Thursday, August 24, 2006

VTSS: No Gray Area

Just about everybody enters into a binding financial contract at some time in their life. We sign financial contracts all of the time without realizing that is what we are doing. If you have ever signed a mortgage, taken out a car loan, or signed a lease you have signed a binding financial contract. You have agreed to adhere to certain requirements in order to receive a loan, or goods or services. Even a credit card application is a financial contract. You are agreeing to use credit, while staying within certain parameters of use, i.e. paying the minimum amount due. It is a fairly easy concept to grasp as long as there is a clear expectation as to what is expected from both parties.

It is very confusing, then, that Vitesse Semiconductor Corporation (Pink Sheets:VTSS) has announced that they received an acceleration notice from the trustee for Vitesse's $96.7 million aggregate principal amount of 1.5% Convertible Subordinated Debentures due 2024. The trustee is claiming that Vitesse failed to make its SEC filings on time, violating the terms of the Debentures. Vitesse is claiming that the company has not violated the terms of the Debentures, and that there in fact was no requirement for SEC filings in a timely fashion.

There are always two sides to every story or there would be no argument. There is a due date on a credit card bill, and if the payment is late, a fee is added. Listen here, people, this is no late fee on a credit card. We are talking millions of dollars here. Either SEC filings were a requirement of the Debentures, or they were not. How could two business-savvy, intelligent entities have such strikingly different claims? It is a good question. I am sure VTSS investors will be awaiting its answer.

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