PAETEC Holdings Corp. (PAET) has issued 600,000 warrants to purchase common stock to agents under its 2009 agent warrant plan, according to an Aug. 12 S-3/A filing with the Securities and Exchange Commission.
PAETEC Chairman and CEO Arunas Chesonis told PHONE+ 20,000 warrants were issued to each of 30 agencies. Each warrant is good for the purchase of one share of PAETEC common stock. The warrants can become vested over two years. Half of the warrants will be vested once an agency sells $50,000 in additional monthly revenue. All the warrants will be vested once an agency sells $100,000 in additional monthly revenue.
The warrants are good for 10 years, so warrant-holders don’t have to cash them in immediately, Chesonis said.
The names of the participating agencies were not disclosed; however Chesonis said they are owner-operated agencies that have already proven to be able to drive business for PAETEC or who have committed to do so. They include both master agencies and direct agents, he added.
The program is not without precedent for the CLEC. PAETEC issued 500,000 pre-IPO stock warrants to about 30 agencies in 1999. When PAETEC went public through its merger with US LEC in 2007, the warrants were valued at $6 million to $7 million, Chesonis said.
According to the Aug. 12, 2009 filing, the 1999 warrants first became exercisable June 11, 2008, but 448,000 warrants have not been exercised. According to the filing, each warrant had an exercise price ranging from $1.24 to $4.93 per share, or an average of $3.32.