The News After Seagate, it is now eSys versus nTan Michelle Quah 1,402 words 26 March 2011 Business

Times Singapore STBT English (c) 2011 Singapore Press Holdings Limited IT components distributor in legal battle with its adviser over professional fees THE highly publicised fallout of eSys Technologies with Seagate in 2006 has taken a new twist. The IT components distributor is now suing the adviser engaged as a result of the Seagate debacle, nTan Corporate Advisory, saying that the latter owes it a partial refund on a $2 million deposit. nTan, set up and managed by Nicky Tan, has countersued - claiming that eSys, headed by Vikas Goel, used nTan's advice and owes the firm the stipulated professional fees. eSys says that nTan owes it an explanation for the $733,440 billed so far and the rest of the deposit; nTan says that eSys owes it advisory fees over and above the $733,440 charged for time costs and outof-pocket expenses and is entitled to set off the amount owed against the rest of the deposit. The suit arises out of a November 2006 incident in which Seagate, the world's largest maker of hard drives, terminated its distributor agreements with eSys. Seagate said that eSys denied its third-party auditors access to eSys's records and that eSys officials indicated that an audit 'would likely reveal irregularities'. eSys denied the allegations and said that the audit would have been 'intrusive'. Seagate sued eSys for US$65 million, but the matter was settled out of court in 2009 with neither side admitting liability and agreeing to keep settlement terms confidential. Before the partnership went asunder, eSys was the largest distributor of Seagate products, with the latter's products forming about 30 per cent of eSys sales, as reported by The Straits Times in February 2007. nTan claims, in its defence, that the blow to eSys by Seagate's action was severe and left it on the brink of insolvency. It says that eSys approached the corporate advisory firm a few days after the incident to provide financial advice. nTan says that, when it came onboard, the situation at eSys was dire, with the company's bank creditors chasing for repayment, cancelling facilities and demanding more security. It says that Mr Goel 'had fled Singapore as he feared being investigated by the Commercial Affairs Department (CAD)'. 'There was widespread panic within the company, with the plaintiff's (eSys') staff being demoralised and asking for the payment of their bonuses. The defendant (nTan) effectively had to step in to assist in running the company.' nTan says that it was engaged on terms that eSys would deposit $2 million with nTan, against which nTan's fees and out-of-pocket expenses would be deducted. The balance, if any, would be returned only after setting off all fees and expenses owed by eSys. nTan's defence details the extensive work reportedly done to manage eSys's problems with its customers, suppliers and creditors, insurance matters, inventory and staff. nTan says that it also advised eSys, to a large extent, on a proposal from India's Teledata Informatics to purchase 51 per cent of eSys shares for cash and a working loan totalling US$100 million - such as how the deal should be structured, the key investment terms, etc. The engagement letter between eSys and nTan further stipulated that eSys would pay nTan a value added fee (VAF) computed as 5 per cent of the Total Gross Value Added (TGVA). The TGVA would be the sum total of: value of the eSys group's liabilities written off, extinguished, avoided or restructured; fair value of new assets injected and recovered by the group; value of new equity and/or debt raised by the group; and any other value add agreed by both sides. Page 1 of 3 2011 Factiva, Inc. All rights reserved.

The VAF would be over and above nTan's bills for its time cost fees and out-of-pocket expenses. nTan says that the deal went sour when Mr Goel proposed that the Teledata investment in eSys should be excluded from the TGVA. nTan refused, saying that the concept of TGVA in the engagement letter was precisely meant to cover such injections of new assets and equity into eSys. Shortly after that, nTan alleges, Mr Goel stopped nTan staff from going down to his office as they had been doing every day. And, very soon after that, just before the Teledata investment was supposed to have been made, eSys terminated nTan's services. nTan then billed eSys for its time costs and out-of-pocket expenses, which totalled $733,440. That reduced the $2 million deposit held by nTan to about $1.3 million. But nTan alleges that eSys still owes it the VAF, which it estimates to be possibly in excess of US$6.6 million. nTan says that it cannot calculate the exact TGVA and the VAF until eSys provides information as to its liabilities extinguished, new equity raised, etc - and nTan says that eSys has for some three years refused to provide such information. nTan goes on to argue that eSys has not paid the VAF, to date, and is therefore not entitled to a return of any part of the balance of the deposit held by nTan - which eSys is claiming. Instead, it says, nTan is entitled to set off the balance of the deposit against the VAF due from eSys and claim the remainder from eSys. eSys, in its reply to the defence and counterclaim, says that nTan is not entitled to any VAF because it did not render the advice or assistance it had purported to. It says that Mr Tan did not make himself available to answer the company's queries and instead dispatched his employees to be stationed on eSys's premises. It alleges that the nTan employees did not render any advice or assistance, and that their work consisted only of asking for the company's documents and records, and then making copies of them. It says that the employees 'were in fact causing disruption to the daily operations of (eSys) and the work of (eSys) employees'. The company claims that it does not owe nTan any VAF as 'no purported advice on strategic options was in fact rendered to the plaintiff much less accepted and/or implemented by the plaintiff'. eSys says that Mr Tan was not involved in identifying the Teledata investment, nor was he involved in the discussions the company had with Teledata. Further, it says that there was eventually no investment by Teledata. It also claims that Mr Goel had 'expressly' told Mr Tan that the Teledata investment would not be included in the calculation of the VAF and that Mr Tan 'acknowledged and accepted' this. nTan's defence says that Teledata's investment into eSys should be included in the computation of the TGVA and VAF, as The Straits Times and The Business Times had reported in February and March 2007, respectively, that Teledata had made a cash injection of US$105 million into eSys. eSys says that there was no investment and that Mr Goel has commenced proceedings in New York against Anush Ramachandran, an officer of Teledata, and will commence arbitration proceedings against Teledata soon for the alleged breach of contract. eSys also denies nTan's claim that it effectively had to run the company, saying that Mr Tan does not possess the skill or knowledge to run eSys which is a global business operated in 34 countries. eSys also says that it was not insolvent after Seagate terminated its contract, only that it suffered temporary cash flow difficulties due to the negative publicity. eSys also says that nTan did not provide a breakdown of the $733,440 billed, despite the company asking for it repeatedly. Mr Goel also says that he did not flee Singapore, as nTan had alleged, but had to travel overseas as part of his work. 'At the material time, Vikas Goel regularly returned to Singapore from his overseas visits to attend to the business and affairs of (eSys) as and when required,' eSys says. eSys is represented by Samuel Chacko of Legis Point LLC, and nTan is represented by Edwin Tong of Allen & Gledhill. SEE YOU IN COURTMr Goel (left) of eSys and Mr Tan of nTan. eSys wants a partial refund of a $2 million deposit while nTan says it's entitled to set off an amount owed by eSys against the rest of the deposit Page 2 of 3 2011 Factiva, Inc. All rights reserved.

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2011 Factiva, Inc. All rights reserved.