Allstate (ALL)

Nonqualified Stock Options.

        Generally an employee will not have any taxable income and we are not entitled to any deduction on the grant of a nonqualified stock option. Upon the exercise of a nonqualified stock option, (or, generally, upon the exercise of an incentive stock option followed by a disqualifying disposition, described below), the employee recognizes ordinary income equal to the excess of the fair market value of the shares acquired over the option exercise price, if any, on the date of exercise. We are generally entitled to a deduction equal to the compensation taxable to the employee as ordinary income, except to the extent such deduction is limited by applicable provisions of the Internal Revenue Code. Any such income is also considered wages and, as such, is subject to

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income, Social Security, and Medicare taxes. If an employee disposes of shares of our common stock acquired upon exercise of a nonqualified stock option in a taxable transaction, the employee will recognize capital gain or loss in an amount equal to the difference between the employee's basis in the shares sold and the total amount realized upon disposition.

Nonqualified Stock Options.

        Generally an employee will not have any taxable income and Allstate is not entitled to any deduction on the grant of a nonqualified stock option. Upon the exercise of the nonqualified stock option, (or, generally, upon the exercise of an incentive stock option followed by a disqualifying disposition, described below) the employee recognizes ordinary income equal to the excess of the fair market value of the shares acquired over the option exercise price, if any, on the date of exercise. Allstate is generally entitled to a deduction equal to the compensation taxable to the employee as ordinary income. Any such income may be subject to federal income, Social Security and employment tax withholding. If vested portions of non-qualified stock options are transferred under the limited circumstances allowed by the plan, any taxes payable upon a transferee's subsequent exercise of the option remain the obligation of the employee, the original option holder.