“Hold on a minute”, I said.
“We’ll have to scratch the progress payment provision until
we learn more about this ‘Data Products Corp.’”
It was March 1962(?) and we had gotten to the last page in
negotiating the contract when Frank Juttras, CEO of Midwest
Instruments/TELEX said, “There is a change on the signature line.
We’re spinning this product off to a new company called Data
Products and they will be signing the agreement.”
I would not normally have been in a procurement meeting but the
agreement called for GE to provide TELEX with $300,000 in progress
payments and I had been assigned to write the contract provision and
defend it in negotiations.
The General Electric mainframe computer business had arranged
with TELEX and Midwest Instruments for a “Juke-box” type magnetic
memory system for the NCR 304 computer system that GE was building for
the National Cash Register Company to market.
The meeting fell silent until Frank said, “I understand your
concern but they need the progress payments, I’ll call Minneapolis
right away and have them send you the Pro-forma financials.”
When, several days later the financials arrived (this was before
FAX machines, FEDEX or email), they showed a “start-up” company with
no operating history and a NEGATIVE net worth of $250,000!!
I called our buyer, Jim Barford and Bob Wooley, the engineering
project manager; to tell them that there was no way we’d advance
$300,000 to this new company.
Wooley was very upset.
“We need this equipment and there is no other place to get
it.” I suggested
that with $300,000 he could design it himself. He replied that we didn’t have the time to develop it
ourselves and he had great faith in Irv Tomash – who was listed as
President of Data Products. I
responded that if they didn’t perform he would have lost not only the
design funds but also even more time.
At Wooley’s insistence, I went to Culver City, California to
meet with Data Products. It was counterproductive.
They were housed in a small, old warehouse where I saw few signs
of the memory system we were to procure and Irv Tomash was much more
interested in showing me the printer hammers he was developing. I held firm on my position about advancing funds to
Wooley called me several days later to tell me that Data Products
was getting a loan from the B of A.
“I’ll believe it when I see it.” I responded.
I suppressed a chuckle when, as I anticipated, Jim Barford also
called me to tell me, “They say they have a $500,000 unsecured line of
credit from the B of A.”
Jim Barford called me again the following day to tell me that
Data Products’ VP of Marketing, Russ DuBois, was in his office and
wanted to come up and see me. “Send him up”, I said.
DuBois reiterated that Data Products did indeed have a $500,000
unsecured line of credit from the B of A.
I said,”All right, Russ: I’ll check it out.
If it’s so and without too many strings attached to it, we’ll
I figured that if anybody at B of A knew anything about Data
Products it would be Tom Clausen.
Tom, who later rose to Chairman, was the Manager of National
Accounts for the Southern Region with headquarters in Los Angeles.
Tom had a Small Business Investment Company (SBIC) under his
control and Tom would occasionally call me to check out a potential
start-up company, a number of whom forecast that they were going to do
lots of business with the GE Computer business.
(I later got Tom to finance Tom O’Rourke’s TYMSHARE. through
I placed a call to Tom and asked, “Hey, Tom, have you heard of
a startup company called Data Products?”
“GOOD LOAN ISN’T IT!” he replied.
“You mean to tell me that you’re in there with a half million
banked Irv Tomash, Graham Tyson and Bill Mozena through two other
ventures and they’ve always come through.
Besides, you’re going to buy from them aren’t you?”
I guess so, I replied.
In view of the precarious financial position of Data Products, I
rewrote the progress payments provision to provide GE with shop
drawings, tooling, etc. and to grant us manufacturing rights if they
failed to perform on time. They
missed the schedule and we were forced to take over the manufacturing.
However, we needed them as a backup source and for emergencies.
I was assigned the responsibility of seeing that we subcontracted
enough to them to keep them alive and I made monthly trips to Culver
City and later to the Warner Ranch in Woodland Hills to negotiate
production schedules with them.
I thought that I was quite generous with them, a view that Graham
Tyson and Russ DuBois dispute to this day.