EXHIBIT 10.7

SUBORDINATION AGREEMENT

This Subordination Agreement (this “Agreement”) is entered into as of the 19th
day of September 2008, by and among Accentia Biopharmaceuticals, Inc., a Florida
corporation (the “Subordinated Lender”), and each of the parties which have
executed this Agreement on the signature pages below as senior lenders (each, a
“Senior Lender” and, collectively, the “Senior Lenders”). Unless otherwise
defined herein, capitalized terms used herein shall have the meaning provided
such terms in the Securities Purchase Agreement referred to below.

BACKGROUND

WHEREAS, it is a condition to each Senior Lender’s agreement to continue to make
investments in Biovest International, Inc., a Delaware corporation (the
“Company”) pursuant to, and in accordance with, (i) that certain Securities
Purchase Agreement, dated as of the date hereof (as amended, modified or
supplemented from time to time, the “Purchase Agreement”), among the Company and
the Senior Lenders, and (ii) the Transaction Documents referred to in the
Purchase Agreement, that the Subordinated Lender enter into this Agreement.

WHEREAS, the Subordinated Lender has made or will make loans to the Company.

NOW, THEREFORE, the Subordinated Lender and the Senior Lenders hereby agree as
follows:

TERMS

1. All obligations of the Company and/or any of its Subsidiaries to any Senior
Lender, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent or now or hereafter existing, or due or to become due are
referred to as “Senior Liabilities”. Any and all loans made by the Subordinated
Lender to the Company and/or any of its Subsidiaries, together with all other
obligations (whether monetary or otherwise) of the Company and/or any of its
Subsidiaries to the Subordinated Lender (in each case, including any interest,
fees or penalties related thereto), howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent or now or hereafter existing,
or due or to become due are referred to as “Junior Liabilities”. It is expressly
understood and agreed that the term “Senior Liabilities”, as used in this
Agreement, shall include, without limitation, any and all interest, fees and
penalties accruing on any of the Senior Liabilities after the commencement of
any proceedings referred to in paragraph 4 of this Agreement, notwithstanding
any provision or rule of law which might restrict the rights of any Senior
Lender, as against the Company, its Subsidiaries or anyone else, to collect such
interest, fees or penalties, as the case may be.

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2. Except as expressly otherwise provided in this Agreement or as the Senior
Lenders may otherwise expressly consent in writing, the payment of the Junior
Liabilities shall be postponed and subordinated in right of payment and priority
to the payment in full of all Senior Liabilities. Furthermore, whether directly
or indirectly, no payments or other distributions whatsoever in respect of any
Junior Liabilities shall be made (whether at stated maturity, by acceleration or
otherwise), nor shall any property or assets of the Company or any of its
Subsidiaries be applied to the purchase or other acquisition or retirement of
any Junior Liability until such time as the Senior Liabilities have been
indefeasibly paid in full.

3. The Subordinated Lender hereby subordinates all claims and security interests
it may have against, or with respect to, any of the assets of the Company and/or
any of its Subsidiaries (the “Subordinated Lender Liens”), to the security
interests granted by the Company and/or any of its Subsidiaries to each Senior
Lender in respect of the Senior Liabilities. No Senior Lender shall owe any duty
to the Subordinated Lender as a result of or in connection with any Subordinated
Lender Liens, including, without limitation, any marshalling of assets or
protection of the rights or interests of the Subordinated Lender. The Senior
Lenders shall have the exclusive right to manage, perform and enforce the
underlying terms of the Purchase Agreements, the Transaction Documents and each
other document, instrument and agreement executed from time to time in
connection therewith (collectively, the “Security Agreements”) relating to the
assets of the Company and its Subsidiaries and to exercise and enforce its
rights according to its discretion. The Subordinated Lender waives all rights to
affect the method or challenge the appropriateness of any action taken by any
Senior Lenders in connection with any Senior Lender’s enforcement of its rights
under the Security Agreements. Only the Senior Lenders shall have the right to
restrict, permit, approve or disapprove the sale, transfer or other disposition
of the assets of the Company or any of its Subsidiaries. As between each Senior
Lender and the Subordinated Lender, the terms of this Agreement shall govern
even if all or part of any Senior Lender’s liens are avoided, disallowed, set
aside or otherwise invalidated.

4. In the event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Company and/or any
of its Subsidiaries or to its creditors, as such, or to its property (whether
voluntary or involuntary, partial or complete, and whether in bankruptcy,
insolvency or receivership, or upon an assignment for the benefit of creditors,
or any other marshalling of the assets and liabilities of the Company and/or any
of its Subsidiaries, or any sale of all or substantially all of the assets of
the Company and/or any of its Subsidiaries, or otherwise), the Senior
Liabilities shall first be irrevocably paid in full before the Subordinated
Lender shall be entitled to receive and to retain any payment, distribution,
other rights or benefits in respect of any Junior Liability. In order to enable
each Senior Lender to enforce its rights hereunder in any such action or
proceeding, each Senior Lender is hereby irrevocably authorized and empowered in
its discretion as attorney in fact for the Subordinated Lender to make and
present for and on behalf of the Subordinated Lender such proofs of claims
against the Company and/or its Subsidiaries as the Senior Lenders may deem
expedient or proper and to vote such proofs of claims in any such proceeding and
to receive and collect any and all dividends or other payments or disbursements
made thereon in whatever form the same may be paid or issued and to apply same
on account of any the Senior Liabilities. In the event, prior to indefeasible
payment in full of the Senior Liabilities, the Subordinated Lender shall receive
any payment in respect of the Junior Liabilities and/or in

 

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connection with the enforcement of the Subordinated Lender’s rights and remedies
against the Company and/or any of its Subsidiaries, whether arising in
connection with the Junior Liabilities or otherwise, then the Subordinated
Lender shall forthwith deliver, or cause to be delivered, the same to the Senior
Lenders in precisely the form held by the Subordinated Lender (except for any
necessary endorsement) and until so delivered the same shall be held in trust by
the Subordinated Lender as the property of the Senior Lender.

5. The Subordinated Lender will mark its/his books and records so as to clearly
indicate that its/his respective Junior Liabilities are subordinated in
accordance with the terms of this Agreement. The Subordinated Lender will
execute such further documents or instruments and take such further action as
any Senior Lender may reasonably request from time to time to carry out the
intent of this Agreement.

6. The Subordinated Lender hereby waives all diligence in collection or
protection of or realization upon the Senior Liabilities or any security for the
Senior Liabilities.

7. The Subordinated Lender will not, without the prior written consent of each
of the Senior Lenders: (a) attempt to enforce or collect any Junior Liability or
any rights in respect of any Junior Liability; or (b) commence, or join with any
other creditor in commencing, any bankruptcy, reorganization or insolvency
proceedings with respect to the Company and/or any of its Subsidiaries.

8. Each Senior Lender may, from time to time, at its sole discretion and without
notice to the Subordinated Lender, take any or all of the following actions:
(a) retain or obtain a security interest in any property to secure any of the
Senior Liabilities; (b) retain or obtain the primary or secondary obligation of
any other obligor or obligors with respect to any of the Senior Liabilities;
(c) extend or renew for one or more periods (whether or not longer than the
original period), alter, increase or exchange any of the Senior Liabilities, or
release or compromise any obligation of any nature of any obligor with respect
to any of the Senior Liabilities; and (d) release its security interest in, or
surrender, release or permit any substitution or exchange for, all or any part
of any property securing any of the Senior Liabilities, or extend or renew for
one or more periods (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any obligor with
respect to any such property.

9. The Senior Lenders, may, from time to time, whether before or after any
discontinuance of this Agreement, without notice to the Subordinated Lender,
assign or transfer any or all of the Senior Liabilities or any interest in the
Senior Liabilities; and, notwithstanding any such assignment or transfer or any
subsequent assignment or transfer of the Senior Liabilities, such Senior
Liabilities shall be and remain Senior Liabilities for the purposes of this
Agreement, and every immediate and successive assignee or transferee of any of
the Senior Liabilities or of any interest in the Senior Liabilities shall, to
the extent of the interest of such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent as
if such assignee or transferee were a Senior Lender, as applicable; provided,
however, that, unless the Senior Lenders shall otherwise consent in writing, the
Senior Lenders shall have an unimpaired right, prior and superior to that of any
such assignee or transferee, to enforce this Agreement, for the benefit of the
Senior Lenders, as to those of the Senior Liabilities which the Senior Lenders
have not assigned or transferred.

 

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10. The Senior Lenders shall not be prejudiced in their rights under this
Agreement by any act or failure to act of the Subordinated Lender, or any
noncompliance of the Subordinated Lender with any agreement or obligation,
regardless of any knowledge thereof which any Senior Lender may have or with
which any Senior Lender may be charged; and no action of any Senior Lender
permitted under this Agreement shall in any way affect or impair the rights of
any other Senior Lender and the obligations of the Subordinated Lender under
this Agreement.

11. No delay on the part of any Senior Lender in the exercise of any right or
remedy shall operate as a waiver of such right or remedy, and no single or
partial exercise by the Senior Lenders of any right or remedy shall preclude
other or further exercise of such right or remedy or the exercise of any other
right or remedy; nor shall any modification or waiver of any of the provisions
of this Agreement be binding upon any Senior Lender except as expressly set
forth in a writing duly signed and delivered by each of the Senior Lenders. For
the purposes of this Agreement, Senior Liabilities shall have the meaning set
forth in Section 1 above, notwithstanding any right or power of the Subordinated
Lender or anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
affect or impair the agreements and obligations of the Subordinated Lender under
this Agreement.

12. This Agreement shall continue in full force and effect after the filing of
any petition (“Petition”) by or against the Company and/or any of its
Subsidiaries under the United States Bankruptcy Code (the “Code”) and all
converted or succeeding cases in respect thereof. All references herein to the
Company and/or Subsidiary shall be deemed to apply to the Company and such
Subsidiary as debtor-in-possession and to a trustee for the Company and/or such
Subsidiary. If the Company or any of its Subsidiaries shall become subject to a
proceeding under the Code, and if the Senior Lenders shall desire to permit the
use of cash collateral or to permit or provide post-Petition financing from any
Senior Lender (or an affiliate or a third party satisfactory to the Senior
Lenders) to the Company or any such Subsidiary under the Code, the Subordinated
Lender agrees as follows: (1) adequate notice to the Subordinated Lender shall
be deemed to have been provided for such consent or post-Petition financing if
the Subordinated Lender receives notice thereof three (3) business days (or such
shorter notice as is given to the Senior Lenders) prior to the earlier of
(a) any hearing on a request to approve such post-petition financing or (b) the
date of entry of an order approving same and (2) no objection will be raised by
the Subordinated Lender to any such use of cash collateral or such post-Petition
financing from any Senior Lender (or an affiliate of the Senior Lender).

13. This Agreement shall be binding upon the Subordinated Lender and upon the
heirs, legal representatives, successors and assigns of the Subordinated Lender
and the successors and assigns of the Subordinated Lender. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall be deemed to constitute one agreement. It is
understood and agreed that if facsimile copies of this Agreement bearing
facsimile signatures are exchanged between the parties hereto, such copies shall
in all respects have the same weight, force and legal effect and shall be fully
as valid, binding, and enforceable as if such signed facsimile copies were
original documents bearing original signature.

 

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14. So long as any of the Senior Liabilities shall remain outstanding, no
Subordinated Lender shall permit any of the documents, instruments and/or
agreements entered into in connection with the Junior Liabilities to be amended,
modified or otherwise supplemented without the prior written consent of the
Senior Lenders.

15. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED
ACCORDING TO, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS PROVISIONS THEREOF AND SHALL BE BINDING UPON THE PARTIES HERETO
AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. ANY ACTION BROUGHT CONCERNING THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE
COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK;
PROVIDED, HOWEVER, THAT THE SENIOR LENDER MAY CHOOSE TO WAIVE THIS PROVISION AND
BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this
Agreement on behalf of the Subordinated Lender agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorneys’ fees and
costs. Wherever possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

[signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been made and delivered this 19th day of
September 2008.

 

ACCENTIA BIOPHARMACEUTICALS, INC. By:  

 

Name:   Francis E. O’Donnell, Jr., M.D. Title:   Chairman & CEO

[Signatures Continued on Next Page]

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SENIOR LENDER:

 

By:  

 

Name:   Title:  

[Signatures Continued on Next Page]

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Acknowledged and Agreed to by:

 

BIOVEST INTERNATIONAL, INC. By:  

 

Name:   Steven Arikian, M.D. Title:   Chairman & CEO