I.              SUMMARY OF THE LITIGATION

On November 27, 2000, a lawsuit was filed against Allstate Insurance Company (and related entities) on behalf of former and current claims adjusters of those companies who have worked in California in connection with the adjusting of property damage and/or bodily injury claims.  The case seeks recovery of overtime pay and penalties which plaintiffs contend are owed to all present and former claims adjusters who adjusted claims in California from November 27, 1996 to December 31, 2004.  The matter has been litigated before the Hon. Anthony J. Mohr, Judge of the Superior Court of the State of California for the County of Los Angeles (hereafter, the “Court”).

On August 23, 2002, the Court certified this matter as a class action over the objection of Allstate.  Class notice was sent to all potential class members at their last known address (as provided by Allstate) via first class U.S. Mail.  Thereafter, on April 21, 2004, the Court entered its order granting the plaintiff class’ motion for summary adjudication of liability and determining that the members of the plaintiff class were and are non-exempt employees entitled to overtime compensation.  That decision of the Court could have been the subject of an appeal if the matter was litigated through trial.  On January 19, 2005, again over the objection of Allstate, the Court further certified this matter as a class action for the determination of damages.

During the course of this litigation, attorneys for the plaintiff class and attorneys for the defendant have engaged in mediation with an experienced mediator who is a former justice of the California Supreme Court.  In addition, counsel for the parties have engaged in numerous discussions in an attempt to resolve this matter.  The parties have reached an agreement to settle this matter, subject to the approval of the Court.