Dear Old Friend

Lucy, please save this whole tape. This is a tough letter to write and I may not get it right the first time. But I want to save any false starts, just for the record. No need to transcribe the false starts, if any. Just file the tape, after you type up the final version. The letter goes to Howard J. Faxton, at that Holiday Inn north of town. You can check the proper address. I'll want hand delivery on it.

If I don't get it right the first time, I'll leave a note on the machine with the index number of the final version.

Dear Howie. You might be able to guess that after you left the house the other night, Ruthie and I stayed up a long time and talked. It was quite a shock, having you come out of the blue after seven long years.

And, naturally, we were very upset to hear that Annabelle passed away over a year ago. Ruthie was quite hurt about your not letting us know. Remember, she gave up writing when Annabelle wouldn't write back. After all, the gals were the best of friends. But I suppose there comes a time when a woman has to be loyal to her husband. And it was pretty obvious at the time you and I split up that Annabelle had the strange idea that I'd given you a raw deal. You know that is not so, and I know it, and so does Ruthie.

All three of us had a little too much to drink the other night, and we finally started saying things that none of us really meant. The evening shouldn't have ended on that note.

After you left, Ruthie and I did some reminiscing, and she remembered a lot of things I'd completely forgotten. I'd forgotten how scared and edgy and insecure you and I felt back there in 1956, when we cut ourselves loose from Win-Tech and all that nice job security and set up as Ray-Fax, Incorporated.

One crummy little cinder-block building out on Route 181, eight grand working capital, two employees--four, if you count Ruthie (continued on page 220)Dear Old Friend(continued from page 99) and Annabelle. Those gals worked like dogs for no pay at all.

Those were the fun years, Howie. How many times did we nearly sink without a trace? I can count three times that first year. But then the contract from Army Ordnance got us over the hump.

I am perfectly willing to admit, anywhere, any time, that you are the fella that made it work. You are the wizard. Win-Tech tried a lot harder to keep you than they did to keep me. I'm a backstop-type guy, hot on administration and controls. But people who can design circuits and take the bugs out of them are rare birds.

Like you said the other night, you haven't kept up with the state of the art, but I'd think that once you caught up with all the new miniaturized advances, you could write your own ticket anywhere.

Because I've got confidence in what I know you can do, I'm willing to make a place for you in Ray-Fax. Our budget on R and D is a little slender, but the way the projected earnings look, I think I could get the board to agree to fatten it up some.

But I wouldn't want you to come in again feeling as if you were getting the dirty end of the stick on the option arrangement that we made seven years ago.

Let me refresh your memory, Howie. You wanted to keep the company in high-risk areas by concentrating all our resources in money and manpower on new-product development. I said we had to dig in and milk the maximum return out of the Diatrex line, cut costs further, go for volume.

We argued bitterly for months before we decided to split. And then we negotiated. Right? You wanted to peddle your 20,000 shares to me for $20 a share and walk away with $400,000. How was I supposed to raise that kind of money? I couldn't put up the stock, because there was no established market in it then.

I did the best I could, Howie. I scrambled up $100,000, and that looked like all the money in the world back then, believe me. That was, as it says in our contract, an option for ten years to buy your 20,000 shares at $15 a share, and you agreed to escrow the stock and give me a proxy to vote it for you.

And you went away and left me with the whole ball of wax and more 15-hour days and seven-day weeks than I want to count.

I can see your point on how it could seem unfair to you for me to exercise that option at this time. With the stock splits and dividends during the past seven years, your 20,000 shares are now 31,600, which means that I would be buying for a little under ten dollars a share stock now bid in the OTC market at 41-3/8, as of today. So it will cost me an additional $300,000 to pick up shares now worth $1,307,450.

I am not promising anything, but maybe we can get together and work something out. We both have to take any kind of chip off our shoulder and talk, man to man, the way we used to be able to.

I only wish that--

Scrap that letter. Try it again, damn it.

Dear Howie. You left Ruthie and myself in a pretty bad state the other night. I think that when a man wants to amend or adjust a legal contract, it isn't exactly smart to show up all of a sudden, without warning, and say some mighty ugly things.

I was so taken aback the other night that I didn't get around to telling you some cold hard facts.

You know the shape we were in when you left. You know how the books looked, how the orders looked, how much money we were making. We'd been in the new buildings a year and the debt-service burden was heavy. Your stock interest wasn't worth a dime more than I agreed to pay for it at that time. Increase in value has happened since you left and you had nothing to do with it. Right?

In a pretty unpleasant way, Howie, you brought up the fact that the profits have come from the Diatrex line, which you developed and which we have fenced in with good solid patents. I want to remind you that at the time you were working out the circuitry, we were both employees of Ray-Fax, working on Ray-Fax time, and so any developments belonged to the corporation, not to you as an individual. If you were an outsider and I had bought the Diatrex concept from you, I would imagine that I would be paying you royalties amounting to hundreds of thousands of dollars a year, even though you would hardly recognize the line these days. I have some hot young kids who are really on the ball and they have made some interesting improvements and refinements.

I think you ought to face the fact, Howie, that you are a little bit out of touch with reality. I realize that you had a very hard time, learning that Annabelle had leukemia, and I can appreciate your going abroad, where living was cheap, so you could be with her for those three years, taking care of her. I can appreciate the fact that you are out of touch with the industry and that you are broke, but, old friend, $300,000 isn't exactly a pittance.

Put yourself in my shoes for a moment. I didn't force you to get out. That was your decision. It shocked me that you actually wanted to leave. I thought at that time you were my best friend in all the world.

You left me holding the bag. OK. I went ahead with the plans you didn't want to live with. I stayed and fought it out, Howie. So now, Ray-Fax has 600 employees, and in the past fiscal year, we made an after-tax net of $1.77 per share on the 588,000 shares outstanding.

Where do you think a record like that comes from? From my sweat, old friend. From plugging away at it for seven years. I added the value. You had nothing to do with it.

You hit the sauce pretty hard the other night, Howie. I don't know if that has become kind of a habit with you since Annabelle passed away, but I can tell you that it made communication pretty difficult.

You make it pretty rough for anybody to try to meet you even halfway on this thing. You certainly didn't leave me with any big fat desire to bring you back into the fold and play wet nurse until you can pull your own weight again.

If you want to come to the office and offer some kind of apology for your words and actions the other night, it might give us some kind of a starting point from which we could--

No dice. Try it again.

Dear Howard. If there were just the two of us involved, like in the old days, then it would make things a lot simpler. But in view of the present setup, your demands and your recriminations just do not make sense. As the chief executive officer and chairman of the board of directors of Ray-Fax, Incorporated, I am responsible to all the hundreds of stockholders of the corporation.

How can that affect a private stock-option agreement between you and me? Because we are now in registration, coming out with additional shares of common and some convertible debentures with warrants attached to finance necessary expansion. I have provided the investment-banking firm, as required by law, with all the facts in full disclosure. The investment bankers are now preparing a "red herring," which will have to be approved by the SEC in every particular. In enumerating my personal holdings in Ray-Fax, I naturally included the option agreement on the 20,000 shares, along with the duration of that option and the purchase price.

Were I now to even attempt to alter any portion of that agreement, the investment bankers and the SEC would want to know why I had not gone through with a stock purchase based upon a perfectly legitimate legal--

Now I think I know which way to go with it. This should do it. Lucy, I think this better go out registered mail, return receipt. And don't use my private stationery. Use the company bond and send a copy to Mike Shanniger.

Ray-Fax, Incorporated

9 January 1970

Mr. Howard J. Faxton

Room 34

Holiday Inn

4840 Bypass Highway

Weston, Ohio

Dear Howard,

I am glad you were able to stop by the other evening and say hello.

Ruth and I want to express again our belated sympathy to you on the loss of your wife, Annabelle.

This letter will serve as formal notification of my intent to purchase from you your holdings in Ray-Fax, Incorporated, represented by those shares now held in escrow by the legal firm of Finch, Dickinson and Shanniger, under the terms of our option-contract agreement dated September 16, 1963.

I have instructed Mr. Michael Shanniger to act in my behalf in this matter and to deliver to you a certified check in the amount of $300,000, and then to release the certificates for registration in my name.

I am sure Mr. Shanniger will be able to answer any questions you may have regarding this contractual transaction.

Ruth joins me in extending to you our best wishes, and we hope you will find agreeable and rewarding work in the very near future.

With warm personal regards,

D. Franklin Raymond

Chief Executive Officer and Chairman of the Board of Directors

cc: Michael Shanniger