Investment Agreement

Exhibit 10.4


INVESTMENT AGREEMENT

BETWEEN


BIOVEST INTERNATIONAL, INC.


and


ACCENTIA, INC.


4/9/03

INVESTMENT AGREEMENT


THIS INVESTMENT AGREEMENT (the " Agreement" ) is made as of April 10, 2003, by and among Biovest International, Inc., a Delaware corporation (" Biovest" ) and Accentia, Inc., a Florida corporation (" Accentia" )

RECITALS:

1. The Board of Directors of Biovest has approved and deemed it fair, advisable and in the best interests of the Biovest stockholders (the " Biovest Stockholders" ) to adopt and approve this Agreement and the transactions contemplated hereby, including the issuance of capital stock contemplated by Section 1.01 below (collectively, the " Transactions" ).

2. The Board of Directors of Accentia has approved and deemed it fair, advisable and in the best interest of the Accentia shareholders (the " Accentia Stockholders" ) to adopt and approve this Agreement and the Transactions contemplated hereby.


3. The parties wish to enter into this Agreement as the definitive agreement and understanding between the parties to set forth the terms and conditions of Accentia' s investment in Biovest.


NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained herein, the parties hereto agree as follows:

ARTICLE I.

The Transaction


1. 1.01 Purchase of Shares . Biovest hereby agrees to issue to Accentia at Closing, as defined, approximately 40,380,304 (as adjusted to represent 81% of the outstanding capital stock immediately following the Closing) shares of common stock, $.01 par value, representing 81% of the shares of Biovest common stock which will be outstanding immediately following such issuance for the aggregate purchase price of $20,000,000. (the " Purchase Price" ) consisting of $5,000,000 in cash to be paid at the last to occur of Closing or sixty days following the execution of this Agreement and a non-interest bearing note for $15,000,000, attached as Schedule 1.01, with the following annual principal payments: $2,500,000 on the first anniversary of Closing, $2,500,000 on the second anniversary of Closing, $5,000,000 on the third anniversary of Closing and $5,000,000 on the fourth anniversary of Closing. Within five business days following execution of this Agreement, Accentia will advance $530,000 to Biovest pursuant to the Promissory Note and Security Agreement attached as Exhibit 1.01(a) (the " Pre-closing Advance" ). The Pre-closing Advance shall be used by Biovest only to pay the NCI. At the closing of this Agreement, the Pre-closing Advance shall be deemed part of the Purchase Price due in cash at closing. Biovest shall make any required disclosure to NIC regarding the Pre-closing Advance, its use of the Pre-closing Advance to pay NIC, and this Agreement. The parties agree that the cash portion of the purchase price shall be paid (and deemed received by Biovest) to the extent Accentia makes payments as set forth on Schedule 1.01 directly to the payees as set forth on such Schedule, on the Closing Date as defined below (" Purchase Price" ). The Purchase Price due from Accentia at Closing shall be automatically reduced by the amount of any payables, liabilities or other obligations of Biovest, not fully disclosed on schedules thereto. At the Closing, all working capital borrowed by Biovest after December 1, 2002, to the extent listed


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on Schedule 1.01(c), shall be repaid with interest out of the Purchase Price. At the Closing, all convertible notes shall remain outstanding under their current terms and conditions. The convertible notes shall be accorded " secured" debt status in accordance with the Security Agreement attached as Exhibit l.0l(b), with such security status being subordinated to all outstanding " secured" debt, if any, of the Company and by secured debt borrowed by Biovest after the Closing up to a maximum amount of $5,000,000. Further, the holders of the convertible notes shall be given the opportunity to extend the maturity of their notes to the third anniversary of the Closing under the following terms:

(a) All principal and interest shall be due in one installment on the third anniversary of the Closing;

(b) Interest shall be 7% per annum paid with principal; and

(c) All principal and accrued interest may be converted into equity of either Accentia or Biovest as follows: (i) all principal and accrued interest may be converted into that number of shares of common stock of Accentia equal to the principal and interest being converted based upon the following Accentia Common Stock value: (a) if Accentia' s shares are publicly traded, the value of a share of Accentia Common Stock shall be an amount equal to the IPO offering price, before discount or commission, as stated in the final Prospectus for Accentia Common Stock or in the alternative (b) if Accentia' s Common Stock is not publicly trading, the value of a share of Accentia Common Stock shall be determined by appraisal by an independent nationally recognized valuation firm selected by the Board of Directors of Accentia. Such appraisal determination shall be set forth in reasonable detail in a written notice to Biovest and, absent manifest error or fraud, shall be binding on the parties; provided, however, that Biovest through its Board of Directors shall have the right to object to such determination by providing written notice (the " Objection Notice" ) to Accentia within five (5) business days of Biovest' s receipt of such written notice of such determination. Provided Biovest delivers the Objection Notice within such five (5) business day period, then, within a further period of ten (10) business days (the " Settlement Period" ), the parties and, if desired, their accountants will attempt to resolve in good faith any disputed items and reach a written agreement with respect thereto. Failing such resolution, the unresolved disputed items will be referred for final binding resolution to an independent nationally recognized firm of certified public accountants (the " Sole Arbiter" ) mutually acceptable to Accentia, on the one hand, and Biovest through its Board of Directors, on the other hand. In the event that Accentia and Biovest are unable to select the Sole Arbiter within five (5) business days following the end of the Settlement Period, then each of Accentia and Biovest shall have an additional five (5) business days to select (and provide written notice of such selection to the other) an independent nationally recognized firm of certified public accountants. Each such firm shall be referred to, respectively, as the " First Arbiter" (selected by Accentia) and the " Second Arbiter" (selected by Biovest). Within ten (10) business days following the selection of the First Arbiter and the Second Arbiter, the First Arbiter and the Second Arbiter shall select (and provide written notice to Accentia and Biovest of such selection) a third independent nationally recognized firm of certified public accountants (the " Third Arbiter" ). For purposes of this Agreement, the " Arbiter" shall mean (A) the Sole Arbiter or, .(B) in the case that the Company and Biovest cannot agree upon the Sole Arbiter, the First Arbiter, Second Arbiter and Third Arbiter collectively; provided that if either the Company or Biovest fails to select the First Arbiter or the Second Arbiter, respectively, then the Sole Arbiter (and thus the " Arbiter" ) shall be deemed to be the First Arbiter in the case where Biovest failed to make


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the selection and the Second Arbiter in the case where the Company failed to make the selection. In the case where the Arbiter consists of a First Arbiter, Second Arbiter and Third Arbiter, the decision of a majority of the First Arbiter, Second Arbiter and Third Arbiter shall constitute the decision of the Arbiter hereunder. The fees and expenses of the Arbiter shall be borne by the non- prevailing party. In making such determination (the " Arbiter' s Determination" ), the Arbiter shall determine only those items in dispute and may not assign a value to any disputed item greater than the greatest value for such sum claimed by either party or less than the lowest value for such item claimed by either party. The Arbiter' s Determination shall be (1) in writing, (2) furnished to Accentia and Biovest as soon as practicable after the items in dispute have been referred to the Arbiter (but in no event later than ten (10) business days after such referral), (3) made in accordance with GAAP consistently applied, and (4) non-appealable; or in the alternative; (ii) all principal and accrued interest of the convertible note may be converted into common stock of Biovest at $0.50 per share.

1.02 Common Stock . The shares of Biovest capital stock to be issued to Accentia hereunder shall be common stock, par value $.01 per share (" Biovest Common Stock" ).


1.03 Letter of Investment Intent . At closing, Accentia shall execute and deliver to Biovest, a Letter of Investment Intent in form acceptable to Biovest confirming Accentia' s intent to hold the shares of Biovest Common Stock for investment and not for resale and confirming Accentia' s covenant set forth in Section 5.02.


1.04 Limitation on Sale . Neither the CRADA nor the rights to the Non-Hodgkin Lymphoma Therapeutic Cancer Vaccine shall be sold by Biovest except in transactions, in which the after tax net proceeds of sale are distributed to the Biovest shareholders with holders of Biovest shares outstanding immediately before Closing receiving the same per share distribution as the common shares of Biovest held by Accentia. Except as provided herein, this Agreement places no limitation of the sale of Biovest assets other than the CRADA and the rights to the Non-Hodgkin Lymphoma Therapeutic Cancer Vaccine owned by Biovest at Closing.


1.05 Commencement of Public Trading . Within twelve months following Closing, Biovest shall file all necessary documents and take all necessary actions required to permit the Free Trading Shares of Biovest common stock to trade publicly (the " Commencement of Public Trading" ). The Board of Directors of Biovest shall have broad discretion in selecting how to comply with the requirement of this Section. In the event that Biovest has not completed the process required to permit the Free Trading Shares of Biovest common stock to trade publicly, Biovest shall, following a ninety day written notice and right to cure, make the following tender offers to purchase the shares of Biovest outstanding immediately before Closing: (i) 980,000 shares at $2.00 per share at the first anniversary of the Closing, (ii) 1,960,000 shares at $2.00 per share at the second anniversary of the Closing, (iii) 2,940,000 shares at $2.00 per share at the third anniversary of the Closing and (iv) 3,920,000 shares at $2.00 per share at the fourth anniversary of the Closing. The Biovest Board of Directors shall exercise good faith to make the tender offer(s) based on the number of the Biovest shares held by each immediately before the Closing or his assignee. To the extent that a registration statement is required under state or federal securities laws before the tender offer(s) can be made or shares purchased, Biovest will exercise good faith to file and effect all required filings and obtain all required governmental approvals. Notwithstanding the forgoing, no tender offer shall be required to be made by Biovest during any annual period provided the process required to permit the free trading shares of Biovest common stock to trade publicly has been completed during that annual period.

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1.06 Outstanding Legal Fees . At the Closing, Accentia will, in the exercise of its discretion, settle all accrued legal accounts payable.


ARTICLE II

Definitions

For all purposes of this Agreement, the following terms shall have the following respective meanings:

2.01 Stock of Biovest . The term " Stock of Biovest" shall mean and refer to the Capital Stock of Biovest regardless of class or series.


2.02 CRADA . The term " CRADA" shall mean the Cooperative Research and Development Agreement for Non-Hodgkin Lymphoma Therapeutic Cancer Vaccine between Biovest and the National Cancer Institute.


2.03 Equity Security . The term " Equity Security" shall mean and refer to capital stock and other securities of a type generally regarded as Equity Securities and options, warrants, rights or other securities convertible into, exchangeable for or entitling the holder thereof, under any circumstances, to purchase or subscribe for any Equity Security.


2.04 Debt . The term " Debt" shall mean and refer to all obligations including, but not limited to, those under written and oral agreements, accounts payable, accruals, notes, bonds, debentures, guarantees and all other types of obligations to pay whether the amount of the obligation is fixed or undetermined or absolute or contingent.

2.05 FDA . The term " FDA" shall mean the U.S. Food and Drug Administration.


2.06 FDA Approval . The term FDA Approval shall mean unconditional licensure and approval of the Biovest non-Hodgkin lymphoma therapeutic cancer vaccine officially granted by the FDA to Biovest.


2.07 Free Trading Shares . Shares of Biovest common stock which are not subject to any restriction on sale or transfer under the Securities Act of 1933, as amended, any applicable state securities law or any contract.


2.08 Intellectual Property . The term " Intellectual Property" shall mean and refer to all applications for patents, trademarks and trade names, all issued patents, trademark registrations and trade name registrations, and all material proprietary trade secrets relating to information, processes or other matters that are not in the public domain.


2.09 Mortgage Indebtedness . The term " Mortgage Indebtedness" shall mean and refer to all mortgages (real, personal and mixed), vendor' s liens, deeds of trust, conditional bills of sale, security interests, pledges and other types of liens generally regarded as mortgages affecting, relating to, or pertaining to real or personal property, whether or not personal liability for the payment or discharge thereof exists.

2.10 Non-Hodgkin Lymphoma Therapeutic Cancer Vaccine . The term " Non-Hodgkin Lymphoma Therapeutic Cancer Vaccine" shall mean the personalized vaccine as described in the FDA trials being conducted by Biovest and in the CRADA.


2.11 Preferred Stock . The term " Preferred Stock" shall mean and refer to the 10,000,000 shares of Preferred Stock of Biovest authorized in the Articles of Incorporation of Biovest.


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2.12 Material Contracts . The term " Material Contracts" shall mean and refer to every contract or arrangement to which the specified person or entity is a party, or by which it is bound, which contract satisfies one of the following requirements: (i) contract for employment which is not terminable at will; (ii) labor union or other collective bargaining agreement; (iii) bonuses, deferred compensation, pension, profit sharing, retirement, insurance or other fringe benefit, plan or arrangement; (iv) franchise, distributorship or other similar contract which will extend beyond the closing; (v) contracts or commitments of any sort or nature relating to the financing or refinancing of Mortgage Indebtedness; (vi) bonds, bills of sale, bank loans, construction loans, liens, security interest of credit agreements not otherwise specified or excluded from the above; and (vii) any contract or commitment involving more than $10,000 in the aggregate or which can not be terminated upon thirty days or less notice.


2.13 Closing . The term " Closing" shall mean and refer to the closing of the transaction contemplated by this Agreement.


2.14 Closing Date . The term " Closing Date" shall mean and refer to the date upon which the closing of this transaction occurs as set forth in Section 6.01.

ARTICLE III

Representations and Warranties of Biovest


Biovest, intending for ACCENTIA and its officers and directors to rely thereon, represents, warrants and agrees as follows:


3.01 Corporate Standing . Biovest is a duly organized, validly existing corporation in good standing under the laws of the State of Delaware. Biovest has full corporate power and authority to own its assets and operate its business in the manner that such business is presently being conducted. Biovest is qualified to transact business in every state where the activities of Biovest require that it qualify to transact business. Except as set forth on Schedule 3.01 attached hereto, Biovest has all governmental permits, licenses and other authorizations necessary to conduct its business as presently being conducted, and none of the transactions contemplated by this Agreement will terminate or violate any such permits, licenses or authorizations.


3.02 Outstanding Equity Securities . Schedule 3.02 attached hereto and incorporated herein by reference lists: (i) each authorized class of Equity Securities, the number of shares, and the holders of all outstanding shares of Biovest and (ii) each option, warrant or right or other obligation of any nature to issue shares of Biovest Capital Stock. There will be no shares of Biovest Preferred Stock issued or outstanding at the Closing. There will be no option, warrant, right or any other obligation of any nature to issue shares of Biovest Capital Stock not fully disclosed on Schedule 3.02. All shares of outstanding Capital Stock reflected as issued on Schedule 3.02 are duly and validly issued and are fully paid and non-assessable. During the period that any options warrants or convertible notes outstanding at the Closing remain outstanding (the " First Right of Refusal Period" ), Accentia shall have a first right of refusal to maintain ownership of 81% of the then outstanding capital stock of Biovest (the " Accentia First Right of Refusal" ). During the First Right of Refusal Period, should Biovest for any reason issue any shares of capital stock, Accentia shall have the right to purchase that number of shares of


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Biovest common stock required to maintain Accentia' s ownership at 81% of the then outstanding Biovest capital stock. The aggregate purchase price to be paid by Accentia for the issuance of Accentia First Right of Refusal shares shall be an amount equal to the aggregate price paid by the third party for the Biovest shares that triggered Accentia' s First Right of Refusal (i.e. the Accentia First Right of Refusal purchase price for all shares required to maintain Accentia' s ownership at 81% of the then outstanding capital stock will equal the aggregate price paid by the third party for all of the shares which triggered the first right of refusal as opposed to matching the per share, price paid by the third party. Accordingly, the Accentia First Right of Refusal per share purchase price may be significantly lower that the per share price paid by the third party). The Accentia First Right of Refusal purchase price may, in the discretion of Accentia, be paid by a five year promissory note bearing the lowest rate of interest permitted by applicable corporate law. The First Right of Refusal applies to all shares issued by Biovest during the First Right of Refusal Period including, but not limited to, shares issued in new financings, acquisitions, option and warrant exercises and conversion of convertible notes.

3.03 Power to Agree . The execution and delivery of this Agreement, the consummation of the Transactions and compliance with the terms of this Agreement will not result in a breach of any of the terms or provisions of, or constitute a default under the Certificate of Incorporation or Bylaws of Biovest, any indenture or other agreement or instrument to which Biovest is a party or by which it or its assets are bound; or any applicable regulation, judgment, order or decree of any government instrumentality or court, domestic or foreign, having jurisdiction over Biovest, its securities or its properties. The execution of this Agreement, the transactions contemplated in this Agreement, including, but not limited to, the issuance of Capital Stock hereunder and the Closing of this Agreement have been fully authorized by Biovest and no further or additional action, approval or consent by Biovest or its directors or shareholders is required to make this Agreement a legal and enforceable obligation of Biovest. Except as set forth on Schedule 3.03 attached hereto, no consent, approval, exemption, audit, waiver, order or authorization of, or registration, qualification, designation, declaration, notice or filing with, any governmental authority or any other person is required for Biovest' s execution, and delivery of this Agreement, the performance of ' its obligations hereunder, or Biovest' s execution or closing of this Agreement . Except as set forth on Schedule 3.03, there are no existing agreements, options, commitments or rights with, of or to Biovest to acquire any of Biovest' s assets, properties or rights or any interest therein, except for contracts for the sale of inventory entered into by Biovest in the ordinary course of business and except for the stock options held by directors and employees of Biovest reflected in Schedule 3.02 which have been either approved by Accentia or terminated immediately before the Closing.


3.04 Outstanding Debts of Biovest . Attached as Schedule 3.04 is a list of each Debt in excess of $1,000, which is outstanding and due by Biovest as of the date reflected on Schedule 3.04. Schedule 3.04 reflects the name of each debtor and the principal amount due and payable. At the Closing, Biovest, with respect to such Debts will have no outstanding unpaid debts, or obligations including accruals except those described on Schedule 3.04. Except as otherwise agreed, Schedule 3.04 shall reflect that the following debts and obligations shall be fully paid or otherwise eliminated concurrently with or as soon as is practicable after the Closing out of the cash provided by the Purchase Price: (i) certain notes listed on Schedule 3.04 payable including but not limited to convertible notes, (ii) all accrued liabilities, including but not limited to accrued compensation and expenses to employees, and (iii) all payables which arose in the


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ordinary course of business and which are due and have been due for sixty days or more. Schedule 1.02 specifies the debts, accruals and obligations to be paid at closing from the Purchase Price.


3.05 Outstanding Material Contracts . Biovest is subject to no Material Contracts which shall survive the Closing, except those fully disclosed on Schedule 3.05. No Material Contract listed on Schedule 3.05 is in default on the part of Biovest or, to the knowledge of Biovest, on the part of any other party thereto except as set forth in Schedule 3.05. Except as set forth in Schedule 3.05, Biovest is in full compliance with all material terms of each of such Material Contract. Except as set forth in Schedule 3.05, Biovest has received no notice of default, deficiency or termination under any Material Contract listed on Schedule 3.05 and Biovest knows of no fact which, but for the passage of time, is reasonably likely to constitute a breach or default under any such contract.


3.06 Governmental Filings and Reports . Except as otherwise set forth on Schedule 3.06, Biovest has timely filed all reports and other filings required to be made by Biovest with any governmental department, commission, agency or other governmental body including, but not limited to, the U.S. Securities and Exchange Commission (the " SEC" ), the National Institutes of Health (the " NIH" ) and The Cooperative Research and Development Agency (the " CRADA" ) to which Biovest is subject (the " Governmental Authorities" ). Except as otherwise provided in Schedule 3.06, all reports and filings previously made by Biovest with any Governmental Authority are accurate and complete in all material respects. Biovest is not in default (and but for the passage of time would not be in default) with any requirement, condition or obligation of any Governmental Authority.

3.07 Financial Condition .

3.07.1 Attached hereto as Schedule 3.07 are the audited Financial Statements as of and for the years ended September 31, 2000, September 31, 2001 and September 31, 2002 (the " Biovest Financial Statements" ). The Biovest Financial Statements present fairly Biovest' s financial position as of the respective dates thereof and its results of operations for the respective fiscal periods then ended, in each case in accordance with Biovest' s past practice and in conformity with GAAP consistently applied during the periods involved.

3.07.2 Biovest has made and kept books, records and accounts in reasonable detail, which, to Biovest' s knowledge, accurately and fairly reflect in all material respects its activities and transactions and the purchase and disposition of any of its assets. Except as otherwise disclosed in this Agreement and in the schedule 3.07, Biovest has not engaged in any material transaction that is not reflected in such books, records and accounts.

3.07.3 No unrecorded funds or assets of Biovest have been established for any purpose; no accumulation or use of funds of Biovest has been made without being properly accounted for in the books and records of Biovest; all payments by or on behalf of Biovest have been duly and properly recorded and accounted for in Biovest' s books and records; no false or artificial entry has been made in the books and records of Biovest for any reason; no payment has been made by or on behalf of Biovest with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and Biovest has not made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic or foreign, or any contribution, gift, bribe, rebate, payoff, influence payment or kickback, whether in cash, property or services, to any individual, corporation, partnership or other entity, to secure business or to pay for business secured.


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3.07.4 The Financial Statements attached as Schedule 3.07 have been accepted by the Biovest Board of Directors and all recommended or advised changes, additions or deletions of the Biovest independent accountants have been made in the Financial Statements except as disclosed in Schedule 3.07.4.

3.07.5 The books, records and accounts of Biovest accurately and fairly reflect in all material respects the transactions and the assets and liabilities of Biovest. Biovest has not engaged in any transaction with respect to the Biovest business, maintained any bank account for the Biovest business, or used any of the funds of Biovest in the conduct of the Biovest business, except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of Biovest.

3.08 Accounts Receivable . Schedule 3.08 lists all Accounts Receivable. Except as disclosed in Schedule 3.08 all accounts receivable of Biovest (the " Accounts Receivable" ): (a) arose from bona fide transactions in the ordinary course of business and (b) are considered collectible, net of the reserves for doubtful and uncollectible amounts and for returns and allowances shown in the Biovest Financial Statements, within one hundred eighty (180) days after the Closing Date in the ordinary course of business.

3.09 Accounts Payable . Schedule 3.09 lists all accounts payable. Except as listed in Schedule 3.09, at Closing Biovest shall have no accounts payable except those which were incurred in the ordinary course of business and have not been due for more than 30 days. Immediately before the Closing Date, Biovest shall have no obligation to pay accrued compensation or other accrued obligations to any employee, director or stockholder and all compensation expenses including those relating to compensation, vacation, healthcare and mandatory contributions, and retirement plans shall be paid current through the Closing.


3.10 Undisclosed Liabilities . Biovest does not have any material liabilities or obligations, whether accrued, absolute, contingent or otherwise, due or to become due, or direct or indirect, arising out of any action or inaction, or with respect to or based upon transactions or events occurring, or any state of facts or condition existing, in connection with Biovest' s conduct of its business, and, to Biovest' s knowledge, there is no basis for any claim against Biovest for any such material liability or obligation, except: (i) to the extent specifically described in this Agreement or disclosed in the schedules hereto, (ii) to the extent fully reflected or reserved against in the Biovest Financial Statements, (iii) for liabilities and obligations arising or incurred in the ordinary course of business under ...