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Plan of Liquidation and Dissolution

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PROPOSAL 2 - CONCLUSION OF THE LIQUIDATION

The second proposal to be acted upon at the 1992 Annual Meeting calls for the Liquidation to be concluded. As described below, the Board recommends that shareholders vote FOR this proposal.

Background of the Liquidation Plan

In August 1990 FAC entered into an agreement to sell Fireman's Fund, then FAC's principal operating business, to a subsidiary of Allianz Aktiengesellschaft Holding, with FAC retaining 95.2% of the capital stock of SOMSC and the substantial portfolio of common equity securities and certain other investments previously held by Fireman's Fund (the "Sale").

In light of the relative magnitudes of the values of the assets that FAC anticipated having after the Sale, the Board determined that tax and other legal and practical constraints would compel FAC to follow one of three courses: (1) FAC could have registered as an investment company under the Investment Company Act of 1940 (the "1940 Act"); (2) it could have attempted to sell a large portion of its assets and reinvest the proceeds in other operating businesses (or distribute all or part of them) within a year of receiving shareholder approval of the Sale in order to meet an exemption from the requirement to register as an investment company; or (3) FAC could have commenced to liquidate in an orderly manner and distribute the liquidation proceeds to its shareholders.

The Board chose the last course of action and on September 26, 1990, adopted the Liquidation Plan.

Recommendation of the Board; Reasons for Concluding the Liquidation

The Board, by unanimous vote of those present and voting at a meeting held on April 9, 1992, has determined that conclusion of the Liquidation is in the best interests of FAC and its shareholders and recommends to the shareholders that they vote FOR the proposal to conclude the Liquidation.

Vote Required for Approval

If Proposal 2 is approved by a majority of the votes actually cast with respect thereto (excluding abstentions and shares of Voting Stock not voted), the Liquidation will be concluded effective as of the date of the 1992 Annual Meeting.

No Appraisal Rights

Under the GCL, the holders of shares of Voting Stock are not entitled to appraisal rights with respect to the conclusion of the Liquidation.

Current Status of the Liquidation

FAC has substantially completed the Liquidation. Pursuant to the Liquidation Plan, during the period January 2, 1991, through April 8, 1992, FAC sold Fireman's Fund, repurchased and retired all outstanding shares of its Convertible Preferred Stock Series A, repaid all its outstanding short-term debt, repaid or redeemed all its outstanding long-term debt and repurchased and retired 17,384,011 Shares.

THE FUND AMERICAN COMPANIES, INC

PARENT ONLY CONDENSED BALANCE SHEETS

(in millions, except per share amounts)

Assets March 31, 1992 Dec. 31, 1990
Common equity securities and other investments436.0971.5
Short-term investments403.6225.9
Other assets3.0226.4
Total Assets1,580.63,792.6

The Liquidation Plan does not contemplate the liquidation of FAE, which is FAC's only direct remaining subsidiary. FAC's assets, exclusive of its investment in FAE, totaled $842.6 million as of March 31, 1992.

So that the Final Distribution can be consummated as soon as possible after the 1992 Annual Meeting, FAC is implementing the Final Distribution through a self-tender offer for up to 4,000,000 Shares at a net price of $70 per Share.

Awards Under the 1985 Long-Term Incentive Plan

In connection with its approval of Proposal 2, the Board considered whether shareholder approval of Proposal 2 would cause accelerated vesting of awards issued under the Incentive Plan.

Continued Operation of Source One

Source One engages primarily in the business of producing, selling and servicing residential mortgage loans. Its sources of revenue are mortgage servicing fees, net interest revenue, net gain on sales of mortgages and other revenue.

Common Equity Securities

The table on the following page summarizes Fund American's portfolio of common equity securities as of March 31, 1992, and December 31, 1990.

COMMON EQUITY SECURITIES

March 31, 1992 / December 31, 1990

Security Cost Market Value % of Total
The Louisiana Land & Exploration Company172.7149.923.1%
San Juan Basin Royalty Trust134.7108.216.7%
Permian Basin Royalty Trust99.985.113.1%
Murphy Oil Corporation85.575.611.7%

Federal Income Tax Considerations

The following is a brief summary of the principal Federal income tax consequences to FAC's shareholders of the proposed conclusion of the Liquidation.

Principal Terms of the Liquidation Plan

Pursuant to the Liquidation Plan, FAC has engaged in the transactions described in the Current Status of the Liquidation and will sell, exchange or otherwise dispose of all its assets during the Liquidation Period.

1. Adoption of Plan

The effective date of this Plan shall be the date on which it is approved and adopted by the Shareholders.

2. Sale of Assets

Within the Liquidation Period, FAC shall have the authority to engage in transactions appropriate to its complete liquidation, including the sale and other transactions described in the Proxy Statement.

3. Provision for Liabilities

Within the Liquidation Period, FAC shall pay or discharge, or set aside a reserve fund for, or otherwise provide for, all its liabilities and obligations, including contingent liabilities.

4. Distributions to Shareholders

FAC shall distribute its assets to the Shareholders to the end that, by the end of the Liquidation Period, FAC shall have distributed all its assets.

5. Transfer of Assets to Transferee Entities

If in the judgment of the Board such a course appears advisable, FAC may distribute assets to the Shareholders by transferring such assets to one or more partnerships, trusts, corporations or other entities.

6. Methods for Distributions to Shareholders

Any distributions made to Shareholders may be by way of pro rata dividends or other distributions of cash, securities or other property, tender or exchange offers, or repurchases or redemptions.

7. Dissolution

During the Liquidation Period and upon the determination of the Board, the Board currently intends to adopt a resolution deeming the dissolution of FAC to be desirable and to submit the dissolution to a vote of the Shareholders.

8. Amendment or Abandonment of Plan

The Board may modify or amend this Plan at any time without Shareholder approval if it determines that such action would be in the best interests of FAC or the Shareholders.

9. Termination of Plan

This Plan shall terminate if the Stock Purchase Agreement shall have been terminated prior to the closing of the Sale.

10. Authorization to Board and Officers

The Board and the officers of FAC are authorized to approve such changes to the terms of any of the transactions referred to herein, to interpret any of the provisions of this Plan, and to make other agreements and documents as necessary to carry out the provisions of this Plan.

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What a Plan of Liquidation and Dissolution Is

A Plan of Liquidation and Dissolution is a formal document that describes how a business will wind down operations, pay or resolve creditor claims, distribute remaining assets to members or shareholders, and complete statutory filings. It sets the effective date, identifies the liquidating agent or trustee, and outlines timelines for notice, claims procedures, tax filings, and final filings with the appropriate state authority. The plan provides a clear roadmap to minimize liability, document decisions, and create a paper trail that supports compliance during and after the wind-up process.

Why a Written Plan Matters for a Clean Wind-Down

A documented plan clarifies roles, preserves creditor rights, reduces litigation risk, and helps ensure statutory filing and tax obligations are met while providing a defensible record of decisions and distributions.

Why a Written Plan Matters for a Clean Wind-Down

Who Typically Prepares and Uses This Plan

Common users include corporate officers, LLC managers, trustees, and advisors responsible for winding up company affairs.

  • Corporate boards and officers who approve formal dissolution resolutions and supervise liquidation activities
  • LLC managers or members who appoint a liquidating member, approve distribution mechanics, and close member accounts
  • Attorneys and accountants who draft the plan, handle creditor notices, and prepare final tax and regulatory filings

Each stakeholder uses the plan to confirm tasks, certify approvals, and document distributions during the dissolution process.

Roles With Authority to Act

Authorized Officer

An authorized officer (CEO, CFO, or board-designated signatory) generally has corporate authority to adopt and execute the plan and sign filings; the officer must follow corporate bylaws and any shareholder approvals required by state law.

Liquidating Agent

A named liquidating agent or trustee handles asset collection, creditor communications, claims resolution, and final distributions. The agent must maintain records and may need separate bonding or authorization under state statutes.

Core Elements a Professional Plan Should Include

A professional plan is concise but complete, addressing governance, creditors, asset disposition, taxes, distributions, and final filings.

Adopting Resolution

A short statement showing who authorized the plan, citing shareholder or member approvals and the corporate or operating agreement authority for dissolution and liquidation.

Asset Inventory

A clear schedule of assets and ownership interests, including valuation approach and any liens or encumbrances that affect distribution order or available proceeds.

Creditor Notice Plan

Procedures for notifying known and potential creditors, including publication or statutory notice steps, the claims submission process, and internal tracking of responses.

Claims Resolution

A method for evaluating, admitting, disallowing, or subordinating claims and for preserving disputes for litigation or settlement, with timelines and appeal steps.

Distribution Schedule

Priority rules for paying liabilities, any accrued expenses, tax obligations, and the order and timing for distributing remaining assets to equity holders.

Final Filings

List of required state filings (articles/certificate of dissolution), final tax returns, and any de-registration or license cancellations to complete the wind-up.

Essential Data Fields to Include

Entity Name: Legal entity name as registered
Jurisdiction: State of formation and governing law
Effective Date: MM/DD/YYYY effective date
Liquidating Agent: Name and contact details
Asset Schedule: Summary of major assets
Distribution Rules: Priority and amounts

Step-by-Step: Filling Out the Plan

Follow a logical sequence: record approvals, compile liabilities and assets, set notices and timelines, finalize distributions, and prepare filings.

  • 01
    Adopt Plan: Document board or member approval and record meeting minutes.
  • 02
    Inventory Assets: List and value assets; identify encumbrances and title issues.
  • 03
    Notify Creditors: Send statutory notices and accept claims per the plan timeline.
  • 04
    File Dissolution: Submit required state filings after satisfying statutory prerequisites.

Digital Workflow Settings for Online Completion

Configure a simple eSignature workflow to route the plan, collect signatures, and retain a complete audit trail for compliance.

Field Configuration
Email notifications Enable carbon copy for trustees and counsel
Signer authentication Use email link or SMS code per sensitivity
Field validation Require MM/DD/YYYY and numeric amounts where applicable
Document template Lock critical clauses to prevent edits

Where to Send and What Happens Next

A typical route: prepare the plan, circulate for signatures, notify creditors, and file dissolution documents with the state after obligations are resolved.

  • Prepare Plan: Draft plan with exhibits and approval language
  • Assign Roles: Designate liquidating agent and responsible officers
  • Collect Signatures: Execute plan with authorized signatories and witnesses as required
  • File Final Papers: File articles of dissolution with the state secretary of state

Technical Considerations for Electronic Execution

Ensure your signing solution supports secure eSignatures, audit trails, and required authentication for document integrity and compliance.

  • File formats: PDF, DOCX supported
  • Integrations: Connectors for cloud storage and ERPs
  • Authentication: Email, SMS, or advanced methods

Typical Deadlines and Critical Timing Considerations

Key timeline elements vary by jurisdiction; plan ahead to meet notice windows, claims cutoffs, final tax returns, and state filing requirements.

Creditor notice window:

Statutory notice period varies by state; often 30–120 days

Claim response period:

Allow a defined cutoff date for creditor claims submission

Final tax filings:

File final federal and state tax returns by normal deadlines

State dissolution filing:

Submit articles or certificate of dissolution after wind-up

Record retention:

Preserve records per legal retention timelines

Key Milestones in the Liquidation Timeline

A high-level sequence helps track approvals, notices, claims handling, and final statutory filings until the entity is dissolved.

01

Adoption of Plan

Formal approval by board or members documented in minutes

02

Creditor Notification

Issue notices and initiate claims intake procedures

03

Claims Resolution

Review, admit, settle, or dispute submitted claims

04

Final Filings

File dissolution paperwork and distribute remaining assets

Common Mistakes to Avoid

  • Failing to verify signatory authority, which can invalidate filings and cause delays in state acceptance
  • Not providing accurate creditor notice or insufficient publication, leading to reopened claims or litigation
  • Mismatching entity names on filings and tax returns, triggering rejections or tax complications
  • Distributing assets before resolving valid claims, creating personal liability for officers or managers

Consequences of an Incorrect or Incomplete Plan

Personal liability: Officers may be liable for wrongful distributions
Tax penalties: Penalties for late or inaccurate returns
Filing fines: State penalties for incorrect dissolution filings
Reopened claims: Creditors may challenge distributions
Loss of protections: Corporate shield can be pierced for mismanagement
Invalid distributions: Returns or restitution orders may follow

Practical Examples of How a Plan Is Used

Two concise scenarios illustrate common approaches and the outcomes a clear plan supports during winding up.

Small LLC Wind-Up

A member-managed LLC adopted a written plan to list assets and creditors and appoint a liquidator.

  • The liquidator published notice and collected claims.
  • By documenting the process, the LLC avoided disputed distributions and completed state dissolution within sixty days, with final tax returns filed and records retained for seven years.

Corp Asset Sale and Close

A corporation sold major assets and drafted a liquidation plan to settle creditors and distribute proceeds.

  • Counsel supervised creditor notifications and tax clearances.
  • The documented claims process and signed distributions reduced post-dissolution disputes and supported final filings with the secretary of state.

Practical Tips for Accurate and Efficient Completion

Following best practices reduces errors, speeds processing, and strengthens the legal defensibility of liquidation actions.

Document approvals contemporaneously
Record board or member votes, keep signed minutes that reference the adopted plan, and store those minutes alongside the executed plan for auditability.
Use a named liquidator
Designate a single liquidating agent with clear duties and contact details to centralize creditor communications and settlement decisions.
Preserve audit trails
Retain electronic audit trails showing who signed, when, and from what IP or authentication method to support attribution and defend actions later.
Coordinate tax closeout
Engage tax counsel early to file final returns, obtain necessary state tax clearances, and avoid penalties for late or incomplete filings.

Frequently Asked Questions About Plans of Liquidation and Dissolution

Answers to common questions cover eSignature validity, notarization, signatory authority, retention, amendments, and creditor disputes.


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