Exhibit 10.2


 


REGISTRATION RIGHTS AGREEMENT


 


This
Registration Rights Agreement (this “Agreement”), dated
September 27, 2007, is entered by and among Nova Biosource Fuels, Inc., a
Nevada corporation (the “Company”),
and the purchasers identified on the signature pages attached
hereto (each, a “Purchaser”
and collectively, the “Purchasers”).


 


This Agreement
is made pursuant to the Securities Purchase Agreements, dated as of the date
hereof between the Company and each of the Purchasers (the “Purchase
Agreements”).


 


NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:


 


1.             Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the
Purchase Agreements shall have the meanings given such terms in the Purchase
Agreements. References to filing a document with the Securities and Exchange
Commission (the “Commission”) shall mean to file such document with the
Commission via the Commission’s Electronic Data Gathering, Analysis and
Reporting, or EDGAR, system. As used in this Agreement, the following terms
shall have the respective meanings set forth in this Section 1:


 


“Additional Effectiveness Deadline”  shall have the meaning
specified in Section 2(b).


 


“Common Stock” means the common stock of
the Company, $0.001 par value per share.


 


“Conversion Shares” means the shares of Common Stock issuable
upon conversion of the Securities pursuant to the terms of the Indenture and
the Securities.


 


“Effective Date”
means the date that a Registration Statement filed pursuant to Section 2(a) or
Section 2(b), as applicable, is first declared effective by the Commission.


 


“Effectiveness Deadline”
means the Initial Effectiveness Deadline and the Additional Effectiveness
Deadline, as applicable.


 


“Effectiveness Period”
shall have the meaning set forth in Section 2(a).


 


“Exchange Act” means the Securities
Exchange Act of 1934, as amended.


 


“Filing Deadline”
means: (a) with respect to the initial Registration Statement to be filed
pursuant to Section 2(a), the 30th day following the first Closing Date under
the Purchase Agreements, and (b) with respect to any additional Registration
Statement filed pursuant to Section 2(b), the earlier of (i) the 30th day
following the date on which the Commission shall indicate as being the first
date or time that such filing may be made and (ii) six (6) months following the
Effective Date.


 

















 


“Holder” or
“Holders”
means the holder or holders, as the case may be, from time to time of
Registrable Securities.


 


“Indemnified Party”
shall have the meaning set forth in Section 5(c).


 


“Indemnifying Party”
shall have the meaning set forth in Section 5(c).


 


“Initial Effectiveness Deadline”
means the earlier of: (i) one-hundred and twenty (120) calendar days after the
Closing Date, and (ii) the fifth Trading Day following the date on which the
Company is notified by the Commission that the Registration Statement filed
pursuant to Section 2(a) will not be reviewed or is no longer subject to
further review and comments.


 


“Losses”
shall have the meaning set forth in Section 5(a).


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.


 


“Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A or 430B promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.


 


“Registrable Securities”
means the Securities issued pursuant to the Purchase Agreements and the
Conversion Shares, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event,
or any conversion price adjustment with respect thereto.


 


“Registration Statement”
means: (i) the initial registration statement which is required to register the
resale of the Registrable Securities pursuant to Section 2(a), and (ii) each
additional registration statement, if any, contemplated by Section 2(b), and
including, in each case, the Prospectus, amendments and supplements to each
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.


 


“Required Holders”
means the holders of at least two-thirds of the Registrable Securities.


 


“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.


 


“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.


 


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“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.


 


“Securities” means the Securities issued to the
Purchasers pursuant to the Purchase Agreements to be unconditionally
guaranteed, jointly and severally, on a senior basis by Nova Holding Clinton
County, LLC and Nova Biofuels Clinton County, LLC, each a subsidiary of the
Company.


 


“Securities Act”
means the Securities Act of 1933, as amended.


 


2.             Registration.


 


(a)           On or prior to each Filing Deadline,
the Company shall prepare and file with the Commission a Registration Statement
covering the resale of all Registrable Securities not already covered by an
existing and effective Registration Statement for an offering to be made on a
continuous or delayed basis pursuant to Rule 415. The Company shall use its
best efforts to cause the Registration Statement to be declared effective under
the Securities Act as soon as possible but, in any event, no later than the
Effectiveness Deadline, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the earliest of
(i) the date when all Registrable Securities covered by the Registration
Statement have been sold, or (ii) the date when all Registrable Securities have
been sold pursuant to Rule 144, or (iiii) the date when all Registrable
Securities covered by the Registration Statement may be sold without
restriction pursuant to Rule 144(k), as determined by counsel to the Company
pursuant to a written opinion letter to such effect, upon actual receipt by the
Holders of a notice from the Company stating that the Company will deliver
certificates without restrictive legends upon surrender by the Holders of the
existing certificates along with appropriate seller’s and broker’s
representation letters, or (iv) with respect to subsequent Holders only, the
date two years after the date that the Registration Statement is declared
effective by the Commission, or (v) the date when all Registrable Securities
cease to be outstanding (the “Effectiveness Period”).


 


(b)           If for any reason the Commission does
not permit all of the Registrable Securities to be included in the Registration
Statement initially filed pursuant to Section 2(a), then the Company shall
prepare and file as soon as possible after the date on which the Commission
shall indicate as being the first date or time that such filing may be made,
but in any event by the 30th day following such date, or, in the event the
Commission does not so indicate, no later than six (6) months after the
Effective Date of the Registration Statement filed pursuant to Section 2(a), an
additional Registration Statement covering the resale of all Registrable
Securities not already covered by an existing and effective Registration
Statement for an offering to be made on a continuous or delayed basis pursuant
to Rule 415. The Company shall use its best efforts to cause each such
Registration Statement to be declared effective under the Securities Act as
soon as possible but, in any event, no later than 120 days following the date
on which the Company becomes aware that such Registration Statement is required
to be filed under this Agreement (the “Additional Effectiveness Deadline” for
such Registration Statement), and shall use its best efforts to keep
such Registration Statement continuously effective under the Securities Act
during the Effectiveness Period. To the extent the staff of the Commission does
not permit all of the Registrable Securities that have not yet been covered on
an effective


 


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Registration Statement
(the “Unregistered
Registrable Securities”) to
be registered on such additional Registration Statement, the Company shall file
additional Registration Statements successively trying to register on each such
Registration Statement the maximum number of Unregistered Registrable
Securities until all of the Registrable Securities have been registered with
the Commission.


 


(c)           If: (i) a Registration Statement is
not filed on or prior to its Filing Deadline, or (ii) a Registration Statement
is not declared effective by the Commission on or prior to its required
Effectiveness Deadline, or (iii) after its Effective Date, such Registration
Statement ceases for any reason to be effective and available to the Holders as
to all Registrable Securities to which it is required to cover at any time
prior to the expiration of its Effectiveness Period for an aggregate of more
than 15 consecutive days or more than 45 days in any 365 consecutive day period
or the Company’s Common Stock is not listed or included for quotation on a
Trading Market (as defined in the Purchase Agreements) for any period of more
than five consecutive Trading Days, (any such failure or breach being referred
to as an “Event”  and
for purposes of clauses (i) or (ii) the date on which such Event occurs, or for
purposes of clause (iii) the date which such 15th consecutive day (or 45th day
in the aggregate) is exceeded, being referred to as “Event Date”), then, in addition to any other
rights available to the Holders: (x) on such Event Date additional interest (“Additional Interest”) and not as a penalty, will accrue at a
rate per annum of 0.50% of the principal amount of such Registrable Securities
included (or to be included) in such Registration Statement for the first
90-day period following such Event Date; and (y) thereafter at a rate per annum
of 1.00% of the principal amount of such Registrable Securities, provided, that all periods shall be
tolled, with respect to a Holder, by the number of days in excess of five (5)
during which such Holder fails to provide the Company with information
regarding such Holder which was requested by the Company in writing in order to
effect the registration of such Holder’s Registrable Securities other than with
respect to an Event covered by clause (iii) of this paragraph unrelated to such
Holder’s information. It shall be a condition precedent to the obligations of
the Company to pay any Additional Interest pursuant to this Section 2 with
respect to the Registrable Securities of any Holder that such Holder shall
furnish to the Company such information regarding itself and the Registrable
Securities held by it as contemplated by the preceding sentence. In the event
the Company fails to pay Additional Interest in a timely manner, such
Additional Interest shall bear interest at the rate of one percent (1.0%) per
month (prorated for partial months)
until paid in full.


 


(d)           The initial number of Registrable
Securities included in any Registration Statement and any increase in the
number of Registrable Securities included therein shall be allocated pro rata
among the Purchasers based on the number of Registrable Securities held by each
Purchaser at the time the Registration Statement covering such initial number
of Registrable Securities or increase thereof is filed with the Commission. In
the event that a Purchaser sells or otherwise transfers any of such Purchaser’s
Registrable Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any Registrable Securities included
in a Registration Statement which remain allocated to any Person which ceases
to hold any Registrable Securities covered by such Registration Statement shall
be allocated to the remaining Purchasers, pro rata based on the number of
Registrable Securities then held by such Purchasers which are covered by such
Registration Statement. In no event shall the Company include any


 


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securities other than
Registrable Securities on any Registration Statement without the prior written
consent of the Required Holders.


 


(e)           Each Holder shall comply with the
prospectus delivery requirements of the Securities Act, or an exemption therefrom,
in connection with the offer or sale of any Registrable Securities pursuant to
the Registration Statement.


 


(f)            Each Purchaser, by such Purchaser’s
acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Purchaser has
notified the Company in writing of such Purchaser’s election to exclude all of
such Purchaser’s Registrable Securities from such Registration Statement.


 


(g)           In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to a majority of
the Required Holders and (ii) undertake to register the Registrable Securities
on Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the Commission.


 


(h)           By 9:30 am, New York City time, on
the Business Day following the Effective Date, the Company shall file with the
Commission in accordance with Rule 424 under the Securities Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.


 


3.             Registration
Procedures.


 


In connection
with the Company’s registration obligations hereunder, the Company shall:


 


(a)           Not less than four Trading Days prior
to the filing of a Registration Statement or any related Prospectus or any
amendment or supplement thereto, the Company shall furnish to the Holders
copies of all such documents proposed to be filed which documents (other than
those incorporated by reference) will be subject to the review of such Holders.
The Company shall not file a Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith. Each Registration
Statement, as of its filing and effective dates and each day thereafter
(including all amendments or supplements thereto, as of their respective filing
and effective dates and each day thereafter), shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading, and
the prospectus contained in such Registration Statement, as of its filing date
and each day thereafter (including all amendments and supplements thereto, as
of their respective filing dates and each day thereafter), shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.


 


(b)           (i) Prepare and file with the
Commission such amendments, including post- effective amendments, to each
Registration Statement and the Prospectus used in connection


 


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therewith as may be
necessary to keep such Registration Statement continuously effective as to the
applicable Registrable Securities for its Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement or “issuer free writing prospectus” (as defined by Rule
405 promulgated by the Commission pursuant to the Securities Act) so that such
Prospectus does not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with respect
to each Registration Statement or any amendment thereto and, as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to such Registration
Statement that pertains to the Holders as Selling Stockholders but not any
comments that would result in the disclosure to the Holders of material and
non-public information concerning the Company; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the Registration Statements and the disposition of all Registrable
Securities covered by each Registration Statement.


 


(c)           Notify the Holders as promptly as
reasonably possible, but in no event later than 5:30 p.m. Eastern time, of the
following Trading Day, (i)(A) when a Registration Statement, Prospectus, any
Prospectus supplement or post-effective amendment to a Registration Statement
is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a “review” of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company
shall provide true and complete copies thereof and all written responses
thereto to each of the Holders that pertain to the Holders as a Selling
Stockholder or to the Plan of Distribution, but not information which the
Company believes would constitute material and non-public information); and (C)
with respect to each Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or supplements
to a Registration Statement or Prospectus or for additional information that
pertains to the Holders as Selling Stockholders or the Plan of Distribution;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose,
including pursuant to Section 8A of the Securities Act; (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (v) of the occurrence of any event or
passage of time that makes the financial statements included in a Registration
Statement ineligible for inclusion therein or any statement made in such
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to such Registration Statement, Prospectus or other documents
so that, in the case of such Registration Statement or the Prospectus, as the
case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Notwithstanding anything to the contrary herein, at
any time after the Effective Date of the initial Registration Statement, the
Company may delay the disclosure of material, non-public


 


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information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the board of directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a “Grace Period”); provided, that the Company shall promptly (i)
notify the Purchasers in writing of the existence of material, non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material, non-public information
to the Purchasers) and the date on which the Grace Period will begin, and (ii)
notify the Purchasers in writing of the date on which the Grace Period ends;
and, provided further, that such Grace Periods shall not exceed an aggregate of
forty-five (45) days in any 12 month period, (ii) each such Grace Period shall
not exceed fifteen (15) consecutive days and (iii) that the first day of any
Grace Period must be at least five (5) Trading Days after the last day of any
prior Grace Period. For purposes of determining the length of a Grace Period
above, the Grace Period shall begin on and include the date the Purchasers
receive the notice referred to in clause (i) and shall end on and include the
later of the date the Purchasers receive the notice referred to in clause (ii)
and the date referred to in such notice.


 


(d)           Use its best efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order suspending
the effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.


 


(e)           Furnish to each Holder, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission; provided, that the
Company shall have no obligation to provide any document pursuant to this
clause that is available on the EDGAR system.


 


(f)            Promptly deliver to each Holder,
without charge, as many copies of each Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.


 


(g)           Prior to any public offering of
Registrable Securities, use its best efforts to register or qualify or
cooperate with the selling Holders in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities, Blue Sky or
other laws of all applicable jurisdictions or governmental authorities or
agencies within the United States and to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statements; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or subject the Company to
any material tax in any such jurisdiction where it is not then so subject. The
Company shall promptly notify each Purchaser who holds Registrable Securities
of the receipt by the Company of any notification


 


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with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or “blue sky” laws of any jurisdiction
in the United States or its receipt of notice of the initiation or threatening
of any proceeding for such purpose.


 


(h)           Cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statements, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.


 


(i)            Upon the occurrence of any event
contemplated by Section 3(c)(v), as promptly as reasonably possible, prepare a
supplement or amendment, including a post-effective amendment, to the affected
Registration Statements or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, no
Registration Statement nor any Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.


 


(j)            The Company may require each selling
Holder to furnish to the Company a certified statement as to the number of
Securities and shares of Common Stock beneficially owned by such Holder and any
Affiliate thereof.


 


(k)           As long as any Holder owns
Registrable Securities, the Company shall timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13 (a) or 15(d) of the Exchange Act. As long as any Holder owns Registrable
Securities, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders
and make publicly available in accordance with Rule 144(c) promulgated under
the Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
similar to those that would otherwise be required to be included in reports
required by Section 13 (a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company will take
such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Person to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act.


 


(l)            The Company shall promptly secure the
listing of all of the Registrable Securities upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed (subject to official notice of issuance) and shall maintain, in
accordance with the Securities, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stocks’ authorization for quotation on one or more
Trading Markets. Neither the Company nor any of its Subsidiaries shall take any
action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on each applicable Trading Market.


 


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The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 3(l).


 


(m)          If requested by a Purchaser, the
Company shall (i) as soon as practicable, incorporate in a prospectus
supplement or post-effective amendment such information as a Purchaser
reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered or
sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as
soon as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by a Purchaser holding any Registrable Securities.


 


(n)           The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the
Commission in connection with any registration hereunder.


 


(o)           Within two (2) Business Days after a
Registration Statement which covers Registrable Securities is declared
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities confirmation that such Registration Statement has been declared
effective by the Commission in the form attached hereto as Exhibit A.


 


(p)           If
any Purchaser is deemed to be or reasonably believes it may be deemed or
alleged to be, an underwriter or is required under applicable securities laws
to be described in the Registration Statement as an underwriter, at the
reasonable request of any Purchaser, the Company shall use its reasonable best
efforts to furnish to such Purchaser, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as any
Purchaser may reasonably request (i) a letter, dated such date, from the
Company’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the Purchasers, and (ii) an
opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Purchasers.


 


(q)           Upon
the written request of any Purchaser in connection with such Purchaser’s due
diligence requirements, if any, the Company shall make available for inspection
by (i) any Purchaser, (ii) such Purchaser’s legal counsel and (iii) one firm of
accountants or other agents retained by the Purchasers (collectively, the “Inspectors”), all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree to
hold in strict confidence and shall not make any disclosure (except to an
Purchaser) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which


 


9

















 


determination the Inspectors are so notified,
unless (a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement or any other Transaction Document. Each Purchaser agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Purchaser) shall be
deemed to limit the Purchasers’ ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and regulations.


 


(r)            Neither
the Company nor any Subsidiary or affiliate thereof shall identify any
Purchaser as an underwriter in any public disclosure or filing with the
Commission or any Trading Market (as defined in the Securities Purchase
Agreement) without the prior written consent of such Purchaser. If the Company
is required by law to identify a Purchaser as an underwriter in any public
disclosure or filing with the Commission or any Trading Market, it must notify
such Purchaser in advance and such Purchaser shall have the option, in its sole
discretion, to consent to such identification as an underwriter within 5
Business Days or such Purchaser shall be deemed to have consented to have its
Registrable Securities removed from the applicable Registration Statement.


 


(s)         The
Company shall use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to consummate the disposition of such Registrable Securities in the United
States.


 


(t)         The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the Securities Act)
covering a twelve-month period beginning not later than the first day of the
Company’s fiscal quarter next following the effective date of a Registration
Statement.


 


4.             Registration
Expenses. All fees and expenses incident to the Company’s performance of
its obligations under this Agreement (excluding any underwriting discounts and
selling commissions) shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the Trading Market on which the Common Stock is then listed for trading,
and (B) in compliance with applicable state securities or Blue Sky laws), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority
of the Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery


 


10

















 


expenses,
(iv) fees and disbursements of counsel for the Company, and (v) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. The Company shall
also reimburse the Holder with the greatest number of Registrable Securities
being registered on the Registration Statement for the fees and disbursements
of legal counsel, up to $10,000, in connection with the registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement for each such
registration, filing or qualification.


 


5.             Indemnification.


 


(a)           Indemnification by the Company.
The Company shall, notwithstanding any termination of this Agreement, indemnify
and hold harmless each Holder, the officers, directors, agents, investment
advisors, partners, members, shareholders, trustees and employees of each of
them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents, trustees and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys’ fees) and expenses
(collectively, “Losses”),
as incurred, arising out of or relating to (i) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement or any
other certificate, instrument or document contemplated hereby, (ii) any breach
of any covenant, agreement or obligation of the Company contained in this
Agreement or any other certificate, instrument or document contemplated hereby,
or (iii) any untrue or alleged untrue statement of a material fact contained in
any Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or any issuer
free writing prospectus or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto or any issuer free writing prospectus, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (1) such untrue statements or
omissions are based solely upon information regarding such Holder or its
intended method of distribution furnished in writing to the Company by such
Holder expressly for use therein, or (2) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of
an outdated or defective Prospectus after such Holder has received actual
notice in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice or an amended or supplemented Prospectus.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with
the transactions contemplated by this Agreement.


 


(b)           Indemnification by Holders.
Each Holder shall, notwithstanding any termination of this Agreement, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses, as incurred, arising solely out of or based solely upon any untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement


 


11

















 


thereto, or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading to
the extent, but only to the extent that, (1) such untrue statements or
omissions are based solely upon information regarding such Holder or its
intended method of distribution furnished in writing to the Company by such
Holder expressly for use therein, or (2) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of
an outdated or defective Prospectus after such Holder has received actual
notice in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice or an amended or supplemented Prospectus.
In no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company and shall survive the
transfer of the Registrable Securities by the Purchasers pursuant to Section
6(e).


 


(c)           Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.


 


An Indemnified
Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless:
(1) the Indemnifying Party has agreed in writing to pay such fees and expenses;
(2) the Indemnifying Party shall have failed promptly to assume the defense of
such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and such counsel shall be at the expense of the
Indemnifying Party), provided,
that the Indemnifying Party shall not be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties (in addition to any local counsel). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject


 


12

















 


matter of such Proceeding and does not contain any admission of
wrongdoing by such Indemnified Party.


 


All fees and
expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid
to the Indemnified Party, as incurred, within fifteen Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).


 


(d)           Contribution. If a claim for
indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified
Party (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and Indemnified Party on the other hand in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the indemnification
provided for in this Section was available to such party in accordance with its
terms.


 


The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5(d) were determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.


 


The indemnity
and contribution agreements contained in this Section are in addition to any
other liability that the Indemnifying Parties may have to the Indemnified
Parties.


 


6.             Miscellaneous.


 


(a)           Remedies. In the event of a
breach by the Company or by a Holder, of any of their obligations under this
Agreement, each Holder or the Company, as the case may be, in


 


13

















 


addition to being
entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agree that monetary
damages would not provide adequate compensation for any losses incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would
be adequate.


 


(b)           Compliance. Each Holder
covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.


 


(c)           Discontinued Disposition. Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c), such Holder will forthwith discontinue disposition
of such Registrable Securities under the Registration Statement until such
Holder’s receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the “Advice”) by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph. Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock or Securities to a transferee of a Purchaser in accordance with the terms
of the Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which a Purchaser has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the applicable
Registration Statement (unless an exemption from such prospectus delivery
requirement exists), prior to the Purchaser’s receipt of the notice of a Grace
Period and for which the Purchaser has not yet settled.


 


(d)           Notices. Any and all notices
or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section prior
to 5:00 p.m. (Central time) on a Business Day, (ii) the Business Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Agreement later
than 5:00 p.m. (Central time) on any date and earlier than 11:59 p.m. (Central
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:


 


	
  If to the Company:

  	
  Nova Biosource Fuels, Inc.

  363 North Sam Houston Parkway East

  Suite 630

  Houston, Texas 77060

  Tel:   (713) 869-6682

  Fax:  (713)583-8478

  



 


14

















 


	
   

  	
  Attention:  President

  
	
   

  	
   

  
	
  with a copy to:

  	
  Baker & McKenzie LLP

  2300 Trammell Crow Center

  2001 Ross Avenue

  Dallas, Texas 75201

  Tel: (214) 978-3095

  Fax:(214)978-3099

  Attention: Roger W. Bivans, Esq.

   

  
	
  If to a Purchaser

  	
  To the address set forth under such Purchaser’s name on the signature
  pages hereof;

   

  
	
  If to a registered Holder:

  	
  To the address of such Holder as it appears in the stock transfer
  books of the Company;

  



 


or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.


 


(e)           Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the benefit of each
Holder. The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreements.


 


(f)            Execution and Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.


 


(g)           Governing Law.    ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAW THAT WOULD APPLY TO ANY OTHER LAW. Each party agrees
that all Proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective Affiliates,
employees or agents) may be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the non-exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York


 


15

















 


Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


 


(h)           Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.


 


(i)            Severability. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.


 


(j)            Headings. The headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.


 


(k)           Amendment of Registration Rights.
Provisions of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the
Required Holders; provided, however, any amendment to this
Agreement that adversely or disproportionately affects any Holder shall require
the prior written consent of such Holder. Any amendment or waiver effected in
accordance with this Section 6(k) shall be binding upon each Purchaser and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities.


 


(l)            (1) Consents. All consents
and other determinations required to be made by the Purchasers pursuant to this
Agreement shall be made, unless otherwise specified in this Agreement, by the
Required Holders.


 


(m)          Limitation on Obligations. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchaser, and no provision of this Agreement is
intended to confer any obligations on any Purchaser vis-a-vis any other
Purchaser. Nothing contained herein, and no action taken by any Purchaser
pursuant hereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of


 


16

















 


entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.


 


[SIGNATURE PAGES ON NEXT PAGE]


 


17

















 


IN WITNESS
WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.


 


	
   

  	
  NOVA
  BIOSOURCE FUELS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  J.D. McGraw

  
	
   

  	
   

  	
  President

  



 


 


[SIGNATURE
PAGES FOR PURCHASERS ON NEXT PAGE]


 


 


Company Signature Page to 

Nova Biosource Fuels, Inc. 

Registration Rights Agreement


 

















 


IN WITNESS
WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above. The Purchaser, intending to be legally bound, hereby
executes and delivers to the Company this signature page to the Registration
Rights Agreement and authorizes the Company to attach it to the counterpart of
the Registration Rights Agreement executed or to be executed by the Company,
which when so attached shall be considered effective and one and the same
agreement.


 


	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [

  	
   

  	
  ]

  
	
   

  	
  (Insert full legal name
  that the Purchaser desires to appear on the Securities. If the registered
  holder is a nominee, state “as nominee for” and insert the full legal name of
  the Purchaser.)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for
  Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile
  No:

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  With a copy
  to:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile
  No:

  	
   

  
	
   

  	
  Attention:

  	
   

  
							



 


Purchaser Signature Page to 


Nova Biosource Fuels, Inc. 


Registration Rights Agreement