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EXHIBIT 1
AMENDMENT TO SWITCH AGREEMENT
This Amendment to Switch Agreement ("Amendment") is entered into between
EQUALNET HOLDING CORP. ("EqualNet"), EQ ACQUISITION SUB, INC. ("Sub"), and
XXXXXX GROUP, LLC ("TWG") effective as of February 12, 1998.
Recitals
Each of the entities described in the preamble are parties to a Switch
Agreement dated December 2, 1997 (the "Agreement"). The parties desire to
amend the Agreement in accordance with the terms of this Amendment. Any
capitalized term used but not defined herein shall have the meaning ascribed to
such term in the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the Parties agree as follows:
1. Section 2(b) of the Agreement is amended as follows:
(a) Deletion of the word "and" at the end of clause (iii) thereof;
(b) Insertion of the following as a new clause (iv):
(iv) subject to the terms of Section 2(e), 1,000,000 of EqualNet
Common Shares; and,
(c) Renumbering the existing clause (iv) to "(v)" and amending
such clause by replacing the reference therein to "$1.50 per
share" with "$1.00 per share".
2. Section 2 of the Agreement is amended by adding the following as
subsection (e):
(e) AUTHORIZED SHARES. (i) If the Closing occurs and as of the
Closing Date the number of EqualNet Common Shares authorized
under EqualNet's Articles of Incorporation is not sufficient
to permit the issuance of all or any part of the 1,000,000
shares referred to in Section 2(b)(iv) (the "Unauthorized
Shares"), then at the Closing in lieu of issuing such
Unauthorized Shares EqualNet shall execute and deliver to
TWG a warrant the ("Unauthorized Shares Warrant") for the
number of shares constituting the Unauthorized Shares, such
warrant to have a term of ten years, to have an exercise
price of $0.01 per share, and to be otherwise substantially
similar to the form of Warrant attached as Exhibit B;
provided, the Unauthorized Share Warrant shall contain a
covenant on the part of EqualNet that it will use its best
efforts to cause the unreserved authorized number of
EqualNet Common Shares to be increased to permit the full
exercise of the Unauthorized Share Warrant and a limitation
on the holder of the Unauthorized Share Warrant to the
effect that the obligation of EqualNet to issue shares upon
an exercise of
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the Unauthorized Share Warrant in whole or in part shall be conditioned
upon EqualNet having a number of unreserved authorized EqualNet Common
Shares at such time sufficient to cover the number of shares relating to
the exercise.
(ii) If by May 31, 1998, the number of EqualNet Common Shares
authorized under EqualNet's Articles of Incorporation has not been
increased to permit a full exercise of the Unauthorized Share Warrant, then
TWG shall have the right and option to repurchase the Switches from Sub for
$5,850,000 in cash by giving written notice of such exercise to EqualNet
and Sub. If such notice is given, then EqualNet and Sub agree that Sub will
convey good title to the Switches to TWG free and clear of any liens or
security interests (other than liens and security interests, if any, that
may encumber the Switches immediately prior to the Closing), and
contemporaneous with such conveyance TWG (x) shall return the Unauthorized
Share Warrant to EqualNet which shall be cancelled and (y) TWG shall return
any shares issued to TWG pursuant to Section 2(b)(iv). In connection with
any such repurchase, TWG shall retain the EqualNet Common Shares issued to
it pursuant to Section 2(b)(iii). During the period from the Closing Date
until the aforementioned May 31, 1998 date, EqualNet and Sub agree that Sub
shall not convey or encumber the Switches, or grant any options or rights
to purchase the Switches, except for liens and security interests securing
any financing used by Sub to acquire the Switches.
(iii) TWG agrees to affirmatively vote all EqualNet Common Shares
issued to TWG pursuant to this Agreement or any other agreement for such
increase in the authorized number of EqualNet Common Shares.
3. Section 5(u) of the Agreement is amended by adding the following
paragraph at the end of such Section:
If the Closing occurs and if necessary for EqualNet to
obtain financing for the acquisition of the Switches, TWG
will guarantee not more than 40% of the principal amount of
such financing. No such guaranty shall impose any obligation
or liability on the part of any member of TWG and TWG shall
not be required to pledge any collateral or provide any
other credit enhancement with respect to such guaranty. The
terms of any such guaranty shall be satisfactory to TWG. If
the Closing occurs and TWG gives such guaranty, as
consideration for such guaranty EqualNet shall issue to TWG
at the Closing a warrant (the "Guaranty Warrant") for
500,000 EqualNet Common Shares exercisable at $1.00 per
share, such warrant to have a term of ten years and to be
otherwise substantially similar to the form of warrant
attached as Exhibit B; provided, if at the Closing the
number of EqualNet Common Shares that are authorized under
EqualNet's Articles of Incorporation is not sufficient to
permit a full exercise of the Guaranty Warrant, then the
Guaranty Warrant shall contain a covenant on the part of
EqualNet that it will use its best efforts to cause
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such unreserved authorized number of shares to be increased to permit
the full exercise of the Guaranty Warrant and a limitation on the
holder of the Guaranty Warrant to the effect that the obligation of
EqualNet to issue shares upon an exercise of the Guaranty Warrant in
whole or in part shall be conditioned upon EqualNet having a number of
unreserved authorized EqualNet Common Shares at such time sufficient
to cover the number of shares relating to the exercise.
4. If the Closing occurs and as of the Closing Date the number of
EqualNet Common Shares authorized under EqualNet's Articles of Incorporation is
not sufficient to permit the issuance of all or any part of the EqualNet Common
Shares covered by the Warrant attached as Exhibit B to the Agreement, then as
of the Closing such Warrant shall be amended to include a covenant on the part
of EqualNet that it will use its best efforts to cause such unreserved
authorized number of shares to be increased to permit the full exercise of the
Warrant and a limitation on the holder of the Warrant to the effect that the
obligation of EqualNet to issue shares upon an exercise of the Warrant in whole
or in part shall be conditioned upon EqualNet having a number of unreserved
authorized EqualNet Common Shares at such time sufficient to cover the number
of shares relating to the exercise.
By entering into this Amendment, TWG does not waive by implication or
otherwise any of the conditions set forth in Section 6.1(a) of the Agreement.
This Amendment contains the entire understanding and agreement between the
Parties with respect to the subject matter of this Amendment and supersedes any
prior or contemporaneous statements, understandings or agreements with respect
to such subject matter
EQUALNET HOLDING CORP.
By: /s/ XXXXXXX X. XXXXXX
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Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
EQ ACQUISITION SUB, INC.
By: /s/ XXXXXXX X. XXXXXX
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Name: Xxxxxxx X. Xxxxxx
Title: President
XXXXXX GROUP, LLC
By: /s/ XXXX X. XXXXXX
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Name: Xxxx X. Xxxxxx
Title: President
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