NovaStar Mortgage, Inc. Amended and Restated Deferred Compensation Plan (Effective December 31, 2007)

 Exhibit 10.1 NOVASTAR MORTGAGE, INC. DEFERRED COMPENSATION PLAN AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 2007 

 NOVASTAR MORTGAGE, INC. DEFERRED COMPENSATION PLAN AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 2007 TABLE OF CONTENTS SECTION 1 INTRODUCTION AND DEFINITIONS..............................1 1.1. STATEMENT OF PLAN.........................................1 1.2. DEFINITIONS...............................................1 1.2.1. Account...................................................1 1.2.2. Affiliate.................................................1 1.2.3. Annual Valuation Date.....................................1 1.2.4. Base Salary...............................................1 1.2.5. Beneficiary...............................................1 1.2.6. Board of Directors........................................2 1.2.7. Bonus.....................................................2 1.2.8. Change of Control.........................................2 1.2.9. Code......................................................3 1.2.10. Committee.................................................3 1.2.11. Common Stock..............................................3 1.2.12. Disabled or Disability....................................3 1.2.13. Employer..................................................3 1.2.14. Enrollment Period.........................................3 1.2.15 ERISA.....................................................3 1.2.16. Grandfathered Account.....................................3 1.2.17. NFI.......................................................3 1.2.18. Normal Retirement Age.....................................3 1.2.19. Participant...............................................3 1.2.20. Plan......................................................4 1.2.21. Plan Termination Date.....................................4 1.2.22. Plan Year.................................................4 1.2.23. Termination of Employment.................................4 1.2.24. Trust.....................................................5 1.2.25. Valuation Date............................................5 1.3. GENDER....................................................5 1.3.1. Gender and Number.........................................5 i 

 SECTION 2 PARTICIPATION.............................................5 2.1. WHO MAY PARTICIPATE.......................................5 2.1.1. Eligible Participant......................................5 2.1.2. Terms and Conditions of Participation.....................5 2.1.3. Termination of Participation..............................5 SECTION 3 CREDITS TO ACCOUNTS.......................................6 3.1. DEFERRALS FROM SALARY.....................................6 3.1.1. Amount of Deferrals.......................................6 3.1.2. Additional Credits........................................6 3.2. DEFERRALS FROM BONUSES....................................6 3.2.1. Amount of Deferrals.......................................6 3.3. DEFERRAL OF STOCK AWARDS..................................6 3.3.1. Amount of Deferrals.......................................6 3.4. EMPLOYER DISCRETIONARY CONTRIBUTION.......................6 3.5. CREDITS FROM MEASURING INVESTMENTS........................7 3.6. OPERATIONAL RULES FOR DEFERRALS...........................7 SECTION 4 ADJUSTMENT OF ACCOUNTS....................................7 4.1. ESTABLISHMENT OF ACCOUNTS.................................7 4.2. ACCOUNTING RULES..........................................7 SECTION 5 VESTING OF ACCOUNTS.......................................7 5.1. GENERAL VESTING...........................................7 5.2. EMPLOYER DISCRETIONARY CONTRIBUTIONS......................7 5.3. EXCEPTIONS TO VESTING SCHEDULE............................8 SECTION 6 SPENDTHRIFT PROVISION.....................................8 SECTION 7 DISTRIBUTIONS.............................................8 7.1. GENERAL PROVISIONS........................................8 7.1.1. Application for Distribution..............................8 7.1.2. Form of Payment...........................................8 7.1.3. Code ss.162(m) Delay......................................9 7.1.4. Delayed Distribution For Key Employees....................9 7.2. BENEFIT UPON NORMAL RETIREMENTL...........................9 7.2.1. Form of Distribution......................................9 7.2.2. Manner and Time of Election...............................9 ii 

 7.2.3. Calculation of Installment Amounts........................9 7.2.4. Request for Lump Sum Payment of Grandfathered Account....10 7.3. BENEFIT UPON TERMINATION OF EMPLOYMENT...................10 7.4. BENEFIT UPON DISABILITY..................................10 7.5. BENEFIT UPON DEATH.......................................10 7.5.1. Pre-Retirement Death Benefit.............................10 7.5.2. Post-Retirement Death Benefit............................10 7.5.3. Additional Death Benefit.................................10 7.5.4. Designation of Beneficiaries.............................10 7.5.5. Failure of Designation...................................11 7.5.6. Disclaimers by Beneficiaries.............................11 7.5.7. Death Prior to Full Distribution.........................11 7.6. BENEFIT PRIOR TO TERMINATION OF EMPLOYMENT...............11 7.6.1. Pre-Selected In-Service Distributions....................11 7.6.2. On Demand In-Service Distributions of Grandfathered Accounts.................................................12 7.6.3. In-Service Distribution for Financial Hardship...........12 7.7. BENEFIT UPON CHANGE OF CONTROL...........................12 7.8. FACILITY OF PAYMENT......................................12 7.9. SPECIAL IRS TRANSITION RULE..............................12 SECTION 8 FUNDING OF PLAN..........................................13 8.1. UNFUNDED PLAN............................................13 8.2. CORPORATE OBLIGATION.....................................13 SECTION 9 AMENDMENT AND TERMINATION................................13 9.1. AMENDMENT AND TERMINATION................................13 9.2 NO ORAL AMENDMENTS.......................................14 9.3. PLAN BINDING ON SUCCESSORS...............................14 SECTION 10. DETERMINATIONS - RULES AND REGULATIONS...................14 10.1. DETERMINATIONS...........................................14 10.2. RULES AND REGULATIONS....................................14 10.3. METHOD OF EXECUTING INSTRUMENTS..........................14 10.4. CLAIMS PROCEDURE.........................................14 10.4.1. Original Claim...........................................15 10.4.2. Review of Denied Claim...................................15 10.4.3. General Rules............................................15 iii 

 10.5. LIMITATIONS AND EXHAUSTION...............................16 10.5.1. Limitations..............................................16 10.5.2. Exhaustion Required......................................16 SECTION 11 PLAN ADMINISTRATION......................................16 11.1. OFFICERS.................................................16 11.2. BOARD OF DIRECTORS.......................................16 11.3. COMMITTEE................................................16 11.4. DELEGATION...............................................17 11.5. CONFLICT OF INTEREST.....................................17 11.6. ADMINISTRATOR............................................17 11.7. SERVICE OF PROCESS.......................................18 11.8. EXPENSES.................................................18 11.9. TAX WITHHOLDING..........................................18 11.10. CERTIFICATIONS...........................................18 11.11. ERRORS IN COMPUTATIONS...................................18 SECTION 12 CONSTRUCTION.............................................18 12.1. APPLICABLE LAWS..........................................18 12.1.1. ERISA Status.............................................18 12.1.2. IRC Status...............................................18 12.1.3. References to Laws.......................................18 12.2. EFFECT ON OTHER PLANS....................................18 12.3. DISQUALIFICATION.........................................18 12.4. RULES OF DOCUMENT CONSTRUCTION...........................19 12.5. CHOICE OF LAW............................................19 12.6. NO EMPLOYMENT CONTRACT...................................19 12.7. CODE SS.409A COMPLIANCE..................................19 iv 

 NOVASTAR MORTGAGE, INC. DEFERRED COMPENSATION PLAN AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 2007 SECTION 1 INTRODUCTION AND DEFINITIONS 1.1. Statement of Plan. The Plan was originally adopted by NovaStar Mortgage, Inc. (the "Sponsor") effective as of January 1, 2002, for the purpose of providing eligible employees of the Sponsor and its Affiliates (collectively the "Employer") with an opportunity to save additional funds for retirement or other purposes. The Plan is designed as an unfunded, deferred compensation plan for the benefit of a select group of management and highly compensated employees. The original Plan was amended and restated in its entirety effective as of January 1, 2004 (the "2004 Restatement") and again effective as of January 1, 2005 (the "2005 Restatement"). The Sponsor now desires to amend and restate the 2005 Restatement in its entirety to (i) comply with the final regulations issued under Section 409A of the Code and (ii) reflect the termination of the Plan effective December 31, 2007 (the "Plan Termination Date"). This amended and restated Plan document is effective as of December 31, 2007 (except as otherwise set forth herein). 1.2. Definitions. When the following terms are used herein with initial capital letters, they shall have the following meanings unless the context clearly requires a different meaning: 1.2.1. Account means the separate bookkeeping account established with respect to each person who is a Participant in the Plan which reflects the total amounts that have been credited from time to time under the Plan on his behalf. A separate "Grandfathered Account" shall be maintained to reflect the portion of each Participant's account which was deferred and vested as of December 31, 2004, and which is not subject to Section 409A of the Code. 1.2.2. Affiliate means a business entity which is affiliated in ownership with the Sponsor either directly or indirectly, and is recognized as an Affiliate by the Committee for purposes of this Plan. 1.2.3. Annual Valuation Date means each December 31. 1.2.4. Base Salary means, with respect to a Participant, such Participant's annual rate of base salary, plus commissions paid to such Participant by the Employer before reduction because of salary deferrals into this Plan or any other plan or arrangement of the Employer whereby compensation is deferred, including, without limitation, a plan whereby compensation is reduced in accordance with Code Section 401(k) or Code Section 125. The term Base Salary shall exclude all other remuneration paid by the Participant's Employer, such as Bonuses, stock options, distributions of compensation previously deferred, restricted stock, allowances for expenses (including moving, travel expenses and automobile expenses) and fringe benefits payable in a form other than cash. 1.2.5. Beneficiary means a person designated by a Participant (or automatically by operation of the Plan) to receive all or a part of the Participant's Account in the event of the Participant's death prior to full distribution thereof. A person so designated shall not be considered a Beneficiary until the death of the Participant. 

 1.2.6. Board of Directors means the Board of Directors of the Sponsor. "Board of Directors" shall also mean and refer to any properly authorized committee of the Board of Directors. 1.2.7. Bonus means, with respect to a Participant, the total cash remuneration paid or payable under the various bonus programs by the Employer to such individual, including any amount which would be included in the definition of Bonus before reduction because of bonus deferrals into this Plan or any other plan or arrangement of the Employer whereby compensation is deferred, including, without limitation, a plan whereby compensation is reduced in accordance with Code Section 401(k) or Code Section 125. The term Bonus shall exclude all other remuneration paid by the Participant's Employer, such as Base Salary, stock options, distributions of compensation previously deferred, restricted stock, allowances for expenses (including moving, travel expenses and automobile expenses) and fringe benefits payable in a form other than cash. 1.2.8. Change of Control shall be deemed to have occurred upon the occurrence of one or more of the following events with respect to NFI: (i) any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires a beneficial ownership (within the meaning of Rule l3d-3 promulgated under the Act) of more than 50 percent of the total fair market value or total voting power of NFI's common stock; (ii) any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) 35 percent or more of the total fair market value or total voting power of NFI's common stock; (iii) a majority of members of NFI's board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of NFI's board of directors prior to the date of the appointment or election; (iv) any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from NFI that have a total gross fair market value (within the meaning of Code Section 409A and the regulations issued thereunder) equal to or more than 40 percent of the total gross fair market value of all of the assets of NFI immediately before such acquisition or acquisitions, other than a transfer of assets to an entity that is controlled by shareholder of NFI immediately after the transfer; or (v) solely with respect to Grandfathered Accounts, (A) the approval by the stockholders of NFI of a reorganization, merger, or consolidation of NFI, in each case, with respect to which persons who were stockholders of NFI immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50 percent of the combined voting power of securities of the surviving entity; (B) the approval by the stockholders of NFI of a complete liquidation or dissolution of NFI or a sale of all or substantially all of the assets of NFI; or 2 

 (C) the following individuals cease for any reason to constitute at least two-thirds (2/3) of the number of directors of NFI then serving: individuals who, on the effective date of the Plan, constitute the board of directors of NFI and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of NFI, as such terms are used in Rule 14A-11 of the Securities Exchange Act of 1934) whose appointment or election by the board of directors of NFI or nomination of election by NFI's stockholders was approved by a vote of at least two-thirds (2/3) of NFI's directors then still in office who either were directors on the effective date of the Plan, or whose appointment, election, or nomination for election was previously approved; or (D) the adoption of a resolution by the board of directors of NFI to the effect that any person has acquired effective control of the business and affairs of NFI. 1.2.9. Code means the Internal Revenue Code of 1986, as amended. 1.2.10. Committee means the Retirement Committee designated by the Sponsor. 1.2.11. Common Stock means the common stock of NovaStar Financial, Inc. 1.2.12. Disabled or Disability, with respect to a Participant, means any disability in which the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not les than 12 months. A Participant will be considered Disabled if he has been determined to be totally disabled by the Social Security Administration or under the Employer's existing long term disability insurance program, provided the Employer's long-term disability provides a definition of Disability that is similar to the definition in the first sentence of this Section. 1.2.13. Employer means the Sponsor and any Affiliate of the Sponsor that adopts the Plan with respect to such Affiliate's employees. 1.2.14. Enrollment Period means the period of time designated by the Committee prior to the first day of each Plan Year during which an eligible person may elect to participate in the Plan. Notwithstanding the foregoing, in the case of the first Plan Year in which an individual becomes eligible to participate in the Plan, the Enrollment Period shall mean the 30 day period immediately following the date the person is designated as being eligible for the Plan. Any election to defer an amount pursuant to Sections 3.1, 3.2 or 3.3 that is entered into during such 30 day period shall apply only to compensation for services performed subsequent to the individual's deferral election. 1.2.15. ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.2.16. Grandfathered Account (See "Account") 1.2.17. NFI means NovaStar Financial, Inc., the parent corporation of the Sponsor. 1.2.18. Normal Retirement Age means the day a Participant reaches age 65 while in the employ of the Employer. 1.2.19. Participant means an employee of the Employer who is designated as eligible to participate in this Plan in accordance with the provisions of Section 2. An employee who has become a 3 

 Participant shall be considered to continue as a Participant in this Plan until the date of the Participant's death or, if earlier, the date when the Participant no longer has any Account under this Plan (that is, the Participant has received a distribution of all of the Participant's Account). 1.2.20. Plan means the NovaStar Mortgage, Inc. Deferred Compensation Plan, as amended from time to time. 1.2.21. Plan Termination Date means December 31, 2007. 1.2.22. Plan Year means the twelve (12) consecutive month period ending each December 31. 1.2.23. Termination of Employment means a separation from service within the meaning of Code Section 409A. Generally, a Participant separates from service if the Participant dies, retires, or otherwise has a termination of employment with the Employer, determined in accordance with the following: (a) Leaves of Absence. The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months, or, if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer. If the period of leave exceeds six (6) months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six (6)-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a twenty-nine (29)-month period of absence shall be substituted for such six (6)-month period. (b) Dual Status. Generally, if a Participant performs services both as an employee and an independent contractor, such Participant must separate from service both as an employee, and as an independent contractor pursuant to standards set forth in Treasury Regulations, to be treated as having a separation from service. However, if a Participant provides services to the Employer as an employee and as a member of the Board, and if any plan in which such person participates as a Board member is not aggregated with this Plan pursuant to Treasury Regulation section 1.409A-1(c)(2)(ii), then the services provided as a director are not taken into account in determining whether the Participant has a separation from service as an employee for purposes of this Plan. (c) Termination of Employment. Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Employer and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor except as provided in section 1.7(b)) would permanently decrease to no more than twenty (20) percent of the average level of bona fide services performed (whether as an employee or an independent contractor, except as provided in section 1.7(b)) over the immediately preceding thirty-six (36)-month period (or the full period of services to the Employer if the Participant has 4 

 been providing services to the Employer less than thirty-six (36) months). For periods during which a Participant is on a paid bona fide leave of absence and has not otherwise terminated employment as described above, for purposes of this paragraph (c) the Participant is treated as providing bona fide services at a level equal to the level of services that the Participant would have been required to perform to receive the compensation paid with respect to such leave of absence. Periods during which a Participant is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this subsection (c) (including for purposes of determining the applicable thirty-six (36)-month (or shorter) period). (d) Service with Related Companies. For purposes of determining whether a separation from service has occurred under the above provisions, the "Employer" shall include the Employer and all Affiliates. 1.2.24. Trust means the NovaStar Mortgage, Inc. Deferred Compensation Trust Agreement, as amended from time to time. 1.2.25. Valuation Date means the business day coincident with or next preceding the Annual Valuation Date, and any other date designated by the Committee in its discretion. 1.3. Gender. 1.3.1. Gender and Number. Except as otherwise indicated by context, masculine terminology used herein also includes the feminine and neuter, and terms used in the singular may also include the plural. SECTION 2 PARTICIPATION 2.1. Who May Participate. 2.1.1. Eligible Participant. Only an employee of the Employer who is eligible for the Plan and who is selected for participation in this Plan for a particular Plan Year by the Committee shall be eligible to become a Participant in this Plan. 2.1.2. Terms and Conditions of Participation. Each selected employee shall be eligible to become a Participant as of the day designated by the Committee (or, if the Committee does not designate a day of initial participation, as of the first day of the next following Plan Year). The Committee shall not select any employee for participation unless the Committee determines that such employee is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). The Committee may at any time determine that a Participant is no longer eligible to make voluntary deferrals under Section 3.1 or Section 3.2. 2.1.3. Termination of Participation. Once an individual has become a Participant in the Plan, participation shall continue until payment in full of all benefits to which the Participant or Beneficiary is entitled under the Plan. 5 

 SECTION 3 CREDITS TO ACCOUNTS 3.1. Deferrals from Salary. 3.1.1. Amount of Deferrals. Subject to the policies and procedures established by the Committee, a Participant may irrevocably elect to defer between (and including) 1% and 75% of such Participant's Base Salary for a Plan Year. The Committee may establish prospectively other limits or other pay eligible for deferral. To be effective, a Base Salary deferral election must be received by the Committee during the Enrollment Period. As a condition of participating in this Plan for each Plan Year, each Participant must elect to contribute to the Employer's 401(k) savings plan the maximum elective deferrals permitted under Section 402(g) of the Code or the maximum elective deferrals permitted under the terms of such 401(k) savings plan. 3.1.2. Additional Credits. In the event any amount becomes distributable under the Employer's 401(k) savings plan to a Participant by reason of such 401(k) plan exceeding the applicable limits under Sections 402(g), 401(k)(3) or 401(m) of the Code and the Treasury regulations issued thereunder (a "Corrective Distribution"), such Participant shall be deemed to have elected to defer receipt of such Corrective Distribution and an amount equal to such Corrective Distribution shall be credited to the Participant's Account. 3.2. Deferrals from Bonuses. On forms furnished by and filed with the Committee, a Participant may elect to defer up to 100% of such Participant's Bonus. To be effective, a Bonus deferral election must be received by the Committee during the Enrollment Period (or in the case of a Bonus attributable to a performance period that is at least twelve (12) months in duration, no later than six (6) months prior to the expiration of such performance period, provided that the Participant was employed by the Employer continuously from the date the performance criteria were established through the date of the Participant's election, and that the payment of such Bonus is not substantially certain or readily ascertainable at the time the deferral election is made). 3.3. Deferral of Stock Awards. Subject to the policies and procedures established by the Committee, a Participant may elect to defer up to 100% of such Participant's restricted stock or restricted stock units awarded under the terms of the NovaStar Financial, Inc. 2004 Incentive Stock Plan (or any successor plan). To be effective, an election to defer must meet the following conditions: (a) the election must be received by the Committee not less than twelve (12) months before the date payment would have otherwise been made or commenced without regard to this election; (b) the election may not take effect until at least twelve (12) months after the date on which the election is received by the Committee; and (c) except in the case of elections relating to payment on account of death or Disability, payment pursuant to the election may not be made or commenced sooner than five (5) years from the date payment would have otherwise been made or commenced without regard to this election. 3.4. Employer Discretionary Contribution. The Employer, in its sole and absolute discretion, may choose to make matching and/or discretionary contributions on behalf of Participants who are employed 6 

 by such Employer. Any Employer contributions credited pursuant to this Section shall be subject to the vesting rules of Section 5. 3.5. Credits from Measuring Investments. On forms furnished by and filed with the Committee, each Participant shall designate one or more "Measuring Investments" which shall be used to credit or debit hypothetical investment gains or losses on such Participant's Account. The Measuring Investments shall be selected by the Committee in its discretion and shall be used solely as a device for computing the amount of benefits to be paid by the Employer under this Plan. Effective upon the filing of a registration statement on Form S-8 with the Securities Exchange Commission, the Measuring Investments available under the Plan shall include a deemed (but not actual) investment in Common Stock of NFI. The Employer shall not be required to purchase any such Measuring Investment. Participants may elect to transfer their account balances between the Measuring Investments in such manner and at such times as determined by the Committee in its sole discretion; provided, however, a Participant may only direct that prospective contributions (and not existing account balances) be credited into the Common Stock Measuring Investment and no amounts credited to the Common Stock Measuring Investment may be transferred to any other Measuring Investment. 3.6. Operational Rules for Deferrals. A Participant's election to defer under Section 3.1 or 3.2 shall be "evergreen" (that is, it shall remain in effect for such Plan Year and, unless timely revised by the Participant for a later Plan Year before the beginning of such Plan Year, for all later Plan Years). If a Participant's pay after deferrals is not sufficient to cover tax or other payroll withholding requirements, the Committee shall reduce the Participant's deferrals to the extent necessary to cover such requirements. SECTION 4 ADJUSTMENT OF ACCOUNTS 4.1. Establishment of Accounts. There shall be established for each Participant an unfunded bookkeeping Account which shall be adjusted as of each Valuation Date. 4.2. Accounting Rules. The Committee may adopt (and revise) accounting rules for the Accounts. SECTION 5 VESTING OF ACCOUNTS 5.1. General Vesting. Except as set forth in Section 5.2, a Participant shall be vested his entire Account under the Plan at all times. 5.2. Employer Discretionary Contributions. Each Participant's interest in his Account attributable to Employer contributions credited pursuant to Section 3.4 shall vest according to the following schedule: 7 

 Percentage of Years Employer Contributions Of Service Vested 1 25% 2 50% 3 75% 4 100% For purposes of the foregoing, a Participant's years of service shall equal the number of years of vesting service credited under the Employer's 401(k) savings plan. 5.3. Exceptions to Vesting Schedule. Notwithstanding Section 5.2, a Participant's interest in his Account attributable to Employer contributions credited pursuant to Section 3.4 shall be fully vested upon a Participant's death prior to Termination of Employment, Disability, or attainment of his Normal Retirement Age, and as of the Plan termination date, December 31, 2007. SECTION 6 SPENDTHRIFT PROVISION No Participant or Beneficiary shall have any interest in the Account which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Employer, nor shall the Committee recognize any assignment thereof, either in whole or in part, nor shall the Account be subject to attachment, garnishment, execution following judgment or other legal process before the Account is distributed to the Participant or Beneficiary. The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's Account or any part thereof and any attempt of a Participant to so exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Committee. SECTION 7 DISTRIBUTIONS 7.1. General Provisions. A Participant's vested Account (reduced by the amount of any applicable payroll, withholding and other taxes) shall be distributable at the time and in the manner set forth in Sections 7.2 through 7.7, as applicable. 7.1.1. Application for Distribution. A Participant shall not be required to make application to receive payment. Distribution shall not be made to any Beneficiary, however, until such Beneficiary shall have filed a written application for benefits in a form acceptable to the Committee and such application shall have been approved by the Committee. 7.1.2. Form of Payment. All distributions from this Plan shall be made in cash, except with respect to the portion of a Participant's Account deemed invested in the Common Stock Measuring Investment which shall be paid in shares of Common Stock (and cash for fractional shares). 8 

 7.1.3. Code §162(m) Delay. Notwithstanding any provision in this Plan to the contrary, if the Committee reasonably determines that paying an amount at the scheduled time would cause the Employer's income tax deduction for the payment to be limited or eliminated by Section 162(m) of the Code, the Employers may unilaterally delay the time of the making or commencement of payments to the earliest date the Committee determines the deduction for the payment(s) will not be limited or eliminated by application of Section 162(m) of the Code. 7.1.4. Delayed Distribution For Key Employees. Notwithstanding any provision in this Plan to the contrary, in the case of any Participant who is a "specified employee" as defined in Section 409A of the Code, payment of such Participant's Account (other than his Grandfathered Account which shall not be subject to this Section 7.1.4) shall be delayed for a period of six months in the event of any distribution payable by reason of such Participant's separation from service. If any such affected Participant is scheduled to receive payment of his benefits in installments, the installments payable for the first six months following such Participant's separation from service shall be accumulated and paid as soon as practicable following the end of such six month waiting period. 7.2. Benefit Upon Normal Retirement. 7.2.1. Form of Distribution. In the event a Participant retires on or after attaining Normal Retirement Age, the Participant's Account shall be distributed at the Participant's election in either (a) a single lump sum or (b) a series of 5, 10 or 15 annual installments. In the absence of any such election, distribution shall be made in a single lump sum. 7.2.2. Manner and Time of Election. On forms furnished by and filed with the Committee, each Participant shall elect at the time of initial enrollment whether distribution of his Normal Retirement Age benefit shall be made (i) in a lump sum, or (ii) in either 5, 10 or 15 annual installments. Any pre-selected distribution option may be changed, provided that such election is received by the Committee at least five (5) years before the Participant's attainment of Normal Retirement Age, and the following additional requirements are met: (a) the election must be received by the Committee not less than twelve (12) months before the date payment would have otherwise been made or commenced without regard to this election; (b) the election may not take effect until at least twelve (12) months after the date on which the election is received by the Committee; and (c) except in the case of elections relating to payment on account of death or Disability, payment pursuant to the election may not be made or commenced sooner than five (5) years from the date payment would have otherwise been made or commenced without regard to this election.. 7.2.3. Calculation of Installment Amounts. The amount of each installment (if any) shall be determined by dividing the vested balance of the Participant's Account as of the Valuation Date as of which the installment is being paid by the number of remaining installment payments to be made (including the payment being determined). After the first installment, the amount of future installments will be determined as of each following January 1 (beginning with the January 1 immediately following the first installment). Such installments shall be actually paid as soon as practicable after each such determination. 9 

 7.2.4. Request for Lump Sum Payment of Grandfathered Account. On forms furnished by and filed with the Committee, a Participant who is receiving installments may elect to receive the total remaining balance of his Grandfathered Account (but not part thereof) for any reason, provided that the Grandfathered Account balance will be reduced by a penalty of 10%, with the result that the Participant will receive 90% of the Grandfathered Account balance and 10% of the Grandfathered Account balance will be forfeited to the Employer. The amount of such distribution will be determined as of the Valuation Date coincident with or next following receipt of the request by the Committee and shall be actually paid by the Employer to the Participant as soon as practicable after such determination. 7.3. Benefit Upon Termination of Employment. In the event a Participant separates from service for any reason other than due to death or Disability or on or after attaining Normal Retirement Age, the Participant's vested Account shall be distributed in full in a single lump sum. 7.4. Benefit Upon Disability. In the event a Participant separates from service as a result of his Disability, the Participant's vested Account shall be distributed in full in a single lump sum (or in the case of a Participant who is eligible to retire, in accordance with Section 7.2.1.). 7.5. Benefit Upon Death. 7.5.1. Pre-Retirement Death Benefit. In the event a Participant dies prior to attaining his Normal Retirement Age, the Beneficiary of such Participant shall receive distribution of the Participant's vested Account in a single lump sum distribution. 7.5.2. Post-Retirement Death Benefit. In the event a Participant dies after attaining his Normal Retirement Age, the Beneficiary of such Participant shall receive payment of the Participant's remaining benefit in the same form and in the same manner as the Participant would have received such benefit had the Participant survived; provided, however, the Committee, in its discretion, may direct that such benefit attributable to the Participant's Grandfathered Account be paid in full in a single lump sum or that such benefits be paid in installments over a shorter period of time. 7.5.3. Additional Death Benefit. If a Participant at the time of death either (a) had a positive Account balance or (b) had a currently effective deferral election under Section 3.1 or 3.2, then the Participant's Account balance payable to his Beneficiary shall be increased as of the Valuation Date following the Participant's death by an amount equal to the lesser of: (i) 200% of the total amount of the Participant's voluntary deferrals credited to his Account under Sections 3.1 and 3.2 (disregarding, however, (a) any earnings adjustment relating to the Measuring Investments, (b) any prior distributions, and (c) any amounts deemed invested in the Common Stock Measuring Investment); or (ii) $2,000,000. Notwithstanding the foregoing, if the Participant dies by suicide within two (2) years of initial enrollment, the additional death benefit under this Section 7.5.3 will not be added to the Account. 7.5.4. Designation of Beneficiaries. Each Participant may designate, upon forms to be furnished by and filed with the Committee, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Participant's Account in the event of such Participant's death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received by the Committee during the Participant's lifetime. 10 

 7.5.5. Failure of Designation. If a Participant fails to designate a Beneficiary, designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, then such Participant's Account, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the Participant's surviving spouse (unless legally separated) or representative of Participant's estate. 7.5.6. Disclaimers by Beneficiaries. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant's Account may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Committee after the date of the Participant's death but not later than one hundred eighty (180) days after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Committee. A disclaimer shall be considered to be delivered to the Committee only when actually received by the Committee. The Committee shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of any other provisions under this Plan. No other form of attempted disclaimer shall be recognized by the Committee. 7.5.7. Death Prior to Full Distribution. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account which is payable to the Beneficiary (and shall not be paid to the Participant's estate). 7.6. Benefit Prior To Termination of Employment. 7.6.1. Pre-Selected In-Service Distributions. If a Participant so elects upon enrollment in the Plan for any Plan Year, such Participant may elect to receive the vested portion of his Account prior to Termination of Employment subject to the following rules: (a) On forms furnished by and filed with the Committee, each Participant may select during the Enrollment Period with respect to each Plan Year one or more in-service distribution dates and amounts with respect to deferred amounts attributable to such Plan Year, provided that any such in-service distribution date is at least two years after the first day of the Plan Year with respect to which such election is made. (b) Only one such distribution will be made in any Plan Year. (c) On forms furnished by and filed with the Committee, any pre-selected distribution date may be extended (one time only), provided that such extension must be received by the Committee at least 12 months (or 6 months in the case of a Grandfathered Account) before the scheduled date of distribution and the new extended distribution date selected must be at least 5 years after the original distribution date (or at least 1 year in the case of a Grandfathered Account). 11 

 (d) On forms furnished by and filed with the Committee, any pre-selected distribution date relating solely to a Grandfathered Account may be cancelled (whether or not previously extended), provided that such cancellation must be received by the Committee at least 6 months before the scheduled date of distribution. 7.6.2. On Demand In-Service Distributions of Grandfathered Accounts. On forms furnished by and filed with the Committee, a Participant may request to receive all or part of such Participant's vested Grandfathered Account prior to Termination of Employment for any reason, provided that the requested distribution amount will be reduced by a penalty equal to 10% of the requested amount, with the result that the Participant will receive 90% of the requested amount and 10% of the requested amount will be forfeited to the Employer. The amount of such distribution shall be determined as of the Valuation Date coincident with or next following receipt of the request by the Committee and shall be actually paid to the Participant as soon as practicable after such determination. 7.6.3. In-Service Distribution for Financial Hardship. On forms furnished by and filed with the Committee, a Participant may request to receive all or part of such Participant's vested Account prior to Termination of Employment to alleviate a Financial Hardship. For purposes of the Plan, "Financial Hardship" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent (as defined in Section 152(a) of the Code), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable emergency circumstances arising as a result of events beyond the control of the Participant. If a hardship is or may be relieved either (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), or (c) by cessation of deferrals under this Plan, then the hardship shall not constitute a Financial Hardship for purposes of this Plan. If a Participant receives a distribution due to Financial Hardship, such Participant's deferrals under the Plan will cease. The Participant may not again elect to defer compensation until the Enrollment Period for the Plan Year that begins at least 12 months after such distribution. A Beneficiary of a deceased Participant may also request an early distribution for Financial Hardship. 7.7. Benefit Upon Change of Control. Notwithstanding any provision in this Plan to the contrary, in the event of a Change of Control of NFI, the Account balance of each Participant or Beneficiary (including any individual receiving installment payments) shall be paid to such Participant or Beneficiary in a single lump sum. 7.8. Facility of Payment. In case of the legal disability of a Participant or Beneficiary entitled to receive any distribution under this Plan, payment shall be made, if the Committee shall be advised of the existence of such condition: (i) to the duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary, or (ii) to a person or institution entrusted with the care or maintenance of the incompetent or disabled Participant or Beneficiary, provided such person or institution has satisfied the Committee that the payment will be used for the best interest and assist in the care of such Participant or Beneficiary, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary. Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation pursuant to this Plan. 7.9. Special IRS Transition Rule. Notwithstanding any provision in the Plan to the contrary, pursuant to Notice 2005-1 and Notice 2006-79 issued by the Department of the Treasury and the Internal Revenue Service and the proposed and final regulations issued by the Department of the Treasury, new payment elections shall be permitted under the Plan without violating the subsequent deferral and anti-acceleration rules of Section 409A of the Code. Accordingly, new payment elections may be made on or 12 

 before December 31, 2008, with respect to the timing of the payment of such amounts and the elections will not be treated as a change in the timing of a payment under Section 409A(a)(4) or an acceleration of a payment under Section 409A(a)(3), provided that the elections are made on or before December 31, 2008. With respect to an election to change the time of payment made on or after January 1, 2008, and on or before December 31, 2008, the election may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008. SECTION 8 FUNDING OF PLAN 8.1. Unfunded Plan. The obligation of the Employer to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Employer to make such payments. No Participant shall have any lien, prior claim or other security interest in any property of the Employer. The Employer shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan. If such a fund, trust or account is established, the property therein shall remain the sole and exclusive property of the Employer. The Employer shall be obligated to pay the cost of this Plan out of its general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the Employer's obligation to Participants in this Plan and shall not be construed to impose on the Employer the obligation to create any separate fund for purposes of this Plan. 8.2. Corporate Obligation. Neither any officer of any Employer nor any member of the Committee in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant. Each Participant and other person entitled at any time to payments hereunder shall look solely to the assets of the Employer for such payments as an unsecured, general creditor. After benefits shall have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, such former Participant or other person or persons, as the case may be, shall have no further right or interest in the other assets of the Employer in connection with this Plan. No person shall be under any liability or responsibility for failure to effect any of the objectives or purposes of this Plan by reason of the insolvency of the Employer. SECTION 9 AMENDMENT AND TERMINATION 9.1. Amendment and Termination. The Board of Directors may unilaterally amend the Plan prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate this Plan both with regard to persons receiving benefits and persons expecting to receive benefits in the future; provided, however, that: (a) the benefit, if any, payable to or with respect to a Participant who has had a Termination of Employment as of the effective date of such amendment or the effective date of such termination shall not be, without the written consent of the Participant, diminished or delayed by such amendment or termination (but the Board of Directors may terminate the Plan completely and provide for immediate payment of all Accounts under the Plan in single lump sum payments, subject to the requirements of Section 409A of the Code and Treasury regulations thereunder, as applicable), and 13 

 (b) the benefit, if any, payable to or with respect to each other Participant determined as if such Participant had a Termination of Employment on the effective date of such amendment or the effective date of such termination shall not be, without the written consent of the Participant, diminished or delayed by such amendment or termination (but the Board of Directors may terminate the Plan completely and provide for immediate payment of all Accounts under the Plan in single lump sum payments, subject to the requirements of Section 409A of the Code and Treasury regulations thereunder, as applicable). Pursuant to the action of the Board of Directors on December 13, 2007, the Plan shall be terminated in its entirety effective as of the Plan Termination Date). Pursuant to such termination, the non-Grandfathered Accounts of Participants shall be distributed within 30 days following the earlier of (i) the 12-month anniversary date of the Plan Termination Date; (ii) a participant's Separation from Service (subject to the required 6-month delay for distributions to specified employees as defined under Section 409A of the Code); and (iii) the fixed payment date (if any) elected by the Participant. The Grandfathered Accounts of Participants shall be distributed within 30 days following the Plan Termination Date. 9.2. No Oral Amendments. No modification of the terms of the Plan or termination of this Plan shall be effective unless it is in writing and signed on behalf of the Board of Directors by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of the Plan shall be effective to amend the Plan. 9.3. Plan Binding on Successors. The Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of such Employer by agreement, to expressly assume and agree to perform this Plan in the same manner and to the same extent that such Employer would be required to perform it if no such succession had taken place. SECTION 10 DETERMINATIONS - RULES AND REGULATIONS 10.1. Determinations. The Committee shall make such determinations as may be required from time to time in the administration of this Plan. The Committee shall have the discretionary authority and responsibility to interpret and construe the Plan and to determine all factual and legal questions under this Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 10.2. Rules and Regulations. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Committee. 10.3. Method of Executing Instruments. Information to be supplied or written notices to be made or consents to be given by the Committee pursuant to any provision of the Plan may be signed in the name of the Committee by any officer who has been authorized to make such certification or to give such notices or consents. 10.4. Claims Procedure. The claims procedure set forth in this Section 10.4 shall be the exclusive administrative procedure for the disposition of claims for benefits arising under this Plan. 14 

 10.4.1. Original Claim. Any person may, if he or she so desires, file with the Committee a written claim for benefits under this Plan. Within ninety (90) days after the filing of such a claim, the Committee shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty (180) days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Committee shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of the Plan on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 10.4.2. Review of Denied Claim. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Board of Directors a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Board of Directors shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty (120) days from the date the request for review was filed) to reach a decision on the request for review. 10.4.3. General Rules. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Committee may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Committee upon request. (b) All decisions on original claims shall be made by the Committee and all decisions on requests for a review of denied claims shall be made by the Board of Directors. (c) The Committee or the Board of Directors may, in their discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but the Committee and the Board of Directors reserve the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled, upon request, to copies of all notices given to the claimant. (e) The decision of the Committee on a claim and a decision of the Board of Directors on a request for a review of a denied claim shall be served on the claimant in writing. 15 

 (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of the Plan and all other pertinent documents in the possession of the Committee and the Board of Directors. (g) The Committee and the Board of Directors may permanently or temporarily delegate its responsibilities under this claims procedure to an individual or a committee of individuals. 10.5. Limitations and Exhaustion. 10.5.1. Limitations. No claim shall be considered under these administrative procedures unless it is filed with the Committee within one (1) year after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based. Every untimely claim shall be denied by the Committee without regard to the merits of the claim. No legal action (whether arising under section 502 or section 510 of ERISA or under any other statute or non-statutory law) may be brought by any claimant on any matter pertaining to this Plan unless the legal action is commenced in the proper forum before the earlier of: (a) two (2) years after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based, or (b) ninety (90) days after the claimant has exhausted these administrative procedures. Knowledge of all facts that a Participant knew (or reasonably should have known) shall be imputed to each claimant who is or claims to be a Beneficiary of the Participant (or otherwise claims to derive an entitlement by reference to a Participant) for the purpose of applying the one (1) year and two (2) year periods. 10.5.2. Exhaustion Required. The exhaustion of these administrative procedures is mandatory for resolving every claim and dispute arising under this Plan. As to such claims and disputes: (a) no claimant shall be permitted to commence any legal action relating to any such claim or dispute (whether arising under section 502 or section 510 of ERISA or under any other statute or non-statutory law) unless a timely claim has been filed under these administrative procedures and these administrative procedures have been exhausted; and (b) in any such legal action all explicit and implicit determinations by the Committee and the Board of Directors (including, but not limited to, determinations as to whether the claim was timely filed) shall be afforded the maximum deference permitted by law. SECTION 11 PLAN ADMINISTRATION 11.1. Officers. Except as hereinafter provided, functions generally assigned to the Employer shall be discharged by its officers or delegated and allocated as provided herein. 11.2. Board of Directors. Notwithstanding the foregoing, the Board of Directors shall have the exclusive authority, which may not be delegated, to amend the Plan or to terminate this Plan. 11.3. Committee. The Committee shall: 16 

 (a) keep a record of all its proceedings and acts and keep all books of account, records and other data as may be necessary for the proper administration of the Plan; notify the Employer of any action taken by the Committee and, when required, notify any other interested person or persons; (b) determine from the records of the Employer the compensation, status and other facts regarding Participants and other employees; (c) prescribe forms to be used for distributions, notifications, etc., as may be required in the administration of the Plan; (d) set up such rules, applicable to all Participants similarly situated, as are deemed necessary to carry out the terms of this Plan; (e) perform all other acts reasonably necessary for administering the Plan and carrying out the provisions of this Plan and performing the duties imposed on it by the Board of Directors. (f) resolve all questions of administration of the Plan not specifically referred to in this section; (g) in accordance with regulations of the Secretary of Labor, provide adequate notice in writing to any claimant whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the claimant; and (h) delegate or re-delegate to one or more persons, jointly or severally, and whether or not such persons are members of the Committee or employees of any Employer, such functions assigned to the Committee hereunder as it may from time to time deem advisable. If there shall at any time be three (3) or more members of the Committee serving hereunder who are qualified to perform a particular act, the same may be performed, on behalf of all, by a majority of those qualified, with or without the concurrence of the minority. No person who failed to join or concur in such act shall be held liable for the consequences thereof, except to the extent that liability is imposed under ERISA. 11.4. Delegation. The Board of Directors and the members of the Committee shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan or pursuant to procedures set forth in the Plan. 11.5. Conflict of Interest. If any individual to whom authority has been delegated or re-delegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant's individual rights hereunder or the interest of a person superior to him or her in the organization (as distinguished from the rights of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 11.6. Administrator. The Sponsor shall be the administrator for purposes of section 3(16)(A) of ERISA. 17 

 11.7. Service of Process. In the absence of any designation to the contrary by the Committee, the General Counsel of the Sponsor and its Board of Directors is designated as the appropriate and exclusive agent for the receipt of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan. 11.8. Expenses. All expenses of administering this Plan shall be borne by the Employer. 11.9. Tax Withholding. The Employer shall withhold the amount of any federal, state or local income tax or other tax required to be withheld by the Employer under applicable law with respect to any amount payable under this Plan. 11.10. Certifications. Information to be supplied or written notices to be made or consents to be given by the Committee pursuant to any provision of this Plan may be signed in the name of the Committee by any officer who has been authorized to make such certification or to give such notices or consents. 11.11. Errors in Computations. The Employer shall not be liable or responsible for any error in the computation of the Account or the determination of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to the Employer and used by the Committee in determining the benefit. The Committee shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment). SECTION 12 CONSTRUCTION 12.1. Applicable Laws. 12.1.1. ERISA Status. This Plan is adopted with the understanding that it is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in section 201(2), section 301(3) and section 401(a)(1) of ERISA. Each provision shall be interpreted and administered accordingly. 12.1.2. IRC Status. This Plan is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this Plan. The rules of section 3121(v) and section 3306(r)(2) of the Code shall apply to this Plan. 12.1.3. References to Laws. Any reference in the Plan to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. 12.2. Effect on Other Plans. This Plan shall not alter, enlarge or diminish any person's employment rights or obligations or rights or obligations under any other employee pension benefit or employee welfare benefit plan. 12.3. Disqualification. Notwithstanding any other provision of the Plan or any election or designation made under this Plan, any potential Beneficiary who feloniously and intentionally kills a Participant shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have 18 

 died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, the Committee shall determine whether the killing was felonious and intentional for this purpose. 12.4. Rules of Document Construction. (a) An individual shall be considered to have attained a given age on such individual's birthday for that age (and not on the day before). Individuals born on February 29 in a leap year shall be considered to have their birthdays on February 28 in each year that is not a leap year. (b) Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to the entire Plan and not to any particular paragraph or Section of the Plan unless the context clearly indicates to the contrary. (c) The titles given to the various Sections of the Plan are inserted for convenience of reference only and are not part of the Plan, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. (d) Notwithstanding anything apparently to the contrary contained in the Plan, the Plan Statement shall be construed and administered to prevent the duplication of benefits provided under this Plan and any other qualified or nonqualified plan maintained in whole or in part by the Employer. 12.5. Choice of Law. Except to the extent that federal law is controlling, this instrument shall be construed and enforced in accordance with the laws of the State of Maryland. 12.6. No Employment Contract. This Plan is not and shall not be deemed to constitute a contract of employment between the Employer and any person, nor shall anything herein contained be deemed to give any person any right to be retained in the Employer's employ or in any way limit or restrict the Employer's right or power to discharge any person at any time and to treat any person without regard to the effect which such treatment might have upon him or her as a Participant in this Plan. Neither the terms of the Plan nor the benefits under this Plan or the continuance of the Plan shall be a term of the employment of any employee. The Employer shall not be obliged to continue this Plan. 12.7. Code §409A Compliance. The Plan shall be interpreted, construed and operated in accordance with the Section 409A of the Code, and the Treasury regulations and other guidance issued thereunder. 19 

 SIGNATURE PAGE IN WITNESS WHEREOF, this amended and restated Plan is adopted this 18th day of December, 2007, but effective as of December 31, 2007. NOVASTAR MORTGAGE, INC. By: /s/ Rodney Schwatken ------------------------------------- Title: Vice President ----------------------------------