The conspirators first made a deal with Old Phoenix National Bank regarding our Real Estate. In order for Pro Arts to continue with its operation, it was very necessary to keep its present building locations.

Though Pro Arts had paid the first five months of post-petitioned rents to our Partnership, JMT, from June of 1982 through June of 1983, nothing had been paid on the rent.

Under bankruptcy law, a confirmation plan must be feasible or the company will ultimately return to Chapter 11 for additional protection.

It was important for the new owners of Pro Arts to have the buildings in order to maintain their regular business. To move Pro Arts after the confirmation of the plan was impossible. It would require at least six months to move the inventory and equipment alone. With the overhead and the loss of sales, Pro Arts would not survive. So the company had to stay in the buildings.

Yet, Bedell and the new investors did not want to pay John, Mike or me the back rent of $150,000 to remain in the building. Furthermore, the new rent from Bedell and Angona would more than double the present existing rent of JMT! Instead of paying about $6,500.oo per month, the new rent was almost $15,000 per month!

Under Chapter 11 Rules, the Debtor MUST HAVE AN ARRANGEMENT WITH THE LANDLORD PRIOR TO THE CONFIRMATION HEARING AS TO HOW THE POST-PETITIONED UNPAID RENTS ARE GOING TO BE PAID.

It was Bedell's and Angona's plan to string John, Mike and me along on the real estate deal up to and including the confirmation hearing before pulling out of the deal.

As Old Phoenix had the foreclosure pending in Judge Baird's Medina Common Pleas Court, they thought that it would only take a few weeks for Old Phoenix to become the Receiver of the property because John, Mike and I failed to pay the $76,500 which was needed to cure the default on the real estate loan!

Hallman, Bramley and Schwemler continued to stress the fact that Old Phoenix would not accept the plan unless both the equipment loan AND THE REAL ESTATE LOAN WERE CURRENT ON THEIR BOOKS.

This assurance gave John and me the force needed to either collect the back rents or sell the real estate to Bedell and Angona.

Old Phoenix had accepted the new amended plan without the real estate loan being current. John and I did not know this.

It was now the bank's plan to obtain the real estate and enter into a new agreement with the new company.

Under the Chapter 11 rules, the rent had to be paid!

Little did John or I know that the bank was working with the other conspirators since we felt that the bank wanted both loans cured.

Old Phoenix was in serious trouble. Hallman and Bramley needed Pro Arts to confirm its plan so that the new investors' money would come into the company and pay down the equipment loan of $500,000.oo!

Since Hallman stated at the Shareholder's Meeting in May that he relied upon the D.I.P. Reports for his information about Pro Arts, Hallman knew that Bedell and Angona had neglected to pay the IRS the withholding due the IRS.

Hallman also helped Stewart "kite" a check for $5,300.oo in February in order for Pro Arts to make its payroll.

The most damning incident was the return of nearly $50,000 in bad checks to Old Phoenix before the Confirmation Hearing. A $25,000 check hit Hallman's office on June 9th, the very day before the hearing!

Old Phoenix needed the new money in Pro Arts as badly as Bedell, Angona and Dietrich needed the money.

Since Dietrich and Stewart never set aside any money for the payments of the post-petitioned rents to John, Mike and me in the testimony given by Stewart at the Confirmation Hearing, Dietrich, Bedell and Angona had already made their deal with the bank prior to the hearing.

Ever since Medina County filed its objections to the payment schedule of Pro Arts on March 18, Stewart and Dietrich kept giving Happ more and more concessions.

In the Pro Arts verses Hustler Magazine lawsuit, Happ and his associate, Bruce Hadden of Columbus, were only to receive 40% of the entire amount of money that Pro Arts was to receive. But Dietrich allowed Happ and Hadden to obtain a "new" agreement which included their attorney's fees and the 40% originally promised by Pro Arts.

In April of 1983, Stevenson and Dietrich filed a notice with the bankruptcy court to "keep the Billie the Bear management contract and the merchandising contract." This was another signal to Happ that Pro Arts intended to keep Billie the Bear until after the plan was confirmed.

As a contract, Billie the Bear could have been sold at time of liquidation to a willing buyer. The buyer would have had to stick to the letter of each agreement, but the value of the bear was well worth keeping the contract.

Though Happ's office filed an objection to the plan, White would dismiss the objection. Happ's office could then elect to appeal White's dismissal. The appeal process could keep Pro Arts' investors from putting money immediately into the company for fear of having the plan unconfirmed.

Happ only needed to "threaten the appeal" in order to extract everything Happ wanted at time of confirmation.

Stewart had met with Happ's mother and tried to appease her on her effort to get Billie the Bear back into her control.

I am sure that a deal was "probably struck" to release Billie after Pro Arts came out of Chapter 11. This would keep Greg Happ from appealing the plan.

Shortly after the Plan was beyond appeal, Mrs. Happ received all the art and contracts from Pro Arts without surrendering one penny!

With the County and the Bank in the Conspirators' back pocket, Dietrich, Bedell and Stewart had to deal with Macon and Treffinger as well as Mihalik, Doughty and Useloff.

These two lawsuits could appeal the plan even though Judge White might find in favor of Pro Arts.

Pro Arts was in a very desperate situation. Without immediate cash put into Pro Arts, the company would not survive another two weeks.

John and I were told by Dietrich that any pending lawsuit against Pro Arts prior to filing Chapter 11 could be brought into Bankruptcy Court and heard by the Judge.

If the judge decided to throw the case out or not find Pro Arts guilty of the claims made against it, the Judge could confirm the plan and not allow anything for the lawsuits.

Now, the suits would be appealed and this would delay the confirmation. With the court's docket as full as it is, the case might not be heard for three to four months!

It would not be necessary for Mihalik or Treffinger to win their appeal; the delay in confirmation would have the same effect as if they had won their case!

Pro Arts would be out of business in either event!

David Best, another Roetzel & Andress attorney working for Dietrich, had begun negotiations with both Mihalik's attorney and Treffinger's attorney to "settle" their claims against Pro Arts without settling their claims against John, Mike and me.

While Pro Arts owed real honest creditors $1,000,000.oo in unsecured debt, Best had elected to give both Mihalik and Treffinger $500,000.oo if they agreed to drop their action against Pro Arts.

Instead of $1,000,000.oo in Creditors dividing up the $100,000 cash settlement, now there would be $2,000,000.00 in creditors to divide up the $100,000.oo cash settlement.

The honest creditors would now receive 5 cents on the dollar instead of 10 cents on their dollar.

Additionally, the honest creditors would only receive 25% of the money obtained in Pro Arts' lawsuits instead of the original 50%. (Mihalik and Treffinger would each receive 12 1/2% as part of their settlement)

After a few weeks of negotiations by Best with the other attorneys, Best obtained a "tentative settlement" of both lawsuits against Pro Arts without settling the suits against John, Mike and me.

The conspirators had agreed in September of 1982 at the time John and I gave Bedell and Angona control of Pro Arts NOT TO SETTLE THESE TWO LAWSUITS. And if they did settle these lawsuits, it had to include Mike, John and me as well! The conspirators in a last ditch effort, chose to throw John, Mike and me to the "wolves!"

As this "tentative settlement" was proposed and accepted at the end of April 1983, it prompted me to call a Shareholders' Meeting the first week of May to address all the problems, which John and I felt were destroying Pro Arts and our families.