Variations to share sale agreement
25 The parties to the share sale agreement executed a number of deeds of variation to that agreement (according to undisputed evidence of Mr Poh - five separate deeds: affidavit of Poh Kiat affirmed 15 March 2006 para 11).
26 For the purposes of these proceedings the relevant deeds were the second, third and fourth deeds of variation.
27 The second deed of variation was executed on 12 January 1998 by Pearlbunch, Talrate, Forbes Asia, Mr Forbes, Mrs Forbes and Forbes Screens. The deed provided that it was effective to vary the share sale agreement as from 22 September 1997.
28 The second deed recited that Forbes Asia, Pearlbunch and Talrate had entered into the share sale agreement, that Mr Forbes, Mrs Forbes and Forbes Asia had entered into a "Letter of Indemnity" on 22 September 1997, and that Forbes Asia and Forbes Screens had entered into a "Letter of Indemnity" on 22 September 1997. (It is clear that the "Letters of Indemnity" to which the deed refers are the Forbes Guarantee and the Forbes Screens Guarantee respectively.)
29 The deed recited further that an error had been discovered in cl 3.3 of the share sale agreement and cll 3.1, 3.2 and 3.3 of the Letters of Indemnity (Forbes Guarantee and Forbes Screens Guarantee).
30 The deed continued:
It is agreed effective 22 September 1997 that:-
1.1 Clause 3.3 of the Share Sale Agreement is deleted and replaced by the following:-
"3.3 The Vendors shall guarantee, ensure and cause the Company to achieve at least 90% of the following audited profits before tax during the following financial years of the Company provided always that the audited said profit before tax is calculated by reference to the formula set out in Annexure 1 attached hereto:
3.3.1 for the first financial year ending 31 December 1997 A$1,300,000;
3.3.2 for the financial year ending 31 December 1998 A$1,400,000; and
3.3.3 for the financial year ending 31 December 1999 A$1,500,000
For the financial year ending 31 December 2000, the Vendor shall use its best endeavours to cause the Company to achieve 90% of an audited profit before tax of A$1,600,000."
1.2 Clause 3.1, 3.2.2 and 3.3.2 of each of the Letters of Indemnity are deleted and replaced by the following:
"3.1 If the audited profit before tax (Pretax Profit YE/97) of FEH calculated in the manner as provided under SS Agreement for the period of 1 January 1997 to 31 December 1997 (YE/97) shall not be more than 90% of $1,300,000 (P/Profit Target) then we hereby irrevocably and unequivocally discharge and release FEH of all obligations to pay to such proportion of the rent payable to FEH to us for the period 1 January 1998 to 31 December 1998 (YE/98) which is equivalent to the difference (Profit Shortfall) between the said P/Profit Target for YE/97 and the said actual audited Pretax Profit YE/97. If the Profit Shortfall exceeds 100% of such rent, then we shall release and discharge FEH of FEH's obligations and liabilities to pay us the rent for YE/98. If the Profit Shortfall is less than such rent, then FEH shall deduct such Profit Shortfall from the rent for YE/98. Such deductions shall be recovered by FEH by deductions on the same amount to the rent payable to FEH to us under the lease (for the YE/98)."
"3.2.2 The P/Profit Target for YE/98 shall be 90% of A$1,400,000."
"3.3.2 The P/Profit Target for YE/99 shall be 90% of A$1,500,000."
31 The third deed of variation was executed by Pearlbunch, Talrate and Forbes Asia on 16 February 1998. So far as relevant, cl 2.2 of the third deed amended cl 2.3 of the share sale agreement in the following terms:
2.3 On or before the date of expiry of a period of 182 days from the date hereof and subject to Clause 2.7 below and the Purchaser having received all the documents referred to in Clause 2.4 below, the Purchaser shall pay into the FEH Accounts a further and last capital injection of $A1,099,999.00 ("3rd Injection") by way of $$599,999.00 cash and the balance by way of 1,800,000 ordinary shares ("Teamsphere Shares") issued by Teamsphere Ltd (Co. No 199705215 G) a public company incorporated in the Republic of Singapore and having its registered office at 1 Changi South Street 1, Changi South Industrial Estate, Singapore 486797 together with the prescribed Transfer Forms duly signed by the registered owner of the Teamsphere Shares, as the transferor thereof PROVIDED ALWAYS THAT the provisions in Clause 2.2 above shall have been complied with and the Purchaser is satisfied that the 3rd Injection shall be applied by the Company (and the parties shall ensure the company shall do so) in the following manner:-
2.3.1 firstly, to pay on behalf of the Vendors, such part of the Said Dividend (which are payable by the Company to the Vendors and the Vendors hereby irrevocably authorise such payment), amounting to A$500,000.00 by way of the delivery of all the Teamsphere Shares (together with the aforesaid signed Transfer Form) with the Vendors' Solicitors namely Cleary Hoare Solicitors of 1st Floor, 145 Eagle Street Brisbane (hereinafter called "the Vendors' Solicitors) which said Teamsphere Shares shall hereinafter collectively be referred to as "the Retention Sum". The Retention Sum shall not be released or drawn upon without the written consent of the Purchaser, unless in pursuant to the terms set out in Clause 3.4 below and the BPP shall have been paid by the Purchaser to the Vendors on the Completion Date (as hereinafter defined) in pursuant to Clause 2.4 or pursuant to Clause 5.1 or 5.2. For the purpose of Clause 5.1 and 5.2, the Teamsphere Shares shall be treated as if each of them is cash of equivalent of the greater of:-
1. their market value; or
2. A$0.2778
2.3.2 secondly, payment to the Vendors such part of the Said Dividend declared and shall have been due and payable to the Vendors by way of cheque for the sum of A$371,000.00 drawn in favour of FEH subject to the Purchaser having received the following:-
2.3.2.1 a letter by the Vendors to the Purchaser authorising the payment of the said A$371,000.00 on behalf of the Vendort to Hevenfleet Pty Ltd as trustee for the Forbes Family Trust ("FFT") directly;
2.3.2.2 a letter by FFT to the Purchaser to pay the same A$371,000.00 (due to FFT pursuant to Clause 2.3.2.1) directly to FI; and
2.3.2.3 a letter by FI to the Purchaser to pay the same A$371,000.00 (due to FI pursuant to Clause 2.3.2.2) directly to FEH;
2.3.3 thirdly, payment to the Vendors of a sum of A$228,999.00 as full and final payment by FEH to the Vendors of the Said Dividends; and
2.3.4 fourthly, to pay on behalf of FIA, a sum of A$1.00 to FI towards full and final settlement of the net total purchase price of A$1,300,000.00 under the SB Agreement.
32 The fourth deed of variation executed by Pearlbunch, Talrate, Forbes Asia and Mr Poh on 23 March 1998 acknowledged the earlier variations of the share sale agreement. So far as is relevant, the parties in this deed of variation varied the share sale agreement to enable the provision of 1,800,000 ordinary shares in Teamsphere Ltd referred to in cl 2.3 of the share sale agreement to be satisfied by the transfer of 180,000 shares in Teamsphere Ltd.