-----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, KQxeM5L6UbAN948Gc8AQt+/BQ2Vunx7l/40OCnzrp6Xxvz1NGXZkQc6GiZLCFNf4 /ZDaHhmO2RdCA+4Bo328ag== 0000909518-04-000599.txt : 20040707 0000909518-04-000599.hdr.sgml : 20040707 20040707153624 ACCESSION NUMBER: 0000909518-04-000599 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20040707 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: 04904327 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: TELEGRAPH & OTHER MESSAGE COMMUNICATIONS [4822] 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 jd7-7_13da7.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. 7) -------------- 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) JULY 7, 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. 7, 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 July 7, 2004, Leucadia submitted a written recommendation (the "Recommendation") to the Company's Board of Directors. The Recommendation proposes that the Company remain a public company with changes in its management, governance, and capital structure. Specifically, the Recommendation proposes that the Company borrow approximately $175 million and use the proceeds to commence a tender offer to purchase up to 10 million shares of Common Stock at a price of $17.00 per share. A copy of the Recommendation is attached hereto as Exhibit 2 and incorporated herein by reference. A copy of the press releases issued by Leucadia on July 7, 2004 is attached hereto as Exhibit 3 and incorporated herein by reference. The Reporting Persons believe that the Recommendation provides a better alternative to PLX shareholders than the pending $16.75 transaction with Vulcan Energy Corporation. The Recommendation has been communicated 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 Recommendation. Pershing Square intends to vote its 1,258,500 shares of Common Stock against the merger. 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. Recommendation, dated July 7, 2004, from Leucadia. 3. Press release of Leucadia National Corporation, dated July 7, 2004. 6 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: July 7, 2004 7 EXHIBIT INDEX Exhibit No. Exhibit 1 - Agreement among the Reporting Persons with respect to the filing of this Schedule 13D Exhibit 2 - Recommendation, dated July 7, 2004, from Pershing Square, L.P. Exhibit 3 - Press release of Leucadia National Corporation, dated July 7, 2004 8 EX-1 2 jd7-7ex_1.txt 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: July 7, 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-2 3 jd7-7ex_2.txt EXHIBIT 2 Via Facsimile (832) 239-6210 Original to follow via FedEx July 7, 2004 Plains Resources Inc. 700 Milam Street, Suite 3100 Houston, TX 77002 Attn: The Board of Directors Gentlemen: We have given considerable thought to the $16.75 Transaction and other alternatives available to shareholders and have concluded that shareholders' interest would be best served if Plains Resources Inc. ("PLX") remained a public company with changes in its management, governance, and capital structure. Assuming our proposed changes are implemented, we believe the prorated equity value to shareholders of the below proposed recapitalization to be approximately $20.91 per share. First, we would propose that Mr. William M. Hitchcock be named Chairman of a newly constituted board of PLX that would include Mr. Greg Armstrong, the current Chairman/CEO of Plains All American Pipeline, L.P. ("PAA"), one shareholder representative, and four newly appointed independent directors. Mr. Hitchcock has clearly proven that he is independent-minded and focused on shareholder interests and we would welcome his stewardship of PLX. Second, we would propose that Mr. Greg Armstrong be given the opportunity to be CEO of PLX. It is evident to us that Mr. Armstrong by virtue of his position at PAA should be CEO of PLX and a member of its board of directors. This would put effective operating control of the GP in the hands of the management of PAA, PLX's principal operating subsidiary. In our opinion, this alignment of interests between PLX and PAA would then be far superior to the $16.75 Transaction wherein financial investors are the primary controlling shareholders of the GP. We would also suggest that Mr. Armstrong, and perhaps other members of PAA's senior management team, receive equity-based incentive compensation for serving as CEO and a board member of PLX. Third, with respect to the limited operating functions of PLX, we would propose that PLX enter into an administrative service agreement whereby these functions could be managed and administered by PAA on market terms. We believe that PLX's existing overhead could be reduced to $2.0 million or less as a result of these changes. Plains Resources Inc. The Board of Directors July 7, 2004 Page 2 of 2 Fourth, we would propose that PLX borrow $175 million (we expect these funds could be raised on the same terms as the senior-secured Vulcan Energy financing which was recently rated by S&P and Moody's) and commence a tender offer to purchase approximately 10 million PLX shares at $17.00 per share. This borrowing and share repurchase will accomplish a number of important objectives: o We believe that there are a substantial number of shareholders who may desire liquidity for their shares. The repurchase would provide liquidity to selling holders at a premium to the $16.75 Transaction. Pershing Square, L.P. has agreed not to tender its 1.259 million shares in the repurchase increasing the available liquidity for tendering shareholders. We believe that the tender will be more than sufficient to buy out those shareholders who want liquidity for their shares. o Because PLX would have $65 million less leverage than in the $16.75 Transaction and may be managed by Mr. Armstrong, we believe that both PLX's and PAA's credit profiles would be substantially improved under this scenario when compared with the $16.75 Transaction. o The company's leveraged equity would provide attractive after-tax free cash flow yields to investors. Assuming that all 10 million shares are repurchased in the PLX self-tender, we estimate that PLX's after-tax free cash flow per share (excluding transaction expenses) in 2005 would be approximately $1.58 per share growing to approximately $2.00 per share in 2006. We believe it is reasonable to expect continued substantial after-tax free cash flow per share growth, assuming PAA continues to achieve its stated growth objectives o Perhaps most importantly, we believe the new capital structure would provide substantially greater value to those shareholders who did not tender. We estimate that if the share repurchase is fully subscribed, and if post-tender PLX trades at our estimated 15 times multiple of 2005 after-tax free cash flow per share, PLX stock will trade for $23.70 after the share repurchase. In light of the growth characteristics of PLX's free cash flow per share, we believe that a 15 times multiple is a conservative expectation of PLX's post-buyback stock price. As a result, we would value the prorated equity value to shareholders of this proposed recapitalization at $20.91 per share. We believe the above proposed changes to PLX's management, governance, and capital structure would not require PLX to pay a break-up fee to Vulcan Energy under the terms of the existing merger agreement, conserving shareholder resources. In substance, the above proposed changes would allow existing PLX shareholders to choose between investing in a newly reconstituted PLX with nearly identical economics to the $16.75 Transaction, but in this case on Vulcan's side of the deal, or alternatively selling their stock at $17.00 per share, a premium to what can be obtained in the $16.75 Transaction. The repurchase transaction would not require a shareholder vote, could be consummated promptly after the failure of the $16.75 Transaction vote, and does not have any tax or other complexities. We look forward to your thoughts. Cordially, Ian M. Cumming Chairman EX-3 4 jd7-7_ex3.txt EXHIBIT 3 FOR IMMEDIATE RELEASE Leucadia National Corporation Contact: Laura Ulbrandt (212) 460-1900 LEUCADIA SUBMITS RECOMMENDATION TO PLAINS RESOURCES INC. PERSHING SQUARE TO VOTE AGAINST THE PLAINS RESOURCES INC. MERGER NEW YORK, NEW YORK, JULY 7, 2004 - Leucadia National Corporation (LUK - NYSE and PCX) submitted the following letter to Plains Resources Inc. (PLX - NYSE) proposing that Plains Resources Inc. remain a public company with changes in its management, governance, and capital structure and also announced that Pershing Square, L.P. has indicated that it intends to vote its 1,258,500 shares of Plains Resources common stock against the merger. "Via Facsimile (832) 239-6210 Original to follow via FedEx July 7, 2004 Plains Resources Inc. 700 Milam Street, Suite 3100 Houston, TX 77002 Attn: The Board of Directors Gentlemen: We have given considerable thought to the $16.75 Transaction and other alternatives available to shareholders and have concluded that shareholders' interest would be best served if Plains Resources Inc. ("PLX") remained a public company with changes in its management, governance, and capital structure. Assuming our proposed changes are implemented, we believe the prorated equity value to shareholders of the below proposed recapitalization to be approximately $20.91 per share. First, we would propose that Mr. William M. Hitchcock be named Chairman of a newly constituted board of PLX that would include Mr. Greg Armstrong, the current Chairman/CEO of Plains All American Pipeline, L.P. ("PAA"), one shareholder representative, and four newly appointed independent directors. Mr. Hitchcock has clearly proven that he is independent-minded and focused on shareholder interests and we would welcome his stewardship of PLX. Second, we would propose that Mr. Greg Armstrong be given the opportunity to be CEO of PLX. It is evident to us that Mr. Armstrong by virtue of his position at PAA should be CEO of PLX and a member of its board of directors. This would put effective operating control of the GP in the hands of the management of PAA, PLX's principal operating subsidiary. In our opinion, this alignment of interests between PLX and PAA would then be far superior to the $16.75 Transaction wherein financial investors are the primary controlling shareholders of the GP. We would also suggest that Mr. Armstrong, and perhaps other members of PAA's senior management team, receive equity-based incentive compensation for serving as CEO and a board member of PLX. Third, with respect to the limited operating functions of PLX, we would propose that PLX enter into an administrative service agreement whereby these functions could be managed and administered by PAA on market terms. We believe that PLX's existing overhead could be reduced to $2.0 million or less as a result of these changes. Fourth, we would propose that PLX borrow $175 million (we expect these funds could be raised on the same terms as the senior-secured Vulcan Energy financing which was recently rated by S&P and Moody's) and commence a tender offer to purchase approximately 10 million PLX shares at $17.00 per share. This borrowing and share repurchase will accomplish a number of important objectives: o We believe that there are a substantial number of shareholders who may desire liquidity for their shares. The repurchase would provide liquidity to selling holders at a premium to the $16.75 Transaction. Pershing Square, L.P. has agreed not to tender its 1.259 million shares in the repurchase increasing the available liquidity for tendering shareholders. We believe that the tender will be more than sufficient to buy out those shareholders who want liquidity for their shares. o Because PLX would have $65 million less leverage than in the $16.75 Transaction and may be managed by Mr. Armstrong, we believe that both PLX's and PAA's credit profiles would be substantially improved under this scenario when compared with the $16.75 Transaction. o The company's leveraged equity would provide attractive after-tax free cash flow yields to investors. Assuming that all 10 million shares are repurchased in the PLX self-tender, we estimate that PLX's after-tax free cash flow per share (excluding transaction expenses) in 2005 would be approximately $1.58 per share growing to approximately $2.00 per share in 2006. We believe it is reasonable to expect continued substantial after-tax free cash flow per share growth, assuming PAA continues to achieve its stated growth objectives o Perhaps most importantly, we believe the new capital structure would provide substantially greater value to those shareholders who did not tender. We estimate that if the share repurchase is fully subscribed, and if post-tender PLX trades at our estimated 15 times multiple of 2005 after-tax free cash flow per share, PLX stock will trade for $23.70 after the share repurchase. In light of the growth characteristics of PLX's free cash flow per share, we believe that a 15 times multiple is a conservative expectation of PLX's post-buyback stock price. As a result, we would value the prorated equity value to shareholders of this proposed recapitalization at $20.91 per share. We believe the above proposed changes to PLX's management, governance, and capital structure would not require PLX to pay a break-up fee to Vulcan Energy under the terms of the existing merger agreement, conserving shareholder resources. In substance, the above proposed changes would allow existing PLX shareholders to choose between investing in a newly reconstituted PLX with nearly identical economics to the $16.75 Transaction, but in this case on Vulcan's side of the deal, or alternatively selling their stock at $17.00 per share, a premium to what can be obtained in the $16.75 Transaction. The repurchase transaction would not require a shareholder vote, could be consummated promptly after the failure of the $16.75 Transaction vote, and does not have any tax or other complexities. We look forward to your thoughts. Cordially, Ian M. Cumming" Leucadia National Corporation is a holding company engaged in a variety of businesses, including telecommunications (principally through WilTel Communications Group, Inc.), healthcare services (through Symphony Health Services, LLC), banking and lending (principally through American Investment Bank, N.A.), manufacturing (through its Plastics Division), real estate activities, winery operations, development of a copper mine (through its 72.5% interest in MK Gold Company) and property and casualty reinsurance. Leucadia beneficially owns equity interests representing more than 5% of the outstanding capital stock of each of the following domestic public companies at April 30, 2004 (determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934): AmeriKing, Inc. (6.8%), Carmike Cinemas, Inc. (6%), The FINOVA Group Inc. (25%), HomeFed Corporation (30%), International Assets Holding Corporation (15.5%), Jackson Products, Inc. (6.2%), Jordan Industries, Inc. (10.1%), Metrocall Holdings, Inc. (9.6%), and ParkerVision, Inc. (6.3%). 2 -----END PRIVACY-ENHANCED MESSAGE-----