Exhibit 10.3

 

September 28, 2007

 

Jefferies & Company, Inc.
520 Madison Ave.
New York, New York 10022

 

Ladies and Gentlemen:

 

On the terms set forth in the Master Securities Loan Agreement dated as of
September 28, 2007 (the “Loan Agreement”), between the undersigned and Jefferies
& Company, Inc. (“Jefferies”), and for other good and valuable consideration,
the receipt of which is hereby acknowledged, notwithstanding any other
agreement, the undersigned has agreed to lend or re-lend, in case the loan is
terminated, to Jefferies up to 4.5 million shares (as such number of shares may
be reduced based upon assignments permitted by the last paragraph hereof, the
“Borrowed Shares”) of common stock of Nova Biosource Fuels, Inc., a Nevada
corporation (the “Issuer”), owned beneficially and of record by the undersigned.
The undersigned hereby agrees not to dispose of or encumber or otherwise impair
in any fashion at any time, the availability of such Borrowed Shares during the
Availability Period. The “Availability Period” shall mean (i) the period
commencing on the date hereof and ending on September 28, 2012. The undersigned
also will use commercially reasonable efforts to cooperate with the Issuer to
assure that the Form S-3 registration statement relating to the Borrowed Shares
is available and effective for the loan of the Borrowed Shares during the
Availability Period.

 

Notwithstanding any of the covenants or agreements set forth herein, in no event
shall any such covenants or agreements: (1) prohibit the undersigned from
selling or otherwise disposing of any or all of the Borrowed Shares in a “Change
of Control Transaction” (as such term is defined herein) or (2) affect or be
deemed to affect the rights and obligations of the undersigned as a director or
officer of the Issuer (including relating to any Board of Director vote), or the
right of the undersigned or any affiliate thereof to vote any shares of common
stock of the Issuer owned thereby, in favor of any Change of Control Transaction
(provided that if any affiliate of the undersigned acquires the Borrowed Shares
pursuant to a transaction described in the first bullet point below, such
affiliate shall assume the obligations hereunder) or on any other matter in the
sole discretion of the undersigned or any such affiliate, provided, however,
that the rights of the undersigned or any affiliate thereof set forth in this
sentence do not alter the undersigned’s or any such affiliate’s obligation to
loan to Jefferies, and not to dispose of, any new or different security

 

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exchanged for the Borrowed Shares in connection with a recapitalization, merger,
consolidation, stock purchase or other corporate action.

 

For purposes of this letter, a “Change of Control Transaction” means:

 

•                  the acquisition by any “person” or group under Section
13(d)(3) of the Exchange Act (collectively, “Person”) unaffiliated with the
undersigned or affiliates (as defined in the Securities Act of 1933, as amended)
of the undersigned of beneficial ownership, directly or indirectly, through a
purchase, merger, or other acquisition transaction or series of transactions, of
shares of the Issuer’s capital stock entitling such Person to exercise more than
50% of the total voting power of all shares of the Issuer’s capital stock
entitling the holders thereof to vote generally in elections of directors, or

 

•                  any consolidation of the Issuer with, or merger of the Issuer
into, any other Person, any merger of another Person into the Issuer, or any
sale or transfer of all or substantially all of the Issuer’s assets to another
Person, other than a merger or sale of assets that (x) is effected solely to
change the Issuer’s jurisdiction of incorporation and results in a
reclassification, conversion, or exchange of outstanding shares of common stock
solely into shares of common stock, or (y) does not have the result that the
Issuer’s shareholders immediately before such transaction beneficially own,
directly or indirectly, immediately following such transaction, less than 50% of
the combined total voting power of all shares of capital stock of the Person
resulting from such transaction entitling the holders thereof to vote generally
in elections of directors.

 

This Letter and the Loan Agreement shall terminate in the event that: (i) the
Issuer has redeemed all of its issued and outstanding 10 Convertible Senior
Secured Notes due 2012 (the “Notes”) in accordance with the terms of the
indenture governing the Notes, or (ii)  all of the issued and outstanding Notes
have been converted by the holders thereof into common stock in accordance with
the terms of the indenture governing the Notes.

 

 

KENNETH T. HERN

 

 

 

 

 

/s/ Kenneth T. Hern

 

 

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September 28, 2007

 

Jefferies & Company, Inc.
520 Madison Ave.
New York, New York 10022

 

Ladies and Gentlemen:

 

On the terms set forth in the Master Securities Loan Agreement dated as of
September 28, 2007 (the “Loan Agreement”), between the undersigned and Jefferies
& Company, Inc. (“Jefferies”), and for other good and valuable consideration,
the receipt of which is hereby acknowledged, notwithstanding any other
agreement, the undersigned has agreed to lend or re-lend, in case the loan is
terminated, to Jefferies up to 3.5 million shares (as such number of shares may
be reduced based upon assignments permitted by the last paragraph hereof, the
“Borrowed Shares”) of common stock of Nova Biosource Fuels, Inc., a Nevada
corporation (the “Issuer”), owned beneficially and of record by the undersigned.
The undersigned hereby agrees not to dispose of or encumber or otherwise impair
in any fashion at any time, the availability of such Borrowed Shares during the
Availability Period. The “Availability Period” shall mean (i) the period
commencing on the date hereof and ending on September 28, 2012. The undersigned
also will use commercially reasonable efforts to cooperate with the Issuer to
assure that the Form S-3 registration statement relating to the Borrowed Shares
is available and effective for the loan of the Borrowed Shares during the
Availability Period.

 

Notwithstanding any of the covenants or agreements set forth herein, in no event
shall any such covenants or agreements: (1) prohibit the undersigned from
selling or otherwise disposing of any or all of the Borrowed Shares in a “Change
of Control Transaction” (as such term is defined herein) or (2) affect or be
deemed to affect the rights and obligations of the undersigned as a director or
officer of the Issuer (including relating to any Board of Director vote), or the
right of the undersigned or any affiliate thereof to vote any shares of common
stock of the Issuer owned thereby, in favor of any Change of Control Transaction
(provided that if any affiliate of the undersigned acquires the Borrowed Shares
pursuant to a transaction described in the first bullet point below, such
affiliate shall assume the obligations hereunder) or on any other matter in the
sole discretion of the undersigned or any such affiliate, provided, however,
that the rights of the undersigned or any affiliate thereof set forth in this
sentence do not alter the undersigned’s or any such affiliate’s obligation to
loan to Jefferies, and not to dispose of, any new or different security

 

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exchanged for the Borrowed Shares in connection with a recapitalization, merger,
consolidation, stock purchase or other corporate action.

 

For purposes of this letter, a “Change of Control Transaction” means:

 

•                  the acquisition by any “person” or group under Section
13(d)(3) of the Exchange Act (collectively, “Person”) unaffiliated with the
undersigned or affiliates (as defined in the Securities Act of 1933, as amended)
of the undersigned of beneficial ownership, directly or indirectly, through a
purchase, merger, or other acquisition transaction or series of transactions, of
shares of the Issuer’s capital stock entitling such Person to exercise more than
50% of the total voting power of all shares of the Issuer’s capital stock
entitling the holders thereof to vote generally in elections of directors, or

 

•                  any consolidation of the Issuer with, or merger of the Issuer
into, any other Person, any merger of another Person into the Issuer, or any
sale or transfer of all or substantially all of the Issuer’s assets to another
Person, other than a merger or sale of assets that (x) is effected solely to
change the Issuer’s jurisdiction of incorporation and results in a
reclassification, conversion, or exchange of outstanding shares of common stock
solely into shares of common stock, or (y) does not have the result that the
Issuer’s shareholders immediately before such transaction beneficially own,
directly or indirectly, immediately following such transaction, less than 50% of
the combined total voting power of all shares of capital stock of the Person
resulting from such transaction entitling the holders thereof to vote generally
in elections of directors.

 

This Letter and the Loan Agreement shall terminate in the event that: (i) the
Issuer has redeemed all of its issued and outstanding 10 Convertible Senior
Secured Notes due 2012 (the “Notes”) in accordance with the terms of the
indenture governing the Notes, or (ii)  all of the issued and outstanding Notes
have been converted by the holders thereof into common stock in accordance with
the terms of the indenture governing the Notes.

 

 

J.D. MCGRAW

 

 

 

 

 

/s/ J.D. McGraw

 

 

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