-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PDVpYni68egve5ATBxgyrgxJNXgrgyME3oBE2MRXesHdfKtLkoe5ORGOuPjqqz3x 1NkOjR8hBttNULVrAHnIKA== 0000909518-04-000236.txt : 20040309 0000909518-04-000236.hdr.sgml : 20040309 20040309143452 ACCESSION NUMBER: 0000909518-04-000236 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20040309 GROUP MEMBERS: PERSHING SQUARE GP, LLC GROUP MEMBERS: PERSHING SQUARE, L.P. GROUP MEMBERS: WILLIAM ACKMAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PLAINS RESOURCES INC CENTRAL INDEX KEY: 0000350426 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 132898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-33092 FILM NUMBER: 04656992 BUSINESS ADDRESS: STREET 1: 700 MILAM STREET 2: SUITE 3100 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 8322396000 MAIL ADDRESS: STREET 1: 700 MILAM STREET 2: SUITE 3100 CITY: HOUSTON STATE: TX ZIP: 77002 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEUCADIA NATIONAL CORP CENTRAL INDEX KEY: 0000096223 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 132615557 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 315 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2124601900 MAIL ADDRESS: STREET 1: 315 PARK AVENUE SOUTH CITY: NEW YORK STATE: NY ZIP: 10010 FORMER COMPANY: FORMER CONFORMED NAME: TALCOTT NATIONAL CORP DATE OF NAME CHANGE: 19800603 SC 13D/A 1 mv3-9_13da1.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (AMENDMENT NO. 1) PLAINS RESOURCES INC. (Name of Issuer) COMMON STOCK, PAR VALUE $.10 PER SHARE 726540503 - -------------------------------------------------------------------------------- (Title of class of securities) (CUSIP number) JOSEPH A. ORLANDO WILLIAM ACKMAN LEUCADIA NATIONAL CORPORATION PERSHING SQUARE CAPITAL MANAGEMENT, LLC 315 PARK AVENUE SOUTH 110 EAST 42ND STREET NEW YORK, NEW YORK 10010 NEW YORK, NEW YORK 10017 (212) 460-1900 (212) 813-3700 - -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) MARCH 5, 2004 - -------------------------------------------------------------------------------- (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. ================================================================================
- ----------------------------------------------------------------- ------------------------------------------------ CUSIP No. 726540503 13D Page 2 - ----------------------------------------------------------------- ------------------------------------------------ - ----------------- ----------------------------------------------- --------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Leucadia National Corporation I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): - ----------------- --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------- -------------------------- ------------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: NA - ----------------- --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_] - ----------------- -------------------------------------------------------------- ------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York - --------------------------- ------ --------------------------------------------- ------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------ --------------------------------------------- ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER: 0 OWNED BY ------ --------------------------------------------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------ --------------------------------------------- ------------------------------------------------ PERSON WITH 10 SHARED DISPOSITIVE POWER: 0 - ----------------- --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 0 - ----------------- --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0% - ----------------- ----------------------------------------------- --------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: CO - ----------------- ----------------------------------------------- --------------------------------------------------------------- 2 - ----------------------------------------------------------------- ------------------------------------------------ CUSIP No. 726540503 13D Page 3 - ----------------------------------------------------------------- ------------------------------------------------ - ----------------- ----------------------------------------------- --------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Pershing Square, L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): 38-3694138 - ----------------- --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------- -------------------------- ------------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: NA - ----------------- --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_] - ----------------- -------------------------------------------------------------- ------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - --------------------------- ------ --------------------------------------------- ------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------ --------------------------------------------- ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER: 1,258,500 OWNED BY ------ --------------------------------------------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------ --------------------------------------------- ------------------------------------------------ PERSON WITH 10 SHARED DISPOSITIVE POWER: 1,258,500 - ----------------- --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 1,258,500 - ----------------- --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 5.33% - ----------------- ----------------------------------------------- --------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: PN - ----------------- ----------------------------------------------- --------------------------------------------------------------- 3 - ----------------------------------------------------------------- ------------------------------------------------ CUSIP No. 726540503 13D Page 4 - ----------------------------------------------------------------- ------------------------------------------------ - ----------------- ----------------------------------------------- --------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Pershing Square GP, LLC I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): 38-3694141 - ----------------- --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------- -------------------------- ------------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: N/A - ----------------- --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_] - ----------------- -------------------------------------------------------------- ------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - --------------------------- ------ --------------------------------------------- ------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------ --------------------------------------------- ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER: 1,258,500 OWNED BY ------ --------------------------------------------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------ --------------------------------------------- ------------------------------------------------ PERSON WITH 10 SHARED DISPOSITIVE POWER: 1,258,500 - ----------------- --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 1,258,500 - ----------------- --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 5.33% - ----------------- ----------------------------------------------- --------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: OO - ----------------- ----------------------------------------------- --------------------------------------------------------------- 4 - ----------------------------------------------------------------- ------------------------------------------------ CUSIP No. 726540503 13D Page 5 - ----------------------------------------------------------------- ------------------------------------------------ - ----------------- ----------------------------------------------- --------------------------------------------------------------- 1 NAME OF REPORTING PERSON: William Ackman I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): - ----------------- --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X] (B) [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------- -------------------------- ------------------------------------------------------------------------------------ 4 SOURCE OF FUNDS: N/A - ----------------- --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_] - ----------------- -------------------------------------------------------------- ------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION: United States - --------------------------- ------ --------------------------------------------- ------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER: 0 SHARES ------ --------------------------------------------- ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER: 1,258,500 OWNED BY ------ --------------------------------------------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER: 0 REPORTING ------ --------------------------------------------- ------------------------------------------------ PERSON WITH 10 SHARED DISPOSITIVE POWER: 1,258,500 - ----------------- --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 1,258,500 - ----------------- --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - ----------------- --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 5.33% - ----------------- ----------------------------------------------- --------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - ----------------- ----------------------------------------------- ---------------------------------------------------------------
5 This Amendment No. 1, amends the Schedule 13D filed on February 23, 2004, and is filed by Leucadia National Corporation ("Leucadia"), Pershing Square, L.P., Pershing Square GP, LLC and William Ackman (collectively, the "Reporting Persons") with respect to the common stock, par value $0.10 per share ("Common Stock"), of Plains Resources Inc. (the "Company"). Item 4. Purpose of Transaction. Item 4 is hereby supplemented as follows: On March 5, 2004, Leucadia submitted a revised written proposal (the "Proposal") to the special committee of the Company's Board of Directors. The Proposal provides for a transaction in which a to-be-formed affiliate of Leucadia will acquire the Company in a merger for a combination of cash and securities (the "Buyer Securities") described in the Proposal and valued by Leucadia at approximately $18.19 per share, representing a 8.6% premium to the $16.75 transaction between the Company, management of the Company and Paul Allen (the "Insider Transaction"). A copy of the Proposal is attached hereto as Exhibit 2 and incorporated herein by reference. A copy of the press releases issued by Leucadia on March 5, 2004 and March 8, 2004 are attached hereto as Exhibits 3, 4 and 5, and incorporated herein by reference. The Reporting Persons believe that the Proposal is superior to the $16.75 Insider Transaction. The Reporting Persons have communicated the Proposal to the Company's Board of Directors and the Reporting Persons intend to communicate to other shareholders of the Company and other interested parties in an effort to determine shareholder interest in the Proposal. The Reporting Persons may acquire additional securities of the Company or dispose of securities of the Company at any time and from time to time in the open market, in privately negotiated transactions or otherwise. Although the foregoing represents the range of activities presently contemplated by the Reporting Persons and, to their knowledge, their respective general partners, directors and officers, as applicable, with respect to the Company, it should be noted that the possible activities of the Reporting Persons and their respective general partners, directors and officers are subject to change at any time. Except as set forth above, neither the Reporting Persons, nor, to their knowledge, any of their respective general partners, directors or officers, have any present plans or proposals which relate to or would result in any of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 7. Materials to be Filed as Exhibits. 1. Agreement among the Reporting Persons with respect to the filing of this Schedule 13D. 2. Proposal, dated March 5, 2004, from Leucadia. 6 3. Press release of Leucadia National Corporation dated March 5, 2004, incorporated herein by reference to Exhibit 99.1 to Leucadia's Current Report on Form 8-K filed on March 8, 2004 (the "Leucadia 8-K"). 4. Press release of Leucadia National Corporation dated March 5, 2004, incorporated herein by reference to Exhibit 99.2 to the Leucadia's 8-K. 5. Press release of Leucadia National Corporation dated March 8, 2004, incorporated herein by reference to Exhibit 99.3 to the Leucadia's 8-K. 7 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. LEUCADIA NATIONAL CORPORATION By: /s/ Joseph A. Orlando ----------------------------------------- Name: Joseph A. Orlando Title: Vice President and Chief Financial Officer PERSHING SQUARE, L.P. By: PERSHING SQUARE GP, LLC By: /s/ William Ackman ----------------------------------------- Name: William Ackman Title: Managing Member PERSHING SQUARE GP, LLC By: /s/ William Ackman ----------------------------------------- Name: William Ackman Title: Managing Member By: /s/ William Ackman ----------------------------------------- Name: William Ackman Date: March 9, 2004 EXHIBIT INDEX Exhibit No. - ----------- Exhibit 1 - Agreement among the Reporting Persons with respect to the filing of this Schedule 13D Exhibit 2 - Proposal, dated March 5, 2004, from Leucadia Exhibit 3 - Press release of Leucadia National Corporation dated March 5, 2004, incorporated herein by reference to Exhibit 99.1 to Leucadia's Current Report on Form 8-K filed on March 8, 2004 (the "Leucadia 8-K") Exhibit 4 - Press release of Leucadia National Corporation dated March 5, 2004, incorporated herein by reference to Exhibit 99.2 to the Leucadia 8-K Exhibit 5 - Press release of Leucadia National Corporation dated March 8, 2004, incorporated herein by reference to Exhibit 99.3 to the Leucadia 8-K EX-99 3 mv3-9_ex1.txt 1 Exhibit 1 AGREEMENT This will confirm the agreement by and among all the undersigned that the Schedule 13D filed on or about this date with respect to the beneficial ownership of the undersigned of shares of the common stock of Plains Resources Inc. is being filed on behalf of each of the entities named below. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Dated: March 9, 2004 LEUCADIA NATIONAL CORPORATION By: /s/ Joseph A. Orlando ----------------------------------------- Name: Joseph A. Orlando Title: Vice President and Chief Financial Officer PERSHING SQUARE, L.P. By: PERSHING SQUARE GP, LLC By: /s/ William Ackman ----------------------------------------- Name: William Ackman Title: Managing Member PERSHING SQUARE GP, LLC By: /s/ William Ackman ----------------------------------------- Name: William Ackman Title: Managing Member By: /s/ William Ackman ----------------------------------------- Name: William Ackman EX-99 4 mv3-9_ex2.txt 2 Exhibit 2 March 5, 2004 Plains Resources Inc. 700 Milam Street, Suite 2100 Houston, TX 77002 Attn: The Special Committee of the Board of Directors Dear Sirs: We are pleased to submit our revised proposal whereby Leucadia National Corporation ("Leucadia"), a NYSE-listed corporation (Ticker: LUK) and/or any of its respective affiliates through a newly formed entity ("the Buyer") would acquire 100% of the capital stock of Plains Resources Inc. ("PLX") in a transaction valued by Leucadia at approximately $18.19 per share ("the Leucadia Transaction"), a $1.44 or 8.6% premium to the previously announced $16.75 transaction (the "$16.75 Transaction"). The Leucadia Transaction is subject only to a one-week due diligence period and the execution of a definitive merger agreement. Under separate cover, we will forward to you in the next few days a blackline version of the $16.75 Transaction merger agreement, modified only to reflect the economic terms of the Leucadia Transaction and to make certain conforming changes, which will allow PLX to avoid the time and cost necessary to renegotiate the merger agreement. In light of the fact that the $16.75 Transaction does not permit PLX to make an Adverse Recommendation Change (as defined in the $16.75 Transaction merger agreement) without a four business day notice period, the Leucadia Transaction's due diligence can be substantially completed by the end of the notice period. In the detailed description of the Leucadia Transaction below, you will note that we are responsive to the issues raised about our initial proposal by the special committee and its advisors as disclosed in your press releases and public filings as well as comments we have received from numerous shareholders of PLX: (i) we are eliminating the requirement that we receive non-public information on Plains All American Pipeline, L.P. ("PAA"), (ii) we have reduced our due diligence period to seven days, (iii) we have increased the yield on the securities issued in the transaction by an additional $0.04 per annum for a total premium over the PAA annual distribution of $0.12 per annum, (iv) we have structured the Notes as debt securities secured by PAA Master Limited Partnership ("MLP") units ("PAA Units"), (v) we have increased the principal amount of the Notes to the greater of $34.00 per Note or the market value of PAA plus $0.25 at the time of closing, (vi) we have attached a detailed term sheet describing the terms of the Notes and their covenants, (vii) we have increased the post closing tender offer to $100 million and increased the tender offer price to $32.00 per Note, (viii) we have increased the number of Notes to equal the 12.4 million PAA Units held by PLX to satisfy the greater demand for Notes by PLX shareholders, and to eliminate the transaction complexity associated with our previous requirement that PLX would sell up to 1.5 million PAA Units prior to closing, (ix) we have agreed not to oppose the break-up fee and expense reimbursement required under the terms of the $16.75 Transaction, (x) we have agreed to include the terms of the $16.75 merger agreement in our merger agreement, revised only to reflect the improved economics of the Leucadia Transaction and to make certain conforming changes, (xi) the Leucadia Transaction continues not to be contingent on financing, (xii) the Leucadia Transaction will not require the filing of a 13E-3, (xiii) we have obtained Leucadia's board approval for the Leucadia Transaction so this is no longer a condition of our proposal, (xiv) Weil, Gotshal & Manages LLP has researched the structure and terms of the Leucadia Transaction and believes that there are no elements of the transaction that would prevent its consummation in a timely fashion. We are willing to make representatives of Weil Gotshal available to answer any questions you or your advisors may have about tax or other legal considerations of the Leucadia Transaction. 1. Structure of Acquisition. In the Leucadia Transaction, a subsidiary of the Buyer would be merged with and into PLX, with PLX as the surviving corporation. In the merger, existing stockholders of PLX will have the opportunity to receive a combination of cash and newly issued publicly traded securities of PLX (the "Notes") in exchange for their existing PLX securities. In the Transaction, PLX will issue 12.4 million Notes, one Note for each PAA Unit owned by PLX. In the Leucadia Transaction, shareholders would receive 0.5019 of a Note and $1.19 in cash for each share of PLX. Based on our estimated value of the Note of $33.86, we estimate the total per share Leucadia Transaction value to be $18.19 per share, a $1.44 or 8.6% premium to the previously announced $16.75 Transaction. Options and other interests convertible into shares of common stock of PLX will be cancelled or exchanged for the economic equivalent of a pro rata share of the merger consideration in accordance with the terms of such securities. Leucadia will fund the acquisition entity with sufficient cash to pay off the existing indebtedness of PLX and fund the Leucadia Transaction cash consideration and transaction costs. Thirty to sixty days subsequent to the closing of the Leucadia Transaction, Leucadia and/or its affiliates will launch a tender offer (the "Tender Offer") to repurchase up to $100 million of Notes at a purchase price of 2 $32.00 per Note. By allowing the Notes to trade in the market for a minimum of 60 days after the closing of the Leucadia Transaction and before the closing of the Tender Offer, PLX shareholders will have the opportunity to monitor the trading price of the Notes and can elect at their option to sell the Notes in the market, in the Tender Offer, or to retain their Notes. We will endeavor to cause a when-issued market to develop in the Notes prior to the consummation of the Leucadia Transaction as promptly as permissible subject to regulatory requirements. We note from our reading of the merger agreement and proxy that the $16.75 Transaction has numerous financing and other contingencies including contingencies that are under the control of Mr. James C. Flores, Mr. John T. Raymond, and Mr. Paul G. Allen. By comparison, upon the execution of the Leucadia Transaction merger agreement, the Leucadia Transaction will have no financing contingencies or other contingencies under the control of Leucadia's principals. Leucadia will fund the transaction and the Tender Offer with readily available cash, cash equivalents and marketable securities which totaled $1,107,000,000 as of September 30, 2003, Leucadia's last publicly filed financial statement, excluding amounts held by Leucadia's regulated subsidiaries. The Notes will be senior debt securities of PLX that will be secured by the PAA Units owned by PLX, which will be the surviving company in the merger and as such will be full recourse obligations of PLX. At the closing of the Leucadia Transaction, PLX will be a direct or indirect subsidiary of Leucadia. The Notes will provide holders thereof with returns based upon the income from and value of the PAA Units. The Notes will pay a minimum annual fixed interest payment of $1.00, plus additional quarterly interest in an amount equal to the quarterly distribution paid on one PAA Unit plus an additional $0.03 per quarter. For example, if the Notes were currently issued and outstanding, they would pay a quarterly interest in an amount equal to PAA's current distribution of $0.5625 plus $0.03 per quarter. If PAA raises or lowers its distribution, the quarterly interest rate will be adjusted accordingly. If, at the end of the year, the aggregate quarterly interest payments are less than $1.00, PLX shall make an interest payment equal to the difference. As a result, the Notes should track the economic characteristics of the PAA Units plus a yield enhancement. Based on the PAA closing price of $32.15 on March 4, 2004, the $0.12 per annum yield premium would yield an additional 37.3 basis points per annum to the holder of Notes compared with the PAA Units. The Notes will have a principal amount equal to the greater of $34.00 per Note or the market value of a PAA Unit at the closing of the transaction plus $0.25. The Notes will mature 20 years after issuance. At maturity, PLX will owe the Note principal amount plus, the amount, if any, by which the fair market value of one PAA Unit exceeds the principal amount of a Note. At maturity, PLX may satisfy its obligations by (i) paying cash to the holders of Notes or (ii) exchanging PAA Units for outstanding Notes at the then market price of the PAA Units or (iii) any combination of (i) and (ii). The Notes are designed to permit investors who cannot own, or choose not to own MLP securities, the opportunity to participate in the quarterly cash flows and upside of PAA. We therefore anticipate that the buyers and holders of 3 the notes will be tax-exempt investors, offshore investors, IRAs, pension funds, institutional investors whose performance is based on pre-tax performance, and/or other investors who prefer to, or can only participate in, the value creation at PAA through the Notes, rather than by ownership of the PAA Units directly. We believe that the additional potential investor base afforded by the Notes to PAA will provide PAA with a substantial alternate source of future capital in the event that it, in the future, elects to issue a similar security. The Notes will be registered securities, and PLX will continue to file 10-Ks, 10-Qs, and other required filings as an SEC registered issuer. We expect that the Notes will be listed for trading on the New York Stock Exchange (or another national securities exchange or market). The Notes will pay a minimum annual fixed interest payment of $1.00, plus additional quarterly interest in an amount equal to the quarterly distribution paid on one PAA Unit plus an additional $0.03 per quarter. In addition, the Notes will contain customary covenants, including without limitation, covenants relating to (1) payment of interest, (2) provision of reports, (3) restrictions on incurrence of additional indebtedness, (4) restrictions on transactions with affiliates, (5) restrictions on payment of dividends, (6) restrictions on asset sales, and (7) restrictions on liens. We have attached Exhibit A to this letter that provides additional detailed terms of the Notes. As you are aware, PAA Units require the holder to accelerate the recognition of any deferred income on the sale of its units. The impact of this negative tax consequence of PAA Units has traditionally resulted in PAA Units' reduced liquidity. In light of (i) the more than $400 million market capitalization of Notes that will be outstanding after the consummation of the Leucadia Transaction, (ii) the lack of adverse consequences on their sale when compared with PAA Units, (iii) the broad initial distribution of the Notes in the PLX merger, and (iv) the greater likely proportion of institutional holders of the Notes compared with PAA Units, we believe that the Notes will afford the holders a substantial degree of trading liquidity and reduced transaction costs. We believe the Notes will not be considered an interest in a partnership for tax purposes and owners of Notes will not receive K-1s, nor will they bear any flow-through income from PAA. In light of the fact that many investors who own shares of PLX do so to participate indirectly in the value of PAA because they are not permitted to own PAA Units, we believe that the Notes will be a superior alternative to PLX stock for existing owners of PLX as well as for other non-MLP investors, particularly because the Notes, unlike PLX stock, will pay quarterly cash interest payments. We anticipate that the Notes will trade at a premium to PAA Units because of several factors: (1) a greater universe of investors will be able to purchase the Notes rather than PAA Units, (2) the number of Notes outstanding will be limited to a maximum of 12.4 million, (3) the Notes will have a 0.373% greater yield than PAA Units, and (4) the Note principal amount will be secured by the PAA Units held by PLX and will be fully recourse against PLX. If the Notes were to trade at the same current yield as the PAA Units based on their closing price of $32.15 yesterday, in light of the $0.12 higher annual distribution, we would anticipate that the Notes would trade at a $1.71 premium to the PAA Units, or a price of $33.86. We believe the Notes will be considered by investors to be superior to MLP I-shares because they will pay a current distribution in cash rather than 4 stock, and because the holder of a Note will, at its maturity, receive the greater of the principal amount of the Note, or the market value of PAA Units in cash or PAA Units. 2 Expenses. The parties shall negotiate in good faith and enter into a revised expense reimbursement agreement on terms to be mutually agreed upon. 3. Effect of Proposal. This letter expresses the proposal of Leucadia only and is not intended to, and does not create a legally binding commitment or obligation on the part of Leucadia or its affiliates to effect a transaction with PLX (it being understood that any such legally binding obligation shall only be set forth in a definitive merger agreement that has been executed and delivered by Buyer and PLX). It is understood that Leucadia and its affiliates shall not be legally bound to PLX by reason of this proposal, nor shall rights, liabilities or obligations arise as a result of this proposal or any other written or oral communications between Leucadia or its affiliates on the one hand, and PLX or its representatives on the other hand. We believe that the proposal set forth herein constitutes a Superior Proposal (as defined in the $16.75 Transaction merger agreement) and allows PLX to engage in negotiations with us and provide us with non-public information related to PLX. As we have previously informed you, upon your agreement to allow us to commence the limited due diligence requested in this proposal, we would be willing to execute the confidentiality agreement that has previously been provided to us, without any changes thereto. Buyer is extremely interested in completing the transactions contemplated hereby and looks forward to working with PLX. Buyer is committed to work with PLX and its advisors in good faith to finalize the transaction on terms, which are mutually agreeable. Please call us with any questions with regard to this proposal. Very truly yours, LEUCADIA NATIONAL CORPORATION By: /s/ Joseph S. Steinberg ------------------------------- Name: Joseph S. Steinberg Title: President 5 TERMS OF NOTES Issuer: PLX, the surviving company in the merger. Structure: The Notes will be issued pursuant a merger of a subsidiary of a newly created company with and into PLX, with PLX being the surviving company in the merger. Securities Offered: The Notes will be issued under an indenture. 12.4 million Notes will be issued in the merger. Face Amount: The face amount of each Note will be the greater of (i) $34.00 or (ii) the fair market value of one MLP Unit on the day prior to the consummation of the merger plus $0.25 per Note. Maturity: The Notes will mature 20 years after issuance. At maturity, the issuer will owe the face amount plus, the amount, if any, by which the fair market value of one MLP Unit as of the maturity date exceeds the face amount. At maturity, the issuer may satisfy its obligations by (i) paying in cash or (ii) exchanging MLP Units for outstanding Notes at the then market price of the MLP Units or (iii) or any combination of (i) and (ii). Registration and Listing: The Notes will be registered securities and are expected to be listed for trading on the New York Stock Exchange (or another national securities exchange or market). Interest: The Notes will pay a minimum fixed annual interest of $1.00, plus additional quarterly interest in an amount equal to the quarterly interest paid on one MLP Unit plus $0.03. Interest shall be paid on a quarterly basis in an amount equal to the quarterly interest paid on one MLP Unit plus $0.03. If at the end of the year, the aggregate quarterly interest payments made are less than $1.00, the issuer shall pay interest equal to the difference. Interest Date and Interest Payments: Interest payments on the Notes shall be payable quarterly in cash in arrears. In the event that the Issuer and the Buyer do not have sufficient cash on hand to make an interest payment, the Issuer shall have the ability to defer interest payments at any time and from time to time for up to 60 consecutive months. Repurchase of Notes: The Buyer or one of its designees shall commence a tender offer promptly after the issuance of the Notes to purchase up to 3.125 million units at $32.00 per unit. The tender offer will be subject to customary terms and conditions. Redemption: The Notes will not be redeemable prior to their maturity. Security: The Notes will be secured by a number of MLP Units equal to the number of Notes outstanding. Covenants: The Notes will contain a covenant requiring quarterly interest payments (without any right to defer) if the MLP Units make a quarterly distribution. In addition, the Notes will contain customary covenants, including without limitation, covenants relating to (1) payment of interest, (2) provision of reports, (3) restrictions on incurrence of additional indebtedness, (4) restrictions on transactions with affiliates, (5) restrictions on payment of dividends, (6) restrictions on asset sales, and (7) restrictions on liens. Amendments: Customary provisions permitting amendments to the indenture with the consent of a majority of the principal amount of units outstanding, provided, that without the consent of each holder of notes, an amendment or waiver may not: (1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any note; (3) reduce the rate of or change the time for payment of interest; (4) waive a default or event of default in the payment of principal or premium, or interest on the notes (except a rescission of acceleration and a waiver of a payment default that resulted in such acceleration); (5) make any note payable in money other than as stated in the notes; (6) make any change in the provisions relating to the waiver of past defaults or the rights of holders to receive payments of principal, premium or interest; or (7) make a change in the foregoing amendment and waiver section. Governing Law: The indenture and the Notes will be governed by New York law. -----END PRIVACY-ENHANCED MESSAGE-----