Exhibit 10.56

 

IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING

SIGNIFICANT REPRESENTATIONS ARE

CALLED FOR HEREIN

 

INVESTMENT LETTER

 

Antares Pharma, Inc.

707 Eagleview Boulevard

Suite 414

Exton, Pennsylvania 19341

 

Gentlemen and Mesdames:

 

The undersigned investor (“Investor”) hereby agrees to convert the Term Notes
listed below (the “Notes”) into Two Million Three Hundred Ninety-eight Thousand
Six Hundred Thirty-five (2,398,635) shares of common stock (the “Shares”) of
Antares Pharma, Inc., a Minnesota corporation (the “Company”), at a price of
$1.00 per share:

 

Date of Note

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   Balance (including accrued interest)

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July 20, 2002

   $329,281.72

September 26, 2002

   $216,207.64

December 13, 2002

   $211,770.00

March 28, 2003

   $134,567.38

April 15, 2003

   $495,210.73

April 28, 2003

   $144,013.40

May 8, 2003

   $256,574.90

May 22, 2003

   $153,465.33

June 10, 2003

   $178,259.39

June 20, 2003

   $152,499.70

June 30, 2003

   $126,785.50

 

As of the date hereof, the total principal and unpaid interest on said Notes
amounts to $2,398,635.69. Investor is hereby delivering to the Company the
original Notes for conversion and cancellation, along with a Conversion Notice
in the form attached hereto as Exhibit A. Investor acknowledges that, as further
consideration for Investor’s agreement to convert the Notes, the Company shall
issue to Investor a five-year warrant to purchase One Million Seven Hundred
Ninety-eight Thousand Nine Hundred Seventy-six (1,798,976) shares of common
stock of the Company at an exercise price of $1.25 per share (the “Warrant”).

 

Investor’s agreement to consummate the conversion of the Notes described herein
is contingent upon (i) the consummation of a license agreement between the
Company and Eli Lilly

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and Company on or prior to September 30, 2003 (the “Lilly Transaction”) and (ii)
the simultaneous consummation of the conversion by Xmark Fund, L.P., Xmark Fund,
Ltd. and SDS Merchant Fund, L.P. of their 8% Senior Secured Convertible
Debentures and Amended and Restated 8% Senior Secured Convertible Debentures
into the Company’s Series D Convertible Preferred Stock (the “Xmark
Conversion”). By accepting this Investment Letter, the Company acknowledges its
agreement to such contingency, and the Company agrees that Investor shall not be
obligated to surrender the Notes until the Lilly Transaction and the Xmark
Conversion are consummated. If the Lilly Transaction and the Xmark Conversion
are not consummated by September 30, 2003, this Investment Letter shall
terminate, and neither Investor nor the Company shall have any obligations
hereunder.

 

By execution below, Investor acknowledges that the Company is relying upon the
accuracy and completeness of the representations contained herein in complying
with its obligations under applicable securities laws.

 

  1.   In connection with the conversion of the Notes and the issuance of the
Shares and the Warrants, Investor acknowledges and represents as follows:

 

  (a)   Investor is familiar with the business and operations of the Company;

 

  (b)   Investor is in a financial position to hold the Shares and the Warrant
for an indefinite period of time and is able to withstand a complete loss of his
investment in the Shares and the Warrant;

 

  (c)   Investor has substantial experience in evaluating and investing in
private placement transactions of securities in companies similar to the
Company, so that he is capable evaluating the merits and risks of his investment
in the Company, and he has the capacity to protect his own interests;

 

  (d)   That by reason of his business or financial experience, Investor has the
capacity to protect his own interests in connection with his ownership of the
Shares and the Warrant;

 

  (e)   Investor has been given access to full and complete information
regarding the Company and has utilized such access to his satisfaction for the
purpose of obtaining information, and Investor has either met with or been given
reasonable opportunity to meet with officers of the Company for the purpose of
asking questions of, and receiving answers from, such officers concerning the
terms and conditions of his conversion of the Notes, the issuance of the Shares
and the Warrant and the current and proposed business and operations of the
Company and to obtain any additional information, to the extent reasonably
available;

 

  (f)   Investor acknowledges that he has made his own investigation of the
Company, its business, personnel and prospects; has had an opportunity to
discuss the Company’s business, management and financial affairs with

 

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directors, officers, and management of the Company; and has had the opportunity
to review the Company’s operations and facilities to his satisfaction;

 

  (g)   Investor has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment in the Shares and the Warrant and has the net worth to undertake such
risks;

 

  (h)   Investor believes that the investment in the Shares and the Warrant is
suitable for him based upon his investment objectives and financial needs, and
Investor has adequate means for providing for his current financial needs and
contingencies and has no need for liquidity of investment with respect to the
Shares and the Warrant;

 

  (i)   Investor recognizes that the Shares and the Warrant as investments are
highly speculative, and involve a high degree of risk including, but not limited
to, the risk of economic losses from operations of the Company and the total
loss of his investment;

 

  (j)   Investor recognizes that any financial projections, forecasts,
assumptions or estimates delivered or communicated to Investor are not
statements of fact and that no representation or warranties are made, by the
Company or any officer, director, shareholder, employee or agent thereof, with
respect to the accuracy of such projections, forecasts, assumptions or estimates
or with respect to the future operations or the amount of any future income or
loss of the Company.

 

  (k)   Investor realizes that (1) the acquisition the Shares and the Warrant is
a long-term investment, (2) the holder of the Shares and the Warrant must bear
the economic risk of investment in the Shares and the Warrant for an indefinite
period of time because neither the Shares nor the Warrant has been registered
under the Securities Act of 1933, as amended (the “Act”), and, therefore, they
cannot be sold unless they are subsequently registered under the Act or an
exemption from such registration is available, and (3) the transferability of
the Shares and the Warrant is restricted and (A) requires conformity with the
restrictions contained in paragraph 2 below, and (B) will be further restricted
by a legend placed on the certificates representing the Shares and on the
Warrant stating that they have not been registered under the Act and referencing
the restrictions on transferability; and

 

  2.   Investor acknowledges that the following registration rights are
applicable to the issuance of the Shares and the Warrant:

 

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  (a)   Investor has been advised that the Shares and the Warrant are not being
registered under the Act or relevant state securities laws but are being offered
and sold pursuant to exemptions from such laws and that the Company’s reliance
upon such exemptions is predicated in part on Investor’s representations as
contained herein. Investor represents and warrants that the Shares and the
Warrant are being acquired for his own account and for investment and without
the intention of reselling or redistributing the same, that he has made no
agreement with others regarding any of the Shares or the Warrant and that his
financial condition is such that it is not likely that it will be necessary to
dispose of any of the Shares or the Warrant in the foreseeable future. Investor
is aware that, in the view of the U.S. Securities and Exchange Commission, a
purchase of securities with an intent to resell any of the same by reason of any
foreseeable specific contingency or anticipated change in market value, or any
change in the condition of the Company, or in connection with a contemplated
liquidation or settlement of any loan obtained for the acquisition of the Shares
or the Warrant and for which the Shares or the Warrant were pledged as security,
would represent an intent inconsistent with the representations set forth above.
Investor further represents and agrees that if, contrary to his foregoing
intentions, he should later desire to dispose of or transfer any of the Shares
or the Warrant in any manner, he shall not do so without first obtaining (1) the
opinion of counsel reasonably acceptable to the Company that such proposed
disposition or transfer lawfully may be made without the registration of the
Shares or the Warrant under the Act and applicable state securities laws, or (2)
such registration.

 

  (b)   If at any time prior to the expiration of ten (10) years from the date
hereof, the Company proposes to register under the 1933 Act (except by a Form
S-4 or Form S-8 Registration Statement or any successor forms thereto) or
qualify for a public distribution under Section 3(b) of the 1933 Act, any of its
equity securities or debt with equity features, it will give written notice to
Investor of its intention to do so and, on the written request of Investor given
within twenty (20) days after receipt of any such notice (which request shall
specify the Shares or the shares of common stock issuable to Investor upon
exercise of the Warrant (the “Warrant Shares”) intended to be sold or disposed
of by Investor and describe the nature of any proposed sale or other disposition
thereof), the Company will use its best efforts to cause all such Shares or
Warrant Shares to be included in such registration statement proposed to be
filed by the Company; provided, however, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any registration. If any
registration pursuant to this Section 2(b) is underwritten in whole or in part,
the Company may require that the Shares or Warrant Shares requested for
inclusion pursuant to this Section 2(b) be included in the underwriting on the
same terms and conditions as

 

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the securities otherwise being sold through the underwriters. If a greater
number of Shares of Warrant Shares is offered for participation in the proposed
offering than in the reasonable opinion of the managing underwriter of the
proposed offering can be accommodated without adversely affecting the proposed
offering, then the amount of Shares or Warrant Shares proposed to be offered by
Investor for registration, as well as the number of securities of any other
selling shareholders participating in the registration, shall be proportionately
reduced to a number deemed satisfactory by the managing underwriter.

 

  (c)   With respect to each inclusion of securities in a registration statement
pursuant to this Section 2, the Company shall bear the following fees, costs,
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the offering is underwritten and the Company is required to bear such fees
and disbursements), all internal expenses, the premiums and other costs of
policies of insurance against liability arising out of the public offering, and
legal fees and disbursements and other expenses of complying with state
securities laws of any jurisdictions in which the securities to be offered are
to be registered or qualified. Fees and disbursements of special counsel and
accountants for Investor, underwriting discounts and commissions, and transfer
taxes for Investor and any other expenses relating to the sale of securities by
Investor not expressly included above shall be borne by Investor.

 

(d)   The Company hereby indemnifies Investor against all losses, claims,
damages, and liabilities caused by (1) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus prepared in connection with any registration statement pursuant to
this Section 2 (and as amended or supplemented if the Company shall have
furnished any amendments thereof or supplements thereto), any Preliminary
Prospectus or any state securities law filings; (2) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages, or liabilities are caused by any untrue statement or
omission contained in information furnished in writing to the Company by
Investor expressly for use therein; and Investor by his acceptance hereof agrees
that he will indemnify and hold harmless the Company, each of its officers who
signs such Registration Statement, and each person, if any, who controls the
Company, within the meaning of Section 15 of the 1933 Act, with respect to
losses, claims, damages, or liabilities which are caused by any untrue

 

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statement or alleged untrue statement, omission or alleged omission contained in
information furnished in writing to the Company by Investor expressly for use
therein.

 

  3.   Investor represents and warrants that he is a bona fide resident of, and
is domiciled in, the Country of Switzerland and that the Shares and the Warrant
are being purchased by him in his name solely for his own beneficial interest
and not as nominee for, or on behalf of, or for the beneficial interest of, or
with the intention to transfer to, any other person, trust or organization.

 

  4.   Investor represents and warrants that he is an “accredited investor” as
that term is defined in Regulation D of the General Rules and Regulations
promulgated under the Act. Investor agrees to furnish any additional information
which the Company deems necessary in order to verify Investor’s status as an
accredited investor. Investor understands that a false representation may
constitute a violation of law, and that any person who suffers damage as a
result of a false representation may have a claim against Investor for damages.

 

* * * * * * *

 

Dated September 12, 2003

 

/s/    Jacques Gonella

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Signature

 

Jacques Gonella

Hauptstrasse 16

4132 Muttenz

Switzerland

 

Tax Identification Number:                                             

Telephone Number:                                                         

 

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ACCEPTANCE

 

The Company hereby accepts the foregoing Investment Letter as of the date above
indicated. The Company acknowledges that Investor shall not be obligated to
surrender the Notes in accordance with the foregoing Investment Letter until
such time as the Company has consummated the Lilly Transaction and the Xmark
Conversion, both of which events must occur on or prior to September 30, 2003.

 

    ANTARES PHARMA, INC.

Date: September 12, 2003

  By   /s/ Lawrence M. Christian      

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Its Chief Financial Officer

 

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EXHIBIT A

 

CONVERSION NOTICE

 

Antares Pharma, Inc.

707 Eagleview Boulevard

Suite 414

Exton, PA 19341

 

Gentlemen and Mesdames:

 

The undersigned investor hereby tenders this Conversion Notice to convert
$2,300,000.00 principal amount, together with $98,635.67 in accrued interest, of
the Term Notes (the “Notes”), dated July 20, 2002, September 26, 2002, December
13, 2002, March 28, 2003, April 15, 2003, April 28, 2003, May 8, 2003, May 22,
2003, June 10, 2003, June 20, 2003 and June 30, 2003, issued to the undersigned
into Two Million Three Hundred Ninety-eight Thousand Six Hundred Thirty-five
(2,398,635) shares of Antares Pharma, Inc.’s common stock, par value $.01 per
share, at a conversion price of $1.00 per share. The undersigned acknowledges
that fractional shares shall not be issued, and that the undersigned will
receive cash in lieu of fractional shares. The undersigned understands that
Antares Pharma, Inc. will also issue to him a five-year warrant to purchase One
Million Seven Hundred Ninety-eight Thousand Nine Hundred Seventy-six (1,798,976)
shares of common stock at an exercise price of $1.25 per share. The
undersigned’s conversion of the Notes is in lieu of all rights which the
undersigned might otherwise have with respect to repayment of the principal and
interest of the Notes. The original Notes are delivered herewith for conversion.

 

Dated: September 12, 2003

 

/s/    Jacques Gonella        

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Jacques Gonella

Hauptstrasse 16

4132 Muttenz

Switzerland

 

Tax Identification Number: