Shortly after I had obtained control of Pro Arts in June of 1979, my first priority was to establish a direct company contact with the K-Mart Buyer, Don Edel, in the Troy headquarters.

Since K-Mart had severely neglected the service aspect of our poster racks in their stores, I felt that our own service representatives would be in the best interest of the company. After all, Western Graphics was servicing their racks in the K-Mart chain, why should Pro Arts be deprived of this function? We supposedly had fifteen times the number of permanent displays in the chain as compared to Western.

When I first met Don Edel, he seemed like a mild mannered reserved gentleman. I later changed this opinion because he was perhaps the one person that could have saved Pro Arts in its final chapter prior to filing bankruptcy under Chapter 11.

Edel not only refused to allow Pro Arts to service its poster racks, but restricted popular posters from their store distribution!

While Western Graphics had been allowed to sell Loni Anderson in a bikini bathing suit, our Morgan Fairchild poster in a one-piece bathing suit was totally forbidden to be in the stores. When I asked Edel why he was discriminating against Pro Arts, he replied that he was the Buyer and if that Fairchild poster appeared in any K-Mart Store, it would be last Pro Art poster to be allowed in their stores!

While the Morgan Fairchild poster was semi-successful in all our other accounts including Zayre, Gold Circle, Fisher Big Wheel and other similar giant discount stores, the lack of distribution in 1,800 K-Mart stores contributed to the poster not selling over 1,000,000 copies!

With the Dallas series and other similar licenses from television series, Pro Arts was keeping its head above water. It wasn't until Pro Arts got the Strawberry Shortcake poster rights from American Greeting Corporation that the company appeared to be making its comeback. American Greetings is such a huge corporation that their ability to inject posters into their distribution often took nine to twelve months from the date they decided to make the poster. Pro Arts on the other hand could manufacture and distribute the poster within two weeks from receipt of their approved art!

With key sales representatives that I had set up prior to Mike becoming the head of the sales department, I rallied Mark Goldstein from Ohio, Charlie and Paul Kaye from Michigan (K-Mart being their biggest account) and Kenny Framer from New England to push the Strawberry Shortcake poster into their retail outlets.

Within four short months, the company again sold over 1,000,000 Strawberry Shortcake posters and was at least leveling off in its downward trend.

But in June of 1981, K-Mart started returning poster racks and posters freight collect to our warehouse!

Our policy with every retail store was very simple. Pro Arts paid the freight into the stores and the stores paid the freight back to Pro Arts. This was on all posters, racks and merchandise. The poster racks were never sold to the stores but placed on loan for their use in selling ONLY PRO ART POSTERS.

The returns from K-Mart on our poster racks were very disheartening. The store managers often neglected to protect the rack and posters and would rope the pages together while taping the front of the rack with duct tape and corrugated sheeting usually cut from a discarded carton on a refrigerator or major appliance.

The fact that a great deal of the racks had other companies' posters displayed on the pages and returned for Pro Arts credits was also very upsetting!

K-Mart would return $50,000 worth of posters freight collect and purchase $25,000 new posters for those stores still using the racks. They would deduct credits from our cash accounts receivables and ultimately reduce their payables prior to paying the old money due our company.

Our cash flow was unpredictable and when we questioned their charge backs, they would delay payments until our records agreed with their records!

Our agreement with K-Mart was identical to all our other rack accounts. They could exchange none selling posters for either new posters or posters selling in their displays. If the store returned 100 posters, that store was obligated to purchase at least 100 posters on the exchange.

Yet, K-Mart elected to use their entire store purchases to off-set return racks from stores no longer carrying the poster racks and posters.

Pro Arts had paid an average of $75.00 to freight each rack to the 1,800 stores of K-Mart. Now K-Mart was charging back the racks and freight against open invoices. While they owed Pro Arts over $500,000, the fact that the charge backs were disputed did not prevent K-Mart from applying the charge backs to the open invoices.

Each month, Pro Arts was losing money on the K-Mart returns.

On November 10, 1981, Bill Hale, our new Central Bank account executive, came to our office with another Central National Bank representative.

Our previous Central National Bank representative had been terminated because Central National Bank was in deep serious trouble and cut backs were constantly happening at the bank.

Hale had come to the company about a week earlier introducing himself as our account executive. He was a milk toast wimp of a man. He was very uneasy and appeared to have a great deal of pressure on this shoulders.

He reminded me of Don Knotts on the Steve Allen "Tonight Show."

My first meeting with Hale was a short not too involved meeting. This meeting with the additional Central Bank representative appeared to be more intense.

It turned out that the additional representative was Rexford Hyre, the bank's legal consultant. I was not sure if he was an attorney or just a consultant. He pounded his fist on my desk making demands on our loan!

Hale informed both John and me that the bank was not too happy about our loan and that the bank was going to withhold $5,000.oo each week until our $300,000.oo accounts receivable loan was reduced to zero! Here we were told by Bill Fee in the Central Bank headquarters that our loan would not be reexamined until mid-January of the following year and now the bank was going against their promise!

It was later reported that Central National Bank had lost over $92,000,000.oo in the bond market and that had occurred in November of 1981. The bank was calling Art Modell's loan for $2.4 million and Bobbie Brook's Loan at the same time they were dragging our loan down!

Modell owned 100% of the Cleveland Indian's Stadium and 51% of the Cleveland Brown's Football team. So Modell arranged to sell the stadium to his football company for $4,000,000.oo and pay off Central Bank. Unfortunately a minority shareholder in the football company did not like the deal so he sued Modell on the "conflict of interest" in order to have the deal rescinded. Nearly four years later, Modell repurchased the stadium for the $4,000,000.oo and re-sold it for $6,000,000.oo! The shareholder did not like that deal either! The Judge said he could not have it both ways. If the deal was a bad deal to begin with, then Modell's repurchase of the stadium was mitigating the damages to the shareholder. If the resale was a good deal for the shareholder, then the original deal was a good deal also and that suit should never have been filed! Needless to say Modell came out smelling like a rose and the minority shareholder lost out.

I illustrate the events so that you will have an idea of the circumstances under which we were operating. The interest rates had climbed to 21.5% on Prime and we were paying 2.5% over the prime rate! Pro Arts paid nearly $1,000,000.oo in interest from 1979 to November 1981! Those individuals that are crying about a 2.5% interest rate on today's Money Market (May 1993) were the same individuals proudly exclaiming their tremendous good fortune in November 1981! Yet, the economic disaster that started then is now the ruination of our present economic future.

I threatened Hale and Hyre with Chapter 11 if they were to take the approach of reducing our loan, but all the cards were in their hands. We had agreed earlier to allow a "Lock Box" to be set up at their bank with all our account receivables going directly to their office. We would draw against the funds as they were deposited, but the bank could withhold deposits and apply them to their outstanding loan. This they did without hesitation!

John was trying to calm me down since I was very upset with both Hale and Hyre. When I asked Hyre for his card, I discovered that he was the Legal Counsel for Central National Bank. It was then that I realized that the bank had made the decision to drag the loan down prior to them even coming to the company that day!

On November 13, 1981, Hale calls John and tells him that it is "official," the bank would start dragging down the loan at $5,000.oo each week. This loss of working capital at this late date will drive us to Chapter 11 unless we could get another bank to take Central National out of the picture.

It was also Friday the 13th! Looking back, I can honestly say that many special events occurred to me on Friday the 13th. Not all bad things, but it has always been a day that I approach with apprehension and curiosity.

It was also at this time that the K-Mart returns were overwhelming us. K-Mart had sent out a bulletin stating that any store not happy with the program could ship the rack and posters back to the company and take a credit for the return! They could ship the racks freight collect and charge us back on the freight charges.

When I relayed the distress to Paul Kaye in Troy, he said that he could do nothing. When I told Paul about the bank dragging the loan down, he said he would try and get a bank in Troy to take out Central National.

Later, in a discussion with Paul Kaye regarding a conversation between the banker in Troy with Gary Hallman of Old Phoenix National Bank, I was informed of Hallman's attitude.

It appeared to Paul that the bank did not want to do anything to help us in our situation. On the contrary, Hallman had smugly commented to the Troy banker that Old Phoenix had everything liened "including the kitchen sink!" Hallman's attitude was no even slightly helpful to our efforts. In fact, Paul said the conversation turned off the other banker immediately. Paul should have known because he was listening in on the extension at the bank when Hallman smugly butchered our company.

I was talking to Paul Kaye almost daily. Even though we owed Paul over $50,000.oo in Commissions on the K-Mart account, he was still sincerely interested in our well being. He was sticking with us through thick and thin. I told him that I would have to go to K-Mart and appeal to Edel so that there could be a more reasonable withdrawal on the product line. Paul said that he would resign from our board of directors and resign the line so that any friction on the account would not hurt him with his other numerous product lines in K-Mart.

From early October of 1981 to the present, Steve Adler from MCA Universal Studios had been calling me to come to Hollywood. He was excited about a new movie that would come out in the Spring of 1982 and we would get the poster rights to it. With Central National taking $5,000.oo each week, I could not even afford the airfare to Los Angeles let alone discuss up front money for this movie due out in May of 1982.

I had about a half dozen good poster licenses with MCA including the rights to Magnum P.I. with Tom Selleck. I felt certain that I would get the movie if I could just hang in there.

John and I were interviewing attorneys to represent Pro Arts in the event we were down to the last step prior to filing Chapter 11. We interviewed Mel Obenhour in Akron and even though we knew him to be very honest and reputable, our attorney, Stanley Aronson also from Akron, wanted us to hire Roetzel & Andress and their partner George Anthony Dietrich.

Stanley Aronson had been recommend to my brother Mike by Mike's Hair person. It appeared that Mike and Stanley had the same person working on their bald spot and Aronson had always talked a good game when it came to the law.

Aronson had supposedly acquired the reputation as an attorney that "goes for the jugular" every time he takes a case. So Mike felt that Aronson would be the right attorney to handle the K-Mart situation if indeed it got to the point where a lawsuit was inevitable.

I had called Edel in late November to meet with him as soon as possible. The sooner the better as the returns were now coming back four and five stores each day! Edel set the meeting for 9:00 AM December 7th! What an appropriate day, Pearl Harbor Day!

Our accountant Andy Finger asked John and me to meet him at Marvin Sickerman's office in Cleveland the same afternoon at 3:00 PM so we could discuss our alternatives after my meeting with K-Mart.

Each week, Central National was taking their $5,000.oo from the week's collections. By December 7th, the bank had reduced the loan to $285,000.oo and the representatives were calling and asking about their commissions. John and I had been making the Real Estate Loan payments to Old Phoenix National Bank to keep the loan current. Yet, each week there was less cash to work with.

Even though I had severe automobile problems, I arrived at K-Mart on time.

When I met with Edel, he was very aloof and distant. He declined talking and only responded when I ask him a question and then it was a short answer.

I told Edel about the returns, the charge backs for freight, the damaged condition of the racks and the competition's posters that were in the racks when then were returned. Edel stated that the sales were a guaranteed sale and not a guaranteed exchange. Additionally he denied the freight return policy in that K-Mart was responsible for return freight charges!

Even though Edel had agreed in July to allow Pro Arts to service our racks, he sent a memo authorizing the return of rack and posters from the stores that did not do well with the posters because of lack of service!

The fact that many stores had "lost" our rack did not concern Edel. The fact was that the store had destroyed the rack or given it to an employee to use as a stereo cabinet in their home!

I also learned that Western Graphics had increased their store count from 125 stores at the test to over 450 stores that they were servicing! Additionally, Edel had determined that our posters were not selling very well especially since he limited our products and did not allow our racks to hold our best posters.

It was here that I asked if we could end our business relationship so that neither of us lost any money and Pro Arts would have a chance to survive the return problem.

I had just released four new Strawberry Shortcake posters and suggested that if K-Mart gave us a blanket order for $320,000.oo in promotional display units, K-Mart could keep the poster racks, sell off the posters in the racks and destroy the racks after they were empty. Edel said that he would think about it, yet I could feel that he was reluctant to agree.

I was finishing my presentation and said to Edel that I felt that K-Mart was doing to Pro Arts what the Japanese Navy had done to the United States.

Without the possibility of a promotional order to set off the returns, Pro Arts would file Chapter 11 and sue K-Mart as the contributing factor.

It was here that Edel asked Mr. David Haarz, their legal counsel, to come to his office. Haarz seemed like a "pleasant man," but he was strictly a K-Mart employee all the way.

After I again related the circumstances to the situation, I told him that I was going to meet with Sickerman at 3:00 PM in Cleveland to discuss this K-Mart meeting and Pro Arts legal direction thereafter.

He defended the K-Mart position and I told him that I would like an answer to my request for a $320,000.oo order as quickly as possible. I stressed that the savings in freight on the remaining racks would be $60,000.oo to K-Mart. He of course declined to comment on anything before he could discuss it with Edel.

With additional car problems on the way to Cleveland, I finally arrived at Sickerman's office to catch the tail end of their meeting. I briefed them on K-Mart and was informed that Sickerman could not represent Pro Arts since he had been representing Old Phoenix National Bank on other situations. It is interesting to note that Sickerman had obtained "inside information" about Pro Arts' possible plans of filing for protection under Chapter 11 before he disclosed his relationship to us regarding Old Phoenix National Bank. Whether he had used this information and discussed it with Old Phoenix National Bank I do not know. But he should have said immediately that there was a problem in a possible conflict of interest prior to our discussion with him. I told them that Haarz would call me December 11 to give me K-Mart's answer on the poster promotion.

When I got back to the office, I called Paul Kaye and told him about the Edel meeting. He was going to Florida and said that he would keep his ears open for any K-Mart information. Though Paul was no longer representing Pro Arts, he was involved since any lawsuit against K-Mart would definitely involve him.