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Forbearance Agreement

This is an actual contract between Accentia Biopharmaceuticals and Mckesson.
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Exhibit 10.40


FORBEARANCE AGREEMENT


THIS FORBEARANCE AGREEMENT (" Agreement" ), dated as of December 9, 2003, is entered into by and among, McKESSON CORPORATION, a Delaware corporation (" McKesson" ), ACCENTIA, INC., a Florida corporation (" Accentia" ), and Accent Rx, Inc., a Florida corporation (" Accent Rx" ), with reference to the following facts and circumstances:


A. Accentia, Inc. is a domestic corporation duly formed under the laws of the state of Florida, which currently owns 100% of the stock in Accent Rx, a Florida corporation (" Accent Rx" ). The majority interest in Accentia is owned by Hopkins Capital Group, LLC (" HCG" ) and MOAB Investments, LP (" MOAB" ). The principals of HCG and MOAB are Francis E. O' Donnell, Jr., M.D. and Dennis L. Ryll, M.D.

B. On or about October 11, 2002, Accent Rx acquired the assets and liabilities of American Prescription Providers, Inc., a Delaware corporation (" APP" ), which was formerly a customer of, and borrower from, McKesson, pursuant to a " Purchase Agreement" between Accent Rx and APP. In connection with the Purchase Agreement, Accent Rx, as " Debtor," executed and delivered to McKesson that certain " Assumption of Debt and Security Agreement" dated as of October 29, 2002 (the " Accent Rx Assumption Agreement" ) pursuant to which Accent Rx assumed all obligations owing by APP to McKesson. Among the liabilities of APP assumed by Accent Rx under the Accent Rx Assumption Agreement were all obligations owed by APP to McKesson pursuant to that certain Credit Agreement executed on or about November 30, 1998 by APP and McKesson (the " Credit Agreement" ), and pursuant to each of the other " Loan Documents" (as defined in the Credit Agreement) executed pursuant thereto or concurrently therewith, including a " McKesson Health Systems Agreement to Serve American Prescription Providers, Inc. as Prime Vendor of Pharmaceuticals" dated as of November 30, 1998 (the " Supply Agreement" also sometimes referred to in certain of the Loan Documents as a " Wholesale Supply Agreement" ). The Credit Agreement, Loan Documents and Supply Agreement were duly modified and amended from time to time from and after November 30, 1998, including by a " Third Amendment to Credit Agreement" dated as of May 2, 2000.


C. Among the " Loan Documents" executed in connection with the Credit Agreement (as amended from time to time) is a third party pledge agreement dated as of November 19, 1999, and executed by Regent Court Technologies (a limited liability company of which Francis E. O' Donnell, Jr., M.D. is the managing member) pledging a minimum of 1,000,000 shares of stock in Star Scientific, lnc. (or such greater number of shares as may be necessary to ensure that the value of the pledged shares is at all times at least equal to $2,250,000). The security interest in the collateral described in said third party pledge agreement was granted to McKesson for the purpose of securing all obligations of Regent Court Technologies (hereafter, " RCT" ), Francis E. O' Donnell, Jr., M.D., and/or APP (or its successor, Accent Rx) to McKesson. The third party pledge agreement signed by RCT remains in full force and effect, excepting that references therein to APP (by any name or designation, whether " borrower" or " debtor" , etc.) currently refers to Accent Rx as the successor of APP.


D. The indebtedness of Accent Rx evidenced by the Credit Agreement and the other Loan Documents has matured and all obligations owing thereunder and under the Supply Agreement are now due and payable. The indebtedness and obligations assumed or incurred by Accent Rx under the Accent Rx Assumption Agreement is referred to herein as the " Assumed Accent Rx Indebtedness."


E. As of November 30, 2003, the components of the Accent Rx Assumed Indebtedness evidenced by the Credit Agreement and other Loan Documents (excluding the Supply Agreement) equaled the following:


DEBT PRINCIPAL
INTEREST
FEES & LATE
CHARGES
TOTAL


1. Revolver $ 2,202,182.36 $ 103,294.93 $ 30,005.05 $ 2,335,482.34

2. Term Loan $ 3,900,000.00 $ 222,587.63 $ 385,217.29 $ 4,507,804.92

TOTAL: $ 6,102,182.36 $ 325,882.56 $ 415,222.79 $ 6,843,287.26


Interest has accrued since November 30, 2003 on the principal amounts of the foregoing obligations at a per diem rate of $791.49, and will continue to do so until paid in full, assuming that the LIBOR rate stays at 1.1694%.


F. The trade debt owing to McKesson by Accent Rx pursuant to the Supply Agreement totaled $4,610,073 as of November 30, 2003 and is currently all due and payable.


G. In mid-2003, Accentia approached McKesson and requested that McKesson loan to Accentia the sum of $2,500,000 with which Accentia would purchase not less than 81% of the " outstanding shares in BioVest International, Inc. (" BioVest" ). McKesson loaned to Accentia $2,500,000.00 (the " Bridge Loan" ), which Bridge Loan is evidenced by a promissory note dated as of June 12, 2003 (the " Bridge Note" ), in order to fund Accentia' s purchase of an 81% stake in BioVest. Concurrently with the execution of the Bridge Note, Accentia and certain of its affiliates executed in favor of McKesson certain security documents (together with the Bridge Note, the " Bridge Loan Documents" ), including a " Third Party Pledge Agreement" executed by Hopkins Capital Group II, LLC (i.e., " HCG II" ) as of June 12, 2003 and a " Stock Pledge Agreement" executed by Accentia as of June 12, 2003. The collateral described in the Bridge Loan Documents is defined as the " Bridge Loan Collateral ." The Bridge Loan matured by its own terms on August 10, 2003 and Accentia has failed to repay the amounts owing to McKesson under the Bridge Note and other Bridge Loan Documents.


H. As of November 30, 2003, the principal owing by Accentia to McKesson in connection with the Bridge Loan was $2,500,000 and accrued and unpaid interest aggregated $51,607.24 for a total of $2,551 ,607.24. Interest has continued to accrue since November 30, 2003 on the unpaid principal of the Bridge Loan at a rate per annum of 10% (based on a 360 day year for actual days elapsed).


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I. Accentia and Accent Rx have asked that McKesson (i) forbear from exercising its creditors' rights and remedies with regard to the Assumed Accent Rx Indebtedness and the Bridge Loan and the collateral therefor, (ii) consent to the sale of the assets of Accent Rx to a third party for net sales proceeds of at least $4,000,000, (iii) release its liens on the assets of Accent Rx notwithstanding that the Assumed Accent Rx Indebtedness will not be paid in full as of the closing of the sale of the Accent Rx assets, and (iv) modify the repayment terms of the Assumed Accent Rx Indebtedness and the Bridge Loan, in exchange for certain consideration, including the assumption by Accentia of all indebtedness owing by Accent Rx to McKesson, including, but not limited to the Assumed Accent Rx Indebtedness. Although its has and had no obligation to do so, McKesson is willing to make certain accommodations to Accentia as expressly set forth herein and in the other documents executed concurrently herewith or pursuant hereto, in each case subject to the satisfaction of various terms and conditions as set forth below.


NOW, THEREFORE, for fair and valuable consideration the receipt and adequacy of which are hereby acknowledged, McKesson, Accentia, and Accent Rx hereby agree as follows:

SECTION 1 Acknowledgement of Accentia and Accent Rx . Accentia and Accent Rx hereby acknowledge and agree and represent and warrant to McKesson that:


a. Incorporation of Recitals . Each of the Recitals set forth above is true and correct, and each is incorporated herein by this reference, excepting only that Accentia and Accent Rx retain the limited ability to disagree with the debt owing as described in Recitals " E" and " F" based solely on mathematical or manifest error, such as the failure of McKesson to apply a payment actually made by Accentia or Accent Rx and received by McKesson in good funds.

b. Additional Payment Obligations . In addition to the amounts set forth in the Recitals, each of Accentia and Accent Rx is obligated to pay all late fees and other charges now due or arising hereafter under the terms of the respective documents which evidence the indebtedness owed by them to McKesson, plus all legal fees and expenses incurred by McKesson as a result of Accentia or Accent Rx' s defaults described herein, including, without limitation, attorneys' fees and costs attributable to in-house counsel.

c. No Defenses, Etc .

i. Accentia has no defenses, counter claims, or rights of off set, in law or in equity, to the full payment and performance of its obligations and indebtedness evidenced by the Bridge Loan Documents, each of which is enforceable in accordance with its express written terms and McKesson has performed all conditions and obligations on its part to be preformed with respect to the Bridge Loan Documents.

ii. Accent Rx has no defenses, counter claims, or rights of off set, in law or in equity, to the full payment and performance of its obligations and indebtedness evidenced by the Accent Rx Assumption Agreement, the Credit Agreement (as amended, including by the Third Amendment to Credit Agreement), the other Loan Documents, and/or the Supply Agreement, each of which is enforceable in accordance with its express written terms and


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McKesson has performed all conditions and obligations on its part to be preformed with respect to such documents and agreements (collectively, the " Accent Rx Debt Documents" ).


d. No Waiver . Accentia is in default of its obligations to McKesson under the Bridge Loan Documents and that Accent Rx is in default of its obligations to McKesson under the Accent Rx Debt Documents and nothing in this Agreement constitutes a waiver of any defaults or defined Events of Default under either the Bridge Loan Documents or the Accent Rx Debt Documents. Consequently (among other things), the interest rate applicable to the indebtedness owing to McKesson is the interest rate applicable after default, if any such default interest rate is specified in the applicable documents.

SECTION 2 Agreements by McKesson . Subject to the satisfaction of each of the conditions precedent set forth in Section 3 below, McKesson agrees to undertake the following:


a. Forbearance Regarding Bridge Loan . To forbear from exercising its creditors' rights and remedies with regard to the Bridge Loan and the Bridge Loan Collateral based on the defaults in the Bridge Loan Documents until the date (the " Forbearance End Date" ) upon which the first of the following occurs: (a) December 31, 2003, (b) the closing of the next round of equity financing by Accentia which is referred to as the " Series E round of financing," and (c) the occurrence of an " Event of Default" as defined herein. On or before the Forbearance End Date, Accentia shall immediately repay in full the Bridge Loan, and all accrued and unpaid " interest and fees thereon and any other amounts owing under any of the Bridge Loan Documents, time being of the essence of such obligation. Should McKesson fail to receive payment in full of all obligations owing under any of the Bridge Loan Documents on or before the Forbearance End Date, McKesson shall be free to exercise any and all of its creditors' rights and remedies with regard to the Bridge Loan and the Bridge Loan Collateral, without further notice to Accentia or to any pledgor of Bridge Loan Collateral. McKesson' s execution of this Agreement is only intended as a temporary and limited forbearance of rights as expressly set forth herein. Accentia is not entitled to (nor is McKesson obligated to provide Accentia with) any further accommodations or additional forbearance periods. (Upon the payment in full of the indebtedness owing under the Bridge Loan Documents, the Bridge Loan Collateral shall secure all other unpaid indebtedness owing by Accentia Inc. to McKesson, whether now existing or hereafter arising, including, without limitation, any and all indebtedness assumed by Accentia, Inc. which was previously owed to McKesson by AccentRx.)


b. Limited Forbearance Regarding Accent Rx Indebtedness . To forbear from exercising its creditors' rights and remedies with regard to the Accent Rx Assumed Indebtedness and the Accent Rx Debt Documents until December 15, 2003, provided that by such date McKesson shall have received from Accentia an " Accentia Assumption Agreement" in substantially the form of Exhibit A attached hereto and duly executed by Accentia, and provided further that all conditions precedent to the obligations of McKesson under th
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