Exhibit 10.5

 
Samuel S. Duffey, Esq.
CEO and President
Biovest International Inc.
324 South Hyde Park Avenue, Suite 350
Tampa, FL 33606
[image110_5.jpg]

 

April 17, 2013              

Project 363

Dear Mr. Duffey,

Pursuant to our recent discussions, you have requested Ferghana Securities, Inc.
(“FSI”) and/or its affiliates, including its parent Ferghana Partners Inc.
(“FPI”) (collectively referred to as “FERGHANA”), to submit to Biovest
International Inc. (referred to herein as “BIOVEST” or the “Company” according
to context) the details under which FERGHANA would represent BIOVEST in a
discrete liquidation sale transaction to be conducted under the auspices of the
Bankruptcy Court in the Company’s pending Chapter 11 Reorganization proceedings
(referred to herein as “Project 363”).  For purposes of clarity, entry into the
relationship proposed herein or Project 363 does not alter, amend or impact the
valid and extant Engagement Agreement between FERGHANA and the Company dated
April 11, 2012 (the “2012 Agreement”) which shall continue until terminated
under its terms. This Engagement Agreement and Project 363 are discrete/separate
and are not being conducted under, nor controlled by, the 2012 Agreement.

I. ENGAGEMENT

Under this Engagement Agreement with respect to Project 363, FERGHANA will
provide assistance, advice, and financial advisory services with regard to a
specific liquidation sale transaction to be conducted in accordance with the
Company’s pending Chapter 11 Reorganization Proceeding (the “Liquidation Sale
Transaction”), including:

1)
Identifying potential purchasing entities [biopharmaceutical companies] for the
Liquidation Sale Transaction that meet qualification criteria defined in the Bid
Procedures Order (the “Court Order”) entered by the U.S. Bankruptcy Court for
the Middle District of Florida, Tampa Division (the “Court”) in connection with
a matter captioned “In re Biovest International, Inc.” bearing Case No.
8:13-bk-02892-KRM (the “Chapter 11 Case”).

 
2)
Advising BIOVEST as to implementation of the transactional procedures to be
employed in accordance with the Court Order within the timetable specified
therein;

 
 
 

--------------------------------------------------------------------------------

 
Page 2 of 4

April 17, 2013
[image210_5.jpg]

 
3)
Preparing marketing materials containing scientific, technical, commercial,
operating and financial information on the Liquidation Sale Transaction and on
BIOVEST for use with counterparties [a “Project 363 Counterparty”];

 
4)
Qualifying the level of interest and the financial resources of potential
Project 363 Counterparties and thereafter providing information describing the
Liquidation Sale Transaction and on BIOVEST;

 
5)
Providing and participating in, confidential presentation(s) to be made to a
potential Project 363 Counterparty concerning the Liquidation Sale Transaction
and BIOVEST;

 
6)
Delivering confidential information to each Project 363 Counterparty that
executes a Confidentiality Agreement in the format designated by  BIOVEST;

 
7)
Assisting and participating in any due diligence exercise that may be necessary
for a potential Project 363 Counterparty to conduct;

 
8)
Providing all necessary information to each Project 363 Counterparty to assist
any such Project 363 Counterparty in the process of the preparation of bids in
accordance with the Court Order;

 
9)
Assisting, as necessary, in the preparation of contracts, documents, approvals
and related matters necessary to consummate the Liquidation Sale Transaction.

II.           GENERAL TERMS

FERGHANA will act for BIOVEST from the date of this Letter Agreement for an
initial period ending on the last day of the Project 363 process, as established
from time to time by the Court within the Chapter 11 Case.

BIOVEST confirms that it will rely on, and directly pay, its selected lawyers,
accountants, consultants, stockbrokers, proxy solicitation firms and other
similar expert advisors.

III.           COMPENSATION

A. RETAINER FEE

A retainer fee shall be payable to FERGHANA by BIOVEST as follows:

Upon the execution of this Letter Agreement, BIOVEST shall make a retainer
payment of $25,000 to FERGHANA; and on May 15, 2013 BIOVEST shall make an
additional retainer payment of $25,000 to FERGHANA.  The payments specified
herein shall be the only compensation paid by BIOVEST to FERGHANA in connection
with this Project 363 engagement other than the Success Fee set forth below.
 
B. SUCCESS FEE

For any Liquidation Sale Transaction completed according to the terms of the
Court Order entered in the Chapter 11 Case, a cash success fee will be payable
by BIOVEST to FERGHANA as follows:
 
 
 

--------------------------------------------------------------------------------

 
Page 3 of 4

April 17, 2013
[image210_5.jpg]

 
(i)  in the amount of 2.0% (two percent) on the first US $125 million of the
Total M&A Consideration paid (defined below),
(ii) 4.0% (four percent) on the next US $100 million Total M&A Consideration,
and
(iii) 6.0% (six percent) on all amounts above US $200 million Total M&A
Consideration.

FERGHANA will be entitled to the success fees described below if, and ONLY if, a
successful Liquidation Sale Transaction is approved by the Court and consummated
with one or more Project 363 Counterparties in accordance with the Court Order.

 
The term “Total Liquidation Sale Consideration” will mean an amount equal to the
total cash paid at closing plus the fair market value of any equity or debt
securities or other consideration transferred to BIOVEST or to its
shareholder(s), plus any long-term debt or other such obligations of BIOVEST, or
its shareholders, as the case may be, explicitly assumed or refinanced by a
Project 363 Counterparty in connection with each such Liquidation Sale
Transaction and treated as part of the consideration thereof.  Success fees will
be paid to Ferghana based on future contingent consideration only if and when
paid to BIOVEST in a “structured Liquidation Sale transaction”.

For clarification, any purchase or Plan of Reorganization sponsored by the
existing Secured Creditors of the Company will be excluded from the Success Fee.

 
C. EXPENSES

FERGHANA will be reimbursed for reasonable out of pocket expenses provided that
any single item of expense in excess of $2,000 must be approved in writing by
the Company and/or the Secured Creditors [as defined in the Reorganization
proceeding].

 
III. TAIL

FERGHANA shall have no “tail” rights or other entitlement to compensation or
fees arising from the Liquidation Sale Transaction or under this Engagement
Agreement for any transaction subsequent to the Liquidation Sale Transaction
other than compensation for future contingent consideration in a “structured M&A
transaction”. For clarification, Project 363 is a discrete Liquidation Sale
Transaction being conducted in connection with the Company’s Reorganization
proceeding. This provision shall not limit or otherwise alter FERGHANA’s rights,
including tail rights, that have vested under the 2012 Agreement provided and to
the extent that such rights including tail rights do not arise from or relate to
the Liquidation Sale Transaction and/or this engagement Agreement.
 
 
 

--------------------------------------------------------------------------------

 
Page 4 of 4

April 17, 2013
[image210_5.jpg]

 
 
IV. INDEMNITY

 
BIOVEST agrees that it will indemnify and hold harmless FERGHANA, its directors,
employees, agents and controlling persons (each being an "Indemnified Party")
from and against any and all losses, claims, damages, liabilities and expenses,
joint or several (including all reasonable fees of counsel and other expenses
incurred by any Indemnified Party in connection with the preparation for, or
defence of, any claim, action or proceeding, whether or not resulting in any
liability), to which such Indemnified Party may become subject under any
applicable American (Federal or State) or European (national or supranational)
law, or otherwise, caused by or arising out of FERGHANA's acting for BIOVEST
pursuant to this Letter Agreement, except that BIOVEST will not be liable
hereunder to the extent that any loss, claim, damage, liability or expense is
found to have resulted primarily from FERGHANA's gross negligence or bad faith
or failure to follow the written instructions of BIOVEST.

FERGHANA shall promptly advise BIOVEST in the event of any claim that is lodged
against FERGHANA and, in such event, shall delegate the control of claims
handling and of the litigation process to BIOVEST. None of the foregoing shall
exclude or restrict any duty of care that FERGHANA may owe to BIOVEST including
those under the Rules of the NASD/FINRA.

The indemnity and Success Fee provisions mentioned above shall remain operative
and in full force and effect regardless of any termination of this Letter
Agreement
 
V           GOVERNING LAW AND SUBMISSION TO JURISDICTION

This Letter Agreement sets out the entire agreement and understanding between
BIOVEST and FERGHANA and shall be governed by and construed in accordance with
Florida law; and BIOVEST and FERGHANA hereby irrevocably submit to the exclusive
jurisdiction of the Florida Courts, the venue being Tampa.
 
We look forward to working with you and your colleagues at BIOVEST on this
challenging and promising assignment.
 
 
Yours sincerely,
 
 
 
William J. Kridel Jr
Managing Director
Biovest International Inc.
Agreed and Accepted:
 
 
By: /s/ David Moser
 
Date:  April 17, 2013
 
Title: Secretary
 

 
 
 
 

--------------------------------------------------------------------------------