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 


 

















 


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

  	
   

  



 

















 


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 


 

















 


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