Exhibit 10.2


 


September 28, 2007


 


Mr. Kenneth T. Hern

c/o Nova Biosource Fuels, Inc.

360 North Sam Houston Parkway East, Suite 630

Houston, Texas 77060


 


Dear Sir:


 


This letter agreement will confirm the
understandings between Nova Biosource Fuels, Inc. (“Nova”) and you, as a
stockholder of Nova, in connection with Nova’s private placement of up to $55.0
million of 10% Convertible Senior Secured Notes due 2012 (the “Notes”), which
closed on September 28, 2007. Prior to the offering, Jefferies & Company,
Inc. (“Jefferies”), the placement agent for the Notes, advised Nova that, to
successfully market the offering, buyers of convertible securities must be able
to borrow shares of Nova common stock on customary terms in order to hedge
purchases of the Notes. Based on the existing public float of Nova’s stock,
there was not a sufficient number of shares available in the market to borrow
on customary terms. Accordingly, Jefferies stated to Nova that the proposed
investors in the Notes would only proceed with the private placement if you, as
a significant stockholder of Nova, agreed for a period until September 28, 2012
(the “Availability Period”), to permit Jefferies to borrow up to 4,500,000
shares of Nova common stock as needed. On September 28, 2007, in order to facilitate
Nova’s placement of the Notes, you and your affiliates agreed with Jefferies
not to dispose of the 4,500,000 shares during the Availability Period and to
make the shares available for borrowing by Jefferies during that period. You
will receive from Jefferies only a minimal spread of approximately 25 basis
points on any shares actually borrowed.


 


In order to appropriately compensate you and
your affiliates for agreeing to lend the shares and accepting the resulting
liquidity risk, you and Nova have agreed as follows:


 


(i)            Promptly
following the date hereof, Nova will use all reasonable efforts to file and
keep in effect a Registration Statement on Form S-3 or other applicable form to
register the resale under the Securities Act of 1933 the shares of Nova common
stock subject to the stock loan arrangement.


 


(ii)           Upon
effectiveness of the Registration Statement, you will enter into the Master
Share Loan Agreement with Jefferies, in substantially the form presented to
you, and to perform your obligations thereunder and under the letter agreement
between Jefferies and you entered into contemporaneously herewith.


 


(iii)          During
the Availability Period, you will not dispose of or encumber or otherwise
impair in any fashion, at any time, the availability of up to 4,500,000 shares
and to make such shares available for borrowing by Jefferies pursuant to the
Master Share Lending Agreement.


 


Nova represents to you that (i) Nova has the
requisite corporate power and authority to enter into and perform its obligations
under this letter agreement; (ii) this letter agreement has been approved by
the Audit Committee of Nova’s Board of Directors; and (iii) any necessary 


 

















 


exceptions or
waivers under Nova’s Code of Ethics and Business Conduct have been obtained in
order to permit Nova to enter into and perform this letter agreement, including
any assignment hereof.


 


This letter agreement contains all the
understandings between Nova and you pertaining to the matters referred to
herein, and supercedes all undertakings and agreements, whether oral or in
writing, previously entered into by Nova and you with respect hereto. No
provision of this letter agreement may be amended or waived unless such
amendment or waiver is agreed to in writing signed by you and a duly authorized
officer of Nova. No waiver by Nova or you of any breach by the other party
hereto of any condition or provision of this letter agreement to be performed
by such other party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same time, any prior time or any subsequent time.
If any provision of this letter agreement or the application of any such
provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid and unenforceable to any extent, the
remainder of this letter agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law. This letter agreement will be governed by and construed in accordance
with the laws of the State of New York. This letter agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


Please indicate your agreement with the
foregoing by signing this letter agreement in the space provided below.


 


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Nova Biosource Fuels, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J.D. McGraw

  	
   

  
	
   

  	
   

  	
  Name: J.D. McGraw

  
	
   

  	
   

  	
  Title: President

  



 


	
  The foregoing letter agreement

  
	
  is consented and agreed to as of

  
	
  date first written above.

  
	
   

  
	
  /s/ Kenneth T. Hern

  	
   

  



 

















 


September 28, 2007


 


Mr. J.D. McGraw

c/o Nova Biosource Fuels, Inc.

360 North Sam Houston Parkway East, Suite 630

Houston, Texas 77060


 


Dear Sir:


 


This letter agreement will confirm the
understandings between Nova Biosource Fuels, Inc. (“Nova”) and you, as a
stockholder of Nova, in connection with Nova’s private placement of up to $55.0
million of 10% Convertible Senior Secured Notes due 2012 (the “Notes”), which
closed on September 28, 2007. Prior to the offering, Jefferies & Company,
Inc. (“Jefferies”), the placement agent for the Notes, advised Nova that, to
successfully market the offering, buyers of convertible securities must be able
to borrow shares of Nova common stock on customary terms in order to hedge
purchases of the Notes. Based on the existing public float of Nova’s stock,
there was not a sufficient number of shares available in the market to borrow
on customary terms. Accordingly, Jefferies stated to Nova that the proposed
investors in the Notes would only proceed with the private placement if you, as
a significant stockholder of Nova, agreed for a period until September 28, 2012
(the “Availability Period”), to permit Jefferies to borrow up to 3,500,000
shares of Nova common stock as needed. On September 28, 2007, in order to
facilitate Nova’s placement of the Notes, you and your affiliates agreed with
Jefferies not to dispose of the 3,500,000 shares during the Availability Period
and to make the shares available for borrowing by Jefferies during that period.
You will receive from Jefferies only a minimal spread of approximately 25 basis
points on any shares actually borrowed.


 


In order to appropriately compensate you and
your affiliates for agreeing to lend the shares and accepting the resulting
liquidity risk, you and Nova have agreed as follows:


 


(i)            Promptly
following the date hereof, Nova will use all reasonable efforts to file and
keep in effect a Registration Statement on Form S-3 or other applicable form to
register the resale under the Securities Act of 1933 the shares of Nova common
stock subject to the stock loan arrangement.


 


(ii)           Upon
effectiveness of the Registration Statement, you will enter into the Master
Share Loan Agreement with Jefferies, in substantially the form presented to
you, and to perform your obligations thereunder and under the letter agreement
between Jefferies and you entered into contemporaneously herewith.


 


(iii)          During
the Availability Period, you will not dispose of or encumber or otherwise
impair in any fashion, at any time, the availability of up to 3,500,000 shares
and to make such shares available for borrowing by Jefferies pursuant to the
Master Share Lending Agreement.


 


Nova represents to you that (i) Nova has the
requisite corporate power and authority to enter into and perform its
obligations under this letter agreement; (ii) this letter agreement has been
approved by the Audit Committee of Nova’s Board of Directors; and (iii) any
necessary 


 

















 


exceptions or
waivers under Nova’s Code of Ethics and Business Conduct have been obtained in
order to permit Nova to enter into and perform this letter agreement, including
any assignment hereof.


 


This letter agreement contains all the
understandings between Nova and you pertaining to the matters referred to
herein, and supercedes all undertakings and agreements, whether oral or in
writing, previously entered into by Nova and you with respect hereto. No
provision of this letter agreement may be amended or waived unless such
amendment or waiver is agreed to in writing signed by you and a duly authorized
officer of Nova. No waiver by Nova or you of any breach by the other party
hereto of any condition or provision of this letter agreement to be performed
by such other party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same time, any prior time or any subsequent time.
If any provision of this letter agreement or the application of any such
provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid and unenforceable to any extent, the
remainder of this letter agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law. This letter agreement will be governed by and construed in accordance
with the laws of the State of New York. This letter agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


Please indicate your agreement with the
foregoing by signing this letter agreement in the space provided below.


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Nova Biosource Fuels, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth T. Hern

  	
   

  
	
   

  	
   

  	
  Name: Kenneth T. Hern

  
	
   

  	
   

  	
  Title: Chairman and CEO

  



 


	
  The foregoing letter agreement

  
	
  is consented and agreed to as of

  
	
  date first written above.

  
	
   

  
	
  /s/ J.D. McGraw