On June 30, 2009, NovaStar Financial, Inc. (the "Company") entered into a Release and Settlement Agreement (the "Agreement") with EHMD, LLC, EHD Holdings, LLC and EHD Properties, LLC (collectively, "EHD") to settle the lease dispute on the Company's former principal office space. Under the terms of the Agreement, the Company agreed to pay to EHD the sum of $5 million in satisfaction and payment of past due rent and other charges and expenses due under the lease. The Agreement further provides for the mutual release by the parties of all claims arising under the lease and the dismissal, with prejudice, of the lawsuits filed by the parties (consolidated as Case No. 0816-CV2258 in the Circuit Court of Jackson County, Missouri (the "Consolidated Lawsuit")). The Agreement does not constitute an admission of liability by the Company or EHD for any claims made in the Consolidated Lawsuit.

The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

At the Company's Annual Meeting of Shareholders on June 25, 2009, the holders of the Company's 8.90% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the "Series C Preferred Stock") elected Howard Amster and Barry Igdaloff as directors of the Company to serve until such time that that all dividends accumulated and due on the Series C Preferred Stock have been paid fully paid. As certified by the Inspector of Election for the meeting, a quorum was present and the results of the voting were as follows:

                    NAME                 FOR    AGAINST ABSTAIN
                    Howard Amster     1,060,296  71,000 157,822
                    Barry Igdaloff    1,158,456  72,800 149,041
                    Glenn S. Gardipee   122,093  87,517 440,994
                    Frankie Adamo         9,300  89,350 444,582
                    Philip F. Sidotti     4,376  92,474 444,882
                    Bridget B. Bruch     16,557 138,508 395,665
                    Paul J. Floto       438,565  65,881 327,823