Update (10/20/2011) - The lawsuit brought by stockholders of XETA Technologies Inc. in connection with the merger between XETA Technologies and Paetec Holding Corp. has been settled. The terms of the settlement were not disclosed.
An investor filed a lawsuit against Chairman of the Board, past Chairman, President and CEO; and certain directors of XETA Technologies alleing breaches of fiduciary duties arising out of their attempt to sell Xeta Technologies too cheaply via an unfair process to PAETEC Holding Corp.

According to the complaint the plaintiff alleges that is trying to block or alter the terms of the XETA Technologies’s proposed acquisition.

On Wednesday, Feb 9, 2011, before the market opened PAETEC Holding Corp. (NASDAQ GS: PAET) had announced that it has signed an agreement to acquire XETA Technologies, Inc. (NASDAQ GM: XETA) for $5.50 per share in cash valued at approximately $61 million.
Shares of XETA Technologies, Inc. (Public, NASDAQ:XETA) traded on Tuesday, Feb 8th, at $3.87 per share and increased to $5.42 in response to the takeover proposal.

However the plaintiff alleges the proposed buyout greatly undervalues XETA Technologies and shortchanges its stockholders. The plaintiff “seeks to level the playing field” and to ensure ”that the proposed merger be conducted in a manner that is not overtly improper, unfair and unlawful.” The plaintiff says in part the buyout price is unfair considering Xeta Technologies’ revenues. Indeed XETA Technologies’ performance for its shareholders increased over the past years. XETA Technologies’ 12 months Total Revenue went from $70.09million reported on Oct 31, 2007 to $85.68million reported on Oct. 31, 2010. Specifically, on December 30, 2010, XETA Technologies reported fourth quarter 2010 revenues of $24.5 million, a 36% increase over fourth quarter 2009 results.