnification and Expenses.
            ----------------------------

     (a)    The Borrowers agree, jointly and severally, to hold the Lender
     harmless from and indemnify the Lender against all liabilities, losses,
     damages, judgments, costs and expenses of any kind which may be imposed on,
     incurred by, or asserted against the Lender, relating to or arising out of,
     this Agreement, the Note, the Credit Supports, any other Loan Document or
     any transaction contemplated hereby or thereby, or any amendment,
     supplement or modification of, or any waiver or consent under or in respect
     of, this Agreement, the Note, the Credit Supports, any other Loan Document
     or any transaction contemplated hereby or thereby, that, in each case,
     results from anything other than the Lender's gross negligence or willful
     misconduct. The Borrowers also agree to reimburse the Lender for all of its
     costs and expenses incurred in connection with the enforcement or the
     preservation of the Lender's rights under this Agreement, the Note, the
     Credit Supports, any other Loan Document or any transaction contemplated
     hereby or thereby, including without limitation the reasonable fees and
     disbursements of its counsel. The Borrowers hereby acknowledge that the
     obligations of the Borrowers under the Note and Credit Supports are
     nonrecourse obligations of the Borrowers.

     (b)    The Borrowers agree to pay as and when billed by the Lender all of
     the out-of-pocket costs and expenses incurred by the Lender in connection
     with the development, preparation and execution of, and any amendment,
     supplement or modification to, this Agreement, the Note, the Credit
     Supports, any other Loan Document or any other documents prepared in
     connection herewith or therewith. The Borrowers agree to pay as and when
     billed by the Lender all of the out-of-pocket costs and expenses incurred
     in connection with the consummation and administration of the transactions
     contemplated hereby and thereby including, without limitation all the
     reasonable fees, disbursements and expenses of Tobin & Tobin, counsel to
     the Lender and any local counsel to the Lender.

     10.04  Amendments.  Except as otherwise expressly provided in this
            ----------
     Agreement, any provision of this Agreement may be modified or supplemented
     only by an instrument in writing signed by the Borrowers and the Lender and
     any provision of this Agreement may be waived by the Lender.

     10.05  Successors and Assigns.  This Agreement shall be binding upon and
            ----------------------
     inure to the benefit of the parties hereto and their respective successors
     and permitted assigns.

     10.06  Survival.  The obligations of the Borrowers under Sections 3.03 and
            --------
     10.03 hereof shall survive the repayment of the Loans and the Credit
     Supports and the termination of this

                                       16
<PAGE>

     Agreement. In addition, each representation and warranty made, or deemed to
     be made by a request for a borrowing, herein or pursuant hereto shall
     survive the making of such representation and warranty, and the Lender
     shall not be deemed to have waived, by reason of making any Loan, any
     Default that may arise by reason of such representation or warranty proving
     to have been false or misleading, notwithstanding that the Lender may have
     had notice or knowledge or reason to believe that such representation or
     warranty was false or misleading at the time such Loan was made.

     10.07  Captions.  The table of contents and captions and section headings
            --------
     appearing herein are included solely for convenience of reference and are
     not intended to affect the interpretation of any provision of this
     Agreement.

     10.08  Counterparts.  This Agreement may be executed in any number of
            ------------
     counterparts, all of which taken together shall constitute one and the same
     instrument, and any of the parties hereto may execute this Agreement by
     signing any such counterpart.

     10.09  Agreement Constitutes Security Agreement; Governing Law.  This
            -------------------------------------------------------
     Agreement shall be governed by Kansas law without reference to choice of
     law doctrine, and shall constitute a security agreement within the meaning
     of the Uniform Commercial Code.

     10.10  SUBMISSION TO JURISDICTION; WAIVERS. EACH BORROWER HEREBY
            -----------------------------------
     IRREVOCABLY AND UNCONDITIONALLY:

     (A)    SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
     PROCEEDING RELATING TO THIS AGREEMENT, THE NOTE, THE CREDIT SUPPORTS, AND
     THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
     JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
     THE COURTS OF THE STATE OF KANSAS, THE FEDERAL COURTS OF THE UNITED STATES
     OF AMERICA FOR KANSAS, AND APPELLATE COURTS FROM ANY THEREOF;

     (B)    CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
     COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
     MAY NOW OR THEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
     ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
     INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

     (C)    AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
     BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
     ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS
     SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE
     LENDER SHALL HAVE BEEN NOTIFIED; AND

     (D)    AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
     OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO
     SUE IN ANY OTHER JURISDICTION.

                                       17
<PAGE>

     10.11  WAIVER OF JURY TRIAL.  EACH OF THE BORROWERS AND THE LENDER HEREBY
            --------------------
     IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
     AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
     RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR TRANSACTIONS
     CONTEMPLATED HEREBY OR THEREBY.

     10.12  Acknowledgments. Each Borrower hereby acknowledges that:
            ---------------

     (a)    the Lender has no fiduciary relationship to the Borrower, and the
     relationship between the Borrower and the Lender is solely that of debtor
     and creditor; and

     (b)    no joint venture exists between the Lender and the Borrower.

     10.13  Termination.  This Agreement may be terminated by the Lender or
            -----------
     Holding by delivering written notice of such termination to each of the
     other parties hereto at least 60 days prior to the effective date of
     termination.  Termination of this Agreement shall not affect the terms of
     Loans or Credit Supports at the time outstanding and shall otherwise be
     subject to Section 10.06 hereof.

                 [remainder of page intentionally left blank]

                                       18
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
     duly executed and delivered as of the day and year first above written.

                                    BORROWERS
                                    ---------

                                    NFI HOLDING CORPORATION

                                    By: __________________________

                                    Name:   W. Lance Anderson

                                    Title:  President

                                    Address for Notices:
                                    -------------------

                                    1901 West 47/th/ Place, Suite 105

                                    Westwood, Kansas 66205

                              Attn: Rodney E. Schwatken

                              Telecopier No.:  913.514.3567

                                    Telephone No.:  913.514.3532

                                    NOVASTAR CAPITAL, INC.

                                    By: __________________________

                                    Name:  Mike Bamburg

                                    Title: President

                                    Address for Notices:
                                    -------------------

                                    1901 West 47/th/ Place, Suite 105

                                    Westwood, Kansas 66205

                                       19
<PAGE>

                              Attn: Rodney E. Schwatken

                              Telecopier No.:  913.514.3567

                                    Telephone No.:  913.514.3532

                                    NOVASTAR MORTGAGE, INC.

                                    By: __________________________

                                    Name:  W. Lance Anderson

                                    Title: President

                                    Address for Notices:
                                    -------------------

                                    1901 West 47/th/ Place, Suite 105

                                    Westwood, Kansas 66205

                              Attn: Rodney E. Schwatken

                              Telecopier No.:  913.514.3567

                                    Telephone No.:  913.514.3532

                                       20
<PAGE>

                                    LENDER
                                    ------

                                    NOVASTAR FINANCIAL, INC.

                                    By: __________________________

                                    Name:  Scott F. Hartman

                                    Title: Chief Executive Officer

                                    Address for Notices:
                                    -------------------

                                    1901 West 47/th/ Place, Suite 105

                                    Westwood, Kansas 66205

                              Attn: Rodney E. Schwatken

                              Telecopier No.:  913.514.3567

                                    Telephone No.:  913.514.3532

                                       21
<PAGE>

                                   EXHIBIT A

                           [FORM OF PROMISSORY NOTE]

     FOR VALUE RECEIVED, NFI HOLDING CORPORATION, a Delaware corporation
     ("Holding"), NOVASTAR CAPITAL,  INC., a Delaware corporation ("Capital"),
     NOVASTAR MORTGAGE,  INC., a Virginia corporation ("Mortgage"), and each
     additional subsidiary of Holding that may sign this Note (collectively, the
     "Borrowers" and each individually, a "Borrower") hereby promise, jointly
     and severally, to pay to the order of NOVASTAR FINANCIAL, INC., a Maryland
     corporation (the "Lender"), at the principal office of the Lender at 1901
     West 47th Place, Suite 105, Westwood, Kansas, 66205, in lawful money of the
     United States, and in immediately available funds, the principal sum of the
     aggregate unpaid principal amount of the Loans made by the Lender to the
     Borrowers under the Agreement, on the dates and in the principal amounts
     provided in the related Loan Commitments issued under the Agreement, and to
     pay interest on the unpaid principal amount of each such Loan, at such
     office, in like money and funds, for the period commencing on the date of
     such Loan until such Loan shall be paid in full, at the rates per annum and
     on the dates provided in each such Loan Commitment.

     The date, amount and interest rate of each Loan made by the Lender to a
     Borrower, and each payment made on account of the principal thereof, shall
     be recorded by the Lender on its books and, prior to any transfer of the
     Note, endorsed by the Lender on the schedule attached hereto or any
     continuation thereof; provided, that the failure of the Lender to make any
                           --------
     such recordation or endorsement shall not affect the obligations of the
     Borrower to make a payment when due of any amount owing under the Agreement
     or hereunder in respect of the Loans made by the Lender.

     This Note is the Note referred to in the Lending and Credit Support
     Agreement dated as of July _, 2000 (as amended, supplemented or otherwise
     modified and in effect from time to time, the "Agreement") between the
     Borrowers and the Lender, and evidences Loans made by the Lender
     thereunder.  Terms used but not defined in this Note have the respective
     meanings assigned to them in the Agreement.

     The Borrowers agree to pay all the Lender's costs of collection and
     enforcement (including reasonable attorneys' fees and disbursements of
     Lender's counsel) in respect of this Note when incurred, including, without
     limitation, reasonable attorneys' fees through appellate proceedings.

     Each Borrower hereby acknowledges, admits and agrees that the Borrower's
     obligations under this Note are nonrecourse obligations of the Borrower.

     The Borrowers, and any indorsers or guarantors hereof, (a) severally waive
     diligence, presentment, protest and demand and also notice of protest,
     demand, dishonor and nonpayments of this Note, (b) expressly agree that
     this Note, or any payment hereunder, may be extended from time to time, and
     (c) expressly agree that it will not be necessary for the Lender, in order
     to enforce payment of this Note, to first institute or exhaust the Lender's
     remedies against the Borrowers or any other party liable hereon.  No
     extension of time for the payment of this Note, or any installment hereof,
     made by agreement by the Lender with any person now or hereafter liable for
     the payment of this Note, shall affect the liability under this Note of any
     Borrower, even if the Borrower is not a party to such agreement; provided,
                                                                      --------

                                       22
<PAGE>

     however, that the Lender and any Borrower, by written agreement between
     -------
     them, may affect the liability of the Borrower.

     Any reference herein to the Lender shall be deemed to include and apply to
     every subsequent holder of this Note.  Reference is made to the Agreement
     for provisions concerning prepayments, acceleration and other material
     terms affecting this Note.

     This Note shall be governed by and construed under the laws of the State of
     Kansas (without reference to choice of law doctrine) whose laws the
     Borrower expressly elects to apply to this Note.  The Borrower agrees that
     any action or proceeding brought to enforce or arising out of this Note may
     be commenced in the courts of the State of Kansas.

                                    NFI HOLDING CORPORATION

                                    By: __________________________

                                    Name:_________________________

                                    Title:________________________

                                    NOVASTAR CAPITAL, INC.

                                    By: __________________________

                                    Name:_________________________

                                    Title:________________________

                                       23
<PAGE>

                              NOVASTAR MORTGAGE, INC.

                                    By:__________________________

                                    Name:________________________

                                     Title:______________________

                                       24
<PAGE>

                               SCHEDULE OF LOANS

               This Note evidences Loans made under the within-described
     Agreement to the Borrowers, on the dates, in the principal amounts and
     bearing interest at the rates set forth below, and subject to the payments
     and prepayments of principal set forth below:

<TABLE>
<CAPTION>
                                    Principal Amount        Amount Paid       Unpaid Principal         Notation
     Date Made        Borrower           of Loan            Or Prepaid             Amount               Made By
     ---------        --------      ----------------        ----------        ----------------         --------
     <S>              <C>           <C>                     <C>               <C>                      <C>
</TABLE>

                                   EXHIBIT B
                        SCHEDULE OF CREDIT SUPPORT FEES

          Description of Credit Support  Fee

<TABLE>
<S>                                                          <C>
Credit support for obligations under mortgage loan           1.00% of the outstanding
warehouse and repurchase agreements                          borrowings*
Commitment fee for the purchase of residual interests in     0.20% of unpaid principal balance
 asset-backed bonds issued by Borrower                       of securitized assets
Guaranty of loan sales to third parties                      0.125% of the unpaid principal
                                                             balance of the loans sold, payable
                                                             upon settlement of the sale
Credit support for loan servicing operations                 0.1% of the outstanding, unpaid
                                                             principal balance of loans
                                                             serviced*
Financing commitment fee                                     Annually, 0.25% of the Commitment
                                                             Amount, payable quarterly
</TABLE>

     * Calculated based on the actual number of days Credit Support is in effect
     and a 360-day year and will be payable monthly, in arrears.

                                       25<PAGE>

Exhibit 10.29

                               SOFTWARE LICENSE

                                BUSINESS TERMS
                                --------------

     NovaStar Financial, Inc., a Maryland corporation ("Supplier"), licenses
NovaStar Mortgage, Inc., a Virginia corporation ("Licensee") to copy, market and
use the computer programs and related documentation identified below (the
"Software") in the territory specified below (the "Territory"). This License is
subject to all the attached terms and conditions (the "Terms and Conditions").

     1.   The Software.
          ------------

     The Software consists of the loan submission software used and developed
under the mark Internet Underwriter and related user documentation in the form
available for distribution on the Effective Date.

     2.   License Fees and Payments due Supplier.
          --------------------------------------

          Annual License Fee:                     $50,000

          Per Loan Submission License Fee:         $15.00

     The Annual License Fee is due on the Effective Date and annually
thereafter.

     Licensee will report and pay Per Loan Submission License Fees monthly as
provided in the Terms and Conditions.

     4.   Delivery.
          --------

     Subject to the Terms and Conditions, Supplier will deliver the Software in
object code form.

     5.   Effective Date of this License: July 1, 2000
          ------------------------------

     6.   Supplier's Address for Notice:
          -----------------------------

          NovaStar Financial, Inc.
          1901 West 47/th/ Place, Suite 105
          Westwood, Kansas 66205

                                       1
<PAGE>

     7.   Licensee's Address for Notice:
          -----------------------------

          NovaStar Mortgage, Inc.
          1901 West 47/th/ Place, Suite 105
          Westwood, Kansas 66205

                   TERMS AND CONDITIONS OF SOFTWARE LICENSE
                   ----------------------------------------

     1.   Term; Termination. This Agreement shall remain in force until the
          -----------------
second anniversary of the Effective Date, and thereafter, it shall be
automatically renewed for a term of one (1) year unless a written notice is
delivered by either party within 30 days prior to the end of the term or any
renewal term of this Agreement.

     2.   Software. The term "the Software" includes, and this License governs,
          --------
the object code for all computer programs and any related documentation and
information provided by Supplier.

     3.   License. Supplier grants Licensee a nonexclusive, nontransferable
          -------
license throughout the Territory to copy, market and distribute the Software in
object code form only, and to sublicense the Software for that use, subject to
the following:

               (a)  Reports and Payment. Licensee will make all reports and
                    -------------------
payments to Supplier as provided in this License.

               (b)  Sublicensing and End-Users. Copies of the Software may be
                    --------------------------
distributed to other end-users only if they have executed written end-user
sublicense agreements with Licensee. Each written sublicense agreement will
provide substantially the same protection of Supplier's interests as this
Software License Agreement.

               (c)  User Documentation. Licensee may copy for distribution the
                    ------------------
user documentation for the Software. Unless otherwise agreed in writing,
Licensee will have no right to prepare, use, copy, market or distribute any
translation of the User Documentation for any part of the Software into a
language other than the English language.

               (d)  Notices. Licensee will include copies of a notice regarding
                    -------
proprietary rights approved in writing by Supplier in all copies of the Software
that Licensee distributes. Licensee's performance of this obligation is a
condition of Supplier's authorization of Licensee's distribution of copies of
the Software. Object code will have an appropriate notice embedded in it.

               (e)  No Modification or Reverse Engineering. Licensee will not
                    --------------------------------------
attempt to modify, reverse compile, disassemble or otherwise reverse engineer
the object code for the Software.

                                       2
<PAGE>

     4.   Warranty. For a period of ninety (90) days after the Effective Date:
          --------

          (a)  Limited Warranty. Supplier warrants only that the latest release
               ----------------
of the Software delivered to Licensee by Supplier will meet and comply in all
material respects with Supplier's most current user documentation for the
Software as of the Effective Date.

          (b)  Remedy. During the warranty period, Supplier will use its best
               ------
efforts to supply an avoidance procedure within fifteen (15) days and to supply
a correction within ninety (90) days for any defect or error in the Software
following receipt of notice thereof from Licensee, as long as the notice is
accompanied by documentary evidence in a mutually agreeable form that permits
the defect or error to be demonstrated on Supplier's premises.

          (c)  Notification of Defects or Errors. Supplier agrees to inform
               ---------------------------------
Licensee of defects or errors in the Software discovered by Supplier or reported
by others within a reasonable time after their discovery by or reporting to
Supplier, and, at Licensee's request, to perform the obligations set forth in
subparagraph (b) above with respect to those defects or errors.

          (d)  Limitation. Under the warranty set out above, Supplier accepts no
               ----------
responsibility for all or any part of the Software that has been modified since
delivery unless Supplier has reviewed the modifications, has determined that
they constitute valid corrections of the Software and has approved them in
writing. Supplier will in any event be free to use and copy any modifications of
the Software so approved for Supplier's normal business purposes in all versions
of the Software, without payment or obligation to Licensee.

     5.   Maintenance.
          -----------

          (a)  Notification or Defects or Errors. After the expiration of the
               ---------------------------------
warranty period provided above, Supplier agrees to notify Licensee of defects or
errors in the then most current version of the Software used by Licensee within
a reasonable time after their discovery by or reporting to Supplier. If so
requested, Supplier agrees to use diligent efforts to supply an avoidance
procedure and a correction for those defects or errors at a reasonable price to
be mutually agreed upon in each individual case.

          (b)  Updates. After the expiration of the warranty period provided
               -------
above, Supplier will make available to Licensee, at Supplier's then-standard
prices and upon Supplier's then-standard terms and conditions, Supplier's
standard updates for the Software that Supplier makes available to its customers
generally.

     6.   LIMITATIONS AND DISCLAIMERS OF WARRANTY. THE FOREGOING WARRANTIES ARE
          ---------------------------------------
FOR LICENSEE'S EXCLUSIVE BENEFIT AND ARE NONTRANSFERABLE. THE FOREGOING WILL BE
LICENSEE'S EXCLUSIVE REMEDIES FOR BREACH OF WARRANTY BY SUPPLIER. SUPPLIER
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING IMPLIED
WARRANTIES OR MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. SUPPLIER
DOES NOT PROMISE THAT THE SOFTWARE WILL BE ERROR FREE OR WILL OPERATE WITHOUT
INTERRUPTION.

                                       3
<PAGE>

     7.   Additional Services. Supplier will consider Licensee's requests for
          -------------------
additional services not required by this License, such as installation,
consulting, modification and training. If Supplier agrees to provide these
services, it will do so at its standard rates and under its standard terms and
conditions then in effect. Supplier may change its standard rates and/or terms
and conditions on thirty (30) days' prior notice to Licensee, but changes will
not apply to any project undertaken by Supplier before the changes become
effective.

     8.   New Releases. From time to time Supplier may provide new releases of
          ------------
the Software containing corrections of errors then available, but Supplier will
have no obligation to do so.

          (a)  During Warranty Period. If provided during the warranty period,
               ----------------------
new releases containing only corrections of errors will be provided without
additional charge, but Supplier may impose a charge for new releases that in
Supplier's opinion contain other modifications, improvements or new material.

          (b)  Service. After the expiration of the warranty period described
               -------
above, Supplier agrees to make available to Licensee an annual maintenance
service for the then-current release of the Software, to the extent and on terms
and conditions Supplier makes such a service available to its customers
generally.

          (c)  Licensee's Duties. Licensee agrees to use diligent efforts to
               -----------------
provide all its sublicensees with all new releases and corrections that Supplier
may provide without additional charge.

     9.   Delivery and Acceptance. The Software will be deemed accepted thirty
          -----------------------
(30) days after delivery unless Licensee first gives Supplier notice of a
material noncompliance under Paragraph 4(a), specifying the nature of the
noncompliance. If Licensee gives that notice, the Software product will be
deemed accepted on the seventh (7th) day after Supplier has delivered a revised
version of it unless Licensee gives Supplier notice before then that all
material noncompliances reported by Licensee have not been cured. Nonmaterial
errors will not affect acceptance, but Supplier will provide warranty or
maintenance service for them as provided above.

     10.  Payment and Reports. Licensee agrees to pay Supplier the Annual
          -------------------
License Fee as shown on the face page of this License. Licensee also agrees to
report and pay Per Loan Submission License Fees, as follows:

          (a)  Reporting. Within thirty (30) days after the end of each calendar
               ---------
quarter, Licensee will send Supplier a written report on the Loan Submissions
during the quarter.

          (b)  Contents of Report; Payments. Each report will specify the number
               ----------------------------
of loan submissions and Per Loan Submission License Fees.  Licensee agrees to
pay those fees by the time the report is due.

                                       4
<PAGE>

          (c)  Form of Payment. Unless otherwise specified on the face page, all
               ---------------
payments will be in United States dollars and will be made by check or by wire
transfer to a bank account specified by Supplier.

          (d)  Taxes and Similar Charges. Licensee on demand will pay or
               -------------------------
reimburse Supplier for all taxes, other taxes and other charges relating to the
Software, this License or payments hereunder imposed by the United States and
their political subdivisions, with the sole exception of taxes on Supplier's
income.

     11.  Proprietary Rights Indemnification. Supplier will indemnify Licensee
          ----------------------------------
against any claim that the Software as delivered by Supplier infringes any third
party's patent, copyright or trade secret under the laws of the United States.

     12.  Supplier's and its Suppliers' Proprietary Rights. Licensee
          ------------------------------------------------
acknowledges and agrees that Supplier and its suppliers have and will retain all
ownership rights in the Software, including all patent rights, copyrights,
copyright registrations, trade secrets, trademarks, service marks, trademark and
service mark registrations, related goodwill and confidential and proprietary
information. Licensee will have no rights in the Software except as explicitly
stated in this License.

     13.  Confidential Information. Each party agrees to use reasonable effort,
          ------------------------
and at least the same care that is uses to protect its own confidential
information of like importance, to prevent unauthorized dissemination or
disclosure of the other party's confidential information during and after the
term of this License.

     14.  LIMITATIONS OF LIABILITY. SUPPLIER WILL NOT BE LIABLE FOR ANY SPECIAL,
          ------------------------
INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY THEREOF
IN ADVANCE. IN NO EVENT WILL SUPPLIER'S LIABILITY IN CONNECTION WITH THE
SOFTWARE OR THIS LICENSE EXCEED AMOUNTS PAID TO SUPPLIER BY LICENSEE HEREUNDER.
THESE LIMITATIONS APPLY TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING
WITHOUT LIMITATION BREACH OF CONTRACT, BREACH OF WARRANTY, SUPPLIER'S
NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS.

     15.  Termination. This License will terminate:
          -----------

          (a)  End of Term. As provided in Paragraph 1;
               -----------

          (b)  Breach. On the thirtieth (30th) day after either party gives the
               ------
other notice of a material breach by the other of any term or condition of this
License, unless the breach is cured before that day; or

          (c)  Bankruptcy or Insolvency. When either party at its discretion
               ------------------------
gives the other notice of termination after the other has been for more than
sixty (60) days the subject of any voluntary or involuntary proceeding relating
to bankruptcy, insolvency, liquidation, receivership, composition of or
assignment for the benefit of creditors.

                                       5
<PAGE>

     16.  Effect of Termination. After termination:
          ---------------------

          (a)  End of Licenses. Licensee will have no right to copy, market or
               ---------------
distribute the Software and will promptly destroy or return to Supplier all
copies of the Software in its possession or under its control.

          (b)  Other End-Users' Rights. Other end-users properly sublicensed
               -----------------------
prior to termination may continue to use the Software under the terms of their
written sublicense agreements, but all sublicense agreements will inure to
Supplier's benefit, and Licensee will execute documents and provide assistance
as reasonably requested by Supplier to enable Supplier to enforce them.

          (c)  No Damages for Termination; No Effect on other Rights and
               ---------------------------------------------------------
Remedies. Neither party will be liable for damages of any kind as a result of
exercising its right to terminate this License according to these Terms and
Conditions, and termination will not affect any other right or remedy of either
party.

          (d)  Continuing Obligations. Payment and indemnification obligations
               ----------------------
arising prior to termination and the obligations of each party to keep the
other's confidential information confidential will remain in force.

     17.  Assignment. Either party may assign this License to the surviving
          ----------
entity in a merger or consolidation in which it participates or to a purchaser
of all or substantially all of its assets or capital stock. In addition,
Supplier may assign this license to any person to whom Supplier transfers all or
substantially all of its rights in the Software. Otherwise, neither party may
assign any rights or delegate any duties under this License without the other's
prior written consent, and any attempt to do so without that consent will be
void. This License will bind and inure to the benefit of the parties and their
respective successors and permitted assigns.

     18.  Miscellaneous.
          -------------

          (a)  Choice of Law. This License will be governed by and construed
               -------------
according to the laws of Kansas, without regard to principles of conflicts of
law.

          (b)  Amendment. This License may be amended or supplemented only by a
               ---------
writing signed on behalf of both parties. No purchase order, invoice, or similar
form will amend this License even if accepted by the receiving party in writing.

          (c)  Waiver. No waiver will be implied from conduct or failure to
               ------
enforce rights. No waiver will be effective unless in a writing signed on behalf
of the party claimed to have waived.

          (d)  Contingencies. Neither party will have the right to claim damages
               -------------
or to terminate this License as a result of the other's failure or delay in
performance due to circumstances beyond its reasonable control, such as labor
disputes, strikes, lockouts, shortages

                                       6
<PAGE>

of or inability to obtain labor, fuel, raw materials or supplies, war, riot,
insurrection, epidemic, act of God, or governmental action not the fault of the
nonperforming party.

          (e)  Severability. If any part of this License is found invalid or
               ------------
unenforceable, it will be enforced to the maximum extent permitted by law, and
other parts of this License will remain in force.

          (f)  Equitable Relief. Either party may have injunctive, preliminary
               ----------------
or other equitable relief to remedy any actual or threatened unauthorized
disclosure of confidential information or unauthorized use, copying, marketing,
distribution or sublicensing of the Software.

          (g)  Entire Agreement. This License represents the entire agreement
               ----------------
between the parties relating to the Software and supersedes all prior
representations, discussions, negotiations and agreements, whether written or
oral.

          (h)  Notices. All notices, reports, requests and other communications
               -------
required or permitted hereunder must be in writing.

          (i)  Attorneys' Fees. In any suit to enforce this agreement, the
               ---------------
prevailing party will have the right to recover its costs and reasonable
attorneys' fees and expenses, including costs, fees and expenses on appeal.

          (j)  Relationship of Parties. The parties to this License are
               -----------------------
independent contractors. There is no relationship of partnership, agency,
employment, franchise or joint venture between the parties. Neither party has
the authority to bind the other or incur any obligation on its behalf.

NOVASTAR FINANCIAL, INC.                NOVASTAR MORTGAGE, INC.
("Supplier")                            ("Licensee")

By:_______________________________      By:_____________________________________

Name:   Scott F. Hartman                Name:   W. Lance Anderson

Title:  Chief Executive Officer         Title:  President

                                       7

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