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Vitesse Announces Proposed Settlement of Class Action and Derivative Lawsuits

Posted on: Thursday, 11 October 2007, 18:00 CDT

Vitesse Semiconductor Corporation (Pink Sheets:VTSS) today announced that it has entered into a proposed settlement of all federal securities class action claims that were filed against the Company and all related federal and state shareholder derivative actions. These actions were filed starting in April 2006 and were based on allegations of stock option backdating and accounting manipulations.

"We are very pleased to reach a settlement with the plaintiffs in these actions. This litigation has been a distraction for Vitesse management and employees as well as its customers and shareholders. This settlement, if approved by the Court, will resolve the uncertainty associated with these litigations and put an end to the significant legal expenses we would have incurred in the event we had to continue to litigate," said Christopher R. Gardner, Chief Executive Officer.

The proposed settlement of the class action will include a cash payment to the settlement fund of $10.2 million: $8.75 million to be paid by Vitesse's directors' and officers' liability insurers and a total of $1.45 million to be paid by Louis R. Tomasetta and Eugene F. Hovanec, two of the former executives of Vitesse. The same two former executives also will contribute all shares of Vitesse common stock that they own, totaling 1,272,669 shares. In addition, Vitesse will contribute 2,650,000 shares of Vitesse common stock and no cash to the class fund.

As part of the proposed settlement of the federal and state derivative actions, the three former executives of Vitesse, Messrs. Tomasetta and Hovanec and Yatin Mody, will release the Company from all rights to future indemnification and costs of defense in the related SEC and Department of Justice investigations. Vitesse retains the right to continue its state court action against KPMG, its former auditing firm. Vitesse will also contribute 4,900,000 shares of Vitesse common stock to cover the attorneys' fees and expenses of the derivative plaintiffs' counsel, and has agreed to adopt certain corporate governance measures.

The proposed corporate governance measures include, among other things, implementing certain policies, procedures and guidelines for stock option grants and compensation decisions, incorporating greater shareholder participation in the procedures for nominating independent directors, adopting additional standards of director independence and adding a "lead independent director" and incorporating additional accounting policies, procedures and guidelines.

In addition, under the proposed agreements, the Company and certain current and former officers and directors of the Company who were named as defendants will be dismissed from the lawsuits and will obtain releases from the class and derivative plaintiffs.

The next step will be the filing of motions in the federal court asking for preliminary approval of the proposed settlement and authorization to provide current and former shareholders of Vitesse with notice of the proposed settlement. The settlements will require final approval from the federal court before they become effective. No assurances can be given that this settlement ultimately will be approved.

About Vitesse

Vitesse designs, develops and markets a diverse portfolio of high-performance, cost-competitive semiconductor solutions for communications and storage networks worldwide. Engineering excellence and dedicated customer service distinguish Vitesse as an industry leader in Gigabit Ethernet LAN, Ethernet-over-SONET, Fibre Channel, Optical Transport, and other applications. Vitesse innovation empowers customers to deliver superior products for Enterprise, Access, Metro, and Core applications. Additional company and product information is available at www.vitesse.com.

Vitesse is a registered trademark in the United States and/or other jurisdictions of Vitesse Semiconductor Corporation. All other trademarks or registered trademarks mentioned herein are the property of their respective holders.

Safe Harbor

Statements made in this release that are not historical facts are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as "anticipate,""believe,""plan,""estimate,""expect,""hope,""intend," and similar expressions. Factors that could cause actual results to differ are identified in the public filings made by Vitesse with the Securities and Exchange Commission and include the fact that we have disclosed that you should not rely upon our published financial statements and the fact that we have not filed all of our reports required by the Securities Exchange Act of 1934. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission, which are available on the web site of the Securities and Exchange Commission, www.sec.gov.

The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. We caution investors that any forward-looking statements made by us are not guarantees of future performance, including, but not limited to, the risks that the settlement will not be completed or approved by the court, that any court approval will be successfully reversed on appeal, or that the settlement agreement is terminated or cancelled under its terms. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

Source: Business Wire

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