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Exhibit 10.2

 

ISDA ®

International Swaps and Derivatives Association, Inc.

 

NOVATION AGREEMENT

 

dated as of February 28, 2007 among:

 

THE ROYAL BANK OF SCOTLAND PLC. (the " Remaining Party "),

NOVASTAR MORTGAGE, INC. (the " Transferor ")

 

AND

 

NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-1 (the " Transferee ").

 

The Remaining Party and the Transferor are parties to a 1992 ISDA Master dated as of July 19, 2006 (the “ Old Agreement ”). The Remaining Party and the Transferor originally entered into certain transactions (each an " Old Transaction ") under the Old Agreement, each evidenced by a Confirmation (an " Old Confirmation ") with reference number D16120156, D16120161, D16126990, D16126995, D16139827, D16139828, D16141301, D16155893, D16165622, D16165623 respectively, attached hereto as Exhibit I.

 

The Remaining Party and the Transferee are simultaneously entering into a 1992 ISDA Master Agreement dated as of the date hereof in the form attached hereto as Exhibit II (the “ New Agreement ”).

 

With effect from and including February [28], 2007 (the " Novation   Date ") the Transferor wishes to transfer by novation to the Transferee, and the Transferee wishes to accept the transfer by novation of, all the rights, liabilities, duties and obligations of the Transferor under and in respect of each Old Transaction, with the exception of the Excluded Rights and Obligations referred to below, with the effect that the Remaining Party and the Transferee enter into a new transaction (each a " New Transaction ") between them having terms identical to those of each Old Transaction, subject to the same exceptions and as more particularly described below. For the avoidance of doubt, the first transaction period being novated in each Old Transaction is the full period ending on the Fixed Rate Payer Payment Date in March 2007.

 

The Remaining Party wishes to accept the Transferee as its sole counterparty with respect to the New Transactions.

 

The Transferor and the Remaining Party wish to have released and discharged, as a result and to the extent of the transfer described above, their respective obligations under and in respect of the Old Transactions.

 

Accordingly, the parties agree as follows: ---

 

1.

Definitions.

 

Terms defined in the ISDA Master Agreement (Multicurrency-Cross Border) as published in 1992 by the International Swaps and Derivatives Association, Inc. (the " 1992 ISDA Master Agreement ") are used herein as so defined, unless otherwise provided herein. For purposes of this Novation Agreement, " Excluded Rights and Obligations " means all obligations of each of the Transferor and the Remaining Party to Transfer (as defined in the Credit Support Annex to the Old Agreement) Eligible Collateral (as so defined) in respect of the Old Transactions and all related rights of the Remaining Party and the Transferor under the Old Agreement.


 

2.

Transfer, Release, Discharge and Undertakings.

 

Subject to the execution and delivery of the New Agreement by each of the parties thereto to the other, with effect from and including the Novation Date and in consideration of the mutual representations, warranties and covenants contained in this Novation Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties):

 

 

(a)

subject to Section 2(d) of this Novation Agreement, the Remaining Party and the Transferor are each released and discharged from further obligations to each other with respect to each Old Transaction and their respective rights against each other thereunder are cancelled, provided that such release and discharge shall not affect any rights, liabilities or obligations of the Remaining Party or the Transferor with respect to payments or other obligations due and payable or due to be performed prior to the Novation Date, and all such payments and obligations shall be paid or performed by the Remaining Party or the Transferor in accordance with the terms of the Old Transactions;

 

 

(b)

in respect of each New Transaction, the Remaining Party and the Transferee each undertake liabilities and obligations towards the other and acquire rights against each other identical in their terms to each corresponding Old Transaction (and, for the avoidance of doubt, as if the Transferee were the Transferor and with the Remaining Party remaining the Remaining Party, save for the Excluded Rights and Obligations and any other rights, liabilities or obligations of the Remaining Party or the Transferor with respect to payments or other obligations due and payable or due to be performed prior to the Novation Date). For the sake of clarity, all references to Independent Amounts shall be deemed deleted from the Confirmations for each New Transaction;

 

 

(c)

each New Transaction shall be governed by, form part of, and be subject to the New Agreement and the relevant Old Confirmation (which, in conjunction and as deemed modified to be consistent with this Novation Agreement, shall be deemed to be a Confirmation between the Remaining Party and the Transferee), and the offices of the Remaining Party and the Transferee for purposes of each New Transaction shall be their offices at their addresses for notices provided for in the New Agreement; and

 

 

(d)

on the Novation Date, the Remaining Party shall transfer all of the Posted Collateral (as defined in the Credit Support Annex to the Old Agreement) held by it in respect of the Old Transactions to the account or accounts of the Transferor identified by it by notice given to the Remaining Party as provided in the Old Agreement, and the Transferor shall transfer all Posted Collateral held by it in respect of the Old Transactions to the account or accounts of the Remaining Party identified by it by notice given to the Transferor as provided in the Old Agreement, in each case together with all Interest Amount and Distributions thereon (as so defined). The Remaining Party’s or the Transferor’s f


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