TOBIN & TOBIN
A PROFESSIONAL CORPORATION
500 SANSOME STREET RICHARD TOBIN (1852-1887)
PHILLIP R. POLLOCK EIGHTH FLOOR ROBERT TOBIN (1875-1889)
SAN FRANCISCO, CALIFORNIA 94111 CYRIL R. TOBIN (1905-1977)
FACSIMILE (415) 433-3883
(415) 433-1400
Exhibit 5.1
January 26, 1998
The Board of Directors
NovaStar Financial, Inc.
1900 West 47th Place
Suite 205
Westwood, KS 66205
Re: Registration Statement on Form S-8 relative to the 1996
Executive and Non-Employee Director Stock Option Plan,
most recently amended December 6, 1996
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Ladies and Gentlemen:
We have acted as your counsel in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act") of the 1996 Executive
and Non-Employee Director Stock Option Plan, last amended December 6, 1996 (the
"Plan"), by NovaStar Financial, Inc., a Maryland corporation (the "Company"),
covering an aggregate of up to ten percent (10%) of the Company's outstanding
shares of common stock, par value $0.01 per share (the "Common Stock" or the
"Shares"), provided no more than 339,332 Shares shall be cumulatively available
for grants as Incentive Stock Options ("ISO's") at any given time.
This opinion is delivered in accordance with the requirements of Items 601(b)(5)
and (23) of Regulation S-K under the Securities Act.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement on Form S-8, relating to the Shares, filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act on or about the date hereof (together with all exhibits thereto, the
"Registration Statement"), (ii) the Prospectus of the Plan to be given to
participants pursuant to the requirements of Part I of the Registration
Statement, (iii) the Charter of the Company, as amended and presently in effect,
(iv) the Bylaws of the Company in effect as of the date hereof, (v) resolutions
of the Board of Directors of the Company relating to the issuance of the Shares
and the filing and effectiveness of the Registration Statement, adopted at a
meeting on November 12, 1997, and (vi) a specimen of the certificates
representing the Shares. We have also examined such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinion set forth below.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
oral or written statements and representations of officers and other
representatives of the Company and others.
TOBIN & TOBIN
Board of Directors
NovaStar Financial, Inc.
January 26, 1998
Page 2
Members of our firm are admitted to the practice of law in the State of
California and we do not express any opinion as to the laws of any other
jurisdiction, except for those matters of Maryland law for which we have relied
solely upon the legal opinion of Piper & Marbury L.L.P., Baltimore, Maryland,
dated on or about the date hereof.
Based upon and subject to the foregoing, we are of the opinion that the
Shares to be issued by the Company pursuant to the Plan, as described in the
Registration Statement, have been duly and validly authorized for issuance, and,
upon issuance and delivery of the Shares in accordance with the terms of the
Plan, the Shares will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to Form S-8 and its incorporation by reference as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act or under the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/ Tobin & Tobin