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Silbernagel was to receive $8,000 per month during the term of the
agreement.
Despite VALC's and Silbernagel's noncompetition agreement with
WESAV, VALC entered into a mortgage servicing agreement with
Imperial Savings Association (Imperial) on November 4, 1987.
Pursuant to that agreement, VALC agreed to service loans purchased
by Imperial in bulk from other lenders; the agreement was
prospective only and no loans were being serviced at the time the
agreement was entered. The agreement required VALC to obtain all
necessary business licenses, a fidelity bond protecting against
losses caused by improper employee acts, and various insurance
policies naming Imperial as the beneficiary.
In response to concerns raised by WESAV regarding VALC's
covenant not to compete with WESAV, the servicing rights and
obligations under the Imperial agreement were assigned to FAMC on
December 12, 1987. At that time FAMC was not an active business
entity and had been a dormant subsidiary of VALC since it was
incorporated in 1986.
Shortly after the assignment of the Imperial contract to FAMC,
and to further alleviate concerns over his covenant not to compete
with WESAV, Silbernagel approached petitioners James Leste (Leste)
and Richard Moore (Moore) to determine whether they would be
interested in buying the stock of FAMC and operating the company as
an independent loan servicing organization. Leste and Moore joined
VALC in 1985 and held the positions of vice president of finance
and senior vice president in charge of lending, respectively. Both
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