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On March 23, 1989, Chesapeake entered into a credit
agreement with Chase Manhattan Bank, N.A. (Chase Manhattan),
pursuant to which Chase Manhattan agreed to make loans to
Chesapeake from time to time in an aggregate principal amount not
to exceed $14,100,000. A general security agreement and a
promissory note were also executed on that date between
Chesapeake and Chase Manhattan in connection with the borrowings
under the credit agreement. Chesapeake borrowed a total of
$13,424,443.37 from Chase Manhattan under the credit agreement.
During 1989, Chesapeake acquired certain assets of Tec
Media, Inc. (Tec Media). As part of the consideration for this
purchase, Chesapeake issued a note to Tec Media in the amount of
$506,000.
Chesapeake subsequently defaulted on its debt to both Chase
Manhattan and Tec Media. The defaults occurred prior to, and
were continuing on, August 7, 1991. On that date, Chase
Manhattan terminated its commitment under the terms of the credit
agreement and demanded that Chesapeake immediately pay the
outstanding principal amount of $13,424,443, together with all
interest thereon, as well as any other amounts payable under the
credit agreement and promissory note.
On January 14, 1992, a judgment in favor of Chase Manhattan
as plaintiff, and against Chesapeake as defendant, was entered by
the Supreme Court of the State of New York, New York County, in
the amount of $15,513,914.87. As of March 19, 1992, Chesapeake
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