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men were aware that VALC's servicing agreement with Imperial was
causing Silbernagel to receive "a lot of flack" from WESAV. They
knew that FAMC had not yet begun servicing loans, and they
understood that FAMC would have to secure the appropriate business
licenses, a fidelity bond, and various insurance policies prior to
commencing loan service for Imperial.
Leste and Moore agreed to acquire the stock of FAMC, and they
executed an agreement with VALC on February 25, 1988. Pursuant to
this agreement, Leste and Moore each paid $10,000 to acquire all
the outstanding stock of FAMC, and thereafter they became equal 50-
percent shareholders of FAMC. In addition to the amounts paid for
FAMC's stock, Leste and Moore each contributed $10,000 to FAMC's
working capital to be used in acquiring office furniture and for
other expenses associated with getting the business started. After
purchasing the stock of FAMC, Leste and Moore served as the
company's chief financial officer and president, respectively.
At the time Leste and Moore purchased the stock of FAMC, the
company had not yet obtained the fidelity bond and insurance
policies required pursuant to the Imperial loan servicing
agreement. Although FAMC began servicing some large loan pools for
Imperial in April 1988, FAMC's failure to obtain the fidelity bond
and insurance policies resulted in a somewhat precarious
relationship with Imperial. In September 1988, Stephen M. Wright
(Wright), Imperial's senior vice president, wrote to Moore
requesting that the fidelity bond and insurance requirements be
satisfied within 30 days or "I will have no choice but to consider
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