SECURITY AGREEMENT

EXHIBIT 10.4

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of September 19, 2008 (this “Agreement”), is among Biovest International, Inc., a Delaware corporation (the “Company” or the “Debtor”) and the holders of the Company’s 15% Secured Convertible Debentures due March 31, 2010 in the original aggregate principal amount not to exceed $5,000,000 (collectively, the “Debentures”) signatory hereto, their endorsees, transferees and assigns (collectively, the “Secured Parties”).

W I T N E S S E T H:

WHEREAS, pursuant to the Purchase Agreement (as defined in the Debentures), the Secured Parties have severally agreed to extend the loans to the Company evidenced by the Debentures; and

WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the Debentures, the Debtor has agreed to execute and deliver to the Secured Parties this Agreement and to grant the Secured Parties, a security interest in the Collateral as hereinafter defined of such Debtor to secure the prompt payment, performance and discharge in full of, among other obligations, all of the Company’s obligations under the Debentures; and

WHEREAS, neither this Security Agreement nor the grant of a security interest hereunder shall be deemed to amend, modify, supplement, supercede and/or recharacterize any security interest and/or lien previously granted by the Company under other documents.

NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the Uniform Commercial Code of the State of New York (“UCC”) (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC.

(a) “ Collateral ” shall mean all of Debtor’s right, title and interest in and to all of Debtor’s personal property and tangible and intangible property (in each case, wherever located and whether now owned or hereafter made, developed or acquired by Debtor): (a) all equipment, computer hardware, machinery, furniture, fixtures, vehicles, trucks, cars, and tangible personal property of Debtor, and all accessions and attachments to or relating to any of the foregoing; (b) all books, records, computer software and other property relating to or referring to any of the foregoing; (c) all trademarks, trademark applications, patent applications, copyrights, copyright applications, patents, trade secrets, know-how, trade names, trade styles, service marks, all other Intellectual Property (as herein defined) rights, all rights associated with the foregoing, and goodwill;

(d) all other property of the Debtor; (e) all guaranties or other agreements securing or relating to any of the items referred to in subparagraphs (a)-(d) above, or acquired for the purpose of securing and enforcing any of such items; (f) all present and future accounts, contract rights, general intangibles, chattel paper, documents and instruments, including, without limitation, all accounts receivable and other receivables of any kind, and all obligations for the payment of money arising out of the sale of goods, rendition of services or the lease or license by Debtor of its property; (g) all cash, cash equivalents, deposit accounts, inventory, goods, commercial tort claims, supporting obligations, investment property, letter of credit rights; (h) additions, accessions and substitutions to any of the foregoing; and (i) all proceeds and products of any of the foregoing in whatever form, including, without limitation, any claims against third parties for loss or damage to or destruction of any or all of the foregoing and cash, negotiable instruments and other instruments for the payment of money, chattel paper, security agreements or other documents. All items of Collateral which are defined in the UCC shall have the meanings set forth in the UCC.

(b) “ Intellectual Property ” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.

2

(c) “ Obligations ” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or owing to, of the Debtor to the Secured Parties under this Agreement, the Debentures, the Securities Purchase Agreement and all other documents, instruments and agreements entered into in connection with the transactions as contemplated hereby and thereby, as same maybe extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of and interest on the Debentures; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtors from time to time under or in connection with this Agreement or the Debentures; and (iii) all amounts (including but not limited to post-petition interest, fees, costs and charges) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Debtor.

(d) “ Organizational Documents ” means with respect to the Debtor, the documents by which such Debtor was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).

(e) “ Securities Purchase Agreement ” means the agreement entered into on the date hereof between the Company and the holders of the Debentures contemplated hereby.

(f) “ UCC ” means the Uniform Commercial Code of the State of New York and/or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.

2. Grant of Security Interest in Collateral. As an inducement for the Secured Parties to extend the loans as evidenced by the Debentures and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, the Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a continuing security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”). The Security Interest is, by virtue of the Subordination Agreement entered into by Accentia Biopharmaceuticals, Inc on the date hereof (as the same may be amended, modified and/or supplemented from time to time), senior in priority to the security interest granted by the Company to Accentia Biopharmaceuticals, Inc. The Security Interest and lien granted hereby is subordinate to the first priority security interests listed in Exhibit A or Exhibit B hereto (“Existing Priority Liens”) and

3

is subject to the terms of that certain Subordination Agreement (as amended, modified, supplemented and/or restated from time to time) by and among the Secured Parties and the Senior Lenders (as defined therein). Nothing herein shall be deemed to amend, modify, supplement, supercede and/or recharacterize in any manner whatsoever the security interests and liens previously granted by the Company under other security agreements with the secured parties identified on Exhibit A all of which security agreements remain in full force and effect in accordance with their terms. The rights and interest of each of the Holders of the Debentures in the Security Interest and lien created hereby shall be pari passu.

3. [Reserved]

4. Representations, Warranties, Covenants and Agreements of the Debtors. Debtor represents and warrants to, and covenants and agrees with the Secured Parties as follows:

(a) The Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by the Debtor of this Agreement and the filings contemplated herein have been duly authorized by all necessary action on the part of such Debtor and no further action is required by such Debtor. This Agreement has been duly executed by the Debtor. This Agreement constitutes the legal, valid and binding obligation of the Debtor, enforceable against Debtor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.

(b) The Debtor has no place of business or office where its respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A attached hereto. Except as disclosed on Schedule A, none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.

Except for liens set forth on Exhibit A and Exhibit B attached hereto, the Debtor is the sole owner of the Collateral free and clear of any liens, security interests, encumbrances, rights or claims, and is fully authorized to grant the Security Interests.

(c) No written claim has been received by the Debtor that any Collateral or the Debtor’s use of any Collateral violates the rights of any third party. There has been no adverse decision to the Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to the Debtor’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of the Debtor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

4

(d) The Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and the Collateral at the locations set forth on Schedule A attached hereto and may not relocate such books of account and records or tangible Collateral unless it delivers to the Secured Parties at least 30 days prior to such relocation written notice of such relocation and the new location thereof (which must be within the United States).

(e) This Agreement creates in favor of the Secured Parties a valid security interest in the Collateral, securing the payment and performance of the Obligations.

(f) The Debtor hereby authorizes the Secured Parties to file one or more financing statements under the UCC, with respect to the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.

(g) The execution, delivery and performance of this Agreement by the Debtor does not (i) violate any of the provisions of any Organizational Documents of the Debtor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to any Debtor or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing the Debtor’s debt or otherwise) or other understanding to which the Debtor is a party or by which collateral is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of Debtor) necessary for Debtor to enter into and perform its obligations hereunder have been obtained.

(h) Debtor will not transfer, pledge, hypothecate, encumber, sell or otherwise dispose of any of the Collateral without the prior written consent of the Secured Parties. Notwithstanding the foregoing, Debtor shall be entitled to conduct business in the normal course, including using cash and cash equivalents and entering into business relationships and agreements, including but not limited to license and marketing agreements relating to products and commercialization. Additionally, notwithstanding the foregoing, Debtor shall be entitled to incur indebtedness in an amount not to exceed the New Indebtedness Threshold (as defined herein) secured by new liens senior in priority to the liens created hereby in the Collateral (“New Priority Liens”). The term “New Indebtedness Threshold” shall mean an amount equal to the difference between: (a) the amount of the obligations secured by the Existing Priority Liens (at any time, the “Existing Priority Obligations”) as of the date hereof and (b) the amount of the Existing Priority Obligations as of the date on which such new indebtedness is incurred. Secured Parties hereby acknowledge and agree that the Security Interest in the Collateral granted to Secured Parties hereby shall be subordinated to any New Priority Liens, but only to the extent of the New Indebtedness Threshold. Notwithstanding the forgoing, any such new liens will require the consent of the holders of any continuing Existing Priority Liens in accordance with the security agreements pursuant to which the Company granted the Existing Priority Liens and all documents, instruments and agreements executed in connection therewith.

5

(i) Debtor shall keep and preserve its equipment, inventory and o