Diamond Claims & Investigation Services, Inc. - Page 10

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                    9.   Plaintiffs Peter and Shirley Diamond are                     
               entitled to recover their lost income, including loss                  
               of profits from ETS, and increased expenses, arising                   
               from defendants' fraud and breach of their agreement                   
               with plaintiffs.                                                       
               In the pretrial order, FIG denied all of the plaintiffs'               
          allegations, including the foregoing, and alleged, inter alia,              
          that the Diamonds were not entitled to recover any damages on               
          account of claims against FIG that properly belonged to DCI.                
               Proceedings Before and Rulings                                         
               By the District Court                                                  
                    Imposition of Sanctions                                           
               At the conclusion of the pretrial discovery period in the              
          Farmers lawsuit, the plaintiffs filed a motion (motion for                  
          sanctions) in which they alleged that FIG had committed various             
          discovery abuses and requested that the District Court enter                
          sanctions against FIG by striking FIG's amended answer and                  
          counterclaims, entering a judgment in favor of the plaintiffs,              
          and awarding attorneys' fees and costs to the plaintiffs.  On               
          September 9, 1986, the District Court issued an order (order)               
          granting the plaintiffs' motion for sanctions and indicating that           
          it would enter a default judgment in favor of the plaintiffs                
          following an evidentiary hearing (damages hearing) to determine             
          the amount of damages that they suffered.                                   
                    Damages Hearing                                                   
               On October 21 and 22, 1986, the District Court held a                  
          damages hearing at which the plaintiffs presented evidence with             

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