Shortly after enrolling into elementary school, Billy becomes attracted to a third grade teacher named Veronica Vaughn, who initially ignores him. Nevertheless, Billy successfully progresses through his first two grades. He finds himself as one of Veronica's students in the third grade and earns her respect by standing up for Ernie, his friend and classmate. Billy becomes popular among the third graders and misses them as he advances through school. Billy's progress alarms Eric. Desperate to take over Madison Hotels, he blackmails Billy's elementary school principal, Max Anderson, into lying that Billy bribed him for passing grades, with a wrestling magazine containing pictures of Max's previous career as the "Revolting Blob", a masked wrestler who accidentally killed a man in the ring.