Royalty Agreement dated October 29, 2007, between Biovest and Valens U.S.



 Exhibit 10.4 
 FUNDS ESCROW AGREEMENT 
 This Funds Escrow
Agreement (this “Agreement”) is dated as of the 30th day of October 2007 among BIOVEST INTERNATIONAL, INC., a Delaware corporation (the
“Company”), VALENS U.S. SPV I, LLC (the “Purchaser”), and Loeb & Loeb LLP (the “Escrow Agent”): 
 WITNESSET: 
 WHEREAS, the Purchaser has advised the Escrow Agent that the Company and the
Purchaser have entered into a Note Purchase Agreement (the “Note Purchase Agreement”) for the sale by the Company to the Purchaser of a secured promissory note (the “Secured Promissory Note”); 
 WHEREAS, the Company and the Purchaser wish to deliver to the Escrow Agent copies of the Documents (as hereafter defined) and, following the satisfaction
of all closing conditions relating to the Documents, the Purchaser to deliver the Escrowed Payment (as hereafter defined), in each case, to be held and released by Escrow Agent in accordance with the terms and conditions of this Agreement; and

 WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to the terms and conditions of this Agreement; 
 NOW THEREFORE, the parties agree as follows: 
 ARTICLE I 
 INTERPRETATION 
 1.1 Definitions. Whenever used in this Agreement, the following terms shall have the meanings set forth below. 
 (a) “Agreement” means this Agreement, as amended, modified and/or supplemented from time to time by written agreement among the parties hereto. 
 (b) “Closing Payments” means the closing payments to be paid under the terms of the Note Purchase Agreement. 
 (c) “Disbursement Letter” means that certain letter delivered to the Escrow Agent by the Company, acceptable in form and
substance to the Purchaser, setting forth wire instructions and amounts to be funded at the Closing. 
 (d)
“Documents” means copies of the Disbursement Letter, the Note Purchase Agreement and the Secured Promissory Note. 
 (e) “Escrowed Payment” means $245,000. 







 1.2 Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto
with respect to the arrangement with the Escrow Agent and supersedes all prior agreements, understandings, negotiations and discussions of the parties, whether oral or written with respect to the arrangement with the Escrow Agent. There are no
warranties, representations and other agreements made by the parties in connection with the arrangement with the Escrow Agent except as specifically set forth in this Agreement. 
 1.3 Extended Meanings. In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine
gender include the feminine and neuter genders. The word “person” includes an individual, body corporate, partnership, trustee or trust or unincorporated association, executor, administrator or legal representative. 
 1.4 Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions
hereof may be waived, in each case only by a written instrument signed by all parties hereto, or, in the case of a waiver, by the party waiving compliance. Except as expressly stated herein, no delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.

 1.5 Headings. The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are
for convenience of reference only and shall not affect the construction or interpretation of this Agreement. 
 1.6 Law Governing this
Agreement; Consent to Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. With respect to any suit, action or proceeding relating
to this Agreement or to the transactions contemplated hereby (“Proceedings”), each party hereto irrevocably submits to the exclusive jurisdiction of the courts of the County of New York, State of New York and the United States District
court located in the county of New York in the State of New York. Each party hereto hereby irrevocably and unconditionally (a) waives trial by jury in any Proceeding relating to this Agreement and for any related counterclaim and
(b) waives any objection which it may have at any time to the laying of venue of any Proceeding brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object,
with respect to such Proceedings, that such court does not have jurisdiction over such party. As between the Company and the Purchaser, the prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and
costs. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, then the remainder of this Agreement shall not be affected and shall remain in full force and effect.

 1.7 Construction. Each party acknowledges that its legal counsel participated in the preparation of this Agreement and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Agreement to favor any party against the other. 
  

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 ARTICLE II 
 APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT 
 2.1 Appointment. The Company and the
Purchaser hereby irrevocably designate and appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the Escrow Agent by its execution and delivery of this Agreement hereby accepts such appointment under the terms and
conditions set forth herein. 
 2.2 Copies of Documents to Escrow Agent. On or about the date hereof, the Purchaser and the Company
shall deliver to the Escrow Agent copies of the Documents executed by such parties. 
 2.3 Delivery of Escrowed Payment to Escrow
Agent. Following the satisfaction of all closing conditions relating to the Documents (other than the funding of the Escrowed Payment), the Purchaser shall deliver to the Escrow Agent the Escrowed Payment. At such time, the Escrow Agent shall
hold the Escrowed Payment as agent for the Company, subject to the terms and conditions of this Agreement. 
 2.4 Intention to Create
Escrow Over the Escrowed Payment. The Purchaser and the Company intend that the Escrowed Payment shall be held in escrow by the Escrow Agent and released from escrow by the Escrow Agent only in accordance with the terms and conditions of this
Agreement. 
 ARTICLE III 
 RELEASE OF ESCROW 
 3.1 Release of Escrow. Subject to the provisions of Section 4.2, the Escrow Agent shall
release the Escrowed Payment from escrow as follows: 
 (a) Upon receipt by the Escrow Agent of (i) oral instructions
from David Grin and/or Eugene Grin (each of whom is a director of the Purchaser) consenting to the release of the Escrowed Payment from escrow in accordance with the Disbursement Letter following the Escrow Agent’s receipt of the Escrowed
Payment, (ii) the Disbursement Letter, and (iii) the Escrowed Payment, the Escrowed Payment shall promptly be disbursed in accordance with the Disbursement Letter. The Disbursement Letter shall include, without limitation, Escrow
Agent’s authorization to retain from the Escrowed Payment the Escrow Agent’s fee as set forth on Schedule A hereto for acting as Escrow Agent hereunder and payment of the Closing Payments, each in accordance with the Disbursement Letter.

 (b) Upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree or award of a court of competent
jurisdiction (a “Court Order”) relating to the Escrowed Payment, the Escrow Agent shall remit the Escrowed Payment in accordance with the Court Order. Any Court Order shall be accompanied by an opinion of counsel for the party
presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order is a court of competent jurisdiction and that the Court Order is final and non-appealable.

  

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 3.2 Acknowledgement of Company and Purchaser; Disputes. The Company and the Purchaser acknowledge
that the only terms and conditions upon which the Escrowed Payment are to be released from escrow are as set forth in Sections 3 and 4 of this Agreement. The Company and the Purchaser reaffirm their agreement to abide by the terms and conditions of
this Agreement with respect to the release of the Escrowed Payment. Any dispute with respect to the release of the Escrowed Payment shall be resolved pursuant to Section 4.2 or by written agreement between the Company and Purchaser. 

ARTICLE IV 
 CONCERNING THE
ESCROW AGENT 
 4.1 Duties and Responsibilities of the Escrow Agent. The Escrow Agent’s duties and responsibilities shall be
subject to the following terms and conditions: 
 (a) The Purchaser and the Company acknowledge and agree that the Escrow
Agent (i) shall not be required to inquire into whether the Purchaser, the Company or any other party is entitled to receipt of any Document or all or any portion of the Escrowed Payment; (ii) shall not be called upon to construe or review
any Document or any other document, instrument or agreement entered into in connection therewith; (iii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement;
(iv) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine
and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (v) may assume that any
person purporting to give notice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so; (vi) shall not be responsible for the identity, authority or rights of any person, firm
or company executing or delivering or purporting to execute or deliver this Agreement or any Document or any funds deposited hereunder or any endorsement thereon or assignment thereof; (vii) shall not be under any duty to give the property held
by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (viii) may consult counsel satisfactory to Escrow Agent (including, without limitation, Loeb & Loeb, LLP or such other counsel
of Escrow Agent’s choosing), the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such
counsel. 
 (b) The Purchaser and the Company acknowledge that the Escrow Agent is acting solely as a stakeholder at their
request and that the Escrow Agent shall not be liable for any action taken by Escrow Agent in good faith and believed by Escrow Agent to be authorized or within the rights or powers conferred upon Escrow Agent by this 

  

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Agreement. The Purchaser and the Company hereby, jointly and severally, indemnify and hold harmless the Escrow Agent and any of Escrow Agent’s partners,
employees, agents and representatives from and against any and all actions taken or omitted to be taken by Escrow Agent or any of them hereunder and any and all claims, losses, liabilities, costs, damages and expenses suffered and/or incurred by the
Escrow Agent arising in any manner whatsoever out of the transactions contemplated by this Agreement and/or any transaction related in any way hereto, including the fees of outside counsel and other costs and expenses of defending itself against any
claims, losses, liabilities, costs, damages and expenses arising in any manner whatsoever out the transactions contemplated by this Agreement and/or any transaction related in any way hereto, except for such claims, losses, liabilities, costs,
damages and expenses incurred by reason of the Escrow Agent’s gross negligence or willful misconduct. The Escrow Agent shall owe a duty only to the Purchaser and the Company under this Agreement and to no other person. 
 (c) The Purchaser and the Company shall jointly and severally reimburse the Escrow Agent for its reasonable out-of-pocket expenses
(including counsel fees (which counsel may be Loeb & Loeb LLP or such other counsel of the Escrow Agent’s choosing) incurred in connection with the performance of its duties and responsibilities hereunder, which shall not (subject to
Section 4.1(b)) exceed $1,000. 
 (d) The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five
(5) business days prior written notice of resignation to the Purchaser and the Company. Prior to the effective date of resignation as specified in such notice, the Purchaser and Company will issue to the Escrow Agent a joint instruction
authorizing delivery of the Documents and the Escrowed Payment to a substitute Escrow Agent selected by the Purchaser and the Company. If no successor Escrow Agent is named by the Purchaser and the Company, the Escrow Agent may apply to a court of
competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and deposit the Documents and the Escrowed Payment with the clerk of any such court, and/or otherwise commence an interpleader or similar action for a
determination of where to deposit the same. 
 (e) The Escrow Agent does not have and will not have any interest in the
Documents and the Escrowed Payment, but is serving only as escrow agent, having only possession thereof. 
 (f) The Escrow
Agent shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized hereby or within the rights or powers conferred upon it hereunder, nor for action taken or omitted by it in good faith, and
in accordance with advice of counsel (which counsel may be Loeb & Loeb LLP or such other counsel of the Escrow Agent’s choosing), and shall not be liable for any mistake of fact or error of judgment or for any acts or omissions of any
kind except to the extent any such liability arose from its own willful misconduct or gross negligence. 
  

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 (g) This Agreement sets forth exclusively the duties of the Escrow Agent with respect to
any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement. 
 (h) The
Escrow Agent shall be permitted to act as counsel for the Purchaser or the Company, as the case may be, in any dispute as to the disposition of the Documents and the Escrowed Payment, in any other dispute between the Purchaser and the Company,
whether or not the Escrow Agent is then holding the Documents and/or the Escrowed Payment and continues to act as the Escrow Agent hereunder. 
 (i) The provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement. 
 4.2 Dispute Resolution; Judgments. Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions: 
 (a) If any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Documents and/or the
Escrowed Payment, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to
hold the Documents and the Escrowed Payment pending receipt of a joint instruction from the Purchaser and the Company, (ii) commence an interpleader or similar action, suit or proceeding for the resolution of any such dispute; and/or
(iii) deposit the Documents and the Escrowed Payment with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice thereof to the Purchaser and the Company and shall thereupon be
relieved and discharged from all further obligations pursuant to this Agreement. The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings which relate to the Documents and the Escrowed Payment. The Escrow Agent
shall have the right to retain counsel if it becomes involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to consult counsel which such counsel may be Loeb & Loeb LLP
or such other counsel of the Escrow Agent’s choosing. 
 (b) The Escrow Agent is hereby expressly authorized to comply
with and obey any Court Order. In case the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be liable to the Purchaser and the Company or to any other person, firm, company or entity by reason of such compliance.

 ARTICLE V 
 GENERAL
MATTERS 
 5.1 Termination. This escrow shall terminate upon disbursement of the Escrowed Payment in accordance with the terms of
this Agreement or earlier upon the agreement in writing of the Purchaser and the Company or resignation of the Escrow Agent in accordance with the terms hereof. 
  


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 5.2 Notices. All notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given one (1) day after being sent by telecopy (with copy delivered by overnight courier, regular or certified mail): 
  

					
	(a)	  	If to the Company, to:	  	Biovest International, Inc.
		  		  	377 Plantation Street
		  		  	Worcester, MA 01605
		  		  	Fax: (508) 798-0899
		  		  	Attention: Chief Financial Officer
			
		  	With a copy to:	  	Nixon Peabody LLP
		  		  	401 Ninth Street, N.W., Suite 900
		  		  	Washington, DC 20004
		  		  	Attention: Herbert F. Stevens, Esq.
		  		  	Facsimile: (202) 585-8080
			
	(b)	  	If to the Purchaser, to:	  	Valens U.S. SPV I, LLC
		  		  	c/o Valens Capital Management, LLC
		  		  	335 Madison Avenue, 10th Floor
		  		  	New York, New York 10017
		  		  	Fax: (212) 581-037
		  		  	Attention: Portfolio Services
			
	(c)	  	If to the Escrow Agent, to:	  	Loeb & Loeb LLP
		  		  	345 Park Avenue
		  		  	New York, New York 10154
		  		  	Fax:(212) 407-4990
		  		  	Attention: Scott J. Giordano, Esq.

 or to such other address as any of them shall give to the others by notice made pursuant to this Section 5.2.

 5.3 Interest. The Escrowed Payment shall not be held in an interest bearing account nor will interest be payable in connection
therewith. 
 5.4 Assignment; Binding Agreement. Neither this Agreement nor any right or obligation hereunder shall be assignable by
any party without the prior written consent of the other parties hereto. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and assigns. 
 5.5 Invalidity. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, 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 contained herein shall not be in any way impaired thereby, it
being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 
  

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 5.6 Counterparts/Execution. This Agreement may be executed in any number of counterparts and by
different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same agreement. This Agreement may be executed by facsimile transmission.

 [Remainder of Page Intentionally Left Blank, 
 Signatures Appear on Following Page] 
  

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

			
	COMPANY:
	
	BIOVEST INTERNATIONAL, INC.
		
	By:	 	 /s/ Steven Arikian

	Name:	 	Steven Arikian, M.D.
	Title:	 	Chairman & CEO
	
	PURCHASER:
	
	VALENS U.S. SPV I, LLC
	
	 By: Valens Capital Management, LLC,
 its
investment manager

		
	By:	 	 /s/ Patrick Regan

	Name:	 	Patrick Regan
	Title:	 	Authorized Signatory
	
	ESCROW AGENT:
	
	LOEB & LOEB LLP
		
	By:	 	 /s/ Scott J. Giordano

	Name:	 	Scott J. Giordano
	Title:	 	Partner


  

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