Mr. Gordon Page 2 M. Baxter, -— Jan. 4, 194A. I have given the to and,as matters, a deal great I do first, of not to thought it thik two these presents a very serious question. I cannot say that a license fee reduction is in order on the 37 mm., but I think this is a matter that should be brought to the attention of the Messrs. Browning with the idea that some consideration be given to the question of whether or not the $60.00 royalty should or can be reduced somewhat to bring the royalty, on the percentage basis, in closer alignment with the royalty on the what machine I the guns. am not cost to clear the in my mind Government is at the on 37 present mm. time machine guns, but I am sure the Brownings have rather accurate information on this. The reduction of royalty on the 37 mm. will and may have some bearing on the renegotiations for 1943 as it will affect profits, and consequently if any adjustment is in order and can be made, it would be better, in my judgment, to do it voluntarily and prior to the institution of any renegotiation proceedings for 1943. The other point, that is, the matter of the Govern- ment buying Colt's capacity is much more difficult to ceal with, but its effect is not and cannot be retroactive and consequently it bears only on the future and cannot affect 1943 renegotiation. Furthermore, it is a matter which concerns Colt'ts much more directly than it does Brownings, although Browning's royalties are directly tieda to Coltts production. questions, In view of I think this it being would be the more desirable serious to of initiate the two and bring to a conclusion the proceeding for renegotiating 1943 as promptly as possible. I say this in order to get the benefit of the attitude of mind concerning these questions which have just resulted in a clearance for the year 1942. I am not sure whether we can initiate the proceedings, but certainly the groundwork has been laid and it might well be that we can go in at an early date with the new figures and enjoy the benefits of the conclusions of the St. Louis Board and the Washington representatives which were recently reached in St. Louis. If this can be done and some adjust- ment of excellent the 37 mm. position Such - Sideration of royalty to was secure a hearing might the requirement a made, we would be in clearance for the year an 1943. precipitate an immediate conto buy Colt's capacity, yet the