Sample Business Contracts

Intercompany Administrative Services/Outsourcing Agreement - NovaStar Financial Inc. and NovaStar Mortgage Inc.

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as of June 30, 1997 (the "Agreement"), is made by and between NOVASTAR
FINANCIAL, INC., a Maryland corporation ("NovaStar"), and NOVASTAR MORTGAGE,
INC., a Virginia corporation ("Mortgage").


         A.  Mortgage is an indirect affiliate of Nova Star in that Mortgage is
             a wholly owned subsidiary of NFI Holding Corporation (NFI).
             NovaStar owns 100% of NFI's Series A (non-voting) Preferred Stock,
             for which it receives 99% of NFI's economic benefits. NFI in turn
             owns 100% of the outstanding capital stock of Mortgage.

         B.  NovaStar desires for Mortgage to provide and Mortgage is willing to
             provide to NovaStar certain administrative services as described
             herein, in each case on the terms and conditions set forth herein.


         ACCORDINGLY, in consideration of the foregoing premises, the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

         1.  Provision of Services. NovaStar may engage the services of Mortgage
             with respect to, and upon the request of NovaStar, Mortgage will
             perform, the Administrative Services described as Schedule 1
             attached hereto, as well as other administrative services necessary
             or appropriate to enable NovaStar to conduct its business.

         2.  No Limitations. There are no contractual limitations on Mortgage's
             ability to perform any of the activities set forth in Schedule 1 on
             its own behalf, nor on NovaStar's ability to utilize the staff and
             resources of Mortgage for such activities, provided that NovaStar
             pays Mortgage for services as provided herein. NovaStar shall be
             responsible for determining those services it requires Mortgage to
             perform and for notifying Mortgage of any special requirements with
             regard to such services.

         3.  Compensation for Services. NovaStar shall reimburse Mortgage for
             the costs and expenses incurred by Mortgage in furnishing or
             obtaining any of the services provided for herein at rates mutually
             agreed upon by an officer of each party. Such compensation for the
             initial term to be as set forth on Schedule 2 attached hereto.

         4.  Payment Dates. Invoices for amounts due pursuant to paragraph 3
             shall be rendered at least quarterly but not more often than
             monthly. Any amounts due shall be paid, or shall be satisfied by
             way of offset against any obligation of the parties to each other,
             within thirty (30) days after receipt of the invoice.

         5.  Term. This Agreement shall have an initial term of six months from
             the date hereof, terminating on December 31, 1997. After the
             initial term it shall automatically renew on each anniversary date
             for a one (1) year renewal term until either party gives the other
             party at least three (3) months' prior written notice of its intent
             to terminate this Agreement at the end of a renewal term.

         6.  Termination of Employees and Consultants. Mortgage shall have the
             right to hire and terminate the employment or engagement of its own
             employees and management consultants.
         7.  Notices. All notices, requests, consents and other communications
             hereunder shall be in writing and shall be deemed to have been duly
             given or delivered if delivered personally or mailed by registered
             or certified mail return receipt requested with first class postage
             prepaid as follows: 
                  If to Mortgage:
                           NovaStar Mortgage, Inc.
                           Lance Anderson, President & CEO
                           1900 W. 47/th/ Place, Suite 205
                           Westwood, KS 66205

                  If to NovaStar:
                           NovaStar Financial, Inc.
                           Scott Hartman, Chairman & CEO 
                           1900 West 47/th/ Place, Suite 205 
                           Westwood, KS 66205

             or such other address as any person may request by notice given.
             Notices sent as provided herein shall be deemed to have been
             delivered on the fifth business day following the date on which it
             is so mailed.

         8.  Governing Law. This agreement shall be governed by and construed
             under the laws of the State of Maryland without regard to such
             state's provisions pertaining to choice of law.

         9.  Amendment. This Agreement, including the Exhibits hereto and all
             other agreements and documents executed in connection herewith,
             constitutes the entire agreement among the parties hereto with
             respect to the subject hereof and no amendment, alteration or
             modification of the Agreement shall be valid unless in each
             instance such amendment, alteration or modification is expressed in
             a written instrument duly executed by each party hereto.

         10. No Third Party Beneficiaries. Each of the provisions of this
             Agreement is for the sole and exclusive benefit of the parties
             hereto, respectively, as their interests shall appear, and shall
             not be deemed to be for the benefit of any other person or entity
             or group of persons or entities.

         11. Successors and Assigns. This Agreement shall bind and inure to the
             benefit of each party hereto, and to each party's successors,
             assigns, agents and representatives.

         12. Counterparts. This Agreement may be executed in two or more
             counterparts, each of which shall be deemed to be an original, but
             all of which together shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date herein above written.

                                     NOVASTAR FINANCIAL INC.



                                     NOVASTAR MORTGAGE, INC.