Document:

Exhibit 4.4

 

 

SHARE LOAN REGISTRATION RIGHTS AGREEMENT

 

AMONG

 

NOVA BIOSOURCE FUELS, INC., A NEVADA CORPORATION,

 

THE LENDERS LISTED HEREIN AND

 

JEFFERIES & COMPANY, INC.

 

AS OF SEPTEMBER 28, 2007

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  Definitions

  	
  1

  
	
   

  	
   

  
	
  Initial Registration

  	
  3

  
	
   

  	
   

  
	
  Subsequent Registrations

  	
  4

  
	
   

  	
   

  
	
  Registration Defaults

  	
  4

  
	
   

  	
   

  
	
  Registration Procedures

  	
  6

  
	
   

  	
   

  
	
  Registration Expenses

  	
  9

  
	
   

  	
   

  
	
  Indemnification

  	
  9

  
	
   

  	
   

  
	
  No Inconsistent Agreements

  	
  9

  
	
   

  	
   

  
	
  Amendments and Waivers

  	
  9

  
	
   

  	
   

  
	
  Notices

  	
  10

  
	
   

  	
   

  
	
  Remedies

  	
  10

  
	
   

  	
   

  
	
  Successors

  	
  10

  
	
   

  	
   

  
	
  Counterparts

  	
  10

  
	
   

  	
   

  
	
  Headings

  	
  11

  
	
   

  	
   

  
	
  Applicable Law

  	
  11

  
	
   

  	
   

  
	
  Severability

  	
  11

  
	
   

  	
   

  
	
  Securities Held by the Company, etc.

  	
  11

  
	
   

  	
   

  
	
  Schedule A

  	
   

  

 

i

 

Nova Biosource Fuels, Inc.,
a corporation organized under the laws of Nevada (the “Company”), proposes to
issue and sell to certain purchasers (the “Purchasers”), its 10% Convertible
Senior Secured Notes due 2012 (the “Notes”), upon the terms set forth in the
Purchase Agreement between the Company and each of the Purchasers dated as of
September 27, 2007 (the “Purchase Agreement”). The Notes will be convertible
into fully paid, nonassessable shares of common stock, par value $.001 per
share, of the Company (the “Common Stock”) on the terms, and subject to the conditions,
set forth in the Indenture (as defined herein).

 

The Lenders and the Company
are entering into this agreement to facilitate hedging transactions by the
Purchasers and future, other holders of the Notes and, relatedly, to facilitate
the Lenders’ satisfying an obligation under the Master Securities Loan
Agreement to have available shares of Common Stock as Loaned Securities (as
defined therein) that are not restricted for purposes of the U.S. federal
securities laws. Jefferies & Company, Inc. (“Jefferies”) is entering into
this Agreement with the Company and the Lenders for the limited purposes stated
herein. In consideration of the foregoing and for good and valuable
consideration, the parties hereto hereby agree as follows:

 

1.             Definitions.
Capitalized terms used herein without definition shall have their respective
meanings set forth in the Purchase Agreement. As used in this Agreement, the
following capitalized defined terms shall have the following meanings:

 

“Act” shall mean the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission promulgated thereunder.

 

“Affiliate” shall have the
meaning specified in Rule 405 under the Act and the terms “controlling” and “controlled”
shall have meanings correlative thereto.

 

“Borrower” shall mean
Jefferies & Company, Inc., as Borrower under the Master Securities Loan
Agreement.

 

“Business Day” shall mean
any day other than a Saturday, a Sunday or a legal holiday or a day on which
banking institutions or trust companies are authorized or obligated by law to
close in New York City.

 

“Closing Date” shall mean
the date of the first issuance of the Notes.

 

“Commission” shall mean the
Securities and Exchange Commission.

 

“Common Stock” shall have
the meaning set forth in the preamble hereto.

 

“Confirmation” shall have
the meaning set forth in the Master Securities Loan Agreement.

 

“Damages Payment Date” shall
mean the sixteenth day of each month.

 

 

“Exchange Act” shall mean
the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

 

 “Holder” shall have the meaning set forth in
the preamble hereto.

 

“Indenture” shall mean the
Indenture relating to the Notes, dated as of

 

September 28, 2007, between the Company, the Guarantors named
therein, Nova Holding Seneca LLC and The Bank of New York, as trustee, as the
same may be amended from time to time in accordance with the terms thereof.

 

“Initial Registration
Statement” shall have the meaning set forth in Section 2 hereof.

 

“Lenders” means Kenneth T.
Hern and J.D. McGraw, as Lenders under the Master Securities Loan Agreement.

 

“Liquidated Damages” shall
have the meaning set forth in Section 4 hereof.

 

“Loan Availability Period”
shall mean the period during which shares may be borrowed pursuant to the
Master Securities Loan Agreement.

 

“Master Securities Loan
Agreement” means the Master Securities Loan Agreement dated as of September 28,
2007 among the Borrower and the Lenders.

 

“Majority Holders” shall
mean, on any date, Holders of a majority of the aggregate original principal
amount of Notes then outstanding.

 

“NASD Rules” shall mean the
Conduct Rules and the By-Laws of the NASD.

 

“Notes” shall have the
meaning set forth in the preamble hereto.

 

“Prospectus” shall mean a
prospectus included in a Registration Statement (including, without limitation,
a prospectus that discloses information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A  under the Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Common Stock covered by such Registration Statement, and all
amendments and supplements thereto, including any and all exhibits thereto and
any information incorporated by reference therein.

 

“Purchase Agreement” shall
have the meaning set forth in the preamble hereto.

 

“Purchasers” shall have the
meaning set forth in the preamble hereto.

 

“Record Date” shall mean the
first day of any month.

 

2

 

“Record Holder” shall mean
with respect to any Damages Payment Date, each person who is a Holder of Notes
at the close of business on the Record Date immediately preceding such Damages
Payment Date.

 

“Registration Request” shall
have the meaning set forth in Section 3  hereof.

 

“Registration Statement”
shall mean a registration statement of the Company pursuant to the provisions
of Section 2 or Section 3  hereof
which covers the Securities on an appropriate form under the Act, amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all materials incorporated by reference therein; provided,
however, that for purposes of Section 2 hereof, the Company shall use
commercially reasonable efforts to effect such Registration Statement by means
of a post effective amendment to the Company’s existing registration statement
on Form S-3.

 

“Securities” shall mean 8
million shares of Common Stock to be borrowed by Borrower pursuant to the
Master Securities Loan Agreement.

 

“Trustee” shall mean the
trustee with respect to the Securities under the Indenture.

 

“Underwriting Agreement”
shall mean a customary underwriting agreement between the Company, the Lenders
and the Borrower relating to the offering of the Securities pursuant to a
Registration Statement. In any such Underwriting Agreement, the Company shall
agree to provide Borrower with, among other things, an auditor’s comfort letter
and opinion of counsel (including a 10b-5 statement), in each case in a form
customary for underwritten securities offerings.

 

2.             Initial
Registration. (a)  The Company shall
no later than the first date on which the Purchase Agreement is executed, file
with the Commission an amendment to its existing Registration Statement (the “Initial
Registration Statement”) providing for the registration of the Securities in
connection with the contemplated use of them under the Master Securities Loan
Agreement.

 

(b)           The Company shall use its reasonable
best efforts to cause the Initial Registration Statement to become or be
declared effective under the Act as promptly as practicable (but in no event
more than (1) 30 calendar days after the Closing Date in the event the Initial
Registration Statement is not reviewed by Commission or (2) 120 days if the
Initial Registration Statement is reviewed by the Commission).

 

(c)           The Company shall use its reasonable
best efforts to keep the Initial Registration Statement effective, supplemented
and amended as required by the Act, in order to permit the Prospectus forming
part thereof to be usable by the Borrower from the date the Initial
Registration Statement is declared effective by the Commission until the
earlier of (i) the date all of the Securities loaned to the Borrower pursuant
to the initial loan under the Master Securities Loan Agreement have been
disposed of by the Borrower and (ii) the date the Borrower notifies the Company
that the disposition of the Securities under the Initial Registration Statement
has terminated.

 

3

 

(d)           The Company shall cause the Initial
Registration Statement and the related Prospectus and any amendment or
supplement thereto, as of the effective date of the Initial Registration
Statement or such amendment or supplement, (i) to comply in all material
respects with the applicable requirements of the Act; and (ii) not to contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein (in the case of the Prospectus, in the light of the circumstances under
which they were made) not misleading.

 

3.         Subsequent Registrations. After the Initial Registration Statement
has been declared effective, the Company shall effect any additional
registrations as provided in this Section 3.

 

(a)           If less than the full number
of Securities are borrowed pursuant to the Initial Registration Statement, at any
time during the period beginning after the date on which the Initial Registration Statement has been declared
effective and ending on the last day of the Loan Availability Period and if
requested by any Lenders, such Lenders shall have the right, solely in
connection with a Confirmation that the Borrower intends to submit pursuant to
the Master Securities Loan Agreement, to submit to the Company a written
request pursuant to this Section 3  (“Registration
Request”) that the Company file a Registration Statement under the Securities
Act with respect to the Securities that such Lenders specify in the
Registration Request. Following receipt of the Registration Request, the
Company shall use its commercially reasonable efforts to as promptly as
practicable file with the Commission a Registration Statement providing for the
registration of such Securities (but in no event more than 30 days following
the date of the Registration Request. The Company shall use its commercially
reasonable efforts to cause any such Registration Statement to become or be
declared effective under the Act as promptly as practicable following the
filing thereof (but in no event more than 120 days following the date of the
Registration Request; provided
that such 120-day period shall be tolled for each day at the conclusion of such
120-day period during which the Registration Statement may not be declared
effective by the Commission as a result of the applicable provisions of
Regulation S-X under the Exchange Act prior to the filing of the Company’s
Annual Report on Form 10-K with the Commission (a “Subsequent Registration
Extension”).

 

(b)           The Company shall use its
commercially reasonable efforts to keep any Registration Statement filed
pursuant to this Section 3 effective, supplemented and amended as required by the Act, in order to permit the
Prospectus forming part thereof to be usable by the Borrower from the date the
Registration Statement is declared effective by the Commission until the
earlier of (i) the date all of the Securities registered pursuant to such
Registration Statement have been disposed of by the Borrower or (ii) the date
the Lenders notify the Company that the disposition of the Securities pursuant
to such Registration Statement has terminated.

 

(c)           The Company shall cause any
such Registration Statement and the related Prospectus and any amendment or
supplement thereto, as of the effective date of such Registration Statement or such amendment or
supplement, (i) to comply in all material respects with the applicable requirements
of the Act; and (ii) not to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading.

 

4

 

4.                                                                                       Registration
Defaults. (a)  If:

 

(i)                                     the
Initial Registration Statement is not filed with the Commission on or prior to the date of the first execution
of the Purchase Agreement;

 

(ii)                                  the
Initial Registration Statement is not declared effective by the Commission on
or before the 30th calendar day following the Closing Date, if the
Initial Registration Statement is not reviewed by the Commission, and the 120th
calendar day if the Initial Registration Statement is reviewed by the
Commission;

 

(iii)                               any subsequent
Registration Statement is not filed with the Commission on or prior to the 30th
day following the delivery of Registration Request;

 

(iv)                              any
subsequent Registration Statement is not declared effective by the Commission
on or before the 120th calendar day following the delivery of a
Registration Request (except in the event of a Subsequent Registration
Extension, in which case a Registration Default will occur if such Registration
Statement is not declared effective at the conclusion of such Subsequent
Registration Extension);

 

(v)                                 in
connection with any Registration Statement, the Company does not execute the
Underwriting Agreement when required, such Underwriting Agreement does not
comply with Section 6 hereof, the Company does not provide customary legal
opinions (including a 10b-5 statement) or a customary comfort letter in
connection with such Underwriting Agreement, or the Company does not comply with any other material agreements or satisfy
any other material conditions set forth in such Underwriting Agreement; provided
that such events shall constitute a Registration Default (as defined below)
only if such events have not been cured by the 30th calendar day
following the Closing Date or the delivery of a Registration Request, as
applicable, and then such Registration Default shall be deemed to begin on such
30th day; and provided, further, for the avoidance of doubt,
any such Registration Default shall only exist until such default is cured; and
provided, further, to the extent any such failure to comply with such
agreements or satisfy such conditions relates to deficiencies in the
Registration Statement (or changes in circumstances after the Registration
Statement has become effective), such failure may be cured through the filing
of appropriate amendments or supplements to such Registration Statement and
entering into a new Underwriting Agreement (so long as the foregoing agreements
and conditions are met with respect to the new Underwriting Agreement);

 

(each such event referred to in the foregoing clauses
(i) through (v), a “Registration Default”), the Company hereby agrees to pay
liquidated damages (“Liquidated Damages”) with respect to the Notes from and
including the day following the Registration Default to but excluding the
earlier of (1) the day two years following the Closing Date and (2) the day on
which the 

 

5

 

Registration Default has been cured to each Holder
cash in an amount per month equal to 0.25% of the accreted principal amount of
the Notes (such Liquidated Damages to accrue daily and be paid monthly),
increasing by an additional 0.25% for each additional 90 day period during
which time a Registration Default has occurred and is continuing, up to a
maximum of 1.0%.

 

(b)           Liquidated Damages shall
accrue daily. All accrued Liquidated Damages shall be paid in arrears to Record
Holders by the Company on each Damages Payment Date by wire transfer of immediately available funds
or by federal funds check. Following the cure of all Registration Defaults, the
further accrual of Liquidated Damages with respect to all Notes will cease. All
Liquidated Damages shall be computed on the basis of a 360-day year composed of
twelve 30-day months.

 

(c)           The parties hereto agree that
the Liquidated Damages provided for in this Section 7 constitute a reasonable
estimate of the damages that may be incurred by Holders by reason of a Registration Default and that
such Liquidated Damages are the only monetary damages available to Holders with
respect to a Registration Default.

 

5.             Registration
Procedures. The following provisions shall apply in connection with any Registration Statement.

 

(a)           The Company shall use its reasonable
best efforts to furnish to the Lenders and the Borrower and to their counsel,
not less than two Business Days in the case of an Initial Registration
Statement and not less than five Business Days in the case of any subsequent
Registration Statement, prior to the filing with the Commission a copy of the
Registration Statement and each amendment thereof and each amendment or
supplement, if any, to the Prospectus included therein (including any documents
incorporated by reference therein after the initial filing) and will reflect in
each such document when so filed with the Commission, such comments as each of
the Lenders and the Borrower reasonably propose (it being understood that the
Company and the Lenders shall accept the comments of the Borrower regarding its
status in the plan of distribution or underwriting section of any Prospectus as
a potential or deemed underwriter and the response of the Company or the
Lenders to the Commission in any response to comment letters regarding any
Registration Statement).

 

(b)           The Company shall give notice
to the Lenders and the Borrower: (i) when the Registration Statement and any
amendment thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for any
amendment or supplement to the Registration Statement or the Prospectus or for
additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the institution of any proceeding for that
purpose; (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Securities included therein for sale in any jurisdiction
or the institution of any proceeding for such purpose; and (v) of the happening of any event that requires
any change in the Registration Statement or the Prospectus so that, as of such
date, they (A) do not contain
any untrue statement of a material fact and (B) do not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which 

 

6

 

they were made) not
misleading; provided that the Company shall not specify the nature of any such
event in such notice.

 

(c)           The Company shall use its
reasonable best efforts to prevent the issuance of any order suspending the
effectiveness of the Registration Statement or the qualification of the securities therein for sale in any
jurisdiction, and if issued, to obtain as soon as possible the withdrawal
thereof.

 

(d)           Prior to the effectiveness of
the Registration Statement, the Company shall provide, and shall cause its
affiliates to provide all the information necessary to enable the Borrower to make all required filings with the NASD
related to the Registration Statement and shall assist the Borrower in
complying with the NASD Rules.

 

(e)           Prior to any offering of
Securities pursuant to the Registration Statement, the Company shall arrange
for the qualification of the Securities for sale under the laws of such jurisdictions as the Lenders shall reasonably
request and shall maintain such qualification in effect so long as required;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or to take any
action in connection therewith that would subject it to taxation or service of
process in suits, other than those arising out of any offering pursuant to the
Registration Statement, in any jurisdiction where it is not then so subject.

 

(f)            Prior to any offering of
Securities pursuant to the Registration Statement, the Company shall have the
Securities approved for listing on the American Stock Exchange, subject only to official notice of issuance.

 

(g)           Upon the occurrence of any
event contemplated by subsections (b)(ii) through (v) above, the Company shall
promptly (or within the time period provided for by Section 5(h) hereof, if applicable) prepare a
post-effective amendment to the Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the securities included therein,
the Prospectus will not include an 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 the light of the circumstances under which they were
made, not misleading.

 

(h)           Notwithstanding the provisions
of Section 3 hereof, the Company may defer filing of, or delay effectiveness
of, a Registration Statement other than the Initial Registration Statement (or, in the case of a “shelf’
Registration Statement, suspend the use of such “shelf’ Registration Statement
and any related Prospectus) for a maximum of 15 consecutive, not to exceed an
aggregate of 45 days in any 12 month period, if (i) the Company, in its reasonable judgment,
believes it may possess material non-public information the disclosure of which
would have a material adverse effect on the Company and its subsidiaries taken
as a whole or (ii) any
Registration Statement and related Prospectus would, in the Company’s judgment,
contain a material misstatement or omission as a result of an event that has
occurred or is continuing. Any suspension period described in this Section 4(h)
shall be referred to herein as the “Deferral Period.” The Company shall give
notice to the Lenders of any Deferral Period, and the Lenders agree that no
Securities shall be sold pursuant to any Registration Statement until the
Lenders 

 

7

 

receive copies of the
supplemented or amended Prospectus provided for in Section 5(g) hereof, or
until it is advised in writing by the Company that the Prospectus may be used,
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus. The
Company shall not specify the nature of the event giving rise to a suspension
in any notice to the Lenders of the existence of such a suspension. For the
avoidance of doubt, the provisions of this Section 4(h) shall not apply to the
Initial Registration Statement.

 

(i)            The Company shall comply with
all applicable rules and regulations of the Commission and shall make generally
available to its security holders an earnings statement satisfying the provisions of Section 1l(a) of
the Act as soon as practicable after the effective date of the Registration
Statement and in any event no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company’s first fiscal quarter commencing after the effective date
of the Initial Registration Statement .

 

(j)            The Company shall take all
appropriate actions as reasonably requested by the Lenders and the Borrower in
order to expedite or facilitate the registration or the disposition of the Securities.

 

(k)                                  From
time to time, upon the request of the Borrower, the Company shall:

 

(i)                                     make
reasonably available for inspection during normal business hours by the
Borrower, and any attorney, accountant or other agent retained by the Borrower all relevant financial and other records and
pertinent corporate documents of the Company and its subsidiaries to permit the
Borrower to conduct a customary due diligence investigation of the Company and
the Lenders;

 

(ii)                                  cause
the Company’s officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Borrower or
any such attorney, accountant or agent in connection with the
offering of the Securities pursuant to the Registration Statement as is
customary for similar due diligence examinations;

 

(iii)                               enter
into the Underwriting Agreement if requested by the Borrower, make the
representations and warranties, comply with the agreements and satisfy the
conditions to the obligations of the Borrower (including, without limitation, obtaining customary legal opinions (including
a 10b-5 negative assurance statement regarding the disclosure contained in the
Registration Statement and the Prospectus) and customary accountants comfort
letters) set forth in the Underwriting Agreement;

 

(iv)                              following
the initial delivery of these items, cause the outside counsel to the Company
to deliver, from time to time as requested by the Borrower, additional customary legal opinions (including a 10b-5
negative assurance statement regarding the Registration Statement and the
Prospectus) and 

 

8

 

the Company outside registered accountants to
deliver customary comfort letters, as provided for in such underwriting
agreement; and

 

(v)           deliver such
other documents and certificates as may be reasonably requested by the Borrower.

 

(l)            The Company shall upon (i)
the filing of the Initial Registration Statement and (ii) the effectiveness of
the Initial Registration Statement, announce the same, in each case by release to the Business Wire service or an
successor thereto.

 

(m)          The Company shall use its reasonable
best efforts to take all other steps necessary to effect the registration of
the Securities pursuant to the terms hereof.

 

(n)           The Company, the Lenders and
the Borrower shall use their reasonable best efforts to cooperate in response
to any comments from the Commission in respect of any Registration Statement.

 

(o)           The
Lenders shall cooperate with the Company regarding the obligations of the
Company under this Agreement to facilitate the registration of the Securities
as contemplated hereby.

 

(p)           The Lenders shall provide to the
Company all information required to be supplied by the Lenders for inclusion in
the Initial Registration Statement
prior to the filing of the Initial Registration Statement. The Lenders shall
provide to the Company all information required to be supplied by the Lenders
for inclusion in any subsequent Registration Statement no later than ten
Business Days after the date of the corresponding Registration Request. The
Lenders shall promptly provide to the Company any additional information
requested by the Commission in connection with any Registration Statement. If
any Lender or Borrower fails to reasonably comply with Company requests for
information for or to be included in any Registration Statement for more than 5
days, then any Registration Default with respect to clauses 4(a)(i) through and
including (iv) shall be deemed tolled until such information is provided.

 

6.             Registration
Expenses. The Company shall bear all expenses incurred in connection with
the performance of its obligations under Sections 2, 3 and 4  hereof and shall reimburse the Lenders and the Borrower for
the reasonable fees and disbursements of their counsel (up to a maximum of
$50,000) in connection with any Registration Statement. To the extent the
provisions of the Underwriting Agreement with respect to expenses conflict with
this Section 5, the provisions of this Section 5 shall control.

 

7.             Indemnification. The Company
shall indemnify and hold harmless the Indemnified Persons (as defined in
Schedule A) in accordance with Schedule A. The terms and provisions of Schedule
A are incorporated by reference herein, constitute a part hereof and shall
survive any termination or expiration of this Agreement.

 

8.             Term. This Agreement shall
continue to be in effect until the termination by its terms of the Master
Securities Loan Agreement.

 

9

 

9.             No Inconsistent Agreements.
The Company has not entered into, and agrees not to enter into, any agreement
with respect to its securities that is inconsistent with the rights granted to the Holders, the Lenders and the
Borrower herein or that otherwise conflicts with the provisions hereof.

 

10.           Amendments and Waivers. The
provisions of this Agreement may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of the Lenders and the Borrower;
provided that no amendment, qualification, supplement, waiver or consent with
respect to (i) Section 2 hereof shall be effective unless consented to by the
Majority Holders (ii) or Section 4 hereof shall be effective as against any
Holder of Notes unless consented to in writing by such Holder; and provided,
further, that the provisions of this Section 9 may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Lenders and the Borrower, and provided, further, any amendment
of the first proviso of this Section 9 shall require the written consent of
each Holder.

 

11.           Notices. All notices, requests
and other communications provided for or permitted hereunder shall be made in
writing by hand-delivery, first-class mail, telex, facsimile or air courier guaranteeing overnight
delivery:

 

(a)                                  if
to the Borrower:

 

Jefferies & Company,
Inc.

520 Madison Avenue

New York, New York 10022

Attention: General Counsel

 

(b)                                 if
to the Company, initially at its address set forth in the Purchase Agreement.

 

(c)                                  if
the Lenders, initially at their address as set forth in the Master Securities
Loan Agreement.

 

All such notices and
communications shall be deemed to have been duly given on the earliest of (i)
at the time delivered, if delivered by hand-delivery; (ii) three business days
after being deposited in the mail, postage prepaid, if mailed by first-class
mail; (iii) when receipt is acknowledged and confirmed as sent by sender’s
telex or facsimile machine, if sent by telex or facsimile transmission; and
(iv) on the day delivered, if sent by overnight air courier guaranteeing next
day delivery.

 

The Borrower, the Lenders or the Company by notice to
the other parties may designate additional or different addresses for
subsequent notices or communications.

 

12.           Remedies.
Each party, in addition to being entitled to exercise all rights provided to it
herein, in the Indenture, the Purchase Agreement or the Placement Agent dated
as of September 27, 2007 by and between Jefferies & Company, Inc., as
placement agent, and the Company or granted by law, including recovery of
liquidated or other damages, will be entitled 

 

10

 

to specific performance of its rights under this
Agreement. Each party agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive in any action for
specific performance the defense that a remedy at law would be adequate.

 

13.           Successors.
This Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. The Company hereby agrees to extend the benefits of this Agreement to any
Holder of Notes, including any subsequent Holders, and any Holder may
specifically enforce Section 2 and Section 7 of this Agreement as if an
original party hereto.

 

14.           Counterparts.
This Agreement may be signed in one or more counterparts, each of which shall
constitute an original and all of which together shall constitute one and the same agreement.

 

15.           Headings. The section headings
used herein are for convenience only and shall not affect the construction hereof.

 

16.           Applicable Law. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York. The parties
hereto each hereby waive any right to trial by jury  in any action, proceeding or counterclaim arising out of or
relating to this Agreement.

 

17.           Severability. In the event
that any one of more of the provisions contained herein, or the application
thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.

 

18.           Securities Held by the Company,
etc. Whenever the consent or approval of Holders of Notes is required
hereunder, Notes held by the Company or its Affiliates (other than subsequent Holders of Securities who are
Affiliates by virtue of their ownership of equity securities of the Company)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

 

11

 

If the foregoing is in
accordance with the understanding of the parties hereto and listed below,
please sign and return to us the enclosed duplicate hereof; whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the Borrower.

 

	
   

  	
  Nova Biosource Fuels, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Kenneth T.
  Hern

  	
   

  
	
   

  	
   

  	
  Kenneth T. Hern

  	
   

  
	
   

  	
   

  	
  Chairman and CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
    Kenneth T.
  Hern

  	
   

  
	
   

  	
   

  	
  Kenneth T. Hern

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
  J.D. McGraw

  	
   

  
	
   

  	
   

  	
  J.D. McGraw

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Jefferies & Company,
  Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Courtney Tuttle

  	
   

  
	
   

  	
   

  	
  Name:  Courtney Tuttle

  	
   

  
	
   

  	
   

  	
  Title:  Managing Director

  	
   

  

 

12

 

SCHEDULE
A

 

Indemnification by
the Company

 

Nova Biosource Fuels,
Inc., (the “Company”) shall, notwithstanding any termination of the
Registration Rights Agreement (the “Agreement”) dated as of September 28, 2007,
by and between the Company, Jefferies & Company, Inc. (the “Borrower”) and
Kenneth T. Hern and J.D. McGraw (collectively, the “Lenders”), indemnify and
hold harmless the (i) Borrower, (ii) its officers, directors, agents,
investment advisors, partners, members, shareholders, trustees and employees,
each person who controls any such Indemnified Party (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and (iii)
the officers, directors, agents, trustees and employees of each such
controlling Person ((i) – (iii), collectively the “Indemnified Parties”), 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 the Agreement or any
other certificate, instrument or document contemplated thereby, (ii) any breach
of any covenant, agreement or obligation of the Company contained in the
Agreement or any other certificate, instrument or document contemplated
thereby, 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 such untrue
statements or omissions are based solely upon information regarding such
Indemnified Party or its intended method of distribution furnished in writing
to the Company by such Indemnified Party expressly for use therein. The Company
shall notify the Indemnified Parties promptly of the institution, threat or
assertion of any proceeding of which the Company is aware in connection with
the transactions contemplated by the Agreement.

 

If any proceeding shall
be brought or asserted against any Indemnified Party, such Indemnified Party
shall promptly notify the Company (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 the
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 

 

13

 

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 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 business 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).

 

If a claim for
indemnification is unavailable to an Indemnified Party (by reason of public
policy or otherwise), then the 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 the immediately preceeding paragraph, 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.

 

14

 

The parties hereto agree
that it would not be just and equitable if such contribution 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 the immediately
preceeding paragraph, no Indemnified Party shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the proceeds
actually received by such Indemnified Party from the sale of the Securities (as
defined in the Agreement) subject to the Proceeding exceeds the amount of any
damages that such Indemnified Party 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 Schedule are in addition to any other
liability that the Indemnifying Party may have to the Indemnified Parties.

 

15Exhibit 10.1

 

MASTER SECURITIES LOAN AGREEMENT

 

	
  Dated as of:

  	
  September
  28, 2007

  
	
   

  	
   

  
	
  Between:

  	
  Kenneth T.
  Hern and J.D. McGraw (“Lenders”)  and
  Jefferies & Company, Inc. (“Borrower”)

  

 

1.             APPLICABILITY.

 

From time to time the parties hereto may
enter into transactions in which Lenders will lend to Borrower certain
Securities (as defined herein) against a transfer of Collateral (as defined
herein).  Each such transaction shall be
referred to herein as a “Loan” and, unless otherwise agreed in writing, shall
be governed by this Agreement, including any supplemental terms or conditions
contained in an Annex or Schedule hereto and in any other annexes identified
herein or therein as applicable hereunder. 
Capitalized terms not otherwise defined herein shall have the meanings
provided in Section 24.

 

2.             LOANS OF SECURITIES.

 

2.1                                 Subject
to the terms and conditions of this Agreement, Borrower or Lenders may, from
time to time, seek to initiate a transaction in which the Lenders will lend
Securities to Borrower.  Borrower and Lenders
shall agree on the terms of each Loan (which terms may be amended during the
Loan), including the issuer of the Securities, the amount of Securities to be
lent, the basis of compensation, the amount of Collateral to be transferred by
Borrower, and any additional terms.  Such
agreement shall be confirmed (a) by a schedule and receipt listing the Loaned
Securities provided by Borrower to the applicable Lender in accordance with
Section 3.2, (b) through any system that compares Loans and in which Borrower
and Lenders are participants, or (c) in such other manner as may be agreed by
Borrower and Lenders in writing.  Such
confirmation (the “Confirmation”), together with the Agreement, shall
constitute conclusive evidence of the terms agreed between Borrower and Lenders
with respect to the Loan to which the Confirmation relates, unless with respect
to the Confirmation specific objection is made promptly after receipt
thereof.  In the event of any
inconsistency between the terms of such Confirmation and this Agreement, this
Agreement shall prevail unless each party has executed such Confirmation.

 

2.2                                 Notwithstanding
any other provision in this Agreement regarding when a Loan commences, unless
otherwise agreed, a Loan hereunder shall not occur until the Loaned Securities
and the Collateral therefor have been transferred in accordance with Section
15.

 

2.3                                 Each
Loan shall be made on a pro rata basis by Lenders to Borrower unless the
Lenders otherwise agree and specify to Borrower.  If any Lender is not making a Loan to
Borrower, references in this Agreement to the Lenders shall mean the applicable
Lender.

 

 

2.4                                 In order to insure that Loaned Securities
are freely tradeable, the Company, the Lenders and the Borrower have entered
into a Share Loan Registration Rights Agreement, dated as of the date hereof,
providing for the registration of Loaned Securities with the Securities and
Exchange Commission.

 

3.             TRANSFER OF LOANED SECURITIES.

 

3.1                                 Unless
otherwise agreed, Lenders shall transfer Loaned Securities to Borrower
hereunder on or before the Cutoff Time on the date agreed to by Borrower and Lenders
for the commencement of the Loan.

 

3.2                                 Unless
otherwise agreed, Borrower shall provide Lenders, for each Loan in which Lenders
are Customers, with a schedule and receipt listing the Loaned Securities.  Such schedule and receipt may consist of (a)
a schedule provided to Borrower by Lenders and executed and returned by
Borrower when the Loaned Securities are received, (b) in the case of Securities
transferred through a Clearing Organization which provides transferors with a
notice evidencing such transfer, such notice, or (c) a confirmation or other
document provided to Lenders by Borrower.

 

3.3                                 Notwithstanding
any other provision in this Agreement, the parties hereto agree that they
intend the Loans hereunder to be loans of Securities.  If, however, any Loan is deemed to be a loan
of money by Borrower to Lenders, then Borrower shall have, and Lenders shall be
deemed to have granted, a security interest in the Loaned Securities and the
proceeds thereof.

 

4.             COLLATERAL.

 

4.1                                 Unless
otherwise agreed, Borrower shall, prior to or concurrently with the transfer of
the Loaned Securities to Borrower, but in no case later than the Close of
Business on the day of such transfer, transfer to Lenders Collateral with a
Market Value at least equal to the Margin Percentage of the Market Value of the
Loaned Securities.

 

4.2                                 The
Collateral transferred by Borrower to the Lenders, as adjusted pursuant to
Section 9, shall be security for Borrower’s obligations in respect of such Loan
and for any other obligations of Borrower to the Lenders hereunder.  Borrower hereby pledges with, assigns to, and
grants the applicable Lender a continuing first priority security interest in,
and a lien upon, the Collateral, which shall attach upon the transfer of the
Loaned Securities by Lenders to Borrower and which shall cease upon the
transfer of the Loaned Securities by Borrower to Lenders.  In addition to the rights and remedies given
to Lenders hereunder, Lenders shall have all the rights and remedies of a
secured party under the UCC.  The
Collateral will be held by Borrower in a segregated account.

 

4.3                                 Except
as otherwise provided herein, upon transfer to Lenders of the Loaned Securities
on the day a Loan is terminated pursuant to Section 6, Lenders shall be
obligated to transfer the Collateral (as adjusted pursuant to Section 9) to
Borrower no later than the Cutoff Time on such day, or, if such day is not a
day on which a 

 

2

 

transfer
of such collateral may be effected under Section 15, the next day on which such
a transfer may be effected.

 

4.4                                 If
Borrower transfers Collateral to Lenders, as provided in Section 4.1, and Lenders
does not transfer the Loaned Securities to Borrower, Borrower shall have the
absolute right to the return of the Collateral; and if Lenders transfer Loaned
Securities to Borrower and Borrower does not transfer Collateral to Lenders as
provided in Section 4.1, Lenders shall have the absolute right to the return of
the Loaned Securities.

 

4.5                                 Borrower
may, upon reasonable notice to Lenders (taking into account all relevant
factors, including industry practice, the type of Collateral to be substituted,
and the applicable method of transfer), substitute additional or new Collateral
for Collateral securing any Loan or Loans; provided, however, that such
substituted Collateral shall (a) consist only of cash, securities or other
property that Borrower and Lenders agreed would be acceptable Collateral prior
to the Loan or Loans and (b) have a Market Value such that the aggregate Market
Value of such substituted Collateral, together with all other Collateral for
Loans in which the party substituting such Collateral is acting as Borrower,
shall equal or exceed the agreed upon Margin Percentage of the Market Value of
the Loaned Securities.

 

4.6                                 Prior
to the expiration of any letter of credit supporting Borrower’s obligations
hereunder, Borrower shall, no later than the Extension Deadline, (a) obtain an
extension of the expiration of such letter of credit, (b) replace such letter
of credit by providing Lenders with a substitute letter of credit in an amount
at least equal to the amount of the letter of credit for which it is
substituted, or (c) transfer such other Collateral to Lenders as may be
acceptable to Lenders.

 

5.             FEES FOR LOAN.

 

5.1                                 Unless
otherwise agreed, (a) Borrower agrees to pay Lenders a loan fee (a “Loan Fee”),
computed daily on each Loan based on the aggregate Market Value of the Loaned
Securities on the day for which such Loan Fee is being computed, and (b) Lenders
agree to pay Borrower a fee or rebate (a “Cash Collateral Fee”) on Collateral
consisting of cash, computed daily based on the amount of cash held by Lenders
as Collateral, in the case of each of the Loan Fee and the Cash Collateral Fee
at such rates as set forth on Schedule B. 
Except as Borrower and Lenders may otherwise agree (in the event that
cash Collateral is transferred by clearing house funds or otherwise), Loan Fees
shall accrue from and including the date on which the Loaned Securities are
transferred to Borrower to, but excluding, the date on which such Loaned
Securities are returned to Lenders, and Cash Collateral Fees shall accrue from
and including the date on which the cash Collateral is transferred to Lenders
to, but excluding, the date on which such cash Collateral is returned to
Borrower.

 

5.2                                 Unless
otherwise agreed, any Loan Fee or Cash Collateral Fee payable hereunder shall
be payable:

 

3

 

(a)                                  in
the case of any Loan of Securities other than Government Securities, upon the
earlier of (i) the fifteenth day of the month following the calendar month in
which such fee was incurred and (ii) the termination of all Loans hereunder
(or, if a transfer of cash in accordance with Section 15 may not be effected on
such fifteenth day or the day of such termination, as the case may be, the next
day on which such a transfer may be effected); and

 

(b)                                 in
the case of any Loan of Government Securities, upon the termination of such
Loan and at such other times, if any, as may be customary in accordance with
market practice.

 

Notwithstanding the foregoing, all Loan Fees shall be
payable by Borrower immediately in the event of a Default hereunder by Borrower
and all Cash Collateral Fees shall be payable immediately by Lenders in the
event of a Default by Lenders.

 

6.             TERMINATION OF THE LOAN.

 

6.1                                 (a)                                  Unless
otherwise agreed, either party may terminate a Loan on a termination date
established by notice given to the other party prior to the Close of Business
on a Business Day.  The termination date
established by a termination notice shall be a date no earlier than the
standard settlement date that would apply to a purchase or sale of the Loaned
Securities (in the case of notice given by Lenders) or the noncash Collateral
securing the Loan (in the case of a notice given by Borrower) entered into at
the time of such notice, which date shall, unless Borrower and Lenders agree to
the contrary, be (i) in the case of Government Securities, the next Business
Day following such notice and (ii) in the case of all other Securities, the
third Business Day following such notice.

 

(b)                                 Notwithstanding
paragraph (a) and unless otherwise agreed, Borrower may terminate a Loan on any
Business Day by giving notice to Lenders and transferring the Loaned Securities
to Lenders before the Cutoff Time on such Business Day.

 

6.2                                 Unless
otherwise agreed, Borrower shall, on or before the Cutoff Time on the termination
date of a Loan, transfer the Loaned Securities to Lenders; provided, however,
that upon such transfer by Borrower, Lenders shall transfer the Collateral (as
adjusted pursuant to Section 9) to Borrower in accordance with Section 4.3.

 

7.             RIGHTS IN RESPECT OF LOANED
SECURITIES AND COLLATERAL.

 

7.1                                 Except
as set forth herein and in Sections 8.1 and 8.2 and as otherwise agreed by
Borrower and Lenders, until Loaned Securities are required to be redelivered to
Lenders upon termination of a Loan hereunder, Borrower shall have all of the
incidents of ownership of the Loaned Securities, including the right to
transfer the Loaned Securities to others; Lenders hereby waive the right to
vote, or to provide 

 

4

 

any
consent or to take any similar action with respect to, the Loaned Securities in
the event that the record date or deadline for such vote, consent or other
action falls during the term of the Loan.

 

8.             DISTRIBUTIONS.

 

8.1                                 Lenders
shall be entitled to receive all Distributions made on or in respect of the
Loaned Securities which are not otherwise received by Lenders, to the full
extent it would be so entitled if the Loaned Securities had not been lent to
Borrower.

 

8.2                                 Any
cash Distributions made on or in respect of the Loaned Securities, which Lenders
are entitled to receive pursuant to Section 8.1, shall be paid by the transfer
of cash to Lenders by Borrower, on the date any such Distribution is paid, in
an amount equal to such cash Distribution, so long as Lenders is not in Default
at the time of such payment.  Non-cash
Distributions that Lenders is entitled to receive pursuant to Section 8.1 shall
be added to the Loaned Securities on the date of distribution and shall be
considered such for all purposes, except that if the Loan has terminated,
Borrower shall forthwith transfer the same to Lenders.

 

8.3                                 Borrower
shall be entitled to receive all Distributions made on or in respect of
non-cash Collateral which are not otherwise received by Borrower, to the full
extent it would be so entitled if the Collateral had not been transferred to Lenders.

 

8.4                                 Any
cash Distributions made on or in respect of such Collateral, which Borrower is
entitled to receive pursuant to Section 8.3, shall be paid by the transfer of
cash to Borrower by Lenders, on the date any such Distribution is paid, in an
amount equal to such cash Distribution, so long as Borrower is not in Default
at the time of such payment.  Non-cash
Distributions that Borrower is entitled to receive pursuant to Section 8.3
shall be added to the Collateral on the date of distribution and shall be
considered such for all purposes, except that if each Loan secured by such
Collateral has terminated, Lenders shall forthwith transfer the same to
Borrower.

 

8.5                                 Unless
otherwise agreed by the parties:

 

(a)                                  If
(i) Borrower is required to make a payment (a “Borrower Payment”) with respect
to cash Distributions on Loaned Securities under Sections 8.1 and 8.2 (“Securities
Distributions”), or (ii) Lenders are required to make a payment (a “Lenders
Payment”) with respect to cash Distributions on Collateral under Sections 8.3
and 8.4 (“Collateral Distributions”), and (iii) Borrower or Lenders, as the
case may be (“Payor”), shall be required by law to collect any withholding or
other tax, duty, fee, levy or charge required to be deducted or withheld from
such Borrower Payment or Lenders Payment (“Tax”), then Payor shall (subject to
subsections (b) and (c) below), pay such additional amounts as may be necessary
in order that the net amount of the Borrower Payment or Lenders Payment
received by the Lenders or Borrower, as the case may be (“Payee”), after
payment of 

 

5

 

such
Tax equals the net amount of the Securities Distribution or Collateral
Distribution that would have been received if such Securities Distribution or
Collateral Distribution had been paid directly to the Payee.

 

(b)                                 No
additional amounts shall be payable to a Payee under subsection (a) above to
the extent that Tax would have been imposed on a Securities Distribution or
Collateral Distribution paid directly to the Payee.

 

(c)                                  No
additional amounts shall be payable to a Payee under subsection (a) above to
the extent that such Payee is entitled to an exemption from, or reduction in
the rate of, Tax on a Borrower Payment or Lenders Payment subject to the
provision of a certificate or other documentation, but has failed timely to
provide such certificate or other documentation.

 

(d)                                 Each
party hereto shall be deemed to represent that, as of the commencement of any
Loan hereunder, no Tax would be imposed on any cash Distribution paid to it
with respect to (i) Loaned Securities subject to a Loan in which it is acting
as Lenders or (ii) Collateral for any Loan in which it is acting as Borrower,
unless such party has given notice to the contrary to the other party hereto
(which notice shall specify the rate at which such Tax would be imposed).  Each party agrees to notify the other of any
change that occurs during the term of a Loan in the rate of any Tax that would
be imposed on any such cash Distributions payable to it.

 

8.6                                 To
the extent that, under the provisions of Sections 8.1 through 8.5, (a) a
transfer of cash or other property by Borrower would give rise to a Margin Excess
or (b) a transfer of cash or other property by Lenders would give rise to a
Margin Deficit, Borrower or Lenders (as the case may be) shall not be obligated
to make such transfer of cash or other property in accordance with such
Sections, but shall in lieu of such transfer immediately credit the amounts
that would have been transferable under such Sections to the account of Lenders
or Borrower (as the case may be).

 

9.             MARK TO MARKET.

 

9.1                                 Borrower
shall daily mark to market any Loan hereunder and in the event that at the
Close of Trading on any Business Day the Market Value of the Collateral for any
Loan to Borrower shall be less than 100% of the Market Value of all the
outstanding Loaned Securities subject to such Loan, Borrower shall transfer
additional Collateral no later than the Close of Business on the next Business
Day so that the Market Value of such additional Collateral, when added to the
Market Value of the other Collateral for such Loan, shall equal 100% of the
Market Value of the Loaned Securities.

 

9.2                                 In
addition to any rights of Lenders under Section 9.1, if at any time the
aggregate Market Value of all Collateral for Loans by Lenders shall be less
than the Margin Percentage of the Market Value of all the outstanding Loaned
Securities subject to 

 

6

 

such
Loans (a “Margin Deficit”), Lenders may, by notice to Borrower, demand that
Borrower transfer to Lenders additional Collateral so that the Market Value of
such additional Collateral, when added to the Market Value of all other
Collateral for such Loans, shall equal or exceed the Margin Percentage of the
Market Value of the Loaned Securities.

 

9.3                                 Subject
to Borrower’s obligations under Section 9.1, if at any time the Market Value of
all Collateral for Loans to Borrower shall be greater than the Margin
Percentage of the Market Value of all the outstanding Loaned Securities subject
to such Loans (a “Margin Excess”), Borrower may, by notice to Lenders, demand
that Lenders transfer to Borrower such amount of the Collateral selected by
Borrower so that the Market Value of the Collateral for such Loans, after
deduction of such amounts, shall thereupon not exceed the Margin Percentage of
the Market Value of the Loaned Securities.

 

9.4                                 Borrower
and Lenders may agree, with respect to one or more Loans hereunder, to mark the
values to market pursuant to Sections 9.2 and

 

9.5                                 by
separately valuing the Loaned Securities lent and the Collateral given in
respect thereof on a Loan-by-Loan basis.

 

9.6                                 Borrower
and Lenders may agree, with respect to any or all Loans hereunder, that the
respective rights of Lenders and Borrower under Sections 9.2 and 9.3 may be
exercised only where a Margin Excess or Margin Deficit exceeds a specified
dollar amount or a specified percentage of the Market Value of the Loaned
Securities under such Loans (which amount or percentage shall be agreed to by
Borrower and Lenders prior to entering into any such Loans).

 

9.7                                 If
any notice is given by Borrower or Lenders under Sections 9.2 or 9.3 at or
before the Margin Notice Deadline on any day on which a transfer of Collateral
may be effected in accordance with Section 15, the party receiving such notice
shall transfer Collateral as provided in such Section no later than the Close
of Business on such day.  If any such
notice is given after the Margin Notice Deadline, the party receiving such
notice shall transfer such Collateral no later than the Close of Business on
the next Business Day following the day of such notice.

 

10.           REPRESENTATIONS.

 

The parties to this Agreement hereby make the
following representations and warranties, which shall continue during the term
of any Loan hereunder:

 

10.1                           Each
party hereto represents and warrants that (a) it has the power to execute and
deliver this Agreement, to enter into the Loans contemplated hereby and to
perform its obligations hereunder, (b) it has taken all necessary action to
authorize such execution, delivery and performance, and (c) this Agreement
constitutes a legal, valid and binding obligation enforceable against it in
accordance with its terms.

 

7

 

10.2                           Each
party hereto represents and warrants that it has not relied on the other for
any tax or accounting advice concerning this Agreement and that it has made its
own determination as to the tax and accounting treatment of any Loan and any
dividends, remuneration or other funds received hereunder.

 

10.3                           Each
party hereto represents and warrants that it is acting for its own account
unless it expressly specifies otherwise in writing and complies with Section
11.1(b).

 

10.4                           Borrower
represents and warrants that it has, or will have at the time of transfer of
any Collateral, the right to grant a first priority security interest therein
subject to the terms and conditions hereof.

 

10.5                           (a)                                  Borrower
represents and warrants that it (or the person to whom it relends the Loaned
Securities) is borrowing or will borrow Loaned Securities that are Equity
Securities for the purpose of making delivery of such Loaned Securities in the
case of short sales, failure to receive securities required to be delivered, or
as otherwise permitted pursuant to Regulation T as in effect from time to time.

 

(b)                                 Borrower
and Lenders may agree, as provided in Section 23.2, that Borrower shall not be
deemed to have made the representation or warranty in subsection (a) with
respect to any Loan.

 

10.6                           Each
Lender represents and warrants that it has, or will have at the time of
transfer of any Loaned Securities, the right to transfer the Loaned Securities
subject to the terms and conditions hereof, and that it owns the Loaned
Securities, free and clear of all liens.

 

11.           COVENANTS.

 

11.1                           Each
party agrees to be liable as principal with respect to its obligations
hereunder.

 

11.2                           Promptly
upon (and in any event within seven (7) Business Days after) demand by Lenders,
Borrower shall furnish Lenders with Borrower’s most recent publicly-available
financial statements and any other financial statements mutually agreed upon by
Borrower and Lenders.  Unless otherwise
agreed, if Borrower is subject to the requirements of Rule 17a-5(c) under the
Exchange Act, it may satisfy the requirements of this Section by furnishing Lenders
with its most recent statement required to be furnished to customers pursuant
to such Rule.

 

12.           EVENTS OF DEFAULT.

 

All Loans hereunder may, at the option of the
non-defaulting party (which option shall be deemed to have been exercised
immediately upon the occurrence of an Act of Insolvency), be terminated
immediately upon the occurrence of any one or more of the following events
(individually, a “Default”):

 

8

 

12.1                           if
any Loaned Securities shall not be transferred to Lenders upon termination of
the Loan as required by Section 6;

 

12.2                           if
any Collateral shall not be transferred to Borrower upon termination of the
Loan as required by Sections 4.3 and 6;

 

12.3                           if
either party shall fail to transfer Collateral as required by Section 9;

 

12.4                           if
either party (a) shall fail to transfer to the other party amounts in respect
of Distributions required to be transferred by Section 8, (b) shall have been
notified of such failure by the other party prior to the Close of Business on
any day, and (c) shall not have cured such failure by the Cutoff Time on the
next day after such Close of Business on which a transfer of cash may be
effected in accordance with Section 15;

 

12.5                           if
an Act of Insolvency occurs with respect to either party;

 

12.6                           if
any representation made by either party in respect of this Agreement or any
Loan or Loans hereunder shall be incorrect or untrue in any material respect
during the term of any Loan hereunder;

 

12.7                           if
either party notifies the other of its inability to or its intention not to
perform its obligations hereunder or otherwise disaffirms, rejects or
repudiates any of its obligations hereunder; or

 

12.8                           if
either party (a) shall fail to perform any material obligation under this
Agreement not specifically set forth in clauses 12.1 through 12.7, above,
including but not limited to the payment of fees as required by Section 5, and
the payment of transfer taxes as required by Section 14, (b) shall have been
notified of such failure by the other party prior to the Close of Business on
any day, and (c) shall not have cured such failure by the Cutoff Time on the
next day after such Close of Business on which a transfer of cash may be
effected in accordance with Section 15.

 

The non-defaulting party shall (except upon
the occurrence of an Act of Insolvency) give notice as promptly as practicable
to the defaulting party of the exercise of its option to terminate all Loans
hereunder pursuant to this Section 12.

 

13.           REMEDIES.

 

13.1                           Upon
the occurrence of a Default under Section 12 entitling Lenders to terminate all
Loans hereunder, Lenders shall have the right, in addition to any other
remedies provided herein, (a) to purchase a like amount of Loaned Securities (“Replacement
Securities”) in the principal market for such Loaned Securities in a
commercially reasonable manner, (b) to sell any Collateral in the principal
market for such Collateral in a commercially reasonable manner and (c) to apply
and set off the Collateral and any proceeds thereof (including any amounts
drawn under a letter of credit supporting any Loan) against the payment of the
purchase price for 

 

9

 

such
Replacement Securities and any amounts due to Lenders under Sections 5, 8, 14
and 16.  In the event that Lenders shall
exercise such rights, Borrower’s obligation to return a like amount of the
Loaned Securities shall terminate.  Lenders
may similarly apply the Collateral and any proceeds thereof to any other
obligation of Borrower under this Agreement, including Borrower’s obligations
with respect to Distributions paid to Borrower (and not forwarded to Lenders)
in respect of Loaned Securities.  In the
event that (i) the purchase price of Replacement Securities (plus all other
amounts, if any, due to Lenders hereunder) exceeds (ii) the amount of the
Collateral, Borrower shall be liable to Lenders for the amount of such excess
together with interest thereon at a rate equal to (A) in the case of purchases
of Foreign Securities, LIBOR, (B) in the case of purchases of any other
Securities (or other amounts, if any, due to Lenders hereunder), the Federal
Funds Rate or (C) such other rate as may be specified in Schedule B, in each
case as such rate fluctuates from day to day, from the date of such purchase
until the date of payment of such excess. 
As security for Borrower’s obligation to pay such excess, Lenders shall
have, and Borrower hereby grants, a security interest in any property of
Borrower then held by or for Lenders and a right of setoff with respect to such
property and any other amount payable by Lenders to Borrower.  The purchase price of Replacement Securities
purchased under this Section 13.1 shall include, and the proceeds of any sale
of Collateral shall be determined after deduction of, broker’s fees and
commissions and all other reasonable costs, fees and expenses related to such
purchase or sale (as the case may be). 
In the event Lenders exercises its rights under this Section 13.1, Lenders
may elect in its sole discretion, in lieu of purchasing all or a portion of the
Replacement Securities or selling all or a portion of the Collateral, to be
deemed to have made, respectively, such purchase of Replacement Securities or
sale of Collateral for an amount equal to the price therefor on the date of
such exercise obtained from a generally recognized source or the last bid
quotation from such a source at the most recent Close of Trading.  Subject to Section 17, upon the satisfaction
of all obligations hereunder, any remaining Collateral shall be returned to
Borrower.

 

13.2                           Upon
the occurrence of a Default under Section 12 entitling Borrower to terminate
all Loans hereunder, Borrower shall have the right, in addition to any other
remedies provided herein, (a) to purchase a like amount of Collateral (“Replacement
Collateral”) in the principal market for such Collateral in a commercially
reasonable manner, (b) to sell a like amount of the Loaned Securities in the
principal market for such Loaned Securities in a commercially reasonable manner
and (c) to apply and set off the Loaned Securities and any proceeds thereof
against (i) the payment of the purchase price for such Replacement Collateral,
(ii) Lenders’s obligation to return any cash or other Collateral, and (iii) any
amounts due to Borrower under Sections 5, 8 and 16.  In such event, Borrower may treat the Loaned
Securities as its own and Lenders’s obligation to return a like amount of the
Collateral shall terminate; provided, however, that Lenders shall immediately
return any letters of credit supporting any Loan upon the exercise or deemed
exercise by Borrower of its termination rights under Section 12.  Borrower may similarly apply the Loaned
Securities and 

 

10

 

any
proceeds thereof to any other obligation of Lenders under this Agreement,
including Lenders’s obligations with respect to Distributions paid to Lenders
(and not forwarded to Borrower) in respect of Collateral.  In the event that (i) the sales price
received from such Loaned Securities is less than (ii) the purchase price of
Replacement Collateral (plus the amount of any cash or other Collateral not
replaced by Borrower and all other amounts, if any, due to Borrower hereunder),
Lenders shall be liable to Borrower for the amount of any such deficiency,
together with interest on such amounts at a rate equal to (A) in the case of
Collateral consisting of Foreign Securities, LIBOR, (B) in the case of
Collateral consisting of any other Securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be specified
in Schedule B, in each case as such rate fluctuates from day to day, from the
date of such sale until the date of payment of such deficiency.  As security for Lenders’s obligation to pay
such deficiency, Borrower shall have, and Lenders hereby grants, a security
interest in any property of Lenders then held by or for Borrower and a right of
setoff with respect to such property and any other amount payable by Borrower
to Lenders.  The purchase price of any
Replacement Collateral purchased under this Section 13.2 shall include, and the
proceeds of any sale of Loaned Securities shall be determined after deduction
of, broker’s fees and commissions and all other reasonable costs, fees and
expenses related to such purchase or sale (as the case may be).  In the event Borrower exercises its rights
under this Section 13.2, Borrower may elect in its sole discretion, in lieu of
purchasing all or a portion of the Replacement Collateral or selling all or a
portion of the Loaned Securities, to be deemed to have made, respectively, such
purchase of Replacement Collateral or sale of Loaned Securities for an amount
equal to the price therefor on the date of such exercise obtained from a
generally recognized source or the last bid quotation from such a source at the
most recent Close of Trading.   Subject
to Section 17, upon the satisfaction of all Lenders’s obligations hereunder,
any remaining Loaned Securities (or remaining cash proceeds thereof) shall be
returned to Lenders.

 

13.3                           Unless
otherwise agreed, the parties acknowledge and agree that (a) the Loaned
Securities and any Collateral consisting of Securities are of a type traded in
a recognized market, (b) in the absence of a generally recognized source for
prices or bid or offer quotations for any security, the non-defaulting party
may establish the source therefor in its reasonable discretion, and (c) all
prices and bid and offer quotations shall be increased to include accrued
interest to the extent not already included therein (except to the extent
contrary to market practice with respect to the relevant Securities).

 

13.4                           In
addition to its rights hereunder, the non-defaulting party shall have any
rights otherwise available to it under any other agreement or applicable law.

 

14.           TRANSFER TAXES.

 

All transfer taxes with respect to the
transfer of the Loaned Securities by Lenders to Borrower and by Borrower to Lenders
upon termination of the Loan and with respect to the 

 

11

 

transfer of
Collateral by Borrower to Lenders and by Lenders to Borrower upon termination
of the Loan or pursuant to Section 4.5 or Section 9 shall be paid by Borrower.

 

15.           TRANSFERS.

 

15.1                           All
transfers by either Borrower or Lenders of Loaned Securities or Collateral
consisting of “financial assets” (within the meaning of the UCC) hereunder
shall be by (a) in the case of certificated securities, physical delivery of
certificates representing such securities together with duly executed stock and
bond transfer powers, as the case may be, with signatures guaranteed by a bank
or a member firm of the New York Stock Exchange, Inc., (b) registration of an
uncertificated security in the transferee’s name by the issuer of such
uncertificated security, (c) the crediting by a Clearing Organization of such financial
assets to the transferee’s “securities account” (within the meaning of the UCC)
maintained with such Clearing Organization, or (d) such other means as Borrower
and Lenders may agree.

 

15.2                           All
transfers of cash hereunder shall be by (a) wire transfer in immediately
available, freely transferable funds or (b) such other means as Borrower and Lenders
may agree.

 

15.3                           All
transfers of letters of credit from Borrower to Lenders shall be made by
physical delivery to Lenders of an irrevocable letter of credit issued by a “bank”
as defined in Section 3(a)(6)(A)-(C) of the Exchange Act.  Transfers of letters of credit from Lenders
to Borrower shall be made by causing such letters of credit to be returned or
by causing the amount of such letters of credit to be reduced to the amount
required after such transfer.

 

15.4                           A
transfer of Securities, cash or letters of credit may be effected under this
Section 15 on any day except (a) a day on which the transferee is closed for
business at its address set forth in Schedule A hereto or (b) a day on which a
Clearing Organization or wire transfer system is closed, if the facilities of
such Clearing Organization or wire transfer system are required to effect such
transfer.

 

15.5                           For
the avoidance of doubt, the parties agree and acknowledge that the term “securities,”
as used herein (except in this Section 15), shall include any “security
entitlements” with respect to such securities (within the meaning of the
UCC).  In every transfer of “financial
assets” (within the meaning of the UCC) hereunder, the transferor shall take
all steps necessary (a) to effect a delivery to the transferee under Section
8-301 of the UCC, or to cause the creation of a security entitlement in favor
of the transferee under Section 8-501 of the UCC, (b) to enable the transferee
to obtain “control” (within the meaning of Section 8-106 of the UCC), and (c)
to provide the transferee with comparable rights under any applicable foreign
law or regulation.

 

12

 

16.           CONTRACTUAL CURRENCY.

 

16.1                           Borrower
and Lenders agree that (a) any payment in respect of a Distribution under
Section 8 shall be made in the currency in which the underlying Distribution of
cash was made, (b) any return of cash shall be made in the currency in which
the underlying transfer of cash was made, and (c) any other payment of cash in
connection with a Loan under this Agreement shall be in the currency agreed
upon by Borrower and Lenders in connection with such Loan (the currency
established under clause (a), (b) or (c) hereinafter referred to as the “Contractual
Currency”).  Notwithstanding the
foregoing, the payee of any such payment may, at its option, accept tender
thereof in any other currency; provided, however, that, to the extent permitted
by applicable law, the obligation of the payor to make such payment will be
discharged only to the extent of the amount of Contractual Currency that such
payee may, consistent with normal banking procedures, purchase with such other
currency (after deduction of any premium and costs of exchange) on the banking
day next succeeding its receipt of such currency.

 

16.2                           If
for any reason the amount in the Contractual Currency received under Section
16.1, including amounts received after conversion of any recovery under any
judgment or order expressed in a currency other than the Contractual Currency,
falls short of the amount in the Contractual Currency due in respect of this
Agreement, the party required to make the payment will (unless a Default has occurred
and such party is the non-defaulting party) as a separate and independent
obligation and to the extent permitted by applicable law, immediately pay such
additional amount in the Contractual Currency as may be necessary to compensate
for the shortfall.

 

16.3                           If
for any reason the amount in the Contractual Currency received under Section
16.1 exceeds the amount in the Contractual Currency due in respect of this
Agreement, then the party receiving the payment will (unless a Default has
occurred and such party is the non-defaulting party) refund promptly the amount
of such excess.

 

17.           SINGLE AGREEMENT.

 

Borrower and Lenders acknowledge that, and
have entered into this Agreement in reliance on the fact that, all Loans
hereunder constitute a single business and contractual relationship and have
been entered into in consideration of each other.  Accordingly, Borrower and Lenders hereby
agree that payments, deliveries and other transfers made by either of them in
respect of any Loan shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Loan
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.  In addition, Borrower and Lenders acknowledge
that, and have entered into this Agreement in reliance on the fact that, all
Loans hereunder have been entered into in consideration of each other.  Accordingly, Borrower and Lenders hereby
agree that (a) each shall perform all of its obligations in respect of each
Loan hereunder, and that a default in the performance of any such 

 

13

 

obligation by
Borrower or by Lenders (the “Defaulting Party”) in any Loan hereunder shall
constitute a default by the

 

Defaulting Party under all such Loans
hereunder, and (b) the non-defaulting party shall be entitled to set off claims
and apply property held by it in respect of any Loan hereunder against
obligations owing to it in respect of any other Loan with the Defaulting Party.

 

18.           APPLICABLE LAW.

 

THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  

 

19.           WAIVER.

 

The failure of a party to this Agreement to
insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.  All waivers in respect of a
Default must be in writing.

 

20.           SURVIVAL OF REMEDIES.

 

All remedies hereunder and all obligations
with respect to any Loan shall survive the termination of the relevant Loan,
return of Loaned Securities or Collateral and termination of this Agreement.

 

21.           NOTICES AND OTHER COMMUNICATIONS.

 

Any and all notices, statements, demands or
other communications hereunder may be given by a party to the other by
telephone, mail, facsimile, e-mail, electronic message, telegraph, messenger or
otherwise to the individuals and at the facsimile numbers and addresses
specified with respect to it in Schedule A hereto, or sent to such party at any
other place specified in a notice of change of number or address hereafter
received by the other party.  Any notice,
statement, demand or other communication hereunder will be deemed effective on
the day and at the time on which it is received or, if not received, on the day
and at the time on which its delivery was in good faith attempted; provided,
however, that any notice by a party to the other party by telephone shall be
deemed effective only if (a) such notice is followed by written confirmation
thereof and (b) at least one of the other means of providing notice that are
specifically listed above has previously been attempted in good faith by the
notifying party.

 

22.           SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.

 

22.1                           EACH
PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN
NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE
PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS
HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN 

 

14

 

HEREUNDER
AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE
OR DOMICILE.

 

22.2                           EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

23.           MISCELLANEOUS.

 

23.1                           Except
as otherwise agreed by the parties, this Agreement supersedes any other
agreement between the parties hereto concerning loans of Securities between
Borrower and Lenders.  This Agreement
shall not be assigned by either party without the prior written consent of the
other party and any attempted assignment without such consent shall be null and
void.  Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of Borrower and Lenders
and their respective heirs, representatives, successors and assigns.  This Agreement may be terminated by either
party upon notice to the other, subject only to fulfillment of any obligations
then outstanding.  This Agreement shall
not be modified, except by an instrument in writing signed by the party against
whom enforcement is sought.  The parties
hereto acknowledge and agree that, in connection with this Agreement and each
Loan hereunder, time is of the essence. 
Each provision and agreement herein shall be treated as separate and
independent from any other provision herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.

 

24.           DEFINITIONS.

 

For the purposes hereof:

 

24.1                           “Act
of Insolvency” shall mean, with respect to any party, (a) the commencement by
such party as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, moratorium, dissolution, delinquency
or similar law, or such party’s seeking the appointment or election of a
receiver, conservator, trustee, custodian or similar official for such party or
any substantial part of its property, or the convening of any meeting of
creditors for purposes of commencing any such case or proceeding or seeking
such an appointment or election, (b) the commencement of any such case or
proceeding against such party, or another seeking such an appointment or
election, or the filing against a party of an application for a protective
decree under the provisions of the Securities Investor Protection Act of 1970,
which (i) is consented to or not timely contested by such party, (ii) results
in the entry of an 

 

15

 

order
for relief, such an appointment or election, the issuance of such a protective
decree or the entry of an order having a similar effect, or (iii) is not
dismissed within 15 days, (c) the making by such party of a general assignment
for the benefit of creditors, or (d) the admission in writing by such party of
such party’s inability to pay such party’s debts as they become due.

 

24.2                           “Bankruptcy
Code” shall have the meaning assigned in Section 25.1

 

24.3                           “Borrower”
shall have the meaning assigned in Section 1.

 

24.4                           “Borrower
Payment” shall have the meaning assigned in Section 8.5(a).

 

24.5                           “Broker-Dealer”
shall mean any person that is a broker (including a municipal securities
broker), dealer, municipal securities dealer, government securities broker or
government securities dealer as defined in the Exchange Act, regardless of
whether the activities of such person are conducted in the United States or
otherwise require such person to register with the U.S. Securities and Exchange
Commission or other regulatory body.

 

24.6                           “Business
Day” shall mean, with respect to any Loan hereunder, a day on which regular
trading occurs in the principal market for the Loaned Securities subject to
such Loan, provided, however, that for purposes of determining the Market Value
of any Securities hereunder, such term shall mean a day on which regular
trading occurs in the principal market for the Securities whose value is being
determined. Notwithstanding the foregoing, (a) for purposes of Section 9, “Business
Day” shall mean any day on which regular trading occurs in the principal market
for any Loaned Securities or for any Collateral consisting of Securities under
any outstanding Loan hereunder and “next Business Day” shall mean the next day
on which a transfer of Collateral may be effected in accordance with Section
15, and (b) in no event shall a Saturday or Sunday be considered a Business
Day.

 

24.7                           “Cash
Collateral Fee” shall have the meaning assigned in Section 5.1.

 

24.8                           “Clearing
Organization” shall mean (a) The Depository Trust Company, or, if agreed to by
Borrower and Lenders, such other “securities intermediary” (within the meaning
of the UCC) at which Borrower (or Borrower’s agent) and Lenders (or Lenders’s
agent) maintain accounts, or (b) a Federal Reserve Bank, to the extent that it
maintains a book-entry system.

 

24.9                           “Close
of Business” shall mean the time established by the parties in Schedule B or
otherwise orally or in writing or, in the absence of any such agreement, as
shall be determined in accordance with market practice.

 

24.10                     “Close of Trading” shall mean,
with respect to any Security, the end of the primary trading session established
by the principal market for such Security on a Business Day, unless otherwise
agreed by the parties.

 

16

 

24.11                     “Collateral” shall mean cash,
securities issued or guaranteed by the United States government or its agencies
or instrumentalities, or irrevocable bank letters of credit issued by a person
other than the Borrower or an affiliate thereof.

 

24.12                     “Collateral Distributions” shall
have the meaning assigned in Section 8.5(a).

 

24.13                     “Confirmation” shall have the
meaning assigned in Section 2.1.

 

24.14                     “Contractual Currency” shall have
the meaning assigned in Section 16.1.

 

24.15                     “Customer” shall mean any person
that is a customer of Borrower under Rule 15c3-3 under the Exchange Act or any
comparable regulation of the Secretary of the Treasury under Section 15C of the
Exchange Act (to the extent that Borrower is subject to such Rule or comparable
regulation).

 

24.16                     “Cutoff Time” shall mean a time on
a Business Day by which a transfer of cash, securities or other property must
be made by Borrower or Lenders to the other, as shall be agreed by Borrower and
Lenders in Schedule B or otherwise orally or in writing or, in the absence of
any such agreement, as shall be determined in accordance with market practice.

 

24.17                     “Default” shall have the meaning
assigned in Section 12.

 

24.18                     “Defaulting Party” shall have the
meaning assigned in Section 17.

 

24.19                     “Distribution” shall mean, with
respect to any Security at any time, any distribution made on or in respect of
such Security, including, but not limited to: (a) cash and all other property,
(b) stock dividends, (c) Securities received as a result of split ups of such
Security and distributions in respect thereof, (d) interest payments, (e) all
rights to purchase additional Securities, and (f) any cash or other
consideration paid or provided by the issuer of such Security in exchange for
any vote, consent or the taking of any similar action in respect of such
Security (regardless of whether the record date for such vote, consent or other
action falls during the term of the Loan). 
In the event that the holder of a Security is entitled to elect the type
of distribution to be received from two or more alternatives, such election
shall be made by Lenders, in the case of a Distribution in respect of the
Loaned Securities, and by Borrower, in the case of a Distribution in respect of
Collateral.

 

24.20                     “Equity Security” shall mean any
security (as defined in the Exchange Act) other than a “nonequity security,” as
defined in Regulation T.

 

24.21                     “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.

 

24.22                     “Extension Deadline” shall mean,
with respect to a letter of credit, the Cutoff Time on the Business Day
preceding the day on which the letter of credit expires.

 

24.23                     “FDIA” shall have the meaning
assigned in Section 25.4.

 

17

 

24.24                     “FDICIA” shall have the meaning
assigned in Section 25.5.

 

24.25                     “Federal Funds Rate” shall mean
the rate of interest (expressed as an annual rate), as published in Federal
Reserve Statistical Release H.15(519) or any publication substituted therefor,
charged for federal funds (dollars in immediately available funds borrowed by
banks on an overnight unsecured basis) on that day or, if that day is not a
banking day in New York City, on the next preceding banking day.

 

24.26                     “Foreign Securities” shall mean,
unless otherwise agreed, Securities that are principally cleared and settled
outside the United States.

 

24.27                     “Government Securities” shall mean
government securities as defined in Section 3(a)(42)(A)-(C) of the Exchange
Act.

 

24.28                     “Lenders” shall have the meaning
assigned in Section 1.

 

24.29                     “Lenders Payment” shall have the
meaning assigned in Section 8.5(a).

 

24.30                     “LIBOR” shall mean for any date,
the offered rate for deposits in U.S. dollars for a period of three months
which appears on the Reuters Screen LIBO page as of 11:00 a.m., London time, on
such date (or, if at least two such rates appear, the arithmetic mean of such
rates).

 

24.31                     “Loan” shall have the meaning
assigned in Section 1.

 

24.32                     “Loan Fee” shall have the meaning
assigned in Section 5.1.

 

24.33                     “Loaned Security” shall mean any
Security transferred in a Loan hereunder until such Security (or an identical
Security) is transferred back to Lenders hereunder, except that, if any new or
different Security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action, such new or
different Security shall, effective upon such exchange, be deemed to become a
Loaned Security in substitution for the former Loaned Security for which such
exchange is made.  For purposes of return
of Loaned Securities by Borrower or purchase or sale of Securities pursuant to
Section 13, such term shall include Securities of the same issuer, class and
quantity as the Loaned Securities, as adjusted pursuant to the preceding
sentence.

 

24.34                     “Margin Deficit” shall have the
meaning assigned in Section 9.2.

 

24.35                     “Margin Excess” shall have the
meaning assigned in Section 9.3.

 

24.36                     “Margin Notice Deadline” shall
mean the time agreed to by the parties in the relevant Confirmation, Schedule B
hereto or otherwise as the deadline for giving notice requiring same-day
satisfaction of mark-to-market obligations as provided in Section 9 hereof (or,
in the absence of any such agreement, the deadline for such purposes
established in accordance with market practice).

 

18

 

24.37                     “Margin Percentage” shall mean,
with respect to any Loan as of any date, a percentage agreed by Borrower and Lenders,
which shall be not less than 100%, unless (a) Borrower and Lenders agree
otherwise, as provided in Section 23.2, and (b) Lenders are not Customers.  Notwithstanding the previous sentence, in the
event that the writing or other confirmation evidencing the agreement described
in clause (a) does not set out such percentage with respect to any such Loan,
the Margin Percentage shall not be a percentage less than the percentage
obtained by dividing (i) the Market Value of the Collateral required to be
transferred by Borrower to Lenders with respect to such Loan at the
commencement of the Loan by (ii) the Market Value of the Loaned Securities
required to be transferred by Lenders to Borrower at the commencement of the
Loan.

 

24.38                     “Market Value” shall have the
meaning set forth in Annex I or otherwise agreed to by Borrower and Lenders in
writing.  Notwithstanding the previous
sentence, in the event that the meaning of Market Value has not been set forth
in Annex I or in any other writing, as described in the previous sentence,
Market Value shall be determined in accordance with market practice for the
Securities, based on the price for such Securities as of the most recent Close
of Trading obtained from a generally recognized source agreed to by the parties
or the closing bid quotation at the most recent Close of Trading obtained from
such source, plus accrued interest to the extent not included therein (other
than any interest credited or transferred to, or applied to the obligations of,
the other party pursuant to Section 8, unless market practice with respect to
the valuation of such Securities in connection with securities loans is to the
contrary).  If the relevant quotation did
not exist at such Close of Trading, then the Market Value shall be the relevant
quotation on the next preceding Close of Trading at which there was such a
quotation.  The determinations of Market
Value provided for in Annex I or in any other writing described in the first
sentences of this Section 24.38 or, if applicable, in the preceding sentence
shall apply for all purposes under this Agreement, except for purposes of
Section 13.

 

24.39                     “Payee” shall have the meaning
assigned in Section 8.5(a).

 

24.40                     “Payor” shall have the meaning
assigned in Section 8.5(a).

 

24.41                     “Plan” shall mean: (a) any “employee
benefit plan” as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such
Act; (b) any “plan” as defined in Section 4975(e)(1) of the Internal Revenue
Code of 1986; or (c) any entity the assets of which are deemed to be assets of
any such “employee benefit plan” or “plan” by reason of the Department of Labor’s
plan asset regulation, 29 C.F.R. Section 2510.3-101.

 

24.42                     “Regulation T” shall mean
Regulation T of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

 

19

 

24.43                     “Retransfer” shall mean, with
respect to any Collateral, to pledge, repledge, hypothecate, rehypothecate,
lend, relend, sell or otherwise transfer such Collateral, or to re-register any
such Collateral evidenced by physical certificates in any name other than
Borrower’s.

 

24.44                     “Securities” shall mean securities
or, if agreed by the parties in writing, other assets.

 

24.45                     “Securities Distributions” shall
have the meaning assigned in Section 8.5(a).

 

24.46                     “Tax” shall have the meaning
assigned in Section 8.5(a).

 

24.47                     “UCC” shall mean the New York
Uniform Commercial Code.

 

25.           INTENT.

 

25.1                           The
parties recognize that each Loan hereunder is a “securities contract,” as such
term is defined in Section 741 of Title 11 of the United States Code (the “Bankruptcy
Code”), as amended (except insofar as the type of assets subject to the Loan
would render such definition inapplicable).

 

25.2                           It
is understood that each and every transfer of funds, securities and other
property under this Agreement and each Loan hereunder is a “settlement payment”
or a “margin payment,” as such terms are used in Sections 362(b)(6) and 546(e)
of the Bankruptcy Code.

 

25.3                           It
is understood that the rights given to Borrower and Lenders hereunder upon a
Default by the other constitute the right to cause the liquidation of a
securities contract and the right to set off mutual debts and claims in
connection with a securities contract, as such terms are used in Sections 555
and 362(b)(6) of the Bankruptcy Code.

 

25.4                           The
parties agree and acknowledge that if a party hereto is an “insured depository
institution,” as such term is defined in the Federal Deposit Insurance Act, as
amended (“FDIA”), then each Loan hereunder is a “securities contract” and “qualified
financial contract,” as such terms are defined in the FDIA and any rules,
orders or policy statements thereunder (except insofar as the type of assets
subject to the Loan would render such definitions inapplicable).

 

25.5                           It
is understood that this Agreement constitutes a “netting contract” as defined
in and subject to Title IV of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (“FDICIA”) and each payment obligation under any Loan
hereunder shall constitute a “covered contractual payment entitlement” or “covered
contractual payment obligation,” respectively, as defined in and subject to
FDICIA (except insofar as one or both of the parties is not a “financial
institution” as that term is defined in FDICIA).

 

20

 

25.6                           Except
to the extent required by applicable law or regulation or as otherwise agreed,
Borrower and Lenders agree that Loans hereunder shall in no event be “exchange
contracts” for purposes of the rules of any securities exchange and that Loans
hereunder shall not be governed by the buy-in or similar rules of any such
exchange, registered national securities association or other self-regulatory
organization.

 

26.           DISCLOSURE RELATING TO CERTAIN
FEDERAL PROTECTIONS.

 

26.1                           WITHOUT
WAIVING ANY RIGHTS GIVEN TO LENDERS HEREUNDER, IT IS UNDERSTOOD AND AGREED THAT
THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT
PROTECT LENDERS WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT,
THEREFORE, THE COLLATERAL DELIVERED TO LENDERS MAY CONSTITUTE THE ONLY SOURCE
OF SATISFACTION OF BORROWER’S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN
THE LOANED SECURITIES.

 

26.2                           LENDERS
ACKNOWLEDGES THAT, IN CONNECTION WITH LOANS OF GOVERNMENT SECURITIES AND AS
OTHERWISE PERMITTED BY APPLICABLE LAW, SOME SECURITIES PROVIDED BY BORROWER AS
COLLATERAL UNDER THIS AGREEMENT MAY NOT BE GUARANTEED BY THE UNITED STATES.

 

(Signature Page Follows)

 

21

 

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

 

 

	
   

  	
  Kenneth T. Hern, as LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Kenneth
  T. Hern

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  J.D. McGraw, as LENDER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ J.D.
  McGraw

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jefferies
  & Company, as BORROWER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Courtney
  Tuttle

  	
   

  

 

S-1

 

ANNEX I

 

MARKET VALUE

 

Unless
otherwise agreed by Borrower and Lenders:

 

1.                                       If the principal
market for the Securities to be valued is a national securities exchange in the
United States, their Market Value shall be determined by their last sale price
on such exchange at the most recent Close of Trading or, if there was no sale
on the Business Day of the most recent Close of Trading, by the last sale price
at the Close of Trading on the next preceding Business Day on which there was a
sale on such exchange, all as quoted on the Consolidated Tape or, if not quoted
on the Consolidated Tape, then as quoted by such exchange.

 

2.                                       If the principal
market for the Securities to be valued is the over-the-counter market, and the
Securities are quoted on The Nasdaq Stock Market (“Nasdaq”), their Market Value
shall be the last sale price on Nasdaq at the most recent Close of Trading or,
if the Securities are issues for which last sale prices are not quoted on
Nasdaq, the last bid price at such Close of Trading.  If the relevant quotation did not exist at
such Close of Trading, then the Market Value shall be the relevant quotation on
the next preceding Close of Trading at which there was such a quotation.

 

3.                                       Except as
provided in Section 4 of this Annex, if the principal market for the Securities
to be valued is the over-the-counter market, and the Securities are not quoted
on Nasdaq, their Market Value shall be determined in accordance with market
practice for such Securities, based on the price for such Securities as of the
most recent Close of Trading obtained from a generally recognized source agreed
to by the parties or the closing bid quotation at the most recent Close of
Trading obtained from such a source.  If
the relevant quotation did not exist at such Close of Trading, then the Market
Value shall be the relevant quotation on the next preceding Close of Trading at
which there was such a quotation.

 

4.                                       If the
Securities to be valued are Foreign Securities, their Market Value shall be
determined as of the most recent Close of Trading in accordance with market
practice in the principal market for such Securities.

 

5.                                       The Market Value
of a letter of credit shall be the undrawn amount thereof.

 

6.                                       All
determinations of Market Value under Sections 1 through 4 of this Annex shall
include, where applicable, accrued interest to the extent not already included
therein (other than any interest credited or transferred to, or applied to the
obligations of, the other party pursuant to Section 8 of the Agreement), unless
market practice with respect to the valuation of such Securities in connection
with securities loans is to the contrary.

 

7.                                       The
determinations of Market Value provided for in this Annex shall apply for all
purposes under the Agreement, except for purposes of Section 13 of the
Agreement.

 

I-1

 

ANNEX II

 

TERM LOANS

 

This Annex
sets forth additional terms and conditions governing Loans designated as “Term
Loans” in which Lenders lends to Borrower a specific amount of Loaned
Securities (“Term Loan Amount”) against a pledge of cash Collateral by Borrower
for an agreed upon Cash Collateral Fee until a scheduled termination date (“Termination
Date”).  Unless otherwise defined,
capitalized terms used but not defined in this Annex shall have the meanings
assigned in the Securities Loan Agreement of which it forms a part (such
agreement, together with this Annex and any other annexes, schedules or
exhibits, referred to as the “Agreement”).

 

1.                                       The terms of
this Annex shall apply to Loans of Equity Securities only if they are
designated as Term Loans in a Confirmation therefor provided pursuant to the
Agreement and executed by each party, in a schedule to the Agreement or in this
Annex.  All Loans of Securities other
than Equity Securities shall be “Term Loans” subject to this Annex, unless
otherwise agreed in a Confirmation or other writing.

 

2.                                       The Confirmation
for a Term Loan shall set forth, in addition to any terms required to be set
forth therein under the Agreement, the Term Loan Amount, the Cash Collateral
Fee and the Termination Date.  Lenders
and Borrower agree that, except as specifically provided in this Annex, each
Term Loan shall be subject to all terms and conditions of the Agreement,
including, without limitation, any provisions regarding the parties’ respective
rights to terminate a Loan.

 

3.                                       In the event
that either party exercises its right under the Agreement to terminate a Term
Loan on a date (the “Early Termination Date”) prior to the Termination Date, Lenders
and Borrower shall, unless otherwise agreed, use their best efforts to
negotiate in good faith a new Term Loan (the “Replacement Loan”) of comparable
or other Securities, which shall be mutually agreed upon by the parties, with a
Market Value equal to the Market Value of the Term Loan Amount under the
terminated Term Loan (the “Terminated Loan”) as of the Early Termination
Date.  Such agreement shall, in
accordance with Section 2 of this Annex, be confirmed in a new Confirmation at
the commencement of the Replacement Loan and be executed by each party.  Each Replacement Loan shall be subject to the
same terms as the corresponding Terminated Loan, other than with respect to the
commencement date and the identity of the Loaned Securities.  The Replacement Loan shall commence on the
date on which the parties agree which Securities shall be the subject of the
Replacement Loan and shall be scheduled to terminate on the scheduled
Termination Date of the Terminated Loan.

 

4.                                       Borrower and Lenders
agree that, except as provided in Section 5 of this Annex, if the parties enter
into a Replacement Loan, the Collateral for the related Terminated Loan need
not be returned to Borrower and shall instead serve as Collateral for such
Replacement Loan.

 

5.                                       If the parties
are unable to negotiate and enter into a Replacement Loan for some or all of
the Term Loan Amount on or before the Early Termination Date, (a) the party
requesting 

 

II-1

 

termination of
the Terminated Loan shall pay to the other party a Breakage Fee computed in
accordance with Section 6 of this Annex with respect to that portion of the
Term Loan Amount for which a Replacement Loan is not entered into and (b) upon
the transfer by Borrower to Lenders of the Loaned Securities subject to the
Terminated Loan, Lenders shall transfer to Borrower Collateral for the
Terminated Loan in accordance with and to the extent required under the
Agreement, provided that no Default has occurred with respect to Borrower.

 

6.                                       For purposes of
this Annex, the term “Breakage Fee” shall mean a fee agreed by Borrower and Lenders
in the Confirmation or otherwise orally or in writing.  In the absence of any such agreement, the
term “Breakage Fee” shall mean, with respect to Loans of Government Securities,
a fee equal to the sum of (a) the cost to the non-terminating party (including
all fees, expenses and commissions) of entering into replacement transactions
and entering into or terminating hedge transactions in connection with or as a
result of the termination of the Terminated Loan, and (b) any other loss,
damage, cost or expense directly arising or resulting from the termination of
the Terminated Loan that is incurred by the non-terminating party (other than
consequential losses or costs for lost profits or lost opportunities), as
determined by the non-terminating party in a commercially reasonable manner,
and (c) any other amounts due and payable by the terminating party to the
non-terminating party under the Agreement on the Early Termination Date.

 

II-2

 

SCHEDULE A

 

NAMES AND ADDRESSES FOR COMMUNICATIONS

 

Kenneth T Hern

c/o Nova Biosource Fuels, Inc.

363 Sam Houston Parkway East

Suite 630

Houston, TX 77060

 

 

J.D. McGraw

c/o Nova Biosource Fuels, Inc.

363 Sam Houston Parkway East

Suite 630

Houston, TX 77060

 

 

Jefferies
& Company, Inc.

520 Madison Ave. 

New York, New York 10022

Attention:  General Counsel

 

A-1

 

SCHEDULE B

 

SUPPLEMENTAL
PROVISIONS

 

A.            IDENTIFICATION AND AMOUNT OF LOANED
SECURITIES:

 

Issuer: Nova Biosource Fuels, Inc.

 

Amount: Up to 8,000,000 shares of common
stock of the Issuer

 

B.            COLLATERAL:

 

Cash in an amount equal to the daily Market
Value of the Loaned Securities

 

C.            FEES:

 

Loan Fee:                            [•]%

 

Cash
Collateral Fee:            [•]%

 

At all times, the net of the two fees should
result in a net benefit of 25 basis points to be retained by Lenders.

 

B-1

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