Dear PGRX Investor,
I hope this finds you well and ready for a productive 2013. I wanted to write you for three reasons:
·Summarize the proposal described in the Proxy Statement that you just received and provide our view on how important this transaction is to the future of PGRX.
·Let you know that our team would be glad to have a call with you to answer any questions, and that we are also available to respond to email questions from you.
·As backup and background, I have added some 2012 highlight accomplishments.
As you know, we worked all fall with certain affiliates of certain investment funds indirectly managed by Apollo Global Management, LLC (the “Apollo Investors”). After extensive due diligence on their part, they proposed and our Board agreed to an investment. We spent considerable time on this important step in our financing. I have worked on a broad range of high cost projects, and it is my experience that having a cornerstone strategic partner is a great help. Apollo’s reputation in sponsoring large natural resource projects could be a major driver for us. We believe that the Apollo Investors will be active partners with PGRX and provide resources and expertise, as well as relationships with financing sources, including project finance lenders. Our board unanimously approved the Apollo investment as in the best interests of our shareholders and recommends that our shareholders vote in favor of the proposal.
Given the significance of this proposed transaction to the Company, I ask that you give this your personal attention. The terms of the Apollo investment are described in detail in the Proxy Statement. Here is a brief summary of some of the terms:
·The Apollo Investors will purchase $100 million of convertible secured notes and receive warrants to purchase up to $140 million of additional common stock (based on the initial conversion price of $2.70 for the notes and exercise prices of $2.70 and $3.25 for the two series of warrants, which are subject to weighted average anti-dilution adjustments for issuances at below the then-current conversion/exercise price after November 29, 2012)
·The investment’s conversion and exercise prices are at a significant premium to today’s common stock market price (approximately 80% premium on the notes and the first warrant and 115% premium on the second warrant)
·The notes will vote with the common stock on an as-converted basis; based on our current capitalization, if the Apollo Investors convert the notes and exercise all of the warrants at the current conversion and exercise prices, they would have 53.8% of the total voting power
·The $100 million investment in the notes is subject to several conditions, including completion of a definitive feasibility study meeting specified conditions
·If the definitive feasibility study shows that total capital costs to complete the project will exceed 102.5% of our current estimate, up to 7.2 million additional shares will be issued to the Apollo Investors at no cost
·The Apollo Investors currently have the right to appoint one director (their appointee is Jim Dietz, a retired senior executive at Potash Corporation of Saskatchewan), and will be entitled to appoint three additional directors upon funding of the notes
·The Apollo Investors were granted certain approval rights at the signing of the agreement over certain corporate matters, including financings (with limited exceptions)